================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]      Quarterly  Report  Pursuant  to Section  13 or 15(d) of the  Securities
         Exchange Act of 1934

                  For the quarterly period ended March 31, 2008

                                       or

[_]      Transition Report Under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934

       For the transition period from ______________ to _________________.

                         Commission file number 0-26509

                               NATIONAL COAL CORP.
             (Exact name of Registrant as Specified in its Charter)

            FLORIDA                                             65-0601272
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                            8915 GEORGE WILLIAMS ROAD
                               KNOXVILLE, TN 37923
               (Address of principal executive offices, zip code)

                                 (865) 690-6900
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

         Indicate by check mark whether the  registrant  is a large  accelerated
filer, an accelerated  filer, a  non-accelerated  filer, or a smaller  reporting
company.  See definitions of "large accelerated filer," "accelerated filer," and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [_]                       Accelerated filer         [_]

Non-accelerated filer   [_]                       Smaller reporting company [X]
(Do not check if smaller reporting company)

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

         As of May 13, 2008, the issuer had  31,151,931  shares of common stock,
par value $.0001 per share, issued and outstanding.

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<PAGE>


                               NATIONAL COAL CORP.
                               INDEX TO FORM 10-Q

                                                                            PAGE
                                                                            ----

PART I   FINANCIAL INFORMATION.................................................3

Item 1.  Financial Statements..................................................3

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations..................................19

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........30

Item 4T. Controls and Procedures..............................................30

PART II  OTHER INFORMATION....................................................31

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds..........31

Item 6.  Exhibits.............................................................31


                                       2
<PAGE>


                         PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL  STATEMENTS

<TABLE>
                              NATIONAL COAL CORP.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<CAPTION>
                                                                            MARCH 31,       DECEMBER 31,
                                                                              2008            2007(1)
                                                                          -------------    -------------
<S>                                                                       <C>              <C>
ASSETS
Current assets
   Cash and cash equivalents ..........................................   $   9,967,265    $   9,854,351
   Accounts receivable ................................................       6,886,099        8,787,046
   Receivable from sale of Straight Creek properties ..................       5,050,000             --
   Inventory ..........................................................       2,111,515        2,946,101
   Prepaid and other current assets ...................................       2,420,059        1,951,827
                                                                          -------------    -------------
        Total current assets ..........................................      26,434,938       23,539,325

   Property, plant, equipment and mine development, net ...............      89,089,080      108,880,599
   Deferred financing costs ...........................................       5,650,862        6,669,703
   Restricted cash ....................................................      29,419,504       29,115,383
   Other non-current assets ...........................................       1,104,038        1,049,991
                                                                          -------------    -------------
        Total Assets ..................................................   $ 151,698,422    $ 169,255,001
                                                                          =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Current maturities of long-term debt ...............................   $   7,900,453    $  15,453,230
   Current installments of obligations under capital leases ...........         127,219          157,062
   Current portion of asset retirement obligations ....................         582,887        1,310,344
   Accounts payable and accrued expenses ..............................      18,000,432       12,759,593
                                                                          -------------    -------------
        Total current liabilities .....................................      26,610,991       29,680,229

   Long-term debt, less current maturities, net of discount ...........     110,545,974      114,350,348
   Obligations under capital leases, less current installments ........          82,750           74,688
   Asset retirement obligations, less current portion .................       6,606,530        8,954,343
   Deferred revenue ...................................................       1,491,268        1,553,806
   Other non-current liabilities ......................................       4,697,871        5,126,231
                                                                          -------------    -------------
        Total Liabilities .............................................     150,035,384      159,739,645
                                                                          -------------    -------------

Commitments and contingencies (Note 15)

Stockholders' equity
   Series A convertible preferred  stock, $.0001 par value; 8% coupon;
     1,611 shares authorized; 133.33 and 356.44 shares issued and
     outstanding at March 31, 2008 and December 31, 2007, respectively.            --               --
   Common  stock, $.0001 per value; 80 million shares authorized;
     28,819,931 and 27,698,792 shares issued and outstanding at March
     31, 2008 and December 31, 2007, respectively .....................           2,882            2,770
   Additional paid-in capital .........................................      86,195,972       83,309,703
   Accumulated deficit ................................................     (84,535,816)     (73,797,117)
                                                                          -------------    -------------
        Total stockholders' equity ....................................       1,663,038        9,515,356
                                                                          -------------    -------------
        Total Liabilities and Stockholders' Equity ....................   $ 151,698,422    $ 169,255,001
                                                                          =============    =============
</TABLE>

---------------
(1) Derived from audited financials.

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


                                       3
<PAGE>


<TABLE>
                              NATIONAL COAL CORP.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<CAPTION>
                                                                THREE MONTHS
                                                               ENDED MARCH 31,
                                                        ----------------------------
                                                            2008            2007
                                                        ------------    ------------
<S>                                                     <C>             <C>
Revenues
  Coal sales ........................................   $ 35,483,441    $ 18,813,897
  Other revenues ....................................        185,306         221,048
                                                        ------------    ------------
     Total revenues .................................     35,668,747      19,034,945
                                                        ------------    ------------

Expenses
  Cost of sales .....................................     34,749,529      17,593,913
  Depreciation, depletion, amortization and accretion      4,812,256       3,628,596
  General and administrative ........................      1,824,622       2,078,897
                                                        ------------    ------------
     Total operating expenses .......................     41,386,407      23,301,406
                                                        ------------    ------------

Operating loss ......................................     (5,717,660)     (4,266,461)
                                                        ------------    ------------

Other income (expense)
  Interest expense ..................................     (4,888,790)     (2,104,348)
  Interest income ...................................        228,910         298,637
  Income from joint venture .........................        202,016            --
  Other (expense) income, net .......................       (682,976)        110,654
                                                        ------------    ------------
     Total other income (expense) ...................     (5,140,840)     (1,695,057)
                                                        ------------    ------------

Loss before income taxes ............................    (10,858,500)     (5,961,518)

Income tax benefit ..................................        119,801            --
                                                        ------------    ------------

Net loss ............................................    (10,738,699)     (5,961,518)

Preferred stock dividend ............................        (39,889)       (207,875)
                                                        ------------    ------------

Net loss attributable to common shareholders ........   $(10,778,588)   $ (6,169,393)
                                                        ============    ============

Basic net loss per common share .....................   $      (0.38)   $      (0.35)
                                                        ============    ============

Diluted net loss per common share ...................   $      (0.38)   $      (0.35)
                                                        ============    ============

Weighted average common shares ......................     28,383,513      17,509,633
                                                        ============    ============
</TABLE>

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


                                       4
<PAGE>


<TABLE>
                               NATIONAL COAL CORP.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<CAPTION>
                                                                               THREE MONTHS
                                                                              ENDED MARCH 31,
                                                                       ----------------------------
                                                                           2008            2007
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
Cash Flows from Operating Activities
  Net loss .........................................................   $(10,738,699)   $ (5,961,518)
  Adjustments to reconcile net loss to net cash flows provided by
     (used in) operating activities:
     Depreciation, depletion, amortization and accretion ...........      4,812,256       3,628,596
     Deferred income tax benefit ...................................       (119,801)           --
     Amortization of deferred financing costs ......................        366,815         172,211
     Amortization of debt discount .................................        805,626         161,331
     Gain on disposal of assets ....................................           --          (164,457)
     Loss on sale of Straight Creek properties .....................        381,247            --
     Loss on extinguishment of debt ................................        454,811          50,720
     Income from joint venture .....................................       (202,016)           --
     Settlement of asset retirement obligations ....................        (93,461)       (191,514)
     Non-cash compensation:
       Stock option expense ........................................        241,076         234,875
       Related party option expense ................................           --           434,493
     Changes in operating assets and liabilities:
       Accounts receivable .........................................      1,718,281         457,317
       Inventory ...................................................        415,649      (2,285,648)
       Prepaid and other current assets ............................       (519,952)        170,108
       Other non-current assets ....................................         88,083          27,903
       Accounts payable and accrued expenses .......................      5,232,266      (2,079,607)
       Deferred revenue ............................................        (62,538)       (128,611)
       Other non-current liabilities ...............................        (56,321)         66,117
                                                                       ------------    ------------
         Net cash flows provided by (used in) operating activities..      2,723,322      (5,407,684)
                                                                       ------------    ------------

Cash Flows from Investing Activities
  Capital expenditures .............................................       (675,781)     (1,358,241)
  Proceeds from sale of equipment and mine development .............      5,661,399       1,040,932
  Increase in restricted cash ......................................       (362,686)       (200,864)
  Increase in prepaid royalties ....................................       (389,294)       (290,134)
                                                                       ------------    ------------
     Net cash flows provided by (used in) investing activities .....      4,233,638        (808,307)
                                                                       ------------    ------------

Cash Flows from Financing Activities
  Proceeds from issuance of common and preferred stock .............           --        13,950,000
  Proceeds from issuance of notes payable ..........................           --           441,077
  Proceeds from borrowings on Term Loan Credit Facility ............           --         2,000,000
  Repayments on notes payable ......................................     (1,806,053)     (1,664,548)
  Repayments of capital leases .....................................        (21,781)       (604,747)
  Repayments on Term Loan Credit Facility ..........................     (5,000,000)           --
  Payments for deferred financing costs ............................        (16,212)        (25,346)
  Dividends paid ...................................................           --          (371,317)
                                                                       ------------    ------------
     Net cash flows (used in) provided by financing activities .....     (6,844,046)     13,725,119
                                                                       ------------    ------------

NET INCREASE IN CASH ...............................................        112,914       7,509,128
Cash and cash equivalents at beginning of period ...................      9,854,351       2,180,885
                                                                       ------------    ------------
Cash and cash equivalents at end of period .........................   $  9,967,265    $  9,690,013
                                                                       ============    ============


                                       5
<PAGE>


Supplemental disclosures
  Interest paid in cash ............................................   $  1,139,183    $    313,929
  Non-cash investing and financing transactions:
     Series A preferred stock converted to common stock ............      3,346,650       1,200,000
     Preferred stock dividends converted to common stock ...........        131,712            --
     10.5% Senior Secured Notes exchanged for common stock .........      2,719,596            --
     Equipment acquired via installment purchase obligations and
       notes payable ...............................................         73,832         250,338
     Equipment acquired via capital leases .........................           --           248,900
     Asset retirement obligations incurred .........................        158,300            --
     Sale of Straight Creek properties .............................      5,050,000            --
</TABLE>

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


                                       6
<PAGE>


                               NATIONAL COAL CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.       BASIS OF PRESENTATION

         The  unaudited  condensed  consolidated  financial  statements  do  not
include footnotes and certain financial  information normally presented annually
under accounting  principles  generally accepted in the United States of America
and should,  therefore,  be read in  conjunction  with the Annual Report on Form
10-K of National  Coal Corp.  (the  "Company")  for the year ended  December 31,
2007. The accompanying  unaudited condensed  consolidated  financial  statements
reflect all  adjustments  that,  in the opinion of  management,  are  considered
necessary  for a  fair  presentation  of  the  financial  position,  results  of
operations, and cash flows for the periods presented. Accounting measurements at
interim dates inherently involve greater reliance on estimates than at year-end.
The  results  of  operations  for the  quarter  ended  March  31,  2008  are not
necessarily indicative of results that can be expected for the fiscal year.

         The  accompanying  financial  statements  reflect the Company's and its
wholly-owned  subsidiaries',  including National Coal of Alabama, Inc. which was
acquired on October 19, 2007,  financial position and results of operations on a
consolidated  basis.  All  intercompany  transactions  and  balances  have  been
eliminated  in  consolidation.  Investments  in  business  entities in which the
Company  and its  subsidiaries  do not have  control  but have  the  ability  to
exercise  significant  influence over the operating and financial policies,  are
accounted for under the equity method.

         At March  31,  2008,  the  Company  had cash  and cash  equivalents  of
approximately $10.0 million, negative working capital of approximately $176,000,
and cash flows  provided by  operations  of  approximately  $2.7 million for the
three months then ended.  Operations  have not always  generated  positive  cash
flows in the past and the ability to do so during the  remainder  of 2008 is not
assured. At March 31, 2008, the Company had shareholders' equity of $1.7 million
and incurred net losses of $10.7 million  (excluding  preferred stock dividends)
for the three  months  then  ended.  Management  expects  that the  Company  may
continue to incur net losses into the  foreseeable  future which would  decrease
shareholders' equity and could lead to an eventual shareholders' deficit.

         The  Company  invested  approximately  $750,000 in  equipment  and mine
development  during the three  months  ended  March 31, 2008  including  $74,000
purchased through equipment financing  arrangements.  Management intends to make
approximately  $15.5 million of additional capital  expenditures  during 2008 to
expand operations and an additional  approximately $900,000 to maintain existing
assets.

         The  Company's  operating  plan for the remainder of 2008 includes cash
receipts  from  sales   committed   under   contracts  or  open  purchase  order
arrangements with long time customers, the release of approximately $7.0 million
of  restricted  cash  from the March 31,  2008  sale of our  Southeast  Kentucky
properties,  and the  sale  of  common  stock  adequate  to  cover  all  planned
commitments.  In early 2008,  management  successfully  renegotiated an existing
coal  supply  agreement  resulting  in  an  increased  selling  price  per  ton.
Management is presently in discussions with other customers on other coal supply
agreements  and intends to pursue other  opportunities  as they arise during the
remainder of 2008.  However,  if the Company is unable to execute its  operating
plan  successfully,  it may not be able to meet its liquidity  requirements  and
will need to raise additional cash or discontinue operations at some facilities.
Management  intends to pursue a $10 million revolver type credit facility in the
second calendar quarter of 2008 to provide additional working capital as needed.

         On May 12, 2008, the Company  completed the sale of 2,332,000 shares of
common  stock at a price of $4.65  per share in a  private  placement  for gross
proceeds to the Company of  $10,843,800.  Daniel  Roling,  Michael  Castle,  and


                                       7
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


William  Snodgrass,  executive  officers  of the  Company,  participated  in the
offering and acquired an aggregate of 55,000 of the shares.  Management  intends
to use  the  net  proceeds  received  from  the  sale  to  facilitate  new  mine
development  including  equipment  acquisitions  and for general working capital
purposes.

2.       RECENT ACCOUNTING PRONOUNCEMENTS

         The Company  adopted  Statement of Financial  Accounting  Standards No.
157, FAIR VALUE MEASUREMENTS ("SFAS 157"), and Statement of Financial Accounting
Standards No. 159, THE FAIR VALUE OPTION FOR  FINANCIAL  LIABILITIES - INCLUDING
AN AMENDMENT  OF FASB  STATEMENT  NO. 115 ("SFAS  159") on January 1, 2008.  The
adoptions  of SFAS  157 and  SFAS  159 did not  have a  material  impact  on the
Company's financial position or results of operations.

         In December  2007,  the FASB issued  Statement of Financial  Accounting
Standards No. 141R, BUSINESS  COMBINATIONS ("SFAS 141R") which becomes effective
December  15,  2008.  SFAS 141R  establishes  principles  and  requirements  for
determining how an enterprise  recognizes and measures the fair value of certain
assets  and   liabilities   acquired  in  a  business   combination,   including
non-controlling  interests,  contingent  consideration,   and  certain  acquired
contingencies.  SFAS 141R also requires acquisition-related transaction expenses
and  restructuring  costs be expensed as incurred  rather than  capitalized as a
component of the business combination.  The Company expects that SFAS 141R could
have an impact on accounting  for any  businesses  acquired  after the effective
date of this pronouncement.

         In  December  2007,  the FASB  issued  SFAS No.  160,  "Non-controlling
Interests  in  Consolidated  Financial  Statements-An  Amendment  of ARB No. 51"
("SFAS 160").  SFAS 160 establishes  accounting and reporting  standards for the
non-controlling  interest in a  subsidiary  (previously  referred to as minority
interests).  SFAS 160 would have an impact on the presentation and disclosure of
the non-controlling interests of any non wholly-owned businesses acquired in the
future. SFAS 160 will be effective for fiscal years beginning after December 15,
2008; earlier adoption is prohibited. The Company is still analyzing SFAS 160 to
determine the impact of adoption.

3.       SALE OF STRAIGHT CREEK PROPERTIES

         On March 31, 2008, the Company's wholly-owned subsidiary, National Coal
Corporation,  completed the sale of the real and personal  property  assets that
comprise  its  Straight  Creek  mining  operations  in Bell,  Leslie  and Harlan
Counties,  Kentucky to Xinergy  Corp.  ("Xinergy")  for $11.0 million in cash in
accordance  with the terms and conditions of a Purchase  Agreement  entered into
among the parties on February 8, 2008 (the "Purchase Agreement"). In addition to
the receipt of the purchase price for the assets, the transaction will result in
the subsequent release of approximately $7.0 million in restricted cash that was
previously pledged to secure reclamation bonds and other liabilities  associated
with  the  Straight  Creek  mining  operations,  and  relieved  the  Company  of
approximately  $3.6 million in reclamation  liabilities,  and approximately $2.6
million  of  equipment  related  debt  which  were  assumed  by  Xinergy  in the
transaction.  The sale included property, plant, equipment, and mine development
with a net book value of approximately  $16.1 million.  After a negative working
capital adjustment of approximately $288,000, the transaction resulted in a loss
of approximately  $381,000 which is reflected in OTHER (EXPENSE) INCOME,  NET on
the  Company's  condensed  consolidated  statement of  operations  for the three
months ended March 31, 2008.  Partial  proceeds  were received by the Company at
the time of  closing  due to an  error in  wiring  instructions  resulting  in a
receivable of $5,050,000  at March 31, 2008 which was  subsequently  received on
April 2, 2008.

         The Company's Straight Creek mining operations  recognized  revenues of
$5.0 million and $9.6 million and operating  losses of $2.3 million and $563,000
on sales of 99,669 and 187,095  tons of coal during the three months ended March
31,  2008 and 2007,  respectively.  Pursuant to a Contract  Mining and  Services


                                       8
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


Agreement dated April 1, 2008, the Company will provide highwall mining services
to Xinergy at the Company's former properties in Southeast Kentucky for a period
of up to twenty-four months.

         Xinergy  was founded and is  controlled  by Jon Nix,  who is a founder,
significant stockholder, and former officer and director of the Company. Mr. Nix
served as a director of the Company from  January  2003 until July 2007,  and as
Chairman  of the Board from March 2004 until July 2007.  Mr. Nix also  served as
the  Company's  President  and Chief  Executive  Officer from January 2003 until
August 2006. He is married to the stepdaughter of the Company's General Counsel,
Charles  Kite.  At April 2, 2008,  based on  reports  Mr. Nix had filed with the
Securities and Exchange Commission,  Mr. Nix beneficially owned 3,626,138 shares
of the Company's common stock, representing approximately 14% of the outstanding
common stock as of such date.

4.       INVENTORY

         Inventory consists of the following:

                                             MARCH 31,     DECEMBER 31,
                                               2008            2007
                                           ------------    ------------
         Coal .........................    $  1,995,815    $  2,830,926
         Tires ........................         115,700         115,175
                                           ------------    ------------
            Inventory .................    $  2,111,515    $  2,946,101
                                           ============    ============

5.       PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT, NET

         Property, plant, equipment and mine development is as follows:

<TABLE>
<CAPTION>
                                                                MARCH 31,      DECEMBER 31,
                                                                  2008             2007
                                                             -------------    -------------
<S>                                                          <C>              <C>
Furniture and office equipment ...........................   $     288,654    $     468,178
Mining equipment and vehicles ............................      67,700,409       77,625,779
Land and buildings .......................................       4,012,538        6,764,479
Mineral rights ...........................................      40,518,618       48,487,494
Mine development .........................................       8,705,051       12,955,114
Construction in progress .................................         636,479        1,268,512
                                                             -------------    -------------
    Total property, plant, equipment and mine development      121,861,749      147,569,556
Less accumulated depreciation, depletion and amortization      (32,772,669)     (38,688,957)
                                                             -------------    -------------
     Property, plant, equipment and mine development, net    $  89,089,080    $ 108,880,599
                                                             =============    =============
</TABLE>

         Mining equipment includes  approximately $493,000 and $493,000 of gross
assets  under  capital   leases  at  March  31,  2008  and  December  31,  2007,
respectively.

         Depreciation expense for the three months ended March 31, 2008 and 2007
was approximately $3,459,000 and $3,068,000, respectively.

         On March 31, 2008, the Company's wholly-owned subsidiary, National Coal
Corporation,  completed  the sale of the Straight  Creek,  Kentucky  properties,
including property, plant, equipment, and mine development with a net book value
of approximately $16.1 million. See Note 3, SALE OF STRAIGHT CREEK PROPERTIES.


                                       9
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


6.       OTHER NON-CURRENT ASSETS

         Other non-current assets are as follows:

                                                      MARCH 31,     DECEMBER 31,
                                                        2008            2007
                                                    ------------    ------------

Prepaid royalties ..............................    $    787,200    $    935,168
Investment in joint venture ....................         316,838         114,823
                                                    ------------    ------------
Total other non-current assets .................    $  1,104,038    $  1,049,991
                                                    ============    ============


         At March 31, 2008 and  December  31,  2007,  the  Company,  through its
subsidiary, National Coal of Alabama, Inc., held an investment totaling $316,838
and $114,823,  respectively,  representing  a 49% interest in Powhatan Dock, LLC
("Powhatan") which operates a barge loadout in Alabama. The Company accounts for
its joint  venture  investment  in  Powhatan,  which was  acquired in the fourth
quarter  of 2007,  using  the  equity  method.  Powhatan  recorded  revenues  of
$1,275,419  and net income of $412,277  during the three  months ended March 31,
2008.

7.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses are as follows:

                                                       MARCH 31,    DECEMBER 31,
                                                         2008           2007
                                                     ------------   ------------

Accounts payable .................................   $ 10,553,151   $ 10,579,615
Accrued payroll and related taxes ................        604,799        528,868
Accrued interest .................................      4,026,586        326,979
Accrued insurance premiums .......................         64,909        229,229
Accrued dividends ................................        154,106        114,216
Royalty obligations ..............................        878,367        774,887
Security deposits received .......................      1,550,493           --
Accrued federal, state and local taxes ...........        168,021        205,799
                                                     ------------   ------------
Total accounts payable and accrued expenses ......   $ 18,000,432   $ 12,759,593
                                                     ============   ============

8.       DEBT AND FINANCING ARRANGEMENTS

         10.5% SENIOR SECURED NOTES DUE 2010

         On February 28, 2008,  certain  holders of the  Company's  10.5% Senior
Secured Notes exchanged  $3,000,000 in notes plus accrued but unpaid interest of
$63,875 for 520,387 shares of the Company's  common stock resulting in a gain on
extinguishment  of debt of  approximately  $148,000  reflected as a component of
OTHER (EXPENSE) INCOME, NET on the Company's condensed consolidated statement of
operations.

         TERM LOAN CREDIT FACILITY

         On March 31, 2008 the Company used a portion of the  proceeds  from the
sale of its Straight  Creek,  Kentucky  properties (see Note 3, SALE OF STRAIGHT
CREEK  PROPERTIES)  to repay $5.0 million of the $10.0  million Term Loan Credit


                                       10
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


Facility entered into in October 2006 with Guggenheim Corporate Funding,  L.L.C.
as administrative  agent and accrued interest of $50,000.  On April 2, 2008, the
Company repaid the remaining $5.0 million and accrued  interest of $51,667 which
indebtedness  otherwise  would have  matured in December  2008.  The  repayments
resulted in a loss of approximately $570,000 in the three months ended March 31,
2008 and will  result in an  additional  loss of  approximately  $570,000 in the
three months ending June 30, 2008 from the write-off of deferred financing costs
associated  with the  Term  Loan  Credit  facility.  The  loss of  approximately
$570,000  for the three  months  ended  March  31,  2008 is  reflected  in OTHER
(EXPENSE)  INCOME,  NET on the  Company's  condensed  consolidated  statement of
operations.

         INSTALLMENT PURCHASE OBLIGATIONS AND EQUIPMENT NOTES

         In February  and March 2008,  the Company  entered  into new  equipment
notes with a bank and an  equipment  manufacturer  pursuant to which the Company
purchased vehicles with an aggregate  principal value of approximately  $74,000.
These equipment notes require payments over 36 months at fixed interest rates of
7.75%.  The  obligations  under the equipment  notes are secured by the vehicles
purchased.

         Approximately  $2.6 million of installment  purchase  obligations  were
assumed  by  Xinergy  as a result of the March  31,  2008 sale of the  Company's
Straight  Creek,  Kentucky  properties.  See  Note  3,  SALE OF  STRAIGHT  CREEK
PROPERTIES.

         The  following  table  summarizes  long-term  debt  obligations  of the
Company, excluding capital leases:

<TABLE>
<CAPTION>
                                                      MARCH 31,      DECEMBER 31,
                                                        2008             2007
                                                   -------------    -------------
<S>                                                    <C>              <C>
12.0% Senior Secured Notes, due 2012 ...........   $  60,000,000    $  60,000,000
10.5% Senior Secured Notes, due 2010 ...........      52,000,000       55,000,000
Term Loan Credit Facility, due 2008 ............       5,000,000       10,000,000
Overriding Royalty Interest obligation, due 2023       8,644,931        9,177,273
Installment purchase obligations, due 2010 .....       1,740,757        4,540,801
Installment purchase obligations, due 2009 .....       1,477,479        1,906,271
Installment purchase obligations, due 2008 .....            --            182,463
Equipment notes (7.75%-9.28%), due 2009-2011 ...         148,342           85,146
Equipment note (4.48%), due 2009 ...............          96,520          124,781
Other ..........................................           1,488           51,817
Less unamortized discounts .....................     (10,663,090)     (11,264,974)
                                                   -------------    -------------
                                                     118,446,427      129,803,578
Less current portion of long-term debt .........      (7,900,453)     (15,453,230)
                                                   -------------    -------------
Long-term debt .................................   $ 110,545,974    $ 114,350,348
                                                   =============    =============
</TABLE>

9.       LEASES

         The  Company   leases   mining  and  certain  other   equipment   under
noncancelable  lease agreements with terms up to five years.  Rental expense for
equipment under operating lease  agreements with initial lease terms of one year
or greater was  approximately  $506,000 and $572,000 for the three months ending
March 31, 2008 and 2007, respectively.

         During the first  quarter of 2007,  the Company  entered into a capital
lease agreement of $248,900 with an equipment supplier for mining equipment with
a comparable value. The lease is for a period of thirty-two months.


                                       11
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


10.      ASSET RETIREMENT OBLIGATIONS

         The  following  table  describes  the  changes to the  Company's  asset
retirement obligations:

Obligation at December 31, 2007 ..........................         $ 10,264,687
Accretion expense ........................................              469,149
Obligations incurred .....................................              158,300
Obligations settled ......................................              (93,461)
Obligations disposed .....................................           (3,609,258)
                                                                   ------------
Obligation at March 31, 2008 .............................            7,189,417
Current portion ..........................................             (582,887)
                                                                   ------------
Long-term liability at March 31, 2008 ....................         $  6,606,530
                                                                   ============

11.      STOCKHOLDERS' EQUITY

         During  the three  months  ended  March 31,  2008 and 2007,  holders of
223.11 and 80.00 shares of Series A cumulative  convertible preferred stock with
liquidation  preferences totaling  approximately  $3,346,650 and $1,200,000 plus
accrued  dividends of $131,712 and $0,  converted  their shares into 600,753 and
200,000 shares of common stock, respectively.

         The  Company's  comprehensive  losses  as  defined  by  SFAS  No.  130,
REPORTING COMPREHENSIVE INCOME, are the same as the net losses reported.

12.      INCOME TAXES

         The Company  accounts  for income  taxes under  Statement  of Financial
Accounting  Standards No. 109,  Accounting for Income Taxes ("SFAS 109").  Under
the asset and liability method of SFAS 109,  deferred tax assets and liabilities
are  recognized  for the future tax  consequences  attributable  to  differences
between  the  financial  statement  carrying  amounts  of  existing  assets  and
liabilities and their respective tax bases.

         During the three months ended March 31,  2008,  the Company  recorded a
reduction to deferred tax  liabilities to reflect  necessary  adjustments to its
initial  purchase  accounting  entries  pursuant to the  Company's  October 2007
purchase of Mann Steel Products,  Inc. The adjustment  decreases by $257,433 its
deferred tax  liabilities  and its mineral  rights and  property  and  equipment
valuations.

         At March 31, 2008, the Company had federal and state net operating loss
("NOL")  carryforwards  of $61.7 million and $68.1 million,  respectively,  that
will begin to expire in 2019. The use of deferred tax assets  including  federal
net operating losses and credits are limited to future taxable  earnings.  Based
on the required  analysis of future  taxable income under the provisions of SFAS
109, management believes that there is not sufficient evidence at March 31, 2008
indicating  that the results of  operations  will  generate  sufficient  taxable
income to realize the net deferred tax asset in years beyond 2008.  As a result,
a valuation  allowance  has been  provided for the entire net deferred tax asset
related to future years, including loss and credit carryforwards.

         The Company accounts for tax contingency  accruals under the provisions
of  Interpretation  No. 48,  ACCOUNTING  FOR  UNCERTAINTY  IN INCOME TAXES -- AN
INTERPRETATION   OF  FASB  STATEMENT  NO.  109  ("FIN  48")  The  Company's  tax
contingency  accruals  are  reviewed  quarterly  and can be adjusted in light of
changing facts and circumstances,  such as the progress of tax audits,  case law
and  emerging  legislation.  Adjustments  to the tax  contingency  accruals  are
recorded  in the period in which the new facts or  circumstances  become  known,
therefore the accruals are subject to change in future  periods and such change,
if it were to occur,  could  have a  material  adverse  effect on the  Company's
results of operations.


                                       12
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


         It is the Company's policy to recognize  accrued interest and penalties
related to its tax  contingencies  as income tax  expense.  The  Company  has no
material  unrecognized  tax benefits or any known material tax  contingencies at
March 31,  2008.  The  Company  files  income tax  returns  in the U.S.  federal
jurisdiction and various state jurisdictions.  With few exceptions,  the Company
is no longer subject to U.S. federal  examinations or state and local income tax
examinations by tax authorities for years before 2003.

13.      EARNINGS (LOSS) PER SHARE

         Basic earnings or loss per share are computed by dividing net income or
loss by the weighted  average  number of common  shares  outstanding  during the
year.  Diluted  earnings  or loss per  share  are  computed  similarly  to basic
earnings or loss per share except that they reflect the potential  dilution that
could occur if dilutive  securities or other  obligations  to issue common stock
were  exercised or converted  into common  stock.  Diluted  earnings or loss per
share  includes  dilutive  common stock  equivalents,  using the treasury  stock
method,  and assumes that the potentially  dilutive  instruments  were converted
into common stock at the beginning of the year or upon  issuance.  Stock options
with  exercise  prices  greater than the average fair market price for a period,
which are defined as anti-dilutive,  are not included in the diluted earnings or
loss per share calculations because of their anti-dilutive effect. In periods of
losses,  diluted  loss per share is computed on the same basis as basic loss per
share as the  inclusion  of any  other  potential  shares  outstanding  would be
anti-dilutive.

         For the three  months  ended  March 31,  2008 and 2007,  1,471,250  and
1,867,897 potentially dilutive shares of the Company from warrants,  convertible
preferred  stock and stock  options  were not  included  in the  computation  of
diluted loss per share because to do so would be anti-dilutive.

         The  computations for basic and diluted earnings or loss per share from
continuing operations for the three months ended March 31 are as follows:

                                                       THREE MONTHS ENDED
                                                            MARCH 31,
                                                  -----------------------------
                                                      2008             2007
                                                  ------------     ------------
Numerator:
Net loss .....................................    $(10,738,699)    $ (5,961,518)
Preferred dividends ..........................         (39,889)        (207,875)
                                                  ------------     ------------
Numerator for basic and diluted ..............    $(10,778,588)    $ (6,169,393)
                                                  ============     ============

Denominator:
Weighted average shares - basic ..............      28,383,513       17,509,633
Effect of warrants ...........................       1,000,000             --
Effect of convertible preferred shares .......            --          1,787,460
Effect of stock options ......................         471,250           80,437
                                                  ------------     ------------
Adjusted weighted average shares - diluted ...      29,854,763       19,377,530
                                                  ============     ============

Net loss per share - basic ...................    $      (0.38)    $      (0.35)
                                                  ============     ============

Net loss per share - diluted .................    $      (0.38)    $      (0.35)
                                                  ============     ============

14.      STOCK-BASED COMPENSATION PLANS

         The Company's 2004 Option Plan (the "Plan") was authorized by the Board
of Directors of the Company in March 2004,  and amended in January  2005.  Under
the terms of the Plan,  stock  options  may be granted to  officers,  directors,


                                       13
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


employees,  and others. At March 31, 2008, 4,450,000 shares of common stock were
authorized  for issuance  under the Plan.  Shares  subject to awards that expire
unexercised or are otherwise terminated, again become available for awards. Upon
exercise,  stock is issued from unissued or treasury shares.  The grant price of
an  option  under  the Plan may not be less  than the fair  market  value of the
common stock subject to such option on the date of grant. Options have a maximum
life of ten years and generally vest 25% per year over a four year period.

         During the three  months  ended  March 31,  2008 and 2007,  the Company
recognized  $241,076  and  $234,875  of  compensation  expense  related to stock
options, respectively.

         The fair value of each  option was  estimated  on the date of the grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:

                                                      THREE MONTHS
                                                     ENDED MARCH 31,
                                                  --------------------
                                                    2008        2007
                                                  --------    --------
         Expected term (years) ................       6.25        6.25
         Risk-free interest rates .............       3.20%       4.69%
         Expected dividend yield ..............       0.00%       0.00%
         Expected volatility ..................      50.38%      53.07%

         The risk-free  interest rate is based on the U.S. Treasury rate for the
expected life at the time of grant, volatility is based on the average long-term
implied  volatilities  of peer  companies as the  Company's  trading  history is
limited,  and the expected term is  determined  using the  SIMPLIFIED  method as
accepted under Securities and Exchange  Commission Staff Accounting Bulletin No.
110  assuming a ten-year  original  contract  term and graded  vesting over four
years. The  weighted-average  grant-date fair value of options issued during the
three months ended March 31, 2008 and 2007 were $2.73, and $3.67,  respectively.
There were no options exercised during the three months ended March 31, 2008 and
2007.

         The following  table  summarizes  activity under the Plan for the three
months ended March 31, 2008:

<TABLE>
<CAPTION>
                                                                          WEIGHTED
                                                                           AVERAGE
                                                           WEIGHTED       REMAINING
                                                            AVERAGE      CONTRACTUAL    AGGREGATE
                                            OPTIONS        EXERCISE         TERM        INTRINSIC
                                          OUTSTANDING        PRICE       (IN YEARS)    VALUE ($000)
                                         ------------    ------------   ------------   ------------
<S>                                         <C>          <C>                    <C>    <C>
Outstanding at December 31, 2007 .....      1,565,625    $       6.22           8.19   $  1,053,320
Granted ..............................        121,500            5.22
Exercised ............................           --                                            --
Forfeited ............................        (38,500)           6.82
Expirations ..........................           --                                            --
                                         ------------    ------------   ------------   ------------
Outstanding at March 31, 2008 ........      1,648,625    $       6.13           8.09   $    881,680
                                         ============
Vested or expected to vest
  at March 31, 2008 ..................      1,484,989    $       6.11           8.00   $    785,520
                                         ============
Exercisable ..........................        774,750    $       5.90           7.25   $    369,438
                                         ============
</TABLE>

         As of March  31,  2008,  there  was  $1,758,594  of total  unrecognized
compensation  cost related to non-vested  stock options  granted under the Plan.
That cost is expected to be  recognized  over a weighted  average  period of 2.7


                                       14
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


years. The total fair value of shares vested during the three months ended March
31, 2008 and 2007 was $597,432 and $593,006, respectively.

         During the first  quarter of 2007,  the Board of Directors  agreed to a
modification of stock option agreements as they apply to independent  directors.
Previously,  at such  time as an  independent  director  ceased  to serve on the
Board, his vested options outstanding at that time were exercisable for a period
of 90 days.  As a result of this  modification,  this  survival  period has been
extended to 18 months.

         In March 2007, Jon Nix, the former  Chairman of the Company's  Board of
Directors,  who is also  the  former  President  and  CEO,  sold to the  current
President and CEO,  Daniel  Roling,  for $10 the fully vested option to purchase
400,000  shares of  National  Coal Corp.  common  stock at $7.00 per share until
December  31,  2008.  The   transaction   resulted  in  $434,493  of  additional
compensation expense to the Company in the three months ended March 31, 2007.

15.      COMMITMENTS AND CONTINGENCIES

         The Company is made a party to legal actions,  claims,  arbitration and
administrative proceedings from time to time in the ordinary course of business.
Management  does not expect the outcome of these or other  pending or threatened
proceedings to have a material  impact on the Company's  cash flows,  results of
operations or financial condition.

16.      RELATED PARTY TRANSACTIONS

         See Note 3, SALE OF STRAIGHT CREEK PROPERTIES.

17.      SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR INFORMATION

         National Coal of Alabama,  Inc. and its parent company,  NCC Corp. (the
"Alabama Companies"),  have been designated as "unrestricted  subsidiaries" with
regard  to the 10.5%  Senior  Secured  Notes  due 2010 and the Term Loan  Credit
Facility,  which  designation  exempts  them from being  guarantors  under those
facilities.  Further,  the Alabama  Companies do not guarantee any debt in which
either  National  Coal Corp.  or  National  Coal  Corporation  is the  borrower.
Conversely,  National Coal Corp., National Coal Corporation and its subsidiaries
(the "Tennessee Companies") have been excluded as guarantors under the 12% Notes
Payable due 2012.


                                       15
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


         The following condensed  consolidating financial information sets forth
the financial  position as of March 31, 2008 and results of operations  and cash
flows for the three months ended March 31, 2008 of the National Coal Corporation
(NCC) and National Coal of Alabama,  Inc. (NCA). NCA was acquired on October 19,
2007.

<TABLE>
               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
                                 MARCH 31, 2008

<CAPTION>
                                              NCC             NCA          ELIMINATIONS     CONSOLIDATED
                                        -------------    -------------    -------------    -------------
<S>                                     <C>              <C>              <C>              <C>
Cash and cash equivalents ...........   $   4,853,665    $   5,113,600    $        --      $   9,967,265
Accounts receivable .................       1,574,103        5,311,996             --          6,886,099
Receivable from sale of Straight
   Creek properties .................       5,050,000             --               --          5,050,000
Inventory ...........................       1,567,118          544,397             --          2,111,515
Prepaid and other current assets ....         795,799        1,624,260             --          2,420,059
                                        -------------    -------------    -------------    -------------
   Total current assets .............      13,840,685       12,594,253             --         26,434,938
                                        -------------    -------------    -------------    -------------

Property, plant, equipment and
   mine development, net ............      32,498,550       56,590,530             --         89,089,080
Deferred financing costs ............       2,268,911        3,381,951             --          5,650,862
Restricted cash .....................      16,815,930       12,603,574             --         29,419,504
Other non-current assets ............      13,659,838          893,038      (13,448,838)       1,104,038
                                        -------------    -------------    -------------    -------------
   Total assets .....................   $  79,083,914    $  86,063,346    $ (13,448,838)   $ 151,698,422
                                        =============    =============    =============    =============

Current maturities of long-term debt    $   7,030,672    $     869,781    $        --      $   7,900,453
Current installments of capital
   lease obligations ................         127,219             --               --            127,219
Current portion of asset retirement
   obligations ......................         367,572          215,315             --            582,887
Accounts payable and accrued expenses      11,229,570        6,770,862             --         18,000,432
                                        -------------    -------------    -------------    -------------
   Total current liabilities ........      18,755,033        7,855,958             --         26,610,991
                                        -------------    -------------    -------------    -------------

Long-term debt, less current
   maturities .......................      51,055,044       59,490,930             --        110,545,974
Capital leases, less current
   installments .....................          82,750             --               --             82,750
Asset retirement obligations, less
   current portion ..................       3,911,386        2,695,144             --          6,606,530
Deferred revenue ....................       1,491,268        1,491,268
Other non-current liabilities .......         393,641        4,304,230             --          4,697,871
                                        -------------    -------------    -------------    -------------
   Total liabilities ................      75,689,122       74,346,262             --        150,035,384
                                        -------------    -------------    -------------    -------------

Preferred stock .....................            --               --               --               --
Common stock ........................           2,882              104             (104)           2,882
Additional paid-in capital ..........      86,195,972       13,448,734      (13,448,734)      86,195,972
Accumulated deficit .................     (82,804,062)      (1,731,754)            --        (84,535,816)
                                        -------------    -------------    -------------    -------------
   Total stockholders' equity .......       3,394,792       11,717,084      (13,448,838)       1,663,038
                                        -------------    -------------    -------------    -------------

   Total liabilities and
      stockholders' equity ..........   $  79,083,914    $  86,063,346    $ (13,448,838)   $ 151,698,422
                                        =============    =============    =============    =============
</TABLE>


                                       16
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


<TABLE>
          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                    FOR THE THREE MONTHS ENDED MARCH 31, 2008

<CAPTION>
                                         NCC             NCA        ELIMINATIONS    CONSOLIDATED
                                    ------------    ------------    ------------    ------------
<S>                                 <C>             <C>             <C>             <C>
Revenues
  Coal sales ....................   $ 15,958,917    $ 19,524,524    $       --      $ 35,483,441
  Other revenues ................        483,621           1,685        (300,000)        185,306
                                    ------------    ------------    ------------    ------------
     Total revenues .............     16,442,538      19,526,209        (300,000)     35,668,747
                                    ------------    ------------    ------------    ------------

Expenses
  Cost of sales .................     18,230,662      16,518,867            --        34,749,529
  Depreciation, depletion,
     amortization and accretion .      3,114,783       1,697,473            --         4,812,256
  General and administrative ....        425,189        (300,000)      1,824,622
                                                                                       1,699,433
                                    ------------    ------------    ------------    ------------
     Total operating expenses ...     23,044,878      18,641,529        (300,000)     41,386,407

                                    ------------    ------------    ------------    ------------
Operating (loss) income .........     (6,602,340)        884,680            --        (5,717,660)
                                    ------------    ------------    ------------    ------------

Other income (expense)
  Interest expense ..............     (2,304,003)     (2,584,787)           --        (4,888,790)
  Interest income ...............        208,536          20,374            --           228,910
  Income from joint venture .....           --           202,016            --           202,016
  Other (expense) income, net ...       (715,400)         32,424            --          (682,976)
                                    ------------    ------------    ------------    ------------
     Total other income (expense)     (2,810,867)     (2,329,973)           --        (5,140,840)

Loss before income taxes ........     (9,413,207)     (1,445,293)           --       (10,858,500)

Income tax benefit ..............           --           119,801            --           119,801
                                    ------------    ------------    ------------    ------------

Net loss ........................   $ (9,413,207)   $ (1,325,492)   $       --      $(10,738,699)
                                    ============    ============    ============    ============
</TABLE>


                                       17
<PAGE>


                               NATIONAL COAL CORP.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                   (UNAUDITED)


<TABLE>
          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                       FOR THE PERIOD ENDED MARCH 31, 2008

<CAPTION>
                                                                NCC              NCA        ELIMINATIONS   CONSOLIDATED
                                                            ------------    ------------    ------------   ------------
<S>                                                         <C>             <C>             <C>            <C>
Cash Flows from Operating Activities:
     Net cash flows (used in) provided by operating
        activities ......................................   $ (2,459,030)   $  5,182,352    $       --     $  2,723,322

Cash Flows from Investing Activities:
  Capital expenditures ..................................       (515,329)       (160,452)           --         (675,781)
  Proceeds from sale of equipment and mine development. .      5,661,399            --              --        5,661,399
  Increase in restricted cash ...........................       (362,686)           --              --         (362,686)
  Increase in prepaid royalties .........................       (321,994)        (67,300)           --         (389,294)
                                                            ------------    ------------    ------------   ------------
     Net cash flows provided by (used in) investing
        activities ......................................      4,461,390        (227,752)           --        4,233,638

Cash Flows from Financing Activities:
  Repayments of notes payable ...........................       (933,718)       (872,335)           --       (1,806,053)
  Repayments of capital leases ..........................        (21,781)           --              --          (21,781)
  Repayments of Term Loan Credit Facility ...............     (5,000,000)           --              --       (5,000,000)
  Payments for deferred financing costs .................        (16,212)           --              --          (16,212)
                                                            ------------    ------------    ------------   ------------
     Net cash flows used in financing activities ........     (5,971,711)       (872,335)           --       (6,844,046)

NET INCREASE (DECREASE) IN CASH .........................     (3,969,351)      4,082,265            --          112,914
Cash and cash equivalents at beginning of period ........      8,823,016       1,031,335            --        9,854,351
                                                            ------------    ------------    ------------   ------------
Cash and cash equivalents at end of period ..............   $  4,853,665    $  5,113,600    $       --     $  9,967,265
                                                            ============    ============    ============   ============


Supplemental Disclosures
  Interest paid in cash .................................   $    850,378    $    288,805    $       --     $  1,139,183
Non-cash investing and financing transactions
  Series A preferred stock converted to common stock ....      3,346,650            --              --        3,346,650
  Preferred stock dividends converted to common stock ...        131,712            --              --          131,712
  10.5% Notes, due 2010 exchanged for common stock ......      2,719,596            --              --        2,719,596
  Equipment acquired via installment purchase obligations           --            73,832            --           73,832
  Asset retirement obligations incurred .................        158,300            --              --          158,300
  Sale of Straight Creek properties .....................      5,050,000            --              --        5,050,000
</TABLE>


18.      EVENTS SUBSEQUENT TO MARCH 31, 2008

         On May 12, 2008, the Company  completed the sale of 2,332,000 shares of
common  stock at a price of $4.65  per share in a  private  placement  for gross
proceeds to the Company of  $10,843,800.  Daniel  Roling,  Michael  Castle,  and
William  Snodgrass,  executive  officers  of the  Company,  participated  in the
offering and acquired an aggregate of 55,000 of the shares.  Management  intends
to use  the  net  proceeds  received  from  the  sale  to  facilitate  new  mine
development  including  equipment  acquisitions  and for general working capital
purposes.


                                       18
<PAGE>


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

         The  information  contained in this Form 10-Q is intended to update the
information  contained  in our  Annual  Report on Form  10-K for the year  ended
December 31, 2007 and presumes  that readers have access to, and will have read,
the "Management's  Discussion and Analysis of Financial Condition and Results of
Operations"  and other  information  contained in such Form 10-K.  The following
discussion  and  analysis  also  should  be read  together  with  our  condensed
consolidated  financial  statements and the notes to the condensed  consolidated
financial statements included elsewhere in this Form 10-Q.

         This report,  including this section entitled "Management's  Discussion
and  Analysis  of  Financial  Condition  and Results of  Operation"  may contain
"forward-looking statements" that include information relating to future events,
future financial performance, strategies, expectations, competitive environment,
regulation  and  availability  of resources.  These  forward-looking  statements
include,  without limitation,  statements regarding:  proposed new services; our
expectations  concerning litigation,  regulatory  developments or other matters;
statements  concerning  projections,  predictions,  expectations,  estimates  or
forecasts for our business,  financial and operating results and future economic
performance;  statements of management's goals and objectives; and other similar
expressions  concerning  matters that are not  historical  facts.  Words such as
"may," "will," "should," "could," "would," "predicts,"  "potential," "continue,"
"expects,"   "anticipates,"   "future,"   "intends,"   "plans,"  "believes"  and
"estimates,"  and similar  expressions,  as well as  statements in future tense,
identify forward-looking statements.

         Forward-looking  statements should not be read as a guarantee of future
performance or results,  and will not necessarily be accurate indications of the
times at, or by which,  that  performance  or those  results  will be  achieved.
Forward-looking  statements are based on information  available at the time they
are made and/or  management's  good faith belief as of that time with respect to
future  events,  and are  subject to risks and  uncertainties  that could  cause
actual  performance or results to differ  materially  from those expressed in or
suggested by the forward-looking statements.  Important factors that could cause
these differences include, but are not limited to:

         o        the worldwide demand for coal;

         o        the price of coal;

         o        the supply of coal and other competitive factors;

         o        the costs to mine and transport coal;

         o        the ability to obtain new mining permits;

         o        the costs of reclamation of previously mined properties;

         o        the risks of expanding coal production;

         o        industry competition;

         o        our  ability to  continue  to finance  and  execute our growth
                  strategies;

         o        general economic conditions; and

         o        other  factors   discussed  under  the  headings   "Cautionary
                  Statements   and  Risk   Factors"   and   elsewhere   in  this
                  "Management's  Discussion and Analysis of Financial  Condition
                  and Results of Operations."

         Forward-looking  statements speak only as of the date of this quarterly
report. You should not put undue reliance on any forward-looking  statements. We
strongly  encourage  investors  to carefully  read the factors  described in our
Annual  Report on Form 10-K for the year ended  December 31, 2007 in the section
entitled  "Risk  Factors" for a description  of certain risks that could,  among


                                       19
<PAGE>


other  things,  cause  actual  results  to  differ  from  these  forward-looking
statements. We assume no responsibility to update the forward-looking statements
contained in this quarterly report on Form 10-Q.

OVERVIEW

         We mine, process and sell high quality bituminous steam coal from mines
located in East  Tennessee  and North  Alabama  and,  until March 31,  2008,  in
Southeast Kentucky. We own the coal mineral rights to approximately 65,000 acres
of land and lease the rights to approximately  15,000 additional acres excluding
the Southeast  Kentucky  properties,  known as Straight Creek, sold on March 31,
2008. As of March 31, 2008, our mining complexes  included one underground mine,
five surface mines, and one highwall mine. In addition,  we have two preparation
plants, one active and one inactive, and two unit train loading facilities,  one
active and one inactive,  served by the Norfolk Southern ("NS") railroad. We are
a minority  joint  venture  partner in a barge  loading  facility on the Warrior
River in North  Alabama.  We hold permits that allow us to open or re-open seven
new mines close to our current  operations.  As of March 31, 2008, we controlled
approximately  28.2 million estimated  recoverable tons. During the three months
ended  March 31,  2008,  we  generated  total  revenues of  approximately  $35.7
million, a net loss of $10.7 million,  an EBITDA loss (See EBITDA NOTE below) of
$785,603 and sold  approximately  597,000  tons of coal.  Our goal is to acquire
additional  mines and  increase  production  from  existing  reserves  as market
conditions allow.

         Our revenues have resulted  primarily from the sale of coal to electric
utility  companies  in the  Southeastern  United  States.  According to the U.S.
Department of Energy, Energy Information  Administration,  the long-term outlook
for coal demand is favorable, as domestic electricity consumption is expected to
grow at an average  annual rate of 1.1% per year through 2030 with 48% to 49% of
that growth provided by coal. International coal consumption is expected to grow
by  2.6%  through   2015.   During  the  three  months  ended  March  31,  2008,
approximately  58.9% of our  revenue was  generated  from coal sales to electric
utility companies in the Southeastern  United States. Our largest customers were
Alabama Power,  Georgia Power,  and Solutia,  Inc.,  representing  approximately
24.5%, 21.9% and 11.8% of our revenues, respectively.

         In  the  three  months  ended  March  31,  2008,   our  mines  produced
approximately  500,000 tons of coal.  Approximately  20.5% of our production for
the three  months  ended March 31, 2008 was  produced at  underground  mines and
79.5% was  produced at our  surface  and  highwall  mine  operations.  We sell a
majority of our coal  pursuant to  long-term  contracts or open  purchase  order
arrangements with long time customers.  We plan to pursue  additional  long-term
contracts.

EBITDA DISCLOSURES

         EBITDA is defined  as net loss plus (i) other  (income)  expense,  net,
(ii) interest expense, (iii) depreciation, depletion, accretion and amortization
minus (iv) interest income and (v) income from joint ventures. We present EBITDA
to  enhance  understanding  of our  operating  performance.  We use  EBITDA as a
criterion  for  evaluating  our  performance  relative  to  that  of our  peers,
including measuring our cost effectiveness and return on capital,  assessing our
allocations of resources and  production  efficiencies  and making  compensation
decisions.  We believe  that EBITDA is an  operating  performance  measure  that
provides investors and analysts with a measure of our operating  performance and
permits  them to evaluate our cost  effectiveness  and  production  efficiencies
relative to competitors.  In addition, our management uses EBITDA to monitor and
evaluate  our  business  operations.  However,  EBITDA is not a  measurement  of
financial  performance  under accounting  principles  generally  accepted in the
United States of America  ("GAAP") and may not be comparable to other  similarly
titled  measures  of other  companies.  EBITDA  should not be  considered  as an
alternative  to cash flows from operating  activities,  determined in accordance
with GAAP, as indicators of cash flows. The following reconciles our net loss to
EBITDA:


                                       20
<PAGE>


EBITDA RECONCILIATION:                             THREE MONTHS ENDED MARCH 31,
                                                  -----------------------------
                                                      2008             2007
                                                  ------------     ------------

Net loss .....................................    $(10,738,699)    $ (5,961,518)
Other (income) expense, net ..................         682,976         (110,654)
Income from joint venture ....................        (202,016)            --
Interest income ..............................        (228,910)        (298,637)
Interest expense .............................       4,888,790        2,104,348
Depreciation, depletion, amortization and
   accretion .................................       4,812,256        3,628,596
                                                  ------------     ------------
    EBITDA ...................................    $   (785,603)    $   (637,865)
                                                  ============     ============

SALE OF STRAIGHT CREEK MINING OPERATION

         On  March  31,  2008,  our  wholly-owned   subsidiary,   National  Coal
Corporation,  completed the sale of the real and personal  property  assets that
comprise  its  Straight  Creek  mining  operations  in Bell,  Leslie  and Harlan
Counties,  Kentucky to Xinergy  Corp.  ("Xinergy")  for $11.0 million in cash in
accordance  with the terms and conditions of a Purchase  Agreement  entered into
among the parties on February 8, 2008 (the "Purchase Agreement"). In addition to
the receipt of the purchase price for the assets, the transaction will result in
the subsequent release of approximately $7.0 million in restricted cash that was
previously pledged to secure reclamation bonds and other liabilities  associated
with the Straight  Creek mining  operations,  and  relieved  approximately  $3.6
million in reclamation liabilities,  and approximately $2.6 million of equipment
related debt which were assumed by Xinergy in the transaction. The sale included
property,  plant,  equipment,  and mine  development  with a net  book  value of
approximately  $16.1 million.  After a negative  working  capital  adjustment of
approximately  $288,000,  the  transaction  resulted in a loss of  approximately
$381,000  which is reflected in OTHER  (EXPENSE)  INCOME,  NET on our  condensed
consolidated  statement of operations for the three months ended march 31, 2008.
Partial  proceeds were received at the time of closing due to an error in wiring
instructions resulting in a receivable of $5,050,000 at March 31, 2008 which was
subsequently received on April 2, 2008.

         Our  Straight  Creek  mining  operations  recognized  revenues  of $5.0
million and $9.6  million and  operating  losses of $2.3 million and $563,000 on
sales of 99,669 and 187,095 tons of coal during the three months ended March 31,
2008  and  2007,  respectively.  Pursuant  to a  Contract  Mining  and  Services
Agreement  dated April 1, 2008,  we will  provide  highwall  mining  services to
Xinergy at our former  properties  in  Southeast  Kentucky for a period of up to
twenty-four months.

         On March 31,  2008 we used a portion of the  proceeds  from the sale to
repay $5.0 million of the $10.0 million Term Loan Credit  Facility  entered into
in October 2006 with Guggenheim  Corporate  Funding,  L.L.C.  as  administrative
agent and accrued interest of $50,000. On April 2, 2008, we repaid the remaining
$5.0 million and accrued interest of $51,667 which indebtedness  otherwise would
have matured in December 2008. The repayment resulted in a loss of approximately
$570,000 in each of the three  months  ended  March 31, 2008 and the  subsequent
quarter from the write-off of deferred  financing costs associated with the Term
Loan Credit facility.  The loss is reflected in OTHER (EXPENSE)  INCOME,  NET on
our condensed consolidated statement of operations.

         Xinergy  was founded and is  controlled  by Jon Nix,  who is a founder,
significant  stockholder,  and former officer and director of National Coal. Mr.
Nix served as a director of National  Coal Corp.  from  January  2003 until July
2007, and as Chairman of the Board from March 2004 until July 2007. Mr. Nix also
served as our  President  and Chief  Executive  Officer  from January 2003 until
August 2006. He is married to the stepdaughter of our General  Counsel,  Charles
Kite. At April 2, 2008,  based on reports Mr. Nix had filed with the  Securities
and Exchange  Commission,  Mr. Nix  beneficially  owned 3,626,138  shares of our
common stock, representing  approximately 14% of the outstanding common stock as
of such date.


                                       21
<PAGE>


         Along  with the  November  sale and  option of our  properties  at Pine
Mountain,  Kentucky,  the sale of our Straight  Creek  properties  substantially
completes our exit of mining  operations in Kentucky.  Management  believes this
will allow  National  Coal to focus  resources  on our assets in  Tennessee  and
Alabama as well as on potential acquisitions in the region.

RESULTS OF OPERATIONS

         The following table presents consolidated  statement of operations data
for each of the periods indicated as a percentage of revenues.

                                                               THREE MONTHS
                                                              ENDED MARCH 31,
                                                            ------------------
                                                             2008        2007
                                                            ------      ------

Revenues ...............................................     100.0%      100.0%
                                                            ------      ------
Operating expenses:
   Cost of sales .......................................      97.4        92.4
   Depreciation, depletion, amortization
      and accretion ....................................      13.5        19.1
   General and administrative ..........................       5.1        10.9
                                                            ------      ------
     Total operating expenses ..........................     116.0       122.4
                                                            ------      ------
Loss from operations ...................................     (16.0)      (22.4)
Other income (expense):
   Interest expense ....................................     (13.7)      (11.1)
   Interest income .....................................       0.6         1.6
   Income from joint venture ...........................       0.6        --
   Other income (expense), net .........................      (1.9)        0.6
                                                            ------      ------
Loss before income taxes ...............................     (30.4)%     (31.3)%
Income tax benefit .....................................       0.3        --
                                                            ------      ------
Net loss ...............................................     (30.1)%     (31.3)%
                                                            ======      ======

     COMPARISON  OF THREE  MONTHS  ENDED MARCH 31, 2008 AND THREE  MONTHS  ENDED
MARCH 31, 2007

         PRODUCTION

         In the three months ended March 31, 2008 and 2007,  our mines  produced
500,223 and 300,803 tons of coal, respectively, as follows:

                                                    THREE MONTHS
                                                   ENDED MARCH 31,
                                      -----------------------------------------
                                              2008                 2007
                                      -------------------   -------------------
                                        TONS         %        TONS         %
                                      --------   --------   --------   --------
Surface mines .....................    343,549       58.7    101,301       23.5
Highwall mines ....................     54,011        9.2     34,808        8.1
Underground mines .................    102,663       17.5    164,694       38.3
                                      --------   --------   --------   --------
  Total tons produced .............    500,223       85.5    300,803       69.9
Coal purchased ....................     84,994       14.5    129,472       30.1
                                      --------   --------   --------   --------
  Total tons made available .......    585,217      100.0    430,275      100.0
                                      ========              ========
Tons produced by contract miners
  included in the above ...........     79,046       13.5    102,924       23.9%


         REVENUES

         For the three months ended March 31, 2008,  approximately 82.7% of coal
sales were made to four utilities and four industrial  customers under contracts
and open purchase  order  arrangements  with original  terms of twelve months or


                                       22
<PAGE>


longer.  The  remaining  coal sales for the three  month  period were made under
short term contracts or purchase  orders.  Tons sold and the associated  revenue
for the three month period ended were as follows:

                                 THREE MONTHS
                                ENDED MARCH 31,          INCREASE (DECREASE)
                          -------------------------   -------------------------
                              2008          2007           $             %
                          -----------   -----------   -----------   -----------

Coal sales ............   $35,483,441   $18,813,897   $16,669,544          88.6%
Tons sold .............       596,732       368,332       228,400          62.0%
Average price per
   ton sold ...........   $     59.46   $     51.08   $      8.38          16.4%

         The  increase  in revenue  from coal sales for the three  months  ended
March 31, 2008 as compared to the same period in 2007 was  primarily  the result
of the  addition of National  Coal of Alabama  which sold  293,650  tons of coal
during the period at an average price of $66.49 per ton. A $2.8 million  decline
in coal sales at our Tennessee and Kentucky  operations was primarily the result
of a 65,250 ton  decline in volume net of an average  $1.58  increase in the per
ton sales  price to an average of $52.66 for the three  months  ended  March 31,
2008.

         Other revenues  representing  less than 1% of total revenues  consisted
primarily of fees charged to another coal  producer for use of our train loading
facilities in Southeast Kentucky which were sold on March 31, 2008.

         OPERATING EXPENSES

         COST OF SALES

                                THREE MONTHS
                               ENDED MARCH 31,            INCREASE (DECREASE)
                          -------------------------   -------------------------
                              2008          2007           $             %
                          -----------   -----------   -----------   -----------

Cost of sales .........   $34,749,529   $17,593,913   $17,155,616          97.5%
Tons sold .............       596,732       368,332       228,400          62.0%
Average cost per
   ton sold ...........   $     58.23   $     47.77   $     10.46          21.9%

         Total cost of sales increased 97.5% during the three months ended March
31,  2008 as  compared to the same three  month  period in 2007  primarily  as a
result of the  addition of National  Coal of Alabama  which sold 293,650 tons of
coal at an average  cost per ton sold of $56.25.  An  increase  in total cost of
sales at our Tennessee and Kentucky  operations  resulted in an average cost per
ton sold of $60.15, a 25.9% increase as compared to the three months ended March
31, 2007 on a per ton basis. Our Tennessee and Kentucky  operations  experienced
large increases in the cost of labor,  explosives,  equipment  repair,  and fuel
while  experiencing  deceases in both production and sales which resulted in the
significant  increase in the average cost per ton sold. A decreased  reliance on
purchased  coal to meet  commitments in the three months ended March 31, 2008 as
compared to the same period in 2007  resulted in a 64.0%  decline in the overall
cost of purchased coal.


                                       23
<PAGE>


         DEPRECIATION, DEPLETION, AMORTIZATION, AND ACCRETION EXPENSE

<TABLE>
<CAPTION>
                                      THREE MONTHS
                                     ENDED MARCH 31,            INCREASE (DECREASE)
                                -------------------------   -------------------------
                                    2008          2007           $             %
                                -----------   -----------   -----------   -----------
<S>                             <C>           <C>           <C>                 <C>
Depreciation, depletion,
   amortization and accretion   $ 4,812,256   $ 3,628,596   $ 1,183,660          32.6%
Tons sold ...................       596,732       368,332       228,400          62.0%
Average cost per ton sold ...   $      8.06   $      9.85   $     (1.79)        (18.2%)
</TABLE>

         The  32.6%  increase  in  depreciation,  depletion,  amortization,  and
accretion  expense for the three  months  ended June 30, 2008 as compared to the
comparable period in 2007, is attributable primarily to the addition of National
Coal of Alabama which sold 293,650 tons of coal with an associated  average cost
of  depreciation,  depletion,  amortization,  and  accretion per ton of $5.78 as
compared to our Tennessee and Kentucky operations which recognized depreciation,
depletion,  amortization,  and accretion of $10.28 per ton, a 4.4% increase over
the three months ended March 31, 2007.

         GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                       THREE MONTHS
                                      ENDED MARCH 31,          INCREASE (DECREASE)
                                  -----------------------   ------------------------
                                     2008         2007          $              %
                                  ----------   ----------   ----------    ----------
<S>                               <C>          <C>          <C>                <C>
General and administrative
   expenses ...................   $1,824,622   $2,078,897   $ (254,275)        (12.2%)
Tons sold .....................      596,732      368,332      228,400          62.0%
Average cost per ton sold .....   $     3.06   $     5.64   $    (2.58)        (45.8%)
</TABLE>

         The 12.2% decline in general and administrative  expenses for the three
months ended March 31, 2008 as compared to the same period in the previous  year
is primarily  attributable  to the effect of  approximately  $434,000 of related
party  option  expense  which was  reflected in the three months ended March 31,
2007.

         OTHER INCOME (EXPENSE)

         The 132.3%  increase in interest  expense  for the three  months  ended
March 31, 2008 as compared to the same three month period in 2007, was primarily
the result of the October 19, 2007  issuance of our 12.0% Senior  Secured  Notes
the  proceeds  of which  were used to  purchase  Mann  Steel  Products,  Inc.  A
breakdown of our interest expenses is as follows:


                                       24
<PAGE>


<TABLE>
<CAPTION>
                                             THREE MONTHS
                                            ENDED MARCH 31,         INCREASE (DECREASE)
                                       -----------------------    -----------------------
                                          2008         2007            $            %
                                       ----------   ----------    ----------   ----------
<C>                                    <C>          <C>            <C>              <C>
12.0% Senior Secured Notes, due 2012   $2,584,787   $     --       2,584,787         --
10.5% Senior Secured Notes, due 2010    1,733,669    1,744,287       (10,618)        (0.6%)
Term loan credit facility ..........      411,517      220,893       190,624         86.3%
Installment obligations and notes ..       85,104       25,220        59,884        237.4%
Capital lease obligations ..........       41,703      108,755       (67,052)       (61.7%)
Other ..............................       32,010        5,193        26,817        516.4%
                                       ----------   ----------    ----------
     Total interest expense ........   $4,888,790   $2,104,348     2,784,442        132.3%
                                       ==========   ==========    ==========
</TABLE>

         Interest  income declined 23.3% to  approximately  $229,000 in the 2008
period  as a result of lower  average  cash  balances.  Other  income  (expense)
reflected a loss of  approximately  $381,000 on the sale of our  Straight  Creek
properties,  a gain of approximately $148,000 on the exchange of $3.0 million of
our 10.5% Senior Secured Notes due 2010, and a loss of approximately $570,000 on
the  write-off  of  deferred   debt  issuance   costs  related  to  the  partial
extinguishment of our Term Loan Credit Facility.

LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2008, we had cash and cash  equivalents  of  approximately
$10.0 million,  negative  working capital of  approximately  $176,000,  and cash
flows provided by operations of approximately  $2.7 million for the three months
then ended. At March 31, 2008, we had  stockholders'  equity of $1.7 million and
incurred net losses of $10.7 million,  excluding preferred stock dividends,  for
the three months then ended.  We expect that we may continue to incur net losses
into the foreseeable future which would reduce our stockholders' equity.

         We invested $750,000 in equipment and mine development during the three
months  ended March 31,  2008  including  $74,000  purchased  through  equipment
financing arrangements. We intend to make approximately $15.5 million of capital
expenditures during the remainder of 2008 to expand operations and an additional
approximately $900,000 to maintain existing assets.

         Our  operating  plan for the  remainder of 2008  includes cash receipts
from sales committed under  contracts or open purchase order  arrangements  with
long time customers, the release of restricted cash from the March 31, 2008 sale
of our Southeast Kentucky  properties,  and the sale of common stock adequate to
cover all planned  commitments.  In early 2008, we successfully  renegotiated an
existing  coal  supply  agreement  which  resulted in an increase in the selling
price per ton. In addition, we are presently in discussions with other customers
on existing coal supply agreements,  and we intend to pursue other opportunities
as they arise during 2008.  However,  if we are unable to execute our  operating
plan  successfully,  we may not be able to meet our liquidity  requirements  and
will need to raise  additional  cash or  discontinue  operations  at some of our
facilities. Accordingly, on May 12, 2008, we sold 2,332,000 shares of our common
stock at a price of $4.65 in a private  placement  for gross  proceeds  to us of
$10,843,800.  We also  intend  to  pursue a $10  million  revolver  type  credit
facility during 2008 to provide additional working capital as needed.

         Included   in  cash  and  cash   equivalents   at  March  31,  2008  is
approximately $5.1 million held at National Coal of Alabama,  Inc. National Coal
of Alabama,  Inc. is restricted  in its ability to distribute  cash to our other
consolidated  companies for use in their  operations  under the terms of our 12%
Notes due 2012. On an annual basis, National Coal of Alabama can distribute cash
for use in our other operations only if it meets certain EBITDA-based  operating
requirements  for the  immediately  preceding  fiscal  year.  Additionally,  our
subsidiary,  National Coal Corporation,  has entered into a management  services
agreement with National Coal of Alabama, Inc. that


                                       25
<PAGE>


compensates  National Coal Corporation for services that it provides to National
Coal of Alabama,  and a tax sharing  agreement  that  requires  National Coal of
Alabama  to  make  payments  to us in  respect  of its  tax  liability.  For the
remainder of fiscal 2008, we anticipate National Coal of Alabama's operations to
provide limited cash for use in our other operations.

         The  following  table   summarizes  our  long-term  debt   obligations,
excluding capital leases:

                                                  MARCH 31,      DECEMBER 31,
                                                    2008             2007
                                               -------------    -------------
12.0% Senior Secured Notes, due 2012 .......   $  60,000,000    $  60,000,000
10.5% Senior Secured Notes, due 2010 .......      52,000,000       55,000,000
Term Loan Credit Facility ..................       5,000,000       10,000,000
Overriding Royalty Interest Obligation, net        8,644,931        9,177,273
Installment purchase obligations, due 2010 .       1,740,757        4,540,801
Installment purchase obligations, due 2009 .       1,477,479        1,906,271
Installment purchase obligations, due 2008 .            --            182,463
Equipment notes (8.39%-9.28%), due 2009-2011         148,342           85,146
Equipment note (4.48%), due 2009 ...........          96,520          124,781
Other ......................................           1,488           51,817
Less unamortized discounts .................     (10,663,090)     (11,264,974)
                                               -------------    -------------
                                                 118,446,427      129,803,578
Less current portion of long-term debt .....      (7,900,453)     (15,453,230)
                                               -------------    -------------
Long-term debt .............................   $ 110,545,974    $ 114,350,348
                                               =============    =============


     TERM LOAN CREDIT FACILITY

         On March 31,  2008 we used a portion of the  proceeds  from the sale to
repay $5.0 million of the $10.0 million Term Loan Credit  Facility  entered into
in October 2006 with Guggenheim  Corporate  Funding,  L.L.C.  as  administrative
agent and accrued interest of $50,000. On April 2, 2008, we repaid the remaining
$5.0 million and accrued interest of $51,667 which indebtedness  otherwise would
have matured in December 2008. The repayment resulted in a loss of approximately
$570,000 in each of the three  months  ended  March 31, 2008 and the  subsequent
quarter from the write-off of deferred  financing costs associated with the Term
Loan Credit facility.  The loss is reflected in OTHER (EXPENSE)  INCOME,  NET on
our condensed consolidated statement of operations.

     10.5% SENIOR SECURED NOTES DUE 2010

         On February 28, 2008, certain holders of our 10.5% Senior Secured Notes
exchanged  $3,000,000 in notes plus accrued but unpaid  dividends of $63,875 for
520,387  shares  of  our  common  stock  resulting  in a gain  of  approximately
$148,000.

     EQUIPMENT NOTES

         In February and March 2008, we entered into new equipment  notes with a
bank and an equipment  manufacturer pursuant to which we purchased vehicles with
an aggregate  principal value of  approximately  $74,000.  These equipment notes


                                       26
<PAGE>


require  payments  over  36  months  at  fixed  interest  rates  of  7.75%.  The
obligations under the equipment notes are secured by the vehicles purchased.

     INSTALLMENT PURCHASE OBLIGATIONS

         Approximately  $2.6  million of  equipment  related debt was assumed by
Xinergy as a result of the March 31, 2008 sale of our Straight  Creek,  Kentucky
properties.

CASH FLOWS

         We currently satisfy our working capital requirements primarily through
cash flows  generated from  operations and sales of debt and equity  securities.
For the three  months  ended March 31,  2008,  we had a net  decrease in cash of
approximately $2.1 million.  Cash flows from operating,  financing and investing
activities  for the three months ended March 31, 2008 and 2007 are summarized in
the following table:

                                                       THREE MONTHS
                                                      ENDED MARCH 31,
                                               ----------------------------
              ACTIVITY                             2008             2007
         -----------------------------------   ------------    ------------

         Operating activities ..............   $  2,723,322    $ (5,407,684)
         Investing activities ..............      4,233,638        (808,307)
         Financing activities ..............     (6,844,045)     13,725,119
                                               ------------    ------------
            Net increase in cash ...........   $    112,914    $  7,509,128
                                               ============    ============

     OPERATING ACTIVITIES

         The net cash  provided by operating  activities of  approximately  $2.7
million  during the three months ended March 31, 2008 was due to the addition of
National Coal of Alabama which provided  operating  cash flows of  approximately
$5.2 million based on a significantly higher average price per ton sold.

     INVESTING ACTIVITIES

         Cash  provided by  investing  activities  of $4.2 million for the three
months  ended March 31, 2008 was  primarily  related to the sale of our Straight
Creek, Kentucky properties net of capital expenditures,  increases in restricted
cash supporting reclamation bonds, and increases in prepaid royalties.

         Cash used in investing  activities of $0.8 million for the three months
ended March 31, 2007 was primarily  related to net capital  expenditures of $0.3
million,  an increase in prepaid  royalties of $0.3 million,  and an increase in
cash collateral supporting reclamation bonds of approximately $0.2 million.

     FINANCING ACTIVITIES

         The net cash used in financing activities of approximately $6.8 million
during the three  months  ended March 31, 2008 was  primarily  the result of the
partial  repayment of our Term Loan Credit  Facility and repayments of notes and
equipment  related  financing as compared to $13.7 million  provided  during the
three months ended March 31, 2007 when we raised $13.95  million on the issuance
of 3,000,000  shares of common stock and an additional $2.0 million  borrowed on
our Term Loan Credit Facility.


                                       27
<PAGE>


CONTRACTUAL OBLIGATIONS

         The following summarizes our contractual  obligations at March 31, 2008
and the effects such obligations are expected to have on liquidity and cash flow
in future periods:

<TABLE>
<CAPTION>
                                                                PAYMENTS DUE BY PERIOD
                                      ------------------------------------------------------------------------
                                                       LESS THAN         1-3            3-5           AFTER
                                          TOTAL         1 YEAR          YEARS          YEARS         5 YEARS
                                      ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>
Long-term debt (including interest)   $188,264,771   $ 22,659,100   $ 84,280,236   $ 73,753,455   $  7,571,979
Operating leases ..................      4,015,801      2,004,871      2,010,930           --             --
Capital leases ....................        227,222        140,574         86,648           --             --
                                      ------------   ------------   ------------   ------------   ------------
     Total contractual obligations    $192,507,794   $ 24,804,545   $ 86,377,814   $ 73,753,455   $  7,571,979
                                      ============   ============   ============   ============   ============
</TABLE>

         We rent mining equipment  pursuant to operating lease  agreements,  and
made lease  payments  totaling  approximately  $506,000  during the three months
ended March 31, 2008.

         For the three months ended March 31, 2008, we accrued  dividends to the
holders of our Series A cumulative  convertible preferred stock in the aggregate
of  approximately  $39,889.  Historically we have made semi-annual cash dividend
payments to the holder of the Series A preferred  stock on June 30 and  December
31. At March 31, 2008,  there were accrued but unpaid  dividends on our Series A
cumulative  convertible  preferred  stock of $154,106.  The dividend rate of our
Series A preferred stock increased from 5% to 8% on September 1, 2006. We intend
to make  dividend  payments  going forward as long as (1) no default of our debt
covenants has  occurred,  (2) we will be in pro-forma  compliance  with our debt
agreements,  and (3) the available  credit and cash  equivalents  we have is not
less than $1.5 million.

OFF-BALANCE SHEET ARRANGEMENTS

         At  March  31,   2008,   we  did  not  have  any   relationships   with
unconsolidated  entities  or  financial  partnerships,  such as  entities  often
referred  to  as  structured  finance,  variable  interest  or  special  purpose
entities,  which would have been  established  for the  purpose of  facilitating
off-balance  sheet  arrangements  or  other  contractually   narrow  or  limited
purposes.  As such, we are not exposed to any  financing,  liquidity,  market or
credit risk that could arise if we had engaged in such relationships.

         At March 31, 2008 and December 31, 2007,  we,  through our  subsidiary,
National  Coal of  Alabama,  Inc.,  held an  investment  totaling  $316,838  and
$114,823,  respectively,  representing  a 49%  interest  in Powhatan  Dock,  LLC
("Powhatan") which operates a barge loadout in Alabama. We account for our joint
venture  investment  in Powhatan,  which was  acquired in the fourth  quarter of
2007, using the equity method.  Powhatan recorded revenues of $1,275,419 and net
income of $412,277 during the three months ended March 31, 2008.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

         Accounting  measurements  at interim dates  inherently  involve greater
reliance on  estimates  than those made at  year-end.  The results for the three
months  ended March 31,  2008 are not  necessarily  indicative  of results to be
expected  for the full year.  Please  refer to the  section  entitled  "Critical
Accounting  Policies,  Judgments and Estimates" included in Item 7. Management's
Discussion  and Analysis of Financial  Condition and Results of Operation of our
Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion
of our critical accounting policies, judgments and estimates. There have been no
material changes to the previously reported information  concerning our Critical
Accounting Policies, Judgments and Estimates.


                                       28
<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

         We adopted  Statement of Financial  Accounting  Standards No. 157, FAIR
VALUE MEASUREMENTS ("SFAS 157"), and Statement of Financial Accounting Standards
No.  159,  THE FAIR VALUE  OPTION  FOR  FINANCIAL  LIABILITIES  -  INCLUDING  AN
AMENDMENT OF FASB  STATEMENT  NO. 115 ("SFAS No.  159") on January 1, 2008.  The
adoptions  of SFAS  157 and  SGAS  159 did not  have a  material  impact  on our
financial position or results of operations.

         In December  2007,  the FASB issued  Statement of Financial  Accounting
Standards No. 141R, BUSINESS  COMBINATIONS ("SFAS 141R") which becomes effective
for  acquisitions  occurring  on or after  the  beginning  of the  first  annual
reporting  period beginning on or after December 15, 2008. SFAS 141R establishes
principles and  requirements  for determining  how an enterprise  recognizes and
measures the fair value of certain assets and liabilities acquired in a business
combination,  including non-controlling interests, contingent consideration, and
certain  acquired  contingencies.  SFAS 141R also  requires  acquisition-related
transaction expenses and restructuring costs be expensed as incurred rather than
capitalized as a component of the business combination. We expect that SFAS 141R
could  have an  impact  on  accounting  for any  businesses  acquired  after the
effective date of this pronouncement.

         In  December  2007,  the FASB  issued  SFAS No.  160,  "Non-controlling
Interests  in  Consolidated  Financial  Statements-An  Amendment  of ARB No. 51"
("SFAS 160").  SFAS 160 establishes  accounting and reporting  standards for the
non-controlling  interest in a  subsidiary  (previously  referred to as minority
interests).  SFAS 160 would have an impact on the presentation and disclosure of
the non-controlling interests of any non wholly-owned businesses acquired in the
future. SFAS 160 will be effective for fiscal years beginning after December 15,
2008;  earlier  adoption  is  prohibited.  We are  still  analyzing  SFAS 160 to
determine the impact of adoption.


                                       29
<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk is the risk of loss arising from adverse  changes in market
rates and prices, such as interest rates, commodity prices, and foreign currency
exchange  rates.  There have been no material  changes to the  quantitative  and
qualitative  disclosures  included in Item 7A of the Company's  Annual Report on
Form 10-K for the year ended December 31, 2007.

ITEM 4T. CONTROLS AND PROCEDURES.

CONTROLS AND PROCEDURES

         Members of our management,  including our President and Chief Executive
Officer,  Daniel A. Roling,  and Chief Financial Officer,  Michael Castle,  have
evaluated  the  effectiveness  of our  disclosure  controls and  procedures,  as
defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of March 31,
2008, the end of the period covered by this report.  Based upon that evaluation,
Messrs.  Roling and Castle concluded that our disclosure controls and procedures
were effective as of March 31, 2008.

INTERNAL CONTROL OVER FINANCIAL REPORTING

         There were no changes in our internal control over financial  reporting
or in other factors  identified in connection  with the  evaluation  required by
paragraph  (d) of Exchange Act Rules 13a-15 or 15d-15 that  occurred  during the
fourth  quarter  ended  March 31,  2008 that have  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.


                                       30
<PAGE>


                           PART II: OTHER INFORMATION

ITEM 1A. RISK FACTORS

         There have been no material  changes to the risk  factors  disclosed in
Item 1A "Risk Factors" in the Company's  Annual Report on Form 10-K for the year
ended December 31, 2007.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

         During the three months ended March 31, 2008,  holders of 223.11 shares
of our  Series  A  convertible  preferred  stock  with  liquidation  preferences
totaling  approximately  $3,346,650 and accrued dividends totaling approximately
$131,712  converted  their shares into 600,753  shares of our common stock.  The
issuance of these  securities was exempt from the  registration  requirements of
the  Securities  Act  pursuant to Section  3(a)(9) of the  Securities  Act as an
exchange by the issuer with its existing security holders where no commission or
other remuneration is paid for soliciting such exchange.

ITEM 6.  EXHIBITS

         The following exhibits are filed as part of this report:

EXHIBIT
NUMBER                                  EXHIBIT TITLE
-------       ------------------------------------------------------------------

31.1          Certificate of Chief Executive  Officer pursuant to Rule 13a-14(a)
              under the Securities and Exchange Act of 1934, as amended.

31.2          Certificate of Chief Financial  Officer pursuant to Rule 13a-14(a)
              under the Securities and Exchange Act of 1934, as amended.

31.3          Certificate of Chief Executive Officer and Chief Financial Officer
              pursuant to Rule  13a-14(b)  under the Securities and Exchange Act
              of 1934, as amended.

32.1          Certification  Pursuant  to 18  U.S.C.  Section  1350  as  Adopted
              Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


                                       31
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                           NATIONAL COAL CORP.


Date: May 15, 2008                         /S/ MICHAEL CASTLE
                                           ---------------------------
                                       By:   Michael Castle
                                       Its:  Chief Financial Officer
                                             (Principal Financial and
                                             Accounting Officer)


                                       32