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 March 31, |
OR | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:001-34743
“COAL KEEPS YOUR LIGHTS ON” | “COAL KEEPS YOUR LIGHTS ON” | |
HALLADOR ENERGY COMPANY (www.halladorenergy.com) |
Colorado (State of incorporation) |
| 84-1014610 (IRS Employer Identification No.) |
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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 May 3, 2021,20, 2022, we had 30,612,57230,785,067 shares of common stock outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Hallador Energy Company
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
March 31, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 3,863 | $ | 8,041 | $ | 4,289 | $ | 2,546 | ||||||||
Restricted cash | 3,771 | 4,030 | 3,288 | 3,283 | ||||||||||||
Accounts receivable | 13,633 | 14,414 | 15,407 | 13,584 | ||||||||||||
Inventory | 34,036 | 24,663 | 8,775 | 7,699 | ||||||||||||
Parts and supplies | 9,288 | 8,903 | 11,470 | 10,015 | ||||||||||||
Prepaid expenses | 1,631 | 3,282 | 1,195 | 2,112 | ||||||||||||
Total current assets | 66,222 | 63,333 | 44,424 | 39,239 | ||||||||||||
Property, plant and equipment, at cost: | ||||||||||||||||
Property, plant and equipment: | ||||||||||||||||
Land and mineral rights | 115,840 | 115,853 | 115,839 | 115,837 | ||||||||||||
Buildings and equipment | 356,256 | 352,115 | 346,932 | 342,782 | ||||||||||||
Mine development | 96,971 | 93,635 | 116,198 | 112,575 | ||||||||||||
Total property, plant and equipment, at cost | 569,067 | 561,603 | ||||||||||||||
Total property, plant and equipment | 578,969 | 571,194 | ||||||||||||||
Less - accumulated depreciation, depletion and amortization | (262,523 | ) | (252,245 | ) | (277,545 | ) | (268,370 | ) | ||||||||
Total property, plant and equipment, net | 306,544 | 309,358 | 301,424 | 302,824 | ||||||||||||
Investment in Sunrise Energy | 3,181 | 3,181 | 3,695 | 3,545 | ||||||||||||
Other assets | 8,261 | 8,258 | 8,333 | 8,372 | ||||||||||||
Total Assets | $ | 384,208 | $ | 384,130 | $ | 357,876 | $ | 353,980 | ||||||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current portion of bank debt, net | $ | 34,311 | $ | 34,311 | $ | 116,178 | $ | 23,098 | ||||||||
Current portion of PPP note | 8,871 | 5,490 | ||||||||||||||
Accounts payable and accrued liabilities | 35,166 | 31,409 | 47,726 | 41,528 | ||||||||||||
Total current liabilities | 78,348 | 71,210 | 163,904 | 64,626 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Bank debt, net | 96,230 | 97,307 | 0 | 84,667 | ||||||||||||
PPP note | 1,129 | 4,510 | ||||||||||||||
Deferred income taxes | 1,095 | 2,824 | 2,673 | 2,850 | ||||||||||||
Asset retirement obligations | 16,537 | 16,177 | 13,668 | 14,025 | ||||||||||||
Other | 2,361 | 2,842 | 1,475 | 1,577 | ||||||||||||
Total long-term liabilities | 117,352 | 123,660 | 17,816 | 103,119 | ||||||||||||
Total liabilities | 195,700 | 194,870 | 181,720 | 167,745 | ||||||||||||
Redeemable noncontrolling interests | 4,000 | 4,000 | 4,000 | 4,000 | ||||||||||||
Stockholders' equity: | ||||||||||||||||
Preferred stock, $.10 par value, 10,000 shares authorized; none issued and outstanding | 0 | 0 | 0 | 0 | ||||||||||||
Common stock, $.01 par value, 100,000 shares authorized; 30,613 and 30,610 issued and outstanding, respectively | 306 | 306 | ||||||||||||||
Common stock, $.01 par value, 100,000 shares authorized; 30,785 issued and outstanding | 308 | 308 | ||||||||||||||
Additional paid-in capital | 103,679 | 103,399 | 104,181 | 104,126 | ||||||||||||
Retained earnings | 80,523 | 81,555 | 67,667 | 77,801 | ||||||||||||
Total stockholders’ equity | 184,508 | 185,260 | 172,156 | 182,235 | ||||||||||||
Total liabilities, redeemable noncontrolling interests, and stockholders’ equity | $ | 384,208 | $ | 384,130 | $ | 357,876 | $ | 353,980 |
See accompanying notes.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
SALES AND OPERATING REVENUES: | ||||||||||||||||
Coal sales | $ | 45,879 | $ | 61,932 | $ | 57,010 | $ | 45,879 | ||||||||
Other revenues | 816 | 551 | 1,897 | 816 | ||||||||||||
Total revenues | 46,695 | 62,483 | ||||||||||||||
Total revenue | 58,907 | 46,695 | ||||||||||||||
EXPENSES: | ||||||||||||||||
Operating expenses | 34,009 | 48,469 | 54,601 | 34,009 | ||||||||||||
Depreciation, depletion and amortization | 10,307 | 10,627 | 9,531 | 10,307 | ||||||||||||
Asset retirement obligations accretion | 363 | 333 | 246 | 363 | ||||||||||||
Exploration costs | 58 | 253 | 57 | 58 | ||||||||||||
General and administrative | 2,821 | 2,978 | 3,149 | 2,821 | ||||||||||||
Total operating expenses | 47,558 | 62,660 | 67,584 | 47,558 | ||||||||||||
LOSS FROM OPERATIONS | (863 | ) | (177 | ) | (8,677 | ) | (863 | ) | ||||||||
Interest expense (1) | (1,898 | ) | (5,714 | ) | (1,784 | ) | (1,898 | ) | ||||||||
Equity method investment income | 0 | 55 | 150 | 0 | ||||||||||||
LOSS BEFORE INCOME TAXES | (2,761 | ) | (5,836 | ) | (10,311 | ) | (2,761 | ) | ||||||||
INCOME TAX BENEFIT: | ||||||||||||||||
Current | 0 | (524 | ) | 0 | 0 | |||||||||||
Deferred | (1,729 | ) | (1,652 | ) | (177 | ) | (1,729 | ) | ||||||||
Total income tax benefit | (1,729 | ) | (2,176 | ) | (177 | ) | (1,729 | ) | ||||||||
NET LOSS | $ | (1,032 | ) | $ | (3,660 | ) | $ | (10,134 | ) | $ | (1,032 | ) | ||||
LOSS PER SHARE: | ||||||||||||||||
NET LOSS PER SHARE: | ||||||||||||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.33 | ) | $ | (0.03 | ) | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||
Basic and diluted | 30,611 | 30,420 | 30,785 | 30,611 | ||||||||||||
(1) Bank interest | 2,135 | 2,654 | ||||||||||||||
(1) Interest Expense: | ||||||||||||||||
Bank interest | 1,710 | 2,135 | ||||||||||||||
Non-cash interest: | ||||||||||||||||
Change in fair value of interest rate swaps valuation | (848 | ) | 2,593 | |||||||||||||
Change in interest rate swap valuation | (617 | ) | (848 | ) | ||||||||||||
Amortization of debt issuance costs | 611 | 467 | 691 | 611 | ||||||||||||
Total non-cash interest | (237 | ) | 3,060 | 74 | (237 | ) | ||||||||||
Total interest | $ | 1,898 | $ | 5,714 | ||||||||||||
Total interest expense | $ | 1,784 | $ | 1,898 |
See accompanying notes.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (1,032 | ) | $ | (3,660 | ) | $ | (10,134 | ) | $ | (1,032 | ) | ||||
Deferred income taxes | (1,729 | ) | (1,652 | ) | (177 | ) | (1,729 | ) | ||||||||
Equity income – Sunrise Energy | 0 | (55 | ) | (150 | ) | 0 | ||||||||||
Depreciation, depletion, and amortization | 10,307 | 10,627 | 9,531 | 10,307 | ||||||||||||
Unrealized gain on marketable securities | 0 | (14 | ) | |||||||||||||
Loss on sale of assets | 57 | 0 | ||||||||||||||
Change in fair value of interest rate swaps | (848 | ) | 2,593 | (617 | ) | (848 | ) | |||||||||
Change in fair value of fuel hedge | (239 | ) | 1,311 | 0 | (239 | ) | ||||||||||
Amortization of debt issuance costs | 611 | 467 | 691 | 611 | ||||||||||||
Asset retirement obligations accretion | 363 | 333 | 246 | 363 | ||||||||||||
Cash paid on asset retirement obligation reclamation | (703 | ) | 0 | |||||||||||||
Stock-based compensation | 282 | 319 | 55 | 282 | ||||||||||||
Provision for loss on customer contracts | 159 | 0 | ||||||||||||||
Change in current assets and liabilities: | ||||||||||||||||
Accounts receivable | 781 | 12,885 | (1,823 | ) | 781 | |||||||||||
Inventory | (9,373 | ) | (9,113 | ) | (1,076 | ) | (9,373 | ) | ||||||||
Parts and supplies | (385 | ) | 889 | (1,455 | ) | (385 | ) | |||||||||
Prepaid income taxes | 0 | 581 | ||||||||||||||
Prepaid expenses | (242 | ) | 159 | 1,647 | (242 | ) | ||||||||||
Accounts payable and accrued liabilities | 4,342 | (1,691 | ) | 6,563 | 4,342 | |||||||||||
Other | 135 | 2,277 | 163 | 135 | ||||||||||||
Cash provided by operating activities | $ | 2,973 | $ | 16,256 | 2,977 | 2,973 | ||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Investment in Sunrise Energy | 0 | (112 | ) | |||||||||||||
Capital expenditures | (5,720 | ) | (6,022 | ) | (9,082 | ) | (5,720 | ) | ||||||||
Proceeds from sale of marketable securities | 0 | 2,310 | ||||||||||||||
Proceeds from maturities of certificates of deposit | 0 | 245 | ||||||||||||||
Proceeds from sale of equipment | 131 | 0 | ||||||||||||||
Cash used in investing activities | (5,720 | ) | (3,579 | ) | (8,951 | ) | (5,720 | ) | ||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Payments on bank debt | (9,188 | ) | (12,100 | ) | (9,188 | ) | (9,188 | ) | ||||||||
Borrowings of bank debt | 7,500 | 0 | 17,500 | 7,500 | ||||||||||||
Debt issuance costs | (590 | ) | 0 | |||||||||||||
Taxes paid on vesting of RSUs | (2 | ) | 0 | 0 | (2 | ) | ||||||||||
Dividends paid | 0 | (1,236 | ) | |||||||||||||
Cash used in financing activities | (1,690 | ) | (13,336 | ) | ||||||||||||
Decrease in cash, cash equivalents, and restricted cash | (4,437 | ) | (659 | ) | ||||||||||||
Cash provided by (used in) financing activities | 7,722 | (1,690 | ) | |||||||||||||
Increase (decrease) in cash, cash equivalents, and restricted cash | 1,748 | (4,437 | ) | |||||||||||||
Cash, cash equivalents, and restricted cash, beginning of period | 12,071 | 13,311 | 5,829 | 12,071 | ||||||||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 7,634 | $ | 12,652 | $ | 7,577 | $ | 7,634 | ||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH CONSIST OF THE FOLLOWING: | ||||||||||||||||
Cash and cash equivalents | $ | 3,863 | $ | 7,918 | $ | 4,289 | $ | 3,863 | ||||||||
Restricted cash | 3,771 | 4,734 | 3,288 | 3,771 | ||||||||||||
$ | 7,634 | $ | 12,652 | $ | 7,577 | $ | 7,634 | |||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||||||
Cash paid for interest | $ | 2,145 | $ | 2,707 | $ | 2,044 | $ | 2,145 | ||||||||
SUPPLEMENTAL NON-CASH FLOW INFORMATION: | ||||||||||||||||
Change in capital expenditures included in accounts payable and prepaid expense | $ | 1,872 | $ | 3,516 | $ | (641 | ) | $ | 1,872 |
See accompanying notes.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Three Months Ended March 31, 2021 | ||||||||||||||||||||
Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Retained | Stockholders' | |||||||||||||||||
Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
Balance, December 31, 2020 | 30,610 | $ | 306 | $ | 103,399 | $ | 81,555 | $ | 185,260 | |||||||||||
Stock-based compensation | — | 0 | 282 | 0 | 282 | |||||||||||||||
Stock issued on vesting of RSUs | 4 | 0 | 0 | 0 | 0 | |||||||||||||||
Taxes paid on vesting of RSUs | (1 | ) | 0 | (2 | ) | 0 | (2 | ) | ||||||||||||
Net loss | — | 0 | 0 | (1,032 | ) | (1,032 | ) | |||||||||||||
Balance, March 31, 2021 | 30,613 | $ | 306 | $ | 103,679 | $ | 80,523 | $ | 184,508 |
Additional | Total | |||||||||||||||||||
Common Stock Issued | Paid-in | Retained | Stockholders' | |||||||||||||||||
Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
Balance, December 31, 2021 | 30,785 | $ | 308 | $ | 104,126 | $ | 77,801 | $ | 182,235 | |||||||||||
Stock-based compensation | — | — | 55 | — | 55 | |||||||||||||||
Net loss | — | 0 | 0 | (10,134 | ) | (10,134 | ) | |||||||||||||
Balance, March 31, 2022 | 30,785 | $ | 308 | $ | 104,181 | $ | 67,667 | $ | 172,156 |
Three Months Ended March 31, 2020 | ||||||||||||||||||||
Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Retained | Stockholders' | |||||||||||||||||
Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
Balance, December 31, 2019 | 30,420 | $ | 304 | $ | 102,215 | $ | 89,011 | $ | 191,530 | |||||||||||
Stock-based compensation | — | 0 | 319 | 0 | 319 | |||||||||||||||
Dividends | — | 0 | 0 | (1,236 | ) | (1,236 | ) | |||||||||||||
Net loss | — | 0 | 0 | (3,660 | ) | (3,660 | ) | |||||||||||||
Balance, March 31, 2020 | 30,420 | $ | 304 | $ | 102,534 | $ | 84,115 | $ | 186,953 |
Additional | Total | |||||||||||||||||||
Common Stock Issued | Paid-in | Retained | Stockholders' | |||||||||||||||||
Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
Balance, December 31, 2020 | 30,610 | $ | 306 | $ | 103,399 | $ | 81,555 | $ | 185,260 | |||||||||||
Stock-based compensation | — | — | 282 | — | 282 | |||||||||||||||
Stock issued on vesting of RSUs | 4 | 0 | 0 | 0 | 0 | |||||||||||||||
Taxes paid on vesting of RSUs | (1 | ) | — | (2 | ) | — | (2 | ) | ||||||||||||
Net loss | — | 0 | 0 | (1,032 | ) | (1,032 | ) | |||||||||||||
Balance, March 31, 2021 | 30,613 | $ | 306 | $ | 103,679 | $ | 80,523 | $ | 184,508 |
See accompanying notes.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) | GENERAL BUSINESS |
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 months ended March 31, 20212022, are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 20212022. To maintain consistency and comparability, certain 2020 amounts have been reclassified to conform to the 2021 presentation, with no impact to cash provided by operating activities or net loss.
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 20202021 Annual Report on Form 10-K.-K. This quarterly report should be read in conjunction with such Annual Report on Form 10-K.
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) and Hourglass Sands, LLC (Hourglass), and Sunrise’s wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Sunrise is engaged in the production of steam coal from mines located in western Indiana.
Subsequent EventsAs announced in our Form 8-K filed on February 18, 2022, on February 14, 2022, Hallador Energy Company, through its subsidiary Hallador Power Company, LLC, entered into an Asset Purchase Agreement (the "Purchase Agreement") to acquire Hoosier Energy’s 1-Gigawatt Merom Generating Station, located in Sullivan County, Indiana, in return for assuming certain decommissioning costs and environmental responsibilities. The transaction, which includes a 3.5-year power purchase agreement (PPA), is scheduled to close in mid- July 2022 upon obtaining required governmental and financial approvals.
We have
Going Concern
In accordance with ASU 2014-15, “ Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (Subtopic 205-40), the Company has evaluated all subsequentwhether there are conditions and events, throughconsidered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that our financials are issued. We performed the analysis, and our overall assessment was there were conditions or events, considered in the aggregate as of March 31, 2022, which raised substantial doubt about our ability to continue as a going concern within the next year.
During our analysis and overall assessment as we were preparing our Form 10-Q in April, we determined that we were in violation of one of our financial covenants for the quarter ending March 31, 2022 due to lower than expected Adjusted EBITDA, a significant non-GAAP factor in the calculation of the ratio, and could be in violation of financial covenants in future quarters, which management determined raises substantial doubt about the Company’s ability to continue as a going concern. These factors did not exist when we filed our Form 10-K on March 28, 2022 as we were projecting at the time that all covenants would be met for the next twelve months and beyond.
The Company has embarked on the following actions to address the concerns:
● | We executed an amendment to our credit agreement loosening our debt to EBITDA covenant for the three months ending March 31, 2022 and June 30, 2022. We plan to continue discussions with our banking group regarding possible non-compliance in future quarters if our other plans do not materialize. |
● | We have improved production productivity by 20% in April and May. This has led to significant production cost improvements. |
● | We have modified existing sales contracts, resulting in our average sales price increasing for the balance of 2022 – 2025. As the sales market is the strongest it has been in decades, we anticipate negotiating additional price increases for 2022-2023 later in the year. |
o | We expect the production cost improvements we have experienced that started in the second quarter 2022, coupled with our anticipated sales price increases, to increase our margins to closer to our historic >$10 per ton margins starting in June. |
● | We anticipate completing the acquisition of the Merom Generating Station (Merom) in the third quarter of 2022, subject to receiving certain regulatory and financial approvals, which we expect to significantly add to the profitability of our Company and increase EBITDA at that time. |
● | We also expect the dramatically stronger coal markets to contribute to an increase in our EBITDA in 2023. |
● | In May, we issued $10 million in convertible notes to parties affiliated with four of our board members and one unrelated party, to add to our March 31, 2022 liquidity of $20.6MM. |
The accompanying financial statements were issued. Therehave been prepared assuming that the Company will continue as a going concern. Although we are confident that the actions we have taken and are taking will alleviate the substantial doubt, no material recognized or non-recognizable subsequent eventsassurance can be given that our plans to address these matters will be successful, and therefore substantial doubt about the ability to continue as a going concern has not been alleviated. These financial statements do not include any adjustments that might result from this uncertainty, other than those already disclosed.
presenting our outstanding debt as current for the period ended March 31, 2022.
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 quarterthree month periods ended March 31, 2022 and March 31, 2021,, there were no0 impairment charges recorded for long-lived assets.
Hourglass Sands
We recorded an impairment of $2.9 million as of December 31, 2019, due to softness in the pricing of the frac sand market. The impairment included inventory, land, mine development, buildings and equipment and was determined using a market approach. The remaining fair market value of inventory, equipment, and buildings at Hourglass Sands was $1.9 million as of December 31, 2019. Due to the continued regression of the frac sand market, in August 2020 we ceased operations of the plant and recorded an impairment of $1.8 million for the quarter ended September 30, 2020, which included the remaining inventory and buildings and which was determined using a market approach.
(3) | INVENTORY |
Inventory is valued at lower of average cost or net realizable value (NRV). As of March 31, 20212022, and December 31, 20202021, coal inventory includes NRV adjustments of $1.1$5.0 million and $1.6$3.8 million, respectively.
(4) | OTHER LONG-TERM ASSETS (in thousands) |
March 31, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Advanced coal royalties | $ | 6,481 | $ | 6,449 | $ | 6,668 | $ | 6,678 | ||||||||
Other | 1,780 | 1,809 | 1,665 | 1,694 | ||||||||||||
Total other assets | $ | 8,261 | $ | 8,258 | $ | 8,333 | $ | 8,372 |
BANK DEBT |
On March 25, 2022, we executed an amendment to our credit agreement with PNC, administrative agent for our lenders. The primary purpose of the amendment was to return the allowable leverage ratio and debt service coverage ratio to their December 31, 2021 levels through September 30, 2022, with the debt service coverage waived for March 31, 2022.
On May 20, 2022, we executed an additional amendment to our credit agreement with PNC, administrative agent for our lenders. The primary purpose of this amendment was to modify the allowable leverage ratio and debt service coverage ratio through June 30, 2022 to provide relief for current and anticipated covenant violations.
Bank debt is comprised of term debt ($58.822.1 million as of March 31, 20212022) and a $120 million revolver ($77.398.0 million borrowed as of March 31, 20212022). The term debt amortization concludes with the final payment in March 2023. The revolver matures in September 2023. As a result of anticipated covenant violations for the three months ending September 30 and December 31, 2021, our revolver has been classified as current in these financial statements. 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.
Liquidity
As of March 31, 20212022, with the provisions of the amendments, we had additional borrowing capacity of $24.0$16.3 million and total liquidity of $27.9$20.6 million. Our additional borrowing capacity is net of $5.7 million in outstanding letters of credit as of March 31, 2021 2022, that were required to maintain surety bonds. Liquidity consists of our additional borrowing capacity and cash and cash equivalents.
Fees
Unamortized bank fees and other costs incurred in connection with the initial facility and subsequent amendments totaled $7.9$4.0 million as of our December 31, 2021. Additional costs incurred with the March 25, 2022 amendment in April 2020. were $0.6 million. These costs were deferred and are being amortized over the term of the loan. Unamortized costs as of March 31, 20212022, and December 31, 20202021, were $5.5$3.9 million and $6.1$4.0 million, respectively.
Bank debt, less debt issuance costs, is presented below (in thousands):
March 31, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Current bank debt | $ | 36,750 | $ | 36,750 | $ | 120,050 | $ | 25,725 | ||||||||
Less unamortized debt issuance costs | (2,439 | ) | (2,439 | ) | ||||||||||||
Less unamortized debt issuance cost | (3,872 | ) | (2,627 | ) | ||||||||||||
Net current portion | $ | 34,311 | $ | 34,311 | $ | 116,178 | $ | 23,098 | ||||||||
Long-term bank debt | $ | 99,300 | $ | 100,988 | $ | 0 | $ | 86,013 | ||||||||
Less unamortized debt issuance costs | (3,070 | ) | (3,681 | ) | ||||||||||||
Less unamortized debt issuance cost | 0 | (1,346 | ) | |||||||||||||
Net long-term portion | $ | 96,230 | $ | 97,307 | $ | 0 | $ | 84,667 | ||||||||
Total bank debt | $ | 136,050 | $ | 137,738 | $ | 120,050 | $ | 111,738 | ||||||||
Less total unamortized debt issuance costs | (5,509 | ) | (6,120 | ) | ||||||||||||
Less total unamortized debt issuance cost | (3,872 | ) | (3,973 | ) | ||||||||||||
Net bank debt | $ | 130,541 | $ | 131,618 | $ | 116,178 | $ | 107,765 |
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 the amounts below:
Fiscal Periods Ending | Ratio | ||
March 31, | |||
June 30, 2022 | 6.00 to 1.00 | ||
September 30, | 3.00 to 1.00 | ||
| 2.50 to 1.00 |
As of March 31, 20212022, our Leverage Ratio of 2.783.03 was in violation of the 3.0 covenant that was in place prior to the current amendment. We are in compliance with the requirements of the amended credit agreement.agreement as noted in the above table.
TheBeginning September 30, 2022, 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 1.05 to 1.00 through December 31, 2021,September 30, 2022, at which time it increases to 1.25 to 1.00 through the maturity of the credit facility.
As of March 31, 2021, our Debt Service Coverage Ratio of 1.13 was in compliance with the requirements of the credit agreement.
Interest Rate
The interest rate on the facility ranges from LIBOR plus 2.75% to LIBOR plus 4.00%, depending on our Leverage Ratio, with a LIBOR floor of 0.50%. We entered into swap agreements to fix the LIBOR component of the interest rate at 2.92% on the entire amount of the declining term loan balance and on $53$52.7 million of the revolver. Those agreements mature in May 2022. At March 31, 20212022, we are paying LIBOR at the swap rate of 2.92% plus 4.0% for a total interest rate of 6.92% on the hedged amount ($111.874.8 million) and 4.0% on the remainder ($24.345.3 million).
Paycheck Protection Program
On As previously reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2020,we entered into a Paycheck Protection Program Promissory Note and Agreement on April 15, 2020, evidencing an unsecured promissory note in the amount of $10 million loan (the “PPP Loan”) under the Paycheck Protection Program (or “PPP”) made through First Financial Bank, N.A., (the “PPP Note”"Lender"). The Paycheck Protection ProgramPPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the "SBA"“SBA”). The PPP note was funded through First Financial Bank, N.A. (the “Lender”).
The annual interest rate on the PPP Note is 1.00%. Monthly principal and interest payments were originally deferred for six months after the date of the loan, but the deferral has been extended to 2021. If the note is not forgiven, monthly payments of ~$1.1 million will commence in August 2021 with maturity of April 2022. The PPP Note contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or Lender, or breaching the terms of the Loan Documents. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining a judgment against the Company.
Under the terms of the CARES Act, PPP loan recipients can apply for and be grantedforgiveness. The SBA can grant forgiveness forof all or a portion of the loan grantedloans made under the PPP. Such forgiveness will be determined, subject to limitations, based onPPP if the recipients use ofthe PPP loan proceeds for payment ofeligible purposes, including payroll costs, and any covered payments of mortgage interest, rent or utility costs, and utilities. Inmeet other requirements regarding, among other things, the eventmaintenance of employment and compensation levels. The Company used the PPP Loan or any portion thereof, is forgiven pursuant toproceeds for qualifying expenses and applied for the PPP, the amount forgiven is applied to outstanding principal. The Company used all proceeds fromforgiveness of the PPP Loan to maintain payroll and utility payments.in accordance with the terms of the CARES Act.
IfOn July 23, 2021, we received a notification from the Lender that the SBA determinesapproved our PPP Loan forgiveness application for the entire PPP Loan balance of $10 million, together with interest accrued thereon. The Lender notified us that the Companyforgiveness payment was received on notJuly 26, 2021. initially eligible under the program or concludes that the Company did not have an adequate basis for making the good-faith certificationThe forgiveness of the necessity of the loan at the time of application, the loan could become payable on demand. PPP Loan was recognized as other income.
The SBA retains the right to review the Company's loan file for a period subsequent to the date the loan is forgiven, or paid in full, with the potential for the SBA to pursue legal remedies at its discretion.
At March 31, 2021, the PPP loan totaling $10 million is presented as current and long-term liabilities on the condensed consolidated balance sheets based upon the schedule of repayments and excluding any possible forgiveness of the loan.
In December 2020, we applied for forgiveness of the full $10 million promissory note. On January 8, 2021, we were notified by the Lender that they had approved the application for the full forgiveness of the $10 million note and had forwarded on to the SBA for final approval. The SBA has 90 days from receipt of application from the Lender to make its determination as to the amount of forgiveness. There can be no assurance that any portion of the PPP loan will be forgiven. The determination was expected by April 8, 2021, however, we are told the SBA is running behind on loan forgiveness applications. Thus, we are patiently awaiting the decision from the SBA as to their determination as to the amount of the forgiveness.
(6) | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (in thousands) |
March 31, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Accounts payable | $ | 16,067 | $ | 14,785 | $ | 30,029 | $ | 27,835 | ||||||||
Accrued property taxes | 2,953 | 2,566 | 2,897 | 2,529 | ||||||||||||
Accrued payroll | 2,838 | 1,621 | 5,014 | 2,413 | ||||||||||||
Workers' compensation reserve | 3,111 | 2,988 | 3,034 | 2,560 | ||||||||||||
Group health insurance | 1,800 | 1,800 | 1,800 | 1,800 | ||||||||||||
Fair value of interest rate swaps | 2,551 | 2,793 | 250 | 867 | ||||||||||||
Other | 5,846 | 4,856 | 4,702 | 3,524 | ||||||||||||
Total accounts payable and accrued liabilities | $ | 35,166 | $ | 31,409 | $ | 47,726 | $ | 41,528 |
(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 collectability of consideration is probable. We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer. We utilize the normal purchase normal sales exception for all long-term sales contracts.
Our revenue is derived from sales to customers of coal produced at our facilities. Our customers typically purchase coal directly from our mine sites or our Princeton Loop, 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 predeterminedpre-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 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 primary geographic markets, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. 77% and 78%87% of our coal revenue for the three months ended March 31, 20212022, and was sold to customers in the State of Indiana with the remainder sold to customers in Florida. 77% of our coal revenue for the three months ended March 31, 20202021, respectively, was sold to customers in the State of Indiana with the remainder sold to customers in Florida, Georgia, North Carolina, and Tennessee.Florida.
Performance Obligations
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 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 of 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 performance obligations relating to fixed pricedfixed-priced contracts of approximately $455$624 million, which represent the average fixed prices on our committed contracts as of March 31, 20212022. We expect to recognize approximately 76%79% of this revenue in 20212022 and 2022,2023, with the remainder recognized thereafter.
We have remaining performance obligations relating to contracts with price reopenersre-openers of approximately $237$166 million, which represents our estimate of the expected re-opener price on committed contracts as of March 31, 20212022. We expect to recognize all of this revenue beginning in 2022.2024.
The tons used to determine the remaining performance obligations are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such option exists in the customer contract.
For the three months ended March 31, 2022, we have recognized a provision for loss on customer contracts of $0.2 million for one contract where our estimated cost to produce exceeds the estimated selling price.
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. 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, 2021, accounts receivable for coal sales billed to customers was $14.4 million. We do not currently have any contracts in place where we would transfer coal in advance of knowing the final price of the coal sold, and thus do not have any contract assets recorded. Contract liabilities arise when consideration is received in advance of performance. This deferred revenue is included in accounts payable and accrued liabilities in our condensed consolidated balance sheets when consideration is received, and revenue is not recognized until the performance obligation is satisfied. We are rarely paid in advance
(8) | INCOME TAXES |
For interim period reporting, we recordthe three months ended March 31, 2022 and 2021, the Company 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. OurThe effective tax rate for the three months ended March 31, 20212022, and 20202021 was ~63%2% and ~37%63%, 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.
STOCK COMPENSATION PLANS |
Non-vested grants at December 31, | ||||
Awarded - price $2.42 | 10,000 | |||
Vested | ||||
Forfeited | ( | ) | ||
Non-vested grants at March 31, |
For the three months ended March 31, 20212022 and 2020,2021 our stock compensation was $0.3$0.1 million and $0.3 million, respectively.
Non-vested RSU grants will vest as follows:
Vesting Year | RSUs Vesting | |||
2021 | 301,750 | |||
2022 | 0 | |||
2023 | 10,000 | |||
311,750 |
Vesting Year | RSUs Vesting | |||
2023 | 188,500 |
The outstanding RSUs have a value of $0.6$0.7 million based on the March 31, 2021, 2022, closing stock price of $1.87.$3.50.
At March 31, 2021 2022, we had 1,444,9161,395,671 RSUs available for future issuance.
(10) | LEASES |
Information related to leases was as follows (in thousands):
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Operating lease information: | ||||||||||||||||
Operating cash outflows from operating leases | $ | 47 | $ | 87 | $ | 58 | $ | 47 | ||||||||
Weighted average remaining lease term in years | 2.94 | 3.92 | 1.97 | 2.94 | ||||||||||||
Weighted average discount rate | 6.0 | % | 6.0 | % | 6.0 | % | 6.0 | % |
Future minimum lease payments under non-cancellable leases as of March 31, 20212022, were as follows:
Year | Amount | Amount | ||||||
(In thousands) | (In thousands) | |||||||
2021 | $ | 152 | ||||||
2022 | 206 | $ | 156 | |||||
2023 | 173 | 174 | ||||||
2024 | 60 | 59 | ||||||
Total minimum lease payments | $ | 591 | $ | 389 | ||||
Less imputed interest | (33 | ) | (13 | ) | ||||
Total operating lease liabilities | $ | 558 | ||||||
Total operating lease liability | $ | 376 | ||||||
As reflected on balance sheet: | ||||||||
Accounts payable and accrued liabilities | $ | 207 | ||||||
Other long-term liabilities | $ | 558 | 169 | |||||
Total operating lease liability | $ | 376 |
At March 31, 20212022, and December 31, 20202021, we had approximately $558,000$376,000 and $602,000,$424,000, respectively, of right-of-use operating lease assets recorded within “buildings and equipment” on the condensed consolidated balance sheets.
(11) | SELF-INSURANCE |
We self-insure our underground mining equipment. Such equipment is allocated among seven mining units dispersed over 10 miles. The historical cost of such equipment was approximately $273$262 million and $269$260 million as of March 31, 20212022, and December 31, 20202021, respectively.
Restricted cash of $3.8 million and $4.0$3.3 million as of March 31, 20212022, and December 31, 20202021, respectively, represents cash held and controlled by a third party and is restricted for future workers’ compensation claim payments.
(12) | NET LOSS PER SHARE |
We compute net loss per share using the two-class method, which is an allocation formula that determines net loss per share for common stock and participating securities, which for us are our outstanding RSUs.
The following table (in thousands, except per share amounts) sets forth the computation of net loss per share:
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||||
Net loss | $ | (1,032 | ) | $ | (3,660 | ) | $ | (10,134 | ) | $ | (1,032 | ) | ||||
Less loss allocated to RSUs | 11 | 59 | 61 | 11 | ||||||||||||
Net loss allocated to common shareholders | $ | (1,021 | ) | $ | (3,601 | ) | $ | (10,073 | ) | $ | (1,021 | ) |
(13) | 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 which are observable, either directly or indirectly, for substantially the full term of the asset or liability. We have no Level 2 instruments.
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). Our Level 3 instruments are comprised of fuel hedges and interest rate swaps and impairment measurements. The fair values of our hedges and swaps were estimated using discounted cash flow calculations based upon forward fuel prices and interest-rate yield curves. The notional values of our two2 interest rate swaps were $53$52.7 million and $58$22.1 million as of March 31, 20212022, both with maturities of May 2022.Fuel hedges include 0.7 million gallons of diesel fuel that are subject to pricing fluctuations with a minimum of $1.79/gallon and a maximum of $2.00/gallon through December 2021. Although we utilize third-party broker quotes to assess the reasonableness of our prices and valuation, we do not have sufficient corroborating market evidence to support classifying these assets and liabilities as Level 2. The Company also recorded impairments during Q32020 which incorporateCertain properties' asset retirement obligation liabilities use Level 3 non-recurring fair value measures as further discussed in Note 2.measures.
The following table summarizes our financial assets and liabilities measured on a recurring basis at fair value at March 31, 20212022, and December 31, 20202021, by the respective level of the fair value hierarchy (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
December 31, 2021 | ||||||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 0 | $ | 0 | $ | 867 | $ | 867 | ||||||||
March 31, 2022 | ||||||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | $ | 0 | $ | 0 | $ | 250 | $ | 250 |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
December 31, 2020 | ||||||||||||||||
Liabilities: | ||||||||||||||||
Fuel hedge | $ | 0 | $ | 0 | $ | 297 | $ | 297 | ||||||||
Interest rate swaps | 0 | 0 | 3,893 | 3,893 | ||||||||||||
$ | 0 | $ | 0 | $ | 4,190 | $ | 4,190 | |||||||||
March 31, 2021 | ||||||||||||||||
Liabilities: | ||||||||||||||||
Fuel hedge | 0 | 0 | 58 | 58 | ||||||||||||
Interest rate swaps | 0 | 0 | 3,045 | 3,045 | ||||||||||||
$ | 0 | $ | 0 | $ | 3,103 | $ | 3,103 |
The table below highlights the change in fair value of the fuel hedges and interest rate swaps which are based on a discounted future cash flow model (in thousands):
Ending balance, December 31, 2020* | $ | (4,190 | ) | |
Change in estimated fair value | 1,087 | |||
Ending balance, March 31, 2021* | $ | (3,103 | ) |
Ending balance, December 31, 2021 | $ | (867 | ) | |
Change in estimated fair value | 617 | |||
Ending balance, March 31, 2022* | $ | (250 | ) |
*Recorded in accounts payable and accrued liabilities and other liabilities in the Condensed Consolidated Balance Sheets.
(14) | EQUITY METHOD INVESTMENTS |
We own a 50% interest in Sunrise Energy, LLC, which owns gas reserves and gathering equipment withand generates revenue from gas sales. Sunrise Energy plans to developcontinue developing and operate such reserves. Sunrise Energy also plans to develop and exploreexploring for oil, 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 March 31, 20212022, and December 31, 20202021, was $3.2 million.$3.7 million and $3.5 million, respectively.
(15) |
|
In On FebruaryMay 2, 2022, as reported on Form 2018,8-K on May 6, 2022, we invested $4issued $5 million in Hourglass Sands, LLC (Hourglass), a frac sand mining company in the State of Colorado. We own 100%senior unsecured convertible notes to parties affiliated with four of the Class A units and are consolidating the activity of Hourglass in these statements. Class A units are entitled to 100% of profit until our capital investment and interest is returned, then 90% of profits are allocated to us with remainder to Class B units. We do not own any Class B units.board members.
In On FebruaryMay 20, 2022, 2018, a Yorktown company associatedwe executed an amendment to our credit agreement with one of our directors also invested $4 millionPNC as discussed in Hourglass in return for a royalty interest in Hourglass. This investment coupled with our $4 million investment brings the initial capitalization of Hourglass to $8 million. We report the royalty interest as a redeemable noncontrolling interest in the consolidated balance sheets. A representative of the Yorktown company holds a seat on the board of managers, and, with a change of control, the Yorktown company may be entitled to receive a portion of the net proceeds realized, as prescribed in the Hourglass operating agreement.
In December 2019, we recorded an impairment to Hourglass Sands of $2.9 million. In August 2020, we ceased operation of the plant and recorded an additional impairment of $1.8 million. See Note 25to these consolidated financial statements for further discussion.statements.
On May 20, 2022, we issued an additional $5 million of senior unsecured convertible notes to parties affiliated with three of our board members and one unrelated party.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Hallador Energy Company
Results of Review of Interim Financial Statements
We have reviewed the condensed consolidated balance sheet of Hallador Energy Company (the "Company") as of March 31, 2021, the related condensed consolidated statements of operations, cash flows, and stockholders’ equity for the three-month periods ended March 31, 2021 and 2020, and the related notes (collectively referred to as the "interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheet of the Company and subsidiaries as of December 31, 2020, and the related consolidated statements of operations, cash flows, and stockholders’ equity for the year then ended (not presented herein); and in our report dated March 8, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These interim financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Plante & Moran, PLLC
Denver, Colorado
May 3, 2021
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION UPDATES THE MD&A SECTION OF OUR 20202021 ANNUAL REPORT ON FORM 10-K AND SHOULD BE READ IN CONJUNCTION THEREWITH.
Our condensed consolidated financial statements should also be read in conjunction with this discussion. The following analysis includes a discussion of metrics on a per ton basis derived from the condensed consolidated financial statements, which are considered non-GAAP measurements. These metrics are significant factors in assessing our operating results and profitability.
COVID-19
In the first quarter of 2020, COVID-19 emerged as a global pandemic. The State of Indiana, where our operations are located, issued a shelter in place order from March 24, 2020, to May 4, 2020. The State deemed our operations necessaryThermal coal demand and essential, and we were allowed to operate as a supplier to critical power infrastructure. We continue to monitor the ongoing pandemic and note that if conditions deteriorate in the future, it could result in further negative impact on our results of operations, financial position, and liquidity.
We have instituted many policies and procedures, in alignment with CDC guidelines along with state and local mandates, to protect our employees during the COVID-19 outbreak. These policies and procedures include, but are not limited to, staggering shift times to limit the number of people in common areas at one time, limiting meetings and meeting sizes, continual cleaning and disinfecting of high touch and high traffic areas, including door handles, bath rooms, bath houses, access elevators, mining equipment, and other areas, limiting contractor access to our properties, limiting business travel, and instituting work from home for administrative employees. We plan to keep these policies and procedures in place, in accordance with CDC, state, and local guidelines, and continually evaluate further enhancements for as long as necessary. We recognize that the COVID-19 outbreak and responses thereto will also impact both our customers and suppliers. To date, we have not had any significant issues with critical suppliers, and we continue to communicate with them and closely monitor their developments to ensure we have accesspricing remain strong due to the goods and services required to maintain our operations. Our customers have reacted, and continue to react, in various ways and to varying degrees to changes inincreased demand for their products. We have worked closely with our customerselectricity and allconstrained growth in thermal coal production. Labor shortages, global supply chain interruptions, and environmental and political pressures are expectedlimiting the ability of operators to honor their contracts.
As vaccinesincrease thermal coal production to meet domestic and international demand. In addition, higher natural gas prices and boycotts on Russian coal caused by the war in Ukraine are further amplifying the tightness in thermal coal markets. Due to these factors, the near-term outlook for COVID-19 continue to become readily available, we intend to continue encouraging our workforce to get vaccinated, and we are hopeful that the case rate of our employees will continue to decline, and economic activity in general will accelerate.thermal coal prices is positive.
OVERVIEW
Below are highlights for the first three months of 2021:
I. |
| Q1 |
a. |
|
|
b. |
c. | 1.4 million tons were shipped at an average sales price of $41.40 during the quarter. |
d. | Production: Q1 2022 production costs were $39.54 per ton, which represents a $4.42 per ton increase over Q4 2021. |
e. | Cash Flow & Debt: During Q1, we generated $3.0 million in operating cash flow and |
i. | As of March 31, |
II. | Q2 2022 Activity |
a. | Financing |
i. | The Company was successful in executing an amendment with our banks loosening our debt to EBITDA covenant for Q1 and Q2, as disclosed in Note 5 to our condensed consolidated financial statements. |
ii. | In May, we issued $10 million in convertible notes to add to our March 31, 2022 liquidity |
b. | Sales |
i. | We modified existing sales contracts, resulting in |
Reconciliation of GAAP “net income” to non-GAAP “adjusted EBITDA” (in thousands), the most comparable GAAP financial measure.
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (1,032 | ) | $ | (3,660 | ) | ||
Income tax benefit | (1,729 | ) | (2,176 | ) | ||||
Loss from Hourglass Sands | 80 | 78 | ||||||
Income from equity method investments | — | (55 | ) | |||||
Depreciation, depletion and amortization | 10,307 | 10,623 | ||||||
Asset retirement obligations accretion | 363 | 333 | ||||||
Gain on marketable securities | — | (14 | ) | |||||
Interest Expense | 1,898 | 5,714 | ||||||
Other amortization | 1,489 | 1,426 | ||||||
Change in fair value of fuel hedges | (239 | ) | 1,311 | |||||
Stock-based compensation | 282 | 319 | ||||||
Adjusted EBITDA | $ | 11,419 | $ | 13,899 |
Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures when used in conjunction with related GAAP financial measures, (i) provide additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provide investors with the financial and analytical framework upon which management bases financial, operation, compensation, and planning decisions, and (iii) present measurements that investors, rating agencies, and debt holders have indicated are useful in assessing our results.
c. | Production |
We expect the production cost improvements we have experienced that started in the second quarter 2022, coupled with our anticipated sales price increases, to increase our margins from Q1 and return them to our historical >$10 per margins in June. |
III. | Q3 & Q4 2022 Activity |
a. | Merom Generating Station |
i. | We anticipate closing on the acquisition of the Merom Power Plant in Q3 2022, subject to certain regulatory and financial approvals. |
ii. | Merom is expected to significantly add to the profitability of our company in 2022 and beyond. |
IV. | 2023 |
a. | Coal & Power |
i. | Our current 2023 average sales price is ~$4 per ton higher than 2022. Additionally, we reopen on price for ~25% of our coal production in 2023. We assume we will be shipping these tons to our newly acquired Merom Plant in 2023, as this is our highest value use of these tons. However, as a fallback position, these tons could be sold on the open market at margins in excess of $50/ton. |
ii. | Traditionally, Hallador has generated $50 million of adjusted EBITDA annually. In 2023, we expect our adjusted EBITDA to grow to over $150 million. |
V. | Solid Sales Position Through |
Contracted | Estimated | |||||||
tons | Priced | |||||||
Year | (millions)* | per ton | ||||||
2021 (Q2 - Q4) | 4.5 | $ | 39.25 | |||||
2022 | 5.1 | 39.35 | ||||||
9.6 |
Contracted | Estimated | |||||||
tons | price | |||||||
Year | (millions)* | per ton | ||||||
2022 (Q2-Q4) | 5.7 | 41.30 | ||||||
2023 (annual) | 5.6 | 45.10 | ||||||
2024-2027 (total) | 6.8 | ** | ||||||
18.1 |
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* Contracted tons are subject to adjustment due to thein instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such options existoption exists in the customer contract.
**Unpriced or partially priced tons.
LONG-LIVED ASSET IMPAIRMENT REVIEW
See Note 2 to our condensed consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
I. |
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a. | As set forth in our condensed consolidated statements of cash flows, cash provided by operations was $3.0 million |
i. | Operating margins from coal decreased during the first three months of |
1. | Our operating margins were |
2. | We |
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b. | Our projected capex budget for the remainder of |
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e. | See Note 5 to |
II. | Material Off-Balance Sheet Arrangements |
a. | Other than our surety bonds for reclamation, we have no material off-balance sheet arrangements. In the event we are not able to perform reclamation, which is presented as asset retirement obligations (ARO) in our accompanying condensed consolidated balance sheets, we have surety bonds totaling |
CAPITAL EXPENDITURES (capex)
For the first three months of 2021,2022, capex was $5.7$9.1 million allocated as follows (in millions):
Oaktown – maintenance capex | $ | 2.3 | $ | 4.5 | ||||
Oaktown – investment | 3.4 | 3.7 | ||||||
Other | 0.9 | |||||||
Capex per the Condensed Consolidated Statements of Cash Flows | $ | 5.7 | $ | 9.1 |
Quarterly coal sales and cost data (in thousands, except per ton and percentage data) are provided below. Per ton calculations below are based on tons sold.
All Mines | 2nd 2021 | 3rd 2021 | 4th 2021 | 1st 2022 | T4Qs | |||||||||||||||
Tons produced | 1,292 | 1,440 | 1,447 | 1,397 | 5,576 | |||||||||||||||
Tons sold | 1,403 | 2,042 | 1,554 | 1,377 | 6,376 | |||||||||||||||
Coal sales | $ | 54,600 | $ | 79,036 | $ | 64,388 | $ | 57,010 | $ | 255,034 | ||||||||||
Average price/ton | $ | 38.92 | $ | 38.71 | $ | 41.43 | $ | 41.40 | $ | 40.00 | ||||||||||
Wash plant recovery in % | 69 | % | 73 | % | 70 | % | 67 | % | ||||||||||||
Operating costs | $ | 42,364 | $ | 67,694 | $ | 54,583 | $ | 54,443 | $ | 219,084 | ||||||||||
Average cost/ton | $ | 30.20 | $ | 33.15 | $ | 35.12 | $ | 39.54 | $ | 34.36 | ||||||||||
Margin | $ | 12,236 | $ | 11,342 | $ | 9,805 | $ | 2,567 | $ | 35,950 | ||||||||||
Margin/ton | $ | 8.72 | $ | 5.55 | $ | 6.31 | $ | 1.86 | $ | 5.64 | ||||||||||
Capex | $ | 5,117 | $ | 7,238 | $ | 9,975 | $ | 9,082 | $ | 31,412 | ||||||||||
Maintenance capex | $ | 1,049 | $ | 2,324 | $ | 3,302 | $ | 4,481 | $ | 11,156 | ||||||||||
Maintenance capex/ton | $ | 0.75 | $ | 1.14 | $ | 2.12 | $ | 3.25 | $ | 1.75 |
All Mines | 2nd 2020 | 3rd 2020 | 4th 2020 | 1st 2021 | T4Qs | |||||||||||||||
Tons produced | 1,468 | 1,234 | 1,233 | 1,592 | 5,527 | |||||||||||||||
Tons sold | 1,244 | 1,585 | 1,613 | 1,174 | 5,616 | |||||||||||||||
Coal sales | $ | 50,473 | $ | 64,754 | $ | 64,925 | $ | 45,879 | $ | 226,031 | ||||||||||
Average price/ton | $ | 40.57 | $ | 40.85 | $ | 40.25 | $ | 39.08 | $ | 40.25 | ||||||||||
Wash plant recovery in % | 76 | % | 71 | % | 68 | % | 74 | % | ||||||||||||
Operating costs | $ | 36,001 | $ | 46,444 | $ | 54,640 | $ | 33,907 | $ | 170,992 | ||||||||||
Average cost/ton | $ | 28.94 | $ | 29.30 | $ | 33.87 | $ | 28.88 | $ | 30.45 | ||||||||||
Margin | $ | 14,472 | $ | 18,310 | $ | 10,285 | $ | 11,972 | $ | 55,039 | ||||||||||
Margin/ton | $ | 11.63 | $ | 11.55 | $ | 6.38 | $ | 10.20 | $ | 9.80 | ||||||||||
Capex | $ | 4,006 | $ | 3,995 | $ | 6,661 | $ | 5,720 | $ | 20,382 | ||||||||||
Maintenance capex | $ | 2,578 | $ | 1,365 | $ | 2,342 | $ | 2,343 | $ | 8,628 | ||||||||||
Maintenance capex/ton | $ | 2.07 | $ | 0.86 | $ | 1.45 | $ | 2.00 | $ | 1.54 |
All Mines | 2nd 2019 | 3rd 2019 | 4th 2019 | 1st 2020 | T4Qs | |||||||||||||||
Tons produced | 2,003 | 1,891 | 2,122 | 1,701 | 7,717 | |||||||||||||||
Tons sold | 1,807 | 2,118 | 2,015 | 1,526 | 7,466 | |||||||||||||||
Coal sales | $ | 71,113 | $ | 82,883 | $ | 78,205 | $ | 61,932 | $ | 294,133 | ||||||||||
Average price/ton | $ | 39.35 | $ | 39.13 | $ | 38.81 | $ | 40.58 | $ | 39.40 | ||||||||||
Wash plant recovery in % | 71 | % | 70 | % | 74 | % | 74 | % | ||||||||||||
Operating costs | $ | 53,915 | $ | 71,372 | $ | 60,082 | $ | 48,334 | $ | 233,703 | ||||||||||
Average cost/ton | $ | 29.84 | $ | 33.70 | $ | 29.82 | $ | 31.67 | $ | 31.30 | ||||||||||
Margin | $ | 17,198 | $ | 11,511 | $ | 18,123 | $ | 13,598 | $ | 60,430 | ||||||||||
Margin/ton | $ | 9.52 | $ | 5.43 | $ | 8.99 | $ | 8.91 | $ | 8.09 | ||||||||||
Capex | $ | 9,448 | $ | 8,981 | $ | 8,264 | $ | 5,999 | $ | 32,692 | ||||||||||
Maintenance capex | $ | 6,164 | $ | 5,537 | $ | 4,115 | $ | 3,470 | $ | 19,286 | ||||||||||
Maintenance capex/ton | $ | 3.41 | $ | 2.61 | $ | 2.04 | $ | 2.27 | $ | 2.58 |
20212022 v. 20202021 (first quarter)
For the first quarter 2022, we sold 1,377,000 tons at an average price of $41.40 per ton. For the first quarter 2021, we sold 1,174,000 tons at an average price of $39.08/ton. For the first quarter 2020 we sold 1,526,000 tons at an average price of $40.58/$39.08 per ton. The decreaseincrease in average price per ton was expected and is the result of our changing contract mix caused by the expiration of contracts and acquisition of new contracts. As notedPricing for the remainder of 2022 is expected to be $41.30. 2023 pricing is currently contracted above the decrease in$45 per ton with 1.7 million tons sold was dueavailable to the effects of transportation issues related to the weather conditions in February. sell, potentially at significantly higher prices.
Operating costs for all coal mines averaged $28.88/$39.54 per ton in 20212022 and $31.67/$28.88 per ton in 2020.2021. Oaktown costs over that same period were $27.21$37.38 and $29.92,$27.21, respectively. Our operating costs for the quarter are withinhigher than our prior guidance as explained in the overview.
Other revenues increased $1.1 million over Q1 2021 due to additional income from coal storage fees, royalty income on mineral interests, and increased scrap prices and volume.
Depreciation, depletion and amortization decreased $0.8 million in large part as a significant amount of $29-$30/ton. Our effortsour assets are depreciated and amortized based on production which was lower in Q1 to improve recovery2022.
General and lower costs have been effective thus far. We expect operating costs associated with the idled Prosperity mine to be $0.9 million for the remainder of 2021. Prosperity operating costs wereadministrative expense increased $0.3 million during the three months ended March 31, 2021.
We expect generalquarter as a result of legal and administrative expenses fordue diligence costs related to the remainderacquisition of 2021 to be $9 million.Merom.
Interest expense decreased $3.8approximately $0.1 million induring the first quarter of 2021 whendue to our lower bank debt balance compared to the first quarter of 2020. The changesame period in estimated fair value of our interest rate swap agreement resulted in a reduction in non-cash expense of $3.4 million in 2021 when compared to 2020. The remainder of the decrease is a result of our declining bank debt balance. 2021.
Our Sunrise Coal employees and contractors totaled 837 at March 31, 2022, compared to 700 at March 31, 2021, compared to 695 at March 31, 2020. 2021.
EARNINGS (LOSS) PER SHARE
2nd 2020 | 3rd 2020 | 4th 2020 | 1st 2021 | |||||||||||||
Basic and diluted | $ | 0.01 | $ | 0.06 | $ | (0.15 | ) | $ | (0.03 | ) |
2nd 2021 | 3rd 2021 | 4th 2021 | 1st 2022 | |||||||||||||
Basic and diluted | $ | (0.10 | ) | $ | 0.26 | $ | (0.25 | ) | $ | (0.33 | ) |
2nd 2019 | 3rd 2019 | 4th 2019 | 1st 2020 | |||||||||||||
Basic and diluted | $ | (0.11 | ) | $ | (0.12 | ) | $ | (1.95 | ) | $ | (0.12 | ) |
2nd 2020 | 3rd 2020 | 4th 2020 | 1st 2021 | |||||||||||||
Basic and diluted | $ | 0.01 | $ | 0.06 | $ | (0.15 | ) | $ | (0.03 | ) |
INCOME TAXES
Our effective tax rate (ETR) is estimated at ~63%~2% and ~37%~63% for the three months ended March 31, 2022, and 2021, respectively. For the three months ended March 31, 2022 and 2020, respectively. Assuming no changes2021, the Company 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 our expected results of operations,states in which we expect our ETR for the remainder of 2021 to be about the same as the first three months.operate. Our ETR differs from the statutory rate due primarily to statutory depletion in excess of tax basis which is a permanent difference.and changes in the valuation allowance. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income (loss) before income taxes.
GOVERNMENT IMPOSITION REIMBURSEMENTS
Some of our legacy coal contracts allow us to pass on to our customers certain costs incurred resulting from changes in costs to comply with mandates issued by Mine Safety and Health Administration (MSHA) or other government agencies. After applying the provisions of ASU 2014-09, as of March 31, 2021,2022, we do not consider unreimbursed costs from our customers related to these compliance matters to be material and have constrained such amounts and will recognize them when they can be estimated with reasonable certainty.
RESTRICTED STOCK GRANTS
See “Item 1. Financial Statements - Note 9. Stock Compensation Plans” for a discussion of RSUs.
CRITICAL ACCOUNTING ESTIMATES
We believe that the estimates of our coal reserves, our interest rate swaps, our asset retirement obligation liabilities, our deferred tax accounts, andour valuation of inventory, the estimates used in our impairment analysis, and management's plans related to our going concern evaluation are our critical accounting estimates.
The reserve estimates are used in the DD&A calculationdepreciation, depletion and amortization calculations and our internal cash flow projections. If these estimates turn out to be materially under or over-stated, our DD&Adepreciation, depletion and amortization expense and impairment test may be affected.
The fair value of our interest rate swaps and asset retirement obligation liabilities is determined using a discounted future cash flow model based on the key assumption of anticipated future interest rates and related credit adjustment considerations.
We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We identified our federal tax return and our Indiana state tax return as “major” tax jurisdictions. We believe that our income tax filing positions and deductions would be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position.
Inventory is valued at lower of average cost or net realizable value (NRV). Anticipated utilization of low sulfur, higher-cost coal from our Ace in the Hole mine has the potential to create NRV adjustments as our estimated need changes.
Management’s evaluation of going concern is an estimate and when there is an indication of substantial doubt about the ability to continue as a going concern, management must assess its plans and evaluate whether management’s plans are probable of alleviating such going concern. No assurance can be given that management's plans to show continued improvement in production and sales prices will be fully realized or that the acquisition of the Merom Generating Station will proceed as planned.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes from the disclosure in our 2020 2021 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS
We maintain a system of disclosure controls and procedures that are designed for the purpose of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our CEO, CFO, and CAO as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO, CFO, and CAO of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our CEO, CFO, and CAO concluded that our disclosure controls and procedures are effective.
There have been no changes to our internal control over financial reporting during the quarter ended March 31, 2021,2022, that materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 4. MINE SAFETY DISCLOSURES
See Exhibit 95 95.1 to this Form 10-Q for a listing of our mine safety violations.
On May 20, 2022, Hallador Energy Company executed an amendment to its credit agreement with PNC, administrative agent for its lenders. The primary purposes of the amendment are to increase the allowable leverage ratio through June 30, 2022 to provide relief for a covenant violation for the three months ended March 31, 2022 and the anticipated covenant violation for the three months ending June 30, 2022, and to allow up to $25 million of additional unsecured indebtedness (covering the issuance of at least $15 million of convertible notes) and to allow up to $25 million of other indebtedness to bolster liquidity prior to June 30, 2022.
The interest rate per the amendment ranges from LIBOR plus 2.75% to LIBOR plus 4.00%, with a LIBOR floor of 0.50%, depending on the Company’s leverage ratio.
A copy of the credit agreement is filed herewith as Exhibit 10.1 to this Form 10-Q.
On May 20, 2022, the Company issued senior unsecured convertible notes (the "Notes") to three related parties, Lubar Opportunities Fund I, of which Mr. David Lubar, a Company director, manages in his capacity as President and CEO of Lubar & Co. ($2.5 million of principal purchased), NextG Partners LLC, of which Mr. Steven R. Hardie, a Company director, is a member and manager ($0.75 million of principal purchased), Hallador Alternative Assets Fund, LLC, of which Mr. David C. Hardie, a Company director, manages in his capacity as Managing Member of Hallador Management, LLC ($0.75 million of principal purchased), and one unrelated party, Murchison Capital Partners, LP ($1.0 million of principal purchased), in the aggregate principal amount of $5,000,000. The funds received from the Notes will be used to provide additional working capital to the Company. The Notes will mature on December 29, 2028 and will accrue interest at 8% per annum, which interest will be payable on the date of the maturity.
Pursuant to the terms of the Notes, the holders of the Notes may convert the entire principal balance and all accrued and unpaid interest then outstanding during the period beginning June 1, 2022 and ending on May 31, 2027 into shares of the Company Common Stock (the "Conversion Shares") at a conversion price the greater of (i)$3.33 and (ii) the 30-day trailing volume-weighted average sales price for the Common Stock on the Nasdaq Capital Market ending on the and including the date on which this Note is converted. Each Conversion Share will consist of one share of our common stock. The conversion price and number of shares of the Company’s Common Stock issuable upon conversion of the May 20, 2022 Notes are subject to adjustment from time to time for any subdivision or consolidation of the Company’s shares and other standard dilutive events.
At any time on or after June 1, 2025, the Company may, at its option and upon 30 days written notice provided to the Holders, elect to redeem the Notes (in whole and not in part) and the Holders shall be obligated to surrender the Notes, at a redemption price equal to 100% of the outstanding Principal Balance, together with any accrued but unpaid interest thereon to the redemption date. After receipt of such redemption notice from the Company, the Holder may, at its option, elect to convert the Principal Balance and accrued interest into Conversion Shares by giving written notice of such election to the Company no later than 5 days prior to the date fixed for redemption.
The foregoing description of the May 20, 2022 Notes are qualified in their entirety by reference to the full text of such documents, copies of which are attached to this Report as Exhibits 10.2 through 10.5, which are incorporated herein by reference.
The issuance of the May 20, 2022 Notes was and, upon conversion of the May 20, 2022 Notes, the issuances of any conversion shares issued thereunder will be, exempt from registration under Section 4(a)(2) and/or Rule 506(b) of Regulation D as promulgated by the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), as transactions by an issuer not involving any public offering.
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10.2* | Hallador Energy Company Unsecured Convertible Promissory Note dated May 20, 2022 - NextG Partners, LLC | |
10.3* | Hallador Energy Company Unsecured Convertible Promissory Note dated May 20, 2022 - Hallador Alternative Asset Fund, LLC | |
10.4* | Hallador Energy Company Unsecured Convertible Promissory Note dated May 20, 2022 - Lubar Opportunities Fund I, LLC | |
10.5* | Hallador Energy Company Unsecured Convertible Promissory Note dated May 20, 2022 - Murchison Capital Partners, LP | |
31.1 * |
| SOX 302 Certification - Chairman, President and Chief Executive Officer |
31.2 * |
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31.3 * |
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32* |
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95.1* |
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101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Schema Document | |
101.CAL* | Inline XBRL Calculation Linkbase Document. | |
101.LAB* | Inline XBRL Labels Linkbase Document. | |
101.PRE* | Inline XBRL Presentation Linkbase Document. | |
101.DEF* | Inline XBRL Definition Linkbase Document. | |
104* | Cover Page Interactive Data File (embedded with the Inline XBRL document) | |
*Filed Herewith |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| HALLADOR ENERGY COMPANY |
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Date: May |
| /S/ LAWRENCE D. MARTIN |
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| Lawrence D. Martin, CFO |
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Date: May |
| /S/ R. TODD DAVIS |
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| R. Todd Davis, CAO |