METC Ramaco Resources Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)

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For the quarterly period ended March 31, 2022

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For the transition period from                 to

Commission File Number: 001-38003

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 Regulation S-T 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.

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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 12, 2022, the registrant had 44,273,388 shares of common stock outstanding.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under, but not limited to, the heading “Item 1A. Risk Factors” included in this Quarterly Report and elsewhere in the Annual Report of Ramaco Resources, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2021 (the “Annual Report”) filed with the United States Securities and Exchange Commission (the “SEC”) on April 1, 2022 and other filings of the Company with the SEC.

Forward-looking statements may include statements about:

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We caution you that these forward-looking statements are subject to a number of risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of coal. Moreover, we operate in a very competitive and rapidly changing environment and additional risks may arise from time to time. It is not possible for our management to predict all of the risks associated with our business, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement and speak only as of the date of this Quarterly Report. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Ramaco Resources, Inc.

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estimated aggregate liability for uninsured claims totaled $3.9 million including $2.4 million included in other long-term liabilities. These estimates are subject to uncertainty due to a variety of factors, including extended lag times in the reporting and resolution of claims, and trends or changes in claim settlement patterns, insurance industry practices and legal interpretations. As a result, actual costs could differ significantly from the estimated amounts. Adjustments to estimated liabilities are recorded in the period in which the change in estimate occurs.

Financial Instruments—Our financial assets and liabilities consist of cash, accounts receivable, accounts payable and indebtedness. The fair values of these instruments approximate their carrying amounts at each reporting date, except that our Senior Notes have an estimated fair value of approximately $2.7 million higher than the balance recorded.

Nonrecurring fair value measurements include asset retirement obligations, the estimated fair value of which is calculated as the present value of estimated cash flows related to its reclamation liabilities using Level 3 inputs. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, our credit adjusted discount rate, inflation rates and estimated date of reclamation.

Concentrations—During the three months ended March 31, 2022, sales to our top four customers accounted for approximately 23%, 18%, 18% and 11% of our total revenue, respectively, aggregating to approximately 70% of our total revenue. The balances due in the aggregate from these four customers at March 31, 2022 was approximately 60% of our total accounts receivable. During the three months ended March 31, 2021, sales to our top two customers accounted for approximately 66% of total revenue.

Adoption of New Accounting Standards

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In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The standard was effective for us in the first quarter of our fiscal year 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements.

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Recent Accounting Pronouncements Being Assessed

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In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR’) or another reference rate expected to be discontinued due to reference rate reform. The new guidance provides the following optional expedients: simplify accounting analyses under current GAAP for contract modifications, simplify the assessment of hedge effectiveness, allow hedging relationships affected by reference rate reform to continue and allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.

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In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The update provides additional optional guidance on the transition from LIBOR to include derivative instruments that use an interest rate for margining, discounting or contract price alignment. The standard will ease, if warranted, the requirements for accounting for the future effects of the rate reform. An entity may elect to apply the amendments prospectively through December 31, 2022. The Company is currently assessing the impact of adopting this standard on its financial statements and the timing of adoption.

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Capitalized amounts related to coal reserves at properties where we are not currently developing or actively engaged in mining operations totaled $25.9 million as of March 31, 2022 and $25.1 million as of December 31, 2021.

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Depreciation and amortization included:

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NOTE 4—DEBT

Revolving Credit Facility and Term Loan—On November 2, 2018, we entered into a Credit and Security Agreement (as amended or amended and restated the “Revolving Credit Facility” or the “Credit Agreement”) with KeyBank National Association (“KeyBank”), as the administrative agent, and other lenders party thereto. The Credit Agreement was amended on February 20, 2020 and March 19, 2021. On October 29, 2021, we entered into the Amended and Restated Credit and Security Agreement (the “Amendment and Restatement”) with KeyBank. Prior to the Amendment and Restatement, the Credit Agreement consisted of the $10.0 million term loan (the “Term Loan”) and up to $30.0 million revolving line of credit, including $3.0 million letter of credit availability. The Amendment and Restatement increased the overall availability under the revolving credit line to $40.0 million and extended the maturity date to December 31, 2024. All personal property assets, including, but not limited to accounts receivable, coal inventory and certain mining equipment are pledged to secure the Revolving Credit Facility.

The Revolving Credit Facility bears interest based on Secure Overnight Financing Rate (“SOFR”) + 2.0% or Base Rate + 1.5%. “Base Rate” is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) SOFR + 2.0%. Advances under the Revolving Credit Facility are made initially as Base Rate loans but may be converted to SOFR rate loans at certain times at our discretion. At March 31, 2022, there was no amount outstanding under the Revolving Credit Facility and we had remaining availability of $39.6 million.

The Term Loan is secured under a Master Security Agreement with a pledge of certain underground and surface mining equipment, bears interest at LIBOR + 5.15% and is required to be repaid in monthly installments of $278 thousand including accrued interest. The outstanding principal balance of the Term Loan was $2.5 million at March 31, 2022.

The Credit Agreement contains usual and customary covenants including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants. At March 31, 2022, we were in compliance with all financial covenants under the Credit Agreement.

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Key Equipment Finance Loan—On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of $4.7 million for the financing of existing underground and surface equipment (the “Equipment Loan”). The Equipment Loan bears interest at 7.45% per annum and is payable in 36 monthly installments of $147 thousand. There is a 3% premium for prepayment of the note within the first 12 months. This premium declines by 1% during each successive 12-month period. The outstanding principal balance of the Equipment Loan was $1.8 million at March 31, 2022.

9.00% Senior Unsecured Notes due 2026—On July 13, 2021, we completed an offering of $34.5 million, in the aggregate, of the Company’s 9.00% Senior Unsecured Notes due 2026 (the “Senior Notes”), and incurred $2.4 million for note offering costs. The Senior Notes mature on July 30, 2026, unless redeemed prior to maturity. The Senior Notes bear interest at a rate of 9.00% per annum, payable quarterly in arrears on the 30th day of January, April, July and October of each year. We may redeem the Senior Notes in whole or in part, at our option, at any time on or after July 30, 2023, or upon certain change of control events, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but not including, the date of redemption. Issuance costs for the Senior Notes included underwriters’ fees, attorney, accounting and filing costs totaling $2.4 million. These issuance costs are reported as a debt discount which is being amortized over the Senior Notes term using an effective rate method. The outstanding principal balance under the Senior Notes was $34.5 million at March 31, 2022 and is presented net of unamortized discounts of $2.0 million. The effective interest rate is approximately 10.45%.

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J. H. Fletcher & Co. Loan—On July 23, 2021 and November 24, 2021, we entered into equipment loans with J. H. Fletcher & Co., as lender, in the principal amount of $0.9 million and $3.9 million, respectively, for the financing of underground equipment (the “Fletcher Equipment Loans”). The Fletcher Equipment Loans bear no interest and are payable in 24 monthly installments of $200 thousand. The outstanding principal balance of the Fletcher Equipment Loans was $3.8 million at March 31, 2022.

Komatsu Financial Limited Partnership Loan—On August 16, 2021, we entered into an equipment loan with Komatsu Financial Limited Partnership, as lender, in the principal amount of $1.0 million for the financing of surface equipment (the “Komatsu Equipment Loan”). The Komatsu Equipment Loan bears interest at 4.6% per annum and is payable in 36 monthly installments of $36 thousand for the first six months and then at $28 thousand until maturity. The outstanding principal balance of the Komatsu Equipment Loan was $0.8 million at March 31, 2022.

Brandeis Machinery & Supply Company—On January 11, 2022, we entered into equipment loans with Brandeis Machinery & Supply Company, as lender, in the principal amount of $1.4 million for the financing of surface equipment (the “Brandeis Equipment Loans”). The Brandeis Equipment Loans bear interest at 4.8% per annum and are payable in 48 monthly installments of $24 thousand. The outstanding principal balance of the Brandeis Equipment Loans was $0.9 million at March 31, 2022.

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NOTE 5—LEASES

The Company has various financing leases for mining equipment. These leases are generally for terms up to 36 months and expire through 2025. We have one operating lease for office space that will expire mid-2022. Operating lease expense for each of the three-month periods ended March 31, 2022 and March 31, 2021 was $20 thousand.

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Right-of-use assets and lease liabilities are determined as the present value of the lease payments, discounted using either the implicit interest rate in the lease or our estimated incremental borrowing rate based on similar terms, payments and the economic environment where the leased asset is located. Below is a summary of our leases:

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NOTE 6—EQUITY

Stock-Based Compensation Awards—Our Long-Term Incentive Plan (“LTIP”) is currently authorized by shareholders for the issuance of awards of up to approximately 10.9 million shares of common stock, and as of March 31, 2022, there were approximately 5.2 million shares of common stock available for grant under the LTIP, which includes 4.0 million authorized shares that became effective on February 23, 2022. Additionally, granted but unvested shares are generally forfeited upon termination of employment, unless an employee enters into another written arrangement, and may not be sold, assigned, transferred, pledged or otherwise encumbered.

As of March 31, 2022, we had four types of stock-based awards outstanding: options, restricted stock, restricted stock units and performance stock units. Stock-based compensation expense for all four types of stock-based awards totaled $1.9 million and $1.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

The following table summarizes stock-based awards outstanding, as well as activity for the period:

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Options for the purchase of a total of 937,424 shares of our common stock for $5.34 per share were granted to two executives on August 31, 2016. The options have a ten-year term from the grant date and are fully vested. The options remain outstanding and unexercised and were in-the-money at March 31, 2022 and had an intrinsic value of $9.8 million.

Restricted Stock—We grant shares of restricted stock to certain senior executives, key employees and directors. These shares vest over approximately one to three and a half years from the date of grant. During the vesting period, the

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participants have voting rights and may receive dividends. The fair value of the restricted stock on the date of the grant, which was $15.65 per share, is amortized ratably over the service period. At March 31, 2022, there was $8.7 million of total unrecognized compensation cost related to unvested restricted stock to be recognized over a weighted-average period of 1.4 years.

Restricted Stock Units—We grant shares of restricted stock units to certain senior executives and key employees. These share units vest ratably over approximately three years from the date of grant. During the vesting period, the participants have no voting rights and no dividend rights; however, participants may receive dividend equivalents, of which none were awarded during the three months ended March 31, 2022. Upon vesting and within 30 days, the recipient will receive one share of common stock for each stock unit.

The 248,706 restricted stock units are linked to the Company’s common stock value which was fair valued on the date of grant at $15.65 per share and is recognized ratably over the service period. At March 31, 2022, there was $3.7 million of total unrecognized compensation cost related to unvested restricted stock units to be recognized over a weighted-average period of 2.8 years.

Performance Stock Units—We grant shares of performance stock units to certain senior executives and key employees. These share units cliff-vest approximately three years from the date of grant based on the achievement of targeted performance levels related to pre-established relative total shareholder return goals. These performance stock units have the potential to be earned from 0% to 200% of target depending on actual results. During the vesting period, the participants have no voting rights and no dividend rights; however, participants may receive dividend equivalents, of which none were awarded during the three months ended March 31, 2022. Upon vesting and within 30 days, the recipient will receive one share of common stock for each stock unit.

The Company’s 248,706 performance stock units were valued relative to the stock price performance of a peer group of companies at a valuation stock price of $15.65 per share, which was fair valued at $22.21 per share at the date of grant based on a Monte Carlo simulation. The fair value of the performance stock units on the date of the grant is recognized ratably over the service period. At March 31, 2022, there was $5.2 million of total unrecognized compensation cost related to unvested performance stock units to be recognized over a weighted-average period of 2.8 years.

NOTE 7—COMMITMENTS AND CONTINGENCIES

Surety Bonds—At March 31, 2022, we had total reclamation bonding requirements of $20.8 million which were supported by surety bonds. Additionally, we had $0.3 million of surety bonds that secured performance obligations.

Contingent Transportation Purchase Commitments—We secure the ability to transport coal through rail contracts and export terminal services contracts that are sometimes funded through take-or-pay arrangements. At March 31, 2022, contingent liabilities under these take-or-pay arrangements totaled $12.8 million under three contracts expiring at various dates between December 31, 2022, and March 31, 2024. The level of these take-or-pay liabilities will be reduced at a per ton rate as such rail and export terminal services are utilized against the required minimum tonnage amounts over the contracts term stipulated in such rail and export terminal contracts.

Litigation—From time to time, the Company may be subject to various litigation and other claims in the normal course of business. No amounts have been accrued in the consolidated financial statements with respect to any matters.

In November 2018, one of our three raw coal storage silos that fed our Elk Creek plant experienced a partial structural failure. Our insurance carrier disputed our claim for coverage and in August 2019 we filed suit. The case went to trial in June 2021 and in July 2021, the jury returned a verdict in our favor for $7.7 million in compensatory damages and made an additional award of $25.0 million for inconvenience and aggravation. In August 2021, the defendants filed a post-trial motion. On March 4, 2022, the court entered its memorandum opinion and order on the motion reducing the jury award to a total of $1.8 million, including pre-judgment interest, based largely on the court’s decision to vacate and set aside, in its entirety, the jury award of damages for inconvenience and aggravation. The same day, the court entered

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the judgment in accordance with the memorandum opinion and order. No amount is currently reflected in the financial statements related to this matter.

On April 1, 2022, we filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit.

At March 31, 2022, we had outstanding performance obligations for the remainder of 2022 of approximately 1.5 million tons for contracts with fixed sales prices averaging $188/ton and 0.2 million tons for contracts with index-based pricing mechanisms.

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NOTE 9—INCOME TAXES

Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items are recognized in the period these occur.

Discrete items during the three months ended March 31, 2021 included the impact of legislative changes in West Virginia. Excluding discrete items, our effective tax rate for the three months ended March 31, 2022 and March 31, 2021 was 19.5% and 5%, respectively. The primary difference from the federal statutory rate of 21% in each period is related to state taxes, permanent differences for non-deductible expenses and depletion expense for income tax purposes.

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Diluted EPS in the three months ended March 31, 2021 excluded 937,424 options to purchase our common stock because their effect would be anti-dilutive.

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NOTE 11—RELATED PARTY TRANSACTIONS

Mineral Lease and Surface Rights Agreements—Much of the coal reserves and surface rights that we control were acquired through a series of mineral leases and surface rights agreements with Ramaco Coal, LLC (“Ramaco Coal”), a related party. Production royalty payables totaling $0.9 million and $0.4 million at March 31, 2022 and December 31, 2021, respectively, were included in accounts payable in the consolidated balance sheets. Royalties paid to Ramaco Coal in the three months ended March 31, 2022 and March 31, 2021 totaled $2.0. million and $1.1 million, respectively.

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On-going Administrative Services—Under a Mutual Services Agreement dated December 22, 2017 but effective as of March 31, 2017, the Company and Ramaco Coal agreed to share the services of certain of each company’s employees. Each party will pay the other a fee on a quarterly basis for such services calculated as the annual base salary of each employee providing services multiplied by the percentage of time each employee spent providing services for the other party. The services will be provided for 12-month terms, but may be terminated by either party at the end of any 12-month term by providing written notice at least 30 days prior to the end of the then-current term. Charges to Ramaco Coal were $23 thousand for the three months ended March 31, 2022. For the three months ended March 31, 2021, charges to Ramaco Coal were $9 thousand.

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Recent Developments

On April 29, the Company closed on its previously announced acquisition of 100% of the equity interests of Ramaco Coal, an entity owned by an investment fund managed by Yorktown Partners and certain members of the Company's management. The consideration for the acquisition will consist of (i) an initial payment of $10 million due at closing and (ii) an aggregate deferred purchase price of $55 million, consisting of (A) $15 million, to be paid during the remainder of 2022 in $5 million ratable quarterly installments, and (B) $40 million, to be paid during 2023 in $10 million ratable quarterly installments.

During the three-month period ended March 31,2022, our net income and Adjusted EBITDA were significantly higher compared to the same period in 2021. Sales pricing and volumes were higher by 163% and 38%, respectively, during the three months ended March 31, 2022 than the same period during 2021, which was primarily due to the global rebound of metallurgical demand from the previous effects of COVID-19. In the first three months of 2021, we recognized a total of $2.5 million in other income for the CARES Act Employee Retention Tax Credit.

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Revenue. Our revenue includes sales of Company produced coal and coal purchased from third parties. We include amounts billed by us for transportation to our customers within revenue and transportation costs incurred within cost of sales. Revenue per ton sold (FOB mine) and cash cost per ton sold (FOB mine) each exclude the impact of transportation billings and costs.

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Coal sales information is summarized as follows:

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Coal sales revenue in the first quarter of 2022 was $154.9 million, 256% higher than in the first quarter of 2021 primarily due to increased tons sold in the first quarter of 2022 and increased revenue per tons sold (FOB Mine). Revenue per ton sold (FOB mine) increased 168% from $88/ton in the first quarter of 2021 to $236/ton in the first quarter of 2022. We sold 583 thousand tons of coal in the first quarter of 2022, a 38% increase over the same period of 2021. We benefited from improved domestic, spot and index pricing for metallurgical coal in 2022. Additionally, favorable conditions in the steel and metallurgical markets contributed to an increase demand for metallurgical coal and stronger pricing. We expect these conditions to continue in the next quarter.

Cost of sales. Our cost of sales totaled $81.3 million for the three months ended March 31, 2022 as compared with $31.2 million for the same period in 2021 due to higher tons sold and higher sales-related costs. The cash cost per ton sold (FOB mine) for the first quarter of 2022 was $110/ton, compared with $59/ton in the first quarter of 2021. Our cash cost per ton sold in the 2022 period was primarily due to higher sales-related costs directly associated with higher revenue per ton sold in 2022.

Asset retirement obligation accretion. Asset retirement obligation accretion was $0.2 million for each of the three-month periods ended March 31, 2022 and March 31, 2021.

Depreciation and amortization. Depreciation and amortization expense was $8.7 million and $6.2 million for the periods ended March 31, 2022 and March 31, 2021, respectively, primarily due to higher production volumes in the first quarter of 2022 and additional mining equipment placed in service in recent periods over the past year.

Selling, general and administrative. Selling, general and administrative expenses were $11.8 million for the three months ended March 31, 2022 and $4.7 million for the three months ended March 31, 2021 primarily due to higher stock compensation, incentives and professional services in 2022, related to the Company’s production growth profile.

Other income. Other income was $0.4 million for the three months ended March 31, 2022. For the three months ended March 31, 2021, other income was $2.9 million which includes $2.5 million for the CARES Act Employee Retention Tax Credit.

Interest expense, net. Interest expense, net was approximately $1.1 million during the three months ended March 31, 2022. Interest expense, net was approximately $0.2 million in the three months ended March 31, 2021. Interest expense, net was higher from the prior period primarily due to the issuance of the Senior Notes in July 2021.

Income tax expense. The effective tax rate for the three months ended March 31, 2022, excluding discrete items, was 19.5%. The effective tax rate for the three months ended March 31, 2021, excluding discrete items, was 5%. Discrete items during the three months ended March 31, 2021 included the impact of legislative changes in West Virginia. The primary difference from the federal statutory rate of 21% is related to state taxes, permanent differences for non-deductible expenses and the difference in depletion expense between GAAP and federal income tax purposes.

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Liquidity and Capital Resources

At March 31, 2022, we had $71.5 million of cash and cash equivalents and $39.6 million available under our existing credit agreements for future borrowings.

Significant sources and uses of cash during the first three months of 2022

Sources of cash:

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Uses of cash:

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At March 31, 2022, we also had $1.0 million of restricted cash, classified in other current assets in the condensed consolidated balance sheets, for potential future workers’ compensation claims.

Future sources and uses of cash

Our primary use of cash includes capital expenditures for mine development, ongoing operating expenses and deferred cash payments in connection with the Ramaco Coal acquisition. We expect to fund our capital and liquidity requirements with cash on hand, anticipated cash flows from operations and borrowings discussed in more detail below. We believe that current cash on hand, cash flow from operations and available liquidity under our existing credit agreements will be sufficient to meet our capital expenditure and operating plans.

Additional factors that could adversely impact our future liquidity and ability to carry out our capital expenditure program include:

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If future cash flows are insufficient to meet our liquidity needs or capital requirements, we may reduce our expected level of capital expenditures and/or fund a portion of our capital expenditures through the issuance of debt or equity securities, the entry into debt arrangements or from other sources, such as asset sales.

Indebtedness

Revolving Credit Facility and Term Loan—On November 2, 2018, we entered into a Credit and Security Agreement (as amended or amended and restated the “Revolving Credit Facility” or the “Credit Agreement”) with KeyBank National Association (“KeyBank”), as the administrative agent, and other lenders party thereto. The Credit Agreement was amended on February 20, 2020 and March 19, 2021. On October 29, 2021, we entered into the Amended

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and Restated Credit and Security Agreement (the “Amendment and Restatement”) with KeyBank. Prior to the Amendment and Restatement, the Credit Agreement consisted of the $10.0 million term loan (the “Term Loan”) and up to $30.0 million revolving line of credit, including $3.0 million letter of credit availability. The Amendment and Restatement increased the overall availability under the revolving credit line to $40.0 million and extended the maturity date to December 31, 2024. All personal property assets, including, but not limited to accounts receivable, coal inventory and certain mining equipment are pledged to secure the Revolving Credit Facility.

The Revolving Credit Facility bears interest based on Secure Overnight Financing Rate (“SOFR”) + 2.0% or Base Rate + 1.5%. “Base Rate” is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) SOFR + 2.0%. Advances under the Revolving Credit Facility are made initially as Base Rate loans but may be converted to SOFR rate loans at certain times at our discretion. At March 31, 2022, there was no amount outstanding under the Revolving Credit Facility and we had remaining availability of $39.6 million.

The Term Loan is secured under a Master Security Agreement with a pledge of certain underground and surface mining equipment, bears interest at LIBOR + 5.15% and is required to be repaid in monthly installments of $278 thousand including accrued interest. The outstanding principal balance of the Term Loan was $2.5 million at March 31, 2022.

The Credit Agreement contains usual and customary covenants including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants. At March 31, 2022, we were in compliance with all financial covenants under the Credit Agreement.

Key Equipment Finance Loan—On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of $4.7 million for the financing of existing underground and surface equipment (the “Equipment Loan”). The Equipment Loan bears interest at 7.45% per annum and is payable in 36 monthly installments of $147 thousand. There is a 3% premium for prepayment of the note within the first 12 months. This premium declines by 1% during each successive 12-month period. The outstanding principal balance of the Equipment Loan was $1.8 million at March 31, 2022.

9.00% Senior Unsecured Notes due 2026—On July 13, 2021, we completed an offering of $34.5 million, in the aggregate, of the Company’s 9.00% Senior Unsecured Notes due 2026 (the “Senior Notes”), and incurred $2.4 million for note offering costs. The Senior Notes mature on July 30, 2026, unless redeemed prior to maturity. The Senior Notes bear interest at a rate of 9.00% per annum, payable quarterly in arrears on the 30th day of January, April, July and October of each year. We may redeem the Senior Notes in whole or in part, at our option, at any time on or after July 30, 2023, or upon certain change of control events, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but not including, the date of redemption. Issuance costs for the Senior Notes included underwriters’ fees, attorney, accounting and filing costs totaling $2.4 million. These issuance costs are reported as a debt discount which is being amortized over the Senior Notes term using an effective rate method. The outstanding principal balance under the Senior Notes was $34.5 million at March 31, 2022 and is presented net of unamortized discounts of $2.0 million. The effective interest rate is approximately 10.45%.

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J. H. Fletcher & Co. Loan—On July 23, 2021 and November 24, 2021, we entered into equipment loans with J. H. Fletcher & Co., as lender, in the principal amount of $0.9 million and $3.9 million, respectively, for the financing of underground equipment (the “Fletcher Equipment Loans”). The Fletcher Equipment Loans bear no interest and are payable in 24 monthly installments of $200 thousand. The outstanding principal balance of the Fletcher Equipment Loans was $3.8 million at March 31, 2022.

Komatsu Financial Limited Partnership Loan—On August 16, 2021, we entered into an equipment loan with Komatsu Financial Limited Partnership, as lender, in the principal amount of $1.0 million for the financing of surface equipment (the “Komatsu Equipment Loan”). The Komatsu Equipment Loan bears interest at 4.6% per annum and is payable in 36 monthly installments of $36 thousand for the first six months and then at $28 thousand until maturity. The outstanding principal balance of the Komatsu Equipment Loan was $0.8 million at March 31, 2022.

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Brandeis Machinery & Supply Company—On January 11, 2022, we entered into equipment loans with Brandeis Machinery & Supply Company, as lender, in the principal amount of $1.4 million for the financing of surface equipment (the “Brandeis Equipment Loans”). The Brandeis Equipment Loans bear interest at 4.8% per annum and are payable in 48 monthly installments of $24 thousand. The outstanding principal balance of the Brandeis Equipment Loans was $0.9 million at March 31, 2022.

Critical Accounting Estimates

A discussion of our critical accounting policies is included in the Annual Report. There were no material changes to our critical accounting policies during the three months ended March 31, 2022.

Off-Balance Sheet Arrangements

At March 31, 2022, we had no material off-balance sheet arrangements.

Non-GAAP Financial Measures

Adjusted EBITDA - Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

We define Adjusted EBITDA as net income plus net interest expense, stock-based compensation, depreciation and amortization expenses and any transaction related costs. A reconciliation of net income to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.

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Non-GAAP revenue per ton - Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue less transportation costs, divided by tons sold. We believe revenue per ton (FOB mine) provides useful information to investors as it enables investors to compare revenue per ton we generate against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing our financial condition. Revenue per ton sold (FOB mine) is not a measure of financial performance in accordance with GAAP and therefore should not be considered as an alternative to revenue under GAAP.