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**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.**

**FORM      10-Q**

**QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

| For                the quarterly period ended | Commission                File      |
|-----------------------------------------------|-------------------------------------|
| **June                30, 2005**              | **Number                000-51129** |

**JAMES      RIVER COAL COMPANY**

*(Exact      name of registrant as specified in its charter)*

| **Virginia**                                              |   | **54-1602012**                       |
|-----------------------------------------------------------|--------|--------------------------------------|
| *(State                or other jurisdiction*             |   | *(I.R.S.                Employer*    |
| *of                incorporation or organization)*        |   | *Identification                No.)* |
|                                            |   |                                 |
|                                       |   |                                 |
| **901                E. Byrd Street, Suite 1600**         |   |                                 |
| **Richmond,                Virginia**                     |   | **23219**                            |
| *(Address                of principal executive offices)* |   | *(Zip                Code)*          |

**:       (804) 780-3000**

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Table          of Contents

**FORM10-Q**
**INDEX**

|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      | Page   |
|-----------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **PART                I**                                                                                       | **FINANCIAL                INFORMATION**                                                                                                                                                                                                                                                                                                                                                                  | 3      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **Item                1.**                                                                                      | **Financial                Statements**                                                                                                                                                                                                                                                                                                                                                                   | 3      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                            | Condensed                Consolidated Balance Sheets                as                of June                30, 2005 and December 31, 2004                                                                                                                                                                                                                                                          | 3      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                            | Condensed                Consolidated Statements of Operations                for                the three                months ended June 30, 2005 (Successor),the                two months ended June 30, 2004 (Successor) and the one                month ended April 30, 2004                (Predecessor)                                                                                         | 5      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                            | Condensed                Consolidated Statements of Operations for the                six                months ended June 30, 2005 (Successor),the                two months ended June 30, 2004 (Successor) and the four                months ended April 30, 2004                (Predecessor)                                                                                                   | 6      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                            | Condensed                Consolidated Statements of Changes in                Shareholders’ Equity                (Deficit) and Comprehensive Income (Loss) for                the six                months ended June 30, 2005 (Successor), eight months                ended                December 31, 2004 (Successor) and four months ended April                30, 2004 (Predecessor) | 7      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|                                                                                                            | Condensed                Consolidated Statements of Cash                Flows                for the six                months ended June 30, 2005 (Successor),the                two months ended June 30, 2004 (Successor) and the four                months ended April 30, 2004                (Predecessor)                                                                                         | 8      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|                                                                                                            | Notes                to Condensed Consolidated Financial                Statements                                                                                                                                                                                                                                                                                                                        | 9      |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **Item                2.**                                                                                      | **Management’s                Discussion and Analysis of **Financial                Condition and Results of****Operations****                                                                                                                                                                                                                                                                      | 23     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                           |   |
| **Item                3.**                                                                                      | **Quantitative                and Qualitative Disclosure about Market                Risk**                                                                                                                                                                                                                                                                                                               | 37     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **Item                4.**                                                                                      | **Controls                and Procedures**                                                                                                                                                                                                                                                                                                                                                                | 37     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **PART                II**                                                                                      | **OTHER                INFORMATION**                                                                                                                                                                                                                                                                                                                                                                      | 38     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **Item                4.**                                                                                      | **Submission                of Matters to a Vote of Securities                Holders**                                                                                                                                                                                                                                                                                                                   | 38     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **Item                6.**                                                                                      | **Exhibits**                                                                                                                                                                                                                                                                                                                                                                                              | 38     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **SIGNATURES**                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                      | 39     |
|                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| Certifications                pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of                2002 |                                                                                                                                                                                                                                                                                                                                                                                                      |

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Table          of Contents

**PARTI**

**FINANCIAL      INFORMATION**

**ITEM      1.**
**FINANCIALSTATEMENTS**

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

Condensed

|                                                                        |   | **June                  30, 2005  ** |    | **December                  31, 2004** |   |
|-----------------------------------------------------------------------------|--------|------------------------------------------------|---------|----------------------------------------|--------|
|  **Assets**                                                            |   | (Unaudited)                               |    |                                   |   |
| Current                  assets:                                            |   |                                           |    |                                   |   |   |   |
| Cash                                                                        |   | $                                              | 26,038  |                                   |   | 3,879 |   |
| Receivables:                                                                |   |                                           |    |                                   |   |   |   |
| Trade                                                                       |   |                                           | 39,403  |                                   |   | 23,871 |   |
| Other                                                                       |   |                                           | 40      |                                   |   | 7,362 |   |
| Total                  receivables                                     |   |                                           | 39,443  |                                   |   | 31,233 |   |
| Inventories:                                                                |   |                                           |    |                                   |   |   |   |
| Coal                                                                        |   |                                           | 9,921   |                                   |   | 2,305 |   |
| Materials                  and supplies                                     |   |                                           | 5,649   |                                   |   | 4,084 |   |
| Total                  inventories                                     |   |                                           | 15,570  |                                   |   | 6,389 |   |
| Prepaid                  royalties                                          |   |                                           | 4,601   |                                   |   | 4,358 |   |
| Other                  current assets                                       |   |                                           | 3,218   |                                   |   | 6,337 |   |
| Total                  current assets                                  |   |                                           | 88,870  |                                   |   | 52,196 |   |
| Property,                  plant, and equipment, at cost:                   |   |                                           |    |                                   |   |   |   |
| Land                                                                        |   |                                           | 5,832   |                                   |   | 2,698 |   |
| Mineral                  rights                                             |   |                                           | 194,564 |                                   |   | 162,577 |   |
| Buildings,                  machinery and equipment                         |   |                                           | 159,943 |                                   |   | 106,105 |   |
| Mine                  development costs                                     |   |                                           | 16,783  |                                   |   | 5,729 |   |
| Construction-in-progress                                                    |   |                                           | 2,169   |                                   |   | 231 |   |
| Total                  property, plant, and equipment                  |   |                                           | 379,291 |                                   |   | 277,340 |   |
| Less                  accumulated depreciation, depletion, and amortization |   |                                           | 42,790  |                                   |   | 21,765 |   |
| Property,                  plant and equipment, net                    |   |                                           | 336,501 |                                   |   | 255,575 |   |
| Goodwill                                                                    |   |                                           | 31,444  |                                   |   | - |   |
| Restricted                  cash (note 1(c))                                |   |                                           | 13,262  |                                   |   | 8,404 |   |
| Other                  assets                                               |   |                                           | 17,260  |                                   |   | 11,651 |   |
| Total                  assets                                          |   | $                                              | 487,337 |                                   |   | 327,826 |   |

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Table          of Contents

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

|                                                                              |   | **June 30,                  2005** |        | **December                  31, 2004** |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------------|-------------|----------------------------------------|--------|
| **Liabilities                  and Shareholders' Equity**                         |   |                                    | (Unaudited) |                                   |   |   |   |
|                                                                              |   |                                    |        |                                   |   |   |   |
| Current                  liabilities:                                             |   |                                    |        |                                   |   |   |   |
| Current                  maturities of long-term debt (note 3)                    |   | $                                       | 259         |                                   |   | 2,700 |   |
| Current                  installments of obligations under capital leases         |   |                                    | 374         |                                   |   | 388 |   |
| Accounts                  payable                                                 |   |                                    | 22,520      |                                   |   | 15,116 |   |
| Accrued                  salaries, wages, and employee benefits                   |   |                                    | 4,248       |                                   |   | 2,093 |   |
| Workers'                  compensation benefits                                   |   |                                    | 12,175      |                                   |   | 12,090 |   |
| Black                  lung benefits                                              |   |                                    | 2,600       |                                   |   | 2,600 |   |
| Accrued                  taxes                                                    |   |                                    | 3,812       |                                   |   | 3,530 |   |
| Other                  current liabilities                                        |   |                                    | 6,462       |                                   |   | 3,633 |   |
| Total                  current liabilities                                   |   |                                    | 52,450      |                                   |   | 42,150 |   |
| Long-term                  debt, less current maturities (note 3)                 |   |                                    | 150,000     |                                   |   | 92,300 |   |
| Other                  liabilities:                                               |   |                                    |        |                                   |   |   |   |
| Noncurrent                  portion of workers' compensation benefits             |   |                                    | 38,337      |                                   |   | 38,223 |   |
| Noncurrent                  portion of black lung benefits                        |   |                                    | 23,496      |                                   |   | 23,341 |   |
| Pension                  obligations                                              |   |                                    | 13,899      |                                   |   | 15,744 |   |
| Asset                  retirement obligations                                     |   |                                    | 22,923      |                                   |   | 14,939 |   |
| Obligations                  under capital leases, excluding current installments |   |                                    | 404         |                                   |   | 637 |   |
| Deferred                  income taxes                                            |   |                                    | 64,487      |                                   |   | 34,615 |   |
| Other                                                                             |   |                                    | 231         |                                   |   | 292 |   |
| Total                  liabilities                                           |   |                                    | 366,227     |                                   |   | 262,241 |   |
| Shareholders'                  equity                                             |   |                                    |        |                                   |   |   |   |
| Preferred                  Stock, $1.00 par value. Authorized 10,000,000 shares   |   |                                    | -           |                                   |   | - |   |
| Common                  stock, $.01 par value. Authorized 100,000,000 shares;     |   |                                    |        |                                   |   |   |   |
| issued                  and outstanding 16,585,426 and 14,740,694, respectively   |   |                                    | 166         |                                   |   | 147 |   |
| Paid-in-capital                                                                   |   |                                    | 129,178     |                                   |   | 71,784 |   |
| Deferred                  stock-based compensation                                |   |                                    | (8,787      | )                                      |   | (7,540 | ) |
| Retained                  earnings                                                |   |                                    | 445         |                                   |   | 1,151 |   |
| Accumulated                  other comprehensive income                           |   |                                    | 108         |                                   |   | 43 |   |
| Total                  shareholders' equity                                  |   |                                    | 121,110     |                                   |   | 65,585 |   |
| Commitments                  and contingencies (note 5)                           |   |                                    |        |                                   |   |   |   |
|  Total                  liabilities and shareholders' equity                 |   | $                                       | 487,337     |                                   |   | 327,826 |   |

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Table          of Contents

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

Condensed

|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  | **Successor**                                                                                                                                                                              |                                                                                                                                                 | **Successor**                                                                                                                                                                                         |                                                                                                                                                            |   | **Predecessor**                   |
|-----------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  | **Three                Months**                                                                                                                                                            |                                                                                                                                                 | **Two                Months**                                                                                                                                                                         |                                                                                                                                                            |   | **One                Month**      |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  | **Ended                06/30/05**                                                                                                                                                          |                                                                                                                                                 | **Ended                06/30/04**                                                                                                                                                                     |                                                                                                                                                            |   | **Ended                04/30/04** |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                                                                                                                                            |   |                              |
| Revenues                                                                                            |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  | $                                                                                                                                                                                |                                    113,313                       |                                                                                                                                                                                                  |                                      64,485                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                      33,091            |
| Cost                of                sales:                                                        |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |
|                                                                                                     | Cost                of coal                sold                                   |                                                                                                                                                                                                  |                                                                                                                                                             |                                      90,965                                                  |                                                                                                                                                                             |                                      47,310            |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                      23,586 |
|                                                                                                     | Depreciation,                depletion, and amortization                          |                                                                                                                                                                                                  |                                      11,571             |                                                                                                                                                                                                  |                                        5,538                  |                                                                                                                                                            |                                                                                                                                                                                                  |                                        3,042                            |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Total                cost of                sales                                                                                                                |                                                                                                                                                                                                  |                                    102,536                                        |                                                                                                                                                            |                                      52,848                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                      26,628                                                  |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Gross                profit                                                                                                                                 |                                                                                                                                                                                                  |                                      10,777                             |                                                                                                                                                            |                                      11,637                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                        6,463                                       |
| Selling,                general, and administrative expenses                                        |                                                                              |                                        6,934                                       |                                                                                                                                                             |                                        2,566                                       |                                                                                                                                                                             |                                                                                                                                                            |                                        1,463                                       |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Total                operating                income                                                                                                        |                                                                                                                                                                                                  |                                        3,843                  |                                                                                                                                                            |                                        9,071                                       |                                                                                                                                                                                       |                                                                                                                                                 |                                        5,000                                       |
| Interest                expense (note 3)                                                            |                                                                              |                                                                                                                                                                                                  |                                        2,919  |                                                                                                                                                                                                  |                                        1,302                  |                                                                                                                                                            |                                                                                                                                                                                                  |                                           164            |
| Interest                income                                                                      |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                           (39) |                                                                                                                                                            |                                           (14)                      |                                                                                                                                                                                       |                                                                                                                                                 |                                               - |
| Charges                associated with repayment of debt (note 3)                                   |                                                                              |                                        2,524                                       |                                                                                                                                                             |                                               - |                                                                                                                                                                             |                                                                                                                                                            |                                               - |
| Miscellaneous                income, net                                                            |                                                                              |                                         (293)                                 |                                                                                                                                                             |                                         (289)                                 |                                                                                                                                                                             |                                                                                                                                                            |                                         (277)                                 |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Total                other expense,                net                                                                                                           |                                                                                                                                                                                                  |                                        5,111                  |                                                                                                                                                            |                                           999                       |                                                                                                                                                                                       |                                                                                                                                                 |                                         (113)                                 |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Income                (loss) before                reorganization items and                                                                                      |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             | income                taxes                                                                                                                                                                           |                                                                                                                                                                             |                                      (1,268)           |                                                                                                                                                                                                  |                                        8,072                            |                                                                                                                                                 |                                                                                                                                                                                                  |                                        5,113 |
| Reorganization                items, net (note                6)                                    |                                                                              |                                               - |                                                                                                                                                             |                                               - |                                                                                                                                                                             |                                                                                                                                                            |                                  (102,465)                                                                       |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Income                (loss) before                income taxes                                                                                                  |                                                                                                                                                                                                  |                                      (1,268)                            |                                                                                                                                                            |                                        8,072                                       |                                                                                                                                                                                       |                                                                                                                                                 |                                    107,578                                                             |
| Income                tax                (benefit) expense                                          |                                                                              |                                         (251)                                 |                                                                                                                                                             |                                        1,727                                       |                                                                                                                                                                             |                                                                                                                                                            |                                               - |
| Net                income                (loss)                                                     |                                                                              |                                                                                                                                                                                                  | $                                                                                                                                                                |                                      (1,017)                                                 |                                                                                                                                                                             |                                        6,345 |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                    107,578            |
| Earnings                (loss) per common share (note 7)                                            |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |
|                                                                                                     | Basic                earnings (loss)                per common share              | $                                                                                                                                                                                                     |                                        (0.07) |                                                                                                                                                                                                  |                                          0.46       |                                                                                                                                                            |                                                                                                                                                                                                  |                                   6,369.32                                                       |
|                                                                                                | Shares                used to                calculate basic earnings per share   |                                                                                                                                                                                                  |                                      14,461             |                                                                                                                                                                                                  |                                      13,800                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                             17 |
|                                                                                                | Diluted                earnings                (loss) per common share            | $                                                                                                                                                                                                     |                                        (0.07) |                                                                                                                                                                                                  |                                          0.43       |                                                                                                                                                            |                                                                                                                                                                                                  |                                   6,369.32                                                       |
|                                                                                                | Shares                used to                calculate diluted earnings per share |                                                                                                                                                                                                  |                                      14,461             |                                                                                                                                                                                                  |                                      14,629                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                             17 |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                                                                                                                                            |   |                              |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                                                                                                                                            |   |                              |
| See                accompanying notes to condensed consolidated financial                statements |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                            |                                                                                                                                                                                                  |

 

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Table          of Contents

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

Consolidated 

|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  | **Successor**                                                                                                                                                                              |                                                                                                                                                 | **Successor**                                                                                                                                                                                         |                                                                                                                                                            |   | **Predecessor**                   |
|-----------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  | **Six                Months**                                                                                                                                                              |                                                                                                                                                 | **Two                Months**                                                                                                                                                                         |                                                                                                                                                            |   | **Four                Months**    |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  | **Ended                06/30/05**                                                                                                                                                          |                                                                                                                                                 | **Ended                06/30/04**                                                                                                                                                                     |                                                                                                                                                            |   | **Ended                04/30/04** |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                                                                                                                                            |   |                              |
| Revenues                                                                                            |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  | $                                                                                                                                                                                |                                    211,188                             |                                                                                                                                                                                                  |                                      64,485                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                    113,949                       |
| Cost                of                sales:                                                        |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |
|                                                                                                     | Cost                of coal                sold                                   |                                                                                                                                                                                                  |                                                                                                                                                             |                                    171,907                                                             |                                                                                                                                                                             |                                      47,310                  |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                      89,294 |
|                                                                                                     | Depreciation,                depletion, and amortization                          |                                                                                                                                                                                                  |                                      21,049             |                                                                                                                                                                                                  |                                        5,538                  |                                                                                                                                                                  |                                                                                                                                                                                                  |                                      12,314                                       |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Total                cost of                sales                                                                                                                |                                                                                                                                                                                                  |                                    192,956                                        |                                                                                                                                                                  |                                      52,848                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                    101,608                                                             |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Gross                profit                                                                                                                                 |                                                                                                                                                                                                  |                                      18,232                             |                                                                                                                                                                  |                                      11,637                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                      12,341                                                  |
| Selling,                general, and administrative expenses                                        |                                                                              |                                      11,969                                                  |                                                                                                                                                             |                                        2,566                                       |                                                                                                                                                                             |                                                                                                                                                                  |                                        5,023                                       |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Total                operating                income                                                                                                        |                                                                                                                                                                                                  |                                        6,263                  |                                                                                                                                                                  |                                        9,071                                       |                                                                                                                                                                                       |                                                                                                                                                 |                                        7,318                                       |
| Interest                expense (note 3)                                                            |                                                                              |                                                                                                                                                                                                  |                                        5,105  |                                                                                                                                                                                                  |                                        1,302                  |                                                                                                                                                                  |                                                                                                                                                                                                  |                                           566            |
| Interest                income                                                                      |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                           (61) |                                                                                                                                                                  |                                           (14)                      |                                                                                                                                                                                       |                                                                                                                                                 |                                               - |
| Charges                associated with repayment of debt (note 3)                                   |                                                                              |                                        2,524                                       |                                                                                                                                                             |                                               - |                                                                                                                                                                             |                                                                                                                                                                  |                                               - |
| Miscellaneous                income, net                                                            |                                                                              |                                         (416)                                 |                                                                                                                                                             |                                         (289)                                 |                                                                                                                                                                             |                                                                                                                                                                  |                                         (330)                                 |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Total                other expense,                net                                                                                                           |                                                                                                                                                                                                  |                                        7,152                  |                                                                                                                                                                  |                                           999                       |                                                                                                                                                                                       |                                                                                                                                                 |                                           236                       |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Income                (loss) before                reorganization items and                                                                                      |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             | income                taxes                                                                                                                                                                           |                                                                                                                                                                             |                                         (889) |                                                                                                                                                                                                  |                                        8,072                            |                                                                                                                                                 |                                                                                                                                                                                                  |                                        7,082 |
| Reorganization                items, net (note                6)                                    |                                                                              |                                               - |                                                                                                                                                             |                                               - |                                                                                                                                                                             |                                                                                                                                                                  |                                  (100,907)                                                                       |
|                                                                                                |                                                                              |                                                                                                                                                                                                  | Income                (loss) before                income taxes                                                                                                  |                                                                                                                                                                                                  |                                         (889)            |                                                                                                                                                                  |                                        8,072                                       |                                                                                                                                                                                       |                                                                                                                                                 |                                    107,989                                                             |
| Income                tax                (benefit) expense                                          |                                                                              |                                         (183)                                 |                                                                                                                                                             |                                        1,727                                       |                                                                                                                                                                             |                                                                                                                                                                  |                                               - |
| Net                income                (loss)                                                     |                                                                              |                                                                                                                                                                                                  | $                                                                                                                                                                |                                         (706)                                 |                                                                                                                                                                             |                                        6,345       |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                    107,989            |
| Earnings                (loss) per common share (note 7)                                            |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  |
|                                                                                                     | Basic                earnings (loss)                per common share              | $                                                                                                                                                                                                     |                                        (0.05) |                                                                                                                                                                                                  |                                          0.46       |                                                                                                                                                                  |                                                                                                                                                                                                  |                                   6,393.67                                                       |
|                                                                                                | Shares                used to                calculate basic earnings per share   |                                                                                                                                                                                                  |                                      14,131             |                                                                                                                                                                                                  |                                      13,800                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                             17 |
|                                                                                                | Diluted                earnings                (loss) per common share            | $                                                                                                                                                                                                     |                                        (0.05) |                                                                                                                                                                                                  |                                          0.43       |                                                                                                                                                                  |                                                                                                                                                                                                  |                                   6,393.67                                                       |
|                                                                                                | Shares                used to                calculate diluted earnings per share |                                                                                                                                                                                                  |                                      14,131             |                                                                                                                                                                                                  |                                      14,629                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                             17 |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                                                                                                                                            |   |                              |
|                                                                                                     |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |                                                                                                                                                                  |                                                                                                                                                                                                  |                                                                                                                                                                                       |                                                                                                                                                 |                                                                                                                                                                                                  |                                                                                                                                                            |   |                              |
| See                accompanying notes to condensed consolidated financial                statements |                                                                              |                                                                                                                                                                                                  |                                                                                                                                                             |                                                                                                                                                                                                  |                                                                                                                                                                             |

 

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Table          of Contents

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

Consolidated 

| **Predecessor                  Company**                                                                                               |   | Common                  stock |   | Paid-in-capital |   | Deferred                  stock-based Compensation |   | Retained                  earnings (accumulated deficit) |   | Subscribed                  shares |   | Accumulated                  other comprehensive income (loss) |   | Total  |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|-----------------|--------|----------------------------------------------------|--------|----------------------------------------------------------|--------|------------------------------------|--------|----------------------------------------------------------------|--------|--------|--------|
|                                                                                                                                   |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |
| Balances,                  December 31, 2003                                                                                           |   | $                             | -      |            |   | 226                                                |   |                                                     | -      |                               |   | (107,989                                                       | )      |   | (821   | ) |   | (15,017 | ) |   | (123,601 | ) |
|                                                                                                                                   |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                            |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | 107,989                                                        |   |   | -      |   |   | - |   |   | 107,989 |   |
| Minimum                  pension liability adjustment                                                                                  |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | (692 | ) |   | (692 | ) |
| Comprehensive                  income                                                                                                  |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   | 107,297 |   |
|                                                                                                                                   |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| Application                  of fresh start accounting (note 2)                                                                        |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| Cancellation                    of Predecessor commonstock                                                                             |   |                          | -      |            |   | (226                                               | )      |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | - |   |   | (226 | ) |
| Elimination                    of Predecessor accumulatedother comprehensive loss and subscribed                    shares   |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | -                                                              |   |   | 821    |   |   | 15,709 |   |   | 16,530 |   |
|                                                                                                                                   |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |    |   |
| Balances,                  April 30, 2004                                                                                              |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | - |   |   | - |   |
|                                                                                                                                   |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| **Successor                  Company**                                                                                            |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of Successor common stock                                                                                    |   |                          | 138    |            |   | 63,153                                             |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | - |   |   | 63,291 |   |
| Net                  income                                                                                                            |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | 1,976                                                          |   |   | -      |   |   | - |   |   | 1,976 |   |
| Unrealized                  gain on marketable securities, net                                                                         |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | 43 |   |   | 43 |   |
| Comprehensive                  Income                                                                                                  |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   | 2,019 |   |
| Deferred                        compensation related to restricted stock awards                                                        |   |                          | 9      |            |   | 8,631                                              |   |                                                     | (8,640 | )                                  |   | -                                                              |   |   | -      |   |   | - |   |   | - |   |
| Cost                  to register common stock                                                                                         |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | (825                                                           | )      |   | -      |   |   | - |   |   | (825 | ) |
| Amortization                    of deferred stock-based                    compensation                                                |   |                          | -      |            |   | -                                                  |   |                                                     | 1,100  |                               |   | -                                                              |   |   | -      |   |   | - |   |   | 1,100 |   |
| Balances,                  December 31, 2004                                                                                           |   |                          | 147    |            |   | 71,784                                             |   |                                                     | (7,540 | )                                  |   | 1,151                                                          |   |   | -      |   |   | 43 |   |   | 65,585 |   |
|                                                                                                                                   |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                              |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | (706                                                           | )      |   | -      |   |   | - |   |   | (706 | ) |
| Unrealized                  gain on marketable securities, net                                                                         |   |                          | -      |            |   | -                                                  |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | 65 |   |   | 65 |   |
| Comprehensive                  Income                                                                                                  |   |                          |   |            |   |                                               |   |                                                     |   |                               |   |                                                           |   |   |   |   |   |   |   |   | (641 | ) |
| Deferred                    compensation related to restricted stock                     awards                                   |   |                          | -      |            |   | 2,150                                              |   |                                                     | (2,150 | )                                  |   | -                                                              |   |   | -      |   |   | - |   |   | - |   |
| Issuance                      of common stock net of offering costs of                      $3,359                                     |   |                          | 15     |            |   | 45,376                                             |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | - |   |   | 45,391 |   |
| Common                    stock issued in acquisition of Triad Mining, Inc                                                             |   |                          | 4      |            |   | 10,996                                             |   |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   |   |   |   | 11,000 |   |
| Tax                  withholding on restricted shares                                                                                  |   |                          | -      |            |   | (1,128                                             | )      |                                                     | -      |                               |   | -                                                              |   |   | -      |   |   | - |   |   | (1,128 | ) |
| Amortization                    of deferred stock-based compensation                                                                   |   |                          | -      |            |   | -                                                  |   |                                                     | 903    |                               |   | -                                                              |   |   | -      |   |   | - |   |   | 903 |   |
| Balances,                  June 30, 2005                                                                                               |   | $                             | 166    |            |   | 129,178                                            |   |                                                     | (8,787 | )                                  |   | 445                                                            |   |   | -      |   |   | 108 |   |   | 121,110 |   |

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Table          of Contents

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

Consolidated 

|                                                                     |                                                                                      |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                    | **Successor**                                                                                                                     |                                                                                                                                                    | **Successor**                                                                                                                               |   |   | **Predecessor**                   |
|---------------------------------------------------------------------|-------------------------------------------------------------------------------------------|-------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------|
|                                                                     |                                                                                      |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                    | **Six                Months**                                                                                                     |                                                                                                                                                    | **Two                Months**                                                                                                               |   |   | **Four                Months**    |
|                                                                     |                                                                                      |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                    | **Ended                06/30/05**                                                                                                 |                                                                                                                                                    | **Ended                06/30/04**                                                                                                           |   |   | **Ended                04/30/04** |
| Cash                flows                from operating activities: |                                                                                      |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |
|                                                                     | Net                income                (loss)                                           |                                |                                                                                                                                                        |                                                                                                            | $                                                                                                                                                                 |                                 (706)                        |                                                                                                                                                              |                                  6,345                                             |                                                                                                                                                    |                                                                                                                                                                    |                              107,989                             |
|                                                                     | Adjustments                to                reconcile net income to net cash provided by |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                                                                                                                                                    |
|                                                                     |                                                                                      | operating                activities |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                    |                                                                                                                              |
|                                                                     |                                                                                      |                                | Fresh                start                accounting adjustment                                                                                             |                                                                                                            |                                      -         |                                                                                                                                         |                                       -   |                                                                                                                                                                    |                                                                                                                                                    |                            (111,533)                                                                             |
|                                                                     |                                                                                      |                                | Non-cash                reorganization items                                                                                                                |                                                                                                            |                                      -         |                                                                                                                                         |                                       -   |                                                                                                                                                                    |                                                                                                                                                    |                                10,010                                                        |
|                                                                     |                                                                                      |                                | Depreciation,                depletion, and amortization                                                                                               |                                                                                                            |                              21,049                                                              |                                                                                                                                         |                                  5,538                                       |                                                                                                                                                                    |                                                                                                                                                    |                                12,313                                                        |
|                                                                     |                                                                                      |                                | Accretion                of asset                retirement obligations                                                                                     |                                                                                                            |                                   678                                   |                                                                                                                                         |                                     199                       |                                                                                                                                                                    |                                                                                                                                                    |                                     397                             |
|                                                                     |                                                                                      |                                | Amortization                of                deferred financing costs                                                                                      |                                                                                                            |                                   273                                   |                                                                                                                                         |                                       -   |                                                                                                                                                                    |                                                                                                                                                    |                                        -   |
|                                                                     |                                                                                      |                                | Amortization                of                deferred stock-based compensation                                                                             |                                                                                                            |                                   903                                   |                                                                                                                                         |                                     153                       |                                                                                                                                                                    |                                                                                                                                                    |                                        -   |
|                                                                     |                                                                                      |                                | Deferred                income tax                benefit                                                                                              |                                                                                                            |                                   (22)                                  |                                                                                                                                         |                                   (511)                                 |                                                                                                                                                                    |                                                                                                                                                    |                                        -   |
|                                                                     |                                                                                      |                                | (Gain)                loss on sale                or disposal of property, plant, and equipment                                                             |                                                                                                            |                                     11                        |                                                                                                                                         |                                       (8)           |                                                                                                                                                                    |                                                                                                                                                    |                                       19                  |
|                                                                     |                                                                                      |                                | Write-off                of deferred                financing costs                                                                                    |                                                                                                            |                                1,733                                                   |                                                                                                                                         |                                       -   |                                                                                                                                                                    |                                                                                                                                                    |                                        -   |
|                                                                     |                                                                                      |                                | Changes                in operating                assets and liabilities:                                                                                  |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                                                                                                                                                    |                                                                                                                                                    |                                                                                                                                                                    |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Receivables                                                                                                     |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                1,470                                                         |                                                                                                                                                    |                                  5,339                                             |                                                                                                                              |                                                                                                                                                    |                              (12,883)                                      |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Inventories                                                                                                     |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                              (6,346)                                                                   |                                                                                                                                                    |                                   (703)                                       |                                                                                                                              |                                                                                                                                                    |                                (4,028)                           |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Prepaid                royalties and                other current assets                                        |                                                                                                                                                              |                                4,296                              |                                                                                                                                                              |                                (1,442)                                                       |                                                                                                                                                    |                                                                                                                                                                    |                                (1,236)                 |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Other                assets                                                                                     |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                 (140)                                                   |                                                                                                                                                    |                                (1,412)                                                       |                                                                                                                              |                                                                                                                                                    |                                     132 |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Accounts                payable                                                                                 |                                                                                                                                                              |                                2,645                              |                                                                                                                                                              |                                (6,612)                                                       |                                                                                                                                                    |                                                                                                                                                                    |                                (2,921)                 |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Accrued                salaries,                wages, and employee benefits                                    |                                                                                                                                                              |                                   599              |                                                                                                                                                              |                                   (710)                                       |                                                                                                                                                    |                                                                                                                                                                    |                                  1,429       |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Accrued                taxes                                                                                    |                                                                                                                                                              |                                                                                                                                         |                                 (846)                                             |                                                                                                                                                                    |                                  2,898                             |                                                                                                                                                                    |                                                                                                                              |                                     139             |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Other                current                liabilities                                                         |                                                                                                                                                              |                                2,528                              |                                                                                                                                                              |                                     210                             |                                                                                                                                                    |                                                                                                                                                                    |                                  1,535       |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Workers'                compensation                benefits                                                    |                                                                                                                                                              |                                   114              |                                                                                                                                                              |                                     654                             |                                                                                                                                                    |                                                                                                                                                                    |                                  1,417       |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Black                lung                benefits                                                               |                                                                                                                                                              |                                   239              |                                                                                                                                                              |                                   (295)                                       |                                                                                                                                                    |                                                                                                                                                                    |                                   (547) |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Pension                obligations                                                                              |                                                                                                                                                              |                              (1,845)                                        |                                                                                                                                                              |                                (1,123)                                                       |                                                                                                                                                    |                                                                                                                                                                    |                                   (609) |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Asset                retirement                obligation                                                       |                                                                                                                                                              |                                 (256)                        |                                                                                                                                                              |                                     (97)                            |                                                                                                                                                    |                                                                                                                                                                    |                                   (108) |
|                                                                     |                                                                                      |                                |                                                                                                                                                        | Other                liabilities                                                                                |                                                                                                                                                              |                                                                                                                                         |                                   (56)                                  |                                                                                                                                                                    |                                       (2) |                                                                                                                                                                    |                                                                                                                              |                                       (2) |
|                                                                |                                                                                      |                                |                                                                                                                                                        |                                                                                                            | Net                cash provided by                operating activities                                                                                           |                                                                                                                                         |                              26,321                                                              |                                                                                                                                                                    |                                  8,421                             |                                                                                                                                                                    |                                                                                                                              |                                  1,513                             |
| Cash                flows                from investing activities: |                                                                                      |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |
|                                                                     | Additions                to                property, plant, and equipment                 |                                |                            (32,899)                                                                  |                                                                                                            |                                (3,877)                                                 |                                                                                                                                         |                                                                                                                                                              |                                (9,521)                                                       |
|                                                                     | Payments                for                acquisitions, net of cash acquired             |                                |                            (58,979)                                                                  |                                                                                                            |                                       -   |                                                                                                                                         |                                                                                                                                                              |                                        -   |
|                                                                     | Proceeds                from sale of                property, plant, and equipment        |                                |                                     49                  |                                                                                                            |                                       12            |                                                                                                                                         |                                                                                                                                                              |                                       86                  |
|                                                                     | Increase                in                restricted cash                                 |                                |                                                                                                                                                        |                              (4,858)           |                                                                                                                                                              |                                     (14) |                                                                                                                                                              |                                                                                                                                                                    |                                     (28)            |
|                                                                |                                                                                      |                                |                                                                                                                                                        |                                                                                                            | Net                cash used in                investing activities                                                                                               |                                                                                                                                         |                            (96,687)                                                                        |                                                                                                                                                                    |                                (3,879)                                       |                                                                                                                                                                    |                                                                                                                              |                                (9,463)                                       |
| Cash                flows                from financing activities: |                                                                                      |                                |                                                                                                                                                        |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |
|                                                                     | Proceeds                from                borrowings                                    |                                |                                                                                                                                                        |                            150,000                       |                                                                                                                                                              |                                20,000                             |                                                                                                                                                              |                                                                                                                                                                    |                                  6,400                             |
|                                                                     | Repayment                of                long-term debt                                 |                                |                            (95,209)                                                                  |                                                                                                            |                                       -   |                                                                                                                                         |                                                                                                                                                              |                                        -   |
|                                                                     | Principal                payments on                short-term debt                       |                                |                                      -   |                                                                                                            |                                (6,400)                                                 |                                                                                                                                         |                                                                                                                                                              |                                        -   |
|                                                                     | Net                proceeds from                issuance of common stock                  |                                |                              45,391                                                        |                                                                                                            |                                       -   |                                                                                                                                         |                                                                                                                                                              |                                        -   |
|                                                                     | Principal                payments                under capital lease obligations          |                                |                                 (248)                                       |                                                                                                            |                                     (89)                      |                                                                                                                                         |                                                                                                                                                              |                                   (164)                                       |
|                                                                     | Capitalized                deferred                financing costs                        |                                |                              (7,409)                                                       |                                                                                                            |                                                                                                                                                              |                                                                                                                                         |                                                                                                                                                              |                                (1,874)                                                       |
|                                                                     |                                                                                      |                                |                                                                                                                                                        |                                                                                                            | Net                cash provided by                financing activities                                                                                           |                                                                                                                                         |                              92,525                                                              |                                                                                                                                                                    |                                13,511                                        |                                                                                                                                                                    |                                                                                                                              |                                  4,362                             |
|                                                                |                                                                                      |                                |                                                                                                                                                        |                                                                                                            | Increase                in                cash                                                                                                                    |                                                                                                                                         |                              22,159                                                              |                                                                                                                                                                    |                                18,053                                        |                                                                                                                                                                    |                                                                                                                              |                                (3,588)                                       |
| Cash                at                beginning of period           |                                                                                      |                                |                                                                                                                                                        |                                3,879 |                                                                                                                                                              |                                  1,301                  |                                                                                                                                                              |                                                                                                                                                                    |                                  4,890                             |
| Cash                at end                of period                 |                                                                                      |                                |                                                                                                                                                        | $                                                                                                               |                              26,038                                                              |                                                                                                                                         |                                19,354                                                  |                                                                                                                                                                    |                                                                                                                                                    |                                  1,302                                             |

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Table          of Contents

**JAMES      RIVER COAL COMPANY**

**AND      SUBSIDIARIES**

Notes

| **(1)** | **Summary                of Significant Accounting Policies and Other                Information** |
|---------|----------------------------------------------------------------------------------------------------|

|  | ***(a)*** | ***Description                of Business and Principles of                Consolidation*** |
|--|-----------|---------------------------------------------------------------------------------------------|

|  | ***(b)*** | ***Bankruptcy                and Restructuring*** |
|--|-----------|---------------------------------------------------|

*Financial      Reporting by Entities in Reorganization under the Bankruptcy      Code*

|  | ***(c)*** | ***Restricted                Cash*** |
|--|-----------|--------------------------------------|

|  | ***(d)*** | ***Inventories*** |
|--|-----------|-------------------|

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Table          of Contents

|  | ***(e)*** | ***Reclamation                Costs*** |
|--|-----------|----------------------------------------|

*Accounting      for Asset Retirement Obligations*

|  | ***(f)*** | ***Workers’                Compensation*** |
|--|-----------|--------------------------------------------------|

|  | ***(g)*** | ***Black                Lung Benefits*** |
|--|-----------|------------------------------------------|

|  | ***(h)*** | ***Revenue                Recognition*** |
|--|-----------|------------------------------------------|

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Table          of Contents

|  | ***(i)*** | ***Income                Taxes*** |
|--|-----------|-----------------------------------|

|  | ***(j)*** | ***Equity-Based                Compensation Plan*** |
|--|-----------|-----------------------------------------------------|

*Accounting      for Stock-Based Compensation*

|                                                                |   |   | **Three                  Months****Ended****June                  30, 2005 ** |   |   | **Six                  Months****Ended****June                  30, 2005** |   |
|---------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|
| Net                  loss, as reported                              |   | $      | (1,017                                                                             | )      |   | (706                                                                       | )      |
| Add:                  Net stock-based employee compensation         |   |   |                                                                               |   |   |                                                                       |   |
| expense                  recorded for restricted and                |   |   |                                                                               |   |   |                                                                       |   |
| performance                  based stock grants                     |   |   | 364                                                                                |   |   | 722                                                                        |   |
|                                                                |   |   |                                                                               |   |   |                                                                       |   |
| Deduct:                  Net stock-based employee compensation      |   |   |                                                                               |   |   |                                                                       |   |
| expense                  for options and restricted and performance |   |   |                                                                               |   |   |                                                                       |   |
| based                  stock grants determined under Black-Scholes  |   |   |                                                                               |   |   |                                                                       |   |
| option                  pricing model                               |   |   | (361                                                                               | )      |   | (650                                                                       | )      |
|                                                                |   |   |                                                                               |   |   |                                                                       |   |
| Pro                  forma net loss                                 |   | $      | (1,014                                                                             | )      |   | (634                                                                       | )      |
|                                                                |   |   |                                                                               |   |   |                                                                       |   |
| Income                  per share:                                  |   |   |                                                                               |   |   |                                                                       |   |
| Basic                  and diluted- as reported                     |   | $      | (0.07                                                                              | )      |   | (0.05                                                                      | )      |
| Basic                  and diluted- pro forma                       |   | $      | (0.07                                                                              | )      |   | (0.04                                                                      | )      |

*“Share-Based      Payment”*

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Table          of Contents

|  | **(2)** | **Fresh                Start Accounting** |
|--|---------|-------------------------------------------|

*Business      Combinations*

| Estimated                enterprise value of the reorganized company                            |   | $      | 155,000 |   |
|-------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| Borrowings                under credit facility                                                 |   |   | (6,400  | )      |
| Capital                leases assumed                                                           |   |   | (1,396  | )      |
| Cash                balance excluded from enterprise value                                      |   |   | 1,301   |   |
| Administrative                claims payable excluded from enterprise value                     |   |   | (10,214 | )      |
|                                                                                            |   |   | 138,291 |   |
| Less:                new secured debt issued to extinguish prepetition debt                     |   |   | 75,000  |   |
| Fair                value of common shares issued to extinguish prepetition                debt |   | $      | 63,291  |        |

----

Table          of Contents

**James      River Coal Company**

**Reorganized      Condensed Consolidated Balance Sheet**

**As      of April 30, 2004**

**(in      thousands)**

**(Unaudited)**

|                                                                                    |   |                                  |    | **Fresh                Start Adjustments** |   |   |   |                                    |   |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------------|--------|--------|--------|-----------------------------------------|--------|
|   **Assets**                                                                  |   | **Predecessor****Company****4/30/04** |    |  **Debt****Extinguishment**           |   |   |   |  **Reorganization****Adjustments** |   |   |   | **Successor****Company****4/30/04** |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |
| Cash                                                                                    |   | $                                     | 1,301   |                                       |   | -      |   |                                    |   |   |   | - |   |   |   |   |   | 1,301 |   |
| Receivables                                                                             |   |                                  | 35,838  |                                       |   | -      |   |                                    |   |   |   | - |   |   |   |   |   | 35,838 |   |
| Inventories                                                                             |   |                                  | 11,930  |                                       |   | -      |   |                                    |   |   |   | 1,079 |   |   | (2) |   |   | 13,009 |   |
| Prepaid                royalties                                                        |   |                                  | 9,932   |                                       |   | -      |   |                                    |   |   |   | (362 | ) |   | (2) |   |   | 9,570 |   |
| Other                current assets                                                     |   |                                  | 4,463   |                                       |   | -      |   |                                    |   |   |   | (347 | ) |   | (2) |   |   | 4,116 |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Total                current assets**                                                 |   |                                  | 63,464  |                                       |   | -      |   |                                    |   |   |   | 370 |   |   |   |   |   | 63,834 |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Land                and mineral rights                                                  |   |                                  | 223,004 |                                       |   | -      |   |                                    |   |   |   | (57,567 | ) |   | (2) |   |   | 165,437 |   |
| Buildings,                machinery, and equipment                                      |   |                                  | 236,901 |                                       |   | -      |   |                                    |   |   |   | (155,050 | ) |   | (2) |   |   | 81,851 |   |
| Mine                development costs                                                   |   |                                  | 12,984  |                                       |   | -      |   |                                    |   |   |   | (12,984 | ) |   | (2) |   |   | - |   |
| Construction-in-progress                                                                |   |                                  | 974     |                                       |   | -      |   |                                    |   |   |   | - |   |   |   |   |   | 974 |   |
|                                                                                    |   |                                  | 473,863 |                                       |   | -      |   |                                    |   |   |   | (225,601 | ) |   |   |   |   | 248,262 |   |
| Less                accumulated depreciation,depletion,                and amortization |   |                                  | 219,604 |                                       |   | -      |   |                                    |   |   |   | (219,604 | ) |   | (2) |   |   | - |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Net                property, plant, and equipment**                              |   |                                  | 254,259 |                                       |   | -      |   |                                    |   |   |   | (5,997 | ) |   |   |   |   | 248,262 |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Restricted                cash                                                          |   |                                  | 8,348   |                                       |   | -      |   |                                    |   |   |   | - |   |   |   |   |   | 8,348 |   |
| Other                long-term assets                                                   |   |                                  | 6,518   |                                       |   | (3,110 | )      |                                    | (1)    |   |   | (734 | ) |   | (2) |   |   | 2,674 |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Total                assets**                                                         |   | $                                     | 332,589 |                                       |   | (3,110 | )      |                                    |   |   |   | (6,361 | ) |   |   |   |   | 323,118 |   |
|                                                                                    |   |                                  |    |                                       |   |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |

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Table          of Contents

**James      River Coal Company**

**Reorganized      Condensed Consolidated Balance Sheet**

**As      of April 30, 2004**

**(in      thousands)**

**(Unaudited)**

|                                                                                                      |   |                                  |                       | **Fresh                Start Adjustments**   |         |                       |   |                                    |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------------------------|----------------------------------------------|--------------|----------------------------|--------|-----------------------------------------|--------|
|  **Liabilities                and Shareholders’ Equity (Deficit)**                             |   | **Predecessor****Company****4/30/04** |                       |  **Debt                Extinguishment** |         |                       |   |  **Reorganization****Adjustments** |   |   |   | **Successor****Company****4/30/04** |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |
| Borrowings                under DIP credit agreement                                                      |   | $                                     | 6,400                      |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 6,400 |   |
| Current                installments of obligations under capital leases                                   |   |                                  | 749                        |                                         |         | -                          |   |                                    |   |   |   | (272 | ) |   | (3) |   |   | 477 |   |
| Accounts                payable                                                                           |   |                                  | 26,293                     |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 26,293 |   |
| Accrued                salaries, wages and employee benefits                                              |   |                                  | 4,501                      |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 4,501 |   |
| Workers’                compensation benefits                                                       |   |                                  | 9,500                      |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 9,500 |   |
| Black                lung benefits                                                                        |   |                                  | 2,500                      |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 2,500 |   |
| Accrued                taxes                                                                              |   |                                  | 3,588                      |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 3,588 |   |
| Other                current liabilities                                                                  |   |                                  | 4,037                      |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 4,037 |   |
| **Total                current liabilities**                                                              |   |                                  | 57,568                     |                                         |         | -                          |   |                                    |   |   |   | (272 | ) |   |   |   |   | 57,296 |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Long                term debt                                                                             |   |                                  | -                          |                                         |         | 75,000                     |   |                                    | (1)    |   |   | - |   |   |   |   |   | 75,000 |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Noncurrent                portion of workers’  compensation benefits                      |   |                                  | 42,699                     |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 42,699 |   |
| Noncurrent                portion of black lung  benefits                                       |   |                                  | 10,661                     |                                         |         | -                          |   |                                    |   |   |   | 13,610 |   |   | (4) |   |   | 24,271 |   |
| Pension                obligations                                                                        |   |                                  | 14,267                     |                                         |         | -                          |   |                                    |   |   |   | 3,363 |   |   | (5) |   |   | 17,630 |   |
| Asset                retirement obligations                                                               |   |                                  | 13,963                     |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 13,963 |   |
| Obligations                under capital leases,  excluding current                installments |   |                                  | 1,159                      |                                         |         | -                          |   |                                    |   |   |   | (240 | ) |   | (3) |   |   | 919 |   |
| Deferred                income taxes                                                                      |   |                                  | -                          |                                         |         | -                          |   |                                    |   |   |   | 27,391 |   |   | (6) |   |   | 27,391 |   |
| Other                long term liabilities                                                                |   |                                  | 658                        |                                         |         | -                          |   |                                    |   |   |   | - |   |   |   |   |   | 658 |   |
|                                                                                                      |   |                             |                  |                                         |    |                  |   |                                    |   |   |    |                  |   |   |   |   |    |                  |   |
| **Total                other liabilities**                                                                |   |                                  | 83,407                     |                                         |         | -                          |   |                                    |   |   |   | 44,124 |   |   |   |   |   | 127,531 |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                subject to compromise                                                          |   |                                  | 319,451                    |                                         |         | (319,451                   | )      |                                    | (1)    |   |   | - |   |   |   |   |   | - |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Total                liabilities**                                                                      |   |                                  | 460,426                    |                                         |         | (244,451                   | )      |                                    |   |   |   | 43,852 |   |   |   |   |   | 259,827 |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Common                stock                                                                               |   |                                  | -                          |                                         |         | 138                        |   |                                    | (1)    |   |   | - |   |   |   |   |   | 138 |   |
| Paid-in-capital                                                                                           |   |                                  | 226                        |                                         |         | 63,153                     |   |                                    | (1)    |   |   | (226 | ) |   | (7) |   |   | 63,153 |   |
| Retained                earnings (accumulated deficit)                                                    |   |                                  | (111,533                   | )                                            |         | 178,050                    |   |                                    | (1)    |   |   | (66,517 | ) |   | (7) |   |   | - |   |
| Subscribed                shares                                                                          |   |                                  | (821                       | )                                            |         | -                          |   |                                    |   |   |   | 821 |   |   | (7) |   |   | - |   |
| Accumulated                other comprehensive income (loss)                                         |   |                                  | (15,709                    | )                                            |         | -                          |   |                                    |   |   |   | 15,709 |   |   | (7) |   |   | - |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Total                shareholders’ equity (deficit)**                                             |   |                                  | (127,837                   | )                                            |         | 241,341                    |   |                                    |   |   |   | (50,213 | ) |   |   |   |   | 63,291 |   |
|                                                                                                      |   |                                  |                       |                                         |         |                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Total                liabilities and shareholders’  equity**                                 |   | $                                     | 332,589                    |                                         |         | (3,110                     | )      |                                    |   |   |   | (6,361 | ) |   |   |   |   | 323,118 |   |

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Table          of Contents

**The      following is a description of the fresh start adjustments for debt      extinguishment and reorganization adjustments:**

**Extinguishment      of Debt**

|   | (1) | Liabilities                subject to compromise that were extinguished in bankruptcy consist                of the                following (amounts in 000’s): |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Pre-petition                bank loan agreement        |   | $      | 207,807 |   |
|--------------------------------------------------------|--------|--------|---------|--------|
| Pre-petition                senior note                |   |   | 37,953  |   |
| Accrued                and unpaid interest             |   |   | 12,234  |   |
| Terminated                interest rate swap           |   |   | 8,434   |   |
| Total                secured                           |   |   | 266,428 |   |
|                                                   |   |   |    |   |
| Promissory                notes                        |   |   | 5,176   |   |
| Redeemable                preferred stock              |   |   | 8,500   |   |
| Accounts                payable and other              |   |   | 39,347  |   |
| Total                unsecured                         |   |   | 53,023  |   |
|                                                   |   |   |    |   |
| Total                liabilities subject to compromise |   | $      | 319,451 |   |

| Liabilities                  subject to compromise                               |   | $                  319,451 |    |
|----------------------------------------------------------------------------------|--------|----------------------------|---------|
| Less:                  Assets of rabbi trust transferred to creditors            |   | (3,110)                    |    |
| Less:                  New secured debt issued in exchange for pre-petition debt |   |                       | (75,000 | ) |
| Less:                  Fair value of common shares issued                        |   |                       | (63,291 | ) |
| Gain                  on extinguishment of pre-petition claims                   |   | $                          | 178,050 |   |

**Reorganization      Adjustments**

|   | (2) | In                connection with the application of fresh start accounting, the Company                made adjustments aggregating approximately $6.3 million to record                its                identifiable assets at fair value as follows: (amounts in                000’s): |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                      |   | Increase/(Decrease)  |     |
|---------------------------------------------------------------------------|--------|---------------------------|----------|
| Coal                inventories                                           |   | $                         | 1,079    |   |
| Prepaid                royalties                                          |   |                      | (362     | ) |
| Other                current assets                                       |   |                      | (347     | ) |
| Land                and mineral rights                                    |   |                      | (57,567  | ) |
| Buildings,                machinery and equipment                         |   |                      | (155,050 | ) |
| Mine                development costs                                     |   |                      | (12,984  | ) |
| Less                accumulated depreciation, depletion, and amortization |   |                      | 219,604  |   |
| Other                long-term assets                                     |   |                      | (734     | ) |
| Total                fair value adjustments to identifiable assets        |   | $                         | (6,361   | ) |

|   | (3) | Contractual                terms of certain capital lease agreements were renegotiated during                bankruptcy. Obligations under capital leases have been adjusted to                reflect                the revised terms. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | The                liability for black lung benefits has been adjusted to reflect the                total                discounted benefit obligation. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | The                pension liability has been adjusted to reflect the total discounted                projected benefit obligation of the                plan. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | Deferred                income taxes have been adjusted to reflect differences in the book                and tax                basis of the revalued assets and liabilities of the Company after                application of fresh start accounting. In addition to the $27.4 million                increase in deferred tax liability that was originally recorded in                connection with the fresh start accounting adjustment, the Company                has                recorded an additional increase in the deferred tax liability of                $15.9                million to adjust the fair values assigned to certain assets and                liabilities for purposes of applying fresh start accounting. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table          of Contents

|  | (7) | The                equity of the predecessor company, including subscribed shares and                accumulated other comprehensive loss, has been eliminated in fresh                start                accounting. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(3)** | **Long                Term Debt and Interest                Expense** |
|---------|-----------------------------------------------------------------------|

|                                                            |   | **June                30,****2005** |    | **December                31,****2004** |   |
|-----------------------------------------------------------------|--------|-------------------------------------|---------|-----------------------------------------|--------|
| Senior                Notes                                     |   | $                                   | 150,000 |                                    |   | - |   |
| Senior                Secured Credit Facility - Revolver        |   |                                | -       |                                    |   | - |   |
| Prior                Senior Secured Credit Facility - Term loan |   |                                | -       |                                    |   | 20,000 |   |
| Prior                Term Credit Facility                       |   |                                | -       |                                    |   | 75,000 |   |
| Other                                                           |   |                                | 259     |                                    |   | - |   |
| Total                long-term debt                             |   |                                | 150,259 |                                    |   | 95,000 |   |
| Less                amounts classified as current               |   |                                | 259     |                                    |   | 2,700 |   |
| Total                long-term debt, less current maturities    |   | $                                   | 150,000 |                                    |   | 92,300 |   |

| ***(a)*** | ***Senior                Notes*** |
|-----------|-----------------------------------|

| ***(b)*** | ***Senior                Secured Credit                Facility*** |
|-----------|--------------------------------------------------------------------|

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Table          of Contents

| ***(c)*** | ***Prior                Senior Secured Credit Facility and Prior Term Credit Facility*** |
|-----------|------------------------------------------------------------------------------------------|

| ***(d)*** | ***Interest                Expense and Other*** |
|-----------|-------------------------------------------------|

| **(4)** | **Equity** |
|---------|------------|

|   | ***(a)*** | ***Preferred                Stock and Shareholder Rights                Agreement*** |
|--------|-----------|--------------------------------------------------------------------------------------|

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Table          of Contents

|  | ***(b)*** | ***Equity                Offering*** |
|--|-----------|--------------------------------------|

|  | ***(c)*** | ***Redeemable                Preferred Stock (Predecessor                Company)*** |
|--|-----------|--------------------------------------------------------------------------------------|

*Accounting      for Certain Financial Instruments with Characteristics of both Liabilities      and      Equity*

| **(5)** | **Commitments                and Contingencies** |
|---------|--------------------------------------------------|

| **(6)** | **Reorganization                Items, Net** |
|---------|----------------------------------------------|

|                                                                                               |   | **Predecessor                Company****One                Months****Ended                04/30/04** |     | **Predecessor                Company****Four                Months****Ended                04/30/04** |   |
|----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|----------|-------------------------------------------------------------------------------------------------------|--------|
|                                                                                               |   |                                                                                                 |     |                                                                                                  |   |
| Professional                fees andadministrative                expenses                         |   | $                                                                                                    | 9,077    |                                                                                                  |   | 10,685 |   |
| Interest                income                                                                     |   |                                                                                                 | (9       | )                                                                                                     |   | (59 | ) |
| Gain                on extinguishment of debt and freshstart                accounting adjustments |   |                                                                                                 | (111,533 | )                                                                                                     |   | (111,533 | ) |
|                                                                                               |   | $                                                                                                    | (102,465 | )                                                                                                     |   | (100,907 | ) |

| **(7)** | **Earnings                Per Share** |
|---------|---------------------------------------|

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Table          of Contents

|                                                         |                                                         |   | **Successor **                                                                                                                                                                 |   | **Successor**                                                                                                           | ** ** | **Predecessor**                                                                                                                                                                                             |
|---------------------------------------------------------|--------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                         |                                                         |   | **Three                Months                Ended**                                                                                                                                |   | **Two                Months                Ended**                                                                      | ** ** | **One                Month                Ended**                                                                                                                                                           |
|                                                         |                                                         |   | **06/30/05**                                                                                                                                                                        |   | **06/30/04**                                                                                                            | ** ** | **04/30/04**                                                                                                                                                                                                |
|                                                         |                                                         |   |                                                                                                                                                                                |   |                                                                                                                    |       |                                                                                                                                                                                                        |
| Weighted                average number of common shares |                                                         |   |                                                                                                                                                                                |   |                                                                                                                    |
|                                                         | outstanding:                                                 |   |                                                                                                                                                                                |   |                                                                                                                    |       |                                                                                                                                                                                                        |
|                                                         | Basic                                                        |   |                            14,461,057                                                                                        |   |                            13,799,994                            |       |                                      16,890                                                        |
|                                                         | Effect                of dilutive                instruments |   |                                          -   |   |                                 829,000 |       |                                              -   |
|                                                         | Diluted                                                      |   |                            14,461,057                                                                                        |   |                            14,628,994                            |       |                                      16,890                                                        |
|                                                         |                                                         |   |                                                                                                                                                                                |   |                                                                                                                    |       |                                                                                                                                                                                                        |
|                                                         |                                                         |   |                                                                                                                                                                                |   |                                                                                                                    |       |                                                                                                                                                                                                        |
|                                                         |                                                         |   |  Successor                                                                                                                                                           |   |  Successor                                                                                                    | ** ** |  Predecessor                                                                                                                                                                                      |
|                                                         |                                                         |   |  Six                Months Ended                                                                                                                                          |   |  Two                Months Ended                                                                              | ** ** |  Four                Months Ended                                                                                                                                                                 |
|                                                         |                                                         |   |  06/30/05                                                                                                                                                                 |   |  06/30/04                                                                                                     | ** ** |  04/30/04                                                                                                                                                                                         |
|                                                         |                                                         |   |                                                                                                                                                                                |   |                                                                                                                    |       |                                                                                                                                                                                                        |
| Weighted                average number of common shares |                                                         |   |                                                                                                                                                                                |   |                                                                                                                    |
|                                                         | outstanding:                                                 |   |                                                                                                                                                                                |   |                                                                                                                    |       |                                                                                                                                                                                                        |
|                                                         | Basic                                                        |   |                            14,130,525                                                                                        |   |                            13,799,994                            |       |                                      16,890                                                        |
|                                                         | Effect                of dilutive                instruments |   |                                          -   |   |                                 829,000 |       |                                              -   |
|                                                         | Diluted                                                      |   |                            14,130,525                                                                                        |   |                            14,628,994                            |       |                                      16,890                                                        |

 

On        May 6,        2004 the Company emerged from bankruptcy under a joint plan of reorganization.        On that date the Company cancelled all existing equity securities and issued        13,799,994 shares of new common stock, which were distributed pro-rata to        the        pre-petition secured creditors.

| **(8)** | **Pension                Expense** |
|---------|------------------------------------|

----

Table          of Contents

|                                                                     |                                                            |                            |                                  | **Successor**                                                |                                | **Predeccessor**                                           |
|--------------------------------------------------------------------------|-----------------------------------------------------------------|---------------------------------|---------------------------------------|--------------------------------------------------------------|-------------------------------------|------------------------------------------------------------|
|                                                                     |                                                            |                            |                                  | **Three                    Months                    Ended** |                                | **Two                    Months                    Ended** |   | **One                    Month                    Ended** |
|                                                                     |                                                            |                            |                                  | **June                    30,                    2005**      |                                | **June                    30,                    2004**    |   | **April                    30,                    2004** |
|                                                                     |                                                            |                            |                                  |                                                         |                                |                                                       |   |   |
| Service                    cost                                          |                                                            | $                               | 527                         |                                                         | 306                       |                                                       | 152                       |
| Interest                    cost                                         |                                                            |                            | 793                         |                                                         | 490                       |                                                       | 242                       |
| Expected                    return on plan assets                        |                                                            | (761)                      |                                  | (431)                                                   |                                | (203)                                                 |
| Amortization                    of prior service                    cost |                                                            | —     |                                  | —                                  |                                | 33                                               |
| Recognized                    actuarial loss                             |                                                            | —     |                                  | —                                  |                                | 85                                               |
|                                                                          | Net                    periodic benefit                    cost | $                               | 559                         |                                                         | 365                       |                                                       | 309                       |
|                                                                          |                                                            |                            |                                  |                                                         |                                |                                                       |   |   |
|                                                                          |                                                            |                            |                                  |                                                         |                                |                                                       |   |   |
|                                                                          |                                                            |                            |                                  | **Successor**                                                |                                | **Predeccessor**                                           |
|                                                                     |                                                            |                            |                                  | **Six                    Months                    Ended**   |                                | **Two                    Months                    Ended** |   | **Four                    Months                    Ended** |
|                                                                          |                                                            |                            |                                  | **June                    30,                    2005**      |                                | **June                    30,                    2004**    |   | **April                    30,                    2004** |
|                                                                          |                                                            |                            |                                  |                                                         |                                |                                                       |   |   |
| Service                    cost                                          |                                                            | $                               | 1,053                       |                                                         | 306                       |                                                       | 611                       |
| Interest                    cost                                         |                                                            |                            | 1,586                       |                                                         | 490                       |                                                       | 965                       |
| Expected                    return on plan assets                        |                                                            | (1,522)                    |                                  | (431)                                                   |                                | (811)                                                 |
| Amortization                    of prior service                    cost |                                                            | —     |                                  | —                                  |                                | 130                                              |
| Recognized                    actuarial loss                             |                                                            | —     |                                  | —                                  |                                | 340                                              |
|                                                                          | Net                    periodic benefit                    cost | $                               | 1,117                       |                                                         | 365                       |                                                       | 1,235                       |

| **(9)** | **Pneumoconiosis                (Black Lung) Benefits** |
|---------|---------------------------------------------------------|

|                                                              |                         |            |                            | **Successor**                                        |                            | **Predeccessor**                                   |
|--------------------------------------------------------------|------------------------------|-----------------|---------------------------------|------------------------------------------------------|---------------------------------|----------------------------------------------------|
|                                                         |                         |            |                            | **Three                Months                Ended** |                            | **Two                Months                Ended** |   | **One                Month                Ended** |
|                                                              |                         |            |                            | **June                30,                2005**      |                            | **June                30,                2004**    |   | **April                30,                2004** |
|                                                              |                         |            |                            |                                                 |                            |                                               |   |   |
| Service                cost                                  |                         | $               | 74                    |                                                 | 50                    |                                               | 25                   |
| Interest                cost                                 |                         |            | 340                   |                                                 | 132                   |                                               | 66                   |
| Amortization                of actuarial                loss |                         | 54    |                            | —                                    |                            | 1                                        |
|                                                              | Total                expense |            | $                               | 468                                        |                            | 182                                      |   | 92                   |
|                                                              |                         |            |                            |                                                 |                            |                                               |   |   |
|                                                              |                         |            |                            |                                                 |                            |                                               |   |   |
|                                                              |                         |            |                            | **Successor**                                        |                            | **Predeccessor**                                   |
|                                                         |                         |            |                            | **Six                Months                Ended**   |                            | **Two                Months                Ended** |   | **Four                Months                Ended** |
|                                                              |                         |            |                            | **June                30,                2005**      |                            | **June                30,                2004**    |   | **April                30,                2004** |
|                                                              |                         |            |                            |                                                 |                            |                                               |   |   |
| Service                cost                                  |                         | $               | 148                   |                                                 | 50                    |                                               | 99                   |
| Interest                cost                                 |                         |            | 680                   |                                                 | 132                   |                                               | 254                   |
| Amortization                of actuarial                loss |                         | 109   |                            | —                                    |                            | 263                                      |
|                                                              | Total                expense |            | $                               | 937                                        |                            | 182                                      |   | 616                   |

----

Table          of Contents

| **(10)** | **Acquisition                of Triad Mining, Inc.** |
|----------|------------------------------------------------------|

|                                                                |   |   |    |
|---------------------------------------------------------------------|--------|--------|---------|
| Accounts                receivable                                  |   | $      | 9,672   |   |
| Coal                inventory                                       |   |   | 1,872   |   |
| Other                current assets                                 |   |   | 1,896   |   |
| Property,                plant and equipment                        |   |   | 37,151  |   |
| Mineral                rights                                       |   |   | 22,538  |   |
| Goodwill                                                            |   |   | 31,444  |   |
| Other                assets                                         |   |   | 495     |   |
| Current                liabilities                                  |   |   | (6,783  | ) |
| Asset                retirement obligations                         |   |   | (7,861  | ) |
| Deferred                taxes and other liabilities                 |   |   | (20,445 | ) |
|                                                                |   |   |    |   |
| Total                purchase price, net of cash received of $5,414 |   | $      | 69,979  |   |
|                                                                |   |   |    |   |

|                                                 |   | Six                MonthsendedJune                30, 2005 |    | Three                MonthsendedJune                30, 2005 |   |
|------------------------------------------------------|--------|------------------------------------------------------------|---------|--------------------------------------------------------------|--------|
| Revenues                (in 000’s)             |   | $                                                          | 250,811 |                                                         | $      | 129,038 |   |
| Net                loss (in 000’s)             |   |                                                       | (916    | )                                                            |   | (2,063 | ) |
| Earning                per share - Basic and Diluted |   |                                                       | (0.06   | )                                                            |   | (0.13 | ) |
|                                                 |   |                                                       |    |                                                         |   |   |   |

| **(11)** | **Segment                Information** |
|----------|----------------------------------------|

----

Table          of Contents

| **Three                  months ended June 30, 2005**                                              |   |           |         |               |               |          |   |             |         |
|----------------------------------------------------------------------------------------------------|--------|----------------|--------------|--------------------|--------------------|---------------|--------|------------------|--------------|
|                                                                                               |   |           |         |               |               |          |   |        |         |
| **(Amounts                  in thousands, except per ton amounts)**                           |   | **CAPP**       |         | **Midwest****(1)** |               | **Corporate** |   | **Consolidated** |         |
|                                                                                               |   |           |         |               |               |          |   |             |         |
| Revenues                                                                                           |   | $              | 105,272      |               |               | 8,041         |   |             | -            |   |   | 113,313 |   |
| Income                  from operations                                                            |   |           | 6,520        |               |               | 690           |   |             | (3,367       | ) |   | 3,843 |   |
| Depreciation,                  depletion and amortization                                          |   |           | 10,430       |               |               | 1,114         |   |             | 27           |   |   | 11,571 |   |
| Total                  assets                                                                      |   |           | 372,543      |               |               | 110,695       |   |             | 4,099        |   |   | 487,337 |   |
|                                                                                               |   |           |         |               |               |          |   |             |         |   |   |   |   |
| **Six                  months ended June 30, 2005**                                                |   |           |         |               |               |          |   |             |         |   |   |   |   |
|                                                                                               |   |           |    |               |               |     |   |             |    |   |   |    |   |
| **(Amounts                      in thousands, except per ton                      amounts)**  |   |  **CAPP** |         |               | **Midwest****(1)** |          |   | **Corporate**    |         |   | **Consolidated** |   |
|                                                                                               |   |           |         |               |               |          |   |             |         |   |   |   |   |
| Revenues                                                                                           |   | $              | 203,147      |               |               | 8,041         |   |             | -            |   |   | 211,188 |   |
| Income                  from operations                                                            |   |           | 11,272       |               |               | 690           |   |             | (5,699       | ) |   | 6,263 |   |
| Depreciation,                  depletion and amortization                                          |   |           | 19,880       |               |               | 1,114         |   |             | 55           |   |   | 21,049 |   |
| Total                  assets                                                                      |   |           | 372,543      |               |               | 110,695       |   |             | 4,099        |   |   | 487,337 |   |
|                                                                                               |   |           |         |               |               |          |   |             |         |   |   |   |   |

----

Table          of Contents

**ITEM      2.**
** **
**MANAGEMENT’SDISCUSSION      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS**

**Overview**

~~-~~

**Reserves**

----

Table          of Contents

|                                                                   |   | **CAPP** |   | **Midwest** |   | **Total** |   |
|------------------------------------------------------------------------|--------|----------|--------|-------------|--------|-----------|--------|
|                                                                   |   |     |   |        |   |      |   |
| Proven                  and Probable Reserves, as of December 31, 2004 |   |     | 207.4  |        |   | -         |   |   | 207.4 |   |
| Coal                  Extracted                                        |   |     | (4.5   | )           |   | (0.3      | )      |   | (4.8 | ) |
| Acquisitions                  (2)                                      |   |     | 16.2   |        |   | 19.9      |   |   | 36.1 |   |
| Adjustments                  (3)                                       |   |     | 1.1    |        |   | -         |   |   | 1.1 |   |
| Proven                  and Probable Reserves, as of June 30, 2005     |   |     | 220.2  |        |   | 19.6      |   |   | 239.8 |   |

**Recent      Accounting Pronouncements **

*“Share-Based      Payment”*

**Key      Performance Indicators**

----

Table          of Contents

**Trends      In Our Business**

|   | · | the                supply of domestic and foreign                coal; |
|--------|--------|------------------------------------------------------------------------|

|   | · | the                demand for electricity; |
|--------|--------|--------------------------------------------|

|   | · | the                demand for steel and the continued financial viability of the domestic                and                foreign steel industries; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                cost of transporting coal to the                customer; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | domestic                and foreign governmental regulations and                taxes; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | air                emission standards for coal-fired power plants;                and |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | the                price and availability of alternative fuels for electricity                generation. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

**Plan      of Reorganization**

**Recent      Developments**

***Acquisition      of Triad Mining, Inc.***

----

Table          of Contents

**Results      of Operations**

***Three      Months Ended June 30, 2005 Compared with the Three Months Ended June 30,      2004***

|                                                      |   |                                             |    |                         |   |
|-----------------------------------------------------------|--------|--------------------------------------------------|---------|------------------------------|--------|
|                                                      |   | **Three                  Months Ended June 30,** |    |                         |   |
|                                                      |   | **2005**                                         |    | **2004**                     |   | **Change** |   |
|                                                      |   | **Total**                                        |    | **Per                  Ton** |   | **Total** |   | **Per                  Ton** |   | **Total** |   |
|                                                      |   |                                             |    |                         |   |   |   |   |   |   |   |
| Volume                  (tons)                            |   |                                             | 2,648   |                         |   |   |   |   | 2,372 |   |   |   |   |   | 12 | % |
| Revenues                                                  |   |                                             |    |                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Coal                  sales                               |   | $                                                | 111,055 |                         |   | 41.94 |   |   | 95,681 |   |   | 40.34 |   |   | 16 | % |
| Synfuel                  handling                         |   |                                             | 2,258   |                         |   |   |   |   | 1,895 |   |   |   |   |   | 19 | % |
| Cost                  of coal sold                        |   |                                             | 90,965  |                         |   | 34.35 |   |   | 70,896 |   |   | 29.89 |   |   | 28 | % |
| Depreciation,                  depletion and amortization |   |                                             | 11,571  |                         |   | 4.37 |   |   | 8,580 |   |   | 3.62 |   |   | 35 | % |
| Gross                  profit                             |   |                                             | 10,777  |                         |   | 4.07 |   |   | 18,100 |   |   | 7.63 |   |   | -40 | % |
| Selling,                  general and administrative      |   |                                             | 6,934   |                         |   | 2.62 |   |   | 4,029 |   |   | 1.70 |   |   | 72 | % |

**Volume      and Revenues by Segment**

|                                         |   |  **Three                  Months Ended June 30,** |    |
|----------------------------------------------|--------|--------------------------------------------------------|---------|
|                                         |   |  2005                                             |    | 2004 |   |
|                                         |   |                                              |    |   |   |   |   |   |   |
|                                         |   |  CAPP                                             |    | Midwest |   | CAPP |   | Midwest |   |
|                                         |   |                                              |    |   |   |   |   |   |   |
| Volume                  (tons)               |   |                                                   | 2,349   |   |   | 299 |   |   | 2,372 |   |   | - |   |
|                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |
| Coal                  sales revenue          |   | $                                                      | 103,014 |   |   | 8,041 |   |   | 95,681 |   |   | - |   |
|                                         |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |
| Average                  sales price per ton |   | $                                                      | 43.85   |   |   | 26.89 |   |   | 40.34 |   |   | - |   |

----

Table          of Contents

**Operating      Costs by Segment**

|                                                        |   | **Three                Months ended June 30,** |   |
|-------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                        |   |  2005                                     |   | 2004 |   |
|                                                        |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |  CAPP                                     |   | Midwest |   | Corporate |   | CAPP |   | Midwest |   | Corporate |   |
|                                                        |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| **Cost                of coal sold**                        |   | $                                              | 84,989 |   |   | 5,976 |   |   | - |   |   | 70,896 |   |   | - |   |   | - |   |
|                                                        |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                ton**                                  |   |                                           | 36.18  |   |   | 19.99 |   |   | - |   |   | 29.89 |   |   | - |   |   | - |   |
|                                                        |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Depreciation,                depletion and amortization** |   |                                           | 10,430 |   |   | 1,114 |   |   | 27 |   |   | 8,551 |   |   | - |   |   | 30 |   |
|                                                        |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                ton**                                  |   |                                           | 4.44   |   |   | 3.73 |   |   | - |   |   | 3.60 |   |   | - |   |   | - |   |

*ost      of Coal Sold*

*Depreciation,      depletion and amortization*

*Selling,      general and administrative*

**Income      Taxes**

----

Table          of Contents

***Six      Months Ended June 30, 2005 Compared with the Six Months Ended June 30,      2004***

|                                                      |   | **Six                  Months Ended June 30,** |    |                         |   |
|-----------------------------------------------------------|--------|------------------------------------------------|---------|------------------------------|--------|
|                                                      |   | **2005**                                       |    | **2004**                     |   | **Change** |   |
|                                                      |   | **Total**                                      |    | **Per                  Ton** |   | **Total** |   | **Per                  Ton** |   | **Total** |   |
| Volume                  (tons)                            |   |                                           | 4,876   |                         |   |   |   |   | 4,659 |   |   |   |   |   | 5 | % |
| Revenues                                                  |   |                                           |    |                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Coal                  sales                               |   | $                                              | 207,456 |                         |   | 42.55 |   |   | 174,921 |   |   | 37.54 |   |   | 19 | % |
| Synfuel                  handling                         |   |                                           | 3,732   |                         |   |   |   |   | 3,513 |   |   |   |   |   | 6 | % |
| Cost                  of coal sold                        |   |                                           | 171,907 |                         |   | 35.25 |   |   | 136,604 |   |   | 29.32 |   |   | 26 | % |
| Depreciation,                  depletion and amortization |   |                                           | 21,049  |                         |   | 4.32 |   |   | 17,852 |   |   | 3.83 |   |   | 18 | % |
| Gross                  Profit                             |   |                                           | 18,232  |                         |   | 3.74 |   |   | 23,978 |   |   | 5.15 |   |   | -24 | % |
| Selling,                  general and administrative      |   |                                           | 11,969  |                         |   | 2.45 |   |   | 7,589 |   |   | 1.63 |   |   | 58 | % |

**Volume      and Revenues by Segment**

|                                         |   |  **Six                  Months Ended June 30,** |    |
|----------------------------------------------|--------|------------------------------------------------------|---------|
|                                         |   |  2005                                           |    | 2004 |   |
|                                         |   |                                            |    |   |   |   |   |   |   |
|                                         |   |  CAPP                                           |    | Midwest |   | CAPP |   | Midwest |   |
|                                         |   |                                            |    |   |   |   |   |   |   |
| Volume                  (tons)               |   |                                                 | 4,577   |   |   | 299 |   |   | 4,659 |   |   | - |   |
|                                         |   |                                                 |    |   |   |   |   |   |   |   |   |   |   |
| Coal                  sales revenue          |   | $                                                    | 199,415 |   |   | 8,041 |   |   | 174,291 |   |   | - |   |
|                                         |   |                                                 |    |   |   |   |   |   |   |   |   |   |   |
| Average                  sales price per ton |   | $                                                    | 43.57   |   |   | 26.89 |   |   | 37.54 |   |   | - |   |

----

Table          of Contents

**Operating      Costs by Segment**

|                                                           |   | **Six                  Months Ended June 30,** |    |
|----------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                           |   | 2005                                           |    | 2004 |   |
|                                                           |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
|                                                           |   | CAPP                                           |    | Midwest |   | Corporate |   | CAPP |   | Midwest |   | Corporate |   |
|                                                           |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| **Cost                  of Coal Sold**                         |   | $                                              | 165,930 |   |   | 5,977 |   |   | - |   |   | 136,604 |   |   | - |   |   | - |   |
|                                                           |   |                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                  ton**                                   |   |                                           | 36.25   |   |   | 19.99 |   |   | - |   |   | 29.32 |   |   | - |   |   | - |   |
|                                                           |   |                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Depreciation,                  depletion, and amortization** |   |                                           | 19,880  |   |   | 1,114 |   |   | 55 |   |   | 17,788 |   |   | - |   |   | 64 |   |
|                                                           |   |                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                  ton**                                   |   |                                           | 4.34    |   |   | 3.73 |   |   | - |   |   | 3.82 |   |   | - |   |   | - |   |

*Cost      of Coal Sold*

*Depreciation,      depletion and amortization*

*Selling,      general and administrative*

**Income      Taxes**

**Liquidity      and Capital Resources**

----

Table          of Contents

|                                                            |   | **June                30,****2005** |    | **December                31,****2004** |   |
|-----------------------------------------------------------------|--------|-------------------------------------|---------|-----------------------------------------|--------|
| Senior                Notes                                     |   | $                                   | 150,000 |                                    |   | - |   |
| Senior                Secured Credit Facility - Revolver        |   |                                | -       |                                    |   | - |   |
| Prior                Senior Secured Credit Facility - Term loan |   |                                | -       |                                    |   | 20,000 |   |
| Prior                Term Credit Facility                       |   |                                | -       |                                    |   | 75,000 |   |
| Other                                                           |   |                                | 259     |                                    |   | - |   |
| Total                long-term debt                             |   |                                | 150,259 |                                    |   | 95,000 |   |
| Less                amounts classified as current               |   |                                | 259     |                                    |   | 2,700 |   |
| Total                long-term debt, less current maturities    |   | $                                   | 150,000 |                                    |   | 92,300 |   |
|                                                            |   |                                |    |                                    |   |   |   |

----

Table          of Contents

** **

**Certain      Risks**

**Off-Balance      Sheet Arrangements**

----

Table          of Contents

**Critical      Accounting Estimates**

***Overview***

***Workers'      Compensation***

***Coal      Miners' Pneumoconiosis***

***Defined      Benefit Pension***

* *

----

Table          of Contents

***Reclamation      and Mine Closure Obligation***

***Contingencies***

***Income      Taxes***

***Coal      Reserves***

|   | · | all                currently available data; |
|--------|--------|----------------------------------------------|

----

Table          of Contents

|   | · | our                own operational experience and that of our                consultants; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | historical                production from similar areas with similar                conditions; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | previously                completed geological and reserve                studies; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | the                assumed effects of regulations and taxes by governmental agencies;                and |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | assumptions                governing future prices and future operating                costs. |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | mining                activities; |
|--------|--------|-----------------------------------|

|   | · | new                engineering and geological data; |
|--------|--------|-----------------------------------------------------|

|   | · | acquisition                or divestiture of reserve holdings;                and |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | modification                of mining plans or mining methods. |
|--------|--------|----------------------------------------------------------------|

**Other      Supplemental Information**

*Labor      and Turnover*

----

Table          of Contents

*Sales      Commitments*

|                         |   | Six                  Months Ended      |   | Year                  Ended |   | Year                  Ended            |   | Year                  Ended |   | Year                  Ended            |   |
|------------------------------|--------|----------------------------------------|--------|-----------------------------|--------|----------------------------------------|--------|-----------------------------|--------|----------------------------------------|--------|
|                         |   | 2005                                   |   | 2006                        |   | 2007                                   |   | 2008                        |   | 2009                                   |   |
|                         |   | Average                  Price Per Ton |   | Tons                        |   | Average                  Price Per Ton |   | Tons                        |   | Average                  Price Per Ton |   | Tons |   | Average                  Price Per Ton |   | Tons |   | Average                  Price Per Ton |   | Tons |   |
| CAPP                         |   | $                                      | 42.46  |                        |   | 4,602                                  |   | $                           | 42.90  |                                   |   | 5,798 |   | $ | 38.37 |   |   | 1,630 |   |   | - |   |   | - |   |   | - |   |   | - |   |
|                         |   |                                   |   |                        |   |                                   |   |                        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Midwest                  (a) |   | $                                      | 24.22  |                        |   | 1,849                                  |   | $                           | 24.92  |                                   |   | 3,446 |   | $ | 24.77 |   |   | 1,250 |   | $ | 25.24 |   |   | 1,250 |   | $ | 25.75 |   |   | 1,250 |   |
|                         |   |                                   |   |                        |   |                                   |   |                        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (a) | Certain                  contracts in the Midwest include a customer option to increase                  or decrease                  the stated tons in the contract.                  We have included option tons that we believe will be exercised                  based on                  current market prices. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Project      Development*

*Surface      Mining of Existing Reserves*

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Table          of Contents

*Preparation      Plant Projects*

**FORWARD-LOOKING      INFORMATION**

|   | · | our                cash flows, results of operation or financial                condition; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | the                consummation of acquisition, disposition or financing transactions                and the                effect thereof on our business; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | governmental                policies and regulatory actions; |
|--------|--------|--------------------------------------------------------------|

|   | · | legal                and administrative proceedings, settlements, investigations and                claims; |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

|   | · | weather                conditions or catastrophic weather-related                damage; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | our                production capabilities; |
|--------|--------|---------------------------------------------|

|   | · | availability                of transportation; |
|--------|--------|------------------------------------------------|

|   | · | market                demand for coal, electricity and                steel; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | competition; |
|--------|--------|--------------|

|   | · | our                relationships with, and other conditions affecting, our                customers; |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | employee                workforce factors; |
|--------|--------|--------------------------------------------|

|   | · | our                assumptions concerning economically recoverable coal reserve                estimates; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | future                economic or capital market                conditions; |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | our                plans and objectives for future operations and expansion or consolidation;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | the                integration of the Triad                acquisition. |
|--------|--------|-------------------------------------------------------------------------|

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Table          of Contents

**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT      MARKET RISK**

**ITEM      4.**
**CONTROLSAND      PROCEDURES**

**Evaluation      of Disclosure Controls and Procedures**

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Table          of Contents

**PARTII**

**OTHER      INFORMATION**

**ITEM      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES      HOLDERS**

| (a) |   | Annual                Meeting of Shareholders held July 26, 2005. |
|-----|--------|-------------------------------------------------------------------|

| (b) |   | Not                applicable |
|-----|--------|-------------------------------|

| (c) |   | There                were 16,578,989 shares of common stock , $0.01 par value per share                (the                “Common Stock”), of James River outstanding and entitled to vote as of                June 24, 2005, the record date for the 2005 Annual Meeting of                Shareholders. Each share of Common Stock entitled the holder thereof                to                one vote. A total of 13,046,935 votes (or 78.7% of the total) were                cast.                There were no broker non-votes. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Director                Nominee** |   | **Votes                For** |   | **Votes****Withheld** |
|-------------------------------------|--------|------------------------------|--------|-----------------------|
| Joseph                H. Vipperman  |   | 12,976,616                   |   | 70,319                |
| Alan                F. Crown        |   | 12,863,409                   |   | 183,526               |

| (d) |   | Not                applicable |
|-----|--------|-------------------------------|

**ITEM**
** 6.      **
**EXHIBITS**

|   | The                following exhibits are filed herewith:                                                                             | Exhibit |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|---------|
|   |                                                                                                                                  |    |
|   | Certification                  of Chief Executive Officer pursuant to Section 302 of theSarbanes-Oxley                  Act of 2002.  | 31.1    |
|   |                                                                                                                                  |    |
|   | Certification                  of Chief Accounting Officer pursuant to Section 302 of theSarbanes-Oxley                  Act of 2002. | 31.2    |
|   |                                                                                                                                  |    |
|   | Certification                  of Chief Executive Officer pursuant to Section 906 of theSarbanes-Oxley                  Act of 2002.  | 32.1    |
|   |                                                                                                                                  |    |
|   | Certification                  of Chief Accounting Officer pursuant to Section 906 of theSarbanes-Oxley                  Act of 2002. | 32.2    |

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Table          of Contents

**SIGNATURES**

|   | James                River Coal Company By:                /s/  Peter                T. Socha                      Peter T. Socha                      Chairman, President and                       Chief Executive Officer By:                /s/                Samuel M. Hopkins II                      Samuel M. Hopkins, II                      Vice President and                      Chief Accounting Officer |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|