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Item 1. Business

2024-03-12 compared with 2023-03-08 · 167 added, 243 removed, 119 unchanged (78% of the section changed)

("Arq", the "Company," "we," "us", "our," or similar pronouns) is an environmental technology company principally engaged in the sale of consumable air, water, and soil treatment solutions including activated carbon ("AC") and chemical technologies.

Our proprietary AC products enable customers to reduce air, water, and soil contaminants, including mercury, per - and polyfluoroalkyl substances ("PFAS") and other pollutants, to meet the challenges of existing and pending air quality and water regulations.

We manufacture and sell AC and other chemicals used to capture and remove contaminants for the coal-fired power generation, industrial, municipal water and air, water and soil treatment and remediation markets (collectively, the advanced purification technologies or "APT" market).

Our predecessor, ADA-ES, Inc.

("ADA"), a Colorado corporation, was incorporated in 1997.

Pursuant to an Agreement and Plan of Merger, effective July 1, 2013, Advanced Emissions Solutions, Inc.

("ADES"), a Delaware company incorporated in 2011, succeeded ADA as the publicly-held corporation and ADA became a wholly-owned subsidiary of ADES.

In 2018, we acquired ADA Carbon Solutions, LLC ("Carbon Solutions") as a means to enter into the broader activated carbon ("AC") market and to expand our product offerings in the mercury control industry and other applicable AC markets.

In February 2023, we acquired the subsidiaries of Arq Limited (hereafter the Arq Limited subsidiaries referred to as "Arq") to secure access to a unique feedstock, a manufacturing facility and certain patented processes as a means to further expand our product offerings.

This Annual Report on Form 10-K is referred to as the "Form 10-K" or the "Report." As used in this Report, the terms the "Company," "we," "us" and "our" means ADES and its consolidated subsidiaries.

We sell consumable products that utilize AC and chemical-based technologies to a broad range of customers, including coal-fired utilities, industrials, water treatment plants and other diverse markets.

Our proprietary technologies and associated product offerings provide purification solutions to enable our customers to reduce certain contaminants and pollutants to meet the challenges of existing and potential future regulations.

As of December 31, 2022 and 2021, we held equity interests of 42.5% and 50.0% in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services"), respectively, which are both unconsolidated entities, and through December 31, 2021, both contributed significantly to our financial position and results of operations.

We account for Tinuum Group and Tinuum Services under the equity method of accounting.

As a result of the expiration of Internal Revenue Code ("IRC") Section 45 - Production Tax Credit ("Section 45") refined coal tax credit program effective December 31, 2021, both Tinuum Group and Tinuum Services have substantially ceased operations as of December 31, 2021 and wound down their operations.

Further, Tinuum Group is in the process of completing reclamation activities.

AC is a specialized sorbent material that is used widely in a host of industrial and consumer applications to remove impurities, contaminants and pollutants from gas, water and other product or waste streams.

Pursuant to an Agreement and Plan of Merger, effective July 1, 2013, the Company (formerly known as Advanced Emissions Solutions, Inc.

("ADES")), a Delaware company incorporated in 2011, succeeded ADA as the publicly-held corporation and ADA became a wholly-owned subsidiary of the Company.

In 2018, we acquired ADA Carbon Solutions, LLC ("Carbon Solutions") to enter into the broader AC market and to expand our product offerings in the mercury control industry and other applicable AC markets.

In February 2023, we acquired 100% of the equity of the subsidiaries of Arq Limited (the "Arq Acquisition," and hereafter the Arq Limited subsidiaries referred to as "Legacy Arq") to secure access to a feedstock, a manufacturing facility and certain patented processes to manufacture new advanced granular activated carbon ("GAC") products for sale into markets to the APT and other markets.

In February 2024, as part of a larger rebranding, the Company changed its name to Arq, Inc., and on February 1, 2024, our common stock commenced trading under the ticker symbol, "ARQ".

This Annual Report on Form 10-K is referred to as the "Form 10-K" or the "Report." As used in this Report, the terms the "Company," "we," "us" and "our" means Arq, Inc.

and its consolidated subsidiaries.

Products and Markets

AC is a specialized sorbent material that is used widely in a host of industrial and consumer applications to remove impurities, contaminants and pollutants from gas, water, soil and other product or waste streams.

AC is produced by activating carbonaceous raw materials, including wood, coal, nut shells, resins and petroleum pitch.

Properties such as surface area, pore volume, surface chemical functionalities and particle size can be specifically engineered to selectively target various contaminants to meet end-use application requirements.

AC can come in several different forms that are important for the end-use application, including powdered activated carbon ("PAC"), granular activated carbon ("GAC"), pellets, honeycombs, blocks or cloths.

Key markets include removal of pollutants from coal-fired electrical generation and other industrial processes, treatment of drinking and waste waters, industrial acid gas and odor removal, automotive gasoline emission control, soil and ground water remediation and food and beverage process and product purification.

Demand for AC products has been, and is expected to continue to be, driven by increasing environmental regulations pertaining to water and air purification, especially in the developed and more industrialized areas of the world.

Properties such as surface area, pore volume, surface chemical functionalities and particle size and form can be specifically engineered to selectively target various contaminants to meet end-use application requirements.

Our AC products are manufactured in several different forms that are important for the end-use application, including powdered activated carbon ("PAC"), granular activated carbon, and colloidal carbon product ("CCP").

Key markets for AC products include removal of pollutants from coal-fired electrical generation and other industrial processes, treatment of drinking and waste waters, industrial and renewable gas purification and odor removal, automotive gasoline emission control, soil and ground water remediation and food and beverage process and product purification.

Demand for AC products has been, and is expected to continue to be driven by increasing environmental regulations pertaining to water, soil, and air quality, especially in the developed and more industrialized areas of the world, and general consumer attention towards environmental issues.

Additionally, we believe enhanced environmental and health advisory issues will continue to drive demand for AC in rapidly developing countries.

We see opportunities and are continuing to pursue diverse markets for our purification products outside of coal-fired power generation, including industrial applications, water treatment plants and other end markets.

We pursue opportunities to expand and diversify our customer base into markets for our purification products including industrial applications, water treatment plants and other end markets.

In addition, we see significant opportunities emerging in the soil, sediment and groundwater treatment markets.

Increased environmental attention has been drawn to the monitoring and treatment of heavy metals, organic and inorganic compounds in groundwater to improve overall drinking water quality across North America.

Increased attention has been drawn to the monitoring and treatment of heavy metals, organic and inorganic compounds in groundwater to improve overall ground and drinking water quality across North America.

AC, in various forms, has and will continue to play a key role in these remediation efforts.

Our products are used to purify contaminated liquid and gas streams from a variety of industrial sources including coal-fired power plants and waste-water treatment plants and other end markets.

Our current products (also referred to as "consumables") are used to purify contaminated liquid, soil, and gas streams from a variety of industrial sources including coal-fired power plants and wastewater treatment plants and other end markets.

Most of the North American coal-fired power generators installed equipment to control air pollutants, such as mercury, prior to or since the implementation of the Mercury and Air Toxics Standards ("MATS").

However, many power generators need consumable products to complement the operation of installed equipment on a recurring basis to chemically and physically capture mercury and other contaminants.

AC has been adopted as the most widely-used technology to capture mercury due to product efficiency and effectiveness, and currently accounts for the majority of the mercury control consumables in the North American market.

We offer AC and other chemical products and work with customers as they develop and implement a compliance control strategy which utilizes the consumables solutions that fit with their unique operating and pollution control configuration.

For the purification of water, AC has been used in the treatment of drinking water, wastewater, contaminated soil and groundwater to adsorb compounds causing unpleasant taste and odor and other contaminants.

Both industrial and municipal wastewater treatment plants have deployed the use of AC in their treatment processes.

However, many power generators need consumable products to complement the operation of installed equipment on a recurring basis to more effectively capture mercury and other contaminants.

AC has been adopted as the most widely-used technology to capture mercury due to product efficiency and

effectiveness, and currently accounts for the majority of the mercury control consumables in the North American market.

We offer AC and other chemical products and work with customers as they develop and implement a compliance control strategy that utilizes the consumables solutions that fit with their unique operating and pollution control configuration.

Coal-fired power plants continue to be a significant, though declining, source of electricity generation in the United States ("U.S.").

Demand for our AC products related to coal-fired electricity generation is highly dependent on the availability and cost of alternative energy sources, such as natural gas, solar and wind energy.

We continue to pursue markets for our purification products outside of coal-fired power generation, including industrial applications, (such as waste-to-energy and cement making), water treatment and other markets.

For the purification of water, our AC products have been used in the treatment of drinking water, wastewater, contaminated soil and groundwater to adsorb compounds causing unpleasant taste and odor and other toxic contaminants.

Both industrial and municipal wastewater treatment plants have deployed the use of our AC products in their treatment processes.

Groundwater contamination has become a matter of increasing concern to federal and state governments as well as to the public, especially over recent years.

AC market may see significant growth from water purification markets, especially if future regulations are passed controlling certain chemicals in drinking water.

At present, individual states are primarily responsible for the protection of groundwater.

The existing technologies for treatment, including removal of the soil for external treatment or landfill, pumping the groundwater above surface for treatment and/or installing treatment trenches or barriers, are expensive and may have complicated life-cycle management requirements.

At present, individual states are primarily responsible for the protection of groundwater and drinking water.

The existing technologies for treatment of groundwater, including removal of the soil for external treatment or landfill, pumping the groundwater above surface for treatment and/or installing treatment trenches or barriers all utilize PAC and GAC products.

An emerging technology generating increasing interest by site engineering firms and owners is injecting highly engineered ACs into the subsoil, also described as "in situ" treatment, to intercept the contamination plume or to treat the groundwater.

In response to this market opportunity, in late 2021, we developed a new Colloidal Carbon Product ("CCP") platform, FluxSorb IS TM , which is currently in the initial stages of in-field testing at multiple contaminated soil and groundwater remediation treatment sites.

Coal-fired power plants continue to be a significant, though declining, source of electricity in the U.S.

Demand for our AC products related to coal-fired electricity generation is dependent on the availability and cost of alternative energy sources, such as natural gas, solar and wind energy.

We see opportunities to continue pursuing diverse markets for our purification products outside of coal-fired power generation, including industrial applications, water treatment plants and other markets.

In response to this market opportunity, in late 2021, we developed a new Colloidal Carbon Product ("CCP") platform, FluxSorb RC, which is currently in the initial stages of field testing at multiple contaminated soil and groundwater remediation treatment sites.

Legacy Arq Products and Markets

With the acquisition of Legacy Arq in February 2023, we now control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin Kentucky (the "Corbin Facility").

Our facility will remediate these reserves, using a patented manufacturing process to convert bituminous coal waste into a purified, microfine carbon powder known as Arq powder TM ("Arq Powder") for high value applications, such as for a raw material to produce GAC products.

We expect by the end of 2024 to begin using Arq Powder as a feedstock to produce high-quality GAC products for sale in the APT and other markets.

We believe Arq Powder has additional potential for us to access new markets and applications.

We expect to secure customer interest in Arq Powder as an additive into other markets, such as components for asphalt.

These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials.

These applications are currently in various stages of proof of concept testing or preliminary customer testing.

Sales and Customers

Sales of consumables are primarily made by the Company’s employees to a range of end customers, including coal-fired utilities, industrial companies, water treatment plants and other customers.

Our AC sales are generally made under requirements-based contracts ranging from one to five years.

Our chemical product sales are generally made on an order by order basis.

Revenues from our top three customers comprised approximately 37% of our consolidated consumables revenues for the year ended December 31, 2022, and the loss of any of these customers would have a material adverse effect on our operating results.

Norit Supply Agreement and Related Agreements

On September 30, 2020, we and Cabot Norit Americas, Inc., ("Norit") entered into a supply agreement (the "Supply Agreement") pursuant to which we agreed to sell and deliver to Norit, and Norit agreed to purchase and accept from us, certain lignite-based AC products ("Furnace Products").

The term of the Supply Agreement is for 15 years with 10-year renewal terms that are automatic unless either party provides three years prior notice of intention not to renew before the end of any term.

Under the Supply Agreement, Norit also reimburses us for certain capital expenditures incurred by us that are necessary to manufacture the Furnace Products.

Reimbursements are comprised of revenues earned from capital expenditures incurred that will benefit both us and Norit (referred to as "Shared Capital") and revenues earned from capital expenditures incurred that will benefit Norit exclusively (referred to as "Specific Capital").

In the event that Norit ceases to make purchases under the Supply Agreement, Norit is obligated to pay the balance of any outstanding payments for Specific Capital.

Further, under the terms of the Supply Agreement, Norit was obligated to pay us $10.2 million of the certain reclamation costs (the "Reclamation Reimbursement") incurred under a reclamation contract entered into by us and a third party for full reclamation of the Marshall Mine (as defined below), inclusive of interest.

On February 25, 2022, we received $10.6 million in cash from Norit (the "Norit Payment") as a result of a change in control provision in the Supply Agreement (the "Change in Control"), which occurred as a result of the sale of Norit by its parent, Cabot Corporation.

Under the Change in Control, we received from Norit full payment of all amounts outstanding under the Reclamation Reimbursement, payment of all unbilled amounts related to Specific Capital for expenditures incurred through February 28, 2022 and payment of $0.8 million related to additional costs due to the third-party operator of Marshall Mine (the "Norit Reclamation Costs").

Under the reclamation contract, we were obligated to remit payment for the Norit Reclamation Costs to the third-party operator of the Marshall Mine, and such payment was remitted in March 2022.

The Change in Control did not impact any other provisions of the Supply Agreement.

Additionally, under the Change in Control, we received $1.3 million in advance of revenue to be recognized in future periods related to Specific Capital.

We believe the Supply Agreement will continue to provide material incremental sales volume and lower fixed operating costs on a per unit basis for our manufacturing plant located in Louisiana (the "Red River Plant").

Further, the Supply Agreement has expanded distribution of our AC products to additional markets outside of those we have traditionally served.

Our primary competitors for consumable sorbent products include Norit, owned by One Equity Partners, Calgon Carbon, a subsidiary of Tokyo Stock Exchange listed Kuraray Co., Ltd.

We sell consumables primarily though our internal sales group and are generally under contracts ranging from one to five years.

We generally recognize revenue on an order-by-order basis.

Revenue from our top three customers comprised approximately 37% of our consumables revenue for the year ended December 31, 2023, and the loss of any of these customers would have a material adverse effect on our operating results.

The timing of the sale of our consumable products is dependent upon several factors.

Power generation is weather dependent, with electricity and steam production varying in response to heating and cooling demands.

As a result, our revenue is generally higher in our first and third fiscal quarters during the warmer and colder months of the year.

Abnormally high and low temperatures during the summer and winter months, respectively, may significantly increase coal consumption for electricity generation and cause increased impurities within various municipalities' water sources, and thus increase the demand for our products.

Additionally, power generating units routinely schedule maintenance outages in the spring and/or fall depending on the operation of their boilers.

During the period in which an outage may occur, which may range from one week to over a month, our product sales may decrease.

Also, our revenue and sales volumes are highly dependent upon the level of coal consumption at coal-fired power plants, which in turn is significantly affected by the prices of competing power generation sources, such as natural gas and renewables.

During periods of low natural gas prices, natural gas provides a competitive alternative to coal-fired power generation and therefore, coal consumption for power generation may be reduced, which in turn reduces the demand for our products.

In contrast, during periods of higher prices for competing power generation sources, coal consumption generally increases and thus demand for our products also increases.

In water purification, the sale of our products depends on demand from municipal water treatment facilities that use these products.

Depending on weather conditions and other environmental factors, the summer months historically have the highest demand for our PAC products in water treatment.

One of the major uses for PAC is for the treatment of taste and odor episodes caused by increased degradation of organic contaminants and natural materials in water that occurs during the summer months.

Additionally, the rainy season generally results in more demand for PAC products to water municipalities due to rain run-offs and contaminant dilution.

Our primary competitors in the AC consumables industry include Cabot Norit Americas, Inc., which is owned by One Equity Partners, Calgon Carbon, which is owned by Kuraray Co., Ltd.

and Donau Carbon Company.

Our primary competitors for consumable chemical products include Midwest Energy Emissions Corp.

(MEEC) and Nalco Holding Company, a subsidiary of Ecolab Inc.

Raw Materials

The principal raw material we use in the manufacturing of AC is lignite coal, which is readily available.

We source 100% of the lignite coal to fulfill customer orders through our ownership of the Five Forks Mine ("Five Forks").

Five Forks is operated for us by a subsidiary of the North American Coal Company.

Sources and Availability of Raw Materials

Currently, the principal raw material we use in the manufacturing of AC is lignite coal, which is readily available through our 100% ownership of a lignite coal mine (the "Five Forks Mine") located in Saline, Louisiana.

All production from the Five Forks Mine is used in our manufacturing process.

The Five Forks Mine is operated for us by a subsidiary of the North American Coal Company.

We may also periodically purchase various ACs to supplement our inventory levels or to produce various products to serve certain AC markets.

We purchase these various ACs through supply agreements or spot purchases with the producers.

With the Arq Acquisition, in 2023, we secured a second feedstock, Arq Powder, which is made from bituminous coal waste, used in manufacturing of GAC products.

Through internal testing, we have demonstrated that Arq Powder can be shaped and successfully activated using industrially available equipment and technology with our proprietary know-how.

Arq Powder has unique properties, including low levels of impurities and small average particle size, which when used as a feedstock to produce certain carbon products may provide for advantages compared to lignite coal, other bituminous coals, or oil-based feedstocks in terms of cost and performance.

In the U.S., the availability of feedstock for GAC manufacturing is limited, as it is either supplied by specialty mined coal or coconut husks, which need to be imported.

Between the Corbin Facility and the Five Forks Mine, we will have a fully integrated supply chain in multiple feedstocks - bituminous coal fines (Corbin Facility) and lignite coal (Five Forks Mine) to produce both GAC and PAC products.

We purchase various additives utilized in the production of AC.

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We also purchase additives that are included in certain chemical products for resale to our customers through contracts with suppliers.

The manufacturing of these consumable products is dependent upon certain discrete additives, which are subject to price fluctuations and supply constraints.

The manufacturing of these chemical products is dependent upon certain discrete additives, which are subject to price fluctuations and supply constraints.

In addition, the number of suppliers who provide the necessary additives needed to manufacture our chemical products are limited.

We purchase these chemical products through spot purchases with the producers.

Due to the nature of our business and the marketplace we operate in, there is an ebb and flow in demand for our product and consequently, our inventory levels may vary throughout the year.

Across our business, there is at times a need to supplement the available production at our Red River Plant to meet an increase in overall demand for our AC products.

For example, for the year ended December 31, 2021, we observed significant increases in demand for our AC products that exceeded our available inventory and production capacity.

As a result, we purchased third party products during 2021 and 2022 to supplement our current inventory and to increase our inventory balances to meet customer requirements.

As demand for our product increases, we will increase our production, if available to do so, and, as necessary, continue to purchase additional inventory from third parties to meet our customer obligations.

We own and operate the Red River plant, which is located in Louisiana.

We also lease land on which we operate a production and distribution facility located in Louisiana.

Additionally, we have sales, product development and administrative operations located in Colorado.

In 2020 and in conjunction with the execution of the Supply Agreement, we purchased 100% of the membership interests in Marshall Mine, LLC, which owns a lignite mine located outside of Marshall, Texas (the "Marshall Mine").

We concluded that the Marshall Mine did not have any remaining economic reserves and independently determined to immediately commence activities to shutter it.

Accordingly, on September 30, 2020, we entered into a reclamation contract with a third party for the full reclamation of the Marshall Mine.

In September 2022, we entered into an agreement with a third-party to sell all membership interests in Marshall Mine, LLC.

The obligations of the parties to close the sale transaction are subject to certain events, including (1) obtaining the approval of the Railroad Commission of Texas for an operating permit in the name of the buyer or an affiliate of the buyer, and (2) replacing our surety bond with a reclamation performance bond, letter of credit or other form of security to which the buyer or an affiliate of the buyer is the principal that is satisfactory to the Railroad Commission of Texas.

We currently expect to close the sale transaction of the Marshall Mine during the first half of 2023.

Due to the seasonality of our business, which is primarily driven by our high concentration of customers in the coal-fired plant market, our sales and inventory levels may vary throughout the year.

We are able to supplement the available production at our Red River Plant by purchasing third party consumables to meet customer demand for our consumables.

We own and operate a manufacturing plant (the "Red River Plant"), located in Coushatta, Louisiana.

We also operate a production and distribution facility located on land we lease in Coushatta.

In addition, we own and operate the Corbin Facility, where we process bituminous coal waste and apply patented technology to produce Arq Powder.

In January 2024, the Company executed a contract with a third-party contractor for the construction of a GAC facility at the Red River Plant, (the "GAC Facility") and immediately commenced construction operations.

The Company expects to complete commissioning activities at the GAC Facility by the end of 2024 and estimates that total construction costs including all equipment purchases will be in the range of $62 to $67 million.

As of January 2024, major construction work at the Corbin Facility remains on track to be completed on time.

We expect to commence commissioning activities during the first half of 2024 and estimate that total construction and commissioning costs at the Corbin Facility will be in the range of $10 to $15 million.

In March 2023, we sold 100% of the membership interests in Marshall Mine, LLC, which owned a shuttered lignite mine located outside of Marshall, Texas to a third party.

Research and Development Activities

We have conducted research and product development related to the customers and market that we currently serve or are pursuing.

During the years ended December 31, 2022 and 2021, we incurred research and development costs of $0.4 million and $0.4 million, respectively.

We conduct research and product development activities for further enhancement of our consumables.

For the years ended December 31, 2023 and 2022, we incurred research and development costs of $3.3 million and $2.1 million, respectively.

Legislation and Environmental Regulations

Our products and services are used for the reduction of pollutants and other contaminants.

Legislation and regulation limit the amount of pollutants and other contaminants permitted and may increase the need for our product.

Legislation and regulations limit the amount of pollutants and other contaminants permitted and may increase the need for our products.

Below is a summary of the primary legislation and regulation that currently affects the market for our current products.

Federal MATS Affecting Electric Utility Steam Generating Units

Environmental Protection Agency (the "EPA") final "MATS Rule" went into effect in April 2012.

The EPA structured the MATS Rule as a Maximum Achievable Control Technology-based ("MACT-based") hazardous pollutant regulation applicable to coal and oil-fired Electric Utility Steam Generating Units ("EGU"), which generate electricity through steam turbines and have a capacity of 25 megawatts or greater, and provide for, among other provisions, control of mercury, control of acid gases such as hydrochloric acid and other Hazardous Air Pollutants ("HAPs").

Environmental Protection Agency ("EPA") final "MATS Rule" went into effect in April 2012.

EGUs generate electricity through steam turbines and have a capacity of 25 megawatts or greater and provide for, among other provisions, control of mercury, control of acid gases such as hydrochloric acid and other Hazardous Air Pollutants ("HAPs").

Approximately 1,260 units in the U.S.

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as of December 31, 2023.

In April 2017, a review by the U.S.

Court of Appeals for the D.C.

Circuit (the "D.C.

Circuit") of a 2016 'supplemental finding' associated with the cost benefit analysis of the MATS Rule conducted by the EPA was stayed at the request of the Trump Administration.

The court case continues to be stayed indefinitely.

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

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

In May 2020, the EPA reconsidered and found that it was not "appropriate and necessary" to regulate HAPs emissions from coal- and oil-fired EGUs.

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

ADES joined a number of parties in seeking review of this EPA action before the D.C.

President Biden identified the EPA’s withdrawal of the supplemental finding as one of the actions to be reviewed for conformity with Biden Administration policy, and in February 2021, the Biden Administration moved that the pending judicial review of the supplemental finding withdrawal be held in abeyance.

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

Circuit granted the Biden Administration’s motion, and this appeal also is now in abeyance.

The MATS Rule remains in effect.

On February 15, 2023, the EPA issued a final rule revoking the May 2020 reconsideration and affirming that it is "appropriate and necessary" to regulate HAP emissions from coal- and oil-fired EGUs.

On April 3, 2023, the EPA issued a proposed update to MATS that, amongst other potential modifications, proposed a reduction to the mercury emission limits for lignite coal-fired EGUs.

This proposal is currently pending.

State Mercury and Air Toxics Regulations Affecting EGUs

In addition, certain states have their own mercury rules that are similar to or more stringent than the MATS Rule.

Coal-fired electricity generating units in the U.S are subject to consent decrees that require the control of acid gases and particulate matter, in addition to mercury emissions.

Coal-fired electricity generating units in the U.S.

are subject to consent decrees that require the control of acid gases and particulate matter, in addition to mercury emissions.

Federal Industrial Boiler MACT

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Existing boilers typically had until January 31, 2017 to comply with the rule.

On December 1, 2014, the EPA announced the reconsideration of the industrial boiler MACT ("IBMACT") and proposed amendments to the version published January 31, 2013, representing technical corrections and clarifications.he proposed amendments do not affect the applicability of the final rule.

The EPA published an amended final rule of the industrial boiler MACT ("IBMACT"), representing technical corrections and clarifications.

On July 21, 2022, the EPA issued a further update of the IBMACT, which, among other things, updated emission limits to certain HAPs.

The EPA estimated that approximately 600 coal-fired boilers will be affected by IBMACT, in industries such as pulp and paper.

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Some halogens may impact the effectiveness of biological wastewater treatment systems that are often used for the removal of selenium.

On August 3, 2021, the EPA initiated a supplemental rule-making initiative to strengthen certain discharge limits and stated its intention to issue a proposed rule for public comment in Fall of 2022, which has not yet been issued.

This proposed rule seeks to establish more stringent discharge standards for certain wastewater generated at coal fired power plants, and is currently under review by the EPA.

Additional U.S.

Legislation and Regulations

In 2015, the EPA finalized rules to reduce greenhouse gases ("GHGs") in the form of the Clean Power Plan ("CPP"), which established guidelines for states to follow in developing plans to reduce GHG emissions from fossil fuel-fired power plants.

Under the CPP, states were required to prepare "State Plans" to meet state targets based on emission reductions from affected sources.

The CPP was challenged by multiple states in the D.C.

The CPP was stayed by the U.S.

Supreme Court.

Circuit held the CPP litigation in abeyance until April 28, 2017, and dismissed the case once the EPA repealed the CPP in July 2019.

The EPA repealed the CPP and replaced it with the Affordable Clean Energy ("ACE") rule, which established guidelines for states to follow in developing plans to reduce GHG emissions from fossil fuel-fired power plants.

ACE also requires states to prepare State Plans and prescribes that they must be based on heat rate improvements at affected plants.

Numerous states, power companies and non-governmental organizations challenged the ACE rule in the D.C.

Circuit, which vacated the ACE rule on January 19, 2021.

On February 12, 2021, EPA stated that neither the ACE or CPP regulations were in place with respect to GHGs for fossil fuel-fired power plants.

In October 2021, the EPA released its PFAS Strategic Roadmap, laying out its approach to addressing PFAS and other pollutants.

The PFAS Strategic Roadmap sets timelines by which the EPA plans to take certain actions through 2024, including establishing a national primary drinking water regulation for certain PFAS and taking Effluent Limitations Guidelines actions to regulate certain PFAS discharges from industrial categories.

On March 14, 2023, the EPA proposed a National Primary Drinking Water Regulation ("NPDWR") for six specific PFAS substances.

NPDWR seeks to establish legally enforceable maximum contaminant levels ("MCL") for the 6 PFAS substances, including a proposed MCL for Perfluorooctane Acid ("PFOA") and Perfluorooctane Sulfonate ("PFOS") of 4.0 parts per trillion.

Under this proposed rule, drinking water utilities would have three years from the publication of a final rule to comply.

The EPA has submitted its final rule with respect to the NPDWR for interagency review and should issue a final rule after this review is completed.

International Regulations

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The BREF conclusions for large coal-fired electricity generating units were adopted by the European Commission in July 2017.

Based on the existing and potential regulations, we believe the international market for mercury control products may expand in the coming years.

In October 2022, the European Commission proposed new directives for better and more cost-effective treatment of urban wastewater, which included amongst other things new standards on micropollutants and new monitoring requirements for microplastics.

In January of 2024, there was a provisional agreement that revised the October 2022 proposed directives.

If the revised directive is adopted by the European Parliament and the Council, it will become enforceable on European Union Member States.

Based on the existing and potential regulations, we believe the international market for activated carbon products may expand in the coming years.

Mining Environmental and Reclamation Matters

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The Five Forks Mine operates in Louisiana, which has achieved primacy and issues permits in lieu of the OSM.

The Marshall Mine operates in Texas, which has also achieved primacy and issues permits in lieu of the OSM.

Mine operators are often required by federal and/or state laws, including SMCRA, to assure, usually through the use of surety bonds, payment of certain long‑term obligations including mine closure or reclamation costs, federal and state workers’ compensation costs, coal leases and other miscellaneous obligations.

Although surety bonds are usually noncancelable during their term, many of these bonds are renewable on an annual basis and collateral requirements may change.

As of December 31, 2022, we posted a surety bond of approximately $7.5 million for reclamation of the Five Forks Mine and $16.6 million for the reclamation of Marshall Mine.

Although surety bonds are usually non-cancelable during their term, many of these bonds are renewable on an annual basis and collateral requirements may change.

As of December 31, 2023, we posted a surety bonds of approximately $7.5 million and $3.0 million for reclamation of the Five Forks Mine and the Corbin Facility, respectively.

Intellectual Property

As of December 31, 2023, we held 83 U.S.

patents and 8 international patents that were issued or allowed, 13 additional U.S.

provisional patents or applications that were pending, and two international patent applications that were either pending or filed relating to different aspects of our technology.

provisional patents or applications that were pending, and 2 international patent applications that were either pending or filed relating to different aspects of our technology.

During the year ended December 31, 2023, we were granted 3 new patents, and obtained an additional 87 patents and patent applications through the Arq Acquisition.

Within the Legacy Arq patent portfolio, there are 7 granted U.S.

patents, 10 pending U.S.

applications, 19 granted international patents, and 51 pending international patent applications.

Our existing patents generally have terms of 20 years from the effective date of filing, with our next patents expiring in 2024.

Seasonality of Activities

The sale of our consumable products depends on the operations of the power generation units, industrial facilities and water treatment plants in which the applicable consumables are provided.

Power generation is weather dependent, with electricity and steam production varying in response to heating and cooling needs.

Additionally, power generating units routinely schedule maintenance outages in the spring and/or fall depending on the operation of the boilers.

During the period in which an outage may occur, which may range from one week to over a month, no consumables are used, and our sales may be correspondingly reduced.

The sale of our AC products for water purification depends on demand from municipal water treatment facilities that use these products.

Depending on weather conditions and other environmental factors, the summer months historically have the highest demand for PAC, as one of the major uses for PAC is for the treatment of taste and odor episodes caused by increased degradation of organic contaminants and natural materials in water during the summer.

Additionally, the rainy season causes more PAC usage for the municipalities due to rain run-offs and contaminant dilution resulting in higher water treatment volumes.

During the year ended December 31, 2023, 7 U.S.

and 6 international patents and applications from our patent portfolio were abandoned, as we determined that they no longer represent future markets or economic opportunities for us.

Further, 22 international patents and applications from the Legacy Arq patent portfolio were abandoned in jurisdictions that were determined to no longer represent future markets or economic opportunities for us.

As of December 31, 2023, we owned over 50 trademark registrations and applications globally.

During the year ended December 31, 2023, we obtained an additional 33 trademarks from the Arq Acquisition.

Safety, Health and Environment

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These SH&E Regulations include requirements to maintain and comply with various environmental permits related to the operation of many of our facilities, including mine health and safety laws required for continued operation of the Five Forks Mine.

As of December 31, 2022, we employed 147 personnel, 28 in Colorado and 119 in Louisiana, all of which were employed full-time.

Entry into Material Definitive Agreements

Securities Purchase Agreement

On February 1, 2023 (the "Acquisition Date"), we entered into a Securities Purchase Agreement (the "Purchase Agreement") with Arq Limited ("Arq Ltd."), a company incorporated under the laws of Jersey, pursuant to which we acquired all of the direct and indirect equity interests of Arq Ltd.'s subsidiaries (the "Arq Acquisition," and hereafter referred to as "Arq") in exchange for consideration (the "Purchase Consideration") totaling $31.2 million and consisting of (i) 3,814,864 shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), valued at $12.4 million and (ii) 5,294,462 shares of the Company's Series A Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), valued at $18.8 million.

In connection with the issuance of the Series A Preferred Stock pursuant to the Purchase Agreement, we filed the Certificate of Designations of Preferred Stock for the Series A Preferred Stock (the "Certificate of Designations") with the Secretary of State of the State of Delaware.

Capitalized terms used herein but not otherwise defined have the meaning set forth in the Purchase Agreement.

The Purchase Agreement contains customary representations, warranties and covenants.

The Arq Acquisition closed concurrently with execution of the Purchase Agreement.

Under the terms of the Purchase Agreement, 833,914 shares of the Series A Preferred stock issued to Arq Ltd.

are being held in escrow (the "Escrow Shares") pending a determination by the Internal Revenue Service (the "IRS") that no tax withholding is required on the Purchase Consideration issued to Arq Ltd.

( the "Arq Ltd.

Tax Liability").

We have estimated the fair value of the potential Arq Ltd.

Tax Liability at $3.3 million.

We accounted for the Arq Acquisition as an acquisition of a business as of the Acquisition Date.

The total Purchase Consideration was $31.2 million and has been preliminarily allocated to the acquired assets and assumed liabilities of Arq based on their estimated fair values as of the Acquisition Date.

Arq's principal office is located in London, United Kingdom, with additional offices located in Lexington and Corbin, Kentucky near its main production facility.

Arq is an environmental technology company that has developed a process for transforming coal waste into a purified, microfine carbon powder, known as Arq powder TM ("Arq Powder"), which can be used as an alternative to oil or in-ground mined coal to produce a range of noncombustible and combustible carbon-rich products.

With the completion of the Arq Acquisition, we intend to utilize Arq Powder as a feedstock to produce high-quality AC for use in water and air purification markets as well as sell Arq Powder as an additive into other markets.

Series A Preferred Stock

Each share of Series A Preferred Stock will be automatically converted into a share of Common Stock upon approval by the holders of the percentage of Common Stock required to approve such conversion under the applicable rules of The Nasdaq Stock Market ("Nasdaq"), without the need for any action on the part of the holders of Series A Preferred Stock (the "Conversion Approval").

Each share of Series A Preferred Stock is deemed to have an original issue price of $4.00 per share (the "Original Issue Amount").

The number of shares of Common Stock issued upon conversion of each share of Series A Preferred Stock shall be equal to the product of (i) the sum of (A) the Original Issue Amount plus (B) an amount equal to the cumulative amount of the accrued and unpaid dividends on such share at such time (regardless of whether or not declared or funds for their payment are lawfully available) divided by (ii) the Original Issue Amount, subject to adjustment as provided in the Certificate of Designations.

Holders of the Series A Preferred Stock are entitled to receive cumulative dividends which will accrue quarterly on the last day of each applicable quarter (whether or not declared or funds for their payment are lawfully available) and will be payable quarterly, in arrears, on the earlier to occur of (a) the date any dividend is paid to holders of Common Stock with respect to such quarter and (b) 30 days after the end of each quarter (the "Series A Quarterly Dividend") at the rate per share of Series A Preferred Stock equal to the greater of (i) if we declare a cash dividend on the Common Stock with respect to such quarter, the amount of the cash dividend that would be received by a holder of Common Stock in which such share of Series A Preferred Stock would be convertible on the record date for such cash dividend and (ii) an annual rate (the "Rate") of 8.0% of the Original Issue Amount per annum compounded quarterly (the "Coupon Dividend") with respect to such quarter.

The Rate will increase by 2.0% on the first day of the first quarter ending on or after the 635 th day following the closing date of the first issuance of Series A Preferred Stock and on each subsequent anniversary of such date.

The Series A Quarterly Dividend is payable in cash or in additional shares of Series A Preferred Stock (the "Series A PIK Shares"), at the Company's option.

The number of Series A PIK Shares to be issued shall be determined by dividing (i) the Series A Quarterly Dividend payable with respect to all shares of Series A Preferred Stock held by a holder thereof by (ii) the aggregate Original Issue Amount of all shares of Series A Preferred Stock held by a holder thereof, and each fractional Series A PIK Share will be rounded to the nearest whole Series A PIK Share (with 0.5 of a share being rounded down to 0.0).

In the event of our liquidation, dissolution or winding up, after payment or provision for payment of our debt and other liabilities, a holder of Series A Preferred Stock will receive a liquidating distribution equal to the amount of the cumulative accrued but unpaid dividends on each share of Series A Preferred Stock held by such holder.

After the payment to the holders of Series A Preferred Stock of such liquidation preference, the holders of outstanding shares of Series A Preferred Stock will participate pari passu with the holders of Common Stock on an as-converted basis in any remaining distributions out of the Company’s assets available for distribution to stockholders.

Holders of shares of Series A Preferred Stock will generally have no voting rights.

However, we are restricted from taking certain actions without the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, including, but not limited to, consummating a merger with or into another party or a sale of substantially all of our assets;

issuing Common Stock or instruments convertible into Common Stock representing more than 20% of our outstanding share capital to the extent the applicable issuance requires approval of holders of Common Stock pursuant to applicable law or the rules of the applicable stock exchange on which the Common Stock is listed;

or authorizing, creating or issuing any Senior Stock or Parity Stock (each as defined in the Certificate of Designations) of the Company (or amending the provisions of any existing class of securities to make such class of securities Senior Stock or Parity Stock).

In addition, we are restricted from amending our Certificate of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred Stock without the written consent or affirmative vote of the holders of at least 75% of the then outstanding shares of Series A Preferred Stock.

If the Conversion Approval has not been obtained prior, each outstanding share of Series A Preferred Stock will be redeemed by us on February 1, 2028 for cash, at a redemption price equal to the sum of (i) the product of (x) 140% and (y) the Original Issue Amount, plus (ii) an amount equal to the cumulative amount of accrued and unpaid dividends on such share of Series A Preferred Stock.

Subscription Agreements

Also, on February 1, 2023, we entered into Subscription Agreements (the "Subscription Agreements") with certain persons (the "Subscribers") pursuant to which the Subscribers subscribed for and purchased shares of Common Stock for an aggregate purchase price of approximately $15.4 million and at a price per share of $4.00 (the "PIPE Price Per Share" and such transaction, the "PIPE Investment").

As of December 31, 2023, we employed 173 personnel, of which 171 were employed full-time.

Arq Acquisition

On February 1, 2023 (the "Acquisition Date"), we entered into a Securities Purchase Agreement (the "Purchase Agreement") with Arq Limited ("Arq Ltd."), a company incorporated under the laws of Jersey, pursuant to which we acquired all of the direct and indirect equity interests of Arq Ltd.'s subsidiaries (the "Arq Acquisition," and hereafter referred to as "Legacy Arq") in exchange for consideration (the "Purchase Consideration") totaling $31.2 million and consisting of (i) 3,814,864 shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), valued at $12.4 million and (ii) 5,294,462 shares of the Company's Series A Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), valued at

$18.8 million.

On June 13, 2023, our stockholders approved the conversion of all of the outstanding shares of the Series A Preferred Stock and the corresponding issuance of 5,362,926 shares of Common Stock.

On February 1, 2023, and pursuant to the Arq Acquisition, we entered into subscription agreements with certain persons (the "Subscribers"), which included existing shareholders of Arq Ltd., three of which were appointed to our board of directors, pursuant to which the Subscribers subscribed for and purchased 3,842,315 shares of Common Stock for an aggregate purchase price of approximately $15.4 million and at a price per share of $4.00 (the "PIPE Investment").

The securities issued to the Subscribers under the Subscription Agreements were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), Rule 506 of Regulation D, which is promulgated thereunder, and Regulations S of the Securities Act.

ADES and its affiliates relied on this exemption from registration based in part on representations made by each of the Subscribers under the Subscription Agreements.

As a requirement of the Arq Acquisition, we appointed three new directors to our Board of Directors (the "New Directors"), each of whom was a director of Arq Ltd, and is considered a related party as of the Acquisition Date.

Each of the New Directors individually and/or through their affiliated entities were Subscribers in the PIPE Investment.

Registration Rights Agreement

Pursuant to the terms of the Purchase Agreement, we entered into a Registration Rights Agreement (the "Registration Rights Agreement") with Arq and the Subscribers to the Subscription Agreements described above.

The Registration Rights Agreement provides that as promptly as practicable following the closing of the Arq Acquisition, but no later than 150 days after the Acquisition Date, ADES will file a registration statement registering the resale of the shares of Common Stock received by Arq Ltd.

as Purchase Consideration and the Subscribers in the PIPE Investment (including shares of Common Stock issued upon conversion of the Series A Preferred Stock).

ADES will also use commercially reasonable efforts to have such registration statement declared effective as soon as practicable following the filing thereof, but no later than the earlier of (i) the 210th calendar day (or 270th calendar day if the U.S.

Securities and Exchange Commission (the "SEC") gives notice that it will review the registration statement) following the filing thereof and (ii) the 10th business day after the date the SEC gives notice that it will not review the registration statement, subject to certain conditions.

The Registration Rights Agreement further provides that certain of the investors party thereto will be entitled to customary "piggyback" registration rights.

The Company and its affiliates relied on this exemption from registration based in part on representations made by each of the Subscribers under the Subscription Agreements.

Pursuant to the terms of the Purchase Agreement, we entered into a Registration Rights Agreement (the "Registration Rights Agreement") with Arq Ltd.

and the Subscribers to the Subscription Agreements described above.

On January 25, 2024, we filed a registration statement on Form S-3/A with the Securities and Exchange Commission ("SEC") to register all shares of Common Stock issued in the Purchase Agreement, all shares of Common Stock issued in the PIPE Investments, and all shares of Common Stock issued from the conversion of all shares of the Series A Preferred Stock subject to the Registration Rights Agreement and 325,457 underlying shares of Common Stock issuable upon the exercise of the Warrant (as defined below) issued as consideration in the CFG Loan (as defined below).

The registration was declared effective by the SEC on January 31, 2024.

Loan Agreement

On August 19, 2022, ADES and CF Global Credit, LP ("CF Global") executed a commitment letter pursuant to which CF Global offered to provide a $10.0 million term loan (the "Term Loan") to us.

The proceeds of the Term Loan are intended to be utilized for the general corporate purposes of ADES and its subsidiaries.

On February 1, 2023 (the "Closing Date"), ADES, as borrower, certain of its subsidiaries, as guarantors, and CF Global, as administrative agent and lender, entered into the Term Loan upon execution of a Term Loan and Security Agreement (the "Loan Agreement").

Capitalized terms used herein but not otherwise defined have the meaning set forth in the Loan Agreement.

The Term Loan has a term of 48 months and bears interest at a rate equal to either (a) Adjusted Term SOFR (subject to a 1.00% floor and a 2.00% cap) plus a margin of 9.00% paid in cash and 5.00% paid in kind or (b) Base Rate plus a margin of 8.00% paid in cash and 5.00% paid in kind, which interest on the Term Loan in each case shall be payable (or capitalized, in the case of in kind interest) quarterly in arrears.

We are permitted to prepay the Term Loan at any time subject to the following prepayment premium:

(i) prior to the twelve (12) month anniversary of the Closing Date, the Make-Whole Amount (as defined below), (ii) thereafter but prior to the thirty-six (36) month anniversary of the Closing Date, 2.00% of the outstanding principal amount of the Term Loan being repaid or prepaid or (iii) thereafter until the maturity date, 1.00% of the outstanding principal amount of the Term Loan being repaid or prepaid.

The "Make-Whole Amount", with respect to any repayment or prepayment, is (i) an amount equal to all required interest payable (except for currently accrued and unpaid interest) on the aggregate principal amount of the Term Loan subject to such prepayment or repayment from the date of such prepayment or repayment through but excluding the date that is the first anniversary of the Closing Date calculated using an interest rate equal to (x) Adjusted Term SOFR for an interest period of one month in effect on the third U.S.

Government Securities Business Day prior to such prepayment or repayment plus (y) 14.00% per annum and assuming all interest was paid in cash, plus (ii) a prepayment premium of 2.00% on the aggregate principal amount of the Term Loan subject to such prepayment or repayment.

The Term Loan is secured by substantially all of the assets of ADES and its subsidiaries, excluding those subsidiaries described in the agreement, subject to customary exceptions.

The Loan Agreement includes, among others, the following covenants:

(1) beginning March 31, 2023 and as of the end of each fiscal quarter thereafter, ADES must maintain a minimum cash balance of $5.0 million;

(2) (x) as of December 31, 2023, for the fiscal year then ended, ADES must have a minimum annual revenue, on a consolidated basis, of $70.0 million, (y) as of December 31, 2024, for the fiscal year then ended, ADES must have a minimum annual revenue, on a consolidated basis, of $85.0 million and (z) for any fiscal year thereafter, ADES must have a minimum annual revenue, on a consolidated basis, of $100.0 million;

(3) (x) as of December 31, 2024, for the fiscal year then ended, ADES must have a minimum EBITDA of $3.0 million and (y) for any fiscal year thereafter, ADES must have a minimum EBITDA of $16.0 million;

and (4) beginning after the fiscal quarter ending September 30, 2023, during an LTV Trigger Period, ADES must not exceed a loan to value ratio (based on the consolidated total assets of ADES and its subsidiaries) of 0.40:1.00.

In addition, in connection with the Loan Agreement and as consideration for the Term Loan, ADES agreed to issue to CF Global a warrant (the "Warrant") to purchase 325,457 shares of Common Stock.

The Warrant has an exercise price of $0.01 per share, subject to adjustment as set forth in the Warrant, is exercisable immediately and will expire on February 1, 2030.

The terms of the Warrant do not allow for cash exercise, and the Warrant may only be exercised pursuant to the terms thereof.

The Warrant was issued without registration under the Securities Act in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506 promulgated under the Securities Act as sales to accredited investors.

One of the New Directors is a principal of CF Global and both this director and CF Global are considered related parties as of the Acquisition Date.

Termination of Transaction Agreement

In connection with entry into the Purchase Agreement described above, that certain Transaction Agreement, dated August 19, 2022, by and among Elbert Holdings, Inc., Arq and ADES (the "Transaction Agreement") was terminated on February 1, 2023 pursuant to a termination agreement entered into by each of the parties to the Transaction Agreement.

The Transaction Agreement would have provided, subject to its terms and conditions, for a business combination of Arq Ltd.

By virtue of the termination of the Transaction Agreement, the Transaction Agreement became void and of no further force or effect, with no liability of any party to the Transaction Agreement.

Arq is an environmental technology company that has developed a process for transforming coal waste into a purified, microfine carbon powder, known as Arq Powder, which can be used as an alternative to oil or in-ground mined coal to produce a range of carbon products or as a feedstock for AC.

Additionally, Arq has developed a portfolio of additional product opportunities that include using Arq Powder as a component for asphalt, carbon black and power generation, that can achieve similar advantages in other large markets.

Arq has constructed a production facility at a large coal waste site in Corbin, Kentucky (the "Corbin Facility").

Arq processes coal mining waste and applies patented technology to produce Arq Powder, which has applications in a broad range of carbon products.

Arq Powder has unique properties, including low levels of impurities and small average particle size, which when used as a feedstock to produce certain carbon products may provide for advantages compared to coal or oil-based feedstocks in terms of cost and performance.

Arq Powder is in development stage, and we do not expect it to be commercially sold until 2024 due to ongoing capital projects to improve the operating capabilities of the Corbin Facility.

We believe the Arq Powder technology has several key environmental benefits:

(1) it enables the remediation of waste land, (2) it displaces native coal production while producing valuable products, and (3) it may also have a lower environmental impact than conventional alternatives because Arq Powder is derived from reclaimed waste.

We intend to first sell Arq Powder as a carbon filler for rubber composites and as a component for asphalt with an opportunity to evaluate expanding into other carbon products.

These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials.

These options are currently in various stages of proof of concept testing or customer testing.

As we complete capital upgrades to the Red River Plant, we intend to use Arq Powder as a bituminous based feedstock to produce high-quality AC for use in various markets.

Through internal testing, we have demonstrated that Arq Powder can be shaped and successfully activated using industrially available equipment, technology, and know-how.

In the U.S, the availability of feedstock for GAC manufacturing is limited as it is either supplied by specialty mined coal or coconut husks which need to be imported.

We believe Arq Powder has the potential to open markets and applications for us, which were previously inaccessible to the lignite-based products made by ADES today.

In addition, the Arq Acquistion enables us to have a fully integrated supply chain in multiple feedstocks - bituminous (Arq) and lignite (through the Five Forks Mine) to produce GAC and PAC.

Arq’s Intellectual Property

Arq has 21 U.S.

and foreign patents issued, with 63 pending patent applications.

Arq’s issued patents and pending patent applications span a variety of products and processes, including:

fuel oil composition containing solid hydrocarbonaceous and carbonaceous particles;

processes for fractionated product from crude oil containing solid hydrocarbonaceous particles;

road asphalt feedstock;

AC feedstock;

anode binder pitch feedstock;

needle coke feedstock;

delayed coker feedstock;

battery graphite feedstock;

purified coal product process;

and process for blending purified coal products with oils, including bio-components.

Arq also enforces its intellectual property across trademark, copyright, and trade secret matters to protect its intellectual property.

On February 1, 2023, and pursuant to the Arq Acquisition, we, as borrower, certain of subsidiaries, as guarantors, and CF Global Credit, as administrative agent and lender, entered into a $10.0 million term loan (the "CFG Loan") upon execution of a Term Loan and Security Agreement (the "Loan Agreement").

The CFG Loan has a term of 48 months and bears interest at a rate equal to either (a) Adjusted Term SOFR (subject to a 1.00% floor and a 2.00% cap) plus a margin of 9.00% paid in cash and 5.00% paid in kind or (b) Base Rate plus a margin of 8.00% paid in cash and 5.00% paid in kind, which interest on the CFG Loan in each case shall be payable (or capitalized, in the case of in kind interest) quarterly in arrears.

In addition, in connection with the Loan Agreement and as consideration for the CFG Loan, we issued to CF Global a warrant (the "Warrant") to purchase 325,457 shares of Common Stock.

The Warrant has an exercise price of $0.01 per share, subject to adjustment as set forth in the Warrant, is exercisable immediately, contains a cashless exercise provision and expires on February 1, 2030.

Available Information

Our periodic and current reports are filed with the Securities and Exchange Commission (the "SEC") pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are available free of charge within 24 hours after they are filed with, or furnished to, the SEC at the Company’s website at www.advancedemissionssolutions.com.

Our periodic and current reports are filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are available free of charge within 24 hours after they are filed with, or furnished to, the SEC at the Company’s website at www.arq.com.

The filings are also available through the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C.

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This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties.

In particular such forward-looking statements are found in this Part I and under the heading in Part II, Item 7 below.

Words or phrases such as "anticipates," "believes," "expects," "intends," "plans," "estimates," "predicts," the negative expressions of such words, or similar expressions are used in this Report to identify forward-looking statements, and such forward-looking statements include, but are not limited to, statements or expectations regarding:

In particular statements about our beliefs, plans, objectives, expectations, assumptions, future events or future performance contained in this report, including certain statements found in this Part I and under the heading in Part II, Item 7 below, are forward-looking statements.

In some cases, forward-looking statements can be identified by words or phrases such as "anticipates," "believes," "expects," "intends," "plans," "estimates,", "may", "predicts," the negative expressions of such words, or similar expressions, and such forward-looking statements include, but are not limited to, statements or expectations regarding:

(a) the anticipated effects from an increase in pricing of our AC products;

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(d) increasing competition in the AC market;

(e) the effects of the Arq Acquisition;

(f) the ability to successfully integrate Arq's business;

(g) the ability to develop and utilize Arq’s products and technology;

(h) the ability to make Arq's products commercially viable;

(i) the expected future demand of Arq's products;

(j) future level of research and development activities;

(k) future plant capacity expansions and site development projects;

(l) the effectiveness of our technologies and the benefits they provide;

(m) probability of any loss occurring with respect to certain guarantees made by Tinuum Group;

(n) the timing of awards of, and work and related testing under, our contracts and agreements and their value;

(o) the timing and amounts of or changes in future revenues, backlog, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures;

(p) the amount of future capital expenditures needed for our business and needed by Arq to fund its business plan;

(q) awards of patents designed to protect our proprietary technologies both in the U.S.

(e) the ability to successfully integrate Legacy Arq's business;

(f) the ability to develop and utilize Legacy Arq’s products and technology;

(g) the ability to make Legacy Arq's products commercially viable;

(h) the expected future demand of Legacy Arq's products;

(i) future level of research and development activities;

(j) future plant capacity expansions and site development projects, including the GAC Facility;

(k) the effectiveness of our technologies and the benefits they provide;

(l) probability of any loss occurring with respect to certain guarantees made by Tinuum Group;

(m) the timing of awards of, and work and related testing under, our contracts and agreements and their value;

(n) the timing and amounts of or changes in future revenue, backlog, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures;

(o) the amount of future capital expenditures needed to fund our business plan;

(p) awards of patents designed to protect our proprietary technologies both in the U.S.

and other countries;

(r) the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns;

(s) the impact of adverse global macroeconomic conditions, including rising interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts;

(t) opportunities to effectively provide solutions to U.S.

(q) the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns;

(r) the impact of adverse global macroeconomic conditions, including rising interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts;

(s) opportunities to effectively provide solutions to U.S.

coal-related businesses to comply with regulations, improve efficiency, lower costs and maintain reliability;

(t) the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products;

(u) bank failures or other events affecting financial institutions.

Our expectations are based on certain assumptions, including without limitation, that:

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(c) we will be able to obtain adequate capital and personnel resources to meet our operating needs and to fund anticipated growth and our indemnity obligations;

(d) Norit will continue to purchase Furnace Products from us under the Supply Agreement in the quantities specified;

(d) significant customers will continue to purchase consumables from us;

(e) we will be able to establish and retain key business relationships with current and other companies;

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(i) we will be able to meet any technical requirements of projects we undertake;

(j) existing environmental regulations such as MATS stay in place.

The forward-looking statements included in this Report involve risks and uncertainties.

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impact of competition;

availability, cost of and demand for alternative energy sources and other technologies;

availability, cost of and demand for alternative energy

sources and other technologies;

technical, start up and operational difficulties;

our inability to commercialize our APT technologies on favorable terms;

competition within the industries in which the Company operates;

our inability to commercialize our APT products on favorable terms;

our inability to effectively and efficiently commercialize new products;

changes in construction costs or availability of construction materials;

our inability to effectively manage construction and startup of the Red River GAC Facility or Corbin Facility;

our inability to obtain required financing or financing on terms that are favorable to us;

our inability to ramp up our operations to effectively address recent and expected growth in our business;

loss of key personnel;

ongoing effects of the inflation and macroeconomic uncertainty, including from the ongoing pandemic and armed conflicts around the world, and such uncertainty's effect on market demand and input costs;

availability of materials and equipment for our business;

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as well as other factors relating to our business strategy, goals and expectations concerning the Arq Acquisition (including future operations, future performance or results);

the effect of the Arq Acquisition on our ability to hire key personnel;

our ability to maintain relationships with customers, suppliers and other with whom we do business, or our results of operations and business generally;

our ability to maintain relationships with customers, suppliers and others with whom it does business and meet supply requirements, or its results of operations and business generally;

risks related to diverting management's attention from our ongoing business operations;

the ability to meet Nasdaq's listing standards following the consummation of the Arq Acquisition;

the ability to meet Nasdaq's listing standards following the consummation of the Transaction;

costs related to the Arq Acquisition;

opportunities for additional sales of our lignite AC products and end-market diversification;

opportunities for additional sales of our activated carbon products and end-market diversification;

the timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them;

our ability to meet customer supply requirements;

the rate of coal-fired power generation in the U.S., as described in our filings with the SEC, with particular emphasis on the risk factor disclosures contained in those filings.

the rate of coal-fired power generation in the U.S., the timing and cost of capital expenditures and the resultant impact to our liquidity and cash flows as described in our filings with the SEC, with particular emphasis on the risk factor disclosures contained in those filings.

You are cautioned not to place undue reliance on the forward-looking statements made in this Report and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities.

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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 1. Business