EX-99.1 2 arec_ex99-1.htm PRESS RELEASE Blueprint
  Exhibit 99.1
 
American Resources Corporation Reports Third Quarter 2019 Financial Results
 
FISHERS, INDIANA / ACCESSWIRE / November 18, 2019 / American Resources Corporation (NASDAQ:AREC) (the "Company"), a supplier of raw materials to the rapidly growing global infrastructure marketplace, with a primary focus on the extraction, processing, transportation and distribution of metallurgical carbon to the steel industry, today reported a net loss from operations of $7.08 million, or a loss of $0.30 per share, in the third quarter of 2019, compared with a net loss from operations of $4.13 million, or a loss of $3.44 per share, in the prior-year period. The Company earned adjusted earnings before interest, taxes, depreciation, amortization, accretion on asset retirement obligations, non-operating expenses, and development costs (‘adjusted EBITDA") of a loss of $2.67 million in the third quarter of 2019, as compared with adjusted EBITDA loss of $0.99 million for the third quarter of 2018. Revenues totaled $1.85 million for the three months ended September 30, 2019 versus $9.04 million in the prior-year quarter.
 
"We are extremely excited about how our platform is set up to perform in 2020 and beyond. The third quarter of 2019 proved to be a challenging quarter for our industry, highlighted by a number of market participants liquidating assets through the bankruptcy process in the face of the seasonal steel slowdown and general macro uncertainties in the global economy. During this period, we were able to execute on both organic opportunities as well as opportunities to further consolidate quality metallurgical carbon assets," stated Mark Jensen, Chairman and CEO of American Resources Corporation. "Organically, we took the opportunity to further develop some of our existing mines around our McCoy Elkhorn complex including commencing the final development stage to bring our Carnegie 2 mine into production. The capital investments and development of our mines meant that we needed to take some production offline. We feel that this was done at an opportune time and has put us in a better position in terms of volume and quality metrics. We were also very active in the bankruptcy processes of assets within our operating region. As a result, we were able to acquire our previously announces, fifth operating complex, Perry County Resources this past September. The addition of Perry County to our portfolio of assets is already proving to be a valuable assets as we are executing on our restructuring plan while serving the existing customer base. Overall, the market for our products remains very promising as the world's need for carbon, steel and infrastructure continues to be healthy, and our platform remains in a unique position of bringing a robust pipeline of growth to the market and to our investors."
 
Operational Results
 
The Company produced and sold 25,969 short tons of coal in the third quarter of 2019.
 
The exhibit below summarizes some of the key sales, production and financial metrics:
 
 
 
Three month ended
 
 
Three month ended
 
 
 
September 30,
 
 
June 31,
 
 
September 30,
 
 
 
2019
 
 
2019
 
 
2018
 
Sales Volume (a)
 
 
 
 
 
 
 
 
 
Tons Sold
  25,969 
  127,021 
  122,823 
 
    
    
    
Company Production (a)
    
    
    
McCoy Elkhorn Coal
  11,180 
  56,335 
  57,721 
Deane Mining
  14,789 
  70,686 
  65,102 
Total
  25,969 
  127,021 
  122,823 
 
    
    
    
Company Financial Metrics(b)
    
    
    
Revenue per Ton
  71.13 
  73.38 
  72.38 
Cash Cost per Ton Sold (c)
  113.84 
  49.27 
  49.27 
Cash Margin per Ton (c)
  -42.71 
  24.11 
  23.11 
 
    
    
    
Development Costs
  1,425,024 
  1,887,447 
  945,341 
 
    
    
    
 
    
    
    
 
Notes:
(a) In short tons
(b) Excludes transportation
(c) Cash cost per ton is based on reported cost of sales and includes items such as production taxes, royalties, labor, fuel, and other similar production and sales cost items, and may be adjusted for other items that, pursuant to GAAP, are classified in the Statement of Operations as costs other than cost of sales, but relate directly to the cost incurred to produce coal. Our cash cost of sales per short ton is calculated as cash cost of sales divided by short tons sold, and our cash margin per ton is calculated by subtracting cash cost per ton from revenue per ton. Cash cost of sales per short ton and average cash margin per ton are non-GAAP financial measure which are calculated in conformity with U.S. GAAP and should be considered supplemental to, and not as a substitute or superior to financial measures calculated in conformity with GAAP. We believe cash cost of sales per ton and average cash margin per ton are useful measurse of performance as it aides some investors and analysts in comparing us against other companies. Cash cost of sales per ton and margin per ton may not be comparable to similarly titled measures used by other companies.
  
 
 
 
Mark Jensen added, "Throughout the third quarter of 2019, where we idled some production during a time of market softness, we also continued to make progress on our growth objectives to position ourselves for advancement in 2020. Most notably, was the acquisition of Perry County Resources, as it represents our fifth carbon processing and logistics hub in the Central Appalachian basin and broadens our footprint in the metallurgical carbon market. Additionally, we continued to position our metallurgical mines at McCoy Elkhorn to provide expanded output with greater efficiencies. Over the past five months, we have seen a meaningful amount of U.S. carbon supply come offline given market participants idling assets plus several participants entering into bankruptcy. Our unique business model has allowed us to be opportunistic during this time and strengthen our position in the market. We expect markets to firm up sometime next year as it digests a tighter supply outlook, while our outlook on demand remains healthy. We feel that we are in as good of a position as we have ever been to deliver attractive growth to our customers, employees and shareholders, and we maintain a sanguine outlook on carbon and steel markets given infrastructure development world-wide."
 
Additional Financial Results
 
Total revenues were $1,847,969 for the third quarter of 2019. Cost of sales (includes mining, transportation, , and processing costs,) for the third quarter of 2019 were $2,956,305, or 160 percent of total revenues, compared to $7,116,009, or 78.7% of total revenue in the same period of 2018.
 
General and administrative expenses for the third quarter of 2019 were $1,434,544 for the third quarter of 2019, or 77.7 percent of total revenue. Depreciation for the third quarter of 2019 was $1,414,942, or 76.6 percent of total revenue. American Resources incurred interest expense of $901,810 during the third quarter of 2019 compared to $305,655 during the third quarter of 2018. Development costs during the quarter were $1,425,024, compared to $2,887,448 in the second quarter of 2019.
 
The Company did not incur any income tax expense as it was able to utilize its available net operating losses ("NOL") carried forward from prior periods of approximately $2,027,765 as of December 31, 2018.
 
Company Outlook
 
Based on American Resources' organic growth from its already owned infrastructure, controlled mining permits and its capital investment schedule, the Company expects its 2020 production forecast to be in the range of 2.0 to 2.2 million tons.
 
 
AMERICAN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
 
 
 
Three Months
September 30,
2019
 
 
Three Months
September 30,
2018 As
Restated
 
 
Nine Months
September 30,
2019
 
 
Nine Months
September 30,
2018 As Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coal Sales
 $1,847,279 
 $8,890,322 
 $18,162,805 
 $23,219,222 
Processing Services Income
  - 
  147,946 
  20,876 
  167,462 
 
    
    
    
    
Total Revenue
  1,847,279 
  9,038,268 
  18,183,681 
  23,386,684 
 
    
    
    
    
Cost of Coal Sales and Processing
  (2,956,306)
  (7,116,009)
  (15,254,961)
  (18,214,195)
Accretion Expense
  (320,900)
  (433,589)
  (962,699)
  (1,116,751)
Depreciation
  (1,414,942)
  (700,595)
  (3,036,747)
  (1,931,374)
Amortization of mining rights
  (252,729)
  (181,385)
  (1,592,110)
  (181,385)
General and Administrative
  (1,434,545)
  (2,320,287)
  (3,798,051)
  (3,892,596)
Professional Fees
  (170,937)
  (707,735)
  (5,136,767)
  (1,106,864)
Production Taxes and Royalties
  (948,148)
  (759,269)
  (2,811,691)
  (2,217,156)
Development Costs
  (1,425,024)
  (945,341)
  (5,912,589)
  (3,429,512)
 
    
    
    
    
Total Operating Expenses
  (8,923,531)
  (13,164,210)
  (38,505,615)
  (32,089,833)
 
    
    
    
    
Net Loss from Operations
  (7,076,252)
  (4,125,942)
  (20,321,934)
  (8,703,149)
 
    
    
    
    
Other Income
  770,405 
  875,942 
  1,251,359 
  1,295,065 
Gain on cancelation of debt
  - 
  - 
  - 
  315,000 
Loss on settlement of payable
  - 
  - 
  (22,660)
    
Receipt of previously impaired receivable
  - 
  - 
  - 
  92,573 
Amortization of debt discount and issuance costs
  (219,218)
  - 
  (7,722,197)
  - 
Interest Income
  82,343 
  - 
  164,686 
  41,171 
Warrant Modification Expense
  - 
  - 
  (2,545,360)
  - 
Interest expense
  (901,810)
  (305,655)
  (1,674,653)
  (864,104)
 
    
    
    
    
Total Other income (expense)
  (268,280)
  570,287 
  (10,548,825)
  879,705 
 
    
    
    
    
Net Loss
  (7,344,532)
  (3,555,655)
  (30,870,759)
  (7,823,444)
 
    
    
    
    
Less: Series B dividend requirement
  - 
  (17,000)
  - 
  (104,157)
 
    
    
    
    
Less: Net income attributable to Non Controlling Interest
  - 
  - 
  - 
  (151,278)
 
    
    
    
    
Net loss attributable to American Resources Corporation Shareholders
 $(7,344,532)
 $(3,572,655)
 $(30,870,759)
 $(8,078,879)
 
    
    
    
    
Net loss per common share - basic and diluted
 $(0.30)
 $(3.44)
 $(1.34)
 $(8.58)
 
    
    
    
    
Weighted average common shares outstanding
  24,886,763 
  1,038,783 
  23,025,762 
  941,495 
 
 
 
 
AMERICAN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
UNAUDITED
 
 
 
September 30,
2019
 
 
December 31,
2018
 
 
  ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
Cash
 $716,840 
 $2,293,107 
 
Accounts Receivable
  71,580 
  1,338,680 
 
Inventory
  1,004,326 
  163,800 
 
Prepaid fees
  483,000 
  147,826 
 
Accounts Receivable - Other
  336,800 
  319,548 
 
Total Current Assets
  2,612,546 
  4,262,961 
 
 
    
    
 
OTHER ASSETS
    
    
 
Cash - restricted
  297,987 
  411,692 
 
Processing and rail facility
  14,496,487 
  11,630,171 
 
Underground equipment
  10,155,915 
  8,717,229 
 
Surface equipment
  3,224,896 
  3,101,518 
 
Acquired mining rights
  28,831,440 
  2,913,241 
 
Coal refuse storage
  12,171,271 
  11,993,827 
 
Less Accumulated Depreciation
  (11,320,116)
  (6,691,259)
 
Land
  3,248,169 
  907,193 
 
Note Receivable
  4,117,139 
  4,117,139 
 
Total Other Assets
  65,223,188 
  37,100,751 
 
 
    
    
 
TOTAL ASSETS
 $67,835,734 
 $41,363,712 
 
 
    
    
 
  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
 
 
    
 
    
    
 
CURRENT LIABILITIES
    
    
 
Accounts payable and accrued liabilities
 $7,483,079 
 $8,139,662 
 
Accounts payable - related party
  639,180 
  474,654 
 
Accrued interest
  1,977,142 
  1,118,736 
 
Funds held for others
  - 
  79,662 
 
Due to affiliate
  132,639 
  124,000 
 
Current portion of long term-debt (net of issuance costs and debt discount of $0 and $134,296)
  14,691,696 
  14,169,139 
 
Current portion of convertible debt
  7,219,612 
  - 
 
Current portion of reclamation liability
  2,327,169 
  2,327,169 
 
Total Current Liabilities
  34,470,517 
  26,433,022 
 
 
    
    
 
OTHER LIABILITIES
    
    
 
Long-term portion of note payable (net of issuance costs of $420,062 and $428,699)
  4,829,330 
  7,918,872 
 
Reclamation liability
  21,425,097 
  16,211,640 
 
Total Other Liabilities
  26,254,427 
  24,134,512 
 
 
    
    
 
Total Liabilities
  60,724,944 
  50,563,534 
 
 
    
    
 
STOCKHOLDERS' EQUITY (DEFICIT)
    
    
 
AREC - Class A Common stock: $.0001 par value; 230,000,000 shares authorized, 27,267,197 and 17,763,469 shares issued and outstanding, respectively
  2,726 
  1,776 
 
AREC - Series A Preferred stock: $.0001 par value; 5,000,000 shares authorized, 0 and 481,780 shares issued and outstanding, respectively
  - 
  48 
 
AREC - Series C Preferred stock: $.001 par value; 20,000,000 shares authorized, 0 and 50,000 shares issued and outstanding, respectively
  - 
  5 
 
Additional paid-in capital
  90,094,006 
  42,913,532 
 
Accumulated deficit
  (82,985,942)
  (52,115,183)
 
Total American Resources Corporation's Stockholders' Equity (Deficit)
    
    
 
Total Stockholders' Deficit
  7,110,790 
  (9,199,822)
 
 
    
    
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 $67,835,734 
 $41,363,712 
 
 
 
 
 
 
 
 
AMERICAN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
 
 
 
For the Nine
Months
September 30,
2019
 
 
For the Nine
Months
September 30,
2018
As Restated
 
Cash Flows from Operating activities:
 
 
 
 
 
 
Net loss
 $(30,870,759)
 $(7,823,444 
Adjustments to reconcile loss to net cash
    
    
Depreciation
  3,036,747 
  1,931,374 
Amortization of mining rights
  1,592,110 
  181,385 
Accretion expense
  962,699 
  1,116,751 
Cancelation of debt
  - 
  (315,000 
Gain on disposition
  - 
  (807,591 
Recovery of previously impaired receipts
  (50,806)
  (92,573 
Amortization of debt discount
  7,722,197 
  420,134 
Warrant expense
  2,528,598 
  234,067 
Warrant modification expense
  2,545,360 
  - 
Option expense
  245,356 
  13,410 
Issuance of common shares for services
  1,806,040 
  201,250 
 
    
    
Change in current assets and liabilities:
    
    
 
    
    
Accounts receivable
  1,300,654 
  (930,478 
Inventory
  (840,526)
  188,371 
Prepaid expenses and other assets
  (335,174)
  (147,826 
Accounts payable
  (2,274,582)
  973,057 
Funds held for others
  (79,662)
  (19,061 
Due to affiliates
  164,526 
  512,378 
Accrued interest
  858,406 
  287,639 
Cash used in operating activities
  (11,688,816)
  (4,076,157 
 
    
    
Cash Flows from Investing activities:
    
    
 
    
    
Advances made in connection with management agreement
  - 
  (99,582 
Advance repayment in connection with management agreement
  - 
  222,304 
Cash paid for PPE, net
  (327,250)
  (127,957 
Cash received in asset acquisitions
  650,000 
  - 
Cash provided by (used in) investing activities
  322,750 
  (5,235 
 
    
    
Cash Flows from Financing activities:
    
    
 
    
    
Principal payments on long term debt
  (2,548,111)
  (2,064,902 
Proceeds from long term debt
  5,139,399 
  5,316,977 
Proceeds from convertible debt
  399,980 
  - 
Proceeds from related party
  8,639 
  - 
Net proceeds from (payments to) factoring agreement
  (1,087,413)
  787,434 
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 
  - 
Cash provided by financing activities
  9,676,094 
  4,039,509 
 
    
    
Decrease in cash and restricted cash
  (1,689,972)
  (41,883 
Cash and restricted cash, beginning of period
  2,704,799 
  385,665 
Cash and restricted cash, end of period
 $1,014,827 
 $343,782 
 
    
    
Supplemental Information
    
    
Cash paid for interest
 $389,437 
 $156,331 
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 
 $2,217,952 
Equipment for notes payable
 $- 
 $906,660 
Conversion of accounts payable into common shares
 $231,661 
 $- 
Beneficial Conversion Feature on note payable due to modification
 $7,362,925 
 $- 
Preferred Series B dividends
 $- 
 $104,157 
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 
 $- 
Forgiveness of accrued management fee
 $- 
 $17,840,615 
Warrant exercise for common shares
 $60 
 $- 
 
 
 
 
Reconciliation of Non-GAAP Measures
 
Reconciliation of Adjusted EBITDA to Amounts Reported Under U.S. GAAP:
 
 
 
For the three months ended
Sept. 30, 2019
 
 
For the nine months ended
Sept. 30, 2019
 
 
For the three months ended
Sept. 30, 2018
 
Net Income
  (7,344,533)
  (30,870,759)
  (3,555,655)
 
    
    
    
Interest & Other Expenses
  1,121,030 
  11,964,870 
  305,655 
Income Tax Expense
  - 
  - 
  - 
Accretion Expense
  320,900 
  962,699 
  433,589 
Depreciation
  1,414,942 
  3,036,747 
  700,595 
Amortization of Mining Rights
  252,728 
  1,592,110 
  181,385 
Non-Cash Stock Options
  - 
  485,799 
  - 
Non-Cash Warrant Expense
  - 
  5,069,860 
  - 
Non-Cash Share Comp. Expense
  138,857 
  1,806,040 
  - 
Development Costs
  1,425,024 
  5,912,589 
  945,341 
 
    
    
    
Total Adjustments
  4,673,481 
  30,830,714 
  2,566,565 
 
    
    
    
Adjusted EBITDA
  (2,671,052)
  (40,045)
  (989,090)
 
1.
Adjusted EBITDA is defined as net income before net interest expense, income tax expense, accretion expense, depreciation, non-cash stock compensation expense, transaction and other professional fees, and development costs. Adjusted EBITDA is not a measure of financial performance in accordance with GAAP, and we believe items excluded from Adjusted EBITDA are significant to a reader in understanding and assessing our financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income, income from operations, cash flow from operations or as a measure of our profitability, liquidity, or performance under GAAP. We believe that Adjusted EBITDA presents a useful measure of our ability to incur and service debt based on ongoing operations. Furthermore, similar measures are used by analysts to evaluate our operating performance. Investors should be aware that our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by others.
 
Use of Non-GAAP Financial Measures
  
This release contains the use of certain U.S. non-GAAP financial measures. These non-GAAP financial measures are provided as supplemental information for financial measures prepared in accordance with GAAP. Management believes that these non-GAAP financial measures provide additional insight into the performance of the Company, and reflect how management analyzes Company performance and compares that performance against other companies. These non-GAAP financial measures may not be comparable to other similarly titled measures used by other entities.
 
 
 
 
About American Resources Corporation
  
American Resources Corporation is a supplier of raw materials to the rapidly growing global infrastructure marketplace. The company's primary focus is on the extraction, processing, transportation and selling of metallurgical carbon and pulverized coal injection (PCI) to the steel industry. The company operations are based in the Central Appalachian basin of eastern Kentucky and southern West Virginia where premium quality metallurgical products are located.
 
The company's business model is based on running a streamlined and efficient operation to economically extract and deliver resources to meet its customers' demands. By running operations with low or no legacy costs, American Resources Corporation works to maximize margins for its investors while being able to scale its operations to meet the growth of the global infrastructure market.
 
Website:
http://www.americanresourcescorp.com
 
Special Note Regarding Forward-Looking Statements
 
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that could cause the Company's actual results, performance, or achievements or industry results to differ materially from any future results, performance, or achievements expressed or implied by these forward-looking statements. These statements are subject to a number of risks and uncertainties, many of which are beyond American Resources Corporation's control. The words "believes", "may", "will", "should", "would", "could", "continue", "seeks", "anticipates", "plans", "expects", "intends", "estimates", or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Any forward-looking statements included in this press release are made only as of the date of this release. The Company does not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances. The Company cannot assure you that the projected results or events will be achieved.
 
Institutional/Retail/Individual Contact:
PCG Advisory
Adam Holdsworth
646-862-4607
adamh@pcgadvisory.com
www.pcgadvisory.com
 
Company Contact:
Mark LaVerghetta
317-855-9926 ext. 0
Vice President of Corporate Finance and Communications
investor@americanresourcescorp.com
 
SOURCE: American Resources Corporation