🔝 Résiliation – Formulaire S-1 / A American Resources Corp

By | février 14, 2019




















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Tel que déposé auprès des États-Unis Securities and Exchange Commission on
14 février 2019

Numéro d'enregistrement 333-226042

ÉTATS-UNIS

COMMISSION DES VALEURS MOBILIÈRES ET D'ÉCHANGE

Washington
C.C. 20549

FORMULAIRE S-1 / A


(Amendement n °
8)

DÉCLARATION D'INSCRIPTION

EN VERTU DE LA LOI SUR LES VALEURS MOBILIÈRES DE 1933

——————————————-

American Resources Corporation

(exact
nom du titulaire tel que spécifié dans sa charte)

—————————————–

Floride

1200

46-3914127

(État
ou autre juridiction de constitution ou
organisation)

(primaire
Numéro de code de la classification type des industries)

(I.R.S.
Numéro d'identification de l'employeur)

—————————————–

9002 allée technologique

Pêcheurs, IN 46038

Téléphone: (317) 855-9926

(Adresse,
y compris le code postal et le numéro de téléphone,

y compris
indicatif régional du dirigeant principal du titulaire
bureaux)

—————————————–

Clifford J. Hunt

Cabinet d'avocats de Clifford J. Hunt, P.A.

8200 Boulevard Seminole

Seminole, Floride 33772

(727) 471-0444

(Nom,
adresse, y compris code postal, et numéro de téléphone, y compris la région
code d'agent de service)

—————————————–

Des copies
à:

Clifford
J. Hunt

loi
Bureau de Clifford J. Hunt, P.A.

8200
Sur le boulevard Seminole

Seminole,
Floride 33772

(727)
471-0444

Mitchell
S. Nussbaum

Loeb
& Lit LLP

345
Park Avenue

nouveau
York, NY 10154

(212)
407-4000

—————————————-

Date approximative du début de la vente proposée de titres
au public: Dès que possible après l'efficacité
date de cette déclaration d'enregistrement.

Si tout
des titres inscrits sur ce formulaire doivent être offerts
sur une base retardée ou continue conformément à la règle 415 en vertu de la
Securities Act of 1933, cochez la case suivante:

Si cela
Un formulaire est déposé pour enregistrer des titres supplémentaires pour une offre
en vertu de la règle 462b) de la Loi sur les valeurs mobilières, vérifiez
à la suite de la case et listez la déclaration d'enregistrement Securities Act
numéro de la déclaration d’inscription effective antérieure pour le même
offre. ☐

Si cela
Le formulaire est une modification post-effective déposée en vertu de la règle 462.c)
en vertu de la Securities Act, cochez la case suivante et indiquez les
Numéro de déclaration d’enregistrement de la loi sur les valeurs mobilières
déclaration d'enregistrement effective pour la même offre.

Si cela
Le formulaire est une modification post-effective déposée en vertu de la règle 462.d)
en vertu de la Securities Act, cochez la case suivante et indiquez les
Numéro de déclaration d’enregistrement de la loi sur les valeurs mobilières
déclaration d'enregistrement effective pour la même offre.

indiqué
par coche si le déclarant est un grand déposant accéléré,
un déposant accéléré, un déposant non accéléré, un rapport plus petit
société, ou une société en croissance émergente. Voir les définitions de
"Grand classeur accéléré" ", accéléré
«déposant», «petite société déclarante» et
«Entreprise à croissance émergente» dans la règle 12b-2 du
Securities Exchange Act de 1934.

grand
Filer accéléré ☐

accéléré
déposant ☐

Non accélérée
déposant ☐

Plus petit
société déclarante

émergents
Société de croissance

Si un
société en croissance émergente, indiquez par coche si le déclarant
a choisi de ne pas utiliser la période de transition prolongée pour se conformer
avec toute norme de comptabilité financière nouvelle ou révisée fournie
conformément à l’article 7 (a) (2) (B) de la Securities Act.

la
le déclarant modifie par la présente la présente déclaration d'enregistrement à cette date
ou les dates nécessaires pour retarder sa date d'entrée en vigueur jusqu'à la
le déposant doit déposer un autre amendement précisant notamment
que cette déclaration d'enregistrement entre ensuite en vigueur
conformément à la Section 8 (a) de la Securities Act of 1933, en tant que
Cette déclaration d’enregistrement devient
en vigueur à la date indiquée par la Securities and Exchange Commission,
Conformément à l’article 8 a), peut déterminer.

LES INFORMATIONS CONTENUES DANS CE PROSPECTUS NE SONT PAS COMPLÈTES ET PEUVENT ÊTRE
CHANGÉ. NOUS NE POUVONS PAS VENDRE CES TITRES AVANT L’ENREGISTREMENT
DÉCLARATION DÉPOSÉE AUX ÉTATS-UNIS COMMISSION DES VALEURS MOBILIÈRES ET D'ÉCHANGE EST
ENTRÉE EN VIGUEUR. CE PROSPECTUS N'EST PAS UNE OFFRE DE VENDRE CES TITRES
ET NOUS NE SOMMES PAS EN OFFRANT DES OFFRES POUR ACHETER CES VALEURS MOBILIÈRES
DÉCLARER LORSQUE L’OFFRE OU LA VENTE EST INTERDITE.

SUJET À TERMINER, PROJET EN DATE DU 14 FÉVRIER 2019

PROSPECTUS PRÉLIMINAIRE

1 000 000 d'actions

American Resources Corporation

Classe A Actions ordinaires

______________________

Ceci est une offre publique de classe A Common
stock (ou appelé «stock commun») de
American Resources Corporation, une société de Floride. Avant de
cette offre, il y a eu un marché public limité pour notre commune
actions sur les marchés hors cote sous le symbole AREC. Nous sommes
vente
en haut
à
[    
  ]
actions
d'actions ordinaires. Il n'y a pas d'actionnaires vendeurs dans cette
offre.

notre
les actions ordinaires sont actuellement cotées sur le marché hors cote,
Le niveau OTC Pink de la société sous le symbole "AREC".
Le 13 février 2019, notre dernier prix de vente rapporté
actions ordinaires était de 12,50 $ par action. Nous attendons l'offre publique
Le prix par action offerte dans le cadre de cette offre se situera entre 4,00 $ et 6,00 $. nous
ont demandé l'inscription de nos actions ordinaires sur le NASDAQ Capital Market
sous le symbole "AREC". Aucune assurance ne peut être donnée que
notre application sera approuvée.

Nous sommes une entreprise en croissance émergente
ce terme est utilisé dans la Loi sur le lancement de notre entreprise, Notre entreprise en démarrage
de
2012, et à ce titre, nous avons
choisi de tirer parti de certaines sociétés publiques réduites
les exigences en matière de rapport pour le présent prospectus et les dépôts ultérieurs. voir
Facteurs de risque et prospectus
Résumé – Société en croissance émergente. ”

Investir dans nos actions ordinaires comporte des risques. Ce «risque
Facteurs ӈ la page 7.

ni
la Securities and Exchange Commission, ni aucun titre d'État
commission a approuvé ou désapprouvé ces valeurs mobilières ou
déterminé si le présent prospectus est véridique ou complet. tout
la représentation au contraire est une infraction pénale.

______________________

Offre publique
prix

$ 06h00

$ 6.000.000 $

souscription
de réduction (1)

$ 00h42

$ 420000

Produit avant
frais

$ 05h58

$ 5580000

——-

(1) En plus des
remise de souscription, nous avons convenu d'émettre au
représentant des souscripteurs garantit l'achat d'un certain nombre de
actions ordinaires équivalant à 7% du nombre total d'actions
vendus dans le cadre de l'offre, y compris les éventuelles surallocations,
et de rembourser les souscripteurs des dépenses engagées par eux.
Voir le début de «Souscription» à la page 51 de ce
Prospectus pour plus d’informations sur le souscripteur total
la rémunération.

Nous avons
a accordé aux preneurs fermes l’option pour une période de 45 jours
d’acquérir des actions ordinaires supplémentaires (jusqu’à 15,0% du
nombre d'actions ordinaires vendues dans le cadre de l'offre principale)
uniquement pour couvrir les surallocations, le cas échéant {
« Attributions excédentaires »).

la
souscripteurs s’attendent à livrer nos actions à des acheteurs dans le
le ou vers le 14 février 2019, sous réserve des conditions habituelles
conditions de fermeture.

MAXIM GROUP, LLC

Responsable de la publication


La date du présent prospectus
aussi
février
14 2019



TABLE DES MATIERES

À PROPOS DE CE PROSPECTUS

4

AUTRES INFORMATIONS

4

SOMMAIRE DU PROSPECTUS

5

FACTEURS DE RISQUE

8

MISE EN GARDE CONCERNANT L’AVENIR
déclarations

41

UTILISATION DU PRODUIT

44

capitalisation

45

INFORMATIONS CONCERNANT L'ENREGISTREMENT

46

DESCRIPTION DE LA PROPRIÉTÉ

65

PRIX DU MARCHÉ ET DIVIDENDES SUR LES CAPITAUX PROPRES DU REGISTRE ET
QUESTIONS RELATIVES AUX ACTIONNAIRES

65

RAPPORT DE GESTION ET ANALYSE DE LA SITUATION FINANCIÈRE
ET RESULTATS DES OPERATIONS

66

ADMINISTRATEURS ET DIRIGEANTS

87

COMPENSATION DES DIRIGEANTS

91

DESCRIPTION DES TITRES

93

PROPRIÉTÉ DE SÉCURITÉ DE CERTAINS PROPRIÉTAIRES BÉNÉFICIAIRES ET
GESTION

96

CERTAINES RELATIONS ET TRANSACTIONS AVEC DES PARTIES APPARENTÉES, DIRECTEUR
INDÉPENDANCE

97

SOUSCRIPTION

99

DÉTERMINATION DU PRIX D'OFFRE

102

INTÉRÊTS DES EXPERTS ET CONSEILS NOMMÉS

103

OU VOUS POUVEZ TROUVER PLUS D'INFORMATIONS

104

DIVULGATION DE LA POSITION DE LA COMMISSION SUR L’INDEMNISATION DES TITRES
ACTE RESPONSABILITÉ

104

INDEX DES ÉTATS FINANCIERS

F-1

—————————————–


Vous devez vous fier uniquement aux informations contenues dans cette
prospectus et tout prospectus écrit gratuit préparé par nous ou sur
au nom de nous ou des informations auxquelles nous vous avons référé.
Ni nous ni les souscripteurs n’avons autorisé quiconque à fournir
vous avec des informations différentes de celles contenues dans cette
prospectus et tout prospectus gratuit. Nous prenons pas
responsabilité et ne peut fournir aucune assurance quant à la
fiabilité de toute autre information que d’autres peuvent vous donner. nous
et les preneurs fermes proposent de vendre des actions ordinaires
et recherchant des offres d’achat d’actions ordinaires uniquement
juridictions où les offres et les ventes sont autorisées. Les informations
dans le présent prospectus n’est précis qu’à la date du présent
prospectus, quel que soit le moment de la remise du présent prospectus
ou toute vente d'actions ordinaires. Notre entreprise, la situation financière,
les résultats d’exploitation et les perspectives peuvent avoir changé depuis
ce jour.

Le présent prospectus contient des déclarations prospectives qui sont
sujet à un certain nombre de risques et d’incertitudes, dont beaucoup sont
hors de notre contrôle. Ces "facteurs de risque" et
Mise en garde concernant l'avenir
Déclarations ".

certain
Termes utilisés dans ce prospectus

tous
références dans le présent prospectus à:

« American
Resources Corporation, "la" société, "
"ARC", "AREC", "nous"
"Nous", "notre", "notre" ou comme
termes utilisés au présent ou par référence prospective
American Resources Corporation et ses filiales, y compris ses
filiale à part entière, Quest Energy Inc., American Resources
Corporation est l’émetteur du présent placement.

« Common
«actions ordinaires» ou «actions ordinaires»
«Actions» fait référence aux actions ordinaires de catégorie A de la société, par
valeur 0,0001 $, telle que définie dans les statuts de la société
Incorporation, en ajustement. Il n'y a pas d'autre classe d'actions ordinaires
de la société autorisée ou émise autre que les actions ordinaires de classe A
stock. Les termes «actions» et «actions» sont
utilisé de façon interchangeable.

«Extraction de charbon
permis »fait référence aux permis du Kentucky Department of
Ressources naturelles ou Département des ressources naturelles de l'Indiana {comme
le cas échéant) et comprend les permis d’extraction du charbon,
traitement, chargement par rail et stockage des déchets et / ou
suspension.

Les tonnes se réfèrent à court
tonnes, sauf indication contraire.

Nous n'avons pas
classé le charbon que nous contrôlons comme «prouvé» ou
«Probable» tel que défini dans les titres américains
et Exchange Commission Industry Guide 7, et par conséquent, ne
avoir des réserves «prouvées» ou «probables»
en vertu de cette définition et sont classés dans la catégorie Exploration
Étape "au guide de l'industrie 7. Par conséquent, tout
les références au charbon dans ce dépôt font référence à un charbon indéterminé
dépôt qui n'a pas été prouvé ou prouvé
probable
.


vous
s'appuyer uniquement sur les informations contenues dans ce document ou
à laquelle nous vous avons référé. Nous n'avons autorisé personne à
vous fournir des informations autrement. Si quelqu'un vous fournit
informations différentes ou incohérentes, vous ne devez pas vous y fier.
Nous ne faisons aucune offre de vente de ces titres dans aucun
juridiction où l'offre ou la vente n'est pas autorisée.

AUTRES INFORMATIONS

notre
l'adresse du site Web est www.americanresourcescorp.com. Nous nous attendons à faire
nos rapports périodiques et autres informations archivés ou fournis
à la Securities Exchange Commission («SEC»),
disponible gratuitement via un lien sur notre site dès que
raisonnablement réalisable après ces rapports et autres informations
sont électroniquement déposées auprès de la SEC ou fournies à celle-ci. informations
sur notre site Web ou tout autre site Web n'est pas incorporé par
référence dans, et ne fait pas partie de, cette
prospectus.

SOMMAIRE DU PROSPECTUS

Ce résumé met en évidence des informations sélectionnées contenues ailleurs dans
ce prospectus. Vous devez lire attentivement le prospectus complet,
y compris des informations sous les rubriques "Risques
Facteurs »,« Mise en garde concernant
Déclarations prospectives »et« La direction
Discussion et analyse de la situation financière et des résultats de
"Opérations" et les états financiers et les notes afférentes aux
les états financiers figurant ailleurs dans le présent prospectus.
L’information présentée dans le présent prospectus suppose une information publique.
prix d’offre de 4,00 $ par action ordinaire.

au sujet de
nous

Nous sommes
un producteur à faible coût de charbon métallurgique de haute qualité
dans l'est du Kentucky. Nous avons démarré notre entreprise le 2 octobre 2013 et
changé notre nom de Natural Gas Fueling and Conversion Inc. à
NGFC Equities, Inc. le 25 février 2015, puis a changé de nom.
de NGFC Equities, Inc. à American Resources Corporation le
17 février 2017. Le 5 janvier 2017, ARC a exécuté une action
Accord d’échange entre la société et Quest Energy Inc., une société
société privée constituée en Indiana avec des bureaux
9002 Technology Lane, Fishers IN 46038, et en raison de la
respect de diverses conditions préalables à la clôture de la
transaction, le contrôle de la société a été transféré au
Actionnaires de Quest Energy le 7 février 2017, donnant lieu à
Energy devient une filiale à 100% d'ARC. À travers ses
filiale à part entière Quest Energy, qui est un Indiana
société fondée en juin 2015, ARC a pu acquérir du charbon
mines et de traitement du charbon, situées presque toutes dans des
Est du Kentucky. Une majorité de nos nationaux et internationaux
la clientèle cible comprend les aciéries de haut fourneau et le coke
ainsi que des consommateurs internationaux de charbon métallurgique,
services publics de production d’électricité, et autres
clients.

nous
atteint la production commerciale initiale de charbon métallurgique
Septembre 2016 de notre mine McCoy Elkhorn # 15 et de notre McCoy
Elkhorn Carnegie 1 Mine En mars 2017. En octobre 2017, nous avons atteint
production commerciale de charbon thermique de notre société Deane Mining Access
Energy Mine et de notre mine à ciel ouvert Deane Mining Razorblade à
Mai 2018. Nous pensons pouvoir tirer parti des avantages
augmentations récentes aux États-Unis et référence mondiale métallurgique et
prix du charbon thermique et ont l'intention d'augmenter de manière opportuniste la
la quantité de notre production projetée qui est dirigée vers l'exportation
marché pour capter les écarts favorables entre les marchés nationaux et
prix de référence mondiaux. La société a commencé ses activités avec deux
sur quatre de ses usines de préparation internes en juillet de
2016 (usines Bevins n ° 1 et Bevins n ° 2 à McCoy Elkhorn), avec un
troisième opération commerciale d’usine de préparation en octobre 2017 {Mill
Creek Prep Plant à Deane Mining) .Poursuite aux définitions de
Alinéa a) 4) de la Securities and Exchange Commission
Industry Guide 7, notre société et ses activités commerciales sont
sont limités à être au stade de l'exploration jusqu'à ce que les réserves minérales sont
défini sur nos propriétés.

Projets en cours

quête
Energy a six subventions d'exploitation pour l'extraction et la transformation du charbon:
McCoy Elkhorn Coal LLC {faisant affaire sous le nom de McCoy Elkhorn Coal
McCoy Elkhorn), comté de Knott, LLC
(Charbon du comté de Knott), Deane Mining LLC (Deane
Mining »), ERC Mining Indiana Corporation (« ERC »),
Wyoming County Coal LLC ("Wyoming County Coal"), et
Quest Processing LLC («Quest Processing»), qui
sont situés dans l'est du Kentucky et de la Virginie-Occidentale dans le
Bassin houiller des Appalaches centrales, à l’exception de ERC Mining
Indiana Corporation, qui est située dans le sud-ouest de l’Indiana en
le bassin houiller d'Illinois. Ci-dessous une organisation et une propriété
tableau de notre société.

la
Les gisements de charbon sous le contrôle de la Société comprennent généralement:
charbon métallurgique (utilisé pour la fabrication de l'acier), charbon pulvérisé
injections ("PCI" utilisé dans le processus de fabrication de l'acier)
et du charbon bitumineux à faible teneur en soufre et à faible teneur en humidité et BTU, utilisé
variété d'utilisations dans plusieurs industries, y compris l'industrie
clients, produits spécialisés et charbon thermique utilisé pour l'électricité
génération.

Société de croissance émergente

Nous sommes
«entreprise émergente» telle que définie dans le
Loi sur le démarrage de notre entreprise (la «Loi sur l’emploi»).
Tant que nous sommes une entreprise en croissance émergente, contrairement au public
entreprises qui ne sont pas des entreprises en croissance émergentes dans le cadre d'emplois
Act, nous ne serons pas obligés de:

fournir un
rapport d'attestation du vérificateur sur l'évaluation de la direction
de l'efficacité de notre système de contrôle interne sur
rapports financiers à la Section 404 (b) de la
Loi Sarbanes-Oxley de 2002;

fournir plus que
deux ans d’états financiers vérifiés et de documents connexes
rapport de gestion et analyse de la situation financière
et résultats d'exploitation;

se conformer à toute nouvelle
exigences adoptées par le Public Company Accounting Oversight
Conseil (le «PCAOB») obligatoire cabinet d'audit obligatoire
rotation ou complément au rapport de l'auditeur dans lequel
le vérificateur serait tenu de fournir des informations supplémentaires sur
l'audit et les états financiers de l'émetteur;

fournir certains
divulgation concernant la rémunération des dirigeants requise
des sociétés ouvertes ou des votes consultatifs des actionnaires sur
Rémunération des dirigeants requise par Dodd-Frank Wall Street
Loi de réforme et de protection du consommateur (Dodd-Frank
Loi « ); ou

obtenir un actionnaire
approbation de tout paiement en or de parachute doré non antérieurement
approuvé.

Nous allons
cesser d'être une société en croissance émergente au plus tôt
de:

le dernier jour du
exercice financier dans lequel nous avons 1,0 milliard de dollars ou plus en annuel
Le chiffre d'affaires;

la date à laquelle
nous devenons un «gros déposant accéléré» (le
fin d’année sur laquelle la valeur marchande totale de nos actions ordinaires
les titres détenus par des sociétés non affiliées représentent au moins 700 millions de dollars, comme le nôtre
dernier trimestre terminé);

la date à laquelle
nous émettons plus de 1,0 milliard de dollars de dette non convertible sur un
période de trois ans; ou

le dernier jour du
exercice financier suivant le cinquième anniversaire de notre premier public
offre.

en
En outre, l’article 107 de la loi sur l’emploi prévoit que cette nouvelle
une entreprise en croissance peut profiter d'une période de transition prolongée
l’alinéa 7 (a) (2) (B) de la loi intitulée Securities Act of 1933, ainsi que
modifiant (la «loi sur les valeurs mobilières») le respect des
normes comptables révisées, mais nous avons l’intention de choisir irrévocablement
de la période de transition prolongée et, par conséquent, nous allons
adopter des normes comptables nouvelles ou révisées aux dates pertinentes
l’adoption de telles normes est requise pour d’autres services publics.
entreprises.

Total des actions ordinaires offertes par la société

Jusqu'à 1150000 actions ordinaires de classe A, en supposant que
L’option de surallocation de souscripteur est entièrement
Exercice.

Utilisation du produit

Nous nous attendons à recevoir environ $6000000
du produit brut basé sur la
prix d'offre de 6,00 $
par action et après déduction de la souscription
réduction de 420 $, 000.
nous nous attendons à recevoir environ5580000.
Si les preneurs fermes exercent pleinement leur droit d’achat
actions ordinaires supplémentaires, nous estimons que nous recevrons
produit brut de $6900000
de la vente d'actions ordinaires et même le produit de
4,278 $, 000
après déduction de 483 $, 000
pour les remises de souscription et les commissions.
La Société utilisera le produit de cette offre
financer la croissance organique et la croissance acquisitive ainsi que les autres utilisations décrites
dans la section «Emploi du produit». La société utilisera
le produit, entre autres, d’initier la production de charbon sur
certains permis que la Société possède et agissent lors de certaines acquisitions
opportunités, les deux sont à proximité de la nôtre
les opérations en cours et celles qui créeraient une autre
Hub à partir duquel nous pouvons améliorer l'expansion de l'entreprise. nous
n’ont pris aucune décision d’investissement définitive concernant l’un des
ces projets potentiels et nous ne pouvons pas actuellement attribuer des
pourcentages du produit net que nous pouvons utiliser aux fins
décrit ci-dessus.

Veuillez lire «Utilisation du produit».

Politique de dividende

Bien que nous n’ayons versé aucun dividende sur nos actions ordinaires depuis le nôtre
notre objectif à plus long terme est de verser des dividendes afin de
améliorer les rendements pour les actionnaires lorsque le conseil d'administration
telle action que dans le meilleur intérêt de ses actionnaires. S'il vous plaît
lire «Politique de dividende».

Cotation et symbole commercial

Actuellement, notre action est cotée sur les marchés hors cote OTC Rose
sous le symbole «AREC». Nous avons demandé un
cotation sur le NASDAQ Capital Market sous le symbole
"AREC".

Facteurs de risque

Vous devez lire attentivement et prendre en compte les informations fournies
sous la rubrique «Facteurs de risque» et tout le reste
informations figurant dans le présent prospectus avant de décider d’investir
dans notre stock commun.

la
L’information ci-dessus ne comprend pas 4 000 000 d’actions de catégorie A
Actions ordinaires réservées pour émission à un employé
Régime d’options d’achat d’actions, dont 636 830 sont émis à compter du
date de ce document.

FACTEURS DE RISQUE

Investir dans nos actions ordinaires comporte des risques. Tu devrais faire attention
examiner les informations contenues dans le présent prospectus, y compris les
abordé sous «Mise en garde concernant
Déclarations prospectives »et les risques suivants avant le
prendre une décision d'investissement. Le cours de notre commune
les actions pourraient baisser et notre capacité à verser des dividendes pourrait être réduite
l’un de ces risques et vous risquez de perdre tout ou partie de votre
investissement.

Risque associé aux petites entreprises et à la liquidité
risques

En tant que société de démarrage ou de développement, notre entreprise et
les perspectives sont difficiles à évaluer car nous en avons un très limité
historique opérationnel et notre modèle commercial évolue, un investissement
en nous est considéré comme un investissement à haut risque par lequel vous pourriez perdre
votre investissement entier.

Nous avons
opérations récemment lancées et, par conséquent, nous sommes considérés comme un
Société «en démarrage» ou «en phase de développement».
Nous avons eu des revenus limités de la vente de charbon de la nôtre
opérations minières. Nous allons engager des dépenses importantes afin de
mettre en œuvre notre plan d'affaires. En tant qu’investisseur, vous devez être conscient de
les difficultés, retards et dépenses normalement rencontrés par un
entreprise en phase de développement, dont beaucoup dépassent la nôtre
le contrôle, y compris les dépenses de développement imprévues, et
frais de publicité et de marketing. Nous ne pouvons vous assurer que notre
Le plan d'affaires proposé se matérialisera ou sera couronné de succès, ou
que nous pourrons jamais fonctionner de manière rentable. Si nous ne pouvons pas
fonctionner de manière rentable, vous pourriez perdre toute votre vie
investissement.

Nous avons des actifs limités, des pertes d’exploitation et des
sources de revenus actuelles limitées.

nous
avoir des actifs limités et des revenus limités depuis notre création en
2015. Depuis notre création, nous avons un rapport annuel
pertes d'exploitation. À la fin des 9 mois
le 30 septembre 2018, notre perte nette d’exploitation non auditée était de
8.869.858 $. Nous avons récemment commencé à générer
revenus et ces revenus sont concentrés parmi un petit nombre de
clients et un petit nombre d'opérations. Nous pouvons fournir aucun
l’assurance que nos actifs actuels ou futurs produiront des
revenus substantiels pour nos actionnaires, ou que ces entreprises
fonctionnera sur une base rentable.

Nos résultats d’exploitation n’ont aucune incidence sur la rentabilité et nous
peut ne pas être en mesure d'atteindre la rentabilité en cours
avant.

nous
ont subi des pertes nettes chaque trimestre depuis notre création. Nous attendons
que nous continuerons à subir des pertes nettes pendant la période prévisible
avenir. Nous pourrions subir des pertes importantes à l’avenir pour un certain nombre de
raisons, y compris les autres risques décrits dans le présent prospectus,
et nous pouvons rencontrer des dépenses imprévues, des difficultés,
complications, retards et autres événements inconnus. En conséquence, nous pouvons
ne pas être en mesure d’atteindre ou de maintenir la rentabilité. Notre métier c'est
développement précoce, marketing,
et vente de notre charbon. Rien ne garantit que même si nous faisons
mettre en œuvre avec succès notre plan d’affaires, que nous pourrons
réduire nos pertes. De plus, comme nous sommes en développement
stade, nous nous attendons à ce que les pertes nettes et le fonds de roulement
carence continuera. Si nous engageons des dépenses supplémentaires importantes
pertes d’exploitation, le cours de nos actions pourrait baisser, peut-être
de manière significative.

Nous n’avons pas encore atteint de cash-flow positif et, compte tenu de nos prévisions
besoins de financement, notre capacité à générer un cash-flow positif est
Incertain.

nous
ont généré des flux de trésorerie négatifs non audités provenant des activités d’exploitation de
4 076 157 $ pour les 9 mois se terminant le 30 septembre 2018. Nous avons
anticiper que nous continuerons à avoir des flux de trésorerie négatifs de
d’exploitation et d’investissement dans un avenir prévisible, car nous
s’attendre à augmenter les dépenses de développement de l’extraction du charbon et à
dépenses en immobilisations importantes dans nos efforts pour commencer l'exploitation minière
opérations sur nos différents sites de permis. Notre entreprise sera également à
fois besoin de fonds de roulement importants pour soutenir notre
croissance, surtout que nous acquérons des infrastructures et des équipements
soutenir nos nouvelles opérations minières. Une incapacité à générer
flux de trésorerie positif dans un avenir prévisible peut avoir un effet défavorable
notre capacité à mobiliser les capitaux nécessaires à notre entreprise dans des conditions raisonnables.
termes, diminuent la volonté du fournisseur ou du client de
transactions avec nous et avoir d’autres effets néfastes qui peuvent
diminuer notre viabilité à long terme. Il ne peut y avoir aucune assurance que nous allons
réaliser des flux de trésorerie positifs dans un avenir proche.

Nous aurons peut-être besoin d’un financement supplémentaire, qui ne sera peut-être pas suffisant.
disponible à des conditions acceptables ou pas du tout, et il existe un
doute important quant à notre capacité à poursuivre nos activités.
Si nous ne pouvons pas accéder à un financement supplémentaire quand nous en avons besoin et sur
conditions acceptables, nos activités, nos perspectives, notre situation financière,
les résultats opérationnels et la capacité à poursuivre son exploitation pourraient
sans être affecté négativement.

notre
plan d'affaires axé sur la croissance pour extraire et vendre le charbon de notre
divers permis et installations nécessiteront d'importants efforts continus
investissement de capital. Notre comptabilité publique indépendante enregistrée
société pour l’exercice clos les 31 décembre 2016 et 31 décembre
2017, a inclus un paragraphe explicatif dans leur opinion selon laquelle
accompagne nos états financiers consolidés audités des et
pour les années indiquant notre position de liquidité actuelle
soulève des doutes substantiels sur notre capacité à continuer sur notre lancée
préoccupation. Si nous ne pouvons pas améliorer notre situation de liquidité, nous pouvons
ne pas être en mesure de poursuivre son activité. L'accompagnement
les états financiers consolidés ne comprennent aucun ajustement
cela pourrait entraîner si nous sommes incapables de poursuivre notre activité
et, par conséquent, être tenu de réaliser nos actifs et de décharger nos
passifs autres que le cours normal des affaires qui pourraient
faire en sorte que les investisseurs subissent la perte totale ou partielle
de leur investissement. Nous ne pouvons être certains de ce financement supplémentaire
sera disponible pour nous à des conditions favorables en cas de besoin, ou à
tous, d'autant plus que nous n'avons pas de crédit engagé
établissement avec un gouvernement ou une institution financière. Si nous ne pouvons pas
obtenir un financement supplémentaire lorsque nous en avons besoin
à nous, nos activités, perspectives, situation financière, exploitation
les résultats et la capacité à poursuivre son exploitation pourraient être
affecté négativement.

Nous n'avons aucune facilité de crédit bancaire existante. Notre capacité à
obtenir un tel financement peut être limité et si nous sommes incapables d'obtenir
ce financement, notre rentabilité peut être défavorable
Affecté.

nous
ne pas avoir de facilité de crédit bancaire. Notre capacité à
obtenir ce financement peut être limité comme les banques et autres institutions financières.
institutions peuvent être réticentes à accorder du crédit aux entreprises qu’elles
comme manquant d’histoires d’exploitation prolongées, une industrie qui
peut être politiquement indésirable, et des informations limitées relatives aux
les revenus et les coûts sur lesquels ils peuvent évaluer les mérites et
risques d’une telle extension de crédit. Notre incapacité à sécuriser la banque
facilités de crédit (ou toute autre forme d’argent / d’injection de liquide) peuvent
avoir un effet défavorable sur nos résultats d’exploitation. En raison de notre
antécédents d’exploitation et actifs limités, et le décalage souvent
les opérations commerciales existantes et la rentabilité,
en l'absence d'un tel financement bancaire, nous pourrions être obligés de nous en prévaloir
uniquement sur les revenus générés par nos activités commerciales afin
soutenir notre société, dont les revenus peuvent ne pas être suffisants pour
répondre à nos dépenses de fonctionnement et d’administration. Si nous ne l'avons pas
suffisamment de trésorerie pour faire face à nos dépenses, que ce soit des revenus ou des
crédit, nous pouvons avoir une activité restrictive ou cesser
opérations.



Nous avons identifié plusieurs faiblesses matérielles dans notre système interne.
contrôle sur les rapports financiers. Si notre remédiation de ces
faiblesses matérielles ne sont pas efficaces, ou si nous éprouvons
faiblesses matérielles supplémentaires à l’avenir ou ne parviennent pas à
maintenir un système efficace de contrôle interne des finances
à l'avenir, nous risquons de ne pas être en mesure de fournir des informations exactes ou opportunes.
signaler notre situation financière ou nos résultats d’exploitation qui pourraient
nuire à la confiance des investisseurs en nous et, par conséquent, la
valeur de nos titres.

en
lien avec l’audit de nos états financiers débutant le
page F-1, la société a identifié plusieurs faiblesses importantes dans son
contrôle interne à l'égard de l'information financière. La faiblesse matérielle est également
définie comme une déficience, ou une combinaison de carences, dans
contrôle interne à l’égard de l’information financière, de sorte qu’il existe une
une possibilité raisonnable qu’une inexactitude importante de la
Les états financiers de la société ne seront pas empêchés ou
détectés en temps opportun. Ci-dessous les faiblesses matérielles
identifiés:

Nombre insuffisant
du personnel établissant les rapports comptables et financiers
fonctions; et

Manque de temps
réconciliations;

ni
nous ni notre cabinet d’expert-comptable enregistré indépendant n’a
effectué une évaluation de notre contrôle interne sur les finances
conformément à l’article 404 de la loi Sarbanes-Oxley.
À la lumière des faiblesses matérielles identifiées, nous avons
croire qu'il est possible que d'autres faiblesses matérielles et
des déficiences de contrôle peuvent avoir été identifiées si une telle évaluation
avait été effectuée.

la
La société travaille à remédier aux faiblesses matérielles, a pris
mesures visant à améliorer l’environnement de contrôle interne et prévoit
prendre des mesures supplémentaires pour remédier aux faiblesses matérielles.
Plus précisément, nous sommes:

cherchant techniquement
un personnel compétent et expérimenté;

conception
contrôles supplémentaires concernant l'identification, la documentation et
application des directives techniques de comptabilité concernant
rapprochement des anomalies de compte.

la
les actions que nous prenons sont soumises à la haute direction en cours
examen ainsi que la surveillance par le comité de vérification. Bien que nous prévoyions de
terminer ce processus de remédiation le plus rapidement possible, nous ne pouvons pas
à ce moment, estimez combien de temps cela va prendre et nos efforts peuvent
ne pas réussir à remédier à ces faiblesses matérielles. en
En outre, nous engagerons des coûts supplémentaires pour améliorer notre fonctionnement interne.
contrôle sur les rapports financiers. Si nous sommes incapables de réussir
remédier à ces faiblesses matérielles ou si nous identifions des
faiblesses importantes, il est possible que nous ne détections pas les erreurs à temps.
Cela pourrait nuire à nos résultats d'exploitation, nous faire échouer notre rencontre
Obligations d'information de la SEC ou inscription au NASDAQ Capital Market
exigences en temps opportun, nuisent à notre réputation,
cause our stock price to decline or result in inaccurate financial
reporting or material misstatements in our annual or interim
financial statements.

In
addition to the remediation efforts related to the material
weaknesses described above, we are in the process of designing and
implementing the internal control over financial reporting required
to comply with Section 404 of the Sarbanes Oxley Act. This process
will be time consuming, costly and complicated. If during the
evaluation and testing process, we identify one or more other
material weaknesses in our internal control over financial
reporting, our management will be unable to assert that our
internal control over financial reporting is effective. Even if our
management concludes that our internal control over financial
reporting is effective, our independent registered public
accounting firm may conclude that there are material weaknesses
with respect to our internal controls or the level at which our
internal controls are documented, designed, implemented or
reviewed. If we are unable to assert that our internal control over
financial reporting is effective, or when required in the future,
if our independent registered public accounting firm is unable to
express an opinion as to the effectiveness of our internal control
over financial reporting, investors may lose confidence in the
accuracy and completeness of our financial reports and the market
price of our securities could be adversely affected, and we could
become subject to investigations by the stock exchange on which our
securities are listed, the SEC, or other regulatory authorities,
which could require additional financial and management
resources.


We have never declared or paid a cash dividend on our common shares
nor will we in the foreseeable future.

You
will not receive dividend income from an investment in the shares
and as a result, the purchase of the shares should only be made by
an investor who does not expect a dividend return on the
investment.

Our Series B
preferred stock, however, received an 8.0% annual dividend, of
which an accrued amount is recorded of $104,157, as of September
30, 2018, and continued to accrue to the Series B preferred stock
holder at the same rate until all Series B preferred stock was
converted to common stock on November 7, 2018. On November 8, 2018,
we filed an amendment to the company’s Articles of
Incorporation that eliminated the Series B preferred stock and
created a new Series C preferred stock. The Series C preferred
stock accrues a 10.0% annual dividend, compounded annually, of
which no amount has been recorded yet as being
accrued.

With
the potential exception of the Series C preferred stock dividend
referenced above, we currently intend to retain future earnings, if
any, to finance the operation and expansion of our business.
Accordingly, investors who anticipate the need for immediate income
from their investments by way of cash dividends should refrain from
purchasing any of our securities. As we do not intend to declare
dividends in the future, you may never see a return on your
investment and you indeed may lose your entire
investment.

We will incur professional fees in connection with being a
reporting company under the Securities Exchange Act of 1934, as
amended.

Our
Company is subject to the reporting requirements of the 1934 Act
and as such, we are required to file 10-Ks, 10-Qs and 8-Ks and
other reports with the Securities and Exchange Commission. We will
incur professional fees (i.e., attorney, auditors and filing
agents) in connection with the preparation and filing of such
reports and we currently anticipate such costs to range from
$25,000 to $50,000 per year. If we are unable to file such reports,
we will be delinquent in our filings which could adversely affect
the marketability of the Shares.

The failure to comply with the internal control evaluation and
certification requirements of Section 404 of Sarbanes-Oxley Act
could harm our operations and our ability to comply with our
periodic reporting obligations.

As a
reporting company under the 1934 Act, we are required to comply
with the internal control evaluation and certification requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. We are in the
process of determining whether our existing internal controls over
financial reporting systems are compliant with Section 404. This
process may divert internal resources and will take a significant
amount of time, effort and expense to complete. If it is determined
that we are not in compliance with Section 404, we may be required
to implement new internal control procedures and reevaluate our
financial reporting. We may experience higher than anticipated
operating expenses as well as outside auditor fees during the
implementation of these changes and thereafter. Further, we may
need to hire additional qualified personnel in order for us to be
compliant with Section 404. If we are unable to implement these
changes effectively or efficiently, it could harm our operations,
financial reporting or financial results and could result in our
being unable to obtain an unqualified report on internal controls
from our independent auditors, which could adversely affect our
ability to comply with our periodic reporting obligations under the
1934 Act.

Future sales of restricted shares could decrease the price a
willing buyer would pay for shares of our common stock, could cause
our price to decline and could impair our ability to raise
capital.

Future
sales of common stock by existing shareholders or a new issuance by
the Company under exemptions from registration or through a
subsequent registered offering could materially adversely affect
the market price of our common stock and could materially impair
our future ability to raise capital through an offering of equity
securities. We are unable to predict the effect, if any, that
market sales of these shares, or the availability of these shares
for future sale, will have on the prevailing market price of our
common stock at any given time.

You may not be able to resell any shares you
purchased.

There
is an extremely limited trading market for our common stock at
present. There is no assurance that any trading market will be
present. This means that it may be hard or impossible for you to
find a willing buyer for your shares should you decide to sell them
in the future.

Risks Related to Our Business

The majority of our properties have not yet been developed into
producing coal mines and, if we experience any development delays
or cost increases, our business, financial condition, and results
of operations could be adversely affected.

We have
not yet completed our development plan and do not expect to have
full annual production from all of our properties until sometime in
the future. We expect to incur significant capital expenditures
until we have completed the development of our properties. In
addition, the development of our properties involves numerous
regulatory, environmental, political and legal uncertainties that
are beyond our control and that may cause delays in, or increase
the costs associated with, their completion. Accordingly, we may
not be able to complete the development of the properties on
schedule, at the budgeted cost or at all, and any delays beyond the
expected development periods or increased costs above those
expected to be incurred could have a material adverse effect on our
business, financial condition, results of operations, cash flows
and ability to pay dividends to our common
stockholders.

In
connection with the development of our properties, we may encounter
unexpected difficulties, including the following:

shortages of
materials or delays in delivery of materials;

unexpected
operational events;

facility or
equipment malfunctions or breakdowns;

unusual or
unexpected adverse geological conditions;

failure to obtain,
or delays in obtaining, all necessary governmental and third-party
rights-of-way, easements, permits, licenses and approvals for the
development, construction and operation of one or more of our
properties;

weather conditions
and other catastrophes, such as explosions, fires, floods and
accidents;

difficulties in
attracting a sufficient skilled and unskilled workforce, increases
in the level of labor costs and the existence of any labor
disputes; and

local and general
economic and infrastructure conditions.

If we
are unable to complete or are substantially delayed in completing
the development of any of our properties, our business, financial
condition, results of operations cash flows and ability to pay
dividends to our common stockholders could be adversely
affected.

Because we have limited operating history and have not yet
generated significant revenues or operating cash flows, you may
have difficulty evaluating our ability to successfully implement
our business strategy.

Because
of our limited operating history, the operating performance of our
properties and our business strategy have not yet been proven. As a
result, our historical financial statements do not provide a
meaningful basis to evaluate our operations or our ability to
achieve our business strategy. Therefore, it may be difficult for
you to evaluate our business and results of operations to date and
assess our future prospects.

In
addition, we may encounter risks and difficulties experienced by
companies whose performance is dependent upon newly-constructed or
newly-acquired assets, such as any one of our properties failing to
perform as expected, having higher than expected operating costs,
having lower than expected customer revenues, or suffering
equipment breakdown, failures or operational errors. We may be less
successful in achieving a consistent operating level capable of
generating cash flows from our operations as compared to a company
whose major assets have had longer operating histories. In
addition, we may be less equipped to identify and address operating
risks and hazards in the conduct of our business than those
companies whose major assets have had longer operating
histories.

We have limited operating history and our future performance is
uncertain.

We are
an early stage enterprise and will continue to be so until
commencement of substantial production from our coal properties. We
have only recently commenced limited production at one of our
properties. We have generated substantial net losses and negative
cash flows from operating activities since our inception and expect
to continue to incur substantial net losses as we continue our mine
development program. We face challenges and uncertainties in
financial planning as a result of the unavailability of historical
data and uncertainties regarding the nature, scope and results of
our future activities. New companies must develop successful
business relationships, establish operating procedures, hire staff,
install management information and other systems, establish
facilities and obtain licenses, as well as take other measures
necessary to conduct their intended business activities. We may not
be successful in implementing our business strategies or in
completing the development of the infrastructure necessary to
conduct our business as planned. In the event that one or more of
our mine development programs are not completed or are delayed or
terminated, our operating results will be adversely affected and
our operations will differ materially from the activities described
in this prospectus. As a result of industry factors or factors
relating specifically to us, we may have to change our methods of
conducting business, which may cause a material adverse effect on
our results of operations, financial condition and ability to pay
dividends to our common stockholders.


We will likely depend on a limited number of customers for a
significant portion of our revenues.

We will
likely depend on a limited number of customers for a significant
portion of our revenues. The failure to obtain additional customers
or the loss of all or a portion of the revenues attributable to any
customer as a result of competition, creditworthiness, inability to
negotiate extensions or replacement of contracts or otherwise,
could have a material adverse effect on our business, financial
condition, results of operations, cash flows and ability to pay
dividends to our common stockholders.

We expect that our customer base will be highly dependent on a
small number of customers.

The
majority of all of the coal that we produce, or plan to produce, is
sold to steel producers. Therefore, demand for our coal will be
highly correlated to the steel industry. The steel industry’s
demand for metallurgical coal is affected by a number of factors
including the cyclical nature of that industry’s business,
technological developments in the steel-making process and the
availability of substitutes for steel such as aluminum, composites
and plastics. A significant reduction in the demand for steel
products would reduce the demand for metallurgical coal, which
would have a material adverse effect upon our business, cash flows
and results of operations. Similarly, if less expensive ingredients
could be used in substitution for metallurgical coal in the
integrated steel mill process, the demand for metallurgical coal
would materially decrease, which would also materially adversely
affect demand for our metallurgical coal.

We do not expect to enter into long-term sales contracts for our
coal and as a result we will be exposed to fluctuations in market
pricing.

Sales
commitments for our coal typically are not long-term in nature and
are generally no longer than one year in duration. Many coal
transactions in the U.S. are done on a calendar year basis, where
both prices and volumes are fixed in the third and fourth quarter
for the following calendar year. Globally the market is evolving to
shorter term pricing. Some annual contracts have shifted to
quarterly contracts and growing volumes are being sold on an
indexed basis, where prices are determined by averaging the leading
spot indexes reported in the market. As a result, once we commence
operations and enter into agreements with customers, we will be
subject to fluctuations in market pricing. We will not be protected
from oversupply or market conditions where we cannot sell our coal
at economic prices. Metallurgical coal has been an extremely
volatile commodity over the past ten years and prices may become
volatile again in the future given the recent rapid increase. There
can be no assurances we will be able to mitigate such conditions as
they arise. Any sustained failure to be able to market our coal
during such periods would have a material adverse effect on our
business, results of operations, cash flows and ability to pay
dividends to our common stockholders.

Product alternatives may reduce demand for our
products.

The
majority of our coal production in the near term will be comprised
of metallurgical coal or pulverized coal injection (PCI), both
which typically command a price premium over the majority of other
forms of coal because of its use in blast furnaces for steel
production. Metallurgical coal has specific physical and chemical
properties, which are necessary for efficient blast furnace
operation. Steel producers are continually investigating
alternative steel production technologies with a view to reducing
production costs. The steel industry has increased utilization of
electric arc furnaces or pulverized coal injection processes, which
reduce or eliminate the use of furnace coke, an intermediate
product produced from metallurgical coal and, in turn, generally
decreases the demand for metallurgical coal. Many alternative
technologies are designed to use lower quality coals or other
sources of carbon instead of higher cost high-quality metallurgical
coal. While conventional blast furnace technology has been the most
economic large-scale steel production technology for a number of
years, and emergent technologies typically take many years to
commercialize, there can be no assurance that over the longer term
competitive technologies not reliant on metallurgical coal could
emerge which could reduce the demand and price premiums for
metallurgical coal.

Moreover, we may
produce and market other coal products, such as thermal coal, which
are also subject to alternative competition. Alternative
technologies are continually being investigated and developed in
order to reduce production costs or minimize environmental or
social impact. If competitive technologies emerge that use other
materials in place of our products, demand and price for our
products might fall.

We face uncertainties in estimating our economically recoverable
coal deposits, and inaccuracies in our estimates could result in
lower than expected revenues, higher than expected costs and
decreased profitability.

Coal is
economically recoverable when the price at which coal can be sold
exceeds the costs and expenses of mining and selling the coal.
Forecasts of our future performance are based on, among other
things, estimates of our recoverable coal deposits. We base our
coal deposit information on geologic data, coal ownership
information and current and proposed mine plans. We have not
independently verified any of the coal deposit information,
including coal qualities within the coal deposit areas, coal
heights, and deposit boundaries, and our information comes
primarily from previously prepared reports by prior management and
other third parties. Coal deposit estimates are periodically
updated to reflect past coal production, if any, new drilling
information, other geologic or mining data, and changes to coal
price expectations or the cost of production and sale. There are
numerous uncertainties inherent in estimating quantities and
qualities of coal and costs to mine coal, including many factors
beyond our control. As a result, estimates of economically
recoverable coal deposits are by their nature uncertain. Some of
the factors and assumptions that can impact economically
recoverable coal deposits estimates include:

geologic and mining
conditions;

historical
production from the area compared with production from other
producing areas;

the assumed effects
of environmental and other regulations and taxes by governmental
agencies;

our ability to
obtain, maintain and renew all required permits;

future improvements
in mining technology;

assumptions related
to future prices; and

future operating
costs, including the cost of materials, and capital
expenditures.


Each of
the factors that impacts coal deposit estimation may vary
considerably from the assumptions used in estimating such deposits.
For these reasons, estimates of coal deposits may vary
substantially. Actual production, revenues and expenditures with
respect to our future coal deposits will vary from estimates, and
these variances may be material. As a result, our estimates may not
accurately reflect our actual future coal deposits.

Our inability to acquire additional coal deposits that are
economically recoverable may have a material adverse effect on our
future profitability.

Our
profitability depends substantially on our ability to mine, in a
cost-effective manner, coal deposits that possess the quality
characteristics that prospective customers desire. Because our coal
deposits will decline as we mine our coal, our future profitability
depends upon our ability to acquire additional coal deposits that
are economically recoverable to replace the coal deposits we will
produce. If we fail to acquire or develop sufficient additional
coal deposits over the long term to replace the coal deposits
depleted by our production, our existing deposits could eventually
be exhausted.

The status of our idled mines, our lack of operating history and
multiple coal quality levels and inability to send test shipments
to our prospective customers may negatively impact our ability to
develop our initial customer base.

As a
company with limited operating history and several idled,
non-producing mines, our potential customer base is also uncertain.
Our ability to commence operations and begin shipments to customers
will be impacted by any potential mine rehabilitation work or
start-up timing and costs.

Deterioration in the global economic conditions in any of the
industries in which prospective customers operate, a worldwide
financial downturn, such as the 2008-2009 financial crisis, or
negative credit market conditions could have a material adverse
effect on our business, financial condition, results of operations,
cash flows and ability to pay dividends to our common
stockholders.

Economic conditions
in the industries in which most of our prospective customers
operate, such as steelmaking and electric power generation,
substantially deteriorated in recent years and reduced the demand
for coal. According to the US Energy Information Agency
(“EIA”), total thermal and metallurgical coal
production in the Central Appalachian Basin is expected to
gradually decline. A deterioration of economic conditions in our
prospective customers’ industries could cause a decline in
demand for and production of metallurgical coal. Renewed or
continued weakness in the economic conditions of any of the
industries served by prospective customers could have a material
adverse effect on our business, financial condition, results of
operations, cash flows and ability to pay dividends to our common
stockholders. For example:

demand for
metallurgical coal depends on domestic and foreign steel demand,
which if weakened would negatively impact our revenues, margins and
profitability;

the tightening of
credit or lack of credit availability to prospective customers
could adversely affect our ability to collect our trade
receivables; and

our ability to
access the capital markets may be restricted at a time when we
intend to raise capital for our business, including for capital
improvements and exploration and/or development of coal
deposits.

Prices for coal are volatile and can fluctuate widely based upon a
number of factors beyond our control, including oversupply relative
to the demand available for our coal and weather. A substantial or
extended decline in the prices we receive for our coal could
adversely affect our business, results of operations, financial
condition, cash flows and ability to pay dividends to our common
stockholders.

Our
financial results will be significantly affected by the prices we
receive for our coal and depend, in part, on the margins that we
will receive on sales of our coal. Our margins will reflect the
price we receive for our coal over our cost of producing and
transporting our coal. Prices and quantities under U.S. domestic
metallurgical coal sales contracts are generally based on
expectations of the next year’s coal prices at the time the
contract is entered into, renewed, extended or re-opened, Pricing
in the global seaborne market is typically negotiated quarterly,
however, increasingly the market is moving towards shorter term
pricing models. The expectation of future prices for coal depends
upon many factors beyond our control, including the
following:

the market price
for coal;

overall domestic
and global economic conditions, including the supply of and demand
for domestic and foreign coal, coke and steel;

the consumption
pattern of industrial consumers, electricity generators and
residential users;

weather conditions
in our markets that affect the demand for thermal coal or that
affect the ability to produce metallurgical coal;

competition from
other coal suppliers;

technological
advances affecting energy consumption;

the costs,
availability and capacity of transportation
infrastructure;

the impact of
domestic and foreign governmental laws and regulations, including
environmental and climate change regulations and regulations
affecting the coal mining industry, and delays in the receipt of,
failure to receive, failure to maintain or revocation of necessary
governmental permits; and

increased
utilization by the steel industry of electric arc furnaces or
pulverized coal injection processes, which reduce or eliminate the
use of furnace coke, an intermediate product produced from
metallurgical coal, and generally decrease the demand for
metallurgical coal.

Metallurgical coal
has been an extremely volatile commodity over the past 10 years, as
steel production growth in Asia underpinned demand growth, while
the market experienced two supply shocks from flooding events in
Australia’s Queensland and a third in 2016 caused by a
reduction in Chinese domestic production. The first severe flooding
sent global metallurgical coal prices from $98 per MT in 2007 to
$305 per MT in 2008. A second round of flooding disrupted the
Australian supply chain in 2011, and prices jumped from $129 per MT
to $330 per MT. The temporary supply disruptions caused major price
spikes, which, while short-lived, resulted in a period of elevated
prices, before declining once supply normalized, and production
growth that high prices incentivized eventually came online. The
slow decline in global prices since 2011 forced high-cost U.S.
suppliers who could not compete in the export market to reduce
output. Any decline in the prices of and demand for coal could have
a material adverse effect on our business, financial condition,
results of operations, cash flows and ability to pay dividends to
our common stockholders.

Increased competition or a loss of our competitive position could
adversely affect sales of, or prices for, our coal, which could
impair our profitability. In addition, foreign currency
fluctuations could adversely affect the competitiveness of our coal
abroad.

We will
compete with other producers primarily on the basis of coal
quality, delivered costs to the customer and reliability of supply.
We expect to compete primarily with U.S. coal producers and with
some Canadian coal producers for sales of metallurgical coal to
domestic steel producers and, to a lesser extent, thermal coal to
electric power generators. We also expect to compete with both
domestic and foreign coal producers for sales of metallurgical coal
in international markets. Certain of these coal producers may have
greater financial resources and larger coal deposit bases than we
do. We expect to sell coal to the seaborne metallurgical coal
market, which is significantly affected by international demand and
competition.

We
cannot assure you that competition from other producers will not
adversely affect us in the future. The coal industry has
experienced consolidation over the past 10 years, including
consolidation among some of our major competitors. We cannot assure
you that the result of current or further consolidation in the coal
industry, or the reorganization through bankruptcy of competitors
with large legacy liabilities, will not adversely affect us. la
number of our competitors have idled production over the last year
in light of lower metallurgical coal prices in 2015 and the first
half of 2016. The recent increase in coal prices in 2017 and 2018
could encourage existing producers to expand capacity or could
encourage new producers to enter the market.

In
addition, we face competition from foreign producers that sell
their coal in the export market. Potential changes to international
trade agreements, trade concessions, foreign currency fluctuations
or other political and economic arrangements may benefit coal
producers operating in countries other than the United States.
Additionally, North American steel producers face competition from
foreign steel producers, which could adversely impact the financial
condition and business of our prospective customers. We cannot
assure you that we will be able to compete on the basis of price or
other factors with companies that in the future may benefit from
favorable foreign trade policies or other arrangements. Coal is
sold internationally in U.S. dollars and, as a result, general
economic conditions in foreign markets and changes in foreign
currency exchange rates may provide our foreign competitors with a
competitive advantage. If our competitors’ currencies decline
against the U.S. dollar or against our prospective foreign
customers’ local currencies, those competitors may be able to
offer lower prices for coal to prospective customers. Furthermore,
if the currencies of our prospective overseas customers were to
significantly decline in value in comparison to the U.S. dollar,
those prospective customers may seek decreased prices for the coal
we sell to them. Consequently, currency fluctuations could
adversely affect the competitiveness of our coal in international
markets, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.

Our business involves many hazards and operating risks, some of
which may not be fully covered by insurance. The occurrence of a
significant accident or other event that is not fully insured could
adversely affect our business, results of operations, financial
condition, cash flows and ability to pay dividends to our common
stockholders.

Our
mining operations, including our preparation and transportation
infrastructure, are subject to many hazards and operating risks. In
particular, underground mining and related processing activities
present inherent risks of injury to persons and damage to property
and equipment. Our mines are subject to a number of operating risks
that could disrupt operations, decrease production and increase the
cost of mining for varying lengths of time, thereby adversely
affecting our operating results. In addition, if coal production
declines, we may not be able to produce sufficient amounts of coal
to deliver under future sales contracts. Our inability to satisfy
contractual obligations could result in prospective customers
initiating claims against us. The operating risks that may have a
significant impact on our future coal operations
include:

variations in
thickness of the layer, or seam, of coal;

adverse geologic
conditions, including amounts of rock and other natural materials
intruding into the coal seam, that could affect the stability of
the roof and the side walls of the mine;

environmental
hazards;

mining and
processing equipment failures and unexpected maintenance
problems;

fires or
explosions, including as a result of methane, coal, coal dust or
other explosive materials, or other accidents;

inclement or
hazardous weather conditions and natural disasters or other force
majeure events;

seismic activities,
ground failures, rock bursts or structural cave-ins or
slides;

delays in moving
our mining equipment;

railroad delays or
derailments;

security breaches
or terroristic acts; and

other hazards or
occurrences that could also result in personal injury and loss of
life, pollution and suspension of operations.

Any of
these risks could adversely affect our ability to conduct
operations or result in substantial loss to us as a result of
claims for:

personal injury or
loss of life;

damage to and
destruction of property, natural resources and equipment, including
our coal properties and our coal production or transportation
facilities;

pollution,
contamination and other environmental damage to our properties or
the properties of others;

potential legal
liability and monetary losses;

regulatory
investigations, actions and penalties;

suspension of our
operations; and

repair and
remediation costs.

In
addition, the total cost of coal sold, and overall coal production
may be adversely affected by various factors.

Although we
maintain insurance for a number of risks and hazards, we may not be
insured or fully insured against the losses or liabilities that
could arise from a significant accident in our future coal
operations. We may elect not to obtain insurance for any or all of
these risks if we believe that the cost of available insurance is
excessive relative to the risks presented. In addition, pollution,
contamination and environmental risks generally are not fully
insurable. Moreover, a significant mine accident or regulatory
infraction could potentially cause a mine shutdown. The occurrence
of an event that is not fully covered by insurance could have a
material adverse effect on our business, financial condition,
results of operations, cash flows and ability to pay dividends to
our common stockholders.

In
addition, if any of the foregoing changes, conditions or events
occurs and is not determined to be a force majeure event, any
resulting failure on our part to deliver coal to the purchaser
under contract could result in economic penalties, suspension or
cancellation of shipments or ultimately termination of the
agreement, any of which could have a material adverse effect on our
business, financial condition, results of operations, cash flows
and ability to pay dividends to our common
stockholders.

Depending on future acquisitions, our operations could be
exclusively located in a single geographic region, making us
vulnerable to risks associated with operating in a single
geographic area.

Initially,
substantially all of our operations will be conducted in a single
geographic region in the eastern United States in the Commonwealth
of Kentucky. The geographic concentration of our operations may
disproportionately expose us to disruptions in our operations if
the region experiences severe weather, transportation capacity
constraints, constraints on the availability of required equipment,
facilities, personnel or services, significant governmental
regulation or natural disasters. If any of these factors were to
impact the region in which we operate more than other coal
producing regions, our business, financial condition, results of
operations and cash flows will be adversely affected relative to
other mining companies that have a more geographically diversified
asset portfolio.

In
addition, some scientists have warned that increasing
concentrations of greenhouse gases (“GHGs”) in the
Earth’s atmosphere may produce climate changes that have
significant physical effects, such as increased frequency and
severity of storms, droughts and floods and other climatic events.
If these warnings are correct, and if any such effects were to
occur in areas where we or our customers operate, they could have
an adverse effect on our assets and operations.

The availability and reliability of transportation facilities and
fluctuations in transportation costs could affect the demand for
our coal or impair our ability to supply coal to prospective
customers.

Transportation
logistics will play an important role in allowing us to supply coal
to prospective customers. Any significant delays, interruptions or
other limitations on the ability to transport our coal could
negatively affect our operations. Delays and interruptions of rail
services because of accidents, failure to complete construction of
rail infrastructure, infrastructure damage, lack of rail or port
capacity, weather-related problems, governmental regulation,
terrorism, strikes, lock-outs, third-party actions or other events
could impair our ability to supply coal to customers and adversely
affect our profitability. In addition, transportation costs
represent a significant portion of the delivered cost of coal and,
as a result, the cost of delivery is a critical factor in a
customer’s purchasing decision. Increases in transportation
costs, including increases resulting from emission control
requirements and fluctuations in the price of locomotive diesel
fuel and demurrage, could make our coal less competitive, which
could have a material adverse effect on our business, financial
condition, results of operations, cash flows and ability to pay
dividends to our common stockholders.

Any significant downtime of our major pieces of mining equipment,
including any preparation plant, could impair our ability to supply
coal to prospective customers and materially and adversely affect
our results of operations.

We
currently and in the future, will depend on several major pieces of
mining equipment to produce and transport our coal, including, but
not limited to, underground continuous mining units and coal
conveying systems, surface mining equipment such as augers,
highwall miners, front-end loaders and coal over burden haul
trucks, preparation plant and related facilities, conveyors and
transloading facilities. If any of these pieces of equipment or
facilities suffered major damage or were destroyed by fire,
abnormal wear, flooding, incorrect operation or otherwise, we may
be unable to replace or repair them in a timely manner or at a
reasonable cost, which would impact our ability to produce and
transport coal and materially and adversely affect our business,
results of operations, financial condition and cash flows.
Moreover, the Mine Safety and Health Administration
(“MSHA”) and other regulatory agencies sometimes make
changes with regards to requirements for pieces of equipment. For
example, in 2015, MSHA promulgated a new regulation requiring the
implementation of proximity detection devices on all continuous
mining machines. Such changes could cause delays if manufacturers
and suppliers are unable to make the required changes in compliance
with mandated deadlines.

If
either our preparation plants, or train loadout facilities, or
those of a third-party processing or loading our coal, suffer
extended downtime, including major damage, or is destroyed, our
ability to process and deliver coal to prospective customers would
be materially impacted, which would materially adversely affect our
business, results of operations, financial condition and cash flows
and our ability to pay dividends to our common
stockholders.

If customers do not enter into, extend or honor contracts with us,
our profitability could be adversely affected.

We have
entered into a limited number of contracts for the sale of our
coal. Coal mined from our operations is subject to testing by our
prospective customers for the ability to meet various
specifications and to work successfully test our coals or enter
into contracts for the sale of our coal, our ability to achieve
profitability would be materially adversely affected. Once we enter
into contracts, if a substantial portion of our sales contracts are
modified or terminated and we are unable to replace the contracts
(or if new contracts are priced at lower levels), our results of
operations would be adversely affected, perhaps materially. In
addition, if customers refuse to accept shipments of our coal for
which they have a contractual obligation, our revenues could be
substantially affected and we may have to reduce production at our
mines until our customer’s contractual obligations are
honored.

Certain provisions in typical long-term sales contracts provide
limited protection during adverse economic conditions, which may
eventually result in economic penalties to us or permit the
customer to terminate the contract. Furthermore, our ability to
collect payments from prospective customers could be impaired if
their creditworthiness declines or if they fail to honor their
contracts with us.

Price
adjustment, “price reopener” and other similar
provisions in typical long-term sales contracts may reduce
protection from short-term coal price volatility traditionally
provided by such contracts. Price reopener provisions may be
included in our future sales contracts. These price reopener
provisions may automatically set a new price based on prevailing
market price or, in some instances, require the parties to agree on
a new price, sometimes within a specified range of prices. Any
adjustment or renegotiations leading to a significantly lower
contract price could adversely affect our profitability. Some
annual metallurgical coal contracts have shifted to quarterly
contracts and growing volumes are being sold on an indexed basis,
where prices are determined by averaging the leading spot indexes
reported in the market, exposing us further to risks related to
pricing volatility.

Our
ability to receive payment for coal sold and delivered depends on
the continued solvency and creditworthiness of prospective
customers. The number of domestic steel producers is small, and
they compete globally for steel production. If their business or
creditworthiness suffers, we may bear an increased risk with
respect to payment default. In addition, some prospective customers
have been adversely affected by the recent economic downturn, which
may impact their ability to fulfill their contractual obligations.
Competition with other coal suppliers could force us to extend
credit to customers and on terms that could increase the risk we
bear with respect to payment default. We could also enter into
agreements to supply coal to energy trading and brokering customers
under which a customer sells coal to end-users. If the
creditworthiness of any prospective energy trading and brokering
customer declines, we may not be able to collect payment for all
coal sold and delivered to or on behalf of this customer. In
addition, if customers refuse to accept shipments of our coal that
they have a contractual obligation to purchase, our revenues will
decrease, and we may have to reduce production at our mines until
prospective customers’ contractual obligations are honored.
Our inability to collect payment from counterparties to our sales
contracts may materially adversely affect our business, financial
condition, results of operations, cash flows and ability to pay
dividends to our common stockholders.

Decreases in demand for electricity and changes in coal consumption
patterns of U.S. electric power generators could adversely affect
our business.

While
our initial coal production consists primarily of metallurgical and
PCI coal, which is not closely linked to domestic demand for
electricity, we anticipate initiating production and sales of
thermal coal in the future. In such case, any changes in coal
consumption by electric power generators in the United States would
likely impact our business over the long term. According to the
EIA, in 2015, the domestic electric power sector accounts for more
than 90% of total U.S. coal consumption. The amount of coal
consumed by the electric power generation industry is affected by,
among other things:

general economic
conditions, particularly those affecting industrial electric power
demand, such as a downturn in the U.S. economy and financial
markets;

overall demand for
electricity;

competition from
alternative fuel sources for power generation, including natural
gas, fuel oil, nuclear, and renewable sources such as
hydroelectric, wind and solar power, and the location,
availability, quality and price of those alternative fuel
sources;

environmental and
other governmental regulations, including those impacting
coal-fired power plants; and

energy conservation
efforts and related governmental policies.

For
example, the low price of natural gas in recent years has resulted,
in some instances, in domestic electric generators increasing
natural gas consumption while decreasing coal consumption. Federal
and state mandates for increased use of electricity derived from
renewable energy sources, such as the Clean Power Plan
(“CPP”), could also affect demand for our coal. Such
mandates, combined with other incentives to use renewable energy
sources, such as tax credits, could make renewable fuel sources
more competitive with coal. A decrease in coal consumption by the
electric power generation industry could adversely affect the price
of coal, which could have a material adverse effect on our
business, financial condition, results of operations, cash flows
and ability to pay dividends to our common
stockholders.

According to the
EIA, although electricity demand fell in only three years between
1950 and 2007, it declined in six of the eight years between 2008
and 2015. The decline in electricity demand is due to several
primary factors, including the steep economic downturn from late
2007 through 2009, the shift from an energy-intensive manufacturing
economy to a service economy and an overall improvement in energy
efficiency. Other factors, such as efficiency improvements
associated with new appliance standards in the buildings sectors,
overall improvement in the efficiency of technologies powered by
electricity, and future conservation efforts based on
implementation of the new CPP, have slowed or may slow electricity
demand growth and may contribute to slower growth in the future,
even if the U.S. economy continues its recovery. Further decreases
in the demand for electricity, such as decreases that could be
caused by a worsening of current economic conditions, a prolonged
economic recession or other similar events, could have a material
adverse effect on the demand for coal and on our business over the
long term.

Changes
in the coal industry that affect our prospective customers, such as
those caused by decreased electricity demand and increased
competition, could also adversely affect our business. Indirect
competition from natural gas-fired plants that are relatively less
expensive to construct and less difficult to permit has the most
potential to displace a significant amount of coal-fired electric
power generation in the near term, particularly older, less
efficient coal-fired powered generators. In addition, uncertainty
caused by federal and state regulations could cause thermal coal
customers to be uncertain of their coal requirements in future
years, which could adversely affect our ability to sell coal to
such prospective customers under multi-year sales
contracts.

We may be unsuccessful in integrating the operations of any future
acquisitions, including acquisitions involving new lines of
business, with our existing operations, and in realizing all or any
part of the anticipated benefits of any such
acquisitions.

From
time to time, we may evaluate and acquire assets and businesses
that we believe complement our existing assets and business, and we
may use a portion of the proceeds from this offering for
acquisitions. The assets and businesses we acquire may be
dissimilar from our initial lines of business. Acquisitions may
require substantial capital or the incurrence of substantial
indebtedness. Our capitalization and results of operations may
change significantly as a result of future acquisitions. We may
also add new lines of business to our existing operations.
Acquisitions and business expansions involve numerous risks,
including the following:

difficulties in the
integration of the assets and operations of the acquired businesses
or lines of business;

inefficiencies and
difficulties that arise because of unfamiliarity with new assets
and the businesses associated with them and new geographic
areas;

the possibility
that we have insufficient expertise to engage in such activities
profitably or without incurring inappropriate amounts of risk;
and

the diversion of
management’s attention from other operations.

Further, unexpected
costs and challenges may arise whenever businesses with different
operations or management are combined, and we may experience
unanticipated delays in realizing the benefits of an acquisition.
Entry into certain lines of business may subject us to new laws and
regulations with which we are not familiar and may lead to
increased litigation and regulatory risk. Also, following an
acquisition, we may discover previously unknown liabilities
associated with the acquired business or assets for which we have
no recourse under applicable indemnification provisions. If an
acquired business or new line of business generates insufficient
revenue or if we are unable to efficiently manage our expanded
operations, our results of operations may be materially adversely
affected. Additionally, we can offer no assurance that the planned
marketing, brokerage and trading company will be able to attract
third-party coal producers as customers or make any significant
contribution to our financial results.

To maintain and grow our business, we will be required to make
substantial capital expenditures. If we are unable to obtain needed
capital or financing on satisfactory terms, we may have to curtail
our operations and delay our construction and growth plans, which
may materially adversely affect our business, financial condition,
results of operations, cash flows and ability to pay dividends to
our common stockholders.

In
order to maintain and grow our business, we will need to make
substantial capital expenditures associated with our mines and the
construction of coal preparation facilities, which have not yet
been constructed. Constructing, maintaining and expanding mines and
infrastructure, including coal preparation and loading facilities,
is capital intensive. Specifically, the exploration, permitting and
development of coal deposits, and the maintenance of machinery,
equipment and facilities, and compliance with applicable laws and
regulations require substantial capital expenditures. We must
continue to invest capital to maintain or to increase our
production and to develop any future acquired properties. Decisions
to increase our production levels could also affect our capital
needs. We cannot assure you that we will be able to maintain our
production levels or generate sufficient cash flow, or that we will
have access to sufficient financing to continue our production,
exploration, permitting and development activities, and we may be
required to defer all or a portion of our capital
expenditures.

If we
do not make sufficient or effective capital expenditures, we will
be unable to develop and grow our business. To fund our projected
capital expenditures, we will be required to use cash from our
operations, incur debt or issue additional common stock or other
equity securities. Using cash from our operations will reduce cash
available for maintaining or increasing our operating activities
and paying dividends to our common stockholders. Our ability to
obtain bank financing or our ability to access the capital markets
for future equity or debt offerings may be limited by our financial
condition at the time of any such financing or offering and the
covenants in our future debt agreements, as well as by general
economic conditions, contingencies and uncertainties that are
beyond our control.

In
addition, incurring additional debt may significantly increase our
interest expense and financial leverage, and issuing additional
equity securities may result in significant stockholder
dilution.

We may not be able to obtain equipment, parts and supplies in a
timely manner, in sufficient quantities or at reasonable costs to
support our coal mining and transportation operations.

Coal
mining consumes large quantities of commodities including steel,
copper, rubber products and liquid fuels and requires the use of
capital equipment. Some commodities, such as steel, are needed to
comply with roof control plans required by regulation. The prices
we pay for commodities and capital equipment are strongly impacted
by the global market. A rapid or significant increase in the costs
of commodities or capital equipment we use in our operations could
impact our mining operations costs because we may have a limited
ability to negotiate lower prices and, in some cases, may not have
a ready substitute.

We will
use equipment in our coal mining and transportation operations such
as continuous mining units, conveyors, shuttle cars, rail cars,
locomotives, and roof bolters. We procure this equipment from a
concentrated group of suppliers, and obtaining this equipment often
involves long lead times. Occasionally, but not currently, demand
for such equipment by mining companies can be high and some types
of equipment may be in short supply. Delays in receiving or
shortages of this equipment, as well as the raw materials used in
the manufacturing of supplies and mining equipment, which, in some
cases, do not have ready substitutes, or the cancellation of any
future supply contracts under which we obtain equipment and other
consumables, could limit our ability to obtain these supplies or
equipment. In addition, if any of our suppliers experiences an
adverse event, or decides to no longer do business with us, we may
be unable to obtain sufficient equipment and raw materials in a
timely manner or at a reasonable price to allow us to meet our
production goals and our revenues may be adversely impacted. We use
considerable quantities of steel in the mining process. If the
price of steel or other materials increases substantially or if the
value of the U.S. dollar declines relative to foreign currencies
with respect to certain imported supplies or other products, our
operating expenses could increase. Any of the foregoing events
could materially and adversely impact our business, financial
condition, results of operations, cash flows and ability to pay
dividends to our common stockholders.

The
decline in coal prices since 2011 has incentivized producers to
retain their used, idle equipment. The availability of used
equipment is a key assumption in our business plan, and we may find
it difficult to procure mining equipment at a suitable cost, in
particular deep mining equipment. To the extent we are unable to
procure suitable mining equipment in line with our projected cost
profile, our projected results may not be realized, and our results
of operations may be negatively affected.

We are a holding company and we depend on the ability of our
subsidiaries to distribute funds to us in order to satisfy our
financial obligations and to make dividend payments.

We are
a holding company and our subsidiaries conduct all of our
operations and own all of our operating assets. We have no
significant assets other than the equity interests in our
subsidiaries. As a result, our ability to pay our obligations and
to make dividend payments depends entirely on our subsidiaries and
their ability to distribute funds to us. The ability of a
subsidiary to make these distributions could be affected by a claim
or other action by a third party, including a creditor, or by the
law of their respective jurisdictions of formation which regulates
the payment of dividends. If we are unable to obtain funds from our
subsidiaries, our board of directors may exercise its discretion
not to declare or pay dividends.

Debt we incur in the future may limit our flexibility to obtain
financing and to pursue other business opportunities. Our future
level of debt could have important consequences to us, including
the following:

our ability to
obtain additional financing, if necessary, for working capital,
capital expenditures or other purposes may be impaired, or such
financing may not be available on favorable terms;

our funds available
for operations and future business opportunities will be reduced by
that portion of our cash flow required to make interest payments on
our debt;

our ability to pay
dividends if an event of default occurs and is continuing or would
occur as a result of paying such dividend;

we may be more
vulnerable to competitive pressures or a downturn in our business
or the economy generally; and

our flexibility in
responding to changing business and economic conditions may be
limited.

Our
ability to service our debt will depend upon, among other things,
our future financial and operating performance, which will be
affected by prevailing economic conditions and financial, business,
regulatory and other factors, some of which are beyond our control.
If our operating results are not sufficient to service any future
indebtedness, we will be forced to take actions such as reducing or
delaying our business activities, investments or capital
expenditures, selling assets or issuing equity. We may not be able
to effect any of these actions on satisfactory terms or at
all.

Our operations could be adversely affected if we are unable to
obtain required financial assurance, or if the costs of financial
assurance increase too much.

Federal
and state laws require financial assurance to secure our permit
obligations including to reclaim lands used for mining, to pay
federal and state workers’ compensation and black lung
benefits, and to satisfy other miscellaneous obligations. 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 Surface Mining Control
and Reclamation Act of 1977 (“SMCRA”) permits including
for reclamation. In response to these bankruptcies, the Office of
Surface Mining Reclamation and Enforcement (“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
in light of changes in the coal-mining industry and the market.
Individually and collectively, revised various financial assurance
requirements may increase the amounts of needed financial assurance
and limit the types of acceptable instruments and strain the
capacity of the surety markets to meet demand, which may delay the
timing for and increase the costs of obtaining this financial
assurance. We use surety bonds, trusts and letters of credit to
provide financial assurance for certain transactions and business
activities. Our reclamation surety bonding program does not
currently require us to post collateral, however, insurance
companies may elect not to provide surety bonds without collateral.
Indeed, 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. We currently have outstanding surety bonds at all of our
mining operations totaling approximately $26.62 million. Using
letters of credit in lieu of surety bonds can be significantly
costlier to us than surety bonds. 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.

Our mines could be located in areas containing oil and natural gas
operations, which may require us to coordinate our operations with
those of oil and natural gas drillers.

Our
coal deposits may be in areas containing developed or undeveloped
oil and natural gas deposits and reservoirs, such as the Marcellus
Shale in eastern Kentucky, which are currently the subject of
substantial oil and natural gas exploration and production
activities, including by horizontal drilling. If we have received a
permit for our mining activities, then, while we will have to
coordinate our mining with such oil and natural gas drillers, our
mining activities are expected to have priority over any oil and
natural gas drillers with respect to the land covered by our
permit. For coal deposits outside of our permits, we expect to
engage in discussions with drilling companies on potential areas on
which they can drill that may have a minimal effect on our mine
plan. Depending on priority of interests, our operations may have
to avoid existing oil and gas wells or expend sums to plug oil and
gas wells.

If a
well is in the path of our mining for coal on land that has not yet
been permitted for our mining activities, we may not be able to
mine through the well unless we purchase it. The cost of purchasing
a producing horizontal or vertical well could be substantial.
Horizontal wells with multiple laterals extending from the well pad
may access larger oil and natural gas deposits than a vertical
well, which would typically result in a higher cost to acquire. The
cost associated with purchasing oil and natural gas wells that are
in the path of our coal mining activities may make mining through
those wells uneconomical, thereby effectively causing a loss of
significant portions of our coal reserves, which could materially
and adversely affect our business, financial condition, results of
operations, cash flows and ability to pay dividends to our common
stockholders.

Defects in title or loss of any leasehold interests in our
properties could limit our ability to conduct mining operations on
these properties or result in significant unanticipated
costs.

We
expect to conduct all of our mining operations on properties that
we lease. A title defect or the loss of any lease upon expiration
of its term, upon a default or otherwise, could adversely affect
our ability to mine the associated coal and/or process the coal we
mine. Title to most of our leased properties and mineral rights is
not usually verified until we make a commitment to develop a
property, which may not occur until after we have obtained
necessary permits and completed exploration of the property. In
many cases, we rely on title information or representations and
warranties provided by our lessors or grantors. Our right to mine
some of our coal deposits may be adversely affected if defects in
title or boundaries exist or if a lease expires. Any challenge to
our title or leasehold interests could delay the exploration and
development of the property and could ultimately result in the loss
of some or all of our interest in the property and, accordingly,
require us to reduce our estimated coal deposits. Mining operations
from time to time may rely on an expired lease that we are unable
to renew. If we were to be in default with respect to leases for
properties on which we have mining operations, we may have to close
down or significantly alter the sequence of such mining operations,
which may adversely affect our future coal production and future
revenues. If we mine on property that we do not own or lease, we
could incur liability for such mining.

Also,
in any such case, the investigation and resolution of title issues
would divert management’s time from our business and our
results of operations could be adversely affected. Additionally, if
we lose any leasehold interests relating to any preparation plants,
we may need to find an alternative location to process our coal and
load it for delivery to customers, which could result in
significant unanticipated costs.

In
order to obtain leases or mining contracts to conduct our mining
operations on property where these defects exist, we may in the
future have to incur unanticipated costs. In addition, we may not
be able to successfully negotiate new leases or mining contracts
for properties containing additional coal deposits or maintain our
leasehold interests in properties where we have not commenced
mining operations during the term of the lease. Some leases have
minimum production requirements. Failure to meet those requirements
could result in losses of prepaid royalties and, in some rare
cases, could result in a loss of the lease itself.

Some of our mining properties are leased from Land Resources &
Royalties LLC, a company owned and controlled by certain members of
our management, and conflicts of interest may arise in the future
as a result.

Some of
our properties are leased or subleased to our subsidiaries from
Land Resources & Royalties, which is a related party and an
entity that is owned and controlled by some of our management team,
with financial and economic benefit of such leases going directly
to those members of the management team. Given some of the common
ownership and control between Land Resources & Royalties LLC
and us and the complex contractual obligations under these
arrangements, conflicts could arise between us and Land Resources
& Royalties LLC that could adversely affect the interests of
our stockholders, including, without limitation, conflicts
involving compliance with payment and performance obligations under
existing leases, and negotiation of the terms of and performance
under additional leases we may enter into with Land Resources &
Royalties LLC in the future.

While none of our employees who conduct mining operations are
currently members of unions, our business could be adversely
affected by union activities.

We are
not subject to any collective bargaining or union agreement with
respect to other properties we currently control. However, it is
possible that future employees, or those of our contract miners,
who conduct mining operations may join or seek recognition to form
a labor union or may be required to become a labor agreement
signatory. If some or all of the employees who conduct mining
operations were to become unionized, it could adversely affect
productivity, increase labor costs and increase the risk of work
stoppages at our mines. If a work stoppage were to occur, it could
interfere with operations and have a material adverse effect on our
business, financial condition, results of operations, cash flows
and our ability to pay dividends to our common
stockholders.

A shortage of skilled labor in the mining industry could pose a
risk to achieving improved labor productivity and competitive
costs, which could adversely affect our profitability.

Efficient coal
mining using modern techniques and equipment requires skilled
laborers, preferably with at least a year of experience and
proficiency in multiple mining tasks. In the event there is a
shortage of experienced labor, it could have an adverse impact on
our labor productivity and costs and our ability to expand
production in the event there is an increase in the demand for our
coal.

Our ability to operate effectively could be impaired if we fail to
attract and retain key personnel.

The
loss of our senior executives could have a material adverse effect
on our business. There may be a limited number of persons with the
requisite experience and skills to serve in our senior management
positions. We may not be able to locate or employ qualified
executives on acceptable terms. In addition, as our business
develops and expands, we believe that our future success will
depend greatly on our continued ability to attract and retain
highly skilled personnel with coal industry experience. We may not
be able to continue to employ key personnel or attract and retain
qualified personnel in the future. Our failure to retain or attract
key personnel could have a material adverse effect on our ability
to effectively operate our business. There is nothing at this time
on which to base an assumption that our business will prove
successful, and there is no assurance that we will be able to
operate profitably if or when operations commence. You may lose
your entire investment do to our lack of experience.

Terrorist attacks or cyber-incidents could result in information
theft, data corruption, operational disruption and/or financial
loss.

Like
most companies, we have become increasingly dependent upon digital
technologies, including information systems, infrastructure and
cloud applications and services, to operate our businesses, to
process and record financial and operating data, communicate with
our business partners, analyze mine and mining information,
estimate quantities of coal deposits, as well as other activities
related to our businesses. Strategic targets, such as
energy-related assets, may be at greater risk of future terrorist
or cyber-attacks than other targets in the United States.
Deliberate attacks on, or security breaches in, our systems or
infrastructure, or the systems or infrastructure of third parties,
or cloud-based applications could lead to corruption or loss of our
proprietary data and potentially sensitive data, delays in
production or delivery, difficulty in completing and settling
transactions, challenges in maintaining our books and records,
environmental damage, communication interruptions, other
operational disruptions and third-party liability. Our insurance
may not protect us against such occurrences. Consequently, it is
possible that any of these occurrences, or a combination of them,
could have a material adverse effect on our business, financial
condition, results of operations and cash flows. Further, as cyber
incidents continue to evolve, we may be required to expend
additional resources to continue to modify or enhance our
protective measures or to investigate and remediate any
vulnerability to cyber incidents.

We may face restricted access to international markets in the
future.

Access
to international markets may be subject to ongoing interruptions
and trade barriers due to policies and tariffs of individual
countries, and the actions of certain interest groups to restrict
the import or export of certain commodities. Although there are
currently no significant trade barriers existing or impending of
which we are aware that do, or could, materially affect our access
to certain markets, there can be no assurance that our access to
these markets will not be restricted in the future. An inability
for U.S. metallurgical thermal, and other specialty coal suppliers
to access international markets would likely result in an
oversupply of such respective coals in the domestic market,
resulting in a decrease in prices.

On
August 14, 2017, the President of the United States issued a
memorandum instructing the U.S. Trade Representative
(“USTR”) to determine whether to investigate under
section 301 of the U.S. Trade Act of 1974 (Trade Act), laws,
policies, practices, or actions of the PRC government that may be
unreasonable or discriminatory and that may be harming U.S.
intellectual property rights, innovation, or technology
development. Based on information gathered in that investigation,
the USTR published a report on March 22, 2018 on the acts, policies
and practices of the PRC government supporting findings that such
are unreasonable or discriminatory and burden or restrict U.S.
commerce.

On
March 8, 2018, the President exercised his authority to issue the
imposition of significant tariffs on imports of steel and aluminum
from a number of countries, including the PRC. Subsequently, the
USTR announced an initial proposed list of 1,300 goods imported
from the PRC that could be subject to additional tariffs and
initiated a dispute with the World Trade Organization against the
PRC for alleged unfair trade practices. The President has indicated
that his two primary concerns to be addressed by the PRC are (i) a
mandatory $100 billion reduction in the PRC/U.S. trade deficit and
(ii) limiting the planned $300 billion PRC government support for
advanced technology industries including artificial intelligence,
semiconductors, electric cars and commercial aircraft. On June 15,
2018, the President announced that the U.S. would go ahead with
tariffs on $50 billion worth of Chinese goods, including
agriculture and industrial machinery, which prompted the PRC
government to consider imposing tariffs on $50 billion worth of
goods from the U.S., including beef, poultry, tobacco and cars. In
response to the PRC’s proposed retaliatory measures, the
President announced on June 19, 2018 that the U.S. would compile a
list of $200 billion in China goods for levies should the PRC move
forward with their proposed tariffs. On August 7, 2018, the U.S.
announced a tariff of 25% on approximately $16 billion worth of
mostly industrial goods from China, including tractors, plastic
tubes and antennas, which went into effect on August 23, 2018. In
response, on August 8, 2018, China announced a 25% tariff on $16
billion worth of US goods, including large passenger cars,
motorcycles, chemical items and diesel fuel, which also went into
effect on August 23, 2018. On September 7, 2018, the President
warned that he was prepared to impose tariffs on another $267
billion of Chinese goods, which in addition to the other previously
announced tariffs, would cover virtually all of China’s
imports into the U.S. Despite a September 12, 2018 invitation by
the U.S. to China to restart trade talks, which China has welcomed,
the President has instructed his administration to proceed with a
10% tariff on Chinese goods worth $200 billion, which China intends
to match with tariffs on $60 billion of US goods.

In
addition to the proposed retaliatory tariffs, the President has
also directed the U.S. Secretary of the Treasury to develop new
restrictions on PRC investments in the U.S. aimed at preventing
PRC-controlled companies and funds from acquiring U.S. firms with
sensitive technologies. Congress is currently considering new
legislation, the Foreign Investment Risk Review Modernization Act,
to modernize the restrictive powers imposed by the Committee on
Foreign Investment in the United States.

This
evolving policy dispute between the PRC and the U.S. is likely to
have significant impact on the industries in which we participate,
directly and indirectly, and no assurance can be given that any
individual customer, or significant groups of companies or a
particular industry, will not be adversely affected by any
governmental actions taken by either the PRC or the U.S., perhaps
materially. In view of the positions of the respective trade
representatives, it is not possible to predict with any certainty
the outcome of this dispute or whether it will involve other
agencies or entities brought in to resolve the policy differences
of the two countries.

Risks Related to Environmental, Health, Safety and Other
Regulations

Laws and regulations restricting greenhouse gas emissions as well
as uncertainty concerning such regulations could adversely impact
the market for coal, increase our operating costs, and reduce the
value of our coal assets.

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. They could also result in direct regulation of the GHGs
produced by our operations.

At
present, we are principally focused on metallurgical coal
production and other industrial uses, 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. 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 can require 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
additional costs incurred to purchase credits that permit us to
continue operations. New laws or regulations could also potentially
require that we curtail coal production.

Current and future government laws, regulations and other legal
requirements relating to protection of the environment and natural
resources may increase our costs of doing business and may restrict
our coal operations.

We and
our potential customers are subject to stringent and complex laws,
regulations and other legal requirements enacted by federal, state
and local authorities relating to protection of the environment and
natural resources. These include those legal requirements that
govern discharges or emissions of materials into the environment,
the management and disposal of substances and wastes, including
hazardous wastes, the cleanup of contaminated sites, threatened and
endangered plant and wildlife protection, reclamation and
restoration of mining properties after mining is completed,
mitigation and restoration of streams or other waters, the
protection of drinking water, assessment of the environmental
impacts of mining, monitoring and reporting requirements, the
installation of various safety equipment in our mines, remediation
of impacts of surface subsidence from underground mining, and work
practices related to employee health and safety. Examples include
laws and regulations relating to:

employee health and
safety;

emissions to air
and discharges to water;

plant and wildlife
protection, including endangered species protections;

the reclamation and
restoration of properties after mining or other activity has been
completed;

limitations on land
use;

mine permitting and
licensing requirements;

the storage,
treatment and disposal of wastes;

air quality
standards;

protection of human
health, plant-life and wildlife, including endangered and
threatened species;

protection of
wetlands;

the discharge of
materials into the environment;

remediation of
contaminated soil, surface and groundwater; and

the effects of
operations on surface water and groundwater quality and
availability.

Complying with
these environmental and employee health and safety requirements,
including the terms of our permits, has had, and will continue to
have, a significant effect on our costs of operations. In addition,
there is the possibility that we could incur substantial costs as a
result of violations of environmental laws, judicial
interpretations of or rulings on environmental laws or permits, or
in connection with the investigation and remediation of
environmental contamination. For example, the EPA and several of
the states where we operate have, or intend to, propose revised
recommended criteria for discharges of selenium regulated under the
Clean Water Act (“CWA”), which may be more stringent
than current criteria. Any additional laws, regulations and other
legal requirements enacted or adopted by federal, state and local
authorities, or new interpretations of existing legal requirements
by regulatory bodies relating to the protection of the environment,
including those related to discharges of selenium, could further
affect our costs or limit our operations.

Our operations may impact the environment or cause exposure to
hazardous substances, and our properties may have environmental
contamination, which could expose us to significant costs and
liabilities.

Our
operations currently use hazardous materials and generate limited
quantities of hazardous wastes from time to time. Drainage flowing
from or caused by mining activities can be acidic with elevated
levels of dissolved metals, a condition referred to as “acid
mine drainage,” or may include other pollutants requiring
treatment. We could become subject to claims for toxic torts,
natural resource damages and other damages as well as for the
investigation and clean-up of soil, surface water, groundwater, and
other media. Such claims may arise, for example, out of conditions
at sites that we currently own or operate, as well as at sites that
we previously owned or operated, or may acquire. Our liability for
such claims may be joint and several, so that we may be held
responsible for more than our share of the contamination or other
damages, or for the entire share.

We will
maintain coal refuse areas and slurry impoundments as necessary.
Such areas and impoundments are subject to extensive regulation.
Structural failure of a slurry impoundment or coal refuse area
could result in extensive damage to the environment and natural
resources, such as bodies of water that the coal slurry reaches, as
well as liability for related personal injuries and property
damages, and injuries to wildlife. If an impoundment were to fail,
we could be subject to claims for the resulting environmental
contamination and associated liability, as well as for fines and
penalties. Our coal refuse areas and slurry impoundments will be
designed, constructed, and inspected by our company and by
regulatory authorities according to stringent environmental and
safety standards.

We must obtain, maintain, and renew governmental permits and
approvals for mining operations, which can be a costly and
time-consuming process and result in restrictions on our
operations.

Numerous
governmental permits and approvals are required for mining
operations. Our operations are principally regulated under permits
issued pursuant to SMCRA and the federal CWA. State and federal
regulatory authorities exercise considerable discretion in the
timing and scope of permit issuance. Requirements imposed by these
authorities may be costly and time consuming and may result in
delays in the commencement or continuation of exploration or
production operations. In addition, we may be required to prepare
and present to permitting or other regulatory authorities data
pertaining to the effect or impact that proposed exploration for or
production of coal might have on the environment.

Our
coal production will be dependent upon our ability to obtain
various federal and state permits and approvals to mine our coal
deposits. The permitting rules, and the interpretations of these
rules, are complex, change frequently, and are often subject to
discretionary interpretations by regulators, all of which may make
compliance more difficult or impractical, and which may possibly
preclude the continuance of ongoing mine development or operations
or the development of future mining operations. The EPA also has
the authority to veto permits issued by the U.S. Army Corps of
Engineers (the “Corps”) under the CWA’s
Section 404 program that prohibits the discharge of dredged or
fill material into regulated waters without a permit. The pace with
which the government issues permits needed for new operations and
for ongoing operations to continue mining, particularly CWA
permits, can be time-consuming and subject to delays and denials.
These delays or denials of environmental permits needed for mining
could reduce our production and materially adversely impact our
cash flow and results of operations.

For
example, prior to placing fill material in waters of the United
States, such as with the construction of a valley fill, coal mining
companies are required to obtain a permit from the Corps under
Section 404 of the CWA. The permit can be either a Nation-Wide
Permit (“NWP”), normally NWP 21, 49 or 50 for coal
mining activities, or a more complicated individual permit. NWPs
are designed to allow for an expedited permitting process, while
individual permits involve a longer and more detailed review
process. 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.

Prior
to discharging any pollutants to 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.
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. Further, on June 29, 2015, the EPA and the Corps
published a new, more expansive, definition of “waters of the
United States” that became effective on August 28, 2015
(the “2015 Rule”). This rule was stayed nationwide by
the U.S. Court of Appeals for the Sixth Circuit pending the outcome
of litigation concerning the rule. 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.

Further, the public
has certain statutory rights to comment on and submit objections to
requested permits and environmental impact statements prepared in
connection with applicable regulatory processes, and otherwise
engage in the permitting process, including bringing
citizens’ claims to challenge the issuance or renewal of
permits, the validity of environmental impact statements or
performance of mining activities. As a result of such potential
challenges, the permits we need may not be issued or renewed in a
timely fashion or issued or renewed at all, or permits issued or
renewed may not be maintained, may be challenged or may be
conditioned in a manner that may restrict our ability to
efficiently and economically conduct our mining activities, any of
which would materially reduce our production, cash flow, and
profitability.

Permitting rules
may also require, under certain circumstances, that we obtain
surface owner consent if the surface estate has been severed from
the mineral estate. This could require 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.

We and our owners and controllers are subject to the Applicant
Violator System.

Under
SMCRA and its state law counterparts, all coal mining applications
must include mandatory “ownership and control”
information, which generally includes listing the names of our
officers and directors, and our principal stockholders owning 10
percent or more of our voting shares, among others. Ownership and
control reporting requirements are designed to allow regulatory
review of any entities or persons deemed to have ownership or
control of a coal mine and bars the granting of a coal mining
permit to any such entity or person (including any “owner and
controller”) who has had a mining permit revoked or
suspended, or a bond or similar security forfeited within the
five-year period preceding a permit application or application for
a permit revision. Regulatory agencies also block the issuance of
permits to an applicant who, or whose owner and controller, has
permit violations outstanding that have not been timely
abated.

la
federal database, known as the Applicant Violator System
(“AVS”), is maintained for this purpose. Certain
relationships are presumed to constitute ownership or control,
including the following: being an officer or director of an entity;
being the operator of the coal mining operation; having the ability
to commit the financial or real property assets or working
resources of the permittee or operator; based on the instruments of
ownership or the voting securities of a corporate entity, owning of
record 10% or more of the mining operator, among others. This
presumption, in most cases, can be rebutted where the person or
entity can demonstrate that it in fact does not or did not have
authority directly or indirectly to determine the manner in which
the relevant coal mining operation is conducted. An ownership and
control notice must be filed by us each time an entity obtains a
10% or greater interest in us. If we have unabated violations of
SMCRA or its state law counterparts, have a coal mining permit
suspended or revoked, or forfeit a reclamation bond, we and our
“owners and controllers,” as discussed above, may be
prohibited from obtaining new coal mining permits, or amendments to
existing permits, until such violations of law are corrected. This
is known as being “permit-blocked.” Additionally,
Thomas M. Sauve and Mark C. Jensen are currently, or may be in the
future, deemed an “owner or controller” of a number of
other mining companies, as such, we could be permit-blocked based
upon the violations of or permit-blocked status of an “owner
or controller” of us.

We may be subject to additional limitations on our ability to
conduct mining operations due to federal jurisdiction.

We may
conduct some underground mining activities on properties that are
within the designated boundary of federally protected lands or
national forests where the above-mentioned restrictions within the
meaning of SMCRA could apply. Federal court decisions could pose a
potential restriction on underground mining within 100 feet of a
public road as well as other restrictions. If these SMCRA
restrictions ultimately apply to underground mining, considerable
uncertainty would exist about the nature and extent of this
restriction. While it could remain possible to obtain permits for
underground mining operations in these areas even where this
100-foot restriction was applied, the time and expense of that
permitting process would be likely to increase significantly, and
the restrictions placed on the mining of those properties could
adversely affect our costs.

Our prospective customers are subject to extensive existing and
future government laws, regulations and other legal requirements
relating to protection of the environment, which could negatively
impact our business and the market for our products.

Coal
contains impurities, including sulfur, mercury, chlorine and other
elements or compounds, many of which are released into the air when
coal is burned. Complying with regulations to address these
emissions can be costly for our customers. For example, in order to
meet the CAA limits for sulfur dioxide emissions from electric
power plants, coal users must install costly pollution control
devices, use sulfur dioxide emission allowances (some of which they
may purchase), or switch to other fuels. Recent EPA rulemakings
requiring additional reductions in permissible emission levels for
coal-fired plants will likely make it costlier to operate
coal-fired electric power plants and may make coal a less
attractive fuel for electric power generation in the future. For
example, the EPA’s Cross-State Air Pollution Rule
(“CSAPR”) is one of a number of significant regulations
that the EPA has issued or expects to issue that will impose more
stringent requirements relating to air, water and waste controls on
electric generating units. These rules also include the EPA’s
new requirements for coal combustion residues management, which
were finalized in December 2014 and further regulate the handling
of wastes from the combustion of coal. In addition, the EPA has
formally adopted a revised final rule to reduce emissions of toxic
air pollutants from power plants. More costly and stringent
environmental regulations could adversely impact the operations of
our customers, which could in turn adversely impact our business. la
number of coal-fired power plants, particularly smaller and older
plants, already have retired or announced that they will retire
rather than retrofit to meet the obligations of these rules.
Additional retirements of coal-fired power plants by prospective
customers could further decrease demand for thermal coal and reduce
our revenues and adversely affect our business and results of
operations.

In
addition, considerable uncertainty is associated with air emissions
initiatives. New regulations are in the process of being developed,
and many existing and potential regulatory initiatives are subject
to review by federal or state agencies or the courts. More
stringent air emissions limitations are either in place or are
likely to be imposed in the short to medium term, and these
limitations will likely require significant emissions control
expenditures for many coal-fired power plants. As a result, some of
our prospective customers may switch to other fuels that generate
fewer of these emissions or may install more effective pollution
control equipment that reduces the need for low-sulfur coal. Any
further switching of fuel sources away from coal, closure of
existing coal-fired power plants, or reduced construction of new
coal-fired power plants could have a material adverse effect on
demand for, and prices received for, our coal. In addition, our
coke plant and steelmaking customers may face increased operational
costs as a result of higher electric costs.

Apart
from actual and potential regulation of air emissions and solid
wastes from coal-fired plants, state and federal mandates for
increased use of electricity from renewable energy sources could
have an impact on the market for our coal. Several states have
enacted legislative mandates requiring electricity suppliers to use
renewable energy sources to generate a certain percentage of power.
Possible advances in technologies and incentives, such as tax
credits, to enhance the economics of renewable energy sources could
make these sources more competitive with coal. Any reductions in
the amount of coal consumed by electric power generators as a
result of current or new standards for the emission of impurities,
or current or new incentives to switch to renewable fuels or
renewable energy sources, such as the CPP and various state
programs, could reduce the demand for our coal, thereby reducing
our revenues and adversely affecting our business, cash flows,
results of operations and our ability to pay dividends to our
common stockholders.

Environmental activism and initiatives aimed at limiting climate
change and a reduction of air pollutants could interfere with our
business activities, operations and ability to access capital
sources.

Participants in the
coal mining industry are frequently targeted by environmental
activist groups that openly attempt to disrupt the industry. It is
possible that we may be the target of such activism in the future,
including when we attempt to grow our business through
acquisitions, commence new mining operations or register our
securities with the SEC. If that were to happen, our ability to
operate our business or raise capital could be materially and
adversely impacted.

In
addition, there have also been efforts in recent years to influence
the investment community, including investment advisors, sovereign
wealth funds, public pension funds, universities and other groups,
promoting the divestment of fossil fuel equities and also
pressuring lenders to limit funding to companies engaged in the
extraction of fossil fuel reserves. In California, for example,
legislation was signed into law in October 2015 that required
California’s state pension funds to divest investments in
companies that generate 50% or more of their revenue from coal
mining, which was done by the established deadline of July 2017.
Several large investment banks also announced that they had adopted
climate change guidelines for lenders. The guidelines require the
evaluation of carbon risks in the financing of electric power
generation plants, which may make it more difficult for utilities
to obtain financing for coal-fired plants. Other activist campaigns
have urged banks to cease financing coal-driven businesses. As a
result, the World Bank announced in December 2017 that it would no
longer finance upstream oil and gas projects after 2019, apart from
certain gas projects in the poorest countries in exceptional
circumstances. The impact of such efforts may adversely affect the
demand for and price of securities issued by us and impact our
access to the capital and financial markets. In addition, several
well-funded non-governmental organizations have explicitly
undertaken campaigns to minimize or eliminate mining and the use of
coal as a source of electricity generation. The net effect of these
developments is to make it more costly and difficult to maintain
our business and to continue to depress the market for
coal.

Our mines are subject to stringent federal and state safety
regulations that increase our cost of doing business at active
operations and may place restrictions on our methods of operation.
In addition, government inspectors in certain circumstances may
have the ability to order our operations to be shut down based on
safety considerations.

The
Federal Mine Safety and Health Act of 1977 (the “Mine
Act”) and Mine Improvement and New Emergency Response Act
(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. In addition, Kentucky
has similar programs for mine safety and health regulation and
enforcement. The various requirements mandated by federal and state
statutes, rules, and regulations may place restrictions on our
methods of operation and potentially 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. 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.

The
regulations enacted under the Mine Act and MINER Act as well as
under similar state acts are routinely expanded, raising compliance
costs and increasing potential liability. For example, in 2014,
MSHA finalized a new rule limiting miners’ exposure to
respirable coal dust. The first phase of the rule went into effect
as of August 1, 2014, and requires, among other things, single
shift sampling to determine noncompliance and corrective action to
remedy any excessive levels of dust. The next phase of the rule
went into effect as of February 1, 2016 and requires increased
sampling frequency and the use of continuous personal dust
monitors. This and other future mine safety rules could potentially
result in or require significant expenditures, as well as
additional safety training and planning, enhanced safety equipment,
more frequent mine inspections, stricter enforcement practices and
enhanced reporting requirements. 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.

We must
also compensate employees for work-related injuries. 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. In such situations, an
injured worker would be able to bring suit against his or her
employer for damages in excess of workers’ compensation
benefits. In addition, Kentucky’s workers’ compensation
act provides a much broader exception to workers’
compensation immunity, allowing an injured employee to recover
against his or her employer if he or she can show damages caused by
an unsafe working condition of which the employer was aware and
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 effect on our operating
costs.

In
addition, we have obtained from a third-party insurer a
workers’ compensation insurance policy, which includes
coverage for medical and disability benefits for black lung disease
under the Federal Coal Mine Health and Safety Act of 1969 and the
Mine Act, as amended. We perform periodic evaluations of our black
lung liability, using assumptions regarding rates of successful
claims, discount factors, benefit increases and mortality rates,
among others. Of note, the Affordable Care Act of 2010
significantly amended the black lung provisions of the Mine Act by
reenacting two provisions, which had been eliminated in 1981. Under
the amendments, a miner with at least fifteen years of underground
coal mine employment (or surface mine employment with similar dust
exposure) who can prove that he suffers from a totally disabling
respiratory condition is entitled to a rebuttable presumption that
his disability is caused by black lung. The other amendment
provides that the surviving spouse of a miner who was collecting
federal black lung benefits at the time of his death is entitled to
a continuation of those benefits. These changes could have a
material impact on our costs expended in association with the
federal black lung program.

We have reclamation, mine closing, and related environmental
obligations under the Surface Mining Control and Reclamation Act.
If the assumptions underlying our accruals are inaccurate, we could
be required to expend greater amounts than
anticipated.

SMCRA
establishes operational, reclamation and closure standards for our
mining operations. SMCRA requires that comprehensive environmental
protection and reclamation standards be met during the course of
and following completion of mining activities. Permits for all
mining operations must be obtained from the U.S. 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. See
“Business—Environmental and Other Regulatory
Matters.”

In
December 2016 OSM published the final 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.

In
addition, SMCRA imposes a reclamation fee on all current mining
operations, the proceeds of which are deposited in the Abandoned
Mine Reclamation Fund (“AML Fund”), which is used to
restore unreclaimed and abandoned mine lands mined before 1977. The
current per ton fee is $0.28 per ton for surface mined coal and
$0.12 per ton for underground mined coal. These fees are currently
scheduled to be in effect until September 30, 2021. We accrue
for the costs of current mine disturbance and of final mine
closure, including the cost of treating mine water discharge where
necessary.

The
amounts recorded are dependent upon a number of variables,
including the estimated future closure costs, the amount of
estimated coal deposits, assumptions involving profit margins,
inflation rates, and the assumed credit-adjusted risk-free interest
rates. If these accruals are insufficient or our liability in a
particular year is greater than currently anticipated, our future
operating results could be adversely affected. We are also required
to post bonds for the cost of a coal mine as a condition of our
mining activities.

Volatility in the Products We Sell.

Our
business plan involves selling coal to various customers, and the
price of coal has historically been volatile and unpredictable. Any
significant change in the price of coal could cause detriment to
our ability to execute our business plan or our ability to be
profitable.

Limited Operating History.

We
have a limited operating history and have incurred significant
losses to date, and our current profitability is not guaranteed,
and we may incur significant losses in the future.

We
have generated limited revenues from the sale of our products, and
our business may fail if we are not able to mine the coal, not
successfully sell the coal we produce, or if we produce the coal at
a loss.

The
successful development of our business depends on our ability to
efficiently and cost-effectively mine, transport, and process coal
that will be purchased at a price above our costs.

Our business currently requires substantial capital expenditures
and any expansion of our operations requires substantial capital
investment and we may not have access to the capital required to
reach profitability.

Maintaining
and expanding our existing business is capital intensive.
Specifically, the ongoing expenses of coal mining and processing,
the required capital investment for any new mines going into
production, and compliance with the applicable laws and regulations
all require substantial capital expenditures. In order to maintain
compliance of existing or future regulations, we invest significant
capital and continue to invest significant capital to maintain our
production and operations. We cannot assure you that we will be
able to maintain our existing or future levels of business or
generate sufficient cash flow, or that we will have access to
sufficient financing to continue our production, development or
marketing at or above our present levels and on our current or
projected timelines and we may be required to defer all or a
portion of our capital expenditures. Our results of operations,
business and financial condition, as well as our ability to satisfy
our obligations may be materially adversely affected if we cannot
make such capital expenditures.

Our business is highly contractual in nature and failure to adhere
to the terms of agreements, such as mineral lease agreements, may
result in significant business impairment.

All
of our material coal deposits and surface rights are leased from
mineral and surface owners, such as Elk Horn Coal Company, LLC,
Alma Land Company, Big Sandy Company, LP, Kentucky Berwind Land
Company, and various individuals and companies (including
potentially Land Resources & Royalties LLC in the future). Our
ability to retain these coal leases is dependent on our ability to
meet the contractual obligations of the leases, such as payments of
royalties and other performance metrics. Failure to adhere to the
lease agreements may result in significantly impairment of our
business, including the loss of coal deposits under management,
loss of revenue, loss of certain operational divisions, and/or
additional costs incurred by our business.

A defect in title or the loss of a leasehold interest in certain
property could limit our ability to mine our coal deposits or
result in significant unanticipated costs.

We
conduct our coal mining operations on properties that we lease. la
title defect or the loss of a lease could adversely affect our
ability to mine the associated coal deposit. We may not verify
title to our leased properties or associated coal deposits until we
have committed to developing those properties or coal deposits. We
may not commit to develop property or coal deposits until we have
obtained necessary permits and completed exploration. As such, the
title to property that we intend to lease or coal deposits that we
intend to mine may contain defects prohibiting our ability to
conduct mining operations. Similarly, our leasehold interests may
be subject to superior property rights of other third parties or to
royalties owed to those third parties. In order to conduct our
mining operations on properties where these defects exist, we may
incur unanticipated costs. In addition, some leases require us to
produce a minimum quantity of coal and require us to pay minimum
production royalties. Our inability to satisfy those requirements
may cause the leasehold interest to terminate.

We outsource certain aspects of our business to third party
contractors, which subjects us to risks, including disruptions in
our business.

la
significant portion of our business is operated via contractor
model, in which we contract with third parties to provide coal
extraction, coal mining, blasting services, and other operational
functions at all of our mines. In addition, we contract with third
parties to provide truck transportation services between our mines
and our preparation plants. Accordingly, we are subject to the
risks associated with the contractors’ ability to
successfully provide the necessary services to meet our needs. If
the contractors are unable to adequately provide the contracted
services, and we are unable to find alternative service providers
in a timely manner, our ability to conduct our coal mining
operations and deliver coal to our customers may be
disrupted.

Our coal sale agreements are subject to quality specifications that
we may not be able to meet, resulting in lower sales price of our
coal or non-acceptance of delivery of our coal by the
customer.

The
coal we sell is subject to stated specifications or a range of
specifications, such as heat value (BTU/lb value), percent sulfur,
percent volatile matter, and percent ash, among other
characteristics. Failure to meet these characteristics on a
particular order, or in general, could result in rejection of coal
delivery, non-payment of coal sales, and/or refusal to continue the
sales relationship. Any of these factors could have a detrimental
effect on our business and our ability to sell our coal and pay our
expenses.

Our coal is sold primarily through various regional coal brokers
and our ability to sell our coal to these brokers and receive
payment for such sales is dependent on their ability to properly
operate and manage their business.

For
the coal we sell to brokers and intermediaries, which is all of our
sales currently and anticipated to be a significant portion of our
sales going forward, the ability to utilize such brokers is
dependent on their ability to successfully operate their business.
Inability to operate their business or impairment of their business
will result in our ability to sell coal to such brokers and
intermediaries.

Furthermore,
there is the risk that any broker or intermediary fails to pay for
any coal delivered, either in whole or in part, due to a potential
combination of factors, such as:

improper
coal qualities and characteristics that don’t meet delivery
specifications;

delay
in the broker and/or intermediaries’ receipt of
payment(s);

fraudulent
activity of the broker and/or intermediary; and

bankruptcy
of the broker and/or intermediary.

Any
failure to receive payment from our brokers and/or intermediaries
could result in severe impairment or bankruptcy of our
business.

Furthermore,
for the coal we may sell directly to the end-customer, our ability
to receive payment for the coal we sell depends on the continued
creditworthiness of our customers. The current economic volatility
and tightening credit markets increase the risk that we may not be
able to collect payments from our customers. A continuation or
worsening of current economic conditions or other prolonged global
or U.S. recessions could also impact the creditworthiness of our
customers. If the creditworthiness of a customer declines, this
would increase the risk that we may not be able to collect payment
for all of the coal we sell to that customer. If we determine that
a customer is not creditworthy, we may not be required to deliver
coal under the customer’s coal sales contract. If we are able
to withhold shipments, we may decide to sell the customer’s
coal on the spot market, which may be at prices lower than the
contract price, or we may be unable to sell the coal at all.
Furthermore, the bankruptcy of any of our customers could have a
material adverse effect on our financial position. In addition,
competition with other coal suppliers could force us to extend
credit to customers and on terms that could increase the risk of
payment default.

Our assets and operations are concentrated in eastern Kentucky, and
a disruption within that geographic region could adversely affect
the Company’s performance.

We
currently rely exclusively on sales generated our coal extraction
within eastern Kentucky’s Central Appalachian coal region.
Due to our lack of diversification in geographic location, an
adverse development in these areas, including adverse developments
due to catastrophic events or weather and decreases in demand for
coal or electricity, could have a significantly greater adverse
impact on our ability to operate our business and our results of
operations than if we held more diverse assets and
locations.

Some officers and management of the Company may spend a substantial
amount of time managing the business and affairs of other
businesses and of other interests.

The
officers and management of the Company have other business
interests that may require substantial time apart from management
of the Company. Furthermore, these other business interests may or
may not compete directly with the business of the Company. These
officers may face a conflict regarding the allocation of their time
between our business and the other business interests of the
Company, and as a result our business may be adversely affected if
the officers spend less time on our business and affairs than would
otherwise be available as a result of such officers’ time
being split between the management of the Company. These officers
may also be conflicted when negotiating the terms of contracts
between the Company and other company interests, although the
officers will act in the best faith of the Company, or recuse
themselves from the negotiations, should a potential conflict
arise

Our business model may result in various legal proceedings, which
may have an adverse effect on our business.

Due
to the nature of our business, at times we may be involved in legal
proceedings incidental to our normal business activities. We will
not be able to predict the outcome, and there is always the
potential that the costs of litigation in an individual matter or
the aggregation of many matters could have an adverse effect on our
cash flows, results of operations or financial
position.

Risk Related to Environmental Reclamation and
Remediation.

We
have a large amount of reclamation liability and large number of
regulatory requirements as part of our operations. Our inability to
perform our reclamation or regulatory requirements under local,
state, or federal laws may result in fines or governmental orders
that limit, impair, or stop our ability to operate. Regulatory
fines may be substantial in nature and may significantly impact our
operational results. Furthermore, we have several permit sites that
require constant water monitoring and treatment for the foreseeable
future due to the poor quality of water present within the
permit.

We do not have Proven or Probable mineral reserves for any of our
properties.

Unlike
other mining companies who have completed a feasibility study, we
do not have any Proven or Probable reserves as described and
defined in the Securities and Exchange Commission’s Industry
Guide 7. As a result, we incur additional risks as compared to
these other mining companies from the fact that we are operating
mines without establishing a Proven or Probable mineral reserve.
These risks may include, but are not limited to, the inherent risk
to commence production without a feasibility study that establishes
the economic recovery of any coal mineralization, as well as
possible volatility in earnings due to our inability to record
certain investments as assets in our financial statements, such as
new mine construction and development costs.

Risks Related to this Offering and Our Common Stock

We have broad discretion in the use of the net proceeds we receive
from this offering and may not use them effectively.

Although we intend
to use a portion of the net proceeds we receive to repay certain
indebtedness as described under “Use of Proceeds,” we
cannot specify with certainty the particular other uses of the net
proceeds that we will receive from such purchase. Our management
will have broad discretion in the application of such proceeds,
including for any of the purposes described in “Use of
Proceeds.” Accordingly, you will have to rely upon the
judgment of our management with respect to the use of the proceeds,
with only limited information concerning management’s
specific intentions. Our management may spend a portion or all of
the net proceeds from this offering in ways that our stockholders
may not desire or that may not yield a favorable return. The
failure by our management to apply these funds effectively could
harm our business. Pending their use, we may invest the net
proceeds from this offering in a manner that does not produce
income or that loses value.

Our ability to pay dividends may be limited by the amount of cash
we generate from operations following the payment of fees and
expenses, by restrictions in any future debt instruments and by
additional factors unrelated to our profitability.

We
intend to pay special and regular quarterly dividends. The
declaration and payment of dividends, if any, is subject to the
discretion of our board of directors and the requirements of
applicable law. The timing and amount of any dividends declared
will depend on, among other things: (a) our earnings, earnings
outlook financial condition, cash flow, cash requirements and
outlook on current and future market conditions, (b) our liquidity,
including our ability to obtain debt and equity financing on
acceptable terms, (c) restrictive covenants in any future debt
instruments and (d) provisions of applicable law governing the
payment of dividends.

The
metallurgical coal industry, and the coal industry in general, is
highly volatile, and we cannot predict with certainty the amount of
cash, if any, that will be available for distribution as dividends
in any period. Also, there may be a high degree of variability from
period to period in the amount of cash, if any, that is available
for the payment of dividends. The amount of cash we generate from
operations and the actual amount of cash we will have available for
dividends will vary based upon, among other things:

the
development of our properties into producing coal
mines;

the
ability to begin generating significant revenues and operating cash
flows;

the
market price for coal;

overall
domestic and global economic conditions, including the supply of
and demand for domestic and foreign coal, coke and
steel;

unexpected
operational events or geological conditions;

our
ability to enter into agreements governing the sale of coal, which
are generally short-term in nature and subject to fluctuations in
market pricing;

the
level of our operating costs;

prevailing
global and regional economic and political conditions;

changes
in interest rates;

the
impact of domestic and foreign governmental laws and regulations,
including environmental and climate change regulations and
regulations affecting the coal mining industry;

delays
in the receipt of, failure to receive, failure to maintain or
revocation of necessary governmental permits;

modification
or revocation of our dividend policy by our board of directors;
and

the
amount of any cash reserves established by our board of
directors.

The
amount of cash we generate from our operations may differ
materially from our net income or loss for the period, which will
be affected by non-cash items. We may incur other expenses or
liabilities that could reduce or eliminate the cash available for
distribution as dividends.

We currently pay a
10.0% annual dividend on our Series C preferred stock, which is
compounded on an annual basis and no accrual has been made as of
the date of this filing. In the past, we paid an 8.0% annual
dividend on our Series B preferred stock, of which an accrued
amount was recorded of $104,157, as of September 30, 2018, and
continues to accrue to the Series B preferred stock
holder at the same rate
until all Series B preferred stock were converted to common stock
on November 7, 2018. A total amount of $114,290 in Series B
preferred dividend was accrued to the Series B preferred holders
and was added to the Series B preferred stock balance upon
conversion into common shares on November 7, 2018. The conversion
resulted in a total of 267,859 common shares issued to the former
Series B preferred holders.

In
addition, any future financing agreements may prohibit the payment
of dividends if an event of default has occurred and is continuing
or would occur as a result of the payment of such
dividends.

We may
not have sufficient surplus or net profits in the future to pay
dividends, and our subsidiaries may not have sufficient funds,
surplus or net profits to make distributions to us. As a result of
these and the other factors mentioned above, we can give no
assurance that dividends will be paid in the future.

The requirements of being a public company, including compliance
with the reporting requirements of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the
requirements of the Sarbanes-Oxley Act, may strain our resources,
increase our costs and distract management, and we may be unable to
comply with these requirements in a timely or cost-effective
manner.

As a
public company, we will need to comply with new laws, regulations
and requirements, certain corporate governance provisions of the
Sarbanes-Oxley Act of 2002, related regulations of the SEC.
Complying with these statutes, regulations and requirements will
occupy a significant amount of time for our board of directors and
management and will significantly increase our costs and expenses.
We will need to:

institute
a more comprehensive compliance function;

comply
with rules promulgated by the OTC Pink or any other exchange that
lists our shares;

continue
to prepare and distribute periodic public reports in compliance
with our obligations under the federal securities
laws;

establish
new internal policies, such as those relating to insider trading;
and

involve
and retain to a greater degree outside counsel and accountants in
the above activities.

Furthermore, while
we generally must comply with Section 404 of the
Sarbanes-Oxley Act of 2002 for our fiscal years, we are not
required to have our independent registered public accounting firm
attest to the effectiveness of our internal controls until our
first annual report subsequent to our ceasing to be an
“emerging growth company” within the meaning of
Section 2(a)(19) of the Securities Act. Accordingly, we may
not be required to have our independent registered public
accounting firm attest to the effectiveness of our internal
controls until as late as our annual report for the fiscal year
ending December 31, 2018. Once it is required to do so, our
independent registered public accounting firm may issue a report
that is adverse in the event it is not satisfied with the level at
which our controls are documented, designed, operated or reviewed.
Compliance with these requirements may strain our resources,
increase our costs and distract management, and we may be unable to
comply with these requirements in a timely or cost-effective
manner.

In
addition, we expect that being a public company subject to these
rules and regulations may make it more difficult and more expensive
for us to obtain director and officer liability insurance and we
may be required to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract
and retain qualified individuals to serve on our board of directors
or as executive officers. We are currently evaluating these rules,
and we cannot predict or estimate the amount of additional costs we
may incur or the timing of such costs.

If we fail to develop or maintain an effective system of internal
controls, we may not be able to accurately report our financial
results or prevent fraud. As a result, current and potential
stockholders could lose confidence in our financial reporting,
which would harm our business and the trading price of our common
stock.

Effective internal
controls are necessary for us to provide reliable financial
reports, prevent fraud and operate successfully as a public
company. If we cannot provide reliable financial reports or prevent
fraud, our reputation and operating results would be
harmed.

We
cannot be certain that our efforts to develop and maintain our
internal controls will be successful, that we will be able to
maintain adequate controls over our financial processes and
reporting in the future or that we will be able to comply with our
obligations under Section 404 of the Sarbanes Oxley Act of
2002. Any failure to develop or maintain effective internal
controls, or difficulties encountered in implementing or improving
our internal controls, could harm our operating results or cause us
to fail to meet our reporting obligations. Ineffective internal
controls could also cause investors to lose confidence in our
reported financial information, which would likely have a negative
effect on the trading price of our common stock.

The offering price of our common stock may not be indicative of the
market price of our common stock after this offering or throughout
the course of our sale of shares under this offering. In addition,
an active, liquid and orderly trading market for our common stock
may not develop or be maintained, and our stock price may be
volatile and/or decrease substantially as a result of the sale of
the shares under this offering.

Prior
to this offering, our common stock was very thinly traded on the
OTC Pink markets. An active, liquid and orderly trading market for
our common stock may not develop or be maintained after this
offering. Active, liquid and orderly trading markets usually result
in less price volatility and more efficiency in carrying out
investors’ purchase and sale orders. The market price of our
common stock could vary significantly as a result of a number of
factors, some of which are beyond our control. In the event of a
drop in the market price of our common stock, you could lose a
substantial part or all of your investment in our common stock. The
offering price will be determined by us and the underwriters in
this offering and may be more or less than the market price of our
stock after this offering. Consequently, you may not be able to
sell shares of our common stock at prices equal to or greater than
the price paid by you in this offering and the common stock offered
under this prospectus may be sold significantly less than the
market price of the stock or the anticipated offering
price.

The
following factors could affect our stock price:

our
operating and financial performance;

quarterly
variations in the rate of growth of our financial indicators, such
as net income per share, net income and revenues;

the
public reaction to our press releases, our other public
announcements and our filings with the SEC;

strategic
actions by our competitors;

changes
in revenue or earnings estimates, or changes in recommendations or
withdrawal of research coverage, by equity research
analysts;

speculation
in the press or investment community;

the
failure of research analysts to cover our common
stock;

sales
of our common stock by us or underwriters or the perception that
such sales may occur;

our
payment of dividends;

changes
in accounting principles, policies, guidance, interpretations or
standards;

additions
or departures of key management personnel;

actions
by our stockholders;

general
market conditions, including fluctuations in commodity
prices;

domestic
and international economic, legal and regulatory factors unrelated
to our performance; and

the
realization of any risks described under this “Risk
Factors” section.

The
stock markets in general have experienced extreme volatility that
has often been unrelated to the operating performance of particular
companies. These broad market fluctuations may adversely affect the
trading price of our common stock. Securities class action
litigation has often been instituted against companies following
periods of volatility in the overall market and in the market price
of a company’s securities. Such litigation, if instituted
against us, could result in very substantial costs, divert our
management’s attention and resources and harm our business,
operating results and financial condition.


Certain of our directors, members of our management team, and
officers have significant duties with, and spend significant time
serving, other entities, including those entities that may compete
with us in seeking acquisitions and business opportunities and,
accordingly, may have conflicts of interest in allocating time or
pursuing business opportunities.

Certain
of our directors, members of our management team and/or officers
(such as Mark C. Jensen and Thomas M. Sauve, among others), who are
responsible for managing the direction of our operations and
acquisition activities, hold positions of responsibility with other
entities (including T Squared Partners LP and other entities) that
have other business interests and may find itself in the business
of identifying and acquiring coal deposits. The existing positions
held by these directors, members of our management team, and/or
officers may give rise to fiduciary or other duties (such as
devotion of time to the company) that are in conflict with the
duties they owe to us. These directors, members of our management
team, and/or officers, may become aware of business opportunities
that may be appropriate for presentation to us as well as to the
other entities with which they are or may become affiliated. Due to
these existing and potential future affiliations, they may present
potential business opportunities to other entities prior to
presenting them to us, which could cause additional conflicts of
interest. They may also decide that certain opportunities are more
appropriate for other entities with which they are affiliated, and
as a result, they may elect not to present those opportunities to
us. These conflicts may not be resolved in our favor. For
additional discussion of our management’s business
affiliations and the potential conflicts of interest of which our
stockholders should be aware, see “Certain Relationships and
Related Party Transactions.”

Our amended and restated certificate of incorporation and amended
and restated bylaws, as well as Florida law, will contain
provisions that could discourage acquisition bids or merger
proposals, which may adversely affect the market price of our
common stock.

Our
amended and restated certificate of incorporation will authorize
our board of directors to issue preferred stock without stockholder
approval. If our board of directors elects to issue preferred
stock, it could be more difficult for a third party to acquire us.
In addition, some provisions of our amended and restated
certificate of incorporation and amended and restated bylaws could
make it more difficult for a third party to acquire control of us,
even if the change of control would be beneficial to our
stockholders, including:

limitations
on the removal of directors;

limitations
on the ability of our stockholders to call special
meetings;

establishing
advance notice provisions for stockholder proposals and nominations
for elections to the board of directors to be acted upon at
meetings of stockholders;

providing
that the board of directors is expressly authorized to adopt, or to
alter or repeal our bylaws; and

establishing
advance notice and certain information requirements for nominations
for election to our board of directors or for proposing matters
that can be acted upon by stockholders at stockholder
meetings.

Investors in this offering will experience immediate and
substantial dilution.

The
sale of up to 1,000,000 shares under this prospectus
could result in significant shareholder dilution and significantly
negatively impact the share price of our stock. Furthermore, some
investors in our stock may pay substantially different prices than
other investors. There also exists the possibility that a large
purchaser of our stock offered under this prospectus may negotiate
a stock price that is more favorable than another purchaser of our
stock offered under this prospectus, include the possibility of
stock price that is priced at a variable rate to the market price
of our stock. This would result in further significant and
substantial dilution to all other holders of our common
stock.

Future sales of our common stock in the public market, or the
perception that such sales may occur, could reduce our stock price,
and any additional capital raised by us through the sale of equity
or convertible securities may dilute your ownership in
us.

We may
issue additional shares of common stock or convertible securities
in subsequent public offerings. After the completion of this
offering, we will have 23,298,530 outstanding shares of common
stock. There may be no market for buyers of our common stock
offered under this prospectus, or any sale of common stock under
this prospectus may be sold at a substantial discount to the market
price.

At some
point after this offering, we intend to file a registration
statement with the SEC on Form S-8 providing for the registration
of up to 4,000,000 shares of our common stock issued or
reserved for issuance under our equity incentive plan. Subject to
the satisfaction of vesting conditions and the expiration of
lock-up agreements, shares registered under the registration
statement on Form S-8 will be available for resale immediately in
the public market without restriction, subject to Rule 144
limitations with respect to affiliates. In addition, the issuance
of shares of common stock upon the exercise of outstanding options
will result in dilution to the interests of other stockholders.
Please read “Description of Capital Stock— Outstanding
Options or Warrants.”

We
cannot predict the size of future issuances of our common stock or
securities convertible into common stock or the effect, if any,
that future issuances and sales of shares of our common stock will
have on the market price of our common stock or the dividend amount
payable per share on our common stock. Sales of substantial amounts
of our common stock (including shares issued in connection with an
acquisition), or the perception that such sales could occur, may
adversely affect prevailing market prices of our common stock or
the dividend amount payable per share on our common
stock.

Certain U.S. federal income tax preferences currently available
with respect to coal exploration and development may be eliminated
by future legislation.

From
time to time, legislation is proposed that could result in the
reduction or elimination of certain U.S. federal income tax
preferences currently available to companies engaged in the
exploration and development of coal. These proposals have included,
but are not limited to, (1) the elimination of current
deductions, the 60-month amortization period and the 10-year
amortization period for exploration and development costs relating
to coal and other hard mineral fossil fuels, (2) the repeal of
the percentage depletion allowance with respect to coal properties,
(3) the repeal of capital gains treatment of coal and lignite
royalties and (4) the elimination of the domestic
manufacturing deduction for coal and other hard mineral fossil
fuels. The passage of these or other similar proposals could
increase our taxable income and negatively impact the value of an
investment in our common stock.

We may issue preferred stock whose terms could adversely affect the
voting power or value of our common stock.

Our amended and restated certificate of
incorporation will authorize us to issue, without the approval of
our stockholders, one or more classes or series of preferred stock
having such designations, preferences, limitations and relative
rights, including preferences over our common stock respecting
dividends and distributions, as our board of directors may
determine. The terms of one or more classes or series of preferred
stock could adversely impact the voting power or value of our
common stock. For example, we might grant holders of preferred
stock the right to elect some number of our directors in all events
or on the happening of specified events or the right to veto
specified transactions. Similarly, the repurchase or redemption
rights or liquidation preferences we might assign to holders of
preferred stock could affect the residual value of the common
stock.

For as long as we are an emerging growth company, we will not be
required to comply with certain reporting requirements, including
those relating to accounting standards and disclosure about our
executive compensation, that apply to other public
companies.

In
April 2012, President Obama signed into law the JOBS Act. We are
classified as an “emerging growth company” under the
JOBS Act. For as long as we are an emerging growth company, which
may be up to five full fiscal years subsequent to our first sale of
an equity security pursuant to registration in 2014, unlike other
public companies, we will not be required to, among other things:
(i) provide an auditor’s attestation report on
management’s assessment of the effectiveness of our system of
internal control over financial reporting pursuant to
Section 404(b) of the Sarbanes-Oxley Act; (ii) comply
with any new requirements adopted by the PCAOB requiring mandatory
audit firm rotation or a supplement to the auditor’s report
in which the auditor would be required to provide additional
information about the audit and the financial statements of the
issuer; (iii) provide certain disclosure regarding executive
compensation required of larger public companies; or (iv) hold
nonbinding advisory votes on executive compensation. We will remain
an emerging growth company for up to five years subsequent to our
first sale of an equity security pursuant to registration in 2014,
although we will lose that status sooner if we have more than $1.07
billion of revenues in a fiscal year, have more than $700.0 million
in market value of our common stock held by non-affiliates, or
issue more than $1.0 billion of non-convertible debt over a
three-year period.

To the
extent that we rely on any of the exemptions available to emerging
growth companies, you will receive less information about our
executive compensation and internal control over financial
reporting than issuers that are not emerging growth companies. If
some investors find our common stock to be less attractive as a
result, there may be a less active trading market for our common
stock and our stock price may be more volatile.

If securities or industry analysts do not publish research or
reports about our business, if they adversely change their
recommendations regarding our common stock or if our operating
results do not meet their expectations, our stock price could
decline.

The
trading market for our common stock will be influenced by the
research and reports that industry or securities analysts publish
about us or our business. If one or more of these analysts cease
coverage of our company or fail to publish reports on us regularly,
we could lose visibility in the financial markets, which in turn
could cause our stock price or trading volume to decline. Moreover,
if one or more of the analysts who cover our company downgrades our
common stock or if our operating results do not meet their
expectations, our stock price could decline.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS

The
information in this prospectus includes “forward-looking
statements.” All statements, other than statements of
historical fact included in this prospectus, regarding our
strategy, future operations, financial position, estimated revenues
and losses, projected costs, prospects, plans and objectives of
management are forward-looking statements. When used in this
prospectus, the words “could,” “believe,”
“anticipate,” “intend,”
“estimate,” “expect,” “project”
and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
such identifying words. These forward-looking statements are based
on management’s current expectations and assumptions about
future events and are based on currently available information as
to the outcome and timing of future events. When considering
forward-looking statements, you should keep in mind the risk
factors and other cautionary statements described under the heading
“Risk Factors” included in this
prospectus.

Forward-looking statements may include statements
about:

our
status as a recently organized corporation with limited operating
history, limited current revenue and properties that have limited
production history;

deterioration
of economic conditions in the steel industry or other markets for
our coal, generally;

deterioration
of economic conditions in the metallurgical and/or thermal coal
industry and other markets for our coal, generally;

higher
than expected costs to develop our planned mining operations,
including, but not limited to, the costs to rehabilitate our
mines;

decreases
in the estimated quantities or quality of our coal
deposits;

changes
in the estimated geological conditions in our mines;

our
expectations relating to dividend payments and our ability to make
such payments;

our
inability to obtain additional financing on favorable terms, if
required, to complete the acquisition of additional metallurgical
coal deposits as currently contemplated or to fund the operations
and growth of our business;

increased
maintenance, operating or other expenses or changes in the timing
thereof;

impaired
financial condition and liquidity of our customers;

increased
competition in coal markets;

decreases
in the price of metallurgical coal and/or thermal
coal;

the
impact of and costs of compliance with stringent domestic and
foreign laws and regulations, including environmental, climate
change and health and safety regulations, and permitting
requirements, as well as changes in the regulatory environment, the
adoption of new or revised laws, regulations and permitting
requirements;

the
impact of potential legal proceedings and regulatory inquiries
against us;

our
inability to effectively deploy the net proceeds of this
offering;

impact
of weather and natural disasters on demand, production and
transportation;

reductions
and/or deferrals of purchases by major customers and our ability to
renew sales contracts;

credit
and performance risks associated with customers, suppliers,
contract miners, co-shippers and trading, banks and other financial
counterparties;

geologic,
equipment, permitting, site access, operational risks and new
technologies related to mining;

our
ability to attract and retain employees;

transportation
availability, performance and costs;

availability,
timing of delivery and costs of key supplies, capital equipment or
commodities such as diesel fuel, steel, explosives and
tires;

the
existence of registration rights with respect to the securities
being offered and the costs of compliance or penalties for
noncompliance with such rights;

the
amount of expenses and other liabilities incurred or accrued after
the completion of this offering;

the
lack of a public market for our securities; and

the
other risks identified in this prospectus including, without
limitation, those under the headings “Risk Factors,”
“Business” and “Certain Relationships and Related
Party Transactions.”

We
caution you that these forward-looking statements are subject to
all of the risks and uncertainties, most of which are difficult to
predict and many of which are beyond our control, incident to the
development, production, gathering and sale of coal. These risks
include, but are not limited to, commodity price volatility, demand
for domestic and foreign steel, inflation, lack of availability of
mining equipment and services, environmental risks, operating
risks, regulatory changes, the uncertainty inherent in estimating
coal deposits and in projecting future rates of production, cash
flow and access to capital, the timing of development expenditures
and the other risks described under “Risk Factors” in
this prospectus.

Should
one or more of the risks or uncertainties described in this
prospectus occur, or should underlying assumptions prove incorrect,
our actual results and plans could differ materially from those
expressed in any forward-looking statements.

All
forward-looking statements, expressed or implied, included in this
prospectus are expressly qualified in their entirety by this
cautionary statement. This cautionary statement should also be
considered in connection with any subsequent written or oral
forward-looking statements that we or persons acting on our behalf
may issue.

Except
as otherwise required by applicable law, we disclaim any duty to
update any forward-looking statements, all of which are expressly
qualified by the statements in this section, to reflect events or
circumstances after the date of this prospectus.

USE OF PROCEEDS

We
expect to receive approximately
$5,580,000
of net proceeds from the sale of the
common stock offered by us, assuming the full sale of 1,000,000
common shares registered under this prospectus, other than the 15%
underwriter’s Over-Allotment and after deducting the
underwriters discount of 7%.


We intend to use approximately
$1.0 million for the purchase of additional surface and
underground equipment and parts and supplies for such equipment, or
the rehabilitation of our current equipment. The equipment will be
used to increase production at existing operating mines and bring
other mines into production at our various operating
subsidiaries.

We intend to use approximately
$0.5 million for future acquisitions of regional coal
mines to complement our current regional operations, larger coal
mining complexes, and/or other businesses related to the coal
mining industry.

We intend to use approximately
$0.67 million for mine rehabilitation of our existing
idled mines to bring these mines in production. The mine
rehabilitation costs are primarily comprised of labor and mining
supplies and are dependent on the amount of rehabilitation and the
existing conditions at the idled mine.

We intend to use approximately
$1.17 million for partial repayment of certain debt and
payables including amounts owed to management and related
parties.
We expect to fund our
remaining current liabilities and satisfy our liquidity
requirements with cash on hand, future borrowings and cash flow
from operations. If future cash flows are insufficient to meet our
liquidity needs or capital requirements, we may reduce our mine
development and/or fund a portion of our expenditures through
issuance of debt or equity securities, the entry into debt
arrangements for from other sources, such as asset
sales.

We intend to use approximately
$0.88 million for working capital, including the public
company costs, closing costs, and general expenses of the
company.

We
do not intend to use any proceeds from this offering to satisfy
Series C preferred stock accrued dividend amounts, if any exist at
the time of this offering. The company has not yet accrued a
dividend for the Series C preferred stock as of the date of this
prospectus.

The
expected use of the net proceeds from this offering represents our
intentions based upon our current plans and business conditions,
which could change in the future as our plans and business
conditions evolve. We believe the net proceeds from this offering,
together with our current cash and investments, and projected cash
flow from future operations will be sufficient to fund our initial
phase of projected capital expenditures. However, the amounts and
timing of our actual expenditures depend on numerous factors,
including the progress of development of our properties, which
involves numerous uncertainties described under “Risk
Factors” included elsewhere in this prospectus. Accordingly,
we may choose to reallocate or otherwise use the proceeds from this
offering and will have broad discretion in the use of the net
proceeds from this offering.

CAPITALIZATION

The
following table summarizes our capitalization and cash and cash
equivalents as of September 30, 2018:

sur
an actual basis; and

sur
an as adjusted basis to reflect (i) the sale by us of units in this
offering based on a public offering price of $[ ] per unit,
assuming no exercise of the underwriters’ option to purchase
additional units, and (ii) the deduction of estimated underwriting
discounts and commissions and estimated offering expenses payable
by us.

The
nature and purpose of this capitalization table is to illustrate
the pro-forma adjustments from our September 30, 2018 quarterly
statement to the current date as of this filing and including the
results of this offering.
You
should read this table together with “Management’s
Discussion and Analysis of Financial Condition and Results of
Operation,” as well as our financial statements and related
notes and the other financial information, appearing elsewhere in
this prospectus.

As
of September 30, 2018 (unaudited)

Pro-Forma
Adjustment

Pro-forma

As-Adjusted

Cash & Cash
Equivalents (8)(9)(15)

$ 343,782

$ 11,231,000

$ 11,574,782

Fixed Assets and
Coal Properties (1)(10)

12,118,730

50,106,101

62,224,831

Cash, Cash
Equivalents, Fixed Assets and Coal Properties

12,462,512

61,477,101

73,939,613

Debt:

Current Debt &
Certain Payables (1)(2)(3)

21,543,180

8,222,000

29,765,180

Long Term
Debt

5,072,493

Reclamation
Liability (1)

22,565,375

234,240

22,799,615

Current Debt,
Certain Payables, Long Term Debt and Reclamation
Liability:

$ 49,181,048

$ 8,456,240

$ 57,637,288

Class A Common
stock, $0.0001 par value, 230,000,000 shares authorized, 1,192,044
shares issued and outstanding, actual and 23,138,700 issued and
outstanding, as adjusted
(1)(2)(3)(4)(5)(6)(8)(9)(10)(11)(12)(13)(14)

118

2,196

2,314

Series A Preferred
stock, $0.0001 par value, 4,817,792 shares authorized, 4,817,792
shares issued and outstanding, actual and no issued and
outstanding, as adjusted (5)

482

(482)

Series B Preferred
stock, $0.001 par value, 20,000,000 shares authorized, 850,000
shares issued and outstanding, actual and 0 issued and outstanding,
as adjusted (6)

850

(850)

Series C Preferred
stock, $0.0001 par value, 20,000,000 shares authorized, 0 shares
issued and outstanding, actual and 50,000 issued and outstanding,
as adjusted (7)

5

5

Additional paid in
capital
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)

19,816,567

53,257,274

73,073,841

Accumulated deficit
(4)(11)

(50,265,183)

(247,200)

(50,512,383)

Total
stockholders’ equity

(30,447,166)

53,010,943

22,563,777

Total
capitalization

18,733,882

61,467,183

80,201,065


(1)
Acquisition of assets creating Wyoming County Coal LLC subsidiary.
For discussion of the terms of the acquisitions see "Management's
Discussion and Analysis". Management is still gathering the
information needed to complete the allocation of the purchase price
to the assets and acquired liabilities assumed

(2)
Conversion of $225,000 unrelated debt into 37,500 shares of Class A
Common stock

(3)
Conversion of $36,000 of unrelated payables into 6,000 shares of
Class A Common stock

(4)
Pursuant to a consulting agreement, issued 10,000 shares of Class A
Common stock

(5) Conversion
of 4,817,792 shares of Series A Preferred stock into 16,059,307
shares of Class A Common stock

(6)
Conversion of 964,290 shares (including accrued dividends) of
Series B Preferred stock into 267,859 shares of Class A Common
stock

(7)
Sale of 50,000 shares of Series C Preferred stock

(8)
Sale of 1,000,000 shares of newly registered Class A Common stock
at $4.00 per share.

(9)
Sale of 20,200 previously registered Class A Common Shares for
cash

(10) Acquisition
of stock and membership interests of entities with non-operating
assets consisting of surface and mineral ownership and other
related agreements. The transaction is expected to close
simultaneous with this offering. Consideration is in the form of
2,000,000 Class A common shares 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. Further described in the discussion of subsequent events
included in Note 8 to our consolidated interim financial statements
appearing on page F-12. Management is still gathering the
information needed to complete the allocation of the purchase price
to the assets and acquired liabilities assumed

(11)
Issuance of 9,000 of previously registered Class A Common
Shares

(12) Cashless
exercise of options into 668,847 Class A Common
Shares

(13)
Issuance of 150,000 Class A Common Shares for
services.

(14)
Issuance of 500 Class A Common Shares for the settlement of $3,000
of trade payables.


(15) 
Loan agreement with an unrelated customer for an amount up to
$6,500,000 of which $3,000,000 was advanced on December 31, 2018
and $2,500,000 was advanced on February 1, 2019. The remaining
balance of $1,500,000 remains available for draw on-demand by the
company. The proceeds of the loan are used for expansion of certain
mines at the company’s McCoy Elkhorn subsidiary and do not
replace any of the use of proceeds expected from this offering, and
the company is not required to repay any of this loan from the
proceeds of this offering. The promissory agreement carries
interest at 5% annual interest rate and payments of principal and
interest shall be repaid at a per-ton rate of coal sold to the
lender.  The outstanding amount of the note has a maturity of
April 1, 2020.  The note is secured by the assets of the
Company



INFORMATION WITH RESPECT TO THE REGISTRANT

Description of Business, Principal Products, Services

We are
a low-cost producer of primarily high-quality, metallurgical coal
in eastern Kentucky. We began our Company on October 2, 2013 and
changed our name from Natural Gas Fueling and Conversion Inc. to
NGFC Equities, Inc. on February 25, 2015, and then changed our name
from NGFC Equities, Inc. to American Resources Corporation on
February 17, 2017. On January 5, 2017, ARC executed a Share
Exchange Agreement between the Company and Quest Energy Inc., a
private company incorporated in the State of Indiana with offices
at 9002 Technology Lane, 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 resulting in Quest
Energy becoming a wholly-owned subsidiary of ARC. Through its
wholly-owned subsidiary Quest Energy, which is an Indiana
corporation founded in June 2015, ARC was able to acquire coal
mining and coal processing operations, substantially all located in
eastern Kentucky. A majority of our domestic and international
target customer base includes blast furnace steel mills and coke
plants, as well as international metallurgical coal consumers,
domestic electricity generation utilities, and other industrial
customers.
Pursuant to the
definitions in Paragraph (a) (4) of the Securities and Exchange
Commission’s Industry Guide 7, our company and its business
activities are deemed to be in the exploration stage until mineral
reserves are defined on our properties.

We
achieved initial commercial production of metallurgical coal in
September 2016 from our McCoy Elkhorn Mine #15 and from our McCoy
Elkhorn Carnegie 1 Mine in March 2017. In October 2017 we achieved
commercial production of thermal coal from our Deane Mining Access
Energy Mine and from our Deane Mining Razorblade Surface Mine in
May 2018. We believe that we will be able to take advantage of
recent increases in U.S. and global benchmark metallurgical and
thermal coal prices and intend to opportunistically increase the
amount of our projected production that is directed to the export
market to capture favorable differentials between domestic and
global benchmark prices. The Company commenced operations of two
out of four of its internally owned preparation plants in July of
2016 (Bevins #1 and Bevins #2 Prep Plants at McCoy Elkhorn), with a
third preparation plant commencing operation in October 2017 (Mill
Creek Prep Plant at Deane Mining).

Distribution Methods Of The Products and Services

Quest
Energy has six 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”), Wyoming County Coal LLC (“Wyoming County
Coal”), ERC Mining Indiana Corporation (“ERC”),
and Quest Processing LLC (“Quest Processing”), all of
which are located in eastern Kentucky and West Virginia within the
Central Appalachian coal basin, with the exception of ERC Mining
Indiana Corporation, which is located in southwestern Indiana in
the Illinois coal basin. Below is an organizational and ownership
chart of our Company.

The
coal deposits under control by the Company generally comprise of
metallurgical coal (used for steel making), pulverized coal
injections (“PCI”, 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, specialty products and thermal coal used for electricity
generation.

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
2017, Mine #15 produced approximately
247,234 tons and sold the coal at an average price
of $67.23 per ton. In 2016, Mine #15 started production and
produced approximately 62,941 tons and sold the coal at an average
price of $82.45 per ton. During 2017 and 2016, 100% and 100%,
respectively, of the coal extracted from Mine #15 was high-vol
“B” metallurgical coal quality, of which 71% and 100%,
respectively, was sold into the metallurgical market, with the
balance sold in the thermal market.

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 Mine as an idled
mine, and since acquisition, the primary work completed at the
Carnegie 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 2017, the first year
of the mine’s production, the Carnegie 1 Mine produced
approximately 11,974 tons and sold the coal at an average price of
$59.78. During 2017, 100% of the coal extracted from the Carnegie
Mine was high-vol “B” metallurgical coal quality, of
which 51% was sold into the metallurgical market, with the balance
sold in the thermal market.

The
PointRock Mine is surface mine in a variety of coal seams,
primarily in the Pond Creek, the Lower Alma, the Upper Alma, and
Cedar Grove coal seams and located near Phelps, Kentucky. Coal has
been produced from the PointRock Mine in the past under different
operators. Quest Energy acquired the PointRock Mine in April 2018
and is currently performing reclamation work in advance of
re-starting production, which is expected in later 2018. PointRock
is anticipated to be mined via contour, auger, and highwall mining
techniques. The coal will be stockpiled on-site and trucked
approximately 23 miles to McCoy Elkhorn’s preparation
facilities. The PointRock Mine is anticipated to be operated as a
modified contractor mine, whereby McCoy Elkhorn provides certain
mining infrastructure and equipment for the operations and pays a
contractor a fixed per-ton fee for managing the workforce,
procuring other equipment and supplies, and maintaining the
equipment and infrastructure in proper working order. The PointRock Mine has the estimated capacity to
produce up to approximately 15,000 tons per month of coal and has
not yet started coal production under McCoy Elkhorn’s
ownership.

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
$58,681.

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:

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.

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 $200,236.

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.

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.

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. Similar to
McCoy Elkhorn’s Carnegie 1 Mine, Access Energy is currently
run as a modified contractor mine, whereby Deane Mining provides
the mining infrastructure and equipment for the operations and pays
the contractor a fixed per-ton fee for managing the workforce,
procuring the supplies, and maintaining the equipment and
infrastructure in proper working order.
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 2017, the first year of the mine’s
production, Access Energy produced approximately 43,286 tons and
sold the coal at an average price of $58.67 per ton. 100% of the
coal sold from Access Energy in 2017 was sold as thermal
coal.

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 will be 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.

The
coal production from Deane Mining LLC is currently sold a utility
located in southeast United States under a contract that expires
December 2018, 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
RapidLoader 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 $2,655,505.

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.

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.

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 $22,926,101 of which $22,326,101
has been paid.

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.

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:

Quest Processing LLC

Quest
Energy’s wholly-owned subsidiary, Quest Processing LLC,
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), the Raven Preparation Facility
(of Knott County Coal LLC), and the 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 Quest MGMT 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, 2017.

ERC Mining Indiana Corporation (the Gold Star Mine)

General:

Quest
Energy, through its wholly-owned subsidiary, ERC Mining Indiana
Corporation (“ERC”), has a management agreement with an
unrelated entity, LC Energy Operations LLC, to manage an
underground coal mine, clean coal processing facility and rail
loadout located in Greene County, Indiana (referred to as the
“Gold Star Mine”) for a monthly cash and per-ton fee.
As part of that management agreement, ERC manages the operations of
the Gold Star Mine, is the holder of the mining permit, provides
the reclamation bonding, is the owner of some of the equipment
located at the Gold Star Mine, and provides the employment for the
personnel located at the Gold Star Mine. LC Energy Operations LLC
owns the remaining equipment and infrastructure, is the lessee of
the mineral (and the owner of some of the mineral and surface) and
provides funding for the operations. Currently the coal mining
operations at the Gold Star Mine are idled. Any cash flow from the
operations of the Gold Star Mine for the foreseeable future will go
to LC Energy Operations LLC to satisfy prior debt advanced to the
Gold Star Mine.

Mine:

The
Gold Star Mine, which is currently the only coal mining operation
within ERC Mining Indiana Corporation (a wholly-owned subsidiary of
Quest Energy Inc.). The Gold Star Mine is an underground mine
located in the Indiana IV (aka Survant) coal seam, which is a low
sulfur coal relative to other coal mining operations in the region.
With a sulfur ranging from 1.0% to 1.5%, the coal has historically
been sold to local power generating facilities that lack more
advanced sulfur capture technologies, as well as to other regional
coal producers to blend their sulfur lower to sell their coal at a
premium.

Processing & Transportation:

Coal
extracted from the Gold Star Mine is belted directly to the
preparation facility on site. The coal can either be loaded to rail
or transported via truck. The rail spur at Gold Star is serviced by
the Indiana Rail Road Company and holds up to 116 rail
cars.

The
Gold Star Mine is currently idled and ARC management is pursuing
potential sales orders for the coal. Any re-initiation of coal
mining operations at the Gold Star Mine would require capital
investment.

In
addition to the current owned permits and controlled coal deposits
described within the above operating subsidiaries, ARC may, from
time to time, and frequently, acquire additional coal mining
permits or coal deposits, or dispose of coal mining permits or coal
deposits currently held by ARC, as management of the Company deems
appropriate.

Status of any publicly announced new products or
services

McCoy Elkhorn Coal LLC:

We are
currently producing at Mine #15 and Carnegie 1 Mine at McCoy
Elkhorn Coal and both of our preparation plants (Bevins 1 and
Bevins 2) are operational, as is the rail loadout facility. Our
PointRock surface mine is currently idled as we interview
contractors for future production. We continue to develop our
Carnegie 2 deep mine in the Alma coal seam and are working on other
permit acquisition and/or development activities in the area of
McCoy Elkhorn.

Knott County Coal LLC:

We are
currently producing at our Wayland Surface mine. The coal from this
mine processed and loaded to rail at the Mill Creek Preparation
Plant and RapidLoader loadout of Deane Mining LLC. We continue
permitting and development work on several other permits, including
the Topper mine.

While
Knott County Coal owns the Supreme Energy Preparation Plant and
Bates Branch rail loadout, those facilities are currently idled and
would require capital to rehabilitate to operational
condition.

Deane Mining LLC:

We are
currently producing at the Access Energy Mine, underground room and
pillar operations, the Razorblade Surface mine, and our Mill Creek
Preparation Plant is operational, as is the rail loadout facility.
We continue to analyze additional coal mines that could be brought
into production, assuming we achieve coal sales for such
operations.

Wyoming County Coal LLC:

We
currently do not have any operations at Wyoming County Coal LLC and
do not anticipate having operations for the foreseeable future.
While Wyoming County Coal LLC owns a preparation plan and rail
loadout those facilities are currently idled and would require
capital to rehabilitate to operational condition.

ERC Mining Indiana Corporation:

We have
completed the rehabilitation of the Gold Star underground mine at
ERC Mining Indiana Corp. and are working to obtain sales for this
mine, although no time frame for production is currently
anticipated. The coal will be belted directly to the on-site
processing facility for coal processing and then anticipated to be
loaded to rail or truck, depending on the customer’s
requirements. ERC Mining Indiana Corp. has a management agreement
with an unrelated entity, LC Energy Operations LLC to manage an
underground coal mine, clean coal processing facility and rail
loadout for a monthly cash and per-ton fee. As part of that
management agreement, LC Energy Operations LLC is required to
provide funding for the operations at the Gold Star mine, and any
cash flow from the operations of the Gold Star Mine for the
foreseeable future will go to LC Energy Operations LLC to satisfy
prior debt advanced to the Gold Star Mine.

Competitive Business Conditions And The Smaller Reporting
Company’s Competitive Position In The Industry And Methods Of
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 Alpha Natural Resources, Ramaco Resources,
Blackhawk Mining, Coronado Coal, Arch Coal, Contura Energy, Warrior
Met Coal, Alliance Resource Partners, and ERP Compliance Fuels.
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 Australia, Colombia, Indonesia and South
Africa.

Coal
prices differ substantially by region and are impacted by many
factors including the overall economy, demand for steel, demand for
electricity, location, market, quality and type of coal, mine
operation costs and the cost of customer alternatives. The major
factors influencing our business are the global economy, the demand
for steel, and the amount of coal being consumed for electricity
generation.

Our
initial marketing strategy is to focus on U.S.- and
internationally-based blast furnace still mills and coke plants,
and other customers where our coal is in demand. Our current sales
are primarily conducted through the use of intermediaries and
brokers who have established relationships with our potential
end-customers, although we may develop and employ an in-house
marketing team in the future.

The
Company sells its coal to domestic and international customers,
some which blend the Company’s coal at east coast ports with
other qualities of coal for export. Coal sales currently come from
the Company’s McCoy Elkhorn’s Mine #15, McCoy
Elkhorn’s Carnegie Mine, and Deane Mining’s Access
Energy 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.

Sources And Availability Of Raw Materials And The Names Of
Principal Suppliers

Supplies used in
our business include petroleum-based fuels, explosives, tires,
conveyance structure, roof support supplies, ventilation supplies,
lubricants and other raw materials as well as spare parts and other
consumables used in the mining process. We use third-party
suppliers for a significant portion of our equipment rebuilds and
repairs, drilling services and construction. We also may utilize
contract miners at our various operations. We believe adequate
substitute suppliers and contractors are available and we are not
dependent on any one supplier or contractor. We continually seek to
develop relationships with suppliers and contractors that focus on
reducing our costs while improving quality and service. Principal
suppliers for our business include Drill Steel, Banks Miller,
Mineral Labs, Jones Oil, and Maggard Sales & Service, among
other regional and national suppliers of the Company.

Dependence On One Or A Few Customers

As of
December 31, 2017, and 2016 63% and 78% of revenue and 99% and 97%
of outstanding accounts receivable came from three and two
customers, respectively. As of September 30, 2018, and 2017 76% and
100% of outstanding accounts receivable came from three and one
customers, respectively. As of September 30, 2018, and 2017 85% and
72% of revenue came from three and four customers, respectively.
Through our network of intermediaries, coal consolidators and end
users, interested potential customers outpace our ability to
fulfill potential orders. The Company’s desire is to expand
the customer base and those who have purchased our
product.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements Or Labor Contracts, Including Duration

We do
not have any registered trademarks or trade names for our products,
services or subsidiaries, and we do not believe that any trademark
or trade name is material to our business. However, the names of
the seams in which we have coal deposits, and attributes thereof,
are widely recognized in the coal markets. We are not a party to
any union or collective bargaining agreements.

Coal
mining and processing involves the extraction of coal (mineral) and
the use of surface property incidental to such extraction and
processing. All the material 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.

Need For Any Government Approval Of Principal Products Or
Services

Prior
to conducting any mining activities, we first need approval from
various local and federal agencies. From our various acquisitions
in 2015 and 2016, we are the holder of 56 coal mining permits
issued by Kentucky Department of Natural Resources and one coal
mining permit issued by Indiana Department of Natural Resources.
The coal mining permits we hold are primarily located in eastern
Kentucky, in the counties of Pike, Knott, Letcher, Perry, Floyd,
Breathitt, and Leslie.

Effect Of Existing Or Probable Governmental Regulations On The
Business

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.

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.

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 surety, Lexon Insurance
Company, 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, 2018 and September 30, 2018,
we had outstanding surety bonds at all of our mining operations
totaling approximately $26.66 million,
respectively. As of December 31, 2017, we had outstanding surety
bonds at all of our mining operations totaling approximately $24.80
million
. 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.

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.

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.

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.

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.

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.

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.

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.

Estimate Of The Amount Of Money Spent During Each Of The Last Two
Fiscal Years On Research And Development

The
Company spent a de-minimus amount on research and development
during its last two fiscal years.

Costs and Effects Of Compliance With Environmental
Laws

As of
December 31, 2017, and 2016, the cost of compliance with
environmental laws amounted to $190,940 and $9,806, respectively.
This amount represents the costs of the company associated with
fines incurred from various regulations regarding environmental and
safety compliance; please see elsewhere in this prospectus for
additional detail regarding other reclamation and remediation
costs.
including the discussion surrounding our Asset Retirement
Obligations (ARO) in Note 1 of the Notes to Consolidated Financial
Statements located in the Index to Financial
Statements.

DESCRIPTION OF PROPERTY

Our
principal offices are located at 9002 Technology Lane, Fishers,
Indiana 46038. We pay $2,500 per month in rent for the office space
and the rental lease expires in December 2018. 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 active
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. At
McCoy Elkhorn Coal, located near Kimper, Kentucky, the Company owns
two coal preparation facilities, a train loadout, and two active
mines (Mine #15 and the Carnegie 1 Mine). At Knott County Coal,
located in Kite, Kentucky, the Company owns one coal preparation
facility, a train loadout, and one active mine (Wayland Surface).
At Deane Mining, located in Deane, Kentucky, the Company owns one
coal preparation facility, a train loadout, and two active mines
(Access Energy and Razorblade Surface). At Wyoming County Coal,
located in Oceana, West Virginia, the Company owns one coal
preparation facility and a train loadout. At ERC, located near
Jasonville, Indiana, the Company manages a coal processing
facility, train loadout, and one underground mine (the Gold Star
Mine). We lease the mineral and surface at all our key locations,
with lease terms at our currently-operating, key properties
typically expiring upon exhaustion of the mineral. Across our key
properties, our mineral royalty rates payable to the mineral owner
range from 5.0% to 11.0% of the gross sales price of our coal. All
permits required to operate our material properties have been
obtained. The source of power for all our key properties is
Kentucky Power, and the source of water for all our key properties
is either the local municipality or our existing water withdrawal
permits that allow us to pull water from nearby streams. See “Distribution Methods Of The Products and
Services
” starting on page 46 for additional
information and description of each mine. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations

starting on page 63 for additional discussion around the capacity
and utilization rate of our material properties and the work
completed on our material properties.

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. As a result, we are considered an exploration stage company
pursuant to Paragraph (a) (4) of Industry Guide 7.

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

(a) Market Information

Currently we are
trading on the OTC Pink
markets under the symbol “AREC” and we have applied for
a listing on the NASDAQ Global Select Market under the symbol
“AREC”. There is presently very limited liquidity for
our shares of Class A Common Stock and we can provide no assurance
that our shares of Class A Common Stock will trade or that a public
market will materialize.

(b) Holders

As
of February 14, 2019, the Company had 217 shareholders of its
Class A Common Stock, no shareholders of its Series A Preferred
Stock, and 1 shareholder of its Series C Preferred
Stock.

(c) Dividends

While
we have not paid any dividends on our common stock since our
inception, our longer-term objective is to pay dividends in order
to enhance stockholder returns when the Board of Directors deems
such action as in the best interest of its shareholders.
Our
Series C preferred stock, however, receives an 10.0% annual
dividend, that accrues annually in arrears. As of the date of this
prospectus, no Series C preferred stock dividend has accrued to any
respective holder(s).

Any
determination to declare a dividend, as well as the amount of any
dividend that may be declared, will be based on the board of
director’s consideration of our financial position, earnings,
earnings outlook, capital spending plans, outlook on current and
future market conditions, alternative stockholder return methods
such as share repurchases, and other factors that our board of
directors considers relevant at that time. Our dividend policy may
change from time to time, and there can be no assurance that we
will declare any dividends at all or in any particular amounts.
Please see “Risk Factors.”

(d) Securities authorized for issuance under equity compensation
plans

We
currently have an employee incentive stock option plan
(“Employee Incentive Stock Option Plan”) in place that
could result in additional options being issued to management at
the discretion of the board of directors. To date there has been a
total of 636,830 options issued under the Employee Incentive Stock
Option Plan issued to various employees of the Company, of which
25,000 options vested immediately, with the remainder vesting
equally over three years. In the future, we may file a registration
statement on Form S-8 under the Securities Act to register any or
all shares issuable under that Employee Incentive Stock Option
Plan. Accordingly, should a Form S-8 become effective, shares
registered under such registration statement may be made available
for sale in the open market following the effective date, unless
such shares are subject to vesting restrictions with us, Rule 144
restrictions applicable to our affiliates or the lock-up
restrictions described above.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction
with the “Selected Historical Financial Data” and the
accompanying financial statements and related notes included
elsewhere in this prospectus. The following discussion contains
forward-looking statements that reflect our future plans,
estimates, beliefs and expected performance. The forward-looking
statements are dependent upon events, risks and uncertainties that
may be outside our control. Our actual results could differ
materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to such
differences are discussed elsewhere in this prospectus,
particularly in “Risk Factors” and “Cautionary
Statement Regarding Forward-Looking Statements,” all of which
are difficult to predict. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed may not
occur. We do not undertake any obligation to publicly update any
forward-looking statements except as otherwise required by
applicable law.

Company Overview

We are
a low-cost producer of primarily high-quality, metallurgical coal
in eastern Kentucky. We began our Company on October 2, 2013 and
changed our name from Natural Gas Fueling and Conversion Inc. to
NGFC Equities, Inc. on February 25, 2015, and then changed our name
from NGFC Equities, Inc. to American Resources Corporation on
February 17, 2017. On January 5, 2017, ARC executed a Share
Exchange Agreement between the Company and Quest Energy Inc., a
private company incorporated in the State of Indiana with offices
at 9002 Technology Lane, 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 resulting in Quest
Energy becoming a wholly-owned subsidiary of ARC. Through its
wholly-owned subsidiary Quest Energy, which is an Indiana
corporation founded in June 2015, ARC was able to acquire coal
mining and coal processing operations, substantially all located in
eastern Kentucky. A majority of our domestic and international
target customer base includes blast furnace steel mills and coke
plants, as well as international metallurgical coal consumers,
domestic electricity generation utilities, and other industrial
customers.
Pursuant to the
definitions in Paragraph (a) (4) of the Securities and Exchange
Commission’s Industry Guide 7, our company and its business
activities are deemed to be in the exploration stage until mineral
reserves are defined on our properties.

We
achieved initial commercial production of metallurgical coal in
September 2016 from our McCoy Elkhorn Mine #15 and from our McCoy
Elkhorn Carnegie 1 Mine in March 2017. In October 2017 we achieved
commercial production of thermal coal from our Deane Mining Access
Energy Mine and from our Deane Mining Razorblade Surface Mine in
May 2018. We believe that we will be able to take advantage of
recent increases in U.S. and global benchmark metallurgical and
thermal coal prices and intend to opportunistically increase the
amount of our projected production that is directed to the export
market to capture favorable differentials between domestic and
global benchmark prices. The Company commenced operations of two
out of four of its internally owned preparation plants in July of
2016 (Bevins #1 and Bevins #2 Prep Plants at McCoy Elkhorn), with a
third preparation plant commencing operation in October 2017 (Mill
Creek Prep Plant at Deane Mining).

Current Projects

Quest
Energy has six 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”), Wyoming County Coal LLC (“Wyoming County
Coal”), ERC Mining Indiana Corporation (“ERC”),
and Quest Processing LLC (“Quest Processing”), all of
which are located in eastern Kentucky and West Virginia within the
Central Appalachian coal basin, with the exception of ERC Mining
Indiana Corporation, which is located in southwestern Indiana in
the Illinois coal basin. Below is an organizational and ownership
chart of our Company.

The
coal deposits under control by the Company generally comprise of
metallurgical coal (used for steel making), pulverized coal
injections (“PCI”, 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, specialty products and thermal coal used for electricity
generation.

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
2017, Mine #15 produced approximately 247,234 tons and sold the
coal at an average price of $67.23 per ton. In 2016, Mine #15
started production and produced approximately 62,941 tons and sold
the coal at an average price of $82.45 per ton. During 2017 and
2016, 100% and 100%, respectively, of the coal extracted from Mine
#15 was high-vol “B” metallurgical coal quality, of
which 71% and 100%, respectively, was sold into the metallurgical
market, with the balance sold in the thermal
market.

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 Mine as an idled
mine, and since acquisition, the primary work completed at the
Carnegie 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 2017, the first year
of the mine’s production, the Carnegie 1 Mine produced
approximately 11,974 tons and sold the coal at an average price of
$59.78. During 2017, 100% of the coal extracted from the Carnegie
Mine was high-vol “B” metallurgical coal quality, of
which 51% was sold into the metallurgical market, with the balance
sold in the thermal market.

The
PointRock Mine is surface mine in a variety of coal seams,
primarily in the Pond Creek, the Lower Alma, the Upper Alma, and
Cedar Grove coal seams and located near Phelps, Kentucky. Coal has
been produced from the PointRock Mine in the past under different
operators. Quest Energy acquired the PointRock Mine in April 2018
and is currently performing reclamation work in advance of
re-starting production, which is expected in later 2018. PointRock
is anticipated to be mined via contour, auger, and highwall mining
techniques. The coal will be stockpiled on-site and trucked
approximately 23 miles to McCoy Elkhorn’s preparation
facilities. The PointRock Mine is anticipated to be operated as a
modified contractor mine, whereby McCoy Elkhorn provides certain
mining infrastructure and equipment for the operations and pays a
contractor a fixed per-ton fee for managing the workforce,
procuring other equipment and supplies, and maintaining the
equipment and infrastructure in proper working order. The
PointRock Mine has the estimated capacity to produce up to
approximately 15,000 tons per month of coal and has not yet started
production under McCoy Elkhorn’s
ownership.

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 the property at McCoy
Elkhorn Coal paid by the company is
$58,681.

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:

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.
The Company
acquired the Wayland Surface Mine as an idled mine, and 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.

During
June 2018, production at the Wayland Surface Mine commenced under
Quest Energy’s ownership. The associated permit was purchased
during May 2018.

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 $200,236.

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.
.

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.

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. Similar to
McCoy Elkhorn’s Carnegie 1 Mine, Access Energy is currently
run as a modified contractor mine, whereby Deane Mining provides
the mining infrastructure and equipment for the operations and pays
the contractor a fixed per-ton fee for managing the workforce,
procuring the supplies, and maintaining the equipment and
infrastructure in proper working order. 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 2017, the first year of the mine’s
production, Access Energy produced approximately 43,286 tons and
sold the coal at an average price of $58.67 per ton. 100% of the
coal sold from Access Energy in 2017 was sold as thermal
coal.

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 will be 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.

The
coal production from Deane Mining LLC is currently sold a utility
located in southeast United States under a contract that expires
December 2018, 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
RapidLoader 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 total cost of for the property at Deane Mining
paid by the company is $2,655,505.

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.
.

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.

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 paid by the Company is $22,926,101.

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.

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:

Quest Processing LLC

Quest
Energy’s wholly-owned subsidiary, Quest Processing LLC,
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), the Raven Preparation Facility
(of Knott County Coal LLC), and the 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 Quest MGMT 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, 2017.

ERC Mining Indiana Corporation (the Gold Star Mine)

General:

Quest
Energy, through its wholly-owned subsidiary, ERC Mining Indiana
Corporation (“ERC”), has a management agreement with an
unrelated entity, LC Energy Operations LLC, to manage an
underground coal mine, clean coal processing facility and rail
loadout located in Greene County, Indiana (referred to as the
“Gold Star Mine”) for a monthly cash and per-ton fee.
As part of that management agreement, ERC manages the operations of
the Gold Star Mine, is the holder of the mining permit, provides
the reclamation bonding, is the owner of some of the equipment
located at the Gold Star Mine, and provides the employment for the
personnel located at the Gold Star Mine. LC Energy Operations LLC
owns the remaining equipment and infrastructure, is the lessee of
the mineral (and the owner of some of the mineral and surface), and
provides funding for the operations. Currently the coal mining
operations at the Gold Star Mine are idled. Any cash flow from the
operations of the Gold Star Mine for the foreseeable future will go
to LC Energy Operations LLC to satisfy prior debt advanced to the
Gold Star Mine.

Mine:

The
Gold Star Mine, which is currently the only coal mining operation
within ERC Mining Indiana Corporation (a wholly-owned subsidiary of
Quest Energy Inc.). The Gold Star Mine is an underground mine
located in the Indiana IV (aka Survant) coal seam, which is a low
sulfur coal relative to other coal mining operations in the region.
With a sulfur ranging from 1.0% to 1.5%, the coal has historically
been sold to local power generating facilities that lack more
advanced sulfur capture technologies, as well as to other regional
coal producers to blend their sulfur lower to sell their coal at a
premium.

Processing & Transportation:

Coal
extracted from the Gold Star Mine is belted directly to the
preparation facility on site. The coal can either be loaded to rail
or transported via truck. The rail spur at Gold Star is serviced by
the Indiana Rail Road Company and holds up to 116 rail
cars.

The
Gold Star Mine is currently idled and ARC management is pursuing
potential sales orders for the coal. Any re-initiation of coal
mining operations at the Gold Star Mine would require capital
investment.

In
addition to the current owned permits and controlled coal deposits
described within the above operating subsidiaries, ARC may, from
time to time, and frequently, acquire additional coal mining
permits or coal deposits, or dispose of coal mining permits or coal
deposits currently held by ARC, as management of the Company deems
appropriate.

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.

Production Plans

We
expect to fund our projected capital expenditures primarily with
our current cash and investments, cash flow from operations and the
net proceeds from this offering. However, if needed, we may seek
additional sources of financing, including revolving credit
arrangements. The majority of our capital expenditure budget
through 2018 is focused on the development of our current projects
with a goal to have the projects fully developed by 2020. We are
currently in production at McCoy Elkhorn Coal’s Mine #15,
McCoy Elkhorn Coal’s Carnegie 1 Mine, Deane Mining’s
Access Energy mine, Deane Mining’s Razorblade Surface mine,
and Knott County Coal’s Wayland Surface mine. We are
currently rehabbing or developing new mines at our McCoy
Elkhorn’s Carnegie 2 Mine, McCoy Elkhorn’s PointRock
mine, Deane Mining’s Love Branch mine, and Knott County
Coal’s Topper mine, and we expect to have these projects
fully developed and/or producing by the first half of 2019, pending
successful sales efforts and additional capital
investment.

Permitting

From
our various acquisitions from 2015 to 2018, we are the holder of 58
coal mining permits issued by Kentucky Department of Natural
Resources and one coal mining permit issued by Indiana Department
of Natural Resources. The coal mining permits we hold are primarily
located in eastern Kentucky, in the counties of Pike, Knott,
Letcher, Perry, Floyd, Breathitt, and Leslie.

Marketing, Sales and Customers

Coal
prices differ substantially by region and are impacted by many
factors including the overall economy, demand for steel, demand for
electricity, location, market, quality and type of coal, mine
operation costs and the cost of customer alternatives. The major
factors influencing our business are the global economy, the demand
for steel, and the amount of coal being consumed for electricity
generation.

Our
initial marketing strategy is to focus on U.S.- and
internationally-based blast furnace still mills and coke plants,
and other customers where our coal is in demand. Our current sales
are primarily conducted through the use of intermediaries and
brokers who have established relationships with our potential
end-customers, although we may develop and employ an in-house
marketing team in the future.

The
Company sells its coal to domestic and international customers,
some which blend the Company’s coal at east coast ports with
other qualities of coal for export. Coal sales currently come from
the Company’s McCoy Elkhorn’s Mine #15, McCoy
Elkhorn’s Carnegie 1 mine, Deane Mining’s Access Energy
mine, Deane Mining’s Razorblade Surface mine, and Knott
County Coal’s Wayland Surface mine. The Company may, at
times, purchase coal from other regional producers to sell on its
contracts.

Historical
pricing for the two primary types of coal we produce are as
follows:

Historic Metallurgical Coal Prices

Historic CAPP Thermal Coal Prices

Year End

Hampton Road Index HCC – High

Year End

Big Sandy / Kanawha Rate District

2013

$110.30

2013

64.09

2014

$100.35

2014

56.00

2015

$80.25

2015

45.55

2016

$223.00

2016

50.65

2017

$210.00

2017

60.90

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.

Development Activities

McCoy Elkhorn Coal LLC:

We are
currently producing at Mine #15 and Carnegie 1 Mine at McCoy
Elkhorn Coal and both of our preparation plants (Bevins 1 and
Bevins 2) are operational, as is the rail loadout facility. Our
PointRock surface mine is currently idled as we interview
contractors for future production. We continue to develop our
Carnegie 2 deep mine in the Alma coal seam and are working on other
permit acquisition and/or development activities in the area of
McCoy Elkhorn.

Knott County Coal LLC:

We are
currently producing at our Wayland Surface mine. The coal from this
mine processed and loaded to rail at the Mill Creek Preparation
Plant and RapidLoader loadout of Deane Mining LLC. We continue
permitting and development work on several other permits, including
the Topper mine.

While
Knott County Coal owns the Supreme Energy Preparation Plant and
Bates Branch rail loadout, those facilities are currently idled and
would require capital to rehabilitate to operational
condition.

Deane Mining LLC:

We are
currently producing at the Access Energy Mine, underground room and
pillar operations, the Razorblade Surface mine, and our Mill Creek
Preparation Plant is operational, as is the rail loadout facility.
We continue to analyze additional coal mines that could be brought
into production, assuming we achieve coal sales for such
operations.

Wyoming County Coal LLC:

We
currently do not have any operations at Wyoming County Coal LLC and
do not anticipate having operations for the foreseeable future.
While Wyoming County Coal LLC owns a preparation plan and rail
loadout those facilities are currently idled and would require
capital to rehabilitate to operational condition.

ERC Mining Indiana Corporation:

We have
completed the rehabilitation of the Gold Star underground mine at
ERC Mining Indiana Corp. and are working to obtain sales for this
mine, although no time frame for production is currently
anticipated. The coal will be belted directly to the on-site
processing facility for coal processing and then anticipated to be
loaded to rail or truck, depending on the customer’s
requirements. ERC Mining Indiana Corp. has a management agreement
with an unrelated entity, LC Energy Operations LLC to manage an
underground coal mine, clean coal processing facility and rail
loadout for a monthly cash and per-ton fee. As part of that
management agreement, LC Energy Operations LLC is required to
provide funding for the operations at the Gold Star mine, and any
cash flow from the operations of the Gold Star Mine for the
foreseeable future will go to LC Energy Operations LLC to satisfy
prior debt advanced to the Gold Star Mine.

Trade Names, Trademarks and Patents

We do
not have any registered trademarks or trade names for our products,
services or subsidiaries, and we do not believe that any trademark
or trade name is material to our business. However, the names of
the seams in which we have coal deposits, and attributes thereof,
are widely recognized in the coal markets.

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 Alpha Natural Resources, Ramaco Resources,
Blackhawk Mining, Coronado Coal, Arch Coal, Contura Energy, Warrior
Met Coal, Alliance Resource Partners, and ERP Compliance Fuels.
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 Australia, Colombia, Indonesia and South
Africa.

Suppliers

Supplies used in
our business include petroleum-based fuels, explosives, tires,
conveyance structure, roof support supplies, ventilation supplies,
lubricants and other raw materials as well as spare parts and other
consumables used in the mining process. We use third-party
suppliers for a significant portion of our equipment rebuilds and
repairs, drilling services and construction. We also may utilize
contract miners at our various operations. We believe adequate
substitute suppliers and contractors are available and we are not
dependent on any one supplier or contractor. We continually seek to
develop relationships with suppliers and contractors that focus on
reducing our costs while improving quality and
service.

Environmental 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.

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.

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 surety, Lexon Insurance
Company, 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, 2018, and September 30,
2018, we had outstanding surety bonds at all of our mining
operations totaling approximately$26.66 million.
respectively. As of December 31, 2017 we had outstanding surety
bonds at all of our mining operations totaling approximately $24.80
million
. 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.

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.

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.

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.

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.

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 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.

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 liability 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.

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.

Seasonality

Our
primary business is not materially impacted by seasonal
fluctuations. Demand for metallurgical coal, thermal coal, and the
other coals we intend to produce is generally more heavily
influenced by other factors such as the general economy, interest
rates and commodity prices.

Employees

The
Company, 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, Carnegie 1 Mine, and Deane
Mining’s Access Energy mine are primarily run by company
employees, while Deane Mining’s Razorblade Surface mine,
Knott County Coals’ Wayland Surface mine, and McCoy
Elkhorn’s PointRock mine are primarily run (or expected to be
run) by contract labor, and the Company’s various coal
preparation facilities are run by company employees.

The
Company currently has approximately 216 employees (excluding personnel hired through
contractors)
, with a substantial majority based in
eastern Kentucky. The Company is headquartered in Fishers, Indiana
with six members of the Company’s executive team based at
this location.

Results of Operations For The Nine Month Period Ended September 30,
2018

Our
consolidated operations had operating revenues of $9,038,268 and
$23,386,684 for the three-months and nine-months ended September
30, 2018 and $4,351,968 and $15,334,047 operating revenue for the
three-months and nine-months ended September 30, 2017.

For
the three-months and nine-months ended September 30, 2018 we have
incurred net loss attributable to American Resources Corporation
shareholders in the amount of $3,628,226 and $8,245,588. For the
three-months and nine-months ended September 30, 2017 we have
incurred net loss attributable to American Resources Corporation
shareholders in the amount of $1,809,643 and
$9,012,121.

The
primary driver for increased revenue was the commencement of
underground mining operations at the Access Energy Mine in
September 2017 along with more production from McCoy’s Mine
#15 and Carnegie mine. The primary driver for decreased net loss
was an increased gross margin during 2018 and higher revenue
volume. Additionally, more coal was sold into the export market
lowering the taxes paid on customer sales.

From
our inception to-date our activities have been primarily financed
from the proceeds of our acquisitions, Series B equity investments
and loans.

For
the three months ended September 30, 2018 and 2017, coal sales and
processing expenses were $6,690,698 and $2,797,140 respectively,
development costs, including loss on settlement of ARO were
$2,188,833 and$1,065,341.
respectively, and production taxes and royalties $1,041,667 and
$865,950, respectively. Depreciation expense for the same periods
ended September 30, 2018 and 2017 were $649,983 and $697,214
respectively.

For
the nine months ended September, 2018 and 2017, coal sales and
processing expenses were $16,783,801 and $12,307,399 respectively,
development costs, including loss on settlement of ARO were
$5,908,207 and $4,454,666.
respectively, and production taxes and royalties $2,769,584 and
$3,464,611, respectively. Depreciation expense for the same periods
ended September 30, 2018 and 2017 were $1,779,539 and $1,856,442
respectively.

Liquidity and Capital Resources

As
of September 30, 2018, our available cash was $343,782. We expect
to fund our liquidity requirements with cash on hand, future
borrowings and cash flow from operations. If future cash flows are
insufficient to meet our liquidity needs or capital requirements,
we may reduce our mine development and/or fund a portion of our
expenditures through issuance of debt or equity securities, the
entry into debt arrangements for from other sources, such as asset
sales.

For
the nine months ending September 30, 2018 our net cash flow used in
operating activities was $4,076,157 and for the nine months ending
September 30, 2017 the net cash flow used in operating activities
was $951,367.

For
the nine months ending September 30, 2018 and 2017 our net cash
flows used in investing activities were $5,235 and provided by
investing activities $218,048 respectively.

For
the nine months ending September 30, 2018 and 2017 net cash
proceeds from financing activities were $4,039,509 and $479,847,
respectively.

As
a public company, we will be subject to certain reporting and other
compliance requirements of a publicly reporting company. We will be
subject to certain costs for such compliance which private
companies may not choose to make. We have identified such costs as
being primarily for audits, legal services, filing expenses,
financial and reporting controls and shareholder communications and
estimate the cost to be approximately $10,000 monthly if the
activities of our Company remain somewhat the same for the next few
months. We have included such costs in our monthly cash flow needs
and expect to pay such costs from a combination of cash from
operations.

Off Balance Sheet Arrangements

We
do not have any off-balance sheet arrangements that we are required
to disclose pursuant to these regulations. In the ordinary course
of business, we enter into operating lease commitments, purchase
commitments and other contractual obligations. These transactions
are recognized in our financial statements in accordance with
generally accepted accounting principles in the United
States.

Results of Operations for the years ended December 31,
2017 and December 31, 2016.

Revenues.

Revenues
for the period ended December 31, 2017 was $20,820,998 and 2016 was
$7,601,194, respectively. The primary drivers for revenue growth
was a full year of production from the Mine #15 of McCoy Elkhorn
and the beginning of production at the Access Energy mine of Deane
Mining in September 2017. Increase mine production was necessary to
fulfill market demands and customer orders.

Expenses.

Total
Operating Expenses for the period ended December 31, 2017 was
$34,839,884 and 2016 was $29,452,263, respectively. The primary
drivers for increase in operating expenses was a full year of
production from the Mine #15 of McCoy Elkhorn and the beginning of
production at the Access Energy mine of Deane Mining in September
2017. Production expenses, such as underground mine roof control,
mining consumables and wages increased as coal mining production
increased. The increased need for production expenses was caused to
the increased demand for the end product due to market demands and
customer orders. If demand from customers for our coal continues to
increase, we anticipate these production expenses will also
increase.

Total
Other Expenses for the period ended December 31, 2017 was $6,580
and 2016 was $238,213, respectively. The primary driver for
decrease in other expenses was an increase in royalty and interest
income from consolidated subsidiaries.

Financial Condition.

Total
Assets as of December 31, 2017 amounted to $18,263,385 and 2016
amounted to $20,273,829, respectively. The primary drivers for
lower asset balance is current year depreciation and lower accounts
receivable balance.

Total
Liabilities as of December 31, 2017 amounted to $58,356,449 and
2016 amounted to $47,781,427, respectively. The primary drivers for
the increase in liability balance is an increase in accounts
payable and equipment and term 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.

Capital Resources.

We
had no material commitments for capital expenditures as of December
31, 2017.

Off-Balance Sheet Arrangements

We
have made no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.

DIRECTORS AND EXECUTIVE OFFICERS

The
following sets forth information regarding our directors and
executive officers.

Name

Age

Positions

Mark C.
Jensen

39

Chief
Executive Officer, Chairman of the Board of Directors

Thomas
M. Sauve

39

President,
Director

Kirk P.
Taylor

39

Chief
Financial Officer

Tarlis
R. Thompson

35

Chief
Operating Officer

Randal
V. Stephenson

58

Director

Ian
Sadler

67

Director

Courtenay
O. Taplin

69

Director

Mark C. Jensen – Chairman
& Chief Executive Officer
: Mark has been an operator,
investor and consultant in various natural resources and energy
businesses.Prior to forming
Quest Energy in 2015, 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. Upon the merger
with NGFC, Mark continued his role as Chief Executive
Officer.
As Chief Executive
Officer, Mark’s duties include setting overall Company
strategy, acquisition due diligence and communicating on a periodic
basis with the Board of Directors.
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 – President
& 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. Prior to forming
Quest Energy in 2015,
Tom worked as a managing member at T
Squared Capital LLC, an investment firm focused on private equity
styled investing in start-up businesses. Upon the merger
with NGFC, Tom continued his role as President.
As President,
Tom’s duties include overseeing day-to-day operations,
acquisition due diligence and communicating on a periodic basis
with the Board of Directors.
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.

Kirk P. Taylor, CPA – 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 forming 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. Upon the merger
with NGFC, Kirk continued his role as Chief Financial
Officer.
As Chief Financial
Officer, Kirk’s duties include overseeing day-to-day
financial operations, financial reporting and communicating on a
periodic basis with regulatory bodies.
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 – 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.

Randal V. Stephenson –
Director
: Randal serves as Director of American Resources
Corporation. He was previously co-founder and CEO of a boutique
FINRA-licensed broker dealer focused in the natural resources
industry from 2012 to 2018 and has started and expanded several
successful investment banking platforms previously at Merrill Lynch
(from 2000 to 2002), Jefferies (from 2002 to 2006), CIT Group (from
2006 to 2007) and Duff & Phelps (from 2010 to 2012). Randal
started and managed a mining & metals equity investment
subsidiary of a global trading company, acquiring over $1.0 billion
in operating businesses and assets starting from just a corporate
development plan. He has worldwide relationships with corporations,
financial sponsors, entrepreneurs and governments and has closed
over 200 transactions valued in excess of $40 billion. 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 in 1990 and his Juris Doctorate
(with honors) from Boston College Law School in 1986. 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
capital raising.

Ian Sadler –
Director
: 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, in
2002 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 from 2001 to 2002, Shenango LLC from
1994 to 2001, Johnstown Corporation from 1989 to 1994, Blaw-Knox
Corp. from 1988 to 1989, and National Roll Company from 1984 to
1988. He received his Bachelor’s Degree, with First Class
Honors, and Master’s Degree in Metallurgy from Cambridge
University in 1972 and 1976, respectively 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.

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 from 1989 to 2007 and Pickands Mather & Company out of
Cleveland, OH from 1974 to 1989. Mr. Taplin attended Hobart College
from 1968 to 1971 and received his degree from Case Western Reserve
University in 1974. 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.

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

Board of Directors

Our
board of directors currently consists of five members, including
our Chairman and Chief Executive Officer, our President, and three
independent directors.

In
evaluating director candidates, we will assess whether a candidate
possesses the integrity, judgment, knowledge, experience, skills
and expertise that are likely to enhance the board of
directors’ ability to manage and direct our affairs and
business, including, when applicable, to enhance the ability of the
committees of the board of directors to fulfill their duties. Our
directors hold office until the earlier of their death,
resignation, retirement, disqualification or removal or until their
successors have been duly elected and qualified.

Director Compensation

We
currently have not established standard compensation arrangements
for our directors and the compensation payable to each individual
for their service on our Board will be determined from time to time
by our board of directors based upon the amount of time expended by
each of the directors on our behalf. Currently, executive officers
of our company who are also members of the board of directors do
not receive any compensation specifically for their services as
directors.

Director Independence

Currently our board
of directors consist of Mark C. Jensen, our Chief Executive
Officer, Thomas M. Sauve, our President, Randal V. Stephenson, Ian
Sadler, and Courtenay O. Taplin, of which Messrs Stephenson,
Sadler, and Taplin are considered independent in accordance under
the requirements of the NASDAQ, NYSE and SEC.

Committees of the Board of Directors

Currently, our
board of directors has three committee: an Audit Committee, a
Compensation Committee, and a Safety and Environmental Committee.
The Audit Committee and Compensation Committee are both comprised
of the three in 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, which is Messrs
Stephenson, Sadler, and Taplin
. SEC rules also require that
a public company disclose whether or not 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, which is Messrs
Stephenson, Sadler, and Taplin. 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.

Code of Business Conduct and 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 network.
We intend to disclose future amendments to, or waivers from,
certain provisions of our Code of Business Conduct and Ethics as
applicable.

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 9002
Technology Lane, Fishers, IN 46038.

Summary
Compensation Table – Officers

(a)

(h)

Name
and principal position

Option

Awards

($)

Non-equity

Incentive plan

Compensation

($)

Nonqualified deferred compensation earnings

($)

All other

Compensation

($)

I. Andrew
Weeraratne,

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

(1) CEO,
CFO

2017

5,000

-0-

-0-

-0-

-0-

-0-

-0-

5,000

Mark C. Jensen, (2)
CEO

2018

156,000

-0-

-0-

-0-

-0-

-0-

16,326

172,326


2017

156,000

-0-

-0-

-0-

-0-

-0-

-0-

156,000

Thomas M. Sauve,
(3) President

2018

156,000

-0-

-0-

-0-

-0-

-0-

16,326

172,326


2017

156,000

-0-

-0-

-0-

-0-

-0-

-0-

156,000

Kirk P. Taylor, (4)
CFO

2018

156,000

-0-

-0-

-0-

-0-

-0-

20,006

179,006


2017

156,000

-0-

-0-

-0-

-0-

-0-

-0-

156,000

Tarlis R Thompson,
(5) COO

2018

117,055

-0-

-0-

76,624

-0-

-0-

-0-

193,679


2017

111,280

-0-

-0-

-0-

-0-

-0-

-0-

111,280

_______________

(1)

The
amount of value for the services of Mr. Weeraratne was determined
by agreement for shares in which he received as a founder for (1)
control, (2) willingness to serve on the Board of Directors and (3)
participation in the foundational days of the corporation. Mr.
Weeraratne submitted his resignation to the Company on February 7,
2017 in connection with a change of control of the
Company.

(2)

Of the
2017 salary amount listed in this table, $32,000 was accrued and
unpaid in 2017. On January 2, 2018, the Company entered into an
employment agreement with Mr. Jensen, at an annual salary rate of
$156,000. The Company also has provided for a discretionary
quarterly performance bonus of up to $.64 per clean ton of coal
mined. The payment of such bonus shall be in the sole discretion of
the Company’s management and/or applicable Board of
Directors. Other compensation totaling $16,326 included $16,326
health insurance reimbursement.

(3)

Of the
2017 salary amount listed in this table, $32,000 was accrued and
unpaid in 2017. On January 2, 2018, the Company entered into an
employment agreement with Mr. Sauve, at an annual salary rate of
$156,000. The Company also has provided for a discretionary
quarterly performance bonus of up to $.54 per clean ton of coal
mined. The payment of such bonus shall be in the sole discretion of
the Company’s management and/or applicable Board of
Directors. Other compensation totaling $16,326 included $16,326
health insurance reimbursement.

(4)

Of the
2017 salary amount listed in this table, $26,293 was accrued and
unpaid in 2017. On January 2, 2018, the Company entered into an
employment agreement with Mr. Taylor, at an annual rate of
$156,000. The Company also has provided for a discretionary
quarterly performance bonus of up to $.20 per clean ton of coal
mined. The payment of such bonus shall be in the sole discretion of
the Company’s management and/or applicable Board of
Directors. Other compensation totaling $20,006 included $18,200
health insurance reimbursement and $4,806 of 2017 accrued
salary.

(5)

There
is no employment agreement in place for Mr. Thompson. In 2018, Mr.
Thompson was awarded 136,830 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, 2018, none
of the options have vested.

(a)



Fees Earned or Paid in
Cash

Non-Equity Incentive Plan
Compensation

Nonqualified deferred compensation
earnings

All Other
Compensation

Name and
principal position

Mark C. Jensen
(1)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Thomas M. Sauve
(2)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Randal V.
Stephenson (3)

2018

-0-

-0-

120,450

-0-

-0-

1,496

121,946


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Ian Sadler
(4)

2018

-0-

-0-

120,450

-0-

-0-

-0-

120,450


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Courtenay O. Taplin
(5)

2018

-0-

-0-

120,450

-0-

-0-

-0-

120,450


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

James C. New
(6)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

I. Andrew
Weeraratne (7)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Eugene Nichols
(8)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Bo G. Engberg
(9)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

William D. Bishop
(10)

2018

-0-

-0-

-0-

-0-

-0-

-0-

-0-


2017

-0-

-0-

50,000

-0-

-0-

-0-

50,000

____________

(1)

Mr.
Jensen was appointed as a director on February 7, 2017. On January
2, 2018, the Company entered into an employment agreement with Mr.
Jensen, at an annual salary rate of $156,000. The Company also has
provided for a discretionary quarterly performance bonus of up to
$.64 per clean ton of coal mined. The payment of such bonus shall
be in the sole discretion of the Company’s management and/or
applicable Board of Directors. Mr. Jensen is not paid separately
for his services as a director for the Company.

(2)

Mr.
Sauve was appointed as a director on February 7, 2017. On January
2, 2018, the Company entered into an employment agreement with Mr.
Sauve, at an annual salary rate of $156,000. The Company also has
provided for a discretionary quarterly performance bonus of up to
$.54 per clean ton of coal mined. The payment of such bonus shall
be in the sole discretion of the Company’s management and/or
applicable Board of Directors. Mr. Sauve is not paid separately for
his services as a director for the Company.

(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, and as of December 31, 2018, none
of the options have vested. Other Compensation includes $1,496 of
health insurance premiums paid by the Company.

(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, and as of December 31, 2018, none of the options have
vested.

(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, and as of December 31, 2018, none of the options have
vested.

(6)

Mr. New
submitted his resignation to the Company on February 7, 2017 in
connection with a change of control of the Company.

(7)

Mr.
Weeraratne submitted his resignation to the Company on February 7,
2017 in connection with a change of control of the
Company.

(8)

Mr.
Nichols submitted his resignation to the Company on February 7,
2017 in connection with a change of control of the
Company.

(9)

Mr.
Engberg submitted his resignation to the Company on February 7,
2017 in connection with a change of control of the
Company.

(10)

Mr.
Bishop was appointed as director on May 10, 2017 and as
compensation to Bill Bishop for his service on the Board of
Directors, the Company issued Mr. Bishop a three-year option to
purchase up to 8,334 common shares of our company at an exercise
price of $3.60 per share, subject to certain price adjustments and
other provisions found within the option issued to Mr. Bishop.
Effective November 8, 2017, Mr. Bishop resigned as a director of
the Company and Mr. Bishop’s resignation from the Board of
Directors did not result from any disagreement with the
Company.

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.

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.

Outstanding Equity Awards

None of our current
executive officers received any equity awards, including, options,
restricted stock or other equity incentives from the Company as of
the date hereof, other than our Chief Operating Officer, who was
issued options under our Employee Incentive Stock Option Plan 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.

DESCRIPTION OF SECURITIES

General

Upon
completion of this offering, the authorized capital stock of
American Resources Corporation will consist of 230,000,000 shares
of Class A Common Stock, $0.0001 par value per share, of which
23,298,530 Class A Common Shares will be issued and outstanding
post this offering (assuming the full underwriter’s
Over-Allotment of 15%), 5,000,000 shares of Series A Preferred
shares, $0.0001 par value per share, of which no Series A Preferred
shares will be issued and outstanding, 20,000,000 shares of Series
C Preferred shares, $0.0001 par value per share, 50,000 of which
will be issued and outstanding (see “Series C Preferred
Stock” below), and 5,000,000 “blank check”
preferred, of which none will be issued and
outstanding.

The
following summary of the capital stock and certificate of
incorporation and bylaws of American Resources Corporation does not
purport to be complete and is qualified in its entirety by
reference to the provisions of applicable law and to our
certificate of incorporation and by-laws, which are filed as
exhibits to the registration statement of which this prospectus is
a part.

Common Stock

Voting Rights. Holders of shares of
common stock are entitled to one vote per share held of record on
all matters to be voted upon by the stockholders. The holders of
common stock do not have cumulative voting rights in the election
of directors.

Dividend Rights. Holders of shares of
our common stock are entitled to ratably receive dividends when and
if declared by our board of directors out of funds legally
available for that purpose, subject to any statutory or contractual
restrictions on the payment of dividends and to any prior rights
and preferences that may be applicable to any outstanding preferred
stock. Please read “Dividend Policy.”

Liquidation Rights. Upon our
liquidation, dissolution, distribution of assets or other winding
up, the holders of common stock are entitled to receive ratably the
assets available for distribution to the stockholders after payment
of liabilities and the liquidation preference of any of our
outstanding shares of preferred stock.

Other Matters. The shares of common
stock have no preemptive or conversion rights and are not subject
to further calls or assessment by us. There are no redemption or
sinking fund provisions applicable to the common stock. All
outstanding shares of our common stock, including the common stock
offered in this offering, are fully paid and
non-assessable.

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. As of the date of this offering, no shares of Series
A Preferred stock are outstanding. See “Security Ownership of
Certain Beneficial Owners and Management” for more detail on
the Series A Preferred stock holders.

Voting Rights. Holders of Series A
Preferred shares are entitled to three hundred and thirty three and
one-third (333 (1/3)) 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.

Dividend Rights. The holders of the
Series A Preferred stock are not entitled to receive
dividends.

Conversion Rights. 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.

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

Anti-Dilution Protections. The Series A
Preferred stock shall have full anti-dilution protection until
March 1, 2020, such that, when the sum of the shares of the common
stock plus the Series A Convertible stock that are held by the
Series A Preferred stock holders as of the date of the Articles of
Amendment are summed (the sum of which is defined as the
“Series A Holdings”, and the group defined as the
“Series A Holders”), the Series A Holdings held by the
Series A Holders shall be convertible into, and/or equal to, no
less than Seventy-Two Percent (72.0%) of the fully-diluted common
stock outstanding of the company (inclusive of all outstanding
“in-the-money” options and warrants). Any amount that
is less than Seventy-Two Percent (72.0%) shall be adjusted to
Seventy-Two Percent (72.0%) through the immediate issuance of
additional common stock to the Series A Holders to cure the
deficiency, which shall be issued proportionally to each respective
Series A Holder’s share in the Series A Holdings at the time
of the adjustment. This anti-dilution protection shall include the
effect of any security, note, common stock equivalents, or any
other derivative instruments or liability issued or outstanding
during the anti-dilution period that could potential cause dilution
during the anti-dilution period or in the future.

Other Matters. The shares of common
stock have no preemptive or conversion rights and are not subject
to further calls or assessment by us. There are no redemption or
sinking fund provisions applicable to the common stock. All
outstanding shares of our common stock, including the common stock
offered in this offering, are fully paid and
non-assessable.

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 $0.0001 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. As of the date of this prospectus, 50,000 shares of
Series C Preferred stock have been issued or are outstanding. See
“Security Ownership of Certain Beneficial Owners and
Management” for more detail on the Series C Preferred stock
holders.

Voting Rights. 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 one vote of common
stock.

Dividend Rights. The holders of the
Series C Preferred shall accrue 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.

Conversion Rights. 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.

Liquidation Rights. 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.

“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

Outstanding Options or Warrants

Pursuant to our
previously-completed Series B Preferred stock offering, investors
in the Series B Preferred stock received options (also referred to
as “warrants”) to purchase additional common shares at
exercise prices stated within such option. The options have an
expiration date of two or three years post the date of the
investment in the Series B Preferred stock by the
investor.

On
October 24, 2018, one of the holders of the options issued pursuant
to the Series B Preferred stock financing exercised 69,445 of his
options through a cashless exercise and received 69,420 Class A
Common shares as a result. Should all the remaining Series B
Preferred stock option holders fully exercise their right to
purchase shares, for cash, the Company will receive $1,700,006
proceeds from such exercises and will increase the common shares
outstanding by 236,112 shares.

On June
27, 2017 we entered into a settlement agreement with Oscaleta
Partners LLC, a company we engaged on February 20, 2017 to perform
consulting services to AREC, and as part of that settlement, we
issued to Oscaleta Partners LLC the amount of 13,333 restricted
shares of the company’s common stock, and a three-year
warrant to purchase up to 33,333 common shares of stock of the
company at an exercise price of $3.60 per share. Should Oscaleta
Partners LLC exercise all of its shares under the warrant, the
company will receive $119,999 cash proceeds.

On May
10, 2017, as compensation to Bill Bishop for his service on the
Board of Directors of the company, we issued Mr. Bishop a
three-year option to purchase up to 8,334 common shares of our
company at an exercise price of $3.60 per share, subject to certain
price adjustments and other provisions found within the option
issued to Mr. Bishop. Should Mr. Bishop be elected as a board
member of the company for additional term(s), the option contains a
cashless exercise provision that will allow Mr. Bishop to exercise
his option without any cash consideration to the company, as
described within the option. Should Mr. Bishop exercise the option
through a cash payment to the company, the Company will receive up
to $30,002 from Mr. Bishop and he will receive up to 8,334
restricted common shares of the Company. There are no registration
rights associated with this warrant that require the Company to
register the shares.

On
October 4, 2017, we entered into a financing transaction with
Golden Properties Ltd., a British Columbia company based in
Vancouver, Canada (“Golden Properties”) that involved a
series of loans made by Golden Properties to the Company. As part
of that financing, we issued to Golden Properties the following
warrants:

Warrant
B-4, for the purchase of 3,417,006 shares of common stock at $0.01
per share, as adjusted from time to time, expiring on October 2,
2020, and providing the Company with up to $34,170 in cash proceeds
should all the warrants be exercised;

Warrant
C-1, for the purchase of 400,000 shares of common stock at $3.55
per share, as adjusted from time to time, expiring on October 2,
2019, and providing the Company with up to $1,420,000 in cash
proceeds should all the warrants be exercised;

Warrant
C-2, for the purchase of 400,000 shares of common stock at $7.09
per share, as adjusted from time to time, expiring on October 2,
2019, and providing the Company with up to $2,836,000 in cash
proceeds should all the warrants be exercised;

Warrant
C-3, for the purchase of 400,000 shares of common stock at $8.58
per share, as adjusted from time to time, expiring October 2, 2020,
and providing the Company with up to $3,432,000 in cash proceeds
should all the warrants be exercised; and

Warrant
C-4, for the purchase of 400,000 shares of common stock at $11.44
per share, as adjusted from time to time, expiring October 2, 2020,
and providing the Company with up to $4,576,000 in cash proceeds
should all the warrants be exercised.

None of
the warrants resulting from the agreement with Golden Properties
have been exercised as of the date of this prospectus.

On
September 12, 2018, pursuant to the Company’s Employee
Incentive Stock Option Plan, we issued a total of 636,830 options
to certain employees. The options have an expiration date of
September 10, 2025 and have an exercise price of $1.00 per share.
Of the total options issued, 25,000 vested immediately, with the
balance of 611,830 options vesting equally over the course of three
years, subject to restrictions regarding the employee’s
continued employment by the Company.

On
September 14, 2018, we entered into a consulting agreement with
Redstone Communications, LLC, an Indiana limited liability company
based in Carmel, Indiana, to provide for public relations with
existing shareholders, broker dealers, and other investment
professionals. As compensation under that agreement, for the first
six months we issued to Redstone Communications a five-year option
to purchase up to 175,000 common shares of our Company at an
exercise price of $1.00 per share and issued to Mr. Marlin Molinaro
a five-year option to purchase up to 75,000 common shares of our
Company at an exercise price of $1.00 per share. Should Redstone
Communications, LLC and Mr. Molinaro exercise the options received
under the first six months of engagement, the Company will receive
up to $175,000 and $75,000, respectively. On January 25,
2019, Redstone Communications and the Company agreed to renew the
consulting agreement, 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, and to Redstone
Communications another five-year option 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 option to
purchase up to 75,000 common shares of our Company at an exercise
price of $1.50 per share. Should Redstone Communications, LLC and
Mr. Molinaro receive and exercise the options received under the
second six months of engagement, the Company will receive up to
$262,500 and $112,500, respectively.

On
November 15, 2018, as compensation to Randal V. Stephenson, Ian
Sadler, and Courtenay O. Taplin for their service on the Board of
Directors of the Company, we issued to each of them a three-year
warrant to purchase up to 15,000 common shares of our company at an
exercise price of $6.00 per share, subject to certain price
adjustments and other provisions found within the respective
warrants. Should each of the three directors exercise the option
through a cash payment to the Company, the Company will receive up
to $90,000 from each director, and each director will receive up to
15,000 restricted common shares of the Company. There are no
registration rights associated with this warrant that require the
Company to register the shares.

On
December 3, 2018, pursuant to a consulting agreement with a
non-related entity, we issued a two-year option to purchase up to
417 common shares of our company at an exercise price of $6.00 per
share. The option can be exercised via a cashless exercise by the
holder at any time during its term.

Please
see “Underwriting” for a description of warrants to be
issued to the representative of the underwriters.

During
the period the options 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 upon the exercise of the options. No fractional shares
will be issued upon the exercise of the options. The options are
not listed on any securities exchange. Except as otherwise provided
within the option, the option holders have no rights or privileges
as members of the Company until they exercise their
options.

Transfer Agent and Registrar

The
transfer agent and registrar for our common stock is Vstock
Transfer, LLC located at 18 Lafayette Place Woodmere, NY 11598,
phone number 212-828-8436.

Listing

Currently we are
trading on the OTC Pink markets under the symbol
“AREC”. We have applied to list on the NASDAQ Capital
Market under the symbol “AREC”.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The
following table lists, as of the date of this Prospectus, the
number of shares of our 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, 9002 Technology
Lane, Fishers, IN 46038.

Name and
Address

of
Shareholder

Number of Shares of

Common
Stock

Beneficially

Owned (1)

Percent of Common

Stock Owned (2)

Golden Properties,
Ltd. (3)

2,122,878

9.99%

________________

(1)

la
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
sur 21,492,281
shares of Common Stock deemed to be outstanding as if one or more
warrants were exercised up to the maximum amount of 9.99%
(or2,122,878
shares) of the issued and outstanding number of shares at December
31, 2018, including the common shares issuable from the conversion
of the Series A Preferred to common and the conversion of the
Series C Preferred to common. 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, 2018
Alexander Lau, who is a principal of
Golden Properties and a beneficial owner through Golden Properties,
is a holder of 5,913 Series
A Preferred shares and 177,400 Class A
Common shares
. Accordingly, Golden Properties, Ltd. is
presently deemed the beneficial owner of 2,122,878
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 Series A Preferred
shares owned by Alexander Lau stated above) is 5,017,006
shares.

Name

Number of 
Shares of

Series A Preferred

Stock Beneficially

Owned (4)

Percent of 
Series A
Preferred Stock
Owned (5)

Common Stock
Beneficially

Owned (6)



Percent of
Common Stock Beneficially
Owned (7)

Officers
and Directors

Mark C. Jensen,
(8) Chief Executive Officer,
Director

158,045

32.80%

5,316,994

27.45%

Thomas M. Sauve,
(9) President, Director

136,014

28.23%

4,336,010

22.99%

Kirk P. Taylor,
Chief Financial Officer

48,612

10.09%

1,620,383

8.37%

Tarlis R. Thompson,
Chief Operating Officer

4,895

1.02%

163,170

0.84%

All
Directors and Officers as a Group (4 persons)

347,566

69.09%

11,552,851

59.65%

5%
Holders

Gregory Q.
Jensen

48,612

10.09%

1,620,383

8.37%

Adam B.
Jensen

48,612

10.09%

1,620,383

8.37%

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

444,790

89.27%

14,793,617

84.57%

(4)

la
person is deemed to be the beneficial owner of securities that can
be acquired by such a person within 60 days from December 31, 2018,
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
sur 481,780
shares of Series A Convertible Preferred Stock outstanding as of
December 31, 2018. These percentages have been rounded for
convenience;

(6)

Assuming
the Series A Preferred Stock is converted to Class A Common Stock
and
including the Class A Common Stock owned by each respective
person
;

(7)

Based
sur 17,763,469
Class A Common Stock outstanding as of December 31, 2018. These
percentages have been rounded for convenience;

(8)

Mr.
Jensen beneficially owns 5,934 shares
of our Series A Convertible Preferred Stock and 178,017 Class A
Common Stock
through his equity ownership in T Squared
Partners, LP, which shares are included in the table
above;

(9)

Mr.
Sauve beneficially owns 3,876 shares
of our Series A Convertible Preferred Stock and 116,294 Class A
Common Stock
through his equity ownership in T Squared
Partners, LP, which shares are included in the table
above;

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, 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 2017 and 2016, the Company
incurred fees totaling $0 and $12,340,615 relating to services
rendered under this agreement. The amount outstanding and payable
as of December 31, 2017 and 2016, was $17,840,615 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
and extinguish the entire $17,840,615 payable.

On
January 1, 2016, the Company awarded stock options for 827,862
shares in exchange for consulting efforts to an entity with common
ownership. No stock options were awarded to related parties during
2017.

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, 2017 and 2016, 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.

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.

The Company,
through its subsidiaries, leases property and mineral from a
related entity, LRR. During the three month period ended September
30, 2018, the Company incurred royalty expense in the amount of
$64,537 to a related entity formally consolidated as a variable
interest entity. As of September 30, 2018, the company owed the
related entity a total of $512,378 for unpaid royalties and
advances.

Director Independence.

We are
not listed on a national securities exchange; however, we have
elected to use the definition of independence under the Nasdaq
listing requirements in determining the independence of our
directors and nominees for director. In 2018, our Board undertook a
review of director independence, which included a review of each
director and director nominee’s responses to questionnaires
inquiring about any relationships with us. This review was designed
to identify and evaluate any transactions or relationships between
a director, or director nominee or any member of his or her
immediate family and us, or members of our senior management or
other members of our Board, and all relevant facts and
circumstances regarding any such transactions or relationships.
Based on its review, our Board determined that Messrs. Stephenson,
Sadler, and Taplin are independent. Messrs. Jensen and Sauve are
not independent under Nasdaq’s independence standards, its
audit committee independence standards or compensation committee
independence standards.

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.”

UNDERWRITING

Subject
to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representative, Maxim Group
LLC, located at 405 Lexington Avenue, New York, NY 10174, referred
to herein as Maxim, have severally agreed to purchase from us on a
firm commitment basis the following respective number of shares of
Class A common stock at a public offering price less the
underwriting discounts and commissions set forth on the cover page
of this prospectus:

Underwriter

Maxim
Group LLC

1,000,000

Total

1,000,000



The
underwriting agreement provides that the obligations of the
underwriters to purchase all of the shares being offered to the
public is subject to specific conditions, including the absence of
any material adverse change in our business or in the financial
markets and the receipt of certain legal opinions, certificates and
letters from us, our counsel and the independent auditors. Subject
to the terms of the underwriting agreement, the underwriters will
purchase all of the shares of Class A common stock being offered to
the public, other than those covered by the over-allotment option
described below, if any of these shares are purchased.

Over-Allotment Option

The Company has granted to the underwriters an
option, exercisable not later than 45 days after the effective date
of the registration statement, to purchase up to 150,000

additional shares of Class A common
stock (equivalent to 15% of the total number of shares of Class A
common stock sold in this offering) at the public offering price
less the underwriting discounts and commissions set forth on the
cover of this prospectus. The underwriters may exercise this option
only to cover over-allotments made in connection with the sale of
the shares in this offering. To the extent that the underwriters
exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the
same percentage of these additional shares of Class A common stock
as the number of shares to be purchased by it in the above table
bears to the total number of shares offered by this prospectus. We
will be obligated, pursuant to the option, to sell these additional
shares of Class A common stock to the underwriters to the extent
the option is exercised. If any additional shares are purchased,
the underwriters will offer the additional shares on the same terms
as those on which the other shares are being offered
hereunder.

Discounts, Commissions and Expenses

The underwriting discounts and commissions are
7.0% of the public offering price. The Company has agreed to pay
the underwriters the discounts and commissions set forth below,
assuming either no exercise or full exercise by the underwriters of
the underwriters’ over-allotment option. We have been advised
by Maxim that the underwriters propose to offer the shares of Class
A common stock to the public at the public offering price set forth
on the cover of this prospectus and to dealers at a price that
represents a concession not in excess of $0.28
per share under the public offering price of
$4.00
per share. The
underwriters may allow, and these dealers may re-allow, a
concession of not more than $0.28
per share to other dealers. After the public
offering, the representative of the underwriters may change the
offering price and other selling terms.

The
following table summarizes the underwriting discounts and
commissions and proceeds, before expenses, to us assuming both no
exercise and full exercise by the underwriters of their 15%
over-allotment option:

Public offering
price

$ 6.00

$ 6,000,000

$ 6,900,000

Underwriting
discounts and commissions (7%)

$ 0.42

$ 420,000

$ 483,000

Proceeds, before
expenses, to us

$ 5.58

$ 5,580,000

$ 6,417,000


(1) The
fees do not include the Representative’s Warrants or expense
reimbursement as described below.

In
addition, we have agreed to reimburse Maxim for up to $125,000 of
out-of-pocket expenses it incurs in connection with this offering,
including, but not limited to, filing offering materials with the
Financial Industry Regulatory Authority, or FINRA, background
checks, “road show” expenses, costs of book-building,
prospectus tracking and compliance software and the fees and
disbursements of its counsel. We have paid $5,000 to Maxim as an
advance to be applied towards reasonable out-of-pocket expenses
(the “Advance”). Any portion of the Advance shall be
returned back to us to the extent not actually
incurred.

We
estimate the expenses of this offering payable by us, not including
underwriting discounts and commissions, will be approximately
$205,000.

Representative Warrants

We
have also agreed to issue to Maxim (or its permitted assignees) the
warrants to purchase a number of our shares of Class A common stock
equal to an aggregate of 7% of the total number of shares sold in
this offering (“Representative’s Warrants”). The
Representative’s Warrants will have an exercise price equal
to 110% of the offering price of the shares sold in this offering
and may be exercised on a cashless basis. The
Representative’s Warrants are exercisable commencing 180 days
after the effective date of the registration statement related to
this offering, and will be exercisable for three years after the
effective date. The Representative’s Warrants are not
redeemable by us. The Representative’s Warrants also provide
for unlimited “piggyback” registration rights at our
expense with respect to the underlying shares during the three year
period commencing from the effective date of the registration
statement related to this offering. The Representative’s
Warrants and the shares underlying the Representative’s
Warrants, have been deemed compensation by FINRA and are therefore
subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA.
The underwriters (or permitted assignees under the Rule) may not
sell, transfer, assign, pledge or hypothecate the
Representative’s Warrants or the securities underlying the
Representative’s Warrants, nor will they engage in any
hedging, short sale, derivative, put or call transaction that would
result in the effective economic disposition of the
Representative’s Warrants or the underlying securities for a
period of 12 months from the effective date of this offering,
except to any FINRA member participating in the offering and their
bona fide officers or partners. The Representative’s Warrants
will provide for adjustment in the number and price of such
Representative’s Warrants (and the shares underlying such
Representative’s Warrants) in the event of recapitalization,
merger or other structural transaction to prevent mechanical
dilution or in the event of a future financing undertaken by
us.

Right of First Refusal

We have
agreed to grant Maxim for the twelve (12) month period following
the effective date of the registration statement, a right of first
refusal to act as lead managing underwriter and book runner or
minimally as a co-lead manager and co-book runner and/or lead
placement agent with at least 80.0% of the economics for any and
all future public or private equity, equity-linked or debt
(excluding commercial bank debt) offerings during such twelve (12)
month period of the Company, or any successor to or any subsidiary
of the Company.

Indemnification

We
have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of representations and warranties
contained in the underwriting agreement, or to contribute to
payments that the underwriters may be required to make in respect
of those liabilities.

Lock-up Agreements

We
and certain of our directors, executive officers and shareholders
have agreed that, for a period of 180 days after the date of this
prospectus, subject to certain limited exceptions, not to directly
or indirectly, without the prior written consent of the
representative of the underwriters, (1) offer, sell, agree to offer
or sell, solicit offers to purchase, grant any call option or
purchase any put option with respect to, pledge, encumber, assign,
borrow or otherwise dispose of or transfer any shares of Class A
common stock, warrant to purchase such shares or any other security
of the company or any other entity that is convertible into, or
exercisable or exchangeable for, such shares or any other equity
security of the company owned beneficially or otherwise as of the
date of this prospectus, which we refer to as relevant securities,
or otherwise publicly disclose the intention to do so, (2)
establish or increase any “put equivalent position” or
liquidate or decrease any “call equivalent position”
(in each case within the meaning of Section 16 of the Exchange Act)
with respect to any relevant security or otherwise enter into any
swap, derivative or other transaction or arrangement that transfers
to another, in whole or in part, any economic consequence of
ownership of relevant securities, whether or not such transaction
is to be settled by the delivery of relevant securities, other
securities, cash or other consideration, or otherwise publicly
disclose the intention to do so, (3) file or participate in the
filing with the SEC of any registration statement or circulate or
participate in the circulation of any preliminary or final
prospectus or other disclosure document, in each case with respect
to any proposed offering or sale of relevant securities or (4)
exercise any rights to require registration with the SEC of any
proposed offering or sale of relevant securities.

Price Stabilization, Short Positions and Penalty Bids

In
connection with the offering the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act:

Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.

Over-allotment involves sales by the underwriters of shares of
Class A common stock in excess of the number of shares the
underwriters are obligated to purchase, which creates a syndicate
short position. The short position may be either a covered short
position or a naked short position. In a covered short position,
the number of shares over-allotted by the underwriters is not
greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of
shares involved is greater than the number of shares in the
over-allotment option. Maxim may close out any covered short
position by either exercising their over-allotment option and/or
purchasing shares in the open market.

Syndicate covering transactions involve purchases of shares of
Class A common stock in the open market after the distribution has
been completed in order to cover syndicate short positions. In
determining the source of shares to close out the short position,
Maxim will consider, among other things, the price of shares
available for purchase in the open market as compared to the price
at which they may purchase shares through the over-allotment
option. If the underwriters sell more shares than could be covered
by the over-allotment option, a naked short position, the position
can only be closed out by buying shares in the open market. A naked
short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the
shares of Class A common stock in the open market after pricing
that could adversely affect investors who purchase in the
offering.

Penalty bids permit Maxim to reclaim a selling concession from a
syndicate member when the shares originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These
stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the
market price of our shares of Class A common stock or preventing or
retarding a decline in the market price of our securities. As a
result, the price of our shares may be higher than the price that
might otherwise exist in the open market.

Neither
we nor the underwriters make any representation or prediction as to
the direction or magnitude of any effect that the transactions
described above may have on the price of our shares of Class A
common stock. In addition, neither we nor the underwriters make any
representation that the underwriters will engage in these
transactions or that any transaction, if commenced, will not be
discontinued without notice.

Electronic Distribution

This
prospectus in electronic format may be made available on websites
or through other online services maintained by Maxim or by its
affiliates. Other than this prospectus in electronic format, the
information on Maxim’s website and any information contained
in any other websites maintained by it is not part of this
prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or Maxim
in its capacity as an underwriter, and should not be relied upon by
investors.

Other Terms

Until
twelve (12) months from the effective date of this registration
statement, the representative shall have an irrevocable right of
first refusal to act as lead managing underwriter and book-runner
(or minimally as a co-lead manager and co-book runner and/or
co-lead placement agent with at least 80% of the economics), at the
representative’s sole discretion, for each and every future
public and private equity and debt offerings (other than commercial
bank debt) for the Company, or any successor to or any subsidiary
of the Company, including all equity linked financings, on terms
customary to the representative. The representative shall have the
sole right to determine whether or not any other broker-dealer
shall have the right to participate in any such offering and the
economic terms of any such participation. The representative will
not have more than one opportunity to waive or terminate the right
of first refusal in consideration of any payment or
fee.

Offers
Outside the United States

Other than in the United States, no action has been taken by us or
the underwriters that would permit a public offering of the
securities offered by this prospectus in any jurisdiction where
action for that purpose is required. The securities offered by this
prospectus may not be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such
securities be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction. Persons into
whose possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the
offering and the distribution of this prospectus. This prospectus
does not constitute an offer to sell or a solicitation of an offer
to buy any securities offered by this prospectus in any
jurisdiction in which such an offer or a solicitation is
unlawful.

DETERMINATION OF OFFERING PRICE

Before
this offering, there has been a very limited public trading market
for our shares of Class A Common Stock, and we cannot give any
assurance to you that an active secondary market might develop or
will be sustained after this offering. The price of the shares of
Common Stock we are offering, and the price at which those shares
can be sold in the future to potential buyers, has been determined
solely by us, after consultation with our underwriter and advisors,
and, as such, may be arbitrary in that the price does not
necessarily bear any relationship to our assets, earnings, book
value or other criteria of value, and may not be indicative of the
price that may prevail in the public market, or such share price
may be the result of a private negotiation between us and the buyer
of the shares and may differ substantially from any prior share
price or the market price of our shares. No third-party valuation
or appraisal has ever been prepared for our business. Among the
factors we considered in setting a price were, without one factor
being materially more important than the others):

our limited operating history, as well as the other numerous
obstacles we face in operating and expanding our business, as
described in the “Risk Factors” section of this
prospectus;

our current company capitalization and our internal future
expectations of our operations and financial performance;
and

our cash requirements to run our business over the next 12 to 60
months.

the information included in this prospectus and otherwise available
to the representative;

the valuation multiples of publicly traded companies that the
representative believes to be comparable to us;

our financial information;

our ability to negotiate the sale price of our shares with
potential buyers of our shares;

our prospects and our history, and the prospects of the industry in
which we compete;

an assessment of our management, its past and present operations,
and the prospects for, and timing of, our future revenues;
and

the above factors in relation to market values and various
evolution measures of other companies engaged in activities similar
to ours.

INTERESTS OF NAMED EXPERTS AND COUNSEL

No
expert or counsel named in this prospectus as having prepared or
certified any part of this prospectus or having given an opinion
upon the validity of the securities being registered or upon other
legal matters in connection with the registration or offering of
the common stock was employed on a contingency basis, or had, or is
to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its
parents or subsidiaries. Nor was any such person connected with the
registrant or any of its parents or subsidiaries as a promoter,
managing or principal underwriter, voting trustee, director,
officer, or employee.

Our
financial statements as of December 31, 2017 and 2016, included in
this prospectus have been audited by MaloneBailey, LLP of Houston,
Texas, independent registered public accounting firm, as indicated
in their report with respect thereto, and have been so included in
reliance upon the report of such firm given on their authority as
experts in accounting and auditing. Our audited financial
statements as of December 31, 2017 and 2016, included in this
prospectus have been prepared by the management of the
Company.

The
validity of the securities offered by this prospectus will be
passed upon for us by Law Office of Clifford J. Hunt, P.A. The law
firm’s principal, Clifford J. Hunt, Esquire, is the
beneficial owner of 1,721 shares of our common stock. Certain legal
matters will be passed upon for the underwriters by Loeb & Loeb
LLP.

WHERE YOU CAN FIND MORE INFORMATION

We have
filed with the SEC a registration statement on Form S-1 (including
the exhibits, schedules and amendments thereto) under the
Securities Act, with respect to the shares of our common stock
offered hereby.

This
prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For
further information with respect to the common stock offered
hereby, we refer you to the registration statement and the exhibits
and schedules filed therewith. Statements contained in this
prospectus as to the contents of any contract, agreement or any
other document are summaries of the material terms of such
contract, agreement or other document and are not necessarily
complete. With respect to each of these contracts, agreements or
other documents filed as an exhibit to the registration statement,
reference is made to the exhibits for a more complete description
of the matter involved. A copy of the registration statement, and
the exhibits and schedules thereto, may be inspected without charge
at the public reference facilities maintained by the SEC at 100 F
Street NE, Washington, D.C. 20549. Copies of these materials may be
obtained, upon payment of a duplicating fee, from the Public
Reference Room of the SEC at 100 F Street NE, Washington, D.C.
20549.Please call the SEC at 1-800-SEC-0330 for further information
on the operation of the Public Reference Room. The SEC maintains a
website that contains reports, proxy and information statements and
other information regarding registrants that file electronically
with the SEC. The address of the SEC’s website is
www.sec.gov.

As a
result of this offering, we will become subject to full information
requirements of the Exchange Act. We will fulfill our obligations
with respect to such requirements by filing periodic reports and
other information with the SEC. We intend to furnish our
stockholders with annual reports containing financial statements
certified by an independent registered public accounting
firm.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES

Our
directors and officers are indemnified as provided by Florida law
and our bylaws. We have agreed to indemnify each of our directors
and certain officers against certain liabilities, including
liabilities under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted
to our directors, officers and controlling persons pursuant to the
provisions described above, or otherwise, we have been advised that
in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.

We have
been advised that in the opinion of the SEC indemnification for
liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the securities
being registered, we will, unless in the opinion of our legal
counsel the matter has been settled by controlling precedent,
submit the question of whether such indemnification is against
public policy to a court of appropriate jurisdiction. We will then
be governed by the court’s decision.

Limitation on Liability

The
Florida Business Corporation Act permits, but does not require,
corporations to indemnify a director, officer or control person of
the corporation for any liability asserted against such person and
liability and expenses incurred by that person in their capacity as
a director, officer, employee or agent, or arising out of their
status as such, if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, unless the articles of
incorporation provide otherwise, whether or not the corporation has
provided for indemnification in its articles of incorporation. Our
articles of incorporation have no separate provision for
indemnification of directors, officers, or control
persons.

Insofar
as the limitation of, or indemnification for, liabilities arising
under the Securities Act of 1933, as amended (the “Securities
Act”), may be permitted to directors, officers, or persons
controlling us pursuant to the foregoing, or otherwise, we have
been advised that, in the opinion of the SEC, such limitation or
indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable.

INDEX TO FINANCIAL STATEMENTS

For the Period Ended September 30, 2018

Page

Consolidated
Balance Sheets as of September 30, 2018 (unaudited) and December
31, 2017

F-2

Consolidated
Statements of Operations for the three and nine months ended
September 30, 2018 and 2017 (unaudited)

F-3

Consolidated
Statements of Cash Flows for the nine months ended September 30,
2018 and 2017 (unaudited)

F-4

Notes
to Unaudited Consolidated Financial Statements for the nine months
ended September 30, 2018

F-5

December 31, 2017 and 2016 and for the Years Ended December 31,
2017 and 2016

Page

Report
of Independent Registered Public Accounting Firm

F-13

Consolidated
Balance Sheets at December 31, 2017 and 2016

F-14

Consolidated
Statements of Operations for the years ended December 31, 2017 and
2016

F-15

Consolidated
Statements of Changes in Stockholders’ Equity (Deficit) for
the years ended December 31, 2017 and 2016

F-16

Consolidated
Statements of Cash Flows for the years ended December 31, 2017 and
2016

F-17

Notes
to Consolidated Financial Statements

F-18

AMERICAN RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

UNAUDITED

September 30,

2018

December 31,

2017

ASSETS

CURRENT
ASSETS

Cash

$

57,739

$

186,722

Accounts Receivable

2,801,040

1,870,562

Inventory

426,725

615,096

Prepaid fees

147,826

Accounts Receivable – Other

102,994

30,021

Total Current Assets

3,536,324

2,702,401

OTHER
ASSETS

Cash – restricted

286,043

198,943

Processing and rail facility

2,802,855

2,914,422

Underground equipment

9,346,692

8,887,045

Surface equipment

4,532,724

3,957,603

Mining rights (net of amortization of $181,385
and $0)

2,036,567

Less Accumulated Depreciation

(6,600,108

)

(4,820,569

)

Land

178,683

Accounts Receivable – Other

127,718

Note Receivable

4,117,139

4,117,139

Total Other Assets

16,521,912

15,560,984

TOTAL
ASSETS

$

20,058,236

$

18,263,385

LIABILITIES AND
STOCKHOLDERS' DEFICIT

CURRENT
LIABILITIES

Accounts payable

$

6,813,924

$

5,360,537

Accrued management fee

17,840,615

Accrued interest

624,209

336,570

Accrued dividend on Series B

104,157

Funds held for others

63,767

82,828

Due to affiliate

636,378

124,000

Current portion of long term-debt (net of
issuance costs and debt discount of $387,442 and
$35,000)

14,625,099

9,645,154

Current portion of reclamation
liability

2,275,848

2,033,862

Total Current Liabilities

25,143,382

35,423,566

OTHER
LIABILITIES

Long-term portion of note payable (net of
issuance costs of $420,293 and $440,333)

5,072,493

5,081,688

Reclamation liability

20,289,527

17,851,195

Total Other Liabilities

25,362,020

22,932,883

Total Liabilities

50,505,402

58,356,449

STOCKHOLDERS'
DEFICIT

AREC – Class A Common stock: $.0001 par value;
230,000,000 shares authorized, 1,192,044 and 892,044 shares issued
and outstanding for the period end

118

89

AREC – Series A Preferred stock: $.0001 par
value; 5,000,000 shares authorized, 4,817,792 shares issued and
outstanding

482

482

AREC – Series B Preferred stock: $.001 par
value; 20,000,000 shares authorized, 850,000 shares issued and
outstanding

850

850

AREC-  Series C Preferred stock: $.0001 par
value; 20,000,000 shares authorized, 0 shares issued and
outstanding

Additional paid-in capital

19,816,567

1,527,254

Accumulated deficit

(50,265,183

)

(42,019,595

)

Total American Resources Corporation's
Shareholders' Deficit

(30,447,166

)

(40,490,920

)

Non controlling interest

397,856

Total Stockholders' Deficit

(30,447,166

)

(40,093,064

)

TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT

$

20,058,236

$

18,263,385

The accompanying footnotes are integral to the unaudited
consolidated financial statements

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

For the
Three and Nine Months Ended September 30, 2018 and
2017

Coal Sales

$ 8,890,322

$ 4,192,244

$ 23,219,222

$ 13,770,183

Processing Services Income

147,946

159,724

167,462

1,563,864

Total Revenue

9,038,268

4,351,968

23,386,684

15,334,047

Cost of Coal Sales and Processing

(6,690,698)

(2,797,140)

(16,783,801)

(12,307,399)

Accretion Expense

(539,771)

(339,288)

(1,435,295)

(1,181,055)

Loss on settlement

(30,055)

(281,907)

Depreciation

(649,983)

(697,214)

(1,779,539)

(1,856,442)

Amortization of mining rights

(181,385)

(181,385)

General and Administrative

(1,142,522)

(26,940)

(2,175,794)

(189,604)

Professional Fees

(784,922)

(144,712)

(1,222,937)

(565,995)

Production Taxes and Royalties

(1,041,667)

(865,950)

(2,769,584)

(3,464,611)

Development Costs

(2,188,833)

(1,035,286)

(5,908,207)

(4,172,759)

Total Expenses from Operations

(13,219,781)

(5,936,585)

(32,256,542)

(24,019,772)

Net Loss from Operations

(4,181,513)

(1,584,617)

(8,869,858)

(8,685,725)

Other Income

875,942

67,844

1,295,065

309,418

Gain on cancelation of debt

315,000

Receipt of previously impaired
receivable

117,657

92,573

241,574

Interest Income

41,171

Interest expense

(305,655)

(342,683)

(864,104)

(567,970)

Net Loss

(3,611,226)

(1,741,799)

(7,990,153)

(8,702,703)

Less: Series B dividend requirement

(17,000)

(104,157)

Less: Net income attributable to Non Controlling
Interest

(67,844)

(151,278)

(309,418)

Net loss attributable to American Resources
Corporation Shareholders

$ (3,628,226)

$ (1,809,643)

$ (8,245,588)

$ (9,012,121)

Net loss per share – basic and
diluted

$ (2.49)

$ (2.03)

$ (8.76)

$ (11.87)

Weighted average shares outstanding

1,038,783

891,180

941,495

759,397

The accompanying
footnotes are integral to the unaudited consolidated financial
statements

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

For the
9 Months Ended September 30, 2018 and

For the
9 Months Ended September 30, 2017

Cash Flows from
Operating activities:

Net loss

$ (7,990,153)

$ (8,702,703)

Adjustments to
reconcile net income (loss) to net cash

Depreciation

1,779,539

1,856,442

Amortization of mining rights

181,385

Accretion expense

1,435,295

1,181,055

Cancelation of debt

(315,000)

Loss on reclamation settlements

281,907

Assumption of note payable in reverse
merger

50,000

Gain on disposition

(807,591)

Recovery of previously impaired
receipts

(92,573)

(241,574)

Amortization of debt discount

420,134

284,406

Warrant expense

234,067

Option expense

13,410

Stock compensation expense

201,250

10,000

Change in current
assets and liabilities:

Accounts receivable

(930,478)

2,123,881

Inventory

188,371

Prepaid expenses and other assets

(147,826)

Accounts payable

973,057

2,824,351

Funds held for others

(19,061)

Due to affiliates

512,378

Accrued interest

287,639

90,000

Reclamation liability settlements

(709,132)

Cash used in operating activities

(4,076,157)

(951,367)

Cash Flows from
Investing activities:

Advances made in connection with management
agreement

(99,582)

(75,000)

Advance repayment in connection with management
agreement

222,304

469,645

Cash paid for PPE, net

(127,957)

(176,597)

Cash (used in) provided by investing
activities

(5,235)

218,048

Cash Flows from
Financing activities:

Principal payments on long term
debt

(2,064,902)

(318,576)

Proceeds from long term debt

5,316,977

1,670,000

Proceeds from related party

50,000

Net proceeds from (payments to) factoring
agreement

787,434

(1,521,577)

Proceeds from sale of Series B Preferred
Stock

600,000

Cash provided by financing
activities

4,039,509

479,847

Decrease in cash and restricted
cash

(41,883)

(253,472)

Cash and restricted cash, beginning of
period

385,665

784,525

Cash and restricted
cash, end of period

$ 343,782

$ 531,053

Supplemental Information

Non-cash investing and financing
activities

Assumption of net assets and liabilities for
asset acquisitions

$ 2,217,952

$

Equipment for notes payable

$ 906,660

$ 1,222,500

Purchase of related party note receivable in
exchange for Series B Equity

$

$ 250,000

Preferred Series B dividends

$ 104,157

$

Conversion of note payable to common
stock

$

$ 50,000

Beneficial conversion feature on note
payable

$

$ 50,000

Forgiveness of accrued management
fee

$ 17,840,615

$

Relative fair value debt discount on warrant
issue

$

$ 300,000

Cash paid for interest

$ 156,331

$ 193,564

Cash paid for income taxes

$

$

The accompanying
footnotes are integral to the unaudited consolidated financial
statements


AMERICAN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

NOTE 1 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

American Resources Corporation (ARC or the
Company) operates through subsidiaries that were acquired in 2016
and 2015 for the purpose of acquiring, rehabilitating and operating
various natural resource assets including coal, oil and natural
gas.

Basis of Presentation and
Consolidation:

The consolidated financial statements include
the accounts for the nine months ended September 30, 2018 and 2017
of the Company and its wholly owned subsidiaries Quest Energy Inc
(QEI), Deane Mining, LLC (Deane), Quest Processing LLC (Quest
Processing), ERC Mining Indiana Corp (ERC), McCoy Elkhorn Coal LLC
(McCoy) and Knott County Coal LLC (KCC). All significant
intercompany accounts and transactions have been
eliminated.

As of July 1, 2018, the accounts of Land
Resources & Royalties, LLC have been deconsolidated from the
financial statements based upon the ongoing review of its status as
a variable interest entity.

On August 23, 2018, KCC disposed of certain
non-operating assets totaling $111,567 and the corresponding asset
retirement obligation totaling $919,158 which resulted in a gain of
$807,591.

The accompanying Consolidated Financial
Statements are unaudited and have been prepared in accordance with
accounting principles generally accepted in the United States
(“U.S. GAAP”)

Interim Financial
Information

Certain information and footnote disclosures
normally included in annual financial statements prepared in
accordance with U.S. GAAP have been omitted. In the opinion of
management, these interim unaudited Consolidated Financial
Statements reflect all normal and recurring adjustments necessary
for a fair presentation of the results for the periods presented.
Results of operations for the three and nine months ended September
30, 2018 are not necessarily indicative of the results to be
expected for the year ending December 31, 2018 or any other period.
These financial statements should be read in conjunction with the
Company’s 2017 audited financial statements and notes thereto
which were filed on Form 10K on April 23, 2018.

Going Concern: The Company has
suffered recurring losses from operations and currently has a
working capital deficit. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern.
We plan to generate profits by expanding current coal operations as
well as developing new coal operations. However, we will need to
raise the funds required to do so through sale of our securities or
through loans from third parties. We do not have any commitments or
arrangements from any person to provide us with any additional
capital. If additional financing is not available when needed, we
may need to cease operations. We may not be successful in raising
the capital needed to expand or develop operations. Management
believes that actions presently being taken to obtain additional
funding provide the opportunity for the Company to continue as a
going concern. The accompanying financial statements have been
prepared assuming the Company will continue as a going concern; no
adjustments to the financial statements have been made to account
for this uncertainty.

Convertible Preferred
Securities:
We account for hybrid contracts that
feature conversion options in accordance with generally accepted
accounting principles in the United States. ASC 815, Derivatives and Hedging Activities
(“ASC 815”) requires companies to bifurcate conversion
options from their host instruments and account for them as free
standing derivative financial instruments according to certain
criteria. The criteria includes circumstances in which (a) the
economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid
instrument that embodies both the embedded derivative instrument
and the host contract is not re-measured at fair value under
otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur and (c) a
separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative
instrument.

We also follow ASC 480-10, Distinguishing Liabilities from Equity
(“ASC 480-10”) in its evaluation of the accounting for
a hybrid instrument. A financial instrument that embodies an
unconditional obligation, or a financial instrument other than an
outstanding share that embodies a conditional obligation, that the
issuer must or may settle by issuing a variable number of its
equity shares shall be classified as a liability (or an asset in
some circumstances) if, at inception, the monetary value of the
obligation is based solely or predominantly on any one of the
following: (a) a fixed monetary amount known at inception; (b)
variations in something other than the fair value of the
issuer’s equity shares; or (c) variations inversely related
to changes in the fair value of the issuer’s equity shares.
Hybrid instruments meeting these criteria are not further evaluated
for any embedded derivatives and are carried as a liability at fair
value at each balance sheet date with remeasurements reported as a
component of other income/expense in the accompanying Consolidated
Statements of Operations.

Cash is maintained in bank
deposit accounts which, at times, may exceed federally insured
limits. To date, there have been no losses in such
accounts.

Restricted cash: As part of the
Kentucky New Markets Development Program an asset management fee
reserve was set up in the amount of $116,115. The funds are held to
pay annual asset management fees to an unrelated party through
2021. The balance as of September 30, 2018 and December 31, 2017
was $73,730 and $116,115, respectively. A lender of the Company
also required a reserve account to be established. The balance as
of September 30, 2018 and December 31, 2017 was $148,546 and $0,
respectively. The total balance of restricted cash also includes
amounts held under the management agreement in the amount of
$63,767 and $82,828, respectively. See note 5 for terms of the
management agreement.

The balance as of September 30, 2018 and
December 31, 2017 was $286,043 and $198,943,
respectively.

The following table sets forth a reconciliation
of cash, cash equivalents, and restricted cash reported in the
consolidated balance sheet that agrees to the total of those
amounts as presented in the consolidated statement of cash flows
for the nine months ended September 30, 2018 and September 30,
2017.

Cash

$ 57,739

$ 342,041

Restricted Cash

286,043

189,012

Total cash and restricted cash presented in the
consolidated statement of cash flows

$ 343,782

$ 531,053

Asset Acquisitions:

On April 21, 2018, McCoy acquired certain assets
known as the Point Rock Mine (Point Rock) in exchange for assuming
certain liabilities of the seller. The fair values of the
liabilities assumed were $53,771 for prior vendors and $2,098,052
for asset retirement obligation totaling $2,151,823. The
liabilities assumed do not require fair value readjustments. In
addition, McCoy entered into a surface and mineral sub-lease in the
amount of up to $4,000,000 to be paid only upon coal extraction at
$2 per extracted ton of coal. McCoy will also pay a portion of the
sales price as a royalty with an annual minimum payment of $60,000
starting in January 2019. The acquired assets have an anticipated
life of 5 years. Capitalized mining rights will be amortized based
on productive activities over the anticipated life of 5 years.
Amortization expense for the 3 months ended September 30, 2018 and
2017 amounted to $179,318 and $0, respectively. The assets will be
measured for impairment when an event occurs that questions the
realization of the recorded value.

The assets acquired of Point Rock do not
represent a business as defined in FASB AS 805-10-20 due to their
classification as a single asset. Accordingly, the assets acquired
are initially recognized at the consideration paid, which was the
liabilities assumed, including direct acquisition costs, of which
there were none. The cost is allocated to the group of assets
acquired based on their relative fair value. The assets acquired
and liabilities assumed of Point Rock were as follows at the
purchase date:

Assets

Mining Rights

$ 2,151,823

Liabilities

Vendor Payables

$ 53,771

Asset Retirement Obligation

$ 2,098,052

On May 10, 2018, KCC acquired certain assets
known as the Wayland Surface Mine (Wayland) in exchange for
assuming certain liabilities of the seller. The fair values of the
liabilities assumed were $66,129 for asset retirement obligation.
The liabilities assumed do not require fair value readjustments. In
addition, KCC entered into a royalty agreement with the seller to
be paid only upon coal extraction in the amount of $1.50 per
extracted ton of coal. The acquired assets have an anticipated life
of 7 years. Capitalized mining rights will be amortized based on
productive activities over the anticipated life of 7 years.
Amortization expense for the 3 months ended September 30, 2018 and
2017 amounted to $2,067 and $0, respectively. The assets will be
measured for impairment when an event occurs that questions the
realization of the recorded value.

The assets acquired of Wayland do not represent
a business as defined in FASB AS 805-10-20 due to their
classification as a single asset. Accordingly, the assets acquired
are initially recognized at the consideration paid, which was the
liabilities assumed, including direct acquisition costs, of which
there were none. The cost is allocated to the group of assets
acquired based on their relative fair value. The assets acquired
and liabilities assumed of Wayland were as follows at the purchase
date:

Assets

Mining Rights

$ 66,129

Liabilities

Asset Retirement Obligation

$ 66,129

Asset Retirement Obligations (ARO) –
Reclamation:
At the time they are incurred, legal
obligations associated with the retirement of long-lived assets are
reflected at their estimated fair value, with a corresponding
charge to mine development. Obligations are typically incurred when
we commence development of underground and surface mines, and
include reclamation of support facilities, refuse areas and slurry
ponds or through acquisitions.

Obligations are reflected at the present value
of their future cash flows. We reflect accretion of the obligations
for the period from the date they incurred through the date they
are extinguished. The asset retirement obligation assets are
amortized using the units-of-production method over estimated
recoverable (proved and probable) reserves. We are using a discount
rate of 10%. Federal and State laws require that mines be reclaimed
in accordance with specific standards and approved reclamation
plans, as outlined in mining permits. Activities include
reclamation of pit and support acreage at surface mines, sealing
portals at underground mines, and reclamation of refuse areas and
slurry ponds.

We assess our ARO at least annually and reflect
revisions for permit changes, change in our estimated reclamation
costs and changes in the estimated timing of such costs. During the
periods ending September 30, 2018 and 2017, $0 and $281,907 were
incurred for loss on settlement on ARO, respectively.

The table below reflects the changes to our
ARO:

Balance at December 31, 2017

$ 19,885,057

Accretion – nine months September 30,
2018

1,435,295

Reclamation work – nine months September
30, 2018

(0)

Asset disposition

(919,158)

Point Rock Acquisition

2,098,052

Wayland Acquisition

66,129

Balance at September 30, 2018

$ 22,565,375

Allowance For Doubtful Accounts:

The Company recognizes an allowance for losses on trade and other
accounts receivable in an amount equal to the estimated probable
losses net of recoveries. The allowance is based on an analysis of
historical bad debt experience, current receivables aging and
expected future write-offs, as well as an assessment of specific
identifiable amounts considered at risk or
uncollectible.

Allowance for trade receivables as of September
30, 2018 and December 31, 2017 amounted to $0, for both periods.
Allowance for other accounts receivables as of September 30, 2018
and December 31, 2017 amounted to $0 and $92,573,
respectively.

Trade and loan receivables are carried at
amortized cost, net of allowance for losses. Amortized cost
approximated book value as of September 30, 2018 and December 31,
2017.

Reclassifications:

Reclassifications of prior periods have been made to conform with
current year presentation.

New Accounting
Pronouncements:

ASU 2016-01, Recognition and Measurement of Financial
Assets and Financial Liabilities
, effective for years
beginning after December 15, 2017. ASU 2016-01 was adopted on
January 1, 2018 and the standard did not have a material effect on
the consolidated financial statements or related
disclosures

ASU 2016-02, Leases, effective for years beginning
after December 15, 2019. We expect to adopt ASU 2016-02 beginning
January 1, 2019 and are in the process of assessing the impact that
this new guidance is expected to have on our consolidated financial
statements and related disclosures.

ASU 2017-09, Compensation – Stock
Compensation,
effective beginning after December 31, 2017.
ASU 2017-09 was adopted on January 1, 2018 and the standard did not
have a material effect on the consolidated financial statements or
related disclosures

ASU 2017-11, Earnings Per Share, effective beginning
after December 15, 2018. We expect to adopt ASU 2017-11 beginning
January 1, 2019 and are in the process of assessing the impact that
this new guidance is expected to have on our consolidated financial
statements and related disclosures.

ASU 2018-05, Income Taxes, effective beginning after
December 15, 2017, was adopted on January 1, 2018 with no effect on
our consolidated financial statements and related
disclosures.

ASU 2018-07, Compensation-Stock Compensation (Topic
718),
effective beginning after December 15, 2018 was
adopted on July 1, 2018 and the standard did not have a material
effect on the consolidated financial statements or related
disclosures.

Management has elected to early adopt ASU
2017-01, Business Combinations
(Topic 805): Clarifying the Definition of a Business

effective at inception.

ASU 2016-18, Statement of Cash Flows: Restricted Cash
(Topic 230).
Topic 230 addressed how restricted cash was
presented in the statement of cash flows. We adopted Topic 230 as
of January 1, 2018 resulting in modifications as to the manner in
which restricted cash transactions are presented in the statement
of cash flows.

ASU 2014-09, Revenue from Contracts with Customers (Topic
606).
Topic 606 supersedes the revenue recognition
requirements in Topic 605 and requires entities to recognize
revenues when control of the promised goods or services is
transferred to customers at an amount that reflects the
consideration to which the entity expects to be entitled to in
exchange for those goods or services. The Company’s primary
source of revenue is from the sale of coal through both short-term
and long-term contracts with utilities, industrial customers and
steel producers whereby revenue is currently recognized when risk
of loss has passed to the customer. During the fourth quarter of
2017, the Company finalized its assessment related to the new
standard by analyzing certain contracts representative of the
majority of the Company’s coal sales and determined that the
timing of revenue recognition related to the Company’s coal
sales will remain consistent between the new standard and the
previous standard. The Company also reviewed other sources of
revenue, and concluded the current basis of accounting for these
items is in accordance with the new standard. The Company adopted
ASU 2014-09 effective January 1, 2018 using the modified
retrospective method, and there was no cumulative adjustment to
retained earnings.

NOTE 2 – PROPERTY AND
EQUIPMENT

At September 30, 2018 and December 31, 2017,
property and equipment were comprised of the
following:

Processing and rail facility

$ 2,802,855

$ 2,914,422

Underground equipment

9,346,692

8,887,045

Surface equipment

4,532,724

3,957,603

Mining rights (Less: accumulated amortization of
$181,385)

2,036,567

Land

178,683

Less: Accumulated depreciation

(6,600,108)

(4,820,569)

Total Property and Equipment, Net

$ 12,118,730

$ 11,117,184

Depreciation expense amounted to $649,983 and
$697,214 for the three month periods September 30, 2018 and
September 30, 2017, respectively. Depreciation expense amounted to
$1,779,539 and $1,856,442 for the nine month periods September 30,
2018 and September 30, 2017, respectively.

The estimated useful lives are as
follows:

Processing and Rail Facilities

20 years

Surface Equipment

7 years

Underground Equipment

5 years

Mining Rights

5 years

NOTE 3 – NOTES
PAYABLE

The net increase in debt includes the
following:

Total debt balance as of December 31,
2017

$ 14,726,842

During the nine-month period ended September 30,
2018, $2,450 ,000 was drawn from the ARC business loan which
carries annual interest at 7%, is due within two months of
advancement and is secure by all company assets. On June 4, 2018,
$30,000 and September 28, 2018, $75,000 of this note was
repaid.

2,450,000

On January 25, 2018, QEI entered into an
equipment loan agreement with an unrelated party in the amount of
$346,660. The agreement calls for monthly payments of $11,360 until
maturity date of December 24, 2020 and carries an interest rate of
9%. The loan is secured by the underlying surface equipment
purchased by the loan. Loan proceeds were used directly to purchase
equipment.

346,660

On March 28, 2018, QEI entered into an equipment
loan agreement with an unrelated party in the amount of $135,000.
The agreement called for payments of $75,000 and $60,000 are due on
April 6, 2018 and April 13, 2018, respectively, at which date the
note was repaid in full. Loan proceeds were used directly to
purchase equipment.

135,000

On May 9, 2018, QEI entered into a loan
agreement with an unrelated party in the amount of $1,000,000 with
a maturity date of September 24, 2018 with monthly payments of
$250,000 due beginning June 15, 2018. The note is secured by the
assets and equity of the company and carries an interest rate of
0%.  Proceeds of the note were split between receipt of
$575,000 cash and $425,000 payment for new equipment. No payments
have been made on the note which is in default.

1,000,000

During May 2018, the company entered into a
financing arrangement with two unrelated parties. The notes totaled
$2,859,500, carried an original issue discount of $752,535,
interest rate of 33% and have a maturity date of January 2019 and
are secured by future receivables as well as personal guarantees of
two officers of the company.

2,963,958

During the nine-month period ended September 30,
2018 net additions to the factoring agreement totaled
$787,435.

787,435

Total increases to debt

7,683,053

Less cash payments

(2,064,902)

In May 2018, an unrelated party forgave $315,000
of the $540,000 equipment loan agreement dated September 30,
2016.

(315,000)

Issuance discount

(752,535)

Amortization of issuance cost and loan
discounts

420,134

Ending debt balance at September 30,
2018

$ 19,697,592

Less current portion:

$ 14,625,099

Total long term debt at September 30,
2018

$ 5,072,493

NOTE 4 – RELATED PARTY
TRANSACTIONS

On June 12, 2015, the Company executed a
consulting agreement with an entity with common ownership. No fees
or repayments have occurred during the nine-month period September
30, 2018 and 2017, respectively.

The amount outstanding and payable as of
September 30, 2018 and December 31, 2017, was $0 and $17,840,615,
respectively. The amount was due on demand and did not accrue
interest. The amounts under the agreement were cancelled and
forgiven on May 31, 2018. The forgiveness was accounted for as an
increase in additional paid in capital.

On April 30, 2017, the Company purchased
$250,000 of secured debt that had been owed to a third 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.

During the three month period ended September
30, 2018, the Company incurred royalty expense in the amount of
$64,537 to a related entity formally consolidated as a variable
interest entity. As of September 30, 2018 the company owed the
related entity a total of $512,378 for unpaid royalties and
advances.

NOTE 5 –
MANAGEMENT AGREEMENT

On April 13, 2015, ERC entered into a mining and
management agreement with an unrelated entity, to operate a coal
mining and processing facility in Jasonville, Indiana. Under the
management agreement, net funds advanced for the nine-month period
ended September 30, 2018 and 2017 are $99,582 and $75,000,
respectively and the amounts repaid totaled $127,957 and $394,645,
respectively. During the nine-month period ended September 30, 2018
and 2017, fees paid under the agreement amounted $313,114 and $0,
respectively which has been recorded in other income.

NOTE 6 – EQUITY
TRANSACTIONS

On July 18, 2018, we issued 150,000 common
shares valued at $165,000 to Sylva International LLC for an
agreement to provide digital marketing services to the Company. The
agreement was subsequently terminated by the Company for breach of
contract. The Company fully recognized $165,000 of stock based
compensation for the nine months September 30, 2018.

On September 12, 2018, pursuant to the
Company’s Employee Incentive Stock Option Plan, we issued a
total of 636,830 options to certain employees. The options have an
expiration date of September 10, 2025 and have an exercise price of
$1.00 per share. Of the total options issued, 25,000 vested
immediately, with the balance of 611,830 options vesting equally
over the course of three years, subject to restrictions regarding
the employee’s continued employment by the Company. The fair
value of the options is $482,751. The Company recognized $13,410 as
option expense for the nine months September 30, 2018. The
unamortized expense at September 30, 2018 is $469,342.

On September 14,
2018, we issued 105,000 common shares valued at $152,250 and
175,000 warrants to Redstone Communications LLC and 45,000 common
shares valued at $65,250 and 75,000 warrants to Mr. Marlin
Molinaro as compensation for the first six months of an agreement
to provide for public relations with existing shareholders, broker
dealers, and other investment professionals for the Company. The
warrants fair value was determined to be $234,067. The warrants
granted are non-refundable and vest immediately and have an
expiration date of September 14, 2023. Stock based compensation of
$36,205 for the common shares issued and $234,067 for the warrant
granted was expensed during the nine months September 30, 2018. As
of September 30, 2018, the unamortized expense for the common
shares issued is $181,250.

The Company has
Series A Preferred stock outstanding, which has the following key
provisions: par value of $0.0001, voting rights of 33(1/3) votes of
Class A Common stock for each Series A Preferred stock, conversion
to Class A Common stock at a rate 3(1/3) Class A Common stock,
liquidation rights at $1.65 per share, and anti-dilution protection
through March 21, 2020 for conversion into Class A Common Stock at
no less than 72.0% of the fully-diluted Class A Common stock
outstanding. The Company evaluated the embedded conversion option
under ASC 815. The conversion option was deemed clearly and closely
related to its equity host instrument and as such was not
bifurcated.

Total preferred dividend requirement for the
nine-month period ending September 30, 2018 and 2017 amounted to
$104,157 and $0, respectively.

Total stock, warrant and option compensation
expense for the nine-month period ending September 30, 2018 and
2017 amounted to $448,727 and $0, respectively.

The price of the above stock, warrants and
options were determined using the closing stock price at the date
of the grant and the Black-Sholes Option Pricing
Model.

9/30/2018

Expected Dividend Yield

0%

Expected volatility

120%

Risk-free rate

1.4%

Expected life of warrants

3-7 Years

Outstanding – December 31, 2017

5,364,230

$ 2.638

2.835

$ 138,069

Exercisable – December 31, 2017

5,364,230

$ 2.638

2.835

$ 138,069

Granted

886,830

$ 1.000

6.388

$ 5,386,975

Forfeited or Expired

Exercised

$

Outstanding – September 30, 2018

6,251,060

$ 2.432

2.474

$ 31,556,641

Exercisable – September 30, 2018

5,639,230

$ 2.590

1.982

$ 27,836,687

NOTE 7 –
CONTINGENCIES

In the course of normal operations, the Company
is involved in various claims and litigation that management
intends to defend. The range of loss, if any, from potential claims
cannot be reasonably estimated. However, management believes the
ultimate resolution of matters will not have a material adverse
impact on the Company’s business or financial
position.

Should the Company
decide to renew the consulting agreement with Redstone
Communication, LLC, as compensation for the following six months of
engagement, we will issue to Redstone Communications another
five-year option to purchase up to 175,000 common shares of our
Company at an exercise price of $1.50 per share, another 105,000
common shares, and a cash payment of $10,000 per month for the
second six-month term (with the first two months payable in advance
upon renewal of the second term). Furthermore, we will issue to Mr.
Marlin Molinaro another five-year option to purchase up to 75,000
common shares of our Company at an exercise price of $1.50 per
share and another 45,000 common shares. Should Redstone
Communications, LLC and Mr. Molinaro receive and exercise the
options received under the second six months of engagement, the
Company will receive up to $262,500 and $112,500,
respectively.

NOTE 8 – SUBSEQUENT
EVENTS

During October 2018, an officer of the company
advanced an additional $13,500. The advance is non-interest
bearing, non-secured and due on demand.

On October 25, 2018, Wyoming County Coal LLC was
formed as a wholly owned subsidiary of Quest Energy
Inc.

On November 7, 2018, Wyoming County Coal LLC,
acquired 5 permits, coal processing and loading facilities, surface
ownership, mineral ownership, and coal refuse storage facilities
from unrelated entities. Consideration for the acquired assets was
the assumption of reclamation bonds totaling $234,240, 1,727,273
shares of common stock of the company priced at $12.79
per share of common stock
, a seller note of $350,000 and a
seller note of $250,000. Management is still gathering the
information needed to complete the allocation of the purchase price
to the assets acquired and liabilities assumed.

On October 24, 2018, options totaling 69,420
common shares of the company were exercised by a non-affiliated
shareholder. The exercise was a cashless exercise.

On November 5, 2018, 4,336,012 Series A
preferred shares were converted into 14,453,373 common shares of
the company in a cashless conversion under the terms of the
agreement.

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

On November 7, 2018, $36,000 worth of trade
payables were settled with 6,000 common shares of the
company.

On November 8,
2018, the Company's Board of Directors elected to amend its
Articles of Incorporation, canceled its Series B Preferred Stock,
designated 20,000,000 shares of a newly created Series C Preferred
Stock, and amended its Series A Preferred stock for the following
key provisions: voting rights of 333(1/3) votes of Class A Common
stock for each Series A Preferred stock, and anti-dilution
protection through March 1, 2020 at no less than 72.0% of the
fully-diluted Class A Common stock. The newly created Series C
Preferred Stock carries the following key provisions: automated
conversion to Class A Common Stock upon the completion of a
underwritten equity offering totaling $5,000,000 or more and a paid
in kind annual dividend with a 10% annual percentage
rate.

On November 13, 2018, $300,000 was advanced
under the ARC business loan which carries annual interest at 7%, is
due within two months of advancement and is secure by all company
assets.

On
November 14, $225,000 of debt to an unrelated entity, was converted
into 37,500 shares of Class A Common stock.

On
November 15, three independent directors were appointed.
As compensation for their services,
each of the directors were issued a three-year warrant to purchase
up to 15,000 common shares of our company at an exercise price of
$6.00 per share, subject to certain price adjustments and other
provisions found within the respective warrants. Should each of the
three directors exercise the option through a cash payment to the
Company, the Company will receive up to $90,000 from each director,
and each director will receive up to 15,000 restricted common
shares of the Company. There are no registration rights associated
with this warrant that require the Company to register the
shares.

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
December 3, 2018, 10,000 shares of Class A Common stock and an
option to purchase 417 shares of the company were issued to an
unrelated firm for consulting services. The option has a strike
price of $6.00 per share, has a two-year term, and can be exercised
via a cashless exercise by the holder at any time during its term.
The agreement also carries the commitment that a cash fee of
$10,000 will be payable under the agreement at the time the company
closes a financing of greater than $1.0 million. An additional
15,000 shares will be issued on June 1, 2019 if the agreement is
still in effect.

On
December 24, 2018, the ARC business loan was amended to reflect the
proper state of incorporation for the Company.

On
December 31, 2018, the Company entered into a loan agreement with
an unrelated party.  The loan is for an amount up to
$6,500,000 of which $3,000,000 was advanced on December 31, 2018
and $2,000,000 was advanced on February 1, 2019.  The
promissory agreement carries interest at 5% annual interest rate
and payments of principal and interest shall be repaid at a per-ton
rate of coal sold to the lender.  The outstanding amount of
the note has a maturity of April 1, 2020.  The note is secured
by the assets of the Company.

On
January 16, 2019, an affiliate of the Company converted its
remaining 29,051 shares of Series A Preferred into 96,837 Class A
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 option 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
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 receive and exercise the options received under the
second six months of engagement, the Company will receive up to
$262,500 and $112,500, respectively. These common shares have not
been physically issued.

On
January 27, 2019, the Company issued 1,000 shares of Class A Common
Stock 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 Class
A Common Stock 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 Class A
Common stock as compensation under the agreement.

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

On
February 4, 2019, the ARC business loan was amended to allow
conversion of outstanding amounts to Class A Common shares at a
price per share of $5,25.

On
February 12.
2019,McCoy signed a
contract with an
unrelated party for the acquisition of
stock and membership interests of entities with non-operating
assets consisting of surface and mineral ownership and other
related agreements. The transaction is expected to close
simultaneous with this offering. Consideration is expected to be in
the form of 2,000,000 Class A common shares, priced at $12.79
per share of common stock, as
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 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.

On
February 4 through February 8, 2019, the Company issued a total of
17,800 shares of Class A Common Stock 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.



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.



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 sheets of American
Resources Corporation and its subsidiaries (collectively, the
“Company”) as of December 31, 2017 and 2016, and the
related consolidated statements of operations, changes in
stockholders’ deficit, and cash flows for the years 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, 2017 and 2016, and the
results of their operations and their cash flows for the years 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 entity'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 have
served as the Company’s auditor since 2017

Houston,
Texas

April
20, 2018

AMERICAN RESOURCES CORPORATION

CONSOLIDATED BALANCE
SHEETS

CURRENT
ASSETS

Cash

$186,722

$784,525

Accounts
Receivable

1,870,562

2,753,199

Inventory

615,096

Intercompany

Accounts Receivable
– Other

30,021

199,701

Total Current
Assets

2,702,401

3,737,425

OTHER
ASSETS

Cash –
restricted

198,943

141,102

Processing and rail
facility

2,914,422

2,914,422

Underground
equipment

8,887,045

7,500,512

Surface
equipment

3,957,603

3,751,054

Less Accumulated
Depreciation

(4,820,569)

(2,262,855)

Land

178,683

178,683

Accounts Receivable
– Other

127,718

196,347

Note
Receivable

4,117,139

4,117,139

Total Other
Assets

15,560,984

16,536,404

TOTAL
ASSETS

$18,263,385

$20,273,829

LIABILITIES
AND STOCKHOLDERS' DEFICIT

CURRENT
LIABILITIES

Accounts
payable

$5,360,537

$2,196,060

Accrued management
fee

17,840,615

17,840,615

Accrued
interest

336,570

122,945

Funds held for
others

82,828

24,987

Due to
affiliate

124,000

74,000

Current portion of
long term-debt (net of unamortized discount of $35,000 and
$0)

9,645,154

4,431,006

Current portion of
reclamation liability

2,033,862

519,489

Total Current
Liabilities

35,423,566

25,209,102

OTHER
LIABILITIES

Long-term portion
of note payable (net of issuance costs $440,333 and
$451,389)

5,081,688

4,964,941

Reclamation
liability

17,851,195

17,607,384

Total Other
Liabilities

22,932,883

22,572,325

Total
Liabilities

58,356,449

47,781,427

STOCKHOLDERS'
DEFICIT

AREC – Class A
Common stock: $.0001 par value; 230,000,000 shares authorized,
892,044 and 0 shares issued and outstanding for the period
end

89

AREC – Series A
Preferred stock: $.0001 par value; 4,817,792 shares authorized,
4,817,792 shares issued and outstanding

482

482

AREC – Series B
Preferred stock: $.001 par value; 20,000,000 shares authorized,
850,000 shares issued and outstanding

850

Additional paid-in
capital

1,527,254

88,193

Accumulated
deficit

(42,019,595)

(27,651,030)

Total American
Resources Corporation Shareholders' Equity

(40,490,920)

(27,562,355)

Non controlling
interest

397,856

54,757

Total Stockholders'
Deficit

(40,093,064)

(27,507,598)

TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT

$18,263,385

$20,273,829

The accompanying footnotes are integral to the consolidated
financial statements

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended
December 31,

Coal
Sales

$19,231,249

$5,345,145

Processing Services
Income

1,589,749

2,256,049

Total
Revenue

20,820,998

7,601,194

Cost of Coal Sales
and Processing

(16,344,567)

(8,961,653)

Accretion
Expense

(1,791,051)

(1,664,774)

Loss on reclamation
settlement

(71,245)

Depreciation

(2,557,714)

(2,262,855)

General and
Administrative

(1,378,111)

(237,601)

Professional
Fees

(694,366)

(391,659)

Consulting Fees –
Related Party

(12,340,615)

Production Taxes
and Royalties

(4,974,013)

(1,250,365)

Impairment Loss
from notes receivable from related party

(250,000)

(510,902)

Development
Costs

(6,850,062)

(1,760,594)

Total Expenses from
Operations

(34,839,884)

(29,452,263)

Net Loss from
Operations

(14,018,886)

(21,851,069)

Other
Income

343,100

54,757

Amortization of
debt discount and debt issuance costs

(477,056)

(9,406)

Interest
Income

298,721

Receipt of
previously impaired receivables

387,427

Interest

(558,772)

(283,564)

Net
Loss

(14,025,466)

(22,089,282)

Less: Preferred
dividend requirement

(53,157)

Less: Net income
attributable to Non Controlling Interest

(343,099)

(54,757)

Net loss
attributable to American Resources Corporation
Shareholders

$(14,421,722)

$(22,144,039)

Net loss per share
– basic and diluted

$(18.20)

$

Weighted average
shares outstanding

792,391

The accompanying footnotes are integral to the consolidated
financial statements

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS OF EQUITY

Balance
January 1, 2016

$

2,550,430

$

$

$

$(5,506,991)

$

$(5,506,991)

Stock-based
compensation

2,267,362

482

88,193

88,675

New issuances

Net loss

(22,144,039)

54,757

(22,089,282)

Balance
December 31, 2016

$

4,817,792

$482

$

$88,193

$(27,651,030)

$54,757

$(27,507,598)

Balance
January 1, 2017

$

4,817,792

$482

$

88,193

(27,651,030)

54,757

(27,507,598)

Recapitalization

845,377

85

(85)

Sale of Preferred Series B
Stock

850,000

850

849,150

850,000

Conversion of
Debt

33,334

3

49,997

50,000

Beneficial conversion
feature

50,000

50,000

Issuance of shares to
consultant

13,333

1

9,999

10,000

Stock-based
compensation

40,000

40,000

Relative fair value debt
discount

on warrants
issued

440,000

440,000

Net loss

(14,358,565)

343,099

(14,025,466)

Balance
December 31, 2017

892,044

$89

4,817,792

$482

850,000

$850

1,527,254

(42,019,595)

397,856

(40,093,064)

The accompanying footnotes are integral to the consolidated
financial statements

AMERICAN RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended
December 31,

Cash
Flows from Operating activities:

Net
loss

$(14,025,466)

$(22,089,282)

Adjustments
to reconcile net income (loss) to net cash

Depreciation

2,557,714

2,262,855

Accretion
expense

1,791,051

1,664,774

Loss on reclamation
settlements

71,245

Assumption of note
payable in reverse merger

50,000

Amortization of
debt discount and debt issuance costs

477,056

9,406

Impairment
(recovery) of advances receivable

(387,427)

510,902

Impairment of
related party note receivable

250,000

Stock compensation
expense

50,000

88,675

Change
in current assets and liabilities:

Accounts
receivable

882,637

(2,753,199)

Prepaid expenses
and other assets

920

Inventory

(615,096)

Restricted cash
used to pay interest expense

14,981

13,984

Accounts
payable

3,096,351

2,196,060

Accrued
expenses

12,340,615

Accrued
interest

213,625

122,945

Reclamation
liability settlements

(256,892)

Cash used in
operating activities

(5,644,574)

(5,816,992)

Cash
Flows from Investing activities:

Note
receivable

(4,117,139)

Increase in
restricted cash

(57,841)

(116,115)

Restricted cash
used to pay down debt

65,604

54,421

Advances made in
connection with management agreement

(77,800)

(1,845,902)

Advance repayment
in connection with management agreement

625,227

1,175,000

Cash paid for PPE,
net

(173,432)

(34,200)

Cash received from
acquisitions, net of $0 and $100 cash paid

5,315,700

Cash provided by
investing activities

381,758

431,765

Cash
Flows from Financing activities:

Principal payments
on long term debt

(392,002)

(303,706)

Proceeds from long
term debt (net of issuance costs $0 and $460,795)

4,440,000

4,857,391

Proceeds from
related party

50,000

Net (payments)
proceeds from factoring agreement

(32,985)

1,616,067

Proceeds from
private placements

600,000

Cash provided by
financing activities

4,665,013

6,169,752

Increase(decrease)
in cash

(597,803)

784,525

Cash, beginning of
year

784,525

Cash,
end of year

$186,722

$784,525

Supplemental
Information

Assumption of net
assets and liabilities for asset acquisitions

$

$2,745,582

Equipment for notes
payable

$1,419,650

$904,425

Purchase of related
party note receivable in exchange for Series B Equity

$250,000

$

Affiliate note for
equipment

$

$63,000

Conversion of note
payable to common stock

$50,000

$

Beneficial
conversion feature on note payable

$50,000

$

Relative fair value
debt discount on warrant issue

$440,000

$

Cash paid for
interest

$345,147

$160,619

The
accompanying footnotes are integral to the consolidated financial
statements

AMERICAN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017 and 2016

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

American Resources Corporation (ARC or the Company) operates
through subsidiaries that were acquired in 2016 and 2015 for the
purpose of acquiring, rehabilitating and operating various natural
resource assets including coal, oil and natural gas.

Basis of Presentation and Consolidation:

The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries Quest Energy Inc (QEI),
Deane Mining, LLC (Deane), Quest Processing LLC (Quest Processing),
ERC Mining Indiana Corp (ERC), McCoy Elkhorn Coal LLC (McCoy) and
Knott County Coal LLC (KCC). All significant intercompany accounts
and transactions have been eliminated.

On January 5, 2017, QEI entered into a share exchange agreement
with NGFC Equities, Inc (NGFC). Under the agreement, the
shareholders of QEI exchanged 100% of its common stock to NGFC for
4,817,792 newly created Series A Preferred shares that is
convertible into approximately 95% of outstanding common stock of
NGFC. The previous NGFC shareholders retained 845,377 common shares
as part of the agreement. The conditions to the agreement were
fully satisfied on February 7, 2017, at which time the Company took
full control of NGFC. NGFC has been renamed to American Resources
Corporation (ARC). The transaction was accounted for as a
recapitalization. QEI was the accounting acquirer and ARC will
continue the business operations of QEI, therefore, the historical
financial statements presented are those of QEI and its
subsidiaries. The equity and share information reflect the results
of the recapitalization. On May 15, 2017 ARC initiated a
one-for-thirty reverse stock split. The financial statements have
been retrospectively restated to give effect to this
split.

Entities for which ownership is less than 100% a determination is
made whether there is a requirement to apply the variable interest
entity (VIE) model to the entity. Where the company holds current
or potential rights that give it the power to direct the activities
of a VIE that most significantly impact the VIE’s economic
performance, combined with a variable interest that gives the
Company the right to receive potentially significant benefits or
the obligation to absorb potentially significant losses, the
Company would be deemed to have a controlling
interest.

The Company is the primary beneficiary of ERC Mining, LLC, which
qualifies as a variable interest entity. Accordingly, the assets,
liabilities, revenue and expenses of ERC Mining, LLC have been
included in the accompanying consolidated financial statements. The
Company has no ownership in ERC Mining, LLC. Determination of the
Company as the primary beneficiary is based on the power
through its management functions to direct the activities that most
significantly impact the economic performance of ERC Mining,
LLC. On March 18, 2016, the company lent ERC Mining, LLC $4,117,139
to facilitate the transaction described in Note 6, which represent
amounts that could be significant to ERC. No further support has
been provided. The Company has ongoing involvement in the
management of ERC Mining, LLC to ensure their fulfillment of the
transaction described in Note 6.

The Company is the primary beneficiary of Land Resources &
Royalties LLC (LRR) which qualifies as a variable interest entity.
Accordingly, the assets, liabilities, revenue and expenses of Land
Resources & Royalties have been included in the accompanying
consolidated financial statements. The Company has no ownership in
LRR. Determination of the Company as the primary beneficiary is
based on the power through its management functions to direct
the activities that most significantly impact the economic
performance of LRR. On October 24, 2016, the company issued
LRR a note in the amount of $178,683 to facilitate the transaction
described in Note 5, which represent amounts that could be
significant to LRR. No further support has been provided. The
Company has ongoing involvement in the management of LRR to ensure
their fulfillment of the transaction described in Note
5.

Deane was formed in November 2007 for the purpose of operating
underground coal mines and coal processing facilities. Deane was
acquired on December 31, 2015 and as such no operations are
presented prior to the acquisition date.

Quest Processing was formed in November 2014 for the purpose of
operating coal processing facilities and had no operations before
March 8, 2016.

ERC was formed in April 2015 for the purpose managing an
underground coal mine and coal processing facility. Operations
commenced in June 2015.

McCoy was formed in February 2016 for the purpose of operating
underground coal mines and coal processing facilities. The assets
of McCoy were acquired on February 17, 2016 and as such no
operations are presented prior to the acquisition
date.

KCC was formed in September 2004 for the purpose of operating
underground coal mines and coal processing facilities. KCC was
acquired on April 14, 2016 and as such no operations are presented
prior to the acquisition date.

On February 17, 2016, McCoy Elkhorn Coal LLC (McCoy) acquired
certain assets in exchange for $100 and for assuming certain
liabilities of Fortress Resources, LLC. The fair values of the
asset retirement obligation liabilities assumed were determined to
be $3,561,848 respectively. The liabilities assumed do not require
fair value readjustments.

The assets acquired of McCoy do not represent a business as defined
in FASB AS 805-10-20. McCoy does not have an integrated set of
activities and assets that that is capable of being conducted and
managed for the purpose of providing a return or other economic
benefit to their investors, members or participants. Accordingly,
the assets acquired are initially recognized at the consideration
paid, which was the liabilities assumed, including direct
acquisition costs, of which there were none. The cost is allocated
to the group of assets acquired based on their relative fair value.
The assets acquired and liabilities assumed of McCoy were as
follows at the purchase date:

Assets

Cash

$2,935,800

Underground Mining
Equipment

531,249

Surface Mining
Equipment

36,218

Coal Preparation
and Loading Facilities

58,681

Liabilities

Asset Retirement
Obligation

$3,561,848

On April 14, 2016, the Company acquired 100% of the membership
interests of ICG Knott County, LLC, subsequently renamed Knott
County Coal LLC. The fair values of the asset retirement obligation
liabilities assumed were determined to be $4,499,434 respectively.
The liabilities assumed do not require fair value
readjustments.

The assets acquired of ICG Knott County do not represent a business
as defined in FASB AS 805-10-20. IGC Knott County does not have an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return or
other economic benefit to their investors, members or participants.
Accordingly, the assets acquired and liabilities assumed are
initially recognized at the consideration paid, including direct
acquisition costs. The cost is allocated to the group of assets
acquired and liabilities assumed based on their relative fair
value. The assets and liabilities assumed of ICG Knott County were
as follows on the purchase date:

Assets

Cash

$2,380,000

Underground Mining
Equipment

1,533,937

Surface Mining
Equipment

206,578

Land

178,683

Coal Preparation
and Loading Facilities

200,236

Liabilities

Asset Retirement
Obligation

$4,499,434

As a result of the KCC and McCoy acquisitions during 2016,
$8,061,282 of ARO was assumed for net cash of $5,315,700 and
property, equipment and land of $2,745,582.

Going Concern: The Company has
suffered recurring losses from operations and currently a working
capital deficit. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. We plan to
generate profits by expanding current coal operations as well as
developing new coal operations. However, we will need to raise the
funds required to do so through sale of our securities or through
loans from third parties. We do not have any commitments or
arrangements from any person to provide us with any additional
capital. If additional financing is not available when needed, we
may need to cease operations. We may not be successful in raising
the capital needed to expand or develop operations. Management
believes that actions presently being taken to obtain additional
funding provide the opportunity for the Company to continue as a
going concern. The accompanying financial statements have been
prepared assuming the Company will continue as a going concern; no
adjustments to the financial statements have been made to account
for this uncertainty.

Estimates: Management uses estimates and assumptions in
preparing financial statements in accordance with accounting
principles generally accepted in the United States of America.
Those estimates and assumptions affect the reported amounts of
assets, liabilities, revenues, expenses and the disclosure of
contingent assets and liabilities. Actual results could vary from
those estimates.

Convertible Preferred Securities: We account for hybrid contracts that feature
conversion options in accordance with generally accepted accounting
principles in the United States. ASC 815,
Derivatives and Hedging
Activities
(“ASC
815”) requires companies to bifurcate conversion options from
their host instruments and account for them as free standing
derivative financial instruments according to certain criteria. The
criteria includes circumstances in which (a) the economic
characteristics and risks of the embedded derivative instrument are
not clearly and closely related to the economic characteristics and
risks of the host contract, (b) the hybrid instrument that
embodies both the embedded derivative instrument and the host
contract is not re-measured at fair value under otherwise
applicable generally accepted accounting principles with changes in
fair value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative
instrument would be considered a derivative
instrument.

We also follow ASC 480-10, Distinguishing Liabilities
from Equity
(“ASC
480-10”) in its evaluation of the accounting for a hybrid
instrument. A financial instrument that embodies an unconditional
obligation, or a financial instrument other than an outstanding
share that embodies a conditional obligation, that the issuer must
or may settle by issuing a variable number of its equity shares
shall be classified as a liability (or an asset in some
circumstances) if, at inception, the monetary value of the
obligation is based solely or predominantly on any one of the
following: (a) a fixed monetary amount known at inception; (b)
variations in something other than the fair value of the
issuer’s equity shares; or (c) variations inversely related
to changes in the fair value of the issuer’s equity shares.
Hybrid instruments meeting these criteria are not further evaluated
for any embedded derivatives, and are carried as a liability at
fair value at each balance sheet date with remeasurements reported
in interest expense in the accompanying Consolidated Statements of
Operations.

Related Party Policies: In
accordance with FASB ASC 850 related parties are defined as either
an executive, director or nominee, greater than 10% beneficial
owner, or an immediate family member of any of the proceeding.
Transactions with related parties are reviewed and approved by the
directors of the Company, as per internal
policies.

Advance Royalties: Coal leases
that require minimum annual or advance payments and are recoverable
from future production are generally deferred and charged to
expense as the coal is subsequently produced.

Cash is maintained in bank
deposit accounts which, at times, may exceed federally insured
limits. To date, there have been no losses in such
accounts.

As of December 31, 2017 and 2016 total cash, including restricted
cash, amounted to $385,665 and $925,627, respectively. Restricted
cash as of December 31, 2017 and 2016 amounted to $198,943 and
$141,102, respectively.

Restrictions to cash include funds held for the benefit other
parties in the amount of $82,828 and $24,987 as of December 31,
2017 and 2016, respectively. The use of these funds are in
conjunction with the management of the property owned by this party
and the duration of the restrictions matches the duration of the
management agreement. (See Note 7)

As part of the Kentucky New Markets Development Program (See Note
3) an asset management fee reserve was set up in the amount of
$116,115. The funds are held to pay annual asset management fees to
an unrelated party through 2021. (See Note 6)

Concentration: As of December
31, 2017 and 2016 63% and 78% of revenue and 99% and 97% of
outstanding accounts receivable came from three and two customers,
respectively.


Coal Property and Equipment are
recorded at cost. For equipment, depreciation is calculated using
the straight-line method over the estimated useful lives of the
assets, generally ranging from three to seven years. Amortization
of the equipment under capital lease is included with depreciation
expense.

Property and equipment and amortizable intangible assets are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability is measured by comparison of the
carrying amount to the future net undiscounted cash flows expected
to be generated by the related assets. If these assets are
determined to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount exceeds the
fair market value of the assets.

Costs related to maintenance and repairs which do not prolong the
asset’s useful life are expensed as incurred.

Mine Development: Costs of
developing new coal mines, including asset retirement obligation
assets, or significantly expanding the capacity of existing mines,
are capitalized and amortized using the units-of-production method
over estimated coal deposits. Costs not incurred for development of
existing coal deposits are expensed as
incurred.

Asset Retirement Obligations (ARO) – Reclamation:
At the time they are incurred, legal
obligations associated with the retirement of long-lived assets are
reflected at their estimated fair value, with a corresponding
charge to mine development. Obligations are typically incurred when
we commence development of underground and surface mines, and
include reclamation of support facilities, refuse areas and slurry
ponds or through acquisitions.

Obligations are reflected at the present value of their future cash
flows. We reflect accretion of the obligations for the period from
the date they incurred through the date they are extinguished. The
asset retirement obligation assets are amortized using the
units-of-production method over estimated coal deposits. We are
using a discount rate of 10%.
risk free rate of .23% and inflation rate of 1.5%
. Federal
and State laws require that mines be reclaimed in accordance with
specific standards and approved reclamation plans, as outlined in
mining permits. Activities include reclamation of pit and support
acreage at surface mines, sealing portals at underground mines, and
reclamation of refuse areas and slurry ponds.

We assess our ARO at least annually and reflect revisions for
permit changes, change in our estimated reclamation costs and
changes in the estimated timing of such costs. During 2017 and
2016, $0 and $71,245 were incurred for loss on settlement on
ARO.

The table below reflects the changes to our ARO:

Beginning
Balance

$18,126,873

$8,586,464

Accretion

1,791,051

1,664,774

Reclamation
work

(32,867)

(185,647)

McCoy
Acquisition

3,561,848

KCC
Acquisition

4,499,434

Ending
balance

$19,885,057

$18,126,873

Current portion of
reclamation liability

$2,033,862

$519,489

Long-term portion
of reclamation liability

$17,851,195

$17,607,384

Income Taxes include U.S.
federal and state income taxes currently payable and deferred
income taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities
and their respective tax basis. Deferred tax assets and liabilities
are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
the period of enactment. Deferred income tax expense represents the
change during the year in the deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some
portion or all of the deferred tax asset will not be
realized.

The Company filed an initial tax return in 2015. Management
believes that the Company’s income tax filing positions will
be sustained on audit and does not anticipate any adjustments that
will result in a material change. Therefore, no reserve for
uncertain income tax positions has been recorded. The
Company’s policy for recording interest and penalties, if
any, associated with income tax examinations will be to record such
items as a component of income taxes.

Revenue Recognition: The
Company recognizes revenue in accordance with ASC 605 when the
terms of the contract have been satisfied; generally, this occurs
when delivery has been rendered, the fee is fixed or determinable,
and collectability is reasonably assured. Revenue is measured as
the amount of consideration we expect to receive in exchange for
transferring goods or providing services.

Our revenue is comprised of sales of mined coal and services for
processing coal. All of the activity is undertaken in eastern
Kentucky.

We recognize revenue from coal sales at the time risk of loss
passes to the customer at contracted amounts and amounts are deemed
collectible. Revenue from coal processing and loading are
recognized when services have been performed according to the
contract in place.

Leases: Leases are reviewed by
management based on the provisions of ASC 840 and examined to see
if they are required to be categorized as an operating lease, a
capital lease or a financing transaction.

The Company leases certain equipment and other assets under
noncancelable operating leases, typically with initial terms of 3
to 7 years. Minimum rent on operating leases is expensed on a
straight-line basis over the term of the lease. In addition to
minimum rental payments, certain leases require additional payments
based on sales volume, as well as reimbursement of real estate
taxes, which are expensed when incurred. Capital leases are
recorded at the present value of the future minimum lease payments
at the inception of the lease. The
gross amount of assets recorded under capital lease amounted to
$333,875, all of which is classified as surface
equipment.

Loan Issuance Costs and Discounts are amortized using the effective interest method.
Amortization expense amounted to $477,056 and $9,406 as of December
31, 2017 and 2016, respectively. Amortization expense for the next
five years is expected to be $11,520, annually.

Allowance For Doubtful Accounts: The Company recognizes an allowance for losses on
trade and other accounts receivable in an amount equal to the
estimated probable losses net of recoveries. The allowance is based
on an analysis of historical bad debt experience, current
receivables aging and expected future write-offs, as well as an
assessment of specific identifiable amounts considered at risk or
uncollectible.

Allowance for trade receivables as of December 31, 2017 and 2016
amounted to $0 and $0, respectively. Allowance for other accounts
receivables as of December 31, 2017 and 2016 amounted to $92,573
and $640,000, respectively.

Trade and loan receivables are carried at amortized cost, net of
allowance for losses. Amortized cost approximated book value as of
December 31, 2017 and 2016.

Inventory: Inventory consisting
of mined coal is stated at the lower of cost (first in, first out
method) or net realizable value.

Stock-based Compensation: Stock-based compensation is measured at the grant
date based on the fair value of the award and is recognized as
expense over the applicable vesting period of the stock award
(generally 0 to 5 years) using the straight-line method. Stock
compensation to employees is accounted for under ASC 718 and stock
compensation to non-employees is accounted for under ASC
505.

Earnings Per Share: The
Company’s basic earnings per share (EPS) amounts have been
computed based on the average number of shares of common stock
outstanding for the period and include the effect of any
participating securities as appropriate. Diluted EPS includes the
effect of the Company’s outstanding stock options, restricted
stock awards, restricted stock units and performance-based stock
awards if the inclusion of these items is
dilutive.

For the years ended December 31, 2017 and 2016, the Company had
5,364,230 and 0 outstanding stock warrants, respectively. For the
years ended December 31, 2017 and 2016, the Company did not have
any restrictive stock awards, restricted stock units, or
performance-based awards.

Reclassifications: Reclassifications have been made to conform with
current year presentation.

New Accounting Pronouncements: Management has determined that the impact of the
following recent FASB pronouncements will not have a material
impact on the financial statements.

·

Accounting
Standards Update (ASU) 2014-09, Revenue from Contracts with Customers.
effective for years beginning after December 15, 2017

·

ASU
2015-11, Simplifying the
Measurement of Inventory
, effective for years beginning
after December 15, 2016. Adoption of ASU 2015-11 did not have a
material effect on the consolidated financial
statements.

·

ASU
2015-17, Balance Sheet
Classification of Deferred Taxes
, effective for years
beginning after December 15, 2016. Adoption of ASU 2015-17 did not
have a material effect on the consolidated financial statements or
related disclosures.

·

ASU
2016-01, Recognition and
Measurement of Financial Assets and Financial Liabilities
.
effective for years beginning after December 15, 2017

·

ASU
2016-02, Leases, effective
for years beginning after December 15, 2019. We expect to adopt ASU
2016-02 beginning January 1, 2019 and are in the process of
assessing the impact that this new guidance is expected to have on
our consolidated financial statements and related
disclosures.

·

ASU
2016-18, Statement of Cash Flows:
Restricted Cash,
effective beginning after December 15,
2017

·

ASU
2017-01, Business
Combinations,
effective beginning after December 15,
2017

·

AUS
2017-09, Compensation –
Stock Compensation,
effective beginning after December 31,
2017

·

ASU
2017-11, Earnings Per
Share,
effective beginning after December 15,
2018

·

ASU
2018-05, Income Taxes,
effective beginning after December 15, 2017. We expect to adopt ASU
2018-05 beginning January 1, 2018 and are in the process of
assessing the impact that this new guidance is expected to have on
our consolidated financial statements and related
disclosures.

Management has elected to early adopt ASU 2017-01,
Business
Combinations (Topic 805): Clarifying the Definition of a
Business
effective at
inception. See above in Note 1.

ASU 2014-09, Revenue from Contracts with
Customers (Topic 606).
Topic
606 supersedes the revenue recognition requirements in Topic 605
and requires entities to recognize revenues when control of the
promised goods or services is transferred to customers at an amount
that reflects the consideration to which the entity expects to be
entitled to in exchange for those goods or services. We adopted
Topic 606 as of January 1, 2018 using the modified retrospective
method of adoption. Implementation of Topic 606 caused no change in
previously recognized revenue.

NOTE 2 – PROPERTY AND EQUIPMENT

At December 31, 2017 and 2016, property and equipment were
comprised of the following:

Processing and rail
facility

$2,914,422

$2,914,422

Underground
equipment

8,887,045

7,500,512

Surface
equipment

3,957,603

3,751,054

Land

178,683

178,683

Less: Accumulated
depreciation

(4,820,569)

(2,262,855)

Total Property and
Equipment, Net

$11,117,184

$12,081,816

Depreciation expense amounted to $2,557,714 and $2,262,855 for the
years of December 31, 2017 and 2016, respectively.

The estimated useful lives are as follows:

Processing
and Rail Facilities

20
years

Surface
Equipment

7
years

Underground
Equipment

5
years

NOTE 3 – NOTES PAYABLE

During the year ended December 31, 2017 and 2016, principal
payments on long term debt totaled $392,002 and $303,706,
respectively. During the year ended December 31, 2017 and 2016, new
debt issuances totaled $5,909,650 and $5,824,816, respectively,
primarily from $4,490,000 of working capital loans and $1,419,650
of equipment loans in 2017 and $4,688,152 from the Kentucky New
Markets Development program and $967,425 in equipment loans in
2016. (See Note 5). During the year ended December 31, 2017 and
2016, net proceeds from our factoring agreement totaled $32,985 and
$1,616,067, respectively.

During the year ended December 31, 2017 and 2016, discounts on debt
issued amounted to $490,000 and $-, respectively related to the ARC
business loan discussed below and the note payable discussed in
note 9. During 2017 and 2016, $455,000 and $- was amortized into
expense with $35,000 and $- remaining as unamortized
discount.

Long-term debt consisted of the following at December 31, 2017 and
2016:

Equipment Loans –
QEI

Note payable to an
unrelated company in monthly installments of $2,064, with interest
at 8.75%, through maturity in March 2019, when the note is due in
full. The note is secured by equipment and a personal guarantee by
an officer of the Company.

$30,962

$50,235

Note payable to an
unrelated company in monthly installments of $1,468, With interest
at 6.95%, through maturity in March 2021, when the note is due in
full. The note is secured by equipment and a personal guarantee by
an officer of the Company

57,290

64,175

On September 8,
2017, Quest entered into an equipment purchase agreement with an
unaffiliated entity, to purchase certain underground mining
equipment for $600,000. The agreement provided for $80,000 paid
upon execution, $30,000 monthly payments until the balance is paid
in full.

460,000


On October 19,
2017, Quest entered into an equipment financing agreement with an
unaffiliated entity, to purchase certain surface equipment for
$90,400. The agreement calls for monthly payments until maturity of
October 19, 2019 and interest of 9.95%.

88,297


On October 20,
2017, Quest entered into an equipment financing agreement with an
unaffiliated entity, to purchase certain surface equipment for
$50,250. The agreement calls for monthly payments until maturity of
October 20, 2019 and interest of 10.60%.

51,320


On December 4,
2017, Quest entered into an equipment financing agreement with an
unaffiliated entity, to purchase certain surface equipment for
$56,900. The agreement calls for monthly payments until maturity of
January 7, 2021.

56,900


Business Loan –
ARC

On October 4, 2017,
ARC entered into a consolidated loan agreement with an unaffiliated
entity. $5,444,632 has been advanced under the note. $1,300,000 of
the note was advanced after December 31, 2017. The agreement calls
for interest of 7% and with all outstanding amounts due on demand.
The note is secured by all assets of Quest and subsidiaries. In
conjunction with the loan, a warrants for up to 5,017,006 common
shares were issued at an exercise price ranging from $.01 to $11.44
per share and with an expiration date of October 2, 2020. The loan
consolidation was treated as a loan modification for accounting
purposes giving rise to a discount of $140,000. The discount was
amortized over the life of the loan with $105,000 included as
interest expense and $35,000 included as a note discount as of
December 31, 2017.

4,444,632

175,000

Equipment Loans
– ERC

Equipment lease
payable to an unrelated company in 48 equal payments of $771 with
an interest rate of 5.25% with a balloon payment at maturity of
June 30, 2019. The note is secured by equipment and a corporate
guarantee from Quest Energy Inc. The equipment is being utilized as
part of the management agreement referred to in Note 7. Therefore,
the title of the assets are not held with ERC and there is a
corresponding receivable due for the payment of this
note.

27,288

35,644

Equipment lease
payable to an unrelated company in 48 equal payments of $3,304 with
an interest rate of 5.25% with a balloon payment at maturity of
June 30, 2019. The note is secured by equipment and a corporate
guarantee from Quest Energy Inc. The equipment is being utilized as
part of the management agreement referred to in Note 7. Therefore,
the title of the assets are not held with ERC and there is a
corresponding receivable due for the payment of this
note.

128,254

161,738

Equipment lease
payable to an unrelated company in 48 equal payments of $2,031 with
an interest rate of 5.25% with a balloon payment at maturity of
August 13, 2019. The note is secured by equipment and a corporate
guarantee from Quest Energy Inc. The equipment is being utilized as
part of the management agreement referred to in Note 7. Therefore,
the title of the assets are not held with ERC and there is a
corresponding receivable due for the payment of this
note.

36,890

60,541

Equipment Loans –
McCoy

Equipment note
payable to an unrelated company, with monthly payments of $150,000
in September 2016, October 2016, November 2016 and a final payment
of $315,000 due in December 2016. No extensions have been entered
into subsequent to December 31, 2017 resulting in the note being in
default.

540,000

540,000

On May 2, 2017,
Quest entered into an equipment purchase agreement with an
unaffiliated entity, Inc. to purchase certain underground mining
equipment for $250,000. Full payment was due September 12,
2017.

135,000


On June 12, 2017,
Quest entered into an equipment purchase agreement with an
unaffiliated entity, Inc. to purchase certain underground mining
equipment for $22,500. Full payment was due September 12,
2017.

22,500


On September 25,
2017, Quest entered into an equipment purchase agreement with an
unaffiliated entity, Inc. to purchase certain underground mining
equipment for $350,000. The agreement provided for $20,000 monthly
payments until the balance is paid in full.

330,000


Business Loans –
McCoy