What changed in this filing

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Item 1A. Risk Factors

2023-03-08 compared with 2022-03-08 · 203 added, 118 removed, 166 unchanged (66% of the section changed)

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Risks Related to Our Business

As of December 31, 2021, earnings in our RC segment have substantially ended and beginning in 2022, we will be solely dependent on earnings from our APT segment to fund our operations.

We will need to grow the earnings from our APT segment substantially to make up for the loss of earnings of our RC segment.

We are solely dependent on earnings from our consumables products to fund our operations and need to substantially grow earnings from the APT business.

Future distributions from Tinuum Group and Tinuum Services will be insignificant.

The Section 45 tax credit period expired on December 31, 2021.

As a result, both Tinuum Group and Tinuum Services have substantially ceased operations and we expect to receive limited, final distributions from each during the first half of 2022.

Substantially all of our earnings and cash flows in 2021 and 2020 were comprised of equity method earnings from Tinuum Group and M-45 Royalties generated from certain of Tinuum Group’s invested RC facilities.

For the year ended December 31, 2021, our RC segment generated segment operating income of $82.6 million.

From an earnings standpoint, our APT segment must grow substantially, either organically or through acquisition, in order to replace earnings from our RC segment.

There can be no assurance that we will be able to increase our APT segment earnings during 2022 or beyond to cover our current operating expenses or to provide a return to shareholders that is comparable to the return that we previously provided while our RC segment was operating.

We do not expect our overall selling, general and administrative portions of our operating expenses to materially decrease in 2022 as a result of the wind down of our RC segment.

As a result, both Tinuum Group and Tinuum Services have substantially ceased operations and we received distributions from each through December 2022.

We expect to receive limited distributions from each in 2023.

From an earnings standpoint, our business must grow substantially, either organically or through acquisition.

There can be no assurance that we will be able to increase our earnings in 2023 and beyond to cover our current operating expenses or to provide a return to shareholders that is comparable to the return that we previously provided while Tinuum Group and Tinuum Services were operating.

We do not expect our overall selling, general and administrative portions of our operating expenses to materially decrease in 2023.

If we are not able to cover operating expenses, we could be forced to raise additional capital, significantly reduce our operating expenses or take other alternative actions.

The financial effects of Tinuum Group providing indemnification under performance guarantees of its RC facilities are largely unknown and could adversely affect our financial condition.

Tinuum Group indemnifies certain utilities and lessees of RC facilities for particular risks associated with the operations and tax treatment of those facilities.

We have provided limited, joint and several guarantees of Tinuum Group’s obligations under those leases.

Any substantial payments made under such guarantees could have a material adverse effect on our financial condition, results of operations and cash flows.

We are reviewing strategic alternatives and there can be no assurance that we will be successful in identifying or completing any strategic transaction, that any such strategic transaction will result in additional value for our stockholders or that the process will not have an adverse impact on our business.

We have announced that our board of directors has initiated a strategic review to assess a range of strategic alternatives to maximize shareholder value.

No timetable has been set for completion of this process, and there can be no assurance that the review of strategic alternatives will result in the identification or consummation of any transaction.

The process of reviewing strategic alternatives may be time consuming and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected.

We have and will continue to incur substantial expenses associated with identifying, evaluating and negotiating potential strategic alternatives.

There can be no assurance that any potential transaction or other strategic alternative, if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock.

Until the review process is concluded, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and business partners.

Our inability to meet customer supply requirements due to damage to or insufficient production capacity of our Red River manufacturing facility may have a material adverse effect on our business, results of operations and financial condition.

We own and operate a single activation-based manufacturing plant, which is our sole manufacturing plant for producing and selling products to our customers.

Our ability to meet customer expectations, manage inventory, complete sales and achieve our

objectives for operating efficiencies depends on the full-time operation of the Red River Plant.

Our future financial results will suffer if we do not effectively manage our expanded operations following the Arq Acquisition.

Following the Arq Acquisition, the size of our business has increased.

Our future results depend, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.

There can be no assurance that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Arq Acquisition.

The Arq Acquisition will require significant capital for us to manufacture Arq’s products.

Arq is a development stage entity that to date has not generated any revenues.

Arq has historically had net losses and required multiple financing rounds to fund its business plan.

We will require significant capital to execute our business plan in order to manufacture Arq’s products.

A significant funding source will be our cash on hand.

Our capital expenditure requirements include improvements and enhancements at the Red River Plant and Corbin Facility.

Going forward there may be additional capital expenditure requirements for the expansion of capacity at the Red River Plant and Corbin Facility.

We may not be successful in obtaining the required financing or, if financing is available to us, such financing may not be on terms that are favorable to us.

The failure to obtain financing as necessary to fund future capital expenditure requirements could result in the delay of the expansion of the Red River Plant and Corbin Facility and other manufacturing facilities.

The Arq Acquisition will require significant technological changes in manufacturing that may adversely affect the market acceptance of Arq’s products.

We will be producing new products that we have not yet sold commercially.

As such, production to date has not been at full throughput.

Arq’s new manufacturing technology has been extensively tested at scale, but continuous operations represent risks including an inability to achieve the scale-up efficiencies which have been assumed in our business plan.

In turn, this could impact throughput in the Corbin Facility, which could lead to lower production and higher operating costs.

There is also risk of delays that are product-specific.

For example, we may not receive adequate customer acceptance or achieve acceptable performance given the specification differentiation between some of Arq’s products and the industry’s existing conventional products.

These risks could have a material adverse effect on our business, operating results and financial condition.

There could be no future demand for Arq’s products.

Our primary market for Arq Powder will be as a feedstock for AC, and although we believe current conditions are favorable as a result of excess demand versus supply, there can be no guarantee that this will continue.

Drivers of demand include factors beyond our control such as population growth and GDP growth, amongst others.

Any major global downturn could also materially negatively impact this demand.

New activated carbon supply is driven by new manufacturing sites being built, and we have little visibility on what additional manufacturing capacity other manufacturers may add in the future.

Arq’s business plan also assumes entry into new markets including additives for carbon black and asphalt.

Although testing data and feedback from potential customers have been positive to date, Arq has had no sales of its products and there can be no assurance that these products will be commercially viable.

Our commercial success will depend on our ability to sell Arq Powder into new markets, including as an additive into the carbon black and asphalt markets.

As we attempt to develop and grow Arq Powder utilization worldwide, our success will depend on our ability to correctly forecast demand in these new markets.

There is no assurance that we will be able to increase our business to meet targets globally, or that projections on which such targets are based will prove accurate, or that the pace of growth or coverage will meet customer expectations.

Our inability to meet customer supply requirements due to damage to or insufficient production capacity of the Red River Plant may have a material adverse effect on our business, results of operations and financial condition.

We own and operate a single activation-based manufacturing plant, which is our sole manufacturing plant for producing and selling AC products to our customers.

Our ability to meet customer expectations, manage inventory, complete sales and achieve our objectives for operating efficiencies depends on the full-time operation of the Red River Plant.

We cannot replicate our manufacturing methods at another plant due to the limited availability of similar manufacturing plants, the additional costs incurred in supplying raw materials such as lignite to another plant, and the risk of revealing our confidential and proprietary technologies and manufacturing processes.

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While we have insured the Red River Plant against damage or destruction as well as for losses from business interruptions, there can be no assurance that any insurance coverage will be sufficient to cover any such losses.

Further, a prolonged disruption in our operations due to Red River Plant downtime or having to meet customer requirements that exceed its maximum manufacturing capacity would require us to seek alternative customer supply arrangements, which may not be on attractive terms to us or could lead to delays in distribution of products to our customers, either of which could have a material adverse effect on our business, results of operations and financial condition.

Governmental regulations requiring mandatory COVID-19 vaccination of employees could have a material adverse impact on our business and results of operations

On September 9, 2021, President Biden issued Executive Order 14042 (the "Executive Order") requiring all employers with U.S.

Government contracts to ensure that their U.S.-based employees, contractors, and subcontractors that work on or in support of U.S.

Government contracts are fully vaccinated by December 8, 2021.

The executive order includes on-site and remote U.S.-based employees, contractors and subcontractors and it only permits limited exemptions for medical and religious reasons.

The Executive Order is facing legal challenges and currently is enjoined nationwide.

Removal of the injunction of the Executive Order or additional vaccine mandates may be announced in jurisdictions in which our business operates.

Our implementation of these required policies may result in employee attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 pandemic is expected to continue to affect and pose risks to our business and other epidemics or outbreaks of infectious diseases may have a similar impact.

The COVID-19 pandemic has resulted in significant volatility in the general economy.

International, federal, state and local public health and governmental authorities have taken extraordinary actions to contain and combat the outbreak and spread of COVID-19, including travel bans, quarantines, "stay-at-home" orders and similar mandates that caused many individuals to substantially restrict their daily activities and many businesses to curtail or cease normal operations.

While certain governments eased restrictions during the balance of 2020 and 2021, the pandemic remains disruptive to our business operations.

We may not be able to operate at optimal levels of efficiency given new work rules and procedures that were or will be implemented to protect our employees, as well as potential increased absenteeism as a result of community spread of COVID-19.

Any suspension of production at our manufacturing facility, or difficulties or inefficiencies in resuming or increasing production, is likely to adversely impact our future results of operations, financial condition and liquidity, and that impact may be material.

Furthermore, COVID-19 and related supply chain disruptions have impacted and may further impact our ability to efficiently operate and may lead to production delays or increased costs of production.

While we are unable to accurately predict the full impact that COVID-19 will have on our results of operations, financial condition, liquidity and cash flows due to continued uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could continue to affect our business and operations, as well as that of our key customers, suppliers and other counterparties, for an indefinite period of time.

The disruptions to our operations caused by COVID-19 have resulted and are expected to continue to result in inefficiencies, delays and additional costs in our manufacturing, sales, marketing, and customer service efforts that we cannot fully mitigate through remote or other alternative work arrangements.

The situation surrounding the COVID-19 pandemic remains fluid.

The ultimate impact of the COVID-19 pandemic on our results of operations, financial condition and liquidity will depend on future developments, some of which are beyond our knowledge or control.

These include the duration and scope of the pandemic, travel restrictions, government mandated

restrictions and regulations, business and workforce disruptions, the impact on demand for our products, the effectiveness of actions taken to contain and treat the disease, including the efficacy of and ability to widely distribute vaccinations and therapeutics, and whether the pandemic leads to recessionary conditions in any of our key markets.

We will continue to evaluate the nature and extent of the impact of COVID-19 to our business.

Demand for our products and services depends significantly on environmental laws and regulations.

Further, a prolonged disruption in our operations at the Red River Plant due to downtime or having to meet customer requirements that exceed its maximum manufacturing capacity would require us to seek alternative customer supply arrangements, which may not be on attractive terms to us or could lead to delays in distribution of products to our customers, either of which could have a material adverse effect on our business, results of operations and financial condition.

There can be no assurance that the Arq Acquisition will result in additional value for our stockholders or that the strategic evaluation process that we have undertaken will not have an adverse impact on our business.

As previously disclosed, in 2021, our board of directors initiated a strategic review to assess a range of strategic alternatives to maximize shareholder value.

We have incurred substantial expenses related to the this strategic review process and the Arq Acquisition.

There can be no assurance that the Arq Acquisition will provide greater value to our stockholders than that reflected in the current price of our common stock.

As a result of the Arq Acquisition, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and business partners.

In connection with the Arq Acquisition, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.

Although we conducted extensive due diligence in connection with the Arq Acquisition, we cannot assure you that this diligence revealed all material issues that may be present, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of ADES’ and Arq’s control will not later arise.

Even if our due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis.

Further, as a result of the Arq Acquisition and the proposed operation of ADES going forward, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.

The failure to successfully integrate the businesses of ADES and Arq in the expected timeframe could adversely affect our future business and financial performance.

The combination of two independent companies is a complex, costly and time-consuming process.

As a result, we will be required to devote significant management attention and resources to integrate the business practices and operations of ADES and Arq.

The integration process may disrupt the business of either or both of the companies and, if implemented ineffectively, could preclude realization of the full benefits expected by us.

The failure by us to meet the challenges involved in successfully integrating the operations of Arq or otherwise realizing the anticipated benefits of the Arq Acquisition could cause an interruption to our business activities and could seriously harm our results of operations.

In addition, the integration of Arq may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management’s attention, and may cause our stock price to decline.

The difficulties of combining the operations of ADES and Arq include, among others:

• managing a larger company;

• coordinating geographically separate organizations;

• the potential diversion of management’s focus and resources from other strategic opportunities and from operational matters;

• performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the Arq Acquisition and integrating the combined companies’ operations;

• aligning and executing a new business strategy;

• retaining existing customers and attracting new customers;

• maintaining employee morale and retaining key management and other employees;

• the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, systems, procedures and policies;

• integrating two unique business cultures, which may prove to be incompatible;

• the possibility of faulty assumptions underlying expectations regarding the integration process;

• consolidating corporate and administrative infrastructures and eliminating duplicative operations;

• coordinating sales, distribution and marketing efforts;

• maintaining R&D technology momentum and lead customer technical collaboration progress;

• significant changes to current market conditions that may adversely affect the business plan;

• integrating IT, communications and other systems;

• changes in applicable laws and regulations;

• managing tax costs or inefficiencies associated with integrating the operations of ADES and Arq;

• unforeseen expenses or delays associated with the Arq Acquisition;

• taking actions that may be required in connection with obtaining regulatory approvals.

Many of these factors will be outside of our control and any one of them could result in increased costs, decreased revenues and diversion of management’s time and energy, which could materially impact our business, financial condition and results of operations.

In addition, even if the operations of Arq are integrated successfully, we may not realize the full benefits of the Arq Acquisition, including the synergies, cost savings or growth opportunities that we expect.

These benefits may not be achieved within the anticipated timeframe, or at all.

As a result, we cannot assure you that the combination of ADES and Arq will result in the realization of the full benefits anticipated from the Arq Acquisition.

Specifically, the realization of the full benefits from the Arq Acquisition is dependent on our ability to construct new facilities and to integrate Arq’s Powder on the projected timeline and within the projected budget.

If these anticipated capital expenditures are delayed, whether as a result of unanticipated challenges in permitting, construction or economic conditions, the cost of such activities may increase and the timing of projected revenues may be impacted.

Further, the costs of such construction activities may significantly exceed the costs included in the projections reviewed by ADES and Arq in connection with the Arq Acquisition.

The costs of construction or other anticipated capital expenditures are subject to the effects of the current inflationary environment and we may not be able to successfully offset the effects of inflation.

Strategic relationships upon which Arq relies on are subject to change, which may diminish our ability to conduct our operations.

Our ability to successfully produce Arq’s products and expand their utilization as intended depends on developing and maintaining close working relationships with industry participants.

In addition, the dynamics of maintaining these relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to do.

If these strategic relationships are not established or maintained, our business prospects may be limited, which could negatively impact our business and results of operations.

The synergies attributable to the Arq Acquisition may vary from expectations.

We may fail to realize the anticipated benefits and synergies expected from the Arq Acquisition, which could adversely affect our business, financial condition and operating results.

The success of the Arq Acquisition will depend, in significant part, on our ability to successfully integrate the businesses of ADES and Arq and realize the anticipated strategic benefits and synergies.

We believe that the combination of the two businesses will allow us to enter into more diversified, higher margin markets with our products.

However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the Arq Acquisition.

These anticipated benefits and actual operating, technological, strategic and revenue opportunities may not be realized fully or at all, or may take longer to realize than expected.

If we are not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Arq Acquisition within the anticipated timeframe or at all, our business, financial condition and operating results may be adversely impacted.

Business issues currently faced by ADES or Arq may be imputed to the operations of the other.

To the extent either ADES or Arq currently has, or is perceived by customers to have, operational challenges, such as service performance, safety issues or workforce issues, those challenges may raise concerns by existing customers of ADES and Arq, respectively, which may limit or impede our future ability to obtain additional business from those customers.

If we fail to develop or maintain an effective system of internal controls as we integrate Arq’s business operations and processes with ours, we may not be able to accurately report our financial results or prevent fraud.

As a result, stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company.

If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed.

We cannot be certain that our efforts to develop and maintain an effective system of internal controls will be successful, will be able to maintain adequate controls over our financial processes and reporting in the future, or will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.

Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results or cause us to fail to meet our reporting obligations.

Ineffective internal controls could additionally lead to increased costs to remediate any failures and could cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common stock.

The financial effects of Tinuum Group providing indemnification under performance guarantees of its RC facilities are largely unknown and could adversely affect our financial condition.

Tinuum Group indemnifies certain utilities and lessees of RC facilities for particular risks associated with the operations and tax treatment of those facilities.

We have provided limited, joint and several guarantees of Tinuum Group’s obligations under those leases.

To date, we have not been required to make any payments under such guarantees and are not aware of any actual or threatened requests or claims for payment under such guarantees.

Nevertheless, if any such obligations are triggered in the future, any substantial payments made under such guarantees could have a material adverse effect on our financial condition, results of operations and cash flows.

A pandemic, epidemic or outbreak of an infectious disease such as COVID-19 may materially adversely affect our business.

The global or national outbreak of an infectious disease, such as COVID-19, may cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) inefficiencies, delays and additional costs in our manufacturing, sales and customer service efforts, (iii) recommendations of, or restrictions imposed by, government and health authorities, including quarantines, to address an infectious disease, such as the COVID-19 pandemic, and (iv) restrictions that we impose, including facility shutdowns, to ensure the safety of employees and others.

COVID-19 pandemic has had, and continues to have, a significant impact around the world, prompting governments and businesses to take unprecedented measures in response.

While it is not possible to predict their extent or duration, these disruptions may have a material adverse effect on our business, financial condition and results of operations.

Demand for our products and services depends significantly on environmental laws and regulations related to emissions.

Uncertainty as to the future of such laws and regulations, changes to such laws and regulations or granting of extensions of compliance deadlines has had, and will likely continue to have, a material effect on our business.

A significant market driver for our existing products and services and those planned in the future are present and expected environmental laws and regulations, particularly those addressing the reduction of mercury and other emissions from coal-fired electricity generating units.

A significant market driver for our existing products and services and those planned in the future are existing and expected environmental laws and regulations, particularly those addressing the reduction of mercury and other emissions from coal-fired electricity generating units.

If such laws and regulations are delayed, or are not enacted or are repealed or amended to be less strict, or include prolonged phase-in periods, or are not enforced, our business would be adversely affected by declining demand for such products and services.

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In addition, Public Utility Commissions ("PUCs") may not allow utilities to charge consumers for, and pass on the cost of, emissions control technologies without federal or state mandates.

All of Arq’s development operations will be subject to environmental permitting and regulations that can make operations expensive, or prohibit them altogether.

Arq uses coal waste as its feedstock and the majority of waste sites targeted by Arq for development contain potential environmental liabilities.

Arq therefore may be subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products that could occur as a result of its development and production activities.

We cannot reasonably predict the impact that any such future laws or regulations or public opposition may have on our results of operations, financial condition or cash flows.

Action by the EPA related to MATS that decreases demand for our mercury removal products could have a material adverse effect on our APT segment.

Performance in our APT segment is largely dependent upon demand for mercury removal-related product, which is largely affected by the amount of coal-based power generation used in the U.S.

With the Arq Acquisition, we will be subject to additional significant governmental regulations, which may negatively impact our operations and costs of conducting business.

Arq’s operations are governed by extensive laws and regulations, including:

• laws and regulations related to exports, taxes and fees;

• labor standards and regulations related to the MSHA;

• environmental standards and regulations related to waste disposal, toxic substances, land use and environmental protection, including environmental protection regulations related to water and air.

Existing and possible future laws, regulations and permits governing operations and activities of energy waste companies, or more stringent implementation, could have a material adverse impact on our business and cause increases in capital expenditures or require abandonment or delays in our products.

Any future regulations regarding CO 2 emissions of coal reclamation and product manufacturing could also impact our future business.

Action by the EPA related to Mercury and Air Toxics Standards ("MATS") that decreases demand for our mercury removal products could have a material adverse effect on our business.

Our operating performance is largely dependent upon demand for mercury removal-related product, which is largely affected by the amount of coal-based power generation used in the U.S.

and the continued regulation of utilities under MATS.

In May 2020, the EPA reconsidered and withdrew its 2016 "supplemental finding" associated with the cost benefit analysis of the MATS Rule.

In this action, the EPA found that it was not "appropriate and necessary" to regulate HAP emissions from coal- and oil-fired EGUs.

In this action, the EPA found that it was not "appropriate and necessary" to regulate Hazardous Air Pollutants ("HAP") emissions from coal- and oil-fired Electric Utility Steam Generating Units ("EGUs").

However, the EPA expressly stated that the reconsideration neither removed coal- and oil-fired EGUs from the list of sources that must comply with the MATS rule, nor rescinded the MATS Rule, which has remained continuously in effect.

On February 9, 2022, the EPA published a new proposed rule revoking the May 2020 withdrawal of the 2016 supplemental finding and affirming that it is "appropriate and necessary" to regulate HAP emissions from coal- and oil-fired EGUs.

Any final action taken by the EPA related to MATS that decreases demand for our products for mercury removal will have a negative effect on the financial results of our APT segment.

Any final action taken by the EPA related to MATS that decreases demand for our products for mercury removal will have a negative effect on our financial results.

The timing and content of the final reconsideration rule are unknown.

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Uncertain geopolitical conditions, including the invasion of Ukraine, sanctions against Russia and other potential impacts on this region's economic environment and currencies may cause disruptions in our business.

These include logistics delays or shortages in producing and shipping certain of our raw materials, increases in energy prices that could increase costs of certain

of our raw materials, increases in transportation costs from overall higher gasoline prices and cyber-attacks targeted at U.S.

These include logistics delays or shortages in producing and shipping certain of our raw materials, increases in energy prices that could increase costs of certain of our raw materials, increases in transportation costs from overall higher gasoline prices and cyber-attacks targeted at U.S.

power infrastructure that could impact demand for our products.

The failure of tariffs placed on U.S.

imports of Chinese activated carbon to adequately address the impact of low-priced imports from China could have a material adverse effect on the competitiveness and financial performance of our APT segment.

Our APT segment faces competition in the U.S.

from low-priced imports of activated carbon products.

If the volumes of these low-priced imports increase, especially if they are sold at less than fair value, our sales of competing products could decline, which could have an adverse effect on the earnings of our APT segment.

imports of Chinese AC to adequately address the impact of low-priced imports from China could have a material adverse effect on the competitiveness and financial performance of our business.

Our business faces competition in the U.S.

from low-priced imports of AC products.

In addition, sales of these low-priced imports may negatively impact our pricing.

To limit these activities, regulators in the U.S.

have enacted an anti-dumping duty order on steam activated carbon products from China.

have enacted an anti-dumping duty order on steam AC products from China.

In 2018, the order was extended for an additional five years.

The amount of anti-dumping duties collected on imports of steam activated carbon from China is reviewed annually by the U.S.

The amount of anti-dumping duties collected on imports of steam AC from China is reviewed annually by the U.S.

Department of Commerce.

To the extent the anti-dumping margins do not adequately address the degree to which imports are unfairly traded, the anti-dumping order may be less effective in reducing the volume of these low-priced activated carbon imports in the U.S., which could negatively affect demand and/or pricing for our AC products.

To the extent the anti-dumping margins do not adequately address the degree to which imports are unfairly traded, the anti-dumping order may be less effective in reducing the volume of these low-priced AC imports in the U.S., which could negatively affect demand and/or pricing for our products.

The market for consumables and other products that provide pollutant reduction is highly competitive, and some of our competitors are significantly larger and more established than we are, which could adversely impede our growth opportunities and financial results.

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and (2) technological developments, including those related to competing alternative energy sources.

Natural gas-fueled generation and renewable energy generation has been displacing and may continue to displace coal-fueled generation, particularly from older, less efficient coal-powered generators.

Natural gas-fueled generation and renewable energy generation have displaced and may continue to displace coal-fueled generation, particularly from older, less efficient coal-powered generators.

We expect that a significant amount of the new power generation necessary to meet increasing demand for electricity generation will be fueled by these sources.

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The loss of, or significant reduction in, purchases by our largest customers could adversely affect our business, financial condition or results of operations.

During the year ended December 31, 2021, we derived approximately 50% of our total consumable revenues from our five largest customers.

Our top three customers accounted for approximately 37% of our total consumable revenue for our last fiscal year.

For 2022, we derived approximately 51% of our total consumable revenues from our five largest customers.

Our top three customers accounted for approximately 37% of our total consumable revenue for 2022.

If any of our five largest customers were to significantly reduce the quantities of consumables they purchase from us, it may adversely affect our business, financial condition and results of operations.

Volatility in price and availability of raw materials can significantly impact our results of operations.

Disruptions of supply chains may affect volatility in price and availability of raw materials.

The development of geopolitical conflicts in 2022 has contributed to disruptions of supply chains, resulting in cost increases for commodities, goods and services in many parts of the world.

Significant disruptions of supply chains and higher costs persisted in 2022 and may continue into 2023 and beyond.

The economic effects from these events over longer terms could negatively impact our business and results of operations.

The manufacturing and processing of our consumable products requires significant amounts of raw materials.

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Significant movements or volatility in the costs of additives could have an adverse effect on our working capital or results of operations.

Additionally, we obtain certain raw materials from selected key suppliers.

Additionally, we purchase certain raw materials from selected key suppliers.

While we have inventory of such raw materials, if any of these suppliers are unable to meet their obligations with us on a timely basis or at an acceptable price, we may be forced to incur higher costs to obtain the necessary raw materials or be unable to obtain the materials.

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If we are unable to fully offset the increased cost of raw materials through price increases, it could significantly impact our business, financial condition and results of operations.

We may experience a shortage of reliable and adequate transport capacity and any material increase in transportation costs could have a material adverse effect on our results of operations.

We currently plan to transport Arq's filter cake from the Corbin Facility to the Red River Plant by rail and truck.

We may experience roadway or railway transportation disruptions that could have a material adverse effect on our operations or financial condition.

There can be no assurance that we will be able to secure sufficient railway transport capacity to transport raw materials from the Corbin Facility to the Red River Plant.

Further, in the event of railway transport shortages, there can be no assurance that road transportation will be able to satisfy the shortfall.

Raw materials may also be combustible or ignitable and appropriate care and permitting may be required in handling and transporting such materials.

In addition, any material increase in transportation costs could have a negative effect on the competitiveness of our future products, which may in turn have a material adverse effect on our business and results of operations.

We face operational risks inherent in mining operations and our mining operations have the potential to cause safety issues, including those that could result in significant personal injury.

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At the Five Forks Mine, the risks are primarily operational risks associated with the maintenance and operation of the heavy equipment required to dig and haul the lignite and risks relating to producing lower than expected lignite quality or recovery rates.

Additionally, cost of inputs in our mining operation, most notably fuel cost, can create operational risks.

The failure to adequately manage these risks could result in significant personal injury, loss of life, damage to mineral properties, production facilities or mining equipment, damage to the environment, delays in or reduced production and potential legal liabilities.

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Reclamation operations by their nature involve a high level of uncertainty and are often affected by risks and hazards outside of our control.

At the Marshall Mine, the current risks are primarily operational risks associated with the maintenance and operation of the heavy equipment.

The failure to adequately manage these risks could result in significant personal injury, loss of life, equipment, damage to the environment, delays in reclamation and potential legal liabilities.

In light of where we are in the reclamation process at the Marshall Mine, the current risks associated with the Marshall Mine are primarily those associated with our inability to fulfill our obligations in the reclamation process.

The failure to adequately manage these risks could result in damage to the environment, delays in reclamation and potential legal liabilities.

Our operations and products are subject to extensive safety, health and environmental requirements that could increase our costs and/or impair our ability to manufacture and sell certain products.

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These include requirements to obtain and comply with various environmental-related permits for constructing any new facilities (or modifications to existing facilities) and operating all of our existing facilities.

In addition, our Red River Plant may become subject to greenhouse gas emission trading requirements under which we may be required to purchase emission credits if our emission levels exceed our allocations.

In addition, the Red River Plant may become subject to greenhouse gas emission trading requirements under which we may be required to purchase emission credits if our emission levels exceed our allocations.

Greenhouse gas regulatory programs that have been adopted, such as cap-and-trade programs, have not had a significant impact on our business to date.

Costs of complying with regulations could increase, as concerns related to greenhouse gases and climate change continue to emerge.

However, costs of complying with regulations could increase, as concerns related to greenhouse gases and climate change continue to emerge.

The enactment of new environmental laws and regulations and/or the more aggressive interpretation of existing requirements could require us to incur significant costs for compliance or capital improvements or limit our current or planned operations, any of which could have a material adverse effect on our earnings or cash flow.

We may attempt to offset the effects of these compliance costs through price increases, productivity improvements and cost reduction efforts, and our success in offsetting any such increased regulatory costs is largely influenced by competitive and economic conditions and could vary significantly depending on the market segment served.

We may attempt to offset the effects of these compliance costs through price increases, productivity improvements and cost reduction efforts.

Our success in offsetting any such increased regulatory costs is largely influenced by competitive and economic conditions and could vary significantly depending on the market segment served.

Such increases may not be accepted by our customers, may not be sufficient to compensate for increased regulatory costs or may decrease demand for our products and our volume of sales.

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We may not be successful in achieving our growth expectations from developing new products for our existing or new markets.

Further, we cannot ensure costs incurred to develop new products will result in an increase in revenues.

Further, there can be no assurance that costs incurred to develop new products will result in an increase in revenues.

Additionally, our ability to bring new products to the market will depend on various factors, including, but not limited to, solving potential technical or manufacturing difficulties, competition and market acceptance, which may hinder the timeliness and cost to bring such products to production.

These factors or delays could affect our future operating results.

We may not be successful in realizing the benefits associated with our acquisitions, dispositions and strategic partnerships, and our business could be adversely affected.

We have and may in the future expand the our scope of products, services, and technologies through selective acquisitions, investments or creating partnerships and joint ventures.

We may also dispose of assets or portions of our business that no longer complement our long-term strategic objectives.

We continually evaluate potential acquisition, disposition, and strategic partnership opportunities in the ordinary course of business.

Acquisitions, dispositions, and strategic partnerships involve numerous risks, including among others:

• inability to negotiate favorable prices and terms;

• incorrect evaluations of the synergies and/or long-term benefits of the acquisition, disposition, and strategic partnership;

• integration difficulties, including challenges and costs associated with implementing systems, processes and controls to comply with the requirements of a publicly-traded company;

• diverting management’s attention;

• litigation arising from acquisition and disposition activity;

• potential increased debt leverage;

• potential issuance of dilutive equity securities;

• entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;

• unanticipated costs and exposure to undisclosed or unforeseen liabilities or operating challenges;

• potential goodwill or other intangible asset impairments;

• potential requirements to provide transition services in connection with a disposition, which may result in the diversion of resources and focus of management and employees;

• potential loss of key employees and customers of the acquired businesses, product or service lines, assets or technologies;

• our ability to properly establish and maintain effective internal controls over an acquired company;

• increasing demands on our operational and IT systems.

The success of an acquisition, disposition or strategic partnership is not always predictable, and we may not be successful in realizing our objectives as anticipated, and our business may be adversely affected as a result.

Natural disasters could affect our operations and financial results.

We operate facilities, including the Red River Plant and Five Forks Mine, that are exposed to natural hazards, such as floods, windstorms and hurricanes.

We operate facilities, including the Red River Plant, Five Forks Mine and the Corbin Facility, that are exposed to natural hazards, such as floods, windstorms and hurricanes.

Extreme weather events present physical risks that may become more frequent as a result of factors related to climate change.

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We rely on information technology ("IT") to manage and conduct business, both internally and externally, with our customers, suppliers and other third parties.

Internet transactions involve the transmission and storage of data including, in certain instances, customer and supplier business information.

Internet transactions involve the transmission and storage of data including customer and supplier business information.

Therefore, maintaining the security of computers and other electronic devices, computer networks and data storage resources is a critical issue for us and our customers and suppliers because security breaches could result in reduced or lost ability to carry on our business and loss of, and/or unauthorized access to, confidential information.

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Such means of protecting our proprietary rights may not be adequate because they provide only limited protection or such protection may be prohibitively expensive to enforce.

We also enter into confidentiality and non-disclosure agreements with our employees, consultants and many of our customers and vendors, and generally control access to and distribution of our proprietary information.

We also enter into confidentiality and non-disclosure agreements with our employees, consultants and many of our customers and vendors, and generally control

access to and distribution of our proprietary information.

Notwithstanding these measures, a third party could copy or otherwise obtain and use our proprietary information without authorization.

We cannot provide assurance that the steps we have taken will prevent misappropriation of our technology and intellectual property, which could negatively impact our business and

financial condition.

In addition, such actions by third parties could divert the attention of our management from the operation of our business.

We cannot provide assurance that the steps we have taken will prevent misappropriation of our technology and intellectual property, which could negatively impact our business and financial condition.

In addition, such actions taken by third parties could divert the attention of our management from the operation of our business.

We may be subject to intellectual property infringement claims from third parties that are costly to defend and that may limit our ability to use the disputed technologies.

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We have agreed to indemnify licensees of our technologies (including Tinuum Group) and purchasers of our products, and we may enter into additional agreements with others under which we agree to indemnify and hold them harmless from losses they may incur as a result of the alleged infringement of third-party rights caused by the use of our technologies and products.

Infringement claims, which are expensive and time-consuming to defend, could have a material adverse effect on our business, operating results and financial condition, even if we are successful in defending ourselves (and the indemnified parties) against them.

Infringement claims, which may be expensive and time-consuming to defend, could have a material adverse effect on our business, operating results and financial condition, even if we are successful in defending ourselves (and the indemnified parties) against them.

Our future success depends in part on our ongoing identification and development of intellectual property and our ability to invest in and deploy new products, services and technologies into the marketplace efficiently and cost effectively.

The process of identifying customer needs and developing and enhancing products, services and solutions for our business segments is complex, costly and uncertain.

The process of identifying customer needs and developing and enhancing products, services and solutions for our customser markets is complex, costly and uncertain.

Any failure by us to identify and anticipate changing needs, emerging trends and new regulations could significantly harm our future market share and results of operations.

Risk related to tax matters

An "ownership change" could limit our ability to utilize tax loss and credit carryforwards to offset future taxable income.

We have certain general business credit tax credits ("Tax Credits").

An "ownership change" is more likely as a result of the Arq Acquisition and PIPE Investment and could limit our ability to utilize tax credit carryforwards to offset future tax liability.

We have certain general business credits carryforwards ("Tax Credits").

As of December 31, 2022, we had $86.1 million of Tax Credits, equaling 87% of our total gross deferred tax assets.

Our ability to use these Tax Credits to offset future taxable income may be significantly limited if we experience an "ownership change" as discussed below.

Our ability to use these Tax Credits to offset future federal income tax liability may be significantly limited if we experience an "ownership change" as discussed below.

Under the Internal Revenue Code ("IRC') and regulations promulgated by the U.S.

Treasury Department, we may carry forward or otherwise utilize the Tax Credits in certain circumstances to offset any current and future taxable income, and thus reduce our federal income tax liability, subject to certain requirements and restrictions.

Treasury Department and the IRS, we may carry forward or otherwise utilize the Tax Credits in certain circumstances to offset current and future federal income tax liabilities, subject to certain requirements and restrictions.

To the extent that the Tax Credits do not otherwise become limited, we believe that we will have available a significant amount of Tax Credits in future years, and therefore the Tax Credits could be a substantial asset to us.

However, if we experience an "ownership change," as defined in Sections 382 and 383 of the IRC, our ability to use the Tax Credits may be substantially limited, and the timing of the usage of the Tax Credits could be substantially delayed, which could therefore significantly impair the value of that asset.

In general, an "ownership change" under Sections 382 and 383 occurs if the percentage of stock owned by an entity’s 5% stockholders (as defined for tax purposes) increases by more than 50 percentage points over a rolling three-year period.

An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax loss and credit carryforwards equal to the equity value of the entity immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the IRS (subject to certain adjustments).

However, if we experience an "ownership change," as defined in IRC Sections 382 and 383, our ability to use the Tax Credits may be substantially limited, and the timing of the usage of the Tax Credits could be substantially delayed, which could significantly impair the value of that asset.

In general, an "ownership change" under IRC Sections 382 and 383 occurs if the percentage of stock owned by an entity’s 5% stockholders (as defined in IRC Section 382) increases by more than 50 percentage points over a rolling three-year period.

An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax credit carryforwards equal to the tax liability which is attributable to the amount of the entity's taxable income that does not exceed the equity value of the entity immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the IRS (subject to certain adjustments).

The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year.

The limitation on our ability to utilize the Tax Credits arising from an ownership change under Sections 382 and 383 of the IRC would depend on the value of our equity at the time of any ownership change.

If we were to experience an "ownership change," it is possible that a significant portion of our tax credit carryforwards could expire before we would be able to use them to offset future taxable income.

The limitation on our ability to utilize the Tax Credits arising from an ownership change under IRC Sections 382 and 383 would depend on the value of our equity at the time of any ownership change.

If we were to experience an "ownership change," it is possible that a significant portion of our Tax Credits could expire before we would be able to use them to offset future federal income tax liability.

In connection with the Arq Acquisition and PIPE Investment, we issued additional shares of our stock.

We performed an IRC Section 382 analysis related to the Arq Acquisition and PIPE Investment and determined we had not experienced an ownership change as of the date of the Arq Acquisition and PIPE Investment.

However, the emergence of a single new 5% stockholder (as defined for purposes of IRC Section 382) or other changes, could result in our undergoing an "ownership change" and therefore there is a risk that we could experience an "ownership change" for purposes of IRC Sections 382 and 383.

On May 5, 2017, our board of directors (the "Board") approved the Tax Asset Protection Plan (the "TAPP") and declared a dividend of one preferred share purchase right (each, a "Right") for each outstanding share of our common stock.

was adopted in an effort to protect stockholder value by attempting to diminish the risk that our ability to use the Tax Credits to reduce potential future federal income tax obligations may become substantially limited.

On April 9, 2021, the Board approved the Fourth Amendment to the TAPP ("Fourth Amendment") that amends the TAPP, as previously amended by the First, Second and Third Amendments that were approved the Board on April 6, 2018, April 5, 2019 and April 9, 2020, respectively.

The Fourth Amendment amends the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith.

At the Company's 2021 annual meeting of stockholders, the Company's stockholders approved the Fourth Amendment, thus the Final Expiration Date will be the close of business on December 31, 2022.

The TAPP was adopted in an effort to protect stockholder value by attempting to diminish the risk that our ability to use the Tax Credits to reduce potential future federal income tax obligations may become substantially limited (the "Protection Plan").

During the years 2018-2022, we executed amendments to the TAPP (the "TAPP Amendments"), which amended the definition of "Final Expiration Date under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith.

The most recent TAPP Amendment was approved at our 2022 annual meeting of stockholders and extended the Final Expiration Date to the close of business on December 31, 2023.

The TAPP, as amended, is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of our outstanding common stock without the approval of the Board.

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The Board may, in its sole discretion, also exempt any person from triggering the Protection Plan.

In connection with the Arq Acquisition and PIPE Investment, we granted a waiver under the TAPP for certain shareholders to acquire more shares of our stock in the future, provided that such acquisition is not expected to, and does not, effect an "ownership change" under IRC Sections 382 and 383.

Despite the TAPP, our projections of what will effect an ownership change could be wrong, and with a waiver in place for certain shareholders, there is a risk that we experience an ownership change for purposes of IRC Sections 382 and 383 because of future acquisitions of our stock.

Risks Related to Our Common Stock

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The market price of our common stock may continue to be affected by numerous factors, including:

market perception of the Arq Acquisition;

actual or anticipated fluctuations in our operating results and financial condition;

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changes in financial estimates by securities analysts;

perceptions of the value of corporate transactions;

trends in social responsibility and investment guidelines;

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From January 1, 2021 to December 31, 2022, the closing price of our common stock ranged from $2.19 to $8.15 per share.

In June 2017, we commenced a quarterly cash dividend program and paid out cash dividends in each succeeding quarter through March 31, 2020.

In 2018, we implemented stock repurchase programs, and repurchased a total of 20,613 shares of our common stock for the fiscal years 2021 and 2020 for cash of $0.2 million.

Stock price volatility over a given period may cause the average price at which we repurchase shares of our common stock to exceed the stock’s price at a given point in time.

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We last paid a cash dividend on March 10, 2020.

With the ceasing of our cash-generating RC segment, it is unlikely, for the foreseeable future, that we will resume declaring quarterly cash dividends under a dividend program.

Under the Loan Agreement with CF Global, we are generally prohibited from paying dividends on our common stock as long as the Term Loan remains outstanding.

Even if the Term Loan with CF Global is repaid, it is unlikely for the foreseeable future that we will resume declaring quarterly cash dividends under a dividend program.

The payment of future dividends will be affected by, among other factors:

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(5) changes to our business model;

and (6) any additional indebtedness that we may incur in the future.

and (6) restrictions on dividends set forth in the agreements governing our existing indebtedness (including the Loan Agreement with CF Global) and any additional indebtedness that we may incur in the future.

Our certificate of incorporation and bylaws contain provisions that may delay or prevent an otherwise beneficial takeover attempt of us.

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Further, if we raise additional funds through the issuance of new shares of our common stock, any shareholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution of their investment.

Certain legacy Arq shareholders and participants in the PIPE Investment hold a significant portion of the voting power of ADES common stock.

Certain legacy Arq shareholders and participants in the PIPE Investment hold a significant percentage of our outstanding common shares.

Accordingly, such persons, acting individually or together, could have the ability to exert a substantial influence on actions requiring a stockholder vote.

For example, Jeremy Blank, a former director of Arq Ltd.

and who is currently one of our directors through his affiliates, hold approximately 2.36% of the outstanding shares of our common stock, and Julian McIntyre, who is Arq's former chief executive officer and director of Arq and who is currently one of our directors, holds approximately 4.49% of the outstanding shares of ADES common stock.

The influence of these significant stockholders may be used in a manner that other stockholders may not support.

Any such concentration of ownership may have the effect of delaying certain corporate actions, and may consequently impact the ability of other stockholders to influence the management and policies of ADES.

The conversion of the outstanding shares of our Series A Preferred Stock would dilute the ownership of holders of our Common Stock and may adversely affect the market price of our Common Stock.

Each share of our Series A Preferred Stock will be automatically converted into shares of Common Stock at the conversion ratio described herein upon the approval by the holders of the percentage of Common Stock required to approve such conversion under the applicable rules of Nasdaq.

As of February 24, 2023, 5,294,462 shares of our Series A Preferred Stock were outstanding, representing approximately 16% of our outstanding common stock on an as-converted basis.

In addition, prior to the conversion of the Series A Preferred Stock into Common Stock, each share of Series A Preferred Stock will accrue dividends on a quarterly basis at an annual rate of 8% on the $4.00 Original Issuance Amount per share of Series A Preferred Stock.

We will have the ability to pay any such dividends in kind by issuing additional shares of Series A Preferred Stock, which would increase the number of shares of Series A Preferred Stock outstanding and, consequently, the number of shares of our Common Stock that would be issuable upon the conversion of the Series A Preferred Stock.

The conversion of the Series A Preferred Stock to Common Stock would dilute the ownership interest of existing holders of our Common Stock, and any sales in the public market of the Common Stock issuable upon conversion of the Series A Preferred Stock would increase the number of shares of our Common Stock available for public trading, and could adversely affect prevailing market prices of our Common Stock.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors