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

                                  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, 2007

                                       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.
                (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)

                                 (865) 690-6900
                           (Issuer's telephone number)

         Indicate  by check  mark  whether  the  issuer  (1) filed  all  reports
required to be filed by Section 13 or 15(d) of the  Exchange Act during the past
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 or a  non-accelerated  filer.  See  definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act.

Large accelerated filer [_]   Accelerated filer [_]   Non-accelerated filer [X]

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

       As of May 11, 2007, the issuer had 20,277,012 shares of common stock, par
value $.0001 per share, issued and outstanding.

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


<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.................................16

Item 3.   Quantitative and Qualitative Disclosures About Market Risk..........26

Item 4.   Controls and Procedures.............................................26

PART II   OTHER INFORMATION...................................................26

Item 1.   Legal Proceedings...................................................26

Item 1A.  Risk Factors........................................................27

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.........27

Item 6.   Exhibits............................................................28


                                       2
<PAGE>


                          PART I: FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                               NATIONAL COAL CORP.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                   (UNAUDITED)
<CAPTION>
                                                                                MARCH 31,     DECEMBER 31,
                                                                                  2007            2006
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
ASSETS
Current assets
   Cash and cash equivalents ..............................................   $  9,690,013    $  2,180,885
   Accounts receivable ....................................................      3,255,461       3,712,779
   Inventory ..............................................................      4,507,390       2,221,742
   Prepaid and other current assets .......................................        697,139         867,247
                                                                              ------------    ------------
     Total current assets .................................................     18,150,003       8,982,653

   Assets held for sale ...................................................           --           640,649
   Property, plant equipment and mine development, net ....................     54,055,169      55,837,627
   Deferred financing costs ...............................................      2,709,670       2,856,534
   Restricted cash ........................................................     17,447,614      17,246,751
   Other non-current assets ...............................................        689,747         427,516
                                                                              ------------    ------------
     Total Assets .........................................................   $ 93,052,203    $ 85,991,730
                                                                              ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
   Current maturities of long-term debt ...................................   $  3,898,009    $  4,720,671
   Current installments of obligations under capital leases ...............        210,862         351,668
   Current portion of asset retirement obligations ........................      1,245,659       1,378,967
   Accounts payable and accrued expenses ..................................      9,738,445      11,981,495
                                                                              ------------    ------------
     Total current liabilities ............................................     15,092,975      18,432,801

   Long-term debt, less current maturities, net of discount ...............     64,103,994      62,093,134
   Obligations under capital leases, less current installments ............        156,749         321,071
   Asset retirement obligations, less current portion .....................      6,002,206       5,835,927
   Deferred revenue .......................................................        903,815       1,032,426
   Other non-current liabilities ..........................................        265,548         199,430
                                                                              ------------    ------------
     Total Liabilities ....................................................     86,525,287      87,914,789
                                                                              ------------    ------------

Commitments and contingencies (Note 13)

Stockholders' equity (deficit)
   Series A convertible  preferred  stock,  $.0001 par value;  8% coupon;
   1,611 shares authorized; 702.54 and 782.54 shares issued and outstanding
   at March 31, 2007 and December 31, 2006, respectively ..................           --              --
   Common stock, $.0001 per value; 80 million shares authorized; 19,540,745
   and 16,340,744 shares issued and outstanding at March 31, 2007 and
   December 31, 2006, respectively ........................................          1,954           1,634
   Additional paid-in capital .............................................     56,460,876      42,049,703
   Accumulated deficit ....................................................    (49,935,914)    (43,974,396)
                                                                              ------------    ------------
     Total stockholders' equity (deficit) .................................      6,526,916      (1,923,059)
                                                                              ------------    ------------
     Total liabilities and stockholders' equity (deficit) .................   $ 93,052,203    $ 85,991,730
                                                                              ============    ============
</TABLE>

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,
                                                        ----------------------------
                                                            2007            2006
                                                        ------------    ------------
<S>                                                     <C>             <C>
Revenues
  Coal sales ........................................   $ 18,813,897    $ 20,237,770
  Other revenues ....................................        221,048         230,962
                                                        ------------    ------------
   Total revenues ...................................     19,034,945      20,468,732
                                                        ------------    ------------

Expenses
  Cost of sales .....................................     17,593,913      20,730,715
  Depreciation, depletion, amortization and accretion      3,628,596       3,832,236
  General and administrative ........................      2,078,897       2,056,709
                                                        ------------    ------------
   Total operating expenses .........................     23,301,406      26,619,660
                                                        ------------    ------------

Operating loss ......................................     (4,266,461)     (6,150,928)
                                                        ------------    ------------

Other income (expense)
  Interest expense ..................................     (2,104,348)     (1,868,844)
  Interest income ...................................        298,637         216,754
  Other income (expense), net .......................        110,654         124,124
                                                        ------------    ------------
   Total other income (expense) .....................     (1,695,057)     (1,527,966)
                                                        ------------    ------------

Net loss ............................................     (5,961,518)     (7,678,894)

Preferred stock dividend ............................       (207,875)       (240,599)
                                                        ------------    ------------

Net loss attributable to common shareholders ........   $ (6,169,393)   $ (7,919,493)
                                                        ============    ============

Basic net loss per common share .....................   $      (0.35)   $      (0.56)
                                                        ============    ============

Diluted net loss per common share ...................   $      (0.35)   $      (0.56)
                                                        ============    ============

Weighted average common shares ......................     17,509,633      14,076,661
                                                        ============    ============
</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)

                                                                                          THREE MONTHS
                                                                                         ENDED MARCH 31,
                                                                                  ----------------------------
                                                                                      2007            2006
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>

Cash Flows from Operating Activities
  Net loss ....................................................................   $ (5,961,518)   $ (7,678,894)
  Adjustments to reconcile net loss to net cash provided by operating
     activities:
     Depreciation, depletion, amortization and accretion ......................      3,628,596       3,832,236
     Amortization of deferred financing costs .................................        172,211         142,258
     Amortization of notes discount ...........................................        161,331         142,843
     Gain on disposal of assets ...............................................       (164,457)       (115,579)
     Loss (gain) on extinguishment of debt ....................................         50,720          (8,544)
     Settlement of asset retirement obligations ...............................       (191,514)        (68,316)
     Non-cash compensation:
       Stock option expense ...................................................        234,875         348,848
       Related party option expense ...........................................        434,493            --
     Changes in operating assets and liabilities:
       Decrease (increase) in accounts receivable .............................        457,317        (737,649)
       Increase in inventory ..................................................     (2,285,648)     (1,362,443)
       Decrease (increase) in prepaid and other current assets ................        170,108        (388,320)
       Decrease in other non-current assets ...................................         27,903            --
       (Decrease) increase in accounts payable and accrued expenses ...........     (2,079,607)      4,665,778
       Decrease in deferred revenue ...........................................       (128,611)        (26,144)
       Increase (decrease) in other non-current liabilities ...................         66,117          (2,787)
                                                                                  ------------    ------------
         Net cash flows used in operating activities ..........................     (5,407,684)     (1,256,713)
                                                                                  ------------    ------------

Cash Flows from Investing Activities
  Capital expenditures ........................................................     (1,358,241)    (10,576,902)
  Proceeds from sale of equipment .............................................      1,040,932         385,000
  Increase in restricted cash .................................................       (200,864)     (7,797,607)
  Increase in prepaid royalties ...............................................       (290,134)       (188,880)
                                                                                  ------------    ------------
     Net cash flows used in investing activities ..............................       (808,307)    (18,178,389)
                                                                                  ------------    ------------

Cash Flows from Financing Activities
  Proceeds from issuance of common and preferred stock ........................     13,950,000           9,018
  Proceeds from exercise of options and warrants ..............................           --           223,300
  Proceeds from issuance of notes payable .....................................        441,077            --
  Proceeds from borrowings on Term Loan Credit Facility .......................      2,000,000            --
  Repayments on notes payable .................................................     (1,664,548)     (1,059,932)
  Repayments of capital leases ................................................       (604,747)        (69,712)
  Payments for deferred financing costs .......................................        (25,346)        (14,410)
  Dividends paid ..............................................................       (371,317)           --
                                                                                  ------------    ------------
     Net cash flows provided by (used in) financing activities ................     13,725,119        (911,736)
                                                                                  ------------    ------------

NET INCREASE (DECREASE) IN CASH ...............................................      7,509,128     (20,346,838)
Cash and cash equivalents at beginning of period ..............................      2,180,885      25,434,988
                                                                                  ------------    ------------
Cash and cash equivalents at end of period ....................................   $  9,690,013    $  5,088,150
                                                                                  ------------    ------------

Supplemental disclosures
  Interest paid in cash .......................................................   $    313,929    $    120,159
   Non-cash investing and financing transactions:
      Preferred stock dividends converted to common stock .....................           --            16,127
      Equipment acquired via installment purchase obligations and notes payable        250,338         477,967
      Equipment acquired via capital leases ...................................        248,900         265,300
</TABLE>

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


                                       5
<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,
2006. 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,  2007  are not
necessarily indicative of results that can be expected for the fiscal year.

         The accompanying  financial  statements reflect the Company's financial
position and results of operations on a  consolidated  basis.  All  intercompany
transactions and balances have been eliminated in consolidation.

2.       RECENT ACCOUNTING PRONOUNCEMENTS

         In June  2006,  the FASB  issued  Interpretation  No.  48  ("FIN  48"),
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES--AN  INTERPRETATION OF FASB STATEMENT
NO. 109. FIN 48 prescribes a recognition threshold and measurement attribute for
the financial  statement  recognition and measurement of a tax position taken or
expected  to  be  taken  in  a  tax  return.   It  also  provides   guidance  on
derecognition,  classification,  interest and  penalties,  accounting in interim
periods,  disclosure  and  transition.  FIN 48 is  effective  for  fiscal  years
beginning  after  December 15,  2006.  The Company is  currently  assessing  the
potential impact of the  interpretation on its financial position and results of
operations.

         The  Company  adopted the  provisions  of FIN No. 48 on January 1, 2007
with no impact to retained  earnings.  The Company has determined that it has no
uncertain tax position.

         Due to the existence of net operating loss ("NOL")  carryforwards,  the
Company  has not  currently  accrued  interest  on any of its  unrecognized  tax
benefits.  If the accrual of  interest or  penalties  becomes  appropriate,  the
Company will record an accrual in its income tax provision.

         The  Company's  Federal and state income tax returns for the years 2003
(inception)  and beyond remain subject to  examination  by the Internal  Revenue
Service and various state taxing authorities.

         In September  2006, the FASB issued  Statement of Financial  Accounting
Standards No. 157, FAIR VALUE  MEASUREMENTS  ("SFAS 157"). SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about  fair  value  measurements.   SFAS  157  applies  under  other  accounting
pronouncements  that  require  or permit  fair value  measurements.  SFAS 157 is
effective  prospectively  for fiscal years beginning after November 15, 2007 and
interim periods within that fiscal year. The Company is still analyzing SFAS 157
to determine the impact of adoption.


                                       6
<PAGE>


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

3.       INVENTORY

         Inventory consists of the following:

                                                MARCH 31,           DECEMBER 31,
                                                  2007                  2006
                                              ------------          ------------
Coal ...............................          $  4,311,225          $  2,014,710
Tires ..............................               196,165               207,032
                                              ------------          ------------
   Inventory .......................          $  4,507,390          $  2,221,742
                                              ============          ============



4.       PROPERTY,   PLANT,   EQUIPMENT   AND  MINE   DEVELOPMENT   AND   ASSETS
         HELD-FOR-SALE

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

<TABLE>
<CAPTION>
                                                               MARCH 31,     DECEMBER 31,
                                                                 2007            2006
                                                             ------------    ------------
<S>                                                          <C>             <C>
Furniture and office equipment ...........................   $    383,101    $    345,554
Mining equipment and vehicles ............................     50,633,329      48,864,201
Land and buildings .......................................      6,678,684       6,674,027
Mineral rights ...........................................     11,911,309      11,911,309
Mine development .........................................     10,286,572      10,003,328
Construction in progress .................................        100,133         854,399
                                                             ------------    ------------
     Total property, plant, equipment and mine development     79,993,128      78,652,818
Less accumulated depreciation, depletion and amortization     (25,937,959)    (22,815,191)
                                                             ------------    ------------
     Property, plant, equipment and mine development, net    $ 54,055,169    $ 55,837,627
                                                             ============    ============
</TABLE>


         Mining equipment includes  approximately $493,000 and $869,000 of gross
assets  under  capital   leases  at  March  31,  2007  and  December  31,  2006,
respectively.

         Depreciation expense for the three months ended March 31, 2007 and 2006
was approximately $3,068,000 and $3,484,000, respectively.

         The net  book  value of  assets  held for  sale at  December  31,  2006
approximated the fair value and is disclosed separately on the balance sheet. In
January 2007, these assets were sold for a gain of approximately $4,000.


                                       7
<PAGE>


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

5.       OTHER NON-CURRENT ASSETS

         Other non-current assets are as follows:

                                                       MARCH 31,    DECEMBER 31,
                                                         2007           2006
                                                     ------------   ------------
Prepaid royalties ................................   $    620,839   $    330,705
Notes receivable .................................         68,908         96,811
                                                     ------------   ------------
Total other non-current assets ...................   $    689,747   $    427,516
                                                     ============   ============


6.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses are as follows:

                                                       MARCH 31,    DECEMBER 31,
                                                         2007           2006
                                                     ------------   ------------
Accounts payable .................................   $  6,312,008   $  9,944,033
Accrued payroll and related taxes ................        155,599        189,753
Accrued interest .................................      1,831,437        379,581
Accrued insurance premiums .......................        355,276        310,726
Accrued dividends ................................        385,038        548,480
Royalty obligations ..............................        513,718        464,987
Accrued federal, state and local taxes ...........        185,369        143,935
                                                     ------------   ------------
Total accounts payable and accrued expenses ......   $  9,738,445   $ 11,981,495
                                                     ============   ============


7.       DEBT AND FINANCING ARRANGEMENTS

         TERM LOAN CREDIT FACILITY

         On October 12, 2006, the Company's  wholly-owned  subsidiary,  National
Coal  Corporation,  entered into a Term Loan Credit  Facility  that provides for
borrowings  of $10.0  million with  Guggenheim  Corporate  Funding,  LLC to fund
general  operating and working capital needs.  The Company borrowed $8.0 million
in 2006, and $2.0 million in March 2007.

         Under this Term Loan Credit  Facility,  the Company's  obligations  are
secured  by a priority  senior  lien on  substantially  all of the assets of the
Company.  All amounts under the credit  facility become due and payable in March
2010 and the interest  under this facility is payable at a rate equal to, at our
option,  the Eurodollar Rate plus 3.5% or the Base Rate (which  approximates the
prime  rate)  plus  2.5%.  The term  loan  credit  facility  contains  financial
covenants and default  provisions  including that the Company  maintain  minimum
levels of EBITDA and liquidity,  maintain minimum interest coverage ratios,  not
exceed maximum leverage ratios,  and that it limit certain future  categories of
transactions  such as the incurrence of additional  indebtedness and the sale of
assets. In March 2007, Guggenheim agreed to amend the credit agreement and reset
the  financial  covenants  for  2007 and 2008  including:  EBITDA,  consolidated
leverage, and consolidated interest coverage. As a result of the amendment,  the
applicable  margin on the credit  facility will increase by 1.0%. The applicable
margin  is the  rate  which  is added  to the  Eurodollar  Rate or Base  Rate to
determine the full interest rate on the facility. The applicable margin increase
will  remain in effect  until the  Company is in  compliance  with the  original
covenant schedule in the credit agreement. As of March 31, 2007, the Company was
in compliance with all of its debt covenants.




                                       8
<PAGE>


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

7.       DEBT AND FINANCING ARRANGEMENTS (CONTINUED)

         INSTALLMENT PURCHASE OBLIGATIONS

         In  January  2007 and  February  2007,  the  Company  entered  into new
installment sale contracts with an equipment  manufacturer pursuant to which the
Company refinanced  equipment with an aggregate principal value of approximately
$719,000 formerly acquired under various capital leases.  These installment sale
contracts  require  payments over 36 months at fixed interest rates ranging from
5.29% to 8.75%. The obligations under the installment sale contracts are secured
by the equipment purchased.

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

                                                     MARCH 31,      DECEMBER 31,
                                                        2007            2006
                                                   ------------    -------------
10.5% Senior Secured Notes, due 2010 ...........   $ 55,000,000    $ 55,000,000
Term Loan Credit Facility ......................     10,000,000       8,000,000
Bank note (prime + 1%), due 2007 ...............        414,882         637,374
Installment purchase obligations, due 2008 .....      1,791,833       2,825,209
Installment purchase obligations, due 2009 .....      2,861,137       3,200,286
Installment purchase obligations, due 2010 .....        667,763            --
Equipment notes (8.39%-9.28%, due 2009-2011) ...        115,659         125,382
Equipment note (4.48%, due 2009) ...............        207,695         234,721
Other ..........................................         80,555          89,512
Less unamortized discounts .....................     (3,137,521)     (3,298,679)
                                                   ------------    ------------
                                                     68,002,003      66,813,805
Less current portion of long-term debt .........     (3,898,009)     (4,720,671)
                                                   ------------    ------------
Long-term debt .................................   $ 64,103,994    $ 62,093,134
                                                   ============    ============

8.       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  $572,000 and $145,000 for the three months ending
March 31, 2007 and 2006, 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.


                                       9
<PAGE>


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

9.       ASSET RETIREMENT OBLIGATIONS

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

Obligation at December 31, 2006 ...........................         $ 7,214,894
Accretion expense .........................................             224,485
Obligations settled .......................................            (191,514)
                                                                    -----------
Obligation at March 31, 2007 ..............................           7,247,865
Current portion ...........................................          (1,245,659)
                                                                    -----------
Long-term liability at March 31, 2007 .....................         $ 6,002,206
                                                                    ===========

10.      STOCKHOLDERS' EQUITY (DEFICIT)

         During the three  months ended March 31, 2007 and 2006,  no  previously
issued warrants were exercised.

         During the three months ended March 31, 2007 and 2006, holders of 80.00
and  64.23  shares of  Series A  cumulative  convertible  preferred  stock  with
liquidation  preferences  totaling  approximately  $1,200,000  and$963,000  plus
accrued  dividends  of $0 and $16,278,  converted  their shares into 200,000 and
163,288 shares of common stock, respectively.

         On February  28,  2007,  the  Company  signed  definitive  subscription
agreements to sell three million  shares of its common stock at the February 28,
2007  closing  consolidated  bid price of $4.65 per share.  Daniel  Roling,  the
Company's   President  and  CEO,   purchased   200,000  of  these  shares.   Two
institutional  investors  purchased  2,800,000  shares and the proceeds from the
sale were $13,950,000. The Company filed a registration statement on Form S-3 to
register the shares on April 27, 2007.

         During the three  months  ended  March 31,  2006,  the  Company  issued
101,500  shares of common stock and  received  gross  proceeds of  approximately
$223,000  upon the exercise of stock  options by employees or former  employees.
There were no stock  option  exercises  during the three  months ended March 31,
2007.


                                       10
<PAGE>


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

11.      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,  2007 and 2006,  1,867,897  and
4,429,951 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:

                                                      2007             2006
                                                  ------------     ------------
Numerator:
Net loss .....................................      (5,961,518)      (7,678,894)
Preferred dividends ..........................        (207,875)        (240,599)
                                                  ------------     ------------
Numerator for basic and diluted ..............    $ (6,169,393)    $ (7,919,493)
                                                  ============     ============

Denominator:
Weighted average shares - basic ..............      17,509,633       14,076,661
Effect of warrants ...........................            --               --

Effect of convertible preferred shares .......       1,787,460        3,273,816
Effect of stock options ......................          80,437        1,156,135
                                                  ------------     ------------
Adjusted weighted average shares - diluted ...      19,377,530       18,506,612
                                                  ============     ============

Net loss per share - basic ...................    $      (0.35)    $      (0.56)

Net loss per share - diluted .................    $      (0.35)    $      (0.56)


                                       11
<PAGE>


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

12.      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,
employees,  and others. At March 31, 2007, 2,750,000 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 vest 25% per year over a four year period.

         During the three  months  ended  March 31,  2007 and 2006,  the Company
recognized  $234,875  and  $348,848  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,
                                                      --------------------------
                                                         2007           2006
                                                      ----------     -----------
Expected term (years) ............................          6.25           6.25
Risk-free interest rates .........................          4.69%          4.36%
Expected dividend yield ..........................           0.0%           0.0%
Expected volatility ..............................         53.07%         50.58%


         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.
107  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, 2007 and 2006 were $3.67, and $2.63,  respectively.
The total  intrinsic  value of options  exercised  during the three months ended
March 31, 2006 was $462,215.  There were no options  exercised  during the three
months ended March 31, 2007.


                                       12
<PAGE>


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

12.      STOCK-BASED COMPENSATION PLANS (CONTINUED)

         The following  table  summarizes  activity under the Plan for the three
months ended March 31, 2007:

<TABLE>
<CAPTION>
                                                                                   WEIGHTED
                                                                                    AVERAGE
                                                                  WEIGHTED         REMAINING         AGGREGATE
                                                OPTIONS           AVERAGE         CONTRACTUAL     INTRINSIC VALUE
                                              OUTSTANDING      EXERCISE PRICE   TERM (IN YEARS)        ($000)
                                            ---------------   ---------------   ---------------   ---------------
<S>                                               <C>         <C>                          <C>    <C>
Outstanding at December 31, 2006 ........         1,323,625   $          6.90              8.81
Granted .................................           100,000              4.65
Exercised ...............................              --                 --
Forfeited ...............................               500              6.60
Expirations .............................              --                 --
                                            ---------------   ---------------   ---------------   ---------------
Outstanding at March 31, 2007 ...........         1,423,125   $          6.74              8.66   $       254,000
                                            ===============
Vested or expected to vest at
   March 31, 2007 .......................         1,266,273   $          6.68              8.61   $       239,144
                                            ===============
Exercisable .............................           411,189   $          5.50              7.74   $       158,250
                                            ===============
</TABLE>

         As of March  31,  2007,  there  was  $2,294,450  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 2.9
years. The total fair value of shares vested during the three months ended March
31, 2007 and 2006 was $593,006 and $1,292,542, 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. Currently, this survival period has been extended to 18 months.

         In March 2007, the Chairman of the Company's Board of Directors, who is
also the former President and CEO, sold to the current President and CEO 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.


                                       13
<PAGE>


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

13.      COMMITMENTS AND CONTINGENCIES

         In October  2004,  the Company  succeeded to a permit for a coal mining
operation in Campbell County, Tennessee and in so doing became the real party in
interest  in  a  pending  civil  action  filed  by  a  group  of   environmental
organizations  in the United States  District Court for the Eastern  District of
Tennessee.  Plaintiffs  alleged that issuance of the original  permit was flawed
because the Office of Surface  mining  ("OSM"),  the federal agency which issued
the permit, had not complied with the requirements of the National Environmental
Policy Act  ("NEPA")  and asked  that the  permit be  revoked by the Court.  The
District Court dismissed the plaintiffs' action and the plaintiffs  subsequently
appealed to the U.S.  Sixth  Circuit  Court.  The  dismissal  of this action was
upheld by final Order of the Sixth Circuit Court entered on January 3, 2007.

         The same plaintiffs filed a similar action in U.S. District Court based
on essentially the same facts alleging NEPA violations  regarding OSM's approval
of an  application  for a revision of the same  permit.  The Company and the OSM
have filed Motions for Summary Judgment based upon the outcome of the prior case
above referenced. An unfavorable outcome of this action would not involve direct
monetary  damages;  however  significant  financial  losses  could  result  from
curtailed mining operations.  Management  believes that the U. S. District Court
will  dismiss this action based upon the prior ruling in the similar case by the
U.S. Sixth Circuit Court.

         During  2005,  the  Company  was  audited  by  its  previous   workers'
compensation insurance provider which contends that an additional  approximately
$1.4 million in premiums is owed for the year ended April 15,  2005.  The matter
primarily  involves the  application  of premium  rates to employees  performing
certain  job  functions.  In January  2006,  the  Company  paid  $427,000 to the
previous  insurance  provider.  Currently,  the matter has not been resolved and
both parties have pursued  legal action in the United States  District  Court of
the Eastern District of Tennessee.  While management believes legal reserves are
sufficient for this matter, it is possible that the actual outcome of the matter
could vary significantly from this amount. The authorized  representative of the
Company made an offer to settle to the attorney for the insurance company, which
the attorney  accepted;  then two days later the  attorney  notified the Company
representative  that the  offer of  settlement  was  rejected.  Counsel  for the
Company has filed a Motion with the Court to enforce the settlement  accepted by
the  insurance  company.  Management  will  continue to review the amount of the
accrual and any adjustment required to increase or decrease the accrual based on
development of the matter will be made.

         In March 2006, the Company was named as defendant in a complaint  filed
in the United States District Court for the Eastern  District of Kentucky by the
sublessee of certain coal mining rights concurrent with the Company's operations
in  Kentucky.  The Company is the  sublessee of the right to mine coal using the
underground  method  on  the  property  in  question,  as the  result  of a 2004
acquisition. The complainant claims that it possesses the right to mine the coal
at this property  through the surface  mining method and that by mining the coal
by the highwall mining method,  the Company  committed  either an intentional or
negligent  trespass.  The complainant seeks damages in the range of $1.2 million
to $2.8  million,  which it estimates to be the range of gross  profits from the
revenues of the coal mined.  Management  acknowledges that the Company mined the
coal in question,  but contends that by using the highwall  mining  method,  the
Company mined the coal pursuant to the Lease by an underground mining method and
therefore committed no trespass. As an additional defense, the Company has filed
a third-party  complaint  against a consultant,  who advised the Company that it
had the right to mine the coal.  This  counterclaim  could  allow the Company to
recover  a  portion  of  any  amounts  lost,  if  the  original  complainant  is
successful. A settlement in the amount of $100,000 was reached with the opposing
party and documented for entry by Order of the Court in February 2007.

         In February  2006,  the Company  purchased a second  highwall miner for
approximately  $6,500,000,  which  was  immediately  placed  in  service  on the
Straight Creek tracts in  Southeastern  Kentucky.  In March 2006,  this highwall
miner was damaged by a rock  collapse,  which  resulted in  approximately  three
months of lost  service.  Repairs to the highwall  miner  totaled  approximately
$1,934,000  and were  recorded  as a cost of sales in the first two  quarters of
2006.  The initial  insurance  claim was denied,  and in April 2006,  management
threatened legal action against the insurance  provider.  In September 2006, the
insurance  provider agreed to the claim, and the Company received  approximately
$1,867,000,  which was  recorded  as a  reduction  of cost of sales in the third
quarter of 2006. The Company also had a second  insurance  provider on a related
claim pertaining to a front-end loader that was destroyed in the same March 2006
rock  collapse.  The Company  agreed to a settlement  and  received  proceeds of
approximately $155,000 during the first quarter of 2007.

         On April 12,  2006,  the Company was named as a defendant  in a suit by
Appalachian Fuels, LLC (the "Plaintiff"),  along with Calvary Coal Company, Inc.
("Calvary"),  a former  independent  contractor  who was the Company's  contract
miner  for the  Kentucky  operations  during a  portion  of 2004 and  2005.  The
Plaintiff seeks to recover approximately  $360,000,  funds allegedly supplied to
Calvary by the  Plaintiff  prior to the time of the  Company's  purchase  of the
Kentucky  operations from the Plaintiff.  The purchase agreement relating to the
Kentucky  operations  allows for the deduction of the funds in question from the
payments to Calvary only upon Calvary's written consent, which the Plaintiff did
not obtain.  Because the required written consent was not obtained,  the Company
did not deduct the funds in  question  and submit  them to the  Plaintiff.  This
matter was dismissed by the Boyd County, Kentucky Circuit Court in February 2007
and has not been appealed.

         The Company is made a party to other 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.


                                       14
<PAGE>


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

14.      RELATED PARTY TRANSACTIONS

         On February  28,  2007,  the  Company  signed  definitive  subscription
agreements to sell three million  shares of its common stock at the February 28,
2007  closing  consolidated  bid price of $4.65 per share.  Daniel  Roling,  the
Company's President and CEO, purchased 200,000 of these shares for a total price
of $930,000.  The sale was completed on March 1, 2007.

         In March 2007, the Chairman of the Company's Board of Directors, who is
also the former President and CEO, sold to the current President and CEO 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.      EVENTS SUBSEQUENT TO MARCH 31, 2007

         Between April 1, 2007 and May 11, 2007, holders of 174.66 shares of our
Series A  convertible  preferred  stock with  liquidation  preferences  totaling
approximately $2,619,894 and unpaid dividends of approximately $61,000 converted
their shares into 536,267 shares of our common stock.


                                       15
<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, 2006 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. The
Company strongly encourages investors to carefully read the factors described in
the Company's Annual Report on Form 10-K for the year ended



                                       16
<PAGE>


December 31, 2006 in the section  entitled  "Risk  Factors" for a description of
certain  risks that could,  among other things,  cause actual  results to differ
from these forward-looking  statements. The Company assumes 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  Southeastern  Kentucky.  We own the coal mineral
rights  to  approximately   74,600  acres  of  land  and  lease  the  rights  to
approximately   40,900   additional  acres.  We  have  expanded  our  operations
considerably  since commencing  operations at a single surface mine in Tennessee
in  July  2003.  As of  March  31,  2007,  our  mining  complexes  included  two
underground  mines,  two surface mines,  and one highwall mine. In addition,  we
have four preparation  plants, two active and two inactive,  and four unit train
loading facilities,  two active and two inactive,  served by the CSX and Norfolk
Southern ("NS") railroads.  We hold permits that allow us to open five new mines
close  to  our  current  operations.   As  of  March  31,  2007,  we  controlled
approximately  35.9 million estimated  recoverable tons. During the three months
ended March 31, 2007, we generated total revenues of approximately $19.0 million
and EBITDA loss (See EBITDA NOTE below) of $0.6  million and sold  approximately
368,000  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  ("EIA"), the long-term
outlook  for coal  demand  in the  Southeast  is  favorable,  as coal  generated
electricity in our region is expected to grow at a rate of 2.5% per year. During
the three  months  ended March 31,  2007,  approximately  86% of our revenue was
generated  from coal sales to electric  utility  companies  in the  Southeastern
United  States.  Our  largest  customers  were  South  Carolina  Public  Service
Authority  (Santee  Cooper),  Duke Power,  and East Kentucky Power  Cooperative,
representing approximately 37%, 22% and 13% of our revenues, respectively.

         In  the  three  months  ended  March  31,  2007,   our  mines  produced
approximately 301,000 tons of coal.  Approximately 55% of our production for the
three months ended March 31, 2007 was produced at underground  mines and 45% was
produced at our surface and highwall mine operations.  We sell a majority of our
coal pursuant to long-term  contracts.  We plan to pursue  additional  long-term
contracts.

         EBITDA NOTE:

         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.  Adjusted EBITDA is defined as
         EBITDA plus  stock-based  compensation  expense.  We present EBITDA and
         Adjusted EBITDA to enhance understanding of our operating  performance.
         We use EBITDA and  Adjusted  EBITDA as a criteria  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 and Adjusted  EBITDA are  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 and Adjusted EBITDA to monitor and
         evaluate our business operations.  However,  EBITDA and Adjusted EBITDA
         are  not  measurements  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 and  Adjusted  EBITDA  should not be  considered  as
         alternatives  to cash flows from  operating  activities,  determined in
         accordance  with GAAP,  as  indicators  of cash  flows.  The  following
         reconciles our net loss to EBITDA and Adjusted EBITDA:


                                       17
<PAGE>



                                                    Three Months Ended March 31,
                                                       2007             2006
                                                   -----------      -----------

Net loss .....................................     $(5,961,518)     $(7,678,894)
Other (income) expense, net ..................        (110,654)        (124,124)
Interest income ..............................        (298,637)        (216,754)
Interest expense .............................       2,104,348        1,868,844
Depreciation, depletion, amortization
   and accretion .............................       3,628,596        3,832,236
                                                   -----------      -----------
EBITDA .......................................        (637,865)      (2,318,692)

Stock-based compensation expense (1) .........         669,368          348,848
                                                   -----------      -----------
Adjusted EBITDA ..............................     $    31,503      $(1,969,844)
                                                   ===========      ===========

(1) Includes $434,493,  attributable to options sold to the President and CEO by
the  Chairman  of the  Company's  Board  of  Directors  who is also  the  former
President and CEO.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June  2006,  the FASB  issued  Interpretation  No.  48  ("FIN  48"),
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES--AN  INTERPRETATION OF FASB STATEMENT
NO. 109. FIN 48 prescribes a recognition threshold and measurement attribute for
the financial  statement  recognition and measurement of a tax position taken or
expected  to  be  taken  in  a  tax  return.   It  also  provides   guidance  on
derecognition,  classification,  interest and  penalties,  accounting in interim
periods,  disclosure  and  transition.  FIN 48 is  effective  for  fiscal  years
beginning  after December 15, 2006. We have  determined that FIN 48 will have no
material impact on our financial position and results of operations.

         We  adopted  the  provisions  of FIN No. 48 on  January 1, 2007 with no
impact to retained  earnings.  We have  determined that we have no uncertain tax
positions.

         Due to the existence of net operating  loss ("NOL")  carryforwards,  we
have not currently accrued interest on any of our unrecognized tax benefits.  If
the accrual of  interest or  penalties  becomes  appropriate,  we will record an
accrual in our income tax provision.

         Our Federal and state income tax returns for the years 2003 (inception)
and beyond remain  subject to examination  by the Internal  Revenue  Service and
various state taxing authorities.

         In September  2006, the FASB issued  Statement of Financial  Accounting
Standards No. 157, FAIR VALUE  MEASUREMENTS  ("SFAS 157"). SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about  fair  value  measurements.   SFAS  157  applies  under  other  accounting
pronouncements  that  require  or permit  fair value  measurements.  SFAS 157 is
effective  prospectively  for fiscal years beginning after November 15, 2007 and
interim  periods  within that fiscal year.  We are still  analyzing  SFAS 157 to
determine the impact of adoption.


                                       18
<PAGE>


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,
                                                         ---------------------
                                                           2007         2006
                                                         --------     --------

Revenues .............................................      100.0%       100.0%
                                                         --------     --------
Operating expenses:
   Cost of sales .....................................       92.4        101.3
   Depreciation, depletion, amortization
   and accretion .....................................       19.1         18.7
   General and administrative ........................       10.9         10.0
                                                         --------     --------
     Total operating expenses ........................      122.4        130.0
                                                         --------     --------
Loss from operations .................................      (22.4)       (30.0)
Other income (expense):
   Interest expense ..................................      (11.1)        (9.1)
   Interest income ...................................        1.6          1.0
   Other income (expense), net .......................        0.6          0.6
                                                         --------     --------
Net loss .............................................      (31.3)%      (37.5)%
                                                         ========     ========

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2007 AND THREE MONTHS ENDED MARCH 31,
2006

<TABLE>
<CAPTION>
                                          THREE MONTHS    THREE MONTHS
                                              ENDED          ENDED
                                            MARCH 31,      MARCH 31,        PERCENT
                                              2007            2006           CHANGE
                                          ------------    ------------    ------------
<S>                                       <C>             <C>                    <C>
Revenues
  Coal sales ..........................   $ 18,813,897    $ 20,237,771            (7.0)%
  Other revenues ......................        221,048         230,962            (4.3)%
                                          ------------    ------------    ------------
   Total revenues .....................     19,034,945      20,468,733            (7.0)%
                                          ------------    ------------    ------------

Expenses
  Cost of sales .......................     17,593,913      20,730,716           (15.1)%
  Depreciation, depletion, amortization
   and accretion ......................      3,628,596       3,832,236            (5.3)%
  General and administrative ..........      2,078,897       2,056,709             1.1%
                                          ------------    ------------    ------------
   Total operating expenses ...........     23,301,406      26,619,661           (12.5)%
                                          ------------    ------------    ------------

Operating loss ........................     (4,266,461)     (6,150,928)          (30.6)%
                                          ------------    ------------    ------------

Other income (expense)
  Interest expense ....................     (2,104,348)     (1,868,844)           12.6%
  Interest income .....................        298,637         216,754            37.8%
  Other income (expense), net .........        110,654         124,124           (10.9)%
                                          ------------    ------------    ------------
   Total other income (expense) .......     (1,695,057)     (1,527,966)           10.9%
                                          ------------    ------------    ------------

Net loss ..............................     (5,961,518)     (7,678,894)          (22.4)%
                                          ------------    ------------    ------------

</TABLE>


                                       19
<PAGE>


         REVENUES

         For the three months ended March 31,  2007,  our revenues  were derived
entirely from coal sales to eleven  customers,  four of which were utilities and
seven of which were industrial customers. Our five largest customers represented
92% of our total  revenues.  For the three  months  ended  March 31,  2006,  our
revenues were derived entirely from coal sales to nine customers,  four of which
were utilities,  four of which were industrial customers, and one of which was a
coal broker.  Our five largest customers  represented 94% of our total revenues.
The 7% decrease in coal sales  during the three  months  ended March 31, 2007 is
primarily  attributable to a 6% decrease in weighted average net sales prices of
our five largest customers,  including penalties and premiums, and a 1% decrease
in sales  volume.  Other  revenues  for the three  months  ended  March 31, 2007
primarily  consists of  approximately  $191,000 charged to another coal producer
for use of our train loading facilities.

         OPERATING EXPENSES

              COST OF SALES

         Cost of  sales  consists  primarily  of  salary,  benefits,  and  other
compensation costs paid directly to miners, and direct costs paid to third party
vendors  whose goods and services were directly used in the process of producing
coal  inventory.   Third  party  vendor  costs  include   equipment  leases  and
maintenance  costs,  blasting  costs,  fuel  costs,  parts  and  supplies,  coal
purchases, and transportation costs.

         Excluding the cost of repairs to a highwall miner, which was damaged by
a rock  collapse  in March  2006  resulting  in  approximately  $1.8  million of
unexpected  expenses,  cost of sales remained  consistent at 92.4% for the three
months ended March 31, 2006 and the three months ended March 31, 2007.

              DEPRECIATION, DEPLETION, AMORTIZATION, AND ACCRETION  EXPENSE

         Depreciation,  depletion,  amortization,  and accretion  expense in the
three month period ended March 31, 2007  decreased  (5.3)% when  compared to the
three month  period  ended March 31,  2006.  This was  primarily  due to reduced
operations in Kentucky as compared to the first quarter of 2006.  Infrastructure
and equipment at these halted  Kentucky mines was not  depreciated in 2007. This
reduction was partially  offset by net increases in capital  expenditures for us
in our Tennessee operations.

              GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative  expenses  primarily include  non-operations
salary,   benefits  and  related  expenses;   consulting  expenses;   legal  and
professional fees;  insurance expenses;  and travel and travel related expenses.
Changes in major  components  of  general  and  administrative  expenses  are as
follows:  1) $118,000  decrease in stock  option  expense  primarily  due to the
accelerated  vesting and exercise of executive  options during 2006, 2) $161,000
decrease  in  payroll,  primarily  due to  additional  severance  paid to former
corporate  employees and an executive bonus in first quarter 2006, 3) reductions
in  charitable  contributions  and travel  expenses  during  2007,  offset by 4)
$434,493 of additional  compensation expense related to the sale by the Chairman
of the Company's Board of Directors,  who is also the former  President and CEO,
to the current  President and CEO of the fully vested option to purchase 400,000
shares of National Coal Corp. common stock at $7.00 per share until December 31,
2008.


                                       20
<PAGE>


         OTHER INCOME (EXPENSE)

         The 12.6% increase in interest expense for the three month period ended
March 31,  2007  compared  to the three  month  period  ended  March 31, 2006 is
attributable  to an  increase  in the  average  outstanding  balance of our debt
related  primarily  to our $10.0  million  Term Loan Credit  Facility.  Interest
income  increased by 37.8%  primarily due to larger average  short-term  deposit
balances.  Other  income  (expense),  net of $110,654 and $124,124 for the three
months ended March 31, 2007 and 2006, respectively, relate primarily to gains on
asset sales.

LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2007, we had cash and cash  equivalents  of  approximately
$9.7 million, working capital of approximately $3.1 million, and cash flows used
in operations of approximately  $5.4 million for the three months then ended. In
order to fund general  operating and working  capital  needs,  we entered into a
Term Loan Credit  Facility in October  2006 that  provided  borrowings  of $10.0
million with Guggenheim Corporate Funding, LLC. We borrowed $8.0 million in 2006
and the remaining $2.0 million in March 2007.

         At March 31,  2007,  we had  stockholders'  equity of $6.5  million and
incurred net losses of $6.0 million  (excluding  preferred stock  dividends) for
the three months then ended. We expect that we will continue to incur net losses
into the foreseeable future which will reduce our stockholders' equity. On March
1, 2007 we sold three million  shares of our common stock in a private sale. Two
institutional  investors  purchased  2.8  million  shares  and our  current  CEO
purchased  the   remaining   200,000   shares.   Proceeds  from  the  sale  were
approximately $14.0 million and will be used for potential internal and external
growth opportunities and to fund general operating and working capital needs. We
filed a registration  statement on Form S-3 to register the shares for resale on
April 27, 2007.

         As noted previously, we have made significant investments over the past
three  years to expand our  production  capacity.  We are now in a  position  to
increase our production when doing so will be economically advantageous. We have
no material  capital projects planned for the remainder of 2007 and our budgeted
capital expenditures for the year are less than $3 million.

         We  expect  to be able  to  meet  our  liquidity  requirements  for the
foreseeable   future  through   current  cash  reserves  and  cash  provided  by
operations.  If our operating plans for the remainder of 2007 vary significantly
from our expectations,  we may have to seek additional financing sources.  Also,
in the  case  that  market  conditions  improve  and  we  determine  that  it is
economically  advantageous  to  resume  expansion  plans,  we may  have  to seek
additional financing sources.  There are no assurances that our efforts to raise
additional financial resources will be successful.


                                       21
<PAGE>


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

                                                     MARCH 31,     DECEMBER 31,
                                                       2007            2006
                                                   ------------    ------------
10.5% Senior Secured Notes, due 2010 ...........   $ 55,000,000    $ 55,000,000
Term Loan Credit Facility ......................     10,000,000       8,000,000
Bank note (prime + 1%), due 2007 ...............        414,882         637,374
Installment purchase obligations, due 2008 .....      1,791,833       2,825,209
Installment purchase obligations, due 2009 .....      2,861,137       3,200,286
Installment purchase obligations, due 2010 .....        667,763            --
Equipment notes (8.39%-9.28%, due 2009-2011) ...        115,659         125,382
Equipment note (4.48%, due 2009) ...............        207,695         234,721
Other ..........................................         80,555          89,512
Less unamortized discounts .....................     (3,137,521)     (3,298,679)
                                                   ------------    ------------
                                                     68,002,003      66,813,805
Less current portion of long-term debt .........     (3,898,009)     (4,720,671)
                                                   ------------    ------------
Long-term debt .................................   $ 64,103,994    $ 62,093,134
                                                   ============    ============


              TERM LOAN CREDIT FACILITY

         On  October  12,  2006,  our  wholly-owned  subsidiary,  National  Coal
Corporation,  entered  into  a Term  Loan  Credit  Facility  that  provides  for
borrowings of $10.0 million with Guggenheim  Corporate Funding,  LLC in order to
fund general  operating and working  capital needs.  We borrowed $8.0 million in
2006 and the remaining $2.0 million in March 2007.

         Under this Term Loan Credit  Facility,  the Company's  obligations  are
secured  by a priority  senior  lien on  substantially  all of the assets of the
Company.  All amounts under the credit  facility become due and payable in March
2010 and the interest  under this facility is payable at a rate equal to, at our
option,  the Eurodollar Rate plus 3.5% or the Base Rate (which  approximates the
prime  rate)  plus  2.5%.  The term  loan  credit  facility  contains  financial
covenants and default  provisions  including that the Company  maintain  minimum
levels of EBITDA and liquidity,  maintain minimum interest coverage ratios,  not
exceed maximum leverage ratios,  and that it limit certain future  categories of
transactions  such as the incurrence of additional  indebtedness and the sale of
assets. In March 2007, Guggenheim agreed to amend the credit agreement and reset
the  financial  covenants  for  2007 and 2008  including:  EBITDA,  consolidated
leverage, and consolidated interest coverage. As a result of the amendment,  the
applicable  margin on the credit  facility will increase by 1.0%. The applicable
margin  is the  rate  which  is added  to the  Eurodollar  Rate or Base  Rate to
determine the full interest rate on the facility. The applicable margin increase
will remain in effect until we are back in compliance with the original covenant
schedule  in the credit  agreement.  As of March 31,  2007,  the  Company was in
compliance with all of its debt covenants.


                                       22
<PAGE>


              10.5% SENIOR SECURED NOTES DUE 2010

         On December  29, 2005,  we issued  $55,000,000  in aggregate  principal
amount of 10.5% Senior Secured Notes due 2010 (the "Senior  Secured  Notes") and
55,000 warrants to purchase a total of 1,732,632  shares of the Company's common
stock (the "Warrants"). The Senior Secured Notes and Warrants were sold in Units
(the "Units")  consisting of one $1,000  principal  amount Note and one Warrant,
which entitled the holder to purchase  31.5024 shares of Company common stock at
an exercise price of $8.50 per share,  subject to  adjustment.  The warrants are
subject to  mandatory  conversion  if the price of the  Company's  common  stock
remains  above  $12.75 for twenty or more days out of a thirty-day  period.  The
Units were sold in a private placement exempt from the registration requirements
under the Securities Act of 1933, as amended (the "Securities  Act"). The Senior
Secured  Notes  are  fully  and   unconditionally   guaranteed  by  all  of  our
wholly-owned  subsidiaries  and were  offered and sold within the United  States
only to  qualified  institutional  buyers in  reliance  on Rule  144A  under the
Securities Act.

         The Senior  Secured  Notes were issued  pursuant to an  indenture  with
Wells  Fargo Bank  National  Association,  as  trustee.  Interest  on the Senior
Secured  Notes  accrues  from the date of issuance  or the most recent  interest
payment date, and is payable in cash  semi-annually  in arrears on June 15th and
December 15th of each year.  The warrants will expire on December 15, 2010.  All
of the securities in this offering were initially purchased by the underwriter.

         The Senior  Secured Notes and the related  guarantees  are secured by a
lien on  substantially  all of our  and the  guarantors'  property  and  assets,
including a pledge of 100% of the capital stock or other equity interests of our
domestic  subsidiaries.  The Senior  Secured  Notes will mature on December  15,
2010.  The Senior  Secured Notes are  subordinated  to our $10 million Term Loan
Credit Facility with Guggenheim Corporate Funding,  LLC, and will rank senior to
any future subordinated debt.

         Before  December  15,  2008,  we may, at any time or from time to time,
redeem up to 35% of the aggregate  principal  amount of the Senior Secured Notes
with the net proceeds of a public or private equity  offering at 110.500% of the
principal  amount of the  Senior  Secured  Notes,  plus any  accrued  and unpaid
interest, if at least 65% of the aggregate principal amount of the notes remains
outstanding  after such  redemption and the redemption  occurs within 90 days of
the date of the closing of such equity offering. The remaining 65% of the Senior
Secured  Notes are  redeemable,  at our  option,  in whole or part,  on or after
December 15, 2008, in each case at the redemption  prices described in the table
below. All redemption  prices are in addition to any accrued and unpaid interest
to the date of the redemption.

                  TIME PERIOD                             PERCENTAGE
                  -----------                             ----------
     December 15, 2008 - December 14, 2009                 105.250%
       December 15, 2009 - June 14, 2010                   102.625%
          June 15, 2010 and thereafter                     100.000%

         The indenture  governing the Senior Secured  Notes,  among other things
and  subject to certain  exceptions,  limits our  ability and the ability of our
subsidiaries to:

         o        incur or guarantee additional  indebtedness or issue preferred
                  stock;

         o        pay dividends or  distributions  on, or redeem or  repurchase,
                  capital stock;

         o        make investments;

         o        issue or sell capital stock of restricted subsidiaries;

         o        engage in transactions with affiliates;


                                       23
<PAGE>


         o        grant or assume liens; or

         o        consolidate, merge or transfer all or substantially all of our
                  assets.

         Our failure to make required  payments of interest and principal and to
comply with other  covenants may result in the  acceleration of the principal of
the Senior Secured Notes.

         We agreed, pursuant to a registration rights agreement with the initial
purchaser,  to use our commercially  reasonable efforts to (a) register with the
SEC a new issue of notes  having  substantially  identical  terms as the  Senior
Secured Notes in order to exchange  freely tradable notes for the Senior Secured
Notes,  and (b) file a shelf  registration  statement  with the SEC covering the
resale of the Warrants and shares of our common stock  issuable upon exercise of
the  Warrants,  and to use our  commercially  reasonable  efforts  to cause that
resale registration statement to be declared effective within 240 days after the
sale date. We filed registration statements subject to our obligations under the
registration rights agreement on May 15, 2006. Both registration statements were
declared  effective on July 28, 2006,  and we issued $51.0  million in principal
amount of freely  tradable  notes in exchange for the same  principal  amount of
Senior Secured Notes.

         We immediately used approximately  $22.1 million of the proceeds of the
Senior  Secured Note offering to repay  existing  indebtedness.  During the year
ended  December  31,  2006,  we used  approximately  $2.0  million to purchase a
forty-two mile rail line in Tennessee,  approximately $8.3 million as collateral
to support  reclamation  bonds,  and $19.7 million to purchase other  equipment,
refurbish a preparation plant and rail load-out, and to use as working capital.

         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,  2007,  we had a net  increase in cash of
approximately $7.5 million.  Cash flows from operating,  financing and investing
activities  for the three months ended March 31, 2007 and 2006 are summarized in
the following table:

                                                          THREE MONTHS
                                                         ENDED MARCH 31,
                                                 ------------------------------
                  ACTIVITY                           2007              2006
                                                 ------------      ------------


Operating activities .......................     $ (5,407,684)     $ (1,256,713)
Investing activities .......................         (808,307)      (18,178,389)
Financing activities .......................       13,725,119          (911,736)
                                                 ------------      ------------
   Net increase (decrease) in cash .........     $  7,509,128      $(20,346,838)
                                                 ============      ============


         OPERATING ACTIVITIES

         The increase in net cash used for operating activities of approximately
$4.1  million to $5.4  million  used in  operating  activities  during the three
months  ended March 31,  2007 was due to a decrease in accounts  payable of $6.7
million and an increase in inventory of $0.9 million  partially offset by a $1.7
million decrease in net loss and a $1.1 million decrease in accounts  receivable
during  2007.  The primary  reason for the  decrease in net loss for 2007 is the
$1.8 million expense related to the highwall miner accident damage in 2006.


                                       24
<PAGE>


         INVESTING ACTIVITIES

         Cash used in investing activities of $0.8 million 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.

         Cash used in investing activities of $18.2 million for the three months
ended  March 31,  2006 was  primarily  related to net  capital  expenditures  of
approximately  $10.2 million  including the acquisition of a forty-two mile rail
line in Tennessee and the purchase of a highwall miner and other equipment along
with  an  increase  in  cash   collateral   supporting   reclamation   bonds  of
approximately $7.8 million.

         FINANCING ACTIVITIES

         The net cash provided by financing  activities of  approximately  $13.7
million during the three months ended March 31, 2007 was primarily the result of
proceeds  raised  by  the  issuance  of  common  stock  for  $13,950,000  and an
additional $2.0 million borrowed on our Term Loan Credit Facility as compared to
$1.0 million used during the three months ended March 31, 2006.

         CONTRACTUAL OBLIGATIONS

         The following summarizes our contractual  obligations at March 31, 2007
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        1-3            3-5           AFTER
                                TOTAL          YEAR           YEARS          YEARS         5 YEARS
-------------------------   ------------   ------------   ------------   ------------   ------------
<S>                         <C>            <C>            <C>            <C>            <C>
Long-term debt (including   $ 94,453,670   $  8,812,400   $ 24,848,735   $ 60,792,535   $       --
   interest)
Operating leases ........      5,949,762      1,524,612      3,997,626        427,524           --
Capital leases ..........        470,478        280,978        189,500           --             --
                            ------------   ------------   ------------   ------------   ------------
     Total contractual
        obligations .....   $100,873,910   $ 10,617,990   $ 29,035,861   $ 61,220,059   $       --
                            ============   ============   ============   ============   ============
</TABLE>

         We rent mining equipment  pursuant to operating lease  agreements,  and
made lease  payments  totaling  approximately  $572,000  during the three months
ended March 31, 2007.

         For the three months ended March 31, 2007, we accrued  dividends to the
holders of our Series A cumulative  convertible preferred stock in the aggregate
of approximately  $207,875.  Historically we have made semi-annual cash dividend
payments to the holder of the Series A preferred  stock on June 30 and  December
31. Dividends accrued on our Series A cumulative  convertible preferred stock of
$371,317  related to 2006 were paid in February  2007. At March 31, 2007,  there
were  accrued  but  unpaid  dividends  on our  Series A  cumulative  convertible
preferred  stock of $250,124.  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,   2007,   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


                                       25
<PAGE>


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.

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,  2007 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, 2006 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.

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, 2006.

ITEM 4.  CONTROLS AND PROCEDURES.

CONTROLS AND PROCEDURES

         Members of our management,  including our President and Chief Executive
Officer,  Daniel A. Roling, and Chief Financial  Officer,  T. Michael Love, 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,
2007, the end of the period covered by this report.  Based upon that evaluation,
Messrs.  Roling and Love concluded  that our disclosure  controls and procedures
were effective as of March 31, 2007.

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,  2007 that have  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

                           PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         In October 2004,  we succeeded to a permit for a coal mining  operation
in Campbell County,  Tennessee and in so doing became the real party in interest
in a pending civil action filed by a group of environmental organizations in the
United States District Court for the Eastern  District of Tennessee.  Plaintiffs
alleged that  issuance of the original  permit was flawed  because the Office of
Surface  mining  ("OSM"),  the federal  agency which issued the permit,  had not
complied with the requirements of the National Environmental Policy Act ("NEPA")
and asked that the permit be revoked by the Court.  The District Court dismissed
the  plaintiffs'  action and the  plaintiffs  subsequently  appealed to the U.S.
Sixth Circuit  Court.  The dismissal of this action was upheld by final Order of
the Sixth Circuit Court entered on January 3, 2007.


                                       26
<PAGE>


         The same plaintiffs filed a similar action in U.S. District Court based
on essentially the same facts alleging NEPA violations  regarding OSM's approval
of an application  for a revision of the same permit.  We and the OSM have filed
Motions  for  Summary  Judgment  based upon the  outcome of the prior case above
referenced.  An  unfavorable  outcome of this action  would not  involve  direct
monetary  damages;  however  significant  financial  losses  could  result  from
curtailed  mining  operations.  We believe  that the U. S.  District  Court will
dismiss  this action based upon the prior ruling in the similar case by the U.S.
Sixth Circuit Court.

         During  2005,  we were audited by our  previous  workers'  compensation
insurance provider which contends that an additional  approximately $1.4 million
in  premiums  is owed for the year ended April 15,  2005.  The matter  primarily
involves the  application of premium rates to employees  performing  certain job
functions. In January 2006, we paid $427,000 to the previous insurance provider.
Currently,  the matter has not been resolved and both parties have pursued legal
action in the United States District Court of the Eastern District of Tennessee.
While we believe legal reserves are  sufficient for this matter,  it is possible
that the actual outcome of the matter could vary significantly from this amount.
Our  authorized  representative  made an offer to settle to the attorney for the
insurance company, which the attorney accepted; then two days later the attorney
notified our  representative  that the offer of  settlement  was  rejected.  Our
counsel has filed a Motion with the Court to enforce the settlement  accepted by
the insurance company.  We will continue to review the amount of the accrual and
any adjustment required to increase or decrease the accrual based on development
of the matter will be made.

         In March 2006,  we were named as defendant in a complaint  filed in the
United  States  District  Court for the  Eastern  District  of  Kentucky  by the
sublessee of certain coal mining rights concurrent with the Company's operations
in  Kentucky.  We are  the  sublessee  of the  right  to  mine  coal  using  the
underground  method  on  the  property  in  question,  as the  result  of a 2004
acquisition. The complainant claims that it possesses the right to mine the coal
at this property  through the surface  mining method and that by mining the coal
by the highwall mining method,  we committed  either an intentional or negligent
trespass.  The  complainant  seeks  damages in the range of $1.2 million to $2.8
million,  which it estimates to be the range of gross  profits from the revenues
of the coal  mined.  We  acknowledge  that we mined  the coal in  question,  but
contends that by using the highwall mining method, we mined the coal pursuant to
the Lease by an underground  mining method and therefore  committed no trespass.
As an  additional  defense,  we have  filed a  third-party  complaint  against a
consultant,  who  advised  us that it had the  right  to  mine  the  coal.  This
counterclaim  could  allow us to recover a portion of any amounts  lost,  if the
original  complainant is successful.  A settlement in the amount of $100,000 was
reached with the opposing  party and  documented for entry by Order of the Court
in February 2007.

         In  February   2006,   we  purchased  a  second   highwall   miner  for
approximately  $6,500,000,  which  was  immediately  placed  in  service  on the
Straight Creek tracts in  Southeastern  Kentucky.  In March 2006,  this highwall
miner was damaged by a rock  collapse,  which  resulted in  approximately  three
months of lost service. Repairs to the highwall miner have totaled approximately
$1,934,000  and were  recorded  as a cost of sales in the first two  quarters of
2006.  The initial  insurance  claim was denied,  and in April 2006,  management
threatened legal action against the insurance  provider.  In September 2006, the
insurance   provider  agreed  to  the  claim,  and  we  received   approximately
$1,867,000,  which was  recorded  as a  reduction  of cost of sales in the third
quarter of 2006. We were also in discussion with a second insurance  provider on
a related claim  pertaining to a front-end loader that was destroyed in the same
March 2006 rock  collapse.  We agreed to a settlement  and received  proceeds of
approximately $155,000 during the first quarter of 2007.

         On  April  12,  2006,  we  were  named  as a  defendant  in a  suit  by
Appalachian Fuels, LLC (the "Plaintiff"),  along with Calvary Coal Company, Inc.
("Calvary"),  a former independent contractor who was our contract miner for the
Kentucky  operations  during a portion of 2004 and 2005. The Plaintiff  seeks to
recover  approximately  $360,000,  funds  allegedly  supplied  to Calvary by the
Plaintiff prior to the time of our purchase of the Kentucky  operations from the
Plaintiff. The purchase agreement relating to the Kentucky operations allows for
the  deduction  of the funds in question  from the payments to Calvary only upon
Calvary's  written  consent,  which the  Plaintiff  did not obtain.  Because the
required  written  consent  was not  obtained,  we did not  deduct  the funds in
question and submit them to the Plaintiff. This matter was dismissed by the Boyd
County, Kentucky Circuit Court in February 2007 and has not been appealed.

         We are made a party to other legal  actions,  claims,  arbitration  and
administrative proceedings from time to time in the ordinary course of business.
We do not expect the outcome of these or other pending or threatened proceedings
to have a material impact on our cash flows,  results of operations or financial
condition.

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, 2006.

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

         On February  28,  2007,  the  Company  signed  definitive  subscription
agreements to sell three million  shares of its common stock at the February 28,
2007  closing  consolidated  bid price of $4.65 per share.  Daniel  Roling,  the
Company's President and CEO, purchased 200,000 of these shares for a total price
of $930,000. The sale was completed on March 1, 2007.

         During the three months ended March 31, 2007, holders of 80.0 shares of
our Series A convertible  preferred stock with liquidation  preferences totaling
approximately $1,200,000 converted


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<PAGE>


their  shares into  200,000  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.

         From April 1, 2007  through May 11, 2007,  holders of 174.66  shares of
our Series A convertible  preferred stock with liquidation  preferences totaling
$2,619,894 and unpaid dividends totaling  approximately  $61,000 converted their
shares into 536,267 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.



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<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, 2007                    /S/ T. MICHAEL LOVE
                                      ---------------------------------------
                                  By:        T. Michael Love
                                  Its:       Chief Financial Officer
                                             (Principal Financial and
                                             Accounting Officer)


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