Annual report [Section 13 and 15(d), not S-K Item 405]



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UNITED STATES




SECURITIES AND EXCHANGE COMMISSION




Washington, D.C. 20549







FORM 10-K






(Mark One)



☒     ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended


December 31, 2020






☐     TRANSITION REPORT UNDER 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 jurisdiction of Incorporation or organization








(I.R.S Employer Identification No.)














12115 Visionary Way




Fishers, Indiana








46038





(Address of principal executive offices)








(Zip Code)







Registrant’s telephone number, including area code:



317-855-9926






Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered






















Title of each class




Trading Symbol(s)




Name of each exchange on which registered




Class A Common, $0.0001 Par Value




AREC




NASDAQ Capital Market




Warrant




ARECW




NASDAQ Capital Market






Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes     ☒ No





Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act. ☐ Yes     ☒ No





Indicate by check mark whether the registrant (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 Web site, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation s-K (§ 229.405 of this chapter is not contained herein and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ 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 “large accelerated filer”, “accelerated filer” “smaller reporting company” in Rule 12b-2 of the Exchange Act.
























Large accelerated filer








Accelerated filer








Non-accelerated filer








Smaller reporting company








(Do not check if a smaller 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 Act). ☐ Yes     ☒ No





State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter; $29,946,586.





Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.





The number of shares outstanding of the issuer’s Common Stock, $.0001 par value, as of March 10, 2021 was 50,804,196 shares.





DOCUMENTS INCORPORATED BY REFERENCE





List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the documents is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).







































AMERICAN RESOURCES CORPORATION





ANNUAL REPORT ON FORM 10-K




Fiscal Year Ended December 31, 2020




TABLE OF CONTENTS



























































































































































































































































Page








Special Note Regarding Forward Looking Statements







3
























PART I





















Item 1.





Business







4








Item 1A.





Risk Factors







24








Item 1B.





Unresolved Staff Comments







24








Item 2.





Properties







24








Item 3.





Legal Proceedings







24








Item 4.





Mine Safety Disclosures







24
























PART II





















Item 5.





Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities







25








Item 6.





Selected Financial Data







33








Item 7.





Management’s Discussion and Analysis of Financial Condition and Results of Operations







33








Item 7A.





Quantitative and Qualitative Disclosure About Market Risk







36








Item 8.





Financial Statements and Supplementary Data







36








Item 9.





Changes in and Disagreements with Accountants on Accounting and Financial Disclosure







36








Item 9A.





Controls and Procedures







36








Item 9B.





Other Information







37
























PART III





















Item 10.





Directors, Executive Officers and Corporate Governance







38








Item 11.





Executive Compensation







44








Item 12.





Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters







46








Item 13.





Certain Relationships and Related Transactions, and Director Independence







48








Item 14.





Principal Accounting Fees and Services







48
























PART IV





















Item 15.





Exhibits, Financial Statement Schedules







49























Signatures







51























2











Special Note Regarding Forward Looking Statements.







This annual report on Form 10-K of American Resources Corporation for the year ended December 31, 2020 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward-looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.





The following are factors that could cause actual results or events to differ materially from those anticipated and include but are not limited to: general economic, financial and business conditions; the price of metallurgical coal and or thermal coal changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.





You should not rely on forward looking statements in this annual report. This annual report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. Our actual results could differ materially from those anticipated in these forward-looking statements.



















3






Table of Contents








PART I








Item 1. Business.







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. On November 25, 2020, Quest Energy changed its name to American Carbon Corp. (American Carbon)





American Carbon 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.





Since mid-2019, we have not mined or sold coal which is sold into the thermal coal markets. All production and future investment will be for the mining of metallurgical coal. The following table is presented for historical purposes.





















































































































Historic Metallurgical Coal Prices











Historic CAPP Thermal Coal Prices








Year End








Hampton Road Index HCC - High











Year End








Big Sandy / Kanawha Rate District







2014






$


100.35










2014






$


56.00







2015






$


80.25










2015






$


45.55







2016






$


223.00










2016






$


50.65







2017






$


210.00










2017






$


60.90







2018






$


205.34










2018






$


68.12







2019






$


135.00










2019






$


60.30







2020






$


101.00










2020






$


54.35























4






Table of Contents








McCoy Elkhorn Coal LLC







General:





Located primarily within Pike County, Kentucky, McCoy Elkhorn is currently comprised of two active mines (Mine #15 and the Carnegie 1 Mine), one mine in “hot idle” status (the PointRock 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. The coal controlled at McCoy Elkhorn (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:





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 and pays all expenses of 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. Mine #15 has the estimated capacity to produce up to approximately 40,000 tons per month of coal. The Company acquired Mine #15 as an idled mine, and since acquisition, the primary work completed at Mine #15 by the Company includes changing working sections within the underground mine, air ventilation enhancements primarily through brattice work and the use of overcasts and installing underground mining infrastructure as the mine advances due to coal extraction. In 2020, Mine #15 produced approximately 461,570 tons and sold the coal at an average price of $70.28 per ton. In 2019, Mine #15 produced approximately 124,740 tons and sold the coal at an average price of $76.40 per ton. During 2020 and 2019, 100% and 100%, respectively, of the coal extracted from Mine #15 was high-vol “B” metallurgical coal quality, of which 100% was sold into the PCI market and 100% was sold into the metallurgical market, respectively.





The Carnegie 1 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 1 Mine in the Alma coal seam commenced and then subsequently the mine was idled. Production at the Carnegie 1 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 1 Mine is currently a “company run” mine, whereby the Company manages the workforce at the mine and pays all expenses of the mine. The Carnegie 1. Mine has the estimated capacity to produce up to approximately 10,000 tons per month of coal. The Company acquired the Carnegie 1 Mine as an idled mine, and since acquisition, the primary work completed at the Carnegie 1 Mine by the Company includes mine rehabilitation work in preparation for production, changing working sections within the underground mine, air ventilation enhancements primarily through brattice work, and installing underground mining infrastructure as the mine advances due to coal extraction. In 2020, the Carnegie 1 Mine produced approximately 0 tons. In 2019, the Carnegie 1 Mine produced approximately 4,276 tons and sold the coal at an average price of $76.40 per ton. During 2019 100% of the coal extracted from the Carnegie 1 Mine was high-vol “B” metallurgical coal quality, of which 100% was sold into the metallurgical market.





Quest Energy acquired the PointRock Mine in April 2018. On May 8, 2020, the PointRock Mine permits were released from the Company’s control upon the settlement agreement with Empire.





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.



















5






Table of Contents







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 processes, stores, and loads 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.





Below is a map showing the material properties at McCoy Elkhorn:


























6






Table of Contents








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 one active mine (the Wayland Surface Mine) and 22 idled mining permits (or permits in reclamation), including the permits associated with the idled Supreme Energy Preparation Plant. The idled mining permits are either in various stages of planning, idle status or reclamation. The idled mines at Knott County Coal are primarily underground mines that utilize room-and-pillar mining. The coal controlled at Knott 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” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.






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. The associated permit was purchased during May 2018. Since acquisition, the primary work completed at the Wayland Surface Mine has been removing overburden to access the coal. The Wayland Surface Mine has the estimated capacity to produce up to approximately 15,000 tons per month of coal and started production in mid-2018 with nominal coal extracted and sold as thermal coal. In 2020, the Wayland Surface Mine produced approximately 0 tons. In 2019, the Wayland Surface Mine produced approximately 45,505 tons and sold the coal at an average price of $61.45 per ton. During 2019, the Wayland Surface Mine was idled due to the company’s focus on the metallurgical and industrial markets.





Other potential customers of Knott County Coal include industrial customers, specialty customers and utilities for electricity generation, although no definitive sales have been identified yet.






Processing & Transportation:





The idled Supreme Energy Preparation Plant is a 400 ton-per-hour coal preparation facility with a fine coal circuit located in Kite, Kentucky. The Bates Branch rail loadout associated with the Supreme Energy Preparation Plant is a batch-weigh rail loadout with 220 rail car storage capacity and serviced by CSX Transportation in their Big Sandy rate district. The coarse refuse is trucked to the Kings Branch impoundment, which is approximately one mile from the Supreme Energy facility. The slurry from coal processing is piped from the Supreme Energy facility to the Kings 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.



















7






Table of Contents






Below is a map showing the location of the idled Supreme Energy Prep Plant, Raven Prep Plant, Loadouts, and plant impoundments at Knott County Coal:














Deane Mining LLC







General:





Located within Letcher County and Knott County, Kentucky, Deane Mining LLC 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. The coal controlled at Deane Mining (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.



















8






Table of Contents







Mines:





Access Energy is a deep 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. The Company acquired Access Energy as an idled mine, and since acquisition, the primary work completed at Access Energy by the Company includes mine rehabilitation work in preparation for production, air ventilation enhancements primarily through brattice work, and installing underground mining infrastructure as the mine advances due to coal extraction. Access Energy has the estimated capacity to produce up to approximately 20,000 tons per month of coal. In 2020, Access Energy produced approximately 0 tons. In 2019, Access Energy produced approximately 86,077.75 tons and sold the coal at an average price of $61.45 per ton. During 2019, 17% of the coal sold from Access Energy was sold as PCI coal and 83% was sold as thermal coal. 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 currently mining the Hazard 4 and Hazard 4 Rider coal seams and located in Deane, Kentucky. Razorblade Surface is mined via contour, auger, and highwall mining methods, and the coal is stockpiled on site where it trucked to the Mill Creek Preparation Plant approximately one mile away for processing. Razorblade Surface is run as both a contractor mine and as a “company run” mine for coal extraction and began extracting coal in spring of 2018. Coal produced from Razorblade Surface is trucked approximately one mile to the Mill Creek Preparation Plant. The Company acquired the Razorblade Surface mine as a new, undisturbed mine, and since acquisition, the primary work completed at Razorblade Surface has been some initial engineering work and removing overburden to access the coal. Razorblade Surface mine has the estimated capacity to produce up to approximately 8,000 tons per month of coal and started production in mid-2018 with nominal coal extracted and sold as thermal coal. In 2020, Razorblade Surface produced approximately 0 tons. In 2019, Razorblade Surface produced approximately 13,433.30 tons and sold the coal at an average price of $61.45 per ton. 100% of the coal sold from Razorblade Surface in 2019 was sold as thermal coal. 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.





The coal production from Deane Mining LLC was currently sold a utility located in southeast United States under a contract that expired December 2018 and extended until June 2019, along with coal sold in the spot market. Deane Mining is in discussions with various customers to sell additional production from Access Energy, Razorblade, and Wayland Surface mines, combined with other potential regional coal production, as pulverized coal injection (PCI) to steel mills, industrial coal, and thermal coal to other utilities for electricity generation.






Processing & Transportation:





The Mill Creek Preparation Plant is an 800 ton-per-hour coal preparation facility located in Deane, Kentucky. The associated Rapid Loader rail loadout is a batch-weight rail loadout with 110 car storage capacity and services by CSX Transportation in their Big Sandy and Elkhorn rate districts. The Mill Creek Preparation Plant is owned by Deane Mining, subject to certain restrictions present in the agreement between Deane Mining and the surface land owner, Land Resources & Royalties LLC. We are currently utilizing less than 10% of the available processing capacity of the Mill Creek Preparation Plant.





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.



















9






Table of Contents






Below is a map showing the material properties at Deane Mining:














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” reserves 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.



















10






Table of Contents







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 was satisfied in the form of a convertible note which was converted to company common stock in December 2020.






Permits:





Wyoming County Coal holds 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. As of the balance sheet date and report date, the West Virginia permit transfers have not yet been approved, 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.





Below is a map showing the location of the idled Pioneer Prep Plant, Hatcher rail Loadout, and Simmons Fork Refuse Impoundment at Wyoming County Coal:
























11






Table of Contents








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.





In 2020, during the period of ownership by the Company, the E4-2 mine produced approximately 1,200 tons and sold the coal at an average price of $52.30. During the period of ownership by the Company, 100% of the coal sold was sold as industrial stoker.





In 2019, during the period of ownership by the Company, the E4-2 mine produced approximately 45,282.78 and sold the coal at an average price of $81.37. During the period of ownership by the Company, 97% of the coal sold was sold as PCI with the remaining 3% being sold as industrial stoker.





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. As of the report date, the permits have not been fully transferred as they await final regulatory approval.





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, 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), 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 ERC Mining 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 December 31, 2020 and 2019, respectively. ERC Mining LLC is considered a variable interest entity and is consolidated into Quest Energy’s financial statements.







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 which was in process during 2020.







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. The Company is facilitating the full reclamation and remediation of the former mine site.



















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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 the 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. During the year ended December 31, 2020, coal sales came from the Company’s Perry’ 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 Resources, 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 cases.






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.





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, GHG 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. For example, if the emissions rates or caps adopted under the CPP on GHGs are upheld or a tax on carbon is imposed, the market share of coal as fuel used to generate electricity would be expected to decrease.



















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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.






Surface Mining Control and Reclamation Act





SMCRA establishes operational, reclamation and closure standards for our mining operations and requires that comprehensive environmental protection and reclamation standards be met during the course of and following completion of mining activities. SMCRA also stipulates compliance with many other major environmental statutes, including the CAA, the CWA, the ESA, RCRA and CERCLA. Permits for all mining operations must be obtained from the United States Office of Surface Mining (“OSM”) or, where state regulatory agencies have adopted federally approved state programs under SMCRA, the appropriate state regulatory authority. Our operations are located in states which have achieved primary jurisdiction for enforcement of SMCRA through approved state programs.





SMCRA imposes a complex set of requirements covering all facets of coal mining. SMCRA regulations govern, among other things, coal prospecting, mine plan development, topsoil or growth medium removal and replacement, disposal of excess spoil and coal refuse, protection of the hydrologic balance, and suitable post mining land uses.





From time to time, OSM will also update its mining regulations under SMCRA. For example, in December 2016, OSM finalized a new version of the Stream Protection Rule which became effective in January 2017. The rule would have impacted both surface and underground mining operations, as it would have imposed stricter guidelines on conducting coal mining operations, and would have required more extensive baseline data on hydrology, geology and aquatic biology in permit applications. The rule also required the collection of increased pre-mining data about the site of the proposed mining operation and adjacent areas to establish a baseline for evaluation of the impacts of mining and the effectiveness of reclamation associated with returning streams to pre-mining conditions. However, in February 2017, both the House and Senate passed a resolution disapproving of the Stream Protection Rule pursuant to the Congressional Review Act (“CRA”). President Trump signed the resolution on February 16, 2017 and, pursuant to the CRA, the Stream Protection Rule “shall have no force or effect” and cannot be replaced by a similar rule absent future legislation. On November 17, 2017, OSMRE published a Federal Register notice that removed the text of the Stream Protection Rule from the Code of Federal Regulations. Whether Congress will enact future legislation to require a new Stream Protection Rule remains uncertain. The existing rules, or other new SMCRA regulations, could result in additional material costs, obligations and restrictions upon our operations.






Abandoned Mine Lands Fund





SMCRA also imposes a reclamation fee on all current mining operations, the proceeds of which are deposited in the AML Fund, which is used to restore unreclaimed and abandoned mine lands mined before 1977. The current per ton fee is $0.280 per ton for surface mined coal and $0.120 per ton for underground mined coal. These fees are currently scheduled to be in effect until September 30, 2021.






Mining Permits and Approvals





Numerous governmental permits and approvals are required for mining operations. We are required to prepare and present to federal, state, and local authorities data detailing the effect or impact that any proposed exploration project for production of coal may have upon the environment, the public and our employees. The permitting rules, and the interpretations of these rules, are complex, change frequently, and may be subject to discretionary interpretations by regulators. The requirements imposed by these permits and associated regulations can be costly and time-consuming and may delay commencement or continuation of exploration, production or expansion at our operations. The governing laws, rules, and regulations authorize substantial fines and penalties, including revocation or suspension of mining permits under some circumstances. Monetary sanctions and, in certain circumstances, even criminal sanctions may be imposed for failure to comply with these laws.





Applications for permits and permit renewals at our mining operations are also subject to public comment and potential legal challenges from third parties seeking to prevent a permit from being issued, or to overturn the applicable agency’s grant of the permit. Should our permitting efforts become subject to such challenges, they could delay commencement, continuation or expansion of our mining operations. If such comments lead to a formal challenge to the issuance of these permits, the permits may not be issued in a timely fashion, may involve requirements which restrict our ability to conduct our mining operations or to do so profitably, or may not be issued at all. Any delays, denials, or revocation of these or other similar permits we need to operate could reduce our production and materially adversely impact our cash flow and results of our operations.



















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In order to obtain mining permits and approvals from state regulatory authorities, mine operators must also submit a reclamation plan for restoring the mined property to its prior condition, productive use or other permitted condition. The conditions of certain permits also require that we obtain surface owner consent if the surface estate has been split from the mineral estate. This requires us to negotiate with third parties for surface access that overlies coal we acquired or intend to acquire. These negotiations can be costly and time-consuming, lasting years in some instances, which can create additional delays in the permitting process. If we cannot successfully negotiate for land access, we could be denied a permit to mine coal we already own.





Finally, we typically submit necessary mining permit applications several months, or even years, before we anticipate mining a new area. However, we cannot control the pace at which the government issues permits needed for new or ongoing operations. For example, the process of obtaining CWA permits can be particularly time-consuming and subject to delays and denials. The EPA also has the authority to veto permits issued by the Corps under the CWA’s Section 404 program that prohibits the discharge of dredged or fill material into regulated waters without a permit. Even after we obtain the permits that we need to operate, many of the permits must be periodically renewed, or may require modification. There is some risk that not all existing permits will be approved for renewal, or that existing permits will be approved for renewal only upon terms that restrict or limit our operations in ways that may be material.






Financial Assurance





Federal and state laws require a mine operator to secure the performance of its reclamation and lease obligations under SMCRA through the use of surety bonds or other approved forms of financial security for payment of certain long-term obligations, including mine closure or reclamation costs. The changes in the market for coal used to generate electricity in recent years have led to bankruptcies involving prominent coal producers. Several of these companies relied on self-bonding to guarantee their responsibilities under the SMCRA permits including for reclamation. In response to these bankruptcies, OSMRE issued a Policy Advisory in August 2016 to state agencies that are authorized under the SMCRA to implement the act in their states. Certain states, including Virginia, had previously announced that it would no longer accept self-bonding to secure reclamation obligations under the state mining laws. This Policy Advisory is intended to discourage authorized states from approving self-bonding arrangements and may lead to increased demand for other forms of financial assurance, which may strain capacity for those instruments and increase our costs of obtaining and maintaining the amounts of financial assurance needed for our operations. In addition, OSMRE announced in August 2016 that it would initiate a rulemaking under SMCRA to revise the requirements for self-bonding. Individually and collectively, these revised various financial assurance requirements may increase the amount of financial assurance needed and limit the types of acceptable instruments, straining the capacity of the surety markets to meet demand. This may delay the timing for and increase the costs of obtaining the required financial assurance.





We may use surety bonds, trusts and letters of credit to provide financial assurance for certain transactions and business activities. Federal and state laws require us to obtain surety bonds to secure payment of certain long-term obligations including mine closure or reclamation costs and other miscellaneous obligations. The bonds are renewable on a yearly basis. Surety bond rates have increased in recent years and the market terms of such bonds have generally become less favorable. Sureties typically require coal producers to post collateral, often having a value equal to 40% or more of the face amount of the bond. As a result, we may be required to provide collateral, letters of credit or other assurances of payment in order to obtain the necessary types and amounts of financial assurance. Under our surety bonding program, we are not currently required to post any letters of credit or other collateral to secure the surety bonds; obtaining letters of credit in lieu of surety bonds could result in a significant cost increase. Moreover, the need to obtain letters of credit may also reduce amounts that we can borrow under any senior secured credit facility for other purposes. If, in the future, we are unable to secure surety bonds for these obligations, and are forced to secure letters of credit indefinitely or obtain some other form of financial assurance at too high of a cost, our profitability may be negatively affected.





Although our current bonding capacity approved by our sureties, Lexon Insurance Company and Continental Heritage, is substantial and enough to cover our current and anticipated future bonding needs, this amount may increase or decrease over time. As of December 31, 2020, and 2019, we had outstanding surety bonds at all of our mining operations totaling approximately $29.29 million and $34.93 million, respectively. While we anticipate reducing the outstanding surety bonds through continued reclamation of many of our permits, that number may increase should we acquire additional mining permits, acquire additional mining operations, expand our mining operations that result in additional reclamation bonds, or if any of our sites encounters additional environmental liability that may require additional reclamation bonding. While we intend to maintain a credit profile that eliminates the need to post collateral for our surety bonds, our surety has the right to demand additional collateral at its discretion.



















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Mine Safety and Health





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.





From time to time MSHA will also publish new regulations imposing additional requirements and costs on our operations. For example, MSHA implemented a rule in August 2014 to lower miners’ exposure to respirable coal mine dust. The rule requires shift dust to be monitored and reduces the respirable dust standard for designated occupants and miners. MSHA also finalized a new rule in January 2015 on proximity detection systems for continuous mining machines, which requires underground coal mine operators to equip continuous mining machines, except full-face continuous mining machines, with proximity detection systems.





Kentucky, West Virginia, and Virginia all have similar programs for mine safety and health regulation and enforcement. The various requirements mandated by federal and state statutes, rules, and regulations place restrictions on our methods of operation and result in fees and civil penalties for violations of such requirements or criminal liability for the knowing violation of such standards, significantly impacting operating costs and productivity. The regulations enacted under the Mine Act and MINER Act as well as under similar state acts are routinely expanded or made more stringent, raising compliance costs and increasing potential liability. Our compliance with current or future mine health and safety regulations could increase our mining costs. At this time, it is not possible to predict the full effect that new or proposed statutes, regulations and policies will have on our operating costs, but any expansion of existing regulations, or making such regulations more stringent may have a negative impact on the profitability of our operations. If we were to be found in violation of mine safety and health regulations, we could face penalties or restrictions that may materially and adversely impact our operations, financial results and liquidity.





In addition, government inspectors have the authority to issue orders to shut down our operations based on safety considerations under certain circumstances, such as imminent dangers, accidents, failures to abate violations, and unwarrantable failures to comply with mandatory safety standards. If an incident were to occur at one of our operations, it could be shut down for an extended period of time, and our reputation with prospective customers could be materially damaged. Moreover, if one of our operations is issued a notice of pattern of violations, then MSHA can issue an order withdrawing the miners from the area affected by any enforcement action during each subsequent significant and substantial (“S&S”) citation until the S&S citation or order is abated. In 2013 MSHA modified the pattern of violations regulation, allowing, among other things, the use of non-final citations and orders in determining whether a pattern of violations exists at a mine.






Workers’ Compensation and Black Lung





We are insured for workers’ compensation benefits for work related injuries that occur within our United States operations. We retain exposure for the first $10,000 per accident for all of our subsidiaries and are insured above the deductible for statutory limits. Workers’ compensation liabilities, including those related to claims incurred but not reported, are recorded principally using annual valuations based on discounted future expected payments using historical data of the operating subsidiary or combined insurance industry data when historical data is limited. State workers’ compensation acts typically provide for an exception to an employer’s immunity from civil lawsuits for workplace injuries in the case of intentional torts. However, Kentucky’s workers’ compensation act provides a much broader exception to workers’ compensation immunity. The exception allows an injured employee to recover against his or her employer where he or she can show damages caused by an unsafe working condition of which the employer was aware that was a violation of a statute, regulation, rule or consensus industry standard. These types of lawsuits are not uncommon and could have a significant impact on our operating costs.





The Patient Protection and Affordable Care Act includes significant changes to the federal black lung program including an automatic survivor benefit paid upon the death of a miner with an awarded black lung claim and the establishment of a rebuttable presumption with regard to pneumoconiosis among miners with 15 or more years of coal mine employment that are totally disabled by a respiratory condition. These changes could have a material impact on our costs expended in association with the federal black lung program. In addition to possibly incurring liability under federal statutes, we may also be liable under state laws for black lung claims.



















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Clean Air Act





The CAA and comparable state laws that regulate air emissions affect coal mining operations both directly and indirectly. Direct impacts on coal mining and processing operations include CAA permitting requirements and emission control requirements relating to air pollutants, including particulate matter such as fugitive dust. The CAA indirectly affects coal mining operations by extensively regulating the emissions of particulate matter, sulfur dioxide, nitrogen oxides, mercury and other compounds emitted by coal-fired power plants. In addition to the GHG issues discussed below, the air emissions programs that may materially and adversely affect our operations, financial results, liquidity, and demand for our coal, directly or indirectly, include, but are not limited to, the following:
















·





Clean Air Interstate Rule and Cross-State Air Pollution Rule

. the Clean Air Interstate Rule (“CAIR”) calls for power plants in 28 states and the District of Columbia to reduce emission levels of sulfur dioxide and nitrogen oxide pursuant to a cap-and-trade program similar to the system now in effect for acid rain. In June 2011, the EPA finalized the Cross-State Air Pollution Rule (“CSAPR”), a replacement rule to CAIR, which requires 28 states in the Midwest and eastern seaboard of the U.S. to reduce power plant emissions that cross state lines and contribute to ozone and/or fine particle pollution in other states. Following litigation over the rule, the EPA issued an interim final rule reconciling the CSAPR rule with a court order, which calls for Phase 1 implementation of CSAPR in 2015 and Phase 2 implementation in 2017. In September 2016, the EPA finalized an update to CSAPR for the 2008 ozone NAAQS by issuing the final CSAPR Update. Beginning in May 2017, this rule will reduce summertime (May—September) nitrogen oxide emissions from power plants in 22 states in the eastern United States. For states to meet their requirements under CSAPR, a number of coal-fired electric generating units will likely need to be retired, rather than retrofitted with the necessary emission control technologies, reducing demand for thermal coal. However, the practical impact of CSAPR may be limited because utilities in the U.S. have continued to take steps to comply with CAIR, which requires similar power plant emissions reductions, and because utilities are preparing to comply with the Mercury and Air Toxics Standards (“MATS”) regulations, which require overlapping power plant emissions reductions.

















·





Acid Rain

. Title IV of the CAA requires reductions of sulfur dioxide emissions by electric utilities and applies to all coal-fired power plants generating greater than 25 Megawatts of power. Affected power plants have sought to reduce sulfur dioxide emissions by switching to lower sulfur fuels, installing pollution control devices, reducing electricity generating levels or purchasing or trading sulfur dioxide emission allowances. These reductions could impact our customers in the electric generation industry. These requirements are not supplanted by CSAPR.

















·





NAAQS for Criterion Pollutants

. The CAA requires the EPA to set standards, referred to as NAAQS, for six common air pollutants: carbon monoxide, nitrogen dioxide, lead, ozone, particulate matter and sulfur dioxide. Areas that are not in compliance (referred to as non-attainment areas) with these standards must take steps to reduce emissions levels. The EPA has adopted more stringent NAAQS for nitrogen oxide, sulfur dioxide, particulate matter and ozone. As a result, some states will be required to amend their existing individual state implementation plans (“SIPs”) to achieve compliance with the new air quality standards. Other states will be required to develop new plans for areas that were previously in “attainment,” but do not meet the revised standards. For example, in October 2015, the EPA finalized the NAAQS for ozone pollution and reduced the limit to parts per billion (ppb) from the previous 75 ppb standard. Under the revised ozone NAAQS, significant additional emissions control expenditures may be required at coal-fired power plants. The final rules and new standards may impose additional emissions control requirements on our customers in the electric generation, steelmaking, and coke industries. Because coal mining operations emit particulate matter and sulfur dioxide, our mining operations could be affected when the new standards are implemented by the states.

















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Nitrogen Oxide SIP Call

. The nitrogen oxide SIP Call program was established by the EPA in October 1998 to reduce the transport of nitrogen oxide and ozone on prevailing winds from the Midwest and South to states in the Northeast, which alleged that they could not meet federal air quality standards because of migrating pollution. The program is designed to reduce nitrogen oxide emissions by one million tons per year in 22 eastern states and the District of Columbia. As a result of the program, many power plants have been or will be required to install additional emission control measures, such as selective catalytic reduction devices. Installation of additional emission control measures will make it costlier to operate coal-fired power plants, potentially making coal a less attractive fuel.

















·





Mercury and Hazardous Air Pollutants

. In February 2012, the EPA formally adopted the MATS rule to regulate emissions of mercury and other metals, fine particulates, and acid gases such as hydrogen chloride from coal- and oil-fired power plants. Following a legal challenge to MATS, the EPA issued a new determination in April 2016 that it is appropriate and necessary to regulate these pollutants from power plants. Like CSAPR, MATS and other similar future regulations could accelerate the retirement of a significant number of coal-fired power plants. Such retirements would likely adversely impact our business.




















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Global Climate Change





Climate change continues to attract considerable public and scientific attention. There is widespread concern about the contributions of human activity to such changes, especially through the emission of GHGs. There are three primary sources of GHGs associated with the coal industry. First, the end use of our coal by our customers in electricity generation, coke plants, and steelmaking is a source of GHGs. Second, combustion of fuel by equipment used in coal production and to transport our coal to our customers is a source of GHGs. Third, coal mining itself can release methane, which is considered to be a more potent GHG than CO2, directly into the atmosphere. These emissions from coal consumption, transportation and production are subject to pending and proposed regulation as part of initiatives to address global climate change.





As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional and state levels of government to monitor and limit emissions of GHGs. Collectively, these initiatives could result in higher electric costs to our customers or lower the demand for coal used in electric generation, which could in turn adversely impact our business.





At present, we are principally focused on metallurgical coal production, which is not used in connection with the production of power generation. However, we may seek to sell greater amounts of our coal into the power-generation market in the future. The market for our coal may be adversely impacted if comprehensive legislation or regulations focusing on GHG emission reductions are adopted, or if our customers are unable to obtain financing for their operations. At the international level, the United Nations Framework Convention on Climate Change released an international climate agreement in December 2015. The agreement has been ratified by more than 70 countries, and entered into force in November 2016. Although this agreement does not create any binding obligations for nations to limit their GHG emissions, it does include pledges to voluntarily limit or reduce future emissions. In addition, in November 2014, President Obama announced that the United States would seek to cut net GHG emissions 26-28 percent below 2005 levels by 2025 in return for China’s commitment to seek to peak emissions around 2030, with concurrent increases in renewable energy.





At the federal level, no comprehensive climate change legislation has been implemented to date. The EPA has, however, has determined that emissions of GHGs present an endangerment to public health and the environment, because emissions of GHGs are, according to the EPA, contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and implementing regulations to restrict emissions of GHGs under existing provisions of the CAA. For example, in August 2015, EPA finalized the CPP to cut carbon emissions from existing power plants. The CPP creates individualized emission guidelines for states to follow and requires each state to develop an implementation plan to meet the individual state’s specific targets for reducing GHG emissions. The EPA also proposed a federal compliance plan to implement the CPP in the event that a state does not submit an approvable plan to the EPA. In February 2016, the U.S. Supreme Court granted a stay of the implementation of the CPP. This stay suspends the rule and will remain in effect until the completion of the appeals process. The Supreme Court’s stay only applies to EPA’s regulations for CO2 emissions from existing power plants and will not affect EPA’s standards for new power plants. If the CPP is ultimately upheld and depending on how it is implemented by the states, it could have an adverse impact on the demand for coal for electric generation.





At the state level, several states have already adopted measures requiring GHG emissions to be reduced within state boundaries, including cap-and-trade programs and the imposition of renewable energy portfolio standards. Various states and regions have also adopted GHG initiatives and certain governmental bodies, have imposed, or are considering the imposition of, fees or taxes based on the emission of GHGs by certain facilities. A number of states have also enacted legislative mandates requiring electricity suppliers to use renewable energy sources to generate a certain percentage of power.





The uncertainty over the outcome of litigation challenging the CPP and the extent of future regulation of GHG emissions may inhibit utilities from investing in the building of new coal-fired plants to replace older plants or investing in the upgrading of existing coal-fired plants. Any reduction in the amount of coal consumed by electric power generators as a result of actual or potential regulation of GHG emissions could decrease demand for our coal, thereby reducing our revenues and materially and adversely affecting our business and results of operations. We or prospective customers may also have to invest in CO2 capture and storage technologies in order to burn coal and comply with future GHG emission standards.





Finally, there have been attempts to encourage greater regulation of coalbed methane because methane has a greater GHG effect than CO2. Methane from coal mines can give rise to safety concerns and may require that various measures be taken to mitigate those risks. If new laws or regulations were introduced to reduce coalbed methane emissions, those rules could adversely affect our costs of operations by requiring installation of air pollution controls, higher taxes, or costs incurred to purchase credits that permit us to continue operations.



















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Clean Water Act





The CWA and corresponding state laws and regulations affect coal mining operations by restricting the discharge of pollutants, including dredged or fill materials, into waters of the United States. Likewise, permits are required under the CWA to construct impoundments, fills or other structure in areas that are designated as waters of the United States. The CWA provisions and associated state and federal regulations are complex and subject to amendments, legal challenges and changes in implementation. Recent court decisions, regulatory actions and proposed legislation have created uncertainty over CWA jurisdiction and permitting requirements.





Prior to discharging any pollutants into waters of the United States, coal mining companies must obtain a National Pollutant Discharge Elimination System (“NPDES”) permit from the appropriate state or federal permitting authority. NPDES permits include effluent limitations for discharged pollutants and other terms and conditions, including required monitoring of discharges. Failure to comply with the CWA or NPDES permits can lead to the imposition of significant penalties, litigation, compliance costs and delays in coal production. Changes and proposed changes in state and federally recommended water quality standards may result in the issuance or modification of permits with new or more stringent effluent limits or terms and conditions. For instance, waters.





For instance, waters that states have designated as impaired (i.e., as not meeting present water quality standards) are subject to Total Maximum Daily Load regulations, which may lead to the adoption of more stringent discharge standards for our coal mines and could require more costly treatment. Likewise, the water quality of certain receiving streams requires an anti-degradation review before approving any discharge permits. TMDL regulations and anti-degradation policies may increase the cost, time and difficulty associated with obtaining and complying with NPDES permits.





In addition, in certain circumstances private citizens may challenge alleged violations of NPDES permit limits in court. While it is difficult to predict the outcome of any potential or future suits, such litigation could result in increased compliance costs following the completion of mining at our operations.





Finally, in June 2015, the EPA and the Corps published a new definition of “waters of the United States” (“WOTUS”) that became effective on August 28, 2015. Many groups have filed suit to challenge the validity of this rule. The U.S. Court of Appeals for the Sixth Circuit stayed the rule nationwide pending the outcome of this litigation. On January 22, 2018, the Supreme Court held that the courts of appeals do not have original jurisdiction to review challenges to the 2015 Rule. With this final rule, the agencies intend to maintain the status quo by adding an applicability date to the 2015 Rule and thus providing continuity and regulatory certainty for regulated entities, the States and Tribes, and the public while the agencies continue to consider possible revisions to the 2015 Rule. In light of this holding, in February 2018 the agencies published a final rule adding an applicability date to the 2015 Rule of February 6, 2020. We anticipate that the WOTUS rules, if upheld in litigation, will expand areas requiring NPDES or Corps Section 404 permits. If so, the CWA permits we need may not be issued, may not be issued in a timely fashion, or may be issued with new requirements which restrict our ability to conduct our mining operations or to do so profitably.






Resource Conservation and Recovery Act





RCRA and corresponding state laws establish standards for the management of solid and hazardous wastes generated at our various facilities. Besides affecting current waste disposal practices, RCRA also addresses the environmental effects of certain past hazardous waste treatment, storage and disposal practices. In addition, RCRA requires certain of our facilities to evaluate and respond to any past release, or threatened release, of a hazardous substance that may pose a risk to human health or the environment.





RCRA may affect coal mining operations by establishing requirements for the proper management, handling, transportation and disposal of solid and hazardous wastes. Currently, certain coal mine wastes, such as earth and rock covering a mineral deposit (commonly referred to as overburden) and coal cleaning wastes, are exempted from hazardous waste management under RCRA. Any change or reclassification of this exemption could significantly increase our coal mining costs.





EPA began regulating coal ash as a solid waste under Subtitle D of RCRA in 2015. The EPA’s rule requires closure of sites that fail to meet prescribed engineering standards, regular inspections of impoundments, and immediate remediation and closure of unlined ponds that are polluting ground water. The rule also establishes limits for the location of new sites. However, the rule does not regulate closed coal ash impoundments unless they are located at active power plants. These requirements, as well as any future changes in the management of coal combustion residues, could increase our customers’ operating costs and potentially reduce their ability or need to purchase coal. In addition, contamination caused by the past disposal of coal combustion residues, including coal ash, could lead to material liability for our customers under RCRA or other federal or state laws and potentially further reduce the demand for coal.



















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Comprehensive Environmental Response, Compensation and Liability Act





CERCLA and similar state laws affect coal mining operations by, among other things, imposing cleanup requirements for threatened or actual releases of hazardous substances into the environment. Under CERCLA and similar state laws, joint and several liabilities may be imposed on hazardous substance generators, site owners, transporters, lessees and others regardless of fault or the legality of the original disposal activity. Although the EPA excludes most wastes generated by coal mining and processing operations from the primary hazardous waste laws, such wastes can, in certain circumstances, constitute hazardous substances for the purposes of CERCLA. In addition, the disposal, release or spilling of some products used by coal companies in operations, such as chemicals, could trigger the liability provisions of CERCLA or similar state laws. Thus, we may be subject to liability under CERCLA and similar state laws for coal mines that we currently own, lease or operate or that we or our predecessors have previously owned, leased or operated, and sites to which we or our predecessors sent hazardous substances. These liabilities could be significant and materially and adversely impact our financial results and liquidity.






Endangered Species and Bald and Golden Eagle Protection Acts





The ESA and similar state legislation protect species designated as threatened, endangered or other special status. The U.S. Fish and Wildlife Service (the “USFWS”) works closely with the OSM and state regulatory agencies to ensure that species subject to the ESA are protected from mining-related impacts. Several species indigenous to the areas in which we operate area protected under the ESA. Other species in the vicinity of our operations may have their listing status reviewed in the future and could also become protected under the ESA. In addition, the USFWS has identified bald eagle habitat in some of the counties where we operate. The Bald and Golden Eagle Protection Act prohibits taking certain actions that would harm bald or golden eagles without obtaining a permit from the USFWS. Compliance with the requirements of the ESA and the Bald and Golden Eagle Protection Act could have the effect of prohibiting or delaying us from obtaining mining permits. These requirements may also include restrictions on timber harvesting, road building and other mining or agricultural activities in areas containing the affected species or their habitats.






Use of Explosives





Our surface mining operations are subject to numerous regulations relating to blasting activities. Due to these regulations, we will incur costs to design and implement blast schedules and to conduct pre-blast surveys and blast monitoring, either directly or through the costs of a contractor we may employ. In addition, the storage of explosives is subject to various regulatory requirements. For example, pursuant to a rule issued by the Department of Homeland Security in 2007, facilities in possession of chemicals of interest (including ammonium nitrate at certain threshold levels) are required to complete a screening review. Our mines are low risk, Tier 4 facilities which are not subject to additional security plans. In 2008, the Department of Homeland Security proposed regulation of ammonium nitrate under the ammonium nitrate security rule. Additional requirements may include tracking and verifications for each transaction related to ammonium nitrate, though a final rule has yet to be issued. Finally, in December 2014, the OSM announced its decision to pursue a rulemaking to revise regulations under SMCRA which will address all blast generated fumes and toxic gases. OSM has not yet issued a proposed rule to address these blasts. The outcome of these rulemakings could materially adversely impact our cost or ability to conduct our mining operations.






National Environmental Policy Act





NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions that have the potential to significantly impact the environment, such as issuing a permit or other approval. In the course of such evaluations, an agency will typically prepare an environmental assessment to determine the potential direct, indirect and cumulative impacts of a proposed project. Where the activities in question have significant impacts to the environment, the agency must prepare an environmental impact statement. Compliance with NEPA can be time-consuming and may result in the imposition of mitigation measures that could affect the amount of coal that we are able to produce from mines on federal lands and may require public comment. Furthermore, whether agencies have complied with NEPA is subject to protest, appeal or litigation, which can delay or halt projects. The NEPA review process, including potential disputes regarding the level of evaluation required for climate change impacts, may extend the time and/or increase the costs and difficulty of obtaining necessary governmental approvals, and may lead to litigation regarding the adequacy of the NEPA analysis, which could delay or potentially preclude the issuance of approvals or grant of leases.



















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The Council on Environmental Quality recently released guidance discussing how federal agencies should consider the effects of GHG emissions and climate change in their NEPA evaluations. The guidance encourages agencies to provide more detailed discussion of the direct, indirect, and cumulative impacts of a proposed action’s reasonably foreseeable emissions and effects. This guidance could create additional delays and costs in the NEPA review process or in our operations, or even an inability to obtain necessary federal approvals for our operations due to the increased risk of legal challenges from environmental groups seeking additional analysis of climate impacts.






Other Environmental Laws





We are required to comply with numerous other federal, state, and local environmental laws and regulations in addition to those previously discussed. These additional laws include but are not limited to the Safe Drinking Water Act, the Toxic Substances Control Act, and the Emergency Planning and Community Right-to-Know Act. Each of these laws can impact permitting or planned operations and can result in additional costs or operational delays.






Property





Our principal offices are located at 12115 Visionary Way, Fishers, Indiana 46038. We pay $2,500 per month in rent for the office space with monthly rental of $5,726 and the rental lease expires December 2026. 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.





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.






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, McCoy Elkhorn’s Carnegie 1 Mine, Perry’s E4-1 mine and Deane Mining’s Access Energy mine are primarily run by company employees, and Deane Mining’s Razorblade Surface 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 direct 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.






Implications of Being an Emerging Growth Company





We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:














































·




A requirement to have only two years of audited financial statements and only two years of related MD&A;

















·




Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;

















·




Reduced disclosure about the emerging growth company’s executive compensation arrangements; and

















·




No non-binding advisory votes on executive compensation or golden parachute arrangements.




















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We have already taken advantage of these reduced reporting burdens in this Form 10-K, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).





In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.





We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.





We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act.







Item 1A. Risk Factors.






Because we are a Smaller Reporting Company, we are not required to provide the information required by this item.







Item 1B. Unresolved Staff Comments.






None.







Item 2. Properties.






Our principal offices are located at 12115 Visionary Way, Fishers, Indiana 46038. We pay $2,500 per month in rent for the office space and the rental lease expires December 2026. 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.





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.







Item 3. 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 cases.







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 Annual Report.



















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PART II.








Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.








Market Information.






Our Class A Common Stock (also referred to as common stock or shares) is presently traded on the NASDAQ Capital Market under the ticker symbol AREC. Our common stock has been thinly traded since our Company’s inception. Moreover, we do not believe that any institutional or other large-scale trading of our stock has occurred or will in fact occur in the near future. The following table sets forth information as reported by the OTC Markets Group through February 14, 2019 and the Nasdaq Capital Markets for the period beginning February 15, 2019 for the high and low bid and ask prices for each of the eight quarters ending December 31, 2020 for our common stock. The following prices reflect inter-dealer prices without retail markup, markdown or commissions and may not reflect actual transactions.



































































































































High











Low








Quarters ending in 2019






















March 31






$

12.20







$

2.10





June 30









4.24










2.10





September 30









3.57










0.59





December 31









0.76










0.52






Quarters ending in 2020




























March 31






$

1.11







$

0.320





June 30









1.40










0.73





September 30









2.33










1.14





December 31






$

4.93







$

1.26








(b) Holders





As of March 10, 2021, the Company had 170 Class A Common Stock shareholders of record holding 50,804,196 shares of our Class A Common Stock issued and outstanding. This number includes one position at Cede & Co., which includes an unknown number of shareholders holding shares of 26,306,071 Class A Common Stock. The number of both shareholders of record and beneficial shareholders may change on a daily basis and without the Company’s immediate knowledge.






(c) Dividends





Holders of common stock are entitled to receive dividends as may be declared by our Board of Directors and, in the event of liquidation, to share pro rata in any distribution of assets after payment of liabilities and preferred shareholders. Our Board of Directors has sole discretion to determine: (i) whether to declare a dividend; (ii) the dividend rate, if any, on the shares of any class of series of our capital stock, and if so, from which date or dates; and (iii) the relative rights of priority of payment of dividends, if any, between the various classes and series of our capital stock. We have not paid any dividends and do not have any current plans to pay any dividends.



















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Public market for common stock





Effective, February 15, 2019, The Company’s Common Stock began trading on the NASDAQ Capital Market.





The Company received a failure to comply with Nasdaq minimum bid pricing letter on October 7, 2019 which was cleared on April 9, 2020.





On January 6, 2021, the Company received a notice of deficiency related to Nasdaq’s required annual shareholder meeting standards. The Company replied and submitted a plan to rectify the deficiency. The notice is open as of the filing date.






Recent Sales of Unregistered Securities.





CLASS A COMMON STOCK





During the periods ending December 31, 2020 and December 31, 2019, the Company engaged in the sale of its unregistered securities as described below. The shares of our Class A Common Stock were issued pursuant to an exemption from registration in Section 4(a)(2) of the Securities Act of 1933. These shares of our Class A Common Stock qualified for exemption under Section 4(a)(2) of the Securities Act of 1933 since the issuance of shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(a)(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, these shareholders had necessary investment intent as required by Section 4(a)(2) since they agreed to receive share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” All shareholders are “sophisticated investors” and are family members, friends or business acquaintances of our officers and directors. Based on an analysis of the above factors, we believe we have met the requirements to qualify for exemption under section 4(a)(2) of the Securities Act of 1933 for this transaction.





On January 16, 2019, an affiliate of the Company converted its remaining 29,051 shares of Series A Preferred into 96,837 common shares.





On January 17, 2019, a non-affiliated shareholder partially exercised 300,000 shares of a warrant they held in the Company. The exercise was cashless, and the shareholder received 299,697 shares of common stock as a result of the conversion.





On January 25, 2019, the Company extended its consulting agreement with Redstone Communications, LLC for an additional six-month term, and as a result, we issued 105,000 restricted common shares to Redstone Communications LLC and 45,000 restricted common shares to Mr. Marlin Molinaro, another five-year warrant to purchase up to 175,000 common shares of our Company at an exercise price of $1.50 per share and issued to Mr. Marlin Molinaro another five-year warrant option to purchase up to 75,000 common shares of our Company at an exercise price of $1.50 per share as compensation for the second six months of an agreement. Should Redstone Communications, LLC and Mr. Molinaro. If the warrants which are received under the second six months of engagement are exercised, the Company will receive up to $262,500 and $112,500, respectively. The common shares were valued at $10.50 on January 25, 2019 and resulted in an expense of $1,575,000 which was recorded in full on January 25, 2019. The corresponding expense of the issued warrants was recorded in full in the amount of $2,385,000.





On January 27, 2019, the Company issued 1,000 shares of common shares to an unrelated party for the consideration of $5,000 cash to the Company.





On January 28, 2019, the Company issued a total of 400 shares of common shares to two unrelated parties for the total consideration of $2,000 cash to the Company.





On January 30, 2019, the Company entered into an Investor Relations Agreement with American Capital Ventures, Inc. (“American Capital”) whereby American Capital will provide, among other services, assistance to the Company in planning, reviewing and creating corporate communications, press releases, and presentations and consulting and liaison services to the Company relating to the conception and implementation of its corporate and business development plan. The term of the agreement is six months and American Capital was immediately issued 9,000 shares of common shares as compensation under the agreement. The common shares were valued at $10.80 on January 30, 2019 and resulted in an expense of $97,200 which was recorded in full on January 30, 2019.





On January 31, 2019, the Company issued a total of 3,917 shares of common shares, priced at $6 per share, to an unrelated party for the settlement of trade payables in the total amount of $23,502. If at the time of potential sale of the shares, the listed price per share is below $6, the Company is required to purchase the shares back at $6 per share which results in a contingent liability of $23,502. The common shares were valued at $11.00 on January 31, 2019 and resulted in a loss on settlement of $19,585.





On February 1, 2019, the Company issued a total of 1,000 shares of common shares to two unrelated parties for the total consideration of $5,000 cash to the Company.





On February 6, 2019, a non-affiliated shareholder partially exercised 300,000 shares of a warrant they held in the Company. The exercise was cashless, and the shareholder received 299,730 shares of common stock as a result of the conversion.



















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On February 4 through February 8, 2019, the Company issued a total of 17,800 shares of common shares to sixteen unrelated parties for the total consideration of $89,000 cash to the Company.





On February 10, 2019, $3,000 worth of trade payables were settled with 500 common shares of the company. The common shares were valued at $12.15 on February 10, 2019 and resulted in a loss on settlement of $3,075.





On February 12, 2019, the Company executed a contract with an unrelated party for the acquisition of stock and assets of entities with non-operating assets consisting of surface and mineral ownership and other related agreements. Consideration is in the form of 2,000,000 common shares, priced at the closing market price of $12.20 per share of common share, as well as $500,000 cash and a promissory note totaling $2,000,000 with a maturity of less than 1 year. The note is secured by a land contract on the acquired property.





On February 14, 2019, 452,729 Series A preferred shares were converted into 1,509,097 common shares of the company in a cashless conversion under the terms of the agreement. This resulted in no more Series A Preferred stock being outstanding as of this date.





On February 20, 2019, the Company issued 1,000,000 shares of Class A Common Stock at a price of $4 per share in conjunction with its effective S-1/A Registration Statement. Net proceeds to the Company amounted to $3,695,000. As part of the underwriter agreement, 70,000 warrants to purchase Class A Common Stock were issued to the underwriter. These warrants expire on February 15, 2021 and carry an exercise price of $4.40 per share. The warrants had a value of $123,000 was recorded as an increase and decrease in additional paid in capital. Offering costs totaled $447,000, which has been recorded as a reduction of equity.





On February 21, 2019, 50,000 Series C Preferred shares were converted into 13,750 shares of Class A Common Stock in a cashless conversion under the terms of the agreement. This resulted in no more Series C Preferred stock being outstanding as of this date.





On March 7, 2019, the Company issued an additional 150,000 shares of Class A Common Stock at a price of $4 per share as the over-allotment from the effective S-1/A Registration Statement. The net proceeds to the company amounted to $558,000. As part of the underwriter agreement, 10,500 warrants to purchase Class A Common Stock were issued to the underwriter. These warrants expire on February 15, 2021 and carry an exercise price of $4.40 per share. The warrants had a value of $23,100 was recorded as an increase and decrease in additional paid in capital.





On May 7, 2019, the Company issued 50,000 shares of common stock as part of a settlement of $200,000 to an unrelated entity for the use of certain mining equipment. The stock price at the time of issuance was $3.88 resulting in a settlement gain of $6,000.





On May 30, 2019, the Company issued 25,000 shares to an unrelated entity in conjunction with a short-term borrowing facility issued by the entity. The stock price at the time of issuance was $3.49 resulting in a stock interest expense of $87,250.





On June 5, 2019, the Company issued options to certain employees in the amount of 175,000 under an adopted stock option plan. The issuance of employee options resulted in an expense totaling $68,736. The total expense will be $353,500 which will be amortized over the three-year vesting period.





On June 6, 2019, the Company and a former employee reached a settlement agreement where 107,000 shares of common stock were canceled and returned to the company. These shares were forfeited and returned to the company for no consideration and are accounted for as authorized and not issued.





On June 7, 2019, the Company issued 25,000 shares of common stock at $4 per share to an unrelated entity under an equity purchase agreement. The Company received $100,000 cash consideration for the investment. The stock price at the time of issuance was $2.10. If the Company, during the period in which the purchased shares are held by the original entity, issues or sells any shares of common stock for a price less than $4.00, the Company shall issue to the purchaser an additional number of shares of common stock, so as to provide the purchaser the benefit of the reduced price per share.





On June 7, 2019, the Company issued 30,000 shares of common stock for consulting services to an unrelated party. The stock price at the time of issuance was $2.10 resulting in an expense totaling $63,000. The consulting agreement is for six months and the shares for services were deemed to have been earned upon execution of the consulting agreement on May 30, 2019. In addition to the shares issued, 75,000 warrants with three-year exercise period and $4.00 strike price were issued upon execution of the consulting agreement resulting in a expense of $139,500.



















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On June 12, 2019, the Company restructured a series of warrants; C-1, C-2, C-3 and C-4, held by an unrelated party as part of the ARC business loan which resulted in an increase in the number of warrants issued from 1.6 million shares across four warrants to 3.0 million shares across four warrants; an increase in the term of the warrants from the date of the amendment from a weighted average of 297 days to 753 days, and a decrease in the weighted average exercise price from $7.665 per share to $4.325 per share. Fair value was determined using the Black-Scholes Option Pricing Model. The incremental value as a result of the modification is a one-time warrant expense totaling $2,545,360.





On June 13, 2019, the Company issued 28,000 shares of common stock under a consulting agreement to an unrelated party. The stock price at the time of issuance was $2.53 resulting in a stock-based compensation of $70,840. The term of the consulting agreement is 6 months with monthly payments equal to $5,000 payable in months three through six of the agreement.





On July 1, 2019, the Company issued 200,000 common stock options under the Incentive Stock Option Agreement. The options vest equally over an 8 year term and have an exercise price of $3.52 per share. Utilizing a Black-Scholes Option Pricing model, the value of these options at issuance was determined to be $540,000, which is being amortized over the vesting term.





On August 16, 2019, the Company issued 300,000 shares of Class A Common Stock in conjunction with a $800,000 loan from an unrelated party. Based on a relative fair value calculation, the stock issuance created a debt discount totaling $210,581 which was fully amortized.





On August 27, 2019, the Company issued 3,600,000 shares of Class A Common Stock at a price of $1.04 per share. In conjunction with the common stock issuance, the Company issued warrants to purchase up to 3,600,000 shares of common stock at $.01 for each warrant in conjunction with its effective S-3/A Registration Statement. Net proceeds to the Company amounted to $3,409,600. The warrants to purchase common stock carry an exercise price of $1.20 and a 5-year term. Offering costs totaled $370,400, which has been recorded as a reduction of equity.





On September 30, 2019, the Company issued warrants to purchase up to 445,400 shares of common stock at $.01 for each warrant in conjunction with its effective S-3/A Registration Statement. Net proceeds to the Company amounted to $4,098. The warrants to purchase common stock carry an exercise price of $1.20 and a 5-year term. Offering costs totaled $356, which has been recorded as a reduction of equity.





On October 11, 2019, the Company issued 70,328 shares of Class A Common Stock pursuant to prior stock purchase agreement dated May 30, 2019. The share price at issuance was $0.67.





On October 23, 2019, the Company issued 23,077 shares of Class A Common Stock pursuant to an agreement for public relations. The share price at issuance was $0.70.





On October 31, 2019, the Company issued 50,000 shares of Class A Common Stock pursuant to an agreement for investor relations. The share price at issuance was $0.74.





On April 1, 2020, the Company issued 600,000 shares of Class A Common Stock pursuant to a lender agreement. The share price at issuance was $1.07.





On May 8, 2020, the Company received 2,000,000 shares of Class A Common Stock pursuant to the agreement of Sale for the Empire Assets. The share price at return was $0.92.





On May 26, 2020, the Company issued 20,000 shares of Class A Common Stock pursuant to an agreement for investor relations. The share price at issuance was $0.94.





On June 11, 2020, the Company issued 10,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.17.





On July 6, 2020, the Company issued 40,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.74.





On July 6, 2020, the Company issued 20,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.74.





On July 6, 2020, the Company issued 100,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.74.





On July 7, 2020, the Company issued 50,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.31.





On July 24, 2020, the Company issued 40,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.37.





On July 24, 2020, the Company issued 29,900 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.37.



















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On September 9, 2020, the Company issued 2,054,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.30.





On September 18, 2020, the Company issued 22,714 shares of Class A Common Stock pursuant to a debt conversion. The share price at issuance was $1.61.





On October 7, 2020, the Company issued 71,160 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.63.





On October 7, 2020, the Company issued 1,162,209 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.63.





On October 7, 2020, the Company issued 75,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.63.





On October 7, 2020, the Company issued 83,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.63.





On October 7, 2020, the Company issued 50,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.63.





On October 8, 2020, the Company issued 72,895 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $2.12.





On October 5, 2020, the Company issued 15,000 shares of Class A Common Stock pursuant to an agreement for press relations. The share price at issuance was $1.60.





On October 9, 2020, the Company issued 30,303 shares of Class A Common Stock pursuant to an agreement for digital investor relations. The share price at issuance was $2.01.





On October 9, 2020, the Company issued 10,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $2.01.





On October 9, 2020, the Company issued 30,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $2.01.





On October 9, 2020, the Company issued 25,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $2.01.





On October 19, 2020, the Company issued 80,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.62.





On October 19, 2020, the Company issued 25,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.62.





On October 20, 2020, the Company issued 45,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.64.





On October 21, 2020, the Company issued 27,628 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.58.





On December 8, 2020, the Company issued 8,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.98.





On December 10, 2020, the Company issued 23,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.86.





On December 14, 2020, the Company issued 60,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.88.





On December 22, 2020, the Company issued 25,000 shares of Class A Common Stock pursuant a debt conversion. The share price at issuance was $1.66.





On December 22, 2020, the Company issued 125,000 shares of Class A Common Stock pursuant a debt conversion. The share price at issuance was $1.66.





On December 28, 2020, the Company issued 144,346 shares of Class A Common Stock pursuant a debt conversion. The share price at issuance was $1.97.





On December 28, 2020, the Company issued 721,730 shares of Class A Common Stock pursuant a debt conversion. The share price at issuance was $1.97.





SERIES A PREFERRED STOCK





Our certificate of incorporation authorizes our board of directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time our Series A Preferred stock, par value $0.0001 per share, covering up to an aggregate of 5,000,000 shares of Series A Preferred stock. The Series A Preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of stockholders. Effective November 5, 2018, the eleven Series A Preferred holders elected to proportionally convert a total of 4,336,012 of the 4,817,792 total Series A Preferred stock outstanding into 14,453,373 common shares of the company, and as a result, 481,780 shares of Series A Preferred stock remained. On February 14, 2019, the remaining outstanding shares of Series A Preferred stock were converted into 1,509,070 common shares of the company.





Pursuant to the Series A Preferred Stock Designation, the holders of the Series A Preferred stock are entitled to three hundred thirty-three and one-third votes, on an “as-converted” basis, per each Series A Preferred share held of record on all matters to be voted upon by the stockholders. The holders of the Series A Preferred stock are not entitled to receive dividends.





The holders of the Series A Preferred stock are entitled to convert into common shares, at the holder’s discretion, at a rate of one Series A Preferred share for three and one-third common shares. Any fractional common shares created by the conversion is rounded to the nearest whole common share.





Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of the Series A Preferred stock shall be entitled to receive in preference to the holders of the Common Stock a per share amount equal to $1.65 per share.



















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SERIES B PREFERRED STOCK





Our certificate of incorporation authorizes our Board of Directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time our Series B Preferred stock, par value $0.001 per share, covering up to an aggregate of 20,000,000 shares of Series B Preferred stock. The Series B Preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the Board of Directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of stockholders. As of December 31, 2020, and 2019, 0 shares of Series B Preferred stock are outstanding, respectively. The amount outstanding as of 2017 includes 850,000 shares of Series B Preferred stock issued to investors and 53,157 shares of Series B Preferred stock issued as part of the 8.0% annual dividend that is accrued and paid in-kind, as described below.





The holders of Series B Preferred shares are entitled to no voting rights until the holder converts any or all of their Series B Preferred shares to common shares. The holders of the Series B Preferred shall accrue and pay-in-kind with additional Series B Preferred stock a dividend based on an 8.0% annual percentage rate, compounded quarterly in arrears, for any Series B Preferred stock that is outstanding at the end of such prior quarter.





The holders of the Series B Preferred stock are entitled to convert into common shares, at the holder’s discretion, at a conversion price of Three Dollars Sixty Cents ($3.60) per share of common stock, subject to certain price adjustments found in the Series B Preferred stock purchase agreements.





Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of Series B Preferred shares shall have a liquidation preference to the common shares and Series A Preferred shares outstanding in the amount equal to the amount initially invested by the Series B Preferred holder in the Series B Preferred stock at the time of such investment minus the pro rata amount that has been converted into common stock or redeemed.





On November 7, 2018, all outstanding shares totaling 964,290 Series B preferred shares were converted into 267,859 common shares of the company in a cashless conversion.





SERIES C PREFERRED STOCK





Our certificate of incorporation authorizes our Board of Directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time our Series C Preferred stock, par value $0.001 per share, covering up to an aggregate of 20,000,000 shares of Series C Preferred stock. The Series C Preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the Board of Directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of stockholders.





The holders of Series C Preferred shares are entitled to vote on an “as-converted” basis of one share of Series C Preferred Stock voting for one vote of common stock. The holders of the Series C Preferred shall accrue and pay-in-kind with additional Series C Preferred stock a dividend based on an 10.0% annual percentage rate, compounded annually in arrears, for any Series C Preferred stock that is outstanding at the end of such prior year.





The holders of the Series C Preferred stock are entitled to convert into common shares, at the holder’s discretion, at a conversion price of Six Dollars ($6.00) per share of common stock, subject to certain price adjustments found in the Series C Preferred stock purchase agreements. Should the company complete an equity offering (including any offering convertible into equity of the Company) of greater than Five Million Dollars ($5,000,000) (the “Underwritten Offering”), then the Series C Preferred stock shall be automatically and without notice convertible into Common Stock of the company concurrently with the subsequent Underwritten Offering at the same per share offering price of the Underwritten Offering. If the Underwritten Offering occurs within twelve months of the issuance of the Series C Preferred stock to the holder, the annual dividend of 10.0% shall become immediately accrued to the balance of the Series C Preferred stock and converted into the Underwritten Offering.





Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of Series C Preferred shares shall have a liquidation preference to the common shares at an amount equal to $1.00 per share.





On November 27, 2018, 50,000 shares of Series C preferred shares were sold at $1.00 per share resulting in proceeds of $50,000 for the Company. On February 21, 2019, all outstanding shares totaling 50,000 of Series C preferred shares were converted into 122,750 shares of Class A Common Stock in a cashless exchange.



















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“BLANK CHECK” PREFERRED STOCK





Our certificate of incorporation authorizes our board of directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time up to an aggregate of 70,000,000 shares of preferred stock that is considered “blank check”. The blank check preferred stock shall be designed by the Board of Directors at the time of classification





OPTIONS AND WARRANTS





On June 5, 2019, the Company issued options to certain employees in the amount of 175,000 under an adopted stock option plan. The issuance of employee options resulted in an expense totaling $4,910. The total expense will be $353,500 which will be amortized over the three-year vesting period.





On June 12, 2019, the Company restructured a series of warrants; C-1, C-2, C-3 and C-4, held by an unrelated party as part of the ARC business loan which resulted in an increase in the number of warrants issued from 1.6 million shares across four warrants to 3.0 million shares across four warrants; an increase in the term of the warrants from the date of the amendment from a weighted average of 297 days to 753 days, and a decrease in the weighted average exercise price from $7.665 per share to $4.325 per share. Fair value was determined using the Black-Scholes Option Pricing Model. The incremental value as a result of the modification is a one-time warrant expense totaling $2,545,360 as of June 30, 2019.





On July 1, 2019, the Company issued 200,000 common stock options under the Incentive Stock Option Agreement. The options vest equally over an 8 year term and have an exercise price of $3.52 per share. Utilizing a Black-Scholes Option Pricing model, the value of these options at issuance was determined to be $540,000, which is being amortized over the vesting term.





On September 30, 2019, the Company issued warrants to purchase up to 445,400 shares of common stock at $.01 for each warrant in conjunction with its effective S-3/A Registration Statement. Net proceeds to the Company amounted to $4,098. The warrants to purchase common stock carry an exercise price of $1.20 and a 5-year term. Offering costs totaled $356, which has been recorded as a reduction of equity.





On June 18, 2020, the Board issued a total of 750,000 options to 2 employees of the Company under the 2018 Plan. The options have an expiration date of June 17, 2027 and have an exercise price of $2.630. The options vested equally over the course of seven years, subject to restrictions regarding the employee’s continued employment by the Company. On July 16, 2020, the Board issued a total of 50,000 options to a director of the Company under the 2018 Plan as amended. The options have an expiration date of March 15, 2021 and vest immediately. On November 23, 2020, the Board issued a total of 302,439 options to 3 employees and 4 directors. The options have an expiration of November 22, 2027 and vest immediately.





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 A-9 was issued in connection to legal services provided. Warrant A-9 is for 100,000 warrant shares. The warrants carry an exercise price of $1.00 and an expiration date of June 1, 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.





On October 20, 2020 Warrant C-34 was issued in connection to the purchase of $500,000 of the senior convertible notes. Warrant C-34 is for 50,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of October 20, 2022.





On November 17, 2020 Warrant C-35 was issued in connection to the purchase of $550,000 of the senior convertible notes. Warrant C-35 is for 55,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of November 17, 2022.





On December 30, 2020 Warrant C-36 was issued in connection to the purchase of $500,000 of the senior convertible notes. Warrant C-36 is for 50,000 warrant shares. The warrants carry an exercise price of $1.50 and an expiration date of December 30, 2022.





During the period the options and warrants are outstanding, we will reserve from our authorized and unissued common stock a sufficient number of shares to provide for the issuance of shares of common stock underlying the options and warrants upon the exercise of the options and warrants. No fractional shares will be issued upon the exercise of the options or warrants. The options and warrants are not listed on any securities exchange. Except as otherwise provided within the option or warrant, the option and warrant holders have no rights or privileges as members of the Company until they exercise their options or warrants.



















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Item 6. Selected Financial Data.






The registrant qualifies as a smaller reporting company, as defined by Rule 229.10(f)(1) and is not required to provide the information required by this Item.







Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.







The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report

.

The management’s discussion, analysis of financial condition, and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this annual report.







Overview.






Our primary source of revenue is the sale of metallurgical coal and coal used in pulverized coal injection (PCI). Both metallurgical and PCI coal is an essential building block in the steel manufacturing process.





The overall outlook of the metallurgical coal business is dependent on a variety of factors such as pricing, regulatory uncertainties and global economic conditions. Coal consumption and production in the U.S. have been driven in recent periods by several market dynamics and trends, such as the global economy, a strong U.S. dollar and accelerating production cuts.






Results of Operations.






Year Ended December 31, 2020 compared to Year Ended December 31, 2019.






Revenues.





Revenues for the year ended December 31, 2020 were $1,059,691 and 2019 were $24,477,707, respectively. The primary drivers for revenue decline was reduction in demand for coal because of Covid-19.





For the year ended 2020, tons sold to steel making end users amounted to 6,569 with a realized sales price of $59.09. For the year ended 2019, tons sold to steel making end users amounted to 179,381 with a realized sales price of $83.36.





For the year ended 2020, tons sold to industrial and utility end users amounted to 1,099.98 with a realized sales price of $58.24. For the year ended 2019, tons sold to industrial and utility end users amounted to 146,537 with a realized sales price of $61.60.



















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Expenses.





Total Operating Expenses for the year ended December 31, 2020 were $17,507,056 and 2019 were $84,463,786, respectively. The primary driver for the decrease in operating expenses was closing production in the mines due to a loss of demand from Covid-19.





Total Other Income/(Expenses) for the period ended December 31, 2020 were $20,538 and 2019 were $(9,427,658), respectively.






Financial Condition.





Total Assets as of December 31, 2020 amounted to $38,415,395 and 2019 amounted to $35,375,431, respectively. The primary driver for the higher asset balance was an increase in cash from debt and equity.





Total Liabilities as of December 31, 2020 amounted to $58,420,895 and 2019 amounted to $66,575,508, respectively. The primary drivers for the decrease in liability balance was execution of convertible debt.






Liquidity and Capital Resources.





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.





We are not aware of any trends or known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in material increases or decreases in liquidity.






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 resumed during December 2020.






Capital Resources.





We had no material commitments for capital expenditures as of December 31, 2020.






Off-Balance Sheet Arrangements





As of December 31, 2020, we had no off-balance sheet arrangements.



















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Critical Accounting Policies and Estimates





The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amounts of revenues and expenses reported for the period then ended.






Mine development costs

. Mine development costs represent the costs incurred to prepare future mine sites for mining. These costs include costs of acquiring, permitting, planning, research, and establishing access to identify mineral reserves and other preparations for commercial production as necessary to develop and permit the properties for mining activities. Operating expenditures, including certain professional fees and overhead costs, are not capitalized but are expensed as incurred.





Amortization of mine development costs, with respect to a specific mine, commences when mining of the related reserves begins. Amortization is computed using the units-of-production method over the proven and probable reserves dedicated to the specific mine.






Asset retirement obligations

. We recognize as a liability an asset retirement obligation, or ARO, associated with the retirement of a tangible long-lived asset in the period in which it is incurred or becomes determinable, with an associated increase in the carrying amount of the related long-lived asset. The initially recognized asset retirement cost is amortized using the same method and useful life as the long-lived asset to which it relates. Amortization begins when mining of the specific mineral property begins. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.





Estimating the future ARO requires management to make estimates and judgments regarding timing and existence of a liability, as well as what constitutes adequate restoration. Inherent in the fair value calculation are numerous assumptions and judgments including the ultimate costs, inflation factors, credit adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the related asset.






Cost of Goods Sold and Gross Profit

.  Cost of Goods Sold for coal mined and processed include direct labor, materials and utilities.  Activities related to metal recover are inherent in both direct coal labor and overhead labor and does not require additional variable costs.






Impairment of Long-lived Assets.



We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These events and circumstances include, but are not limited to, a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, a significant adverse change in the extent or manner in which we use a long-lived asset or a change in its physical condition.





When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount. If the projected undiscounted cash flows are less than the carrying amount, an impairment is recorded for the excess of the carrying amount over the estimated fair value.





We make various assumptions, including assumptions regarding future cash flows in our assessments of long-lived assets for impairment. The assumptions about future cash flows and growth rates are based on the current and long-term business plans related to the long-lived assets.



















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Item 7A. Quantitative and Qualitative Disclosure About Market Risk.






The Company qualifies as a smaller reporting company, as defined by SEC Rule 229.10(f)(1) and is not required to provide the information required by this Item.







Item 8. Financial Statements and Supplementary Data.






The report of the independent registered public accounting firm and the financial statements listed on the accompanying index at page F-1 of this report are filed as part of this report and incorporated herein by reference.







Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.






We did not have any disagreements on accounting and financial disclosure with our accounting firm during the reporting period.







Item 9A. Controls and Procedures







(a) Evaluation of Disclosure Controls and Procedures.





The management, with participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 12a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply is judgement in evaluating the benefits of possible controls and procedures relative to their costs.





Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, due to the weakness in internal control over financial reporting described below, our disclosure controls and procedures are not designed at a reasonable assurance level or effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As discussed below, we plan on increasing the size of our accounting staff at the appropriate time for our business and its size to ameliorate the concern that the Company does not effectively segregate certain accounting duties, which we believe would resolve the material weakness in internal control over financial reporting and similarly improve disclosure controls and procedures, but there can be no assurances as to the timing of any such action or that the Company will be able to do so.






(b) Management’s Annual Report on Internal Control over Financial Reporting.





The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Principal Executive Officer and Principal 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 the U.S. generally accepted accounting principles.





As of December 31, 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 Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described

Internal Control – Integrated Framework (2013)

issued by the Committee of Sponsoring Organizations of the Treadway Commission.. Based on this evaluation, management concluded that our internal controls over financial reporting were not effective for the purposes for which it is intended. Specifically, managements determination was based on the following material weakness which existed as of December 31, 2020:



















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Due to the Company’s insufficient number of staff performing accounting and reporting functions, there is a lack of segregation of duties within the financial reporting function resulting in limited level of multiple reviews among those tasked with preparing the financial statements, resulting in the need for adjustments.





A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Notwithstanding the determination that our internal control over financial reporting was not effective, as of December 31, 2020, and that there was a material weakness as identified in this Annual Report, we believe that our consolidated financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered hereby in all material respects.





The management, including its Principal Executive Officer and Principal Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls over financial reporting 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 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.





This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.





This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of this section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.






(c) Changes in Internal Control Over Financial Reporting





There have been no changes in the Company’s internal control over financial reporting during the period ended December 31, 2020 that have materially affected the Company’s internal controls over financial reporting.







Item 9B. Other Information.






None.



















37






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PART III








Item 10. Directors, Executive Officers and Corporate Governance.








Directors and Executive Officers.






The following individuals serve as our executive officers and members of our board of directors as of December 31, 2020:





















































































Name








Age








Positions



















Mark C. Jensen







41







Chief Executive Officer, Chairman of the Board of Directors




Thomas M. Sauve







41







President, Director




Kirk P. Taylor







41







Chief Financial Officer




Tarlis R. Thompson







37







Chief Operating Officer




Michael Layman







29







Director




Gerardine Botte, PH.D.







50







Director




Courtenay O. Taplin







70







Director




Randal V. Stephenson







59







Director - Former




Ian Sadler







68







Director- Former







Mark C. Jensen (age 41) – Chief Executive Officer





Mark has been an operator, investor and consultant in various natural resources and energy businesses. He has been highly involved in the navigation of numerous growth businesses to mature businesses, working as a managing member at T Squared Capital LLC since 2007, an investment firm focused on private equity styled investing in start-up businesses. Mark has significant experience with major Wall Street firms such as Citigroup and graduated from the Kelley School of Business at Indiana University with a BS in Finance and International Studies with a focus on Business. Mark also studied in Sydney Australia through Boston University completing his International Studies degree with a focus on East Asian culture and business. There are no arrangements or understandings between Mark and any other persons pursuant to which he was selected as an officer. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Thomas M. Sauve (age 41) – President





Tom has been involved a number of energy related businesses. Prior he had been an investor and partner in various natural resources assets over the last seven years including coal mining operations and various oil and gas wells throughout Texas and the Appalachia region. Since 2007, Tom also worked as a managing member at T Squared Capital LLC, an investment firm focused on private equity styled investing in start-up businesses Tom received his Bachelor’s degree in Economics, magna cum laude, from the University of Rochester, New York, with additional studies at the Simon Graduate School of Business. There are no arrangements or understandings between Tom and any other persons pursuant to which he was selected as an officer. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.



















38






Table of Contents







Kirk Taylor, CPA (age 41) – Chief Financial Officer





Kirk conducts all tax and financial accounting roles of the organization, and has substantial experience in tax credit analysis and financial structure. Kirk’s main focus over his 13 years in public accounting had been the auditing, tax compliance, financial modeling and reporting on complex real estate and business transactions utilizing numerous federal and state tax credit and incentive programs. Prior to joining American Resources Corporation, Kirk was Chief Financial Officer of Quest Energy, Inc., ARC’s wholly-owned subsidiary. Prior to joining Quest Energy in 2015, he was a Manager at K.B. Parrish & Co. LLP where he worked since 2014. Prior to that, he worked at Katz Sapper Miller since 2012 as Manager. In addition, Kirk is an instructor for the CPA examination and has spoken at several training and industry conferences. He received a BS in Accounting and a BS in Finance from the Kelley School of Business at Indiana University, Bloomington Indiana and is currently completing his Masters of Business Administration from the University of Saint Francis at Fort Wayne, Indiana. Kirk serves his community in various ways including as the board treasurer for a community development corporation in Indianapolis, Indiana. Kirk does not have any family relationships with any of the Company’s directors or executive officers. There are no arrangements or understandings between Kirk and any other persons pursuant to which he was selected as an officer. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Tarlis R. Thompson (age 37) – Chief Operating Officer





Tarlis overseas all operations at American Resources’ Central Appalachian subsidiaries, which includes McCoy Elkhorn, Deane Mining, and Knott County Coal. In this role, Tarlis manages the activities at the company’s various coal processing facilities and loadout, coordinates coal production at the company’s various mines, manages environmental compliance and reclamation, and is responsible for coal quality control and shipments to customers. Tarlis graduated from Millard High School in Kentucky in 2001 and subsequently worked for Commercial Testing and Engineering, working underground, performing surveying services and coal sampling. In 2002 he joined SGS Minerals, working as a Quality Control Manager. Shortly thereafter, he joined Massey Energy, working as logistics manager for coal shipments via truck and train, as well as a coal quality manager, working under Jim Slater and Mike Smith. After several years at Massey, Tarlis joined Central Appalachian Mining (CAM), in charge of lab analysis and environmental compliance at CAM’s various processing plants and loadouts. Tarlis graduated from Millard High School and has additional courses in Mining Engineering from Virginia Tech (Training), Business Administration Management from National College in Pikeville, and LECO Certified Course from West Virginia Training Institute. Tarlis does not have any family relationships with any of the Company’s directors or executive officers. There are no arrangements or understandings between Tarlis and any other persons pursuant to which he was selected as an officer. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Directors:






Mark C. Jensen – Chairman of Board & Director





Mark has been an operator, investor and consultant in various natural resources and energy businesses. He has been highly involved in the navigation of numerous growth businesses to mature businesses, working as a managing member at T Squared Capital LLC since 2007, an investment firm focused on private equity styled investing in start-up businesses. Mark has significant experience with major Wall Street firms such as Citigroup and graduated from the Kelley School of Business at Indiana University with a BS in Finance and International Studies with a focus on Business. Mark also studied in Sydney Australia through Boston University completing his International Studies degree with a focus on East Asian culture and business. There are no arrangements or understandings between Mark and any other persons pursuant to which he was selected as an officer. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Thomas M. Sauve – Director





Tom has been involved a number of energy related businesses. Prior he had been an investor and partner in various natural resources assets over the last seven years including coal mining operations and various oil and gas wells throughout Texas and the Appalachia region. Since 2007, Tom also worked as a managing member at T Squared Capital LLC, an investment firm focused on private equity styled investing in start-up businesses Tom received his Bachelor’s degree in Economics, magna cum laude, from the University of Rochester, New York, with additional studies at the Simon Graduate School of Business. There are no arrangements or understandings between Tom and any other persons pursuant to which he was selected as an officer. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.



















39






Table of Contents







Michael Layman – Director





Mr. Layman is a well-established financial industry executive with a track record for driving value and growth for both private and publicly traded companies. Mr. Layman currently serves as General Partner/CEO of Emerald Shoals Targeted Opportunities Fund LP, a hybrid growth fund backed by a network of ultra-high net worth individuals seeking novel opportunities to invest in high-growth catalyst driven companies. Prior to his current role at Emerald Shoals, Mr. Layman served at a large top-four brokerage house where he was co-owner of a private wealth management group where he was responsible for identifying attractive and undervalued investment opportunities. Additionally, he also aided in the development and implementation of various investment strategies based on differing types of needs from conservative to aggressive growth. Additionally, Mr. Layman previously worked for a private equity fund in New York where he established a strong network of relationships with research analysts and investment bankers at a number of Wall Street firms. Mr. Layman obtained his Bachelor of Arts degree in business from Otterbein University. The Board nominated Mr. Layman to serve as a director because of his leadership in the finance industry and assisting companies with capital raising. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Gerardine Botte, PH.D. – Director





Dr. Botte has over 21 years of experience in the development of electrochemical processes and advanced water treatment. She has served in leadership roles for the Electrochemical Society and is currently the Chair of the Electrochemical Process Engineering and Technology Division of the International Society of Electrochemistry. Dr. Botte also serves as the Editor in Chief of the Journal of Applied Electrochemistry. In 2014, she was named a Fellow of the Electrochemical Society for her contributions and innovation in electrochemical processes and engineering. She became a Chapter Fellow of the National Academy of Inventors in 2012. In 2010, she was named a Fellow of the World Technology Network for her contributions on the development of sustainable and environmental technologies. Prior to Texas Tech, Dr. Botte was University Distinguished Professor and Russ Professor of Chemical and Biomolecular Engineering at Ohio University, the founder and Director of Ohio University’s Center for Electrochemical Engineering Research, and the founder and Director of the Consortium for Electrochemical Processes and Technology – an Industry University Cooperative Research Center. Her entrepreneurial spirit has led to the commercialization of various technologies and has founded and co-founded various companies to help achieve this goal. The Board nominated Dr. Botte to serve as a director because of her thought leadership in the technical innovations of in carbon and rare earth elements. She has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Courtenay O. Taplin – Director





Courtenay serves as Director of American Resources Corporation. He brings over 40 years of experience of sourcing and supplying iron ore, coke and metallurgical coal to the steel industry to assist American Resources with their supply chain, logistics, customers, overall corporate strategy. He has a vast knowledge of both the global and domestic marketplace where he works with both suppliers and consumers. Courtenay is currently Managing Director of Compass Point Resources, LLC which he founded in 2007. His prior experience includes Crown Coal & Coke Company and Pickands Mather & Company out of Cleveland, OH. Mr. Taplin attended Hobart College and received his degree from Case Western Reserve University. The Board nominated Courtenay to serve as a director because of his experience and relationships in the raw materials and coking sector and his experience in managing growing businesses. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.






Randal V. Stephenson – Director (Former)





Randal serves as Director of American Resources Corporation. He is an investment banking, strategy and corporate finance professional with over 25 years of experience in mergers, acquisitions, sale of companies, private capital placements, strategic planning and corporate development. Randal has Wall Street Bulge Bracket investment banking experience, and previously was the Global Head of Mergers & Acquisitions for CIT Group, the Head of Exclusive Sales & Divestitures M&A for Jefferies & Company, and the Global Head of Energy & Mining Investment Banking for Duff & Phelps Securities. Randal co-founded a FINRA broker-dealer and is a leading U.S. expert witness in large dollar, complex commercial litigation involving M&A and corporate finance issues. Randal graduated with a Bachelor of Arts degree from the University of Michigan, Ann Arbor and has a Master of Business Administration degree from Harvard University and his Juris Doctorate (with honors) from Boston College Law School. He is an attorney admitted to practice in New York, and holds the Series 7, 79, 63 and 24 securities licenses. The Board nominated Randal to serve as a director because of his leadership experience and leadership in the finance industry and assisting companies with mergers and acquisitions and capital raising. Effective November 23, 2020, Mr. Stephenson resigned from the board and took a position on the Company’s advisory committee. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.



















40






Table of Contents







Ian Sadler - Director (Former)





Ian serves as Director of American Resources Corporation. He brings decades of direct leadership and experience in the steel industry and has demonstrated expertise in successfully leading rapidly-growing companies, optimizing operational efficiencies and performance enhancements. He has experience in due diligence, joint ventures and mergers and acquisitions with a history of successfully assimilating acquired businesses into value creating enterprises. Prior to retirement, Ian was the President and CEO of Miller Centrifugal Casting International in Cecil, PA. He has a history of leadership with the Pennsylvania Foundry Group, Shenango LLC, Johnstown Corporation, Blaw-Knox Corp., and National Roll Company. He received his Bachelor’s Degree, with First Class Honors, and Master’s Degree in Metallurgy from Cambridge University and was a prior President of the American Institute of Mining, Metallurgical and Petroleum Engineers (AIME) and previously served as President of the Iron and Steel Society. The Board nominated Ian to serve as a director because of his executive management experience and experience with growing companies in an efficient and cost-effective manner. Effective February 24, 2020, Mr. Sadler resigned from the board for retirement. He has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.





None of the directors have been involved in any legal proceedings that would require a disclosure under Item 401 of Regulation SK.





During the past ten years, none of our directors or executive officers has been:


































































·




the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

















·




convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

















·




subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

















·




found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, that has not been reversed, suspended, or vacated;

















·




subject of, or a party to, any order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of a federal or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

















·




subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.






None of our directors, executive officers or affiliates, or any beneficial owner of 5% or more of our common stock, or any associate of such persons, is an adverse party in any material proceeding to, or has a material interest adverse to, us.



















41






Table of Contents







Separation of Duties of the Chairman of the Board, the Chief Executive Officer and the President





Due to the inherent limitations of nonexecutive chairs, the duties of the Chairman of the Board and the Chief Executive Officer have not been separated. In order to increase objectivity and fiduciary responsibilities to the shareholders both in appearance and operation, the duties of the Chief Executive Officer and the President have been separated.






Director Independence





Currently our board of directors consist of Mark C. Jensen, our Chief Executive Officer, Thomas M. Sauve, our President, Michael Layman, Gerardine Botte, PHD, and Courtenay O. Taplin, of which Ms. Botte and Messrs Layman and Taplin are considered independent in accordance under the requirements of the NASDAQ, NYSE and SEC.






Limitation of Director Liability; Indemnification






Indemnity





To the fullest extent permitted by the Florida Business Corporation Act, the Company shall indemnify, or advance expenses to, any person made, or threatened to be made, a party to any action, suit or proceeding by reason of the fact that such person (i) is or was a director of the Company; (ii) is or was serving at the request of the Company as a director of another Company, provided that such person is or was at the time a director of the Company; or (iv)is or was serving at the request of the Company as an officer of another Company, provided that such person is or was at the time a director of the Company or a director of such other Company, serving at the request of the Company. Unless otherwise expressly prohibited by the Florida Business Corporation Act, and except as otherwise provided in the previous sentence, the Board of Directors of the Company shall have the sole and exclusive discretion, on such terms and conditions as it shall determine, to indemnify, or advance expenses to, any person made, or threatened to be made, a party to any action, suit, or proceeding by reason of the fact such person is or was an officer, employee or agent of the Company as an officer, employee or agent of another Company, partnership, joint venture, trust or other enterprise. No person falling within the purview of this paragraph may apply for indemnification or advancement of expenses to any court of competent jurisdiction.







Section 16(a) Beneficial Ownership Reporting Compliance






Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. During the fiscal year ended December 31, 2020, none of our officers, directors or 10% shareholders failed to file any Section 16 report on a timely basis.







Code of Ethics






We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. In addition to the Code of Business Conduct and Ethics, our principal executive officer, principal financial officer and principal accounting officer are also subject to written policies and standards that are reasonably designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to the SEC and in other public communications made by us; compliance with applicable government laws, rules and regulations; the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and accountability for adherence to the code. We have posted the text of our Code of Business Conduct and Ethics on our internal website. We intend to disclose future amendments to, or waivers from, certain provisions of our Code of Business Conduct and Ethics as applicable.



















42






Table of Contents








Legal Proceedings.






To the best of our knowledge, except as set forth herein, none of the directors or director designees to our knowledge has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.






Committees of the Board of Directors





Currently, our board of directors has three committees: an Audit Committee, a Compensation Committee, and a Safety and Environmental Committee. The Audit Committee and Compensation Committee are both comprised of the three independent directors of the Company. The Safety and Environmental Committee is comprised of Thomas M. Sauve and Mark C. Jensen. The composition and responsibilities of the three committees are described below.






Audit Committee





As required by the rules of the SEC, the audit committee consists solely of independent directors, who are Ms. Botte and Messrs Layman, and Taplin. SEC rules also require that a public company disclose whether its audit committee has an “audit committee financial expert” as a member. An “audit committee financial expert” is defined as a person who, based on his or her experience, possesses the attributes outlined in such rules.





This committee oversees, reviews, acts on and reports on various auditing and accounting matters to our board of directors, including: the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices. In addition, the audit committee oversees our compliance programs relating to legal and regulatory requirements. We have adopted an audit committee charter defining the committee’s primary duties in a manner consistent with the rules of the SEC and applicable stock exchange or market standards.






Compensation Committee





As required by the rules of the SEC, the compensation committee consists solely of independent directors, who are Ms. Botte and Mr. Layman. The purpose of this committee shall be to (i) assist the board of directors in the oversight of the Company’s executive officer and director compensation programs, (ii) discharge the board of director’s duties relating to administration of the Company’s incentive compensation and any other stock- based plans, and (iii) act on specific matters within its delegated authority, as determined by the board of directors from time to time.






Safety and Environmental Committee





The board of directors formed a Safety and Environmental Committee, which is comprised of Messrs Jensen and Sauve. The purpose of this committee is to assist the board in fulfilling its responsibilities by providing oversight and support in assessing the effectiveness of the Company’s environmental, health, and safety policies, programs and initiatives. This committee will monitor the continued effectiveness of these policies and procedures by periodically reviewing the applicable environmental, health and safety laws, rules and regulations. The Committee will also perform such other functions as the Board may assign to the Committee from time to time.



















43






Table of Contents








Item 11. Executive Compensation.






The following table sets forth information concerning the annual and long-term compensation of our executive officers for services rendered in all capacities to us during the last two completed fiscal years. The listed individuals shall hereinafter be referred to as the “Named Executive Officers.” We also have included below a table regarding compensation paid to our directors who served during the last completed fiscal year. The address for all individuals identified in the following tables is 12115 Visionary Way, Suite 174, Fishers, IN 46038.






Summary Compensation Table - Officers













































































































































































































































































































































































































(a)








(b)








(c)











(d)








(e)








(f)











(g)








(h)








(I)











(j)








Name and principal position








Year








Salary




($)











Bonus




($)








Stock




Awards




($)








Option




Awards




($)











Non-equity




Incentive plan




Compensation




($)








Nonqualified deferred compensation earnings




($)








All other




Compensation




($)











Total




($)












































































Mark C. Jensen, (1) CEO







2020









250,000








-0-







-0-









100,000








-0-







-0-









24,187










374,187











2019









156,000








-0-







-0-







-0-










-0-







-0-









15,550










171,550






















































































Thomas M. Sauve, (2) President







2020









200,000








-0-







-0-









57,730








-0-







-0-









29,197










286,927











2019









156,000








-0-







-0-







-0-










-0-







-0-









15,550










171,550






















































































Kirk P. Taylor, (3) CFO







2020









200,000








-0-







-0-









57,730








-0-







-0-









25,836










181,467











2019









156,000








-0-







-0-







-0-










-0-







-0-









25,467










181,467






















































































Tarlis R Thompson, (4) COO







2020









175,000








-0-







-0-









435,000








-0-







-0-







-0-












610,000











2019









117,055








-0-







-0-









151,500








-0-







-0-







-0-












268,555





_____________

































(1)




During 2017 salary in the amount of $32,000 was accrued and unpaid during 2017 and 2018. During 2019, $15,550 was repaid leaving an unpaid balance of $16,450. On January 2, 2018, the Company entered into an employment agreement with Mr. Jensen, at an annual salary rate of $156,000 which expired on December 31, 2019. On October 1, 2020, the Company entered into an employment agreement with Mr. Jensen increasing base pay to $250,000 and carrying certain performance bonuses which would be awarded by the board of directors. 60,976 options were issued under the new contract and vest immediately. No bonus was awarded during 2019 and 2020. During 2019, other compensation totaling $15,550 included $15,550 of retroactive pay. During 2020, other compensation totaling $24,187 included $16,450 of retroactive pay.










(2)




During 2017 salary in the amount of $32,000 was accrued and unpaid during 2017 and 2018. During 2019, $12,672 was repaid leaving an unpaid balance of $19,328. On January 2, 2018, the Company entered into an employment agreement with Mr. Sauve, at an annual salary rate of $156,000, which expired on December 31, 2019. On October 1, 2020, the Company entered into an employment agreement with Mr. Sauve increasing base pay to $200,000 and carrying certain performance bonuses which would be awarded by the board of directors.49,342 options were issued under the new contract and vest immediately. No bonus was awarded during 2019 and 20120. Other compensation totaling $15,550 included $2,878 health insurance reimbursement and $12,672 of retroactive pay. Other compensation totaling $29,197 included $3,051 health insurance reimbursement and $19,328 of retroactive pay.










(3)




During 2017 salary in the amount of $21,487 was accrued and unpaid during 2017 and 2018. During 2019, $13,109 was repaid leaving an unpaid balance of $8,378. On January 2, 2018, the Company entered into an employment agreement with Mr. Taylor, at an annual rate of $156,000, which expired on December 31, 2019. On October 1, 2020, the Company entered into an employment agreement with Mr. Taylor increasing base pay to $200,000 and carrying certain performance bonuses which would be awarded by the board of directors. 49,342 options were issued under the new contract and vest immediately. No bonus was awarded during 2019 and 2020. Other compensation totaling $25,467 included $12,358 health insurance reimbursement and $13,109 of retroactive pay. Other compensation totaling $25,836 included $13,639.60 health insurance reimbursement and $8,378 of retroactive pay.










(4)




There is no employment agreement in place for Mr. Thompson. In 2019, Mr. Thompson was awarded 75,000 options as part of the company’s 2018 stock option plan. The options to Mr. Thompson vest equally over the course of three years, and as of December 31, 2019, one third of the options have vested. In 2020, Mr. Thompson was awarded 500,000 options which vest over 7 years.




















44






Table of Contents







Director Compensation








































































































































































































































































































































































































































































































































































(a)














(b)








(c)








(d)











(e)








(f)








(g)











(h)








Name and principal position














Fees Earned or Paid in Cash




($)








Stock




Awards




($)








Option




Awards




($)











Non-Equity Incentive Plan Compensation




($)








Nonqualified deferred compensation earnings




($)








All Other Compensation




($)











Total




($)







Mark C. Jensen (1)







2020







-0-







-0-










41,000










-0-







-0-










-0-













-0-













2019







-0-







-0-










-0-










-0-







-0-










-0-













-0-












































































Thomas M. Sauve (2)







2020







-0-







-0-










41,000










-0-







-0-










-0-













-0-













2019







-0-







-0-










-0-










-0-







-0-










-0-













-0-












































































Randal V. Stephenson (Former) (3)







2020







-0-







-0-










41,000










-0-







-0-










13,640













64,640













2019







-0-







-0-










-0-










-0-







-0-










1,496













121,946












































































Ian Sadler (Former) (4)







2020







-0-







-0-










-0-










-0-







-0-










-0-













-0-













2019







-0-







-0-










-0-










-0-







-0-










-0-













-0-












































































Courtenay O. Taplin (5)







2020







-0-







-0-










161,450










-0-







-0-










-0-













161,450













2019







-0-







-0-










120,450










-0-







-0-










-0-













120,450












































































Michael Layman (6)







2020







-0-







-0-










93,500










-0-







-0-










-0-













93,500













2019







-0-







-0-










-0-










-0-







-0-










-0-













-0-












































































Dr. Gerardine Botte







2020







-0-







-0-










41,000










-0-







-0-










-0-













41,000













2019







-0-







-0-










-0-










-0-







-0-










-0-













-0-







____________

















(1)




For services rendered on the board of directors, Mr. Jensen was issued 25,000 options which vest immediately on October 1, 2020. The Option Award to Directors in Column (d) of $41,000 represents the amortized book value of warrants priced using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder.










(2)




For services rendered on the board of directors, Mr. Sauve was issued 25,000 options which vest immediately on October 1, 2020. The Option Award to Directors in Column (d) of $41,000 represents the amortized book value of warrants priced using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder.












(3)




Mr. Stephenson was appointed as a director on November 15, 2018. In 2018, Mr. Stephenson was awarded 15,000 options for services rendered as a director. The options to Mr. Stephenson vest equally over the course of three years. In 2020, Mr. Stephenson was awarded 25,000 options which vest immediately. The Option Award to Directors in Column (d) of $161,450 represents the amortized book value of warrants priced using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder. Other Compensation includes $13,640 and 3,672 of health insurance premiums paid by the Company for 2020 and 2019, respectively.












(4)




Mr. Sadler was appointed as a director on November 15, 2018. In 2018, Mr. Sadler was awarded 15,000 options for services rendered as a director. The options to Mr. Sadler vest equally over the course of three years. The Option Award to Directors in Column (d) of $120,450 represents the amortized book value of warrants priced valued using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder.












(5)




Mr. Taplin was appointed as a director on November 15, 2018. In 2018, Mr. Taplin was awarded 15,000 options for services rendered as a director. The options to Mr. Taplin vest equally over the course of three years. In 2020, Mr. Taplin was awarded 25,000 options which vest immediately. The Option Award to Directors in Column (d) of $161,450 represents the amortized book value of warrants priced using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder.












(6)




Mr. Layman was appointed as a director on July 16, 2020. In 2020, Mr. Layman was awarded 75,000 options for services rendered as a director. The options to Mr. Layman immediately. The Option Award to Directors in Column (d) of $93,500 represents the amortized book value of warrants valued using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder.












(7)




Ms. Botte was appointed as a director on November 23, 2020. Ms. Botte was awarded 25,000 options for her services on the board. The options vest immediately. The Option Award to Directors in Column (d) of $41,000 represents the amortized book value of warrants priced using the Black-Scholes Option Pricing Model, and does not represent the actual cash value of the warrants to the warrant holder.






No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.





There are no understandings or agreements regarding compensation our management will receive after a business combination that is required to be included in this table, or otherwise.



















45






Table of Contents







Employment Agreements





Except for our Chief Operating Officer, we have employment agreements with the Named Executive Officers that provide for the base salaries and a discretionary annual performance bonus of up to three times their annual base salary, plus potential participation in the Company’s Employee Incentive Stock Option Plan. The payment of such bonus and/or incentive stock options shall be in the sole discretion of the Company’s Board of Directors. The in-place contracts we effective beginning October 1, 2020 and expires December 31, 2021.






Outstanding Equity Awards





The following equity awards, including, options, restricted stock or other equity incentives from the Company to current officers are as follows:





- Chief Executive Officer, who was issued options under our Employee Incentive Stock Option Plan on November 23, 2020 to purchase up to 85,976 shares of our Company at $1.64 per share. Those options vest upon issuance.





- President, who was issued options under our Employee Incentive Stock Option Plan on November 23, 2020 to purchase up to 70,732 shares of our Company at $1.64 per share. Those options vest upon issuance.





- Chief Financial Officer, who was issued options under our Employee Incentive Stock Option Plan on November 23, 2020 to purchase up to 45,732 shares of our Company at $1.64 per share. Those options vest upon issuance.





- Chief Operating Officer, who was issued options under our Employee Incentive Stock Option Plan on June 18, 2020 to purchase up to 500,000 shares of our Company at $1.13 per share, June 5, 2019 to purchase up to 75,000 shares of our Company at $2.63 per share and on September 12, 2018 to purchase up to 136,830 shares of our Company at $1.00 per share. Those options vest equally over the course of three years.







Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.






The following table lists, as of December 31, 2020, the number of shares of our Class A Common Stock and Series A Convertible Preferred Stock that are beneficially owned by (i) each person or entity known to us to be the beneficial owner of more than 5% of our common stock; (ii) each executive officer and director of our company; and (iii) all executive officers and directors as a group. Information relating to beneficial ownership of Common Stock and our Convertible Preferred Stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days under any contract, option or warrant. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power. Unless otherwise specified, the address of each beneficial owner listed in the tables is c/o American Resources Corporation, 12115 Visionary Way, Fishers, IN 46038.





































Name and Address of Shareholder








Number of Shares of




Common Stock




Beneficially




Owned (1)











Percent of Common Stock Owned




























Golden Properties, Ltd. (2) (3)









4,084,188










9.99

%


_________

























(1)




A person is deemed to be the beneficial owner of securities that can be acquired by such a person within 60 days upon exercise of options, warrants or convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such a person (but not those held by any other person) and are exercisable within 60 days from that date have been exercised;










(2)




Based on 42,882,762 shares of Common Stock deemed to be outstanding as if one or more warrants were exercised up to the maximum amount of 9.99% (or 4,084,188 shares) of the issued and outstanding number of shares at December 31, 2020. This percentage has been rounded for convenience;










(3)




Golden Properties, Ltd. is the owner of several Company common stock warrants for the purchase of shares of our Common Stock, which warrants are exercisable at such company’s discretion, subject to the following limitation on amount. The warrant agreements provide that at no time may Golden Properties, Ltd. or its affiliates exercise any warrant that would result in their ownership of more than 9.99% of the issued and outstanding shares of our Common Stock on the date of exercise. Additionally, as of December 31, 2020 Alexander Lau, who is a principal of Golden Properties and a beneficial owner through Golden Properties, is believed to be a holder of 19,710 Class A Common shares. Accordingly, Golden Properties, Ltd. is presently deemed the beneficial owner of 4,064,478 shares of our Common Stock pursuant to Securities and Exchange Commission Rule 13d-3, promulgated under the Securities Exchange Act of 1934. The full number of shares that Golden Properties' beneficially owns (including all shares underlying all the warrants owned by Golden Properties and excluding those Class A Common shares owned by Alexander Lau stated above) is 7,101,408shares.




















46






Table of Contents


































































































































































































































































































































































Name








Number of




Shares of




Series A Preferred




Stock Beneficially




Owned




(4)











Percent of




Series A




Preferred




Stock




Owned




(5)











Common




Stock




Beneficially




Owned




(4)











Percent of




Common




Stock




Beneficially




Owned




(6)















































Officers and Directors















































































Mark C. Jensen,

(

7) Chief Executive Officer, Director









-










0

%







5,251,755










12.85

%





















































Thomas M. Sauve, (8) President, Director









-










0

%







4,464,136










10.92

%





















































Kirk P. Taylor, Chief Financial Officer









-










0

%







1,620,383










3.96

%





















































Tarlis R. Thompson, Chief Operating Officer









-










0

%







163,170










0.40

%






















































All Directors and Officers as a Group (4 persons)










-












0



%









11,412,313












27.91



%






















































5% Holders







































































































Golden Properties, LTD

































2,404,917










5.88

%






















































All Directors, Officers and 5% Holders as a Group (5 persons)










-












0



%









13,817,230












33.80



%



____________









































(4)




A person is deemed to be the beneficial owner of securities that can be acquired by such a person within 60 days from December 31, 2020, upon exercise of options, warrants or convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such a person (but not those held by any other person) and are exercisable within 60 days from that date have been exercised;










(5)




Based on 0 shares of Series A Convertible Preferred Stock outstanding as of December 31, 2020;










(6)




Based on 40,882,762 Class A Common Stock outstanding as of December 31, 2020. These percentages have been rounded for convenience;










(7)




Mr. Jensen beneficially owns 92,264 shares of our Class A Common Stock through his equity ownership in T Squared Capital LLC, which shares are included in the table above.










(8)




Mr. Sauve beneficially owns 61,509 shares of our Class A Common Stock through his equity ownership in T Squared Capital LLC, which shares are included in the table above.




















47






Table of Contents








Item 13. Certain Relationships and Related Transactions, and Director Independence.








Transactions with Related Persons, Promoters and Certain Control Persons.






On June 12, 2015, the Company executed a consulting agreement with an entity with common ownership. During 2018 and 2017, the Company incurred fees totaling $0 and $0 relating to services rendered under this agreement. The amount outstanding and payable as of December 31, 2018 and 2017, was $0 and $17,840,615, respectively. The amount is due on demand and does not accrue interest. On May 25, 2018, the related party agreed to terminate the agreement and extinguish the entire $17,840,615 payable.





During 2015, equipment purchasing was paid by an affiliate resulting in a note payable. The balance of the note was $74,000 as of December 31, 2020 and 2019 respectively.





On January 1, 2016, the Company awarded stock options for 827,862 shares in exchange for consulting efforts to an entity with common ownership. 0 and 636,830 stock options were awarded to related parties during 2020 or 2019, respectively.





On April 30, 2017, the Company purchased $250,000 of secured debt that had been owed to that party, by an operating subsidiary of a related party. As a result of the transaction, the Company is now the creditor on the notes. The first note in the amount of $150,000 is dated March 13, 2013, carries an interest rate of 12% and was due on September 13, 2015. The second note in the amount of $100,000 is dated July 17, 2013, carries an interest rate of 12% and was due January 17, 2016. Both notes are in default and have been fully impaired due to collectability uncertainty as of December 31, 2020 and 2019, respectively.





During July 2017 and October 2018, an officer of the Company advanced $50,000 and $13,500, respectively, to the Company. The advance is non-secured, non-interest bearing and due on demand.





During December 2018, an officer of the Company advanced $5,000 to the Company. The advance is non-secured, non-interest bearing and due on demand.





On February 13, 2020, the Company entered into a Contract Services Agreement with Land Betterment Corp, 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 and covers services across the Company’s locations.





The Company, through its subsidiaries, leases property and mineral from a related entity, LRR. During the year ended December 31, 2020 and 2019, the Company incurred royalty expense in the amount of $232,208 and $330,060.29 to a related entity formally consolidated as a variable interest entity. As of December 31, 2020, and 2019, the Company owed the related entity a total of $679,146 and $737,981 for unpaid royalties and advances, respectively. From inception, October 24, 2016, through June 30, 2018, the accounts of LRR were consolidated with the company as a variable interest entity. Due to its ongoing review, on July 1, 2018 management determined that LRR no longer met the requirements of consolidation and the accounts were deconsolidated.





On October 13, 2020, the company paid $110,828.89 to settle past sales commission invoices. The sales broker is 50% owned by one of our directors.





On June 30, 2020 and on October 20, 2020, an investment fund controlled by one of our directors made investments in the Company’s convertible debt offering for a total of $1,250,000 as of December 31, 2020.





On November 23, 2020, American Rare Earth, entered into an operating agreement with one of our directors to form Advanced Carbon Materials, LLC ACM. The agreement calls for the company to fund the ACM in the amount of $4,000 monthly for the purpose of procuring licenses to further advance the technologies in advanced carbon uses. As of December 31, 2020, no transaction between the companies had been made.





On February 13, 2020, the Company entered into a Contract Services Agreement with Land Betterment Corp, 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. The agreement covers services across all of the Company’s properties. During 2020, the amount incurred under the agreement amounted to $1,547,671 and the amount paid amounted to $1,547,671. As of December 31, 2020, the amount due under the agreement amounted to $355,899.





On June 11, 2020 the Company purchased $1,494,570 of secured debt included accrued interest that had been owed to that party, by an operating subsidiary of a related party. As a result of the transaction, the Company is now the creditor on the four notes. The first note in the amount of $75,000 is dated June 28, 2013, carries an interest rate of 12% and was due on June 28, 2015. The second note in the amount of $150,000 is dated June 28, 2013, carries an interest rate of 12% and was due June 28, 2015. The third note in the amount of $199,500 is dated March 18, 2014, carries an interest rate of 4% and was due on March 18, 2016. The fourth note in the amount of $465,500 is dated March 18, 2014, carries an interest rate of 4% and was due on March 18, 2016. The notes are in default and have been fully impaired due to collectability uncertainty.







Director Independence.






The Board of Directors determined that Ms. Botte and Messrs. Layman, Taplin, Stephenson (retired), and Sadler (retired) are independent are independent within the meaning of the listing standards for general independence of the NASDAQ Capital Market.





Under the listing standards, the Audit Committee is required to be composed solely of independent directors. The standards for audit committee membership include additional requirements under rules of the Securities and Exchange Commission. The Board has determined that all of the members of the audit committee meet the applicable independence requirements.





To the extent required by the trading market on which our shares are listed, we will ensure that the overall composition of our Board complies with the Sarbanes-Oxley Act, and the rules thereunder, and the listing requirements of the trading market, including the requirement that one member of the Board qualifies as a “financial expert.”







Item 14. Principal Accounting Fees and Services.


























































































2020











2019







Audit fees – BF Borgers, PC






$

180,000







$

-





Audit related fees – BF Borgers, PC









10,000










-





Audit fees – Malone Bailey LLP









-










235,000





Audit related fees – Malone Bailey LLP









35,500










34,000





Tax fees









---










---





All other fees









---










---





















48






Table of Contents








PART IV








Item 15. Exhibits, Financial Statement Schedule.






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.












































































































































































































Exhibit




Number








Description








Location Reference




















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 24, 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





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 February 14, 2019.




















49






Table of Contents







































































































































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 February 14, 2019.





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 Form 8-K filed on November 25, 2020.





10.14








Employment Agreement with Thomas M. Sauve







Incorporated herein by Form 8-K filed on November 25, 2020.





10.15








Employment Agreement with Kirk P. Taylor







Incorporated herein by reference Form 8-K filed on November 25, 2020.





10.16








Employee Stock Option Plan







Incorporated herein by reference to Exhibit 10.16 to the Company’s registration statement filed on February 14, 2019.





10.17








Letter of Intent







Incorporated herein by reference to Exhibit 10.17 to the Company’s registration statement filed on February 14, 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.




23.1







Consent of B.F Borgers, PC







Incorporated Herewith





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




















50






Table of Contents








SIGNATURES






Pursuant to the requirements of Section 13 or 15(d) 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




































NAME








TITLE








DATE




















/s/ Mark C. Jensen







Principal Executive Officer,







March 10, 2021




Mark C. Jensen







Chief Executive Officer, Chairman of the Board of Directors












Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.













































































































































NAME








TITLE








DATE




















/s/ Mark C. Jensen







Principal Executive Officer,







March 10, 2021




Mark C. Jensen







Chief Executive Officer, Chairman of the Board of Directors


























/s/ Kirk P. Taylor







Principal Financial Officer, Chief Financial Officer







March 10, 2021




Kirk P. Taylor
































/s/ Thomas M. Sauve







Director, President







March 10, 2021




Thomas M. Sauve
































/s/ M


ichael Layman









Director







March 10, 2021




Michael Layman
































/s/ G


erardine Botte







Director







March 10, 2021




Gerardine Botte, PHD
































/s/ Courtenay O. Taplin







Director







March 10, 2021




Courtenay O. Taplin
































51






Table of Contents







Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants




Which Have Not Registered Securities Pursuant to Section 12 of the Act





None.



















52






Table of Contents







AMERICAN RESOURCES CORPORATION






CONSOLIDATED FINANCIAL STATEMENTS




December 31, 2020 and 2019





















53






Table of Contents








AMERICAN RESOURCES CORPORATION







CONTENTS














































































































Page








CONSOLIDATED FINANCIAL STATEMENTS


























Report of Independent Registered Public Accounting Firm - 2020







F-1




















Report of Independent Registered Public Accounting Firm - 2019







F-2




















Consolidated Balance Sheets







F-3




















Consolidated Statements of Operations







F-4




















Consolidated Statements of Changes Stockholders' Deficit







F-5




















Consolidated Statements of Cash Flows







F-7




















Notes to Consolidated Financial Statements







F-8
























54








Table of Contents








Report of Independent Registered Public Accounting Firm






To the shareholders and the board of directors of American Resources Corporation






Opinion on the Financial Statements





We have audited the accompanying consolidated balance sheet of American Resources Corporation (the "Company") as of December 31, 2020, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.






Basis for Opinion





These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.





We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.





Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.






Substantial Doubt about the Company’s Ability to Continue as a Going Concern





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.







/s/ BF Borgers CPA PC





BF Borgers CPA PC





We have served as the Company's auditor since 2020



Lakewood, CO



March 10, 2021



















F-1






Table of Contents








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






To the Shareholders and Board of Directors of



American Resources Corporation







Opinion on the Financial Statements






We have audited the accompanying consolidated balance sheet of American Resources Corporation and its subsidiaries (collectively, the “Company”) as of December 31, 2019, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.







Going Concern Matter






The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.







Basis for Opinion






These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.





We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.





Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.







/s/ MaloneBailey, LLP




www.malonebailey.com



We served as the Company's auditor 2017 to 2020.



Houston, Texas



May 29, 2020



















F-2






Table of Contents








AMERICAN RESOURCES CORPORATION





CONSOLIDATED BALANCE SHEETS

















































































































































































































































































































































































































































































































































































































































































December 31,














2020











2019

























ASSETS





























CURRENT ASSETS






















Cash






$

10,617,495







$

3,324





Accounts Receivable









38,650










2,424,905





Inventory









150,504










515,630





Prepaid









175,000










-





Accounts Receivable - Other









234,240










234,240





Total Current Assets









11,215,889










3,178,099

































OTHER ASSETS




























Cash - restricted









583,708










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





Mine development









561,575










669,860





Coal Refuse Storage









12,134,192










12,171,271





Less Accumulated Depreciation









(12,726,809

)







(11,162,622

)


Land









1,572,435










1,748,169





Note Receivable









4,117,139










4,117,139





Total Other Assets









27,199,506










32,051,551

































TOTAL ASSETS






$

38,415,395







$

35,229,650

































LIABILITIES AND STOCKHOLDERS' DEFICIT
































CURRENT LIABILITIES




























Accounts payable






$

4,288,794







$


11,044,479







Non-Trade Payables









3,850,781











-







Accounts payable - related party









679,146










718,156





Accrued interest









1,043,519










2,869,763





Funds held for others









-










-





Due to affiliate









74,000










132,639





Current portion of notes payables (net of unamortized discount of $0 and $134,296)









10,997,692










20,494,589





Convertible note payables









-










7,419,612





Current portion of reclamation liability









2,327,169










2,327,169





Total Current Liabilities









23,261,101










45,006,407

































OTHER LIABILITIES




























Long-term portion of note payable (net of issuance costs $405,667 and $428,699)









5,330,752










5,415,271





Long-term portion of convertible note payable (net of unamortized discount of $0 and $0)









14,300,907










-





Reclamation liability









15,528,135










17,512,613





Total Other Liabilities









35,159,794










22,927,884
































Total Liabilities









58,420,895










67,934,291

































STOCKHOLDERS' DEFICIT




























AREC - Class A Common stock: $.0001 par value; 230,000,000 shares




























authorized, 40,522,762 and 27,410,512 shares issued and outstanding for the period end









4,256










2,740





AREC - Series A Preferred stock: $.0001 par value; 100,000 shares authorized, nil and nil shares issued and outstanding









-










-





AREC - Series B Preferred stock: $.001 par value; 20,000,000 shares authorized, nil and nil shares issued and outstanding, respectively









-










-





AREC - Series C Preferred stock: $.001 par value; 20,000,000 shares authorized, nil and nil shares issued and outstanding









-










-





Additional paid-in capital










113,279,448












90,326,104





Accumulated deficit










(133,289,247



)







(123,033,485

)





























Total Stockholders' Deficit









(20,005,500

)







(32,704,641

)






























TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT






$

38,415,395







$

35,229,650







The accompanying footnotes are integral to the consolidated financial statements



















F-3






Table of Contents








AMERICAN RESOURCES CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS






























































































































































































































































































































































































































































































Years ended December 31,














2020











2019




























Coal Sales






$

524,334







$

24,456,831





Processing Services Income









-










20,876





Metal Recovery and Sales









535,357










-
































Total Revenue









1,059,691










24,477,707
































Cost of Coal Sales and Processing









(3,749,519

)







(26,086,814

)


Accretion Expense









(1,287,496

)







(1,482,349

)


Gain on purchase and disposal of asset, respectively









-










394,484





Depreciation









(2,298,703

)







(4,588,136

)


Amortization of mining rights









(1,251,357

)







(1,657,673

)


General and Administrative









(2,486,799

)







(5,113,688

)


Professional Fees









(1,076,548

)







(6,750,848

)


Production Taxes and Royalties









(1,357,749

)







(4,222,175

)


Impairment of Fixed Assets









-










(27,688,030

)


Development Costs









(3,998,885

)







(7,236,652

)





























Total Expenses from Operations









(17,507,056

)







(84,431,881

)





























Net Loss from Operations









(16,447,365

)







(59,954,174

)





























Other Income









20,538










2,072,861





(Loss)/Gain on settlement of note payable and accounts payable









-










(22,660

)


Gain on Interest Forgiven









832,500

















Gain on Depreciation Recapture









1,706,569

















Gain on Sale of Stock









6,820,949

















Amortization of debt discount and debt issuance costs









(11,516

)







(7,725,076

)


Interest Income









205,857










164,686





Warrant modification expense









-










(2,545,360

)


Interest expense









(3,383,294

)







(2,908,579

)





























Net Loss









(10,255,762

)







(70,918,302

)





























Less: Net income attributable to Non Controlling Interest









-










-
































Net loss attributable to American Resources Corporation Shareholders






$

(10,255,762

)




$

(70,918,302

)





























Net loss per share - basic and diluted






$

(.35

)




$

(2.94

)





























Weighted average shares outstanding









29,359,993










24,094,420







The accompanying footnotes are integral to the consolidated financial statements



















F-4






Table of Contents







American Resources Corporation




Statement of Stockholders' Deficit




December 31, 2020



















































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































American Resources











American Resources











American Resources











American Resources



































Common Stock











Preferred Series A











Preferred Series B











Preferred Series C



































Par




Value




Shares











0.0001




Amount











Par Value




Shares











0.0001




Amount











Par Value




Shares











0.0001




Amount











Par Value




Shares











0.0001




Amount











Additional




paid in




capital











Accumulated




Deficit











Total









January 1, 2019




















17,763,469


























1,776


























481,780


























48


























-


























-


























50,000


























5


























42,913,532


























(52,115,183





)



















(9,199,822





)






































































































































































































































Issuance of Common Stock for Cash














4,795,200


















479


















-


















-


















-


















-


















-


















-


















7,763,121


















-


















7,763,600










































































































































































































































Issuance of Common Shares for Services














360,315


















36


















-


















-


















-


















-


















-


















-


















1,906,217


















-


















1,906,253










































































































































































































































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














54,417


















5


















-


















-


















-


















-


















-


















-


















231,656


















-


















231,661










































































































































































































































Issuance of Warrants to Consultants














-


















-


















-


















-


















-


















-


















-


















-


















2,524,500


















-


















2,524,500










































































































































































































































Amortization of Options - Stock Based Compensation














-


















-


















-


















-


















-


















-


















-


















-


















377,255


















-


















377,255










































































































































































































































Issuance of Common Shares for Warrant Exercise- cashless














599,427


















60


















-


















-


















-


















-


















-


















-


















(60



)













-


















-










































































































































































































































Conversion of Series A 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














-


















-


















-


















-


















-


















-


















-


















-


















7,362,925


















-


















7,362,925










































































































































































































































Return of common shares














(107,000



)













(11



)













-


















-


















-


















-


















-


















-


















11


















-


















-










































































































































































































































Warrant modification expense














-


















-


















-


















-


















-


















-


















-


















-


















2,545,360


















-


















2,545,360










































































































































































































































Underwriter warrants














-


















-


















-


















-


















-


















-


















-


















-


















4,098


















-


















4,098










































































































































































































































Issuance of common shares with note payable














325,000


















33


















-


















-


















-


















-


















-


















-


















297,798


















-


















297,831










































































































































































































































Net loss














-


















-


















-


















-


















-


















-


















-


















-


















-


















(70,918,302



)













(70,918,302



)



















F-5






Table of Contents








































































































































































































































































































































































































































































































































































































































































































































Balance December 31, 2019
















27,410,512




















2,740




















-




















-




















-




















-




















-




















-




















90,326,104




















(123,033,485





)















(32,704,641





)






































































































































































































































Issuance of Common Stock for cash














5,200,000


















520


















-


















-


















-


















-


















-


















-


















12,034,480


















-


















12,035,000










































































































































































































































Issuance of Common Stock for Debt Conversions














9,461,683


















947


















-


















-


















-


















-


















-


















-


















8,622,291


















-


















8,623,238










































































































































































































































Issuance of Common Stock for Consulting Services














65,303


















7


















-


















-


















-


















-


















-


















-


















92,793


















-


















92,800










































































































































































































































Issuance of Common Stock for Warrant Exercises














2,145,264


















217


















-


















-


















-


















-


















-


















-


















2,270,714


















-


















2,270,931










































































































































































































































Issuance of Common Stock for Account Payable Conversions














90,000


















9


















-


















-


















-


















-


















-


















-


















217,767


















-


















217,776










































































































































































































































Issuance of Common Stock for Note Settlement














600,000


















60


















-


















-


















-


















-


















-


















-


















642,000


















-


















642,060










































































































































































































































Return of Common Stock for Asset Sale














(2,000,000



)













(200



)













-


















-


















-


















-


















-


















-


















(1,840,000



)













-