American Resources Corporation Reports Second Quarter 2019 Financial Results

American Resources Corporation

Companies Mentioned:

Primary Exchange: NASDAQ
Under the Symbol: AREC

$1.20

($0.9099)

-43.1232


American Resources Corporation Reports Second Quarter 2019 Financial Results

Monday, August 12, 2019 5:40 PM
  • Reports Adjusted EBITDA of $1.8 million
  • Revenues grew over 33 percent to $9.34 million
  • Company records best quarterly production and sales volume of over 126 thousand short tons; a 30% year-over-year increase

FISHERS, IN / ACCESSWIRE / August 12, 2019 / American Resources Corporation (NASDAQ: AREC), 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 coal to the steel industry, today reported a net loss from operations of $3.35 million, or a loss of $0.14 per share, in the second quarter of 2019, compared with a net loss from operations of $1.99 million, or a loss of $2.23 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 $1.8 million in the second quarter of 2019, as compared with adjusted EBITDA loss of $.68 million for the second quarter of 2018. Revenues totaled $9.34 million for the three months ended June 30, 2019 versus $7.02 million in the prior-year quarter.

“The market for our coal qualities remained strong in the second quarter and we continue to work hard and focus on increasing our production level to fulfill the contracted demand from our customers. We’re pleased with the thirty percent year-over-year production growth we achieved in the second quarter which resulted in an approximate thirty-two percent revenue growth over the same period,” stated Mark Jensen, Chairman and CEO of American Resources Corporation. “These solid results reflect the beginnings of our growth objectives and what our platform has been set up to deliver for our employees, customers and shareholders.”

Operational Results

The Company produced and sold 126,977 short tons of coal in the second quarter of 2019, 30.3% more than the second quarter of 2018.

The exhibit below summarizes some of the key sales, production and financial metrics:

Three months ended Three months ended
June 31, March 31, June 31,
2019 2019 2018
Sales Volume (a)
Tons Sold
127,021 99,339 97,457
Company Production (a)
McCoy Elkhorn Coal
56,335 38,276 53,208
Deane Mining
70,686 61,058 44,249
Total
127,021 99,334 97,457
Company Financial Metrics(b)
Revenue per Ton
73.38 70.41 72.09
Cash Cost per Ton Sold (c)
49.27 79.57 55.39
Cash Margin per Ton (c)
24.11 (9.15 ) 16.71
Development Costs
1,887,447 2,600,117 2,032,201

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 measures 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 second quarter of 2019, we made some solid advancements in our organic growth plans. Most notably, we were able to bring our Carnegie 1 mine back into production after a period of development production which confirmed the appropriate mining style and equipment. We are in the process of ramping our production at Carnegie 1 under our enhanced mine plan to support long-term, expanded production. We expect to have Carnegie 1 running at our expected capacity of 32,000 - 42,000 clean tons per month later this fall. Additionally, we continue to progress on enhancing our already producing mines, such as Mine #15 and Access Energy, to increase production and efficiencies. Once completed, we will be focusing on advancing our organic production growth by bringing our next round of mines online to feed our McCoy Elkhorn Coal and Deane Mining complexes. These mines consist of our Carnegie 2, PointRock, Elk 2 and Classic mines that we have already begun development work on and should begin to see production from this phase of growth later this year and early 2020.”

Additional Financial Results

Total revenues were $9,342,126for the second quarter of 2019, which increased 33 percent from $7,023,040 in the second quarter of 2018.

Cost of sales (includes mining, transportation, , and processing costs,) for the second quarter of 2019 were $5,654,568, or 60.5 percent of total revenues, compared to $4,619,675, or 65.8% of total revenue in the same period of 2018.

General and administrative expenses for the second quarter of 2019 were $990,918 for the second quarter of 2019, or 10.6 percent of total revenue. Depreciation for the second quarter of 2019 were $804,889, or 8.6 percent of total revenue. American Resources incurred interest expense of $447,989 during the second quarter of 2019 compared to $311,295 during the second quarter of 2018. Development costs during the quarter were $2,887,448, compared to $1,600,117 in the first 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

As previously stated, based on American Resources’ organic growth from its already owned infrastructure, controlled mining permits and its capital investment schedule, the company is maintaining its 2020 production forecast range of 2.2 to 2.8 million tons.

AMERICAN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED

For the three months ended June 30, 2019 For the three months ended June 30, 2018 For the six months ended June 30, 2019 For the six months ended June 30, 2018
As Restated As Restated
Coal Sales
$ 9,321,250 $ 7,023,040 $ 16,315,526 $ 14,328,900
Processing Services Income
20,876 - 20,876 19,516
Total Revenue
9,342,126 7,023,040 16,336,402 14,348,416
Cost of Coal Sales and Processing
(5,654,568 ) (4,619,675 ) (12,298,655 ) (10,093,103 )
Accretion Expense
(320,098 ) (341,580 ) (641,799 ) (683,161 )
Depreciation
(804,889 ) (615,390 ) (1,621,805 ) (1,230,779 )
Amortization of Mining Rights
(802,590 ) - (1,339,381 ) -
General and Administrative
(990,918 ) (464,110 ) (2,363,506 ) (940,699 )
Professional Fees
(631,934 ) (163,412 ) (4,965,830 ) (438,015 )
Production Taxes and Royalties
(603,957 ) (778,124 ) (1,863,543 ) (1,727,917 )
Development Costs
(2,887,448 ) (2,032,201 ) (4,487,565 ) (3,719,374 )
Total Operating Expenses
(12,696,402 ) (9,014,492 ) (29,582,084 ) (18,833,048 )
Net Loss from Operations
(3,354,276 ) (1,991,452 ) (13,245,682 ) (4,484,632 )
Other Income and (expense)
Other Income
214,529 290,609 480,954 419,123
Gain on cancelation of debt
- 315,000 - 315,000
Loss on settlement of payable
- - (22,660 ) -
Amortization of debt discount and issuance costs
(2,869,118 ) - (7,502,979 ) -
Interest Income
41,172 - 82,343 41,171
Warrant Modification Expense
(2,545,360 ) - (2,545,360 ) -
Interest expense
(447,989 ) (311,295 ) (772,843 ) (558,449 )
Total Other income (expense)
(5,606,765 ) 294,314 (10,280,545 ) 216,845
Net Loss
(8,961,042 ) (1,697,138 ) (23,526,227 ) (4,267,787 )
Less: Series B dividend requirement
- (17,000 ) - (87,157 )
Less: Net loss attributable to Non Controlling Interest
- (22,764 ) - (151,278 )
Net loss attributable to American Resources Corporation Shareholders
$ (8,961,042 ) $ (1,736,902 ) $ (23,526,227 ) $ (4,506,222 )
Net loss per common share - basic and diluted
$ (0.38 ) $ (1.95 ) $ (1.07 ) $ (5.05 )
Weighted average common shares outstanding
23,345,857 892,044 22,078,999 892,044

AMERICAN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
UNAUDITED

June 30,
2019
December 31,
2018
ASSETS
CURRENT ASSETS
Cash
$ 1,129,790 $ 2,293,107
Accounts Receivable
1,945,330 1,338,680
Inventory
121,026 163,800
Prepaid fees
483,000 147,826
Accounts Receivable - Other
360,718 319,548
Total Current Assets
4,039,864 4,262,961
OTHER ASSETS
Cash - restricted
364,985 411,692
Processing and rail facility
11,630,171 11,630,171
Underground equipment
9,452,724 8,717,229
Surface equipment
3,101,518 3,101,518
Acquired mining rights
28,313,241 2,913,241
Coal refuse storage
11,993,827 11,993,827
Less Accumulated Depreciation
(9,652,446 ) (6,691,259 )
Land
2,407,193 907,193
Note Receivable
4,117,139 4,117,139
Total Other Assets
61,728,352 37,100,751
TOTAL ASSETS
$ 65,768,216 $ 41,363,712
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
$ 6,245,513 $ 8,139,662
Accounts payable - related party
597,656 474,654
Accrued interest
1,698,222 1,118,736
Funds held for others
19,955 79,662
Due to affiliate
124,000 124,000
Current portion of long term-debt (net of unamortized discount of $- and $134,296)
15,528,199 14,169,139
Current portion of convertible debt, (net of unamortized discount of $- and $-)
6,819,632 -
Current portion of reclamation liability
2,327,169 2,327,169
Total Current Liabilities
33,360,346 26,433,022
OTHER LIABILITIES
Long-term portion of note payable (net of issuance costs of $422,941 and $428,699)
4,826,451 7,918,872
Reclamation liability
16,853,436 16,211,640
Total Other Liabilities
21,679,887 24,130,512
Total Liabilities
55,040,233 50,563,534
STOCKHOLDERS' EQUITY (DEFICIT)
AREC - Class A Common stock: $.0001 par value; 230,000,000 shares authorized, 23,367,197 and 17,763,469 shares issued and outstanding
2,337 1,776
AREC - Series A Preferred stock: $.0001 par value; 5,000,000 shares authorized, 0 and 481,780 shares issued and outstanding
- 48
AREC - Series C Preferred stock: $.0001 par value; 20,000,000 shares authorized, 0 and 50,000 shares issued and outstanding
- 5
Additional paid-in capital
86,367,056 42,913,532
Accumulated deficit
(75,641,410 ) (52,115,183 )
Total Stockholders' Equity (Deficit)
10,727,983 (9,199,822 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$ 65,768,216 $ 41,363,712

AMERICAN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

For the six
months ended
For the six
months ended
June 30,
2019
June 30, 2018
As Restated
Cash Flows from Operating activities:
Net loss
$ (23,526,227 ) $ (4,267,787 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
1,621,805 1,230,779
Amortization of mining rights
1,339,381 -
Accretion expense
641,799 683,161
Gain on cancelation of debt
- (315,000 )
Recovery of previously impaired accounts receivable
(50,806 ) (92,573 )
Amortization of issuance costs and debt discount
7,502,979 126,529
Warrant modification expense
2,545,360 -
Stock option expense
142,296 -
Warrant expense
2,524,500
Share compensation expense
1,806,040 -
Change in current assets and liabilities:
Accounts receivable
(597,015 ) 102,134
Inventory
42,774 548,752
Prepaid expenses and other assets
(335,174 ) (323,924 )
Accounts payable
(1,679,980 ) (369,510 )
Funds held for others
(59,707 ) (58,776 )
Accrued interest
579,486 254,774
Accounts payable - related party
123,002 -
Cash used in operating activities
(7,379,486 ) (2,481,441 )
Cash Flows from Investing activities:
Advances made in connection with management agreement
- (99,582 )
Advance repayment in connection with management agreement
- 192,155
Cash paid for PPE, net
(735,495 ) -
Cash provided by (used in) investing activities
(735,495 ) (92,573 )
Cash Flows from Financing activities:
Principal payments on long term debt
(2,314,680 ) (1,147,974 )
Proceeds from the sale of common stock, net
4,354,000 -
Proceeds from long term debt
4,299,980 4,281,965
Net proceeds from (payments to) factoring agreement
565,657 (191,623 )
Cash provided by financing activities
6,904,957 2,942,368
Increase(decrease) in cash and restricted cash
(1,210,024 ) 553,500
Cash and restricted cash, beginning of period
2,704,799 385,665
Cash and restricted cash, end of period
$ 1,494,775 $ 939,165
Supplemental Information
Non-cash investing and financing activities
Assumption of net assets and liabilities for asset acquisitions
$ 2,500,000 $ 2,217,952
Equipment for notes payable
$ - $ 906,660
Common shares issued in asset acquisition
$ 24,400,000 $ -
Preferred Series B dividends
$ - $ 87,157
Conversion of accounts payable to common stock
$ 231,661 $ -
Issuance of common shares with note payable
$ 87,250 $ -
Conversion of Series A Preferred into common stock
$ 161 $ -
Conversion of Series B Preferred into common stock
$ 1 $ -
Warrant exercise for common shares
$ 60 $ -
Discount on note due to beneficial conversion feature
$ 7,362,925 $ -
Cancellation of common shares
$ 11 $ -
Forgiveness of accrued management fee
$ - $ 17,840,615
Cash paid for interest
$ 281,832 $ 171,954
Cash paid for income taxes
$ - $ -

AMERICAN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
UNAUDITED

June 30,
2019
December 31,
2018
ASSETS
CURRENT ASSETS
Cash
$ 1,129,790 $ 2,293,107
Accounts Receivable
1,945,330 1,338,680
Inventory
121,026 163,800
Prepaid fees
483,000 147,826
Accounts Receivable - Other
360,718 319,548
Total Current Assets
4,039,864 4,262,961
OTHER ASSETS
Cash - restricted
364,985 411,692
Processing and rail facility
11,630,171 11,630,171
Underground equipment
9,452,724 8,717,229
Surface equipment
3,101,518 3,101,518
Acquired mining rights
28,313,241 2,913,241
Coal refuse storage
11,993,827 11,993,827
Less Accumulated Depreciation
(9,652,446 ) (6,691,259 )
Land
2,407,193 907,193
Note Receivable
4,117,139 4,117,139
Total Other Assets
61,728,352 37,100,751
TOTAL ASSETS
$ 65,768,216 $ 41,363,712
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
$ 6,245,513 $ 8,139,662
Accounts payable - related party
597,656 474,654
Accrued interest
1,698,222 1,118,736
Funds held for others
19,955 79,662
Due to affiliate
124,000 124,000
Current portion of long term-debt (net of unamortized discount of $- and $134,296)
15,528,199 14,169,139
Current portion of convertible debt, (net of unamortized discount of $- and $-)
6,819,632 -
Current portion of reclamation liability
2,327,169 2,327,169
Total Current Liabilities
33,360,346 26,433,022
OTHER LIABILITIES
Long-term portion of note payable (net of issuance costs of $422,941 and $428,699)
4,826,451 7,918,872
Reclamation liability
16,853,436 16,211,640
Total Other Liabilities
21,679,887 24,130,512
Total Liabilities
55,040,233 50,563,534
STOCKHOLDERS' EQUITY (DEFICIT)
AREC - Class A Common stock: $.0001 par value; 230,000,000 shares authorized, 23,367,197 and 17,763,469 shares issued and outstanding
2,337 1,776
AREC - Series A Preferred stock: $.0001 par value; 5,000,000 shares authorized, 0 and 481,780 shares issued and outstanding
- 48
AREC - Series C Preferred stock: $.0001 par value; 20,000,000 shares authorized, 0 and 50,000 shares issued and outstanding
- 5
Additional paid-in capital
86,367,056 42,913,532
Accumulated deficit
(75,641,410 ) (52,115,183 )
Total Stockholders' Equity (Deficit)
10,727,983 (9,199,822 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$ 65,768,216 $ 41,363,712

Reconciliation of Non-GAAP Measures

Reconciliation of Adjusted EBITDA to Amounts Reported Under U.S. GAAP:

For the three months ended June 30, 2019 For the six months ended June 30, 2019 For the three months ended June 30, 2018
Net Income
(8,961,042 ) (23,526,227 ) (1,733,902 )
Interest & Other Expenses
5,606,766 10,280,545 (294,314 )
Income Tax Expense
0 0 0
Accretion Expense
320,098 641,799 341,580
Depreciation
804,889 1,621,805 615,390
Amortization of Mining Rights
802,590 1,339,381 0
Non-Cash Stock Options
73,602 142,294 0
Non-Cash Warrant Expense
0 2,524,500
Non-Cash Share Comp. Expense
273,340 1,806,040 0
Development Costs
2,887,448 4,487,565 2,032,201
Total Adjustments
10,768,733 22,843,929 2,694,857
Adjusted EBITDA
1,807,691 (682,298 ) 960,955
  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 coal 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:

American Capital Ventures
Howard Gostfrand, President
305-918-7000 - Office
hg@amcapventures.com
www.amcapventures.com

Company Contact:
Mark LaVerghetta
317-855-9926 ext. 0
Vice President of Corporate Finance and Communications
investor@americanresourcescorp.com

SOURCE: American Resources Corporation


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