We had revenue for the three months ended March 31, 2011 of approximately $3.5 million, a 217% increase from revenues of $1.1 million for the same three month period in 2010. The increase in revenues was attributable to an approximate 98% increase in coal production in 2011 compared to 2010 due to 1) the Company deploying a second continuous miner in February 2011, and 2) the Company intermittently idling the mine in the first quarter of 2010 due to lower demand for coal at that time. All coal sales revenue during the first quarter of 2011 was related to coal produced from our Horizon coal mine operations by our wholly-owned subsidiary, Hidden Splendor Resources, Inc.
Our production costs during the three months ended March 31, 2011 were approximately $2.4 million, an increase of 91% over the production costs of approximately $1.3 million reported for the three months ended March 31, 2010. The 91% increase in production costs was due to approximately 98% higher production volume in the first quarter of 2011 compared to the same period in 2010.
We had a gross profit of approximately $0.6 million for the three months ended March 31, 2011, representing a favorable variance of 147% from the approximate $1.3 million gross loss recognized during the three months ended March 31, 2010. The variance is primarily attributed to higher coal production in the first quarter of 2011 compared to 2010 for the reasons stated above.
Operating expenses for the three months ended March 31, 2011 totaled approximately $2.1 million, an increase of approximately $0.17 million, or 9%, from operating expenses of approximately $1.9 million in the prior year’s comparable three month period. The increase is primarily attributed to an approximate $0.6 million increase in MSHA compliance legal expenses in the first quarter of 2011 compared to 2010, partially offset by an approximate $0.4 million decrease in royalty expense associated with the cancellation of royalties previously accrued, which are no longer due to third parties. The Company’s legal expenses in the first quarter of 2011 are fees related to MSHA compliance and are expected to be significantly lower going forward.
Loss from operations decreased approximately $1.8 million or 56%, due to the aforementioned increase in revenues offset by the increase in operating expenses.
Total net other expenses totaled approximately $5.1 million for the first three months of 2011, compared to net other income of $1.7 million for the first three months of 2010. The negative variance between periods of approximately $3.4 million was primarily due to an approximate $3.4 million increase in interest expense. Interest expense increased due to an approximate $2.5 million one-time charge associated with the amortization of debt discount in relation to the restructure of loans with shareholders.
We incurred an approximate $6.5 million net loss for the three months ended March 31, 2011, compared to an approximate $5.0 million net loss for the three months ended March 31, 2010. The negative variance between the periods of $1.6 million, or 31%, is primarily attributed to the $3.4 million variance in net other expenses, partially offset by the approximate $1.8 million positive variance in loss from operations as described in detail above.
Of the $6.5 million net loss for the three months ended March 31, 2011, approximately $4.5 million is associated with expenses that are one-time charges and/or non-cash items, composed of the following:
$2.5 million – one-time non-cash charge to interest expense associated with the restructure of shareholder loans
$0.6 million –legal expenses related to MSHA compliance which are not expected to be recurring
$0.6 million - non-cash charge on extinguishment of debt associated with extension of loans and issuance of stock for liabilities
$0.4 million – non-cash charge for the amortization of deferred financing costs associated with warrants issued in relation to a previous financing
$0.4 - non-cash charge associated with previous issuance of stock options to management and employees, as well as warrants previously issued to third parties for services
News 
Market Data 
Discover 
AI
