UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2017March 31, 2020

OR

For the transition period from ________ to ________

Commission file number 001-34892

RHINO RESOURCE PARTNERS LP
(Exact name of registrant as specified in its charter)

(859) 389-6500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth“smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

As of November 3, 2017, 12,993,869May 15, 2020, 13,078,668 common units, 1,143,171 subordinated units and 1,235,534 subordinated1,500,000 Series A preferred units were outstanding.

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward-looking statements.” Statements included in this report that are not historical facts, that address activities, events or developments that we expect or anticipate will or may occur in the future, including things such as statements regarding our future financial position, expectations with respect to our liquidity, capital resources, and ability to continue as a going concern, plans for growth of the business, future capital expenditures, references to future goals or intentions or other such references are forward-looking statements. These statements can be identified by the use of forward-looking terminology, including “may,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or similar words. These statements are made by us based on our experience and our perception of historical trends, current conditions and expected future developments as well as other considerations we believe are reasonable as and when made. Whether actual results and developments in the future will conform to our expectations is subject to numerous risks and uncertainties, many of which are beyond our control. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecasted in these statements.

Any differences could be caused by a number of factors, including, but not limited to: our ability to maintain adequate cash flow and to obtain financing necessary to fund our capital expenditures, meet working capital needs and maintain and grow our operations or our ability to obtain alternative financing upon the expiration of our amended and restated senior secured credit facility and our related ability to continue as a going concern;operations; our future levels of indebtedness and compliance with debt covenants; sustained depressed levels of or further decline in coal prices, which depend upon several factors such as the supply of domestic and foreign coal, the demand for domestic and foreign coal, governmental regulations, price and availability of alternative fuels for electricity generation and prevailing economic conditions; our ability to comply with the qualifying income requirement necessary to maintain our status as a partnership for U.S. federal income tax purposes; declines in demand for electricity and coal; the consummation of the acquisition of Armstrong Energy, Inc. from, and the transfer of 50% of our general partner to, Yorktown Partners LLC; our ability to realize the expected benefits of an acquisition of Armstrong Energy, Inc.; current and future environmental laws and regulations, which could materially increase operating costs or limit our ability to produce and sell coal; extensive government regulation of mine operations, especially with respect to mine safety and health, which imposes significant actual and potential costs; difficulties in obtaining and/or renewing permits necessary for operations; a variety of operating risks, such as unfavorable geologic conditions, adverse weather conditions and natural disasters, mining and processing equipment unavailability, failures and unexpected maintenance problems and accidents, including fire and explosions from methane; poor mining conditions resulting from the effects of prior mining; the availability and costs of key supplies and commodities such as steel, diesel fuel and explosives; fluctuations in transportation costs or disruptions in transportation services, which could increase competition or impair our ability to supply coal; a shortage of skilled labor, increased labor costs or work stoppages; our ability to secure or acquire new or replacement high-quality coal reserves that are economically recoverable; material inaccuracies in our estimates of coal reserves and non-reserve coal deposits; existing and future laws and regulations regulating the emission of sulfur dioxide and other compounds, which could affect coal consumers and reduce demand for coal; federal and state laws restricting the emissions of greenhouse gases; our ability to acquire or failure to maintain, obtain or renew surety bonds used to secure obligations to reclaim mined property; our dependence on a few customers and our ability to find and retain customers under favorable supply contracts; changes in consumption patterns by utilities away from the use of coal, such as changes resulting from low natural gas prices; changes in governmental regulation of the electric utility industry; defects in title in properties that we own or losses of any of our leasehold interests; our ability to retain and attract senior management and other key personnel; material inaccuracy of assumptions underlying reclamation and mine closure obligations; and weakness in global economic conditions.conditions; and our current liquidity constraints, which may require us to sell assets, restructure our debt, or seek protection under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”). Other factors that could cause our actual results to differ from our projected results are described elsewhere in (1) this Form 10-Q, (2) our Annual Report on Form 10-K for the year ended December 31, 2016,2019, (3) our reports and registration statements filed from time to time with the Securities and Exchange Commission and (4) other announcements we make from time to time. In addition, we may be subject to unforeseen risks that may have a materially adverse effect on us. Accordingly, no assurances can be given that the actual events and results will not be materially different from the anticipated results described in the forward-looking statements.

The forward-looking statements speak only as of the date made, and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I.—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

RHINO RESOURCE PARTNERS LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(inIn thousands)

See notes to unaudited condensed consolidated financial statements.

RHINO RESOURCE PARTNERS LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(inIn thousands, except per unit data)

(1) No distributions were paid for the nine months ended September 30, 2017 and 2016.

See notes to unaudited condensed consolidated financial statements.

RHINO RESOURCE PARTNERS LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSPARTNERS’ CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2020 and 2019

(inIn thousands)

See notes to unaudited condensed consolidated financial statements.

RHINO RESOURCE PARTNERS LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See notes to unaudited condensed consolidated financial statements.

RHINO RESOURCE PARTNERS LP

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017MARCH 31, 2020 AND DECEMBER 31, 20162019 AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2020 AND 20162019

1. BASIS OF PRESENTATION AND ORGANIZATION

Basis of Presentation and Principles of ConsolidationConsolidation.— The accompanying unaudited interim financial statements include the accounts of Rhino Resource Partners LP and its subsidiaries (the “Partnership”). Intercompany transactions and balances have been eliminated in consolidation.

Upon an evaluation of the effects on the Partnership from the weakness of the metallurgical and steam coal markets, which have been further negatively impacted from the effects of the COVID-19 pandemic, the Partnership determined that it may not have sufficient liquidity to operate its business over the next twelve months from the date of filing this Form 10-Q. Thus, substantial doubt is raised about the Partnership’s ability to continue as a going concern. Our independent registered public accounting firm included an emphasis paragraph with respect to our ability to continue as a going concern in its report on the Partnership’s consolidated financial statements for the year ended December 31, 2019. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of and classification of liabilities that may result should the Partnership be unable to continue as a going concern. Failure to generate sufficient cash flow from operations could cause us to further curtail our operations and reduce spending and alter our business plan. We may also be required to consider other options, such as selling additional assets or seeking merger opportunities, and depending on the urgency of our liquidity constraints, we may be required to pursue such an option at an inopportune time.

The Partnership continues to take measures, including the suspension of cash distributions on its common and subordinated units and cost and productivity improvements, to enhance and preserve our liquidity in order to fund our ongoing operations and necessary capital expenditures to meet our financial commitments and debt service obligations.

The Partnership is currently exploring alternatives for other sources of capital for ongoing liquidity needs and transactions to enhance its ability to comply with its financial covenants. As disclosed on the Partnership’s Form 8-K filed with the SEC on March 27, 2020, the Partnership has engaged legal and financial advisors to assist it in evaluating its strategic options. The Partnership is working to improve its operating performance and its cash, liquidity and financial position. This includes pursuing the sale of non-strategic surplus assets, continuing to drive cost improvements across the company, continuing to negotiate alternative payment terms with creditors, and obtaining waivers of going concern and financial covenant violations under our financing agreement, or alternatively, pursuing a court-supervised reorganization under Chapter 11 and related financing needs.

Debt Classification— The Partnership evaluated its financing agreement at March 31, 2020 to determine whether the debt liability should be classified as a long-term or current liability on the Partnership’s unaudited condensed consolidated statements of financial position. The Partnership determined that it was in violation of certain debt covenants in the financing agreement as of March 31, 2020 and the lenders were unwilling to grant a waiver to the Partnership for these events of default as of the filing date of this Form 10-Q. The financing agreement contains negative covenants that restrict the Partnership’s ability to, among other things, permit the trailing nine month fixed charge coverage ratio of the Partnership and its subsidiaries to be less than 1.20 to 1.00. The financing agreement also requires the Partnership to receive an annual unqualified audit opinion from its external audit firm that does not include an emphasis paragraph on the Partnership’s ability to continue as a going concern. As of March 31, 2020, Rhino’s fixed charge coverage ratio was less than 1.20 to 1.00 and the Partnership’s annual report on Form 10-K for 2019 included an audit opinion from its external auditors that included an emphasis paragraph regarding the Partnership’s ability to continue as a going concern. Based upon these covenant violations, the Partnership’s debt liability is currently callable by the lenders and is classified as current as of March 31, 2020 and December 31, 2019.

Debt issuance costs related to the debt liability are also classified as current. However, since the Partnership is currently in negotiations with its lender, the Partnership has not changed the amortization period of these costs. Included in debt costs are the exit fees described further in Note 10, which absent a waiver, are also callable with the accompanying debt as of March 31, 2020. (Please read Note 10 for additional discussion of the Partnership’s financing agreement).

Cash, Cash Equivalents and Restricted Cash. The Partnership considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Restricted cash is combined with cash and cash equivalents on the unaudited condensed consolidated statement of cash flows.

Unaudited Interim Financial InformationInformation.—The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. The condensed consolidated statement of financial position as of September 30, 2017,March 31, 2020, condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017March 31, 2020 and 20162019, consolidated statements of partners’ capital for the three months ended March 31, 2020 and 2019 and the condensed consolidated statements of cash flows for the ninethree months ended September 30, 2017March 31, 2020 and 20162019 include all adjustments that the Partnership considers necessary for a fair presentation of the financial position, partners’ capital, operating results and cash flows for the periods presented. The condensed consolidated statement of financial position as of December 31, 20162019 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.”). The Partnership filed its Annual Report on Form 10-K for the year ended December 31, 20162019 with the Securities and Exchange Commission (“SEC”), which included all information and notes necessary for such presentation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year or any future period. These unaudited interim financial statements should be read in conjunction with the audited financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 20162019 filed with the SEC.

Reclassifications.Organization.Certain prior year amounts have been reclassified to discontinued operations on the unaudited condensed consolidated statements of operations and comprehensive income related to the disposal of the Elk Horn coal leasing business during 2016. See Note 3 for further information on the Elk Horn disposal.

Debt Classification— The Partnership evaluated its amended and restated senior secured credit facility at September 30, 2017 to determine whether this debt liability should be classified as a long-term or current liability on the Partnership’s unaudited condensed consolidated statements of financial position. On May 13, 2016, the Partnership entered into a fifth amendment (the “Fifth Amendment”) of its amended and restated agreement that initially extended the term of the senior secured credit facility to July 31, 2017. Per the Fifth Amendment, the term of the credit facility automatically extended to December 31, 2017 when the revolving credit commitments were reduced to $55 million or less as of December 31, 2016. As of December 31, 2016, the Partnership had met the requirements to extend the maturity date of the credit facility to December 31, 2017. Since the credit facility has an expiration date of December 2017, the Partnership determined that its credit facility debt liability at September 30, 2017 and December 31, 2016 of $9.9 million and $10.0 million, respectively, should be classified as a current liability on its consolidated statements of financial position. The classification of the credit facility balance as a current liability raises substantial doubt of the Partnership’s ability to continue as a going concern for the next twelve months. The Partnership is considering alternative financing options that could result in a new long-term credit facility. Since the credit facility has an expiration date of December 31, 2017, the Partnership will have to secure alternative financing to replace its credit facility by the expiration date of December 31, 2017 in order to continue its normal business operations and meet its obligations as they come due. The financial statements do not include any adjustments relating to the recoverability and classification of assets carrying amounts or the amount of and classification of liabilities that may result should the Partnership be unable to continue as a going concern.

Organization—Rhino Resource Partners LP is a Delaware limited partnership formed on April 19, 2010 to acquire Rhino Energy LLC (the “Operating Company”). The Operating Company and its wholly owned subsidiaries produce and market coal from surface and underground mines in Kentucky, Ohio, Virginia, West Virginia and Utah. The majority of sales are made to electric utilities, coal brokers, domestic and non-U.S. steel producers and other coal-related organizations in the United States. In addition, the Partnership continues its sales focus to U.S. export customers through brokers and direct end-user relationships.

Reverse Unit Split

On April 18,Through a series of transactions completed in the first quarter of 2016, the Partnership completed a 1-for-10 reverse split on its common units and subordinated units. Pursuant to the reverse split, common unitholders received one common unit for every 10 common units owned on April 18, 2016 and subordinated unitholders received one subordinated unit for every 10 subordinated units owned on April 18, 2016. All common and subordinated units, net income (loss) per unit and distribution per unit references included herein have been adjusted as if the change took place before the date of the earliest transaction reported. Any fractional units resulting from the reverse unit split were rounded to the nearest whole unit.

Royal Energy Resources, Inc. Acquisition

On January 21, 2016, a definitive agreement (“Definitive Agreement”) was completed between Royal Energy Resources, Inc. (“Royal”) acquired a majority ownership and Wexford Capital LP (“Wexford Capital”) whereby Royal acquired 676,911 issued and outstanding common unitscontrol of the Partnership and 100% ownership of the Partnership’s general partner. The Partnership’s common units trade on the OTCQB Marketplace under the ticker symbol “RHNO.”

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL

Revenue Recognition. Most of the Partnership’s revenues are generated under coal sales contracts with electric utilities, coal brokers, domestic and non-U.S. steel producers, industrial companies or other coal-related organizations. Revenue is recognized and recorded when shipment or delivery to the customer has occurred, prices are fixed or determinable, control has passed in accordance with the terms of the sales agreement and collectability is reasonably assured. Under the typical terms of these agreements, control transfers to the customers at the mine or port, when the coal is loaded on the rail, barge, truck or other transportation source that delivers coal to its destination. Advance payments received are deferred and recognized in revenue as coal is shipped and title passes.

Freight and handling costs paid directly to third-party carriers and invoiced separately to coal customers are recorded as freight and handling costs and freight and handling revenues, respectively. Freight and handling costs billed to customers as part of the contractual per ton revenue of customer contracts is included in coal sales revenue.

Other revenues generally consist of coal royalty revenues, coal handling and processing revenues, rebates and rental income. With respect to other revenues recognized in situations unrelated to the shipment of coal, the Partnership carefully reviews the facts and circumstances of each transaction and does not recognize revenue until the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured.

Debt Issuance Costs. Debt issuance costs reflect fees incurred to obtain financing and are amortized (included in interest expense) using the straight-line method over the life of the related debt, which approximates the effective interest method. Debt issuance costs are presented as a direct deduction from Wexford Capitallong-term debt as of March 31, 2020 and December 31, 2019. The effective interest rate for $3.5 million. the three months ended March 31, 2020 was 20.58% and 21.93% for the three months ended March 31, 2019.

Recently Issued Accounting Standards.On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASC 848”):Facilitation of the Effects of Reference Rate Reform on Financial Reporting.The Definitiveamendments in ASC 848 provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASC 848 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Partnership is currently evaluating this guidance.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820),Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 revise the disclosure requirements for fair value measurements. These changes are to be applied prospectively for only the most recent interim or annual period present in the year of adoption. The Partnership adopted ASU 2018-13 during the first quarter of 2020. The adoption of ASU 2018-13 did not have a material impact on the Partnership’s unaudited condensed consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11,“Earnings Per Share (Topic 260): Distinguishing Liabilities from Equity (Topic 480), I. Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.”Part I of ASU 2017-11 will result in freestanding equity-linked financial instruments, such as warrants, and conversion options in convertible debt or preferred stock to no longer be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in Part II recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification. The amendments in Part II do not require any transition guidance as the amendments do not have an accounting effect. The amendments in ASU 2017-11 were effective on January 1, 2020, and the Part I amendments must be applied retrospectively. Early application is permitted. The Partnership early adopted ASU 2017-11, which did not have any material impact.

3. ACQUISITION

Blackjewel Assignment Agreement also included

On August 14, 2019, Jewell Valley Mining LLC (“Jewell Valley”), a wholly owned subsidiary of the committed acquisition by RoyalPartnership, entered into a general assignment and assumption agreement and bill of sale (the “Assignment Agreement”) with Blackjewel L.L.C., Blackjewel Holdings L.L.C., Revelation Energy Holdings, LLC, Revelation Management Corp., Revelation Energy, LLC, Dominion Coal Corporation, Harold Keene Coal Co. LLC, Vansant Coal Corporation, Lone Mountain Processing LLC, Powell Mountain Energy, LLC, and Cumberland River Coal LLC (together, “Blackjewel”) to purchase certain assets from Blackjewel for cash consideration of $850,000 plus an additional royalty of $250,000 that is payable within sixty daysone year from the date of the Definitive Agreement of all of the issued and outstanding membership interests of Rhino GP LLC, the general partner of the Partnership (the “General Partner”), as well as 945,525 issued and outstanding subordinated units of the Partnership from Wexford Capital for $1.0 million.

On March 17, 2016, Royal completed the acquisition of all of the issued and outstanding membership interests of the General Partnerpurchase, as well as the 945,525 issued and outstanding subordinated units from Wexford Capital. Royal obtained controlassumption of and a majority limited partner interest, in the Partnershipassociated reclamation obligations. The transaction costs associated with the completionAssignment Agreement were $103,577. The assets that are subject of the Assignment Agreement consist of three underground mines in Virginia that were actively producing coal prior to Blackjewel’s filing for relief under Chapter 11 of the United States Bankruptcy Code, along with a preparation plant, rail loadout facility, related mineral and surface rights and infrastructure and certain purchase contracts to be assumed at Jewell Valley’s option.

The Partnership resumed mining at two of the three Jewell Valley mines during the fourth quarter of 2019. The operating results for Jewell Valley is reported as part of the Partnership’s Central Appalachia business segment. The Partnership reviewed the appropriate guidance within ASU 2017-01,Business Combinations (Topic 805)and determined that this transaction.transaction was an asset purchase.

The Assignment Agreement was funded by borrowings from the Partnership’s delayed draw feature of the financing agreement. Please refer to Note 10 for additional details of the financing agreement. The following table summarizes the assets acquired and liabilities assumed as of the acquisition date:

4. DISCONTINUED OPERATIONS

Pennyrile Asset Purchase Agreement

On March 21, 2016,September 6, 2019, the Partnership and RoyalAlliance Coal, LLC (“Buyer”) and Alliance Resource Partners, L.P. (“Buyer Parent”) entered into a securities purchase agreementan Asset Purchase Agreement (the “Securities Purchase Agreement”“Pennyrile APA”) pursuant to which the Partnership issued 6,000,000 common unitsagreed to sell to the Buyer all of the real property, permits, equipment and inventory and certain other assets associated with its Pennyrile mine complex, as well as the buyer’s assumption of the Pennyrile reclamation obligation, in exchange for approximately $3.7 million, subject to certain adjustments. The final adjustments included the Partnership retaining certain equipment originally included in the Partnershipassets to Royalbe sold to the Buyer, which resulted in a private placement at $1.50 per common unit for an aggregate$0.3 million favorable adjustment to the impairment loss originally recorded by the Partnership in the third quarter of 2019 and a decrease in the final purchase price paid by the Buyer. The transaction was completed in March of $9.0 million. Royal paid2020 and the Partnership $2.0received cash consideration of $3.0 million.

Coal Supply Asset Purchase Agreement

On September 6, 2019, the Partnership, the Buyer and the Buyer Parent entered into an Asset Purchase Agreement for the sale and assignment of certain coal supply agreements associated with the Pennyrile mine complex (the “Coal Supply APA”) in exchange for approximately $7.3 million. The Coal Supply APA included customary representations of the parties thereto and indemnification for losses arising from the breaches of such representations and for liabilities arising during the period in which the relevant parties were not party to the coal supply agreements. The transactions contemplated by the Coal Supply APA closed upon the execution thereof.

Discontinued Operations

The Pennyrile operating results for the months ended March 31, 2020 and 2019 are recorded as discontinued operations on the Partnership’s unaudited condensed consolidated statements of operations. The current and non-current assets and liabilities previously related to Pennyrile have been reclassified to the appropriate held for sale categories on the Partnership’s unaudited condensed consolidated statement of financial position at December 31, 2019. The footnotes to the consolidated statement of financial position have been adjusted accordingly.

Major assets and liabilities of discontinued operations for Pennyrile Energy LLC as of March 31, 2020 and December 31, 2019 are summarized as follows:

Major components of net loss from discontinued operations for Pennyrile Energy LLC for three months ended March 31, 2020 and 2019 are summarized as follows:

Cash Flows. The depreciation, depletion and amortization amounts for Pennyrile for each period presented are listed in the previous table. The Pennyrile capital expenditures for the three months ended March 31, 2019 were $0.3 million. The Partnership recorded a $0.3 million favorable adjustment to asset impairment expense during the first quarter of 2020 as discussed above. Pennyrile did not have any material investing items for any periods presented.

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of March 31, 2020 and December 31, 2019 consisted of the following:

Receivable-other

On June 28, 2019, the Partnership entered into a settlement agreement with a third party which allowed the third party to maintain certain pipelines pursuant to designated permits at our Central Appalachia operations. The agreement required the third party to pay the Partnership $7.0 million in cash and delivered a promissory note payable to theconsideration. The Partnership (“Rhino Promissory Note”) in the amount of $7.0 million. The promissory note was payable in three installments: (i) $3.0received $4.2 million on July 31, 2016; (ii) $2.03, 2019 and the balance of $2.8 million on or before September 30, 2016 and (iii) $2.0 million on or beforeJanuary 2, 2020. At December 31, 2016. In2019, the event$2.8 million receivable was recorded in Receivable –Other on the disinterested membersPartnership’s consolidated statements of financial position. A gain of $6.9 million was recorded on the Partnership’s unaudited condensed consolidated statements of operations during the second quarter of 2019.

Investment-securities

The Partnership acquired 568,794 shares of Mammoth Energy Services, Inc. (NASDAQ: TUSK) (“Mammoth Inc.”) through a series of transactions in years prior to 2018. As of December 31, 2018, the Partnership owned 104,100 shares of Mammoth Inc., which were recorded at fair market value as a current asset on the Partnership’s unaudited condensed consolidated statements of financial position. During the first quarter of 2019, the Partnership sold its 104,100 shares for net consideration of approximately $2.3 million. A gain of $0.4 million was recorded on the Partnership’s unaudited condensed consolidated statements of operations during the first quarter of 2019.

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, including coal properties and mine development and construction costs, as of March 31, 2020 and December 31, 2019 are summarized by major classification as follows:

Depreciation expense for mining and other equipment and related facilities, depletion expense for coal properties, amortization expense for mine development costs and amortization expense for asset retirement costs for the three months ended March 31, 2020 and 2019 was as follows:

7. LEASES

The Partnership leases various mining, transportation and other equipment under operating and finance leases. The leases have remaining lease terms of 1 year to 8 years, some of which include options to extend the leases for up to 15 years. The Partnership determines if an arrangement is a lease at inception. Some of the boardleases include both lease and non-lease components which are accounted for as a single lease component as the Partnership has elected the practical expedient to combine these components for all leases. Operating leases are included in operating lease right-of-use (“ROU”) assets, current liabilities and non-current liabilities. Finance leases are included in property, plant and equipment, current liabilities and long-term liabilities.

ROU assets represent the Partnership’s right to use an underlying asset for the lease term and lease liabilities represent the Partnership’s obligation to make lease payments related to the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of directorslease payments over the lease term. The Partnership utilizes the implicit rate in the lease, if determinable, at the commencement date of the General Partner determinedlease to determine the present value of the lease payments. If the implicit rate is not determinable, the Partnership utilizes its incremental borrowing rate at the commencement date of the lease to determine the present value of the lease payments. The Partnership’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Partnership did not needwill exercise the capital that would be provided by either or both installments set forth in (ii)option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Supplemental information related to leases was as follows:

Weighted Average Discount Rates and (iii) above, in each case,Lease Terms

Supplemental cash flow information related to leases was as follows:

Maturities of lease liabilities are as follows:

The components of lease expense were as follows:

8. OTHER NON-CURRENT ASSETS

Other non-current assets as of March 31, 2020 and December 31, 2019 consisted of the following:

Non-current receivable. The non-current receivable balance of $30.6 million as of March 31, 2020 and December 31, 2019 consisted of the amount due from the Partnership’s workers’ compensation insurance providers for potential claims against the Partnership hadthat are the option to rescind Royal’s purchaseprimary responsibility of 1,333,333 common units and the applicable installment would not be payable (each, a “Rescission Right”). If the Partnership, failed to exercise a Rescission Right,which are covered under the Partnership’s insurance policies. The $30.6 million is also included in each case, the Partnership hadPartnership’s accrued workers’ compensation benefits liability balance, which is included in the option to repurchase 1,333,333 common units at $3.00 per common unit from Royal (each, a “Repurchase Option”). The Repurchase Options terminate on December 31, 2017. On May 13, 2016 and September 30, 2016, Royal paid the Partnership $3.0 million and $2.0 million, respectively, for the promissory note installments that were due July 31, 2016 and September 30, 2016, respectively. The payments were made in relation to the Fifth Amendmentother non-current liabilities section of the amendedPartnership’s unaudited condensed consolidated statements of financial position. The Partnership presents this amount on a gross asset and restated credit agreement completedliability basis since a right of setoff does not exist per the accounting guidance in ASC Topic 210,Balance Sheet. This presentation has no impact on May 13, 2016. On December 30, 2016, the Partnership modified the Securities Purchase Agreement with Royal for the final $2.0 million payment due onPartnership’s results of operations or before December 31, 2016 to extend the due date to December 31, 2018. Please read “—Letter Agreement Regarding Rhino Promissory Note and Weston Promissory Note.”cash flows.

9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of March 31, 2020 and December 31, 2019 consisted of the following:

10. DEBT

Debt as of March 31, 2020 and December 31, 2019 consisted of the following:

Option Agreement-Armstrong Energy

The balance of the financing agreement and related debt issuance costs have been classified as a current liability as of March 31, 2020 and December 31, 2019 (please read Note 1 for further discussion).

Other Debt.Other debt consisting of equipment and insurance financing was approximately $2.0 million and $3.1 million as of March 31, 2020 and December 31, 2019, respectively.

Financing Agreement

On December 30, 2016,27, 2017, the Partnership entered into an option agreementa Financing Agreement (the “Option“Financing Agreement”) with Royal, Rhino Resources Partners Holdings,Cortland Capital Market Services LLC, (“Rhino Holdings”), an entity wholly owned by certain investment partnerships managed by Yorktown Partnersas Collateral Agent and Administrative agent, CB Agent Services LLC, (“Yorktown”),as Origination Agent and the General Partner. Uponparties identified as Lenders therein (the “Lenders”), pursuant to which the Lenders agreed to provide the Partnership with a multi-draw term loan in the original aggregate principal amount of $80 million, subject to the terms and conditions set forth in the Financing Agreement. The total principal amount was divided into a $40 million commitment, the conditions of which were satisfied at the execution of the OptionFinancing Agreement (the “Effective Date Term Loan Commitment”) and a $40 million additional commitment that was contingent upon the satisfaction of certain conditions precedent specified in the Financing Agreement (“Delayed Draw Term Loan Commitment”). As of March 31, 2020, the Partnership receivedhad utilized $18 million of the $40 million additional commitment, which results in $22 million of the additional commitment remaining. The Financing Agreement contains negative covenants that restrict the Partnership’s ability to, among other things: (i) incur liens or additional indebtedness or make investments or restricted payments, (ii) liquidate or merge with another entity, or dispose of assets, (iii) change the nature of their respective businesses; (iv) make capital expenditures in excess, or, with respect to maintenance capital expenditures, lower than, specified amounts, (v) incur restrictions on the payment of dividends, (vi) prepay or modify the terms of other indebtedness, (vii) permit the Collateral Coverage Amount to be less than the outstanding principal amount of the loans outstanding under the Financing Agreement or (viii) permit the trailing nine month Fixed Charge Coverage Ratio of the Partnership and its subsidiaries to be less than 1.20 to 1.00.

The Lenders are entitled to certain fees, including: (i) 1.50% per annum of the unused Delayed Draw Term Loan Commitment for as long as such commitment exists, (ii) for the 12-month period following the execution of the Financing Agreement, a make-whole amount (“Make-Whole Amount”) equal to the interest and unused Delayed Draw Term Loan Commitment fees that would have been payable but for the occurrence of certain events, including among others, bankruptcy proceedings or the termination of the Financing Agreement by the Partnership, and (iii) audit and collateral monitoring fees and origination and exit fees. Commencing December 31, 2018, the principal for each loan made under the Financing Agreement is payable on a quarterly basis in an option (the “Call Option”) from Rhino Holdingsamount equal to acquire$375,000 per quarter. All remaining unpaid principal and accrued and unpaid interest is due on the loan termination date. The Financing Agreement originally had a termination date of December 27, 2020, which was amended to December 27, 2022. Loans made pursuant to the Financing Agreement are secured by substantially all of the outstanding common stock of Armstrong Energy, Inc. (“Armstrong Energy”) that is currently owned by investment partnerships managed by Yorktown, representing approximately 97% ofPartnerships’ assets.

The Partnership entered into various amendments and consents to the outstanding common stock of Armstrong Energy. The OptionFinancing Agreement stipulates that the Partnership can exercise the Call Option no earlier than January 1,during 2018 and no later than2019, which (a) increased the original lender exit fee (“Exit Fee”) of 3.0% to 7.0% as of December 31, 2019. In exchangeThe Exit Fee is applied to the principal amount of the loans made under the Financing Agreement that is payable on the earliest of (i) the final maturity date of the Financing Agreement, (ii) the termination date of the Financing Agreement, (iii) the acceleration of the obligations under the Financing Agreement for Rhino Holdings grantingany reason, including, without limitation, acceleration in accordance with Section 9.01 of the Financing Agreement, including as a result of the commencement of an insolvency proceeding and (iv) the date of any refinancing of the term loan under the Financing Agreement, (b) modified certain definitions and concepts to account for the Partnership’s 2019 acquisition of properties from Blackjewel, (c) permitted the 2019 disposition of the Pennyrile mining complex, (d) required the Partnership to pay a $1.0 million consent fee related to the Call Option,Pennyrile sale (paid March 2020), (e) allowed the Partnership issued 5.0to sell certain real property in Western Colorado and adjusted the timing for remittance to the Lender of the proceeds from the sales, (f) provided $15.0 million common units, representing limited partner interests in additional terms loans under the Delayed Draw Term Loan Commitment feature of the Financing Agreement, (g) revised the definition of the Make-Whole Amount under the Financing Agreement to extend the date of the Make-Whole Amount period to December 31, 2021 and (h) extended the termination date of the Financing Agreement to December 27, 2022.

On March 3, 2020, the Partnership entered into a sixth amendment (the “Call Option Premium Units”“Sixth Amendment”) to Rhino Holdings upon the executionFinancing Agreement originally executed on December 27, 2017 with the Lenders. The Sixth Amendment, among other things, provided a consent by the Origination Agent to a $3.0 million term loan under the Delayed Draw Term Loan Commitment feature of the Option Agreement. The OptionFinancing Agreement stipulatesand increased the Partnership can exercise the Call Option and purchase the common stock of Armstrong Energy in exchange for a number of common units to be issued to Rhino Holdings, which when added with the Call Option Premium Units, will result in Rhino Holdings owning 51% of the fully diluted common units of the Partnership. The purchase of Armstrong Energy through the exercise of the Call Option would also require Royal to transfer a 51% ownership interest in the General Partner to Rhino Holdings. The Partnership’s ability to exercise the Call Option is conditioned upon (i) sixty (60) days having passed since the entry by Armstrong Energy into an agreement with its bondholders to restructure its bonds and (ii) the amendment of the Partnership’s revolving credit facility to permit the acquisition of Armstrong Energy.

The Option Agreement also contains an option (the “Put Option”) grantedExit Fee payable by the Partnership to Rhino Holdings whereby Rhino Holdings has the right, but not the obligation,Lenders by 1.0% to cause the Partnership to purchase substantially alla total of the outstanding common stock of Armstrong Energy from Rhino Holdings under the same8.0% (payment terms and conditions discussed above for the Call Option. The exercise of the Put Option is dependent upon (i) the entry by Armstrong Energy into an agreement with its bondholders to restructure its bonds and (ii) the termination and repayment of any outstanding balance under the Partnership’s revolving credit facility.above).

The Optionfollowing table presents the loan balances and applicable interest rates for each term loan made under the Financing Agreement contains customary covenants, representations and warranties and indemnificationas of March 31, 2020:

11. ASSET RETIREMENT OBLIGATIONS

The changes in asset retirement obligations for losses arising from the inaccuracythree months ended March 31, 2020 and the year ended December 31, 2019 are as follows:

12. EMPLOYEE BENEFITS

401(k) Plans

The Operating Company sponsors a defined contribution savings plans for all employees. Under the defined contribution savings plan, the Operating Company matches voluntary contributions of representations or warranties or breachesparticipants up to a maximum contribution based upon a percentage of covenants containeda participant’s salary with an additional matching contribution possible at the Partnership’s discretion. The expense under these plans for the three months ended March 31, 2020 and 2019 is included in Cost of operations and Selling, general and administrative expense in the Option Agreement, the Seventh Amendment (defined below)Partnership’s unaudited condensed consolidated statements of operations and the GP Amendment (defined below). Upon the request by Rhino Holdings,was as follows:

13. PARTNERS’ CAPITAL

Common Unit Warrants

In December 2017, the Partnership will also enterentered into a registration rightswarrant agreement with certain parties that provides Rhino Holdings withare also parties to the right to demand two shelf registration statements and registration statements on Form S-1, as well as piggyback registration rightsFinancing Agreement discussed above. The warrant agreement included the issuance of a total of 683,888 warrants for as long as Rhino Holdings owns at least 10%common units (“Common Unit Warrants”) of the outstanding common units.

Pursuant toPartnership at an exercise price of $1.95 per unit, which was the Option Agreement, the Second Amended and Restated Limited Liability Company Agreement of our general partner was amended (“GP Amendment”). Pursuant to the GP Amendment, Mr. Bryan H. Lawrence was appointed to the board of directorsclosing price of the General Partner as a designee of Rhino Holdings and Rhino Holdings has the right to appoint an additional independent director. Rhino Holdings has the right to appoint two members to the board of directors of the General Partner for as long as it continues to own 20% of thePartnership’s common units on an undiluted basis.the OTC market as of December 27, 2017. The GP Amendment also provided Rhino HoldingsCommon Unit Warrants have a five year expiration date. The Common Unit Warrants and the Partnership’s common units after exercise are both transferable, subject to applicable US securities laws. The Common Unit Warrant exercise price is $1.95 per unit, but the price per unit will be reduced by future common unit distributions and other further adjustments in price included in the warrant agreement for transactions that are dilutive to the amount of the Partnership’s common units outstanding. The warrant agreement includes a provision for a cashless exercise where the warrant holders can receive a net number of common units. Per the warrant agreement, the warrants are detached from the Financing Agreement and fully transferable. The Partnership analyzed the Common Unit Warrants in accordance with the authority to consent to any delegation of authority to any committee ofapplicable accounting literature and concluded the board ofCommon Unit Warrants should be classified as equity. The Partnership allocated the General Partner. Upon$40.0 million proceeds from the exercise ofFinancing Agreement between the Call Option orCommon Unit Warrants and the Put Option,Financing Agreement based upon their relative fair values. The allocation based upon relative fair values resulted in approximately $1.3 million being recorded for the Second Amended and Restated Limited Liability Company Agreement of the General Partner, as amended, will be further amended to provide that Royal and Rhino Holdings will each have the ability to appoint three directors and that the remaining director will be the chief executive officer of the General Partner unless agreed otherwise.

On October 31, 2017, Armstrong Energy filed Chapter 11 petitionsCommon Unit Warrants in the Eastern District of Missouri’s United States Bankruptcy Court. Per the Chapter 11 petitions, Armstrong Energy will filePartner’s Capital equity section and a detailed restructuring plan as part of the Chapter 11 proceedings. The Partnership is evaluating the Armstrong Energy Chapter 11 filing and any effect it may have on the Option Agreement. See Note 6 for further informationcorresponding reduction in Long-term debt, net on the Partnership’s assessmentunaudited condensed consolidated statements of the Call Option.financial position.

Series A Preferred Unit Purchase AgreementUnits

On December 30, 2016, the Partnership entered into a Series A Preferred Unit Purchase Agreement (the “Preferred Unit Agreement”) with Weston Energy LLC (“Weston”), an entity wholly owned by certain investment partnerships managed by Yorktown, and Royal. Under the Preferred Unit Agreement, Weston and Royal purchased 1,300,000 and 200,000, respectively, of Series A preferred units representing limited partner interests in the Partnership at a price of $10.00 per Series A preferred unit. The Series A preferred units have the preferences, rights and obligations set forth in the Amended and Restated Partnership Agreement. Weston and Royal paid cash of $11.0 million and $2.0 million, respectively, to the Partnership and Weston assigned to the Partnership a $2.0 million note receivable from Royal originally dated September 30, 2016 (the “Weston Promissory Note”). Please read “—Letter Agreement Regarding Rhino Promissory Note and Weston Promissory Note.”

The Preferred Unit Agreement contains customary representations, warrants and covenants, which include among other things, that, for as long as the Series A preferred units are outstanding, the Partnership will cause CAM Mining, LLC (“CAM Mining”), which comprises the Partnership’s Central Appalachia segment, to conduct its business in the ordinary course consistent with past practice and use reasonable best efforts to maintain and preserve intact its current organization, business and franchise and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having business relationships with CAM Mining.

The Preferred Unit Agreement stipulates that upon the request of the holder of the majority of the Partnership’s common units following their conversion from Series A preferred units, as outlined in the Amended and Restated Partnership Agreement (defined below), the Partnership will enter into a registration rights agreement with such holder. Such majority holder has the right to demand two shelf registration statements and registration statements on Form S-1, as well as piggyback registration rights.

Letter Agreement Regarding Rhino Promissory Note and Weston Promissory Note

On December 30, 2016, the Partnership and Royal entered into a letter agreement whereby they extended the maturity dates of the Weston Promissory Note and the final installment payment of the Rhino Promissory Note to December 31, 2018. The letter agreement further provides that the aggregate $4.0 million balance of the Weston Promissory Note and Rhino Promissory Note may be converted at Royal’s option into a number of shares of Royal’s common stock equal to the outstanding balance multiplied by seventy-five percent (75%) of the volume-weighted average closing price of Royal’s common stock for the 90 days preceding the date of conversion (“Royal VWAP”), subject to a minimum Royal VWAP of $3.50 and a maximum Royal VWAP of $7.50. On September 1, 2017, Royal elected to convert the Rhino Promissory Note and the Weston Promissory Note to shares of Royal common stock. Royal issued 914,797 shares of its common stock to Rhino at a conversion price of $4.51 as calculated per the method stipulated above. See Note 11 for further discussion.

Fourth Amended and Restated Agreement of Limited Partnership of Rhino Resource Partners LP

On December 30, 2016, the general partner entered into the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership (“Amended and Restated Partnership Agreement”) to create, authorize and issue the Series A preferred units.

The Series A preferred units are a new class of equity security that rank senior to all classes or series of equity securities of the Partnership with respect to distribution rights and rights upon liquidation. The holders of the Series A preferred units shall beare entitled to receive annual distributions equal to the greater of (i) 50% of the CAM Mining free cash flow (as defined below) and (ii) an amount equal to the number of outstanding Series A preferred units multiplied by $0.80. “CAM Mining free cash flow” is defined in the Amended and Restated Partnership Agreement as (i) the total revenue of the Partnership’s Central Appalachia business segment, minus (ii) the cost of operations (exclusive of depreciation, depletion and amortization) for the Partnership’s Central Appalachia business segment, minus (iii) an amount equal to $6.50, multiplied by the aggregate number of coal tons sold by the Partnership from its Central Appalachia business segment. If the Partnership fails to pay any or all of the distributions in respect of the Series A preferred units, such deficiency will accrue until paid in full and the Partnership will not be permitted to pay any distributions on its Partnership interests that rank junior to the Series A preferred units, including its common units. The Series A preferred units will be liquidated in accordance with their capital accounts and upon liquidation will be entitled to distributions of property and cash in accordance with the balances of their capital accounts prior to such distributions toon equity securities that rank junior to the Series A preferred units.

The Series A preferred units will vote on an as-converted basis with the common units, and the Partnership will beis restricted from taking certain actions without the consent of the holders of a majority of the Series A preferred units, including: (i) the issuance of additional Series A preferred units, or securities that rank senior or equal to the Series A preferred units; (ii) the sale or transfer of CAM Mining or a material portion of its assets; (iii) the repurchase of common units, or the issuance of rights or warrants to holders of common units entitling them to purchase common units at less than fair market value; (iv) consummation of a spin off; (v) the incurrence, assumption or guaranty of indebtedness for borrowed money in excess of $50.0 million except indebtedness relating to entities or assets that are acquired by the Partnership or its affiliates that is in existence at the time of such acquisition or (vi) the modification of CAM Mining’s accounting principles or the financial or operational reporting principles of the Partnership’s Central Appalachia business segment, subject to certain exceptions.

The Partnership will havehas the option to convert the outstanding Series A preferred units at any time on or after the time at which the amount of aggregate distributions paid in respect of each Series A preferred unit exceeds $10.00 per unit. Each Series A preferred unit will convert into a number of common units equal to the quotient (the “Series A Conversion Ratio”) of (i) the sum of $10.00 and any unpaid distributions in respect of such Series A Preferred Unit divided by (ii) 75% of the volume-weighted average closing price of the common units for the preceding 90 trading days (the “VWAP”); provided however, that the VWAP will be capped at a minimum of $2.00 and a maximum of $10.00. On December 31, 2021, all outstanding Series A preferred units will convert into common units at the then applicable Series A Conversion Ratio.

DelistingDuring the first quarter of Common Units from NYSE

On December 17, 2015, the New York Stock Exchange (“NYSE”) notified2019, the Partnership thatpaid $3.2 million to the NYSE had determined to commence proceedings to delist its commonholders of Series A preferred units from the NYSE as a result of the Partnership’s failure to comply with the continued listing standard set forth in Section 802.01B of the NYSE Listed Company Manual to maintain an average global market capitalization over a consecutive 30 trading-day period of at least $15 million for our common units. The NYSE also suspended the trading of the Partnership’s common units at the close of trading on December 17, 2015.

On January 4, 2016, the Partnership filed an appeal with the NYSE to review the suspension and delisting determination of the Partnership’s common units. The NYSE held a hearing regarding our appeal on April 20, 2016 and affirmed its prior decision to delist the Partnership’s common units.

On April 27, 2016, the NYSE filed with the SEC a notification of removal from listing and registration on Form 25 to delist the Partnership’s common units and terminate the registration of its common units under Section 12(b) of the Securities Exchange Act of 1934. The delisting became effective on May 9, 2016. The Partnership’s common units trade on the OTCQB Marketplace under the ticker symbol “RHNO.”

The Partnership is exploring the possibility of listing its common units on the NASDAQ Stock Market (“NASDAQ”), pending its capability to meet the NASDAQ initial listing standards.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL

Investments in Unconsolidated Affiliates. Investments in other entities are accounteddistributions earned for using the consolidation, equity method or cost basis depending upon the level of ownership, the Partnership’s ability to exercise significant influence over the operating and financial policies of the investee and whether the Partnership is determined to be the primary beneficiary of a variable interest entity. Equity investments are recorded at original cost and adjusted periodically to recognize the Partnership’s proportionate share of the investees’ net income or losses after the date of investment. Any losses from the Partnership’s equity method investments are absorbed by the Partnership based upon its proportionate ownership percentage. If losses are incurred that exceed the Partnership’s investment in the equity method entity, then the Partnership must continue to record its proportionate share of losses in excess of its investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

In December 2012, the Partnership made an initial investment in a new joint venture, Muskie Proppant LLC (“Muskie”), with affiliates of Wexford Capital. In November 2014, the Partnership contributed its investment interest in Muskie to Mammoth Energy Partners LP (“Mammoth”) in return for a limited partner interest in Mammoth. In October 2016, the Partnership contributed its limited partner interests in Mammoth to Mammoth Energy Services, Inc. (NASDAQ: TUSK) (“Mammoth Inc.”) in exchange for 234,300 shares of common stock of Mammoth, Inc.

In September 2014, the Partnership made an initial investment of $5.0 million in a new joint venture, Sturgeon Acquisitions LLC (“Sturgeon”), with affiliates of Wexford Capital and Gulfport Energy Corporation (NASDAQ: GPOR) (“Gulfport”). The Partnership accounted for the investment in this joint venture and results of operations under the equity method based upon its ownership percentage. The Partnership recorded its proportionate share of the operating income for this investment for the three and nine months ended September 30, 2017 of approximately $0 and $36,000, respectively. The Partnership recorded its proportionate share of the operating (loss) for Sturgeon for the three and nine months ended September 30, 2016 of approximately ($26,000) and ($0.1) million, respectively. In June 2017, the Partnership contributed its limited partner interests in Sturgeon to Mammoth Inc. in exchange for 336,447 shares of common stock of Mammoth Inc. As of September 30, 2017, the Partnership owned 568,794 shares of Mammoth Inc.

As of September 30, 2017 and December 31, 2016, the Partnership recorded a fair market value adjustment of $1.0 million and $1.6 million, respectively, for its available-for-sale investment in Mammoth Inc. based on the market value of the shares at September 30, 2017 and December 31, 2016, respectively, which was recorded in Other Comprehensive Income. As of September 30, 2017 and December 31, 2016, the Partnership has recorded its investment in Mammoth Inc. as a short-term asset, which the Partnership has classified as available-for-sale. The Partnership has included its investment in Mammoth Inc. and its prior investment in Muskie and Sturgeon in its Other category for segment reporting purposes.

Recently Issued Accounting Standards.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,Revenue from Contracts with Customers. ASU 2014-09 clarifies the principles for recognizing revenue and establishes a common revenue standard for U.S. financial reporting purposes. The guidance in ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605,Revenue Recognition, and most industry-specific accounting guidance. Additionally, ASU 2014-09 supersedes some guidance included in ASC 605-35,Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of ASC 360,Property, Plant, and Equipment, and intangible assets within the scope of ASC 350,Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in ASU 2014-09. In July 2015, the FASB approved to defer the effective date of ASU 2014-09 by one year. Accordingly, ASU 2014-09 will be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Partnership is evaluating the requirements of this new accounting guidance and currently believes the new guidance will not have a material impact on its financial results when adopted, but will require additional disclosures in its financial statements.

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). ASU 2016-02 requires that lessees recognize all leases (other than leases with a term of twelve months or less) on the balance sheet as lease liabilities, based upon the present value of the lease payments, with corresponding right of use assets. ASU 2016-02 also makes targeted changes to other aspects of current guidance, including identifying a lease and lease classification criteria as well as the lessor accounting model, including guidance on separating components of a contract and consideration in the contract. The amendments in ASU 2016-02 will be effective for the Partnership on January 1, 2019 and will require modified retrospective application as of the beginning of the earliest period presented in the financial statements. Early application is permitted. The Partnership is currently evaluating this guidance and currently believes this new guidance will not have a material impact on its financial results when adopted, but will require additional assets and liabilities to be recognized for certain agreements where the Partnership has the rights to use assets.

In August 2016, the FASB issued ASU 2016-15,Statement of Cash Flows (Topic 230):Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs. ASU 2016-15 requires that cash payments related to debt prepayments or debt extinguishments, excluding accrued interest, be classified as a financing activity rather than an operating activity even when the effects enter into the determination of net income. The amendments in ASU 2016-15 will be effective on January 1, 2018 and must be applied retrospectively. Early application is permitted. The Partnership is currently evaluating this guidance.

In January 2017, the FASB issued ASU 2017-01,Business Combinations (Topic 805). ASU 2017—01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Partnership is currently evaluating this guidance.

3. DISCONTINUED OPERATIONS

Elk Horn Coal Leasing

In August 2016, the Partnership entered into an agreement to sell its Elk Horn coal leasing company (“Elk Horn”) to a third party for total cash consideration of $12.0 million. The Partnership received $10.5 million in cash consideration upon the closing of the Elk Horn transaction and the remaining $1.5 million of consideration was paid in ten equal monthly installments of $150,000 on the 20th of each calendar month beginning on September 20, 2016. The Partnership recorded a loss of $119.9 million from the Elk Horn disposal during the year ended December 31, 2016. The previous operating results of Elk Horn have been reclassified and reported on the (Gain)/loss from discontinued operations line on the Partnership’s unaudited condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2016.

Major components of net (loss)/income from discontinued operations for the three and nine months ended September 30, 2017 and 2016 are summarized as follows:

The depreciation, depletion and amortization amounts for Elk Horn for each period presented are listed in the previous table.2018. The Partnership did not fund any capital expenditures for Elk Horn for any periods presented. The amortization of Elk Horn’s deferred revenue, which was zero and $1.3accrued approximately $1.2 million for the nine months ended September 30, 2017 and 2016, respectively, is the only material non-cash operating item for all periods presented. Elk Horn did not have any material non-cash investing items for the nine months ended September 30, 2016.

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of September 30, 2017 and December 31, 2016 consisted of the following: