RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2024

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

A.RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS:

Current Restatement

Subsequent to filing of our original 2024 Form 10-K on May 19, 2025, we became aware of a few matters requiring adjustments to the consolidated financial statements included therein.   Those matters have been corrected in this Amendment No. 2 to the 2024 Form 10-K and include the following:

· Depreciation and amortization of mining rights in the 2024 statement of operations were overstated by $550,640 and $307,294, respectively, due to an error in the Company’s calculation of depreciation and amortization for the quarter ended September 30, 2024. Accumulated depreciation included in property & equipment, net in the December 31, 2024 balance sheet was overstated by $857,934.

· The 2023 statement of operations omitted certain “net revenue adjustments” to increase cost of coal sales and holding costs and decrease coal sales by $1,412,500. There was no change in the 2023 consolidated net loss or our net assets as of December 31, 2023.

· Certain amounts previously classified as restricted cash on the consolidated balance sheets as of December 31, 2024 and 2023, should have been classified as restricted investments. Those reclassifications have been made in the accompanying consolidated balance sheets. As of December 31, 2024, $151,253,539 of non-current restricted cash was reclassified to non-current restricted investments and as of December 31, 2023, $25,797,202 of restricted cash – current was reclassified to restricted investment – current.

Prior Restatement

The Company identified certain accounting errors in the Company’s 2023 consolidated financial statements included in the 2023 Form 10-K filed with the SEC on April 15, 2024.  Those accounting errors were corrected in the consolidated financial statements included in our original 2024 Form 10-K filed with the SEC on May 19, 2025.

Accompanying Restatement Schedules and Notes

The following notes and restatement schedules describe the significant current and prior restatement adjustments made to adjust the 2023 consolidated financial statements included in the 2023 Form 10-K filed with the SEC on April 15, 2024 to the 2023 consolidated financial statements included in this 2024 Form 10-K/A. 

1. Treasury bills and mutual fund reclassification

Treasury bills and mutual fund investments were incorrectly classified as cash and cash equivalents versus short-term investments on the balance sheets and the change in fair value of the investments was not recognized in the statement of operations. The adjustment corrects these matters.

2. Restricted investment reclassification

Cash balances in the WCC bond fund balances were classified as short-term investments on the balance sheets. The adjustment reclassifies the WCC bond fund balances to restricted cash and restricted investments. Certain amounts previously classified as restricted cash on the consolidated balance sheets as of December 31, 2024 and 2023, should have been classified as restricted investments. Those reclassifications have been made in the accompanying consolidated balance sheets.

3. Due from related party reclassification

A note receivable balance related to a working capital loan issued to American Acquisition Opportunity Inc was written off. However, the note was supported by Royalty Management Holding Corp., a related party, who has committed to issue shares of its stock if required to fulfill the obligation. The adjustment re-establishes the note receivable on the balance sheet and reverses the charge previously recognized in the statement of operations.

4. Coal inventory cost basis adjustment

As of December 31, 2023, the Company recorded a true-up adjustment to increase the coal inventory balance to reconcile to the actual quantities on hand.  The increase was recognized as an adjustment to inventory with a corresponding reduction to operating expenses.

5. Failed leaseback adjustment

Certain fixed assets under the Maxus lease agreements were incorrectly recorded as a sale and lease-back arrangement, resulting in the removal of the assets from the balance sheet and recognition of a gain on sale. This adjustment reinstates the fixed assets and derecognizes the right of use assets and related finance lease liabilities previously recorded. Additionally, the previously recorded finance lease liabilities have been reclassified as Other Financing Obligations on the balance sheet.

6. Operating lease recognition adjustment

An operating lease was previously not recognized on the balance sheet and accounted for under ASC 842, Leases. The adjustment recognizes this operating lease under the provisions of ASC 842.

7. Equity investment accounting adjustment

There were accounting errors determined with respect to investments in other entities – related parties. Adjustments have been applied to the Company’s equity investment in Novusterra, which was initially recorded at a derived value rather than fair market value (FMV). Additionally, the equity investment in SPAC American Acquisition Opportunity Inc. (AAO) was incorrectly carried at its cost basis without reflecting changes in earnings. An adjustment was made to account for AAO on the equity method of accounting.

8. Advanced Magnet Lab, Inc. loan reclassification

A note receivable from Advanced Magnet Lab, Inc. was incorrectly classified as Investment in Other Entities - Related Party on the balance sheet. An adjustment was recognized to reclassify this item to notes receivable on the balance sheet.

9. Accrued litigation settlement

Certain amounts accrued under ongoing litigation matters were classified in trade, non-trade or related party accounts payable rather more appropriately classified on the balance sheet as accrued expenses or accrued litigation settlements. The Company incorrectly included an accrued litigation settlement in the balance, alongside certain invoices that had not been accounted for. These amounts have been reclassified on the balance sheet to accrued litigation settlements.

10. Accrued expenses and settlement adjustments

In connection with our 2024 audit and the re-audit of the 2023 financial statements, legal letter responses were requested and received from attorneys representing the Company with various litigation matters. Based on those responses, the Company concluded a loss was probable and reasonably estimable under Accounting Standards Codification (ASC) 450, Contingencies,. It was also concluded that the status of these litigation cases as of December 31, 2023 supported that a potential loss was probable and estimable at that date. Accordingly, adjustments were recognized to record the reserve for these potential litigation losses as of December 31, 2023.

11. Borrowings for equipment adjustment

Certain expenditures for equipment were paid for by the issuance of notes rather than cash. For these items, the notes payable to various parties and the related fixed assets obtain were not recognized on the balance sheet. This adjustment recognizes the omitted borrowings and fixed assets on the balance sheet with corresponding adjustments to depreciation expense for the use of the equipment upon installment.

12. Missed invoices and accrued expenses adjustment

Various expenses incurred prior to December 31, 2023 were not recognized in the proper period. This adjustment recognizes the required December 31, 2023 accrual with a corresponding charge to operating expenses.

13. Bond balance reclassification

Based on the review of the terms, provisions and covenants under the WCC Bond, it was determined that the Company was not in compliance with certain provisions with those matters dating back to December 31, 2023. The assessment was that these compliance issues could be deemed an event of default which then could lead to the acceleration of maturity. Accordingly, the outstanding balance was reclassified to a current liability on the balance sheet.

14. Non-controlling interest recognition adjustment

Non-controlling interests were previously not recognized for those subsidiaries that the Company does not wholly own. This adjustment records the non-controlling interest in minority ownership in various subsidiaries.

15. Prepaid deposit removal adjustment

Certain prepaid deposits were refunded to the Company. However, the deposit amount recognized in the balance sheet was not de-recognized upon the Company’s receipt of such funds. The adjustment de-recognizes the deposits from the balance sheet and reverses the income recognized in the statement of operations that had been recorded when the funds were returned to the Company.

16. Black-Scholes calculation adjustment

An acceptable valuation model, such as the Black-Scholes model was not utilized to determine the fair value of equity awards granted. Black-Scholes calculations have now been used to determine the fair value of the equity awards. This adjustment has been made to reflect the appropriate fair value of the equity awards.

17. Forfeited deposit recognition adjustment

A deposit was received from a potential buyer of equipment from the Company. The potential transaction was ultimately not executed resulting in forfeiture of the deposit by the potential buyer. Upon forfeiture of the deposit, the Company did not de-recognize the deposit liability on the balance sheet and recognize the benefit to the statement of operations. This adjustment de-recognizes the deposit liability from the balance sheet and recognizes the income in the statement of operations.

18. Taxes and royalties reclassification

Certain taxes and royalties were classified in the statement of operations as development costs not accurately reflecting their nature. This adjustment reclassifies these expenditures to the correct expense classification in the statement of operations.

19. Depreciation and amortization of mining rights

Depreciation and amortization of mining rights in the 2024 statement of operations were overstated by $550,640 and $307,294, respectively, due to an error in the Company’s calculation of depreciation and amortization for the quarter ended September 30, 2024. Accumulated depreciation included in property & equipment, net in the December 31, 2024 balance sheet was overstated by $857,934. 

20. Coal Sales

The 2023 statement of operations omitted certain “net revenue adjustments” to increase cost of coal sales and holding costs and decrease coal sales by $1,412,500. There was no change in the 2023 consolidated net loss or our net assets as of December 31, 2023.

* Represents revision for immaterial error correction

The following tables summarize the effect of the prior restatement on each financial statement line item that was restated in the consolidated financial statements.

Balance Sheet as of December 31, 2023	As Reported			Adjustment			As Restated			Reference
Cash and cash equivalents	$	2,666,638		$	(1,347,784	)	$	1,318,854			1
Restricted cash - current		-			2,237,294			2,237,294			13
Restricted investments - current		-			30,297,202			30,297,202			2
Short-term investments		30,297,204			(28,949,297	)		1,347,907			2
Due from related party		-			741,243			741,243			3
Inventories		54,000			75,991			129,991			4
Prepaid expenses and other current assets		1,867,651			(138,000	)		1,729,651			15
Total current assets		34,885,493			2,916,649			37,802,142
Restricted cash		6,798,029			(5,276,617	)		1,521,412			13
Property and Equipment, net		15,337,004			5,321,675			20,658,679			5
Right-of-use assets, net		18,276,913			(17,479,711	)		797,202			5
Right-of-use assets, net - related party		-			89,419			89,419			6
Investment in other entities - Related Parties		18,780,000			(15,302,700	)		3,477,300			7
Notes Receivable, net		99,022			280,000			379,022			8
Total assets	$	91,746,164		$	(27,020,988	)	$	64,725,176
Trade payables	$	6,709,224		$	(3,337,118	)	$	3,372,106			9,11
Non-trade payables		2,607,942			(1,658,000	)		949,942			9
Accounts Payable - Related Party		2,371,697			2,059,407			4,431,104			3,9
Accrued expenses		-			311,809			311,809			10,11
Accrued litigation settlement		-			14,103,270			14,103,270			9,10
Accrued interest		512,558			(27,127	)		485,431		*
Other current liabilities		200,000			(100,000	)		100,000		*
Bond payable, current		-			43,535,159			43,535,159			14
Current portion of long term debt		804,656			1,335,672			2,140,328			11
Operating lease liabilities, current		57,663			19,993			77,656		*
Operating lease liabilities, current - related party		-			11,138			11,138		*
Finance lease - related party, current		4,806,822			(4,806,822	)		-			5
Other financing obligations, current		-			7,488,333			7,488,333			5
Total current liabilities		18,070,562			58,935,714			77,006,276
Remediation liability		21,288,799			(414	)		21,288,385		*
Bond payable, net		44,152,500			(44,152,500	)		-			13
Finance lease liabilities, non-current		7,514,848			(7,028,292	)		486,556			5
Other financing obligations, net of current portion		-			10,099,795			10,099,795			5
Operating lease liabilities, non-current		495,611			275,572			771,183			6
Operating lease liabilities, non-current - related party		-			78,280			78,280			6
Total liabilities	$	91,522,320		$	18,208,155		$	109,730,475
Common Stock		7,627			-			7,627
Additional paid-in capital		178,910,546			2,842,715			181,753,261			16
Accumulated deficit		(178,694,329	)		(46,598,006	)		(225,292,335	)
Total stockholders' equity		223,844			(43,755,291	)		(43,531,447	)
Non-controlling interest		-			(1,473,852	)		(1,473,852	)		14
Total deficit		223,844			(45,229,143	)		(45,005,299	)
Total liabilities and stockholders' deficit	$	91,746,164		$	(27,020,988	)	$	64,725,176

Statement of Operations for the year ended December 31, 2023	As Reported			Adjustment			As Restated			Reference
Coal sales	$	16,120,841		$	(4,922,176	)	$	11,198,665			20
Metal recovery and sales		66,552			-			66,552
Royalty income		556,682			-			556,682
Total revenue		16,744,075			(4,922,176	)		11,821,899		*
Operating expenses (income)
Cost of coal sales and processing		11,611,886			(4,036,788	)		7,575,098			4
Accretion		993,165			22,398			1,015,563		*
Depreciation		46,953			2,276,478			2,323,431			5
Amortization of mining rights		1,240,914			(18,228	)		1,222,686		*
General and administrative		7,013,833			3,656,525			10,670,358			12
Professional fees		1,340,745			201,430			1,542,175			12
Litigation expense		-			11,067,926			11,067,926			9
Production taxes and royalties		2,647,655			347,780			2,995,435			18
Development		11,746,725			(432,888	)		11,313,837			18
Gain on sale of equipment		(8,475,468	)		6,946,060			(1,529,408	)		5
Total operating expenses		28,166,408			20,030,693			48,197,101
Net loss from operations		(11,422,333	)		(24,952,869	)		(36,375,202	)
Earnings from equity method investees		-			(562,696	)		(562,696	)		7
Other income and (expense)		423,281			(252,501	)		170,780			3
Unrealized gain on short-term investments		499,639			(499,639	)		-			7
Interest income		381,234			(351,005	)		30,229			13
Interest expense		(1,336,997	)		(651,077	)		(1,988,074	)		5,11
Total other income (expenses)		(32,843	)		(2,316,918	)		(2,349,761	)
Net loss		(11,455,176	)		(27,269,787	)		(38,724,963	)
Non-controlling interest		-			197,555			197,555			14
Net loss attributable to AREC shareholders	$	(11,455,176	)	$	(27,072,232	)	$	(38,527,408	)
Net loss per share - basic and diluted	$	(0.15	)	$	(0.36	)	$	(0.52	)
Weighted average shares outstanding - basic and diluted		75,144,374			75,144,374			75,144,374

	Common				(As reported)				(Restated)												(As reported)					(Restated)			(As
	Stock Par Value				Additional Paid-in				Additional  Paid-in		(As reported) Accumulated							(Restated) Accumulated			Non-controlling					Non-controlling			reported)Total						(Restated) Total
	Shares		Amount		Capital		Adjustments		Capital		Deficit			Adjustments				Deficit			interest		Adjustments			interest			Deficit			Adjustments			Deficit
Balance as of December 31, 2022		66,777,620	$	6,680	$	167,517,259		582,378	$	168,099,637	$	(167,239,243	)		(19,525,684	)	$	(186,764,927		)		-		(1,276,297	)		(1,276,297	)	$	284,696			(20,219,603	)		(19,934,907	)
Issuance of common shares for Convertible Debt Conversion		9,420,730		942		9,787,000		-		9,787,000		-			-				-			-		-			-			9,787,942			-			9,787,942
Stock compensation – options		-		-		1,506,292		2,260,337		3,766,629		-			-				-			-		-			-			1,129,717			2,636,912			3,766,629
Issuance of common shares for consulting services		49,020		5		99,995		-		99,995		-			(99,995	)			-			-		-			-			100,000			-			100,000
Net loss		-		-		-		-		-		(11,455,086	)		(27,072,322	)			(38,527,408	)		-		(197,555	)		(197,555	)		(11,455,086	)		(27,269,877	)		(38,724,963	)
Balance as of December 31, 2023		76,247,370	$	7,627	$	178,910,546		2,842,715	$	181,753,261	$	(178,694,329	)		(46,598,006	)	$	(225,292,335		)		-		(1,473,852	)		(1,473,852	)	$	223,844			(45,229,143	)		(45,005,299	)

Statement of Cash flows for the year ended December 31, 2023	As Reported			Adjustment			As Restated			Reference
Cash Flows from Operating activities:
Net loss	$	(11,455,086	)	$	(27,269,877	)	$	(38,724,963	)
Stock- based compensation expense		-			3,766,629			3,766,629			7
Depreciation expense		46,953			2,276,478			2,323,431			5
Amortization of mining rights		1,240,914			(18,228	)		1,222,686		*
Accretion expense		993,165			(416	)		992,749		*
Amortization of right-to-use assets - related party		626,253			(626,253	)		-			6
Accretion of right-to-use assets		64,386			(64,386	)		-			6
Amortization of issuance costs and debt discount		52,500			6,771			59,271		*
Option Expense		1,506,292			(1,506,292	)		-			16
Investment in other entities - Related Parties, net		-			562,696			562,696			7
Gain on sale of equipment		(8,475,468	)		6,946,060			(1,529,408	)		5
Issuance of common shares for services		-			100,000			100,000		*
Unrealized gain on short-term investments		(499,639	)		514,981			15,342			7,13
Due from related party		-			(352,243	)		(352,243	)		3
Receivables		660,755			1			660,756		*
Inventories		392,690			(75,991	)		316,699			4
Prepaid expenses and other current assets		(1,081,075	)		138,518			(942,557	)		5
Trade and non-trade payable		1,876,680			(4,995,118	)		(3,118,438	)		9,10,12
Accounts payable related party		(1,923,535	)		2,156,963			233,428			3,10
Accrued expenses		-			311,809			311,809			10,12
Accrued litigation settlement		-			14,103,270			14,103,270			9,10
Accrued interest		406,191			(28,885	)		377,306		*
Other current liabilities		200,000			(100,000	)		100,000		*
Operating lease assets and liabilities, net		200,001			(197,245	)		2,756			5
Operating lease assets and liabilities, net - related party		752,783			(752,783	)		-			5
Cash used in operating activities		(14,415,240	)		(5,103,541	)		(19,518,781	)
Cash Flows from Investing activities:
Purchase of property and equipment, net of capitalized interest income and (expense)		964,319			(4,581,185	)		(3,616,866	)		5
Proceeds from sale of equipment		-			1,529,408			1,529,408			5
Proceeds from short-term investments, net		22,067,980			(21,426,363	)		641,617			2
Purchases of short-term investments		(51,865,545	)		51,865,545			-			12
Restricted investments purchased		-			(30,297,202	)		(30,297,202	)		2
Cash used in investing activities		(28,833,246	)		(2,909,797	)		(31,743,043	)
Cash Flows from Financing activities:
Proceeds from tax exempt bonds, net		44,100,000			(624,112	)		43,475,888			13
Proceeds from the exercise of stock option		(1,112,852	)		1,112,852			-			16
Proceeds received from other financing obligation		-			7,733,231			7,733,231			5
Repayment on current portion of long term debt		-			1,158,428			1,158,428		*
Repayments of other financing obligation		(5,599,988	)		(483,398	)		(6,083,386	)		5
Cash provided by financing activities		37,387,160			7,961,395			45,348,555