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EX-99.2 - PRESS RELEASE DATED OCTOBER 29, 2020 - American Resources Corp | arec_ex992.htm |
8-K - CURRENT REPORT - American Resources Corp | arec_8k.htm |
Exhibit
99.1
American Resources Corporation Reports Third Quarter 2020 Financial
Results and Provides Business Outlook
Company reports $127,982 of net income and $2.8 million of adjusted
EBITDA
American Metal LLC subsidiary grew 30% over second quarter of
2020
Well-positioned to be a long-term supplier of raw material and
critical elements to the modern-day infrastructure
market
Strategic steps taken to transform into an infrastructure company
producing pure metallurgical carbon, rare earth elements and metal
aggregation, while enhancing environmental, social and governance
(ESG) profile
Company expects multiple value driving milestones over the
remainder of 2020
Company to host conference call on Monday, November 9, 2020 at
10:30 AM ET
October 30, 2020 | Source: American Resources
Corporation
FISHERS, INDIANA / ACCESSWIRE / October 30, 2020
/ American Resources
Corporation (NASDAQ:AREC)
(“American Resources” or the “Company”), a
next generation and socially responsible supplier of raw materials
to the new infrastructure marketplace, today reported its third
quarter of 2020 financial results and provided a corporate
update.
Mark Jensen, Chairman and CEO of American Resources Corporation
commented, “Over the course of the third quarter, our team
continued to execute on the strategic transformation of the Company
to solidify our position as a next generation and socially
responsible supplier of raw materials. Our first-class portfolio of
assets, which have been strategically acquired at a substantial
discount to replacement value, has never been in a better position
to deliver long term value for our stakeholders. Bolstered by our
restructuring efforts that eliminate the industry’s legacy
mentality and issues and focuses on efficiency and forward
thinking, our dynamic platform now sits at an inflection point and
the beginning of a new era.
Third Quarter 2020 Key Highlights
●
Acquired two
additional continuous miners (critical pieces of mining equipment)
in anticipation of restarting Perry County Resources in the fourth
quarter of 2020. The two additional continuous miners give American
Resources a total of six to utilize under its restructured,
efficient, low-cost operating structure. The Company’s plan
involves using a total of five continuous miners once fully ramped
with two “super” sections
and one bridge section.
●
Further reduced
environmental liabilities and long-term costs through the strategic
execution of environmental reclamation of idled, irrational thermal
coal mines resulting in the bond release of an additional $400,000
of associated environmental reclamation bonds.
●
Commenced a railcar
and metal recycling service partnership through its American Metals
business line where it began to receive retired coal railcars to be
recycled for their metal content and
reused for alternative, modern-day purposes.
●
Received a
prestigious Sentinels of Safety Award from the National Mining
Association in recognition of its outstanding safety
performance.
●
Further streamlined
the Company’s capital structure through the exercise of over
two million warrants during and subsequent to the third quarter of
2020.
Mr. Jensen continued, “With the closing of our most
recent capital raise and improvements to our balance sheet, we are
confident that we are fully capitalized to execute our near-term
plans and advance American Resources into its next and exciting
chapter. Our metallurgical carbon
operations are poised to restart in the fourth quarter of 2020 at
Perry County Resources (“PCR”) to fulfill our
customers’ 2021 contracted demand, with production
capabilities of over 1.0 million tons per year of metallurgical
carbon. Once we are operating at PCR this quarter, our sights will
be set towards bringing our McCoy Elkhorn complex online sometime
in mid-2021. Additionally, we are pleased with our American Metals
business line, having grown nearly 30 percent quarter-over-quarter.
We are committed to the growth of American Metals to further
diversify our business in a meaningful way, and to advance and
support our environmental efforts.”
“Lastly, our recently announced American Rare Earth business
line provides us with a lot of excitement and a tremendous
opportunity to produce critical elements in the most
environmentally friendly and socially conscious manner; all while
helping to secure our country’s resource independence and
national security. American Rare Earth enables us to continue to
innovate by advancing the Central Appalachian region towards
becoming a domestic production hub of critical elements and at the
same time, fully complements our ESG efforts and Sustainable
Development Goals (“SDG”). Through its unique regional
production attributes, the collection of these rare earth elements
is done in a way that is a benefit to the environment, creates
well-paying and meaningful jobs to an economically distressed area,
and advances the United States, and the world, to a cleaner, more
modern economy. We believe these ESG efforts will further
distinguish American Resources as industry revolutionaries along
with permanently shutting down and remediating irrational thermal
coal operation throughout our region,” added Mr.
Jensen.
Conference Call Information
American Resources management will host a conference call for
investors, analysts and other interested parties on Monday,
November 9, 2020 at 10:30 AM ET.
To participate in the call, please dial (877) 407-4019 and
reference the American Resources Conference Call.
Financial Results for Third Quarter 2020
For the third quarter of 2020, American Resources reported net
income of $123,982, or $0.00 per share for the three months ended
September 30, 2020, as compared with a net loss of $7.34 million,
or a loss of $0.30 per share in the prior-year period. The Company
earned adjusted earnings before interest, taxes, depreciation,
amortization, equity-based compensation, warrant expense and
development and restructuring costs (“Adjusted EBITDA”)
of $2.8 million in the third quarter of 2020, as compared with
Adjusted EBITDA loss of $2.5 million for the third quarter of
2019.
Third Quarter 2020 Summary
Total
revenues were $294,646 for the third quarter of 2020. Cost of sales
(includes mining, transportation, royalty, holding and processing
costs) for the third quarter of 2020 were $72,692, or 24.7 percent
of total revenues, compared to $2.95 million, or 160 percent of
total revenue in the same period of 2019.
General
and administrative expenses for the third quarter of 2020 were
$132,676, or 45 percent of total revenue, compared to $1.43 million
during the third quarter of 2019. Depreciation for the third
quarter of 2020 was $646,438, or 219 percent of total revenue.
American Resources incurred interest expense of $379,583 during the
third quarter of 2020 compared to $901,812 during the third quarter
of 2019. Development costs during the quarter were $792,926,
compared to $307,247 in the second quarter of 2020.
The
Company did not incur any income tax expense in the third quarter
of 2020 as it was able to utilize its available net operating
losses (“NOL”) carried forward from prior periods of
approximately $13,746,391 as of
December 31, 2019.
Operational Results
During the third quarter of 2020, all carbon production continued
to be idled due to the disruptions related to the global COVID-19
pandemic. As previously stated, the Company instead shifted its
primary focus on increasing efficiencies, readying Perry County
Resources to be brought back online, reducing its long-term cost
structure, monetizing non-core assets and advancing environmental
reclamation.
Mr. Jensen reiterated, “During the third quarter, our carbon
production and processing operation remained idle due to the
COVID-19 related market disruptions and to ensure the safety of our
workers. Enabled by our low corporate overhead and our dedication
to not waste valuable resources, we continued to focus on improving
our operations, advancing environmental reclamation and scaling our
American Metals business during this market disruption, which we
believe will drive significant long-term value for our
shareholders. As carbon markets began to stabilize, we were able to
secure 2021 baseload contracts for Perry County Resources and are
in the final stages of preparing to bring the complex back online
in the fourth quarter. Furthermore, with the infusion of additional
capital, along with a first-class operational team behind a premier
asset such as Perry County, we are in a position of strength to
ensure a smooth and rapid ramp.”
The exhibit below summarizes some of the key sales, production and
financial metrics:
|
Three month
ended
|
Three month
ended
|
|
|
September 30,
|
June 30,
|
September 30,
|
|
2020
|
2020
|
2019
|
Sales Volume (a)
|
|
|
|
Tons
Sold
|
-
|
-
|
25,969
|
|
|
|
|
Company Production (a)
|
|
|
|
McCoy
Elkhorn Coal
|
-
|
-
|
11,180
|
Perry
County Resources
|
-
|
-
|
-
|
Deane
Mining
|
-
|
-
|
14,789
|
Total
|
-
|
-
|
25,969
|
|
|
|
|
Company Financial Metrics(b)
|
|
|
|
Revenue
per Ton
|
-
|
-
|
71.13
|
Cash Cost per Ton Sold (c)
|
-
|
-
|
113.84
|
Cash Margin per Ton (c)
|
-
|
-
|
(42.71)
|
|
|
|
|
Development
Costs
|
$792,926
|
$307,247
|
1,425,024
|
Notes:
|
|
|
|
(a)
In short tons
|
|
|
|
(b)
Excludes transportation
|
|
|
|
(c) Cash cost per ton is based on reported cost of sales and
includes items such as production taxes, royalties, labor, fuel,
and other similar production and sales cost items, and may be
adjusted for other items that, pursuant to GAAP, are classified in
the Statement of Operations as costs other than cost of sales, but
relate directly to the cost incurred to produce coal. Our cash cost
of sales per short ton is calculated as cash cost of sales divided
by short tons sold, and our cash margin per ton is calculated by
subtracting cash cost per ton from revenue per ton. Cash cost of
sales per short ton and average cash margin per ton are non-GAAP
financial measure which are calculated in conformity with U.S. GAAP
and should be considered supplemental to, and not as a substitute
or superior to financial measures calculated in conformity with
GAAP. We believe cash cost of sales per ton and average cash margin
per ton are useful measurse of performance as it aides some
investors and analysts in comparing us against other companies.
Cash cost of sales per ton and margin per ton may not be comparable
to similarly titled measures used by other companies.
|
AMERICAN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
|
Three
Months
September
30,
2020
|
Three
Months
September
30,
2019
|
Nine
Months
September
30,
2020
|
Nine
Months
September
30,
2019
|
|
|
|
|
|
Coal
Sales
|
$-
|
$1,847,279
|
$524,334
|
$18,162,805
|
Metal Aggregating,
Processing and Sales
|
294,646
|
-
|
521,482
|
-
|
Processing Services
Income
|
-
|
-
|
-
|
20,876
|
|
|
|
|
|
Total
Revenue
|
294,646
|
1,847,279
|
1,045,816
|
18,183,681
|
|
|
|
|
|
Cost of Coal Sales
and Processing
|
(72,692)
|
(2,956,306)
|
(2,590,435)
|
(15,254,961)
|
Accretion
Expense
|
(240,685)
|
(320,900)
|
(981,859)
|
(962,699)
|
Depreciation
|
(646,438)
|
(1,414,942)
|
(1,855,236)
|
(3,036,747)
|
Amortization of
mining rights
|
(313,224)
|
(252,729)
|
(939,672)
|
(1,592,110)
|
General and
Administrative
|
(132,676)
|
(1,434,545)
|
(1,659,908)
|
(3,798,051)
|
Professional
Fees
|
(175,832)
|
(170,937)
|
(686,158)
|
(5,136,767)
|
Production Taxes
and Royalties
|
(154,604)
|
(948,148)
|
(404,660)
|
(2,811,691)
|
Development
Costs
|
(792,926)
|
(1,425,024)
|
(1,228,333)
|
(5,912,589)
|
|
|
|
|
|
Total Operating
Expenses
|
(2,529,078)
|
(8,923,531)
|
(10,346,261)
|
(38,505,615)
|
|
|
|
|
|
Net Loss from
Operations
|
(2,234,432)
|
(7,076,252)
|
(9,300,445)
|
(20,321,934)
|
|
|
|
|
|
Other
Income
|
160,635
|
770,405
|
(153,544)
|
1,251,359
|
Gain on interest
forgiven
|
832,500
|
-
|
832,500
|
-
|
Gain on
Depreciation Recapture
|
1,706,569
|
-
|
1,706,569
|
-
|
Gain on sale of
stock
|
-
|
-
|
6,820,949
|
-
|
Loss on settlement
of payable
|
-
|
-
|
|
(22,660)
|
Amortization of
debt discount and issuance costs
|
(2,879)
|
(219,218)
|
(8,637)
|
(7,722,197)
|
Interest
Income
|
41,172
|
82,343
|
164,686
|
164,686
|
Warrant
Modification Expense
|
-
|
-
|
-
|
(2,545,360)
|
Interest
expense
|
(379,583)
|
(901,810)
|
(1,891,226)
|
(1,674,653)
|
|
|
|
|
|
Total Other income
(expense)
|
2,358,413
|
(268,280)
|
7,471,297
|
(10,548,825)
|
|
|
|
|
|
Net Income
(Loss)
|
123,982
|
(7,344,532)
|
(1,829,148)
|
(30,870,759)
|
|
|
|
|
|
Net loss per common
share - basic and diluted
|
$0.00
|
$(0.30)
|
$(0.07)
|
$(1.34)
|
|
|
|
|
|
Weighted average
common shares outstanding
|
26,785,364
|
24,886,763
|
27,009,075
|
23,025,762
|
CONSOLIDATED BALANCE SHEETS
UNAUDITED
|
September
30,
2020
|
December
31,
2019
|
ASSETS
|
||
|
|
|
CURRENT
ASSETS
|
|
|
Cash
|
$753,910
|
$3,324
|
Accounts
Receivable
|
46,150
|
2,424,905
|
Inventory
|
150,503
|
515,630
|
Prepaid fees
|
175,000
|
-
|
Accounts Receivable -
Other
|
234,240
|
234,240
|
Total Current
Assets
|
1,359,803
|
3,178,099
|
|
|
|
OTHER
ASSETS
|
|
|
Cash -
restricted
|
637,806
|
265,487
|
Processing and rail
facility
|
11,591,273
|
12,723,163
|
Underground
equipment
|
6,838,417
|
8,294,188
|
Surface
equipment
|
2,527,576
|
3,224,896
|
Acquired mining
rights
|
561,575
|
669,860
|
Coal refuse
storage
|
12,134,192
|
12,171,271
|
Less Accumulated
Depreciation
|
(11,971,657)
|
(11,162,622)
|
Land
|
1,572,435
|
1,748,169
|
Note Receivable
|
4,117,139
|
4,117,139
|
Total Other
Assets
|
28,008,756
|
32,051,551
|
|
|
|
TOTAL
ASSETS
|
$29,368,559
|
$35,229,650
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIT)
|
||
|
|
|
CURRENT
LIABILITIES
|
|
|
Accounts payable and accrued
liabilities
|
$5,640,915
|
$6,604,134
|
Accounts payable –
nontrade
|
4,012,674
|
4,440,345
|
Accounts payable – related
party
|
979,146
|
718,156
|
Accrued
interest
|
573,526
|
2,869,763
|
Due to
affiliate
|
74,000
|
132,639
|
Current portion of long term-debt
(net of issuance costs and debt discount of $0 and
$134,296)
|
12,469,374
|
20,494,589
|
Current portion of convertible
debt
|
-
|
7,419,612
|
Current portion of reclamation
liability
|
2,327,169
|
2,327,169
|
Total Current
Liabilities
|
26,076,804
|
45,006,407
|
|
|
|
OTHER
LIABILITIES
|
|
|
Long-term portion of note payable
(net of issuance costs of $408,546 and
$417,183)
|
4,734,639
|
5,415,271
|
Convertible note payables –
long term
|
16,911,548
|
-
|
Reclamation
liability
|
15,222,499
|
17,512,613
|
Total Other
Liabilities
|
36,868,686
|
22,927,884
|
|
|
|
Total
Liabilities
|
62,945,490
|
67,934,291
|
|
|
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
|
|
AREC - Class A Common stock: $.0001
par value; 230,000,000 shares authorized, 28,400,512 and 27,410,512
shares issued and outstanding, respectively
|
2,839
|
2,740
|
AREC - Series A Preferred stock:
$.0001 par value; 5,000,000 shares authorized, 0 and 0 shares
issued and outstanding, respectively
|
-
|
-
|
AREC - Series C Preferred stock:
$.001 par value; 20,000,000 shares authorized, 0 and 0 shares
issued and outstanding, respectively
|
-
|
-
|
Additional paid-in
capital
|
91,397,889
|
90,326,104
|
Accumulated
deficit
|
(124,977,659)
|
(123,033,485)
|
Total American Resources
Corporation’s Stockholders’ Equity
(Deficit)
|
|
|
Total Stockholders’
Deficit
|
(33,576,931)
|
(32,704,641)
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
(DEFICIT)
|
$29,368,559
|
$35,229,650
|
AMERICAN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
|
For the
Nine
Months
September
30,
2020
|
For the
Nine
Months
September
30,
2019
|
Cash
Flows from Operating activities:
|
|
|
Net
loss
|
$(1,829,148)
|
$(30,870,759)
|
Adjustments
to reconcile loss to net cash
|
|
|
Depreciation
|
1,855,236
|
3,036,747
|
Amortization of
mining rights
|
939,672
|
1,592,110
|
Accretion
expense
|
981,859
|
962,699
|
Cancelation of
debt
|
-
|
-
|
Liabilities reduced
due to sale of assets
|
(3,271,973)
|
-
|
Recovery of
previously impaired receipts
|
-
|
(50,806)
|
Amortization of
debt discount
|
-
|
7,722,197
|
Warrant
expense
|
230,050
|
2,528,598
|
Warrant
modification expense
|
-
|
2,545,360
|
Option
expense
|
-
|
245,356
|
Issuance of common
shares for services
|
18,800
|
1,806,040
|
Issuance of common
shares for debt settlement
|
642,060
|
-
|
Return of common
shares for property sale
|
(1,840,200)
|
-
|
|
|
|
Change
in current assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
2,378,755
|
1,300,654
|
Inventory
|
365,126
|
(840,526)
|
Prepaid expenses
and other assets
|
(175,000)
|
(335,174)
|
Accounts
payable
|
(303,567)
|
(2,274,582
|
Funds held for
others
|
-
|
(79,662)
|
Due to
affiliates
|
202,351
|
164,526
|
Accrued
interest
|
(2,296,237)
|
858,406
|
Cash used in
operating activities
|
(2,102,216)
|
(11,688,816)
|
|
|
|
Cash
Flows from Investing activities:
|
|
|
|
|
|
Cash paid for PPE,
net
|
-
|
(327,250)
|
Cash received in
asset acquisitions, net
|
417,857
|
650,000
|
Cash provided by
(used in) investing activities
|
417,857
|
322,750
|
|
|
|
Cash
Flows from Financing activities:
|
|
|
|
|
|
Principal payments
on long term debt
|
(1,072,745)
|
(2,548,111)
|
Proceeds from long
term debt
|
28,000
|
5,139,399
|
Proceeds from
convertible debt
|
3,638,277
|
399,980
|
Proceeds from
related party
|
-
|
8,639
|
Issuance of
warrants in conjunction with convertible notes
|
1,223,700
|
-
|
|
|
|
Net proceeds from
(payments to) factoring agreement
|
(1,807,443)
|
(1,087,413)
|
Sale of common
stock for cash in connection with public offering
|
-
|
4,354,000
|
Sale of common
stock for cash issued with warrants in connection with public
offering
|
-
|
3,409,600
|
Sale of common
stock in connection with warrant conversions
|
797,475
|
-
|
Cash provided by
financing activities
|
2,807,264
|
9,676,094
|
|
|
|
Increase (Decrease)
in cash and restricted cash
|
1,122,905
|
(1,689,972)
|
Cash and restricted
cash, beginning of period
|
268,811
|
2,704,799
|
Cash
and restricted cash, end of period
|
$1,391,716
|
$1,014,827
|
|
|
|
Supplemental
Information
|
|
|
Cash paid for
interest
|
$208,154
|
$389,437
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
Non-cash investing
and financing activities
|
|
|
Shares issued in
asset acquisition
|
$-
|
$24,400,000
|
Assumption of net
assets and liabilities for asset acquisitions
|
$-
|
$8,787,748
|
Issuance of
warrants in conjunction with convertible notes
|
$1,223,700
|
$-
|
Conversion of
accounts payable into common shares
|
$-
|
$231,661
|
Beneficial
Conversion Feature on note payable due to modification
|
$-
|
$7,362,925
|
Shares issued in
connection with note payable
|
$-
|
$297,831
|
Conversion of
Series A Preferred into common shares
|
$-
|
$161
|
Conversion of
Series C Preferred into common shares
|
$-
|
$1
|
Return of shares
related to employee settlement
|
$-
|
$11
|
Warrant exercise
for common shares
|
$-
|
$60
|
Reconciliation of Non-GAAP Measures
Reconciliation
of Adjusted EBITDA to Amounts Reported Under U.S. GAAP
|
For the three months ended
September 30, 2020
|
For the three months ended
September 30, 2019
|
Net
Income
|
123,982
|
(7,344,533)
|
|
|
|
Interest
& Other Expenses
|
379,583
|
1,121,030
|
Income
Tax Expense
|
-
|
-
|
Accretion
Expense
|
240,685
|
320,900
|
Depreciation
|
646,438
|
1,414,942
|
Amortization
of Mining Rights
|
313,224
|
252,728
|
Amortization
of Dedt Discount & Issuance
|
2,879
|
219,218
|
Non-Cash
Stock Options
|
-
|
-
|
Non-Cash
Warrant Expense
|
142,296
|
-
|
Non-Cash
Share Comp. Expense
|
101,615
|
138,857
|
Development
Costs
|
792,926
|
1,425,024
|
PCR
Restructuring Expenses
|
66,275
|
-
|
|
|
|
Total
Adjustments
|
2,685,921
|
4,892,699
|
|
|
|
Adjusted
EBITDA
|
2,809,903
|
(2,451,834)
|
About American Resources Corporation
American Resources Corporation is a supplier of high-quality raw
materials to the rapidly growing global infrastructure market. The
Company is focused on the extraction and processing of
metallurgical carbon, an essential ingredient used in steelmaking.
American Resources has a growing portfolio of operations located in
the Central Appalachian basin of eastern Kentucky and southern West
Virginia where premium quality metallurgical carbon deposits are
concentrated.
American Resources has established a nimble, low-cost business
model centered on growth, which provides a significant opportunity
to scale its portfolio of assets to meet the growing global
infrastructure market while also continuing to acquire operations
and significantly reduce their legacy industry risks. Its
streamlined and efficient operations are able to maximize margins
while reducing costs. For more information visit
americanresourcescorp.com or connect with the Company on
Facebook,
Twitter, and
LinkedIn.
Special Note Regarding Forward-Looking Statements
This
press release contains “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve known and unknown
risks, uncertainties, and other important factors that could cause
the Company’s actual results, performance, or achievements or
industry results to differ materially from any future results,
performance, or achievements expressed or implied by these
forward-looking statements. These statements are subject to a
number of risks and uncertainties, many of which are beyond
American Resources Corporation’s control. The words
“believes”, “may”, “will”,
“should”, “would”, “could”,
“continue”, “seeks”,
“anticipates”, “plans”,
“expects”, “intends”,
“estimates”, or similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain such identifying words. Any
forward-looking statements included in this press release are made
only as of the date of this release. The Company does not undertake
any obligation to update or supplement any forward-looking
statements to reflect subsequent events or circumstances. The
Company cannot assure you that the projected results or events will
be achieved.
PR Contact:
Precision
Public Relations
Matt
Sheldon
917-280-7329
matt@precisionpr.co
Investor Contact:
JTC
Team, LLC
Jenene
Thomas
833-475-8247
AREC@jtcir.com
Company Contact:
Mark
LaVerghetta
317-855-9926
ext. 0
Vice
President of Corporate Finance and Communications
investor@americanresourcescorp.com
Source:
American Resources Corporation