HALLADOR ENERGY CO [HNRG] Filings

10-Q 1 hnrg20240630c_10q.htm FORM 10-Q hnrg20240630c_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2024
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:001-34743

HALLADOR ENERGY COMPANY

(www.halladorenergy.com)

Colorado

(State of incorporation)

84-1014610

(IRS Employer Identification No.)

1183 East Canvasback Drive, Terre Haute, Indiana

(Address of principal executive offices)

47802

(Zip Code)

Registrant’s telephone number, including area code: 812.299.2800

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Shares, $.01 par value	HNRG	Nasdaq

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

Large accelerated filer ☐		Accelerated filer ☑
Non-accelerated filer ☐		Smaller reporting company ☑
		Emerging growth company ☐

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

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

As of August 2, 2024, we had 42,598,058 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	1

ITEM 1. FINANCIAL STATEMENTS (Unaudited)	1

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Operations	2

Condensed Consolidated Statements of Cash Flows	3

Condensed Consolidated Statements of Stockholders’ Equity	4

Notes to Condensed Consolidated Financial Statements	5

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25

ITEM 4. CONTROLS AND PROCEDURES	25

PART II - OTHER INFORMATION	26

ITEM 4. MINE SAFETY DISCLOSURES	26

ITEM 6. EXHIBITS	26

SIGNATURES	27

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Hallador Energy Company

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

	*June 30,*			*December 31,*
	*2024*			*2023*
ASSETS
Current assets:
Cash and cash equivalents	$	6,446		$	2,842
Restricted cash		4,282			4,281
Accounts receivable		19,098			19,937
Inventory		32,595			23,075
Parts and supplies		39,459			38,877
Prepaid expenses		2,027			2,262
Total current assets		103,907			91,274
Property, plant and equipment:
Land and mineral rights		115,486			115,486
Buildings and equipment		531,413			537,131
Mine development		164,475			158,642
Finance lease right-of-use assets		19,869			12,346
Total property, plant and equipment		831,243			823,605
Less - accumulated depreciation, depletion and amortization		(349,462	)		(334,971	)
Total property, plant and equipment, net		481,781			488,634
Investment in Sunrise Energy		2,305			2,811
Other assets		7,176			7,061
Total assets	$	595,169		$	589,780

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of bank debt, net	$	17,938		$	24,438
Accounts payable and accrued liabilities		45,890			62,908
Current portion of lease financing		6,204			3,933
Deferred revenue		84,772			23,062
Contract liability - power purchase agreement and capacity payment reduction		40,735			43,254
Total current liabilities		195,539			157,595
Long-term liabilities:
Bank debt, net		24,734			63,453
Convertible notes payable		—			10,000
Convertible notes payable - related party		—			9,000
Long-term lease financing		10,699			8,157
Deferred income taxes		5,614			9,235
Asset retirement obligations		15,335			14,538
Contract liability - power purchase agreement		25,076			47,425
Other		2,002			1,789
Total long-term liabilities		83,460			163,597
Total liabilities		278,999			321,192
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par value, 10,000 shares authorized; none issued		—			—
Common stock, $.01 par value, 100,000 shares authorized; 42,599 and 34,052 issued and outstanding, as of June 30, 2024 and December 31, 2023, respectively		426			341
Additional paid-in capital		186,945			127,548
Retained earnings		128,799			140,699
Total stockholders’ equity		316,170			268,588
Total liabilities and stockholders’ equity	$	595,169		$	589,780

See accompanying notes to the condensed consolidated financial statements.

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Hallador Energy Company

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	*Three Months Ended June 30,*						*Six Months Ended June 30,*
	*2024*			*2023*			*2024*			*2023*
SALES AND OPERATING REVENUES:
Electric sales	$	56,846		$	71,017		$	115,601		$	163,409
Coal sales		32,801			88,574			82,431			183,176
Other revenues		1,267			1,603			2,554			2,943
Total sales and operating revenues		90,914			161,194			200,586			349,528
EXPENSES:
Fuel		10,439			32,641			18,498			88,614
Other operating and maintenance costs		35,912			41,908			73,394			74,428
Utilities		3,396			4,343			7,770			8,840
Labor		26,555			36,528			61,723			77,059
Depreciation, depletion and amortization		13,649			17,169			29,092			35,145
Asset retirement obligations accretion		399			461			798			912
Exploration costs		47			305			117			511
General and administrative		7,803			5,595			13,747			12,542
Total operating expenses		98,200			138,950			205,139			298,051

INCOME (LOSS) FROM OPERATIONS		(7,286	)		22,244			(4,553	)		51,477

Interest expense (1)		(3,735	)		(3,541	)		(7,672	)		(7,440	)
Loss on extinguishment of debt		(1,937	)		—			(2,790	)		—
Equity method investment (loss)		(257	)		(217	)		(506	)		(148	)
NET INCOME (LOSS) BEFORE INCOME TAXES		(13,215	)		18,486			(15,521	)		43,889

INCOME TAX EXPENSE (BENEFIT):
Current		—			61			—			493
Deferred		(3,011	)		1,510			(3,621	)		4,430
Total income tax expense (benefit)		(3,011	)		1,571			(3,621	)		4,923

NET INCOME (LOSS)	$	(10,204	)	$	16,915		$	(11,900	)	$	38,966

NET INCOME (LOSS) PER SHARE:
Basic	$	(0.27	)	$	0.51		$	(0.32	)	$	1.18
Diluted	$	(0.27	)	$	0.47		$	(0.32	)	$	1.08

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		37,879			33,137			37,026			33,061
Diluted		37,879			36,708			37,026			36,696

(1) Interest Expense:
Interest on bank debt	$	2,779		$	2,055		$	5,584		$	4,310
Other interest		547			462			1,275			894
Amortization:
Amortization of debt issuance costs		409			1,024			813			2,236
Total amortization		409			1,024			813			2,236
Total interest expense	$	3,735		$	3,541		$	7,672		$	7,440

See accompanying notes to the condensed consolidated financial statements.

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Hallador Energy Company

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	*Six Months Ended June 30,*
	*2024*			*2023*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(11,900	)	$	38,966
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax (benefit)		(3,621	)		4,430
Equity loss – Sunrise Energy		506			148
Cash distribution - Sunrise Energy		—			625
Depreciation, depletion, and amortization		29,092			35,145
Loss on extinguishment of debt		2,790			—
Loss (gain) on sale of assets		(246	)		58
Amortization of debt issuance costs		813			2,236
Asset retirement obligations accretion		798			912
Cash paid on asset retirement obligation reclamation		(602	)		(931	)
Stock-based compensation		2,247			2,001
Amortization of contract asset and contract liabilities		(24,868	)		(22,162	)
Other		1,402			704
Change in operating assets and liabilities:
Accounts receivable		839			8,461
Inventory		(9,520	)		(9,322	)
Parts and supplies		(582	)		(5,564	)
Prepaid expenses		2,140			282
Accounts payable and accrued liabilities		(11,107	)		(11,867	)
Deferred revenue		61,710			121
Net cash provided by operating activities		39,891			44,243
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(28,044	)		(30,610	)
Proceeds from sale of equipment		2,474			62
Net cash used in investing activities		(25,570	)		(30,548	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on bank debt		(86,500	)		(37,013	)
Borrowings of bank debt		40,500			26,000
Payments on lease financing		(2,665	)		—
Proceeds from sale and leaseback arrangement		3,783			—
Issuance of related party notes payable		5,000			—
Payments on related party notes payable		(5,000	)		—
Debt issuance costs		(76	)		(1,629	)
ATM offering		34,515			—
Taxes paid on vesting of RSUs		(273	)		(1,109	)
Net cash used in financing activities		(10,716	)		(13,751	)
Increase (decrease) in cash, cash equivalents, and restricted cash		3,605			(56	)
Cash, cash equivalents, and restricted cash, beginning of period		7,123			6,426
Cash, cash equivalents, and restricted cash, end of period	$	10,728		$	6,370
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Cash and cash equivalents	$	6,446		$	2,337
Restricted cash		4,282			4,033
	$	10,728		$	6,370
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	6,312		$	5,010
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Change in capital expenditures included in accounts payable and prepaid expense	$	(1,694	)	$	426
Stock issued on redemption of convertible notes and interest	$	22,993		$	—

See accompanying notes to the condensed consolidated financial statements.

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Hallador Energy Company

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

							*Additional*						*Total*
	*Common Stock Issued*						*Paid-in*			*Retained*			*Stockholders'*
	*Shares*			*Amount*			*Capital*			*Earnings*			*Equity*
Balance, March 31, 2024		36,534		$	365		$	144,490		$	139,003		$	283,858
Stock-based compensation		—			—			1,581			—			1,581
Stock issued on vesting of RSUs		58			1			(1	)		—			—
Taxes paid on vesting of RSUs		(27	)		(1	)		(271	)		—			(272	)
Stock issued on redemption of convertible notes		2,090			21			13,251			—			13,272
Stock issued in ATM offering		3,944			40			27,895			—			27,935
Net loss		—			—			—			(10,204	)		(10,204	)
Balance, June 30, 2024		42,599		$	426		$	186,945		$	128,799		$	316,170

Balance, December 31, 2023		34,052		$	341		$	127,548		$	140,699		$	268,588
Stock-based compensation		—			—			2,247			—			2,247
Stock issued on vesting of RSUs		379			4			(4	)		—			—
Taxes paid on vesting of RSUs		(159	)		(2	)		(271	)		—			(273	)
Stock issued on redemption of convertible notes		3,672			36			22,957			—			22,993
Stock issued in ATM offering		4,655			47			34,468			—			34,515
Net loss		—			—			—			(11,900	)		(11,900	)
Balance, June 30, 2024		42,599		$	426		$	186,945		$	128,799		$	316,170

							*Additional*					*Total*
	*Common Stock Issued*						*Paid-in*			*Retained*		*Stockholders'*
	*Shares*			*Amount*			*Capital*			*Earnings*		*Equity*
Balance, March 31, 2023		33,137		$	332		$	118,897		$	117,957	$	237,186
Stock-based compensation		—			—			781			—		781
Net income		—			—			—			16,915		16,915
Balance, June 30, 2023		33,137		$	332		$	119,678		$	134,872	$	254,882

Balance, December 31, 2022		32,983		$	330		$	118,788		$	95,906	$	215,024
Stock-based compensation		—			—			2,001			—		2,001
Stock issued on vesting of RSUs		275			3			(3	)		—		—
Taxes paid on vesting of RSUs		(121	)		(1	)		(1,108	)		—		(1,109	)
Net income		—			—			—			38,966		38,966
Balance, June 30, 2023		33,137		$	332		$	119,678		$	134,872	$	254,882

See accompanying notes to the condensed consolidated financial statements.

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Hallador Energy Company

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1)

GENERAL BUSINESS

The condensed consolidated financial statements include the accounts of Hallador Energy Company (hereinafter known as “we, us, or our”) and its wholly owned subsidiaries Sunrise Coal, LLC ("Sunrise"), Hallador Power Company, LLC ("Hallador Power"), as well as Sunrise and Hallador Power's wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the Company’s prior period condensed consolidated financial information to conform to the current period presentation. These presentation changes did not impact the Company’s condensed consolidated net income (loss), consolidated cash flows, total assets, total liabilities or total stockholders’ equity.

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

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

The Coal Operations reportable segment includes mining complexes Oaktown 1 and 2 underground mines, Prosperity surface mine, Freelandville surface mine, and Carlisle wash plant. On February 23, 2024, our Coal Operations Segment committed to a reorganization effort designed to strengthen its financial and operational efficiency and create significant operational savings and higher margins. For further information, see “Note 16 – Organizational Restructuring” below.

The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The condensed consolidated financial statements included herein have been prepared pursuant to the Securities and Exchange Commission’s (the "SEC") rules and regulations; accordingly, certain information and footnote disclosures normally included in generally accepted accounting principles ("GAAP") financial statements have been condensed or omitted.

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

Our organization and business, the accounting policies we follow, and other information are contained in the notes to our consolidated financial statements filed as part of our 2023 Annual Report on Form 10-K. This quarterly report should be read in conjunction with such Annual Report on Form 10-K.

(2)

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 primarily requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker ("CODM"), the amount and composition of other segment items, and the title and position of the CODM. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07, but do not expect it to have a material effect on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 primarily requires enhanced disclosures to (1) disclose specific categories in the rate reconciliation, (2) disclose the amount of income taxes paid and expensed disaggregated by federal, state, and foreign taxes, with further disaggregation by individual jurisdictions if certain criteria are met, and (3) disclose income (loss) from continuing operations before income tax (benefit) disaggregated between domestic and foreign. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09, but do not expect it to have a material effect on our consolidated financial statements.

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(3)

LONG-LIVED ASSET IMPAIRMENTS

Long-lived assets are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable. For the three and six-month periods ended June 30, 2024 and June 30, 2023, no impairment charges were recorded for long-lived assets.

(4)

INVENTORY

Inventory is valued at a lower of cost or net realizable value (NRV). As of June 30, 2024, and December 31, 2023, coal inventory includes NRV adjustments of $0.9 million and $2.0 million, respectively.

(5)

BANK DEBT

At June 30, 2024, the Company had term debt of $45.5 million. The term debt required quarterly payments of $6.5 million starting in April 2024 through maturity. Our debt is recorded at amortized cost, which approximates fair value due to the variable interest rates in the agreement and is collateralized primarily by our assets.

Bank debt was reduced by $46.0 million during the six months ended June 30, 2024.

Liquidity

As of June 30, 2024, we had additional borrowing capacity of $54.4 million and total liquidity of $60.7 million. Our additional borrowing capacity utilizes our $75.0 million revolver availability and reduces it by $20.6 million for outstanding letters of credit that we were required to maintain for surety bonds. Liquidity consists of our additional borrowing capacity and cash and cash equivalents.

Fees

Unamortized bank fees related to our term debt as of June 30, 2024, and December 31, 2023, were $2.8 million and $3.6 million, respectively. These unamortized bank fees were deferred and are being amortized over the term of the loan.

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

	*June 30,*			*December 31,*
	*2024*			*2023*
Current bank debt	$	19,500		$	26,000
Less unamortized debt issuance cost		(1,562	)		(1,562	)
Net current portion	$	17,938		$	24,438

Long-term bank debt	$	26,000		$	65,500
Less unamortized debt issuance cost		(1,266	)		(2,047	)
Net long-term portion	$	24,734		$	63,453

Total bank debt	$	45,500		$	91,500
Less total unamortized debt issuance cost		(2,828	)		(3,609	)
Net bank debt	$	42,672		$	87,891

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Covenants

The credit facility includes a Maximum Leverage Ratio (consolidated funded debt/trailing twelve months adjusted EBITDA), calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed 2.25 to 1.00. As of June 30, 2024, our Leverage Ratio of 2.12 was in compliance with the requirements of the credit agreement.

The credit facility also requires a Minimum Debt Service Coverage Ratio (consolidated adjusted EBITDA/annual debt service) calculated as of the end of each fiscal quarter for the trailing twelve months of 1.25 to 1.00 through the credit facility's maturity. As of June 30, 2024, our Debt Service Coverage Ratio of 1.56 was in compliance with the requirements of the credit agreement.

As of June 30, 2024, we were in compliance with all other covenants defined in the credit agreement.

Interest Rate

The interest rate on the facility ranges from SOFR plus 4.00% to SOFR plus 5.00%, depending on our Leverage Ratio. As of June 30, 2024, we were paying SOFR plus 5.00% on the outstanding bank debt which equates to an all-in rate of 10.49%.

Future Maturities (in thousands):
2024	$	6,500
2025		26,000
2026		13,000
Total	$	45,500

(6)

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

	*June 30,*		*December 31,*
	*2024*		*2023*
Accounts payable	$	29,151	$	43,636
Accrued property taxes		4,109		2,987
Accrued payroll		3,606		6,575
Workers' compensation reserve		4,364		3,629
Group health insurance		1,900		2,300
Asset retirement obligation - current portion		1,548		2,150
Other		1,212		1,631
Total accounts payable and accrued liabilities	$	45,890	$	62,908

(7)

REVENUE

Revenue from Contracts with Customers

We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all the consideration will be collected. We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer.

Electric operations

We concluded that for a Power Purchase Agreement (“PPA”) that is not determined to be a lease or derivative, the definition of a contract and the criteria in ASC 606, Revenue from Contracts with Customers ("ASC 606"), is met at the time a PPA is executed by the parties, as this is the point at which enforceable rights and obligations are established. Accordingly, we concluded that a PPA that is not determined to be a lease or derivative constitutes a valid contract under ASC 606.

We recognize revenue daily, based on an output method of capacity made available as part of any stand-ready obligations for contract capacity performance obligations and daily, based on an output method of MWh of electricity delivered.

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For the delivered energy performance obligation in the PPA with Hoosier, we recognize revenue daily for actual delivered electricity plus the amortization of the contract liability as a result of the Asset Purchase Agreement with Hoosier. For delivered energy to all other customers, we recognize revenue daily for the actual delivered electricity.

Coal operations

Our coal revenue is derived from sales to customers of coal produced at our facilities. Our customers typically purchase coal directly from our mine sites where the sale occurs and where title, risk of loss, and control pass to the customer at that point. Our customers arrange for and bear the costs of transporting their coal from our mines to their plants or other specified discharge points. Our customers are typically domestic utility companies. Our coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, or include a pre-determined escalation in price for each year. Price re-opener and index provisions may allow either party to commence a renegotiation of the contract price at a pre-determined time. Price re-opener provisions may automatically set a new price based on the prevailing market price or, in some instances, require us to negotiate a new price, sometimes within specified ranges of prices. The terms of our coal sales agreements result from competitive bidding and extensive negotiations with customers. Consequently, the terms of these contracts vary by customer.

Coal sales agreements will typically contain coal quality specifications. With coal quality specifications in place, the raw coal sold by us to the customer at the delivery point must be substantially free of magnetic material and other foreign material impurities and crushed to a maximum size as set forth in the respective coal sales agreement. Price adjustments are made and billed in the month the coal sale was recognized based on quality standards that are specified in the coal sales agreement, such as Btu factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped.

Disaggregation of Revenue

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

Electric operations

	*Three Months Ended June 30,*				*Six Months Ended June 30,*
	*2024*		*2023*		*2024*		*2023*
Delivered energy (including contract liability amortization)	$	39,973	$	53,862	$	86,955	$	130,284
Capacity		16,873		17,155		28,646		33,125
Total Electric Operations sales	$	56,846	$	71,017	$	115,601	$	163,409

Coal operations

	*Three Months Ended June 30,*				*Six Months Ended June 30,*
	*2024*		*2023*		*2024*		*2023*
Outside third-party Indiana customers	$	15,048	$	34,214	$	33,152	$	83,650
Customers in Florida, North Carolina, Alabama and Georgia		17,753		54,360		49,279		99,526
Total Coal Operations sales	$	32,801	$	88,574	$	82,431	$	183,176

Performance Obligations

Electric operations

We concluded that each megawatt-hour ("MWh") of delivered energy is capable of being distinct as a customer could benefit from each on its own by using/consuming it as a part of its operations. We also concluded that the stand-ready obligation to be available to provide electricity is capable of being distinct as each unit of capacity provides an economic benefit to the holder and could be sold by the customer.

During 2022, we entered into an Asset Purchase Agreement (“APA”) with Hoosier (“Hoosier APA”) in which Hallador Power shall sell, and Hoosier shall buy, delivered energy quantities through 2025 at the contract price, which is $34.00 per MWh. We have remaining delivered energy obligations to Hoosier on the APA totaling $83.9 million through 2025 as of June 30, 2024. The agreement was amended August 31, 2023, to extend through 2028. The amendment included additional obligations to Hoosier of $186.6 million, or $56.00 per MWh, as of June 30, 2024.

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In addition to delivered energy, under the Hoosier APA, Hallador Power shall provide a stand-ready obligation to provide electricity to MISO, also known as contract capacity. The contract capacity that Hallador Power shall provide to Hoosier is 917 megawatts (“MW”) for contract year one, and on average 300 MW for contract years two to four. Hoosier shall pay Hallador Power the capacity price of $5.80 per kilowatt month for the contract capacity. We have remaining capacity obligations to Hoosier through 2025 totaling $30.0 million as of June 30, 2024. The agreement was amended August 31, 2023, to extend through 2028, with additional capacity obligations to Hoosier of $60.9 million as of June 30, 2024, at a price of $7.02 per kilowatt month for the contract capacity.

During the second quarter 2024, the Company entered into an 11-month, $45.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,302,480 MWh. We have energy and capacity obligations to customers, excluding Hoosier, through 2029 totaling $152.0 million and $151.1 million, respectively, as of June 30, 2024. We have $45.0 million and $39.8 million of deferred revenue as of June 30, 2024, related to the prepaid physically delivered power contract and other capacity obligations outside of the Hoosier APA, respectively.

Coal operations

A performance obligation is a promise in a contract with a customer to provide distinct goods or services. Performance obligations are the unit of account for purposes of applying the revenue recognition standard and therefore determine when and how revenue is recognized. In most of our coal contracts, the customer contracts with us to provide coal that meets certain quality criteria. We consider each ton of coal a separate performance obligation and allocate the transaction price based on the base price per the contract, increased or decreased for quality adjustments.

We recognize revenue at a point in time as the customer does not have control over the asset at any point during the fulfillment of the contract. For substantially all our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine. This is also the point at which physical possession of the coal transfers to the customer, as well as the right to receive substantially all benefits and the risk of loss in ownership of the coal.

We have remaining coal sales performance obligations relating to fixed priced contracts to third-party customers of approximately $207.7 million, which represents the average fixed prices on our committed contracts as of June 30, 2024. We expect to recognize approximately 30.3% of this coal sales revenue in 2024, with the remainder recognized through 2027.

We have remaining performance obligations relating to coal sales contracts with price reopeners of approximately $154.5 million, which represents our estimate of the expected reopener price on committed contracts as of June 30, 2024. We expect to recognize all of this coal sales revenue 2025 through 2027.

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

Contract Balances

Under ASC 606, the timing of when a performance obligation is satisfied can affect the presentation of accounts receivable, contract assets, and contract liabilities. The main distinction between accounts receivable and contract assets is whether consideration is conditional on something other than the passage of time. A receivable is an entity’s right to consideration that is unconditional.

Under the typical payment terms of our contracts with customers, the customer pays us a base price for the coal, increased or decreased for any quality adjustments, electricity, or capacity. Amounts billed and due are recorded as trade accounts receivable and included in accounts receivable in our condensed consolidated balance sheets. As of January 1, 2023, accounts receivable for coal sales billed to customers was $16.3 million.

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INCOME TAXES

For the six months ended June 30, 2024 and 2023, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income, forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate. The effective tax rate for the six months ended June 30, 2024 and 2023, was ~23% and ~11%, respectively. Historically, our actual effective tax rates have differed from the statutory effective rate primarily due to the benefit received from statutory percentage depletion in excess of tax basis. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income (loss) before income taxes.

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STOCK COMPENSATION PLANS

Non-vested grants as of December 31, 2023	858,363
Awarded - weighted average share price on award date was $5.69	599,013
Vested - weighted average share price on vested date was $5.30	(379,390	)
Forfeited	(37,500	)
Non-vested grants as of June 30, 2024	1,040,486

For the three and six months ended June 30, 2024 our stock compensation was $1.6 million and $2.2 million, respectively. For the three and six months ended June 30, 2023, our stock compensation was $0.8 million and $2.0 million, respectively.

Non-vested RSU grants will vest as follows:

Vesting Year	*RSUs Vesting*
2024	1,000
2025	641,144
2026	199,171
2027	199,171
		1,040,486

The outstanding RSUs have a value of $8.1 million based on the June 28, 2024 closing stock price of $7.77.

As of June 30, 2024, unrecognized stock compensation expense is $5.7 million, and we had 48,761 RSUs available for future issuance. RSUs are not allocated earnings and losses as they are considered non-participating securities.

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LEASES

We have operating leases for office space and processing facilities with remaining lease terms ranging from 1 month to 8 years. As most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. Imputed interest on our operating leases were $0.3 million and $0.3 million for the three and six months ended June 30, 2024.

During the six months ended June 30, 2024, we entered into four finance leases that were accounted for as failed sale-leaseback transactions. Finance lease assets are included in finance lease right-of-use assets on the condensed consolidated balance sheets and the associated finance lease liabilities are reflected within current portion of lease financing and long-term lease financing on the condensed consolidated balance sheets, as applicable. Depreciation on our finance lease assets was $1.1 million and $2.2 million for the three and six months ended June 30, 2024 . Imputed interest on our finance leases was $0.1 million and $2.0 million for the three and six months ended June 30, 2024 . We deferred financing fees of $0.2 and $0.1 million at June 30, 2024 and December 31, 2023, respectively, in connection with entry into the finance leases. These deferred financing fees will be amortized on a straight-line basis over the term of the finance leases. We did not have finance leases during the three and six months ended June 30, 2023.

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

	*Three Months Ended June 30,*						*Six Months Ended June 30,*
	*2024*			*2023*			*2024*			*2023*
Operating lease information:
Operating cash outflows from operating leases	$	52		$	52		$	104		$	104
Weighted average remaining lease term in years		7.6			0.95			7.6			0.95
Weighted average discount rate		10.5	%		6.0	%		10.5	%		6.0	%
Finance lease information:
Financing cash outflows from finance leases	$	1,427			—		$	2,665			—
Proceeds from sale and leaseback arrangement	$	1,856			—		$	3,783			—
Weighted average remaining lease term in years		2.64			—			2.64			—
Weighted average discount rate		8.5	%		—			8.5	%		—

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

	*Operating*			*Finance*
	*Leases*			*Leases*
	(In thousands)
2024	$	8		$	3,745
2025		118			7,490
2026		122			7,177
2027		125			662
2028		129			—
Thereafter		483			—
Total minimum lease payments	$	985		$	19,074
Less imputed interest and deferred finance fees		(347	)		(2,171	)
Total lease liability	$	638		$	16,903

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

		*For the Six Months Ended June 30,*		*For the Year Ended December 31,*
		*2024*		*2023*
		(In thousands)

Operating lease assets	Buildings and equipment	$	638	$	712
Operating lease liabilities:
Current operating lease liabilities	Accounts payable and accrued liabilities	$	8	$	58
Non-current operating lease liabilities	Other long-term liabilities		630		654
Total operating lease liability		$	638	$	712

Finance lease assets	Finance lease right-of-use assets	$	19,869	$	12,346
Finance lease liabilities:
Current finance lease liabilities	Current portion of lease financing	$	6,204	$	3,933
Non-current finance lease liabilities	Long-term lease financing		10,699		8,157
Total finance lease liabilities		$	16,903	$	12,090

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SELF-INSURANCE

We self-insure our non-leased underground mining equipment. Such equipment was allocated among four mining units dispersed over seven miles and seven mining units dispersed over eleven miles, at June 30, 2024 and December 31, 2023, respectively. The historical cost of such equipment was approximately $250.4 million and $262.0 million as of June 30, 2024, and December 31, 2023.

We also self-insure for workers’ compensation claims. Restricted cash of $4.3 million as of June 30, 2024, and December 31, 2023, represents cash held and controlled by a third party and is restricted primarily for future workers’ compensation claim payments.

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FAIR VALUE MEASUREMENTS

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. We have no Level 1 instruments.

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. We have no Level 2 instruments.

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Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). ARO liabilities use Level 3 non-recurring fair value measures.

Credit Risk

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

The Company’s cash and cash equivalent and restricted cash balances on deposit with financial institutions total $10.7 million and $7.1 million as of June 30, 2024 and December 31, 2023, respectively, which exceeded FDIC insured limits. The Company regularly monitors these institutions’ financial condition. The Company utilizes large and reputable banking institutions which it believes mitigates these risks. The Company has not experienced any losses in such accounts.

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EQUITY METHOD INVESTMENTS

We own a 50% interest in Sunrise Energy, LLC, which owns gas reserves and gathering equipment with plans to develop and operate such reserves. Sunrise Energy, LLC, also plans to develop and explore for oil, natural gas, and coal-bed methane gas reserves on or near our underground coal reserves. The carrying value of the investment included in our condensed consolidated balance sheets as of June 30, 2024, and December 31, 2023, was $2.3 million and $2.8 million, respectively.

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CONVERTIBLE NOTES

On July 29, 2022, we issued a $5.0 million senior unsecured convertible note (the “July 29^th Note”) to a related party affiliated with an independent member of our board of directors. The July 29^th Note carries an interest rate of 8% per annum with a maturity date of December 29, 2028. For the period August 18, 2022, through August 17, 2024, the holder has the option to convert the July 29^th Note into shares of the Company's common stock at a conversion price of $6.254. During the first quarter of 2024, the holders of the July 29^th Note converted them into 799,488 shares of common stock of the Company, and in connection with such early conversion, we elected to pay interest through August 2025 with 112,570 shares of common stock on the conversion date. We recorded a loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $0.6 million six months ended June 30, 2024. As of June 30, 2024, the entire July 29^th Note had been converted to shares of common stock of the Company.

On August 8, 2022, we issued an additional $4.0 million of senior unsecured convertible notes (the “August 8^th Notes”) to related parties affiliated with independent members of our board of directors. The August 8^th Notes carry an interest rate of 8% per annum with a maturity date of December 29, 2028. For the period August 18, 2022, through August 17, 2024, the holder has the option to convert the Notes into shares of the Company's common stock at a conversion price of $6.254. Beginning August 8, 2025, we may elect to redeem the August 8^thNotes and the holder shall be obligated to surrender them at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from the Company, the holder may elect to convert the principal balance and accrued interest into the Company's common stock. During the first quarter of 2024, the holders converted $3.0 million of the August 8^th Notes into 479,693 shares of common stock of the Company, and in connection with such early conversion, we elected to pay interest through August 2025 with 67,542 shares of common stock on the conversion date. During the same period, the holders also converted accrued interest into 57,564 shares of the Company's common stock. We recorded a loss on extinguishment of debt during the first quarter of 2024 in the condensed consolidated statements of operations in the amount of $0.3 million. During the second quarter of 2024, the holder converted the remaining $1.0 million of August 8^th Notes into 159,898 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 5,099 and 25,003, respectively, on the conversion date. We recorded a loss on extinguishment of debt during the second quarter of 2024 in the condensed consolidated statements of operations in the amount of $0.2 million. As of June 30, 2024, the entire August 8^th Note had been converted to shares of common stock of the Company.

On August 12, 2022, we issued an additional $10.0 million senior unsecured convertible note (the “August 12^th Note”) to an unrelated party. The August 12^th Note carries an interest rate of 8% per annum with a maturity date of December 31, 2026. For the period August 18, 2022, through the maturity date, the holder has the option to convert the August 12^th Note into shares of the Company's common stock at a conversion price of $6.15. Beginning August 12, 2025, we may elect to redeem the August 12^th Note and the holder shall be obligated to surrender at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from the Company, the holder may elect to convert the principal balance and accrued interest into the Company's common stock. During the three months ended March 31, 2024, the holder converted accrued interest into 65,041 shares of the Company's common stock. During the second quarter of 2024, the holder converted the $10.0 million August 12^th Note into 1,626,016 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 49,716 and 224,268, respectively, on the conversion date. We recorded a loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $1.7 million during the second quarter of 2024. As of June 30, 2024, the entire August 12^th Note had been converted to shares of common stock of the Company.

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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.

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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".

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ORGANIZATIONAL RESTRUCTURING

On February 23, 2024, (the "Effective Date"), we committed to a reorganization effort in the Coal Operations Segment (the "Reorganization Plan") that included a workforce reduction of approximately 110 employees, or approximately 12% of the workforce. The reduction in workforce was communicated to employees on the Effective Date and implemented immediately, subject to certain administrative procedures. The Reorganization Plan is designed to strengthen our financial and operational efficiency and create significant operational savings and higher margins in our coal segment. This step will help to advance our transition from a company primarily focused on coal production to a more resilient and diversified integrated independent power producer ("IPP"). As part of this initiative, we substantially idled production at our higher cost surface mines, Prosperity Mine, and Freelandville Mine, with minimal production. We also focused our seven units of underground equipment on four units of our lowest cost production at our Oaktown Mine. In connection with the Reorganization Plan, we incurred aggregate expenses of $1.9 million ($1.1 million in the first quarter of 2024 and $0.8 million in the second quarter of 2024) that were included in operating expenses in the condensed consolidated statements of operations. These charges related to compensation, tax, professional, and insurance related expenses and are considered one-time charges paid in the first six months of 2024.

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AT THE MARKET AGREEMENT

On December 18, 2023, we entered into an At The Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”), pursuant to which we may issue and sell, from time to time, shares (the “Shares”) of our common stock, par value $0.01 per share (the “Common Stock”), with aggregate gross proceeds of up to $50.0 million through an “at-the-market” equity offering program under which the Agent will act as sales agent (the “ATM Program”). Under the Sales Agreement, we or the Agent have the right, by giving five (5) days’ notice, to terminate the Sales Agreement in our and the Agents sole discretion. The Agent may also terminate the Agreement, by notice to us, upon the occurrence of certain events described in the Sales Agreement.

During December 2023, we issued 794,000 shares of Common Stock under the ATM Program for net proceeds of $7.3 million. During the three and six months ended June 30, 2024, we issued 3,943,807 and 4,654,430 shares of Common Stock, respectively, under the ATM Program for net proceeds of $27.9 million and $34.5 million, respectively.

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SEGMENTS OF BUSINESS

As of June 30, 2024, our operations are divided into two primary reportable segments, Electric Operations and Coal Operations. The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other and Eliminations" and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC, which the Company accounts for using the equity method and our wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.

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	*Three Months Ended June 30,*						*Six Months Ended June 30,*
	*2024*			*2023*			*2024*			*2023*
	(in thousands)						(in thousands)
Operating revenues
Electric operations⁽ⁱ⁾	$	57,020		$	71,103		$	115,932		$	163,597
Coal operations		46,429			113,098			113,299			208,371
Corporate and other and eliminations		(12,535	)		(23,007	)		(28,645	)		(22,440	)
Consolidated operating revenues	$	90,914		$	161,194		$	200,586		$	349,528

Operating expenses
Electric operations	$	50,232		$	61,847		$	93,897		$	135,636
Coal operations		57,750			86,735			136,077			168,920
Corporate and other and eliminations		(9,782	)		(9,632	)		(24,835	)		(6,505	)
Consolidated operating expenses	$	98,200		$	138,950		$	205,139		$	298,051

Income (loss) from operations
Electric operations	$	6,788		$	9,256		$	22,035		$	27,961
Coal operations		(11,321	)		26,363			(22,778	)		39,451
Corporate and other and eliminations		(2,753	)		(13,375	)		(3,810	)		(15,935	)
Consolidated income (loss) from operations	$	(7,286	)	$	22,244		$	(4,553	)	$	51,477

Depreciation, depletion and amortization
Electric operations	$	4,698		$	4,675		$	9,395		$	9,350
Coal operations		8,930			12,466			19,658			25,741
Corporate and other and eliminations		21			28			39			54
Consolidated depreciation, depletion and amortization	$	13,649		$	17,169		$	29,092		$	35,145

Assets
Electric operations	$	220,511		$	216,665		$	220,511		$	216,665
Coal operations		367,807			387,653			367,807			387,653
Corporate and other and eliminations		6,851			(4,429	)		6,851			(4,429	)
Consolidated assets	$	595,169		$	599,889		$	595,169		$	599,889

Capital expenditures
Electric operations	$	5,277		$	2,683		$	11,519		$	3,526
Coal operations		7,560			14,445			16,192			27,084
Corporate and other and eliminations		333			—			333			—
Consolidated capital expenditures	$	13,170		$	17,128		$	28,044		$	30,610

(i).

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

	*Three Months Ended June 30,*				*Six Months Ended June 30,*
	*2024*		*2023*		*2024*		*2023*
Operating revenues:
Capacity revenue	$	16,873	$	17,155	$	28,646	$	33,125
Delivered energy		27,893		34,307		62,087		77,382
Amortization of contract liability		12,080		19,555		24,868		52,902
Other operating revenue		174		86		331		188
Total Electric Operations revenue:	$	57,020	$	71,103	$	115,932	$	163,597

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NET INCOME (LOSS) PER SHARE

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

Three Months Ended June 30,