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Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-03-14 · 522 added, 371 removed, 467 unchanged (66% of the section changed)

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Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Hallador Energy Company (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, cash flows and stockholders’ equity for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Hallador Energy Company (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, cash flows and stockholders’ equity for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 17, 2025 expressed an unqualified opinion.

Change in accounting principle

As discussed in Notes 1 and 20 to the consolidated financial statements, the Company has adopted new accounting guidance in 2024 related to the disclosure of segment information in accordance with ASU 2023-07, Segment Reporting (Topic 280) .

The adoption was retrospectively applied to 2023.

Basis for opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Asset retirement obligations

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As described further in Note 1 to the consolidated financial statements, the Company’s asset retirement obligations are associated with retirement of long-lived assets and recognized at fair value at the time the obligations are incurred.

The Company reviews its asset retirement obligations at least annually and makes necessary adjustments for revisions of inputs and assumptions utilized in the calculations.

The calculation of asset retirement obligations requires significant management judgement due to the inherent complexity in estimating the amount and timing of future reclamation activities.

The Company reviews its asset retirement obligations at least annually and makes necessary adjustments for revisions of inputs and

assumptions utilized in the calculations.

The calculation of asset retirement obligations requires significant management judgment due to the inherent complexity in estimating the amount and timing of future reclamation activities.

We identified the accounting for the asset retirement obligations as a critical audit matter.

The principal consideration for our determination that the accounting for the asset retirement obligations is a critical audit matter is that management utilized significant judgment in determining the amount of asset retirement obligations.

In particular, the obligations value is estimated based upon a discounted cash flow technique and includes inputs and assumptions related to reclamation costs and the timing of reclamation activities.

Accordingly, auditing management’s assumptions involved a high degree of subjectivity due to the uncertainty of management’s significant judgements.

In particular, the obligations’ value is estimated based upon a discounted cash flow technique and includes inputs and assumptions related to uncertain future reclamation costs and the timing of reclamation activities.

Accordingly, auditing management’s assumptions involved a high degree of subjectivity due to the uncertainty of management’s significant judgments.

Our audit procedures related to the accounting for asset retirement obligations included the following, among others:

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● We tested the completeness and accuracy of the underlying data used in management’s asset retirement obligations calculation.

We evaluated the reasonableness of significant judgements including inflation rate, credit-adjusted risk-free rate, reclamation cost estimates and timing of expected reclamation activities.

● We evaluated the reasonableness of significant judgments including inflation rate, credit-adjusted risk-free rate, reclamation cost estimates and timing of expected reclamation activities.

● We interviewed the Company’s professionals with specialized skill and knowledge regarding the regulatory requirements and mine plans.

Impairment of coal properties

As described further in Notes 1 and 19 to the consolidated financial statements, long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

When performing the impairment assessments, the Company projects undiscounted cash flows at the asset group level.

If the asset group is determined not to be recoverable, the Company, with the assistance of third-party valuation specialists, performs an analysis of the fair value of the asset group and recognizes an impairment loss when the fair value of the asset group is less than the carrying value.

As of December 31, 2024, the Company recorded asset impairment charges of $215.1 million associated with its coal properties.

The identification of impairment indicators and the calculation of the amount of impairment requires significant management judgment.

We identified the long-lived asset impairment assessment of coal properties as a critical audit matter.

The principal consideration for our determination that the long-lived asset impairment assessment of coal properties is a critical audit matter is due to the uncertainties and significant management judgment when estimating the fair value of the coal properties.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s forecasted future revenues and cash flows and evaluation of the reasonableness of the valuation model used.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Our audit procedures related to the long-lived asset impairment assessment of coal properties included the following, among others:

● We tested the design and operating effectiveness of internal controls over the identification of impairment indicators, estimation of fair value, and recognition processes.

● With the assistance of professionals with specialized skill and knowledge, we tested management’s process for calculating the asset impairment of coal properties, including evaluating the reasonableness of the valuation methodology and certain significant assumptions used in the calculations including the discount rate applied to the estimated future cash flows.

● We evaluated the qualifications of the third-party specialist engaged by the Company based on their credentials and experience.

● We evaluated the reasonableness of significant judgments including forecasted revenue and operating expenses.

We tested whether these forecasts were reasonable and consistent with historical performance and industry projections and conditions found in industry reports, as applicable.

/s/ GRANT THORNTON LLP

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Cash and cash equivalents

$ 2,842 $ 3,009

Restricted cash

Accounts receivable

19,937 29,889

23,075 49,796

Parts and supplies

38,877 28,295

Contract asset - coal purchase agreement

Prepaid expenses

Assets held-for-sale

Total current assets

91,274 138,519

Property, plant and equipment:

Land and mineral rights

115,486 115,595

Buildings and equipment

537,131 534,129

Mine development

158,642 140,108

Finance lease right-of-use assets

Total property, plant and equipment

823,605 789,832

Less - accumulated depreciation, depletion and amortization

( 334,971 ) ( 309,370 )

Total property, plant and equipment, net

488,634 480,462

Investment in Sunrise Energy

$ 589,780 $ 630,554

Equity method investments

LIABILITIES AND STOCKHOLDERS' EQUITY

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Current portion of bank debt, net

$ 24,438 $ 33,031

Accounts payable and accrued liabilities

62,908 82,972

Current portion of lease financing

Deferred revenue

23,062 35,485

Contract liability - power purchase agreement and capacity payment reduction

43,254 88,114

Contract liabilities - current

Total current liabilities

157,595 239,602

Long-term liabilities:

Bank debt, net

63,453 49,713

Convertible notes payable

10,000 10,000

Convertible notes payable - related party

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Asset retirement obligations

14,538 17,254

Contract liability - power purchase agreement

47,425 84,096

Contract liabilities - long-term

Total long-term liabilities

163,597 175,928

Total liabilities

321,192 415,530

Commitments and contingencies

Commitments and contingencies (Note 22)

Stockholders' equity:

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Common stock, $ .01 par value, 100,000 shares authorized;

34,052 and 32,983 issued and outstanding, respectively

42,621 and 34,052 issued and outstanding, as of December 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

127,548 118,788

Retained earnings

140,699 95,906

Retained earnings (deficit)

Total stockholders’ equity

268,588 215,024

Total liabilities and stockholders’ equity

$ 589,780 $ 630,554

The accompanying notes are an integral part of these Consolidated Financial Statements

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Total sales and operating revenues

OPERATING EXPENSES:

Operating expenses

Other operating and maintenance costs

Cost of purchased power

Depreciation, depletion and amortization

2 unchanged sentences

General and administrative

Asset impairment

(Gain) loss on disposal or abandonment of assets, net

Settlement of litigation

Total operating expenses

INCOME FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

Interest expense (1)

Loss on extinguishment of debt

Equity method investment (loss) income

INCOME BEFORE INCOME TAXES

Equity method investment (loss)

NET INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX EXPENSE (BENEFIT):

Total income tax expense

NET INCOME PER SHARE:

Total income tax expense (benefit)

NET INCOME (LOSS)

NET INCOME (LOSS) PER SHARE:

WEIGHTED AVERAGE SHARES OUTSTANDING

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Other interest

Amortization and swap related interest:

Payments on interest rate swap, net of changes in value

Amortization:

Amortization of debt issuance costs

Total amortization and swap related interest

Total amortization

Total interest expense

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred income taxes

Equity income (loss) – Sunrise Energy

Cash distribution - Sunrise Energy

Deferred income tax (benefit)

Equity method investment (loss)

Cash distribution - equity method investment

Depreciation, depletion and amortization

Asset impairment

Loss on extinguishment of debt

Loss (gain) on sale of assets

Payments on interest rate swap, net of changes in value

(Gain) loss on disposal or abandonment of assets, net

Amortization of debt issuance costs

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Stock-based compensation

Provision for loss on customer contracts

Amortization of contract asset and contract liabilities

Director fees paid in stock

Change in current assets and liabilities:

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Accounts payable and accrued liabilities

Deferred revenue

Contract liabilities

Net cash provided by operating activities

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Proceeds from sale of equipment

Proceeds from held-for-sale assets

Investment in equity method investments

Net cash used in investing activities

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Borrowings of bank debt

Payments on lease financing

Proceeds from sale and leaseback arrangement

Issuance of convertible notes payable

Issuance of related party convertible notes payable

Issuance of related party notes payable

Payments on related party notes payable

Debt issuance costs

Distributions to redeemable noncontrolling interests

Taxes paid on vesting of RSUs

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SUPPLEMENTAL NON-CASH FLOW INFORMATION:

Change in capital expenditures included in accounts payable and finance lease

Change in capital expenditures included in accounts payable and prepaid expense

The accompanying notes are an integral part of these Consolidated Financial Statements

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Stock-based compensation

Cancellation of redeemable noncontrolling interests

Stock issued on redemption of convertible note

Stock issued on redemption of related party convertible notes

Stock issued on vesting of RSUs

Taxes paid on vesting of RSUs

Stock issued in ATM offering

BALANCE, DECEMBER 31, 2023

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Taxes paid on vesting of RSUs

Stock issued on redemption of convertible notes

Stock issued in ATM offering

Stock issued for director fees

BALANCE, DECEMBER 31, 2024

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Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of Hallador Energy Company (hereinafter, “we”, “our” or “us”) and our wholly owned subsidiaries Sunrise Coal, LLC (“Sunrise”), Hallador Power Company, LLC (“Hallador Power”) and Hourglass Sands, LLC (“Hourglass”), as well as Sunrise and Hallador Power's wholly owned subsidiaries.

The consolidated financial statements include the accounts of Hallador Energy Company (hereinafter, “we”, “our” or “us”) and our wholly owned subsidiaries Hallador Power Company, LLC (“Hallador Power”), Sunrise Coal, LLC (“Sunrise”), and Hourglass Sands, LLC (“Hourglass”), as well as Hallador Power and Sunrise’s wholly owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

Sunrise is engaged in the production of steam coal from mines located in western Indiana.

Hallador Power is engaged in the production of coal-fired electric power generation located in Sullivan County, Indiana.

Sunrise is engaged in the production of steam coal from mines located in western Indiana.

Segment Information

As the result of Hallador Power’s acquisition of the Merom Generating Station one gigawatt power plant in Sullivan County, Indiana (the “Merom Power Plant”) from Hoosier Energy Rural Electric Cooperative, Inc.

(“Hoosier”) on October 21, 2022 ( the “Merom Acquisition”), as further described in Note 15, beginning in the fourth quarter of 2022, we began to strategically view and manage our operations through two reportable segments:

Coal Operations and Electric 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 primarily are comprised of unallocated corporate costs and activities, including a 50 % interest in Sunrise Energy, LLC (“Sunrise Energy”), 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 Coal Operations reportable segment includes currently operating mining complexes Oaktown 1 and Oaktown 2 underground mines, Prosperity surface mine, Freelandville surface mine and Carlisle wash plant.

On February 23, 2024, our Sunrise Coal Division undertook an initiative designed to strengthen our financial and operational efficiency and to create significant operational savings and higher margins in our coal segment.

For further information, see “Note 19 - Subsequent Events” below.

The Electric Operations reportable segment includes electric power generation facilities of the Merom Power Plant.

Our business is organized based on the services and products we provide in two segments:

(i) Electric Operations and (ii) Coal Operations.

The Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer, reviews and assesses operating performance measures related to our Electric Operations and our Coal Operations segments.

In addition to these reportable segments, the Company has a “Corporate and Other and Eliminations” category, which is not significant enough, on a stand-alone basis, to be considered an operating segment.

Corporate and Other and Eliminations primarily consist of unallocated corporate costs and activities, including a 50 % interest in Sunrise Energy, LLC (“Sunrise Energy”), a private gas exploration company with operations in Indiana and Oaktown Gas, LLC, which we account for using the equity method.

During the fourth quarter of 2024, we sold our held-for-sale wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.

For further information, see “ Note 21 – Assets Held For Sale ” below.

The Electric Operations reportable segment includes electric power generation facilities of the Merom Power Plant (“Merom”).

The Coal Operations reportable segment includes our currently operating underground mining complex Oaktown 1 among other mining complexes and locations which operated throughout the year ended December 31, 2023 and were subsequently idled during the year ended December 31, 2024.

Reclassifications

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Any reclassification adjustments had no impact on prior year total assets, liabilities, net income or shareholders’ equity.

In the fourth quarter of 2024, the Company made certain reclassifications that reduced “other operating and maintenance costs” and increased “depreciation, depletion and amortization” on the Consolidated Statements of Operations for certain assets with a useful life of one to three years.

The entire adjustment is reflected in the fourth quarter of 2024.

Previous interim periods and prior year were not adjusted as the amounts were not material.

The amounts recognized in the fourth quarter of 2024 that are related to the first, second and third quarters of 2024 were $ 2.1 million, $ 2.6 million and $ 1.7 million, respectively.

Cash and Cash Equivalents

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The Company has not experienced any material losses in such accounts.

Restricted Cash

Restricted cash represents cash held by third parties primarily for future workers’ compensation claims and MISO escrow payments.

Workers’ compensation is based estimated claim liabilities and MISO escrow payments are based on power purchased or sold related to power demand and our power purchase agreements (“PPA”).

Accounts Receivable

The timing of revenue recognition, billings and cash collections results in accounts receivable from customers.

Customers are invoiced as coal is shipped or as power is delivered or at periodic intervals in accordance with contractual terms.

Invoices typically include customary adjustments for the resolution of price variability, such as coal quality thresholds.

Customers are invoiced as power is delivered or as coal is shipped or at periodic intervals in accordance with contractual terms.

Coal invoices typically include customary adjustments for the resolution of price variability, such as coal quality thresholds.

Payments are generally received within thirty days of invoicing.

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Contract Asset - Coal Purchase Agreement

Contract Asset - Coal Purchase Agreement (as defined in Note 15 ) is the result of a coal purchase agreement with Hoosier whereby we purchased coal from Hoosier through May 31, 2023, at fixed prices which were below market prices at the date of entry into the agreement.

This agreement was entered into as consideration in the Merom Acquisition.

Contract Asset - Coal Purchase Agreement, is the result of a coal purchase agreement with Hoosier whereby we purchased coal from Hoosier through May 31, 2023, at fixed prices which were below market prices at the date of entry into the agreement.

This agreement was entered into as consideration in our 2022 acquisition of Merom.

The asset was amortized to inventory as coal was purchased over the term of the agreement as the contract was fulfilled.

During the years ended December 31, 2023 and 2022, $ 19.6 million and $ 14.7 million, respectively, were amortized, of which $ 30.7 million and $ 3.6 million, respectively, was recognized in operating expenses on the consolidated statements of operations.

During the years ended December 31, 2023, $ 19.6 million was amortized, of which $ 30.7 million was recognized in operating expenses on the consolidated statements of operations.

The Coal Purchase Agreement term was from October 21, 2022 to May 31, 2023.

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Advance royalties are included in other assets.

Mining Properties and Plant Equipment

Plant Equipment and Mining Properties

The values of our Hallador Power property, plant and equipment were initially recorded at relative fair value based on the consideration paid upon closing of the acquisition of Merom in 2022.

Other equipment is recorded at cost.

Expenditures that extend the useful lives or increase the productivity of the assets are capitalized.

The cost of maintenance and repairs that do not extend the useful lives or increase the productivity of the assets are expensed as

Most power plant equipment is depreciated over the remaining estimated useful life of the Merom at the time of equipment acquisition, or seven to nine years .

Mining properties are recorded at cost.

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Other than land and most mining equipment, mining properties are depreciated using the units-of-production method over the estimated recoverable reserves.

Most surface and underground mining equipment is depreciated using estimated useful lives ranging from three to twenty-five years.

The values of the property, plant and equipment acquired as part of the Merom Acquisition were recorded at relative fair value based on the consideration paid upon closing of the acquisition of the plant in October 2022.

Other equipment is recorded at cost.

Expenditures that extend the useful lives or increase the productivity of the assets are capitalized.

The cost of maintenance and repairs that do not extend the useful lives or increase the productivity of the assets are expensed as incurred.

Most power plant equipment is depreciated using estimated useful lives ranging from four to nine years.

If facts and circumstances suggest that a long-lived asset may be impaired, the carrying value is reviewed for recoverability.

If this review indicates that the carrying value of the asset will not be recoverable through estimated undiscounted future net cash flows related to the asset over its remaining life, then an impairment loss is recognized by reducing the carrying value of the asset to its estimated fair value.

There were no long-lived asset impairments during the years ended December 31, 2023 or December 31, 2022.

Most surface and underground mining equipment is depreciated using estimated useful lives ranging from three to fifteen years .

The Company reviews long-lived assets for impairment whenever events or changes in circumstances, known as triggering events, indicate that the carrying amount of a long-lived asset or asset group, may not be recoverable.

Management considers various factors when determining if long-lived assets should be evaluated for impairment, including a significant adverse change in the business climate or industry conditions (such as sustained decreases in commodity prices, volatility in energy costs, and the global economy), a current period operating or cash flow loss combined with a history of losses, a significant adverse change in the extent or manner in which an asset is used, or a current expectation that the asset will be sold or otherwise disposed of before the end of its useful life.

During the fourth quarter of 2024, the Company completed a review of its coal mining facilities and future mining plans.

The impairment analysis was based upon our coal mining operating plans, market driven pricing and cost trends.

As part of that analysis, the Company determined the carrying amount of its coal mining long-lived asset group was not recoverable and recorded a non-cash, long-lived asset impairment charge of $ 215.1 million in 2024.

See “ Note 19 – Impairment of Coal Properties ” below related to our 2024 impairment.

There were no long-lived asset impairments during the year ended December 31, 2023.

Mine Development

Costs of developing new mines, including asset retirement obligation assets, or significantly expanding the capacity of existing mines, are capitalized and amortized using the units-of-production method over estimated recoverable reserves.

Deferred Revenue

Deferred revenue includes advance payments on electric capacity payments and prepayments on coal deliveries.

The deferred revenue for each will be reversed to revenue on a monthly pro-rata basis for the capacity payments and as coal is delivered for the coal prepayments based upon the underlying contractual terms.

All deferred revenue is expected to be recognized in revenue within one year.

Asset Retirement Obligations (“ARO”) – Reclamation

At the time they are incurred, legal obligations associated with the retirement of long-lived assets are reflected at their estimated fair value, with a corresponding charge to mine development.

Obligations are typically incurred when we commence development of underground and surface mines and include reclamation of support facilities, refuse areas and slurry ponds.

Obligations are typically incurred when the Company commences development of underground and surface mines and include reclamation of support facilities, refuse areas and slurry ponds.

Obligations are reflected at the present value of their future cash flows.

We reflect accretion of the obligations for the period from the date they are incurred through the date they are extinguished.

The Company reflects accretion of the obligations for the period from the date they are incurred through the date they are extinguished.

The ARO assets are amortized using the units-of-production method over estimated recoverable (proven and probable) reserves.

We use credit-adjusted risk-free discount rates ranging from 7 % to 10 % to discount the obligation, inflation rates anticipated during the time to reclamation, and cost estimates prepared by its engineers inclusive of market risk premiums.

The Company uses the credit-adjusted risk-free discount rates ranging from 7 % to 10 % to discount the obligation, inflation rates anticipated during the time to reclamation, and cost estimates prepared by its engineers inclusive of market risk premiums.

Federal and state laws require that mines be reclaimed in accordance with specific standards and approved reclamation plans, as outlined in mining permits.

Activities include reclamation of pit and support acreage at surface mines, sealing portals at underground mines, and reclamation of refuse areas and slurry ponds.

We review our ARO at least annually and reflect revisions for permit changes, changes in estimated reclamation costs and changes in the estimated timing of such costs.

The change in estimate for the year ended December 31, 2023, was a result of a change in timing and acreage of expected reclamation of the Merom Power Plant.

In the event we are not able to perform reclamation, we have surety bonds at December 31, 2023 totaling $ 37.5 million to cover ARO.

The Company reviews its ARO at least annually and reflects revisions for permit changes, changes in estimated reclamation costs and changes in the estimated timing of such costs.

The change in estimate for the year ended December 31, 2023, was a result of a change in timing and acreage of expected reclamation of Merom.

There was no change in estimate for the year ended December 31, 2024.

In the event the Company is not able to perform reclamation, it has surety bonds at December 31, 2024 totaling $ 30.8 million to cover ARO.

The undiscounted asset retirement obligation was $ 26.1 million and $ 26.6 million at December 31, 2024 and 2023, respectively.

2 unchanged sentences

Balance, beginning of year

$ 20,834 $ 14,125

Merom acquisition

Freelandville addition

Change in estimate

( 3,384 ) ( 3,162 )

Balance, end of year

16,688 20,834

Less current portion

( 2,150 ) ( 3,580 )

Long-term balance, end of year

$ 14,538 $ 17,254

Contract Liabilities - Power Purchase Agreement and Capacity Payment Reduction

Contract Liabilities - Power Purchase Agreement and Capacity Payment Reduction (both as defined in Note 15 ) are the result of a power purchase agreement with Hoosier whereby Hallador Power is selling power to Hoosier through 2025 at fixed prices which were below market prices at the date the parties entered into the agreement.

Contract Liabilities

Contract Liabilities include the PPA with Hoosier whereby Hallador Power is selling power to Hoosier through 2025 at fixed prices which were below market prices at the date the parties entered into the agreement.

Hallador Power also agreed to a reduction in future capacity payments as part of the acquisition consideration.

These agreements were entered into as consideration in the Merom Acquisition.

These agreements were entered into as consideration for the acquisition of Merom in 2022.

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 December 31, 2024.

The power purchase agreement liability is amortized to electric sales revenue pro-rata over the term of the agreement as the contract is fulfilled.

During the years ended December 31, 2024 and 2023, amortization of the power purchase agreement contract liability totaled $ 47.1 million and $ 70.5 million, respectively.

The Power Purchase Agreement term is from October 21, 2022 to December 31, 2025.

The Power Purchase Agreement term is from October 21, 2022 to May 31, 2028.

The Capacity Payment Reductions occurred on May 31, 2023 and November 30, 2023 in the amount of $ 7.5 million each.

Interest Rate Swaps

We have historically utilized derivative instruments to manage exposures to interest rate risk on long-term debt.

We enter interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate.

These interest rate swaps have not been designated as hedging instruments and were accounted for as an asset or a liability in the accompanying consolidated balance sheets at their fair value.

Realized and unrealized gains and losses are classified as operating activities in the accompanying consolidated statements of cash flows.

As of December 31, 2023 and 2022, we were not a party to any interest rate swaps.

The contract liability relating to this contract totaled $ 43.5 million as of December 31, 2024.

We also have contract liabilities arising from PPA’s for capacity and physically delivered power entered into whereas the customers made advance payments to Hallador Power.

These contracts that have delivery periods through the Spring shoulder season ending May 31, 2025.

The liability will be amortized to electric sales revenue over the remaining term of the agreement as the contract is fulfilled.

The contract liability relating to these contracts totaled $ 42.0 million as of December 31, 2024.

During the year ended December 31, 2024, the Company entered into a $ 60.0 million prepaid physically delivered power contract.

The power purchase agreement term is from June 1, 2025 through December 31, 2026.

The power purchase agreement liability will be amortized to electric sales revenue pro-rata over the term of the agreement as the contract is fulfilled.

The contract liability, including $ 1.2 million of implied interest relating to this contract totaled $ 61.2 million as of December 31, 2024.

Commitments and Contingencies

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We have concluded that the likelihood is remote that the ultimate resolution of any pending litigation or pending claims will be material or have a material adverse effect on our business, financial position, results of operations or liquidity.

See “Note 22 – Contingencies” related to our decision to settle certain litigation in February of 2025.

Fuel costs in our Electric Operations include coal purchased from Sunrise Coal and third parties to operate Merom.

Fuel costs in our Coal Operations include mainly diesel, as well as natural gas and petroleum to operate our coal mines.

These fuel costs are expensed as the fuel is used.

The difference between Sunrise Coal’s cost to produce coal and the contracted sales price to Hallador Power is eliminated from fuel costs on the Consolidated Statements of Operations.

Income taxes are provided based on the liability method of accounting.

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The most significant estimates included in the preparation of the financial statements relate to:

(i) deferred income tax accounts, (ii) coal reserves, (iii) depreciation, depletion, and amortization, (iv) estimates related to the Merom Acquisition, (v) estimates used in our impairment analysis, and (vi) estimates used in the calculation of ARO.

(i) deferred income tax accounts, (ii) coal reserves, (iii) SMCRA and other state statutes, (iv) depreciation, depletion, and amortization, (v) the lower of cost or net realizable value for our inventory (vi) estimates used in our impairment analysis, and (vii) estimates used in the calculation of ARO.

Long-term Contracts

As of December 31, 2023 , we are committed to supplying third -party customers up to a maximum of 9.2 million tons of coal through 2027, of which 6.2 million tons are priced.

We are committed to supplying coal to Merom Power Plant up to a maximum of 10.7 million tons of coal through 2028.

All committed tons to Merom are priced.

For 2023 , we derived 93 % of our third -party coal sales from five customers, each representing at least 10% of coal sales.

At December 31, 2023, 85 % of our coal operations accounts receivable was from four customers, each representing more than 10%.

Power Operations

As of December 31, 2024, we are committed to supply the following long-term delivered energy and capacity related to Hoosier and third-party customers:

Annual plant energy generation (in MWh) (in millions)

Hoosier PPA delivered energy (in MWh) (in millions)

Percentage of annual plant energy generation

Other customers delivered energy (in MWh) (in millions)

Percentage of annual plant energy generation

Plant capacity (in MW)

Hoosier PPA Capacity (in MW)

Percentage of annual plant capacity

Other customers capacity (in MW)

Percentage of annual plant capacity

For 2024, we derived 89 % of our delivered energy and 88 % of our capacity sales revenue from three and four customers, respectively, each of which representing at least 10% of sales revenue.

At December 31, 2024, 100 % of our accounts receivable were with three customers.

For 2023, we derived 100 % of our electric delivered energy generation from Hoosier and 91 % of our capacity sales revenue from three customers, each representing at least 10% of capacity sales revenue.

For the year ended December 31, 2023, 100 % of our electric sales and accounts receivable were with two customers.

For 2022 , we derived 90 % of our coal sales from five customers, each representing at least 10% of our coal sales.

Coal Operations

As of December 31, 2024, we are committed to supplying third-party customers 8.4 million tons of coal through 2028.

There are no coal contracts with price reopeners at December 31, 2024.

In addition, we are committed to supplying 9.2 million tons of coal to Merom through 2028 .

All committed tons to Merom are priced based upon the terms of the intercompany sales transactions.

For 2024, we derived 94 % of our third-party coal sales from three customers, each representing at least 10% of coal sales.

At December 31, 2024, 98 % of our coal operations accounts receivable was from four customers, each representing more than 10%.

For the year ended December 31, 2022, 100 % of our electric sales and accounts receivable was with one customer.

For 2023, 100 % of our delivered energy generation revenue was sold to Hoosier or the Midcontinent Independent System Operator ("MISO") wholesale market.

MISO is the independent system operator managing the flow of high-voltage electricity across 15 U.S.

states and the Canadian province of Manitoba.

For 2023, we derived 91 % of our capacity sales revenue from three customers, each representing at least 10% of capacity sales revenue.

As of December 31, 2023, we are committed to supply approximately 22 % of the plant’s energy generation output and approximately 32 % of the plant’s capacity to Hoosier from June 1, 2023, through May 31, 2028.

Additionally, as of December 31, 2023, we are committed to supply to other customers approximately 47 % to 55 % of the plant’s capacity during the years ending December 31, 2024, through 2026 and approximately 28 % of the plant’s capacity during the years ending December 31, 2027, through 2028.

For 2022, we derived 100% of our electric delivered energy generation and capacity sales revenue from Hoosier.

For 2023, we derived 93 % of our third-party coal sales from five customers, each representing at least 10% of coal sales.

At December 31, 2023, 85 % of our coal operations accounts receivable was from four customers, each representing more than 10%.

Stock-based Compensation

Stock-based compensation for restricted stock units is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally two to four years ) using the straight-line method.

Recent Accounting Pronouncements - Adopted

The Company has adopted Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which is effective retrospectively for the year end December 31, 2024.

ASU 2023-07 primarily enhances 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.

The Company updated the “ Segment of Business ” footnote below to reflect changes for what the CODM reviews on a regular basis.

The Company updated its prior year information to conform to the current year presentation.

See “ Note 20 – Segments of Business ” for enhanced disclosures associated with the adoption of ASU 2023-07.

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 ):

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("ASU 2023-09").

2 unchanged sentences

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.

In November 2024, the FASB issued ASU 2024-04, Debt - Debt With Conversion and Other Options (Subtopic 470-20):

Induced Conversion of Convertible Debt Instruments.

The objective of the standard is to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt with Conversion and Other

This standard will affect entities that settle convertible debt instruments for which the conversion privileges are changed to induce conversion.

The guidance will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

The Company is currently evaluating the impact of the new standard on its financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions.

The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The standard will be applied on a prospective basis, with retrospective application permitted.

The Company is currently evaluating the impact of adoption of the standard on its financial statement disclosures.

(2) INVENTORY

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(4) BANK DEBT

On March 25, 2022, we executed an amendment to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, “PNC”), administrative agent for its lenders under its credit agreement.

The primary purpose of the amendment was to return the allowable leverage ratio and debt service coverage ratio to December 31, 2021 levels through September 30, 2022, with the debt service coverage waived for March 31, 2022.

On May 20, 2022, we executed an additional amendment to our credit agreement with PNC.

The primary purpose of this amendment was to modify the allowable leverage ratio and debt service coverage ratio through June 30, 2022, to provide relief for current and anticipated covenant violations.

On August 5, 2022, we executed an additional amendment to our credit agreement with PNC.

The primary purpose of this amendment was to modify the allowable leverage ratio and debt service coverage ratio through September 30, 2022, to provide relief for anticipated covenant violations.

On March 13, 2023, we executed an additional amendment to our credit agreement with PNC.

The primary purpose of the amendment was to convert $ 35 million of the outstanding balance on the revolver into a new term loan with a maturity date of March 31, 2024, and extend the maturity date of the revolver to May 31, 2024.

The amendment also reduced the total capacity under the revolver to $ 85 million and waived the maximum annual capital expenditure covenant for 2022 and increased the covenant for 2023 to $ 75 million.

Subsequent to December 31, 2022, and prior to the effective date of this amendment, we had borrowed an additional $ 17 million under the revolver.

Additionally, this amendment provided for the transition in interest rates from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) based pricing with ranges from SOFR plus 4.00 % to SOFR plus 5.00 %, depending on our leverage ratio.

On August 2, 2023, we executed an additional amendment to our credit agreement with PNC, which was accounted for as a debt extinguishment.

The primary purpose of the amendment was to convert $ 65 million of the outstanding funded debt into a new term loan with a maturity of March 31, 2026, and enter into a revolver of $ 75 million with a maturity of July 31, 2026.

The amendment increased the maximum annual capital expenditure limit to $ 100 million.

Prior to the March 13, 2023 amendment, bank debt was comprised of term debt ($ 5.5 million as of December 31, 2022) and a $ 120 million revolver ($ 79.7 million borrowed as of December 31, 2022).

On March 13, 2023, we executed an amendment (“March 13 th Amendment”) to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, "PNC").

The primary purpose of the March 13 th Amendment was to convert $ 35.0 million of the outstanding balance on the revolver into a new term loan with a maturity date of March 31, 2024, and extend the maturity date of the revolver to May 31, 2024.

The March 13 th Amendment also reduced the total capacity under the revolver to $ 85.0 million and waived the maximum annual capital expenditure covenant for 2022 and increased the covenant for 2023 to $ 75.0 million.

Subsequent to December 31, 2022, and prior to the effective date of the March 13 th Amendment, we had borrowed an additional $ 17.0 million under the revolver.

Additionally, the March 13 th Amendment provided for the transition in interest rates from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) based pricing with ranges from SOFR plus 4.00 % to SOFR plus 5.00 %, depending on our leverage ratio.

On August 2, 2023, we executed an additional amendment (“August 2 nd Amendment”) to our credit agreement with PNC, which was accounted for as a debt extinguishment.

The primary purpose of the August 2 nd Amendment was to convert $ 65.0 million of the outstanding funded debt into a new term loan with a maturity of March 31, 2026, and enter into a revolver of $ 75.0 million with a maturity of July 31, 2026.

The August 2 nd Amendment increased the maximum annual capital expenditure limit to $ 100.0 million.

Prior to the March 13 th Amendment, bank debt was comprised of term debt ($ 5.5 million as of December 31, 2022) and a $ 120 million revolver ($ 79.7 million borrowed as of December 31, 2022).

The term debt amortization was to conclude with the final payment of $ 5.5 million in March 2023.

The revolver was to mature in September 2023.

Under the provision of the March 13, 2023 amendment, bank debt was comprised of term debt ($ 35.0 million as of March 13, 2023) and an $ 85 million revolver ($ 40.2 million borrowed as of March 13, 2023).

Under the provision of the March 13 th Amendment, bank debt was comprised of term debt ($ 35.0 million as of March 13, 2023) and an $ 85.0 million revolver ($ 40.2 million borrowed as of March 13, 2023).

The term debt required payment of $ 10.0 million in June 2023 each quarter thereafter in 2023 and $ 5.0 million by March 31, 2024.

Under the August 2, 2023 amendment, bank debt was comprised of term debt ($ 58.5 million borrowed as of December 31, 2023) and a $ 75 million revolver ($ 33.0 million borrowed as of December 31, 2023.

The term debt requires payments of $ 6.5 million beginning April 2024 through March 2026.

Bank debt increased by $ 6.3 million and was reduced by $ 26.5 million during the years ended December 31, 2023 and 2022, respectively.

Under the August 2 nd Amendment, bank debt was comprised of term debt ($ 58.5 million borrowed as of December 31, 2023) and a $ 75.0

million revolver ($ 33.0 million borrowed as of December 31, 2023).

The term debt requires quarterly payments of $ 6.5 million beginning April 2024 through March 2026.

On September 27, 2024, the Company executed the First Amendment (“First Amendment”) to the Fourth Amended and Restated Credit Agreement, dated as of August 2, 2023 (as amended, the “Credit Agreement”), with PNC which was accounted for as a debt modification.

The primary purpose of the First Amendment was to provide the Company with short-term covenant relief to pursue additional liquidity.

The First Amendment provides for additional flexibility for the Company to enter into prepaid forward power sale contracts, provided that the Company repays outstanding term loans under the Credit Agreement (“Term Loan”) with proceeds received from certain eligible power purchase agreements, up to a maximum of $ 20.0 million.

These required prepaid forward power sale Term Loan repayments, if any, will take the place of the $ 6.5 million quarterly Term Loan payments.

During the fourth quarter of 2024, the Company entered into a prepaid forward power sales contract in which $ 20.0 million of the proceeds were used to pay our required $ 6.5 million quarterly loan payments through the third quarter of 2025 and also reduced our fourth quarter 2025 payment to $ 6.0 million.

Furthermore, the First Amendment defines certain administrative changes which include, among other things, added requirements related to reporting, third party financial advisors, and appraisals on coal and power assets.

Bank debt was reduced by $ 47.5 million and increased by $ 6.3 million during the years ended December 31, 2024 and 2023, respectively.

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.

2 unchanged sentences

Liquidity consists of additional borrowing capacity and cash and cash equivalents.

Unamortized bank fees and other costs incurred in connection with the initial facility and subsequent amendments totaled $ 2.5 million as of December 31, 2022.

Additional costs incurred with the March 13, 2023 and August 2, 2023 amendments totaled $ 1.6 million and $ 4.3 million, respectively.

During 2023 we recognized a loss on extinguishment of debt of $ 1.5 million for the write-off of unamortized loan fees related to the August 2, 2023 amendment to our credit agreement, which was accounted for as a debt extinguishment.

Unamortized bank fees and other costs incurred in connection with our initial facility totaled $ 4.3 million.

Additional costs incurred with the First Amendment totaled $ 0.6 million .

These unamortized bank fees were deferred and are being amortized over the term of the loan.

During 2023 we recognized a loss on extinguishment of debt of $ 1.5 million for the write-off of unamortized loan fees related to the August 2 nd Amendment to our credit agreement, which was accounted for as a debt extinguishment.

The remaining costs were deferred and are being amortized over the term of the loan.

Unamortized costs as of December 31, 2023, and December 31, 2022 were $ 3.6 million and $ 2.5 million, respectively.

Unamortized bank fees as of December 31, 2024 and 2023, were $ 2.5 million and $ 3.6 million, respectively.

Bank debt, less debt issuance costs, is presented below (in thousands):

Current bank debt

$ 26,000 $ 35,500

Less unamortized debt issuance cost

( 1,562 ) ( 2,469 )

Net current portion

$ 24,438 $ 33,031

Long-term bank debt

$ 65,500 $ 49,713

Less unamortized debt issuance cost

Net long-term portion

$ 63,453 $ 49,713

Total bank debt

$ 91,500 $ 85,213

Less total unamortized debt issuance cost

( 3,609 ) ( 2,469 )

Net bank debt

$ 87,891 $ 82,744

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 December 31, 2023 , our Leverage Ratio of 1.32 was in compliance with the requirements of the credit agreement.

Beginning December 31, 2022, the credit facility 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 12 months of 1.25 to 1.00 through the maturity of the credit facility.

As of December 31, 2023 , our Debt Service Coverage Ratio of 3.30 was in compliance with the requirements of the credit agreement.

The First Amendment, among other things, provided the Company with short-term covenant relief to pursue additional liquidity.

The First Amendment waived the Company’s Leverage Ratio requirement for the third and fourth quarters of 2024, increased the threshold to 5.50 to 1.00 for the first quarter of 2025, and decreased the threshold back to 2.25 to 1.00 for each fiscal quarter thereafter.

Additionally, the Debt Service Coverage Ratio requirement ( 1.25 to 1.00) was waived from third quarter of 2024 through the first quarter of 2025.

The First Amendment also added additional financial covenants which include:

(i) a maximum First Lien Leverage Ratio for the first quarter of 2025, calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed 3.50 to 1.00;

(ii) a minimum liquidity requirement of $ 10.0 million, beginning on the First Amendment execution date and ending when the second quarter of 2025 compliance certificate is received;

and (iii) a minimum quarterly EBITDA requirement, as defined in the First Amendment, of $ 5.0 million for the third quarter of 2024 through the first quarter of 2025.

As of December 31, 2024, our liquidity of $ 37.8 million and quarterly EBITDA of $ 6.2 million were in compliance with the requirements of 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.

December 31, 2023, we were paying SOFR plus

4.25 % on the outstanding bank debt.

The interest rate on the facility ranges from SOFR plus 4.00 % to SOFR plus 5.00 %, depending on our Leverage Ratio.

As of December 31, 2024, we were paying SOFR plus 5.00 % on the outstanding bank debt which equates to an all-in rate of 9.48 %.

Future Maturities (in thousands):

7 unchanged sentences

Total accounts payable and accrued liabilities

( 6 ) REVENUE

Revenue from Contracts with Customers

1 unchanged sentence

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.

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 the delivered energy to all other customers, we recognize revenue daily for the actual delivered electricity.

Coal operations

11 unchanged sentences

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 British thermal unit (“Btu”) factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped.

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.

For the delivered energy to all other customers, we recognize revenue daily for the actual delivered electricity.

Disaggregation of Revenue

Revenue is disaggregated by primary geographic markets for our coal operations and by revenue source for our electric operations, as we believe this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Coal operations

For the years ended December 31, 2023 and 2022, 33 % and 74 %, respectively, of our coal revenue was sold to customers in the State of Indiana with the remainder sold to customers in Florida, North Carolina, Georgia, and Alabama.

Revenue is disaggregated by revenue source for our electric operations and primary geographic markets for our coal operations, as we believe this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Electric operations

For the year ended December 31, 2023, electric sales revenue from delivered energy generation and capacity sales revenue was $ 211.8 million and $ 56.1 million, respectively.

For the year ended December 31, 2022, electric sales revenue from delivered energy generation and capacity sales revenue was $ 53.9 million and $ 12.3 million, respectively.

Delivered energy (including contract liability amortization)

Total Electric Operations sales

Coal operations

Outside third-party Indiana customers

Customers in Florida, North Carolina, Alabama and Georgia

Total Coal Operations sales

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.

In accordance with our Asset Purchase Agreement (“Hoosier APA”) with Hoosier 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 totaling $ 59.0 million through 2025 as of December 31, 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 December 31, 2024.

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 $ 18.6 million as of December 31, 2024.

The agreement was amended August 31, 2023, to extend through 2028 , with additional capacity obligation to Hoosier of $ 59.5 million as of December 31, 2024, at a price of $ 7.02 per kilowatt month for the contract capacity.

During the second quarter of 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.

Since the period between customer payment

and the transfer of promised services is less than one year, we have elected the practical expedient which allows us to not assess whether a customer contract has a significant financing component.

During the fourth quarter of 2024, we entered into a 19-month, $ 60.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,918,200 MWh.

As the total amount paid up-front by the customer differs from the stand-alone selling price of the transferred power, the Company concluded the contract contains a significant financing component.

The contract liability associated with the $ 60.0 million prepayment will be accreted over the agreement term based upon the Company’s incremental borrowing rate which approximates 10.3 %, and the accretion will be separately recognized as interest expense.

The Company also has additional PPA’s with customers for capacity whereas the customers made advance payments to Hallador Power in the amounts of $ 35.4 million and $ 35.3 million during the years ended December 31, 2024 and 2023, respectively.

The delivery periods related to these prepayments are June 1 through May 31.

The liability will be amortized to electric sales revenue as the contract is fulfilled.

Additionally, during the fourth quarter of 2024, we entered into three contracts in the amount of $ 52.1 million to provide a total of 1,389,600 MWh from December 2024 through December 2025.

We have energy and capacity obligations to customers, excluding the Hoosier APA, through 2029 totaling $ 230.8 million and $ 131.3 million, respectively, as of December 31, 2024 .

Coal Operations

8 unchanged sentences

We expect to recognize approximately 32.7 % of this coal sales revenue in 2025 , with the remainder recognized through 2028 .

We have remaining performance obligations relating to coal sales contracts with price reopeners of approximately $ 155 million, which represents our estimate of the expected re-opener price on committed contracts as of December 31, 2023.

We expect to recognize all of this coal sales revenue beginning in 2024 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 option exists in the customer contract.

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.

In accordance with the APA, as defined in Note 15.

Merom Acquisition, with Hoosier, Hallador Power shall sell, and Hoosier shall buy, at least 70 % of the delivered energy quantities through 2025 at the contract price, which is $ 34.00 per MWh.

We have remaining delivered energy obligations to Hoosier totaling $ 115.6 million through 2025 as of December 31, 2023.

The agreement was amended August 31, 2023 to extend through 2028 with additional obligations to Hoosier of $ 186.6 million as of December 31, 2023.

In addition to delivered energy, under the APA, Hallador Power shall provide a stand-ready obligation to provide electricity, also known as contract capacity.

The contract capacity that Hallador Power shall provide to Hoosier is 917 megawatts (“MW”) for contract year one, and 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 $ 41.6 million as of December 31, 2023.

The agreement was amended August 31, 2023 to extend through 2028 with additional capacity obligation to Hoosier of $ 60.9 million as of December 31, 2023.

We also have capacity obligations outside of the APA to customers through 2028 totaling $ 144.6 million as of December 31, 2023.

The Company has $ 23.1 million of deferred revenue as of December 31, 2023, related to these obligations.

Contract Balances

4 unchanged sentences

Amounts billed and due are recorded as trade accounts receivable and included in accounts receivable in our consolidated balance sheets.

As of December 31, 2023, accounts receivable for coal sales billed to customers was $ 14.3 million.

Accounts receivable from contracts with customers

Contract assets

Contract liabilities - current

Contract liabilities - long-term

Total contract liabilities

We received payments related to advanced capacity and advanced physically delivered energy of $ 160.0 million and $ 41.2 million for the years ending December 31, 2024 and 2023, respectively.

Of the amount of contract liabilities that we recorded as of the beginning of the period, we recognized $ 70.2 million and $ 123.6 million of electric revenue related to these advance contract liability payments for the years ended December 31, 2024 and 2023, respectively.

We do not currently have any other contracts in place where it would transfer coal, electricity or capacity in advance of knowing the final price, and thus do not have any other contract assets recorded.

2 unchanged sentences

Our income tax is different than the expected amount computed using the applicable federal statutory income tax rate of 21 %.

The reasons for and effects of such differences for the years ended December 31 are below (in thousands):

The reasons for and effects of such differences for the years ended December 31st are below (in thousands):

Expected amount

$ 10,344 $ 4,171

State income taxes, net of federal benefit

Percentage depletion

( 3,348 ) ( 2,081 )

Change in valuation allowance

( 3,681 ) ( 970 )

Stock-based compensation

Return to provision adjustments

Nondeductible items

Total income tax expense

The deferred tax assets and liabilities resulting from temporary differences between book and tax basis are comprised of the following at December 31 (in thousands):

The deferred tax assets and liabilities resulting from temporary differences between book and tax basis are comprised of the following at December 31st (in thousands):

Deferred tax assets:

Net operating loss

$ 20,029 $ 26,570

Power contracts

23,302 34,233

Accrued liabilities

ARO liabilities

Lease liabilities

Coal properties

Total deferred tax assets

48,204 63,174

Valuation allowance

2 unchanged sentences

Coal properties

( 25,764 ) ( 27,700 )

Power properties

1 unchanged sentence

Total deferred tax liabilities

( 57,439 ) ( 64,099 )

Net deferred tax liability

$ ( 9,235 ) $ ( 4,606 )

Our effective tax rate (“ETR”) for 2023 and 2022 was approximately 9 %.

Our effective tax rate (“ETR”) for 2024 and 2023 was approximately 4 % and 9 % respectively.

The tax rate for the years ended December 31, 2024 and 2023 are not predictive of future tax rates.

3 unchanged sentences

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

Due to historical cumulative earnings over the prior three years as well as projected earnings into the future, we believe that it is more likely than not that the benefit from certain federal and state deferred tax assets will be realized.

As such, we released the valuation allowance as of December 31, 2023.

The federal NOLs generated in pre- 2018 years and remaining of $ 13.4 million can offset 100% of future years' taxable income.

Due to historical cumulative losses over the prior three years as well as projected losses over the next year, we believe that it is not more likely than not that the benefit from certain federal and state deferred tax assets will be realized.

As such, we have recorded a full valuation allowance as of December 31, 2024.

The remaining federal NOLs generated in pre-2018 years of $ 19.5 million can offset 100% of future years’ taxable income.

The federal NOLs generated in post 2017 years of $ 104.9 million can offset 80% of future years’ taxable income.

The pre-2018 federal NOLs will expire in varying amounts from 2035 to 2037 if they are not utilized.

Indiana NOLs have a 20 -year carryforward period and will expire in the years 2034 to 2041 if they are not utilized.

Indiana NOLs, which total $ 168.0 million, have a 20-year carryforward period and will expire in the years 2034 to 2044 if they are not utilized.

We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions, to determine whether the positions will be more likely than not be sustained by the applicable tax authority.

11 unchanged sentences

Non-vested grants

( 1,034,486 )

RSUs available for future issuance

1 unchanged sentence

Granted – weighted average share price on grant date was $ 9.30

Non-vested grants at December 31, 2022

Granted – weighted average share price on grant date was $9.30

Non-vested grants at December 31, 2023

Non-vested grants as of December 31, 2023

Awarded - weighted average share price on award date was $ 5.69

Non-vested grants as of December 31, 2024

RSU Vesting Schedule

3 unchanged sentences

For the years ended December 31, 2024 and 2023, stock-based compensation was $ 4.5 million and $ 3.6 million, respectively.

As of December 31, 2023, unrecognized stock compensation expense was $ 4.1 million, and we had 451,459 RSUs available for future issuance.

As of December 31, 2024, unrecognized stock compensation expense to be recognized over the remaining 3-year vesting period was $ 2.7 million, and we had 54,084 RSUs available for future issuance.

RSUs are not allocated earnings and losses as they are considered non-participating securities.

Forfeitures are recognized as they occur.

Stock Options

1 unchanged sentence

(9) EMPLOYEE BENEFITS

Our employee benefit expenses for the years ended December 31 are below (in thousands):

Our employee benefit expenses for the years ended December 31st are below (in thousands):

Health benefits, including premiums

$ 18,483 $ 14,607

401(k) matching

Deferred bonus plan

$ 22,080 $ 17,965

Of the amounts in the above table, $ 21.5 million and $ 17.4 million are recorded in operating expenses in the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively, with the remainder in general and administrative.

Our mine employees are also covered by workers’ compensation and such costs were approximately $ 4.9 million for 2023 and 2022, and are recorded in operating expenses in the consolidated statements of operations.

Of the amounts in the above table, $ 15.2 million and $ 21.5 million are recorded in “ labor ” in the consolidated statements of operations for the years ended December 31, 2024 and 2023, respectively, with the remainder in general and administrative.

Our mine employees are also covered by workers’ compensation and such costs were approximately $ 4.0 million and $ 4.9 million for 2024 and 2023, respectively, and are recorded in “ labor ” in the consolidated statements of operations.

Workers’ compensation is a no-fault system by which individuals who sustain work-related injuries or occupational diseases are compensated.

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Our maximum annual exposure is limited to $ 1.0 million per occurrence with a $ 4.0 million aggregate deductible.

( 10 ) LEASES

We determine if an arrangement is an operating or finance lease at the inception of each contract.

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If our lease does not provide an implicit rate in the contract, we use our incremental borrowing rate when calculating the present value.

We have 2 operating leases for office space and processing facilities with remaining lease terms ranging from less than one year to approximately five years.

We have operating leases for office space with remaining lease terms ranging from one month to approximately eight years .

As most of the leases do not provide an implicit rate, we calculate the ROU assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date.

At December 31, 2023 and 2022, respectively, we had approximately $ 0.7 and $ 0.2 million of ROU operating lease assets recorded within buildings and equipment on the consolidated balance sheets.

Imputed interest on our operating leases was $ 0.3 million as of December 31, 2024.

At December 31, 2024 and 2023, respectively, we had approximately $ 0.7 million of ROU operating lease assets recorded within buildings and equipment on the consolidated balance sheets.

Operating lease expense associated with ROU assets is recognized on a monthly basis over the lease term in operating costs on the consolidated statements of operation.

We entered into three finance leases during 2023, which are accounted for as failed sale-leaseback transactions.

We entered into three finance leases during 2023 and five finance leases during 2024, which are accounted for as failed sale-leaseback transactions.

Finance lease assets are included in finance lease right-of-use assets on the consolidated balance sheets and the associated finance lease liabilities are reflected within current portion of lease financing and long-term lease financing on the consolidated balance sheets as applicable.

Depreciation on our finance lease assets was $ 2.3 million for the year ended December 31, 2023.

Imputed interest expense on our lease liabilities was $ 0.1 million for the year ended December 31, 2023.

We deferred financing fees of $ 0.1 million in connection with entry into the finance leases.

Depreciation on our finance lease assets was $ 5.2 million and $ 2.3 million for the years ended December 31, 2024 and 2023, respectively.

Interest expense on our finance lease liability was $ 1.5 million during the year ended December 31, 2024.

Imputed interest expense on our future remaining finance lease liability was $ 1.7 million for the year ended December 31, 2024.

We had deferred financing fees of $ 0.2 million and $ 0.1 million at December 31, 2024 and 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.

For the year ended December 31, 2023, the amortization of finance lease deferred financing fees was immaterial.

Information related to leases was as follows as of December 31 ( in thousands):

Information related to leases was as follows as of December 31st (in thousands):

Operating lease information:

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We recognized the following costs related to our leases in our consolidated balance sheets:

Classification on Consolidated Balance Sheets

For the Year Ended December 31,

(In thousands)

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Other long-term liabilities

Total operating lease liabilities

Total operating lease liability

Finance lease assets

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Total minimum lease payments

$ 1,035 $ 13,925

Less imputed interest and deferred finance fees

( 323 ) ( 1,835 )

Total lease liability

$ 712 $ 12,090

(11) SELF INSURANCE

We self-insure non-leased underground mining equipment.

Such equipment is allocated among seven mining units dispersed over 11 miles.

Such equipment is allocated among four mining units dispersed over seven miles and seven mining units dispersed over eleven miles, at December 31, 2024 and 2023, respectively.

The historical cost of such equipment was approximately $ 227.8 million and $ 262.0 million as of December 31, 2024 and 2023, respectively.

We also self-insure for workers’ compensation claims under a guaranteed cost program.

Under this program, we are responsible for the first $ 1.0 million per claim up to an aggregate of $ 4.0 million annually.

Restricted cash of $ 3.4 million and $ 3.8 million as of December 31, 2024 and 2023, respectively, represents cash held and controlled by a third party and is restricted for future workers’ compensation claim payments.

( 12 ) NET INCOME PER SHARE

The Company had $ 4.3 million and $ 3.6 million of workers’ compensation reserve as of December 31, 2024 and 2023, respectively in “Accounts payable and accrued liabilities” on the Consolidated Balance Sheets.

(12) NET INCOME (LOSS) PER SHARE

The following table (in thousands, except per share amounts) sets forth the computation of basic earnings per share for the periods presented:

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Basic earnings per common share:

Net income - basic

$ 44,793 $ 18,105

Net income (loss) - basic

Weighted average shares outstanding - basic

33,133 32,043

Basic earnings per common share

$ 1.35 $ 0.57

The following table (in thousands, except per share amounts) sets forth the computation of diluted net income per share:

Basic earnings (loss) per common share

The following table (in thousands, except per share amounts) sets forth the computation of diluted net income (loss) per share:

Year Ended December 31,

Diluted earnings per common share:

Net income - basic

$ 44,793 $ 18,105

Net income (loss) - basic

Convertible Notes interest expense, net of tax

Net income - diluted

$ 45,994 $ 18,632

Net income (loss) - diluted

Weighted average shares outstanding - basic

33,133 32,043

Dilutive effects of if converted Convertible Notes

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Weighted average shares outstanding - diluted

36,827 33,649

Diluted net earnings per share

$ 1.25 $ 0.55

Diluted net income (loss) per share

(13) FAIR VALUE MEASUREMENTS

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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.

See asset impairment discussion below in Nonrecurring Fair Value Measurements sections below.

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 as further discussed in Note 1.

Lastly, Level 3 fair value measurements were also used in the determination of the fair values of assets acquired, liabilities assumed, and considerations exchanged as part of the Merom Acquisition.

ARO liabilities use Level 3 non-recurring fair value measures as further discussed in “ Note 1 – Summary of Significant Accounting Policies ”.

Nonrecurring Fair Value Measurements

During the fourth quarter of 2024, the Company completed its review of the coal mining facilities and future mining plans.

The impairment analysis was based upon the coal mining operating plans of the Company, market driven pricing and cost trends.

The discounted cash flow model was calculated using projected economics for the Coal Operations assets, using the Company’s mining plan and reserve estimates to be mined and sold at prevailing commodity prices, operating expenses, and production cost levels, which are classified as Level 3 inputs.

(14) EQUITY METHOD INVESTMENTS

Sunrise Energy, LLC

We own a 50 % interest in Sunrise Energy, which owns gas reserves and gathering equipment with plans to develop and operate such reserves.

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The carrying value of the investment included in the consolidated balance sheets as of December 31, 2024 and 2023 was $ 2.1 million and $ 2.8 million, respectively.

( 15 ) MEROM ACQUISITION

On February 14, 2022, Hallador Power signed an Asset Purchase Agreement (“APA”), with Hoosier, a rural electric membership corporation organized and existing under the laws of the state of Indiana.

Under the APA, Hallador Power acquired the Merom power plant, along with:

equipment and machinery in the power plant;

materials inventory;

a coal purchase agreement;

a coal combustion certified coal ash landfill, certain generation interconnection agreements, and coal inventory (collectively, the “Acquired Assets”).

Additionally, contemporaneous with entering into the APA, Hallador Power entered into three other agreements with Hoosier comprised of ( 1 ) a Power Purchase Agreement (the “PPA”), ( 2 ) a Coal Supply Purchase Agreement (the “Coal Purchase Agreement”), and ( 3 ) a Closing Side Letter agreeing to a reduction in future capacity payments of $ 15.0 million (“Capacity Payment Reduction”).

The purchase price for the Acquired Assets also consisted of the assumption of the power plant’s closure and post-closure remediation, valued at approximately $ 7.2 million;

no cash was paid by Hallador Power to Hoosier to effectuate the APA other than payments totaling approximately $ 17.0 million for coal inventory on hand, with an initial payment of $ 5.4 million and subsequent periodic payments over time, subject to post-close adjustments based on actual on-site inventories.

The acquisition closed on October 21, 2022.

The acquisition was accounted for as an asset acquisition under ASC Topic 805 - 50, Business Combinations as substantially all of the fair value of the gross assets acquired are concentrated in a group of similar identifiable assets.

As such, the total purchase consideration (which includes $ 2.9 million of transaction costs) is allocated to the assets acquired on a relative fair value basis.

The following table summarizes the final relative fair value allocation of assets acquired and liabilities assumed and incurred as of the Merom Acquisition date.

Consideration:

(in thousands)

Direct transaction costs

Contract liability - PPA

Contract liability - Capacity payment reduction

Contract asset - Coal purchase agreement

Coal inventory purchased

Deferred coal inventory payment

Total consideration

Relative fair value of assets acquired:

Materials and supplies

Coal inventory

Amount attributable to assets acquired

Fair value of liabilities assumed:

Asset retirement obligations

Amount attributable to liabilities assumed

The Company also owns a 50 % interest in Oaktown Gas, LLC.

Oaktown Gas, LLC operates an emission abatement project through the destruction of gases extracted from the Oaktown mines to generate carbon credits and other emissions offset credits.

The carrying value of the investment included in the consolidated balance sheets as of December 31, 2024 was $ 0.5 million.

(15) CONVERTIBLE NOTES

On May 2, 2022, and May 20, 2022, we issued senior unsecured convertible notes (the “Notes”) to five parties, in the aggregate principal amount of $ 10 million, with $ 9 million being issued to related parties affiliated with independent members of our board of directors and the remainder to a non-affiliated party.

The Notes were scheduled to mature on December 29, 2028, and accrue interest at 8 % per annum, with interest payable on the date of maturity.

Pursuant to the terms of the Notes, the holders of the Notes may convert the entire principal balance and all accrued and unpaid interest then outstanding during the period beginning June 1, 2022, and ending on May 31, 2027, into shares of the Company's common stock at a conversion price the greater of (i) $ 3.33 and (ii) the 30 -day trailing volume-weighted average sales price for the common stock on the Nasdaq Capital Market ending on and including the date on which this Note is converted.

At any time on or after June 1, 2025, we may, at our option and upon 30 days' written notice provided to the holders, elect to redeem the Notes (in whole and not in part) and the holders shall be obligated to surrender the Notes, at a redemption price equal to 100% of the outstanding principal balance, together with any accrued but unpaid interest thereon to the redemption date.

After receipt of such redemption notice from us, the holder may, at its option, elect to convert the principal balance and accrued interest into the Company's common stock by giving written notice of such election to us no later than 5 days prior to the date fixed for redemption.

In June 2022, the four holders of the $ 9 million related party notes converted them into 1,965,841 shares of common stock of the Company and the one holder of the $ 1 million Notes converted it into 231,697 shares of common stock pursuant to the terms of the Notes and their related agreements.

On July 29, 2022, we issued an additional $ 5 million senior unsecured convertible note to a related party affiliated with an independent member of our board of directors.

The 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 Note into shares of our common stock at a conversion price of $ 6.254 .

Beginning August 18, 2025, we may elect to redeem the Note and the holder shall be obligated to surrender the note at 100% of the outstanding principal balance together with any accrued unpaid interest.

Upon receipt of the redemption notice from us, the holder may elect to convert the principal balance and accrued interest into the Company's common stock.

On August 8, 2022, we issued an additional $ 4 million of senior unsecured convertible notes to related parties affiliated with independent members of our board of directors.

The 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 our common stock at a conversion price of $ 6.254 .

Beginning August 8, 2025, we may elect to redeem the Notes and the holder shall be obligated to surrender the Notes at 100% of the outstanding principal balance together with any accrued unpaid interest.

Upon receipt of the redemption notice from us, the holder may elect to convert the principal balance and accrued interest into the Company's common stock.

On August 12, 2022, we issued an additional $ 10 million senior unsecured convertible note to an unrelated party.

The 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 Note into shares of our common stock at a conversion price of $ 6.15 .

Beginning August 12, 2025, we may elect to redeem the Note and the holder shall be obligated to surrender the Note at 100% of the outstanding principal balance together with any accrued unpaid interest.

Upon receipt of the redemption notice from us, the holder may elect to convert the principal balance and accrued interest into the Company's common stock.

The funds received from the issuance of the various Notes described above in this Note 16 were used to provide additional working capital to the Company.

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 carried 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 had 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 inducement expense which is reported in loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $ 0.6 million during the three months ended March 31, 2024.

As of December 31, 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 carried 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 had 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 could elect to redeem the August 8 th Notes and the holder was 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 could have elected 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 inducement expense which is reported in 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 inducement expense which is reported in 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 December 31, 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 carried 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 had 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 could elect to redeem the August 12 th Note and the holder would have been 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 could 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 inducement expense which is reported in 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 December 31, 2024, the entire August 12 th Note had been converted to shares of common stock of the Company.

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 our 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.

(16) 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 6 – Revenue ”.

(17) 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 ongoing 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 “Labor” in the consolidated statements of operations.

These charges related to compensation, tax, professional, and insurance related expenses and are considered one-time charges paid during 2024.

The coal mining properties asset group was

tested for impairment as result of the organizational restructuring passing the undiscounted recoverability test.

See “ Note 19 – Impairment of Coal Properties” for additional changes to the Company’s mining plans that occurred during the fourth quarter of 2024.

(18) AT MARKET AGREEMENT

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(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, each of us and the Agent have the right, by giving five ( 5 ) days’ notice, to terminate the Sales Agreement in its sole discretion.

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.

For the period January 1, 2024, to March 14, 2024, we issued 710,623 shares of Common Stock under the ATM Program for net proceeds of $ 6.6 million.

During the year ended December 31, 2024, we issued 4,654,430 shares of Common Stock under the ATM Program for net proceeds of $ 34.5 million.

(19) IMPAIRMENT OF COAL PROPERTIES

Annually, the Company reviews its business plans for the next several years, with specific emphasis on the upcoming year.

This business plan review involves updates to its mining plans that take into account many factors, such as changes in market price trends, cost trends, expected demand trends, its latest engineering studies and current year operational and financial results.

During the fourth quarter of 2024, the Company began its annual business plan review.

The Company evaluated core hole samples at several of its mines, reviewing the quality of the mine seam and density of the coal.

Based upon market price trends, the Company believes the required course of action is to only produce those reserves that will allow it the lowest possible cost, and therefore capture the highest possible margins.

The core hole samples at the Oaktown 2 mine were of a lower quality and density than that of the Oaktown 1 mine.

As such, at the conclusion of the Company’s annual business plan review during the fourth quarter of 2024, it decided to temporarily seal the Oaktown 2 mine, and to focus coal production at the Oaktown 1 mine, which has lower recovery costs.

As a result of the Company’s decision to temporarily seal the Oaktown 2 mine, the Company determined a triggering event had occurred.

The Company then completed an impairment review to determine if the carrying value of its coal properties were impaired.

The Company compared the net book value of its coal properties to estimated undiscounted future net cash flows.

The result of this undiscounted cash flow test indicated the carrying amount of its coal properties may not be recoverable.

As a result, the Company prepared a discounted cash flow model (Level 3 fair value measurement under the fair value hierarchy) to estimate fair value.

Significant inputs used to determine fair value include estimates of future cash flows from coal sales and minimum payments, an appropriate discount rate and the useful economic life.

The estimated cash flows are the product of a process that began with current realized pricing as of the measurement date and included an adjustment for risk related to the realization of such future cash flows.

The discounted cash flow model used assumptions regarding the projected economics of the Coal Operations assets, given prevailing commodity prices and operating expense levels, which are classified as Level 3 inputs.

Coal Operations assets include all of our coal mining properties as these properties are all within the same asset group given the near proximity to one another and their sharing of personnel and assets used to fulfill customer contracts.

The Company utilized an estimated market participant discount rate of 11.5 % and assumed production that is consistent with our current mining plans and reserve estimates that equate to approximately 3.6 million tons per year until all reserves are produced as part of the analysis.

The result of the discounted cash flow analysis confirmed that fourth quarter of 2024 changes to the mining plans caused the carrying amount of its coal properties to not be recoverable.

As a result, the Company recorded an impairment expense during the fourth quarter of 2024 of $ 215.1 million.

The Company did not record an impairment during the year ended December 31, 2023.

(20) SEGMENTS OF BUSINESS

At December 31, 2023, our operations are divided into two primary reportable segments, the Coal Operations and Electric Operations segments.

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, which is accounted for using the equity method and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.

Year Ended December 31, (in thousands)

Operating Revenues

Our business is organized based on the services and products we provide in two segments:

(i) Electric Operations and (ii) Coal Operations.

Our Electric Operations segment includes the electric power generation facilities of our Merom power plant, which is a two unit, 1080 -megawatt rated coal fired power plant located in Sullivan County, Indiana.

Our sales region is in MISO Zone 6, which includes Indiana and a portion of western Kentucky.

Revenues from our Electric Operations segment consist primarily of delivered energy and capacity revenues.

Fuel costs included in our Electric Operations segment include the cost of coal purchased from our Coal Operations segment, which are based on multi-year contracts which approximate market prices at the time the contracts are entered into.

Our Coal Operations segment includes the Oaktown 1 and 2 underground mining complexes, as well as other currently idled mining facilities, which produce high-quality bituminous coal from the Illinois Basin.

Revenues from our Coal Operations segment consist of sales of coal to various third-parties and to Merom.

Coal sales to our Electric Operations are based on multi-year contracts which approximate market prices at the time the contracts are entered into.

Intercompany coal sales and amounts above actual costs to produce the coal are eliminated in the consolidated statements of operations.

Corporate and Other and Eliminations primarily consist of unallocated corporate costs and activities, including our equity method investments.

The CODM evaluates segment performance based upon EBITDA margin for each business segment.

EBITDA margin is calculated for each segment as follows:

For our Electric Operations segment, EBITDA margin is comprised of delivered energy revenues less certain significant segment expenses, which include (i) variable costs, (ii) other operating and maintenance costs, (iii) costs of purchased power, (iv) utilities, (v) labor and (vi) general and administrative costs.

Variable operating costs are comprised of fuel costs and certain other operating costs, such as limestone and soda ash.

For our Coal Operations segment, EBITDA margin is comprised of coal sales less certain significant segment expenses, which include (i) fuel, (ii) other operating and maintenance costs, (iii) utilities, (iv) labor and (v) general and administrative costs.

EBITDA margin for each segment is a key measure used by our CODM and provides information about our core operating performance, significant expenses and ability to generate cash flow.

Additionally, EBITDA margin provides investors with the financial analytical framework upon which our CODM bases financial, operational, compensation and planning decisions and presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

Our CODM reviews variable costs, as defined above, in our Electric Operations segment in order to evaluate the efficiency of that segments operations.

Presented below are the Electric and Coal Operations key metrics reviewed by the CODM at December 31, 2024 (in thousands):

Electric Operations

Coal Operations

$ 435,425 $ 293,344

Delivered Energy

Capacity Revenue

Electric Sales

Other Operating Costs (1)

Total Variable Costs

Other Operating and Maintenance Costs (2)

Cost of Purchased Power

Other Operating and Maintenance Costs

Power Margin Without General and Administrative

Coal Margin Without General and Administrative

General and Administrative

Electric Operations — EBITDA Margin

Coal Operations — EBITDA Margin

(1) Other operating costs include costs for limestone, dibasic acid, ammonia, lime dust and soda ash.

(2) Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable as discussed above in (1).

Presented below are the Electric and Coal Operations key metrics reviewed by the CODM at December 31, 2023 (in thousands):

Electric Operations

$ 268,341 $ 66,316

Corporate and Other and Eliminations

$ ( 69,286 ) $ 2,331

Consolidated Operating Revenues

$ 634,480 $ 361,991

Income (Loss) from Operations

Coal Operations

$ 63,600 $ 3,736

Delivered Energy

Capacity Revenue

Electric Sales

Other Operating Costs (1)

Total Variable Costs

Other Operating and Maintenance Costs (2)

Cost of Purchased Power

Other Operating and Maintenance Costs

Power Margin Without General and Administrative

Coal Margin Without General and Administrative

General and Administrative

Electric Operations — EBITDA Margin

Coal Operations — EBITDA Margin

(1) Other operating costs include costs for limestone, dibasic acid, ammonia, lime dust and soda ash.

(2) Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable as discussed above in (1).

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues at December 31, 2024 (in thousands):

Corporate and Other

Reconciliation of Revenue:

Electric Operations

$ 12,552 $ 31,505

Corporate and Other and Eliminations

$ ( 11,140 ) $ ( 4,811 )

Consolidated Income (Loss) from Operations

$ 65,012 $ 30,430

Depreciation, Depletion and Amortization

Coal Operations

$ 48,365 $ 43,612

and Eliminations

Delivered Energy

Capacity Revenue

Other Operating Revenue

Coal Sales (Third-Party)

Coal Sales (Intercompany)

Operating Revenues

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues at December 31, 2023 (in thousands):

Corporate and Other

Reconciliation of Revenue:

Electric Operations

$ 18,739 $ 3,117

Corporate and Other and Eliminations

Consolidated Depreciation, Depletion and Amortization

$ 67,211 $ 46,875

Coal Operations

$ 376,387 $ 376,228

and Eliminations

Delivered Energy

Capacity Revenue

Other Operating Revenue

Coal Sales (Third-Party)

Coal Sales (Intercompany)

Operating Revenues

Presented below is our reconciliation of EBITDA Margin to the most comparable GAAP account, income (loss) before income taxes at December 31, 2024 (in thousands):

Corporate and Other

Reconciliation of Income (Loss) before Income Taxes:

Electric Operations

$ 208,331 $ 266,730

Corporate and Other and Eliminations

$ 5,062 $ ( 12,404 )

Consolidated Assets

$ 589,780 $ 630,554

Capital Expenditures

Coal Operations

$ 56,521 $ 50,367

and Eliminations

Electric Operations — EBITDA Margin

Coal Operations — EBITDA Margin

Other Operating Revenue

Depreciation, Depletion and Amortization

Asset Impairment

Asset Retirement Obligations Accretion

Exploration Costs

Gain (loss) on disposal or abandonment of assets, net

Interest Expense

Loss on Extinguishment of Debt

Equity Method Investment (Loss)

Settlement of litigation

Corporate — General and Administrative

Corporate — Other Operating and Maintenance Costs

Income (Loss) before Income Taxes

Presented below is our reconciliation of EBITDA Margin to the most comparable GAAP account, income (loss) before income taxes at December 31, 2023 (in thousands):

Corporate and Other

Reconciliation of Income (Loss) before Income Taxes:

Electric Operations

$ 18,831 $ 3,653

Corporate and Other and Eliminations

Consolidated Capital Expenditures

$ 75,352 $ 54,020

( 19 ) SUBSEQUENT EVENTS

On February 23, 2024, our Coal Operations Segment undertook an initiative designed to strengthen our financial and operational efficiency and to create significant operational savings and higher margins in our coal segment.

This step will advance our transition from a company primarily focused on coal production to a more resilient and diversified vertically integrated IPP.

As part of this initiative, we idled production at our higher cost Prosperity Mine, and substantially idled production at 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.

Increasing the run time of these four lower cost units from five and a half days per week to seven days per week is intended to further improve the overall cost structure of the coal segment.

As part of the initiative, the Company reduced its workforce by approximately 110 employees.

In the first quarter of 2024, Hallador borrowed $ 5 million from certain members of the Company’s Board of Directors.

The notes are unsecured, mature in February 2025 and accrue interest at 12 % annually, with interest to be paid quarterly beginning on May 31, 2024.

In February 2024, the Company elected to pay the semi-annual interest due on the $ 19 million senior unsecured convertible notes with common stock as allowed in the note agreements.

The amount of stock issued for the interest payments was 122,600 shares.

Coal Operations

and Eliminations

Electric Operations — EBITDA Margin

Coal Operations — EBITDA Margin

Other Operating Revenue

Amortization of Contract Asset

Depreciation, Depletion and Amortization

Asset Retirement Obligations Accretion

Exploration Costs

Gain (loss) on disposal or abandonment of assets, net

Interest Expense

Loss on Extinguishment of Debt

Equity Method Investment (Loss)

Corporate — General and Administrative

Corporate — Other Operating and Maintenance Costs

Income (Loss) before Income Taxes

Presented below are our Electric and Coal Operations assets and capital expenditures at December 31, 2024 (in thousands):

Corporate and Other

Other Reconciliations:

Electric Operations

Coal Operations

and Eliminations

Capital Expenditures

Presented below are our Electric and Coal Operations assets and capital expenditures at December 31, 2023 (in thousands):

Corporate and Other

Other Reconciliations:

Electric Operations

Coal Operations

and Eliminations

Capital Expenditures

(21) ASSETS HELD FOR SALE

During the third quarter of 2024, the Company considered strategic alternatives with respect to its wholly-owned subsidiary Summit.

Summit primarily held property, plant and equipment.

On July 29, 2024, the Company entered into a ninety day right of first refusal (“ROFR”) with a potential buyer of Summit for $ 3.2 million.

As of July 29, 2024, Summit met the held-for-sale criteria, and its assets were included in "assets held-for-sale" in the current assets section of the consolidated balance sheets.

The Company recorded the Summit assets, once held for sale, at the lower of their carrying value or their estimated fair value less cost to sell.

The Company also did not record depreciation and amortization of $ 0.1 million ( $ 0.1 million after-tax) on assets held-for-sale and continued to do so while held-for-sale criteria was met.

Fair value is the amount at which an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques or may be observable using quoted market prices.

The Company used a market approach consisting of the contractual ROFR sales price, subject to prorations for property taxes and utilities, to determine the fair value, and subtracted estimated costs to sell from that calculated fair value.

The sale of Summit did not represent a strategic shift that has or will have a major effect on the Company, and as such, did not qualify for treatment as a discontinued operation.

The Company sold Summit on December 23, 2024 for $ 3.2 million.

The Company recorded a $ 1.7 million gain in “(Gain) loss on disposal or abandonment of assets, net” in its consolidated statements of operations.

(22) CONTINGENCIES

Our Coal Operations subsidiary is party to litigation in which the plaintiffs allege violations of the Fair Labor Standards Act and state law due to alleged failure to compensate for time "donning" and "doffing" equipment and to account for certain bonuses in the calculation of overtime rates and pay.

In January 2025, we agreed to settle with the plaintiffs such litigation for $ 2.8 million, which is recorded in “accounts payable and accrued liabilities” on our consolidated balance sheets at December 31, 2024.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data