What changed in this filing

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Item 9A. Controls and Procedures

2023-03-08 compared with 2022-03-08 · 83 added, 684 removed, 177 unchanged (81% of the section changed)

3 unchanged sentences

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2021 due to a material weakness in our internal control over financial reporting described below.

Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2022.

Management’s Report on Internal Control over Financial Reporting

8 unchanged sentences

Under the supervision of, and with the participation of our management, including the principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control-Integrated Framework in 2013, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2021 due to the material weakness described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

During the assessment process, we identified deficiencies in the design and operation of controls over (1) the selection and application of accounting principles;

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

Remediation Efforts Related to Past Material Weaknesses

As reported in Item 9A of Annual Report on Form 10-K for the fiscal year ended December 31, 2021, we identified deficiencies in the design and operation of controls over (1) the selection and application of accounting principles;

(2) the monitoring of interpretative guidance of previously adopted accounting standards;

1 unchanged sentence

These deficiencies in combination were evaluated as having a reasonable possibility that a material misstatement would not be prevented or detected on a timely basis resulting in a material weakness in our internal controls.

As a result of these deficiencies, as described in Note 2 to the consolidated financial statements included in Item 8.

"Financial Statements and Supplementary Data," the Company identified and corrected immaterial errors in previously reported revenues due to freight revenue being improperly classified as consumables cost of revenue instead of consumables revenues.

The material weakness did not result in a material misstatement of our historical consolidated financial statements.

Management developed a plan to remediate the material weakness described above.

Remediation efforts include (1) changes to the design of controls relating to the selection and application of accounting principles and the evaluation of changes in interpretative guidance relating to previously implemented accounting standards and (2) implementing an annual review of key accounting policies.

The implementation of the remediation plan is in progress, and we expect to design and implement these changes in internal controls during the first half of fiscal year 2022.

As of December 31, 2022, we have implemented additional processes and procedures for the monitoring of interpretative guidance on previously adopted accounting standards and our annual review of policies and process narratives related to material financial statement components that have been deemed effective for the fiscal year ended December 31, 2022.

Moss Adams LLP, an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting as of December 31, 2022 and its report is included herein.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the fourth quarter of 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Advanced Emissions Solutions, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Advanced Emissions Solutions, Inc.

and subsidiaries’ (the "Company") internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets of Advanced Emissions Solutions, Inc.

and subsidiaries as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements") and our report dated March 8, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting included in Item 9A.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Moss Adams LLP

Denver, Colorado

March 8, 2023

We have served as the Company’s auditor since 2017.

Other Information

15 unchanged sentences

Total — 1,403,043

(1) Includes securities registered for issuance under the ADA-ES Profit Sharing Retirement Plan and the 2017 Omnibus Incentive Plan.

(1) Includes securities registered for issuance under the 2017 Omnibus Incentive Plan and 2022 Omnibus Incentive Plan.

(2) The number of securities is reduced by 652,962 shares of restricted common stock for which restrictions have not lapsed.

19 unchanged sentences

8-K 001-37822 3.1 May 8, 2017

3.4 Certificate of Designations of Series A Preferred Stock

8-K 001-37822 3.1 February 1, 2023

4.1 Form of Specimen Common Stock Certificate

10 unchanged sentences

8-K 001-37822 4.5 April 13, 2021

4.7 Fifth Amendment to Tax Asset Protection Plan dated as of March 15, 2022, by and between the Company and Computershare Trust Company, N.A., as rights agent

8-K 001-37822 4.6 March 16, 2022

4.8 Form of Warrant

8-K 001-37822 4.1 February 1, 2023

10.1 Advanced Emissions Solutions, Inc.

1 unchanged sentence

8-K 001-37822 10.1 June 22, 2017

10.2 Advanced Emissions Solutions, Inc.

2022 Omnibus Incentive Plan **

8-K 001-37822 10.1 May 17, 2022

10.3 Rider to Employment Agreement dated August 27, 2014 between Heath Sampson and ADA-ES, Inc.

6 unchanged sentences

10-Q 001-37822 10.3 August 10, 2020

Description Form File No.

Incorporated by Reference

Exhibit Filing Date

10.6 Advisor Services Agreement dated as of July 1, 2020, between the Company and Heath Sampson

6 unchanged sentences

10-Q 001-37822 10.5 May 10, 2021

Description Form File No.

Incorporated by Reference

Exhibit Filing Date

10.10 Form of Amended Retention Agreement dated May 8, 2022 of Greg Marken, Morgan Fields and Joe Wong **

10-Q 001-37822 10.1 May 9, 2022

10.11 Employment Agreement dated May 7, 2020, between the Company and Christine Bellino **, ***

38 unchanged sentences

10-K 001-37822 10.44 March 18, 2019

Description Form File No.

Incorporated by Reference

Exhibit Filing Date

10.26 Third Amendment to the Second Amended and Restated Operating Agreement of Tinuum Group, LLC.

3 unchanged sentences

8-K 001-37822 10.1 September 30, 2020

Description Form File No.

Incorporated by Reference

Exhibit Filing Date

10.28 Amended and Restated Lignite Mining Agreement among Caddo Creek Resources Company, L.L.C., ADA Carbon Solutions (Operations), LLC, Marshall Mine, LLC and The North American Coal Corporation dated as of September 30, 2020 ***

8-K 001-37822 10.2 September 30, 2020

10.29 Membership Interest Purchase Agreement between Caddo Creek Resources Company, L.L.C., as Buyer, and ADA Carbon Solutions (Operations), LLC, as Seller dated as of September 2, 2022 ***

8-K 001-37822 10.2 September 6, 2022

10.3 Fifteenth Amendment of 2013 Loan and Security Agreement by and among ADA-ES,Inc., Advanced Emissions Solutions, Inc., and BOK, NA d/b/a Bank of Oklahoma dated as of March 23, 2021

2 unchanged sentences

8-K 001-37822 10.1 July 29, 2021

10.32 Securities Purchase Agreement, dated as of February 1, 2023, by and among Advanced Emissions Solutions, Inc.

and Arq Limited ***

8-K 001-37822 2.1 February 1, 2023

10.33 Registration Rights Agreement ***

8-K 001-37822 10.1 February 1, 2023

10.34 Term Loan and Security Agreement among Advanced Emissions Solutions, Inc., as Debtor, Certain Subsidiaries of Debtor, as Guarantors, CF Global Credit, LP, as Administrative Agent, and the Lenders, from time to time party hereto, dated as of February 1, 2023 ***

8-K 001-37822 10.2 February 1, 2023

10.35 Loan Agreement among Community Trust Bank, Inc.

Corbin Project LLC , Arq Projects Holding Company LLC , Arq St.

Rose LLC , Arq Corbin LLC and Arq Corbin Land LLC , dated January 27, 2021 *,†

21.1 Subsidiaries of Advanced Emissions Solutions, Inc.

23.1 Consent of Moss Adams LLP *

23.2 Consent of Moss Adams LLP *

31.1 Certification of Principal Executive Officer of Advanced Emissions Solutions, Inc.

4 unchanged sentences

Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

Description Form File No.

Incorporated by Reference

Exhibit Filing Date

95 Mine Safety Disclosure Exhibit *

6 unchanged sentences

*** – Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

† – Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the SEC.

Filings for the Company were made under the name ADA-ES, Inc.

3 unchanged sentences

001-37822) starting on July 6, 2016.

(1) Tinuum Group, LLC and Subsidiaries;

Consolidated Financial Statements, December 31, 2021 and 2020 (with Independent Auditors' Reports thereon);

Tinuum Group, LLC and Subsidiaries

CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Years Ended

December 31, 2021 and 2020

REPORT OF INDEPENDENT AUDITORS 101

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS 103

CONSOLIDATED STATEMENTS OF OPERATIONS 105

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY 106

CONSOLIDATED STATEMENTS OF CASH FLOWS 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 109

Report of Independent Auditors

To the Board of Managers and Members

Tinuum Group, LLC

Report on the Audit of the Financial Statements

We have audited the consolidated financial statements of Tinuum Group, LLC and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of operations, members’ equity, and cash flows for the years then ended and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Tinuum Group, LLC and its subsidiaries as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS).

Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We are required to be independent of Tinuum Group, LLC and its subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Tinuum Group, LLC and its subsidiaries’ ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Tinuum Group, LLC and its subsidiaries’ internal control.

Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Tinuum Group, LLC and its subsidiaries’ ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

Emphasis of Matter Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that Tinuum Group, LLC and its subsidiaries will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, with the expiration of the production tax credit (PTC) as of December 31, 2021 all third-party investor contracts have expired or been terminated and Tinuum Group, LLC and its subsidiaries have terminated reduced emissions fuel production as of December 31, 2021, which has led to cash inflows ending in January 2022.

To date, management has not developed an alternative business strategy that would support continued business operations.

Given these events and conditions, substantial doubt exists about the Tinuum Group, LLC and its subsidiaries’ ability to continue as a going concern.

Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our opinion is not modified with respect to this matter.

/s/ Moss Adams LLP

Denver, Colorado

March 4, 2022

TINUUM GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2021 and 2020

(in thousands)

CURRENT ASSETS

Cash and cash equivalents $ 28,156 $ 50,540

Accounts receivable 7,727 8,029

Related party receivables 102 —

Income tax receivable — 5,966

Contract receivables – current 3,342 47,264

Contract costs – current — 5,541

Inventory — 13,730

Other current assets 60 11,370

Total current assets 39,387 142,440

Fixed assets, net 220 24,508

Contract receivables – long term — 4,122

Other assets, net — 19

TOTAL ASSETS $ 39,607 $ 171,089

The following table presents certain assets of the consolidated variable interest entities ("VIEs"), which are included in the Consolidated Balance Sheets above.

The assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs, presented on the following page, and are in excess of those obligations.

Additionally, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.

Assets of Consolidated VIEs to be Used to Settle Obligations of Consolidated VIEs

Cash and cash equivalents $ 9,539 $ 32,050

Accounts receivable 3,001 25

Income tax receivable — 5,966

Inventory — 13,724

Other current assets — 403

Non-current assets — 10,631

TOTAL ASSETS $ 12,540 $ 62,799

Statement continues on the next page

The accompanying notes are an integral part of the consolidated financial statements

TINUUM GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2021 and 2020

(in thousands)

LIABILITIES AND MEMBERS' EQUITY

CURRENT LIABILITIES

Accounts payable $ 1,057 $ 6,446

Accrued liabilities 4,235 6,568

Related party payables 6,636 7,653

Deferred revenue — 11,898

Note payable to customer — 5,400

Secured promissory notes — 6,313

Asset retirement obligations 1,795 —

Accrued retention compensation 1,835 —

Total current liabilities 15,558 44,278

Asset retirement obligations — 2,070

Accrued retention compensation — 3,116

TOTAL LIABILITIES 15,558 49,464

MEMBERS' EQUITY

Members’ equity attributable to Class A Members 8,890 59,221

Member equity attributable to Class B Member 9,887 18,769

Noncontrolling interests 5,272 43,635

Total Members' equity 24,049 121,625

TOTAL LIABILITIES AND MEMBERS' EQUITY $ 39,607 $ 171,089

The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above.

The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.

The liabilities also exclude intercompany amounts where creditors have recourse against the general credit of Tinuum Group, LLC.

Liabilities of Consolidated VIEs for Which Creditors Do Not Have Recourse Against the General Credit of Tinuum Group, LLC

Accounts payable and accrued liabilities $ 1,244 $ 7,859

Related party payables 2,358 3,747

Secured promissory notes — 6,313

Non-current liabilities 1,795 1,670

TOTAL LIABILITIES $ 5,397 $ 19,589

The accompanying notes are an integral part of the consolidated financial statements.

TINUUM GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2021 and 2020

(in thousands)

Reduced emissions and unrefined fuel $ 776,397 $ 619,101

REF Facility revenues – over time 104,905 89,478

REF Facility revenues – point-in-time (2,643) (1,129)

Other 606 594

TOTAL REVENUES 879,265 708,044

COST OF SALES (exclusive of depreciation shown separately below)

Feedstock purchases 776,397 619,101

Cost of REF facilities — (12)

Chemicals 37,260 27,496

Site and production fees 38,091 35,950

Royalties and fees 20,522 18,860

TOTAL COST OF SALES 872,270 701,395

GROSS PROFIT 6,995 6,649

OPERATING EXPENSES 13,881 11,217

IMPAIRMENT OF REF FACILITIES 15 2,968

DEPRECIATION AND AMORTIZATION EXPENSE 24,101 28,175

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,417 15,648

LOSS FROM OPERATIONS (42,419) (51,359)

OTHER (INCOME) EXPENSE

Interest income (570) (1,744)

Other expense (536) 655

Interest expense 88 1,671

TOTAL OTHER (INCOME) EXPENSE (1,018) 582

LOSS BEFORE INCOME TAXES (41,401) (51,941)

Deferred tax benefit (9,769) (18,979)

Income tax expense 1,061 1,137

NET LOSS (32,693) (34,099)

Loss attributable to noncontrolling interests 126,948 91,501

NET INCOME AVAILABLE TO MEMBERS $ 94,255 $ 57,402

The accompanying notes are an integral part of the consolidated financial statements.

TINUUM GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

Years Ended December 31, 2021 and 2020

(in thousands)

Class A Members Class B Member Non-Controlling Interests Total Members' Equity

BALANCES, JANUARY 1, 2020 $ 117,006 $ 28,967 $ 35,588 $ 181,561

Member contributions — — 113,465 113,465

Member distributions (106,577) (18,808) — (125,385)

Member distributions, noncontrolling interests — — (13,917) (13,917)

Net income available to members 48,792 8,610 — 57,402

Net loss attributable to noncontrolling interests — — (91,501) (91,501)

BALANCES, DECEMBER 31, 2020 59,221 18,769 43,635 121,625

Member contributions — — 104,450 104,450

Member distributions (130,448) (23,020) — (153,468)

Member distributions, noncontrolling interests — — (15,865) (15,865)

Net income available to members 80,117 14,138 — 94,255

Net loss attributable to noncontrolling interests — — (126,948) (126,948)

BALANCES, DECEMBER 31, 2021 $ 8,890 $ 9,887 $ 5,272 $ 24,049

The accompanying notes are an integral part of the consolidated financial statements.

TINUUM GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2021 and 2020

(in thousands)

CASH, BEGINNING OF YEAR $ 50,540 $ 44,441

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss (32,693) (34,099)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 24,101 28,175

Amortization of contract costs 5,541 21,188

Noncash operating lease expense 182 176

Assets sold as part of REF Facility transaction — (12)

(Gain)/loss on sale of assets (384) 264

Impairment of REF facilities (15) 2,968

Gain on removal of asset retirement obligation (131) (194)

Accretion of asset retirement obligation 399 184

Effects of changes in operating assets and liabilities:

Accounts receivable 302 (1,943)

Related party receivables (102) —

Income tax receivable 5,966 (5,062)

Contract receivables 48,044 43,117

Inventory 13,730 (1,864)

Other assets 11,329 8,047

Accounts payable and accrued liabilities (7,509) 1,010

Accrued retention compensation (1,281) 3,116

Payments on operating leases (213) (200)

Related party payables (863) (2,196)

Deferred revenue (11,898) 2,088

Settlement of asset retirement obligation (543) —

Net cash provided by operating activities 53,962 64,763

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures for fixed assets — (5,648)

Proceeds from sale of fixed assets 250 99

Net cash provided by/(used) in investing activities 250 (5,549)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings under line of credit — 8,900

Repayments under line of credit — (14,400)

Repayments on note payable to customer (5,400) (21,600)

Repayments under secured promissory note (6,313) (178)

Contributions from noncontrolling interest members 104,450 113,465

Distributions paid to minority interest members (15,865) (13,917)

Distributions paid to members (153,468) (125,385)

Net cash used in financing activities (76,596) (53,115)

NET (DECREASE)/INCREASE IN CASH (22,384) 6,099

The accompanying notes are an integral part of the consolidated financial statements.

TINUUM GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2021 and 2020

(in thousands)

CASH, END OF YEAR $ 28,156 $ 50,540

SUPPLEMENTAL DISCLOSURES

Cash paid for interest $ 104 $ 1,824

Cash paid for taxes 1,207 1,212

NON-CASH TRANSACTIONS

Asset proceeds included in reduction of accounts payable $ 154 $ —

Capital expenditures included in related party payables — 429

Asset retirement obligation layer — 631

The accompanying notes are an integral part of the consolidated financial statements.

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Tinuum Group, LLC (together with its subsidiaries, "Tinuum" or "TG" or the "Company") develops, manages, sells and leases facilities ("REF Facilities") used in the production and sale of reduced emissions fuel ("REF" or refined coal).

The production and sale of REF via these REF Facilities qualifies for production tax credits that are available under Section 45 of the Internal Revenue Code ("PTCs").

The value of the PTC is adjusted annually based on inflation adjustment factors published in the Federal Register.

The 2021 and 2020 PTC rates were $7.384 and $7.301 per ton of REF produced, respectively.

The PTC period expired as of December 31, 2021 and as a result the Company has ceased production of REF.

Tinuum is owned 42.5% by ADA-ES, Inc.

("ADA"), 42.5% by NexGen Refined Coal, LLC ("NexGen") (collectively, Class A Members), and 15% by GSFS Investments I Corp.

("GSFS" or the "Class B Member").

ADA, NexGen, and GSFS are collectively referred to herein as the “Members.”

Tinuum placed in service 28 REF Facilities prior to January 1, 2012.

Each REF Facility has demonstrated the required emissions reductions from the production of REF to qualify for PTCs.

The REF produced at these REF Facilities is burned at coal-fired generation stations (the owner of which is a "Generator") and continues to qualify for PTCs for a period of 10 years following the applicable placed in service date.

The 28 REF Facilities, of which 23 were operating during the year ended December 31, 2021, no longer qualified for PTCs as of December 31, 2021.

Two of the REF Facilities’ ability to produce PTCs ended during December 2019 since those two REF Facilities were placed in service in 2009.

REF Facilities were either sold to or were under lease with third-party investors ("TP Investors") who utilize the REF Facilities to produce REF (each of these REF Facilities is owned or leased by a “Producer Entity”).

Some of the Producer Entities are owned or leased exclusively by a TP Investor and some are owned or leased by a TP Investor with some ownership percentage retained by the Company.

The REF Facilities are located at coal-fired generation stations throughout the United States.

In instances where Tinuum retains certain member interests in a Producer Entity, PTCs generated are allocated to Tinuum in proportion to its member interests and are therefore available for the benefit of Tinuum’s Members.

As of December 31, 2020, 23 REF Facilities had been sold or were under lease to TP Investors.

For the year ended December 31, 2021, 23 REF Facilities were owned or leased by TP Investors for some portion of the year ranging from six to nearly twelve months.

All 23 REF Facilities had ceased operations as of December 31, 2021.

Tinuum Services, LLC ("TS"), operates and maintains the REF Facilities under respective operating and maintenance agreements.

TS is owned 50% each by ADA and NexGen and is not consolidated with the accounts of Tinuum.

TP Investors of REF Facilities pay TS, subject to certain limitations, a fee for procuring certain proprietary chemical additives, an operating fee for the production of REF, and for the other operating and maintenance costs associated with running the REF Facilities.

Basis of Presentation

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and several variable interest entities ("VIEs"), for which Tinuum is the primary beneficiary.

An entity is referred to as a VIE if it meets any of the following criteria outlined in Accounting Standard Codification 810 - Consolidation ("ASC 810"), which are:

(i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties;

(ii) the entity has equity investors that, as a group, lack the characteristics of a controlling financial interest;

or (iii) the entity is structured with non-substantive voting rights.

The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the entity that could be potentially significant to the VIE (i.e., it is the primary beneficiary).

All intercompany balances and transactions have been eliminated in consolidation.

Going Concern

Currently, with the expiration of the PTCs as of December 31, 2021, all TP Investor contracts have expired or been terminated and the Company has terminated REF production, which has led to cash inflows to TG ending in January 2022.

To date, management has not developed an alternative business strategy that would support continued business operations.

Management continues to engage in efforts to pursue an extension of the PTC period by the U.S.

Congress, though at present no such

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

extension has been adopted.

In the event of a PTC extension in a timely manner, management would investigate any opportunity to continue REF production.

Debt financing is no longer available to the Company.

Management has budgeted, and is planning, to reserve enough cash from the final cash inflows of 2021 and 2022 to satisfy anticipated remaining liabilities and obligations.

These cash reserves will be utilized to conduct an orderly wind down of business operations.

The decision to commence liquidation of the Company will be subject to approval by the Members.

Management has concluded that these factors, in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements have been prepared on a basis which assumes the Company will be able to continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

Significant estimates include the estimated contingent revenues recognized related to revenues recognized at a point-in-time, assumptions associated with asset retirement obligations (“ARO”) and the final realization of remediation efforts, and the estimate for any outstanding contingent liabilities.

Ultimate realization of assets and settlement of liabilities in the future could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

The carrying value approximates fair value due to the short-term nature of these instruments.

The Company maintains its cash and cash equivalents in accounts with a local financial institution.

These accounts at times may exceed federally insured limits.

The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk related to cash and cash equivalents.

Accounts Receivable

Accounts receivable consist primarily of payments due from TP Investors that own or lease the REF Facilities.

The carrying amount of accounts receivable may be reduced by a valuation allowance that reflects management's best estimate of amounts that will not be collected.

Under the Company’s agreements, interest can accrue on delinquent balances.

No interest on delinquent balances was recorded for the years ended December 31, 2021 and 2020.

Any allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the accounts receivable.

If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due to the Company could be adversely affected.

As of December 31, 2021 and 2020, no allowance for doubtful accounts was considered necessary.

Inventory is comprised primarily of feedstock fuel and chemicals used in the production and sale of REF at REF Facilities.

Inventory is valued at the lower of cost or net realizable value using the average cost method.

Fixed assets are stated at historical cost less accumulated depreciation and consist primarily of the REF Facilities and ancillary equipment, including major additions and improvements.

Expenditures for major improvements are capitalized, while maintenance and repair costs that do not significantly improve the related asset or extend its useful life are charged to expense as incurred.

For financial reporting purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 10 years.

The Company records an ARO liability equal to the fair value of the estimated cost to retire a REF Facility.

The ARO liability is initially recorded in the period in which the obligation meets the definition of a liability, which is generally when a REF

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

Facility is installed at a generation station ("Site").

The ARO liability is estimated by the Company based on legal removal requirements, historical removal experience, and anticipated future inflation rates.

When the liability is initially recorded, the Company increases the carrying amount of the related long-lived asset by an amount equal to the original liability.

The liability is increased over time to reflect the change in its present value, and the capitalized cost is depreciated over the useful life of the related long-lived asset.

The ARO liability is removed when the Company is relieved of its removal obligation due to either completion of the removal activities at a Site or a transfer of the responsibility for the REF Facility removal to a third party.

The Company reevaluates the adequacy of its recorded ARO liability at least annually.

Actual costs of asset retirements, such as removing the REF Facility from a Site and related Site restoration, are charged against the related liability.

Any difference between costs incurred upon settlement of an ARO and the recorded liability is recognized in other expense as a gain or loss in the Company’s consolidated statements of operations.

Intangible Assets

Tinuum has two exclusive licenses from ADA for the patented and proprietary "CyClean™" and "M-45™" technologies related to the production of REF.

The patents underlying the CyClean™ technology license expire beginning in 2021;

however, the license agreement includes potential future patents related to the technology.

The costs associated with the exclusive CyClean™ license are included in other assets, net on the consolidated balance sheets and are being amortized over the useful economic life of the technology, or approximately 14 years, using the straight-line method.

Amortization expense was $0 and $5 for each of the years ended December 31, 2021 and 2020, respectively.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

As part of the Company’s on-going monitoring of its REF Facilities, the Company evaluated the REF Facility assets for potential impairment as of December 31, 2020.

Given the expiration of the original PTC period, December 31, 2021, and the fact that the Company does not have an expectation of additional future cash flows associated with the REF Facilities beyond the PTC period, any REF Facilities that had not been invested by TP Investors have been considered to be impaired.

Impairment was assessed based upon the future undiscounted cash flows of each REF Facility as compared to its net book value.

As a result, the Company recognized an impairment loss of $15 and $2,968 as of and for the years ended December 31, 2021 and 2020, respectively.

Revenue Recognition

REF Facilities

The Company identifies performance obligations by reviewing the combination of customer agreements for material distinct goods and services.

Goods and services are distinct when the customer can benefit from them on their own and the promises to transfer these items are separately identifiable from other promises within the contract.

When the Company is contracted to provide a single promise (an integrated system), it is treated as a single performance obligation as goods and services are provided with the same pattern of transfer.

The Company has identified the provision of the technology sublicense combined with the use of the REF Facility to be a single performance obligation.

REF Facility revenues are recognized based upon the type of contract with the TP Investor.

Generally, the Company has three types of contracts with customers (a) Leases, (b) Member Interest Purchase Agreements ("MIPAs") and (c) Asset Purchase Agreements ("APAs").

In all instances the contracts relate to the use of the REF Facility and the related sublicensed patented technology which is necessary for each Producer Entity to produce REF utilizing the REF Facility.

Depending upon the agreement, the Company may receive fixed payments or a combination of fixed and variable payments over the contract term.

Variable payments are determined based upon the expected amount of REF production during the defined period.

Certain prepayments are received upon execution of TP Investor agreements.

Significant judgments and estimates are used in the Company’s revenue policies.

Throughout the revenue cycle, the Company evaluates contractual evidence, monitors performance and evaluates variable consideration changes.

For the Leases and MIPAs, revenue is recognized “over time” using the output method, utilizing actual REF production volumes.

In these agreements where a prepayment is received, that amount is recorded as deferred revenue and is amortized

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

into revenue in accordance with the amortization period of the respective TP Investor agreement.

Contingent consideration associated with Leases or MIPAs is recorded based upon actual REF production volumes achieved, constrained by any contractual limitations or by production volumes that management estimates could occur.

Revenues recorded related to the APAs are recorded when the Company has completed delivery of the REF Facility and has transferred title and control of the REF Facility to the TP Investor.

These revenues are recognized at a “point-in-time” based upon the net present value of the expected fixed purchase payments plus management’s estimate of any variable payments associated with the sale.

Additionally, since the payments are made quarterly over a time period exceeding one year, a financing component exists to these transactions.

For the years ended December 31, 2021 and 2020, interest recorded related to these contracts was $541 and $1,619, respectively, and is recorded as interest income in the statement of operations.

As a result of the recording of APA revenues as of a point-in-time, future cash flows will be received according to the contractual payment schedules, but no future revenues, other than changes in estimates, will be recognized for these contracts.

Changes in estimates for variable consideration can occur for a variety of reasons, including but not limited to (i) annual inflation adjustment factors being different from what was originally estimated and (ii) changes in actual versus expected production volumes of REF.

For the years ended December 31, 2021 and 2020, the impact of the change in estimate resulted in a decrease in revenues of $2,643 and $1,129, respectively.

Generally, the REF Facility is collateral for the outstanding contract receivable balances recorded by Tinuum.

The Company recognizes a contract receivable when the Company transfers control of a REF Facility to the customer in advance of receiving consideration.

Contracts with variable consideration are billed quarterly in arrears, once production volumes are known, under similar payment terms.

Reduced Emissions and Unrefined Fuel

The Company’s consolidated VIEs, which are Producer Entities, purchase and take title to feedstock fuel under purchase agreements with each respective Generator or other supplier of feedstock fuel.

Each Producer Entity purchases chemicals from third-party vendors and applies them to the feedstock fuel to produce REF utilizing the REF Facility.

The REF is sold by the Producer Entities, under REF sale agreements, to a Generator or to another third party at the discretion of the manager of each Producer Entity, as permitted under the applicable Generator agreements.

The Company performs REF recertification or redetermination testing periodically as required by Section 45 with respect to production and sale of REF at each of its REF Facilities.

During the years ended December 31, 2021 and 2020, each of the Producer Entities sold all of its REF and unrefined fuel (coal untreated but part of the REF process) to third parties that used the fuel to generate electricity and recorded such amounts as reduced emissions and unrefined fuel revenues.

Each VIE utilizes the combination of the REF Facility and the technology license to combine raw materials (feedstock coal and chemicals) to produce REF which is then sold as a separate manufactured product to its customer, the Generator.

As a result, the Company recognizes both REF Facility revenues and reduced emissions and unrefined fuel on a gross basis.

An accounts receivable balance represents the Company’s right to consideration that is unconditional and only the passage of time is required before payment of that consideration is due.

No allowance for doubtful accounts related to accounts receivable balances or impairment of contract receivables has been recorded as of December 31, 2021 and 2020.

Deferred revenue is recognized when the Company receives consideration in advance of performance.

The Company disaggregates revenue based upon the revenue recognition methodology (over time vs.

point-in-time).

Taxes assessed by a governmental agency that are imposed on and concurrent with a specific revenue producing transaction collected by the Company from a customer are excluded from revenues.

Shipping and handling costs are not associated with Tinuum’s products and services and therefore are not included in revenues or costs of revenues.

No amounts have been recorded for returns, refunds, or other similar obligations.

The Company, with the consent of its Members, has elected to be taxed under applicable sections of federal and state income tax laws as a limited liability company treated as a partnership for income tax purposes.

As a result of this election, no federal income taxes are incurred by the Company.

Instead, the Members are liable for income taxes on their pro rata share of the Company's income, deductions, losses, and credits.

In certain states, the Company is taxed based upon shareholder equity or other enterprise considerations.

In these instances, the Company records and pays the applicable tax directly to the state agency.

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

One of the Company’s consolidated VIEs has elected to be a C corporation for federal and state income tax purposes.

As a result, that VIE’s income tax provision and related deferred tax assets and liabilities are included within the consolidated financial statements.

Deferred income taxes are provided for temporary differences arising from differences between the financial statement amount and tax basis of assets and liabilities existing at each balance sheet date, using enacted tax rates anticipated to be in effect when the related taxes are expected to be paid.

A valuation allowance is established if it is more likely than not that a deferred tax asset will not be realized.

The Company includes interest and penalties related to state tax as a component of income tax expense.

The Company applies the requirement of ASC 740, Income Taxes, related to accounting for uncertain tax positions.

In January 2021, the Company was notified that one of its consolidating VIEs was selected for audit by the IRS.

Tinuum is the partnership representative and cooperated with the IRS audit requirements.

The audit was completed by the IRS during 2021 with no proposed adjustments.

Recent Accounting Pronouncements

The Company does not believe that there are any new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 2 - FIXED ASSETS

Reduced Emissions Fuel Facilities

Each of the REF Facilities and related components that were placed in service by the Company demonstrated the qualified emissions reductions to qualify for PTCs.

REF Facilities are stated at historical cost.

Depreciation is calculated using the straight-line method over a 10 year period, commencing with the original placed in service date.

All REF Facilities were fully depreciated as of December 31, 2021.

Furniture, Fixtures and Equipment

Furniture, fixtures, and equipment is comprised of office furniture, fixtures and office equipment, including those under finance leases.

These assets are recorded at cost and depreciated using the straight-line method with estimated useful lives ranging from 3 to 8 years.

The following table summarizes the components of gross and net carrying amounts for fixed assets as of December 31, 2021 and 2020:

REF Facilities and related equipment $ 73,649 $ 91,399

Assets associated with removal obligations 1,059 1,637

Furniture, fixtures, equipment and other 1,369 1,397

ROU assets 703 711

Accumulated depreciation (75,956) (67,668)

Impairment reserve (604) (2,968)

Fixed assets, net $ 220 $ 24,508

Depreciation expense was $24,101 and $28,175, for the years ended December 31, 2021 and 2020, respectively.

During 2021 the Company reevaluated certain REF Facility equipment for which an impairment reserve had been recognized in 2020.

Certain REF Facility equipment was either disposed of or sold, resulting in an adjustment to the impairment reserve.

Under the site license agreements between the Producer Entities or Tinuum and the Generators, Tinuum may be required to return the Site upon which the REF Facility is located to its original condition at the end of the applicable contract period.

In instances where the applicable agreements place this responsibility on the Company, the Company has recorded a liability for an ARO equal to the fair value of the estimated cost to retire the REF Facility and return each Site to its original condition.

The ARO liability was estimated by the Company using estimated and historical facility removal costs and anticipated future inflation rates.

This estimated future value was discounted to its present value using the Company’s credit-adjusted risk-free

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

The carrying value of the asset is depreciated on a straight-line basis over the remaining estimated life of the REF Facility asset group.

The ARO liability is increased over time to reflect the change in its present value, and the capitalized cost is depreciated over the useful life of the site license.

In subsequent periods, the Company is required to make adjustments to AROs based on changes in the estimated fair values of the obligations.

Corresponding increases in asset book values are depreciated over the remaining useful life of the related site license.

Uncertainties as to the probability, timing, or amount of cash flows associated with AROs may affect management’s estimates of fair value.

For the years ended December 31, 2021 and 2020, within operating expenses, the Company recorded $399 and $184 of accretion expense, respectively.

The following table describes changes to the Company’s ARO liability for the years ended December 31, 2021 and 2020:

Beginning balance $ 2,070 $ 1,449

Liabilities incurred, net — 631

Gain on removal of liability (131) (194)

Accretion 399 184

Settlement of obligations (543) —

Ending balance $ 1,795 $ 2,070

NOTE 3 - INVENTORY

Inventory is comprised primarily of feedstock fuel and chemicals used in the production and sale of REF at REF Facilities.

The Company assesses the inventory valuation on a monthly basis and reduces the value for any obsolete inventory.

No valuation allowance was considered necessary as of December 31, 2021 and 2020.

Feedstock fuel $ — $ 12,707

Chemicals — 1,023

Total inventory $ — $ 13,730

NOTE 4 - REVENUES

As discussed in Note 1, revenue is recognized when a performance obligation is satisfied.

The Company’s contracts can contain both fixed and variable components of the transaction price.

Each contract is evaluated for these components and may be determined to include fixed consideration, variable consideration and financing components as part of the overall transaction price.

The Company receives payments from customers based upon specific payment schedules established under each contract.

Payment schedules can include a combination of prepayments, fixed payments and variable payments, based upon expected production volumes, and are generally made quarterly.

When a contract is determined to contain variable consideration, the transaction price is estimated using the expected value (i.e., the most likely amount method) to predict revenue for that contract.

These variable amounts are estimated at contract inception based upon the projected REF production volumes associated with the specific Generator location.

Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Estimates of variable consideration are estimated based upon contractual terms, historical experience and projected REF production volumes.

Nine REF Facility transactions with TP Investors are transactions with a related party as of December 31, 2021 and 2020.

These transactions generally have terms that extend to the date ten years after the placed in service date for the particular REF Facility, subject to earlier termination by the TP Investor at periodic intervals or upon the occurrence of specified events.

As of December 31, 2021 all transactions with a related party TP Investor had been terminated.

Under the various TP Investor agreements, Tinuum has committed to provide the REF Facility and the related sublicense for a term as identified in each contract.

Most of the agreements expired in 2021 or will expire by the first quarter of 2022.

Generally, payments are made quarterly to Tinuum on a net 10 to 30 days basis, in advance of the respective quarter.

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

Future REF Facility payments, including any eliminated in consolidation, are based on the 2021 levels of REF production and are $9,753 for 2022.

In December 2019, the Company agreed to provide a future price concession to a significant customer.

A portion of the price concession was provided via a note payable (“Customer Note”) under which the Company would make monthly principal and interest payments to the customer commencing in January 2020 and continuing through March 2021.

The Customer Note was $27,000 and the Company recorded the amount as contract costs on the consolidated balance sheet and allocated the payments to the customer as a reduction to the transaction price of the existing contracts with the customer.

The reduction in the transaction price was recorded monthly, commencing with the contract date of December 2019 through the end of the term of the payments of March 31, 2021.

The reduction in the transaction price is recorded as production volumes are achieved (over time).

For the years ended December 31, 2021 and 2020, the Company reduced revenues under this price concession contract by $5,226 and $20,903, respectively.

In certain instances, the Company employs outside parties to facilitate the commencement of a Lease, MIPA or APA transaction.

Under these agreements, the Company typically pays the outside party a fee (“Fee”) relative to either the collection of revenues by the Company or the REF production volumes achieved.

Under the Lease and MIPA transactions, any related contract costs are recorded as the production volumes or collection of revenues are achieved.

These amounts are recorded as a component of cost of goods sold.

Under the APA agreements, the Fees are capitalized as contract costs based on the estimated revenues recognized at the commencement of the contract and are amortized as a reduction of revenue over the period of benefit.

For the years ended December 31, 2021 and 2020, Fees included in contract costs on the consolidated balance sheet were $0 and $315, respectively.

NOTE 5 - VARIABLE INTEREST ENTITIES

For the years ended December 31, 2021 and 2020, the Company consolidates nine entities (the “TG VIEs”) that were created as REF production companies.

The operations include the purchase of feedstock fuel from a Generator, application of chemicals utilizing that Producer Entity’s REF Facility, and the subsequent sale of REF to the Generator.

In all nine of the TG VIEs, CCS-AE, LLC (“CCS-AE”), a subsidiary of the Company, or another Tinuum entity is the manager (“Managing Member”) and holds a 0.2% or 1.0% member interest, depending on the transaction.

As the Managing Member of the TG VIEs, CCS-AE or Tinuum directs the activities that are considered most significant to the entities.

Based upon the criteria set forth in ASC 810, the Company has determined that it is the primary beneficiary in the TG VIEs for the years ended December 31, 2021 and 2020.

As such, the financial results of the TG VIEs are consolidated with the results of the Company, and the results attributable to the other owners are presented as noncontrolling interests within the consolidated financial statements.

Creditors of the TG VIEs have no recourse against the general credit of the Company (outside of its member interest or specific guarantee obligations) and the assets of the Company are not collateral for any TG VIE obligations.

The operations of all nine entities are financed through capital calls of the respective members in proportion to their member interests.

In the event that a member defaults on a capital call request made by the Managing Member, the Managing Member may (i) withhold distributions payable to the defaulting member or sue for the amount due, and/or (ii) elect to transfer the defaulting member’s interest to a separate legal entity controlled by the Managing Member, or (iii) suspend operations of the REF Facility.

In certain instances, the TP Investor has the ability to put, and Tinuum has the ability to call, the other member interests at a purchase price equal to fair market value.

Under the provisions of certain of the TG VIEs’ various agreements, including the leases of REF Facilities or the partnership operations of the TG VIEs, the agreements terminate during time periods ranging from the fourth quarter of 2021 through December 31, 2022, unless terminated earlier by written consent of the members.

Under certain of the TG VIE agreements, capital call limitations exist, limiting the amount of capital calls if certain operational costs are exceeded.

NOTE 6 - NOTES PAYABLE

Line of Credit

In September 2019, the 2013 Revolver (“Revolver”) with BOK Financial (“BOK”), was amended and replaced with the Fifth Amendment to the Revolver (“Fifth Amendment”).

The Fifth Amendment expired on December 31, 2020 and was not renewed and all balances were fully repaid.

Under the Fifth Amendment, prior to expiration, the available borrowing limit was:

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

Available Borrowing Limit

For the period ending December 30, 2019 through September 29, 2020 $ 7,000

For the period commencing September 30, 2020 through December 30, 2020 $ 3,400

For the period after December 31, 2020 $ —

The Fifth Amendment required any outstanding borrowings to be fully repaid for a period of fifteen consecutive days during two non-consecutive calendar quarters.

Amounts outstanding under the Fifth Amendment were repaid at the option of the Company.

Any undrawn balance during the years ended December 31, 2020, was subject to a quarterly unused facility fee in the amount of 0.826% annually.

Interest on outstanding balances was payable monthly and was accrued at the greater of 5.5% per annum or the prime rate (as defined in the agreement) plus 1.0%.

The Fifth Amendment was collateralized by the assets of the Company and the equity interests and proceeds related to such equity interests of each material subsidiary owned by the Company.

The Fifth Amendment was also collateralized by the Company’s deposit accounts held at BOK.

These accounts were not restricted by the Fifth Amendment.

Customer Note

As mentioned in Note 4, in December 2019, the Company agreed to provide a future price concession to a significant customer via a Customer Note.

The Company made monthly principal and interest payments to the customer.

Payments commenced in January 2020 and extended through March 2021, when the Customer Note was fully repaid.

As of December 31, 2020, the Customer Note balance was $5,400.

The Customer Note bears interest at 8% per annum.

Under the Customer Note, Tinuum has agreed to maintain a Cash Reserve Account of $3,000, to limit additional indebtedness to $7,000 (plus amounts to finance Company insurance premiums plus a maximum of $500 for finance leases) and to maintain compliance with certain loan covenants.

At December 31, 2020, the Company was in compliance with the Customer Note covenants.

Secured Promissory Note

In February 2014, a VIE consolidated into the consolidated financial statements of the Company, entered into an $11,000 secured promissory note (the “Note”) with a Generator from which it purchases feedstock fuel, and to which it sells reduced emissions and unrefined fuel on a monthly basis.

The purpose of the Note is to finance the purchases of feedstock fuel from the Generator.

The amount of principal and interest owed is dependent upon the amount of feedstock fuel purchased and reduced emissions and unrefined fuel sold between the two parties and is net settled on a monthly basis.

The Note was collateralized by the feedstock fuel inventory.

The Note bears interest at a per annum rate equal to the short-term applicable federal rate announced by the IRS in December of each year.

The interest rate for the years ended December 31, 2021 and 2020 was 0.14% and 1.60% per annum, respectively.

Interest is payable quarterly in arrears.

All outstanding amounts owed under the Note are due and payable on the earlier of December 31, 2021 or the termination or expiration of the Feedstock Coal Purchase Agreement between the TG VIE and the Generator.

The Note was fully repaid as of December 31, 2021.

As of December 31, 2021 and 2020, respectively, the outstanding balance on the Note was $0 and $4,327 with interest payable of $0 and $16, respectively.

In June 2018, a second VIE consolidated into the consolidated financial statements of the Company, entered into an $1,986 secured promissory note (“2018 Note”) with a Generator to fund the initial purchase of feedstock fuel.

The 2018 Note bears interest at a per annum rate equal to the mid-term applicable federal rate announced by the IRS in December of each year.

The rate was 0.48% and 1.67% for the years ended December 31, 2021 and 2020, respectively.

Interest is payable quarterly in arrears.

The 2018 Note is collateralized by the feedstock fuel inventory.

All outstanding amounts owed under the 2018 Note are due and payable on the earlier of December 31, 2025, or the termination or expiration of the Feedstock Coal Purchase Agreement between the Company and the Generator.

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

As of December 31, 2021 and 2020, respectively, the outstanding balance on the Note was $0 and $1,986.

Interest payable of $1 and $3 was recorded as of December 31, 2021 and 2020, respectively.

NOTE 7 - MEMBERS’ EQUITY

Under the Class B Unit Purchase Agreement (“Class B Agreement”) with GSFS, which was entered into upon the amendment and restatement of the Tinuum Operating Agreement in 2011, ADA and NexGen each entered into a limited guarantee agreement under which the parties are obligated to guarantee performance by Tinuum of its obligations to indemnify GSFS against certain losses it may suffer as a result of inaccuracies or breach in representations and covenants related to the Class B Agreement or REF Facilities’ lease agreements with GSFS affiliates.

ADA and NexGen entered into a contribution agreement where, in the event of such a breach, they have agreed to contribute their pro rata share of any amounts under the limited guarantee.

The Class B units were considered conditionally redeemable as specified in the Second Amended and Restated Operating Agreement and the Class B Agreement.

Upon satisfaction of the redemption criteria in 2018, GSFS continues to own the Class B units which have no further capital call requirements and have limited voting rights.

In September 2019, the Second Amended and Restated Operating Agreement was amended to eliminate the preferential redemption provisions for the Class B shares and simultaneously reallocated certain tax attributes between the Class A and B Members.

The Company had the following classes and percentages of Member units issued and outstanding at December 31, 2021 and 2020.

Class A Units (voting) 85 %

Class B Units (non-voting) 15 %

NOTE 8 - INCOME TAXES

During the years ended December 31, 2021 and 2020, the Company has concluded that there are no significant uncertain tax positions that would require recognition or disclosure in the financial statements.

As of December 31, 2021 and 2020, the Company made no provision for interest or penalties related to uncertain positions.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes related to one of the Company’s consolidated VIEs.

Under a tax sharing agreement with the specific TP Investor of this VIE, the deferred tax assets are allocated specifically to the TP Investor and are not for the benefit of Tinuum or its members.

On a quarterly basis, the TP Investor provides a cash payment to the VIE for the prior quarter’s tax benefits generated, generally production tax credits and net operating losses.

As a result, the quarterly estimated funding is presented as an income tax receivable in the consolidated balance sheets.

As of December 31, 2021, an income tax payable is being presented as the estimated funding exceeded the actual TP investor provision.

The income tax payable as of December 31, 2021 is included in accrued liabilities in the consolidated balance sheets and consists of:

Net operating losses $ 28

Deferred tax liability —

Production tax credits —

TP Investor provision modification (93)

Income tax payable $ (65)

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

The income tax receivable as of December 31, 2020 consists of:

Net operating losses $ 1,026

Deferred tax liability (21)

Production tax credits 4,961

Income tax receivable $ 5,966

Net operating loss carryforwards can be carried forward indefinitely and the PTCs can be carried forward for 20 years.

For the years ended December 31, 2021 and 2020, income tax expense (benefit) consisted of the following:

Current $ 1,061 $ 1,137

Deferred (9,769) (18,979)

Total income tax (benefit) expense $ (8,708) $ (17,842)

NOTE 9 - RELATED PARTY TRANSACTIONS

During 2021 and 2020, the Company incurred expenses and capital expenditures and had amounts payable (excluding capital distributions) to and revenues recognized from the following related party entities:

ADA TS GSFS Affiliates NexGen and Affiliates

(a) (b) (c) (d)

Accounts Receivable as of the Year Ended

December 31, 2021 $ 102 $ — $ — $ —

Accounts Payable as of the Year Ended

December 31, 2021 $ 2,467 $ 4,154 $ — $ 15

December 31, 2020 3,454 4,179 — 20

Revenues Recognized During the Year Ended

December 31, 2021 $ — $ (2,230) $ 85,672 $ 34

December 31, 2020 — (593) 88,243 —

Expenses Incurred During the Year Ended

December 31, 2021 $ 14,377 $ 18,668 $ — $ 240

December 31, 2020 13,656 16,629 — 527

ADA expenses include expenditures for royalties and consulting services.

TS expenses include operating expenses associated with the operations of REF Facilities.

TS revenues include APA point in time revenue estimates and management fee revenues from TP Investors included within the TS consolidated financial statements.

GSFS affiliates revenues relate to REF Facility lease revenues recognized.

NexGen and affiliates expenses include management fees and labor costs.

The Company acquires substantial amounts of fixed assets from TS.

For the years ended December 31, 2021 and 2020, the Company acquired $0 and $5,549, respectively, of capital assets from its related party, TS.

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

For the year ended December 31, 2021, TS incurred, on the Company’s behalf, proceeds related to the sale of fixed assets in the amount of $250.

NOTE 10 - COMMITMENTS

Purchase Commitments

In November 2011, Tinuum entered into a technology licensing agreement with ADA whereby Tinuum agreed to pay ADA royalties based on a percentage of operating income from REF production at REF Facilities that utilize the M-45™ technology.

During the years ended December 31, 2021 and 2020, respectively, the Company recognized royalty expense under cost of sales in the amounts of $14,354 and $13,440 respectively.

In December 2015 the Company was assigned, by TS, a Master Supply Agreement with a chemical vendor.

Under the agreement the Company had a commitment commencing January 1, 2015, for minimum purchase quantities of the specified chemical that if not achieved would require a shortfall payment amount (“Shortfall”) to be paid to the vendor on a monthly basis.

Any Shortfall payment required would be applied to future chemical purchases once certain minimum volume levels were achieved.

In 2018 an agreement was reached to further amend the Master Supply Agreement and the Company made an additional prepayment of $8,187 resulting in a total prepaid amount of $17,755 on deposit with the vendor as of December 31, 2019.

Beginning in August 2020, the Company started utilizing the prepaid deposit balance through ongoing chemical usage.

The prepaid deposit balance was fully utilized as of December 31, 2021 and therefore the balance was $0 at December 31, 2021.

As of December 31, 2020, the balance was $10,632 and was included within other current assets in the Company’s consolidated balance sheets.

Retention Compensation

It has been an ongoing practice of the Company to provide severance payments to employees that are involuntarily terminated for reasons other than for cause.

In anticipation of the wind down of operations expected by 2022, the Company has formalized that practice into a retention compensation program.

The purpose of the program is to incent employees to remain with the Company through the wind down dates necessary for the successful cessation of the Company.

Certain executive employees have contracts that do not have a defined retention date but provide for severance payment provisions equivalent to one year of base salary that only become due and payable upon a decision by the Board of Managers to terminate an executive other than for cause.

The potential estimated liability under these contracts is approximately $750.

All non-executive employees have a retention bonus agreement with a defined dollar amount that is payable by the Company upon the earlier of the Company’s initiation of an involuntary termination or the employee remaining with the Company until the defined retention date within their agreement.

Any employees electing to voluntarily terminate employment with the Company prior to their defined retention date will forfeit their retention bonus amount.

Compensation expense of $3,116 and $2,048 was recognized for the years ended December 31, 2021 and 2020, respectively.

A remaining liability of $3,613 is recorded and of this amount $1,835 is included in other current liabilities for TG employees and $1,778 is in the related party payables related to TS employees with retention dates in 2022.

401k Profit Sharing Plan and Other Benefits

The Company offers a defined contribution and profit sharing plan (the “Plan”) to employees who are over 18 years of age and have been employed by the Company for more than 30 days.

Employees can deposit up to 80% of their eligible pay up to the statutory limit in the Plan.

The Company contributes 3% of employees’ eligible pay to the Plan as safe harbor contributions and an additional matching contribution equivalent to 50% of the first 6% of employee contributions.

Company contributions charged to benefits expense was $157 and $194 for the years ended December 31, 2021 and 2020, respectively.

As of January 24, 2022, the Company has initiated the termination of the Plan.

Accordingly, employees will be required to roll over their balances under the termination provisions stipulated by the Plan.

Tinuum’s ROU asset and lease liability are comprised of its lease for its corporate office space.

The lease has an eight-year term that commenced in March 2014.

The lease does not include renewal options that the Company expects to utilize.

The Company has utilized its implicit borrowing rate of 5.75% to calculate the ROU asset and lease liabilities.

Operating lease expense for each of the years ended December 31, 2021 and 2020 was $197 and $199 respectively.

Operating leases are included in the ROU assets within fixed assets, net, and lease liabilities are included within accrued liabilities on the consolidated balance

TINUUM GROUP, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

(in thousands)

Real estate taxes and common area maintenance charges are expensed as incurred as operating expenses and are not included in the lease payments.

As of December 31, 2021, future annual lease payments under lease agreements through December 31, 2022 are $233 less $7 of interest expense, reflecting a present value of lease liabilities of $226.

NOTE 11 - CONCENTRATIONS

The Company’s operations were dependent upon TP Investors leasing or purchasing REF Facilities.

Further, under the terms of the various TP Investor agreements, the agreements were subject to termination or modification by the TP Investor at periodic intervals or upon the occurrence of specified events which included amendments to Section 45 of the Internal Revenue Code.

The termination or modification of all or a material portion of any TP Investor agreements would have had a significant adverse impact on the Company’s future operations and financial condition.

Additionally, the production and sale of REF was dependent upon the plant operations of specific generating stations where the REF Facilities were located.

Production at these locations could have been impacted by the demand for electricity, the amount of fuel burned by the utility to produce electricity, disruptions due to foreseen or unforeseen plant outages, or changes in government regulations related to electricity generation or coal burning activities.

Certain of the chemicals utilized by the Company to produce REF were available from a limited number of vendors in the United States.

The Company's operations could have been materially and adversely affected if the Company encountered difficulty procuring these chemicals, the quality of available chemicals deteriorated or there were significant price increases for the chemicals.

NOTE 12 - SUBSEQUENT EVENTS

Management evaluated subsequent events through March 4, 2022, the date financial statements were available to be issued.

Please refer to Item 15(a) above.

Form 10-K Summary

8 unchanged sentences

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By /s/ Richard Campbell-Breeden By /s/ Jeremy Blank

Richard Campbell-Breeden, Director Jeremy Blank, Director

March 8, 2023 Date:

March 8, 2023

By /s/ Carol Eicher By /s/ Gilbert Li

2 unchanged sentences

March 8, 2023

Taylor Simonton By /s/ L.

By /s/ Julian McIntyre By /s/ J.

Taylor Simonton

Julian McIntyre, Director J.

Taylor Simonton, Director

March 8, 2023 Date:

March 8, 2023

Spencer Wells

Taylor Simonton, Director L.

Spencer Wells, Director

March 8, 2022 Date:

March 8, 2023

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 9A. Controls and Procedures