HALLADOR ENERGY CO

(1)BASIS OF PRESENTATION

Organization

Hallador Energy Company (“Hallador” or the “Company”) is a vertically-integrated, independent power producer (“IPP”) and fuel company with operations primarily in Indiana. The Company operates across multiple stages of the energy supply chain, from accredited capacity and electricity to coal. The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The condensed consolidated financial statements include the accounts of Hallador and our wholly owned subsidiaries, including our main operating subsidiaries, Hallador Power Company, LLC (“Hallador Power”) and Sunrise Coal, LLC (“Sunrise”) and their respective subsidiaries, as well Turtle Creek Gas Holdings, LLC and its subsidiary Turtle Creek Gas Generation, LLC and Hourglass Sands, LLC. Additionally, we hold 50% interests in Sunrise Energy, LLC (“Sunrise Energy”), a private gas exploration company with operations in Indiana and Oaktown Gas, LLC (“Oaktown Gas”), which we account for using the equity method. Hallador Power provides accredited capacity and energy to utilities and other energy market participants through the Midcontinent Independent System Operator ("MISO") interconnection, and Sunrise mines bituminous coal in Indiana to serve various power plants in the Midwest and Southeast United States.

Reclassifications

During the second quarter of 2026, it was determined that electric sales and utilities expenses were each understated by $2.7 million in the unaudited condensed consolidated statements of operations for the three months ended March 31, 2026. The understatements had no impact on net loss for the period. These amounts have been properly reflected in our unaudited condensed consolidated statement of operations for the nine months ended September 30, 2026 and have no impact on our unaudited condensed consolidated statement of operations the three months ended September 30, 2026. As the impacts are not considered material to the previously reported amounts, they will be corrected when we present the three months ended March 31, 2026 in our March 31, 2027 Quarterly Report on Form 10-Q. This correction did not impact previously reported amounts of assets, liabilities, equity, net loss, or cash flows.

Certain other 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.

Basis of Presentation

Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or Securities and Exchange Commission (“SEC”) rules and regulations for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our 2025 consolidated financial statements and notes thereto included in our 2025 Annual Report on Form 10-K (our “2025 10-K”). All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, deferred income tax accounts, coal reserves, depreciation, depletion, and amortization, impairment analyses, and calculation of asset retirement obligations (“ARO”). Actual results could differ from those estimates.

Change in Accounting Estimate

On May 1, 2026, the Company entered into a 12-year capacity agreement with a subsidiary of a utility for planning years 2028 through 2040, as previously reported on the Company's Current Report on Form 8-K filed May 6, 2026. As a result of this agreement, together with the Company's other long-term contracted commitments and future maintenance plans, the Company reevaluated the estimated remaining useful life of the Merom Generating Station, (the "Merom Station"), and determined that the plant's estimated operating life should also be extended through 2040, compared to the previous estimate of 2032. Accordingly, effective June 1, 2026, the Company extended the estimated useful lives of the plant and related assets to align with the revised remaining life of the facility. This change was accounted for prospectively as a change in accounting estimate; depreciation expense recorded in prior periods was not adjusted, and the remaining net book value of the affected assets is being depreciated over the revised remaining useful lives. The effect of this change for the three and nine months ended September 30, 2026 was a decrease in depreciation expense of $3.6 million and $4.8 million, respectively or approximately $0.08 and $0.10 per basic and diluted share, respectively, which impacted our Electric Operations segment.

(2)RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements – Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The update is intended to improve the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The standard will be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of adoption of the standard on its financial statement disclosures.

(3)RESTRICTED CASH

The following table reconciles cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheets to the total shown in the condensed consolidated statements of cash flows (in thousands):

Restricted cash is classified as current in the condensed consolidated balance sheets based on the nature of the restriction and the expected timing of its release or use.

(4)INVENTORY

Inventory is valued at the lower of cost or net realizable value (“NRV”). Coal inventory includes NRV adjustments of $0.5 million and $0.1 million as of September 30, 2026, and December 31, 2025, respectively. During the three months ended September 30,2025, as part of the Company’s routine inventory reconciliation process, a downward adjustment of $2.6 million was recorded to coal inventory.

(5)DEBT

KLIM Facility

On September 15, 2026 (the “KLIM Closing Date”), the Company and its wholly owned subsidiary, Turtle Creek Gas Holdings, LLC (“Turtle Creek”), each as a co-borrower, jointly and severally liable for all obligations thereunder (and together, the "KLIM Borrowers"), entered into a Credit Agreement (the “KLIM Credit Agreement”) with U.S. Bank Trust Company, National Association, as administrative agent, U.S. Bank National Association, as collateral agent, Kennedy Lewis Investment Management LLC ("KLIM"), acting for certain managed or advised funds and accounts, and the other lenders from time to time party thereto. The KLIM Credit Agreement provides for a senior secured term loan facility (the “KLIM Facility”) to finance the development and construction of a 460 MW natural gas-fired peaking generation facility in Sullivan County, Indiana (the “Turtle Creek Project”) to be owned and operated by Turtle Creek Gas Generation, LLC (“Turtle Creek Gas”), a wholly owned subsidiary of Turtle Creek.

The KLIM Facility provides for term loans in an aggregate principal amount of up to $600.0 million, consisting of a $550.0 million initial term loan, which was funded in September 2026, and a $50.0 million delayed draw term loan commitment, which is available until September 15, 2027, subject to an agreed draw schedule and funding conditions. The delayed draw term loan may only be used to fund the Turtle Creek Project. As of September 30, 2026, no amounts had been drawn under the delayed draw term loan commitment. Amounts repaid or prepaid under the KLIM Facility may not be re-borrowed. The KLIM Facility matures on September 15, 2029, and may be extended for two additional years with the consent of the lenders upon payment of an extension fee equal to 3.0% of the then-outstanding principal amount. The KLIM Credit Agreement also permits the Company to obtain, on a post-closing basis, a separate revolving credit facility of up to $75.0 million from one or more commercial banks. Any such revolving facility would not be documented under the KLIM Credit Agreement, but would be secured by a first-priority lien on the Company’s collateral, senior to the lien securing the KLIM Facility, and would be subject to an inter-creditor agreement between the lenders. As of September 30, 2026, no such revolving credit facility had been established.

Turtle Creek Gas and certain other subsidiaries of the Company, including Hallador Power and Sunrise Coal, guarantee the obligations under the KLIM Facility. The obligations are secured by a first-priority perfected security interest in substantially all real and personal property of the Company, Turtle Creek and the subsidiary guarantors, including the equity interests of their subsidiaries (other than subsidiaries designated as unrestricted subsidiaries under the KLIM Credit Agreement), the Turtle Creek Project, the Merom Station, and certain mining assets of Sunrise Coal, subject to customary exceptions and, upon establishment of the revolving credit facility described above, an inter-creditor agreement.

Prior to the date the Turtle Creek Project achieves commercial operation (the “Commercial Operation Date”), borrowings bear interest at (i) a fixed rate of 3.5% per annum, payable in cash, plus (ii) Term SOFR plus 4.5% per annum, which is paid-in-kind ("PIK") by adding such interest to the outstanding principal balance. On and after the Commercial Operation Date, borrowings bear interest at Term SOFR plus 8.0% per annum, payable in cash. Term SOFR is subject to a floor of 3.5%. As of September 30, 2026, the interest rate on borrowings under the KLIM Facility was 11.9%, and the effective interest rate, including the amortization of debt issuance costs, was 14.7%. On the KLIM Closing Date, Turtle Creek made an intercompany loan of $19.7 million to the Company to fund cash collateral for the Company’s outstanding letters of credit (the “Closing Date Intercompany Loan”). Under the KLIM Credit Agreement, the PIK interest rate on the KLIM Facility increases by 1.0% per annum if the Closing Date Intercompany Loan remains outstanding after October 31, 2026, and by an aggregate of 3.0% per annum if it remains outstanding after January 15, 2027, in each case until the loan is repaid in full. The Closing Date Intercompany Loan was not repaid by October 31, 2026, and as a result, effective November 1, 2026, the PIK interest rate on the KLIM Facility increased by 1.00% per annum. As of the date of this Quarterly Report, the loan remains outstanding. The Company is required to pay its excess cash flow for fiscal year 2026 and each fiscal year thereafter (calculated excluding Turtle Creek and its subsidiaries and including the net proceeds of equity issuances and permitted convertible indebtedness) into the construction account to repay the Closing Date Intercompany Loan until it is repaid in full.

Upon repayment in full of the term loans, whether at maturity, upon acceleration, or otherwise, the Company is required to pay a premium to the extent necessary for each lender to have received cash payments and outstanding principal (including PIK interest) equal to at least 1.35 times its funded term commitment, increasing to 1.50 times if the maturity date is extended (the “MOIC Premium”). The MOIC Premium is not accrued as of September 30, 2026 because payment is contingent on a repayment or acceleration event that was not probable at the balance sheet date.

Prior to the Commercial Operation Date, no scheduled principal payments are required. Beginning with the first full fiscal quarter after the Commercial Operation Date, the Company is required to make quarterly principal payments equal to 0.25% of the original principal amount of the term loans. Beginning with the first full fiscal year ending after the Commercial Operation Date, the Company is required to prepay the term loans with 100.0% of Consolidated Excess Cash Flow, as defined in the KLIM Credit Agreement. The KLIM Facility also requires mandatory prepayments from the net proceeds of certain asset dispositions and casualty events in excess of $2.5 million, subject to reinvestment rights, and from the proceeds of indebtedness not permitted under the KLIM Credit Agreement.

Proceeds from the initial term loan were used to (i) repay in full and terminate the TCB Credit Facility, including$100.9 million of outstanding principal and interest, as described below, (ii) reimburse the Company for $41.0 million of Turtle Creek Project costs previously funded by the Company, (iii) fund $19.7 million of cash collateral supporting the

Company’s outstanding letters of credit, (iv) fund the costs of developing and constructing the Turtle Creek Project, including payments due under the Company’s Asset Purchase Agreement (the "APA") with Energy World Corporation Ltd. (the “Seller”) as described in"Note 15 - Commit ments and Conti ngencies," and (v) pay transaction fees and expenses and fund general corporate purposes. Turtle Creek Project funds are held in a construction account subject to a deposit account control agreement in favor of the collateral agent, from which disbursements may be made only upon approval of the administrative agent. Amounts held in the construction account and the letter of credit cash collateral accounts are presented as restricted cash in the condensed consolidated balance sheet.

In connection with the KLIM Facility, the Company incurred debt issuance costs of $26.2 million, consisting of $15.0 million of fees paid to the lenders, including a 2.5% commitment fee, and $11.2 million of third-party costs, including financial advisory, legal, and agency fees. These costs are presented as a reduction of the carrying amount of the debt and are amortized to interest expense using the effective interest method over the term of the KLIM Facility.

TCB Credit Facility

On March 5, 2026, Hallador entered into a credit agreement with Texas Capital Bank, as administrative agent, and Old National Bank, among others, (the "TCB Credit Agreement") that replaced the credit agreement with PNC Bank, National Association, (“PNC”) and included a $75.0 million senior secured revolving credit facility (the "TCB Revolving Credit Facility") and a $45.0 million senior secured term loan facility (the "TCB Delayed Draw Term Loan", and together with the TCB Revolving Credit Facility, the "TCB Credit Facility").

On April 21, 2026 and June 25, 2026, the Company entered into the First and Second Amendments to the TCB Credit Agreement, respectively, which among other things made certain administrative and technical modifications and modified certain financial covenants.

On the KLIM Closing Date, the Company used proceeds from the KLIM Facility to repay in full the TCB Credit Facility, including $100.2 million of outstanding principal, consisting of $45.0 million under the term loan and $55.2 million under the revolving credit facility, and $0.7 million of accrued interest, and the TCB Credit Facility was terminated. The repayment was accounted for as a debt extinguishment. The Company recognized a loss on extinguishment of debt of $5.7 million during the three months ended September 30, 2026, largely consisting of the write-off of unamortized debt issuance costs related to the TCB Credit Facility, and $5.9 million during the nine months eneded September 30, 2026, which also includes $0.2 million related to the the PNC credit agreement recognized in the first quarter.

PNC Credit Agreement

The Company was party to a credit agreement with PNC, in its capacity as administrative agent, which consisted of a revolving credit facility of up to$75.0 million and a term loan ("PNC Credit Agreement").

On June 27, 2025, the Company executed the Third Amendment (“Third Amendment”) to the PNC Credit Agreement, which was accounted for as a debt modification. The primary purpose of the Third Amendment was to provide additional operating flexibility for the remainder of 2025 by redefining covenants and deferring certain covenants until the third quarter of 2025. During the third quarter of 2025, the Company entered into a $35.0 million prepaid forward power sales contract of which $19.0 million of the proceeds were deposited into a money market account with the administrative agent as a compensating balance. The compensating balance was utilized to fully repay the outstanding term loan during the fourth quarter of 2025. As of March 5, 2026, the Company fully repaid its revolving credit facility with PNC.

Liquidity

Liquidity consists of our additional borrowing capacity and unrestricted cash and cash equivalents. As of September 30, 2026, we did not have additional borrowing capacity under the KLIM Facility for general corporate purposes, as the undrawn delayed draw term loan commitment is available only to fund the Turtle Creek Project. Total liquidity was $103.2 million.

Fees

Bank fees and other costs incurred in connection with the KLIM Facility totaled $26.2 million and are amortized over the term of the KLIM Facility. Unamortized bank fees as of September 30, 2026, and December 31, 2025, were $26.0 million and $0.3 million, respectively.

Unamortized bank fees and other costs incurred in connection with our prior credit agreements of $5.9 million were recorded as a loss on extinguishment of debt on the condensed consolidated statements of operations for the nine months ended September 30, 2026.

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

All debt was classified as long-term at September 30, 2026 and December 31, 2025.

Future maturities of debt as of September 30, 2026, are as follows (in thousands):

The amounts above reflect scheduled amortization based on the Company’s expected Commercial Operation Date in the second half of 2028 and exclude any mandatory prepayments from Consolidated Excess Cash Flow, additional PIK interest to be accrued after September 30, 2026, the MOIC Premium, and the Company’s potential refinancing of the KLIM Facility prior to its scheduled maturity.

Covenants

The KLIM Credit Agreement contains financial covenants that require the Company, beginning with the test period ending December 31, 2026, to maintain (i) unrestricted cash of not less than $10.0 million and (ii) a Consolidated Debt Service Coverage Ratio (as defined in the KLIM Credit Agreement) of not less than 1.15 to 1.00. Beginning with the first full fiscal quarter ending after the Commercial Operation Date, the Company is also required to maintain a Consolidated Leverage Ratio (as defined in the KLIM Credit Agreement) not to exceed 9.00 to 1.00 for the first tested period and 8.00 to 1.00 for each period thereafter. The debt service coverage ratio and leverage ratio covenants are subject to equity cure rights, which may be exercised in no more than two of any four consecutive fiscal quarters and no more than three times over the term of the KLIM Facility. The minimum unrestricted cash covenant is not subject to a cure right.

The KLIM Credit Agreement also contains customary affirmative and negative covenants, including limitations on the occurrence of indebtedness and liens, investments, asset sales, restricted payments, and affiliate transactions, and requires Turtle Creek to maintain an independent manager. Events of default include, among others, nonpayment, covenant breaches (subject to applicable cure periods), cross-default to other indebtedness in excess of $15.0 million, judgments in excess of $25.0 million, a change of control, and the failure of the Turtle Creek Project to achieve the Commercial Operation Date on or before June 30, 2029. Upon an event of default, the lenders may accelerate the outstanding obligations, and the MOIC Premium would become payable.

The KLIM Credit Agreement restricts the ability of Turtle Creek and its subsidiaries to pay dividends, make distributions, or make loans or advances to the Company, other than certain permitted payments, including the reimbursement of up to $43.0 million of Turtle Creek Project costs and an intercompany loan of up to $20.0 million made at closing. As of September 30, 2026, the Companywas in compliance with all covenants under the KLIM Credit Agreement. The test period for financial covenants does not begin until December 31, 2026.

Interest Expense

Interest expense from the KLIM Facility consisted of the following (in thousands):

Interest incurred on the KLIM Facility during the construction of the Turtle Creek Project is capitalized as part of the cost of the Turtle Creek Project. PIK interest of $1.9 million and the repayment of the TCB Facility directly by the lenders on behalf of the Company of $100.2 million were noncash activities during the nine months ended September 30, 2026.

Interest capitalized to the Turtle Creek Project totaled $0.5 million on the TCB Credit Facility and $0.2 million on the KLIM Facility, or $0.7 million in total, for the three and nine months ended September 30, 2026.

Fair Value

The KLIM Facility was funded on September 15, 2026 at interest rates, including a floating Term SOFR-based component, negotiated at arm’s length with unrelated lenders. Accordingly, the Company believes the fair value of its debt approximates its principal amount as of September 30, 2026. The fair value of the Company’s debt is classified within Level 2 of the fair value hierarchy.

(6)ACCRUED LIABILITIES AND OTHER

Accrued liabilities and other consist of the following for the indicated dates (in thousands):

(7)REVENUE

Revenue from Contracts with Customers

We account for contracts with customers when the parties have executed the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable that 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.

For Power Purchase Agreements (“PPA”) that are not determined to be leases or derivatives, we have concluded that a contract exists when the PPA is executed by the parties, as this is the point at which enforceable rights and obligations are established.

Under accredited capacity PPAs, we recognize revenue daily, based on an output method of capacity made available as part of any stand-ready obligations for contracted accredited capacity performance obligations. For delivered energy PPAs, we recognize revenue daily for the actual delivered MWh of electricity. For the prepaid delivered energy PPAs, we recognize revenue daily for the funds received for the actual delivered MWh of electricity plus any accretion attributable to the time value of money.

When there is an outage at one of the generating units at Merom or energy hours at the Merom Hub are priced below our production cost, we have the option to make net hourly purchases of power in the MISO market to satisfy our obligations, which we record as cost of purchased power in our condensed consolidated statements of operations.

Coal operations

Our coal revenue is derived from sales to customers of coal produced at our mining facilities. Our customers typically purchase coal free on board from our mine sites where title, risk of loss, and control pass to the customer. 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. Coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, but some include a pre-determined escalation in price for each year and some allow for our customers to vary the fixed-volume by pre-determined quantities during a set period, such as quarterly. The terms of our coal sales agreements result from extensive, competitive negotiations with customers. Consequently, the terms of these contracts vary by customer.

Coal sales agreements typically contain coal quality specifications which require the raw coal sold by us to the customer to be (i) substantially free of magnetic material and other foreign material impurities and (ii) 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 British thermal unit factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped. When applicable, we have constrained the expected value of variable consideration in our estimation of transaction price and only included this consideration to the extent that it is probable that a significant revenue reversal will not occur.

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.

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.

We concluded that each MWh of delivered energy is capable of being distinct as a customer could benefit from each on its own by using 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 accredited capacity provides an economic benefit to the holder and could be sold by the customer.

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 using the base price per the contract, increased or decreased for quality adjustments.

The following table illustrates the balance of all current Electric and Coal Operations contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2026, disaggregated by segment and contract duration (in thousands).

1 - Coal Operations revenue consists of consolidated revenue excluding our intercompany revenues from Merom.

Subsequent to September 30, 2026, on October 7, 2026, the Company entered intotwo agreements, asix-year Power Purchase Agreement (the "Energy PPA") and an agreement under a Master Power Purchase and Sale Agreement (the "Capacity PPA") with an Indiana utility provider ("Indiana Utility"). The Energy PPA and Capacity PPA are not included in the table above. Both agreements run from June 1, 2029 through May 31, 2035. The Energy PPA has an annual average base energy quantity of 200 MW of electricity from the Merom Station. Under the Capacity PPA, the Company will sell the Indiana Utility an annual average of 225 Zonal Resource Credits per day, which represent accredited generating capacity under MISO rules and will be sourced exclusively from the Merom Station’stwo generating units.

Contract Balances

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 the contracted price for electricity or accredited capacity. For coal contracts, the customer pays us a base price for the coal, increased or decreased for any quality adjustments. Amounts billed and due are recorded as trade accounts receivable and included in accounts receivable in our condensed consolidated balance sheets. Payments received prior to fulfilling our performance obligations are included in contract liabilities in our condensed consolidated balance sheets. When the Company receives customer payments more than one year in advance of the related performance obligations and the financing is significant in the context of the contract, the Company adjusts the transaction price for the significant financing component associated with these contracts at risk adjusted market rates. The resulting interest accretion is recognized as interest expense over the period between the customer payment date and the expected satisfaction of the performance obligation.

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

As the Company fulfills its contractual obligations, we recognize those amounts in revenue. The following table reconciles our beginning and ending contract liabilities for the nine-month periods presented (in thousands):

(8)INCOME TAXES

For the nine months ended September 30, 2026 and 2025, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate. The effective tax rate for the nine months ended September 30, 2026 and 2025, was approximately 0%. The three months ended September 30, 2026 include income tax expense of $1.8 million related to a change in our estimated annual effective tax rate, which resulted from a decrease in forecasted full-year pretax income, now a pretax loss. Historically, our actual effective tax rates 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.

On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both domestic and international), expanding certain Inflation Reduction Act incentives, and accelerating the phase-out of or repealing others. We have analyzed the provisions within the act and determined that the benefits relating to capital expenditures and deductibility of interest under IRC Section 163(j) will provide cash flow benefits to the company by accelerating deductions for tax purposes. As the more significant benefits relate to the timing of deductions, there were no material impact affecting the effective tax rate or the valuation allowance determination in the period that OBBBA was enacted.

(9)STOCK COMPENSATION PLANS

Non-vested grants and activity for the period presented are as follows (in whole shares):

For the three and nine months ended September 30, 2026, our stock compensation expense was $1.2 million and $3.7 million, respectively. For the three and nine months ended September 30, 2025, our stock compensation expense was $0.6 million and $2.1 million, respectively.

Non-vested restricted stock unit (“RSU”) grants will vest as follows (in whole shares):

As of September 30, 2026, unrecognized stock compensation expense to be recognized over the respective vesting period is $5.9 million, and we had 1,782,203 RSUs available for future issuance. RSUs are not allocated earnings and losses as they are considered non-participating securities. Forfeitures are recognized as they occur.

(10)SELF-INSURANCE

The Company is self-insured for certain risks, including physical damage and operational liability, related to our non-leased underground mining equipment. The Company records a liability for self-insured risks when a loss is both probable and reasonably estimable. The Company hadno accrual for self-insurance liabilities as of September 30, 2026 or December 31, 2025.

The Company also self-insures for a portion of its workers’ compensation claims under a guaranteed cost program. Under this program, the Company is responsible for the first $1.0 million per claim up to an aggregate of $4.0 million annually. As of September 30, 2026 and December 31, 2025, the Company has restricted cash of $4.2 million and $3.0 million, respectively, for future workers’ compensation claim payments. The Company had $5.6 million and $5.2 million of workers’ compensation reserve as of September 30, 2026 and December 31, 2025, respectively, in accrued liabilities on the condensed consolidated balance sheets.

(11)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.

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.

The carrying amounts for cash equivalents, accounts receivable, accounts payable, accrued liabilities and other, approximate fair value due to the short maturity of those instruments. Our debt is recorded at amortized cost. As described in“Note 5 – Debt,” its fair value approximates its principal amount and is classified within Level 2 of the fair value hierarchy. Our debt is collateralized primarily by our assets.

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 totaled $433.0 million and $15.4 million as of September 30, 2026 and December 31, 2025, 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.

(12)EQUITY METHOD INVESTMENTS

We own a 50% interest in Sunrise Energy which owns gas reserves and gathering equipment with plans to develop and operate such reserves. Sunrise Energy 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 was $2.1 million and $1.9 million as of September 30, 2026 and December 31, 2025, respectively.

The Company also owns a 50% interest in Oaktown Gas, LLC. Oaktown Gas, LLC operates an emission abatement project through the destruction of gases extracted from the Oaktown mines to generate carbon credits and other emissions offset credits. The carrying value of the investment included in the condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, was $0.5 million and $0.7 million, respectively.

(13)SEGMENTS OF BUSINESS

Our business is organized based on the services and products we provide intwo segments: (i) Electric Operations and (ii) Coal Operations. The CODM, who is the Company’s Chief Executive Officer, reviews and assesses operating performance measures related to our Electric Operations and our Coal Operations segments.

Our Electric Operations segment includes the electric power generation facilities of the Merom Station, which is atwo-unit,1,080-megawatt rated coal fired power plant located in Sullivan County, Indiana. Our sales region is in MISO Zone 6, which includes Indiana and a portion of western Kentucky. Revenues from our Electric Operations segment consist primarily of delivered energy and accredited capacity revenues. Fuel costs included in our Electric Operations segment include the cost of coal purchased from our Coal Operations segment, which are based on multi-year contracts which approximated market prices at the time the prices were agreed.

Our Coal Operations segment includes the Oaktown 1 underground mining complex, as well as other currently idled mining facilities, which produce high-quality bituminous coal from the Illinois Basin. Revenue from our Coal Operations segment consists of sales of coal to various third parties and to the Merom Station. Coal sales to our Electric Operations are based on multi-year contracts that approximated market prices at the time the prices were agreed. Intercompany coal sales and amounts above actual costs to produce the coal are eliminated in the condensed consolidated statements of operations.

In addition to these reportable segments, the Company has a “Corporate and Other and Eliminations” category, which is not significant enough, on a stand-alone basis, to be considered an operating segment. Corporate and Other and Eliminations primarily consist of unallocated corporate costs and activities, including our equity method investments.

The CODM evaluates segment performance based upon Segment EBITDA for each business segment. Segment EBITDA is calculated for each segment as follows:

1. For our Electric Operations segment, Segment EBITDA is comprised of accredited capacity and delivered energy revenues less certain significant segment expenses, which include (i) variable costs comprised of fuel costs and certain other operating costs, such as limestone and soda ash, (ii) other operating and maintenance costs, (iii) costs of purchased power, (iv) utilities, (v) labor and (vi) general and administrative costs.

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

Segment EBITDA for each segment is a key measure used by our CODM and provides information about our core operating performance, significant expenses and ability to generate cash flow. Additionally, Segment EBITDA provides investors with the financial analytical framework upon which our CODM bases financial, operational, compensation and planning decisions and presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations. Our CODM reviews variable costs, as defined above, in our Electric Operations segment in order to evaluate the efficiency of that segment’s operations.

Presented below are the Electric and Coal Operations key metrics reviewed by the CODM for the three months ended September 30, 2026 and 2025 (in thousands):

Presented below are the Electric and Coal Operations key metrics reviewed by the CODM for thenine months ended September 30, 2026 and 2025 (in thousands):

1 Other operating costs primarily include costs for lime dust.

2 Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable included in fuel and other operating costs.

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the three months ended September 30, 2026 (in thousands):

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the three months ended September 30, 2025 (in thousands):

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the nine months ended September 30, 2026 (in thousands):

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the nine months ended September 30, 2025 (in thousands):

Presented below is the summary of Segment EBITDA (in thousands):

Presented below is our reconciliation of Segment EBITDA to the most comparable GAAP account, income (loss) before income taxes (in thousands):

Presented below are our Electric and Coal Operations assets and capital expenditures for the periods presented below (in thousands):

1 As of December 31, 2025, Coal Operations assets included $9.4 million of cash and cash equivalents held on behalf of the consolidated group, consisting of funds transferred from Electric Operations and Hallador for centralized treasury management purposes. During the third quarter of 2026, this cash was transferred to Corporate and Other. The December 31, 2025 presentation is not reflective of Coal Operations' earnings capacity; refer to the condensed consolidated balance sheets.

(14)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 presented:

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

The computation of diluted net loss per share for the three and nine months ended September 30, 2026 excludes 273,538 and 320,469 potentially dilutive securities, respectively, related to unvested restricted stock units as their inclusion would have been anti-dilutive.

(15)COMMITMENTS AND CONTINGENCIES

Commitments

Asset Purchase Agreement — Turbine Equipment

On May 30, 2026, the Company entered into an APA with the Seller to acquire approximately 460 MW of Siemens gas turbines, generators, a steam turbine, and ancillary equipment for a total purchase price of $350.0 million. The Company expects to incur approximately $100.0 million of additional costs for transportation, refurbishment, insurance, and logistics in connection with the delivery of the equipment.

The Company paid $23.8 million to third party vendors on behalf of the Seller during the nine months ended September 30, 2026 which is included in construction work in progress on the condensed consolidated balance sheets. As of September 30, 2026, the remaining purchase price under the APA was approximately $326.2 million. In October 2026, the Company made the third and fourth installment payments under the APA totaling $315.0 million consisting of a $50.0 million payment to the Seller and a $265.0 million payment into an escrow account held by the Seller, and paid an additional $11.0 million to the Seller and to third party vendors on behalf of the Seller. The October payments were paid from Turtle Creek funds, including the construction account established under the KLIM Facility. See“Note 5 – Debt.” As of October 31, 2026, the Company had paid $349.8 million of the $350.0 million purchase price. In October 2026, the equipment was loaded onto an ocean-going vessel, which departed the Philippines and title to the equipment transferred to the Company.

Other

Our Coal Operations subsidiary was party to litigation in which the plaintiffs alleged violations of the Fair Labor Standards Act and state law due to alleged failure to compensate for time "donning" and "doffing" equipment and to account for certain bonuses in the calculation of overtime rates and pay. In January 2025, we agreed to settle with the plaintiffs such litigation for $2.8 million, which was recorded in operating expenses on our consolidated statements of operations for the year ended December 31, 2024. During the third quarter of 2025, we transferred $2.7 million into an escrow accountand in late 2025 the settlement terms were approved by the court. At September 30, 2026, there wereno further amounts accrued on our consolidated balance sheet related to this litigation.

(16)AT MARKET AGREEMENT AND CONFIDENTIALLY MARKETED PUBLIC OFFERING

ATM

On December 18, 2023, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”), under which the Company could issue and sell, from time to time, shares of its 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 with the Agent acting as sales agent (the “ATM Program”). Either the Company or the Agent could terminate the Sales Agreement, in its sole discretion, by giving five days’ notice. On December 16, 2025, the Company amended the Sales Agreement to increase the aggregate gross sales proceeds under the ATM Program from $50.0 million to $100.0 million.

During the first quarter of 2026, we issued 10,832 shares of Common Stock under the ATM Program for net proceeds of $0.2 million. During the year ended December 31, 2025, we issued 697,227 shares of Common Stock under the ATM Program for net proceeds of $13.5 million. In January 2026, the Company delivered written notice to the Agent to terminate the Sales Agreement effective January 18, 2026. As a result of the termination of the Sales Agreement, the Company will not offer or sell any further shares under the ATM Program.

CMPO

In January 2026, the Company conducted a confidentially marketed public offering (the "CMPO") pursuant to a base prospectus and a final prospectus supplement that were filed with the SEC. The Company sold a total of 3,194,444 shares of Common Stock, at a price to the public of $18.00 per share for aggregate gross proceeds of approximately $57.5 million, including the exercise of the underwriter’s option prior to deducting underwriting discounts, commissions, and other offering expenses of $3.7 million.