Item 1. Business
Item 1. Business
General
Arq, Inc. ("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, 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 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 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 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 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 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
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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. The U.S. 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 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 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
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.
Seasonality
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.
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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.
Competition
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.
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. The manufacturing of AC is dependent upon these various 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 ACs is limited. We purchase these additives through supply agreements or spot purchases with the producers. Supply agreements with these producers are generally renewed on an annual basis.
We also purchase additives that are included in certain chemical products for resale to our customers through contracts with suppliers. 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 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.
Facilities
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.
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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 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 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
The U.S. Environmental Protection Agency ("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"). 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. were coal-fired EGUs when the rule was enacted. According to our estimates, the MATS Rule sets a limit that we believe requires the capture of 80-90% plus of the mercury in the coal burned in electric power generation boilers as measured at the exhaust stack outlet for most plants. The MACT-based standards are also known as National Emission Standards for Hazardous Air Pollutants ("NESHAP"). Plants generally had four years to comply with the MATS Rule, and implementation of the MATS Rule is now largely completed. We estimate that 58% of the coal-fired units that were operating in December 2012 when the MATS Rule was finalized have been permanently shut down, leaving approximately 406 units in operation in the U.S. as of December 31, 2023.
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. 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.
U.S. Federal Industrial Boiler MACT
In January 2013, the EPA issued the final set of adjustments to the MACT-based air toxics standards for industrial boilers, including mercury, particulate matter and acid gas emission limits. Existing boilers typically had until January 31, 2017 to comply with the 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. Our estimates, based on conversations with plant operators, suggest that most of the affected plants have either shut down or switched fuels to natural gas to comply with the regulation.
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Effluent Limitation Guidelines
In 2015, the EPA set the first federal limits known as effluent limitation guidelines ("ELGs") on the levels of toxic metals in wastewater that can be discharged from power plants. The final rule requires, among other things, zero discharge for fly ash and bottom ash transport water and limits on mercury, arsenic, selenium, and nitrate from flue gas desulfurization ("FGD") wastewater. In September 2017, the EPA finalized a rule that delayed the original compliance deadlines for certain wastewater streams from November 2018 to November 2020, with the possibility that plants would not need to comply until December 2023 with state approval. In April 2019, the U.S. Court of Appeals for the Fifth Circuit struck down the EPA’s ELGs that apply to leachate wastewater and "legacy wastewater," and directed the EPA to revise the limits on the levels of toxic metals in those wastewater streams. In November 2019, the EPA proposed to revise the ELGs for bottom ash and FGD wastewater. The final rule, published in the Federal Register on October 13, 2020 and effective on December 14, 2020, does not directly regulate halogens. It does, however, propose to establish a voluntary incentives program for the removal of certain halides. In many (though not all) of the proposed treatment options that the EPA is considering, selenium in FGD wastewater would be regulated. 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, and issued a proposed rule on ELGs for the Steam Electric Power Generating Category on March 29, 2023. 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 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
There are various international regulations related to mercury control. In Canada, the Canada-Wide Standard ("CWS") was initially implemented in 2010, with increasingly stringent limits through 2020 and varying mercury emissions caps for each province. China and Germany both have limits for mercury emissions that are less stringent than U.S. limits and are typically met using co-benefits from other installed air pollution control equipment designed to control other pollutants. In May 2017, the EU ratified the Minimata Convention on Mercury, triggering mercury control regulations with implementation starting in 2021. Specific emissions limits for dust, nitrogen oxides (NOx), sulfur dioxide (SO 2 ), mercury and particulate matter (PM) are currently being developed, guided by the best available technologies reference ("BREF") document for limiting stack emissions and liquid effluents from industrial processes. The BREF conclusions for large coal-fired electricity generating units were adopted by the European Commission in July 2017.
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.
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Mining Environmental and Reclamation Matters
Federal, state and local authorities regulate the U.S. coal mining industry with respect to matters such as employee health and safety and the environment, including the protection of air quality, water quality, wetlands, special status species of plants and animals, land uses, cultural and historic properties and other environmental resources identified during the permitting process. Reclamation is required during production and after mining has been completed. Materials used and generated by mining operations must also be managed according to applicable regulations and law.
The Surface Mining Control and Reclamation Act of 1977 ("SMCRA"), establishes mining, environmental protection, reclamation and closure standards for all aspects of surface mining. Mining operators must obtain SMCRA permits and permit renewals from the Office of Surface Mining (the "OSM") or from the applicable state agency if the state agency has obtained regulatory primacy. A state agency may achieve primacy if the state regulatory agency develops a mining regulatory program that is no less stringent than the federal mining regulatory program under SMCRA. The Five Forks Mine operates in Louisiana, which has 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 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 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.
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
Our operations are subject to numerous federal, state, and local laws, regulations, rules and ordinances relating to safety, health, and environmental matters ("SH&E Regulations"). 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.
Employees
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
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$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. 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 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 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. 20549 or by calling 1-800-SEC-0330. Alternatively, these reports can be accessed at the SEC’s website at www.sec.gov. The information contained on our website shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act.
Forward-Looking Statements Found in this Report
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 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;
(b) the anticipated effects from an increase in costs of our AC products and related cost increases in supply and logistics;
(c) expected supply and demand for our AC products and services;
(d) increasing competition in the AC market;
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(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;
(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; and
(u) bank failures or other events affecting financial institutions.
Our expectations are based on certain assumptions, including without limitation, that:
(a) coal will continue to be a significant source of fuel for electrical generation in the U.S.;
(b) we will continue as a key supplier of consumables to the coal-fired power generation industry as it seeks to implement reduction of mercury emissions;
(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) 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;
(f) orders we anticipate receiving will be received;
(g) we will be able to formulate new consumables that will be useful to, and accepted by, the markets;
(h) we will be able to effectively compete against others;
(i) we will be able to meet any technical requirements of projects we undertake; and
(j) existing environmental regulations such as MATS stay in place.
The forward-looking statements included in this Report involve risks and uncertainties. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors including, but not limited to, timing of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government’s failure to promulgate regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; impact of competition; availability, cost of and demand for alternative energy
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sources and other technologies; technical, start up and operational difficulties; 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; intellectual property infringement claims from third parties; pending litigation; as well as other factors relating to our business strategy, goals and expectations concerning the Arq Acquisition (including future operations, future performance or results); 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 Transaction; costs related to the Arq Acquisition; 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., 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. The forward-looking statements contained in this Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law to do so.
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