HALLADOR ENERGY CO 10-Q

ITEM 1. FINANCIAL STATEMENTS Hallador Energy Company Condensed Consolidated Balance Sheets (in thousands, except per share data) (unaudited) June 30, December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 6,446 $ 2,842 Restricted cash 4,282 4,281 Accounts receivable 19,098 19,937 Inventory 32,595 23,075 Parts and supplies 39,459 38,877 Prepaid expenses 2,027 2,262 Total current assets 103,907 91,274 Property, plant and equipment: Land and mineral rights 115,486 115,486 Buildings and equipment 531,413 537,131 Mine development 164,475 158,642 Finance lease right-of-use assets 19,869 12,346 Total property, plant and equipment 831,243 823,605 Less - accumulated depreciation, depletion and amortization ( 349,462 ) ( 334,971 ) Total property, plant and equipment, net 481,781 488,634 Investment in Sunrise Energy 2,305 2,811 Other assets 7,176 7,061 Total assets $ 595,169 $ 589,780 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of bank debt, net $ 17,938 $ 24,438 Accounts payable and accrued liabilities 45,890 62,908 Current portion of lease financing 6,204 3,933 Deferred revenue 84,772 23,062 Contract liability - power purchase agreement and capacity payment reduction 40,735 43,254 Total current liabilities 195,539 157,595 Long-term liabilities: Bank debt, net 24,734 63,453 Convertible notes payable — 10,000 Convertible notes payable - related party — 9,000 Long-term lease financing 10,699 8,157 Deferred income taxes 5,614 9,235 Asset retirement obligations 15,335 14,538 Contract liability - power purchase agreement 25,076 47,425 Other 2,002 1,789 Total long-term liabilities 83,460 163,597 Total liabilities 278,999 321,192 Commitments and contingencies Stockholders' equity: Preferred stock, $ .10 par value, 10,000 shares authorized; none issued — — Common stock, $ .01 par value, 100,000 shares authorized; 42,599 and 34,052 issued and outstanding, as of June 30, 2024 and December 31, 2023, respectively 426 341 Additional paid-in capital 186,945 127,548 Retained earnings 128,799 140,699 Total stockholders’ equity 316,170 268,588 Total liabilities and stockholders’ equity $ 595,169 $ 589,780 See accompanying notes to the condensed consolidated financial statements. 1 Table of Contents Hallador Energy Company Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 SALES AND OPERATING REVENUES: Electric sales $ 56,846 $ 71,017 $ 115,601 $ 163,409 Coal sales 32,801 88,574 82,431 183,176 Other revenues 1,267 1,603 2,554 2,943 Total sales and operating revenues 90,914 161,194 200,586 349,528 EXPENSES: Fuel 10,439 32,641 18,498 88,614 Other operating and maintenance costs 35,912 41,908 73,394 74,428 Utilities 3,396 4,343 7,770 8,840 Labor 26,555 36,528 61,723 77,059 Depreciation, depletion and amortization 13,649 17,169 29,092 35,145 Asset retirement obligations accretion 399 461 798 912 Exploration costs 47 305 117 511 General and administrative 7,803 5,595 13,747 12,542 Total operating expenses 98,200 138,950 205,139 298,051 INCOME (LOSS) FROM OPERATIONS ( 7,286 ) 22,244 ( 4,553 ) 51,477 Interest expense (1) ( 3,735 ) ( 3,541 ) ( 7,672 ) ( 7,440 ) Loss on extinguishment of debt ( 1,937 ) — ( 2,790 ) — Equity method investment (loss) ( 257 ) ( 217 ) ( 506 ) ( 148 ) NET INCOME (LOSS) BEFORE INCOME TAXES ( 13,215 ) 18,486 ( 15,521 ) 43,889 INCOME TAX EXPENSE (BENEFIT): Current — 61 — 493 Deferred ( 3,011 ) 1,510 ( 3,621 ) 4,430 Total income tax expense (benefit) ( 3,011 ) 1,571 ( 3,621 ) 4,923 NET INCOME (LOSS) $ ( 10,204 ) $ 16,915 $ ( 11,900 ) $ 38,966 NET INCOME (LOSS) PER SHARE: Basic $ ( 0.27 ) $ 0.51 $ ( 0.32 ) $ 1.18 Diluted $ ( 0.27 ) $ 0.47 $ ( 0.32 ) $ 1.08 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 37,879 33,137 37,026 33,061 Diluted 37,879 36,708 37,026 36,696 (1) Interest Expense: Interest on bank debt $ 2,779 $ 2,055 $ 5,584 $ 4,310 Other interest 547 462 1,275 894 Amortization: Amortization of debt issuance costs 409 1,024 813 2,236 Total amortization 409 1,024 813 2,236 Total interest expense $ 3,735 $ 3,541 $ 7,672 $ 7,440 See accompanying notes to the condensed consolidated financial statements. 2 Table of Contents Hallador Energy Company Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ ( 11,900 ) $ 38,966 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income tax (benefit) ( 3,621 ) 4,430 Equity loss – Sunrise Energy 506 148 Cash distribution - Sunrise Energy — 625 Depreciation, depletion, and amortization 29,092 35,145 Loss on extinguishment of debt 2,790 — Loss (gain) on sale of assets ( 246 ) 58 Amortization of debt issuance costs 813 2,236 Asset retirement obligations accretion 798 912 Cash paid on asset retirement obligation reclamation ( 602 ) ( 931 ) Stock-based compensation 2,247 2,001 Amortization of contract asset and contract liabilities ( 24,868 ) ( 22,162 ) Other 1,402 704 Change in operating assets and liabilities: Accounts receivable 839 8,461 Inventory ( 9,520 ) ( 9,322 ) Parts and supplies ( 582 ) ( 5,564 ) Prepaid expenses 2,140 282 Accounts payable and accrued liabilities ( 11,107 ) ( 11,867 ) Deferred revenue 61,710 121 Net cash provided by operating activities 39,891 44,243 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 28,044 ) ( 30,610 ) Proceeds from sale of equipment 2,474 62 Net cash used in investing activities ( 25,570 ) ( 30,548 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on bank debt ( 86,500 ) ( 37,013 ) Borrowings of bank debt 40,500 26,000 Payments on lease financing ( 2,665 ) — Proceeds from sale and leaseback arrangement 3,783 — Issuance of related party notes payable 5,000 — Payments on related party notes payable ( 5,000 ) — Debt issuance costs ( 76 ) ( 1,629 ) ATM offering 34,515 — Taxes paid on vesting of RSUs ( 273 ) ( 1,109 ) Net cash used in financing activities ( 10,716 ) ( 13,751 ) Increase (decrease) in cash, cash equivalents, and restricted cash 3,605 ( 56 ) Cash, cash equivalents, and restricted cash, beginning of period 7,123 6,426 Cash, cash equivalents, and restricted cash, end of period $ 10,728 $ 6,370 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: Cash and cash equivalents $ 6,446 $ 2,337 Restricted cash 4,282 4,033 $ 10,728 $ 6,370 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 6,312 $ 5,010 SUPPLEMENTAL NON-CASH FLOW INFORMATION: Change in capital expenditures included in accounts payable and prepaid expense $ ( 1,694 ) $ 426 Stock issued on redemption of convertible notes and interest $ 22,993 $ — See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents Hallador Energy Company Condensed Consolidated Statements of Stockholders’ Equity (in thousands) (unaudited) Additional Total Common Stock Issued Paid-in Retained Stockholders' Shares Amount Capital Earnings Equity Balance, March 31, 2024 36,534 $ 365 $ 144,490 $ 139,003 $ 283,858 Stock-based compensation — — 1,581 — 1,581 Stock issued on vesting of RSUs 58 1 ( 1 ) — — Taxes paid on vesting of RSUs ( 27 ) ( 1 ) ( 271 ) — ( 272 ) Stock issued on redemption of convertible notes 2,090 21 13,251 — 13,272 Stock issued in ATM offering 3,944 40 27,895 — 27,935 Net loss — — — ( 10,204 ) ( 10,204 ) Balance, June 30, 2024 42,599 $ 426 $ 186,945 $ 128,799 $ 316,170 Balance, December 31, 2023 34,052 $ 341 $ 127,548 $ 140,699 $ 268,588 Stock-based compensation — — 2,247 — 2,247 Stock issued on vesting of RSUs 379 4 ( 4 ) — — Taxes paid on vesting of RSUs ( 159 ) ( 2 ) ( 271 ) — ( 273 ) Stock issued on redemption of convertible notes 3,672 36 22,957 — 22,993 Stock issued in ATM offering 4,655 47 34,468 — 34,515 Net loss — — — ( 11,900 ) ( 11,900 ) Balance, June 30, 2024 42,599 $ 426 $ 186,945 $ 128,799 $ 316,170 Additional Total Common Stock Issued Paid-in Retained Stockholders' Shares Amount Capital Earnings Equity Balance, March 31, 2023 33,137 $ 332 $ 118,897 $ 117,957 $ 237,186 Stock-based compensation — — 781 — 781 Net income — — — 16,915 16,915 Balance, June 30, 2023 33,137 $ 332 $ 119,678 $ 134,872 $ 254,882 Balance, December 31, 2022 32,983 $ 330 $ 118,788 $ 95,906 $ 215,024 Stock-based compensation — — 2,001 — 2,001 Stock issued on vesting of RSUs 275 3 ( 3 ) — — Taxes paid on vesting of RSUs ( 121 ) ( 1 ) ( 1,108 ) — ( 1,109 ) Net income — — — 38,966 38,966 Balance, June 30, 2023 33,137 $ 332 $ 119,678 $ 134,872 $ 254,882 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents Hallador Energy Company Notes to Condensed Consolidated Financial Statements (unaudited) ( 1 ) GENERAL BUSINESS The condensed consolidated financial statements include the accounts of Hallador Energy Company (hereinafter known as “we, us, or our”) and its wholly owned subsidiaries Sunrise Coal, LLC ("Sunrise"), Hallador Power Company, LLC ("Hallador Power"), as well as Sunrise and Hallador Power's wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the Company’s prior period condensed consolidated financial information to conform to the current period presentation. These presentation changes did not impact the Company’s condensed consolidated net income (loss), consolidated cash flows, total assets, total liabilities or total stockholders’ equity. We strategically view and manage our operations through two reportable segments: Electric Operations and Coal Operations. The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other and Eliminations" and primarily are comprised of unallocated corporate costs and activities, the elimination of coal sales from coal operations to electric operations, a 50 % interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River. The Electric Operations reportable segment includes electric power generation facilities of the Merom Power Plant. The Coal Operations reportable segment includes mining complexes Oaktown 1 and 2 underground mines, Prosperity surface mine, Freelandville surface mine, and Carlisle wash plant. On February 23, 2024, our Coal Operations Segment committed to a reorganization effort designed to strengthen its financial and operational efficiency and create significant operational savings and higher margins. For further information, see “Note 16 – Organizational Restructuring” below. The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The condensed consolidated financial statements included herein have been prepared pursuant to the Securities and Exchange Commission’s (the "SEC") rules and regulations; accordingly, certain information and footnote disclosures normally included in generally accepted accounting principles ("GAAP") financial statements have been condensed or omitted. The results of operations and cash flows for the three and six months ended June 30, 2024 , are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2024 . Our organization and business, the accounting policies we follow, and other information are contained in the notes to our consolidated financial statements filed as part of our 2023 Annual Report on Form 10 -K . This quarterly report should be read in conjunction with such Annual Report on Form 10 -K. ( 2 ) RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures ("ASU 2023 - 07" ). ASU 2023 - 07 primarily requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker ("CODM"), the amount and composition of other segment items, and the title and position of the CODM. ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023 - 07, but do not expect it to have a material effect on our consolidated financial statements. In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures ("ASU 2023 - 09" ). ASU 2023 - 09 primarily requires enhanced disclosures to ( 1 ) disclose specific categories in the rate reconciliation, ( 2 ) disclose the amount of income taxes paid and expensed disaggregated by federal, state, and foreign taxes, with further disaggregation by individual jurisdictions if certain criteria are met, and ( 3 ) disclose income (loss) from continuing operations before income tax (benefit) disaggregated between domestic and foreign. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023 - 09, but do not expect it to have a material effect on our consolidated financial statements. 5 Table of Contents ( 3 ) LONG-LIVED ASSET IMPAIRMENTS Long-lived assets are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable. For the three and six -month periods ended June 30, 2024 and June 30, 2023, no impairment charges were recorded for long-lived assets. ( 4 ) INVENTORY Inventory is valued at a lower of cost or net realizable value (NRV). As of June 30, 2024 , and December 31, 2023 , coal inventory includes NRV adjustments of $ 0.9 million and $ 2.0 million, respectively. ( 5 ) BANK DEBT At June 30, 2024, the Company had term debt of $ 45.5 million. The term debt required quarterly payments of $ 6.5 million starting in April 2024 through maturity. Our debt is recorded at amortized cost, which approximates fair value due to the variable interest rates in the agreement and is collateralized primarily by our assets. Bank debt was reduced by $ 46.0 million during the six months ended June 30, 2024. Liquidity As of June 30, 2024 , we had additional borrowing capacity of $ 54.4 million and total liquidity of $ 60.7 million. Our additional borrowing capacity utilizes our $ 75.0 million revolver availability and reduces it by $ 20.6 million for outstanding letters of credit that we were required to maintain for surety bonds. Liquidity consists of our additional borrowing capacity and cash and cash equivalents. Fees Unamortized bank fees related to our term debt as of June 30, 2024 , and December 31, 2023 , were $ 2.8 million and $ 3.6 million, respectively. These unamortized bank fees were deferred and are being amortized over the term of the loan. Bank debt, less debt issuance costs, is presented below (in thousands): June 30, December 31, 2024 2023 Current bank debt $ 19,500 $ 26,000 Less unamortized debt issuance cost ( 1,562 ) ( 1,562 ) Net current portion $ 17,938 $ 24,438 Long-term bank debt $ 26,000 $ 65,500 Less unamortized debt issuance cost ( 1,266 ) ( 2,047 ) Net long-term portion $ 24,734 $ 63,453 Total bank debt $ 45,500 $ 91,500 Less total unamortized debt issuance cost ( 2,828 ) ( 3,609 ) Net bank debt $ 42,672 $ 87,891 6 Table of Contents Covenants The credit facility includes a Maximum Leverage Ratio (consolidated funded debt/trailing twelve months adjusted EBITDA), calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed 2.25 to 1.00. As of June 30, 2024 , our Leverage Ratio of 2.12 was in compliance with the requirements of the credit agreement. The credit facility also requires a Minimum Debt Service Coverage Ratio (consolidated adjusted EBITDA/annual debt service) calculated as of the end of each fiscal quarter for the trailing twelve months of 1.25 to 1.00 through the credit facility's maturity. As of June 30, 2024, our Debt Service Coverage Ratio of 1.56 was in compliance with the requirements of the credit agreement. As of June 30, 2024, we were in compliance with all other covenants defined in the credit agreement. Interest Rate The interest rate on the facility ranges from SOFR plus 4.00 % to SOFR plus 5.00 %, depending on our Leverage Ratio. As of June 30, 2024 , we were paying SOFR plus 5.00 % on the outstanding bank debt which equates to an all-in rate of 10.49 %. Future Maturities (in thousands): 2024 $ 6,500 2025 26,000 2026 13,000 Total $ 45,500 ( 6 ) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following for the indicated dates (in thousands): June 30, December 31, 2024 2023 Accounts payable $ 29,151 $ 43,636 Accrued property taxes 4,109 2,987 Accrued payroll 3,606 6,575 Workers' compensation reserve 4,364 3,629 Group health insurance 1,900 2,300 Asset retirement obligation - current portion 1,548 2,150 Other 1,212 1,631 Total accounts payable and accrued liabilities $ 45,890 $ 62,908 ( 7 ) REVENUE Revenue from Contracts with Customers We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all the consideration will be collected. We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer. Electric operations We concluded that for a Power Purchase Agreement (“PPA”) that is not determined to be a lease or derivative, the definition of a contract and the criteria in ASC 606, Revenue from Contracts with Customers ("ASC 606" ), is met at the time a PPA is executed by the parties, as this is the point at which enforceable rights and obligations are established. Accordingly, we concluded that a PPA that is not determined to be a lease or derivative constitutes a valid contract under ASC 606. We recognize revenue daily, based on an output method of capacity made available as part of any stand-ready obligations for contract capacity performance obligations and daily, based on an output method of MWh of electricity delivered. 7 Table of Contents For the delivered energy performance obligation in the PPA with Hoosier, we recognize revenue daily for actual delivered electricity plus the amortization of the contract liability as a result of the Asset Purchase Agreement with Hoosier. For delivered energy to all other customers, we recognize revenue daily for the actual delivered electricity. Coal operations Our coal revenue is derived from sales to customers of coal produced at our facilities. Our customers typically purchase coal directly from our mine sites where the sale occurs and where title, risk of loss, and control pass to the customer at that point. Our customers arrange for and bear the costs of transporting their coal from our mines to their plants or other specified discharge points. Our customers are typically domestic utility companies. Our coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, or include a pre-determined escalation in price for each year. Price re-opener and index provisions may allow either party to commence a renegotiation of the contract price at a pre-determined time. Price re-opener provisions may automatically set a new price based on the prevailing market price or, in some instances, require us to negotiate a new price, sometimes within specified ranges of prices. The terms of our coal sales agreements result from competitive bidding and extensive negotiations with customers. Consequently, the terms of these contracts vary by customer. Coal sales agreements will typically contain coal quality specifications. With coal quality specifications in place, the raw coal sold by us to the customer at the delivery point must be substantially free of magnetic material and other foreign material impurities and crushed to a maximum size as set forth in the respective coal sales agreement. Price adjustments are made and billed in the month the coal sale was recognized based on quality standards that are specified in the coal sales agreement, such as Btu factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped. Disaggregation of Revenue Revenue is disaggregated by revenue source for our electric operations and by primary geographic markets for our coal operations, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. Electric operations Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Delivered energy (including contract liability amortization) $ 39,973 $ 53,862 $ 86,955 $ 130,284 Capacity 16,873 17,155 28,646 33,125 Total Electric Operations sales $ 56,846 $ 71,017 $ 115,601 $ 163,409 Coal operations Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Outside third-party Indiana customers $ 15,048 $ 34,214 $ 33,152 $ 83,650 Customers in Florida, North Carolina, Alabama and Georgia 17,753 54,360 49,279 99,526 Total Coal Operations sales $ 32,801 $ 88,574 $ 82,431 $ 183,176 Performance Obligations Electric operations We concluded that each megawatt-hour ("MWh") of delivered energy is capable of being distinct as a customer could benefit from each on its own by using/consuming it as a part of its operations. We also concluded that the stand-ready obligation to be available to provide electricity is capable of being distinct as each unit of capacity provides an economic benefit to the holder and could be sold by the customer. During 2022, we entered into an Asset Purchase Agreement (“APA”) with Hoosier (“Hoosier APA”) in which Hallador Power shall sell, and Hoosier shall buy, delivered energy quantities through 2025 at the contract price, which is $ 34.00 per MWh. We have remaining delivered energy obligations to Hoosier on the APA totaling $ 83.9 million through 2025 as of June 30, 2024 . The agreement was amended August 31, 2023, to extend through 2028. The amendment included additional obligations to Hoosier of $ 186.6 million, or $ 56.00 per MWh, as of June 30, 2024 . 8 Table of Contents In addition to delivered energy, under the Hoosier APA, Hallador Power shall provide a stand-ready obligation to provide electricity to MISO, also known as contract capacity. The contract capacity that Hallador Power shall provide to Hoosier is 917 megawatts (“MW”) for contract year one, and on average 300 MW for contract years two to four. Hoosier shall pay Hallador Power the capacity price of $ 5.80 per kilowatt month for the contract capacity. We have remaining capacity obligations to Hoosier through 2025 totaling $ 30.0 million as of June 30, 2024 . The agreement was amended August 31, 2023, to extend through 2028, with additional capacity obligations to Hoosier of $ 60.9 million as of June 30, 2024, at a price of $ 7.02 per kilowatt month for the contract capacity. During the second quarter 2024, the Company entered into an 11 -month, $ 45.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,302,480 MWh. We have energy and capacity obligations to customers, excluding Hoosier, through 2029 totaling $ 152.0 million and $ 151.1 million, respectively, as of June 30, 2024 . We have $ 45.0 million and $ 39.8 million of deferred revenue as of June 30, 2024 , related to the prepaid physically delivered power contract and other capacity obligations outside of the Hoosier APA, respectively. Coal operations A performance obligation is a promise in a contract with a customer to provide distinct goods or services. Performance obligations are the unit of account for purposes of applying the revenue recognition standard and therefore determine when and how revenue is recognized. In most of our coal contracts, the customer contracts with us to provide coal that meets certain quality criteria. We consider each ton of coal a separate performance obligation and allocate the transaction price based on the base price per the contract, increased or decreased for quality adjustments. We recognize revenue at a point in time as the customer does not have control over the asset at any point during the fulfillment of the contract. For substantially all our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine. This is also the point at which physical possession of the coal transfers to the customer, as well as the right to receive substantially all benefits and the risk of loss in ownership of the coal. We have remaining coal sales performance obligations relating to fixed priced contracts to third -party customers of approximately $ 207.7 million, which represents the average fixed prices on our committed contracts as of June 30, 2024. We expect to recognize approximately 30.3 % of this coal sales revenue in 2024, with the remainder recognized through 2027 . We have remaining performance obligations relating to coal sales contracts with price reopeners of approximately $ 154.5 million, which represents our estimate of the expected reopener price on committed contracts as of June 30, 2024. We expect to recognize all of this coal sales revenue 2025 through 2027. The coal tons used to determine the remaining performance obligations are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such an option exists in the customer contract. Contract Balances Under ASC 606, the timing of when a performance obligation is satisfied can affect the presentation of accounts receivable, contract assets, and contract liabilities. The main distinction between accounts receivable and contract assets is whether consideration is conditional on something other than the passage of time. A receivable is an entity’s right to consideration that is unconditional. Under the typical payment terms of our contracts with customers, the customer pays us a base price for the coal, increased or decreased for any quality adjustments, electricity, or capacity. Amounts billed and due are recorded as trade accounts receivable and included in accounts receivable in our condensed consolidated balance sheets. As of January 1, 2023, accounts receivable for coal sales billed to customers was $ 16.3 million. ( 8 ) INCOME TAXES For the six months ended June 30, 2024 and 2023, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income, forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate. The effective tax rate for the six months ended June 30, 2024 and 2023, was ~23% and ~11%, respectively. Historically, our actual effective tax rates have differed from the statutory effective rate primarily due to the benefit received from statutory percentage depletion in excess of tax basis. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income (loss) before income taxes. 9 Table of Contents ( 9 ) STOCK COMPENSATION PLANS Non-vested grants as of December 31, 2023 858,363 Awarded - weighted average share price on award date was $ 5.69 599,013 Vested - weighted average share price on vested date was $ 5.30 ( 379,390 ) Forfeited ( 37,500 ) Non-vested grants as of June 30, 2024 1,040,486 For the three and six months ended June 30, 2024 our stock compensation was $ 1.6 million and $ 2.2 million, respectively. For the three and six months ended June 30, 2023, our stock compensation was $ 0.8 million and $ 2.0 million, respectively. Non-vested RSU grants will vest as follows: Vesting Year RSUs Vesting 2024 1,000 2025 641,144 2026 199,171 2027 199,171 1,040,486 The outstanding RSUs have a value of $ 8.1 million based on the June 28, 2024 closing stock price of $ 7.77 . As of June 30, 2024, unrecognized stock compensation expense is $ 5.7 million, and we had 48,761 RSUs available for future issuance. RSUs are not allocated earnings and losses as they are considered non-participating securities. ( 10 ) LEASES We have operating leases for office space and processing facilities with remaining lease terms ranging from 1 month to 8 years. As most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. Imputed interest on our operating leases were $ 0.3 million and $ 0.3 million for the three and six months ended June 30, 2024. During the six months ended June 30, 2024, we entered into four finance leases that were accounted for as failed sale-leaseback transactions. Finance lease assets are included in finance lease right-of-use assets on the condensed consolidated balance sheets and the associated finance lease liabilities are reflected within current portion of lease financing and long-term lease financing on the condensed consolidated balance sheets, as applicable. Depreciation on our finance lease assets was $ 1.1 million and $ 2.2 million for the three and six months ended June 30, 2024 . Imputed interest on our finance leases was $ 0.1 million and $ 2.0 million for the three and six months ended June 30, 2024 . We deferred financing fees of $ 0.2 and $ 0.1 million at June 30, 2024 and December 31, 2023, respectively, in connection with entry into the finance leases. These deferred financing fees will be amortized on a straight-line basis over the term of the finance leases. We did not have finance leases during the three and six months ended June 30, 2023. The following information relates to our leases (dollar amounts in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Operating lease information: Operating cash outflows from operating leases $ 52 $ 52 $ 104 $ 104 Weighted average remaining lease term in years 7.6 0.95 7.6 0.95 Weighted average discount rate 10.5 % 6.0 % 10.5 % 6.0 % Finance lease information: Financing cash outflows from finance leases $ 1,427 — $ 2,665 — Proceeds from sale and leaseback arrangement $ 1,856 — $ 3,783 — Weighted average remaining lease term in years 2.64 — 2.64 — Weighted average discount rate 8.5 % — 8.5 % — 10 Table of Contents Future minimum lease payments under non-cancellable leases as of June 30, 2024, were as follows: Operating Finance Leases Leases (In thousands) 2024 $ 8 $ 3,745 2025 118 7,490 2026 122 7,177 2027 125 662 2028 129 — Thereafter 483 — Total minimum lease payments $ 985 $ 19,074 Less imputed interest and deferred finance fees ( 347 ) ( 2,171 ) Total lease liability $ 638 $ 16,903 The following are reflected within the indicated condensed consolidated balance sheet line items: For the Six Months Ended June 30, For the Year Ended December 31, 2024 2023 (In thousands) Operating lease assets Buildings and equipment $ 638 $ 712 Operating lease liabilities: Current operating lease liabilities Accounts payable and accrued liabilities $ 8 $ 58 Non-current operating lease liabilities Other long-term liabilities 630 654 Total operating lease liability $ 638 $ 712 Finance lease assets Finance lease right-of-use assets $ 19,869 $ 12,346 Finance lease liabilities: Current finance lease liabilities Current portion of lease financing $ 6,204 $ 3,933 Non-current finance lease liabilities Long-term lease financing 10,699 8,157 Total finance lease liabilities $ 16,903 $ 12,090 ( 11 ) SELF-INSURANCE We self-insure our non-leased underground mining equipment. Such equipment was allocated among four mining units dispersed over seven miles and seven mining units dispersed over eleven miles, at June 30, 2024 and December 31, 2023, respectively. The historical cost of such equipment was approximately $ 250.4 million and $ 262.0 million as of June 30, 2024 , and December 31, 2023 . We also self-insure for workers’ compensation claims. Restricted cash of $ 4.3 million as of June 30, 2024 , and December 31, 2023 , represents cash held and controlled by a third party and is restricted primarily for future workers’ compensation claim payments. ( 12 ) FAIR VALUE MEASUREMENTS We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. We have no Level 1 instruments. Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. We have no Level 2 instruments. 11 Table of Contents Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). ARO liabilities use Level 3 non-recurring fair value measures . Credit Risk The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and restricted cash. The Company’s cash and cash equivalent and restricted cash balances on deposit with financial institutions total $ 10.7 million and $ 7.1 million as of June 30, 2024 and December 31, 2023, respectively, which exceeded FDIC insured limits. The Company regularly monitors these institutions’ financial condition. The Company utilizes large and reputable banking institutions which it believes mitigates these risks. The Company has not experienced any losses in such accounts. ( 13 ) EQUITY METHOD INVESTMENTS We own a 50 % i nterest in Sunrise Energy, LLC, which owns gas reserves and gathering equipment with plans to develop and operate such reserves. Sunrise Energy, LLC, also plans to develop and explore for oil, natural gas, and coal-bed methane gas reserves on or near our underground coal reserves. The carrying value of the investment included in our condensed consolidated balance sheets as of June 30, 2024 , and December 31, 2023 , was $ 2.3 million and $ 2.8 million, respectively. ( 14 ) CONVERTIBLE NOTES On July 29, 2022, we issued a $ 5.0 million senior unsecured convertible note (the “July 29 th Note”) to a related party affiliated with an independent member of our board of directors. The July 29 th Note carries an interest rate of 8 % per annum with a maturity date of December 29, 2028. For the period August 18, 2022, through August 17, 2024, the holder has the option to convert the July 29 th Note into shares of the Company's common stock at a conversion price of $ 6.254 . During the first quarter of 2024, the holders of the July 29 th Note converted them into 799,488 shares of common stock of the Company, and in connection with such early conversion, we elected to pay interest through August 2025 with 112,570 shares of common stock on the conversion date. We recorded a loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $ 0.6 million six months ended June 30, 2024. As of June 30, 2024, the entire July 29 th Note had been converted to shares of common stock of the Company. On August 8, 2022, we issued an additional $ 4.0 million of senior unsecured convertible notes (the “August 8 th Notes”) to related parties affiliated with independent members of our board of directors. The August 8 th Notes carry an interest rate of 8 % per annum with a maturity date of December 29, 2028. For the period August 18, 2022, through August 17, 2024, the holder has the option to convert the Notes into shares of the Company's common stock at a conversion price of $ 6.254 . Beginning August 8, 2025, we may elect to redeem the August 8 th Notes and the holder shall be obligated to surrender them at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from the Company, the holder may elect to convert the principal balance and accrued interest into the Company's common stock. During the first quarter of 2024, the holders converted $ 3.0 million of the August 8 th Notes into 479,693 shares of common stock of the Company, and in connection with such early conversion, we elected to pay interest through August 2025 with 67,542 shares of common stock on the conversion date. During the same period, the holders also converted accrued interest into 57,564 shares of the Company's common stock. We recorded a loss on extinguishment of debt during the first quarter of 2024 in the condensed consolidated statements of operations in the amount of $ 0.3 million . During the second quarter of 2024, the holder converted the remaining $ 1.0 million of August 8 th Notes into 159,898 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 5,099 and 25,003 , respectively, on the conversion date. We recorded a loss on extinguishment of debt during the second quarter of 2024 in the condensed consolidated statements of operations in the amount of $ 0.2 million. As of June 30, 2024, the entire August 8 th Note had been converted to shares of common stock of the Company. On August 12, 2022, we issued an additional $ 10.0 million senior unsecured convertible note (the “August 12 th Note”) to an unrelated party. The August 12 th Note carries an interest rate of 8 % per annum with a maturity date of December 31, 2026. For the period August 18, 2022, through the maturity date, the holder has the option to convert the August 12 th Note into shares of the Company's common stock at a conversion price of $ 6.15 . Beginning August 12, 2025, we may elect to redeem the August 12 th Note and the holder shall be obligated to surrender at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from the Company, the holder may elect to convert the principal balance and accrued interest into the Company's common stock. During the three months ended March 31, 2024, the holder converted accrued interest into 65,041 shares of the Company's common stock. During the second quarter of 2024, the holder converted the $ 10.0 million August 12 th Note into 1,626,016 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 49,716 and 224,268 , respectively, on the conversion date. We recorded a loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $ 1.7 million during the second quarter of 2024. As of June 30, 2024, the entire August 12 th Note had been converted to shares of common stock of the Company. 12 Table of Contents The funds received from the issuance of the various notes described above were used to provide additional working capital to the Company. The conversion price and number of shares of the Company's common stock issuable upon conversion of the above notes are subject to adjustment from time to time for any subdivision or consolidation of our shares of common stock and other standard dilutive events. ( 15 ) NOTES PAYABLE - RELATED PARTIES In March 2024, we issued unsecured promissory notes, having a 12 -month maturity date and 12 % per annum interest rate, to (i) Charles R. Wesley IV Revocable Trust (in which our director Charles R. Wesley IV has a pecuniary interest) in the principal amount of $ 2,000,000 , (ii) Lubar Opportunities Fund I, LLC (in which are our director David J. Lubar has a pecuniary interest) in the principal amount of $ 2,500,000 , and (iii) Hallador Alternative Investment Advisors LLC (in which our director David C. Hardie has a pecuniary interest) in the principal amount of $ 500,000 . The related party notes were paid off in June 2024 with proceeds from the prepaid physically delivered power contract mentioned above in "Note 7 – Revenue". ( 16 ) ORGANIZATIONAL RESTRUCTURING On February 23, 2024, ( the "Effective Date"), we committed to a reorganization effort in the Coal Operations Segment (the "Reorganization Plan") that included a workforce reduction of approximately 110 employees, or approximately 12 % of the workforce. The reduction in workforce was communicated to employees on the Effective Date and implemented immediately, subject to certain administrative procedures. The Reorganization Plan is designed to strengthen our financial and operational efficiency and create significant operational savings and higher margins in our coal segment. This step will help to advance our transition from a company primarily focused on coal production to a more resilient and diversified integrated independent power producer ("IPP"). As part of this initiative, we substantially idled production at our higher cost surface mines, Prosperity Mine, and Freelandville Mine, with minimal production. We also focused our seven units of underground equipment on four units of our lowest cost production at our Oaktown Mine. In connection with the Reorganization Plan, we incurred aggregate expenses of $ 1.9 million ($ 1.1 million in the first quarter of 2024 and $ 0.8 million in the second quarter of 2024 ) that were included in operating expenses in the condensed consolidated statements of operations. These charges related to compensation, tax, professional, and insurance related expenses and are considered one -time charges paid in the first six months of 2024. ( 17 ) AT THE MARKET AGREEMENT On December 18, 2023 , we entered into an At The Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”), pursuant to which we may issue and sell, from time to time, shares (the “Shares”) of our common stock, par value $ 0.01 per share (the “Common Stock”), with aggregate gross proceeds of up to $ 50.0 million through an “at-the-market” equity offering program under which the Agent will act as sales agent (the “ATM Program”). Under the Sales Agreement, we or the Agent have the right, by giving five ( 5 ) days’ notice, to terminate the Sales Agreement in our and the Agents sole discretion. The Agent may also terminate the Agreement, by notice to us, upon the occurrence of certain events described in the Sales Agreement. During December 2023 , we issued 794,000 shares of Common Stock under the ATM Program for net proceeds of $ 7.3 million. During the three and six months ended June 30, 2024 , we issued 3,943,807 and 4,654,430 shares of Common Stock, respectively, under the ATM Program for net proceeds of $ 27.9 million and $ 34.5 million, respectively. ( 18 ) SEGMENTS OF BUSINESS As of June 30, 2024, our operations are divided into two primary reportable segments, Electric Operations and Coal Operations. The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other and Eliminations" and primarily are comprised of unallocated corporate costs and activities, including a 50 % interest in Sunrise Energy, LLC, which the Company accounts for using the equity method and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River. 13 Table of Contents Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 (in thousands) (in thousands) Operating revenues Electric operations (i) $ 57,020 $ 71,103 $ 115,932 $ 163,597 Coal operations 46,429 113,098 113,299 208,371 Corporate and other and eliminations ( 12,535 ) ( 23,007 ) ( 28,645 ) ( 22,440 ) Consolidated operating revenues $ 90,914 $ 161,194 $ 200,586 $ 349,528 Operating expenses Electric operations $ 50,232 $ 61,847 $ 93,897 $ 135,636 Coal operations 57,750 86,735 136,077 168,920 Corporate and other and eliminations ( 9,782 ) ( 9,632 ) ( 24,835 ) ( 6,505 ) Consolidated operating expenses $ 98,200 $ 138,950 $ 205,139 $ 298,051 Income (loss) from operations Electric operations $ 6,788 $ 9,256 $ 22,035 $ 27,961 Coal operations ( 11,321 ) 26,363 ( 22,778 ) 39,451 Corporate and other and eliminations ( 2,753 ) ( 13,375 ) ( 3,810 ) ( 15,935 ) Consolidated income (loss) from operations $ ( 7,286 ) $ 22,244 $ ( 4,553 ) $ 51,477 Depreciation, depletion and amortization Electric operations $ 4,698 $ 4,675 $ 9,395 $ 9,350 Coal operations 8,930 12,466 19,658 25,741 Corporate and other and eliminations 21 28 39 54 Consolidated depreciation, depletion and amortization $ 13,649 $ 17,169 $ 29,092 $ 35,145 Assets Electric operations $ 220,511 $ 216,665 $ 220,511 $ 216,665 Coal operations 367,807 387,653 367,807 387,653 Corporate and other and eliminations 6,851 ( 4,429 ) 6,851 ( 4,429 ) Consolidated assets $ 595,169 $ 599,889 $ 595,169 $ 599,889 Capital expenditures Electric operations $ 5,277 $ 2,683 $ 11,519 $ 3,526 Coal operations 7,560 14,445 16,192 27,084 Corporate and other and eliminations 333 — 333 — Consolidated capital expenditures $ 13,170 $ 17,128 $ 28,044 $ 30,610 (i). Electric operations revenue as of each period presented were comprised of the components noted below (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Operating revenues: Capacity revenue $ 16,873 $ 17,155 $ 28,646 $ 33,125 Delivered energy 27,893 34,307 62,087 77,382 Amortization of contract liability 12,080 19,555 24,868 52,902 Other operating revenue 174 86 331 188 Total Electric Operations revenue: $ 57,020 $ 71,103 $ 115,932 $ 163,597 14 Table of Contents ( 19 ) NET INCOME (LOSS) PER SHARE The following table (in thousands, except per share amounts) sets forth the computation of basic earnings (loss) per share for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Basic earnings per common share: Net income (loss) - basic $ ( 10,204 ) $ 16,915 $ ( 11,900 ) $ 38,966 Weighted average shares outstanding - basic 37,879 33,137 37,026 33,061 Basic earnings (loss) per common share $ ( 0.27 ) $ 0.51 $ ( 0.32 ) $ 1.18 The following table (in thousands, except per share amounts) sets forth the computation of diluted net income (loss) per share: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Diluted earnings per common share: Net income (loss) - basic $ ( 10,204 ) $ 16,915 $ ( 11,900 ) $ 38,966 Add: Convertible Notes interest expense, net of tax — 296 — 592 Net income (loss) - diluted $ ( 10,204 ) $ 17,211 $ ( 11,900 ) $ 39,558 Weighted average shares outstanding - basic 37,879 33,137 37,026 33,061 Add: Dilutive effects of if converted Convertible Notes — 3,224 — 3,163 Add: Dilutive effects of Restricted Stock Units — 347 — 472 Weighted average shares outstanding - diluted 37,879 36,708 37,026 36,696 Diluted net income (loss) per share $ ( 0.27 ) $ 0.47 $ ( 0.32 ) $ 1.08 15 Table of Contents