American Resources(AREC) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Interim Consolidated Financial Statements The company's financial position improved with increased assets and positive equity, though net loss widened due to higher operational costs Consolidated Condensed Balance Sheets Total assets grew to $51.9 million and stockholders' equity turned positive, driven by stock issuances and reduced liabilities Consolidated Condensed Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $21,503,647 | $11,215,889 | | Total Assets | $51,901,373 | $38,415,395 | | Total Current Liabilities | $27,942,690 | $23,261,101 | | Total Liabilities | $49,133,890 | $58,420,895 | | Total Stockholders' Equity (Deficit) | $2,767,483 | $(20,005,500) | Consolidated Condensed Statements of Operations Revenue grew significantly from resumed coal sales, but higher operating expenses led to a substantial increase in net loss Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,813,923 | $294,646 | $3,217,781 | $1,045,816 | | Net Loss from Operations | $(7,842,882) | $(2,234,432) | $(19,401,315) | $(9,300,445) | | Net Income (Loss) | $(8,913,521) | $123,982 | $(21,953,551) | $(1,829,148) | | Net loss per share | $(0.15) | $0.00 | $(0.41) | $(0.07) | Consolidated Condensed Statements of Cash Flows Cash from financing activities funded increased cash usage in operations and investments for the nine-month period Cash Flow Summary for Nine Months Ended Sep 30 (Unaudited) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,441,221) | $(2,102,216) | | Net cash provided by (used in) investing activities | $(5,075,701) | $417,857 | | Net cash provided by financing activities | $31,446,016 | $2,807,264 | | Increase in cash and restricted cash | $8,929,094 | $1,122,905 | | Cash and restricted cash, end of period | $20,130,297 | $1,391,716 | Notes to Unaudited Consolidated Condensed Financial Statements Notes detail accounting policies for VIEs, significant equity issuances, and a major subsequent loan forgiveness event - The company invested in and licensed technology to several Variable Interest Entities (VIEs), including American Opportunity Venture, LLC and Novusterra, Inc., but is not the primary beneficiary and thus accounts for them using the equity method[16][18][52] Asset Retirement Obligation (ARO) Changes | Description | Amount | | :--- | :--- | | Balance at Dec 31, 2020 | $17,855,304 | | Accretion – nine months Sep 30, 2021 | $916,909 | | Balance at Sep 30, 2021 | $18,772,213 | - In June 2021, the company issued 8,600,000 shares of Class A Common Stock, raising net proceeds of $27,943,000[53] - Subsequent to the reporting period, on November 9, 2021, the company was released from all obligations of a $5,143,186 loan related to the Kentucky New Markets Development Program[65] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift to metallurgical coal, the operational impact of COVID-19, and resulting financial performance Overview and Operations The company focuses on metallurgical coal operations, which are recommencing after pandemic-related idling, and is diversifying into metal recovery - The company's business is focused on metallurgical coal for the steel industry, having ceased mining thermal coal since mid-2019, and is also diversifying into metal recovery and rare earth elements[71][72] - Many mining operations were idled due to the COVID-19 pandemic; Perry County's E4-2 mine recommenced operations on March 29, 2021, and McCoy Elkhorn's Carnegie 1 mine recommenced on October 8, 2021[77][99] - The company does not have any 'proven' or 'probable' reserves as defined by SEC Industry Guide 7 and is considered to be in the exploration stage[72][73][83] Results of Operations Q3 2021 revenue rose to $2.8 million with resumed production, but higher costs widened the net loss to $8.9 million Comparison of Operations for the Three Months Ended September 30 | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Operating Revenue | $2,813,923 | $294,646 | | Coal Sales and Processing Expenses | $3,068,847 | $72,692 | | Development Costs | $5,142,306 | $792,926 | | Net Income (Loss) | $(8,913,521) | $123,982 | - The primary driver for the increase in revenue and operating expenses was the ramp-up of mining activities in 2021 following the idling of operations during the COVID-19 pandemic[120][121] Liquidity and Capital Resources The company maintains liquidity with $19.1 million in cash, financed by equity and debt to fund operations - The company held $19,121,714 in available cash as of September 30, 2021[124] - For the nine months ending September 30, 2021, net cash from financing activities was $31.3 million, primarily from stock sales, which funded the $17.4 million used in operations and $5.1 million used in investing[13][125] - Future liquidity is expected to be funded by cash on hand, future borrowings, and issuance of common stock[124] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, disclosure under this item is not required - As a smaller reporting company, disclosure for this item is not required[130] Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to insufficient accounting staff - Management concluded that disclosure controls and procedures were not effective as of the end of the period[132] - The identified weaknesses were an insufficient number of accounting staff and a lack of timely reconciliations[132] PART II. OTHER INFORMATION Legal Proceedings The company is not involved in any litigation expected to have a material adverse effect on its financials - The company is not involved in any litigation expected to have a material adverse effect[136] Risk Factors This section is not applicable for this quarterly filing - Not applicable[136] Unregistered Sales of Equity Securities and Use of Proceeds The company sold 425,000 restricted common shares for gross proceeds of $1.275 million for general purposes - On March 17, 2021, the company sold 425,000 restricted common shares for gross proceeds of $1,275,000[136] Defaults upon Senior Securities The company reported no defaults upon its senior securities - None[137] Mine Safety Disclosures Mine safety violation information is provided in Exhibit 95.1 of the report - Mine safety disclosures are included in Exhibit 95.1 to the report[137] Other Information No other information was reported for this item - None[137] Exhibits This section lists all exhibits filed with the report, including contracts and certifications