NOTE 11—SUBSEQUENT EVENTS

Response to the Coronavirus Disease 2019 (COVID-19) Pandemic on Our Business—On March 11, 2020, the
World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020,
the United States declared a national emergency. The impact of COVID-19 on our business is currently unknown. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence and practice social distancing when engaging in essential activities. These actions and the global health crisis caused by COVID-19 have created significant volatility, uncertainty and economic disruption.

We have observed declining demand and spot price reductions for metallurgical coal as business and consumer activity decelerates across the globe. This weakness limited our ability to complete spot sales in the first quarter, leading to an increase in our inventories. We are not able to estimate the impact that lower demand or spot pricing may have on our business but expect that spot pricing and demand will remain weak through at least the second quarter of 2020.

Two customers have notified us that their contractual obligations for purchases of metallurgical coal from us may be delayed or curtailed because of COVID-19. These two customers accounted for approximately 56% of our total revenue during the three months ended March 31, 2020. Based on the current environment, we estimate that a portion of our contractual commitments for the remainder of the year could be delayed or curtailed.

In response, we have taken steps to limit our production in the near-term. Effective April 1, 2020, out of an abundance of caution and to minimize the economic impact to our business, we took the following actions:

We implemented a roughly two-week operational furlough of 182 employees at the Elk Creek mining complex in West Virginia. The Elk Creek prep plant remained fully operational to process coal. Our Berwind mine and the Knox Creek prep plant remained open;

We temporarily reduced the salaries of certain executives, including our named executive officers, by 30% beginning April 1, 2020, and we deferred payment of cash bonuses for these individuals for an indefinite period; and

We reduced or deferred non-essential capital expenditures to adapt to the current market conditions.

We began to partially reopen the furloughed Elk Creek complex operations and recalled approximately one-third of our furloughed workforce during the week of April 20, 2020. We recalled all furloughed employees by May 1, 2020.

To date we have not had any significant issues with critical suppliers, but we continue to communicate with them and closely monitor their developments to ensure we have access to the goods and services required to maintain our operations.

We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities. Additional measures we may take could include extensions of operational furloughs and temporary salary reductions for certain executives, staffing reductions and idling or realignment of additional mines as conditions might dictate. It is not clear what the potential effects any such alterations or modifications may have on our business. The effects on our results in our second quarter and other future periods could be much more significant and cannot currently be quantified.

SBA Paycheck Protection Program Loan—On April 20, 2020, we received proceeds from a loan in the amount of approximately $8.4 million (the “PPP Loan”) from KeyBank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The purpose of the PPP is to encourage the continued employment of workers. Based upon receipt of this funding, we elected to recall our furloughed workers at our Elk Creek complex. We intend to use all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments.

The PPP Loan matures on April 16, 2022 and bears interest at a rate of 1% per annum. Beginning November 17, 2020, we are required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 17, 2022 the principal amount outstanding on the PPP Loan as of October 17, 2020. The PPP Loan is evidenced by a promissory note dated April 17, 2020, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan and accrued interest thereon may be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight week period beginning on the date of loan funding. For purposes of the CARES Act, payroll costs exclude cash compensation of an individual employee in excess of $100 thousand, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100 thousand or less annually are reduced by more than 25%.

Equipment Financing 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 approximately $4.7 million for the financing of existing underground and surface equipment. 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. We intend to use the proceeds from this loan for general corporate purposes including the financing of anticipated future capital expenditures.