American Resources Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited consolidated results; comparisons are with the corresponding 2021 periods. The company operates coal mining and processing businesses and has additional metal recovery and rare-earth initiatives.
Financial performance and position
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $16.20 million | $25.28 million | $0.39 million and $0.40 million, respectively |
| Operating loss | $4.13 million | $8.12 million | $5.59 million and $11.56 million, respectively |
| Net loss | $2.44 million | $5.20 million | $6.65 million and $13.04 million, respectively |
| Net loss per share, basic and diluted | $(0.04) | $(0.08) | $(0.13) and $(0.26), respectively |
| Cash used in operating activities | Not separately presented | $7.95 million | $10.45 million |
- Coal sales were $15.97 million in Q2 and $25.00 million for the first half. Management attributed the revenue increase primarily to higher coal production after pandemic-related disruption.
- Operating expenses were $20.33 million in Q2 and $33.40 million for the first half, including development costs of $11.53 million and $18.32 million, respectively. The filing does not present a defined gross-margin measure.
- Net results included debt-cancellation gains of $1.89 million in Q2 and $3.41 million for the first half; without these gains, reported losses would have been higher.
- At June 30, cash was $3.81 million, restricted cash $1.09 million, accounts receivable $5.35 million, and current assets $9.98 million versus current liabilities of $9.85 million. Cash and restricted cash totaled $4.89 million.
- Total liabilities were $42.37 million and stockholders’ deficit was $4.70 million. Listed borrowings comprised $0.41 million current debt, $2.50 million notes payable, and $9.19 million convertible notes. The reclamation liability was $19.58 million.
- Cash used in investing was $0.93 million; financing activities provided $1.19 million. Cash and restricted cash declined by $7.69 million from year-end 2021. The company received $2.56 million of debt proceeds and made $1.28 million of principal payments during the first half.
Changes versus prior period
- Revenue rose sharply from very low 2021 levels as coal production resumed and increased. Development activity and associated operating costs also increased.
- First-half net loss narrowed to $5.20 million from $13.04 million, aided in part by the $3.41 million debt-cancellation gain. Operating loss also narrowed, but remained substantial.
- Cash fell from $11.49 million at December 31, 2021 to $3.81 million at June 30, 2022, while accounts receivable increased from $3.18 million to $5.35 million.
- Total liabilities declined to $42.37 million from $45.21 million, and total stockholders’ deficit increased to $4.70 million from $2.35 million.
Outlook, risks and notable items
- No quantified revenue, earnings, production, or capital-spending guidance is provided. Management expects liquidity needs to be met with cash on hand, future borrowings, stock issuance, and operating cash flow. If funding is inadequate, it may reduce mine development or pursue debt, equity, or asset sales.
- Management cited supply-chain constraints and exposure to steel demand, coal-market conditions, and pandemic-related effects. Coal operations face extensive safety, environmental, permitting, and reclamation requirements; the company disclosed outstanding violations that could affect future permit approvals.
- The company states it has no proven or probable reserves under the cited SEC definition. Many mines and facilities are idle or in development and would require capital to restart or upgrade.
- Reclamation liability was $19.58 million, up from $18.95 million at year-end, including $0.63 million of accretion. Regulatory claims include $1.43 million assessed by the Kentucky Energy Cabinet and $0.75 million assessed by MSHA; the company reports accruals of $1.71 million and $0.35 million, respectively.
- A company investment was proportionally obligated to fund American Acquisition Opportunity Inc. deficits up to $0.80 million. The amount outstanding at June 30 was $0.49 million and the filing says it was repaid after the balance-sheet date.
- Related-party Land Betterment service costs incurred were $3.68 million for the first half, of which $1.90 million was paid. The agreement includes a 10% markup and a cost-savings share; the filing identifies management and directors among the related party’s owners.
- Management concluded disclosure controls were not effective because of insufficient accounting/reporting staff and untimely reconciliations. It reported no material changes in internal control during the quarter.
Important facts for investors to verify
- Production volumes, realized coal prices, customer concentration, and whether the revenue growth and operating performance can be sustained.
- Near-term cash needs and access to additional financing given first-half operating cash use and the decline in cash.
- Debt terms, maturities, conversion or dilution exposure, and the effect of the debt-cancellation gains on underlying results.
- Reclamation estimates, regulatory claims, outstanding violations, and permit-transfer status, including the West Virginia permits.
- Related-party service charges, outstanding balances, and the terms and oversight of the Land Betterment arrangement.
- Several filing figures warrant reconciliation: the balance sheet reports net property and equipment of $22.88 million, while the property note reports $20.88 million; shares outstanding at June 30 are reported as 66,613,085, versus 66,519,279 as of August 15. The filing text does not explain these differences.