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

                                   FORM 10-QSB

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

                  For the quarterly period ended March 31, 2004

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

  For the transition period from __________________ to ______________________.

                         Commission file number 0-26509

                               NATIONAL COAL CORP.
        (Exact Name of Small Business Issuer as Specified in its Charter)

          FLORIDA                                                65-0601272
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                              Identification No.)

                                319 EBENEZER ROAD
                               KNOXVILLE, TN 37923
                    (Address of Principal Executive Offices)

                                 (865) 769-3749
                (Issuer's Telephone Number, Including Area Code)

         Check whether the issuer (i) 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 ___

         As of April 30, 2004, the issuer had 43,873,549 shares of common stock,
par value $.0001 per share, issued and outstanding.

         Transitional Small Business Disclosure Format (check one):

                              Yes [_]      No  [X]


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<PAGE>


                               NATIONAL COAL CORP.

                              INDEX TO FORM 10-QSB

                                                                            PAGE
                                                                            ----

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

Item 1.  Financial Statements (unaudited)......................................3

         Condensed Consolidated Balance Sheet (unaudited)
            as of March 31, 2004...............................................3

         Condensed Consolidated Statements of Operations
            (unaudited) for the three months ended
            March 31, 2004 and the period from inception
            (January 30, 2003) to March 31, 2003...............................4

         Condensed Consolidated Statement of Cash Flows
            (unaudited) for the three months ended
            March 31, 2004 and March 31, 2003..................................5

         Notes to Condensed Consolidated Financial Statements..................6

Item 2.  Management's Discussion and Analysis or Plan of Operation............11

Item 3.  Controls and Procedures..............................................26



PART II  OTHER INFORMATION....................................................27

Item 2.  Changes in Securities and Small Business Issuer
            Purchases of Equity Securities....................................27

Item 4.  Submission of Matters to a Vote of Security Holders..................27

Item 6.  Exhibits and Reports on Form 8-K.....................................28


                                       2
<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                               NATIONAL COAL CORP.
                      CONDENSED CONSOLIDATED BALANCE SHEET

                                                                      MARCH 31,
                                                                        2004
                                                                    -----------
ASSETS                                                               (unaudited)
Current Assets:
   Cash and cash equivalents ................................       $   631,171
   Inventory ................................................           261,156
   Prepaid and other ........................................             2,347
                                                                    -----------
Total current assets ........................................           894,674
                                                                    -----------

Property and Equipment:
   Mining equipment .........................................         1,611,566
   Computer equipment and software ..........................            81,474
   Automobile and mobile equipment ..........................           146,232
   Office equipment and furniture ...........................            32,448
                                                                    -----------
                                                                      1,872,163
   Less: accumulated depreciation and depletion .............          (342,077)
                                                                    -----------
                                                                      1,530,086
                                                                    -----------
Coal and mineral rights, net of $5,453
   accumulated depletion ....................................         1,359,777
Escrow deposit to purchase mining equipment
   and rights ...............................................           500,000
Reclamation bond ............................................           257,500
                                                                    -----------
TOTAL ASSETS ................................................       $ 4,542,037
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
   Notes payable ............................................       $ 3,465,217
   Notes payable to related parties .........................           400,000
   Capital lease obligations ................................           201,414
   Accounts payable and accrued expenses, other
      than payroll related expenses .........................           651,339
   Accrued payroll, including payroll taxes .................            95,237
   Accrued interest payable .................................            16,720
   Deferred revenue .........................................            29,122
                                                                    -----------
Total current liabilities ...................................         4,859,049

Bank loan ...................................................            50,053
Accrued reclamation expense .................................            69,359
                                                                    -----------
TOTAL LIABILITIES ...........................................         4,978,766
                                                                    -----------

Stockholders' Deficiency:
   Preferred stock, $.0001 par value; 10 million
      shares authorized; none issued and
      outstanding ...........................................              --
   Common stock, $.0001 par value; 80 million
      shares authorized; 42,873,549 issued and
      outstanding ...........................................             4,271
   Additional paid-in capital ...............................         3,958,093
   Accumulated deficit ......................................        (4,399,093)
                                                                    -----------
TOTAL STOCKHOLDERS' DEFICIENCY ..............................          (436,729)
                                                                    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY ..............       $ 4,542,037
                                                                    ===========

            See Notes to Condensed Consolidated Financial Statements.


                                       3
<PAGE>


                               NATIONAL COAL CORP.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                    TWO MONTHS     THREE MONTHS
                                                      ENDED           ENDED
                                                     MARCH 31,       MARCH 31,
                                                       2003            2004
                                                   ------------    ------------
REVENUES
    Coal sales .................................   $       --      $    990,622
    Royalty receipts ...........................           --            74,281
                                                   ------------    ------------
       Total revenue ...........................           --         1,064,903

EXPENSES
    Cost of mine operations and selling expenses           --           937,384
    General and administrative .................        776,744         831,138
    Exploration and development ................           --            60,182
    Depreciation, depletion and accretion ......           --           109,355
    Amortization ...............................          5,725          45,607
                                                   ------------    ------------
       TOTAL OPERATING EXPENSES ................        782,469       1,983,665
                                                   ------------    ------------

LOSS FROM OPERATIONS ...........................       (782,469)       (918,762)
                                                   ------------    ------------

OTHER INCOME (EXPENSE)
    Other income (expense), net ................           --           (14,646)
    Interest expense ...........................        (11,989)       (132,800)
                                                   ------------    ------------
       TOTAL OTHER INCOME (EXPENSE) ............        (11,989)       (147,446)
                                                   ------------    ------------

NET (LOSS) .....................................   $   (794,458)   $ (1,066,208)
                                                   ============    ============

BASIC AND DILUTED NET (LOSS) PER SHARE .........   $      (0.02)   $      (0.03)
                                                   ============    ============

WEIGHTED AVERAGE COMMON SHARES .................     33,731,667      40,186,312
                                                   ============    ============

            See Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>


<TABLE>
                               NATIONAL COAL CORP.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (UNAUDITED)

<CAPTION>
                                                                  TWO MONTHS    THREE MONTHS
                                                                     ENDED         ENDED
                                                                   MARCH 31,      MARCH 31,
                                                                     2003          2004
                                                                 -----------    -----------
<S>                                                              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) ................................................   $  (794,458)   $(1,066,208)
   Adjustments to reconcile net (loss) to net
      cash used by operating activities:
         Depreciation, depletion and accretion ...............          --          109,355
         Amortization ........................................         5,725         45,607
         Issuance of common stock in lieu of interest payments          --          165,313
         Stock issued for outside services ...................       153,500           --
         Non-cash compensation:
            Common stock issued in payment of accrued salary .       184,000        226,573
            Stock option expense .............................          --          216,562
         Changes in operating assets and liabilities:
            Receivables ......................................          --            4,327
            Inventory ........................................          --         (115,293)
            Prepaid and other ................................        (5,000)        27,850
            Accounts payable and accrued liabilities .........        26,864        (68,748)
            Deferred revenue .................................          --         (149,928)
                                                                 -----------    -----------
   Net cash used in operating activities .....................      (429,369)      (604,590)
                                                                 -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Deposit made to acquire mineral property ..................    (1,270,000)          --
   Mining permit purchased ...................................       (30,000)          --
   Deposit ...................................................          --         (500,000)
   Equipment and vehicles purchased ..........................          --         (647,785)
                                                                 -----------    -----------
   Net cash used in investing activities .....................    (1,300,000)    (1,147,785)
                                                                 -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock ....................        26,864      2,750,000
   Proceeds from issuance of debt, less acquisition costs ....     2,782,667           --
   Proceeds from / payment of related party debt .............       150,000       (160,000)
   Proceeds from bank loan ...................................          --           50,053
   Payments on capital leases ................................          --         (257,390)
                                                                 -----------    -----------
   Net cash provided by financing activities .................     2,950,167      2,382,663
                                                                 -----------    -----------

NET INCREASE (DECREASE) IN CASH ..............................   $ 1,220,798    $   630,288

CASH AND EQUIVALENTS, BEGINNING OF PERIOD ....................          --              883
                                                                 -----------    -----------

CASH AND EQUIVALENTS, END OF PERIOD ..........................   $ 1,220,798    $   631,171
                                                                 ===========    ===========

SUPPLEMENTAL DISCLOSURES:
   Interest paid in cash .....................................   $      --      $    52,364
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                       5
<PAGE>


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


1.       BASIS OF PRESENTATION

         The accompanying  unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted  accounting  principles
in the United States for interim financial information and with the instructions
to Form 10-QSB and Item 310 of Regulation S-B. Accordingly,  they do not include
all of the information and footnotes required by generally  accepted  accounting
principles  in  the  United  States  for  complete  financial  statements.   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.  The results of operations for such periods are
not necessarily  indicative of the results  expected for the full fiscal year or
for any future period. The accompanying  financial  statements should be read in
conjunction with the audited consolidated  financial statements of National Coal
Corp. and consolidated  subsidiaries  (the "Company")  included in the Company's
Form 10-KSB for the fiscal year ended December 31, 2003.

         The  discussion and analysis of the Company's  financial  condition and
results of  operations  are based upon its  consolidated  financial  statements,
which have been  prepared in accordance  with  accounting  principles  generally
accepted in the United States.  The  preparation of these  financial  statements
requires the Company to make  estimates and  judgments  that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent  assets and liabilities.  On an on-going basis, the Company evaluates
its  estimates,  including  those  related to  reserves  for bad debts and those
related to the possible  impairment of long-lived  assets. The Company bases its
estimates on historical  experience  and on various other  assumptions  that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying value of assets and  liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.  The Company's use of
estimates,  however, is quite limited, as they have adequate time to process and
record actual results from operations.

         During the three months ended March 31, 2003, National Coal Corp. was a
"blank check" company,  which is a company that has no specific business plan or
purpose  or has  indicated  that its  business  plan is to engage in a merger or
acquisition  with an  unidentified  company  or  companies.  On April 30,  2003,
National Coal Corp. consummated a reorganization in which all of the outstanding
shares of National Coal Corporation,  a Tennessee  corporation formed in January
2003,  were  exchanged  for  34,200,000  shares of the National  Coal Corp. As a
result of the  reorganization  of the group and the  commencement  of  operating
activities, the results from inception through March 31, 2003 are not comparable
to those for the three months ended March 31, 2004.

         The  principal  activity  of the  Company is coal  mining.  The Company
currently  owns, in fee simple,  the coal mineral  rights to the New River Tract
assemblage,  which consists of approximately  sixty-five thousand (65,000) acres
that lie in Anderson,  Campbell and Scott  Counties,  approximately  twenty-five
miles northwest of Knoxville, Tennessee. These mineral rights revert back to the
surface owner on June 5, 2093. At the present time there are two separate  areas
located on the New River Tract  assemblage that are producing coal which include
(1) a surface mine situated in Devonia,  Tennessee (Patterson Mountain), and (2)
a deep mine commonly referred to as "mine #9" by U.S. Coal, Inc., an independent
mine operator  that pays  royalties to the Company on its coal  production.  SEE
FOOTNOTE #6.

         The Company's  financial  statements  have been  presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.  From inception to
date, the Company has incurred  significant  outstanding current obligations and
has  incurred  substantial  net  losses.  This  factor,  among  others,   raises
substantial doubt as to the Company's ability to continue as a going concern.


                                       6
<PAGE>


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

2.       RECENT ACCOUNTING PRONOUNCEMENTS

         In April  2003,  the  Financial  Accounting  Standards  Board  ("FASB")
approved SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging  Activities."  SFAS No. 149 is not  expected  to apply to the  Company's
current or planned activities.

         In June 2003, the FASB approved SFAS No. 150,  "Accounting  for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
No. 150 establishes  standards for how an issuer classifies and measures certain
financial  instruments with characteristics of both liabilities and equity. This
Statement is effective for financial  instruments entered into or modified after
May 31, 2003,  and  otherwise is effective at the beginning of the first interim
period  beginning  after June 15, 2003.  SFAS No. 150 is not expected to have an
effect on the Company's financial position.

         In  December  2003,  the FASB issued a revised  Interpretation  No. 46,
"Consolidation of Variable Interest Entities".  The interpretation clarifies the
application  of Accounting  Research  Bulletin No. 51,  "Consolidated  Financial
Statements",  to certain  types of  entities.  The  Company  does not expect the
adoption of this interpretation to have any impact on its financial statements.

3.       NOTES PAYABLE

         In March 2003,  the Company issued  convertible  notes in the principal
amount of $3,194,902 to an unrelated party (the "Convertible Notes). These notes
and related  accrued  interest  are  convertible  into common stock at $0.50 per
share.  In  addition,  the note holder  received  two-year  warrants to purchase
1,597,250  shares of common  stock at $0.55 per share.  In September  2003,  the
Company borrowed  $75,000 and $195,315 from the same entity.  These two notes do
not have a conversion  feature.  All of the notes payable accrue simple interest
at an annual rate of 12%,  mature in March 2004,  and have terms that require an
earlier payoff in the event of a successful equity or debt capital financing. In
February 2004, Crestview Capital Master, LLC ("Crestview"), an entity controlled
by Crestview  Capital Funds,  directly  purchased these four  outstanding  notes
payable, in the aggregate principal amount of $3,465,200,  plus accrued,  unpaid
interest.  Concurrent  with the  repurchase  of this debt,  Crestview  agreed to
extend the maturity date on all four notes to March 25, 2005.  The interest rate
remains at 12% per annum.  The Convertible  Notes have been modified to preclude
conversion if the issuance of common stock upon conversion would cause Crestview
to own more  that  9.99% of the then  outstanding  equity  in the  Company  when
computed in accordance  with Section 13d of the  Securities  and Exchange Act of
1934. Crestview also purchased the warrants from the debt holder, which had been
concurrently issued with the two convertible notes. SEE FOOTNOTE #4. As of March
31, 2003, the four notes totaled approximately $3,465,200,  exclusive of accrued
interest.

4.       EQUITY TRANSACTIONS

ISSUANCE OF STOCK FOR SERVICES

         In March 2004,  a total of 167,832  shares of common stock were granted
to the  Chairman of the Board in lieu of cash  compensation  for  services.  The
stock was valued at $226,573 or $1.35 per share,  which was the closing price of
the Company's common stock on the date the stock was issued.

ISSUANCE OF STOCK FOR CASH

         In February 2004, the Company sold an aggregate of 5,000,000  shares of
its common stock in a private placement,  at a price per share of $0.55. The net
proceeds to the Company  were  $2,750,000.  Crestview  Capital  Master,  LLC, an
entity  controlled  by  Crestview  Capital  Funds,  purchased  2,600,000  of the
5,000,000 shares. This was Crestview's first investment with the Company.  Three
unrelated  accredited  individual  investors  purchased the remaining  2,400,000
shares.


                                       7
<PAGE>


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

ISSUANCE OF STOCK UPON THE CONVERSION OF NOTES PAYABLE

         On January 30,  2004,  four  unrelated  parties,  holding an  aggregate
principal  amount of  $198,000  of notes  payable,  accepted  an offer  from the
Company to convert all of their then outstanding  principal and accrued interest
into  common  shares of the  Company at a  conversion  price of $0.55 per share.
Consequently,  the Company  issued  368,399  shares  collectively  of its common
stock,  with 360,000  shares  representing  the conversion of principal due, and
8,399 shares representing accrued interest.

CONVERTIBLE DEBT AND WARRANTS TO PURCHASE COMMON STOCK

         In February 2004,  Crestview  purchased the Convertible  Notes directly
from the holder.  Concurrent with the repurchase of this debt,  Crestview agreed
to  extend  the  maturity  date on  these  notes,  as well the two  other  notes
purchased,  to March 25, 2005.  The interest rate remains at 12% per annum.  The
Convertible  Notes have been  modified to preclude  conversion  if the  issuance
would cause Crestview to own more that 9.99% of the then  outstanding  equity in
the Company when computed in accordance  with Section 13d of the  Securities and
Exchange Act of 1934.  Crestview also  purchased  warrants from the debt holder,
which  had been  concurrently  issued  with  the two  convertible  notes.  Those
warrants allow for Crestview to purchase  1,597,250  shares of common stock at a
price per share equal to $0.55 until March 25, 2005.

         As of March 31, 2004, none of the warrants had been exercised.

ISSUANCE OF STOCK UPON THE CONVERSION OF ACCRUED INTEREST

         On March 31, 2004, Crestview exercised its right to convert all accrued
unpaid  interest on the  Convertible  Notes.  Consequently,  the Company  issued
321,387  shares of its common  stock as  compensation  for  $160,693  of accrued
interest due at March 31, 2004.

2004 STOCK OPTION PLAN

         In February  2004,  the Company sought and received the approval of its
three largest shareholders, whose holdings collectively exceeded 80% of the then
outstanding  shares of the Company's  common stock,  to establish a stock option
plan, to provide for the issuance of stock options to employees, consultants and
vendors.  The stock  option plan (the "2004  Plan")  allows for the  issuance of
options to purchase up to an aggregate of 6 million  shares of Company's  common
stock to be distributed  pursuant to the rules and  regulations of the Plan. Any
shares of common stock subject to an options award, which for any reason expires
or terminates unexercised, are again available for issuance under the 2004 Plan.

         On March 25, 2004,  the Board of Directors of the Company  approved the
issuance of options to purchase a total of  4,950,000  shares of common stock to
senior  executives,  board  members and key  employees at an exercise  price per
share of $0.55.  The options  vest  ratably  over a four-year  period  beginning
January 1,  2005.  In  accordance  with APB No. 25,  the  Company  recognized  a
quarterly  pro-rata  $216,562  non-cash  compensation  expense  related  to  the
issuance of these options  since the exercise  price of the options at $0.55 per
share was below the  closing  price of $1.25 of the  Company's  common  stock on
March 25, 2004.

5.       RELATED PARTY TRANSACTIONS

         On July 1, 2003, the Company sold mineral royalty rights for coal mined
on the Patterson  Mountain  portion of its' New River Tract for $75,156 to Jenco
Capital  Corporation,  an entity controlled by the CEO/President  ("Jenco").  As
consideration  for the $75,156  received,  the Company is obligated to pay Jenco


                                       8
<PAGE>


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

$2.00 per mined ton on the  property.  During the three  months  ended March 31,
2004, the Company paid Jenco $31,111 in accordance with this transaction.

         On August 1, 2003,  the Company  sold its  interest in mineral  royalty
rights received by the Company from U.S. Coal, Inc. for coal mined on the Smokey
Mountain  portion of the New River  Tract.  The royalty was sold for $250,000 to
Jenco. As  consideration  for the $250,000  received,  Jenco began receiving the
royalty  payments  from U.S.  Coal.  The Company  recorded  the  transaction  as
deferred  revenue  and  recognizes  revenue  each  month  based  on U.S.  Coal's
production.  As of  March  31,  2004,  royalties  totaling  $220,878  have  been
recognized, leaving $29,122, which is included in deferred revenue.

         These  transactions were completed by the Company with Jenco, a related
party,  because (i) the Company needed a prompt capital infusion to ramp up coal
production, (ii) Jenco had available cash for the transaction, (iii) the Company
could not have  developed  another  independent  source for the capital  without
considerable  time  delay  due to lack of a  production  history,  and  (iv) the
Company had no knowledge of any outside  sources for such  capital.  The Company
believes  that given the time delay to search for  capital  and the cost of lost
opportunity, the terms of these transactions were acceptable because it afforded
immediate liquidity for operating purposes.

         On June 30, 2003, the Board of Directors assigned a ten-year, $0.25 per
ton royalty interest on all the coal sold from the Company's New River Tract, to
both the Chairman of the Board and the  CEO/President.  In the event any mineral
properties are sold prior to the end of the ten-year  period,  the obligation is
to be settled by paying 12 1/2% of the sales price to each individual.  Pursuant
to the sale of mineral property rights to Jenco (see two paragraphs  above), the
Company paid both the Chairman of the Board and the CEO/President 12 1/2% of the
sales price, a total of $81,289. In February 2004, the Chairman of the Board and
the CEO/President  each agreed to permanently cancel all future royalty payments
pursuant to this royalty agreement.

         In October 2003, the Company loaned the Chief Financial Officer $15,000
at an annual  interest  rate of 3 1/2% and a maturity  of 1 year.  This loan was
made  during  the  period of time that the CFO was  performing  his duties on an
interim  basis and was not  considered  an officer of the  Company.  In February
2004, this loan, plus accrued interest, was paid in full.

         During the three months ended March 31, 2004,  the Company paid the law
firm of  Kite,  Bowen &  Associates,  PA a total  of  $10,000  for  professional
services rendered. Mr. Kite is the managing partner of Kite, Bowen & Associates,
PA, and is a director of the Company. SEE FOOTNOTE #6.

6.       EVENTS SUBSEQUENT TO MARCH 31, 2004

SECURED PROMISSORY NOTES

         In April 2004 and May 2004 the  Company  closed on the sale of secured,
one-year  promissory  notes in the aggregate  principal  amount of $6.75 million
(the "Secured Notes") and three-year  warrants to purchase up to an aggregate of
2,250,000  shares of its common  stock at an exercise  price of $1.00 per share.
The Company sold these  securities to  institutional  investors  and  individual
accredited investors,  with the largest investor being Crestview Capital Master,
LLC,  for an  aggregate  purchase  price to the  Company of $6.75  million.  The
Company paid an agent  $270,000  and issued  135,000  warrants  with an exercise
price of $1.00 per share as  consideration  for brokerage  services  pursuant to
this transaction.


                                       9
<PAGE>


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

CONVERSION OF CONVERTIBLE NOTES

         In April 2004,  Crestview exercised its right and converted $500,000 of
Convertible  Notes into  1,000,000  common shares of the Company.  Subsequent to
this conversion,  the remaining  principal  balance of the Convertible  Notes is
$2,694,900.

PURCHASE OF ASSETS FROM U.S. COAL, INC.

         In  February  2004,  the  Company   deposited  in  escrow  $500,000  in
connection with the subsequent  April 2004  acquisition of certain mining assets
including  active and idle mining  permits of U.S.  Coal,  Inc.,  for a purchase
price of $4.2  million  plus the  assumption  of  certain  operating  leases for
equipment used in the normal course of business. Proceeds from the Secured Notes
were used to fund the acquisition of these assets.

ISSUANCE OF WARRANTS

         In April 2004,  the Company issued  100,000  2-year  warrants,  with an
exercise price of $1.20 to an attorney as consideration for past legal services.
Also in April 2004, the Company issued 50,000 2-year warrants,  with an exercise
price of $1.00 to a financial  consulting firm as  consideration  for not paying
monthly consulting services on a timely basis pursuant to a consulting agreement
between such firm and the Company.

RELATED PARTY MATTERS

         In May 2004,  the Company hired Charles Kite as General  Counsel.  Upon
agreeing to join the  Company,  Mr. Kite  immediately  resigned  his  director's
position.  Mr. Kite is the step-father of Jeanne Nix, Secretary and Treasurer of
the Company and wife of Jon Nix, President/CEO of the Company.


                                       10
<PAGE>


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The information contained in this Form 10-QSB is intended to update the
information  contained  in our Annual  Report on Form  10-KSB for the year ended
December 31, 2003 and presumes  that readers have access to, and will have read,
the  "Management's  Discussion  and  Analysis  or Plan of  Operation"  and other
information contained in such Form 10-KSB. 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-QSB.

         THIS  DISCUSSION  SUMMARIZES  THE  SIGNIFICANT  FACTORS  AFFECTING  THE
CONSOLIDATED OPERATING RESULTS, FINANCIAL CONDITION AND LIQUIDITY AND CASH FLOWS
OF NATIONAL COAL CORP.  FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND THE PERIOD
FROM  INCEPTION  (JANUARY  30, 2003) TO MARCH 31,  2003.  EXCEPT FOR  HISTORICAL
INFORMATION,  THE MATTERS DISCUSSED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION  ARE FORWARD  LOOKING  STATEMENTS  THAT  INVOLVE  RISKS AND
UNCERTAINTIES AND ARE BASED UPON JUDGMENTS  CONCERNING  VARIOUS FACTORS THAT ARE
BEYOND OUR CONTROL.  ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED
IN THE  FORWARD-LOOKING  STATEMENTS  AS A RESULT OF,  AMONG  OTHER  THINGS,  THE
FACTORS  DESCRIBED  BELOW  UNDER THE  CAPTION  "CAUTIONARY  STATEMENTS  AND RISK
FACTORS."

OVERVIEW

         National Coal Corp. engages  principally in the business of mining coal
in  Eastern  Tennessee.  Our  historical  operations  prior  to April  30,  2003
discussed  in  this  section  reflect  only  the  operations  of  National  Coal
Corporation,  a Tennessee  corporation.  Prior to April 30, 2003,  National Coal
Corp., formerly known as Southern Group International, Inc., was a "blank check"
company, which is a company that has no specific business plan or purpose or has
indicated that its business plan is to engage in a merger or acquisition with an
unidentified  company  or  companies.  On April 30,  2003,  National  Coal Corp.
consummated a reorganization in which all of the outstanding  shares of National
Coal Corporation, a Tennessee corporation,  were exchanged for 34,200,000 shares
of the National Coal Corp. National Coal Corporation was formed in January 2003,
and from inception  through June 30, 2003,  National Coal Corporation was in the
development stage with no operating  revenue.  During the third quarter of 2003,
we  commenced  coal mining  operations  and,  accordingly,  are no longer in the
development  stage.  As a result  of the  reorganization  of the  group  and the
commencement  of  operating  activities,  our  results  for the two months  from
inception  (January 30, 2003) to March 31, 2003 are not  comparable to those for
the three months ended March 31, 2004.

         We own the coal mineral rights to the New River Tract assemblage, which
consists  of  approximately  sixty-five  thousand  (65,000)  acres in  Anderson,
Campbell  and Scott  Counties,  approximately  twenty-five  miles  northwest  of
Knoxville,  Tennessee.  These mineral rights revert back to the surface owner on
June 5, 2093. At March 31, 2004, we were  extracting coal from a surface mine in
Devonia,  Tennessee  (Patterson  Mountain),  and U.S. Coal, Inc., an independent
mine operator that pays us royalties on its coal production, was extracting coal
from a deep mine New River Tract assemblage  commonly  referred to as "mine #9."
In April 2004,  we acquired  certain coal mining  assets from U.S.  Coal,  Inc.,
including equipment, a coal washing plant, a load out facility, and coal mineral
rights to mine #9 and other deep mines,  and commenced  mining coal from mine #9
in April 2004.

         We  engage  in  coal  production  by  locating,  assembling,   leasing,
assessing, permitting and developing coal properties in Eastern Tennessee. After
obtaining permits from the U.S.  Department of the Interior,  we mine properties
for the extraction of coal minerals. We then sell the coal on a per ton basis at
previously negotiated rates, primarily to state run utility companies. We obtain
reclamation  bonds for each of our producing  properties.  These bonds typically
take the form of cash deposits with the U.S. Department of the Interior,  Office
of Surface Mining,  or OSM. At March 31, 2004,  $257,500 was on deposit with OSM
for reclamation bonds.


                                       11
<PAGE>


         We  sell  our  coal  at  a  negotiated  price  pursuant  to  short-term
contracts.  The price charged is typically for a specified  tonnage  amount.  We
also price sales on a one-day or one-shipment  tonnage amount. The price per ton
for these types of sales typically fluctuates in direct correlation to the price
per ton of coal quoted on the New York Mercantile  Exchange,  referred to as the
"spot price." We intend to reduce the price  volatility for our coal by entering
long-term  supply  contracts  (contracts in excess of one year) for a portion of
our coal  production,  which will provide us a fixed price for our coal over the
term of the  contract.  We will  continue to use the spot market to sell surplus
coal produced above our long-term contract commitments.

         We also sell coal that we purchase from third party coal producers on a
case by case basis. We only enter into these transactions when the price per ton
paid to these third party  producers  is below the price per ton at which we are
able to sell the coal,  usually from short term  contracts.  Additionally,  when
capacity is available,  we charge third party coal producers a negotiated  price
per ton for their use of our load out facility located in Turley,  TN. This load
out facility allows easy,  direct access to load previously mined coal onto rail
cars for  shipment to their  customers.  This load out  facility was acquired in
April 2004 from U.S. Coal, Inc. As such, we will only begin recognizing  revenue
from this source in the second  calendar  quarter.  We do not expect the sale of
coal purchased from third party  producers or the rental to third parties of our
load out facility to represent a material portion of our business in 2004.

         The coal industry has been highly  competitive with very low margins in
the past several years.  Recently,  the surge in prices for natural gas has made
coal more  competitive with that  alternative  energy source,  which has enabled
coal  fired  power  plants,  using  the  latest  clean  air  compliant  scrubber
technology,  to be price  competitive with natural gas fired plants.  We believe
this has and will continue to cause  increased  demand for coal for at least the
next twelve to  twenty-four  months,  resulting  in higher  prices and  improved
margins for our product.  However, the price of coal is very volatile, and there
can be no assurances  that the price of coal will not drop below current levels.
To reduce our exposure to  fluctuations  in the price of coal, we intend to sign
long term contracts with respect to a majority of our coal production to fix the
price we receive for our coal over a period of one or more years.

         We estimate our cost of commencing  mining  operations at a new mine is
between $500,000 to $750,000, per mine, including the cost of reclamation bonds.
We do not generate sufficient cash from operations to fund new mine development,
and our expansion into new mines  therefore  depends on our ability to raise the
required  funds  through  debt or equity  offering.  If we are not able to raise
additional  financing or if such financing is not available on acceptable terms,
we may be unable to expand  our  mining  operations  beyond  current  production
levels.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

         The discussion  and analysis of our financial  condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.  On an on-going basis,  we evaluate our estimates,  including those
related to computing depreciation,  depletion, amortization,  reclamation, asset
impairment,  valuation of non-cash  transactions  and  recovery of  receivables.
Estimates  are  then  based  on  historical  experience  and  on  various  other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions. Our use of estimates,  however, is limited, as we have adequate time
to process and record actual results from operations.

         We  believe  our most  critical  accounting  policies  include  revenue
recognition, the corresponding accounts receivable and the methods of estimating
depletion and accretion expense of actual mining


                                       12
<PAGE>


operations  in relation to  estimated  total  mineable  tonnage on our New River
Tract  property.  We believe the following  accounting  policies affect our more
significant  judgments and estimates  used in  preparation  of our  consolidated
financial statements.

         REVENUE RECOGNITION

         Under SEC Staff Accounting  Bulletin No. 101,  "Revenue  Recognition in
Financial  Statements," we recognize revenue when all of the following  criteria
are met: (1)  persuasive  evidence of an  arrangement  exists,  (2) delivery has
occurred or services have been rendered,  (3) the seller's price to the buyer is
fixed or determinable, and (4) collectibility is reasonably assured.

               MINED COAL.  In the case of coal we mine and sell, we negotiate a
specific  sales  contract with each  customer,  which includes a fixed price per
ton, a delivery schedule, and terms for payment. We recognize revenue from sales
made pursuant to these contracts at the time of delivery.

               COAL ROYALTIES.  We recognize coal royalty  revenues on the basis
of tons of coal mined by our lessees.  We  currently  have one source of royalty
revenue pursuant to our agreement with Jenco Capital Corporation. We recognize a
fixed price per ton of coal mined by U.S. Coal, Inc., when the coal is mined. We
expect to recognize the final remaining royalties pursuant to our agreement with
Jenco in the second  calendar  quarter of 2004 and don't  anticipate  any future
royalty transactions for the foreseeable future.

         ACCOUNTS RECEIVABLE

         Accounts  receivable  balances are  evaluated on a continual  basis and
allowances  are  provided  for  potentially   uncollectable  accounts  based  on
management's  estimate  of  the  collectability  of  customer  accounts.  If the
financial  condition  of  a  customer  were  to  deteriorate,  resulting  in  an
impairment  of its ability to make  payments,  an  additional  allowance  may be
required. Allowance adjustments are charged to operations in the period in which
the facts that give rise to the adjustments become known.

         ASSET RETIREMENT OBLIGATION

         The  Surface  Mining  Control and  Reclamation  Act of 1977 and similar
state  statutes  require that mine  properties  be restored in  accordance  with
specified standards and an approved  reclamation plan.  Significant  reclamation
activities  include  reclaiming refuse and slurry ponds,  reclaiming the pit and
support acreage at surface mines, and sealing portals at deep mines. Reclamation
activities that are performed outside of the normal mining process are accounted
for as  asset  retirement  obligations  in  accordance  with the  provisions  of
Statement of  Financial  Standards  No. 143,  "Accounting  For Asset  Retirement
Obligations"   ("SFAS  143").  We  record  our  reclamation   obligations  on  a
mine-by-mine  basis  based  upon  current  permit   requirements  and  estimated
reclamation  obligations  for such mines as  determined by the Office of Surface
Mining  when we post a  predetermined  amount  of  reclamation  bonds  prior  to
commencing  mining  operations.  The Office of  Surface  Mining's  estimates  of
disturbed  acreage are  determined  based on approved  mining  plans and related
engineering  data.  Cost estimates are based upon estimates  prepared by the OSM
based on historical  costs.  In accordance  with SFAS 143, we determine the fair
value  of  our  asset  retirement  obligations  using  a  discounted  cash  flow
methodology  based on a discount rate related to the rates of US treasury  bonds
with maturities similar to the expected life of a mine,  adjusted for our credit
standing.

         On at least an annual basis, we review our entire reclamation liability
and make necessary  adjustments for permit changes granted by state authorities,
additional costs resulting from accelerated mine closures, and revisions to cost
estimates and productivity assumptions,  to reflect current experience. At March
31, 2004, we recorded asset retirement obligation  liabilities of $69,664. While
the precise amount of these future costs cannot be determined with certainty, as
of March 31, 2004,  we estimate that the  aggregate  undiscounted  cost of final
mine closure is approximately $257,500.


                                       13
<PAGE>


         RESERVES

         We do  not  disclose  coal  "reserves"  in  our  financial  statements.
"Reserves",  to be  so  classified,  must  be  based  upon  reasonably  accurate
scientific data and  professional  analysis,  be recoverable  (economically  and
physically),  have a permitted and operating mine facility at the coal location,
and be subject to current sales. We have not satisfied all of these requirements
with respect to our coal mineral rights. To record coal reserves, in addition to
the  other  requirements,  we would  have to  engage  a  geologist  to  render a
professional  report  indicating the recoverable  tonnage on the portions of our
property which are being actively mined.

RESULTS OF OPERATIONS

         REVENUES.  Revenues were  $1,064,902 for the  three-month  period ended
March 31, 2004,  consisting  of coal sales of $990,622  and royalty  receipts of
$74,281.  For the two months ended March 31, 2003,  we did not have any revenues
as we did not have any revenue-generating  operations during the period. For the
three months  ended March 31, 2004,  three  customers  accounted  for all of our
sales,  and our largest  customer  representing  approximately  90% of our total
sales which were made pursuant to a short term contract to deliver  100,000 tons
of coal during a one year  period.  The royalty  receipts  for the three  months
ended March 31,  2004 were the result of the  recognition  of  deferred  revenue
relating to our sale in August 2003 for $250,000 of royalty  rights  relating to
coal mined on the Smokey Mountain portion of our New River Tract property.

         COST OF MINING  OPERATIONS AND SELLING  EXPENSES.  For the  three-month
period ended March 31, 2004, cost of mining  operations and selling expenses was
$937,384.  These  expenses  consist  primarily  of  salary,  benefits  and other
compensation costs paid directly to miners of approximately $278,700, 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 coal
purchases of $132,500,  equipment  leases and maintenance  expenses of $170,800,
blasting  expenses of $93,700,  fuel costs of  $103,700,  parts and  supplies of
$84,600, and hauling costs $36,100.
 For the two months  ended March 31, 2003,  we did not have any sales,  and thus
did not have any direct cost of mining operations and selling expenses.

         EXPLORATION AND DEVELOPMENT EXPENSES.  For the three-month period ended
March 31, 2004, we incurred  exploration and development  costs of approximately
$60,200 for fees paid to professional  geological and exploration  experts.  For
the two  months  ended  March  31,  2003,  we did not have any  exploration  and
development expenses.

         GENERAL  AND  ADMINISTRATIVE   EXPENSES.   General  and  administrative
expenses  primarily include salary,  benefits and related  expenses;  executive,
financial,   and  accounting  consulting  expenses;   legal  and  outside  audit
professional fees;  insurance expenses;  and travel and travel related expenses.
General and administrative  expenses  increased $54,400,  or 7.0%, from $776,700
for the two months  ended March 31, 2003 to $831,100  for the three months ended
March 31,  2004.  This  increase  is  primarily  attributable  to an increase in
salary,  benefits  and  related  expenses  of  $565,900,  partially  offset by a
decrease in consulting fees of $552,400.  This occurred as we transitioned  from
our initial start-up phase in the two month period ended March 31, 2003,  during
which we used  consultants,  to on-going  operations  conducted  by employees in
2004.  Additionally,  legal and other  professional  fees increased $46,700 from
$11,000 for the two months  ended March 31, 2003 to $57,700 for the three months
ended March 31, 2004.

         INTEREST,  DEPRECIATION,  AMORTIZATION  AND OTHER  INCOME AND  EXPENSE.
Other  significant  expenses  primarily  include interest expense related to the
issuance  of notes  payable,  depreciation  of fixed  assets,  and  amortization
expense. Interest, depreciation, amortization and other income and expense items


                                       14
<PAGE>


increased  $284,700  from  $17,700  for the two months  ended  March 31, 2003 to
$302,400 for the three months ended March 31, 2004.  This  increase is primarily
attributable to an increase in interest expense of $120,800 from $12,000 for the
two months ended March 31, 2003 to $132,800 for the three months ended March 31,
2004, attributable to increase indebtedness; an increase in depreciation expense
of $101,600  from $0 for the two months ended March 31, 2003 to $101,600 for the
three months  ended March 31, 2004,  attributable  to the  acquisition  of fixed
assets;  and an increase in amortization  expense of $39,900 from $5,700 for the
two months  ended March 31, 2003 to $45,600 for the three months ended March 31,
2004,  attributable  to  amortization  expense related to financing fees paid in
conjunction with our issuance of convertible notes in March 2003.

RELATED PARTY TRANSACTIONS

         On July 1, 2003, we sold mineral  royalty  rights for coal mined on the
Patterson  Mountain portion of our New River Tract property for $75,156 to Jenco
Capital Corporation ("Jenco"),  an entity partially owned by our Chief Executive
Officer and President.  We are obligated to pay Jenco $2.00 per mined ton on the
property. During the three months ended March 31, 2004, we paid Jenco $31,111 in
accordance with our agreement.

         On August 1, 2003, we sold our interest in mineral  royalty rights that
we received from U.S. Coal, Inc. for coal mined on the Smokey  Mountain  portion
of our New River Tract  property.  We sold these royalty  rights for $250,000 to
Jenco. We recorded the proceeds from the sale as deferred  revenue and recognize
revenue  each  month  based on U.S.  Coal's  production.  As of March 31,  2004,
royalties  totaling  $220,878 have been recognized,  leaving $29,122 of deferred
revenue.

         We engaged in these  transactions with Jenco, a related party,  because
of our need for a prompt  capital  infusion  to ramp up coal  production,  which
capital we do not  believe  was  available  from an  independent  party  without
considerable  time delay, if at all. We believe these  transactions  were in our
best  interests as they  afforded us  immediate  capital to fund  operations  on
commercially reasonable terms.

         On June 30,  2003,  we  assigned  a  ten-year,  $0.25  per ton  royalty
interest  on all the coal sold from our New River  Tract  property,  to both the
Chairman  of the  Board and our  Chief  Executive  Officer  and  President.  The
agreement  provided that in the event any mineral  properties were sold prior to
the end of the ten-year  period,  the  obligation  would be settled by paying 12
1/2% of the sales  price to each  individual.  Pursuant  to the sale of  mineral
property  rights to Jenco in July and August 2003,  we paid both the Chairman of
the Board and our Chief  Executive  Officer and  President  12 1/2% of the sales
price,  for an aggregate  payment of $81,289.  In February 2004, the Chairman of
the  Board  and our  Chief  Executive  Officer  and  President  each  agreed  to
permanently  cancel  all  future  royalty  payments  pursuant  to  this  royalty
agreement.

         In October 2003, we loaned our Chief Financial  Officer $15,000 with an
annual  interest rate of 3 1/2% and a maturity of 1 year.  This loan was made to
this  individual  before he became  our CFO and  before he was an officer of the
company. In February 2004, this loan, plus accrued interest, was paid in full.

         During the three months  ended March 31, 2004,  we paid the law firm of
Kite, Bowen & Associates,  PA, $10,000 for professional  services rendered.  Mr.
Kite was the managing partner of Kite, Bowen & Associates, PA, and served on our
Board of  Directors.  In May 2004,  Mr.  Kite  joined us on a full time basis as
General Counsel.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 2004, we had cash and cash equivalents of $631,200.  As
of March 31, 2004, we had negative working capital of  approximately  $3,464,400
and  a  stockholders'   deficiency  of  approximately   $436,700.  We  expect  a
significant  use of cash  during the first half of fiscal 2004 as we continue to
expand our


                                       15
<PAGE>


coal mining operations.  We anticipate,  however, that our current cash reserves
plus cash we expect to generate from  operations  will be sufficient to fund our
operational  expenditures for the next twelve months.  If we acquire  additional
assets and/or mining operations,  however,  we will require additional equity or
debt financing,  the amount and timing of which will depend in large part on our
spending program.  If additional funds are raised through the issuance of equity
securities, the current stockholders may experience dilution. Furthermore, there
can be no assurance that  additional  financing will be available when needed or
that  if  available,   such  financing  will  include  terms  favorable  to  our
stockholders.  If  such  financing  is not  available  when  required  or is not
available on acceptable  terms,  we may be unable to take  advantage of business
opportunities  or respond to  competitive  pressures,  any of which could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

         In April  and May 2004,  we  raised  gross  proceeds  of $6.75  million
pursuant to a series of private  placements of senior secured  promissory  notes
that  mature on April  15,  2005.  We used $3.7  million  of these  proceeds  in
connection  with our  acquisition of assets from U.S.  Coal,  Inc.  which,  when
combined with  $500,000  previously  deposited in escrow in connection  with the
purchase,  total the purchase  price for the U.S.  Coal assets of $4.2  million.
Additionally,  in April  2004,  the  holder of  approximately  $3.2  million  of
convertible  notes  included in current  liabilities at March 31, 2004 converted
$500,000 of these notes into  1,000,000  shares of common  stock.  After  giving
effect  to  these   transactions,   we  have  approximately   $10.1  million  of
indebtedness  underlying promissory notes with maturities of less than one year.
We intend to repay these notes from proceeds from the sale of equity securities.
There can be no  assurance,  however,  that we will be successful in raising the
proceeds necessary to repay this indebtedness,  or that we will be able to do so
without our existing stockholders experiencing significant dilution.

         CASH FLOWS

         We currently satisfy our working capital requirements primarily through
cash flows  generated from  operations and sales of equity and debt  securities.
For the three  months  ended March 31,  2004,  we had a net  increase in cash of
$630,288. Cash flows from operating,  financing and investing activities for the
three  months  ended March 31,  2004 and 2003 are  summarized  in the  following
table:

                                                        THREE MONTHS ENDED
                                                  -----------------------------
         ACTIVITY:                              MARCH 31, 2003    MARCH 31, 2004
                                                  -----------       -----------

Operating activities .......................      $  (429,369)      $  (604,590)
Investing activities .......................       (1,300,000)       (1,147,785)
Financing activities .......................        2,950,167         2,382,663
                                                  -----------       -----------
  Net increase (decrease) in cash ..........      $ 1,220,798       $   630,288

         The net cash used in operating  activities of $604,590 during the three
months  ended  March 31,  2004 was  primarily  the net result of the net loss of
$1,066,208, an increase in inventory of $115,293 as we increased coal production
during the period, and decreases in accounts payable and accrued  liabilities of
$68,748 and deferred revenue of $149,928.  These amounts were offset by non-cash
expenses of $763,410,  of which $443,135 was non-cash  compensation expense from
the issuance of stock options at below fair market value  ($216,562)  and common
stock issued as payment for accrued salary  ($226,573).  Additionally,  $165,313
was non-cash interest expense related to the issuance of common stock in lieu of
cash  payments.  We expect that we will generate  positive cash from  operations
commencing  in the second  quarter of 2004 and  continuing  at least through the
remainder of fiscal 2004.

         The net cash used in operating  activities  of $429,369  during the two
months  ended  March 31,  2003 was  primarily  the net result of the net loss of
$794,458,  offset by  non-cash  expenses  of  $337,500,  of which


                                       16
<PAGE>


$153,500 was non-cash consulting expense and $184,000 was non-cash  compensation
expense both from the issuance of common stock in lieu of cash payments.

         The  $1,147,785 of cash used in investing  activities  during the three
months  ended March 31, 2004 was due to $647,785  for the  purchase of equipment
and vehicles and $500,000 used as a deposit for the  acquisition  of assets from
U.S. Coal.  For the two months ended March 31, 2003,  $1,300,000 of cash used in
investing  activities resulted from the acquisition of a mining property and the
corresponding permit.

         The net cash provided by financing  activities of $2,382,663 during the
three months ended March 31, 2004 was the result of $2,750,000 raised from sales
of common stock, and $50,053 borrowed for the purchase of an automobile,  offset
by $160,000 paid on related party debt, and $257,390 paid on capital leases. The
net cash provided by financing  activities  of $2,950,167  during the two months
ended March 31, 2003 was the result of  $2,782,667  raised from the  issuance of
convertible  notes, less the cost to acquire the debt, $26,864 raised from sales
of common stock, and $150,000 borrowed from a related party.

         COMMON STOCK TRANSACTIONS

         In March 2004,  a total of 167,832  shares of common stock were granted
to the  Chairman of the Board in lieu of cash  compensation  for  services.  The
stock was valued at $226,573 or $1.35 per share,  which was the closing price of
our common stock on the date the stock was issued.

         In February  2004,  we sold an  aggregate  of  5,000,000  shares of our
common stock in a private placement,  at a price per share of $0.55. We received
net proceeds of $2,750,000.  Crestview Capital Master, LLC, an entity controlled
by Crestview Capital Funds,  purchased  2,600,000 of the 5,000,000  shares,  and
other accredited investors purchased the remaining 2,400,000 shares.

         On January 30,  2004,  four  unrelated  parties,  holding an  aggregate
principal  amount of  $198,000  of notes  payable,  converted  all of their then
outstanding  principal and accrued interest into common shares of the Company at
a conversion price of $0.55 per share. We issued 368,399 shares of common stock,
360,000  shares of which were issued in repayment of principal  and 8,399 shares
of which were issued in repayment of accrued interest.

         In February 2004,  Crestview Capital Master,  LLC purchased  $3,194,902
original principal amount of our convertible  promissory notes (the "Convertible
Notes") from the then holder of the notes.  Contemporaneously  with its purchase
of this debt, Crestview agreed to extend to March 25, 2005, the maturity date of
the notes,  as well as the maturity  date of two of our other  promissory  notes
which they acquired. The interest rate remains at 12% per annum. The Convertible
Notes have been  modified to preclude  conversion  if the  issuance  would cause
Crestview to own more that 9.99% of our then outstanding  equity securities when
computed in accordance  with Section 13(d) of the Securities and Exchange Act of
1934.  Crestview also  purchased  from the debt holder  warrants to purchase our
common stock, which had been concurrently issued with the Convertible Notes. The
warrants allow Crestview to purchase 1,597,250 shares of common stock at a price
per share of $0.55 until March 25, 2005. On March 31, 2004,  Crestview converted
$160,693 of accrued and unpaid  interest on the  Convertible  Notes into 321,387
shares of our common stock.

         2004 STOCK OPTION PLAN

         In February 2004, we adopted,  and our stockholders  approved,  a stock
option  plan  to  provide  for the  issuance  of  stock  options  to  employees,
consultants  and  vendors.  The stock  option  plan  allows for the  issuance of
options to purchase up to an aggregate of 6 million  shares of our common stock.
Any  shares of common  stock  subject to an option  award,  which for any reason
expires or terminates  unexercised,  are again  available for issuance under the
plan.


                                       17
<PAGE>


         On March 25,  2004,  the Board of  Directors  approved  the issuance of
options to purchase  4,950,000 shares of our common stock to senior  executives,
board members and key employees at an exercise  price per share of $0.55,  which
was the price at which we sold shares of our common stock in our  February  2004
private  placement.  In accordance  with APB No. 25, we  recognized  $216,562 of
non-cash compensation expense related to the issuance of these options since the
exercise  price of $0.55  was below the  closing  price of $1.25 for our  common
stock  on the  OTC  Bulletin  Board  on  March  25,  2004.  Correspondingly,  we
recognized $216,562 of additional paid-in capital pursuant to this transaction.

         CONTRACTUAL OBLIGATIONS

         The following summarizes our contractual  obligations at March 31, 2004
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>
Notes payable ....................   $3,865,217   $3,865,217   $     --     $     --     $      --
Capital lease obligations ........      201,400      201,400         --           --            --
Operating leases .................       95,600       95,600         --           --            --
Property leases ..................       10,800       10,800         --           --            --
Employment obligations ...........      372,000      341,000       31,000         --            --
                                     ----------   ----------   ----------   ----------   -----------
     Total contractual obligations   $4,924,217   $4,893,217   $   31,000   $     --     $      --
                                     ==========   ==========   ==========   ==========   ===========
</TABLE>

         Our notes payable at March 31, 2004 consisted of the following:

PROMISSORY NOTES                                                   AMOUNT DUE AT
                                                                  MARCH 31, 2004
--------------------------------------------------                   -----------

Convertible  notes  payable  dated March 24, 2003,
12% interest,  payable with accrued  interest upon
the  earlier of March 25,  2005 and the closing of
certain    financing,    merger   or   disposition
activities........................................                   $ 3,194,902

Note payable to a trust owned by an officer  dated
February  20,  2003,  8%  interest,  payable  with
accrued  interest upon the earlier of February 20,
2008 and the closing of certain financing,  merger
or disposition activities.........................                       150,000

Note  payable to an entity  partially  owned by an
officer   dated  August  27,  2003,  8%  interest,
payable with accrued  interest upon the earlier of
February  27,  2004  and the  closing  of  certain
financing, merger or disposition activities.......                       250,000

Note  payable  dated   September  25,  2003,   12%
interest,  payable with accrued  interest upon the
earlier of  September  25, 2004 and the closing of
certain    financing,    merger   or   disposition
activities........................................                        75,000

Note  payable  dated   September  30,  2003,   12%
interest,  payable with accrued  interest upon the
earlier of  September  30, 2004 and the closing of
certain    financing,    merger   or   disposition
activities........................................                       195,315
                                                                     -----------

      Total.......................................                   $ 3,865,217
                                                                     ===========

         During  the  second  quarter of 2003,  we  entered  into four  one-year
capital lease agreements to acquire mining  equipment with a combined  estimated
fair value of $775,916, which approximates the present value of


                                       18
<PAGE>


the lease payments. This equipment is being depreciated on a straight line basis
based on a 36-month useful life.

         We rent mining equipment  pursuant to operating lease  agreements,  and
made lease  payments  totaling  $92,882  during the three months ended March 31,
2004.

         In March 2003, we leased office space in Peachtree City,  Georgia, on a
month-to-month  basis,  at $600 per month. In April 2003, we leased office space
in Knoxville,  Tennessee, for nine months at $1,800 per month, which we extended
for an addition  nine  months in January  2004.  Rental  expense for these lease
commitments totaled $7,200 during the three months ended March 31, 2004.

OFF-BALANCE SHEET ARRANGEMENTS

         At March 31,  2004 and  2003,  we did not have any  relationships  with
unconsolidated  entities  or  financial  partnerships,  such as  entities  often
referred to as structured finance or special purpose entities,  which would have
been established for the purpose of facilitating  off-balance sheet arrangements
or other contractually  narrow or limited purposes.  As such, we are not exposed
to any  financing,  liquidity,  market or credit risk that could arise if we had
engaged in such relationships.

CAUTIONARY STATEMENTS AND RISK FACTORS

         Several   of  the   matters   discussed   in  this   document   contain
forward-looking  statements  that  involve  risks  and  uncertainties.   Factors
associated with the  forward-looking  statements that could cause actual results
to differ  materially  from those  projected  or  forecast  are  included in the
statements  below.  In addition to other  information  contained in this report,
readers should carefully consider the following cautionary statements.

OUR INABILITY TO GENERATE  ADDITIONAL  REVENUE OR RAISE CAPITAL COULD  ADVERSELY
IMPACT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

         We currently  have a number of  obligations  that we are unable to meet
without  generating  additional  revenues or raising additional  capital.  If we
cannot  generate  additional  revenues or raise  additional  capital in the near
future,  we may become  insolvent.  As of March 31,  2004,  our cash balance was
$631,171 and our  outstanding  short term capital  lease  obligations,  accounts
payable and accrued  expenses  totaled more than $964,710.  Our working  capital
needs consist of debt reduction and interest service, mine development, property
acquisition and exploration  costs,  bonding costs,  equipment  expenditures and
compensation  payments  for  mining.  Historically,  we have  funded our capital
requirements  with debt and equity  financing.  Our ability to obtain additional
equity or debt financing  depends on a number of factors including the financial
performance and the overall  conditions in the coal industry.  We have not fully
investigated  the   availability,   source,  or  terms  that  might  govern  the
acquisition  of additional  capital and will not do so until we determine a need
for additional financing. If we are not able to raise additional financing or if
such financing is not available on acceptable  terms,  we may liquidate  assets,
seek or be forced  into  bankruptcy,  and/or  continue  operations,  but  suffer
material harm to our  operations and financial  condition.  These measures could
have a material, adverse affect on our ability to continue as a going concern.

SIGNIFICANT COMPETITION FROM ENTITIES WITH GREATER RESOURCES COULD RESULT IN OUR
FAILURE.

         We  operate  in  a  highly  competitive   industry  with  national  and
international  energy resources  companies.  Some of our competitors have longer
operating histories and substantially greater financial and other resources than
we do. Our  competitors'  use of their  substantially  greater  resources  could
overwhelm our efforts to operate successfully and could cause our failure.


                                       19
<PAGE>


THERE IS NO ASSURANCE THAT OUR LIMITED REVENUES WILL BE SUFFICIENT TO OPERATE AS
A GOING CONCERN, OR THAT WE WILL GENERATE GREATER REVENUES IN THE FUTURE.

         We were formed to create a regional coal producer in Tennessee.  We had
no revenues  from  inception  until the third  quarter 2003 when we began mining
operations. We are not profitable and our business status is considered to be in
an early  development  stage. We must be regarded as a risky venture with all of
the unforeseen costs, expenses,  problems,  risks and difficulties to which such
ventures are subject.

         We have achieved  limited  revenues to date consisting of approximately
$2,000,000 in coal sales,  through the end of March 2004.  There is no assurance
that we can achieve greater sales or maintain  profitable  sales. We expect that
many coal  producers  could produce and sell coal at cheaper prices per ton than
our  production  cost  rates,  which could  adversely  affect our  revenues  and
profits,  if any.  There is no assurance  that we will ever operate  profitably.
There is no assurance that we will generate  continued  revenues or any profits,
or that the market price of our common stock will be increased thereby.

A LIMITED  PUBLIC  MARKET  EXISTS FOR OUR  SECURITIES,  WHICH MAY  RESTRICT  OUR
SHAREHOLDERS' ABILITY TO TRADE IN OUR STOCK.

         There  is  a  limited  public  market  for  our  common  stock  on  the
Over-the-Counter  Bulletin  Board,  and no assurance  can be given that a market
will  continue  or  that a  shareholder  will  ever be  able  to  liquidate  his
investment without  considerable delay, if at all. Our stock price may be highly
volatile. Factors such as those discussed in this section may have a significant
impact  upon the  market  price of our  securities.  Due to the low price of our
securities,  many brokerage  firms may not be willing to effect  transactions in
our  securities.  Even if a  purchaser  finds  a  broker  willing  to  effect  a
transaction in our securities,  the combination of brokerage commissions,  state
transfer  taxes,  if any,  and any other  selling  costs may exceed the  selling
price.  Further,  many  lending  institutions  will not  permit  the use of such
securities as collateral for any loans.

         In  addition,  all of the  outstanding  shares of common  stock held by
present  officers,   directors,   and  affiliate  stockholders  are  "restricted
securities"  within the meaning of Rule 144 under the Securities Act of 1933, as
amended.  As restricted  shares,  these shares may be resold only pursuant to an
effective  registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Securities Act and as required
under  applicable  state  securities  laws.  Rule 144 provides in essence that a
person  who has held  restricted  securities  for one year  may,  under  certain
conditions,  sell every three  months,  in brokerage  transactions,  a number of
shares  that does not exceed  the  greater  of 1.0% of a  company's  outstanding
common stock or the average weekly trading volume during the four calendar weeks
prior to the sale. There is no limit on the amount of restricted securities that
may be  sold  by a  non-affiliate  after  the  owner  has  held  the  restricted
securities  for a period of two years.  A sale under Rule 144 or under any other
exemption  from the  Securities  Act, if  available,  or pursuant to  subsequent
registration  of shares  of common  stock of  present  stockholders,  may have a
depressive  effect  upon the price of our common  stock in any  market  that may
develop.

THE SALE OF OUR  COMMON  STOCK ON THE  OVER-THE-COUNTER  BULLETIN  BOARD AND THE
POTENTIAL  DESIGNATION  OF OUR COMMON  STOCK AS "PENNY  STOCK"  COULD IMPACT THE
TRADING MARKET FOR OUR COMMON STOCK.

         Our securities,  as traded on the Over-the-Counter Bulletin Board, will
be subject to Securities and Exchange Commission rules that impose special sales
practice  requirements upon  broker-dealers  who sell such securities to persons
other than established  customers or accredited  investors.  For purposes of the
rule, the phrase  "accredited  investors" means, in general terms,  institutions
with assets in excess of $5,000,000, or individuals having a net worth in excess
of $1,000,000 or having an annual  income that exceeds  $200,000 (or that,  when
combined with a spouse's income, exceeds $300,000).  For transactions covered by
the rule, the broker-dealer  must make a special  suitability  determination for
the purchaser and receive the purchaser's  written  agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of broker-


                                       20
<PAGE>


dealers to sell our  securities and also may affect the ability of purchasers to
sell their securities in any market that might develop therefor.

         In  addition,  the  Securities  and Exchange  Commission  has adopted a
number of rules to regulate  "penny  stock." Such rules  include  Rules  3a51-1,
15g-1,  15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
and Exchange Act of 1934,  as amended.  Because our  securities  may  constitute
"penny stock"  within the meaning of the rules,  the rules would apply to us and
to our  securities.  The rules may  further  affect the ability of owners of our
common stock to sell our securities in any market that might develop for them.

         Shareholders should be aware that, according to Securities and Exchange
Commission,  the  market  for penny  stock has  suffered  in recent  years  from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the  security  by one or a few  broker-dealers  that are  often  related  to the
promoter or issuer; (ii) manipulation of prices through prearranged  matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices   involving   high-pressure   sales  tactics  and  unrealistic   price
projections  by  inexperienced  sales persons;  (iv)  excessive and  undisclosed
bid-ask  differentials  and  markups  by  selling  broker-dealers;  and  (v) the
wholesale dumping of the same securities by promoters and  broker-dealers  after
prices have been  manipulated to a desired level,  resulting in investor losses.
Our  management  is aware of the abuses that have occurred  historically  in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior  of the market or of  broker-dealers  who  participate  in the  market,
management  will strive within the confines of practical  limitations to prevent
the described patterns from being established with respect to our securities.

OUR  INABILITY  TO  DIVERSIFY  OUR   OPERATIONS   MAY  SUBJECT  US  TO  ECONOMIC
FLUCTUATIONS WITHIN OUR INDUSTRY.

         Our limited  financial  resources reduce the likelihood that we will be
able to  diversify  our  operations.  Our probable  inability  to diversify  our
activities  into  more  that one  business  area  will  subject  us to  economic
fluctuations within a particular business or industry and therefore increase the
risks associated with our operations.

THE LOSS OF, OR CONFLICTS WITH, KEY MANAGEMENT  PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS.

         We are heavily dependent upon their skills,  talents,  and abilities of
our executive  officers and board of directors,  as well as our consultants,  to
implement  our  business  plan.  Given the  intense  competition  for  qualified
management  personnel  in our  industry,  the  loss of the  services  of any key
management personnel may significantly and detrimentally affect our business and
prospects. There is no assurance that we will be able to retain these personnel,
and it may be time consuming and costly to recruit qualified personnel.

         Certain conflicts of interest may exist between our officers, directors
and us.  Although  management's  time is  devoted to our  business,  some of our
officers and directors have other business  interests to which they devote their
attention, and they may be expected to continue to do so. As a result, conflicts
of interest may arise that can be resolved  only through the exercise of prudent
judgment  consistent with such officers' and directors'  fiduciary duties to us.
We may,  from time to time,  find that the  inability of our directors and other
officers to devote their full time attention to our business  results in a delay
in progress toward implementing our business plan, and detrimentally affects our
business.

WE DEPEND ON OUTSIDE  ADVISORS TO ASSIST OUR OFFICERS  AND  DIRECTORS IN CERTAIN
AREAS.

         To supplement the business experience of our officers and directors, we
may be required to employ accountants, technical experts, appraisers, attorneys,
or other  consultants or other advisors.  Our  CEO/President,  without any input
from stockholders, will make the selection of any such advisors. Furthermore, it
is anticipated  that such persons may be engaged on an "as needed" basis without
a continuing


                                       21
<PAGE>


fiduciary or other obligation to us. In the event our CEO/President considers it
necessary  to hire  outside  advisors,  he may  elect  to hire  persons  who are
affiliates, if they are able to provide the required services.

OUR  DIRECTOR  AND  OFFICER  INDEMNIFICATION  POLICIES IN  CONJUNCTION  WITH THE
PROVISIONS OF FLORIDA LAW COULD RESULT IN SUBSTANTIAL UN-RECOUPABLE EXPENDITURES
AND REDUCED REMEDIES AGAINST DIRECTORS AND OFFICERS.

         Florida  Revised  Statutes  provide  for  the  indemnification  of  our
directors, officers, employees, and agents, under certain circumstances, against
attorney's  fees and other expenses  incurred by them in any litigation to which
they become a party  arising from their  association  with or  activities on our
behalf.  We will  also  bear  the  expenses  of such  litigation  for any of our
directors,  officers,  employees, or agents, upon such person's promise to repay
us therefor,  if it is ultimately determined that any such person shall not have
been entitled to indemnification.  This  indemnification  policy could result in
substantial expenditures by us that we will be unable to recoup.

         Florida Revised Statutes exclude personal liability of our directors to
us and our stockholders for monetary damages for breach of fiduciary duty except
in  certain  specified  circumstances.  Accordingly,  we will  have a much  more
limited right of action against our directors than otherwise  would be the case.
This  provision  does not affect the liability of any director  under federal or
applicable state securities laws.

WE DO NOT FORESEE PAYING DIVIDENDS IN THE NEAR FUTURE.

         We have not paid  dividends on our common  stock and do not  anticipate
paying such dividends in the foreseeable future.

OUR  ISSUANCE  OF  FURTHER  STOCK MAY  RESULT IN THE LOSS OF  CONTROL BY PRESENT
MANAGEMENT AND STOCKHOLDERS.

         We may issue  further  shares  as  consideration  for  cash,  assets or
services out of our  authorized  but not issued  common  stock that could,  upon
issuance,  represent  a majority of our voting  power and equity.  The result of
such an  issuance  would be that those new  stockholders  and  management  would
control us, and unknown  persons could replace our management at that time. Such
an occurrence would result in a greatly reduced percentage of ownership of us by
our current shareholders.

THERE IS NO ASSURANCE THAT WE WILL FIND  PURCHASERS OF OUR PRODUCT AT PROFITABLE
PRICES.

         If we are unable to  achieve  supply  contracts,  or are unable to find
buyers  willing to purchase  our coal at  profitable  prices,  our  revenues and
operating profits could suffer.

IF  TRANSPORTATION  FOR OUR  COAL  BECOMES  UNAVAILABLE  OR  UNECONOMIC  FOR OUR
CUSTOMERS, OUR ABILITY TO SELL COAL COULD SUFFER.

         Transportation  costs represent a significant portion of the total cost
of  delivered  coal  and,  as a result,  play a  critical  role in a  customer's
purchasing decision.  Increases in transportation costs could make our coal less
competitive  as a source  of energy or could  make some of our  operations  less
competitive than other sources of coal. Some coal supply  agreements  permit the
customer to terminate the contract if the cost of transportation increases by an
amount ranging from 10% to 20%, in any given 12-month period.

         Coal producers depend upon rail, barge, trucking, overland conveyor and
other systems to deliver coal to markets.  While U.S. coal  customers  typically
arrange  and pay for  transportation  of coal from the mine to the point of use,
disruption of these transportation services because of weather-related problems,
strikes,


                                       22
<PAGE>


lock-outs or other events could temporarily impair our ability to supply coal to
our customers and thus could adversely affect our results of operations.

RISKS INHERENT TO MINING COULD INCREASE THE COST OF OPERATING OUR BUSINESS.

         Our mining operations are subject to conditions beyond our control that
can delay coal deliveries or increase the cost of mining at particular mines for
varying lengths of time. These conditions include weather and natural disasters,
unexpected maintenance problems, key equipment failures, variations in coal seam
thickness, variations in the amount of rock and soil overlying the coal deposit,
variations  in rock and other  natural  materials  and  variations  in  geologic
conditions.

THE  GOVERNMENT  EXTENSIVELY  REGULATES  OUR MINING  OPERATIONS,  WHICH  IMPOSES
SIGNIFICANT  COSTS ON US, AND FUTURE  REGULATIONS  COULD INCREASE THOSE COSTS OR
LIMIT OUR ABILITY TO PRODUCE COAL.

         Federal,  state and local authorities regulate the coal mining industry
with  respect to matters  such as  employee  health and safety,  permitting  and
licensing  requirements,  air  quality  standards,  water  pollution,  plant and
wildlife  protection,  reclamation  and restoration of mining  properties  after
mining is completed,  the discharge of materials into the  environment,  surface
subsidence  from  underground   mining  and  the  effects  that  mining  has  on
groundwater  quality and  availability.  In  addition,  significant  legislation
mandating  specified  benefits  for retired  coal miners  affects our  industry.
Numerous  governmental permits and approvals are required for mining operations.
We are  required to prepare and present to federal,  state or local  authorities
data  pertaining  to the effect or impact that any proposed  exploration  for or
production of coal may have upon the  environment.  The costs,  liabilities  and
requirements  associated with these regulations may be costly and time-consuming
and  may  delay  commencement  or  continuation  of  exploration  or  production
operations.  The possibility  exists that new legislation and/or regulations and
orders  may  be  adopted  that  may  materially   adversely  affect  our  mining
operations,  our cost structure  and/or our customers'  ability to use coal. New
legislation  or  administrative  regulations  (or  judicial  interpretations  of
existing laws and regulations), including proposals related to the protection of
the environment that would further regulate and tax the coal industry,  may also
require  us or  our  customers  to  change  operations  significantly  or  incur
increased costs. The majority of our coal supply agreements  contain  provisions
that allow a purchaser to terminate its contract,  if legislation is passed that
either restricts the use or type of coal permissible at the purchaser's plant or
results in specified increases in the cost of coal or its use. These factors and
legislation,  if enacted,  could have a material adverse effect on our financial
condition and results of operations.

         In  addition,  the  United  States  and  over  160  other  nations  are
signatories  to the  1992  Framework  Convention  on  Climate  Change,  which is
intended to limit  emissions of greenhouse  gases,  such as carbon  dioxide.  In
December 1997, in Kyoto, Japan, the signatories to the convention  established a
binding set of emission  targets for  developed  nations.  Although the specific
emission  targets  vary from  country to  country,  the United  States  would be
required to reduce  emissions  to 93% of 1990  levels  over a  five-year  budget
period from 2008 through  2012.  Although the United States has not ratified the
emission targets and no comprehensive  regulations  focusing on U.S.  greenhouse
gas emissions are in place, these restrictions,  whether through ratification of
the emission  targets or other  efforts to stabilize  or reduce  greenhouse  gas
emissions, could adversely impact the price of and demand for coal. According to
the Energy  Information  Administration's  Emissions of Greenhouse  Gases in the
United States 2001,  coal  accounts for 32% of  greenhouse  gas emissions in the
United States,  and efforts to control  greenhouse gas emissions could result in
reduced  use of coal if  electricity  generators  switch to sources of fuel with
lower  carbon  dioxide  emissions.   Further  developments  in  connection  with
regulations  or other limits on carbon dioxide  emissions  could have a material
adverse effect on our financial condition or results of operations.


                                       23
<PAGE>


OUR FUTURE SUCCESS DEPENDS UPON OUR ABILITY TO CONTINUE ACQUIRING AND DEVELOPING
COAL RESERVES THAT ARE ECONOMICALLY RECOVERABLE.

         Our  recoverable  reserves will decline as we produce coal. We have not
yet applied for the permits required or developed the mines necessary to use all
of the coal deposits under our mineral rights.  Furthermore,  we may not be able
to  mine  all  of our  coal  deposits  as  profitably  as we do at  our  current
operations.   Our  future  success   depends  upon  our  conducting   successful
exploration  and  development  activities  and acquiring  properties  containing
economically recoverable coal deposits. Our current strategy includes increasing
our coal deposits base through acquisitions of other mineral rights,  leases, or
producing   properties   and   continuing   to  use  our  existing   properties.
Additionally,  the federal government limits the amount of federal land that may
be leased by any company to 150,000 acres  nationwide.  As of December 31, 2003,
we leased no acres from the federal  government.  The limit could  restrict  our
ability to lease significant federal lands.

         Our  planned  development  and  exploration  projects  and  acquisition
activities  may not result in the  acquisition of  significant  additional  coal
deposits and we may not have continuing success developing additional mines. Our
mining  operations are conducted on mineral rights owned by us. Because title to
most of our mineral  rights are not  thoroughly  verified until a permit to mine
the property is obtained, our right to mine some of our leased coal deposits may
be materially  adversely  affected,  if defects in title or boundaries exist. In
addition,  in order  to  develop  our coal  deposits,  we must  receive  various
governmental  permits. We cannot predict whether we will continue to receive the
permits necessary for us to operate profitably in the future.

IF THE COAL INDUSTRY  EXPERIENCES  OVERCAPACITY IN THE FUTURE, OUR PROFITABILITY
COULD BE IMPAIRED.

         During  the  mid-1970s  and early  1980s,  a growing  coal  market  and
increased demand for coal attracted new investors to the coal industry,  spurred
the  development  of  new  mines  and  resulted  in  added  production  capacity
throughout  the industry,  all of which led to increased  competition  and lower
coal prices.  Similarly,  an increase in future coal prices could  encourage the
development  of  expanded  capacity  by  new or  existing  coal  producers.  Any
overcapacity could reduce coal prices in the future.

OUR  OPERATIONS  COULD BE  ADVERSELY  AFFECTED IF WE FAIL TO  MAINTAIN  REQUIRED
SURETY BONDS.

         Federal  and state laws  require  bonds or cash  deposits to secure our
obligations to reclaim lands used for mining,  to pay federal and state workers'
compensation,   to  secure  coal  lease   obligations   and  to  satisfy   other
miscellaneous  obligations.  As of  March  31,  2004,  we had  $257,500  in cash
deposited  with the  Department  of the  Interior for  post-mining  reclamation.
Reclamation surety bonds are typically  renewable on a yearly basis, if they are
not posted with cash. Our failure to maintain,  or inability to acquire,  surely
bonds that are  required by state and federal law would have a material  adverse
effect on us. That failure could result from a variety of factors  including the
following:

         o        lack of  availability,  higher expense or  unfavorable  market
                  terms of new surety bonds;

         o        restrictions on the availability of collateral for current and
                  future  third-party surety bond issuers under the terms of our
                  indenture or new credit facility; and

         o        the exercise by third-party surety bond issuers of their right
                  to refuse to renew the surety.

OUR ABILITY TO OPERATE OUR COMPANY  EFFECTIVELY COULD BE IMPAIRED IF WE LOSE KEY
PERSONNEL.

         We manage our business with key personnel,  the loss of whom could have
a material  adverse  effect on us. In  addition,  as our  business  develops and
expands, we believe that our future success will depend


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<PAGE>


greatly on our  continued  ability to attract  and  retain  highly  skilled  and
qualified  personnel.  We cannot make any  assurances  that key  personnel  will
continue  to be  employed  by us or that we will be able to  attract  and retain
qualified  personnel in the future. We have "key person" life insurance covering
the President/CEO,  Secretary/Treasurer,  Directors, and the Operations Manager.
Failure to retain or attract key personnel could have a material  adverse effect
on us.

TERRORIST  ATTACKS AND THREATS,  ESCALATION OF MILITARY  ACTIVITY IN RESPONSE TO
SUCH  ATTACKS  OR ACTS OF WAR MAY  NEGATIVELY  AFFECT  OUR  BUSINESS,  FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

         Terrorist  attacks and  threats,  escalation  of  military  activity in
response  to such  attacks or acts of war may  negatively  affect our  business,
financial  condition  and  results of  operations.  Our  business is affected by
general economic  conditions,  fluctuations in consumer confidence and spending,
and market liquidity,  which can decline as a result of numerous factors outside
of our control,  such as  terrorist  attacks and acts of war.  Future  terrorist
attacks  against  U.S.  targets,  rumors or  threats  of war,  actual  conflicts
involving  the United  States or its allies,  or  military or trade  disruptions
affecting our customers may materially  adversely  affect our  operations.  As a
result, there could be delays or losses in transportation and deliveries of coal
to our customers,  decreased sales of our coal and extension of time for payment
of  accounts   receivable  from  our  customers.   Strategic   targets  such  as
energy-related  assets may be at greater risk of future  terrorist  attacks than
other  targets in the United  States.  In addition,  disruption  or  significant
increases in energy prices could result in government-imposed price controls. It
is  possible  that any,  or a  combination,  of these  occurrences  could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

OUR ABILITY TO COLLECT  PAYMENTS  FROM OUR  CUSTOMERS  COULD BE IMPAIRED  DUE TO
CREDIT ISSUES.

         Our ability to receive  payment for coal sold and delivered  depends on
the continued  creditworthiness  of our customers.  Our customer base may not be
highly  creditworthy.  If deterioration of the  creditworthiness of customers or
trading counterparties occurs, our business could be adversely affected.


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<PAGE>


ITEM 3.  CONTROLS AND PROCEDURES.

         We maintain disclosure controls and procedures,  which we have designed
to ensure that material  information  related to National Coal Corp.,  including
our consolidated  subsidiaries,  is disclosed in our public filings on a regular
basis. In response to recent legislation and proposed  regulations,  we reviewed
our internal control  structure and our disclosure  controls and procedures.  We
believe our  pre-existing  disclosure  controls and  procedures  are adequate to
enable us to comply with our disclosure obligations.

         Members of the  company's  management,  including  our Chief  Executive
Officer and President, Jon Nix, and Chief Financial Officer, Robert Chmiel, have
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and  procedures as of March 31, 2004,  the end of the period covered by
this report.  Based upon that evaluation,  Messrs. Nix and Chmiel concluded that
our  disclosure  controls  and  procedures  are  effective  in causing  material
information to be recorded, processed, summarized and reported by our management
on a timely  basis and to ensure that the quality and  timeliness  of our public
disclosures complies with our SEC disclosure obligations.

         There  were  no  significant  changes  in  our  internal  control  over
financial  reporting  or in other  factors that could  significantly  affect the
internal  control  over  financial  reporting  after the date of our most recent
evaluation.


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<PAGE>


                                     PART II

                                OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES  AND SMALL  BUSINESS  ISSUER  PURCHASES OF EQUITY
         SECURITIES

         In March 2004,  a total of 167,832  shares of common stock were granted
to the  Chairman of the Board in lieu of cash  compensation  for  services.  The
stock was valued at $226,573 or $1.35 per share,  which was the closing price of
our common stock on the date the stock was issued.  The Chairman  represented to
us that he was an  "accredited  investor"  within  the  meaning  of Rule  501 of
Regulation D under the  Securities  Act of 1933,  and that he was purchasing the
securities for investment and not in connection with a distribution thereof. The
issuance  and sale of these  securities  was exempt  from the  registration  and
prospectus delivery  requirements of the Securities Act pursuant to Section 4(2)
of the Securities Act as a transaction not involving any public offering.

         In February  2004,  we sold an  aggregate  of  5,000,000  shares of our
common stock in a private placement,  at a price per share of $0.55. We received
net proceeds of $2,750,000.  Crestview Capital Master, LLC, an entity controlled
by Crestview Capital Funds,  purchased  2,600,000 of the 5,000,000  shares,  and
other accredited investors purchased the remaining 2,400,000 shares. Each of the
investors  in  the  transaction  represented  to us  that  the  investor  was an
"accredited  investor"  within the meaning of Rule 501 of Regulation D under the
Securities Act of 1933, and that such investor was purchasing the securities for
investment and not in connection with a distribution  thereof.  The issuance and
sale of these  securities  was  exempt  from  the  registration  and  prospectus
delivery  requirements  of the  Securities  Act  pursuant to Section 4(2) of the
Securities Act as a transaction not involving any public offering.

         On January 30,  2004,  four  unrelated  parties,  holding an  aggregate
principal  amount of  $198,000  of notes  payable,  converted  all of their then
outstanding  principal and accrued interest into common shares of the Company at
a conversion price of $0.55 per share. We issued 368,399 shares of common stock,
360,000  shares of which were issued in repayment of principal  and 8,399 shares
of which were issued in  repayment  of accrued  interest.  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.

         On March 31, 2004,  Crestview Capital Master, LLC converted $160,693 of
accrued and unpaid interest on Convertible  Promissory Notes into 321,387 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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         In  February  2004,  our three  largest  shareholders,  whose  holdings
collectively  exceeded 80% of the then  outstanding  shares of our common stock,
approved  the  establishment  a stock option plan to provide for the issuance of
stock options to employees,  directors  and  consultants.  The stock option plan
allows for the  issuance of options to purchase up to an  aggregate of 6 million
shares of Company's  common stock to be distributed in accordance with the terms
of the plan. Any shares of common stock subject to an options  award,  which for
any reason expires or terminates  unexercised,  are again available for issuance
under the plan.


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<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      EXHIBITS -- THE  FOLLOWING  EXHIBITS ARE FILED AS PART OF THIS
                  REPORT:

                  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.

                  32.1     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.

         (b)      REPORTS ON FORM 8-K

                  Current  Report  on  Form  8-K,  reporting  Item 5,  filed  on
                  February 17, 2004.

                  Current  Report  on Form  8-K/A,  reporting  Item 5,  filed on
                  February 19, 2004.

                  Current Report on Form 8-K,  reporting Items 5 and 7, filed on
                  March 2, 2004.

                  Current Report on Form 8-K,  reporting Items 2, 5 and 7, filed
                  on April 29, 2004.


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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 14, 2004                      /s/ Robert Chmiel
                                       -----------------------------------------
                                       By:    Robert Chmiel
                                       Its:   Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)


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