American Resources(US:AREC)2025-08-19 10:17PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of the company's financial condition and operational results Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show a decrease in total assets to $200.4 million from $205.0 million at year-end 2024, and an increase in total liabilities to $292.6 million, with a net loss of $8.7 million for Q2 2025, and restatement of prior period financials due to accounting errors Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Summary (as of June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $200,445,719 | $205,013,999 | | Total Current Assets | $9,542,095 | $11,325,039 | | Total Liabilities | $292,644,028 | $286,923,743 | | Total Current Liabilities | $82,298,344 | $84,802,847 | | Total Stockholders' Deficit | ($90,630,594) | ($80,348,078) | - The company's total assets decreased slightly, while total liabilities increased, leading to a larger total stockholders' deficit of $90.6 million as of June 30, 2025, compared to $80.3 million at the end of 20248 Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 (Restated) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $13,256 | $4,095 | $45,184 | $98,114 | | Net Loss from Operations | ($6,770,634) | ($8,432,856) | ($11,754,062) | ($15,163,041) | | Net Loss Attributable to AREC Shareholders | ($8,666,129) | ($11,056,660) | ($15,318,888) | ($17,998,025) | | Net Loss Per Share (Basic and Diluted) | ($0.10) | ($0.14) | ($0.19) | ($0.24) | - The company's revenue for the first six months of 2025 was $45,184, a significant decrease from $98,114 in the same period of 2024, though the net loss attributable to shareholders improved, decreasing to $15.3 million from $18.0 million year-over-year11 Condensed Consolidated Statements of Changes in Stockholders' Deficit - The total stockholders' deficit increased from $80.3 million at the end of 2024 to $90.6 million as of June 30, 2025, primarily driven by a net loss of $15.3 million for the six-month period, partially offset by stock compensation and shares issued to settle accounts payable1415 Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Six Months Ended June 30 | Cash Flow Activity | 2025 | 2024 (Restated) | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,880,683) | ($13,300,247) | | Net cash provided by (used in) investing activities | $2,691,099 | ($148,271,896) | | Net cash provided by financing activities | $5,980,665 | $146,703,378 | | Net change in cash and cash equivalents | ($208,919) | ($14,868,765) | - For the six months ended June 30, 2025, the company used $8.9 million in cash from operations, with significant year-over-year changes in investing and financing activities primarily due to proceeds from tax-exempt bonds in 2024 and convertible notes in 202516 Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's accounting policies, business segments, and the basis of presentation, highlighting the restatement of previously issued financial statements for 2024 due to accounting errors and expressing substantial doubt about the company's ability to continue as a going concern - The company's operations comprise three segments: American Infrastructure (coal mining), ReElements (rare earth elements), and Electrified Materials (metal recovery), with American Infrastructure and ReElements consolidated as variable interest entities (VIEs) despite distributed ownership18 - Management has concluded there is substantial doubt about the company's ability to continue as a going concern for the next twelve months, contingent on obtaining additional financing and generating revenue2729 - The company restated its previously issued financial statements for the year ended December 31, 2023, and the three and six months ended June 30, 2024, due to multiple accounting errors related to cash adjustments, investment classifications, bond compliance, lease accounting, accrued expenses, and stock compensation calculations3132 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic shift from coal mining towards revenue diversification through its ReElements and Electrified Materials segments, with coal production suspended due to adverse market conditions, resulting in decreased revenue but reduced operating expenses and net loss for H1 2025, while liquidity remains constrained - The company has shifted its business focus and capital allocation away from coal production towards diversifying revenue streams through its ReElements (rare earth elements) and Electrified Materials (metal recovery) segments, which were in development stages through 202420201 - All coal mining operations are currently idled due to adverse market conditions, with any future production focused on metallurgical coal203 - The company has a working capital deficit of $73.9 million as of June 30, 2025, and expects to fund its liquidity needs over the next 12 months with cash on hand and additional debt and equity financing277 Results of Operations Comparison of Results for the Three Months Ended June 30 | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $13,256 | $4,095 | $9,161 | | Total Operating Expenses | $6,783,890 | $8,436,951 | ($1,653,061) | | Net Loss from Operations | ($6,770,634) | ($8,432,856) | $1,662,222 | | Net Loss | ($8,668,904) | ($11,042,325) | $2,373,421 | Comparison of Results for the Six Months Ended June 30 | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $45,184 | $98,114 | ($52,930) | | Total Operating Expenses | $11,799,246 | $15,261,155 | ($3,461,909) | | Net Loss from Operations | ($11,754,062) | ($15,163,041) | $3,408,979 | | Net Loss | ($15,324,938) | ($18,063,448) | $2,738,510 | - For the six months ended June 30, 2025, total operating expenses decreased by $3.5 million compared to the prior year, primarily due to lower coal production costs, reduced general and administrative expenses, and lower professional fees272 Liquidity and Capital Resources - The company's primary liquidity sources are existing cash, bond fund reimbursements, and other debt/capital proceeds, with continued reliance on financing to support operations and the development of new businesses due to suspended coal production and limited revenues in 2024276 Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash used in operating activities | ($8,880,176) | ($13,300,247) | | Cash provided by (used in) investing activities | $2,691,099 | ($148,271,896) | | Cash provided by financing activities | $5,980,665 | $146,703,379 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is not required to provide this disclosure as it qualifies as a smaller reporting company - As a smaller reporting company, the registrant is exempt from providing disclosures about market risk285 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to insufficient accounting staff and lack of timely reconciliations, with no material changes to internal controls during the quarter - Management has concluded that the company's disclosure controls and procedures were not effective as of the period ending June 30, 2025288 - The ineffectiveness was attributed to an insufficient number of accounting and reporting staff and a lack of timely reconciliations288 - There were no changes in internal control over financial reporting during the quarter that materially affected the company's internal controls290 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, defaults on senior securities, mine safety disclosures, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is subject to routine litigation incidental to its business operations, with detailed information on specific cases referred to in the financial statements - The company is involved in ordinary routine litigation, and for details on specific legal cases, readers are directed to the contingencies footnote in the financial statements (Note 9, though the text incorrectly refers to Note 6)292293 Item 1A. Risk Factors This section is not applicable for this filing - No risk factors are provided in this quarterly report294 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - The company reports no unregistered sales of equity securities for the period295 Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during the period, although Note 7 of the financial statements indicates non-compliance with certain bond provisions, constituting an event of default - The company reports no defaults upon senior securities, which contradicts information in Note 7 stating non-compliance with certain bond provisions, constituting an event of default140296 Item 4. Mine Safety Disclosures Information regarding mine safety violations and other regulatory matters as required by the Dodd-Frank Act is included in Exhibit 95.1 of this report - Mine safety disclosures are provided in Exhibit 95.1 to the Quarterly Report297 Item 5. Other Information There is no other information to report for this period - The company reports no other information for the period298 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, various agreements, and certifications from the CEO and CFO - A comprehensive list of exhibits filed with the report is provided, including corporate governance documents, material contracts, officer certifications, and mine safety disclosures300303