10-Q

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: September 30, 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, IN 46038

(Address and Zip Code of principal executive offices)

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

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

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 ☒

As of October 28, 2020, the registrant had 35,602,410 shares of Class A common stock issued and outstanding.

AMERICAN RESOURCES CORPORATION

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements		3
	Consolidated Balance Sheets (Unaudited)		4
	Consolidated Statements of Operation for the Three and Nine Months ended September 30, 2020 and 2019 (Unaudited)		5
	Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months ended September 30, 2020 and 2019 (unaudited)		6
	Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2020 and 2019 (Unaudited)		9
	Notes to Unaudited Consolidated Financial Statements		10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		34
Item 4.	Controls and Procedures		34
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		35
Item 1A.	Risk Factors		35
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds		35
Item 3.	Defaults upon Senior Securities		35
Item 4.	Mine Safety Disclosures		35
Item 5.	Other Information		35
Item 6.	Exhibits		36
SIGNATURES			38

2

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

AMERICAN RESOURCES CORPORATION

CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

For the three months and nine months ended

September 30, 2020

3

AMERICAN RESOURCES CORPORATION

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

The accompanying footnotes are integral to the unaudited consolidated financial statements

4

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

The accompanying footnotes are integral to the unaudited consolidated financial statements

5

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE PERIOD FROM JANAURY 1, 2020 THROUGH SEPTEMBER 30, 2020 AND JANAURY 1, 2019 THROUGH SEPTEMBER 30, 2019

UNAUDITED

	Common Shares				Preferred Series A						Preferred Series C									Accumulated			Non-controlling
	Shares		Amount		Shares			Amount			Shares			Amount			APIC			Deficit			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 Preferred 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			-			-		-
Beneficial conversion on note payable due to modification		-		-		-			-			-			-			7,362,925			-			-		7,362,925
Net loss		-		-		-			-			-			-			-			(14,565,185	)		-		(14,565,185	)
Balance March 31, 2019		23,316,197		2,331		-			-			-			-			83,105,009			(66,680,368	)		-		16,426,972

6

	Common Shares						Preferred Series A				Preferred Series C						Accumulated			Non-controlling
	Shares			Amount			Shares		Amount		Shares		Amount		APIC		Deficit			Interest		Total
Issuance of common shares for cash, net		25,000			3			-		-		-		-		99,997		-			-		100,000
Issuance of common shares for services		58,000			6			-		-		-		-		133,834		-			-		133,840
Issuance of warrants to consultants		-			-			-		-		-		-		139,500		-			-		139,500
Issuance of common shares for conversion of accounts payable		50,000			5			-		-		-		-		182,495		-			-		182,500
Common shares issued in connection with note payable		25,000			3			-		-		-		-		87,247		-			-		87,250
Stock option expense		-			-			-		-		-		-		73,603		-			-		73,603
Cancellation of common shares		(107,000	)		(11	)		-		-		-		-		11		-			-		-
Warrant modification Expense		-			-			-		-		-		-		2,545,360		-			-		2,545,360
Net loss		-			-			-		-		-		-		-		(8,961,042	)		-		(8,961,042	)
Balance June 30, 2019		23,367,197			2,337			-		-		-		-		86,367,056		(75,641,410	)		-		10,727,983
Issuance of common shares and warrants issued for public offering, net		3,600,000			359			-		-		-		-		3,409,241		-			-		3,409,600
Common shares issued in connection with note payable		300,000			30			-		-		-		-		210,551		-			-		210,581
Underwriter Warrants		-			-			-		-		-		-		4,098		-			-		4,098
Stock option expense		-			-			-		-		-		-		103,060		-			-		103,060
Net loss		-			-			-		-		-		-		-		(7,344,532	)		-		(7,344,532	)
Balance September 30, 2019		27,267,197		$	2,726			-	$	-		-	$	-	$	90,094,006	$	(82,985,942	)	$	-	$	7,110,790

The accompanying footnotes are integral to the unaudited consolidated financial statements

7

	American Resources
	Common Stock
	Par value			0.0001						Accumulated
	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	)
Issuance of Warrants in conjunction with Convertible Notes		-			-			671,138			-			671,138
Common Stock Issuances		-			-			-			-			-
April 1 600,000 for loan modification		600,000			60			642,000			-			642,060
May 8 Return of 2,000,000 shares for Empire		(2,000,000	)		(200	)		(1,840,000	)		-			(1,840,200	)
May 26 20,000 for Investor Relations Contract		20,000			2			18,798			-			18,800
June 11 10,000 warrants exercised for cash		10,000			1			10,499			-			10,500
Amortization of Warrant and Option Expense		-			-			115,025			-			115,025
Net Income		-			-			-			1,308,237			1,308,237
Balance June 30, 2020		26,040,512			2,603			90,611,151			(125,101,641	)		(34,487,887	)
														-
July Warrants Exercised		-			29			293,866			-			293,895
														-
Conversion of Senior Convertible Notes		-			2			20,091			-			20,093
														-
Issuance of Warrants in conjunction with Convertible Notes		-			-			371,371			-			371,371
														-
Conversion of Senior Convertible Notes		-			205			(205	)		-			-
														-
Amortization of Warrant and Stock Option Expense		-			-			101,615			-			101,615
														-
Net Income		-			-			-			123,982			123,982
Balance September 30, 2020		26,040,512		$	2,839		$	91,397,889		$	(124,977,659	)	$	(33,576,931	)

The accompanying footnotes are integral to the unaudited consolidated financial statements

8

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

The accompanying footnotes are integral to the unaudited consolidated financial statements

9

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 or formed in 2020, 2019, 2018, 2016 and 2015 for the purpose of acquiring, rehabilitating and operating various natural resource assets including coal used in the steel making and industrial markets.

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), Perry County Resources LLC (PCR), American Rare Earth LLC (ARE) and American Metals LLC (AM). All significant intercompany accounts and transactions have been eliminated.

On June 8, 2020, American Rare Earth LLC was created as a wholly owned subsidiary of American Resources Corp for the purpose of developing and monetizing rare earth mineral deposits.

On June 28, 2020, American Metals LLC was created as a wholly owned subsidiary of American Resources Corp for the purpose of aggregating, processing and selling recovered steel and metals.

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 and nine months ended September 30, 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 consolidated 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 has 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.

10

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.

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 as a component of other income/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 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 September 30, 2020 and December 31, 2019 was $19,138 and $47,897, respectively. The total balance of restricted cash also includes amounts held under the management agreement in the amount of $0 and $82,828, respectively. See note 5 for terms of the management agreement. The balance as of September 30, 2020 and December 31, 2019 includes in the amount of $251,168 and $0, respectively, to pay for assumed liabilities in the PCR asset acquisition.

The balance as of September 30, 2020 and December 31, 2019 was $637,806 and $265,487, respectively.

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 nine months ended September 30, 2020 and September 30, 2019.

	September 30, 2020		September 30, 2019
Cash	$	753,910	$	716,840
Restricted Cash		637,806		297,987
Total cash and restricted cash presented in the consolidated statement of cash flows	$	1,391,716	$	1,014,827

11

Asset Acquisition:

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 $1,994,727. 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 were provisional as of December 31, 2019 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. As of September 30, 2020, the values assigned were deemed final.

The assets acquired and liabilities assumed of Perry County Coal, LLC were as follows at the purchase date:

Assets
Coal Inventory	$	523.150
Mine Development		415,984
Coal Refuse		142,443
Land		675,092
Equipment - Underground		692,815
Equipment - Surface		3,763
Processing and Loading Facility		1,550,663
Liabilities
Reclamation liability		2,009,181
Accrued liabilities		1,994,727

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.

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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 transaction resulted in a gain on sale of $6,820,949 for the 9 - month period ending September 30, 2020.

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 periods ending September 30, 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	$	18,538,806
Accretion – nine months September 30, 2019		962,699
Reclamation work – nine months September 30, 2019		-
Asset disposition		-
Gold Star Acquisition		1,300,000
Perry County Acquisition		2,950,761
Balance at September 30, 2019	$	23,752,266

Balance at December 31, 2019	$	19,839,782
Accretion – nine months September 30, 2020		981,859
Reclamation work – nine months September 30, 2020		-
Asset disposition		(3,271,973	)
Balance at September 30, 2020	$	17,549,668

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Revenue Recognition: The Company adopted and recognizes revenue in accordance with ASC 606 as of January 1, 2018, using the modified retrospective approach. The Company concluded that the adoption did not change the timing at which the Company historically recognized revenue nor did it have a material impact on its consolidated financial statements.

Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied; for all contracts this occurs when control of the promised goods have been transferred to our customers. For coal shipments to domestic and international customers via rail, control is transferred when the railcar is loaded.

Our revenue is comprised of sales of mined coal, sales of recovered metals and services for processing coal. All of the activity is undertaken in eastern Kentucky and Southern Indiana.

Revenue from metal recovery and sales are recognized when conditions within the contract or sales agreement are met including transfer of title.

Revenue from coal processing and loading are recognized when services have been performed according to the contract in place.

Our coal sales generally include 10 to 30-day payment terms following the transfer of control of the goods to the customer. We typically do not include extended payment terms in our contracts with customers. As such, spot sales prices and forward contract pricing has declined.

During late 2019 management anticipated adverse market conditions globally, and in response began to selectively reduce or idle coal production operations and furlough or terminate employees. During Q1 2020, the worldwide COVID-19 outbreak sharply reduced worldwide demand for infrastructure and steel products and their necessary inputs including Metallurgical coal. Company management fully idled the Company’s operations accordingly, and the operations have remained idled through the report date. These recent, global market disruptions and developments are expected to result in lower sales and gross margins for the coal industry and the Company in 2020 and possibly beyond.

Leases: In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”). ASU 2016-02, along with related amendments issued from 2017 to 2018 (collectively, the “New Leases Standard”), requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet. The Company adopted ASU 2016-02 effective January 1, 2019 using the modified retrospective approach and elected the option to not restate comparative periods in transition and also elected the package of practical expedients for all leases within the standard, which permits the Company not to reassess its prior conclusions about lease identification, lease classification and initial direct costs.

Beneficial Conversion Features of Convertible Securities: Conversion options that are not bifurcated as a derivative pursuant to ASC 815 and not accounted for as a separate equity component under the cash conversion guidance are evaluated to determine whether they are beneficial to the investor at inception (a beneficial conversion feature) or may become beneficial in the future due to potential adjustments. The beneficial conversion feature guidance in ASC 470-20 applies to convertible stock as well as convertible debt which are outside the scope of ASC 815. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. In addition, our preferred stock issues contain conversion terms that may change upon the occurrence of a future event, such as antidilution adjustment provisions. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as a dividend over either the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the dividend must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

The Company has a loan, convertible into common shares at $5.25 per share, with a beneficial conversion feature added through a loan modification on February 4, 2019. At the time of the modification the loan had a maturity date of three months, and the conversions may occur any time from the time of the modification.

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 September 30, 2020 and December 31, 2019 amounted to $0, for both periods. Allowance for other accounts receivables, including note receivables as of September 30, 2020 and December 31, 2019 amounted to $1,494,570 and $0, respectively. The allowance related to the purchase of a note receivable from a third party. The note receivable has collateral in certain mining permits which are strategic to KCC. Timing of payment on the note is uncertain resulting a full allowance for the note.

Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2020 and December 31, 2019.

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

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NOTE 2 - PROPERTY AND EQUIPMENT

At September 30, 2020 and December 31, 2019, property and equipment were comprised of the following:

	September 30, 2020			December 31, 2019
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
Coal refuse storage		12,134,192			12,171,271
Mine development		561,575			669,860
Land		1,572,435			1,748,169
Less: Accumulated depreciation		(11,971,657	)		(11,162,662	)
Total Property and Equipment, Net	$	23,253,811		$	27,668,885

Depreciation expense amounted to $646,438 and $1,414,942 for the three month periods September 30, 2020 and September 30, 2019, respectively. Depreciation expense amounted to $1,855,236 and $3,036,747 for the nine month periods September 30, 2020 and September 30, 2019, respectively.

The estimated useful lives are as follows:

Processing and Rail Facilities	20 years
Surface Equipment	7 years
Underground Equipment	5 years
Mining Rights	5-10 years
Coal Refuse Storage	10 years

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NOTE 3 - NOTES PAYABLE

During the nine-month period ended September 30, 2020, principal reductions of long term debt totaled $1,072,745. During the nine-month period ended September 30, 2020, increases to long term debt totaled $3,666,277, primarily from the senior convertible debt offering.

The senior convertible note has 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 nine-month period ended September 30, 2019, principal payments on long term debt totaled $2,548,111. During the nine-month period ended September 30, 2019, increases to long term debt totaled $8,039,379.

During the nine-month period ended September 30, 2020, proceeds from the factoring agreement totaled $0 and repayments totaled $1,807,443.

During the nine-month period ended September 30, 2019, proceeds from the factoring agreement totaled $16,710,922 and repayments totaled $17,798,335.

NOTE 4 - RELATED PARTY TRANSACTIONS

Land Resources & Royalties

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 September 30, 2020, royalty expense incurred with LRR amounted to $68,251 and amounts advanced from LRR amounted $25,866 and amounts repaid amounted to $0. For the three-month period ending September 30, 2019, royalty expense incurred with LRR amounted to $112,107 and amounts advanced from LRR amounted to $31,507 and amounts repaid to LRR amounted to $100,000.

For the nine-month period ending September 30, 2020, royalty expense incurred with LRR amounted to $149,416 and amounts advanced from LRR amounted $27,769 and amounts repaid amounted to $1,615. For the nine-month period ending September 30, 2019, royalty expense incurred with LRR amounted to $231,685 and amounts advanced from LRR amounted to $137,562 and amounts repaid to LRR amounted to $137,209.

As of September 30, 2020, total amounts owed LRR amounted to $979,146.

Land Betterment Corp

On February 13, 2020, the Company entered into a Contract Services Agreement with Land Betterment Corporation (LBET), 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 nine-months ended September 30, 2020 amounts incurred under the agreement amounted to $1,263,766 and amounts paid totaled $864,184. For the nine-months ended September 30, 2020, service charges covering members of the Company’s management amounted to $0.

As of September 30, 2020, total amounts owed to LBET amounted to $399,582 which has been included in trade payables.

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NOTE 5 – EQUITY TRANSACTIONS

Employee stock compensation expense for the three-month period ending September 30, 2020 and 2019 amounted to $101,615 and $103,060 respectively.

Employee stock compensation expense for the nine-month period ending September 30, 2020 and 2019 amounted to $331,665 and $245,354 respectively.

Common Share Transactions

On April 1, 2020, 600,000 common shares of the company were issued as part of the settlement with ENCECo, Inc. See below. The closing common stock price on this date was $1.07.

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. The closing common stock price on this date was $0.92

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. The closing common stock price on this date was $0.94

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.

On July 6, 2020, the company received notice of exercise of 100,000 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 $105,000 in cash consideration.

On July 6, 2020, the company received notice of exercise of 20,000 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 $21,000 in cash consideration.

On July 6, 2020, the company received notice of exercise of 40,000 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 $42,000 in cash consideration.

On July 7, 2020, the company received notice of exercise of 50,000 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 $52,500 in cash consideration.

On July 24, 2020, the company received notice of exercise of 40,000 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 $42,000 in cash consideration.

On July 24, 2020, the company received notice of exercise of 29,900 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 $31,395 in cash consideration.

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.

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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 20, 2020 Warrant C-6 was issued in connection to the 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.

On April 1, 2020 Warrant C-7 was issued in connection to the conversion of $375,690 of outstanding debt into the senior convertible notes. Warrant C-7 is for 37,569 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-8 was issued in connection to the conversion of $225,000 of outstanding debt into the senior convertible notes. Warrant C-8 is for 22,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-9 was issued in connection to the conversion of $900,000 of outstanding debt into the senior convertible notes. Warrant C-9 is for 90,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-10 was issued in connection to the conversion of $1,888,444 of outstanding debt into the senior convertible notes. Warrant C-10 is for 188,844 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-11 was issued in connection to the conversion of $200,000 of outstanding debt into the senior convertible notes. Warrant C-11 is for 20,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-12 was issued in connection to the conversion of $110,000 of outstanding debt into the senior convertible notes. Warrant C-12 is for 11,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

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

On April 14, 2020 Warrant C-15 was issued in connection to the purchase of $53,639 of the senior convertible notes. Warrant C-15 is for 5,364 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 14, 2022.

On April 14, 2020 Warrant C-16 was issued in connection to the purchase of $5,000 of the senior convertible notes. Warrant C-16 is for 500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 14, 2022.

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On June 1, 2020 Warrant C-18 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-18 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 1, 2022.

On June 5, 2020 Warrant C-27 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-27 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 5, 2022.

On June 11, 2020 Warrant C-19 was issued in connection to the issuance of $1,019,573 of the senior convertible notes. Warrant C-19 is for 101,957 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 11, 2022.

On June 11, 2020 Warrant C-20 was issued in connection to the issuance of $474,996 of the senior convertible notes. Warrant C-20 is for 47,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 11, 2022.

On June 15, 2020 Warrant C-23 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-23 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 15, 2022.

On June 16, 2020 Warrant C-24 was issued in connection to the issuance of $12,154 of the senior convertible notes. Warrant C-24 is for 1,215 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 16, 2022.

On June 22, 2020 Warrant C-21 was issued in connection to the purchase of $180,000 of the senior convertible notes. Warrant C-21 is for 18,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 30, 2022.

On June 23, 2020 Warrant C-25 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-25 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 23, 2022.

On June 30, 2020 Warrant C-26 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-26 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 30, 2022.

On June 30, 2020 Warrant C-21 was issued in connection to the purchase of $570,000 of the senior convertible notes. Warrant C-21 is for 57,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 30, 2022.

On August 19, 2020 Warrant C-28 was issued in connection to the purchase of $2,081,273 of the senior convertible notes. Warrant C-22 is for 208,127 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of August 19, 2022.

On August 26, 2020 Warrant C-22 was issued in connection to the purchase of $150,000 of the senior convertible notes. Warrant C-22 is for 15,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of August 26, 2022.

On September 8, 2020 Warrant C-14 was issued in connection to the purchase of $134,367 of the senior convertible notes. Warrant C-14 is for 13,437 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 8, 2022.

On September 14, 2020 Warrant C-29 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-29 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 14, 2022.

On September 14, 2020 Warrant C-30 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-30 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 14, 2022.

On September 16, 2020 Warrant C-31 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-31 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 16, 2022.

On September 29, 2020 Warrant C-32 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-32 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 29, 2022.

On September 30, 2020 Warrant C-33 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-33 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 30, 2022.

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The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the warrant and option fair value:

Warrant and Option Fair Value Inputs

	September 30, 2020			September 30, 2019
Expected Dividend Yield		0	%		0	%
Expected volatility	123-479		%	87.97-97.29		%
Risk-free rate	1.40-1.62		%	1.4-1.62		%
Expected life of warrants	1.596-6.151 years			.43-7.75 years

The following is a summary of the Company’s stock warrant activity for the nine months September 30, 2020:

Company Warrants:

WARRANTS
December 31, 2019 to September 30, 2020
			Weighted		Weighted
			Average		Average		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Warrants		Price		Life in Years		Value
Outstanding - December 31, 2018		5,545,227	$	2.745		1.704	$	42,063,228
Exercisable - December 31, 2018		5,545,227	$	2.745		1.704	$	42,063,228
Granted		7,450,900	$	2.516		-	$	-
Forfeited or Expired		1,697,223	$	7.638		-	$	-
Exercised		600,000	$	0.010		-	$	-
Outstanding - September 30, 2019		10,698,904	$	1.831		2.855	$	1,633,863
Exercisable - September 30, 2019		10,698,904	$	1.831		2.855	$	1,633,863

Exercisable - December 31, 2019		10,689,904	$	1.856	2.310	$	1,746,544
Granted	4.952,670		$	1.217	2.013	$	1,432,786
Forfeited or Expired		3,172,222	$	4.443	1.19	$	706,437
Exercised		2,359,822	$	0.138	1.37	$	3,214,338
Outstanding - September 30, 2020		10,119,530	$	1.114	2.687	$	5,152,399
Exercisable - September 30, 2020		10,119,530	$	1.114	2.687	$	5,152,399

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The following is a summary of the Company’s stock option activity for the nine months September 30, 2020:

Company Options:

OPTIONS
December 31, 2019 to September 30, 2020
			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 - December 31, 2018		70,000	$	4.214		4.247	$	405,000
Granted		375,000	$	3.105		-	$	-
Forfeited or Expired		-	$	-		-	$	-
Exercised		-	$	-		-	$	-
Outstanding - September 30, 2019		1,056,830	$	1.960		6.250	$	-
Exercisable - September 30, 2019		273,943	$	1.821		5.324	$	-

Outstanding - December 31, 2019	1,056,830	$	1.960	5.998	$	-
Exercisable - December 31, 2019	273,943	$	1.821	5.072	$	-
Granted	750,000	$	1.130	6.715	$	292,500
Forfeited or Expired	-	$	-	-	$	-
Exercised	-	$	-	-	$	-
Outstanding - September 30, 2020	1,806,830	$	1.615	5.856	$	1,130,333
Exercisable - September 30, 2020	536,220	$	1.597	4.707	$	399,489

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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.

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 $1,452,700, the Company has accrued $2,031,314 as a payable to the Commonwealth of Kentucky including amounts owed to the Kentucky Energy Cabinet. Claims assessed by the Mine Health Safety Administration amount to $947,302 of which the Company has accrued $564,560 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. During 2020, WCC has paid the delinquent transfer fees and has filed for permit transfer and the seller note was satisfactorily converted into the AREC’s convertible note offering. 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, 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 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. This note is currently 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.

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.

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, 2020. 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

On October 7, 2020, the company received notice of exercise of 1,441,369 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 $1,513,437 in cash consideration.

On October 8, 2020, the company received notice of exercise of 72,895 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 $76,540 in cash consideration.

On October 8, 2020, the Company issued 5,200,000 shares of Class A Common Stock at a price of $2.50 per share in conjunction with its effective S-3/A Registration Statement. Net proceeds to the Company amounted to $12,030,000.

On October 9, 2020, the company received notice of exercise of 90,000 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 $26,250 in cash consideration.

On October 19, 2020, the company received notice of exercise of 105,000 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 $110,250 in cash consideration.

On October 20, 2020, the company received notice of exercise of 45,000 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 $47,250 in cash consideration.

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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.

On January 5, 2017, American Resources Corporation (ARC) 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 seven 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 and specialty products.

Efforts to diversify revenue streams have led to the establishment of additional subsidiaries; American Metals LLC (AM) which is focused on the recovery and sale of recovered metal and steel and American Rare Earth LLC (ARE) which is focused on the aggregation and monetization of critical and rare earth element deposits.

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 reserves are defined on our properties.

McCoy Elkhorn Coal LLC

General:

Located primarily within Pike County, Kentucky, McCoy Elkhorn is currently comprised of two “hot idle” mines (Mine #15 and the Carnegie 1 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.

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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.

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.

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.

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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.

Other potential customers of Knott County Coal include industrial customers and specialty customers.

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.

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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.

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 $1,550,663.

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. The permits were successfully transferred on July 9, 2020.

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.

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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.

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.

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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.

Permits:

Wyoming County Coal controls 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.

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Quest Processing LLC

Quest Energy’s wholly-owned subsidiary, Quest Processing LLC, 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 Quest MGMT 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 September 30, 2019.

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 $-.

Permits:

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

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 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.

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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 legal matters.

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, SMCRA with respect to coal mining activities and ancillary activities; the CAA with respect to air emissions; the CWA with respect to water discharges and the permitting of key operational infrastructure such as impoundments; 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.

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.

30

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. 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.

Property

Our principal offices were located at 9002 Technology Way, Fishers, Indiana 46038. We paid $2,500 per month in rent for the office space and the rental lease expired in December 2018 and was 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 at 1845 South KY Highway 15, Hazard, Kentucky 41701 and currently pay $1,702 per month rent and $476 per month rent, respectively, and the rental leases expire January 1, 2030 at both locations.

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.

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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 is primarily run by company employees, McCoy Elkhorn’s Carnegie Mine is primarily run by contract labor, and the Company’s various coal preparation facilities are run by company employees.

The Company currently has approximately 10 employees, with a substantial majority based in eastern Kentucky. The Company is headquartered in Fishers, Indiana with four members of the Company’s executive team based at this location.

Results of Operations

Our consolidated operations had operating revenues of $294,646 and $1,045,816 for the three-months and nine-months ended September 30, 2020 and $1,847,279 and $18,183,681 operating revenue for the three-months and nine-months ended September 30, 2019.

For the three-months ended September 30, 2020 we have incurred net income attributable to American Resources Corporation shareholders in the amount of $123,982 for the and nine-months ended September 30, 2020 we have incurred a net loss of $1,829,148. For the three-months and nine-months ended September 30, 2019 we have incurred net loss attributable to American Resources Corporation shareholders in the amount of $7,344,532 and $30,870,759.

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, sale of common shares, cash from operations and loans.

For the three months ended September 30, 2020 and 2019, coal sales and processing expenses were $72,692 and $2,956,305 respectively, development costs, including loss on settlement of ARO were $792,926 and $1,425,024, respectively, and production taxes and royalties $154,604 and $948,148, respectively. Depreciation expense for the same periods ended September 30, 2020 and 2019 were $646,438 and $1,414,942 respectively.

For the nine months ended September 30, 2020 and 2019, coal sales and processing expenses were $2,590,435 and $15,254,961 respectively, development costs, including loss on settlement of ARO were $1,228,333 and $5,912,589, respectively, and production taxes and royalties $404,660 and $2,811,691, respectively. Depreciation expense for the same periods ended September 30, 2020 and 2019 were $1,855,236 and $3,036,747 respectively.

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Liquidity and Capital Resources

As of September 30, 2020, our available cash was $753,910. 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.

For the nine months ending September 30, 2020 our net cash flow used in operating activities was $878,516 and for the nine months ending September 30, 20198 the net cash flow used in operating activities was $11,688,816.

For the nine months ending September 30, 2020 and 2019 our net cash flows provided by investing activities were $417,857 and $322,750 respectively.

For the nine months ending September 30, 2020 and 2019 net cash proceeds from financing activities were $1,583,564 and $9,676,094, 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 Note1 to the financial statements included elsewhere in this report.

Recent Accounting Pronouncements

None.

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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.

As of September 30, 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, as of September 30, 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 September 30, 2020 that have materially affected the Company’s internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors

Not applicable.

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

During the 9-month period ending September 30, 2019, sales of unregistered equity securities totaled $45,200. Proceeds of these sales amounted to $201,000 which were primarily used for working capital and development costs.

During the 9-month period ending September 30, 2020 sales of unregistered equity securities totaled $999,900 which were for $600,000 of debt settlement, $379,900 warrant conversions and $20,000 for investor relations contract.

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.

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Item 6. Exhibits

The following exhibits are filed herewith except as otherwise noted. Exhibits referenced in previous filings by the Company with the SEC are incorporated by reference herein.

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

36

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.
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

37

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: October 28, 2020	By:	/s/ Mark C. Jensen
	Name:	Mark C. Jensen
	Title:	CEO, Chairman of the Board
		(Principal Executive Officer)

38

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Principal Executive Officer

I, Mark C. Jensen, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	AMERICAN RESOURCES CORPORATION
Date: October 28, 2020		/s/: Mark C. Jensen
		Mark C. Jensen,
		Chief Executive Officer
		Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Principal Financial Officer and

Principal Accounting Officer

I, Kirk P. Taylor, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	AMERICAN RESOURCES CORPORATION
Date: October 28, 2020		/s/: Kirk P. Taylor
		Kirk P. Taylor,
		Chief Financial Officer
		Principal Financial Officer
		Principal Accounting Officer

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of American Resources Corporation, (the “Company”) on Form 10-Q for the period ending September 30, 2020 to be filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Mark C. Jensen, Principal Executive Officer of the Company, certify, to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(I)	the accompanying Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

	AMERICAN RESOURCES CORPORATION
October 28, 2020	By:	/s/: Mark C. Jensen
		Mark C. Jensen,
		Chief Executive Officer
		Principal Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer

and Principal Accounting Officer

Pursuant to 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of American Resources Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2020 to be filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Kirk P. Taylor, Principal Financial Officer and Principal Accounting Officer of the Company, certify, to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(I)	the accompanying Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

	AMERICAN RESOURCES CORPORATION
October 28, 2020	By:	/s/: Kirk P. Taylor
		Kirk P. Taylor,
		Chief Financial Officer
		Principal Financial Officer
		Principal Accounting Officer

EX-95.1

EXHIBIT 95.1

Federal Mine Safety and Health Act Information

We work to prevent accidents and occupational illnesses. We have in place health and safety programs that include extensive employee training, safety incentives, drug and alcohol testing and safety audits. The objectives of our health and safety programs are to provide a safe work environment, provide employees with proper training and equipment and implement safety and health rules, policies and programs that foster safety excellence.

Our mining operations are subject to extensive and stringent compliance standards established pursuant to the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA monitors and rigorously enforces compliance with these standards, and our mining operations are inspected frequently. Citations and orders are issued by MSHA under Section 104 of the Mine Act for violations of the Mine Act or any mandatory health or safety standard, rule, order or regulation promulgated under the Mine Act.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requires issuers to include in periodic reports filed with the SEC certain information relating to citations or orders for violations of standards under the Mine Act. We present information below regarding certain mining safety and health violations, orders and citations, issued by MSHA and related assessments and legal actions and mine-related fatalities with respect to our active coal mining operations. In evaluating this information, consideration should be given to factors such as: (i) the number of violations, orders and citations will vary depending on the size of the coal mine, (ii) the number of violations, orders and citations issued will vary from inspector to inspector and mine to mine, and (iii) violations, orders and citations can be contested and appealed, and in that process, are often reduced in severity and amount, and are sometimes dismissed.

The following tables include information required by the Dodd-Frank Act for the nine months ended September 30, 2020. The mine data retrieval system maintained by MSHA may show information that is different than what is provided herein. Any such difference may be attributed to the need to update that information on MSHA’s system and/or other factors.

Mine or Operating Name / MSHA Identification Number	Section 104(a) S&S Citations(1)		Section 104(b) Orders(2)		Section 104(d) Citations and Orders(3)		Section 110(b)(2) Violations(4)		Section 107(a) Orders(5)		Total Dollar Value of MSHA Assessments Proposed (in thousands)(6)
Active Operations
McCoy Elkhorn Mine #15 / 15-18775		0		0		0		0		0	$	540.45
McCoy Elkhorn Carnegie Mine / 15-19313		0		0		0		0		0	$	38.68
McCoy Elkhorn Bevins Branch Preparation Plant / 15-10445		0		2		0		0		0	$	57.76
McCoy Elkhorn Point Rock / 15-07010		0		0		0		0		0	$	0.0
Deane Mining Access Mine/ 15-19532		0		0		0		0		0	$	182.38
Deane Mining Mill Creek Preparation Plant / 15-16577		0		0		0		0		0	$	15.55
Deane Mining Razorblade / 15-19829		0		0		0		0		0	$	6.2
Perry County Davidson Preparation Plant / 15-05485		0		0		0		0		0	$	52.10
Perry County E4-2 Mine / 15-19015
		3		0		0		0		0	$	45.65
Knott County Coal Wayland/15-19402		0		0		0		0		0	$	0.12

1

Mine or Operating Name / MSHA Identification Number	Total Number of Mining Related Fatalities		Received Notice of Pattern of Violations Under Section 104(e) (yes/no)(7)	Legal Actions Pending as of Last Day of Period		Legal Actions Initiated During Period		Legal Actions Resolved During Period
Active Operations
McCoy Elkhorn Mine #15 / 15-18775		0	No		0		0		0
McCoy Elkhorn Carnegie Mine / 15-19313		0	No		0		0		0
McCoy Elkhorn Bevins Branch Preparation Plant / 15-10445		0	No		0		0		0
McCoy Elkhorn Point Rock / 15-07010		0	No		0		0		0
Deane Mining Access Mine / 15-19532		0	No		0		0		0
Deane Mining Mill Creek Preparation Plant / 15-16577		0	No		0		0		0
Deane Mining Razorblade / 15-19829		0	No		0		0		0
Perry County Davidson Preparation Plant / 15-05485		0	No		0		0		0
Perry County E4-2 Mine / 15-19015		0	No		0		0		0
Knott County Coal Wayland / 15-19402		0	No		0		0		0

The number of legal actions pending before the Federal Mine Safety and Health Review Commission as of September 30, 2020 that fall into each of the following categories is as follows:

Mine or Operating Name / MSHA Identification Number	Contests of Citations and Orders		Contests of Proposed Penalties		Complaints for Compensation		Complaints of Discharge / Discrimination / Interference		Applications for Temporary Relief		Appeals of Judge’s Ruling
Active Operations
McCoy Elkhorn Mine #15 / 15-18775		1		1		0		0		0		0
McCoy Elkhorn Carnegie Mine / 15-19313		0		0		0		0		0		0
McCoy Elkhorn Bevins Branch Preparation Plant / 15-10445		1		1		0		0		0		0
McCoy Elkhorn Point Rock / 15-07010		0		0		0		0		0		0
Deane Mining Access Mine / 15-19532		0		0		0		0		0		0
Deane Mining Mill Creek Preparation Plant / 15-16577		0		0		0		0		0		0
Deane Mining Razorblade / 15-19829		0		0		0		0		0		0
Perry County Davidson Preparation Plant / 15-05485		12		12		0		0		0		0
Perry County E4-2 Mine / 15-19015		0		0		0		0		0		0
Knott County Coal Wayland / 15-19402		0		0		0		0		0		0

_____________

(1)	Mine Act section 104(a) S&S citations shown above are for alleged violations of mandatory health or safety standards that could significantly and substantially contribute to a coal mine health and safety hazard. It should be noted that, for purposes of this table, S&S citations that are included in another column, such as Section 104(d) citations, are not also included as Section 104(a) S&S citations in this column.
(2)	Mine Act section 104(b) orders are for alleged failures to totally abate a citation within the time period specified in the citation.
(3)	Mine Act section 104(d) citations and orders are for an alleged unwarrantable failure (i.e., aggravated conduct constituting more than ordinary negligence) to comply with mandatory health or safety standards.
(4)	Mine Act section 110(b)(2) violations are for an alleged “flagrant” failure (i.e., reckless or repeated) to make reasonable efforts to eliminate a known violation of a mandatory safety or health standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.
(5)	Mine Act section 107(a) orders are for alleged conditions or practices which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated and result in orders of immediate withdrawal from the area of the mine affected by the condition.
(6)	Amounts shown include assessments proposed by MSHA during the nine months ended September 30, 2020 on all citations and orders, including those citations and orders that are not required to be included within the above chart. This number may differ from actual assessments paid to MSHA as the Company may contest any proposed penalty.
(7)	Mine Act section 104(e) written notices are for an alleged pattern of violations of mandatory health or safety standards that could significantly and substantially contribute to a coal mine safety or health hazard.

2

XML

Cover - shares	9 Months Ended
	Sep. 30, 2020	Oct. 28, 2020
Cover [Abstract]
Entity Registrant Name	AMERICAN RESOURCES CORPORATION
Entity Central Index Key	0001590715
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2020
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		35,602,410
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash	$ 753,910	$ 3,324
Accounts Receivable	46,150	2,424,905
Inventory	150,503	515,630
Prepaid fees	175,000	0
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
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	0	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	0
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
Additional paid-in capital	91,397,889	90,326,104
Accumulated deficit	(124,977,659)	(123,033,485)
Total Stockholders' Deficit	(33,576,931)	(32,704,641)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	29,368,559	35,229,650
Series A Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred shares	0	0
Series C Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred shares	$ 0	$ 0

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Unamortized discount, current portion of long term-debt	$ 0	$ 134,296
Debt issuance costs, long-term portion of note payable	$ 408,546	$ 417,183
Series A Preferred Stock [Member]
Preferred Stock, Par Value	$ .0001	$ .0001
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Series C Preferred Stock [Member]
Preferred Stock, Par Value	$ .0001	$ .0001
Preferred Stock, Shares Authorized	20,000,000	20,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Class A [Member]
Common Stock, Par Value	$ .0001	$ .0001
Common Stock, Shares Authorized	230,000,000	230,000,000
Common Stock, Shares Issued	28,400,512	27,410,512
Common Stock, Shares Outstanding	28,400,512	27,410,512

XML

CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Coal Sales	$ 0	$ 1,847,279	$ 524,334	$ 18,162,805
Metal Aggregating, Processing and Sales	294,646	0	521,482	0
Processing Services Income	0	0	0	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	0	832,500	0
Gain on Depreciation Recapture	1,706,569	0	1,706,569	0
Gain on sale of stock	0	0	6,820,949	0
Loss on settlement of payable	0	0		(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	0	0	0	(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

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) UNAUDITED - USD ($)	Total	Preferred Series C [Member]	Common Share [Member]	Preferred Series A [Member]	APIC	Accumulated Deficit	Noncontrolling Interest
Balance, shares at Dec. 31, 2018		50,000	17,763,469	481,780
Balance, amount at Dec. 31, 2018	$ (9,199,822)	$ 5	$ 1,776	$ 48	$ 42,913,532	$ (52,115,183)	$ 0
Issuance of common shares for cash, net, shares			1,170,200
Issuance of common shares for cash, net, amount	4,254,000	$ 0	$ 117	$ 0	4,253,883	0	0
Issuance of common shares for services, shares			159,000
Issuance of common shares for services, amount	1,672,200	$ 0	$ 16	$ 0	1,672,184	0	0
Issuance of common shares for asset acquisition, shares			2,000,000
Issuance of common shares for asset acquisition, amount	24,400,000	$ 0	$ 200	$ 0	24,399,800	0	0
Issuance of common shares for conversion of debt and accounts payable, shares			4,417
Issuance of common shares for conversion of debt and accounts payable, amount	49,161	$ 0	$ 0	$ 0	49,161	0	0
Issuance of warrants to consultants	2,385,000	0	0	0	2,385,000	0	0
Stock option expense	68,693	$ 0	$ 0	$ 0	68,693	0	0
Issuance of common shares for warrant exercise, shares			599,427
Issuance of common shares for warrant exercise, amount	0	$ 0	$ 60	$ 0	(60)	0	0
Conversion of Series A Preferred into common stock, shares			1,605,934	(481,780)
Conversion of Series A Preferred into common stock, amount	0	$ 0	$ 161	$ (48)	(113)	0	0
Conversion of Series C into common stock, shares		(50,000)	13,750
Conversion of Series C into common stock, amount	0	$ (5)	$ 1	$ 0	4	0	0
Beneficial conversion on note payable due to modification	7,362,925	0	0	0	7,362,925	0	0
Net loss	(14,565,185)	$ 0	$ 0	$ 0	0	(14,565,185)	0
Balance, shares at Mar. 31, 2019			23,316,197
Balance, amount at Mar. 31, 2019	16,426,972	$ 0	$ 2,331	$ 0	83,105,009	(66,680,368)	0
Balance, shares at Dec. 31, 2018		50,000	17,763,469	481,780
Balance, amount at Dec. 31, 2018	(9,199,822)	$ 5	$ 1,776	$ 48	42,913,532	(52,115,183)	0
Beneficial conversion on note payable due to modification	7,362,925
Net loss	(30,870,759)
Warrant modification Expense	2,545,360
Issuance of Warrants in conjunction with Convertible Notes	0
Balance, shares at Sep. 30, 2019			27,267,197
Balance, amount at Sep. 30, 2019	7,110,790	$ 0	$ 2,726	$ 0	90,094,006	(82,985,942)	0
Balance, shares at Mar. 31, 2019			23,316,197
Balance, amount at Mar. 31, 2019	16,426,972	$ 0	$ 2,331	$ 0	83,105,009	(66,680,368)	0
Issuance of common shares for cash, net, shares			25,000
Issuance of common shares for cash, net, amount	100,000	$ 0	$ 3	$ 0	99,997	0	0
Issuance of common shares for services, shares			58,000
Issuance of common shares for services, amount	133,840	$ 0	$ 6	$ 0	133,834	0	0
Issuance of warrants to consultants	139,500	0	0	0	139,500	0	0
Stock option expense	73,603	0	0	0	73,603	0	0
Net loss	(8,961,042)	$ 0	$ 0	$ 0	0	(8,961,042)	0
Issuance of common shares for conversion of accounts payable, shares			50,000
Issuance of common shares for conversion of accounts payable, amount	182,500	$ 0	$ 5	$ 0	182,495	0	0
Common shares issued in connection with note payable, shares			25,000
Common shares issued in connection with note payable, amount	87,250	$ 0	$ 3	$ 0	87,247	0	0
Cancellation of common shares, shares			(107,000)
Cancellation of common shares, amount	0	$ 0	$ (11)	$ 0	11	0	0
Warrant modification Expense	2,545,360	$ 0	$ 0	$ 0	2,545,360	0	0
Balance, shares at Jun. 30, 2019			23,367,197
Balance, amount at Jun. 30, 2019	10,727,983	$ 0	$ 2,337	$ 0	86,367,056	(75,641,410)	0
Stock option expense	103,060	0	0	0	103,060	0	0
Net loss	(7,344,532)	$ 0	$ 0	$ 0	0	(7,344,532)	0
Common shares issued in connection with note payable, shares			300,000
Common shares issued in connection with note payable, amount	210,581	$ 0	$ 30	$ 0	210,551	0	0
Issuance of common shares and warrants issued for public offering, net, shares			3,600,000
Issuance of common shares and warrants issued for public offering, net, amount	3,409,600	$ 0	$ 359	$ 0	3,409,241	0	0
Underwriter Warrants	4,098	$ 0	$ 0	$ 0	4,098	0	0
Balance, shares at Sep. 30, 2019			27,267,197
Balance, amount at Sep. 30, 2019	7,110,790	$ 0	$ 2,726	$ 0	90,094,006	(82,985,942)	$ 0
Balance, shares at Dec. 31, 2019			27,410,512
Balance, amount at Dec. 31, 2019	(32,704,641)		$ 2,740		90,326,104	(123,033,485)
Net loss	(3,261,368)		0			(3,261,368)
Issuance of Warrants in conjunction with Convertible Notes	552,562		0		552,562	0
Amortization of Warrant and Option Expense	0		$ 0		115,025	(115,025)
Balance, shares at Mar. 31, 2020			27,410,512
Balance, amount at Mar. 31, 2020	(35,413,447)		$ 2,740		90,993,691	(126,409,878)
Balance, shares at Dec. 31, 2019			27,410,512
Balance, amount at Dec. 31, 2019	(32,704,641)		$ 2,740		90,326,104	(123,033,485)
Beneficial conversion on note payable due to modification	0
Net loss	(1,829,148)
Warrant modification Expense	0
Issuance of Warrants in conjunction with Convertible Notes	1,223,700
Balance, shares at Sep. 30, 2020			26,040,512
Balance, amount at Sep. 30, 2020	(33,576,931)		$ 2,839		91,397,889	(124,977,659)
Balance, shares at Mar. 31, 2020			27,410,512
Balance, amount at Mar. 31, 2020	(35,413,447)		$ 2,740		90,993,691	(126,409,878)
Net loss	1,308,237		0			1,308,237
Issuance of Warrants in conjunction with Convertible Notes	671,138				671,138
Amortization of Warrant and Option Expense	115,025		1		115,025	0
Common Stock Issuances	0		$ 0		0	0
April 1 600,000 for loan modification, shares			600,000
April 1 600,000 for loan modification, amount	642,060		$ 60		642,000	0
May 8 Return of 2,000,000 shares for Empire, shares			(2,000,000)
May 8 Return of 2,000,000 shares for Empire, amount	(1,840,200)		$ (200)		(1,840,000)	0
May 26 20,000 for Investor Relations Contract, shares			20,000
May 26 20,000 for Investor Relations Contract, amount	18,800		$ 2		18,798	0
June 11 10,000 warrants exercised for cash, shares			1,000
June 11 10,000 warrants exercised for cash, amount	10,500		$ 1		10,499	0
Balance, shares at Jun. 30, 2020			26,040,512
Balance, amount at Jun. 30, 2020	(34,487,887)		$ 2,603		90,611,151	(125,101,641)
Net loss	123,982					123,982
Issuance of Warrants in conjunction with Convertible Notes	371,371				3,713,711	0
July Warrants Exercised, Shares
July Warrants Exercised	293,895		$ 29		293,866	0
Conversion of Senior Convertible Notes, Shares
Conversion of Senior Convertible Notes	20,093		$ 2		20,091	0
Conversion of Senior Convertible Notes One, Amount			$ 205		(205)
Conversion of Senior Convertible Notes One, Shares
Amortization of Warrant and Stock Option Expense	101,615				101,615
Balance, shares at Sep. 30, 2020			26,040,512
Balance, amount at Sep. 30, 2020	$ (33,576,931)		$ 2,839		$ 91,397,889	$ (124,977,659)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 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	0	0
Liabilities reduced due to sale of assets	(3,271,973)	0
Recovery of previously impaired receipts	0	(50,806)
Amortization of debt discount	0	7,722,197
Warrant expense	230,050	2,528,598
Warrant modification expense	0	2,545,360
Option expense	0	245,356
Issuance of common shares for services	18,800	1,806,040
Issuance of common shares for debt settlement	642,060	0
Return of common shares for property sale	(1,840,200)	0
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	0	(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	0	(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	0	8,639
Issuance of warrants in conjunction with convertible notes	1,223,700	0
Net proceeds from (payments to) factoring agreement	(1,807,443)	(1,087,413)
Sale of common stock for cash in connection with public offering	0	4,354,000
Sale of common stock for cash issued with warrants in connection with public offering	0	3,409,600
Sale of common stock in connection with warrant conversions	797,475	0
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	0	0
Non-cash investing and financing activities
Shares issued in asset acquisition	0	24,400,000
Assumption of net assets and liabilities for asset acquisitions	0	8,787,748
Issuance of warrants in conjunction with convertible notes	1,223,700
Conversion of accounts payable into common shares	0	231,661
Beneficial Conversion Feature on note payable due to modification	0	7,362,925
Shares issued in connection with note payable	0	297,831
Conversion of Series A Preferred into common shares	0	161
Conversion of Series C Preferred into common shares	0	1
Return of shares related to employee settlement	0	11
Warrant exercise for common shares	$ 0	$ 60

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

American Resources Corporation (ARC or the Company) operates through subsidiaries that were acquired or formed in 2020, 2019, 2018, 2016 and 2015 for the purpose of acquiring, rehabilitating and operating various natural resource assets including coal used in the steel making and industrial markets.

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), Perry County Resources LLC (PCR), American Rare Earth LLC (ARE) and American Metals LLC (AM). All significant intercompany accounts and transactions have been eliminated.

On June 8, 2020, American Rare Earth LLC was created as a wholly owned subsidiary of American Resources Corp for the purpose of developing and monetizing rare earth mineral deposits.

On June 28, 2020, American Metals LLC was created as a wholly owned subsidiary of American Resources Corp for the purpose of aggregating, processing and selling recovered steel and metals.

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 and nine months ended September 30, 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 consolidated 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 has 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.

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 as a component of other income/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 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 September 30, 2020 and December 31, 2019 was $19,138 and $47,897, respectively. The total balance of restricted cash also includes amounts held under the management agreement in the amount of $0 and $82,828, respectively. See note 5 for terms of the management agreement. The balance as of September 30, 2020 and December 31, 2019 includes in the amount of $251,168 and $0, respectively, to pay for assumed liabilities in the PCR asset acquisition.

The balance as of September 30, 2020 and December 31, 2019 was $637,806 and $265,487, respectively.

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 nine months ended September 30, 2020 and September 30, 2019.

	September 30, 2020		September 30, 2019
Cash	$	753,910	$	716,840
Restricted Cash		637,806		297,987
Total cash and restricted cash presented in the consolidated statement of cash flows	$	1,391,716	$	1,014,827

Asset Acquisition:

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 $1,994,727. 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 were provisional as of December 31, 2019 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. As of September 30, 2020, the values assigned were deemed final.

The assets acquired and liabilities assumed of Perry County Coal, LLC were as follows at the purchase date:

Assets
Coal Inventory	$	523.150
Mine Development		415,984
Coal Refuse		142,443
Land		675,092
Equipment - Underground		692,815
Equipment - Surface		3,763
Processing and Loading Facility		1,550,663
Liabilities
Reclamation liability		2,009,181
Accrued liabilities		1,994,727

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.

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 transaction resulted in a gain on sale of $6,820,949 for the 9 - month period ending September 30, 2020.

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 periods ending September 30, 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	$	18,538,806
Accretion – nine months September 30, 2019		962,699
Reclamation work – nine months September 30, 2019		-
Asset disposition		-
Gold Star Acquisition		1,300,000
Perry County Acquisition		2,950,761
Balance at September 30, 2019	$	23,752,266

Balance at December 31, 2019	$	19,839,782
Accretion – nine months September 30, 2020		981,859
Reclamation work – nine months September 30, 2020		-
Asset disposition		(3,271,973	)
Balance at September 30, 2020	$	17,549,668

Revenue Recognition: The Company adopted and recognizes revenue in accordance with ASC 606 as of January 1, 2018, using the modified retrospective approach. The Company concluded that the adoption did not change the timing at which the Company historically recognized revenue nor did it have a material impact on its consolidated financial statements.

Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied; for all contracts this occurs when control of the promised goods have been transferred to our customers. For coal shipments to domestic and international customers via rail, control is transferred when the railcar is loaded.

Our revenue is comprised of sales of mined coal, sales of recovered metals and services for processing coal. All of the activity is undertaken in eastern Kentucky and Southern Indiana.

Revenue from metal recovery and sales are recognized when conditions within the contract or sales agreement are met including transfer of title.

Revenue from coal processing and loading are recognized when services have been performed according to the contract in place.

Our coal sales generally include 10 to 30-day payment terms following the transfer of control of the goods to the customer. We typically do not include extended payment terms in our contracts with customers. As such, spot sales prices and forward contract pricing has declined.

During late 2019 management anticipated adverse market conditions globally, and in response began to selectively reduce or idle coal production operations and furlough or terminate employees. During Q1 2020, the worldwide COVID-19 outbreak sharply reduced worldwide demand for infrastructure and steel products and their necessary inputs including Metallurgical coal. Company management fully idled the Company’s operations accordingly, and the operations have remained idled through the report date. These recent, global market disruptions and developments are expected to result in lower sales and gross margins for the coal industry and the Company in 2020 and possibly beyond.

Leases: In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”). ASU 2016-02, along with related amendments issued from 2017 to 2018 (collectively, the “New Leases Standard”), requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet. The Company adopted ASU 2016-02 effective January 1, 2019 using the modified retrospective approach and elected the option to not restate comparative periods in transition and also elected the package of practical expedients for all leases within the standard, which permits the Company not to reassess its prior conclusions about lease identification, lease classification and initial direct costs.

Beneficial Conversion Features of Convertible Securities: Conversion options that are not bifurcated as a derivative pursuant to ASC 815 and not accounted for as a separate equity component under the cash conversion guidance are evaluated to determine whether they are beneficial to the investor at inception (a beneficial conversion feature) or may become beneficial in the future due to potential adjustments. The beneficial conversion feature guidance in ASC 470-20 applies to convertible stock as well as convertible debt which are outside the scope of ASC 815. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. In addition, our preferred stock issues contain conversion terms that may change upon the occurrence of a future event, such as antidilution adjustment provisions. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as a dividend over either the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the dividend must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

The Company has a loan, convertible into common shares at $5.25 per share, with a beneficial conversion feature added through a loan modification on February 4, 2019. At the time of the modification the loan had a maturity date of three months, and the conversions may occur any time from the time of the modification.

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 September 30, 2020 and December 31, 2019 amounted to $0, for both periods. Allowance for other accounts receivables, including note receivables as of September 30, 2020 and December 31, 2019 amounted to $1,494,570 and $0, respectively. The allowance related to the purchase of a note receivable from a third party. The note receivable has collateral in certain mining permits which are strategic to KCC. Timing of payment on the note is uncertain resulting a full allowance for the note.

Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2020 and December 31, 2019.

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

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PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2020

PROPERTY AND EQUIPMENT

NOTE 2 - PROPERTY AND EQUIPMENT

 At September 30, 2020 and December 31, 2019, property and equipment were comprised of the following:

	September 30, 2020			December 31, 2019
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
Coal refuse storage		12,134,192			12,171,271
Mine development		561,575			669,860
Land		1,572,435			1,748,169
Less: Accumulated depreciation		(11,971,657	)		(11,162,662	)
Total Property and Equipment, Net	$	23,253,811		$	27,668,885

Depreciation expense amounted to $646,438 and $1,414,942 for the three month periods September 30, 2020 and September 30, 2019, respectively. Depreciation expense amounted to $1,855,236 and $3,036,747 for the nine month periods September 30, 2020 and September 30, 2019, respectively.

The estimated useful lives are as follows:

Processing and Rail Facilities	20 years
Surface Equipment	7 years
Underground Equipment	5 years
Mining Rights	5-10 years
Coal Refuse Storage	10 years

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NOTES PAYABLE

9 Months Ended

Sep. 30, 2020

NOTES PAYABLE

NOTE 3 - NOTES PAYABLE

During the nine-month period ended September 30, 2020, principal reductions of long term debt totaled $1,072,745. During the nine-month period ended September 30, 2020, increases to long term debt totaled $3,666,277, primarily from the senior convertible debt offering.

The senior convertible note has 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 nine-month period ended September 30, 2019, principal payments on long term debt totaled $2,548,111. During the nine-month period ended September 30, 2019, increases to long term debt totaled $8,039,379.

During the nine-month period ended September 30, 2020, proceeds from the factoring agreement totaled $0 and repayments totaled $1,807,443.

During the nine-month period ended September 30, 2019, proceeds from the factoring agreement totaled $16,710,922 and repayments totaled $17,798,335.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2020

RELATED PARTY TRANSACTIONS

NOTE 4 - RELATED PARTY TRANSACTIONS

Land Resources & Royalties

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 September 30, 2020, royalty expense incurred with LRR amounted to $68,251 and amounts advanced from LRR amounted $25,866 and amounts repaid amounted to $0. For the three-month period ending September 30, 2019, royalty expense incurred with LRR amounted to $112,107 and amounts advanced from LRR amounted to $31,507 and amounts repaid to LRR amounted to $100,000.

For the nine-month period ending September 30, 2020, royalty expense incurred with LRR amounted to $149,416 and amounts advanced from LRR amounted $27,769 and amounts repaid amounted to $1,615. For the nine-month period ending September 30, 2019, royalty expense incurred with LRR amounted to $231,685 and amounts advanced from LRR amounted to $137,562 and amounts repaid to LRR amounted to $137,209.

As of September 30, 2020, total amounts owed LRR amounted to $979,146.

Land Betterment Corp

On February 13, 2020, the Company entered into a Contract Services Agreement with Land Betterment Corporation (LBET), 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 nine-months ended September 30, 2020 amounts incurred under the agreement amounted to $1,263,766 and amounts paid totaled $864,184. For the nine-months ended September 30, 2020, service charges covering members of the Company’s management amounted to $0.

As of September 30, 2020, total amounts owed to LBET amounted to $399,582 which has been included in trade payables.

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EQUITY TRANSACTIONS

9 Months Ended

Sep. 30, 2020

EQUITY TRANSACTIONS

NOTE 5 - EQUITY TRANSACTIONS

Employee stock compensation expense for the three-month period ending September 30, 2020 and 2019 amounted to $101,615 and $103,060 respectively.

Employee stock compensation expense for the nine-month period ending September 30, 2020 and 2019 amounted to $331,665 and $245,354 respectively.

Common Share Transactions

On April 1, 2020, 600,000 common shares of the company were issued as part of the settlement with ENCECo, Inc. See below. The closing common stock price on this date was $1.07.

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. The closing common stock price on this date was $0.92

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. The closing common stock price on this date was $0.94

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.

On July 6, 2020, the company received notice of exercise of 100,000 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 $105,000 in cash consideration.

On July 6, 2020, the company received notice of exercise of 20,000 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 $21,000 in cash consideration.

On July 6, 2020, the company received notice of exercise of 40,000 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 $42,000 in cash consideration.

On July 7, 2020, the company received notice of exercise of 50,000 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 $52,500 in cash consideration.

On July 24, 2020, the company received notice of exercise of 40,000 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 $42,000 in cash consideration.

On July 24, 2020, the company received notice of exercise of 29,900 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 $31,395 in cash consideration.

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.

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 20, 2020 Warrant C-6 was issued in connection to the 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.

On April 1, 2020 Warrant C-7 was issued in connection to the conversion of $375,690 of outstanding debt into the senior convertible notes. Warrant C-7 is for 37,569 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-8 was issued in connection to the conversion of $225,000 of outstanding debt into the senior convertible notes. Warrant C-8 is for 22,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-9 was issued in connection to the conversion of $900,000 of outstanding debt into the senior convertible notes. Warrant C-9 is for 90,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-10 was issued in connection to the conversion of $1,888,444 of outstanding debt into the senior convertible notes. Warrant C-10 is for 188,844 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-11 was issued in connection to the conversion of $200,000 of outstanding debt into the senior convertible notes. Warrant C-11 is for 20,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

On April 1, 2020 Warrant C-12 was issued in connection to the conversion of $110,000 of outstanding debt into the senior convertible notes. Warrant C-12 is for 11,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 1, 2022.

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

On April 14, 2020 Warrant C-15 was issued in connection to the purchase of $53,639 of the senior convertible notes. Warrant C-15 is for 5,364 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 14, 2022.

On April 14, 2020 Warrant C-16 was issued in connection to the purchase of $5,000 of the senior convertible notes. Warrant C-16 is for 500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of April 14, 2022.

On June 1, 2020 Warrant C-18 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-18 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 1, 2022.

On June 5, 2020 Warrant C-27 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-27 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 5, 2022.

On June 11, 2020 Warrant C-19 was issued in connection to the issuance of $1,019,573 of the senior convertible notes. Warrant C-19 is for 101,957 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 11, 2022.

On June 11, 2020 Warrant C-20 was issued in connection to the issuance of $474,996 of the senior convertible notes. Warrant C-20 is for 47,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 11, 2022.

On June 15, 2020 Warrant C-23 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-23 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 15, 2022.

On June 16, 2020 Warrant C-24 was issued in connection to the issuance of $12,154 of the senior convertible notes. Warrant C-24 is for 1,215 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 16, 2022.

On June 22, 2020 Warrant C-21 was issued in connection to the purchase of $180,000 of the senior convertible notes. Warrant C-21 is for 18,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 30, 2022.

On June 23, 2020 Warrant C-25 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-25 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 23, 2022.

On June 30, 2020 Warrant C-26 was issued in connection to the issuance of $2,000 of the senior convertible notes. Warrant C-26 is for 200 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 30, 2022.

On June 30, 2020 Warrant C-21 was issued in connection to the purchase of $570,000 of the senior convertible notes. Warrant C-21 is for 57,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of June 30, 2022.

On August 19, 2020 Warrant C-28 was issued in connection to the purchase of $2,081,273 of the senior convertible notes. Warrant C-22 is for 208,127 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of August 19, 2022.

On August 26, 2020 Warrant C-22 was issued in connection to the purchase of $150,000 of the senior convertible notes. Warrant C-22 is for 15,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of August 26, 2022.

On September 8, 2020 Warrant C-14 was issued in connection to the purchase of $134,367 of the senior convertible notes. Warrant C-14 is for 13,437 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 8, 2022.

On September 14, 2020 Warrant C-29 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-29 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 14, 2022.

On September 14, 2020 Warrant C-30 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-30 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 14, 2022.

On September 16, 2020 Warrant C-31 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-31 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 16, 2022.

On September 29, 2020 Warrant C-32 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-32 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 29, 2022.

On September 30, 2020 Warrant C-33 was issued in connection to the purchase of $105,000 of the senior convertible notes. Warrant C-33 is for 10,500 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of September 30, 2022.

The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the warrant and option fair value:

Warrant and Option Fair Value Inputs

	September 30, 2020			September 30, 2019
Expected Dividend Yield		0	%		0	%
Expected volatility	123-479		%	87.97-97.29		%
Risk-free rate	1.40-1.62		%	1.4-1.62		%
Expected life of warrants	1.596-6.151 years			.43-7.75 years

The following is a summary of the Company’s stock warrant activity for the nine months September 30, 2020:

Company Warrants:

WARRANTS
December 31, 2019 to September 30, 2020
			Weighted		Weighted
			Average		Average		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Warrants		Price		Life in Years		Value
Outstanding - December 31, 2018		5,545,227	$	2.745		1.704	$	42,063,228
Exercisable - December 31, 2018		5,545,227	$	2.745		1.704	$	42,063,228
Granted		7,450,900	$	2.516		-	$	-
Forfeited or Expired		1,697,223	$	7.638		-	$	-
Exercised		600,000	$	0.010		-	$	-
Outstanding - September 30, 2019		10,698,904	$	1.831		2.855	$	1,633,863
Exercisable - September 30, 2019		10,698,904	$	1.831		2.855	$	1,633,863

Exercisable - December 31, 2019		10,689,904	$	1.856	2.310	$	1,746,544
Granted	4.952,670		$	1.217	2.013	$	1,432,786
Forfeited or Expired		3,172,222	$	4.443	1.19	$	706,437
Exercised		2,359,822	$	0.138	1.37	$	3,214,338
Outstanding - September 30, 2020		10,119,530	$	1.114	2.687	$	5,152,399
Exercisable - September 30, 2020		10,119,530	$	1.114	2.687	$	5,152,399

The following is a summary of the Company’s stock option activity for the nine months September 30, 2020:

Company Options:

OPTIONS
December 31, 2019 to September 30, 2020
			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 - December 31, 2018		70,000	$	4.214		4.247	$	405,000
Granted		375,000	$	3.105		-	$	-
Forfeited or Expired		-	$	-		-	$	-
Exercised		-	$	-		-	$	-
Outstanding - September 30, 2019		1,056,830	$	1.960		6.250	$	-
Exercisable - September 30, 2019		273,943	$	1.821		5.324	$	-

Outstanding - December 31, 2019	1,056,830	$	1.960	5.998	$	-
Exercisable - December 31, 2019	273,943	$	1.821	5.072	$	-
Granted	750,000	$	1.130	6.715	$	292,500
Forfeited or Expired	-	$	-	-	$	-
Exercised	-	$	-	-	$	-
Outstanding - September 30, 2020	1,806,830	$	1.615	5.856	$	1,130,333
Exercisable - September 30, 2020	536,220	$	1.597	4.707	$	399,489

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CONTINGENCIES

9 Months Ended

Sep. 30, 2020

CONTINGENCIES

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.

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 $1,452,700, the Company has accrued $2,031,314 as a payable to the Commonwealth of Kentucky including amounts owed to the Kentucky Energy Cabinet. Claims assessed by the Mine Health Safety Administration amount to $947,302 of which the Company has accrued $564,560 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. During 2020, WCC has paid the delinquent transfer fees and has filed for permit transfer and the seller note was satisfactorily converted into the AREC’s convertible note offering. 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, 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 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. This note is currently 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.

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.

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, 2020. 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.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2020

SUBSEQUENT EVENTS

NOTE 7 - SUBSEQUENT EVENTS

On October 7, 2020, the company received notice of exercise of 1,441,369 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 $1,513,437 in cash consideration.

On October 8, 2020, the company received notice of exercise of 72,895 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 $76,540 in cash consideration.

On October 8, 2020, the Company issued 5,200,000 shares of Class A Common Stock at a price of $2.50 per share in conjunction with its effective S-3/A Registration Statement. Net proceeds to the Company amounted to $12,030,000.

On October 9, 2020, the company received notice of exercise of 90,000 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 $26,250 in cash consideration.

On October 19, 2020, the company received notice of exercise of 105,000 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 $110,250 in cash consideration.

On October 20, 2020, the company received notice of exercise of 45,000 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 $47,250 in cash consideration.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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), Perry County Resources LLC (PCR), American Rare Earth LLC (ARE) and American Metals LLC (AM). All significant intercompany accounts and transactions have been eliminated.

On June 8, 2020, American Rare Earth LLC was created as a wholly owned subsidiary of American Resources Corp for the purpose of developing and monetizing rare earth mineral deposits.

On June 28, 2020, American Metals LLC was created as a wholly owned subsidiary of American Resources Corp for the purpose of aggregating, processing and selling recovered steel and metals.

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 and nine months ended September 30, 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 consolidated 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 has 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.

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 as a component of other income/expense in the accompanying Consolidated Statements of Operations.

Cash

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 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 September 30, 2020 and December 31, 2019 was $19,138 and $47,897, respectively. The total balance of restricted cash also includes amounts held under the management agreement in the amount of $0 and $82,828, respectively. See note 5 for terms of the management agreement. The balance as of September 30, 2020 and December 31, 2019 includes in the amount of $251,168 and $0, respectively, to pay for assumed liabilities in the PCR asset acquisition.

The balance as of September 30, 2020 and December 31, 2019 was $637,806 and $265,487, respectively.

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 nine months ended September 30, 2020 and September 30, 2019.

	September 30, 2020		September 30, 2019
Cash	$	753,910	$	716,840
Restricted Cash		637,806		297,987
Total cash and restricted cash presented in the consolidated statement of cash flows	$	1,391,716	$	1,014,827

Asset Acquisition

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 $1,994,727. 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 were provisional as of December 31, 2019 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. As of September 30, 2020, the values assigned were deemed final.

The assets acquired and liabilities assumed of Perry County Coal, LLC were as follows at the purchase date:

Assets
Coal Inventory	$	523.150
Mine Development		415,984
Coal Refuse		142,443
Land		675,092
Equipment - Underground		692,815
Equipment - Surface		3,763
Processing and Loading Facility		1,550,663
Liabilities
Reclamation liability		2,009,181
Accrued liabilities		1,994,727

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.

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 transaction resulted in a gain on sale of $6,820,949 for the 9 - month period ending September 30, 2020.

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 periods ending September 30, 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	$	18,538,806
Accretion – nine months September 30, 2019		962,699
Reclamation work – nine months September 30, 2019		-
Asset disposition		-
Gold Star Acquisition		1,300,000
Perry County Acquisition		2,950,761
Balance at September 30, 2019	$	23,752,266

Balance at December 31, 2019	$	19,839,782
Accretion – nine months September 30, 2020		981,859
Reclamation work – nine months September 30, 2020		-
Asset disposition		(3,271,973	)
Balance at September 30, 2020	$	17,549,668

Revenue Recognition

The Company adopted and recognizes revenue in accordance with ASC 606 as of January 1, 2018, using the modified retrospective approach. The Company concluded that the adoption did not change the timing at which the Company historically recognized revenue nor did it have a material impact on its consolidated financial statements.

Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied; for all contracts this occurs when control of the promised goods have been transferred to our customers. For coal shipments to domestic and international customers via rail, control is transferred when the railcar is loaded.

Our revenue is comprised of sales of mined coal, sales of recovered metals and services for processing coal. All of the activity is undertaken in eastern Kentucky and Southern Indiana.

Revenue from metal recovery and sales are recognized when conditions within the contract or sales agreement are met including transfer of title.

Revenue from coal processing and loading are recognized when services have been performed according to the contract in place.

Our coal sales generally include 10 to 30-day payment terms following the transfer of control of the goods to the customer. We typically do not include extended payment terms in our contracts with customers. As such, spot sales prices and forward contract pricing has declined.

During late 2019 management anticipated adverse market conditions globally, and in response began to selectively reduce or idle coal production operations and furlough or terminate employees. During Q1 2020, the worldwide COVID-19 outbreak sharply reduced worldwide demand for infrastructure and steel products and their necessary inputs including Metallurgical coal. Company management fully idled the Company’s operations accordingly, and the operations have remained idled through the report date. These recent, global market disruptions and developments are expected to result in lower sales and gross margins for the coal industry and the Company in 2020 and possibly beyond.

Leases

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”). ASU 2016-02, along with related amendments issued from 2017 to 2018 (collectively, the “New Leases Standard”), requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet. The Company adopted ASU 2016-02 effective January 1, 2019 using the modified retrospective approach and elected the option to not restate comparative periods in transition and also elected the package of practical expedients for all leases within the standard, which permits the Company not to reassess its prior conclusions about lease identification, lease classification and initial direct costs.

Beneficial Conversion Features of Convertible Securities

Conversion options that are not bifurcated as a derivative pursuant to ASC 815 and not accounted for as a separate equity component under the cash conversion guidance are evaluated to determine whether they are beneficial to the investor at inception (a beneficial conversion feature) or may become beneficial in the future due to potential adjustments. The beneficial conversion feature guidance in ASC 470-20 applies to convertible stock as well as convertible debt which are outside the scope of ASC 815. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. In addition, our preferred stock issues contain conversion terms that may change upon the occurrence of a future event, such as antidilution adjustment provisions. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as a dividend over either the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the dividend must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

The Company has a loan, convertible into common shares at $5.25 per share, with a beneficial conversion feature added through a loan modification on February 4, 2019. At the time of the modification the loan had a maturity date of three months, and the conversions may occur any time from the time of the modification.

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 September 30, 2020 and December 31, 2019 amounted to $0, for both periods. Allowance for other accounts receivables, including note receivables as of September 30, 2020 and December 31, 2019 amounted to $1,494,570 and $0, respectively. The allowance related to the purchase of a note receivable from a third party. The note receivable has collateral in certain mining permits which are strategic to KCC. Timing of payment on the note is uncertain resulting a full allowance for the note.

Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2020 and December 31, 2019.

Reclassifications

Reclassifications of prior periods have been made to conform with current year presentation.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2020

Schedule of restricted cash and cash equivalents

	September 30, 2020		September 30, 2019
Cash	$	753,910	$	716,840
Restricted Cash		637,806		297,987
Total cash and restricted cash presented in the consolidated statement of cash flows	$	1,391,716	$	1,014,827

Schedule of Asset Retirement Obligations

Balance at December 31, 2018	$	18,538,806
Accretion – nine months September 30, 2019		962,699
Reclamation work – nine months September 30, 2019		-
Asset disposition		-
Gold Star Acquisition		1,300,000
Perry County Acquisition		2,950,761
Balance at September 30, 2019	$	23,752,266

Balance at December 31, 2019	$	19,839,782
Accretion – nine months September 30, 2020		981,859
Reclamation work – nine months September 30, 2020		-
Asset disposition		(3,271,973	)
Balance at September 30, 2020	$	17,549,668

Perry County Coal, LLC [Member]

Schedule of assets acquired and liabilities assumed

Assets
Coal Inventory	$	523.150
Mine Development		415,984
Coal Refuse		142,443
Land		675,092
Equipment - Underground		692,815
Equipment - Surface		3,763
Processing and Loading Facility		1,550,663
Liabilities
Reclamation liability		2,009,181
Accrued liabilities		1,994,727

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PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2020

PROPERTY AND EQUIPMENT

Schedule of property, plant and equipment

	September 30, 2020			December 31, 2019
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
Coal refuse storage		12,134,192			12,171,271
Mine development		561,575			669,860
Land		1,572,435			1,748,169
Less: Accumulated depreciation		(11,971,657	)		(11,162,662	)
Total Property and Equipment, Net	$	23,253,811		$	27,668,885

Schedule of property, plant and equipment, estimated useful lives

Processing and Rail Facilities	20 years
Surface Equipment	7 years
Underground Equipment	5 years
Mining Rights	5-10 years
Coal Refuse Storage	10 years

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EQUITY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2020

EQUITY TRANSACTIONS

Schedule of Stockholders' Equity Note, Warrants

	September 30, 2020			September 30, 2019
Expected Dividend Yield		0	%		0	%
Expected volatility	123-479		%	87.97-97.29		%
Risk-free rate	1.40-1.62		%	1.4-1.62		%
Expected life of warrants	1.596-6.151 years			.43-7.75 years

Schedule of assumptions used to messure fair value of warrants/rights

Company Warrants:

			Weighted		Weighted
			Average		Average		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Warrants		Price		Life in Years		Value
Outstanding - December 31, 2018		5,545,227	$	2.745		1.704	$	42,063,228
Exercisable - December 31, 2018		5,545,227	$	2.745		1.704	$	42,063,228
Granted		7,450,900	$	2.516		-	$	-
Forfeited or Expired		1,697,223	$	7.638		-	$	-
Exercised		600,000	$	0.010		-	$	-
Outstanding - September 30, 2019		10,698,904	$	1.831		2.855	$	1,633,863
Exercisable - September 30, 2019		10,698,904	$	1.831		2.855	$	1,633,863

Exercisable - December 31, 2019		10,689,904	$	1.856	2.310	$	1,746,544
Granted	4.952,670		$	1.217	2.013	$	1,432,786
Forfeited or Expired		3,172,222	$	4.443	1.19	$	706,437
Exercised		2,359,822	$	0.138	1.37	$	3,214,338
Outstanding - September 30, 2020		10,119,530	$	1.114	2.687	$	5,152,399
Exercisable - September 30, 2020		10,119,530	$	1.114	2.687	$	5,152,399

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 - December 31, 2018		70,000	$	4.214		4.247	$	405,000
Granted		375,000	$	3.105		-	$	-
Forfeited or Expired		-	$	-		-	$	-
Exercised		-	$	-		-	$	-
Outstanding - September 30, 2019		1,056,830	$	1.960		6.250	$	-
Exercisable - September 30, 2019		273,943	$	1.821		5.324	$	-

Outstanding - December 31, 2019	1,056,830	$	1.960	5.998	$	-
Exercisable - December 31, 2019	273,943	$	1.821	5.072	$	-
Granted	750,000	$	1.130	6.715	$	292,500
Forfeited or Expired	-	$	-	-	$	-
Exercised	-	$	-	-	$	-
Outstanding - September 30, 2020	1,806,830	$	1.615	5.856	$	1,130,333
Exercisable - September 30, 2020	536,220	$	1.597	4.707	$	399,489

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Sep. 30, 2020	Sep. 30, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash	$ 753,910	$ 716,840
Restricted Cash	637,806	297,987
Total cash and restricted cash presented in the consolidated statement of cash flows	$ 1,391,716	$ 1,014,827

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Assets
Equipment - Underground	$ 6,838,417	$ 8,294,188
Liabilities
Reclamation liability	2,327,169	2,327,169
Accrued liabilities	573,526	$ 2,869,763
Perry County Coal, LLC [Member]
Assets
Coal Inventory	523,150
Mine Development	415,984
Coal Refuse	142,443
Land	675,092
Equipment - Underground	692,815
Equipment - Surface	3,763
Processing and Loading Facility	1,550,663
Liabilities
Reclamation liability	2,009,181
Accrued liabilities	$ 1,994,727

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Beginning Balance	$ 19,839,782	$ 18,538,806
Accretion	981,859	962,699
Reclamation work	0	0
Gold Star Acquisitions		1,300,000
Perry County Acquisition		2,950,761
Asset disposition	(3,271,973)	0
Ending Balance	$ 17,549,668	$ 23,752,266

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	May 08, 2020	Sep. 30, 2019	Feb. 04, 2019
Asset management fee reserve	$ 116,115
Common stock price per share					$ 5.25
Loss on settlement on ARO	$ 0	$ 0
Discount rate on federal and state laws	10.00%
Assumed liability - Total	$ 251,168	0
Allowance for trade receivables	0	0
Allowance for other accounts receivables	1,494,570	0
Restricted cash	637,806			$ 297,987
Cash received	753,910	3,324
Kentucky Energy Cabinet [Member]
Restricted cash	19,138	47,987
Mutual Release Agreement [Member]
Common stock shares issued, transfer back of property			2,000,000
Extinguishment of financing note			$ 2,000,000
Gain on sale	6,820,949
Perry County Resources LLC (PCR) [Member]
Restricted cash	637,806	265,487
Amount held under management agreement	0	$ 82,828
Perry County Resources LLC (PCR) [Member] | March 4, 2020 [Member]
Reclamation bond	2,386,439
Retirement obligations	336,995
Cash received	700,000
Equipment received (as payment)	300,000
Gain on sale of permits	1,061,225
Perry County Resources LLC (PCR) [Member] | September 27, 2019 [Member] | Assets Acquisition [Member]
Assumed liability - Total	1,994,727
Fair value of assumed liability	$ 2,009,181

XML

PROPERTY AND EQUIPMENT (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Less: Accumulated depreciation	$ (11,971,657)	$ (11,162,662)
Total Property and Equipment, Net	23,253,811	27,668,885
Underground equipment [Member]
Property and equipment	6,838,417	8,294,188
Surface equipment [Member]
Property and equipment	2,527,576	3,224,896
Mine development [Member]
Property and equipment	561,575	669,860
Processing and rail facilities [Member]
Property and equipment	11,591,273	12,723,163
Coal refuse storage [Member]
Property and equipment	12,134,192	12,171,271
Land [Member]
Property and equipment	$ 1,572,435	$ 1,748,169

XML

PROPERTY AND EQUIPMENT (Details 1)	9 Months Ended
	Sep. 30, 2020
Surface equipment [Member]
Estimated useful lives	7 years
Underground equipment [Member]
Estimated useful lives	5 years
Mining Rights [Member] | Minimum [Member]
Estimated useful lives	5 years
Mining Rights [Member] | Maximum [Member]
Estimated useful lives	10 years
Processing and rail facilities [Member]
Estimated useful lives	20 years
Coal refuse storage [Member]
Estimated useful lives	10 years

XML

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
PROPERTY AND EQUIPMENT
Depreciation expense	$ 646,438	$ 1,414,942	$ 1,855,236	$ 3,036,747

XML

NOTES PAYABLE (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
NOTES PAYABLE (Details Narrative)
Repayment on long term debt	$ 1,807,443	$ 17,798,335
Principal payment on long term debt		2,548,111
Description of Notes and loan payable	The senior convertible note has 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.
Increases to long term debt	$ 3,666,277	8,039,379
Proceeds from the factoring agreement	0	$ 16,710,922
Principal reduction on long term debt	$ 1,072,745

XML

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Royalty expense	$ 154,604	$ 948,148	$ 404,660	$ 2,811,691
LRR [Member]
Total amount owned from related party	979,146		979,146
Royalty expense	68,251	112,107	149,416	231,685
Repayment of related party	0	100,000	1,615	137,209
Advance from related party	25,866	$ 31,507	27,769	$ 137,562
Land Betterment Corporation [Member] | Contract Services Agreement [Member]
Total amount owned from related party	$ 399,582		399,582
Total amount incurred			1,263,766
Service charges paid			$ 864,184
Terms of contract, Description			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
Management service charges			$ 0

XML

EQUITY TRANSACTIONS (Details)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Expected Dividend Yield	0.00%	0.00%
Minimum [Member]
Expected volatility	123.00%	87.97%
Risk-free rate	1.40%	1.40%
Expected life of warrants	1 year 7 months 5 days	5 months 5 days
Maximum [Member]
Expected volatility	479.00%	97.29%
Risk-free rate	1.62%	1.62%
Expected life of warrants	6 years 1 month 25 days	7 years 8 months 30 days

XML

EQUITY TRANSACTIONS (Detail 1) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Aggregate Intrinsic Value [Member]
Outstanding Balance Intrinsic	$ 1,746,544	$ 42,063,228
Beginning Exercisable (Vested) weighted Average		42,063,228
Granted, Aggregate Intrinsic Value	1,432,786	0
Forfeited or Expired, Aggregate Intrinsic Value	706,437	0
Exercisable (Vested) Ending Weighted Average	5,152,399	1,633,863
Ending Balance option, Aggregate Intrinsic Value	1,806,830
Ending Balance Intrinsic	$ 5,152,399	$ 1,633,863
Weighted Average Contractual Life in Years [Member]
Outstanding Balance Weighted Average	2 years 3 months 22 days	1 year 8 months 14 days
Beginning Exercisable (Vested) weighted Average		1 year 8 months 14 days
Forfeited or Expired	1 year 2 months 9 days
Granted	2 years 5 days
Exercised	1 year 4 months 12 days
Ending Balance Weighted Average	2 years 8 months 7 days	2 years 10 months 8 days
Exercisable (Vested) Ending Weighted Average	2 years 8 months 7 days	2 years 10 months 8 days
Weighted Average Exercise Price [Member]
Beginning Outstanding Exercise	$ 1.856	$ 2.745
Exercisable (Vested) beginning Exercise		2.745
Exercised, Weighted Average Exercise Price	0.138	0.010
Forfeited or Expired, Weighted Average Exercise Price	4.443	7.638
Granted	1.217	2.516
Ending Balance Exercise	1.114	1.831
Ending Exercisable (Vested) Exercise	$ 1.114	$ 1.831
Warrants [Member]
Exercisable beginning Exercise	10,689,904	5,545,227
Beginning Exercisable option		5,545,227
Granted	4,952,670	7,450,900
Forfeited or Expired	3,172,222	1,697,223
Exercised	2,359,822	600,000
Exercisable Ending option	10,119,530	10,698,904
Ending Balance option	10,119,530	10,698,904

XML

EQUITY TRANSACTIONS (Detail 2) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Aggregate Intrinsic Value [Member]
Outstanding Balance Intrinsic	$ 0	$ 405,000
Ending Balance Intrinsic	1,130,333	0
Ending Exercisable Intrinsic	399,489	0
Beginning Exercisable Intrinsic	0	405,000
Forfeited or Expired, Aggregate Intrinsic Value	0	0
Granted	$ 292,500	$ 0
Weighted Average Contractual Life in Years [Member]
Outstanding Balance Weighted Average	5 years 11 months 30 days	6 years 5 months 11 days
Exerisable beginning weighted average	5 years 26 days	4 years 2 months 17 days
Granted	6 years 8 months 18 days
Ending Balance Weighted Average	5 years 10 months 8 days	6 years 2 months 30 days
Exercisable Ending Weighted Average	4 years 8 months 15 days	5 years 3 months 27 days
Weighted Average Exercise Price [Member]
Exercisable beginning Exercise	$ 1.821	$ 4.214
Beginning Outstanding Exercise	1.960	1.413
Granted	1.130	3.105
Forfeited or Expired, Weighted Average Exercise Price	0	0
Exercised	0	0
Ending Outstanding Exercise	1.615	1.960
Ending Exercisable Exercise	1.597	1.821
Option [Member]
Exercisable beginning Exercise	$ 1,056,830	$ 681,830
Beginning Exercisable option	273,943	70,000
Granted	750,000	375,000
Forfeited or Expired
Exercised
Exercisable Ending option	536,220	273,943
Ending Balance option	1,806,830	1,056,830

XML

EQUITY TRANSACTIONS (Details Narrative) - USD ($)				1 Months Ended				3 Months Ended		9 Months Ended
	Jul. 07, 2020	Jul. 06, 2020	Jun. 11, 2020	Jul. 24, 2020	May 26, 2020	Feb. 20, 2020	Feb. 03, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	May 08, 2020	Apr. 01, 2020	Feb. 04, 2019
Conversion price	$ 1.05	$ 1.05	$ 1.05	$ 1.05
Proceeds from exercise of warrants	50,000	105,000	10,500	40,000
Warrants expected to be vest	$ 52,500	$ 100,000	$ 10,000	$ 42,000
Stock based compensation expense								$ 101,615	$ 103,060	$ 331,665	$ 245,354
Common stock price														$ 5.25
ENCECo, Inc. [Member]
Common stock price													$ 1.07
Common stock shares issued													600,000
Empire Coal and Point Rock [Member]
Common stock price												$ 0.92
Common stock shares returned												2,000,000
Investor relations contract [Member]
Expiration date					Jun. 01, 2020
Warrant issued					20,000
Periodic payment					$ 7,500
Frequency of periodic payment					Monthly
Periodic issuance of fully vested shares					20,000
Common stock price					$ 0.94
Term of contract					3 months
Warrant C-33[Member] | September 30, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Sep. 30, 2022
Warrant issued										10,500
Debt conversion, converted instrument, amount										$ 105,000
Warrant C-32[Member] | September 29, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Sep. 29, 2022
Warrant issued										10,500
Debt conversion, converted instrument, amount										$ 105,000
Warrant C-31[Member] | September 16, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Sep. 16, 2022
Warrant issued										10,500
Debt conversion, converted instrument, amount										$ 105,000
Warrant C-30 [Member] | September 14, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Sep. 14, 2022
Warrant issued										10,500
Debt conversion, converted instrument, amount										$ 105,000
Warrant C-29 [Member] | September 14, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Sep. 14, 2022
Warrant issued										10,500
Debt conversion, converted instrument, amount										$ 105,000
Warrant C-14 [Member] | September 8, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Aug. 09, 2022
Warrant issued										13,437
Debt conversion, converted instrument, amount										$ 134,367
Warrant C-28 [Member] | August 19, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Aug. 19, 2022
Warrant issued										208,127
Debt conversion, converted instrument, amount										$ 2,081,273
Warrant 3 [Member] | July 24, 2020 [Member]
Conversion price								$ 1.05		$ 1.05
Warrants expected to be vest										$ 31,395
Proceeds from exercise of warrants										$ 29,000
Warrant 2 [Member] | July 6, 2020 [Member]
Conversion price								1.05		$ 1.05
Proceeds from exercise of warrants										40,000
Warrants expected to be vest										$ 42,000
Warrant 1 [Member] | July 6, 2020 [Member]
Conversion price								$ 1.05		$ 1.05
Proceeds from exercise of warrants										20,000
Warrants expected to be vest										$ 21,000
Warrant C-21 [Member] | June 30, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 30, 2022
Warrant issued										57,000
Debt conversion, converted instrument, amount										$ 570,000
Warrant C-21 [Member] | June 22, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 30, 2022
Warrant issued										18,000
Debt conversion, converted instrument, amount										$ 180,000
Warrant C-26 [Member] | June 30, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 30, 2022
Warrant issued										200
Debt conversion, converted instrument, amount										$ 2,000
Warrant C-25 [Member] | June 23, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 23, 2022
Warrant issued										200
Debt conversion, converted instrument, amount										$ 2,000
Warrant C-24 [Member] | June 16, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 16, 2022
Warrant issued										1,215
Debt conversion, converted instrument, amount										$ 12,154
Warrant C-23 [Member] | June 15, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 15, 2022
Warrant issued										200
Debt conversion, converted instrument, amount										$ 2,000
Warrant C-20 [Member] | June 11, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 11, 2022
Warrant issued										47,500
Debt conversion, converted instrument, amount										$ 474,996
Warrant C-19 [Member] | June 11, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 11, 2022
Warrant issued										101,957
Debt conversion, converted instrument, amount										$ 1,019,573
Warrant C-22 [Member] | June 5, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 05, 2022
Warrant issued										200
Debt conversion, converted instrument, amount										$ 2,000
Warrant C-18 [Member] | June 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Jun. 01, 2022
Warrant issued										200
Debt conversion, converted instrument, amount										$ 2,000
Warrant C-16 [Member] | April 14, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 14, 2022
Warrant issued										500
Debt conversion, converted instrument, amount										$ 5,000
Warrant C-15 [Member] | April 14, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 14, 2022
Warrant issued										5,364
Debt conversion, converted instrument, amount										$ 53,639
Warrant C-13 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										2,250
Debt conversion, converted instrument, amount										$ 22,500
Warrant C-12 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										11,000
Debt conversion, converted instrument, amount										$ 110,000
Warrant C-11 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										20,000
Debt conversion, converted instrument, amount										$ 200,000
Warrant C-10 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										188,844
Debt conversion, converted instrument, amount										$ 1,888,444
Warrant C-9 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										90,000
Debt conversion, converted instrument, amount										$ 900,000
Warrant C-8 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										22,500
Debt conversion, converted instrument, amount										$ 225,000
Warrant C-7 [Member] | April 1, 2020 [Member]
Exercise price										$ 1.50
Expiration date										Apr. 01, 2022
Warrant issued										37,569
Debt conversion, converted instrument, amount										$ 375,690
Warrant C-6 [Member]
Exercise price						$ 1.50
Expiration date						Feb. 20, 2022
Warrant issued						20,000
Debt conversion, converted instrument, amount						$ 200,000
Warrant C-5 [Member]
Exercise price							$ 1.50
Expiration date							Feb. 03, 2023
Warrant issued							949,407
Debt conversion, converted instrument, amount							$ 9,494,073
Warrant C-4 [Member] | GoldenProperties Ltd. [Member]
Expiration date							Jan. 31, 2023
Price per share							$ 1.05
Future value of shares issuable							$ 787,500
Common stock, shares issuable							750,000
Warrant C-3 [Member] | GoldenProperties Ltd. [Member]
Expiration date							Jan. 31, 2023
Price per share							$ 1.05
Future value of shares issuable							$ 787,500
Common stock, shares issuable							750,000
Warrant C-2 [Member] | GoldenProperties Ltd. [Member]
Expiration date							Jan. 31, 2023
Price per share							$ 1.05
Future value of shares issuable							$ 787,500
Common stock, shares issuable							750,000
Warrant C-1 [Member] | GoldenProperties Ltd. [Member]
Expiration date							Jan. 31, 2023
Price per share							$ 1.05
Future value of shares issuable							$ 787,500
Common stock, shares issuable							750,000

XML

CONTINGENCIES (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended
	Sep. 20, 2019	Sep. 30, 2020	May 08, 2020	Dec. 31, 2019	Nov. 07, 2018
Rent payment, monthly		$ 500
Frequency of periodic payment		Month-to-month
Annual rent maturity date		Oct. 30, 2021
Accrued payable		$ 573,526		$ 2,869,763
Kentucky Energy Cabinet [Member]
Claims amounts		1,452,700
Kentucky Energy Cabinet [Member] | Commonwealth of Kentucky [Member]
Accrued payable		2,031,314
Mutual Release Agreement [Member]
Return of common stock shares issued			2,000,000
Extinguishment of financing note			$ 2,000,000
Empire Kentucky [Member]
Acquisition of assets		2,500,000
Upfront due amount		$ 500,000
Debt description		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
Mine Health Safety [Member]
Accrued payable		$ 564,560
Claims amounts		$ 947,302
Wyoming County Coal LLC [Member]
Reclamation bonds amount					$ 234,240
Reclamation bonds shares					1,727,273
Breach of contract, amount	$ 225,000
Transfer fees	$ 10,500
Wyoming County Coal LLC [Member] | Seller Note Two [Member]
Seller note					$ 250,000
Wyoming County Coal LLC [Member] | Seller Note One [Member]
Seller note					$ 350,000

XML

SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($)				1 Months Ended
	Oct. 09, 2020	Oct. 08, 2020	Oct. 07, 2020	Oct. 20, 2020	Oct. 19, 2020
Conversion price	$ 1.05		$ 1.05	$ 1.05	$ 1.05
Warrants exercised	90,000		1,441,369	45,000	105,000
Proceeds from issuance of warrant	$ 26,250		$ 1,513,437	$ 47,250	$ 110,250
Warrant 1 [Member]
Conversion price		$ 2.50
Warrants exercised		5,200,000
Proceeds from issuance of warrant		$ 12,030,000
Warrant [Member]
Conversion price		$ 1.05
Warrants exercised		72,895
Proceeds from issuance of warrant		$ 76,540