What changed in this filing

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Item 1. Financial Statements

2025-05-12 compared with 2024-11-12 · 251 added, 262 removed, 286 unchanged (64% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

September 30,

Current assets:

4 unchanged sentences

Prepaid expenses

Assets held-for-sale

Total current assets

7 unchanged sentences

Total property, plant and equipment, net

Investment in Sunrise Energy

Equity method investments

LIABILITIES AND STOCKHOLDERS' EQUITY

3 unchanged sentences

Current portion of lease financing

Deferred revenue

Contract liability - power purchase agreement and capacity payment reduction

Contract liabilities - current

Total current liabilities

1 unchanged sentence

Bank debt, net

Convertible notes payable

Convertible notes payable - related party

Long-term lease financing

Deferred income taxes

Asset retirement obligations

Contract liability - power purchase agreement

Contract liabilities - long-term

Total long-term liabilities

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 16)

Stockholders' equity:

1 unchanged sentence

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

42,599 and 34,052 issued and outstanding, as of September 30, 2024 and December 31, 2023, respectively

42,978 and 42,621 issued and outstanding , as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

Retained earnings

Retained earnings (deficit)

Total stockholders’ equity

4 unchanged sentences

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

SALES AND OPERATING REVENUES:

8 unchanged sentences

General and administrative

Gain on disposal or abandonment of assets, net

Total operating expenses

20 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Deferred income tax (benefit)

Equity loss – Sunrise Energy

Cash distribution - Sunrise Energy

Equity method investment loss

Depreciation, depletion and amortization

Loss on extinguishment of debt

Loss (gain) on sale of assets

Gain on disposal or abandonment of assets, net

Amortization of debt issuance costs

2 unchanged sentences

Stock-based compensation

Amortization of contract asset and contract liabilities

Change in operating assets and liabilities:

Amortization of contract liabilities

Accretion on contract liabilities

Change in current assets and liabilities:

Accounts receivable

2 unchanged sentences

Accounts payable and accrued liabilities

Deferred revenue

Contract liabilities

Net cash provided by operating activities

Hallador Energy Company

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended March 31,

CASH FLOWS FROM INVESTING ACTIVITIES:

8 unchanged sentences

Issuance of related party notes payable

Payments on related party notes payable

Debt issuance costs

Taxes paid on vesting of RSUs

Net cash provided by (used in) financing activities

Increase in cash, cash equivalents, and restricted cash

Net cash used in financing activities

Increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, beginning of period

14 unchanged sentences

Stockholders’

Balance, June 30, 2024

Stock-based compensation

Balance, September 30, 2024

Balance, December 31, 2024

2 unchanged sentences

Taxes paid on vesting of RSUs

Stock issued on redemption of convertible notes

Stock issued in ATM offering

Balance, September 30, 2024

Balance, March 31, 2025

Common Stock Issued

Stockholders’

Balance, June 30, 2023

Stock-based compensation

Stock issued on vesting of RSUs

Taxes paid on vesting of RSUs

Balance, September 30, 2023

Balance, December 31, 2023

2 unchanged sentences

Taxes paid on vesting of RSUs

Balance, September 30, 2023

Stock issued on redemption of convertible notes

Stock issued in ATM offering

Balance, March 31, 2024

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

GENERAL BUSINESS

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

We strategically view and manage our operations through two reportable segments:

Electric Operations and Coal Operations.

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

The Coal Operations reportable segment includes mining complexes Oaktown 1 and 2 underground mines, Prosperity surface mine, Freelandville surface mine, and Carlisle wash plant.

On February 23, 2024, our Coal Operations Segment committed to a reorganization effort designed to strengthen its financial and operational efficiency and create significant operational savings and higher margins.

For further information, see “Note 16 – Organizational Restructuring” below.

The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as “Corporate and Other and Eliminations” and primarily are comprised of unallocated corporate costs and activities, the elimination of coal sales from coal operations to electric operations, a 50 % interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method, and our wholly-owned subsidiary Summit Terminal LLC (“Summit”), a logistics transport facility located on the Ohio River.

See “Note 20 – Assets Held-for-Sale” for further discussion on Summit.

The condensed consolidated financial statements include the accounts of Hallador Energy Company (hereinafter known as “we, us, or our”) and its 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.

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.

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.

We have other mining complexes and locations which were idled during the year ended December 31, 2024.

All significant intercompany accounts and transactions have been eliminated.

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accordingly, certain information and footnote disclosures normally included in generally accepted accounting principles (“GAAP”) financial statements have been condensed or omitted.

The results of operations and cash flows for the three and nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2024.

The results of operations and cash flows for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2025.

Our organization and business, the accounting policies we follow, and other information are contained in the notes to our consolidated financial statements filed as part of our 2024 Annual Report on Form 10-K .

This quarterly report should be read in conjunction with such Annual Report on Form 10-K.

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):

RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements - Adopted

For the year ended December 31, 2024, the Company retrospectively adopted 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 ):

See “ Note 14 – Segments of Business ” for enhanced disclosures associated with the adoption of ASU 2023-07.

Recent Accounting Pronouncements – Not Yet Adopted

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").

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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 Options.

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.

LONG-LIVED ASSET IMPAIRMENTS

Long-lived assets are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable.

For the three and nine months ended September 30, 2024 and 2023, no impairment charges were recorded for long-lived assets.

During the year ended December 31, 2024, the Company recorded a $ 215.1 million non-cash impairment charge in our Coal Operations segment due to the results of our annual business plan review.

As part of that business plan review, the Company evaluated core hole samples at several of our mines, noting the samples obtained at our Oaktown 2 mine were determined to be of a lower quality and density than that of the Oaktown 1 mine.

As such, the Company decided to temporarily seal the Oaktown 2 mine, and to focus coal production at the Oaktown 1 mine, which has lower recovery costs.

The fair values of the impaired assets were determined using a discounted cash flow model, which represents Level 3 fair value measurements under the fair value hierarchy.

The fair value analysis used assumptions regarding the projected economics of the Coal Operations assets, given prevailing commodity prices and operating expense levels.

For the three months ended March 31, 2025 and 2024, no impairment charges were recorded for long-lived assets.

Inventory is valued at a lower of cost or net realizable value (NRV).

As of September 30, 2024, and December 31, 2023, coal inventory includes NRV adjustments of $ 1.8 million and $ 2.0 million, respectively.

As of March 31, 2025, and December 31, 2024, coal inventory includes NRV adjustments of $ 0.1 million and $ 0.3 million, respectively.

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 Bank, National Association (in its capacity as administrative agent, "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 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 $ 21.5 million during the nine months ended September 30, 2024.

Bank debt is comprised of our Term Loan ( $ 45.5 million as of September 30, 2024) and a $ 75.0 million revolver ( $ 24.5 million borrowed as of September 30, 2024) under the Credit Agreement.

The term debt required quarterly payments of $ 6.5 million starting in April 2024 through maturity.

Bank debt reduced by $ 21.0 million during the three months ended March 31, 2025.

Bank debt totaled $ 23.0 million and is comprised of our Term Loan ( $ 19.0 million as of March 31, 2025) and a $ 75.0 million revolver ( $ 4.0 million borrowed as of March 31, 2025) under the Credit Agreement.

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.

As of September 30, 2024, we had additional borrowing capacity of $ 31.1 million under the revolver and total liquidity of $ 34.9 million.

Our additional borrowing capacity is net of $ 19.4 million in outstanding letters of credit that we were required to maintain for surety bonds and $ 24.5 million drawn on the revolver at September 30, 2024.

As of March 31, 2025, we had additional borrowing capacity of $ 52.8 million under the revolver and total liquidity of $ 69.0 million.

Our additional borrowing capacity is net of $ 18.2 million in outstanding letters of credit as of March 31, 2025 that were required to maintain surety bonds .

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

2 unchanged sentences

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

Unamortized bank fees as of September 30, 2024, and December 31, 2023, were $ 3.0 million and $ 3.6 million, respectively.

Unamortized bank fees as of March 31, 2025, and December 31, 2024, were $ 2.0 million and $ 2.5 million, respectively.

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

September 30,

Current bank debt

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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 September 30, 2024, our liquidity of $ 34.9 million and quarterly EBITDA of $ 9.6 million were in compliance with the requirements of the Credit Agreement.

As of September 30, 2024, we were in compliance with all other covenants defined in the Credit Agreement.

As of March 31, 2025, our Leverage Ratio and First Lien Leverage Ratios were 1.89 , liquidity of $ 69.0 million and quarterly adjusted EBITDA of $ 19.3 million were in compliance with the requirements of the Credit Agreement.

As of March 31, 2025, we were in compliance with all other covenants defined in the Credit Agreement.

Interest Rate

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

As of September 30, 2024, we were paying SOFR plus 5.00 % on the outstanding bank debt which equates to an all-in rate of 9.76 %.

The interest rate on the facility ranges from secured overnight financing rate (“SOFR”) plus 4.00 % to SOFR plus 5.00 %, depending on our Leverage Ratio.

As of March 31, 2025, we were paying SOFR plus 5.00 % on the outstanding bank debt which equates to an all-in rate of 9.45 %.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following for the indicated dates (in thousands):

September 30,

Accounts payable

6 unchanged sentences

Revenue from Contracts with Customers

We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all the consideration will be collected.

We account for a contract with a customer when the parties have executed the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all the consideration will be collected.

We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer.

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

When energy hours at the Merom Hub are priced below our production cost or during outages at our Merom Facility, we have the option to make net hourly purchases of power in the MISO market.

We record these as “Cost of purchased power” on our condensed consolidated statements of operations.

Coal operations

14 unchanged sentences

Electric operations

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Delivered energy (including contract liability amortization)

1 unchanged sentence

Coal operations

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Outside third-party Indiana customers

5 unchanged sentences

We also concluded that the stand-ready obligation to be available to provide electricity is capable of being distinct as each unit of capacity provides an economic benefit to the holder and could be sold by the customer.

During 2022, we entered into an Asset Purchase Agreement (“APA”) with Hoosier (“Hoosier APA”) in which Hallador Power shall sell, and Hoosier shall buy, delivered energy quantities through 2025 at the contract price, which is $ 34.00 per MWh.

We have remaining delivered energy obligations to Hoosier on the APA totaling $ 70.1 million through 2025 as of September 30, 2024 .

The agreement was amended August 31, 2023, to extend through 2028 .

The amendment included additional obligations to Hoosier of $ 186.6 million, or $ 56.00 per MWh, as of September 30, 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 $ 25.0 million as of September 30, 2024 .

The agreement was amended August 31, 2023, to extend through 2028 , with additional capacity obligations to Hoosier of $ 60.9 million as of September 30, 2024, at a price of $ 7.02 per kilowatt month for the contract capacity.

During the second quarter 2024, the Company entered into an 11-month, $ 45.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,302,480 MWh.

We have energy and capacity obligations to customers, excluding the Hoosier APA, through 2029 totaling $ 134.1 million and $ 140.2 million, respectively, as of September 30, 2024 .

We have $ 32.6 million and $ 24.7 million of deferred revenue as of September 30, 2024 , related to the prepaid physically delivered power contract and other capacity obligations outside of the Hoosier APA, respectively.

Coal Operations

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We consider each ton of coal a separate performance obligation and allocate the transaction price based on the base price per the contract, increased or decreased for quality adjustments.

We recognize revenue at a point in time as the customer does not have control over the asset at any point during the fulfillment of the contract.

For substantially all our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine.

This is also the point at which physical possession of the coal transfers to the customer, as well as the right to receive substantially all benefits and the risk of loss in ownership of the coal.

We have remaining coal sales performance obligations relating to fixed priced contracts to third-party customers of approximately $ 320.28 million, which represents the average fixed prices on our committed contracts as of September 30, 2024.

We expect to recognize approximately 9.9 % of this coal sales revenue in 2024 , with the remainder recognized through 2028 .

We have remaining volume performance obligations relating to coal contracts with price reopeners of 3.0 million tons ( 1.0 million tons in 2025, 2026 and 2027 ) as of September 30, 2024.

The coal tons used to determine the remaining performance obligations are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such an option exists in the customer contract.

The following table illustrates the balance of all current Electric and Coal Operations contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2025 and disaggregated by segment and contract duration.

Delivered energy revenues

Capacity revenues

Coal Operations revenues

Total revenue (1)

(1) Coal revenues consist of consolidated revenues excluding our intercompany revenues from Merom .

Contract Balances

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A receivable is an entity’s right to consideration that is unconditional.

Under the typical payment terms of our contracts with customers, the customer pays us a base price for the coal, increased or decreased for any quality adjustments, electricity, or capacity.

Under the typical payment terms of our contracts with customers, the customer pays us the contracted price for electricity or capacity.

For coal contracts, the customer pays us a base price for the coal, increased or decreased for any quality adjustments.

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

As of January 1, 2023, accounts receivable for coal sales billed to customers was $ 16.3 million.

For the nine months ended September 30, 2024 and 2023, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate.

The effective tax rate for the nine months ended September 30, 2024 and 2023, was ~ 24 % and ~ 13 %, respectively.

Payments received prior to fulfilling our performance obligations are included in contract liabilities in our condensed consolidated balance sheets.

The following table shows our beginning and ending accounts receivable from contracts with customers balance for the periods presented (in thousands):

Accounts receivable from contracts with customers - beginning balance

Accounts receivable from contracts with customers - ending balance

As the Company fulfills its contractual obligations, we recognized those amounts in revenues.

The following table reconciles our beginning and ending contract liabilities for the periods presented (in thousands):

Total contract liabilities - beginning balance

Cash payments received on future contract obligations

Accretion on contract liabilities

Revenue recognized, cash payment received in prior period

Total contract liabilities - ending balance

For the three months ended March 31, 2025 and 2024, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate.

The effective tax rate for the three months ended March 31, 2025 and 2024, was 0 % due to recording of a full valuation allowance and ~ 26 %, respectively.

Historically, our actual effective tax rates have differed from the statutory effective rate primarily due to the benefit received from statutory percentage depletion in excess of tax basis.

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Non-vested grants as of December 31, 2024

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

Vested - weighted average share price on vested date was $ 12.28

Non-vested grants as of September 30, 2024

For the three and nine months ended September 30, 2024, our stock compensation was $ 1.1 million and $ 3.3 million, respectively.

For the three and nine months ended September 30, 2023, our stock compensation was $ 0.8 million and $ 2.8 million, respectively.

Non-vested grants as of March 31, 2025

For the three months ended March 31, 2025 and 2024, our stock compensation expense was $ 1.1 million and $ 0.7 million, respectively.

Non-vested RSU grants will vest as follows:

The outstanding RSUs have a value of $ 9.8 million based on the September 30, 2024 closing stock price of $ 9.43 .

As of September 30, 2024, unrecognized stock compensation expense is $ 3.8 million, and we had 53,761 RSUs available for future issuance.

The outstanding RSUs have a value of $ 6.3 million based on the March 31, 2025 closing stock price of $ 12.28 .

As of March 31, 2025, unrecognized stock compensation expense to be recognized over the rolling 3 -year vesting period is $ 1.5 million, and we had 217,319 RSUs available for future issuance.

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

We have operating leases for office space with remaining lease terms ranging from 1 month to 8 years.

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

Imputed interest on our operating leases was $ 0.3 million as of September 30, 2024.

During the nine months ended September 30, 2024, we entered into four finance leases that were accounted for as failed sale-leaseback transactions.

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

Depreciation on our finance lease assets was $ 1.5 million and $ 3.7 million for the three and nine months ended September 30, 2024 .

Interest expense on our finance lease liability was $ 0.4 million and $ 1.1 million during the three and nine months ended September 30, 2024, respectively.

Imputed interest on our future remaining finance lease liability was $ 1.8 million as of September 30, 2024 .

We had deferred financing fees of $ 0.2 and $ 0.1 million at September 30, 2024 and December 31, 2023, respectively, in connection with entry into the finance leases.

These deferred financing fees will be amortized on a straight-line basis over the term of the finance leases.

We did no t have finance leases during the three and nine months ended September 30, 2023.

The following information relates to our leases (dollar amounts in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease information:

Operating cash outflows from operating leases

Weighted average remaining lease term in years

Weighted average discount rate

Finance lease information:

Financing cash outflows from finance leases

Proceeds from sale and leaseback arrangement

Weighted average remaining lease term in years

Weighted average discount rate

Future minimum lease payments under non-cancellable leases as of September 30, 2024, were as follows:

Operating Leases

Finance Leases

(In thousands)

Total minimum lease payments

Less imputed interest and deferred finance fees

Total lease liability

The following are reflected within the indicated condensed consolidated balance sheet line items:

For the Nine Months Ended September 30,

For the Year Ended December 31,

(In thousands)

Operating lease assets

Buildings and equipment

Operating lease liabilities:

Current operating lease liabilities

Accounts payable and accrued liabilities

Non-current operating lease liabilities

Other long-term liabilities

Total operating lease liability

Finance lease assets

Finance lease right-of-use assets

Finance lease liabilities:

Current finance lease liabilities

Current portion of lease financing

Non-current finance lease liabilities

Long-term lease financing

Total finance lease liabilities

Forfeitures are recognized as they occur.

SELF-INSURANCE

We self-insure our non-leased underground mining equipment.

Such equipment was allocated among four mining units dispersed over seven miles and seven mining units dispersed over eleven miles, at September 30, 2024 and December 31, 2023, respectively.

The historical cost of such equipment was approximately $ 247.3 million and $ 262.0 million as of September 30, 2024, and December 31, 2023.

We also self-insure for workers’ compensation claims.

Restricted cash of $ 5.8 million and $ 4.3 million as of September 30, 2024, and December 31, 2023, represents cash held and controlled by a third party and is restricted primarily for future workers’ compensation claim payments.

Such equipment was allocated among four mining units dispersed over seven miles, at March 31, 2025 and December 31, 2024.

The historical cost of such equipment was approximately $ 160.8 million and $ 227.8 million as of March 31, 2025, and December 31, 2024.

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 $ 3.3 million and $ 3.4 million as of March 31, 2025, and December 31, 2024, respectively, represents cash held and controlled by a third party and is restricted primarily for future workers’ compensation claim payments.

The Company had $ 4.8 million and $ 4.3 million of workers’ compensation reserve as of March 31, 2025 and December 31, 2024 , respectively, in “accounts payable and accrued liabilities” on the condensed consolidated balance sheets.

FAIR VALUE MEASUREMENTS

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ARO liabilities use Level 3 non-recurring fair value measures .

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.

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.

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.

The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and restricted cash.

The Company’s cash and cash equivalent and restricted cash balances on deposit with financial institutions total $ 9.6 million and $ 7.1 million as of September 30, 2024 and December 31, 2023, respectively, which exceeded FDIC insured limits.

The Company’s cash and cash equivalent and restricted cash balances on deposit with financial institutions total $ 16.2 million and $ 12.2 million as of March 31, 2025 and December 31, 2024, respectively, which exceeded FDIC insured limits.

The Company regularly monitors these institutions’ financial condition.

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Sunrise Energy, LLC, also plans to develop and explore for oil, natural gas, and coal-bed methane gas reserves on or near our underground coal reserves.

The carrying value of the investment included in our condensed consolidated balance sheets as of September 30, 2024, and December 31, 2023, was $ 2.1 million and $ 2.8 million, respectively.

CONVERTIBLE NOTES

On July 29, 2022, we issued a $ 5.0 million senior unsecured convertible note (the “July 29 th Note”) to a related party affiliated with an independent member of our board of directors.

The July 29 th Note 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 a 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 September 30, 2024, the entire July 29 th Note had been converted to shares of common stock of the Company.

On August 8, 2022, we issued an additional $ 4.0 million of senior unsecured convertible notes (the “August 8 th Notes”) to related parties affiliated with independent members of our board of directors.

The August 8 th Notes 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 a loss on extinguishment of debt during the first quarter of 2024 in the condensed consolidated statements of operations in the amount of $ 0.3 million .

During the second quarter of 2024, the holder converted the remaining $ 1.0 million of August 8 th Notes into 159,898 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 5,099 and 25,003 , respectively, on the conversion date.

We recorded a loss on extinguishment of debt during the second quarter of 2024 in the condensed consolidated statements of operations in the amount of $ 0.2 million.

As of September 30, 2024, the entire August 8 th Note had been converted to shares of common stock of the Company.

On August 12, 2022, we issued an additional $ 10.0 million senior unsecured convertible note (the “August 12 th Note”) to an unrelated party.

The August 12 th Note 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 a loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $ 1.7 million during the second quarter of 2024.

As of September 30, 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 the Company’s common stock issuable upon conversion of the above notes are subject to adjustment from time to time for any subdivision or consolidation of our shares of common stock and other standard dilutive events.

NOTES PAYABLE - RELATED PARTIES

In March 2024, we issued unsecured promissory notes, having a 12-month maturity date and 12 % per annum interest rate, to (i) Charles R.

Wesley IV Revocable Trust (in which our director Charles R.

Wesley IV has a pecuniary interest) in the principal amount of $ 2,000,000 , (ii) Lubar Opportunities Fund I, LLC (in which are our director David J.

Lubar has a pecuniary interest) in the principal amount of $ 2,500,000 , and (iii) Hallador Alternative Investment Advisors LLC (in which our director David C.

Hardie has a pecuniary interest) in the principal amount of $ 500,000 .

The related party notes were paid off in June 2024 with proceeds from the prepaid physically delivered power contract mentioned above in “Note 7 – Revenue” .

The carrying value of the investment included in our condensed consolidated balance sheets as of March 31, 2025, and December 31, 2024, was $ 2.0 million and $ 2.1 million, respectively.

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 condensed consolidated balance sheets as of March 31, 2025, and December 31, 2024, was $ 0.4 million and $ 0.5 million, respectively.

ORGANIZATIONAL RESTRUCTURING

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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”).

The Reorganization Plan was designed to strengthen our financial and operational efficiency and create significant operational savings and higher margins in our Coal Operations segment.

This step helped 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 operating expenses in the condensed consolidated statements of operations.

These charges related to compensation, tax, professional, and insurance related expenses and are considered one-time charges paid in the nine months of 2024.

AT THE MARKET AGREEMENT

On December 18, 2023 , we entered into an At The Market Issuance Sales Agreement (the “Sales Agreement”) with B.

Riley Securities, Inc.

(the “Agent”), pursuant to which we may issue and sell, from time to time, shares (the “Shares”) of our common stock, par value $ 0.01 per share (the “Common Stock”), with aggregate gross proceeds of up to $ 50.0 million through an “at-the-market” equity offering program under which the Agent will act as sales agent (the “ATM Program”).

Under the Sales Agreement, we or the Agent have the right, by giving five ( 5 ) days’ notice, to terminate the Sales Agreement in our and the Agents sole discretion.

The Agent may also terminate the Agreement, by notice to us, upon the occurrence of certain events described in the Sales Agreement.

During the nine months ended September 30, 2024, we issued 4,654,430 shares of Common Stock under the ATM Program for net proceeds of $ 34.5 million.

No shares were issued under the ATM Program during the third quarter of 2024.

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 condensed consolidated statements of operations.

These charges related to compensation, tax, professional, and insurance related expenses 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.

SEGMENTS OF BUSINESS

As of September 30, 2024, our operations are divided into two primary reportable segments, Electric Operations and Coal Operations.

The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as “Corporate and Other and Eliminations” and primarily are comprised of unallocated corporate costs and activities, including a 50 % interest in Sunrise Energy, LLC, which the Company accounts for using the equity method and our held-for-sale wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Operating revenues

Electric operations (i)

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 underground mining complex, 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 March 31, 2025 (in thousands):

Electric Operations

Coal Operations

Corporate and other and eliminations

Consolidated operating revenues

Operating expenses

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 March 31, 2024 (in thousands):

Electric Operations

Coal Operations

Corporate and other and eliminations

Consolidated operating expenses

Income (loss) from operations

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 March 31, 2025 (in thousands):

Corporate and Other

Reconciliation of Revenue:

Electric Operations

Coal Operations

Corporate and other and eliminations

Consolidated income (loss) from operations

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 March 31, 2024 (in thousands):

Corporate and Other

Reconciliation of Revenue:

Electric Operations

Coal Operations

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 March 31, 2025 (in thousands):

Corporate and Other

Reconciliation of Income (Loss) before Income Taxes:

Electric Operations

Coal Operations

and Eliminations

Electric Operations — EBITDA Margin

Coal Operations — EBITDA Margin

Other Operating Revenue

Depreciation, Depletion and Amortization

Asset Retirement Obligations Accretion

Exploration Costs

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

Interest Expense

Equity Method Investment (Loss)

Corporate — General and Administrative

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 March 31, 2024 (in thousands):

Corporate and Other

Reconciliation of Income (Loss) before Income Taxes:

Electric Operations

Coal Operations

Corporate and other and eliminations

Consolidated depreciation, depletion and amortization

and Eliminations

Electric Operations — EBITDA Margin

Coal Operations — EBITDA Margin

Other Operating Revenue

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 March 31, 2025 (in thousands):

Corporate and Other

Other Reconciliations:

Electric Operations

Coal Operations

Corporate and other and eliminations

Consolidated assets

and Eliminations

Capital Expenditures

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

Corporate and Other

Other Reconciliations:

Electric Operations

Coal Operations

Corporate and other and eliminations

Consolidated capital expenditures

Electric operations revenue as of each period presented were comprised of the components noted below (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Operating revenues:

Capacity revenue

Delivered energy

Amortization of contract liability

Other operating revenue

Total Electric Operations revenue:

and Eliminations

Capital Expenditures

NET INCOME (LOSS) PER SHARE

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Basic earnings per common share:

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Diluted earnings per common share:

Net income (loss) - basic

Convertible Notes interest expense, net of tax

Net income (loss) - diluted

Weighted average shares outstanding - basic

Dilutive effects of if converted Convertible Notes

Dilutive effects of Restricted Stock Units

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Diluted net income (loss) per share

(20) ASSETS HELD-FOR-SALE

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

Summit is included in our “Corporate and other and eliminations” segment and primarily holds 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 are included in "assets held-for-sale" in the current assets section of the condensed 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 will continue to do so while held-for-sale criteria is met.

The Company expects the Summit sale to be executed by December 31, 2024.

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 as of September 30, 2024, and subtracted estimated costs to sell from that calculated fair value.

The resulting net fair value of Summit's assets exceeded the carrying value of Summit’s assets, and accordingly no impairments were recorded.

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

SUBSEQUENT EVENTS

On October 23, 2024 , the Company entered into a 19-month (beginning in June of 2025) $ 60.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,918,275 MWh.

A portion of the proceeds were used to pay down $ 20.0 million on our Term Loan, which satisfies our January 2025, April 2025, July 2025 and a portion of our October 2025 required quarterly Term Loan payments.

We also paid $ 34.0 million on our revolver.

On October 23, 2024, the Company entered into a second amendment to the Fourth Amended and Restated Credit Agreement with PNC, dated as of August 2, 2023, to clarify certain provisions of the First Amendment that was entered into on September 27, 2024.

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 was recorded in “Operating expenses” on our consolidated statements of operations for the year ended December 31, 2024 and is in “Accounts payable and accrued liabilities” on our condensed consolidated balance sheets at March 31, 2025.

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-Q

Item 1. Financial Statements