Attached files

file filename
EX-95.1 - MINE SAFETY DISCLOSURE - American Resources Corparec_ex951.htm
EX-32.2 - CERTIFICATION - American Resources Corparec_ex322.htm
EX-32.1 - CERTIFICATION - American Resources Corparec_ex321.htm
EX-31.2 - CERTIFICATION - American Resources Corparec_ex312.htm
EX-31.1 - CERTIFICATION - American Resources Corparec_ex311.htm

  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For the quarterly period ended: March 31, 2020

 

or

 

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: 000-55456

 

American Resources Corporation

(Exact name of registrant as specified in its charter)

 

Florida

 

46-3914127

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

12115 Visionary Way Fishers, Indiana

(Address and Zip Code of principal executive offices)

 

Registrant’s telephone number, including area code: (317) 855-9926

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common

AREC

NASDAQ Capital Market

 

As of June 17, 2020, the registrant had 26,040,512 shares of Class A common stock issued and outstanding.

 

Explanatory Note

 

Reliance on SEC Relief from Filing Requirements

 

The Company filed the Original Filing in reliance on the Order, permitting the delay in filing due to circumstances related to COVID-19. The Company filed, on May 13, 2020, a Current Report on Form 8-K (the “May 13 Form 8-K”) indicating its intention to rely on the Order. As stated in the May 13 Form 8-K, the Company required additional time to finalize the Quarterly Report due to circumstances related to COVID-19, the disease caused by the coronavirus. The effects of COVID-19 have limited the abilities of the Company’s employees to conduct normal business activities. This, in turn, delayed the Company’s ability to complete its review and prepare the Original Filing.

 

 

 

 

AMERICAN RESOURCES CORPORATION

 

TABLE OF CONTENTS

 

 

PAGE

 

PART I. FINANCIAL INFORMATION

 

3

 

Item 1.

Consolidated Financial Statements

 

3

 

Consolidated Balance Sheets (Unaudited)

 

4

 

Consolidated Statements of Operation (Unaudited)

 

5

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three Months ended March 31, 2020 and 2019 (unaudited)

6

 

Consolidated Statements of Cash Flows (Unaudited)

 

8

 

Notes to Unaudited Consolidated Financial Statements

 

9

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

30

 

Item 4.

Controls and Procedures

 

30

 

PART II. OTHER INFORMATION

31

 

Item 1.

Legal Proceedings

 

31

 

Item 1A.

Risk Factors

 

31

 

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

 

31

 

Item 3.

Defaults upon Senior Securities

 

31

 

Item 4.

Mine Safety Disclosures

 

31

 

Item 5.

Other Information

 

31

 

Item 6.

Exhibits

 

32

 

SIGNATURES

 

34

 

 
2

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

AMERICAN RESOURCES CORPORATION

 

CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

 

For the three months ended

March 31, 2020

 

 
3

Table of Contents

  

AMERICAN RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

 

 

March 31,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

ASSETS 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$ 43,745

 

 

$ 3,324

 

Accounts Receivable

 

 

37,400

 

 

 

2,424,905

 

Inventory

 

 

150,504

 

 

 

515,630

 

Prepaid fees

 

 

175,000

 

 

 

-

 

Accounts Receivable - Other

 

 

234,240

 

 

 

234,240

 

Total Current Assets

 

 

640,889

 

 

 

3,178,099

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

Cash - restricted

 

 

415,487

 

 

 

265,487

 

Processing and rail facility

 

 

12,554,715

 

 

 

12,723,163

 

Underground equipment

 

 

8,550,626

 

 

 

8,294,188

 

Surface equipment

 

 

3,136,906

 

 

 

3,224,896

 

Acquired mining rights

 

 

669,860

 

 

 

669,860

 

Coal refuse storage

 

 

12,171,271

 

 

 

12,171,271

 

Less Accumulated Depreciation

 

 

(11,981,983 )

 

 

(11,162,622 )

Land

 

 

1,748,169

 

 

 

1,748,169

 

Note Receivable

 

 

4,117,139

 

 

 

4,117,139

 

Total Other Assets

 

 

31,382,190

 

 

 

32,051,551

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 32,023,079

 

 

$ 35,229,650

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$ 11,763,906

 

 

$ 11,044,479

 

Accounts payable – related party

 

 

803,602

 

 

 

718,156

 

Accrued interest

 

 

2,363,380

 

 

 

2,869,763

 

Due to affiliate

 

 

132,639

 

 

 

132,000

 

Current portion of long term-debt (net of unamortized discount of $- and $-)

 

 

17,944,572

 

 

 

20,494,589

 

Convertible note payables – short term

 

 

-

 

 

 

7,419,612

 

Current portion of reclamation liability

 

 

2,327,169

 

 

 

2,327,169

 

Total Current Liabilities

 

 

35,335,268

 

 

 

45,006,407

 

 

 

 

 

 

 

 

 

 

OTHER LIABILITIES

 

 

 

 

 

 

 

 

Long-term portion of note payable (net of issuance costs of $425,820 and $428,699)

 

 

5,415,271

 

 

 

5,415,271

 

Convertible note payables – long term

 

 

9,164,011

 

 

 

-

 

Reclamation liability

 

 

17,521,976

 

 

 

17,512,613

 

Total Other Liabilities

 

 

32,101,258

 

 

 

22,927,884

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

67,436,526

 

 

 

67,934,291

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

AREC - Class A Common stock: $.0001 par value; 230,000,000 shares authorized, 27,410,512 and 27,410,512 shares issued and outstanding

 

 

2,740

 

 

 

2,740

 

AREC - Series A Preferred stock: $.0001 par value; 5,000,000 shares authorized, 0 and 0 shares issued and outstanding

 

 

-

 

 

 

-

 

AREC - Series C Preferred stock: $.0001 par value; 20,000,000 shares authorized, 0 and 0 shares issued and outstanding

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

90,993,691

 

 

 

90,326,104

 

Accumulated deficit

 

 

(126,409,878 )

 

 

(123,033,485 )

Total Stockholders’ Equity (Deficit)

 

 

(35,413,447 )

 

 

(32,704,641 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

$ 32,023,079

 

 

$ 35,229,650

 

 

The accompanying footnotes are integral to the unaudited consolidated financial statements

 

 
4

Table of Contents

  

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

For the three months ended

 

 

 

March 31,

2020

 

 

March 31,

2019

 

 

 

 

 

 

 

 

Coal Sales

 

$ 524,334

 

 

$ 6,994,276

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

524,334

 

 

 

6,994,276

 

 

 

 

 

 

 

 

 

 

Cost of Coal Sales and Processing

 

 

(1,855,187 )

 

 

(6,644,087 )

Accretion Expense

 

 

(370,587 )

 

 

(321,701 )

Depreciation

 

 

(915,052 )

 

 

(816,916 )

Amortization of Mining Rights

 

 

(313,224 )

 

 

(536,791 )

General and Administrative

 

 

(842,925 )

 

 

(1,372,588 )

Professional Fees

 

 

(194,046 )

 

 

(4,333,896 )

Production Taxes and Royalties

 

 

(160,230 )

 

 

(1,259,586 )

Development Costs

 

 

(128,159 )

 

 

(1,600,117 )

 

 

 

 

 

 

 

 

 

Total Operating expenses

 

 

(4,779,410 )

 

 

(16,885,682 )

 

 

 

 

 

 

 

 

 

Net Loss from Operations

 

 

(4,255,076 )

 

 

(9,891,406 )

 

 

 

 

 

 

 

 

 

Other Income and (expense)

 

 

 

 

 

 

 

 

Loss on payable settlement

 

 

-

 

 

 

(22,660 )

Other Income

 

 

1,412,005

 

 

 

266,425

 

Amortization of debt discount and debt issuance costs

 

 

-

 

 

 

(134,296 )

Interest Income

 

 

82,343

 

 

 

41,171

 

Interest expense

 

 

(500,640 )

 

 

(324,854 )

Total Other income (expense)

 

 

993,708

 

 

 

(174,214 )

 

 

 

 

 

 

 

 

 

Net loss attributable to American Resources Corp. Shareholders

 

$ (3,261,368 )

 

$ (10,065,620 )

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$ (0.12 )

 

$ (0.48 )

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding- basic and diluted

 

 

27,267,197

 

 

 

20,798,065

 

 

The accompanying footnotes are integral to the unaudited consolidated financial statements

 

 
5

Table of Contents

  

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE PERIOD FROM JANAURY 1, 2020 THROUGH MARCH 31, 2020 AND JANAURY 1, 2019 THROUGH MARCH 31, 2019

UNAUDITED

 

 

 

American Resources

 

 

 

 

American Resources

 

 

 

 

American Resources

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

Preferred Series A

 

 

 

 

Preferred Series C

 

 

 

 

 

 

 

 

 

Par value

 

 

 

0.0001

 

 

 

 

 

Par Value

 

 

 

0.0001

 

 

 

 

 

Par Value

 

 

 

0.0001

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

APIC

 

 

Shares

 

 

Amount

 

 

APIC

 

 

Shares

 

 

Amount

 

 

APIC

 

 

Deficit

 

 

Total

 

Balance December 31, 2019

 

 

27,410,512

 

 

 

2,740

 

 

 

90,326,104

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(123,033,485 )

 

 

(32,704,641 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Warrants in conjunction with Convertible Notes

 

 

 

 

 

 

 

 

 

 

552,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

552,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of Warrant and Option Expense

 

 

 

 

 

 

 

 

 

 

115,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115,025 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,261,368 )

 

 

(3,261,368 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2020

 

 

27,410,512

 

 

 

2,740

 

 

 

90,993,691

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(126,409,878 )

 

 

(35,413,447 )

 

 
6

Table of Contents

 

 

 

Common shares

 

 

Preferred Series A

 

 

Preferred Series B

 

 

Preferred Series C

 

 

Additional

 

 

Accumulated

 

 

Non

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Paid- In

Capital

 

 

Deficit

Accumulated

 

 

controlling

Interest

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2018

 

 

17,763,469

 

 

$ 1,776

 

 

 

481,780

 

 

$ 48

 

 

 

-

 

 

$ -

 

 

 

50,000

 

 

$ 5

 

 

$ 42,913,532

 

 

$ (52,115,183 )

 

$ -

 

 

$ (9,199,822 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for cash, net

 

 

1,170,200

 

 

 

117

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,253,883

 

 

 

-

 

 

 

-

 

 

 

4,254,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for services

 

 

159,000

 

 

 

16

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,672,184

 

 

 

-

 

 

 

-

 

 

 

1,672,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for asset acquisition

 

 

2,000,000

 

 

 

200

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,399,800

 

 

 

-

 

 

 

-

 

 

 

24,400,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for conversion of debt and accounts payable

 

 

4,417

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

49,161

 

 

 

-

 

 

 

-

 

 

 

49,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants to consultants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,385,000

 

 

 

-

 

 

 

-

 

 

 

2,385,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

68,693

 

 

 

-

 

 

 

-

 

 

 

68,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common Shares for warrant Exercise

 

 

599,427

 

 

 

60

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(60 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A into common stock

 

 

1,605,934

 

 

 

161

 

 

 

(481,780 )

 

 

(48 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(113 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series C into common stock

 

 

13,750

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50,000 )

 

 

(5 )

 

 

4

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,065,620 )

 

 

-

 

 

 

(10,065,620 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2019

 

 

23,316,197

 

 

$ 2,331

 

 

 

-

 

 

$ -

 

 

 

-

 

 

$ -

 

 

 

-

 

 

$ -

 

 

 

75,742,084

 

 

$ (62,180,803 )

 

 

-

 

 

$ 13,563,612

 

 

The accompanying footnotes are integral to the unaudited consolidated financial statements

 

 
7

Table of Contents

  

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

For the three months ended

 

 

 

March 31,

2020

 

 

March 31,

2019

 

 

 

 

 

 

 

 

Cash Flows from Operating activities:

 

 

 

 

 

 

Net loss

 

$ (3,261,368 )

 

$ (10,065,620 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

915,052

 

 

 

816,916

 

Amortization of mining rights

 

 

313,224

 

 

 

536,791

 

Accretion expense

 

 

370,587

 

 

 

321,701

 

Reduction of ARO liability due to sale of assets

 

 

(312,338 )

 

 

-

 

Warrant expense

 

 

115,025

 

 

 

2,385,000

 

Issuance of common shares for services

 

 

-

 

 

 

1,672,200

 

Stock compensation expense

 

 

-

 

 

 

68,693

 

Amortization of issuance costs and debt discount

 

 

-

 

 

 

134,296

 

Recovery of previously impaired receivable

 

 

-

 

 

 

(50,806 )

Change in current assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,387,505

 

 

 

792,381

 

Prepaid expenses and other assets

 

 

(175,000 )

 

 

(335,174 )

Inventory

 

 

365,126

 

 

 

(574,254 )

Funds held for others

 

 

-

 

 

 

60,202

 

Accounts payable

 

 

555,516

 

 

 

(1,804,045

Accounts payable – related party

 

 

85,446

 

 

 

104,467

 

Accrued interest

 

 

(506,383 )

 

 

193,826

 

Cash provided by (used in) operating activities

 

 

852,392

 

 

 

(5,743,426 )

 

 

 

 

 

 

 

 

 

Cash Flows from Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for PPE, net

 

 

(408,915 )

 

 

(721,444 )

Cash provided by (used in) investing activities

 

 

(408,915 )

 

 

(721,444 )

 

 

 

 

 

 

 

 

 

Cash Flows from Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments on long term debt

 

 

(72,255 )

 

 

(1,373,024 )

Proceeds from long term debt

 

 

28,000

 

 

 

2,000,000

 

Payments on factoring agreement, net

 

 

(1,807,443 )

 

 

(649,258 )

Proceeds from convertible note

 

 

1,598,642

 

 

 

-

 

Proceeds from sale of common stock, net

 

 

-

 

 

 

4,254,000

 

Cash provided by financing activities

 

 

(253,056

 

 

4,231,718

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and restricted cash

 

 

190,421

 

 

 

(2,233,152 )

 

 

 

 

 

 

 

 

 

Cash and restricted cash, beginning of period

 

 

268,811

 

 

 

2,704,799

 

 

 

 

 

 

 

 

 

 

Cash and restricted cash, end of period

 

$ 459,232

 

 

$ 471,647

 

 

 

 

 

 

 

 

 

 

Supplemental Information

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in asset acquisition

 

$ -

 

 

$ 24,400,000

 

Assumption of net assets and liabilities for asset acquisitions

 

$ -

 

 

$ 6,623,999

 

Discount on note due to beneficial conversion feature

 

$ -

 

 

$ 7,362,925

 

Conversion of trade payable to common shares

 

$ -

 

 

$ 231,661

 

Issuance of shares as part of note payable consideration

 

$ -

 

 

$ 297,831

 

Warrant exercise for common shares

 

$ -

 

 

$ 60

 

Return of shares related to employee settlement

 

$ -

 

 

$ 11

 

Conversion of Preferred Series A Shares to common shares

 

$ -

 

 

$ 161

 

Conversion of Preferred Series C Shares to common shares

 

$ -

 

 

$ 1

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ 165,728

 

 

$ 557,663

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

The accompanying footnotes are integral to the unaudited consolidated financial statements

 

 
8

Table of Contents

  

AMERICAN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

American Resources Corporation (ARC or the Company) operates through subsidiaries that were acquired in 2019, 2018, 2016 and 2015 for the purpose of acquiring, rehabilitating and operating various natural resource assets including coal, oil and natural gas.

 

Basis of Presentation and Consolidation:

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Quest Energy Inc (QEI), Deane Mining, LLC (Deane), Quest Processing LLC (Quest Processing), ERC Mining Indiana Corp (ERC), McCoy Elkhorn Coal LLC (McCoy), Knott County Coal LLC (KCC), Wyoming County Coal (WCC), Empire Kentucky Land, Inc, Colonial Coal Company, Inc. (Empire) and Perry County Resources LLC (PCR). All significant intercompany accounts and transactions have been eliminated.

 

The accompanying Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

 

Interim Financial Information

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, these interim unaudited Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or any other period. These financial statements should be read in conjunction with the Company’s 2019 audited financial statements and notes thereto which were filed on form 10-K on May 29, 2020.

 

Going Concern: The Company has suffered recurring losses from operations and currently a working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. We plan to generate profits by expanding current coal operations as well as developing new coal operations. However, we will need to raise the funds required to do so through sale of our securities or through loans from third parties. We do not have any commitments or arrangements from any person to provide us with any additional capital. If additional financing is not available when needed, we may need to cease operations. We may not be successful in raising the capital needed to expand or develop operations. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. The accompanying financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial statements have been made to account for this uncertainty.

 

Convertible Preferred Securities: We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities (“ASC 815”) requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

 
9

Table of Contents

  

We also follow ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception (b) variations in something other than the fair value of the issuer’s equity shares or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date with remeasurements reported in interest expense in the accompanying Consolidated Statements of Operations.

 

Cash is maintained in bank deposit accounts which, at times, may exceed federally insured limits. To date, there have been no losses in such accounts.

 

Restricted cash: As part of the Kentucky New Markets Development Program (See Note 3) an asset management fee reserve was set up in the amount of $116,115. The funds are held to pay annual asset management fees to an unrelated party through 2021. The balance as of March 31, 2020 and December 31, 2019 was $47,987 and $47,987, respectively. The total balance of restricted cash also includes amounts held under the management agreement. See note 5.

 

During the 2019 the Company established a reclamation bonding collateral fund. The balance of the restricted cash being held totaled $250,000 and $0 as of March 31, 2020 and December 31, 2019. 

 

The following table sets forth a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that agrees to the total of those amounts as presented in the consolidated statement of cash flows for the three months ended March 31, 2020 and March 31, 2019:

 

 

 

March 31,

2020

 

 

March 31,

2019

 

Cash

 

$ 43,745

 

 

$ 7

 

Restricted Cash

 

 

415,487

 

 

 

471,640

 

Total cash and restricted cash presented in the consolidated statement of cash flows

 

$ 459,232

 

 

$ 471,647

 

 

Asset Acquisitions:

 

On September 23, 2019, American Resources Corporation, (“Buyer”) entered into a binding agreement with Bear Branch Coal LLC, a Kentucky limited liability company, Perry County Coal LLC, a Kentucky limited liability company, Ray Coal LLC, a Kentucky limited liability company, and Whitaker Coal LLC, a Kentucky limited liability company (each a “Seller” and collectively, “Sellers”). The agreement was entered into as part of the bankruptcy proceedings of Cambrian Holding Company LLC, (“Cambrian), and is subject to approval by the United States Bankruptcy Court for the Eastern District of Kentucky (the “Bankruptcy Court”) in the chapter 11 bankruptcy cases of the Sellers, Case No. 19-51200(GRS), by entry of an order in form and substance acceptable to Sellers and Buyer (the “Sale Order). Under the agreement of the Sale Order, each Seller will sell, transfer, assign, convey and deliver to American Resources Corporation, effective as of the Closing, all assets, rights, titles, permits, leases, contracts and interests of such Seller free and clear of all liens, claims, interests and encumbrances, to the fullest extent permitted by the Bankruptcy Court. In consideration for the purchased assets, the Buyer will assume certain liabilities. Additionally, the Buyer will assume all liabilities relating to the transferred permits and the associated reclamation and post-mining liabilities of the purchased assets. On September 26, 2019, the Company received notice that a certain lease assumption as part of the PCR acquisition was being disputed by the lessor. As of the report date, the Company is in the process of transferring the permits.

 

On September 27, 2019, PCR closed and acquired certain assets in exchange for assuming certain liabilities of Perry County Coal, LLC and a cash payment of $1. The preliminary fair values of the asset retirement obligation liabilities assumed were determined to be $2,009,181. Additional assumed liabilities total $3,036,987, of which $1,067,000 of the assumed liabilities are in negotiation as of the report date. The liabilities assumed do not require fair value readjustments.

 

The assets acquired do not represent a business as defined in FASB AS 805-10-20 due to their classification as a single asset. Accordingly, the assets acquired are initially recognized at the consideration paid, which was the liabilities assumed and a cash payment of $1, including direct acquisition costs, of which there were none. The cost is allocated to the group of assets acquired based on their relative fair value. Because the transaction closed near the end of the reporting quarter the values assigned are provisional as of March 31, 2020 while the company continues to gather information, including evaluations of mining permits, discovery of assumed unsecured payables and timing and extent of end of mine life cost. The assets acquired and liabilities assumed of Perry County Coal, LLC were as follows at the purchase date:

 

Assets

 

 

 

Coal Inventory

 

$ 659,331

 

Mine Development

 

 

524,268

 

Coal Refuse

 

 

179,522

 

Land

 

 

850,826

 

Equipment - Underground

 

 

873,161

 

Equipment - Surface

 

 

4,743

 

Processing and Loading Facility

 

 

1,954,317

 

Liabilities

 

 

 

 

Reclamation liability

 

$ 2,009,181

 

Accrued liabilities

 

 

3,036,987

 

 

 
10

Table of Contents

 

On March 4, 2020, PCR entered into a sales agreement with an unrelated entity for three non-core permits which were acquired during the initial purchase on September 27, 2019. At the time of the purchase, PCR did not assign any value to the permits as they were not within the company’s plans to operate. The sale of the permits resulted in the release of $2,386,439 of reclamation bonds and $336,995 of asset retirement obligation liability. Consideration received was $700,000 in cash and $300,000 in equipment. The equipment has not been received as of the report date. The transaction resulted in a gain on sale of $1,061,225.

 

Asset Retirement Obligations (ARO) – Reclamation: At the time they are incurred, legal obligations associated with the retirement of long-lived assets are reflected at their estimated fair value, with a corresponding charge to mine development. Obligations are typically incurred when we commence development of underground and surface mines, and include reclamation of support facilities, refuse areas and slurry ponds or through acquisitions.

 

Obligations are reflected at the present value of their future cash flows. We reflect accretion of the obligations for the period from the date they incurred through the date they are extinguished. The asset retirement obligation assets are amortized using the units-of-production method over estimated recoverable (proved and probable) deposits. We are using a discount rate of 10%. Federal and State laws require that mines be reclaimed in accordance with specific standards and approved reclamation plans, as outlined in mining permits. Activities include reclamation of pit and support acreage at surface mines, sealing portals at underground mines, and reclamation of refuse areas and slurry ponds.

 

We assess our ARO at least annually and reflect revisions for permit changes, change in our estimated reclamation costs and changes in the estimated timing of such costs. During the period ending March 31, 2020 and 2019, $- and $- were incurred for loss on settlement on ARO, respectively.

   

The table below reflects the changes to our ARO:

 

Balance at December 31, 2018

 

$ 18,538,009

 

Accretion – 3 months March 31, 2019

 

 

321,701

 

Reclamation work – 3 months March 31, 2019

 

 

-

 

Balance at March 31, 2019

 

$ 18,859,710

 

 

Balance at December 31, 2019

 

$ 19,839,782

 

Accretion – 3 months March 31, 2020

 

 

370,587

 

Reclamation work – 3 months March 31, 2020

 

 

-

 

Sale of PCR Permits

 

 

(361,225 )

Balance at March 31, 2020

 

$ 19,849,144

 

 

Allowance For Doubtful Accounts: The Company recognizes an allowance for losses on trade and other accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs, as well as an assessment of specific identifiable amounts considered at risk or uncollectible.

 

Allowance for trade receivables as of March 31, 2020 and December 31, 2019 amounted to $0, for both periods. Allowance for other accounts receivables as of March 31, 2020 and December 31, 2019 amounted to $0 and $0, respectively.

 

Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of March 31, 2020 and December 31, 2019.

 

Reclassifications: Reclassifications have been made to conform with current year presentation.

 

 
11

Table of Contents

 

NOTE 2 - PROPERTY AND EQUIPMENT

 

At March 31, 2020 and December 31, 2019, property and equipment were comprised of the following:

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Processing and rail facility

 

$ 12,554,715

 

 

$ 12,723,163

 

Underground equipment

 

 

8,550,626

 

 

 

8,294,188

 

Surface equipment

 

 

3,136,906

 

 

 

3,224,896

 

Coal refuse storage

 

 

12,171,271

 

 

 

12,171,271

 

Mine Development

 

 

669,860

 

 

 

669,860

 

Land

 

 

1,748,169

 

 

 

907,193

 

Less: Accumulated depreciation

 

 

(11,981,983 )

 

 

(11,162,662 )

 

 

 

 

 

 

 

 

 

Total Property and Equipment, Net

 

$ 27,265,051

 

 

$ 27,668,855

 

 

Depreciation expense amounted to $915,052 and $816,916 for the periods March 31, 2020 and March 31, 2019, respectively.

 

The estimated useful lives are as follows:

 

Processing and Rail Facilities

7-20 years

Surface Equipment

7 years

Underground Equipment

5 years

Mining Rights

5-10 years

Coal Refuse Storage

10 years

   

NOTE 3 - NOTES PAYABLE

 

During the three-month period ended March 31, 2020, principal payments on long term debt totaled $72,255. During the three-month period ended March 31, 2020, increases to long term debt totaled $1,626,642, primarily from cash received in the form of a senior convertible note totaling $1,598,642. The notes have a minimum offering amount of $12,500,000 and maximum of $25,000,000 and minimum investment of $500,000. The notes carry a 24-month term, 12.5% interest 10% warrant coverage and a conversion price of $1.05. The warrants have an exercise price of $1.50. 

 

During the three-month period ended March 31, 2019, principal payments on long term debt totaled $1,373,024. During the three-month period ended March 31, 2019, increases to long term debt totaled $4,500,000, primarily from cash received in the form of $2,000,000 from the ARC development loan and $2,500,000 from seller financing for the acquisition of Empire. The ARC development loan carries annual interest at 5%, is due on April 1, 2020 and is secured by all company assets. The acquisition loan totaling $2,500,000 is due with $500,000 upfront and $2,000,000 due through a $1 per ton royalty off the coal sold from the acquired property and is secured by the underlying property.

 

 
12

Table of Contents

  

During the three-month period ended March 31, 2020 proceeds from the factoring agreement totaled $0 and repayments according to the factoring agreement totaled $1,807,443.

 

During the three-month period ended March 31, 2019 proceeds from the factoring agreement totaled $10,472,108, and repayments according to the factoring agreement totaled $11,121,366.

 

NOTE 4 - RELATED PARTY TRANSACTIONS

 

The Company leases property from Land Resources & Royalties (LRR), an entity controlled by certain members of the Company’s management who are also directors and shareholders. Until July 1, 2018, LRR was consolidated as a VIE resulting in transaction between the two companies to be eliminated upon consolidation. Upon deconsolidation, amounts paid and owed to LRR have been disclosed discreetly in the consolidated financial statements. For the three-month period ending March 31, 2020, royalty expense incurred with LRR amounted to $85,419 and amounts advanced from LRR amounted $932 and amounts repaid amounted to $905. For the three-month period ending March 31, 2019, royalty expense incurred with LRR amounted to $104,469 and amounts advanced from LRR amounted to $0 and amounts repaid to LRR amounted to $0. As of March 31, 2019, total amounts owed LRR amounted to $579,123.

 

On February 13, 2020, the Company entered into a Contract Services Agreement with Land Betterment Corporation, an entity controlled by certain members of the Company’s management who are also directors and shareholders. The contract terms state that service costs are passed through to the Company with a 10% mark-up and a 50% share of cost savings which includes payroll covering aforementioned members of the Company’s management. The services agreement covers all of the Company’s properties. For the 3 months ended March 31, 2020 amounts incurred under the agreement amounted to $107,621 and amounts paid totaled $97,837. As of March 31, 2020, amounts payable under the agreement amounted to $9,784. For the 3 months ended March 31, 2020, service charges covering members of the Company’s management amounted to $0. 

 

NOTE 5 – EQUITY TRANSACTIONS

 

Employee stock compensation expense for the three-month period ending March 31, 2020 and 2019 amounted to $115,025 and $68,693 respectively.

 

Warrant Modification

 

On February 3 2020, we entered into a warrant adjustment agreement with Golden Properties Ltd., a British Columbia company based in Vancouver, Canada (“Golden Properties”) to amend warrants “C-1”, “C-2” “C-3”, and “C-4” that were originally part of a October 4, 2017 agreement with Golden Properties that involved a series of loans made by Golden Properties to the Company. As a result, the following warrants modified for Golden Properties:

 

·

Warrant C-1, for the purchase of 750,000 shares of common stock at $1.05 per share, as adjusted from time to time, expiring on January 31, 2023, and providing the Company with up to $787,500 in cash proceeds should all the warrants be exercised;

·

Warrant C-2, for the purchase of 750,000 shares of common stock at $1.05 per share, as adjusted from time to time, expiring on January 31, 2023, and providing the Company with up to $787,500 in cash proceeds should all the warrants be exercised;

·

Warrant C-3, for the purchase of 750,000 shares of common stock at $1.05 per share, as adjusted from time to time, expiring January 31, 2023, and providing the Company with up to $787,500 in cash proceeds should all the warrants be exercised; and

·

Warrant C-4, for the purchase of 750,000 shares of common stock at $1.05 per share, as adjusted from time to time, expiring January 31, 2023, and providing the Company with up to $787,500 in cash proceeds should all the warrants be exercised.

 

 
13

Table of Contents

  

New Warrant Issuances

 

On February 3, 2020 Warrant C-5 was issued in connection to the conversion of $9,494,073 of outstanding debt into the senior convertible note. Warrant C-5 is for 949,407 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of February 3, 2023.

 

On February 19, 2020 Warrant C-13 was issued in connection to purchase of $22,500 of the senior convertible notes. Warrant C-5 is for 2,250 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

 

On February 20, 2020 Warrant C-6 was issued in connection to purchase of $200,000 of the senior convertible notes. Warrant C-6 is for 20,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of February 20, 2022.

 

The company uses the black Scholes option pricing model to value its warrants and options. The significant inputs are as follows:

 

 

March 31,

2020

 

March 31,

2019

 

Expected Dividend Yield

 

0

%

 

0

%

Expected volatility

 

123-617

 

87.97-109

%

Risk-free rate

 

1.40-1.62%

 

2.40-2.33

%

Expected life of warrants

 

2.310-5.748 years

 

1.62 – 6.20 years

 

Company Warrants:

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Life in Years

 

 

Value

 

Exercisable (Vested) – December 31, 2018

 

 

5,545,227

 

 

$ 2.745

 

 

 

1.704

 

 

$ 42,063,228

 

Granted

 

 

330,500

 

 

$ 2.206

 

 

 

4.106

 

 

$ 1,026,255

 

Forfeited or Expired

 

 

-

 

 

-

 

 

 

-

 

 

-

 

Exercised

 

 

600,000

 

 

$ 0.010

 

 

 

1.688

 

 

$ 4,869,250

 

Outstanding - March 31, 2019

 

 

5,275,727

 

 

$ 2.867

 

 

 

1.620

 

 

$ 13,945,162

 

Exercisable (Vested) - March 31, 2019

 

 

5,275,727

 

 

$ 2.867

 

 

 

1.620

 

 

$ 13,945,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable (Vested) – December 31, 2019

 

 

10,689,904

 

 

$ 1.856

 

 

 

2.310

 

 

$ 1,746,544

 

Granted

 

 

3,969,407

 

 

$ 1.160

 

 

 

2.596

 

 

$ -

 

Forfeited or Expired

 

 

3,138,889

 

 

$ 4.452

 

 

 

1.21

 

 

$ 2,363,611

 

Exercised

 

 

-

 

 

$ -

 

 

 

-

 

 

$ -

 

Outstanding - March 31, 2020

 

 

11,529,422

 

 

$ 0.892

 

 

 

2.751

 

 

$ 5,027,760

 

Exercisable (Vested) - March 31, 2020

 

 

11,529,422

 

 

$ 0.891

 

 

 

2.753

 

 

$ 5,027,760

 

 

 
14

Table of Contents

  

Company Options:

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Life in Years

 

 

Value

 

Outstanding – December 31, 2018

 

 

681,830

 

 

$ 1.413

 

 

 

6.447

 

 

$ 405,000

 

Exercisable (Vested) – December 31, 2018

 

 

70,000

 

 

$ 4.214

 

 

 

4.247

 

 

$ 405,000

 

Granted

 

 

-

 

 

-

 

 

 

-

 

 

-

 

Forfeited or Expired

 

 

-

 

 

-

 

 

 

-

 

 

-

 

Exercised

 

 

-

 

 

-

 

 

 

-

 

 

$

-

 

Outstanding - March 31, 2019

 

 

681,830

 

 

$ 1.330

 

 

 

6.200

 

 

$ 80,998

 

Exercisable (Vested) - March 31, 2019

 

 

70,000

 

 

$ 4.214

 

 

 

4.000

 

 

$ 80,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding – December 31, 2019

 

 

1,056,830

 

 

$ 1.960

 

 

 

5.998

 

 

$ -

 

Exercisable (Vested) – December 31, 2019

 

 

273,943

 

 

$ 1.821

 

 

 

5.072

 

 

$ -

 

Granted

 

 

-

 

 

-

 

 

 

-

 

 

$

-

 

Forfeited or Expired

 

 

-

 

 

-

 

 

 

-

 

 

$

-

 

Exercised

 

 

-

 

 

-

 

 

 

-

 

 

-

 

Outstanding - March 31, 2020

 

 

1,056,830

 

 

$ 1.960

 

 

 

5.748

 

 

$ 551,260

 

Exercisable (Vested) - March 31, 2020

 

 

273,943

 

 

$ 1.821

 

 

 

4.823

 

 

$ 58,287

 

   

NOTE 6 - CONTINGENCIES

 

In the course of normal operations, the Company is involved in various claims and litigation that management intends to defend. The range of loss, if any, from potential claims cannot be reasonably estimated. However, management believes the ultimate resolution of matters will not have a material adverse impact on the Company’s business or financial position. These claims include amounts assessed by the Kentucky Energy Cabinet totaling $1,228,790, the Company has accrued $2,251,057 as a payable to the Commonwealth of Kentucky including amounts owed to the Kentucky Energy Cabinet. Claims assessed by the Mine Health Safety Administration totaling $892,638 of which the Company has accrued $588,846 as a payable. During 2019, McCoy and Deane, received notice of intent to place liens for amounts owed on federal excise taxes. The amounts associated with the notices are included in the company’s trade payables. 

 

On November 7, 2018, Wyoming County Coal LLC, acquired 5 permits, coal processing and loading facilities, surface ownership, mineral ownership, and coal refuse storage facilities from unrelated entities. Consideration for the acquired assets was the assumption of reclamation bonds totaling $234,240, 1,727,273 shares of common stock of the company, a seller note of $350,000 and a seller note of $250,000. On September 20, 2019 Wyoming County received a Notice of Breach of the asset purchase agreement between WCC and Synergy Coal, LLC due to consideration of $225,000 not being paid, failure to file for permit transfers and pay delinquent transfer fees of $10,500 and other contract breaches, including failure to transfer reclamation surety bonds. WCC has paid the delinquent transfer fees and has filed for permit transfer. As a result of these steps, the seller notified us on May 17, 2020 that all breaches were cured. As of the balance sheet date and report date, the West Virginia permit transfers have not yet been approved, the seller has not been paid cash amounts due, and WCC has not substituted its reclamation surety bonds for the seller’s bond collateral.

 

 
15

Table of Contents

  

The Empire acquisition loan in conjunction with the Empire Kentucky Land merger totaling $2,500,000 is due with $500,000 upfront and $2,000,000 due through a $1 per ton royalty off the coal sold from the acquired property and is secured by the underlying property. As of the balance sheet date the agreement was in default and the company received a breach of contract notice in September 2019. On May 8, 2020, the Company entered into a Settlement, Rescission and Mutual Release Agreement with the parties of the Empire acquisition. The agreement provides for the property of Empire to transfer back to the former parties for the return of 2,000,000 common shares of the Company and extinguishment $2,000,000 seller financing note. Additionally, permits and bonding liability associated with the Point Rock Mine were also transferred back to the original permit holders for the consideration of them assuming the reclamation liability. The default was cured on May 8, 2020 through the Settlement, Recission and Mutual Release Agreement.

 

On April 3, 2019 KCC partially settled a case relating to a reclamation issue while the property was under former ownership. The settled amount is $100,000 which will be paid out of a prior insurance policy. The remaining portion of the case was settled during for amount of $280,000. The outstanding amount has not been paid as of the report date and is included in trade payables.

 

On September 26, 2019, the Company received notice that a certain lease assumption as part of the PCR acquisition was being disputed by the lessor (see note 1).

 

During January 2020, the Company and Sylva International LLC agreed to the termination of a digital marketing consulting services agreement that the Company had entered upon mutually acceptable terms.

 

On March 1, 2020 the Company entered into an investor relations consulting contract with a non-related entity. The contract has a three month term, with $7,500 in cash due monthly and the issuance of 20,000 shares that fully vest over the three month term.

 

 The company leases various office space some from an entity which was consolidated as a variable interest entity until June 30, 2018 (see note 4). The rental lease for the Company’s former principal office space expired in December 31, 2018 and continued on a month-to-month basis until February 15, 2019. On February 14, the Company moved its principal offices to 12115 Visionary Way Fishers, IN 46038. A lease through December 2026 was executed. We also rent office space from an affiliated entity, LRR, at 11000 Highway 7 South, Kite, Kentucky 41828 and pay $500 per month rent and the rental lease expires October 30, 2021.

 

NOTE 7 - SUBSEQUENT EVENTS

 

Empire Coal and Point Rock Settlement

 

On May 8, 2020, the Company entered into a Settlement, Rescission and Mutual Release Agreement with the parties of the Empire acquisition. The agreement provides for the property of Empire to transfer back to the former parties for the return of 2,000,000 common shares of the Company and extinguishment $2,000,000 seller financing note. Additionally, permits and bonding liability associated with the Point Rock Mine were also transferred back to the original permit holders for the consideration of them assuming the reclamation liability.

 

Common Stock Transactions

 

On May 8, 2020, 2,000,000 common shares of the company were returned as part of the Empire Coal and Point Rock Settlement. See above.

 

On April 1, 2020, 600,000 common shares of the company were issued as part of the settlement with ENCECo, Inc. See below.

 

On May 26, 2020, 20,000 common shares of the company were issued as part of an investor relations contract. The contract, dated March 1, 2020 has a three month term, with $7,500 in cash due monthly and the issuance of 20,000 shares that fully vest over the three month term. The contract expired on June 1, 2020 and both parties are working together on renewal terms.

 

 
16

Table of Contents

 

Settlements into and Issuances of Senior Convertible Notes (See Note 6)

 

Below are the transactions completed through the Senior Convertible Notes subsequent to the balance sheet date:

 

The following issuance of Senior Convertible Notes:

 

 

-

April 1, 2020 – Issuance of $22,500 of notes for cash proceeds to an unrelated party

  

The following notes and liabilities were converted or settled into the senior convertible notes:

 

 

-

April 1, 2020 - Libertas Funding LLC for the principal amount of $375,690

 

-

April 1, 2020 - Wyoming County Seller Note for the principal amount of $225,000

 

-

April 1, 2020 - Trade payable to Dominion Carbon Sales, LLC for the principal amount of $200,000

 

-

April 1, 2020 - Trade payable to Calvin R. Tackett for the principal amount of $110,000

 

-

April 1, 2020 - Interest and usage fees for the ENCECo, Inc. for the principal amount of $900,000

 

-

April 1, 2020 - Coking Coal Financing, LLC for the principal amount of $1,888,444

 

-

April 14, 2020 - Note with officers for the principal amount of $58,639

 

Promissory Note

 

On April 21, 2020, the Company entered into a promissory note with Merchants Bank of Indiana for the amount of $2,649,800. The note accrues interest at 1% and is due April 1, 2022. Commencing October 21, 2020, payments of principal and interest are due on a repayment schedule of eighteen months. The promissory note was issued pursuant to the CARES Act and SBA’s Paycheck Protection Program.

 

Warrant Conversion

 

On June 11, 2020, the company received notice of exercise of 10,000 warrant shares of the Company pursuant to the August 27, 2019 Class A Common Stock and Warrant offering. The warrants converted at $1.05 per share and the company received $10,500 in cash consideration.

 

 
17

Table of Contents

  

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

 

This Form 10-Q and other reports filed by Registrant from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, Registrant’s management as well as estimates and assumptions made by Registrant’s management. When used in the filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to Registrant or Registrant’s management identify forward looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to Registrant’s industry, Registrant’s operations and results of operations and any businesses that may be acquired by Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

Although Registrant believes that the expectations reflected in the forward-looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Overview

 

When we formed our company, our focus was to (i) construct and/or purchase and manage a chain of combined gasoline, diesel and natural gas (NG) fueling and service stations (initially, in the Miami, FL area); (ii) construct conversion factories to convert NG to liquefied natural gas (LNG) and compressed natural gas (CNG); and (iii) construct conversion factories to retrofit vehicles currently using gasoline or diesel fuel to also run on NG in the United States and also to build a convenience store to serve our customers in each of our locations. These operations represent historical operations of the company and do not represent the company’s current operations and business plan.

 

On January 5, 2017, American Resources Corporation (ARC or the Company) executed a Share Exchange Agreement between the Company and Quest Energy Inc. (Quest Energy), a private company incorporated in the State of Indiana on May 2015 with offices at 12115 Visionary Way, Fishers, IN 46038, and due to the fulfillment of various conditions precedent to closing of the transaction, the control of the Company was transferred to the Quest Energy shareholders on February 7, 2017. This transaction resulted in Quest Energy becoming a wholly-owned subsidiary of ARC. Through Quest Energy, ARC was able to acquire coal mining and coal processing operations, substantially all located in eastern Kentucky and western West Virginia.

 

Quest Energy currently has six coal mining and processing operating subsidiaries: McCoy Elkhorn Coal LLC (doing business as McCoy Elkhorn Coal Company) (McCoy Elkhorn), Knott County Coal LLC (Knott County Coal), Deane Mining, LLC (Deane Mining) and Wyoming County Coal LLC (Wyoming County), Quest Processing LLC (Quest Processing), Perry County Resources (Perry County) located in eastern Kentucky and western West Virginia within the Central Appalachian coal basin, and ERC Mining Indiana Corporation (ERC) located in southwest Indiana within the Illinois coal basin. The coal deposits under control by the Company are generally comprise of metallurgical coal (used for steel making), pulverized coal injections (used in the steel making process) and high-BTU, low sulfur, low moisture bituminous coal used for a variety of uses within several industries, including industrial customers, specialty products and thermal coal used for electricity generation.

 

We have not classified, and as a result, do not have any “proven” or “probable” reserves as defined in United States Securities and Exchange Commission Industry Guide 7, and as a result, our company and its business activities are deemed to be in the exploration stage until mineral deposits are defined on our properties.

 

McCoy Elkhorn Coal LLC

 

General:

 

Located primarily within Pike County, Kentucky, McCoy Elkhorn is currently comprised of two active mines (Mine #15 and the Carnegie Mine), one mine in “hot idle” status (the PointRock Mine), two coal preparation facilities (Bevins #1 and Bevins #2), and other mines in various stages of development or reclamation. McCoy Elkhorn sells its coal to a variety of customers, both domestically and internationally, primarily to the steel making industry as a high-vol “B” coal or blended coal, and high-grade thermal coal to utilities.

 

 
18

Table of Contents

  

Mines:

 

Mine #15 is an underground mine in the Millard (also known as Glamorgan) coal seam and located near Meta, Kentucky. Mine #15 is mined via room-and-pillar mining methods using continuous miners, and the coal is belted directly from the stockpile to McCoy Elkhorn’s coal preparation facility. Mine #15 is currently a “company run” mine, whereby the Company manages the workforce at the mine. The coal from Mine #15 is stockpiled at the mine site and belted directly to the Company’s nearby coal preparation facilities. Production at Mine #15 re-commenced under Quest Energy’s ownership in September 2016.

 

The Carnegie Mine is an underground mine in the Alma and Upper Alma coal seams and located near Kimper, Kentucky. In 2011, coal production from the Carnegie Mine in the Alma coal seam commenced and then subsequently the mine was idled. Production at the Carnegie Mine was reinitiated in early 2017 under Quest Energy’s ownership and is currently being mined via room-and-pillar mining methods utilizing a continuous miner. The coal is stockpiled on-site and trucked approximately 7 miles to McCoy Elkhorn’s preparation facilities. The Carnegie Mine is currently operated as a modified contractor mine, whereby McCoy Elkhorn provides the mining infrastructure and equipment for the operations and pays the contractor a fixed per-ton fee for managing the workforce, procuring the supplies, and maintaining the equipment and infrastructure in proper working order.

 

The PointRock Mine is a surface mine in a variety of coal seams, primarily in the Pond Creek, the Lower Alma, the Upper Alma, and Cedar Grove coal seams and located near Phelps, Kentucky. Coal has been produced from the PointRock Mine in the past under different operators. Quest Energy acquired the PointRock Mine in April 2018 and primarily performed reclamation work during 2019. PointRock is anticipated to be mined via contour, auger, and highwall mining techniques. The coal will be stockpiled on-site and trucked approximately 23 miles to McCoy Elkhorn’s preparation facilities. The PointRock Mine is anticipated to be operated as a modified contractor mine, whereby McCoy Elkhorn provides certain mining infrastructure and equipment for the operations and pays a contractor a fixed per-ton fee for managing the workforce, procuring other equipment and supplies, and maintaining the equipment and infrastructure in proper working order. The PointRock Mine has the estimated capacity to produce up to approximately 15,000 tons per month of coal and has not yet started coal production under McCoy Elkhorn’s ownership.

 

Quest Energy acquired the PointRock Mine in April 2018. On May 8, 2020, the PointRock Mine permits were released from the Company’s control upon the settlement agreement with Empire.

 

Beginning in January 2020 through the report date, Mine #15 and Carnegie 1 mines were idled due to the adverse market effects Covid-19 global pandemic.

 

Processing & Transportation:

 

The Bevins #1 Preparation Plant is an 800 ton-per hour coal preparation facility located near Meta, Kentucky, across the road from Mine #15. Bevins #1 has raw coal stockpile storage of approximately 25,000 tons and clean coal stockpile storage of 100,000 tons of coal. The Bevins #1 facility has a fine coal circuit and a stoker circuit that allows for enhance coal recovery and various coal sizing options depending on the needs of the customer. The Company acquired the Bevins Preparation Plants as idled facilities, and since acquisition, the primary work completed at the Bevins Preparation Plants by the Company includes rehabilitating the plants’ warehouse and replacing belt lines.

 

The Bevins #2 Preparation Plant is on the same permit site as Bevins #1 and is a 500 ton-per-hour processing facility with fine coal recovery and a stoker circuit for coal sizing options. Bevins #2 has raw coal stockpile storage of 25,000 tons of coal and a clean coal stockpile storage of 45,000 tons of coal. We are currently utilizing less than 10% of the available processing capacity of Bevins #1 and Bevins #2.

 

Both Bevins #1 and Bevins #2 have a batch-weight loadout and rail spur for loading coal into trains for rail shipments. The spur has storage for 110 rail cars and is serviced by CSX Transportation and is located on CSX’s Big Sandy, Coal Run Subdivision. Both Bevins #1 and Bevins #2 have coarse refuse and slurry impoundments called Big Groundhog and Lick Branch. While the Big Groundhog impoundment is nearing the end of its useful life, the Lick Branch impoundment has significant operating life and will be able to provide for coarse refuse and slurry storage for the foreseeable future at Bevins #1 and Bevins #2. Coarse refuse from Bevins #1 and Bevins #2 is belted to the impoundments. Both Bevins #1 and Bevins #2 are facilities owned by McCoy Elkhorn, subject to certain restrictions present in the agreement between McCoy Elkhorn and the surface land owner.

 

 
19

Table of Contents

 

Both Bevins #1 and Bevins #2, as well as the rail loadout, are operational and any work required on any of the plants or loadouts would be routine maintenance. The allocated cost of for this property at McCoy Elkhorn Coal paid by the company is $95,210.

 

Due to additional coal processing storage capacity at Bevins #1 and Bevins #2 Preparation Plants, McCoy Elkhorn has the ability to process, store, and load coal for other regional coal producers for an agreed-to fee.

   

Additional Permits:

 

In addition to the above mines, McCoy Elkhorn holds 11 additional coal mining permits that are idled operations or in various stages of reclamation. For the idled coal mining operations, McCoy Elkhorn will determine which coal mines to bring back into production, if any, as the coal market changes, and there are currently no other idled mines within McCoy Elkhorn that are slated to go into production in the foreseeable future. Any idled mines that are brought into production would require significant upfront capital investment, and there is no assurance of the feasibility of any such new operations.

 

Knott County Coal LLC

 

General:

 

Located primarily within Knott County, Kentucky (but with additional idled permits in Leslie County, Perry County, and Breathitt County, Kentucky), Knott County Coal is comprised of 1 active mine (the Wayland Surface Mine) and 22 idled mining permits (or permits in reclamation) and permits for one preparation facility: the idled Supreme Energy Preparation Plant. The idled mining permits are either in various stages of reclamation or being maintained as idled, pending any changes to the coal market that may warrant reinitiating production. The idled mines at Knott County Coal are primarily underground mines that utilize room-and-pillar mining.

 

Mines:

 

The Wayland Surface Mine is a surface waste-rock reprocessing mine in a variety of coal seams (primarily the Upper Elkhorn 1 coal seam) located near Wayland, Kentucky. The Wayland Surface Mine is mined via area mining through the reprocessing of previously processed coal, and the coal is trucked approximately 22 miles to the Mill Creek Preparation Plant at Deane Mining, where it is processed and sold. The Wayland Surface Mine is currently a “company run” mine, whereby the Company manages the workforce at the mine and pays all expenses of the mine. During June 2018, production at the Wayland Surface Mine commenced under Quest Energy’s ownership which occurred during May 2018 and was idled during June 2019 due to the company’s continued focus on the metallurgical and industrial markets.

 

Other potential customers of Knott County Coal include industrial customers, specialty customers and utilities for electricity generation.

 

 
20

Table of Contents

 

Processing & Transportation:

 

The idled Supreme Energy Preparation Plant is a 450 ton-per-hour coal preparation facility located in Kite, Kentucky. The Bates Branch rail loadout associated with the Supreme Energy Preparation Plant is a batch-weigh rail loadout with 110 rail car storage capacity and serviced by CSX Transportation in their Big Sandy rate district. The Supreme Energy Preparation Plant has a coarse refuse and slurry impoundment called the King Branch Impoundment.

  

The Supreme Energy Preparation Plant is owned by Knott County Coal, subject to certain restrictions present in the agreement between Knott County Coal and the surface land owner, Land Resources & Royalties LLC.

 

The Company acquired the Supreme Energy Preparation Plants as an idled facility, and since acquisition, no work has been performed at the facility other than minor maintenance. Both the Supreme Energy Preparation Plant and the rail loadout are idled and would require an undetermined amount of work and capital to bring them into operation. The allocated cost of for the property at Knott County Coal paid by the Company is $286,046.

 

Additional Permits:

 

In addition to the above mines, Knott County Coal holds 20 additional coal mining permits that are in development, idled or in various stages of reclamation. Any idled mines that are brought into production would require significant upfront capital investment and there is no assurance of the feasibility of any such new operations.

 

Deane Mining LLC

 

General:

 

Located within Letcher County and Knott County, Kentucky, Deane Mining is comprised of one active underground coal mine (the Access Energy Mine), one active surface mine (Razorblade Surface) and one active coal preparation facility called Mill Creek Preparation Plant, along with 12 additional idled mining permits (or permits in reclamation). The idled mining permits are either in various stages of development, reclamation or being maintained as idled, pending any changes to the coal market that may warrant re-starting production.

  

Mines:

 

Access Energy is an underground mine in the Elkhorn 3 coal seam and located in Deane, Kentucky. Access Energy is mined via room-and-pillar mining methods using continuous miners, and the coal is belted directly from the mine to the raw coal stockpile at the Mill Creek Preparation Plant across the road from Access Energy. Access Energy is currently a “company run” mine, whereby the Company manages the workforce at the mine and pays all expenses of the mine. During 2019, the permit related to the Access Energy mine was idled and is not expected to produce again under the Company’s control due to the continued focused on the metallurgical and industrial markets.

 

Razorblade Surface is a surface mine targeting the Hazard 4 and Hazard 4 Rider coal seams and located in Deane, Kentucky. Deane Mining commenced mining activity at Razorblade Surface during the spring of 2018. Coal produced from Razorblade Surface is trucked approximately one mile to the Mill Creek Preparation Plant. Razorblade Surface is currently run as a contractor model for which the contractor is paid a fixed per-ton fee for the coal produced. During 2019, the permit related to the Access Energy mine was idled and is not expected to produce again under the Company’s control due to the continued focused on the metallurgical and industrial markets. 

 

Processing & Transportation:

 

Coal from Access Energy is processed at Deane Mining’s Mill Creek Preparation Plant, an 800 ton-per hour coal preparation facility with a batch-weight loadout and rail spur for loading coal into trains for rail shipments. The spur has storage for 110 rail cars and is serviced by CSX Transportation and is located on both CSX’s Big Sandy rate district and CSX’s Elkhorn rate district. The Mill Creek Preparation Plant has a coarse refuse and slurry impoundment called Razorblade Impoundment.

 

 
21

Table of Contents

 

Both the Mill Creek Preparation Plant and the rail loadout are operational, and any work required on any of the plant or loadouts would be routine maintenance. The allocated cost of for the property at Deane Mining paid by the Company is $1,569,641.

 

Additional Permits:

 

In addition to the above mines and preparation facility, Deane Mining holds 12 additional coal mining permits that are in development, idled or in various stages of reclamation. Any idled mines that are brought into production would require significant upfront capital investment and there is no assurance of the feasibility of any such new operations.

 

Wyoming County Coal LLC

 

General:

 

Located within Wyoming County, West Virginia, Wyoming County Coal is comprised of two idled underground mining permits and the three permits associated with the idled Pioneer Preparation Plant, the Hatcher rail loadout, and Simmons Fork Refuse Impoundment. The two idled mining permits are undisturbed underground mines that are anticipated to utilize room-and-pillar mining. The coal controlled at Wyoming County Coal (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” deposits under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

 

Mines:

 

The mining permits held by Wyoming County Coal are in various stages of planning with no mines currently in production.

 

Potential customers of Wyoming County Coal would include steel mills in the United States or international marketplace although no definitive sales have been identified yet.

  

Processing & Transportation:

 

The idled Pioneer Preparation Plant is a 350 ton-per-hour coal preparation facility located near Oceana, West Virginia. The Hatcher rail loadout associated with the Pioneer Preparation Plant is a rail loadout serviced by Norfolk Southern Corporation. The refuse from the preparation facility is trucked to the Simmons Fork Refuse Impoundment, which is approximately 1.0 mile from the Pioneer Preparation facility. The preparation plant utilizes a belt press technology which eliminates the need for pumping slurry into a slurry pond for storage within an impoundment.

 

The Company is in the initial planning phase of getting estimates on the cost to upgrade the preparation facility to a modern 350 ton per hour preparation facility, although no cost estimates have yet been received. The Company is also in the initial planning phase of getting estimates on the cost and timing of upgrading the rail load out facility to a modern batch weight load out system, although no cost estimates have yet been received.

 

The Company acquired the Pioneer Preparation Plants as an idled facility, and since acquisition, no work has been performed at the facility. Both the Pioneer Preparation Plant and the rail loadout are idled and would require an undetermined amount of work and capital to bring them into operation, which is currently in the initial phases of planning and no cost estimates have been received. The allocated cost for the property at Wyoming County Coal will pay by the Company is $22,326,101 of which $22,091,688 has been paid using shares of the Company’s Class A Common stock. The remaining portion is to be paid from cash.

 

 
22

Table of Contents

 

Permits:

 

Wyoming County Coal holds two coal mining permits that are in the initial planning phase and three permits associated with the idled Pioneer Preparation Plant, the Hatcher rail loadout, and Simmons Fork Refuse Impoundment. Any mine that is brought into production would require significant upfront capital investment and there is no assurance of the feasibility of any such new operations. As of the report date, the permits have not been fully transferred as they await final regulatory approval. On September 20, 2019 Wyoming County received a Notice of Breach of the asset purchase agreement between WCC and Synergy Coal, LLC due to consideration of $225,000 not being paid, failure to file for permit transfers and pay delinquent transfer fees of $10,500 and other contract breaches, including failure to transfer reclamation surety bonds. Subsequent to the balance sheet date, WCC has paid the delinquent transfer fees and has filed for permit transfer. As a result of these steps, the seller notified us on May 17, 2020 that all breaches were cured. As of the balance sheet date and report date, the West Virginia permit transfers have not yet been approved, the seller has not been paid cash amounts due, and WCC has not substituted its reclamation surety bonds for the seller’s bond collateral. The transfer of any new permits to the Company is subject to regulatory approval. This approval is subject to the review of both unabated or uncorrected violations that are listed on the Applicator Violator List. The Company, to include several of its subsidiaries, does have unabated and/or uncorrected violations that are listed on the Applicator Violator List. Should the state regulators believe that the Company is not in the process of abating or correcting the currently outstanding issues associated with their currently held permits they may choose not to issue the Company any new permits until such issues are properly rectified.

 

Perry County Resources LLC

 

General:

 

Located primarily within Perry County, Kentucky, Perry County Resources LLC is comprised of one active underground mine (the E4-2 mine) and one active coal processing facility called the Davidson Branch Preparation Plant, along with two additional idled underground mining permits. The two idled mining permits are for underground mines and have been actively mined in the past and being maintained as idled, pending any changes to the coal market that may warrant re-starting production. The coal controlled at Perry County Resources (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

 

Mines:

 

The E4-2 mine is an underground mine in the Elkhorn 4 (aka the Amburgy) coal seam located near the town of Hazard, Kentucky. The E4-2 mine is mined via room-and-pillar mining methods using both continuous miners and continuous haulage systems, and the coal is belted directly from the mine to the raw coal stockpile at the Davidson Branch Preparation Plant less than a mile away. The E4-2 mine is currently a “company-run” mine, whereby the Company manages the workforce at the mine and pays all expenses of the mine. The Company acquired the E4-2 mine as an active mine, and since acquisition in September 2019, the primary work at the E4-2 mine has been rehabilitation of existing infrastructure to increase the operational efficiencies of the mine, including replacing belt structure, repairing equipment, replacing underground mining infrastructure, and installing new mining infrastructure as the mine advances due to coal extraction. The E4-2 mine has the estimated capacity to produce up to approximately 80,000 tons per month of coal.

 

Beginning in January 2020 through the report date, the E4-2 mine was idled due to the adverse market effects Covid-19 global pandemic.

 

 
23

Table of Contents

 

Processing and Transportation:

 

The Davidson Branch Preparation Plant is a 1,300 ton-per-hour coal preparation facility located near Hazard, Kentucky. The associated “Bluegrass 4” rail loadout is a batch-weight rail loadout with 135 car storage capacity and services by CSX Transportation in their Hazard/Elkhorn rate district. The Davidson Branch Preparation Plant is owned by Perry County Resources. We are currently utilizing less than 10% of the available processing capacity of the Davidson Branch Preparation Plant.

 

Both the Davidson Branch Preparation Plant and the rail loadout are operational, and any work required on any of the plant or loadouts would be routine maintenance. The allocated cost of for the property at Perry County Resources paid by the Company is $1,954,317.

 

Additional Permits:

 

In addition to the above mine, preparation facility, and related permits, Perry County Resources holds four additional coal mining permits that are idled or in development. Any idled mines that are brought into production would require significant upfront capital investment and there is no assurance of the feasibility of any such new operations. Three of the idled permits were sold to an unrelated entity on March 4, 2020 for $700,000 cash and $300,000 of value for equipment. As of the report date, the permits have not been fully transferred as they await final regulatory approval.

 

The transfer of any new permits to the Company is subject to regulatory approval. This approval is subject to the review of both unabated or uncorrected violations that are listed on the Applicator Violator List. The Company, to include several of its subsidiaries, does have unabated and/or uncorrected violations that are listed on the Applicator Violator List. Should the state regulators believe that the Company is not in the process of abating or correcting the currently outstanding issues associated with their currently held permits they may choose not to issue the Company any new permits until such issues are properly rectified.

 

Empire Kentucky Land, Inc

 

General:

 

Empire Kentucky Land, Inc., and its wholly-owned subsidiary, Colonial Coal Company, Inc., own approximately 3,000 acres of mineral and another approximately 3,000 acres of surface real estate, primarily located near Phelps, Pike County, Kentucky. There are currently no coal mining or coal processing permits owned by Empire. The coal owned at Empire (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7. American Resources Corporation has received a Breach of Promissory Notes from Empire Kentucky Land, Inc. The amount being sought is $2,000,000 as well as additional fees and charges. The acquired assets have an anticipated life of 25 years. Capitalized mining rights will be amortized based on productive activities over the anticipated life of 25 years. Amortization expense for this asset for the year ended December 31, 2019 and 2018 amounted to $931,333 and $0, respectively. The assets will be measured for impairment when an event occurs that questions the realization of the recorded value. On May 2020, the Company reached a Settlement, Recission and Mutual Release Agreement with the sellers where the Company sold back the property for the forgiveness of $2,000,000 seller note and the return of 2,000,000 shares of Company common stock.

 

Mines:

 

There are no permitted coal mines at Empire.

 

Processing and Transportation:

 

There is no permitted coal processing or loading infrastructure at Empire.

 

Permits:

 

Empire holds no permits and is not expected to hold any permits in the future.

 

 
24

Table of Contents

  

Quest Processing LLC

 

Quest Energy’s wholly-owned subsidiary, Quest Processing, manages the assets, operations, and personnel of the certain coal processing and transportation facilities of Quest Energy’s various other subsidiaries, namely the Supreme Energy Preparation Facility (of Knott County Coal LLC), the Raven Preparation Facility (of Knott County Coal LLC), and Mill Creek Preparation Facility (of Deane Mining LLC). Quest Processing LLC was the recipient of a New Markets Tax Credit loan that allowed for the payment of certain expenses of these preparation facilities. As part of that financing transaction, Quest Energy loaned ERC Mining LLC, an entity owned by members of Quest Energy, Inc.’s management, $4,120,000 to facilitate the New Markets Tax Credit loan, of which is all outstanding as of March 31, 2019. ERC Mining LLC is considered a variable interest entity and is consolidated into Quest Energy’s financial statements.

 

ERC Mining Indiana Corporation (the Gold Star Mine)

 

General:

 

Located primarily within Greene and Sullivan Counties, Indiana, ERC Mining Indiana Corporation (“ERC”) is currently comprised of one idled underground mine (the Gold Star Mine), one idled coal preparation plant and rail loadout. ERC sold its coal in the past as thermal coal to utilities. The Company does not plan to mine the property and purchased it for monetization of infrastructure assets and to reclaim the property.

 

Mines:

 

The Gold Star Mine is an underground mine in the Indiana IV (aka the Survant) coal seam located near the town of Jasonville, Indiana. Currently idled, the Gold Star Mine has been mined in the past via room-and-pillar mining methods using continuous miners, and the coal is belted directly from the mine to the raw coal stockpile at the preparation plant less than a mile away.

  

Processing and Transportation:

 

The idled preparation plant is a 165 ton-per-hour coal preparation facility located near the underground mine portal. The rail loadout associated with the preparation plant is a rail loadout serviced by the Indiana Rail Road. The preparation plant has a coarse refuse and slurry impoundment. The allocated cost of for the property at Gold Star paid by the Company is $77,831.

 

Permits: 

 

ERC holds one permit that covers the Gold Star Mine, processing plant, rail loadout, and related infrastructure.

 

 
25

Table of Contents

 

Mineral and Surface Leases

 

Coal mining and processing involves the extraction of coal (mineral) and the use of surface property incidental to such extraction and processing. All of the mineral and surface related to the Company’s coal mining operations is leased from various mineral and surface owners (the “Leases”). The Company’s operating subsidiaries, collectively, are parties to approximately 200 various Leases and other agreements required for the Company’s coal mining and processing operations. The Leases are with a variety of Lessors, from individuals to professional land management firms such as the Elk Horn Coal Company LLC and Alma Land Company. In some instances, the Company has leases with Land Resources & Royalties LLC (LRR), a professional leasing firm that is an entity wholly owned by Quest MGMT LLC, an entity owned by members of Quest Energy Inc.’s management.

 

Coal Sales

 

ARC sells its coal to domestic and international customers, some which blend ARC’s coal at east coast ports with other qualities of coal for export. Coal sales currently come from the Company’s McCoy Elkhorn’s Mine #15 and Carnegie 1 mines, and Perry’s E4-2 mine. The Company may, at times, purchase coal from other regional producers to sell on its contracts.

 

Coal sales at the Company is primarily outsource to third party intermediaries who act on the Company’s behalf to source potential coal sales and contracts. The third-party intermediaries have no ability to bind the Company to any contracts, and all coal sales are approved by management of the Company.

 

Due to the Covid-19 global pandemic, traditional sales channels have been disrupted. As a supplier of the raw materials into the steel and industrial industries, our customers are sensitive to global fluctuations in steel demand. 

  

Competition

 

The coal industry is intensely competitive. The most important factors on which the Company competes are coal quality, delivered costs to the customer and reliability of supply. Our principal domestic competitors will include Corsa Coal Corporation, Ramaco Resources, Blackhawk Mining, Coronado Coal, Arch Coal, Contura Energy, and Warrior Met Coal. Many of these coal producers may have greater financial resources and larger coal deposit bases than we do. We also compete in international markets directly with domestic companies and with companies that produce coal from one or more foreign countries, such as China, Australia, Colombia, Indonesia and South Africa.

 

Legal Proceedings

 

From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. 

 

Please see financial statement note 9 for detail on cases.

 

Environmental, Governmental, and Other Regulatory Matters

 

Our operations are subject to federal, state, and local laws and regulations, such as those relating to matters such as permitting and licensing, employee health and safety, reclamation and restoration of mining properties, water discharges, air emissions, plant and wildlife protection, the storage, treatment and disposal of wastes, remediation of contaminants, surface subsidence from underground mining and the effects of mining on surface water and groundwater conditions. In addition, we may become subject to additional costs for benefits for current and retired coal miners. These environmental laws and regulations include, but are not limited to, the Surface Mining Control and Reclamation Act of 1977 (SMCRA) with respect to coal mining activities and ancillary activities; the Clean Air Act (CAA) with respect to air emissions; the Clean Water Act (CWA) with respect to water discharges and the permitting of key operational infrastructure such as impoundments; Resource Conservation and Recovery RCRA with respect to solid and hazardous waste management and disposal, as well as the regulation of underground storage tanks; the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) with respect to releases, threatened releases and remediation of hazardous substances; the Endangered Species Act of 1973 (ESA) with respect to threatened and endangered species; and the National Environmental Policy Act of 1969 (NEPA) with respect to the evaluation of environmental impacts related to any federally issued permit or license. Many of these federal laws have state and local counterparts which also impose requirements and potential liability on our operations.

 

 
26

Table of Contents

 

Compliance with these laws and regulations may be costly and time-consuming and may delay commencement, continuation or expansion of exploration or production at our facilities. They may also depress demand for our products by imposing more stringent requirements and limits on our customers’ operations. Moreover, these laws are constantly evolving and are becoming increasingly complex and stringent over time. These laws and regulations, particularly new legislative or administrative proposals, or judicial interpretations of existing laws and regulations related to the protection of the environment could result in substantially increased capital, operating and compliance costs. Individually and collectively, these developments could have a material adverse effect on our operations directly and/or indirectly, through our customers’ inability to use our products.

 

Certain implementing regulations for these environmental laws are undergoing revision or have not yet been promulgated. As a result, we cannot always determine the ultimate impact of complying with existing laws and regulations.

 

Due in part to these extensive and comprehensive regulatory requirements and ever-changing interpretations of these requirements, violations of these laws can occur from time to time in our industry and also in our operations. Expenditures relating to environmental compliance are a major cost consideration for our operations and safety and compliance is a significant factor in mine design, both to meet regulatory requirements and to minimize long-term environmental liabilities. To the extent that these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, operating results will be reduced.

  

In addition, our customers are subject to extensive regulation regarding the environmental impacts associated with the combustion or other use of coal, which may affect demand for our coal. Changes in applicable laws or the adoption of new laws relating to energy production, greenhouse gas emissions and other emissions from use of coal products may cause coal to become a less attractive source of energy, which may adversely affect our mining operations, the cost structure and, the demand for coal.

 

We believe that our competitors with operations in the United States are confronted by substantially similar conditions. However, foreign producers and operators may not be subject to similar requirements and may not be required to undertake equivalent costs in or be subject to similar limitations on their operations. As a result, the costs and operating restrictions necessary for compliance with United States environmental laws and regulations may have an adverse effect on our competitive position with regard to those foreign competitors. The specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, applicable legislation and its production methods.

 

The Mine Act and the MINER Act, and regulations issued under these federal statutes, impose stringent health and safety standards on mining operations. The regulations that have been adopted under the Mine Act and the MINER Act are comprehensive and affect numerous aspects of mining operations, including training of mine personnel, mining procedures, roof control, ventilation, blasting, use and maintenance of mining equipment, dust and noise control, communications, emergency response procedures, and other matters. The Mine Safety and Health Administration (MSHA) regularly inspects mines to ensure compliance with regulations promulgated under the Mine Act and MINER Act.

 

Due to the large number of mining permits held by the Company that have been previously mined and operated, there is a significant amount of environmental reclamation and remediation required by the Company to comply with local, state, and federal regulations for coal mining companies.

 

 
27

Table of Contents

 

Property

 

Our principal offices were located at 9002 Technology Lane, Fishers, Indiana 46038. We pay $2,500 per month in rent for the office space and the rental lease expired in December 2018 and is continuing on a month-to-month basis through January 2020. On February 14, 2020 the Company moved its principal offices to 12115 Visionary Way Fishers, IN 46038. A lease through December 2026 was executed. We also rent office space from an affiliated entity, LRR, at 11000 Highway 7 South, Kite, Kentucky 41828 and pay $500 per month rent and the rental lease expires October 30, 2021.

 

The Company also utilizes various office spaces on-site at its coal mining operations and coal preparation plant locations in eastern Kentucky, with such rental payments covered under any surface lease contracts with any of the surface land owners.

 

Employees

 

ARC, through its operating subsidiaries, employs a combination of company employees and contract labor to mine coal, process coal, and related functions. The Company is continually evaluating the use of company employees and contract labor to determine the optimal mix of each, given the needs of the Company. Currently, McCoy Elkhorn’s Mine #15, Wayland Surface Mine and Deane Mining’s Access Energy mine are primarily run by company employees, McCoy Elkhorn’s Carnegie Mine and Deane Mining’s Razorblade Surface mine are primarily run by contract labor, and the Company’s various coal preparation facilities are run by company employees.

 

The Company currently has approximately 11 employees, with a substantial majority based in eastern Kentucky. The Company is headquartered in Fishers, Indiana with six members of the Company’s executive team based at this location.

  

Results of Operations

 

Our consolidated operations had operating revenues of $524,334 for the three-months ended March 31, 2020 and $6,994,276 operating revenue for the three-months ended March 31, 2019. We have incurred net loss attributable to American Resources shareholders in the amount of $3,261,368 and a net loss of $10,065,620 respectively for the same periods.

 

The primary driver for decrease in revenue was a decrease in coal production during the Covid-19 global pandemic.

 

From our inception to-date our activities have been primarily financed from the proceeds of our acquisitions, common share equity investments and loans.

 

For the three months ended March 31, 2020 and 2019, coal sales and processing expenses were $1,855,187 and $6,664,087 respectively, development costs, including loss on settlement of ARO were $128,159 and $1,600,117, respectively, and production taxes and royalties $160,230 and $1,259,586, respectively. Depreciation expense for the three months ended March 31, 2020 and 2019 were $915,052 and $816,916 respectively.

 

Liquidity and Capital Resources

 

As of March 31, 2020, and 2019, our available cash was $43,745 and $7. We expect to fund our liquidity requirements with cash on hand, future borrowings and cash flow from operations. If future cash flows are insufficient to meet our liquidity needs or capital requirements, we may reduce our mine development and/or fund a portion of our expenditures through issuance of debt or equity securities, the entry into debt arrangements for from other sources, such as asset sales. We do not have any credit lines currently available to fund our liquidity requirements, and currently there is uncertainty regarding our ability to execute on the above strategy.

 

 
28

Table of Contents

  

For the three months ending March 31, 2020 our net cash flow provided by operating activities was $852,392 and for the period ending March 31, 2019 the net cash flow used in operating activities was $5,743,426.

 

For the three months ending March 31, 2020 and 2019 net cash provided by (used in) investing activities were $(408,915) and $721,444 respectively.

 

For the three months ending March 31, 2020 and 2019 net cash proceeds (used in) from financing activities were $(253,056) and $4,231,718 respectively.

 

As a public company, we will be subject to certain reporting and other compliance requirements of a publicly reporting company. We will be subject to certain costs for such compliance which private companies may not choose to make. We have identified such costs as being primarily for audits, legal services, filing expenses, financial and reporting controls and shareholder communications and estimate the cost to be approximately $35,000 monthly if the activities of our Company remain somewhat the same for the next few months. We have included such costs in our monthly cash flow needs and expect to pay such costs from a combination of cash from operations.

 

Business Effect of Covid-19

 

During 2020, the worldwide COVID-19 outbreak has resulted in muted demand for infrastructure and steel products and their necessary inputs including Metallurgical coal. These recent developments are expected to result in lower sales and gross margins. Because of the adverse market conditions caused by the global pandemic the Company’s operations were idled in January 2020 and remained idled through the report date.

 

Off Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

 

Critical Accounting Policies

 

The preparation of financial statements requires management to utilize estimates and make judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. The estimates are evaluated by management on an ongoing basis, and the results of these evaluations form a basis for making decisions about the carrying value of assets and liabilities that are not readily apparent from other sources. Although actual results may differ from these estimates under different assumptions or conditions, management believes that the estimates used in the preparation of our financial statements are reasonable. The critical accounting policies affecting our financial reporting are summarized in Note 1 to the financial statements included elsewhere in this report.

 

 
29

Table of Contents

  

Recent Accounting Pronouncements

 

None.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Because we are a smaller reporting company, we are not required to include any disclosure under this item.

 

Item 4. Controls and Procedures

 

(a) Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

With respect to the period ending March 31, 2020, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.

 

Based upon our evaluation regarding the period ending March 31, 2020, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has concluded that its disclosure controls and procedures were not effective due to the Company’s insufficient number of staff performing accounting and reporting functions and lack of timely reconciliations. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.

 

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

 

(b) Changes in Internal Controls.

 

There have been no changes in the Company’s internal control over financial reporting during the period ended March 31, 2020 that have materially affected the Company’s internal controls over financial reporting.

 

 
30

Table of Contents

  

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. 

 

Please see financial statement note 6 for detail on cases.

 

Item 1A. Risk Factors

 

Not applicable.

 

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

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Quarterly Report.

 

Item 5. Other Information

 

None.

 

 
31

Table of Contents

  

Item 6. Exhibits

 

The following exhibits are filed herewith except as otherwise noted:

 

Exhibit

Number

 

Description

 

Location Reference

 

3.1

 

Articles of Incorporation of Natural Gas Fueling and Conversion Inc.

 

Incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 27, 2013.

3.2

 

Amended and Restated Articles of Incorporation of NGFC Equities Inc.

 

Incorporated herein by reference to Exhibit 3.1 to the Company’s 8k filed on February 25, 2015.

3.3

 

Articles of Amendment to Articles of Incorporation of NGFC Equities, Inc.

 

Incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K on February 21, 2017.

3.4

 

Articles of Amendment to Articles of Incorporation of American Resources Corporation dated March 21, 2017.

 

Incorporated herein by reference to Exhibit 3.4 to the Company’s Form 10-Q, filed with the SEC on February 20, 2018.

3.5

 

Bylaws of Natural Gas Fueling and Conversion Inc.

 

Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 27, 2013.

3.6

 

Bylaws, of NGFC Equities Inc., as amended and restated.

 

Incorporated herein by reference to Exhibit 3.2 to the Company’s 8k filed on February 25, 2015.

3.7

 

Articles of Amendment to Articles of Incorporation of American Resources Corporation dated November 8, 2018.

 

Filed as Exhibit 99.1 to the Company’s 8k filed on November 13, 2018, incorporated herein by reference.

3.8

 

Bylaws of American Resources Corporation, as amended and restated

 

Incorporated herein by reference to Exhibit 99.2 to the Company’s 8k filed on November 13, 2018.

4.1

 

Common Stock Purchase Warrant “B-4” dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.1 to the Company’s 8k filed on October 11, 2017.

4.2

 

Common Stock Purchase Warrant “C-1” dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.2 to the Company’s 8k filed on October 11, 2017.

4.3

 

Common Stock Purchase Warrant “C-2” dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.3 to the Company’s 8k filed on October 11, 2017.

4.4

 

Common Stock Purchase Warrant “C-3” dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.4 to the Company’s 8k filed on October 11, 2017.

4.5

 

Common Stock Purchase Warrant “C-4” dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.5 to the Company’s 8k filed on October 11, 2017.

4.6

 

Promissory Note for $600,000.00 dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.6 to the Company’s 8k filed on October 11, 2017.

4.7

 

Promissory Note for $1,674,632.14 dated October 4, 2017

 

Incorporated herein by reference to Exhibit 4.7 to the Company’s 8k filed on October 11, 2017.

4.8

 

Loan Agreement for up to $6,500,000 dated December 31, 2018

 

Incorporated herein by reference to Exhibit 99.1 to the Company’s 8k filed on January 3, 2019.

4.9

 

Promissory Note for up to $6,500,000 dated December 31, 2018

 

Incorporated herein by reference to Exhibit 99.2 to the Company’s 8k filed on January 3, 2019.

10.1

 

Secured Promissory Note

 

Incorporated herein by reference to Exhibit 99.1 to the Company’s 8k filed on May 15, 2018.

10.2

 

Security Agreement

 

Incorporated herein by reference to Exhibit 99.2 to the Company’s 8k filed on May 15, 2018.

10.3

 

Pledge Agreement

 

Incorporated herein by reference to Exhibit 99.3 to the Company’s 8k filed on May 15, 2018.

10.4

 

Guaranty Agreement

 

Incorporated herein by reference to Exhibit 99.4 to the Company’s 8k filed on May 15, 2018.

10.5

 

Bill of Sale

 

Incorporated herein by reference to Exhibit 99.5 to the Company’s 8k filed on May 15, 2018.

10.6

 

Sublease Agreement Between Colonial Coal Company, Inc. and McCoy Elkhorn Coal LLC

 

Incorporated herein by reference to Exhibit 99.1 to the Company’s 8k filed on May 1, 2018

10.7

 

Interim Operating Agreement

 

Incorporated herein by reference to Exhibit 99.2 to the Company’s 8k filed on May 1, 2018

10.8

 

Consolidated and Restated Loan and Security Agreement dated October 4, 2017

 

Incorporated herein by reference to Exhibit 10.1 to the Company’s 8k filed on October 11, 2017

10.9

 

Asset Purchase Agreement between Wyoming County Coal LLC and Thomas Shelton dated November 7, 2018

 

Incorporated herein by reference to Exhibit 10.9 to the Company’s registration statement filed on December 11, 2018.

 

 
32

Table of Contents

 

10.10

 

Asset Purchase Agreement between Wyoming County Coal LLC and Synergy Coal, LLC dated November 7, 2018

 

Incorporated herein by reference to Exhibit 10.10 to the Company’s registration statement filed on December 11, 2018.

10.11

 

Security Agreement

 

Incorporated herein by reference to Exhibit 99.3 to the Company’s 8k filed on January 3, 2019.

10.12

 

Purchase Order

 

Incorporated herein by reference to Exhibit 99.4 to the Company’s 8k filed on January 3, 2019.

10.13

 

Employment Agreement with Mark C. Jensen

 

Incorporated herein by reference to Exhibit 10.13 to the Company’s registration statement filed on February 6, 2019.

10.14

 

Employment Agreement with Thomas M. Sauve

 

Incorporated herein by reference to Exhibit 10.14 to the Company’s registration statement filed on February 6, 2019.

10.15

 

Employment Agreement with Kirk P. Taylor

 

Incorporated herein by reference to Exhibit 10.15 to the Company’s registration statement filed on February 6, 2019.

10.16

 

Employee Stock Option Plan

 

Incorporated herein by reference to Exhibit 10.16 to the Company’s registration statement filed on February 6, 2019.

10.17

 

Letter of Intent

 

Incorporated herein by reference to Exhibit 10.17 to the Company’s registration statement filed on February 6, 2019.

10.18

 

Merger Agreement with Colonial Coal

 

Incorporated herein by reference to Exhibit 10.18 to the Company’s registration statement filed on February 14, 2019.

10.19

 

Share Exchange Agreement to replace Merger Agreement with Colonial Coal

 

Incorporated herein by reference to Exhibit 10.19 to the Company’s registration statement filed on February 14, 2019.

14.1

 

Code of Conduct

 

Incorporated herein by reference to Exhibit 99.2 to the Company’s 8k filed on November 13, 2018.

14.2

 

Financial Code of Ethics

 

Incorporated herein by reference to Exhibit 99.3 to the Company’s 8k filed on November 13, 2018.

31.1

 

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed Herewith

31.2

 

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed Herewith

 

32.1

 

Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

Filed Herewith

 

32.2

 

Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

Filed Herewith

 

95.1

 

Mine Safety Disclosure pursuant to Regulation S-K, Item 104

 

Filed Herewith

  

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
33

Table of Contents

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

AMERICAN RESOURCES CORPORATION

 

Date: June 17, 2020

By:

/s/ Mark C. Jensen

 

Name:

Mark C. Jensen

 

Title:

CEO, Chairman of the Board

 

(Principal Executive Officer)

 

 

34<