American Resources Corporation Reports First Quarter 2020 Financial Results and Provides Business Outlook

Company prepared to rapidly emerge as leading infrastructure company solely focused on mining metallurgical carbon used in the steelmaking process
Company well-positioned to be a long-term supplier of raw material to the global infrastructure market while bringing a more efficient and modernized business model to the industry
Strategic steps taken to transform Company into infrastructure company producing pure metallurgical carbon, while enhancing environmental, social and governance (ESG) profile
Company expects multiple value driving milestones over the course of 2020

FISHERS, IN / ACCESSWIRE / June 18, 2020 / American Resources Corporation (NASDAQ:AREC) ("American Resources" or the "Company"), a supplier of raw materials to the rapidly growing global infrastructure marketplace with a primary focus on the extraction, processing, transportation and distribution of metallurgical carbon to the steel and specialty metals industries, today reported its first quarter of 2020 financial results.

Mark Jensen, Chairman and CEO of American Resources Corporation commented, "The first three months of 2020 continued to be very productive in the transformation of the Company in becoming an infrastructure company and pure producer of metallurgical carbon. We continued to advance our efforts and position the company to be a stable, long-term supplier of metallurgical carbon to the worldwide steel markets to support growing global infrastructure demand, while bringing a more efficient and modernized business model to the industry."

First Quarter 2020 Key Highlights

January 2020: Advanced the Company's Environmental Social Governance (ESG) position by establishing a partnership with Land Betterment Corporation, an environmental solutions company focused on fostering a positive impact through upcycling former coal mining sites to create sustainable community development and job creation.
February 2020: Completed the restructuring of Perry County Resources (PCR), the Company's fifth carbon processing and logistics complex which was acquired in September 2019. The Company implemented its Strategic Plan of Action to bring its next-generation operating model and philosophy to eliminate overburdensome, legacy costs and streamline its operations to allow the complex to operate more efficiently.
March 2020: Divested certain non-core assets at Perry County Resources to lower the complex's holding costs and to monetize assets that are not in the Company's 5-10 year operating plan.

Mr. Jensen continued, "Looking forward to the remainder of 2020 and into the coming years, we remain quite optimistic on global infrastructure demand and believe governments around the world will continue to look to increase infrastructure projects as a way to stimulate economic activity as we recover from the COVID-19 pandemic. We feel we are currently in a great position to fulfill a portion of that demand growth given the efforts and achievements we have made at our PCR and McCoy Elkhorn complexes to effectively be one of the lowest cost producers of metallurgical carbon in the industry. Additionally, and as we execute on this transformational phase of our growth, so does our equally important ability to provide stable long-term employment to a region in need."

"Lastly, we believe our ESG efforts will further distinguish American Resources as industry revolutionaries and the partnerships we have made will accelerate our goals to permanently shut down and remediate irrational thermal coal operation throughout our region and find creative ways to contribute to the advancement of social and environmental issues facing this region."

Financial Results for First Quarter 2020

For the first quarter of 2020, American Resources reported a net loss from operations of $4.26 million, or a loss of $0.12 per share, as compared with a net loss from operations of $9.89 million, or a loss of $0.48 per share, in the prior-year period. The Company earned adjusted EBITDA loss of $713,008 in the first quarter of 2020, as compared with adjusted EBITDA loss of $3.82 million for the first quarter of 2019.

Fourth Quarter 2019 Summary

Total revenues were $524,334 for the first quarter of 2020. Cost of sales (includes mining, transportation, royalty and processing costs,) for the first quarter of 2020 were $1.86 million, or 353 percent of total revenues, compared to $6.64 million, or 95 percent of total revenue in the same period of 2019.

General and administrative expenses for the first quarter of 2020 were $842,925, or ­­160 percent of total revenue, compared to $1.37 million during the first quarter of 2019. Depreciation for the first quarter of 2020 was $915,052, or 174 percent of total revenue. American Resources incurred interest expense of $500,640 during the first quarter of 2020 compared to $324,854 during the first quarter of 2019. Development costs during the quarter were $128,159, compared to $1.32 million in the fourth quarter of 2019.

The Company did not incur any income tax expense in the first 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

The Company produced and sold 6,568 short tons of coal in the first quarter of 2020, compared to 73,633 short tons in the fourth of 2019 and ­­99,338 short tons in the first quarter of 2019.

The exhibit below summarizes some of the key sales, production and financial metrics:

 
Three month ended
 
 
Three month ended
 

 
March 31,
 
 
December 31,
 
 
March 31,
 

 
2020
 
 
2019
 
 
2019
 

Sales Volume (a)

Tons Sold

 
 
6,568
 
 
 
73,633
 
 
 
99,338
 

Company Production (a)

McCoy Elkhorn Coal

 
 
6,568
 
 
 
28,351
 
 
 
38,276
 

Perry County Resources

 
 
–
 
 
 
45,282
 
 
 
–
 

Deane Mining

 
 
–
 
 
 
–
 
 
 
61,062
 

Total

 
 
6,568
 
 
 
73,633
 
 
 
99,338
 

Company Financial Metrics(b)

Revenue per Ton

 
 
79.83
 
 
 
85.48
 
 
 
70.41
 

Cash Cost per Ton Sold (c)

 
 
282.46
 
 
 
147.10
 
 
 
66.88
 

Cash Margin per Ton (c)

 
 
(202.63
)
 
 
(61.62
)
 
 
3.53
 

Development Costs

 
$
128,159
 
 
$
1,324,063
 
 
 
1,600,117
 

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

 
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
 

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
 

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

 
$ 
–
 
 
$ 
–
 

Reconciliation of Non-GAAP Measures
Reconciliation of Adjusted EBITDA to Amounts Reported Under U.S. GAAP

 
For the three months ended March 31, 2020
 
 
For the three months ended March 31, 2019
 

Net Income

 
 
(3,261,368
)
 
 
(10,065,620
)

Interest & Other Expenses

 
 
500,640
 
 
 
324,854
 

Income Tax Expense

 
 
–
 
 
 
–
 

Accretion Expense

 
 
370,587
 
 
 
321,701
 

Depreciation

 
 
915,052
 
 
 
816,916
 

Amortization of Mining Rights

 
 
313,224
 
 
 
536,791
 

Amortization of Dedt Discount & Issuance

 
 
–
 
 
 
134,296
 

Non-Cash Stock Options

 
 
–
 
 
 
49,161
 

Non-Cash Warrant Expense

 
 
115,025
 
 
 
2,385,000
 

Non-Cash Share Comp. Expense

 
 
–
 
 
 
68,693
 

Development Costs

 
 
128,159
 
 
 
1,600,117
 

PCR Restructuring Expenses

 
 
205,673
 
 
 
–
 

Total Adjustments

 
 
2,548,360
 
 
 
6,237,529
 

Adjusted EBITDA

 
 
(713,008
)
 
 
(3,828,091
)

Adjusted EBITDA is defined as net income before net interest expense, income tax expense, accretion expense, depreciation, non-cash stock compensation expense, transaction and other professional fees, and development costs. Adjusted EBITDA is not a measure of financial performance in accordance with GAAP, and we believe items excluded from Adjusted EBITDA are significant to a reader in understanding and assessing our financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income, income from operations, cash flow from operations or as a measure of our profitability, liquidity, or performance under GAAP. We believe that Adjusted EBITDA presents a useful measure of our ability to incur and service debt based on ongoing operations. Furthermore, similar measures are used by analysts to evaluate our operating performance. Investors should be aware that our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by others.

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

ReleaseID: 594261