Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a‑15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we have evaluated, under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this annual report. 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 effective as of December 31, 2022.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. The 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 our assets;
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 our management and directors; 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 our 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.
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 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; and (3) the annual review of policies and procedures related to material accounts. 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 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.
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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.
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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.
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Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this Item is incorporated by reference to our definitive proxy statement for the Annual Meeting of Stockholders to be filed within 120 days from December 31, 2022.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to our definitive proxy statement for the Annual Meeting of Stockholders to be filed within 120 days from December 31, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item concerning security ownership of certain beneficial owners and management is incorporated by reference to our definitive proxy statement for the Annual Meeting of Stockholders to be filed within 120 days from December 31, 2022, with the exception of the following information.
Securities Authorized for Issuance under Equity Compensation Plans
We have plans under which equity awards are authorized for grant or issuance as compensation to eligible employees, consultants, and members of the Board. Our stockholders have approved these plans. See Note 12 - Stock-Based Compensation included in Item 8 of this Report for further information about the material terms of our equity compensation plans. The following table is a summary of the shares of our common stock authorized for issuance under the equity compensation plans as of December 31, 2022:
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) (2)
Equity compensation plans approved by security holders (1) — $ — 1,403,043
Equity compensation plans not approved by security holders — $ — —
Total — 1,403,043
(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.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item is incorporated by reference to our definitive proxy statement for the Annual Meeting of Stockholders to be filed within 120 days from December 31, 2022.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to our definitive proxy statement for the Annual Meeting of Stockholders to be filed within 120 days from December 31, 2022.
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Item 15. Exhibits and Financial Statement Schedules
(a) The following consolidated financial statements of Advanced Emissions Solutions, Inc. are filed as part of this Report under Item 8:
(1) Financial Statements – see Index to Consolidated Financial Statements in Item 8;
(2) Financial Statement Schedules – All schedules are omitted because the required information is not applicable or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements and Notes thereto; and
(3) Exhibits – Those exhibits required by Item 601 of Regulation S-K and by paragraph (b) below.
(b) The following exhibits are filed as part of this Report or, where indicated, were heretofore filed and are hereby incorporated by reference:
Exhibit No. Description Form File No. Incorporated by Reference
Exhibit Filing Date
3.1 Second Amended and Restated Certificate of Incorporation of Advanced Emissions Solutions, Inc.
10-Q 000-54992 3.1 August 9, 2013
3.2 Conformed Copy of the Bylaws of Advanced Emissions Solutions, Inc., as amended
10-K 001-37822 3.2 March 12, 2018
3.3 Certificate of Designation, Preferences, and Rights of Series B Junior Participating Preferred Stock of Advanced Emissions Solutions, Inc
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-Q 000-54992 4.1 August 9, 2013
4.2 Tax Asset Protection Plan dated as of May 5, 2017, by and between the Company and Computershare Trust Company, N.A., as rights agent, which includes as Exhibit B the Form of Rights Certificate
8-K 001-37822 3.2 May 8, 2017
4.3 First Amendment to Tax Asset Protection Plan dated as of April 6, 2018, by and between the Company and Computershare Trust Company, N.A., as rights agent
8-K 001-37822 4.2 April 11, 2018
4.4 Second Amendment to Tax Asset Protection Plan dated as of April 5, 2019, by and between the Company and Computershare Trust Company, N.A., as rights agent
8-K 001-37822 4.3 April 11, 2019
4.5 Third Amendment to Tax Asset Protection Plan dated as of April 8, 2020, by and between the Company and Computershare Trust Company, N.A., as rights agent
8-K 001-37822 4.4 April 9, 2020
4.6 Fourth Amendment to Tax Asset Protection Plan dated as of April 9, 2021, by and between the Company and Computershare Trust Company, N.A., as rights agent
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. 2017 Omnibus Incentive Plan **
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. and Advanced Emissions Solutions, Inc. **
8-K 000-54992 10.66 September 2, 2014
10.4 Form of Amendment No. 2 to Employment Agreement of Greg Marken **
10-Q 001-37822 10.1 August 6, 2018
10.5 Release of Claims and Separation Agreement dated as of June 30, 2020, between the Company and Heath Sampson
10-Q 001-37822 10.3 August 10, 2020
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Exhibit No. 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
10-Q 001-37822 10.4 August 10, 2020
10.7 Employment Agreement dated February 26, 2021 between the Company and Morgan Fields **, ***
8-K 001-37822 10.1 March 3, 2021
10.8 Form of Retention Agreement dated May 5, 2021 of Greg Marken and Morgan Fields **, ***
10-Q 001-37822 10.4 May 10, 2021
10.9 Retention Agreement dated May 5, 2021 between the Company and Joe Wong **, ***
10-Q 001-37822 10.5 May 10, 2021
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 **, ***
8-K 001-37822 10.1 May 11, 2020
10.12 Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC dated May 27, 2011, by and among Clean Coal Solutions, LLC, ADA-ES, Inc., GSFS Investments I Corp. and NexGen Refined Coal, LLC ***
10-Q/A 000-50216 10.33 September 28, 2011
10.13 The First Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC, by and among Clean Coal Solutions, LLC, ADA-ES, Inc., GSFS Investments I Corp. and NexGen Refined Coal, LLC dated September 9, 2011
10-Q 000-50216 10.89 November 14, 2011
10.14 Second Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC by and among ADA-ES, Inc., NexGen Refined Coal, LLC and GSFS Investments I Corp. dated July 31, 2012
10-Q 000-50216 10.59 November 9, 2012
10.15 Contribution Agreement dated May 27, 2011 between ADA-ES, Inc. and NexGen Refined Coal, LLC
10-Q 000-50216 10.87 August 12, 2011
10.16 Amended and Restated Limited Liability Company Operating Agreement by and between ADA-ES, Inc., NexGen Refined Coal, LLC and Clean Coal Solutions Services, LLC dated November 20, 2013
10-K 000-54992 10.38 February 29, 2016
10.17 Amended and Restated License Agreement between ADA-ES, Inc. and Clean Coal Solutions, LLC dated October 30, 2009
10-Q 000-50216 10.77 August 16, 2010
10.18 First Amendment to the Amended and Restated License Agreement between ADA-ES, Inc. and Clean Coal Solutions, LLC dated as of August 4, 2010
10-K 000-50216 10.81 March 28, 2011
10.19 Second Amendment to Amended and Restated License Agreement by and between ADA-ES, Inc. and Clean Coal Solutions, LLC dated as of July 23, 2013 ***
10-Q 000-54992 10.63 November 12, 2013
10.20 Technology Sublicense Agreement between ADA-ES, Inc., Clean Coal Solutions, LLC, and GS RC Investments LLC dated June 29, 2010
10-Q 000-50216 10.74 August 16, 2010
10.21 Amendment to Technology Sublicense Agreement between ADA-ES, Inc., GS RC Investments, LLC, and Clean Coal Solutions, LLC dated November 21, 2011 ***
10-K 000-54992 10.44 February 29, 2016
10.22 Amendment #2 to Technology Sublicense Agreement between ADE-ES, Inc, GS RC Investments, LLC, and Clean Coal Solutions, LLC dated December 15, 2011
10-K 000-50216 10.49 March 15, 2012
10.23 M-45 Technology License Agreement between ADA-ES, Inc. and Clean Coal Solutions, LLC dated July 27, 2012 ***
10-Q 000-50216 10.58 November 9, 2012
10.24 Lignite Mining Agreement between Demery Resources Company, L.L.C. and Five Forks Mining, LLC dated as of June 29, 2009 ***
10-K 001-37822 10.43 March 18, 2019
10.25 First Amendment to Lignite Mining Agreement between Demery Resources Company, L.L.C. and Five Forks Mining, LLC, dated as of March 22, 2017 ***
10-K 001-37822 10.44 March 18, 2019
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Exhibit No. 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. dated September 4, 2019 ***
10-Q 001-37822 10.1 November 12, 2019
10.27 Master Agreement for Supply of Furnace Products between ADA Carbon Solutions, LLC and Cabot Norit Americas, Inc. ***
8-K 001-37822 10.1 September 30, 2020
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
8-K 001-37822 10.1 March 29, 2021
10.31 Sixteenth 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 July 29, 2021
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 *
31.1 Certification of Principal Executive Officer of Advanced Emissions Solutions, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a) *
31.2 Certification of Principal Financial Officer of Advanced Emissions Solutions, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a) *
32.1 Certification of Principal Executive Officer and Principal Financial Officer of Advanced Emissions Solutions, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
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Exhibit No. Description Form File No. Incorporated by Reference
Exhibit Filing Date
95 Mine Safety Disclosure Exhibit *
101 The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2022 and 2021, (ii) Consolidated Statements of Operations for the Years ended December 31, 2022 and 2021, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the Years ended December 31, 2022 and 2021; and (v) Notes to the Consolidated Financial Statements. The information in Exhibit 101 is "furnished" and not "filed" as provided in Rule 401 of Regulation S-T.
Notes:
* – Filed herewith.
** – Management contract or compensatory plan or arrangement.
*** – 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. (File No. 000-50216) prior to July 1, 2013, the effective date of our reorganization, and under the name Advanced Emissions Solutions, Inc. (File No. 000-54992) starting on July 1, 2013. Filings for the Company were made under the name Advanced Emissions Solutions, Inc. (File No. 001-37822) starting on July 6, 2016.
(c) Financial Statement Schedules. Please refer to Item 15(a) above.
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Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Advanced Emissions Solutions, Inc.
(Registrant)
By /s/ Greg P. Marken By /s/ Morgan Fields
Greg P. Marken Morgan Fields
Chief Executive Officer (Principal Executive Officer) Chief Accounting Officer (Principal Financial and Accounting Officer)
Date: March 8, 2023 Date: March 8, 2023
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
Date: March 8, 2023 Date: March 8, 2023
By /s/ Carol Eicher By /s/ Gilbert Li
Carol Eicher, Director Gilbert Li, Director
Date: March 8, 2023 Date: March 8, 2023
By /s/ Julian McIntyre By /s/ J. Taylor Simonton
Julian McIntyre, Director J. Taylor Simonton, Director
Date: March 8, 2023 Date: March 8, 2023
By /s/ L. Spencer Wells
L. Spencer Wells, Director
Date: March 8, 2023
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