United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37822

______________________________________

Advanced Emissions Solutions, Inc.

(Exact name of registrant as specified in its charter)

______________________________________


Delaware						27-5472457
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

8051 E. Maplewood Ave, Suite 210, Greenwood Village, CO						80111
(Address of principal executive offices)						(Zip Code)

(720) 598-3500
(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

______________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,”" "smaller reporting company," and ~~“smaller reporting company”~~"emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $0.001 per share

ADES

~~NASDAQ~~Nasdaq Global Market

As of ~~August~~May 4, ~~2021,~~2022, there were ~~18,853,288~~19,096,217 outstanding shares of Advanced Emissions Solutions, Inc. common stock, par value $0.001 per share.

INDEX


		PAGE
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	1
	Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~	2
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~	3
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and 2020~~	4
	Notes to Condensed Consolidated Financial Statements	45
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2620
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4429
Item 4.	Controls and Procedures	4429

PART II. - OTHER INFORMATION

Item 1.	Legal Proceedings	4530
Item 1a.	Risk Factors	4530
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4530
Item 3.	Defaults Upon Senior Securities	4530
Item 4.	Mine Safety Disclosures	4530
Item 5.	Other Information	4530
Item 6.	Exhibits	4631
	Signatures	4732

Part I. – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Advanced Emissions Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


		As of					As of
(in thousands, except share data)	(in thousands, except share data)	June 30, 2021		December 31, 2020		(in thousands, except share data)	March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash, cash equivalents and restricted cash		$	47,335	$	30,932
Cash and cash equivalents						Cash and cash equivalents	$	79,807	$	78,753
Receivables, net	Receivables, net	11,560		13,125		Receivables, net	13,008		12,622
Receivables, related parties	Receivables, related parties	3,656		3,453		Receivables, related parties	—		2,481
Inventories, net	Inventories, net	8,161		9,882		Inventories, net	10,280		7,850
Prepaid expenses and other assets	Prepaid expenses and other assets	5,320		4,597		Prepaid expenses and other assets	7,387		6,661

Total current assets	Total current assets	76,032		61,989		Total current assets	110,482		108,367
Restricted cash, long-term	Restricted cash, long-term	10,000		5,000		Restricted cash, long-term	10,000		10,027
Property, plant and equipment, net of accumulated depreciation of $5,344 and $3,340, respectively		31,204		29,433
Property, plant and equipment, net of accumulated depreciation of $8,885 and $7,684, respectively						Property, plant and equipment, net of accumulated depreciation of $8,885 and $7,684, respectively	30,310		30,171
Intangible assets, net	Intangible assets, net	1,631		1,964		Intangible assets, net	1,155		1,237
Equity method investments	Equity method investments	3,564		7,692		Equity method investments	711		2,391
Deferred tax assets, net		3,787		10,604

Other long-term assets, net	Other long-term assets, net	32,277		29,989		Other long-term assets, net	28,913		33,243

Total Assets	Total Assets	$	158,495	$	146,671	Total Assets	$	181,571	$	185,436
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	8,162	$	7,849	Accounts payable	$	9,328	$	10,009
Accrued payroll and related liabilities	Accrued payroll and related liabilities	2,660		3,257		Accrued payroll and related liabilities	3,959		6,477
Current portion of long-term debt		4,373		18,441
Current portion of finance lease obligations						Current portion of finance lease obligations	957		1,011
Other current liabilities	Other current liabilities	11,955		12,996		Other current liabilities	4,552		5,124

Total current liabilities	Total current liabilities	27,150		42,543		Total current liabilities	18,796		22,621
Long-term debt, net of current portion		3,670		5,445
Long-term finance lease obligations, net of current portion						Long-term finance lease obligations, net of current portion	2,955		3,152

Other long-term liabilities	Other long-term liabilities	11,392		13,473		Other long-term liabilities	15,470		12,362
Total Liabilities	Total Liabilities	42,212		61,461		Total Liabilities	37,221		38,135
Commitments and contingencies (Note 11)		0		0
Commitments and contingencies (Note 7)						Commitments and contingencies (Note 7)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, NaN outstanding		0		0
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 23,452,485 and 23,141,284 shares issued, and 18,834,339 and 18,523,138 shares outstanding at June 30, 2021 and December 31, 2020, respectively		23		23
Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of June 30, 2021 and December 31, 2020, respectively		(47,692)		(47,692)
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none issued						Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none issued	—		—
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 23,724,218 and 23,460,212 shares issued, and 19,106,072 and 18,842,066 shares outstanding at March 31, 2022 and December 31, 2021, respectively						Common stock: par value of $.001 per share, 100,000,000 shares authorized, 23,724,218 and 23,460,212 shares issued, and 19,106,072 and 18,842,066 shares outstanding at March 31, 2022 and December 31, 2021, respectively	24		23
Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of March 31, 2022 and December 31, 2021, respectively						Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of March 31, 2022 and December 31, 2021, respectively	(47,692)		(47,692)
Additional paid-in capital	Additional paid-in capital	101,171		100,425		Additional paid-in capital	102,187		102,106
Retained earnings	Retained earnings	62,781		32,454		Retained earnings	89,831		92,864

Total stockholders’ equity		116,283		85,210
Total Stockholders’ Equity						Total Stockholders’ Equity	144,350		147,301
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	158,495	$	146,671	Total Liabilities and Stockholders’ Equity	$	181,571	$	185,436

See Notes to the Condensed Consolidated Financial Statements.

Advanced Emissions Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		2021		2020		(in thousands, except per share data)	2022		2021
Revenues:	Revenues:									Revenues:
Consumables	Consumables	$	15,976	$	8,170	$	33,007	$	17,387	Consumables	$	26,402	$	18,541
License royalties, related party	License royalties, related party	3,657		3,313		7,723		6,359		License royalties, related party	—		4,066

Total revenues	Total revenues	19,633		11,483		40,730		23,746		Total revenues	26,402		22,607
Operating expenses:	Operating expenses:									Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization	Consumables cost of revenue, exclusive of depreciation and amortization	13,300		7,416		25,774		18,907		Consumables cost of revenue, exclusive of depreciation and amortization	21,507		13,984

Payroll and benefits	Payroll and benefits	2,908		3,812		5,377		6,554		Payroll and benefits	2,626		2,469

Legal and professional fees	Legal and professional fees	1,431		1,022		3,234		3,065		Legal and professional fees	2,172		1,803
General and administrative	General and administrative	1,593		2,462		3,508		4,793		General and administrative	1,926		1,915
Depreciation, amortization, depletion and accretion	Depreciation, amortization, depletion and accretion	1,904		1,733		4,010		4,030		Depreciation, amortization, depletion and accretion	1,506		2,106
Impairment of long-lived assets		0		26,103		0		26,103
Gain on change in estimate, asset retirement obligation		(1,942)		0		(1,942)		0

Total operating expenses	Total operating expenses	19,194		42,548		39,961		63,452		Total operating expenses	29,737		22,277
Operating income (loss)		439		(31,065)		769		(39,706)
Operating (loss) income										Operating (loss) income	(3,335)		330
Other income (expense):	Other income (expense):									Other income (expense):
Earnings from equity method investments	Earnings from equity method investments	21,437		8,168		39,749		16,441		Earnings from equity method investments	833		18,312

Interest expense	Interest expense	(493)		(962)		(1,330)		(2,172)		Interest expense	(86)		(837)
Other	Other	150		148		571		191		Other	(445)		421

Total other income	Total other income	21,094		7,354		38,990		14,460		Total other income	302		17,896
Income (loss) before income tax expense		21,533		(23,711)		39,759		(25,246)
(Loss) income before income tax expense										(Loss) income before income tax expense	(3,033)		18,226
Income tax expense	Income tax expense	4,943		103		9,432		461		Income tax expense	—		4,489
Net income (loss)		$	16,590	$	(23,814)	$	30,327	$	(25,707)
Earnings (loss) per common share (Note 1):
Net (loss) income										Net (loss) income	$	(3,033)	$	13,737
(Loss) earnings per common share (Note 1):										(Loss) earnings per common share (Note 1):
Basic	Basic	$	0.91	$	(1.32)	$	1.66	$	(1.43)	Basic	$	(0.17)	$	0.76
Diluted	Diluted	$	0.90	$	(1.32)	$	1.65	$	(1.43)	Diluted	$	(0.17)	$	0.75
Weighted-average number of common shares outstanding:	Weighted-average number of common shares outstanding:									Weighted-average number of common shares outstanding:
Basic	Basic	18,271		18,014		18,219		17,974		Basic	18,344		18,166
Diluted	Diluted	18,398		18,014		18,356		17,974		Diluted	18,344		18,274

See Notes to the Condensed Consolidated Financial Statements.

Advanced Emissions Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)


		Common Stock			Treasury Stock										Common Stock			Treasury Stock
(Amounts in thousands, except share data)	(Amounts in thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		(Amounts in thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
Balances, January 1, 2021		23,141,284	$	23	(4,618,146)	$	(47,692)	$	100,425	$	32,454	$	85,210
Balances, January 1, 2022														Balances, January 1, 2022	23,460,212	$	23	(4,618,146)	$	(47,692)	$	102,106	$	92,864	$	147,301

Stock-based compensation	Stock-based compensation	381,339	—		—	—		421		—		421		Stock-based compensation	323,742	1		—	—		463		—		464

Repurchase of common shares to satisfy minimum tax withholdings	Repurchase of common shares to satisfy minimum tax withholdings	(40,975)	—		—	—		(216)		—		(216)		Repurchase of common shares to satisfy minimum tax withholdings	(59,736)	—		—	—		(382)		—		(382)

Net income		—	—		—	—		—		13,737		13,737
Balances, March 31, 2021		23,481,648	$	23	(4,618,146)	$	(47,692)	$	100,630	$	46,191	$	99,152
Stock-based compensation		(25,330)	—		—	—		566		—		566

Repurchase of common shares to satisfy minimum tax withholdings		(3,833)	—		—	—		(25)		—		(25)

Net income		—	—		—	—		—		16,590		16,590
Balances, June 30, 2021		23,452,485	$	23	(4,618,146)	$	(47,692)	$	101,171	$	62,781	$	116,283
Net loss														Net loss	—	—		—	—		—		(3,033)		(3,033)
Balances, March 31, 2022														Balances, March 31, 2022	23,724,218	$	24	(4,618,146)	$	(47,692)	$	102,187	$	89,831	$	144,350

Common Stock Treasury Stock
(Amounts in thousands, except share data) Shares Amount Shares Amount Additional Paid-in Capital Retained Earnings Total Stockholders’
Equity
Balances, January 1, 2020 22,960,157 $ 23 (4,597,533) $ (47,533) $ 98,466 $ 57,336 $ 108,292
Stock-based compensation 218,259 — — — 506 — 506
Repurchase of common shares to satisfy minimum tax withholdings (64,198) — — — (376) — (376)
Cash dividends declared on common stock — — — — — (4,590) (4,590)
Repurchase of common shares — — (20,613) (159) — — (159)
Net loss — — — — — (1,893) (1,893)
Balances, March 31, 2020 23,114,218 $ 23 (4,618,146) $ (47,692) $ 98,596 $ 50,853 $ 101,780
Stock-based compensation (3,549) — — — 1,138 — 1,138
Repurchase of common shares to satisfy minimum tax withholdings (384) — — — (2) — (2)
Net loss — — — — — (23,814) (23,814)
Balances, June 30, 2020 23,110,285 $ 23 (4,618,146) $ (47,692) $ 99,732 $ 27,039 $ 79,102


	Common Stock			Treasury Stock
(Amounts in thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
Balances, January 1, 2021	23,141,284	$	23	(4,618,146)	$	(47,692)	$	100,425	$	32,454	$	85,210

Stock-based compensation	381,339	—		—	—		421		—		421

Repurchase of common shares to satisfy minimum tax withholdings	(40,975)	—		—	—		(216)		—		(216)


Net income	—	—		—	—		—		13,737		13,737
Balances, March 31, 2021	23,481,648	$	23	(4,618,146)	$	(47,692)	$	100,630	$	46,191	$	99,152

See Notes to the Condensed Consolidated Financial Statements.

Advanced Emissions Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income (loss)		$	30,327	$	(25,707)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (loss) income						Net (loss) income	$	(3,033)	$	13,737
Adjustments to reconcile net (loss) income to net cash provided by operating activities:						Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Deferred income tax expense	Deferred income tax expense	6,817		11,647		Deferred income tax expense	—		3,051
Depreciation, amortization, depletion and accretion	Depreciation, amortization, depletion and accretion	4,010		4,030		Depreciation, amortization, depletion and accretion	1,506		2,106
Impairment of long-lived assets		0		26,103

Operating lease expense	Operating lease expense	912		1,353		Operating lease expense	663		379
Amortization of debt discount and debt issuance costs	Amortization of debt discount and debt issuance costs	945		709		Amortization of debt discount and debt issuance costs	—		591
Gain on change in estimate, asset retirement obligation		(1,942)		0

Stock-based compensation expense	Stock-based compensation expense	987		1,644		Stock-based compensation expense	464		421
Earnings from equity method investments	Earnings from equity method investments	(39,749)		(16,441)		Earnings from equity method investments	(833)		(18,312)
Other non-cash items, net	Other non-cash items, net	(319)		31		Other non-cash items, net	550		(273)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables and related party receivables	Receivables and related party receivables	1,362		2,854		Receivables and related party receivables	2,095		2,147

Prepaid expenses and other assets	Prepaid expenses and other assets	(723)		(11,129)		Prepaid expenses and other assets	(725)		1,178

Inventories, net	Inventories, net	1,327		(590)		Inventories, net	(2,359)		1,548

Other long-term assets, net	Other long-term assets, net	616		(224)		Other long-term assets, net	3,116		(1,817)
Accounts payable	Accounts payable	150		(1,095)		Accounts payable	(692)		(706)
Accrued payroll and related liabilities	Accrued payroll and related liabilities	(597)		134		Accrued payroll and related liabilities	(2,518)		(1,043)
Other current liabilities	Other current liabilities	(1,468)		(515)		Other current liabilities	(1,231)		1,305

Operating lease liabilities	Operating lease liabilities	(1,314)		(1,213)		Operating lease liabilities	2,680		2,104
Other long-term liabilities	Other long-term liabilities	(2,334)		(22)		Other long-term liabilities	910		(2,113)
Distributions from equity method investees, return on investment	Distributions from equity method investees, return on investment	19,144		32,516		Distributions from equity method investees, return on investment	1,501		17,644

Net cash provided by operating activities	Net cash provided by operating activities	18,151		24,085		Net cash provided by operating activities	2,094		21,947
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Distributions from equity method investees in excess of cumulative earnings	Distributions from equity method investees in excess of cumulative earnings	24,732		0		Distributions from equity method investees in excess of cumulative earnings	1,013		5,607

Acquisition of property, plant, equipment, and intangible assets, net	Acquisition of property, plant, equipment, and intangible assets, net	(4,573)		(4,189)		Acquisition of property, plant, equipment, and intangible assets, net	(1,359)		(1,321)
Mine development costs	Mine development costs	(653)		(507)		Mine development costs	(93)		(248)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	895		0		Proceeds from sale of property and equipment	—		848

Net cash provided by (used in) investing activities		20,401		(4,696)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(439)		4,886
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Principal payments on term loan	Principal payments on term loan	(16,000)		(12,000)		Principal payments on term loan	—		(10,000)
Principal payments on finance lease obligations	Principal payments on finance lease obligations	(818)		(676)		Principal payments on finance lease obligations	(226)		(315)
Dividends paid	Dividends paid	(90)		(4,828)		Dividends paid	(20)		—
Repurchase of common shares		0		(159)

Repurchase of common shares to satisfy tax withholdings	Repurchase of common shares to satisfy tax withholdings	(241)		(378)		Repurchase of common shares to satisfy tax withholdings	(382)		(216)
Borrowings from Paycheck Protection Program Loan		0		3,305

Net cash used in financing activities	Net cash used in financing activities	(17,149)		(14,736)		Net cash used in financing activities	(628)		(10,531)
Increase in Cash and Cash Equivalents and Restricted Cash	Increase in Cash and Cash Equivalents and Restricted Cash	21,403		4,653		Increase in Cash and Cash Equivalents and Restricted Cash	1,027		16,302
Cash and Cash Equivalents and Restricted Cash, beginning of period	Cash and Cash Equivalents and Restricted Cash, beginning of period	35,932		17,080		Cash and Cash Equivalents and Restricted Cash, beginning of period	88,780		35,932
Cash and Cash Equivalents and Restricted Cash, end of period	Cash and Cash Equivalents and Restricted Cash, end of period	$	57,335	$	21,733	Cash and Cash Equivalents and Restricted Cash, end of period	$	89,807	$	52,234

Supplemental disclosure of non-cash investing and financing activities:	Supplemental disclosure of non-cash investing and financing activities:					Supplemental disclosure of non-cash investing and financing activities:

Acquisition of property, plant and equipment through accounts payable		$	163	$	223
Acquisition of property and equipment through accounts payable						Acquisition of property and equipment through accounts payable	$	10	$	765

Dividends payable		$	0	$	77

See Notes to the Condensed Consolidated Financial Statements.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 - Basis of Presentation

Nature of Operations

Advanced Emissions Solutions, Inc. ("ADES" or the "Company") is a Delaware corporation with its principal office located in

Greenwood Village, Colorado and operations located in Louisiana. The Company is principally engaged in the sale of

consumable air and water treatment ~~options~~solutions including activated carbon ("AC") and chemical technologies. The Company's proprietary technologies in the advanced purification technologies ("APT") market enable customers to reduce air and water contaminants, including mercury and other pollutants, to maximize utilization levels and to improve operating efficiencies to meet the challenges of existing and pending ~~emission control~~air quality and water regulations. ~~Through its wholly-owned subsidiary, ADA Carbon Solutions, LLC ("Carbon Solutions"), the~~The Company manufactures and sells AC used to capture and remove contaminants for coal-fired power plants and industrial and water treatment markets. ~~Carbon Solutions~~The Company also owns an associated lignite mine ~~that~~("Five Forks Mine") which supplies the primary raw material for manufacturing AC.

Through December 31, 2021, the Company generated substantial earnings from its equity ownership in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services"), both of which are unconsolidated ~~entities, the Company generates substantial earnings.~~entities. Both Tinuum Group ~~provides~~and Tinuum Services ceased material operations effective December 31, 2021 as a result of the expiration of a tax credit program under Internal Revenue Code Section 45 - Production Tax Credit (the "Section 45 Tax Credit Program"). Tinuum Group provided reduction of mercury and nitrogen oxide ("NOx") emissions at select coal-fired power generators through the production and sale of refined coal ("RC") that ~~qualifies~~qualified for tax credits under the ~~Internal Revenue Code ("IRC")~~ Section 45 ~~- Production~~ Tax Credit Program ("Section 45 tax credits"). The Company also ~~earns~~earned royalties for technologies that ~~are~~were licensed to Tinuum Group and used at certain RC facilities to enhance combustion and ~~reduced~~reduce emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services ~~operates~~operated and ~~maintains~~maintained the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities. ~~Both~~Presently, both Tinuum Group and Tinuum Services ~~expect~~continue to ~~commence significantly winding down~~wind-down their operations, ~~starting in~~and the ~~third quarter of 2021 due~~Company expects to ~~the~~receive final cash distributions, which are not expected ~~expiration of the Section 45 tax credit period as of December 31, 2021.~~

~~The Company’s sales occur principally in the United States. See Note 17 for additional information regarding the Company's operating segments.~~to be significant, from these entities during 2022.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of ADES are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and with Article 10 of Regulation S-X of the Securities and Exchange Commission. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

The unaudited Condensed Consolidated Financial Statements of ADES in this quarterly report ("Quarterly Report") are presented on a consolidated basis and include ADES and its wholly-owned subsidiaries (collectively, the "Company"). Also included within the unaudited Condensed Consolidated Financial Statements are the Company's unconsolidated equity investments: Tinuum Group and Tinuum Services, ~~and GWN Manager, LLC ("GWN Manager"),~~ which are accounted for under the equity method of accounting, and Highview Enterprises Limited (the "Highview Investment"), which is accounted for in accordance with U.S. GAAP applicable to equity investments that do not qualify for the equity method of accounting.

Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts were eliminated in consolidation for all periods presented in this Quarterly Report.

In the opinion of management, these Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary for a fair presentation of the results of operations, financial position, stockholders' equity and cash flows for the interim periods presented. These Condensed Consolidated Financial Statements ~~of ADES~~ should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~"2020~~"2021 Form 10-K"). Significant accounting policies disclosed therein have not changed.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using the ~~two-class method, which is an earnings allocation formula that determines earnings (loss) per share for~~weighted-average number of shares of common stock ~~and any participating securities according to dividend and participating rights in undistributed earnings (losses). Pursuant to U.S. GAAP,~~ outstanding during

the ~~Company has elected not to separately present basic or diluted earnings per share attributable to participating securities in the Condensed Consolidated Statements of Operations.~~

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

reporting period. Diluted earnings (loss) per share is computed in a manner consistent with that of basic earnings per share, while considering other potentially dilutive securities. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and March 31, 2021, potentially dilutive securities consist of unvested ~~non-participating~~ restricted stock awards ("RSA's")~~, as well as~~ and contingent performance stock units ("PSU's"). ~~For the three~~

Advanced Emissions Solutions, Inc. and ~~six months ended June 30, 2020, potentially dilutive securities consist of both unvested, participating and non-participating RSA's, as well as outstanding options~~Subsidiaries

Notes to ~~purchase common stock ("Stock Options") and PSU's.~~Condensed Consolidated Financial Statements

The dilutive effect, if any, for non-participating RSA's, Stock Options and PSU's is determined using the greater of dilution as calculated under the treasury stock method or the two-class method. Potentially dilutive securities are excluded from diluted earnings per share when their effect is anti-dilutive. When there is a net loss for a period, all potentially dilutive securities are anti-dilutive and are excluded from the calculation of diluted loss per share for that period.(Unaudited)

The following table sets forth the calculations of basic and diluted (loss) earnings ~~(loss)~~ per share:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share amounts) 2021 2020 2021 2020
Net income (loss) $ 16,590 $ (23,814) $ 30,327 $ (25,707)
Less: Dividends and undistributed income (loss) allocated to participating securities 0 (17) 0 (19)
Income (loss) attributable to common stockholders $ 16,590 $ (23,797) $ 30,327 $ (25,688)
Basic weighted-average common shares outstanding 18,271 18,014 18,219 17,974
Add: dilutive effect of equity instruments 127 0 137 0
Diluted weighted-average shares outstanding 18,398 18,014 18,356 17,974
Earnings (loss) per share - basic $ 0.91 $ (1.32) $ 1.66 $ (1.43)
Earnings (loss) per share - diluted $ 0.90 $ (1.32) $ 1.65 $ (1.43)


	Three Months Ended March 31,
(in thousands, except per share amounts)	2022		2021
Net (loss) income	$	(3,033)	$	13,737



Basic weighted-average common shares outstanding	18,344		18,166
Add: dilutive effect of equity instruments	—		108


Diluted weighted-average shares outstanding	18,344		18,274
(Loss) earnings per share - basic	$	(0.17)	$	0.76
(Loss) earnings per share - diluted	$	(0.17)	$	0.75

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ potentially dilutive securities convertible to ~~0.1~~0.3 million and ~~0.7 million and 0 and 0.3~~0.1 million shares of common stock, respectively, were outstanding but were not included in the ~~computation~~calculation of diluted net (loss) income ~~(loss)~~ per share because the effect would have been anti-dilutive.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There have been no changes in the Company’s critical accounting estimates from those that were disclosed in the ~~2020~~2021 Form 10-K. Actual results could differ from these estimates.

Due to the coronavirus ("COVID-19") pandemic, there has been uncertainty and disruption in the global economy and financial markets. Additionally, due to COVID-19, overall power generation and coal-fired power demand may decline, which could have a material adverse effect on the Company. The Company is not aware of any specific event or circumstance due to COVID-19 that would require an update to its estimates or judgments or a revision of the carrying values of its assets or liabilities through the date of this Quarterly Report. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Risks and Uncertainties

The ~~Company’s~~loss of earnings ~~are significantly affected by equity earnings from Tinuum Group. As~~and cash distributions of ~~June 30, 2021, Tinuum Group has 22 invested RC facilities, of which 8 are leased to a single customer. Both~~both Tinuum Group and Tinuum Services ~~expect~~will continue to commence significantly winding down their operations starting in the third quarter of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021. During the second quarter of 2021, Tinuum Group ceased operating 1 RC facility, with the remaining RC facilities expected to cease operations during the second half of 2021. The loss of Tinuum Group's customers, reduction in revenue streams as a result of lease renewals and the expiration of Section 45 tax credits will have a significant adverse impact on Tinuum Group's financial position, results of operations and cash flows, which in turn will have a material adverse impact on the Company’s financial position, results of operations and cash flows.

~~Advanced Emissions Solutions, Inc.~~ For 2022, the Company is solely dependent on operations of its APT business and ~~Subsidiaries~~

~~Notes~~its cash and cash equivalents on hand to ~~Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

provide liquidity over the near and long term. The Company's revenues, sales volumes, earnings and cash flows are significantly affected by prices of competing power generation sources such as natural gas and renewable energy. During periods of low natural gas prices, natural gas provides a competitive alternative to coal-fired power generation and therefore, coal consumption may be reduced, which in turn reduces the demand for the Company's products. However, during periods of higher prices for competing power generation sources, ~~the~~there is an increase in coal consumption and thus demand for the Company's products ~~increases due to the increase in coal consumption.~~also increases. In addition, coal consumption and demand for the Company's products are ~~also~~ affected by the demand for electricity, which is higher in the warmer and colder months of the year. Abnormal temperatures during the summer and winter months may significantly affect coal consumption and impurities within various municipalities' water sources, and thus impact the demand for the Company's products.

Reclassifications

Certain balances have been reclassified from the prior year to conform to the current year presentation. Such reclassifications had no effect on the Company’s results of operations or financial position in any of the periods presented.

~~New Accounting Standards~~Segments

~~Adopted~~Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision-making group, in deciding how to allocate resources and in assessing financial performance. As of March 31, 2022, the Company's CODM was the Company's Chief Executive Officer, and the Company concluded that it has 1 reportable segment, Advanced Purification Technologies ("APT").

~~In December 2019,~~Given the ~~FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying~~wind-down of Tinuum Group and Tinuum Services and the Accounting for Income Taxes ("ASU 2019-12"). The amendments in ASU 2019-12 simplify various aspects related to accounting for income taxes by removing certain exceptions contained in Topic 740 and also clarify and amends existing guidance in Topic 740 to improve consistent application. ASU 2019-12 is effective for public business entities beginning after December 15, 2020, including interim periods within those years, and early adoption is permitted. The Company adopted ASU 2019-12 effective January 1, 2021 and it did not have a material impact on the Company's financial statements, the Company determined the historical RC segment no longer met the qualitative or quantitative criteria to be considered a reporting segment under U.S. GAAP. As a result, including the method in which the CODM allocates resources, beginning January 1, 2022, the Company determined that it had 1 reportable segment, and ~~disclosures.~~therefore has removed its segment disclosures for this Quarterly Report.

~~Not Yet Adopted~~

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. ASU 2016-13 is effective for "smaller reporting companies" (as defined by the Securities and Exchange Commission) for fiscal years beginning after December 15, 2022, including interim periods within those years, and must be adopted under a modified retrospective method approach. The Company intends to adopt ASU 2016-13 effective January 1, 2023 and is currently evaluating the provisions of this guidance and assessing the impact on its financial statements and ~~disclosures and~~disclosures. The Company does not believe this standard will have a material impact on its financial statements and disclosures.

Note 2 - Customer Supply Agreement

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

~~As part~~ 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 ~~Company and Cabot agreed to additional terms whereby Cabot~~end of any term.

Under the Supply Agreement, Norit also reimburses the Company for certain capital expenditures incurred by the Company that are necessary to manufacture the Furnace ~~Products, and both the Company and Cabot must mutually agree on these~~Products. Reimbursements are comprised ofrevenues earned from capital expenditures ~~in advance of procurement and commissioning. Capital expenditures~~ incurred that will benefit both the Company and ~~Cabot ("Shared~~Norit (referred to as "Shared Capital") ~~are partially reimbursable by Cabot~~ and ~~recognized as~~ revenues ~~based on a formula contained in the Supply Agreement. Revenues~~earned from and reimbursements of Shared Capital are recognized and billable, respectively, beginning on the first day of a half year (January 1 and July 1 of a calendar year) following the placed in service date of a Shared Capital asset(s).

~~Capital~~capital expenditures incurred that will benefit ~~Cabot~~Norit exclusively ~~("Specific~~(referred to as "Specific Capital") are fully reimbursable by Cabot and recognized as revenues based on a formula contained in the Supply Agreement. Revenues earned from Specific Capital are recognized beginning on the first day of a half year following the placed in service date of a Specific Capital asset(s). Reimbursements of Specific Capital are billable in quarterly installments beginning on the first day of a half year following the placed in service date of a Specific Capital asset(s). In the event that ~~Cabot~~Norit ceases to make purchases under the Supply Agreement, ~~Cabot~~Norit is obligated to pay the balance of any outstanding ~~amounts~~payments for Specific Capital.

~~Revenues earned~~Further, under the terms of the Supply Agreement, Norit was obligated to pay the Reclamation Reimbursement (defined below) to the Company for $10.2 million of the Reclamation Costs, inclusive of interest. The Company recorded the Norit Receivable for the Reclamation Reimbursement at its estimated fair value, which was measured using a discounted cash flows valuation model that considered the estimated credit risk associated with the obligor's (Norit's) future performance, which the Company estimated was approximately 1.5%.

On February 25, 2022, the Company received $10.6 million in cash from ~~both Shared Capital and~~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, the Company received from Norit full payment of all amounts outstanding under the Reclamation Reimbursement, payment of all unbilled amounts related to Specific Capital ~~are reported~~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, the Company is obligated to remit payment for the Norit Reclamation Costs to the third-party operator of Marshall Mine within a specified timeframe, and such payment was remitted in March 2022. The Change in Control did not impact any other provisions of the Supply Agreement.

As of February 25, 2022, the carrying value of the Reclamation Reimbursement was $9.0 million, which was reflective of the principal balance, adjusted for accretion of interest and payments made to date. Under the Change in Control, the Company received $8.5 million in cash for full payment of the outstanding Reclamation Reimbursement. The Company concluded that the cash proceeds received represented an early payment of a receivable based on a change in contractual terms and accounted for the difference between the cash proceeds received and the carrying amount of the Reclamation Reimbursement of $0.5 million as a loss, which is included in the ~~Consumables revenue~~"Other Income (Expense)" line item in the ~~Statements~~Condensed Consolidated Statement of ~~Operations.~~Operations for the three months ended March 31, 2022.

Also, under the Change in Control, the Company received $1.3 million in advance of revenues to be recognized in future periods related to Specific Capital and recorded this amount as deferred revenue, which will be recognized as revenues ratably over the remaining contractual term as stipulated in the Supply Agreement.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 3 - Acquisition of Marshall Mine

Concurrently with the execution of the Supply Agreement, on September 30, 2020, the Company entered into an agreement to purchase from ~~Cabot~~Norit 100% of the membership interests in Marshall Mine, LLC (the "Marshall Mine ~~Purchase Agreement"~~Acquisition") for a nominal cash purchase price. Marshall Mine, LLC owns a lignite mine located outside of Marshall, Texas (the "Marshall Mine"). The Company concluded that the Marshall Mine did not have any remaining economic reserves and independently determined to immediately commence activities to shutter it. OnAccordingly, on September 30, 2020, the Company and a third party entered into a reclamation contract (the "Reclamation Contract") ~~with a third party that provided a capped cost agreement, subject to certain contingencies, in~~for full reclamation of the ~~amount of approximately $19.7 million plus an obligation to pay certain direct costs estimated~~Marshall Mine, which is expected to be ~~$3.6 million (collectively, the "Reclamation Costs") over the estimated reclamation period of 10 years (the "Reclamation Period").~~completed by 2030. Under the terms of the Supply Agreement, ~~Cabot is~~Norit was obligated to reimburse the Company for $10.2 million ~~of Reclamation Costs~~ (the "Reclamation ~~Reimbursements"~~Reimbursement") for a portion of the total costs incurred under the Reclamation Contract (the "Reclamation Costs"), which ~~are~~was payable semi-annually over 13 years and inclusive of interest. ~~In the event that Cabot has a change~~As discussed in ~~control~~Note 2, on February 25, 2022 as ~~described in the Supply Agreement, all outstanding balances~~part of the ~~Reclamation Reimbursements shall be due and payable~~Change in ~~full. See further discussion of~~Control, Norit fully paid the outstanding amount owed under the Reclamation ~~Costs~~Reimbursement and ~~Reclamation Reimbursements in Note 4.~~has no further liability related to the Marshall Mine.

The Company accounted for the Marshall Mine ~~Purchase Agreement~~Acquisition as an asset acquisition, and it included the acquisition of certain assets ~~that will be consumed~~ and ~~the~~ assumption of certain liabilities ~~that are to be paid in reclamation of the Marshall Mine in addition to~~as well as the incurrence of an obligation for the Reclamation ~~Costs. The Company accounted for~~Costs (the "Marshall Mine ARO"). As of March 31, 2022 and December 31, 2021, the carrying value of the Marshall Mine ~~Purchase Agreement as an asset acquisition.~~ARO was $4.7 million and $6.3 million, respectively.

As the Marshall Mine ~~Purchase Agreement represents~~Acquisition represented a transaction with a customer of net assets acquired and liabilities assumed from ~~Cabot,~~Norit, the Company accounted for the excess of the fair value of liabilities assumed over assets acquired as upfront consideration transferred to a customer, ~~Cabot~~Norit (the "Upfront Customer Consideration"). The amount of the Upfront Customer Consideration was also recognized net of ~~an additional asset recognized in the Marshall Mine Acquisition, which was comprised of a receivable from Cabot (the "Cabot Receivable") for~~ the Reclamation Reimbursements. ~~The Cabot Receivable is further discussed in Note 4.~~

The total Upfront Customer Consideration is being amortized as a reduction to revenues on a straight-line basis over the expected 15-year contractual period of the Supply Agreement.

~~As part~~ Amortization of the Marshall Mine Purchase Agreement, the Company assumed liabilities, whose fair value exceeded the fair value of assets acquired. A summary of the net assets acquired and liabilities assumed and the additional assets recorded in the Marshall Mine Purchase Agreement as of September 30, 2020 are shown in the table below. The Company completed additional analysis of the assets acquired and liabilities assumed and recorded adjustments as of December 31, 2020 as shown in the table below.

(in thousands) As Originally Reported Adjustments As Adjusted
Assets acquired:
Receivables $ 0 $ 513 $ 513
Property, plant and equipment 3,863 0 3,863
Spare parts 100 0 100
Liabilities assumed:
Accounts payable and accrued expenses (673) 160 (513)
Asset retirement obligation (21,328) 0 (21,328)
Net assets acquired and liabilities assumed from Marshall Mine acquisition (18,038) 673 (17,365)
Cabot Receivable 9,749 0 9,749
Upfront Customer Consideration $ 8,289 $ (673) $ 7,616
Upfront Customer Consideration is approximately $0.5 million per year.

The Company also evaluated ~~the~~ Marshall Mine, ~~entity~~LLC as a potential variable interest entity ("VIE"), and determined that ~~Marshall Mine, LLC~~it was a VIE and the Company was its primary beneficiary. Therefore, the Company consolidates Marshall Mine, LLC's assets and liabilities in ~~the~~its consolidated financial statements.

The following tables summarize the assets and liabilities of Marshall Mine, LLC and their classification in the Company's Condensed Consolidated Balance Sheets:


	As of
(in thousands)	March 31, 2022		December 31, 2021		Balance sheet component

Cash	$	169	$	914	Current assets
Norit receivable, short-term	—		2,056		Current assets
Property and equipment, net	1,861		1,968		Non-current assets
Norit receivable, long-term	—		6,846		Non-current assets
Restricted cash	10,000		10,027		Non-current assets
Upfront customer consideration	6,855		6,982		Non-current assets

	$	18,885	$	28,793


Accounts payable and accrued liabilities	$	105	$	1,065	Current liabilities
Asset retirement obligation, short-term	29		1,775		Current liabilities
Asset retirement obligation, long-term	4,623		4,546		Non-current liabilities
	$	4,757	$	7,386

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4 - ~~Marshall Mine Asset Retirement Obligation~~Leases

The Company's operating and ~~Cabot Receivable~~

~~Asset Retirement Obligation~~

Asfinance lease right-of-use ("ROU") assets and liabilities as of September 30, 2020, the Company recorded an asset retirement obligation (the "Marshall Mine ARO") for the total Reclamation Costs of $21.3 million as measured at the expected future cash flows of $23.7 million, inclusive of contingency costs, discounted to their present value using a discount rate based on a credit-adjusted, risk-free rate of 7.0%. As of June 30, 2021March 31, 2022 and December 31, ~~2020, the carrying value~~2021 consisted of the ~~Marshall Mine ARO was $11.7~~following items (in thousands):


	As of
Leases	March 31, 2022		December 31, 2021
Operating Leases






Operating lease right-of-use assets, net of accumulated amortization (1)	$	8,754	$	6,000

Operating lease obligations, current	$	2,797	$	2,157
Long-term operating lease obligations	6,218		4,178
Total operating lease obligation	$	9,015	$	6,335

Finance Leases



Finance lease right-of-use assets, net of accumulated amortization (2)	$	1,602	$	1,743

Finance lease obligations, current	$	957	$	1,011
Long-term finance lease obligations	2,955		3,152
Total finance lease obligations	$	3,912	$	4,163

(1) Operating lease ROU assets are reported net of accumulated amortization of $2.3 million and ~~$18.1 million, respectively.~~

As of June 30, 2021, the Company revised its estimate of future obligations owed for the reclamation of Marshall Mine primarily based on scope reductions related to future reclamation requirements. As a result, the Company reduced the Marshall Mine ARO by $1.9 million as of ~~June 30,~~March 31, 2022 and December 31, 2021, respectively.

(2) Finance lease ROU assets are reported net of accumulated amortization of $1.3 million and ~~recorded a corresponding gain on change~~$1.1 million as of March 31, 2022 and December 31, 2021, respectively.

Finance leases

ROU assets under finance leases are included in ~~estimate for~~ the ~~three~~"Property, plant and ~~six months ended June 30,~~equipment" line item in the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021. ~~This is~~Interest expense related to finance lease obligations and amortization of ROU assets under finance leases are included ~~as "Gain on change~~ in ~~estimate, asset retirement obligation"~~the "Interest expense" and "Depreciation, amortization, depletion and accretion" line items, respectively, in the Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021.

~~Cabot Receivable~~Operating leases

As of September 30, 2020, the Company recorded the Cabot Receivable at its estimated fair value of $9.7 million, reflecting a discount rate of approximately 1.5% or $0.5 million. There were no significant related fees or costs associated with the Cabot Receivable. The Company did not elect the fair value option in its initial or subsequent accounting for the Cabot Receivable.

~~The Cabot Receivable requires Cabot to pay the Reclamation Reimbursements to the Company~~ROU assets under operating leases and operating lease liabilities are included in the ~~amount of $10.2 million inclusive of interest based on a mutually agreed-upon payment schedule through 2033. Interest is accreted on the Cabot Receivable~~"Other long-term assets" and ~~recognized as interest income. An allowance for the Cabot Receivable asset is assessed periodically,~~"Other current liabilities" and ~~0 allowance was deemed necessary as of June 30, 2021 and December 31, 2020.~~

~~Surety Bond~~

As the owner of the Marshall Mine, the Company is required to post a surety bond to ensure performance of its reclamation activities. On September 30, 2020, the Company and a third party entered into a surety bond indemnification agreement (the "Surety Agreement") pursuant to which the Company secured and posted a $30.0 million surety bond (the "Bond") with the local regulatory agency. On June 7, 2021, the third party agreed to reduce the Surety Bond amount to $16.6 million. The Bond will remain in place until the Marshall Mine is fully reclaimed, and may be further reduced in amount from time to time as the Company progresses with its reclamation activities. As of June 30, 2021, the Company was required to post collateral of $10.0 million for the obligations due under the Reclamation Contract, which is recorded as"Other long-term ~~restricted cash on the Condensed Consolidated Balance Sheet.~~

~~Note 5 - COVID-19~~

In March 2020, the federal government passed the Coronavirus Aid, Relief, and Security Act (the "CARES Act"), which provided among other things the creation of the Paycheck Protection Plan ("PPP"), which is sponsored and administered by the U.S. Small Business Administration ("SBA"). On April 20, 2020, the Company executed a loan agreement (the "PPP Loan") under the PPP, evidenced by a promissory note, with BOK, NA dba Bank of Oklahoma ("BOK"), providing for $3.3 million in proceeds, which was funded to the Company on April 21, 2020. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 (the "PPPFA") was signed into law and established the payment dates in the event that amounts borrowed under the PPP are not forgiven. The PPP Loan matures April 21, 2022, but may be forgiven subject to the terms of the PPP and approval by the SBA. The Company recorded the PPP Loan as a debt obligation and accrues interest over the term of the PPP Loan.

The interest rate on the PPP Loan is 1.00%. The PPP Loan is unsecured and contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or BOK, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company.

Under the PPPFA, monthly payments of principal and interest commence on the later of 10 months following the "covered period" (as defined in the PPPFA) or the date that BOK notifies the Company that the SBA has notified BOK that all or a portion of the PPP Loan has not been forgiven. In January 2021, the Company submitted its application to the SBA for forgiveness of the PPP Loan. As of June 30, 2021, the PPP Loan principal and accrued interest are classified as currentliabilities" line items, respectively, in the Condensed Consolidated Balance ~~Sheets.~~Sheets as of March 31, 2022 and December 31, 2021.

~~On July 27, 2021,~~Lease expense for operating leases for the ~~Company received formal notification~~three months ended March 31, 2022 was $1.1 million, of which $1.0 million is included in the ~~form~~"Consumables - cost of ~~a letter dated July 19, 2021 from BOK that~~revenue, exclusive of depreciation and amortization" line item and $0.1 million is included in the ~~SBA approved~~"General and administrative" line item in the ~~Company’s PPP Loan forgiveness application~~Condensed Consolidated Statements of Operations. Lease expense for operating leases for the ~~Company’s Loan~~three months ended March 31, 2021 was $1.0 million, of which $0.9 million is included in the ~~amount~~"Consumables - cost of ~~$3.3~~revenue, exclusive of depreciation and amortization" line item and $0.1 million ~~(including accrued interest). The Company will account for the debt forgiveness during its fiscal third quarter of 2021~~is included in "General and ~~will recognize a gain on extinguishment of debt~~administrative" line item in the ~~amount of $3.3 million in the~~Condensed Consolidated Statements of Operations.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The CARES Act also provided~~Lease financial information as of and for the ~~deferral of payroll tax payments for all payroll~~three months ended March 31, 2022 and 2021 is provided in the following table:


	Three Months Ended March 31,
(in thousands)	2022			2021
Finance lease cost:
Amortization of right-of-use assets	$	141		$	174
Interest on lease liabilities	78			79

Operating lease cost	806			459
Short-term lease cost	243			567
Variable lease cost (1)	9			9

Total lease cost	$	1,277		$	1,288

Other Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases	$	78		$	79
Operating cash flows for operating leases	$	738		$	575
Financing cash flows for finance leases	$	226		$	315

Right-of-use assets obtained in exchange for new operating lease liabilities	$	3,418		$	2,679
Weighted-average remaining lease term - finance leases	2.7 years			3.3 years
Weighted-average remaining lease term - operating leases	4.4 years			1.6 years
Weighted-average discount rate - finance leases	6.29		%	6.18		%
Weighted-average discount rate - operating leases	5.99		%	8.46		%

(1) Primarily includes common area maintenance, property taxes ~~incurred through December 31, 2020. The Company elected~~and insurance payable to defer payments of payroll taxes for the periods allowed under the CARES Act and will repay 50% by December 31, 2021 and 50% by December 31, 2022. As of June 30, 2021, the Company has deferred $0.4 million of payroll tax payments under the CARES Act.lessors.

Note 65 - ~~Equity Method Investments~~Revenues

~~Tinuum Group, LLC~~

~~As of June 30, 2021 and December 31, 2020, the Company's ownership interest~~Trade receivables represent an unconditional right to consideration in ~~Tinuum Group was 42.5%. Tinuum Group supplies technology equipment and technical~~exchange for goods or services ~~at select coal-fired generators, but its primary purpose is~~transferred to ~~put into operation facilities that produce and sell RC that lower emissions and also qualify for Section 45 tax credits.~~a customer. The Company ~~concluded~~invoices its customers in accordance with the terms of the contract. Credit terms are generally net 30 from the date of invoice. The timing between the satisfaction of performance obligations and when payment is due from the customer is generally not significant. The Company records allowances for doubtful trade receivables when it is probable that ~~Tinuum Group was a VIE, but~~ the ~~Company does~~balances will not have the power to direct the activities that most significantly impact Tinuum Group's economic performance, as the voting partners of Tinuum Group have identical voting rights, equity control interests and board control interests, and therefore power is shared. Accordingly, the Company has accounted for its investment in Tinuum Group under the equity method of accounting since inception.be collected.

Receivables, net

The following table ~~summarizes~~shows the ~~results~~components of ~~operations~~the Company's Receivables, net:


	As of
(in thousands)	March 31, 2022		December 31, 2021


Trade receivables, net	$	12,987	$	10,476
Other receivables	21		—
Norit Receivable - current	—		2,146
Total Receivable, net	$	13,008	$	12,622

Disaggregation of ~~Tinuum Group:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Gross profit $ 8,820 $ 6,868 $ 11,495 $ 11,878
Operating, selling, general and administrative expenses 12,429 11,919 26,231 24,695
Loss from operations (3,609) (5,051) (14,736) (12,817)
Other income (expenses), net 3,150 2,144 4,003 5,787
Loss attributable to noncontrolling interest 29,038 18,823 64,616 38,094
Net income available to members $ 28,579 $ 15,916 $ 53,883 $ 31,064
ADES equity earnings from Tinuum Group $ 19,125 $ 6,764 $ 35,487 $ 13,202
Revenue

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~the Company~~all performance obligations related to revenues recognized ~~earnings from Tinuum Group's net income available to members that~~ were different from its pro-rata share of Tinuum Group's net income available to members, as cash distributions for the three and six months ended June 30, 2021 exceeded the carrying value of the Tinuum Group equity investment. For 2021, the Company expects to recognize such excess contributions as equity method earningssatisfied at a point in ~~the period the distributions occur, limited to the carrying value of the Tinuum Group equity investment.~~time. For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2022 and 2021, approximately 11% and 19%, respectively, of Consumables revenue was generated in Canada, and all other revenues were generated in the ~~Company recognized its pro-rata share of Tinuum Group's net income available to its members for the respective period.~~U.S.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables present the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, if any, for the three and six months ended June 30, 2021 and 2020 (~~in thousands~~):

Description Date(s) Investment balance ADES equity earnings Cash distributions Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance 12/31/2020 $ 3,387 $ 0 $ 0 $ 0
ADES proportionate share of income from Tinuum Group First Quarter 10,755 10,755 0 0
Cash distributions from Tinuum Group First Quarter (19,749) 0 19,749 0
Adjustment for current year cash distributions in excess of investment balance First Quarter 5,607 5,607 0 (5,607)
Total investment balance, equity earnings and cash distributions 3/31/2021 0 $ 16,362 $ 19,749 (5,607)
ADES proportionate share of income from Tinuum Group Second Quarter 12,146 $ 12,146 $ 0 0
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions) Second Quarter (5,607) (5,607) 0 5,607
Cash distributions from Tinuum Group Second Quarter (19,125) 0 19,125 0
Adjustment for current year cash distributions in excess of investment balance Second Quarter 12,586 12,586 0 (12,586)
Total investment balance, equity earnings and cash distributions 6/30/2021 $ 0 $ 19,125 $ 19,125 $ (12,586)

Description Date(s) Investment balance ADES equity earnings Cash distributions
Beginning balance 12/31/2019 $ 32,280 $ 0 $ 0
ADES proportionate share of income from Tinuum Group First Quarter 6,438 6,438 0
Cash distributions from Tinuum Group First Quarter (13,764) 0 13,764
Total investment balance, equity earnings and cash distributions 3/31/2020 24,954 $ 6,438 $ 13,764
ADES proportionate share of income from Tinuum Group Second Quarter 6,764 $ 6,764 $ 0
Cash distributions from Tinuum Group Second Quarter (13,600) 0 13,600
Total investment balance, equity earnings and cash distributions 6/30/2020 $ 18,118 $ 6,764 $ 13,600

~~Tinuum Services, LLC~~

The Company has a 50% voting and economic interest in Tinuum Services as of June 30, 2021 and December 31, 2020. The Company determined that Tinuum Services was not a VIE and further evaluated it for consolidation under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Tinuum Services under the equity method of accounting since inception. As of June 30, 2021 and December 31, 2020, the Company’s investment in Tinuum Services was $3.5 million and $4.2 million, respectively.

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Note 6 - Inventories, net

The following table summarizes the ~~results~~Company's inventories recorded at the lower of ~~operations~~average cost or net realizable value as of ~~Tinuum Services:~~March 31, 2022 and December 31, 2021:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Gross loss $ (22,641) $ (20,418) $ (41,163) $ (42,677)
Operating, selling, general and administrative expenses 47,355 43,515 101,722 89,268
Loss from operations (69,996) (63,933) (142,885) (131,945)
Other income (expenses), net 32 (330) (394) (615)
Loss attributable to noncontrolling interest 74,587 67,071 151,802 139,043
Net income $ 4,623 $ 2,808 $ 8,523 $ 6,483
ADES equity earnings from Tinuum Services $ 2,312 $ 1,404 $ 4,262 $ 3,242


	As of
(in thousands)	March 31, 2022		December 31, 2021
Product inventory, net	$	5,706	$	4,901
Raw material inventory	4,574		2,949

	$	10,280	$	7,850

Included in the Consolidated Statements of Operations of Tinuum Services for the three and six months ended June 30, 2021 and 2020 were losses attributable to noncontrolling interests of Tinuum Services' VIE entities, which were eliminated in the calculations of Tinuum Services' net income attributable to the Company's interest.

The following table details the carrying value of the Company's respective equity method investments included in the Equity method investments line item on the Condensed Consolidated Balance Sheets and indicates the Company's maximum exposure to loss:

As of
(in thousands) June 30,
2021 December 31,
2020
Equity method investment in Tinuum Group $ 0 $ 3,387
Equity method investment in Tinuum Services 3,501 4,242
Equity method investment in other 63 63
Total equity method investments $ 3,564 $ 7,692

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The following table details the components of the Company's respective equity method investments included in the Earnings from equity method investments line item on the Condensed Consolidated Statements of Operations:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Earnings from Tinuum Group $ 19,125 $ 6,764 $ 35,487 $ 13,202
Earnings from Tinuum Services 2,312 1,404 4,262 3,242
Earnings (loss) from other 0 0 0 (3)
Earnings from equity method investments $ 21,437 $ 8,168 $ 39,749 $ 16,441

The following table details the components of the cash distributions from the Company's respective equity method investments included as a component of cash flows from operating activities and investing activities in the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported in the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" within Operating cash flows until such time as the carrying value in an equity method investee company is reduced to zero. Thereafter, such distributions are reported as "distributions in excess of cumulative earnings" as a component of cash flows from investing activities.

Six Months Ended June 30,
(in thousands) 2021 2020
Distributions from equity method investees, return on investment
Tinuum Group $ 14,142 $ 27,364
Tinuum Services 5,002 5,152
$ 19,144 $ 32,516
Distributions from equity method investees in excess of investment basis
Tinuum Group $ 24,732 $ 0
$ 24,732 $ 0

Note 7 ~~- Inventories, net~~

~~The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value as of June 30, 2021 and December 31, 2020:~~

As of
(in thousands) June 30, 2021 December 31, 2020
Product inventory, net $ 6,639 $ 8,361
Raw material inventory 1,522 1,521
$ 8,161 $ 9,882

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note 8 - Debt Obligations~~

As of
(in thousands) June 30, 2021 December 31, 2020
Finance lease obligations $ 4,738 $ 5,526
PPP Loan 3,305 3,305
Senior Term Loan due December 2021, related party 0 16,000
Less: net unamortized debt issuance costs 0 (465)
Less: net unamortized debt discount 0 (480)
Senior Term Loan due December 2021, net 0 15,055
8,043 23,886
Less: Current maturities (4,373) (18,441)
Total long-term debt $ 3,670 $ 5,445

~~Senior Term Loan~~

On December 7, 2018, the Company, and ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, and certain other subsidiaries of the Company as guarantors, The Bank of New York Mellon as administrative agent, and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo"), affiliates of a beneficial owner of greater than 5 percent of the Company's common stock and a related party, entered into the Term Loan and Security Agreement (the "Senior Term Loan") in the amount of $70.0 million less original issue discount of $2.1 million. Proceeds from the Senior Term Loan were used to fund the acquisition of Carbon Solutions. The Company also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan bore interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which was adjusted quarterly to the current 3-month LIBOR rate, and interest was payable quarterly in arrears. The Senior Term Loan was secured by substantially all the assets of the Company, including the cash flows from Tinuum Group and Tinuum Services (collectively, the "Tinuum Entities"), but excluding the Company's equity interests in the Tinuum entities.

On June 1, 2021 and prior to the Senior Term Loan's maturity date, the Company paid-off in its entirety the Senior Term Loan and all remaining accrued interest through this date in the amount of $6.1 million. The Company did 0t incur any prepayment fees associated with the early pay-off.

~~Line of Credit~~

In September 2013, ADA, as borrower, and the Company, as guarantor, entered into a line credit (the "Line of Credit") with a bank (the "Lender") for an aggregate borrowing amount of $10.0 million, which was secured by certain amounts due to the Company from certain Tinuum Group RC leases. The Line of Credit has been amended 15 times from the period from December 2, 2013 through June 30, 2021 and included a reduction in the borrowing amount to $5.0 million in September 2018.

On March 23, 2021, ADA, the Company and the Lender entered into an amendment to the Line of Credit (the "Fifteenth Amendment"), which extended the maturity date of the Line of Credit to December 31, 2021 and increased the minimum cash requirement from $5.0 million to $6.0 million.

~~As of June 30, 2021 and December 31, 2020, there were 0 outstanding borrowings under the Line of Credit.~~

On July 29, 2021, the Company and the Lender entered into the Sixteenth Amendment (the "Sixteenth Amendment") to the Line of Credit. The Sixteenth Amendment amends certain terms and conditions related to collateral securing the Line of Credit.

~~Note 9 - Leases~~

As of June 30, 2021 and December 31, 2020, the Company had obligations under finance leases of $4.7 million and $5.5 million, respectively, and obligations under operating leases of $5.0 million and $3.0 million, respectively. As of June 30, 2021 and December 31, 2020, the Company had right of use ("ROU") assets, net of accumulated amortization, under finance leases of $2.0 million and $2.4 million, respectively, and ROU assets, net of accumulated amortization, under operating leases of $4.4 million and $1.9 million, respectively.

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Finance leases~~

ROU assets under finance leases and finance lease liabilities are included in Property, plant and equipment and Current portion and Long-term portion of borrowings, respectively, in the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020. Interest expense related to finance lease liabilities and amortization of ROU assets under finance leases are included in Interest expense and Depreciation, amortization, depletion and accretion, respectively, in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and June 30, 2020.

~~Operating leases~~

ROU assets under operating leases and operating lease liabilities are included in Other long-term assets and Other current liabilities and Other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020.

Lease expense for operating leases for the three and six months ended June 30, 2021 was $0.9 million and $1.9 million, respectively, of which $0.8 million and $1.7 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.1 million and $0.2 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations. Lease expense for operating leases for the three and six months ended June 30, 2020 was $1.1 million and $2.4 million, respectively, of which $1.0 million and $2.0 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million and $0.4 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations.

~~Lease financial information as of and for the three and six months ended June 30, 2021 and 2020 is provided in the following table:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Finance lease cost:
Amortization of right-of-use assets $ 174 $ 465 $ 348 $ 979
Interest on lease liabilities 70 93 149 187
Operating lease cost 453 676 912 1,529
Short-term lease cost 406 424 973 706
Variable lease cost (1) 12 44 21 137
Total lease cost $ 1,115 $ 1,702 $ 2,403 $ 3,538
Other Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases $ 149 $ 187
Operating cash flows from operating leases $ 1,314 $ 1,213
Financing cash flows from finance leases $ 818 $ 676
Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,362 $ 60
Weighted-average remaining lease term - finance leases 3.3 years 3.8 years
Weighted-average remaining lease term - operating leases 2.9 years 2.1 years
Weighted-average discount rate - finance leases 6.4 % 6.1 %
Weighted-average discount rate - operating leases 7.8 % 8.5 %

~~(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.~~

~~Note 10 - Revenues~~

Trade receivables represent an unconditional right to consideration in exchange for goods or services transferred to a customer. The Company invoices its customers in accordance with the terms of the contract. Credit terms are generally net 30 from the date of invoice. The timing between the satisfaction of performance obligations and when payment is due from the customer is

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~generally not significant. The Company records allowances for doubtful trade receivables when it is probable that the balances will not be collected.~~

~~Trade receivables, net~~

~~The following table shows the components of the Company's Trade receivables, net:~~

As of
(in thousands) June 30, 2021 December 31, 2020
Trade receivables $ 9,983 $ 12,241
Less: Allowance for doubtful accounts (39) (37)
Trade receivables, net $ 9,944 $ 12,204

~~Cabot Receivable~~

~~The following table shows the components of the Cabot Receivable:~~

As of
(in thousands) June 30, 2021 December 31, 2020
Receivables, net $ 1,616 $ 921
Other long-term assets, net 7,952 8,852
Total Cabot Receivable $ 9,568 $ 9,773

~~Disaggregation of Revenue and Earnings from Equity Method Investments~~

For the three and six months ended June 30, 2021 and 2020, all performance obligations related to revenues recognized were satisfied at a point in time. The Company disaggregates its revenues by major components as well as between its 2 reportable segments, which are further discussed in Note 17 to the Condensed Consolidated Financial Statements. The following tables disaggregate revenues by major component for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Segment Segment
APT RC Total APT RC Total
Revenue component
Consumables $ 15,976 $ 0 $ 15,976 $ 33,007 $ 0 $ 33,007
License royalties, related party 0 3,657 3,657 0 7,723 7,723
Revenues from customers 15,976 3,657 19,633 33,007 7,723 40,730
Earnings from equity method investments 0 21,437 21,437 0 39,749 39,749
Total revenues from customers and earnings from equity method investments $ 15,976 $ 25,094 $ 41,070 $ 33,007 $ 47,472 $ 80,479

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
Segment Segment
APT RC Total APT RC Total
Revenue component
Consumables $ 8,170 $ 0 $ 8,170 $ 17,387 $ 0 $ 17,387
License royalties, related party 0 3,313 3,313 0 6,359 6,359
Revenues from customers 8,170 3,313 11,483 17,387 6,359 23,746
Earnings from equity method investments 0 8,168 8,168 0 16,441 16,441
Total revenues from customers and earnings from equity method investments $ 8,170 $ 11,481 $ 19,651 $ 17,387 $ 22,800 $ 40,187

~~Note 11~~ - Commitments and Contingencies

Legal Proceedings

The Company is from time to time subject to ~~and is presently involved in,~~ various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and outcomes, the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements, and judgments where management has assessed that a loss is probable and an amount can be reasonably estimated. There were no significant legal proceedings as of ~~June 30, 2021.~~March 31, 2022.

Surety Bonds and Restricted Cash

As the owner of ~~June 30, 2021~~the Marshall Mine, the Company is required to post surety bonds to ensure performance of its reclamation activities under the Reclamation Contract. As of March 31, 2022 and December 31, ~~2020,~~2021, the Company had ~~short-term~~posted a $16.6 million surety bond, which will remain in place until the Marshall Mine is fully reclaimed, and may be further reduced in amount from time to time as the Company progresses with its reclamation activities. The Company is also required to post collateral of $10.0 million for the surety bonds insuring the performance requirements for the reclamation of Marshall Mine. As of March 31, 2022 and December 31, 2021, the restricted cash ~~of $6.0 million and $5.0 million, respectively,~~is reported as ~~required under a minimum cash balance requirement of a Line of Credit covenant, and~~ long-term restricted cash on the Condensed Consolidated Balance Sheets.

As of ~~$10.0~~March 31, 2022 and December 31, 2021, the Company had an outstanding surety bond of $7.5 million ~~and $5.0 million, respectively, as required~~ related to performance requirements under reclamation contracts associated with the ~~Surety Agreement.~~Five Forks Mine.

Other Commitments and Contingencies

The Company has certain limited obligations contingent upon future events in connection with the activities of Tinuum Group. The Company, NexGen Refined Coal, LLC ("NexGen") and 2 entities affiliated with NexGen have provided an affiliate of the Goldman Sachs Group, Inc. with limited guaranties (the "Tinuum Group Party Guaranties") related to certain losses it may suffer as a result of inaccuracies or breach of representations and covenants. The Company also is a party to a contribution agreement with NexGen under which any party called upon to pay on a Tinuum Group Party Guaranty is entitled to receive contributions from the other party equal to 50% of the amount paid. The Company has 0tnot recorded a liability or expense provision related to this contingent obligation as it believes that it is not probable that a loss will occur with respect to the Tinuum Group Party Guaranties.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 8 - Supplemental Financial Information

Supplemental Balance Sheet Information

The following table summarizes the components of Prepaid expenses and other assets and Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:


	As of
(in thousands)	March 31, 2022		December 31, 2021
Prepaid expenses and other assets:

Prepaid expenses	$	3,102	$	2,571
Prepaid income taxes and income tax refunds	2,899		2,782
Other	1,386		1,308


	$	7,387	$	6,661
Other long-term assets, net:
Right of use assets, operating leases, net	$	8,754	$	6,000
Upfront Customer Consideration	6,855		6,982
Mine development costs, net	5,340		5,330
Spare parts, net	4,243		4,598
Mine reclamation asset, net	1,717		1,742
Highview Investment	552		552
Other	1,452		1,193
Norit Receivable	—		6,846
	$	28,913	$	33,243

Spare parts include critical spares required to support plant operations. Parts and supply costs are determined using the lower of cost or estimated replacement cost. Parts are recorded as maintenance expenses in the period in which they are consumed or are capitalized if applicable.

Mine development costs include acquisition costs, the cost of other development work and mitigation costs related to the Five Forks Mine and are depleted over the estimated life of the related mine reserves. The Company performs an evaluation of the recoverability of the carrying value of mine development costs to determine if facts and circumstances indicate that their carrying value may be impaired and if any adjustment is warranted. There were no indicators of impairment as of March 31, 2022. Mine reclamation asset, net represents an asset retirement obligation ("ARO") asset related to the Five Forks Mine and is depreciated over the estimated life of the Five Forks Mine.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:


	As of
(in thousands)	March 31, 2022		December 31, 2021
Other current liabilities:
Current portion of operating lease obligations	$	2,797	$	2,157

Current portion of mine reclamation liability	29		1,775
Income and other taxes payable	888		807
Deferred revenue	268		—



Other	570		385

	$	4,552	$	5,124
Other long-term liabilities:
Mine reclamation liabilities	$	8,317	$	8,184
Operating lease obligations, long-term	6,218		4,178

Deferred revenue, long-term	935		—


	$	15,470	$	12,362

The Mine reclamation liability related to the Five Forks Mine is included in Other long-term liabilities. The Mine reclamation liability related to Marshall Mine is included in Other current liabilities and Other long-term liabilities. The Mine reclamation liabilities represent AROs and activity for the three months ended March 31, 2022 and year ended December 31, 2021 was as follows:


	As of
(in thousands)	March 31, 2022		December 31, 2021
Asset retirement obligations, beginning of period	$	9,959	$	21,447

Accretion	157		1,102
Liabilities settled	(1,770)		(10,010)
Changes due to scope and timing of reclamation (1)	—		(2,580)

Asset retirement obligations, end of period	8,346		9,959
Less current portion	29		1,775
Asset retirement obligations, long-term	$	8,317	$	8,184

(1) As of June 30, 2021 and December 31, 2021, the Company revised its estimate of future obligations owed for the reclamation of the Marshall Mine primarily based on scope reductions related to future reclamation requirements. As a result, the Company reduced the Marshall Mine ARO by $2.7 million and recorded a corresponding gain on change in estimate of $2.7 million for the year ended December 31, 2021.

Note 129 - Equity Method Investments

Tinuum Group, LLC

As of March 31, 2022 and December 31, 2021, the Company's ownership interest in Tinuum Group was 42.5%. Tinuum Group supplied technology equipment and technical services at select coal-fired generators, but its primary purpose was to put into operation facilities that produce and sell RC that lowers emissions and also qualifies for Section 45 tax credits. The Company concluded that Tinuum Group was a VIE, but the Company does not have the power to direct the activities that most significantly impact Tinuum Group's economic performance, as the voting partners of Tinuum Group have identical voting rights, equity control interests and board control interests, and therefore power is shared. Accordingly, the Company has accounted for its investment in Tinuum Group under the equity method of accounting since inception.

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes the results of operations of Tinuum Group:


	Three Months Ended March 31,
(in thousands)	2022		2021
Gross profit	$	964	$	2,675
Operating, selling, general and administrative expenses	3,197		13,802
Loss from operations	(2,233)		(11,127)
Other income (expenses), net	501		853

(Income) loss attributable to noncontrolling interest	(294)		35,578
Net (loss) income available to members	$	(2,026)	$	25,304
ADES equity earnings from Tinuum Group	$	1,012	$	16,362

For the three months ended March 31, 2022 and 2021, the Company recognized earnings from Tinuum Group's net (loss)/income available to members that were different from its pro-rata share of Tinuum Group's net (loss)/income available to members for those periods, as cash distributions for the three months ended March 31, 2022 and 2021 exceeded the carrying value of the Tinuum Group equity investment.

The following tables present the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, if any, for the three months ended March 31, 2022 and 2021 (in thousands):


Description	Date(s)	Investment balance		ADES equity earnings		Cash distributions		Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance	12/31/2021	$	—	$	—	$	—	$	(21,779)

ADES proportionate share of loss from Tinuum Group	First Quarter	(861)		(861)		—		—
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)	First Quarter	(21,779)		(21,779)		—		21,779
Cash distributions from Tinuum Group	First Quarter	(1,012)		—		1,012		—
Adjustment for current year cash distributions in excess of investment balance	First Quarter	23,652		23,652		—		(23,652)
Total investment balance, equity earnings and cash distributions	3/31/2022	$	—	$	1,012	$	1,012	$	(23,652)


Description	Date(s)	Investment balance		ADES equity earnings		Cash distributions		Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance	12/31/2020	$	3,387	$	—	$	—	$	—

ADES proportionate share of income from Tinuum Group	First Quarter	10,755		10,755		—		—

Cash distributions from Tinuum Group	First Quarter	(19,749)		—		19,749		—
Adjustment for current year cash distributions in excess of investment balance	First Quarter	5,607		5,607		—		(5,607)
Total investment balance, equity earnings and cash distributions	3/31/2021	$	—	$	16,362	$	19,749	$	(5,607)

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Tinuum Services, LLC

The Company has a 50% voting and economic interest in Tinuum Services as of March 31, 2022 and December 31, 2021. The Company determined that Tinuum Services was not a VIE and further evaluated it for consolidation under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Tinuum Services under the equity method of accounting since inception. As of March 31, 2022 and December 31, 2021, the Company’s investment in Tinuum Services was $0.7 million and $2.4 million, respectively.

The following table summarizes the results of operations of Tinuum Services:


	Three Months Ended March 31,
(in thousands)	2022		2021
Gross profit (loss)	$	968	$	(18,522)
Operating, selling, general and administrative expenses	2,545		54,366
Loss from operations	(1,577)		(72,888)
Other income (expenses), net	894		(427)
Loss attributable to noncontrolling interest	323		77,215
Net (loss) income	$	(360)	$	3,900
ADES equity (loss) earnings from Tinuum Services	$	(180)	$	1,950

Included in the Consolidated Statements of Operations of Tinuum Services for the three months ended March 31, 2022 and 2021 were losses/earnings attributable to noncontrolling interests of Tinuum Services' VIE entities, which were eliminated in the calculations of Tinuum Services' net income attributable to the Company's interest.


	As of
(in thousands)	March 31, 2022		December 31, 2021
Equity method investment in Tinuum Services	$	711	$	2,391
Equity method investment in Tinuum Group	—		—



Total equity method investments	$	711	$	2,391

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table details the components of the Company's respective equity method investments included in the "Earnings from equity method investments" line item on the Condensed Consolidated Statements of Operations:


	Three Months Ended March 31,
(in thousands)	2022		2021
Earnings from Tinuum Group	$	1,012	$	16,362
(Loss) earnings from Tinuum Services	(180)		1,950
Earnings from other	1		—


Earnings from equity method investments	$	833	$	18,312

The following table details the components of the cash distributions from the Company's respective equity method investments included as a component of cash flows from operating activities and investing activities in the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported in the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" as a component of cash flows from operations until such time as the carrying value in an equity method investee company is reduced to zero. Thereafter, such distributions are reported as "Distributions from equity method investees in excess of cumulative earnings" as a component of cash flows from investing activities.


	Three Months Ended March 31,
(in thousands)	2022		2021
Distributions from equity method investees, return on investment
Tinuum Services	$	1,501	$	3,502
Tinuum Group	—		14,142



	$	1,501	$	17,644
Distributions from equity method investees in excess of investment basis
Tinuum Group	$	1,012	$	5,607

Other	1		—


	$	1,013	$	5,607

Note 10 - Stockholders' Equity

Stock Repurchase Programs

In November 2018, the Company's Board of Directors (the "Board") authorized the Company to purchase up to $20.0 million of its outstanding common stock under a stock repurchase program (the "Stock Repurchase Program"), which was to remain in effect until December 31, 2019 unless otherwise modified by the Board. ~~As of November 2019, $2.9 million remained outstanding related to the Stock Repurchase Program.~~ In November 2019, the Board authorized an incremental $7.1 million to the Stock Repurchase Program and provided that it will remain in effect until all amounts are utilized or it is otherwise modified by the Board.

Under the Stock Repurchase Program, for the three and six months ended June 30, 2021, the Company did 0t repurchase any shares. For the three and six months ended June 30, 2020, the Company purchased 0 and 20,613 shares, respectively, of its common stock for cash of 0 and $0.2 million, respectively, inclusive of commissions and fees. As of ~~June 30, 2021,~~March 31, 2022, the Company had $7.0 million remaining under the Stock Repurchase Program.

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Quarterly Cash Dividend~~

~~Dividends declared and paid quarterly on all outstanding shares of common stock during the three and six months ended June 30, 2021 and 2020 were as follows:~~

2021 2020
Per share Date paid Per share Date paid
Dividends declared during quarter ended:
March 31 $ 0 N/A $ 0.25 March 10, 2020
June 30 $ 0 N/A $ 0 N/A
$ 0 $ 0.25

A portion of the dividends declared remains accrued subsequent to the payment dates and represents dividends accumulated on nonvested shares of common stock held by employees and directors of the Company that contain forfeitable dividend rights that are not payable until the underlying shares of common stock vest. These amounts are included in both Other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020.

Tax Asset Protection Plan

U.S. federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and ~~other~~ tax ~~assets~~credits if the Company experiences an "ownership change" (as defined in the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in the ownership of the Company by "5 percent stockholders" that exceeds 50 percentage points over a rolling three-year period.

On May 5, 2017, the Board approved the declaration of a dividend of rights to purchase Series B Junior Participating Preferred Stock for each outstanding share of common stock as part of a tax asset protection plan (the "TAPP") designed to protect the Company’s ability to utilize its net operating losses and tax credits. The TAPP is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of the Company’s outstanding common stock.

On ~~April 9, 2021,~~March 15, 2022, the Board approved the ~~Fourth~~Fifth Amendment to the TAPP ~~("Fourth~~(the "Fifth Amendment") that amends the TAPP, as previously amended by the First, Second, Third and ~~Third~~Fourth Amendments that were approved the Board on April 6, 2018, April 5, 2019, April 9, 2020 and April 9, ~~2020,~~2021, respectively. The ~~Fourth~~Fifth Amendment amends the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith. AtPursuant to the ~~Company's 2021 annual meeting of stockholders, the Company's stockholders approved the Fourth Amendment, thus the Final Expiration Date will be the close of business on December 31, 2022.~~

~~Note 13 - Stock-Based Compensation~~

The Company grants equity-based awards to employees, non-employee directors, and consultants that may include, but are not limited to, RSA's, restricted stock units ("RSU's"), performance stock units ("PSU's") and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included within the Cost of revenue and Payroll and benefits line items, respectively, in the Condensed Consolidated Statements of Operations. Stock-based compensation expense related to non-employee directors and consultants is included within the General and administrative line item in the Condensed Consolidated Statements of Operations.

~~Total stock-based compensation expense for the three and six months ended June 30, 2021 and 2020 was as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
RSA expense $ 511 $ 975 $ 918 $ 1,481
PSU expense 55 163 69 163
Total stock-based compensation expense $ 566 $ 1,138 $ 987 $ 1,644

1816

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The amount~~Fifth Amendment, the Final Expiration Date shall be the close of ~~unrecognized compensation cost as of June 30, 2021, and the expected weighted-average period over which the cost will be recognized is as follows:~~

As of June 30, 2021
(in thousands) Unrecognized Compensation Cost Expected Weighted-
Average Period of
Recognition (in years)
RSA expense $ 2,736 2.31
PSU expense 490 2.24
Total unrecognized stock-based compensation expense $ 3,226 2.30

~~Restricted Stock~~

~~Restricted stock is typically granted with vesting terms of three years. The fair value of RSA's and RSU's is determined based~~business on the ~~closing price~~earlier of (i) December 31, 2023 or (ii) December 31, 2022 if stockholder approval of the ~~Company’s common stock on the authorization date of the grant multiplied by the number of shares subject~~Fifth Amendment has not been obtained prior to ~~the stock award. Compensation expense for RSA's is generally recognized on a straight-line basis over the entire vesting period.~~

~~A summary of RSA activity under the Company's various stock compensation plans for the six months ended June 30, 2021 is presented below:~~

Restricted Stock Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2021 373,860 $ 7.25
Granted 387,632 $ 5.28
Vested (183,700) $ 7.45
Forfeited (31,623) $ 5.75
Non-vested at June 30, 2021 546,169 $ 5.88

~~Performance Share Units~~

Compensation expense is recognized for PSU awards on a straight-line basis over the applicable service period, which is generally three years, based on the estimated fair value at the date of grant using a Monte Carlo simulation model. A summary of PSU activity for the six months ended June 30, 2021 is presented below:

Units Weighted-Average
Grant Date
Fair Value Aggregate Intrinsic Value (in thousands) Weighted-Average
Remaining
Contractual
Term (in years)
PSU's outstanding, January 1, 2021 50,127 $ 6.17
Granted 62,448 7.09
Vested / Settled 0 0
Forfeited / Canceled 0 0
PSU's outstanding, June 30, 2021 112,575 $ 6.68 $ 834 2.24

such date.

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Note 1411 - ~~Supplemental Financial Information~~

~~Supplemental Balance Sheet Information~~Stock-Based Compensation

The ~~following table summarizes~~Company grants equity-based awards to employees, non-employee directors and consultants that may include, but are not limited to, RSA's, PSU's, restricted stock units and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included within the ~~components~~"Cost of ~~Prepaid expenses~~revenue" and ~~other assets~~"Payroll and ~~Other long-term assets, net as presented~~benefits" line items, respectively, in the Condensed Consolidated ~~Balance Sheets:~~

As of
(in thousands) June 30,
2021 December 31,
2020
Prepaid expenses and other assets:
Prepaid expenses $ 2,278 $ 1,690
Prepaid income taxes and income tax refunds 1,723 1,605
Other 1,319 1,302
$ 5,320 $ 4,597
Other long-term assets, net:
Cabot Receivable (1) $ 7,952 $ 8,852
Upfront Customer Consideration (1) 7,236 7,490
Mine development costs, net 4,837 4,338
Right of use assets, operating leases, net 4,380 1,930
Spare parts, net 4,173 3,727
Mine reclamation asset, net 1,666 1,712
Highview Investment 552 552
Other 1,481 1,388
$ 32,277 $ 29,989

~~(1) See further discussion~~Statements of ~~Upfront Customer Consideration in Note 3~~Operations. Stock-based compensation expense related to non-employee directors and ~~Cabot Receivable in Note 4~~consultants is included within the "General and ~~Note 10.~~

Spare parts include critical spares required to support plant operations. Parts and supply costs are determined using the lower of cost or estimated replacement cost. Parts are recorded as maintenance expensesadministrative" line item in the Condensed Consolidated Statements of Operations.

Total stock-based compensation expense for the three months ended March 31, 2022 and 2021 was as follows:


	Three Months Ended March 31,
(in thousands)	2022		2021
RSA expense	$	427	$	407

PSU expense	37		14

Total stock-based compensation expense	$	464	$	421

The amount of unrecognized compensation cost as of March 31, 2022, and the expected weighted-average period inover which ~~they are consumed.~~

~~Mine development costs include acquisition costs,~~ the cost will be recognized is as follows:


	As of March 31, 2022
(in thousands, expect years)	Unrecognized Compensation Cost		Expected Weighted- Average Period of Recognition (in years)
RSA expense	$	3,625	2.40

PSU expense	245		2.07

Total unrecognized stock-based compensation expense	$	3,870	2.34

Restricted Stock

Restricted stock is typically granted with vesting terms of ~~other development work and mitigation costs related to the Five Forks Mine and are depleted over the estimated life of the related mine reserves.~~three years. The Company performs an evaluation of the recoverability of the carrying value of mine development costs to determine if facts and circumstances indicate that their carrying value may be impaired and if any adjustment is warranted. There were no indicators of impairment as of June 30, 2021. Mine reclamation asset, net represents an asset retirement obligation ("ARO") asset related to the Five Forks Mine and is depreciated over the estimated life of the Five Forks Mine.

The Company holds a long-term investment (the "Highview Investment") in Highview Enterprises Limited ("Highview"), a UK-based developmental stage company specializing in power storage. The Company accounts for the Highview Investment as an investment recorded at cost, less impairment, plus or minus observable changes in price for identical or similar investments of the same issuer.

~~The Highview Investment is evaluated for indicators of impairment such as an event or change in circumstances that may have a significant adverse effect on the~~ fair value of RSA's is determined based on the ~~investment. There were no changes~~closing price of the Company’s common stock on the authorization date of the grant multiplied by the number of shares subject to the ~~carrying value~~stock award. Compensation expense for RSA's is generally recognized on a straight-line basis over the entire vesting period.

A summary of RSA activity under the ~~Highview Investment~~Company's various stock compensation plans for the three ~~and six~~ months ended ~~June 30, 2021 as there were no indicators of impairment or observable price changes for identical or similar investments.~~March 31, 2022 is presented below:


	Restricted Stock	Weighted-Average Grant Date Fair Value

Non-vested at January 1, 2022	531,623	$	5.94
Granted	336,079	$	6.40
Vested	(217,973)	$	6.47
Forfeited	(12,337)	$	6.05
Non-vested at March 31, 2022	637,392	$	6.00

2017

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:~~Performance Share Units

As of
(in thousands) June 30,
2021 December 31,
2020
Other current liabilities:
Current portion of operating lease obligations $ 2,342 $ 1,883
Current portion of mine reclamation liability 6,986 9,370
Income and other taxes payable 2,159 1,305
Other current liabilities 468 438
$ 11,955 $ 12,996
Other long-term liabilities:
Mine reclamation liabilities $ 8,137 $ 12,077
Operating lease obligations, long-term 2,698 1,109
Other long-term liabilities (1) 557 287
$ 11,392 $ 13,473
~~(1) Included within Other long-term liabilities~~Compensation expense is $0.3 million related to agreements the Company entered into with all of its executive officers and certain other key employees of the organization ("Retention Agreements"). The Retention Agreements arerecognized for ~~the benefit of retaining those officers and key employees in order to maintain the Company’s current business operations while it pursues and executes~~PSU's on its strategic initiatives. The Retention Agreements with the executive officers were approved by the Compensation Committee of the Board of Directors and the Board of Directors on May 5, 2021. The Company is recognizing expensea straight-line basis over the ~~expected~~applicable service period, which is generally three years, based on ~~certain conditions outlined in the Retention Agreements.~~

The Mine reclamation liability related to the Five Forks Mine is included in Other long-term liabilities. The Mine reclamation liability related to Marshall Mine, which was assumed in the Marshall Mine Acquisition, is included in Other current liabilities and Other long-term liabilities. The Mine reclamation liabilities represent AROs. Changes in the AROs were as follows:

As of
(in thousands) June 30, 2021 December 31, 2020
Asset retirement obligation, beginning of period $ 21,447 $ 2,721
Asset retirement obligation assumed 0 21,328
Accretion 661 543
Liabilities settled (5,043) (3,565)
Changes due to scope and timing of reclamation (1,942) 420
Asset retirement obligations, end of period 15,123 21,447
Less current portion 6,986 9,370
Asset retirement obligation, long-term $ 8,137 $ 12,077

As discussed in Note 4, as of June 30, 2021, the Company reduced the Marshall Mine by $1.9 million based on scope reductions for future reclamation requirements and recorded a corresponding gain on change in estimate for the three and six months ended June 30, 2021.

~~Supplemental Condensed Consolidated Statements of Operations Information~~

~~The following table details the components of Interest expense in the Condensed Consolidated Statements of Operations:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Interest on Senior Term Loan $ 52 $ 484 $ 207 $ 1,114
Debt discount and debt issuance costs 355 355 946 709
453A interest 7 28 7 160
Other 79 95 170 189
$ 493 $ 962 $ 1,330 $ 2,172

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note 15 - Impairment~~

As of June 30, 2020 and as part of its periodic review of the carrying value of long-lived assets, the Company assessed its long-lived assets for potential impairment. In assessing impairment of its APT segment's and certain other long-lived asset groups, the Company considered factors such as the significant decline in both the APT segment's trailing twelve months revenues and current and future years’ forecasted revenues. These factors were largely due to the significant drop in coal-fired power dispatch that began in 2019 amid historically low prices of alternative power generation sources such as natural gas, leading to an increase in natural gas usage as well as other competing energy sources.

As of June 30, 2020, the Company completed an undiscounted cash flow analysis of its APT segment's long-lived assets (the "Asset Group"), which are comprised of its manufacturing plant and related assets and its lignite mine assets, and estimated the undiscounted cash flows from the Asset Group at $54.7 million, which was less than the carrying value of the Asset Group of $58.3 million. Accordingly, the Company completed an assessment of the Asset Group’s fair value and estimated the fair value of the Asset Group at $32.2 million. This resulted in an impairment and write-down of the Asset Group (the "Impairment Charge") of $26.1 million as of June 30, 2020, which is reflected as "Impairment of long-lived assets" in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020.

~~The following table summarizes the allocation to the Asset Group of the Impairment Charge of $26.1 million recorded as of June 30, 2020:~~


~~(in thousands)~~
~~Property, plant and equipment, net~~	$	~~18,986~~
~~Intangible assets, net~~	~~1,445~~
~~Other long-term assets, net~~	~~5,672~~

~~Total impairment~~	$	~~26,103~~

~~The Company engaged an independent third party to perform the valuation of the Asset Group in order to determine~~ the estimated fair value of the Asset Group. This valuation was based on the use of several established valuation models including an expected future discounted cash flow model based on cash flows expected to be generated by market participants discounted at the ~~risk-free rate~~date of ~~interest. Because~~grant using a Monte Carlo simulation model. A summary of PSU activity for the ~~continued future uncertainty surrounding the level of coal-fired dispatch, the impact of historically low natural gas prices and other estimates impacting the expected future cash flow, it~~three months ended March 31, 2022 is ~~reasonably possible that the expected future cash flows may change in the near term and may result in the Company recording additional impairment of the Asset Group.~~presented below:

~~As of June 30, 2021, the Company determined that there was 0 additional impairment of the Asset Group.~~


	Units	Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)		Weighted-Average Remaining Contractual Term (in years)
PSU's outstanding, January 1, 2022	88,026	$	6.65
Granted	60,565	9.59
Vested / Settled	—	—
Forfeited / Canceled	—	—
PSU's outstanding, March 31, 2022	148,591	$	7.85	$	924	2.07

Note 1612 - Income Taxes

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company's income tax expense and effective tax rates ~~based on forecasted pretax income~~ were:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(in thousands, except for rate)	(in thousands, except for rate)	2021			2020			2021			2020			(in thousands, except for rate)	2022			2021
Income tax expense	Income tax expense	$	4,943		$	103		$	9,432		$	461		Income tax expense	$	—		$	4,489
Effective tax rate	Effective tax rate	23		%	0		%	24		%	(2)		%	Effective tax rate	—		%	25		%

The effective rate for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 was zero, as the Company incurred pretax loss for this period and the resultant tax benefit was offset by a valuation allowance recorded as of March 31, 2022, as the Company expects to incur pretax loss for the year ended December 31, 2022. The effective rate for the three months ended March 31, 2021 was higher ~~than~~from the federal statutory rate primarily from the impact of estimated state income taxes.

The Company assesses ~~the~~a valuation allowance recorded against deferred tax assets at each reporting date. The determination of whether a valuation allowance for deferred tax assets is appropriate requires the evaluation of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income available to realize deferred tax assets, including, as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating income taxes, the Company assesses the relative merits and risks of the appropriate income tax treatment of transactions taking into account statutory, judicial and regulatory guidance.

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note 17 - Business Segment Information~~

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision-making group, to allocate resources and assess financial performance. As of June 30, 2021, the Company's CODM was the Company's CEO. The Company's operating and reportable segments are identified by products and services provided.

As of June 30, 2021, the Company has 2 reportable segments: (1) Refined Coal ("RC"); and (2) Advanced Purification Technologies ("APT"). Effective December 31, 2020, and as reported in the 2020 Form 10-K, the Company revised its segments to RC and APT, and amounts for the three and six months ended June 30, 2020 have been recast to conform with the current year presentation.

~~The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below:~~

•~~The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2020 Form 10-K.~~

•~~Segment revenues include equity method earnings and losses from the Company's equity method investments.~~

•Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, General and administrative and Depreciation, amortization, depletion and accretion.

•~~RC segment operating income includes interest expense directly attributable to the RC segment.~~

As of June 30, 2021 and December 31, 2020, substantially all of the Company's material assets are located in the U.S. and substantially all significant customers are U.S. companies. The following table presents the Company's operating segment results for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Revenues:
Refined Coal:
Earnings in equity method investments $ 21,437 $ 8,168 $ 39,749 $ 16,441
License royalties, related party 3,657 3,313 7,723 6,359
25,094 11,481 47,472 22,800
Advanced Purification Technologies:
Consumables 15,976 8,170 33,007 17,387
15,976 8,170 33,007 17,387
Total segment reporting revenues 41,070 19,651 80,479 40,187
Adjustments to reconcile to reported revenues:
Earnings in equity method investments (21,437) (8,168) (39,749) (16,441)
Total reported revenues $ 19,633 $ 11,483 $ 40,730 $ 23,746
Segment operating income (loss):
Refined Coal $ 24,905 $ 10,777 $ 47,176 $ 21,637
Advanced Purification Technologies (1) (2) 258 (29,999) 273 (37,369)
Total segment operating income (loss) $ 25,163 $ (19,222) $ 47,449 $ (15,732)

(1) Included in APT segment operating income (loss) for the three and six months ended June 30, 2021 and 2020 is $1.8 million and $3.7 million, $1.5 million and $3.8 million, respectively, of depreciation, amortization, depletion and accretion expense on mine and plant long-lived assets and liabilities and $0.1 million, $0.3 million, 0 and 0, respectively, of amortization of Upfront Customer Consideration.

~~(2) Included in APT segment operating income for the three and six months ended June 30, 2021 is $1.9 million gain related to the change in the Marshall Mine ARO as of June 30, 2021.~~

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~A reconciliation of reportable segment operating income to consolidated income (loss) before income tax expense is as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Total reported segment operating income (loss) $ 25,163 $ (19,222) $ 47,449 $ (15,732)
Adjustments to reconcile to income (loss) before income (loss) tax expense attributable to the Company:
Corporate payroll and benefits (826) (1,148) (1,465) (1,857)
Corporate legal and professional fees (1,376) (925) (3,130) (2,674)
Corporate general and administrative (1,049) (1,558) (2,225) (3,157)
Corporate depreciation and amortization (122) (163) (276) (189)
Corporate interest expense, net (348) (824) (998) (1,766)
Other income, net 91 129 404 129
Income (loss) before income tax expense $ 21,533 $ (23,711) $ 39,759 $ (25,246)

Corporate general and administrative expenses include certain costs that benefit the business as a whole but are not directly related to one of the Company's segments. Such costs include, but are not limited to, accounting and human resources staff, information systems costs, legal fees, facility costs, audit fees and corporate governance expenses.

~~A reconciliation of reportable segment assets to consolidated assets is as follows:~~

As of
(in thousands) June 30,
2021 December 31,
2020
Assets:
Refined Coal (1) $ 7,427 $ 11,516
Advanced Purification Technologies (2) 81,775 80,877
Total segment assets 89,202 92,393
All Other and Corporate (3) 69,293 54,278
Consolidated $ 158,495 $ 146,671

~~(1) Includes $3.6 million and $7.7 million of investments in equity method investees as of June 30, 2021 and December 31, 2020,respectively.~~

~~(2) Includes $37.0 million and $34.6 million of long-lived assets, net.~~

~~(3) Includes the Company's deferred tax assets of $3.8 million and $10.6 million as of June 30, 2021 and December 31, 2020,respectively.~~

Note 1813 - Fair Value Measurements

Fair value of financial instruments

The carrying amounts of financial instruments, including cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturity of these instruments. The carrying amounts of the ~~Cabot~~Norit Receivable and ~~debt~~finance lease obligations approximate fair value based on credit terms and market interest rates currently available for similar instruments. Accordingly, these instruments are not presented in the table below. The following table provides the estimated fair values of the remaining financial instruments:


		As of June 30, 2021				As of December 31, 2020					As of March 31, 2022				As of December 31, 2021
(in thousands)	(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value		(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Instruments:	Financial Instruments:									Financial Instruments:

Highview Investment	Highview Investment	$	552	$	552	$	552	$	552	Highview Investment	$	552	$	552	$	552	$	552

Highview Obligation	Highview Obligation	$	233	$	233	$	228	$	228	Highview Obligation	$	221	$	221	$	227	$	227

Advanced Emissions Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Concentration of credit risk

The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company holds cash and cash equivalents at ~~four~~two financial institutions as of ~~June 30, 2021.~~March 31, 2022. If an institution

~~Advanced Emissions Solutions, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

was unable to perform its obligations, the Company would be at risk regarding the amount of cash and investments in excess of the Federal Deposit Insurance Corporation limits (currently $250 thousand) that would be returned to the Company.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had 0no financial instruments carried and measured at fair value on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

~~As disclosed in Note 14, the~~The Company accounts for the Highview Investment as an investment recorded at cost, less impairment, plus or minus observable changes in price for identical or similar investments of the same issuer. Fair value measurements, if any, represent either Level 2 or Level 3 measurements.

~~Note 19 - Subsequent Events~~

~~All~~ The Highview Investment is evaluated for indicators of impairment such as an event or change in circumstances that may have a significant ~~matters that occurred subsequent to June 30, 2021 are disclosed elsewhere within~~adverse effect on the ~~notes~~fair value of the investment. There were no changes to the ~~Condensed Consolidated Financial Statements.~~carrying value of the Highview Investment for the three months ended March 31, 2022 as there were no indicators of impairment or observable price changes for identical or similar investments.

2519

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our operations should be read together with the unaudited Condensed Consolidated Financial Statements and notes of Advanced Emissions Solutions, Inc. ("ADES" or the "Company") included elsewhere in Item 1 of Part I ("Item 1") of this Quarterly Report and with the audited consolidated financial statements and the related notes of ADES included in the ~~2020~~2021 Form 10-K.

The results of operations discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are those of ~~Advanced Emissions Solutions, Inc. ("ADES")~~ADES and its consolidated subsidiaries, collectively, the ~~"Company", "we",~~"Company," "we," "our" or ~~"us".~~"us."

Overview

We operate two segments: RC and APT. Our RC segment is comprised of our equity ownership in Tinuum Group and Tinuum Services, both of which are unconsolidated entities in which we generate substantial earnings. Tinuum Group provides reduction of mercury and NOx emissions at select coal-fired power generators through the production and sale of RC that qualifies for Section 45 tax credits under IRC Section 45. We benefit from Tinuum Group's production and sale of RC, which generates tax credits, as well as its revenue from selling or leasing RC facilities to tax equity investors. We also earn royalties for technologies that we license to Tinuum Group and are used at certain RC facilities to enhance combustion and reduced emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services operates and maintains the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities. Both Tinuum Group and Tinuum Services expect to commence significantly winding down their operations starting in the third quarter of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021. During the second quarter of 2021, Tinuum Group ceased operating an RC facility, with the remaining RC facilities expected to cease operations during the second half of 2021. As such, our earnings and distributions from our RC segment will substantially cease as of December 31, 2021.

~~Our APT segment is primarily operated through a wholly-owned subsidiary, Carbon Solutions.~~ We sell consumable products that utilize AC and ~~chemical based~~chemical-based technologies to a broad range of customers, including coal-fired utilities, industrials, water treatment plants, and other diverse markets through ~~the~~a customer supply agreement ~~defined~~described below. Our primary products are comprised of AC, which isare produced from ~~lignite coal.~~a variety of carbonaceous raw materials. Our AC products include both powdered activated carbon ("PAC") and granular activated carbon ("GAC"). 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. Additionally, we own an associated lignite mine that supplies the primary raw material for the manufacturing of our products.

Through December 31, 2021, we generated substantial earnings from our equity investments in Tinuum Group and Tinuum Services. Both entities ceased operations effective December 31, 2021 as a result of the expiration of a tax credit program under the Section 45 Tax Credit Program. Tinuum Group provided reduction of mercury and nitrogen oxide ("NOx") emissions at select coal-fired power generators through the production and sale of refined coal ("RC") that qualified for tax credits under the Section 45 Tax Credit Program ("Section 45 tax credits"). We also earned royalties for technologies that were licensed to Tinuum Group and used at certain RC facilities to enhance combustion and reduced emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services operated and maintained the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities. Presently, both Tinuum Group and Tinuum Services continue to wind-down their operations, and we expect to receive final cash distributions from these entities during 2022.

Given the wind-down of Tinuum Group and Tinuum Services and the impact on our financial statements, we determined the historical RC segment no longer met the qualitative or quantitative criteria to be considered a reporting segment under U.S. GAAP. As a result, as well as the method in which the chief operating decision maker ("CODM") allocates resources, beginning January 1, 2022 we determined that we had one reportable segment, and therefore have removed segment disclosures for this Quarterly Report.

Drivers of Demand and Key Factors Affecting Profitability

Drivers of demand and key factors affecting our profitability differ by segment. In the RC segment, demand has been driven primarily from investors who purchase or lease RC facilities that qualify under the Section 45 tax credit period, which is expected to expire no later than December 31, 2021. Operating results in RC are ~~affected by: (1) the ability to lease or operate RC facilities; (2) lease renegotiation or termination; and (3) changes in tonnage~~sales of ~~RC due to changing coal-fired dispatch and electricity power generation sources. As discussed above, earnings and distributions from~~ our ~~RC segment will substantially cease as of December 31, 2021 as Tinuum ceases operations at its RC facilities.~~

~~In the APT segment, demand is driven primarily by~~ consumables-based solutions for coal-fired power generation, ~~and other~~ industrials, municipal water customers and ~~since September 30, 2020, demand from Cabot's customers~~other diverse markets served by Norit, whom we supply through the Supply Agreement discussed below. ~~Operating~~Our operating results ~~in the APT segment has been~~are influenced by: (1) changes in our sales volumes; (2) changes in price and product mix; ~~and~~ (3) changes in coal-fired dispatch and electricity power generation ~~sources.~~

~~On April 22, 2021, there was an incident at~~sources and (4) changes in demand for contaminant removal within water treatment facilities. During the three months ended March 31, 2022, we have continued to see increases in demand for our ~~Red River Plant in Louisiana ("Plant Incident"), which involved an isolated fire in one of the Red River Plant's coal handling systems.~~AC product. As a result, the Red River Plant was shut down for nine days for repair. As of June 30, 2021, the cash flow impact associated with the Plant Incident was $0.2 million for repairs and $0.7 million in purchasedsuch, we continue to purchase inventory to supplement ~~lost production.~~customer demands in excess of our production capacity and achieve our target inventory levels.

~~Customer~~ Supply Agreement

On September 30, 2020, we and ~~Cabot~~Norit entered into the Supply Agreement pursuant to which we agreed to sell and deliver to ~~Cabot,~~Norit, and ~~Cabot~~Norit agreed to purchase and accept from us, Furnace Products. ~~In addition to~~Under the ~~sale by us and purchase by Cabot of Furnace Products, we and Cabot have agreed to additional terms whereby Cabot will reimburse~~Supply Agreement, Norit reimburses us for certain capital expenditures incurred by us that are necessary to manufacture the Furnace Products. Reimbursements ~~will be in the form~~are comprised of

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

~~For 2021, we have generated material incremental volume and lowered unit operating costs at~~ In the ~~Red River Plant due~~event that Norit ceases to make purchases under the Supply Agreement, ~~which~~Norit is obligated to pay the balance of any outstanding payments for Specific Capital.

On February 25, 2022, we received $10.6 million in ~~turn has increased our gross margins. Further,~~cash from Norit (the "Norit Payment") as a result of a change in control provision in the Supply Agreement ~~has further expanded our AC products~~(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 (defined below), payment of all unbilled amounts related to ~~diverse end-markets~~Specific Capital for expenditures incurred through February 28, 2022 and payment of $0.8 million related to additional Reclamation Costs (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 Marshall Mine within a specified timeframe, and such payment was remitted in March 2022. The Change in Control did not impact any other provisions of the Supply Agreement.

As of February 25, 2022, the carrying value of the Reclamation Reimbursement was $9.0 million, which was reflective of the principal balance, adjusted for accretion of interest and payments made to date. Under the Change in Control, we received $8.5 million in cash for full payment of the outstanding Reclamation Reimbursement. We concluded that ~~are outside~~the cash proceeds received represented an early payment of ~~coal-fired power generation.~~a receivable based on a change in contractual terms and accounted for the difference between the cash proceeds received and the carrying amount of the Reclamation Reimbursement of $0.5 million as a loss, which is included within the "Other Income (Expense)" line item in the Condensed Consolidated Statement of Operation for three months ended March 31, 2022.

As of March 31, 2022, we have materially completed the dirt work (i.e., contouring, backfilling, etc.) for the reclamation of Marshall Mine.

Acquisition of Marshall Mine

Concurrently with the execution of the Supply Agreement, on September 30, 2020, we ~~entered into~~completed the ~~Mine Purchase Agreement with Cabot to purchase 100% of the membership interests in~~ Marshall Mine ~~LLC (the "Marshall Mine Acquisition")~~Acquisition for a nominal cash purchase price. Marshall Mine ~~LLC owns~~is a lignite mine located outside of Marshall, ~~Texas (the "Marshall Mine").~~Texas. We independently determined to immediately ~~commence activities to~~ shutter the Marshall Mine and ~~have and will continue to incur the associated~~commenced full reclamation ~~costs.~~

~~In conjunction with the execution of the Supply Agreement and the Mine Purchase Agreement, on September 30, 2020, we entered into~~activities under the Reclamation Contract with a third party that provides a capped cost, subject to certain contingencies, in the amount of approximately $19.7 million plus an obligation to pay certain direct costs estimated to be $3.6 million (collectively, the "Reclamation Costs") over the estimated reclamation period of 10 years. We are accounting for this obligation as an asset retirement obligation under U.S. GAAP ("ARO").Contract. Under the terms of the Supply Agreement, ~~Cabot is~~Norit was obligated to reimburse us for $10.2 million, inclusive of ~~Reclamation Costs~~interest, over a 13-year term (the "Reclamation ~~Reimbursements"~~Reimbursement")~~, which are payable semi-annually over 13 years~~ for a portion of the Reclamation Costs. As discussed above, on February 25, 2022 as part of the Change in Control, Norit fully paid the outstanding amount owed under the Reclamation Reimbursement and ~~inclusive of interest. For~~has no further liability related to the ~~three and six months ended June 30, 2021, we settled $2.7 million and $5.0 million in of Reclamation Costs, respectively.~~Marshall Mine.

As the owner of the Marshall Mine, we were required to post a surety bond with a third party to ensure performance of our reclamation activities in the amount of $30.0 million under the Surety Agreement. On June 7, 2021, the third party agreed to reduce the Surety Bond amount to $16.6 million. As of ~~June 30, 2021,~~March 31, 2022, we were required to post collateral of $10.0 million in the form of restricted cash for the obligations due under the Reclamation Contract.

As of June 30, 2021, we revised our estimate of future obligations owed for reclamation of the Marshall Mine primarily based on scope reductions related to future reclamation requirements. As a result, we reduced the Marshall Mine ARO by $1.9 million as of June 30, 2021 and a recorded a corresponding gain on change in estimate in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021.

~~Impact of COVID-19~~

In March 2020, the World Health Organization declared COVID-19 a global pandemic. We are designated by CISA of the Department of Homeland Security as a critical infrastructure supplier to the energy sector. Our operations have been deemed essential and, therefore, our facilities remained open and our employees employed. We follow the COVID-19 guidelines from the Centers for Disease Control concerning the health and safety of our personnel. The measures we have taken have resulted in an increase in our personnel costs, operational inefficiencies and the incurrence of incremental costs to allow manufacturing operations to continue.

The duration and scope of the COVID-19 pandemic continues to be uncertain. Many parts of the world are still experiencing high infection rates and the level and timing of COVID-19 vaccine distribution will impact the economic recovery and growth. We cannot predict the long-term effects on our business, including our financial position or results of operations, if governmental restrictions or other such directives continue for a prolonged period of time and cause a material negative change in power generation demand, materially disrupt our supply chain, substantially increase our operating costs or limit our ability to serve existing customers and seek new customers.

In response to the COVID-19 outbreak, in March 2020, the federal government passed the CARES Act. The CARES Act provided, among other things, the deferral of payroll tax payments for all payroll taxes incurred through December 31, 2020 and created the Paycheck Protection Program ("PPP"), which is sponsored and administered by the SBA. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 (the "PPPFA") was signed into law and established the payment dates in the event that amounts borrowed under the PPP are not forgiven. See further discussion below of the loan made to us under the PPP under the section "PPP Loan" under this Item.

We elected to defer payments of payroll taxes for the periods allowed under the CARES Act and will repay 50% by December 31, 2021 and 50% by December 31, 2022. As of June 30, 2021, total payroll tax payments deferred under the CARES Act were $0.4 million.

~~Our customers may also be impacted by COVID-19 pandemic as the utilization of energy has changed. We cannot predict the long-term impact on our customers and the subsequent impact on our business.~~

Results of Operations

For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, we recognized net ~~income~~loss of ~~$16.6~~$3.0 million ~~and $30.3 million, respectively,~~ compared to net ~~loss~~income of ~~$23.8 million and $25.7~~$13.7 million for the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021. The most significant factor impacting results period over period was the decrease in equity earnings from Tinuum Group as the ability to generate Section 45 tax credits, the driver for Tinuum Group's operations, ceased as of December 31, 2021.

The following sections provide additional information regarding these comparable periods. For comparability purposes, the following tables set forth our results of operations for the periods presented in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. The period-to-period comparison of financial results may not be indicative of financial results to be achieved in future periods.

Comparison of the Three Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

Total Revenue and Cost of Revenue

A summary of the components of our revenues and cost of revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:


		Three Months Ended June 30,				Change					Three Months Ended March 31,				Change
(in thousands, except percentages)	(in thousands, except percentages)	2021		2020		($)		(%)		(in thousands, except percentages)	2022		2021		($)		(%)
Revenues:	Revenues:									Revenues:
Consumables	Consumables	$	15,976	$	8,170	$	7,806	96	%	Consumables	$	26,402	$	18,541	$	7,861	42	%
License royalties, related party	License royalties, related party	3,657		3,313		344		10	%	License royalties, related party	—		4,066		(4,066)		(100)	%

Total revenues	Total revenues	$	19,633	$	11,483	$	8,150	71	%	Total revenues	$	26,402	$	22,607	$	3,795	17	%
Operating expenses:	Operating expenses:									Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization	Consumables cost of revenue, exclusive of depreciation and amortization	$	13,300	$	7,416	$	5,884	79	%	Consumables cost of revenue, exclusive of depreciation and amortization	$	21,507	$	13,984	$	7,523	54	%

Consumables and consumables cost of revenue

For the three months ended ~~June 30, 2021,~~March 31, 2022, consumables revenues increased from the comparable quarter in ~~2020~~2021 primarily ~~driven by~~from higher product volumes, ~~most significantly from products sold under the Supply Agreement,~~ which comprised ~~of $7.4~~$4.9 million of the total change in consumables revenues. Product volumes were higher in power generation customers primarily due to higher natural gas prices and higher demand for electricity compared to the same quarter in 2021, which contributed to increased utilization of coal-fired generation and increased demand for our products. Total revenues ~~and provided~~also increased due to favorable pricing mix of our products by approximately ~~$0.6~~$2.8 million. Negatively impacting revenues quarter over quarter was less favorable product mix of approximately $0.2 million. For the three months ended June 30, 2021, there were higher than average temperatures as well as an increase in natural gas prices compared to the prior quarter, both of which caused an increase in demand for our products.

Our consumables gross margin, exclusive of depreciation and amortization, increased for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the corresponding quarter in ~~2020~~2021 primarily due to the higher product volumes, which resulted in lower fixed ~~cost~~costs per ~~pound compared to the corresponding quarter.~~pound. Offsetting ~~higher gross margin~~these improvements from higher product volumes for the three months ended ~~June 30, 2021, was~~March 31, 2022, consumables gross margin was negatively impacted by ~~routine scheduled maintenance outages planned during~~ the ~~second quarter of 2021 as well as additional~~inflationary rise in cost for key raw materials, transportation including fuel, and operational costs ~~associated with~~to produce and deliver our products. Further negatively impacting consumables gross margin was the ~~Plant Incident. The impact of the Plant Incident is expected to continue for the remainder of 2021 as we continue~~requirement to purchase inventory due to ~~lost production and~~ increased demand for our ~~products.~~products and high utilization of the Red River Plant. We expect to continue purchasing inventory through the remainder of 2022 as a result of ongoing increased demand for our products and high Red River Plant utilization. We will continue to evaluate the need for additional inventory purchases in subsequent years.

We expect ~~Consumable~~that consumables revenues and gross margin towill be positively impacted by our product price increase announced in the second quarter of ~~2021 along with~~2022 and our efforts to ~~improve customer and~~move our product ~~mix. The~~mix to higher margin products. We anticipate that the product price ~~increase~~increases will also help offset the increase in operating ~~costs.~~costs from purchasing inventory as a result of changes in product mix due to the loss of certain power generation customers, who are shuttering certain of their utilities as part of scheduled closures.

Consumables revenues continues to be affected by electricity demand driven by seasonal weather and related power generation needs, as well as competitor prices related to alternative power generation sources such as natural gas. According to data provided by the U.S. Energy Information Administration ("EIA"), for the three months ended June 30, 2021, power generation from coal-fired power dispatch increased approximately 34% compared to the corresponding quarter in 2020.

gas and renewables.

License royalties, related party

~~For the three months ended June 30,~~As discussed above, Tinuum Group ceased operations as of December 31, 2021 and ~~2020, there were 12.8 million tons and 9.2 million tons, respectively, of RC produced using M-45~~TM ~~and M-45-PC~~TM ~~technologies ("M-45 Technology"), which Tinuum Group licenses from us ("M-45 License"). M-45 License royalties increased~~as a result for the three months ended June 30, 2021 primarily from higher tonnage compared to the three months ended June 30, 2020. This was primarily a result of an increase quarter over quarter in RC facilities that use the M-45 Technology. While tonnage increased quarter over quarter, there was a reduction in the royalty rate per ton primarily attributable to a majority of the RC contracts having fixed lease payments such that increased tonnagesMarch 31, 2022, we did not ~~result in increased earnings. Both~~recognize any revenues from license royalties from Tinuum Group and Tinuum Services expect to commence significantly winding down their operations starting in the third quarter of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021. As such, we do not expect to continue earning M-45 License royalties after December 31, 2021.

Additional information related to revenue concentrations and contributions by class and reportable segment can be found within the Business Segments discussion and in Note 17 to the Condensed Consolidated Financial Statements.Group.

Other Operating Expenses

A summary of the components of our operating expenses for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ exclusive of cost of revenue items (presented above), is as follows:

Three Months Ended June 30, Change
(in thousands, except percentages) 2021 2020 ($) (%)
Operating expenses:
Payroll and benefits $ 2,908 $ 3,812 $ (904) (24) %
Legal and professional fees 1,431 1,022 409 40 %
General and administrative 1,593 2,462 (869) (35) %
Depreciation, amortization, depletion and accretion 1,904 1,733 171 10 %
Impairment of long-lived assets — 26,103 (26,103) (100) %
Gain on change in estimate, asset retirement obligation (1,942) — (1,942) *
$ 5,894 $ 35,132 $ (29,238) (83) %
* Calculation not meaningful


	Three Months Ended March 31,				Change
(in thousands, except percentages)	2022		2021		($)		(%)
Operating expenses:
Payroll and benefits	$	2,626	$	2,469	$	157	6	%

Legal and professional fees	2,172		1,803		369		20	%
General and administrative	1,926		1,915		11		1	%
Depreciation, amortization, depletion and accretion	1,506		2,106		(600)		(28)	%


	$	8,230	$	8,293	$	(63)	(1)	%

Payroll and benefits

Payroll and benefits expenses, which represent costs related to selling, general and administrative personnel, ~~decreased~~increased for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the corresponding quarter in ~~2020~~2021 primarily due to ~~a decrease in payroll-related expenses of executives and changes in personnel mix. Offsetting these decreases was~~ an increase in ~~our headcount and~~ expense related to the agreements with our executive officers and certain other key employees ("Retention Agreements")~~. See below for additional information on the Retention Agreements.~~ of $0.4 million. Offsetting this increase was a decrease in our headcount, which decreased payroll and benefits expense by approximately $0.2 million.

Legal and professional fees

Legal and professional fees increased for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the corresponding quarter in ~~2020~~2021 as a result of costs incurred related to our strategic alternatives review process, including consulting, tax services and legal fees of $0.4 million.

General and administrative

General and administrative expenses ~~decreased for the three months ended June 30, 2021 compared to the corresponding~~had no significant changes quarter in 2020 primarily due to a reduction of product development costs of $0.4 million and a reduction in costs incurred due to the sequestration of certain of our employees at our manufacturing plant in Louisiana of approximately $0.3 million during the three months ended June 30, 2020. Offsetting these decreases were increases in rent and occupancy expenses of approximately $0.1 million related to property taxes.over quarter.

Depreciation, amortization, depletion and accretion

Depreciation and amortization expense ~~increased~~decreased for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the corresponding quarter in ~~2020~~2021 primarily due to higher production volumes ~~during~~compared to sales volumes for the three months ended ~~June 30, 2021,~~March 31, 2022, resulting in $0.4 million ~~more~~less absorption of depreciation in inventory. Further driving the ~~increase~~decrease was a decrease in accretion expense of ~~$0.3~~$0.2 million related to the Marshall Mine ARO. Offsetting this increase was a reduction in depreciation and amortization expense of $0.6 million related to the Impairment Charge recorded in the second quarter of 2020 that reduced the carrying value of our property, plant, equipment and intangibles.

~~Impairment of long-lived assets~~

As previously discussed, as of June 30, 2020, we recorded the Impairment Charge of $26.1 million, which is included in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2020.

~~Gain on change in estimate, asset retirement obligation~~

As previously discussed, we recorded a gain on change in estimate of $1.9 million related to a reduction in scope of our future reclamation efforts of the Marshall Mine, which is included in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2021.

Other Income (Expense), net

A summary of the components of other income (expense), net for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

Three Months Ended June 30, Change
(in thousands, except percentages) 2021 2020 ($) (%)
Other income (expense):
Earnings from equity method investments $ 21,437 $ 8,168 $ 13,269 162 %
Interest expense (493) (962) 469 (49) %
Other 150 148 2 1 %
Total other income $ 21,094 $ 7,354 $ 13,740 187 %


	Three Months Ended March 31,				Change
(in thousands, except percentages)	2022		2021		($)		(%)
Other income (expense):
Earnings from equity method investments	$	833	$	18,312	$	(17,479)	(95)	%

Interest expense	(86)		(837)		751		(90)	%
Other	(445)		421		(866)		(206)	%




Total other income	$	302	$	17,896	$	(17,594)	(98)	%

Earnings from equity method investments

As discussed above, both Tinuum Group and Tinuum Services ceased operations as of December 31, 2021 and as a result for the three months ended March 31, 2022, we recognized significantly lower earnings from Tinuum Group and a loss from Tinuum Services. The following table details the components of our respective equity method investments included in the Earnings from equity method investments line item in the Condensed Consolidated Statements of Operations:

Three Months Ended June 30,
(in thousands) 2021 2020
Earnings from Tinuum Group $ 19,125 $ 6,764
Earnings from Tinuum Services 2,312 1,404
Earnings from other — —
Earnings from equity method investments $ 21,437 $ 8,168

~~Earnings from equity method investments, and changes related thereto, are impacted by our significant equity method investees: Tinuum Group and Tinuum Services.~~


	Three Months Ended March 31,
(in thousands)	2022		2021
Earnings from Tinuum Group	$	1,012	$	16,362
(Loss) earnings from Tinuum Services	(180)		1,950
Earnings from other	1		—


Earnings from equity method investments	$	833	$	18,312

For the three months ended ~~June 30, 2021,~~March 31, 2022, we recognized ~~$19.1~~$1.0 million in equity earnings from Tinuum Group compared to our proportionate share of Tinuum Group's net ~~income~~loss of ~~$12.1~~$0.9 million for the quarter. The difference between our pro-rata share of Tinuum Group's net ~~income~~loss and our earnings from ~~Tinuum Group equity method investment as reported on~~ the Condensed Consolidated Statements of Operations is the result of cumulative distributions received from Tinuum Group being in excess of the carrying value of the investment, and therefore we recognize such excess distributions as equity method earnings in the period the distributions occur.

For the three months ended June 30, 2020, we recognized $6.8 million in equity earnings from Tinuum Group, which was equal to our proportionate share of Tinuum Group's net income for the respective quarter.

See further discussion of quarter over quarter changes in Earnings from Equity Investments in "Business Segments" under this Item. Additional information related to equity method investments is included in Note 6 to the Condensed Consolidated Financial Statements included in Part I - Item 1 of this Report.

~~For 2021, we expect to recognize such excess contributions as equity method earnings in the period the distributions occur, limited to the carrying value of the Tinuum Group equity investment.~~

~~Interest expense~~

For the three months ended June 30, 2021, interest expense decreased $0.5 million compared to the three months ended June 30, 2020 primarily due to a reduction in interest expense related to the Senior Term Loan, as the principal balance was reduced from payments of $28.0 million made during the period from June 30, 2020 to June 30, 2021. Further, the Senior Term Loan was paid-off in its entirety as of June 1, 2021. The remaining decrease in interest expense related to reductions in finance lease liabilities and the deferred tax liability associated with Internal Revenue Code section 453A ("Section 453A") during the period from June 30, 2020 to June 30, 2021. Section 453A requires taxpayers to pay an interest charge ("453A interest") on the portion of the tax liability that is deferred under the installment method for tax purposes.

~~Income tax expense~~

For the three months ended June 30, 2021, we recorded income tax expense of $4.9 million compared to income tax expense of $0.1 million for the three months ended June 30, 2020. The income tax expense recorded for the three months ended June 30, 2021 was comprised of estimated federal income tax expense of $5.0 million and estimated state income tax benefit of $0.1 million. The income tax expense recorded for the three months ended June 30, 2020 was comprised of estimated federal income tax expense of $0.3 million and estimated state income tax benefit of $0.2 million.

The increase in income tax expense quarter over quarter was primarily due to pretax income for the three months ended June 30, 2021 of $21.5 million compared to a pretax loss for the three months ended June 30, 2020 of $23.7 million.

~~Comparison of the Six Months Ended June 30, 2021 and 2020~~

~~Total Revenue and Cost of Revenue~~

~~A summary of the components of our revenues and cost of revenue for the six months ended June 30, 2021 and 2020 is as follows:~~

Six Months Ended June 30, Change
(in thousands, except percentages) 2021 2020 ($) (%)
Revenues:
Consumables $ 33,007 $ 17,387 $ 15,620 90 %
License royalties, related party 7,723 6,359 1,364 21 %
Total revenues $ 40,730 $ 23,746 $ 16,984 72 %
Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization $ 25,774 $ 18,907 $ 6,867 36 %

~~Consumables and consumables cost of revenue~~

For the six months ended June 30, 2021, consumables revenues increased from the comparable period in 2020 primarily driven by higher product volumes, most significantly from products sold under the Supply Agreement, which comprised of approximately $14.5 million of total revenue and favorable price impact of approximately $2.8 million. Negatively impacting consumables revenues period over period was less favorable product mix, which impacted consumables revenue by approximately $1.7 million.

Volumes were positively impacted by seasonal weather and an increase of 4.4% in overall power generation, including an increase in power generation from coal-fired power dispatch, which according to data provided by the EIA, increased approximately 36% for the six months ended June 30, 2021 compared to the corresponding period in 2020.

Our gross margin, exclusive of depreciation and amortization, increased for the six months ended June 30, 2021 compared to the corresponding period in 2020 primarily due to the higher product volumes, which resulted in lower fixed cost per pound compared to the prior year. Offsetting higher gross margin from higher product volumes for the six months ended June 30, 2021, was gross margin negatively impacted by additional costs associated with the Plant Incident.

Consumables cost of revenue was negatively impacted for the six months ended June 30, 2020 due to safety actions taken by us to provide for continued operation of our manufacturing facilities in response to COVID-19.

~~License royalties, related party~~

For the six months ended June 30, 2021 and 2020, there were 27.5 million tons and 21.1 million tons, respectively, of RC produced using the M-45 Technology under the M-45 License. While tonnage increased period over period, there was a reduction in the royalty rate per ton primarily attributable to a majority of the RC contracts having fixed lease payments such that increased tonnages did not result in increased earnings.

Additional information related to revenue concentrations and contributions by class and reportable segment can be found within the segment discussion below and in Note 17 to the Condensed Consolidated Financial Statements.

~~Other Operating Expenses~~

~~A summary of the components of our operating expenses, exclusive of cost of revenue items (presented above), for the six months ended June 30, 2021 and 2020 is as follows:~~

Six Months Ended June 30, Change
(in thousands, except percentages) 2021 2020 ($) (%)
Operating expenses:
Payroll and benefits $ 5,377 $ 6,554 $ (1,177) (18) %
Legal and professional fees 3,234 3,065 169 6 %
General and administrative 3,508 4,793 (1,285) (27) %
Depreciation, amortization, depletion and accretion 4,010 4,030 (20) — %
Impairment of long-lived assets — 26,103 (26,103) (100) %
Gain on change in estimate, asset retirement obligation (1,942) — (1,942) *
$ 14,187 $ 44,545 $ (30,358) (68) %

* Calculation not meaningful

~~Payroll and benefits~~

Payroll and benefits expenses decreased for the six months ended June 30, 2021 compared to the same period in 2020 primarily due to a decrease in payroll-related expenses of executive and changes in personnel mix. Offsetting these increases were an increase in our headcount and expense related to the Retention Agreements.

~~Legal and professional fees~~

Legal and professional fees increased for the six months ended June 30, 2021 compared to the same period in 2020 primarily due to costs incurred related to our corporate incentives and strategic alternatives, including consulting and legal fees of $0.5 million. Offsetting this increase was a reduction in outsourced IT costs specific to the completion of the integration of Carbon Solutions of $0.4 million.

~~General and administrative~~

General and administrative expenses decreased for the six months ended June 30, 2021 compared to the same period in 2020 primarily due to a decrease in product development expenses of approximately $0.8 million related to the Supply Agreement, a decrease in costs incurred due to the sequestration of certain of our employees at the Red River Plant of approximately $0.3 million and reductions in general and administrative expenses, including recruiting and licenses and fees. Offsetting these decreases was an increase in rent and occupancy expenses of approximately $0.2 million related to property taxes.

~~Depreciation and amortization~~

Depreciation and amortization expense remained relatively flat for the six months ended June 30, 2021 compared to the same period in 2020 due to higher production volumes during the six months ended June 30, 2021, resulting in $0.4 million more absorption of depreciation in inventory. Further driving the increase was accretion expense of $0.6 million related to the Marshall Mine ARO. Offsetting these increases was a reduction in depreciation and amortization expense of $1.0 million related to the Impairment Charge recorded in the second quarter of 2020 that reduced the carrying value of our property, plant, equipment and intangibles.

~~Impairment of long-lived assets~~

~~Gain on change in estimate, asset retirement obligation~~

~~Other Income (Expense), net~~

~~A summary of the components of our other income (expense), net for the six months ended June 30, 2021 and 2020 is as follows:~~

Six Months Ended June 30, Change
(in thousands, except percentages) 2021 2020 ($) (%)
Other income (expense):
Earnings from equity method investments $ 39,749 $ 16,441 $ 23,308 142 %
Interest expense (1,330) (2,172) 842 (39) %
Other 571 191 380 199 %
Total other income $ 38,990 $ 14,460 $ 24,530 170 %

~~Earnings from equity method investments~~

The following table details the components of our respective equity method investments included within the Earnings from equity method investments line item on the Condensed Consolidated Statements of Operations:

Six Months Ended June 30,
(in thousands) 2021 2020
Earnings from Tinuum Group $ 35,487 $ 13,202
Earnings from Tinuum Services 4,262 3,242
Earnings (loss) from other — (3)
Earnings from equity method investments $ 39,749 $ 16,441

~~As of June 30, 2021 and 2020, Tinuum Group had 22 and 20 invested RC facilities, respectively, that were generating revenues.~~

For the six months ended June 30, 2021, we recognized $35.5 million in equity earnings from Tinuum Group compared to our proportionate share of Tinuum Group's net income of $22.9 million for the period. The difference between our pro-rata share of Tinuum Group's net income and our earnings from Tinuum Group equity method investment as reported on the Condensed Consolidated Statements of Operations is the result of cumulative distributions received from Tinuum Group being in excess of the carrying value of the investment, and therefore we recognize such excess distributions as equity method earnings in the period the distributions occur. For the ~~six~~remainder of 2022, we expect to recognize such excess contributions as equity method earnings in the period the distributions occur, limited to the carrying value of the Tinuum Group equity investment.

For the three months ended ~~June 30, 2020,~~March 31, 2021, we recognized ~~$13.2~~$16.4 million in equity earnings from Tinuum Group ~~which was equal~~compared to our proportionate share of Tinuum Group's net income of $10.8 million for the ~~respective~~ quarter.

~~See further discussion~~For the three months ended March 31, 2022, earnings from Tinuum Services decreased compared to the corresponding quarter in 2021 due to a decrease in the number of operating RC facilities in which Tinuum Services provided operating and maintenance services due to the expiration of the Section 45 tax credit period ~~over period changes in Earnings from Equity Investments in "Business Segments" under this Item.~~ on December 31, 2021.

Additional information related to equity method investments is included in Note 69 to the Condensed Consolidated Financial Statements included in ~~Part I -~~ Item 1 of this Report.

Interest expense

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, interest expense decreased $0.8 million compared to the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 primarily due to ~~interest expense incurred~~the Company's pay-off of a senior term loan as of June 1, 2021.

Other

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 ~~six months ended June 30, 2021~~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 ~~Senior Term Loan, as~~third party mine operator (the "Norit Reclamation Costs"). Under the Reclamation Contract, we are obligated to remit payment for the Norit Reclamation Costs to the third-party operator of Marshall Mine within a specified timeframe, and such payment was remitted in March 2022.

As of February 25, 2022, the Reclamation Reimbursement was $9.0 million, which is reflective of the principal balance ~~was reduced from payments~~adjusted for accretion of ~~$28.0~~interest and collection of payments. Under the Change in Control, we received $8.5 million ~~made during~~in cash in relation to the ~~period from June 30, 2020~~outstanding Reclamation Reimbursement. We applied the cash proceeds to ~~June 30, 2021. The remaining decrease in interest expense related to lower 453A interest from~~the Reclamation Reimbursement and recognized a ~~reduction~~loss of $0.5 million, which is included in the ~~deferred balance related to Section 453A during~~"Other income (expense)" line item in the ~~period from June 30, 2020 to June 30, 2021.~~ Condensed Consolidated Statement of Operations for the three months ended March 31, 2022 .

Income tax expense

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we recorded no income tax expense ~~of $9.4 million~~or benefit compared to income tax expense of ~~$0.5~~$4.5 million for the ~~six~~three months ended ~~June 30, 2020. The income tax expense recorded~~March 31, 2021 primarily due to pretax loss for the ~~six~~three months ended ~~June 30, 2021 was comprised~~March 31, 2022 of ~~estimated federal~~$3.0 million compared to pretax income ~~tax expense of $9.1 million and state income tax expense of $0.3 million. The income tax expense recorded~~ for the ~~six~~three months ended ~~June 30, 2020 was comprised~~March 31, 2021 of ~~estimated federal income~~$18.2 million. We did not recognize a tax ~~expense~~benefit for the three months ended March 31, 2022 related to the pretax loss for this period, as we recorded a valuation allowance as of ~~$0.5 million.~~March 31, 2022 based on our forecast of pretax loss for the year ended December 31, 2022.

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The increase in income tax expense period over period was primarily due to pretax income for the six months ended June 30, 2021 of $39.8 million compared to a pretax loss for the six months ended June 30, 2020 of $25.2 million.

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with U.S. GAAP (or "GAAP"), we ~~are providing~~provide non-GAAP measures of certain financial performance. These non-GAAP measures include Consolidated EBITDA ~~Consolidated Adjusted EBITDA, RC Segment EBITDA, RC Segment Adjusted EBITDA, APT Segment EBITDA~~ and ~~APT Segment~~Consolidated Adjusted EBITDA. We have included these non-GAAP measures because management believes that they help to facilitate period to period comparisons of our operating ~~results. We believe the non-GAAP measures~~results and provide useful information to both management and users of the financial statements by excluding certain expenses, gains and losses that may not be indicative of core operating results and business outlook. Management uses these non-GAAP measures in evaluating the performance of our business.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

We define Consolidated EBITDA as net income adjusted for the impact of the following items that are either non-cash or that we do not consider representative of our ongoing operating performance: depreciation, amortization, depletion, accretion, amortization of upfront customer consideration that was recorded as a component of the Marshall Mine Acquisition ("Upfront Customer Consideration"), interest expense, net and income tax (benefit) expense. We define Consolidated Adjusted EBITDA as Consolidated EBITDA reduced by the non-cash impact of equity earnings from equity method investments and ~~gain on change in estimate, asset retirement obligation and~~ increased by cash distributions from equity method investments and ~~impairment~~loss on early settlement of ~~long-lived assets.~~the Norit Receivable. Because Consolidated Adjusted EBITDA omits certain non-cash items, we believe that the measure is less susceptible to variances that affect our operating performance.

We define APT Segment EBITDA (loss) as APT Segment Operating Income (loss) adjusted for the impact of the following items that are either non-cash or that we do not consider representative of our ongoing operating performance: depreciation, amortization, depletion, accretion and interest expense, net and amortization of Upfront Customer Consideration. We define APT Segment Adjusted EBITDA (loss) as APT Segment EBITDA (loss) reduced by gain on settlement and gain on change in estimate, asset retirement obligation and increased by impairment of long-lived assets. There were no additional adjustments made to APT Segment Adjusted EBITDA (loss) for the three and six months ended June 30, 2021.

We define RC Segment EBITDA as RC Segment operating income adjusted for the impact of the following items that are either non-cash or that we do not consider representative of our ongoing operating performance: depreciation, amortization, depletion, accretion and interest expense. We define RC Segment Adjusted EBITDA as RC Segment EBITDA reduced by the non-cash impact of equity earnings from equity method investments and increased by cash distributions from equity method investments.

When used in conjunction with GAAP financial measures, we believe these non-GAAP measures are supplemental measures of operating performance that explain our operating performance for our ~~period to period~~period-to-period comparisons and against our competitors' performance. Generally, we believe these non-GAAP measures are less susceptible to variances that affect our operating performance results.

We expect the adjustments to Consolidated ~~Adjusted~~ EBITDA and ~~APT Segment~~Consolidated Adjusted EBITDA in future periods will be generally similar. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP.

Consolidated EBITDA and Adjusted EBITDA


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021
Net income (loss)		$	16,590	$	(23,814)	$	30,327	$	(25,707)
Net (loss) income										Net (loss) income	$	(3,033)	$	13,737
Depreciation, amortization, depletion and accretion	Depreciation, amortization, depletion and accretion	1,904		1,733		4,010		4,030		Depreciation, amortization, depletion and accretion	1,506		2,106
Amortization of Upfront Customer Consideration	Amortization of Upfront Customer Consideration	127		—		254		—		Amortization of Upfront Customer Consideration	127		127
Interest expense, net	Interest expense, net	434		945		1,163		2,113		Interest expense, net	64		729
Income tax expense		4,943		103		9,432		461
Consolidated EBITDA (loss)		23,998		(21,033)		45,186		(19,103)
Income tax (benefit) expense										Income tax (benefit) expense	—		4,489
Consolidated (EBITDA loss) EBITDA										Consolidated (EBITDA loss) EBITDA	(1,336)		21,188
Cash distributions from equity method investees	Cash distributions from equity method investees	20,625		15,400		43,876		32,516		Cash distributions from equity method investees	2,514		23,251
Equity earnings	Equity earnings	(21,437)		(8,168)		(39,749)		(16,441)		Equity earnings	(833)		(18,312)
Gain on change in estimate, asset retirement obligation		(1,942)		—		(1,942)		—
Impairment		—		26,103		—		26,103

Loss on early settlement of Norit Receivable										Loss on early settlement of Norit Receivable	535		—
Consolidated Adjusted EBITDA	Consolidated Adjusted EBITDA	$	21,244	$	12,302	$	47,371	23,075		Consolidated Adjusted EBITDA	$	880	$	26,127

~~Business Segments~~

As of June 30, 2021, we have two reportable segments: (1) RC and (2) APT. The business segment measurements provided to and evaluated by our chief operating decision maker are computed in accordance with the principles listed below:

•~~The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2020 Form 10-K.~~

•~~Segment revenues include equity method earnings and losses from our equity method investments.~~

•Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Rent and occupancy, Legal and professional fees, and General and administrative.

•~~RC segment operating income includes interest expense directly attributable to the RC segment.~~

~~The principal products and services of our segments are:~~

1.~~RC - Our RC segment derives its earnings from equity method investments as well as royalty payment streams and other revenues related to enhanced combustion of and reduced emissions of both NO~~X and mercury from the burning of coal. Our equity method investments related to the RC segment primarily include Tinuum Group and Tinuum Services. Segment revenues include our equity method earnings (losses) from our equity method investments and M-45 License royalties earned from Tinuum Group. These earnings are included in the Earnings from equity method investments and License royalties, related party line items in the Condensed Consolidated Statements of Operations. Key drivers to the RC segment performance are the produced and sold RC from both operating and retained RC facilities, royalty-bearing tonnage and the number of operating (leased or sold) and retained RC facilities. These key drivers impact our earnings and cash distributions from equity method investments. Both Tinuum Group and Tinuum Services expect to commence significantly winding down their operations starting in the third quarter of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021. As such, our earnings and distributions from our RC segment will substantially cease as of December 31, 2021.

2.APT - Our APT segment includes revenues and related expenses from the sale of our AC and chemical products, which are used to purify coal-fired utilities, industrials, water treatment plants, and other markets. For the purification of air and gases, one of the uses of AC is to reduce mercury emissions and other air contaminants, specifically at coal-fired power generators and other industrial companies. These amounts are included within the Consumables and respective cost of revenue line items in the Condensed Consolidated Statements of Operations.

Management uses segment operating income (loss) to measure profitability and performance at the segment level. Management believes segment operating income (loss) provides investors with a useful measure of our operating performance and underlying trends of the businesses. Segment operating income (loss) may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our Condensed Consolidated Statements of Operations.

~~The following table presents our operating segment results for the three and six months ended June 30, 2021 and 2020:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Revenues:
Refined Coal:
Earnings in equity method investments $ 21,437 $ 8,168 $ 39,749 $ 16,441
License royalties, related party 3,657 3,313 7,723 6,359
25,094 11,481 47,472 22,800
Advanced Purification Technologies:
Consumables 15,976 8,170 33,007 17,387
15,976 8,170 33,007 17,387
Total segment reporting revenues 41,070 19,651 80,479 40,187
Adjustments to reconcile to reported revenues:
Earnings in equity method investments (21,437) (8,168) (39,749) (16,441)
Total reported revenues $ 19,633 $ 11,483 $ 40,730 $ 23,746
Segment operating income (loss):
Refined Coal $ 24,905 $ 10,777 $ 47,176 $ 21,637
Advanced Purification Technologies 258 (29,999) 273 (37,369)
Total segment operating income (loss) $ 25,163 $ (19,222) $ 47,449 $ (15,732)

~~The following table details the segment revenues of our respective equity method investments:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Earnings from Tinuum Group $ 19,125 $ 6,764 $ 35,487 $ 13,202
Earnings from Tinuum Services 2,312 1,404 4,262 3,242
Earnings (loss) from other — — — (3)
Earnings from equity method investments $ 21,437 $ 8,168 $ 39,749 $ 16,441

~~For the three months ended June 30, 2021 and June 30, 2020~~

RC earnings increased primarily due to an increase in equity earnings in Tinuum Group for the three months ended June 30, 2021 compared to the corresponding quarter in 2020, primarily from the addition of three new RC facilities in 2020.

For the three months ended June 30, 2021, earnings from Tinuum Services increased compared to the corresponding quarter in 2020 primarily due to an increase in tonnage quarter over quarter and an increase in the number of operating RC facilities in which Tinuum Services provides operating and maintenance services from 19 to 21.

RC earnings related to M-45 License royalties increased for the three months ended June 30, 2021 compared to the corresponding quarter in 2020 due to higher tonnage quarter over quarter, which was primarily a result of an increase in RC facilities that use the M-45 Technology. While tonnage increased quarter over quarter, there was a reduction in the royalty rate per ton primarily attributable to a majority of the RC contracts having fixed lease payments such that increased tonnages did not result in increased earnings.

~~For the six months ended June 30, 2021 and June 30, 2020~~

RC earnings increased primarily due to an increase in equity earnings in Tinuum Group for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily from the addition of three new RC facilities in 2020. Further, for the six months ended June 30, 2020, we recognized equity earnings from Tinuum Group equal to our proportionate share of Tinuum Group's net income for the period, which was less than cash distributions received for the same period.

For the six months ended June 30, 2021, earnings from Tinuum Services increased compared to the six months ended June 30, 2020 primarily due to an increase in tonnage quarter over quarter and an increase in the number of operating RC facilities in which Tinuum Services provides operating and maintenance services from 19 to 21.

RC earnings related to M-45 License royalties increased for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to higher tonnage period over period, which was primarily a result of an increase in RC facilities that use the M-45 Technology. While tonnage increased period over period, there was a reduction in the royalty rate per ton primarily attributable to lower royalty amounts paid related to a facility that was partially retained during 2020 and was producing a higher per-ton royalty amount prior to closure by Tinuum in the second half of 2020.

~~Outlook~~

Both Tinuum Group and Tinuum Services expect to commence significantly winding down their operations starting in the third quarter of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021. During the second quarter of 2021, Tinuum Group ceased operating an RC facility, with the remaining RC facilities expected to cease operations during the second half of 2021. The loss of equity earnings, distributions and M-45 License royalties beginning in 2022 will have a material adverse effect on our financial condition and consolidated operating results compared to historical periods. Earnings in the RC segment for 2021 will continue to be impacted by coal-fired dispatch and invested facilities with leases subject to periodic renewals being terminated, repriced, or otherwise subject to renegotiated terms. As a result of the wind-down in both Tinuum Group's and Tinuum Services' operations occurring through the remainder of 2021, we expect our earnings in both entities to decrease in 2021 compared to 2020. However, in 2021, cash distributions should substantially exceed earnings.

~~RC Segment EBITDA and Adjusted EBITDA~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
RC Segment operating income $ 24,905 $ 10,777 $ 47,176 $ 21,637
Depreciation, amortization, depletion and accretion 12 32 32 59
Interest expense 7 28 7 160
RC Segment EBITDA 24,924 10,837 47,215 21,856
Cash distributions from equity method investees 20,625 15,400 43,876 32,516
Equity earnings (21,437) (8,168) (39,749) (16,441)
RC Segment Adjusted EBITDA $ 24,112 $ 18,069 $ 51,342 $ 37,931

~~APT~~

~~Discussion of revenues derived from our APT segment and costs related thereto are included above in our consolidated results.~~

~~For the three months ended June 30, 2021 and June 30, 2020~~

APT segment operating income increased for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily due to the Impairment Charge of $26.1 million recorded for the three months ended June 30, 2020. In addition consumables revenues and associated margins increased for the three months ended June 30, 2021, driven by an increase in volume quarter over quarter, specifically product sold under the Supply Agreement. Our gross margin, exclusive of depreciation and amortization, increased primarily due to the higher volumes that resulted in a lower fixed cost per pound compared to the three months ended June 30, 2020.

~~For the six months ended June 30, 2021 and June 30, 2020~~

APT segment operating income increased for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to the Impairment Charge of $26.1 million recorded for the six months ended June 30, 2020. Further, during the six months ended June 30, 2021 consumable revenues and associated margins increased, driven by an increase in volume period over period, specifically products sold under the Supply Agreement.

During the three and six months ended June 30, 2020, we incurred costs of $0.3 million related to sequestration of certain of our employees at the Red River Plant. These costs included hazardous pay, lodging expense and other related costs for 60 days.

~~Outlook~~

Based on current market estimates, we believe that the APT segment will continue to be affected by power generation and the pricing of other sources, including natural gas and renewable energy, as well as weather throughout the U.S. For the remainder of 2021, we expect other power generation sources to have higher prices than in previous quarters, increasing demand for our products. Further, in 2021 and beyond, we expect the Supply Agreement to continue to play a significant role in diversifying our product mix into markets outside of power generation.

~~APT Segment Adjusted EBITDA (Loss)~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
APT Segment operating income (loss) $ 258 $ (29,999) $ 273 $ (37,369)
Depreciation, amortization, depletion and accretion 1,770 1,538 3,702 3,782
Amortization of Upfront Customer Consideration 127 — 254 —
Interest expense, net 79 93 158 187
APT Segment EBITDA (loss) $ 2,234 $ (28,368) $ 4,387 $ (33,400)
Gain on change in estimate, asset retirement obligation (1) (1,942) — (1,942) —
Impairment — 26,103 — 26,103
APT Segment Adjusted EBITDA (loss) $ 292 $ (2,265) $ 2,445 $ (7,297)

~~(1) Included in APT segment operating income for the three and six months ended June 30, 2021 is a $1.9 million gain related to the change in the Marshall Mine ARO as of June 30, 2021.~~

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Liquidity and Capital Resources

~~Overview of~~Current Resources and Factors Affecting Our Liquidity

For the six months ended June 30, 2021, our liquidity position was positively affected primarily from distributions from Tinuum Group and Tinuum Services, M-45 License royalty payments from Tinuum Group.

As of ~~June 30, 2021,~~March 31, 2022, our principal sources of liquidity include:

•cash and cash equivalents on hand, excluding restricted cash of ~~$16.0~~$10.0 million pledged under the ~~Line of Credit and~~ Surety ~~Agreement requirements;~~

•~~distributions from Tinuum Group and Tinuum Services;~~

•~~M-45 License royalty payments from Tinuum Group;~~

•~~operations of the APT segment;~~Agreement; and

•~~the Line of Credit.~~our operations.

As of ~~June 30, 2021,~~March 31, 2022, our principal uses of liquidity ~~include:~~included:

•our business operating ~~expenses, including federal~~expenses;

•capital and ~~state tax payments;~~spare parts expenditures;

•payments on our lease obligations; and

•payments of ARO liabilities associated with the Five Forks Mine and Marshall Mine.

Due to the expiration of the Section 45 tax credit period as of December 31, 2021 and the resultant wind down of Tinuum Group's and Tinuum Services' operations in 2022, distributions from Tinuum Group and Tinuum Services will no longer be a significant source of liquidity.

Tinuum Group and Tinuum Services Distributions

The following table summarizes the cash distributions from our equity method investments ~~that most significantly affected~~

~~our consolidated cash flow results~~ for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Tinuum Services						Tinuum Services	$	1,501	$	3,502
Tinuum Group	Tinuum Group	$	38,874	$	27,364	Tinuum Group	1,012		19,749
Tinuum Services		5,002		5,152
Other						Other	1		—
Distributions from equity method investees	Distributions from equity method investees	$	43,876	$	32,516	Distributions from equity method investees	$	2,514	$	23,251

Cash distributions from Tinuum ~~Group~~ for the ~~six~~three months ended ~~June 30, 2021 increased~~March 31, 2022 decreased by ~~$11.5~~$20.7 million compared to the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 primarily due to ~~three RC facilities added in 2020.~~

~~Future cash flows from Tinuum are expected to range from $30 million to $40 million. The key drivers in achieving these future cash flows are based on the following:~~

•~~22 invested facilities as of June 30, 2021 and inclusive of all net Tinuum cash flows (distributions and license~~

~~royalties), offset by estimated federal and state income tax payments.~~

~~Expected future cash flows from Tinuum Group are based on the following key assumptions:~~

•~~Tinuum Group continues to not operate retained facilities;~~

•~~Tinuum Group does not have material unexpected expenditures related to remediation costs;~~

•~~Tax equity lease renewals on invested facilities are not terminated or repriced; and~~

•~~Coal-fired power generation remains consistent with contractual expectations.~~

~~Both~~ Tinuum Group and Tinuum Services ~~expect to commence significantly winding down their~~ceasing material operations ~~starting in the third quarter of 2021 due to the expected expiration of the Section 45 tax credit period~~ as of December 31, 2021. As such, our distributions from our RC segment are expected to decline during the second half of 2021 and will substantially cease as of December 31, 2021, pending final remediation of Tinuum Group’s RC facilities that is expected to occur in 2022.

~~PPP Loan~~

On April 20, 2020, we entered into the PPP Loan under the PPP, evidenced by a promissory note with BOK, providing for $3.3 million in proceeds, which was funded on April 21, 2020. The PPP Loan matures April 21, 2022. The PPP Loan principal may be forgiven subject to the terms of the PPP and approval by the SBA. The interest rate on the PPP Loan is 1.00%. The PPP Loan is unsecured and contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or BOK, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from us, or filing suit and obtaining judgment against us.

In January 2021, we submitted an application to the SBA for forgiveness of the PPP Loan and on July 27, 2021, we received formal notification in the form of a letter dated July 19, 2021 from the Lender that the SBA approved our PPP Loan forgiveness application for our Loan in the amount of $3.3 million (including accrued interest). We will account for the debt forgiveness during its fiscal third quarter of 2021 and will recognize a gain on extinguishment of debt in the amount of $3.3 million in the Consolidated Statements of Operations.

Our business has been classified as an essential business, and therefore we continue to operate on a modified basis to comply with governmental restrictions and public health authority guidelines. In April 2020, we sequestered approximately 60 employees to continue to run the Red River Plant and build-up inventory in order to supply our customers. This resulted in additional costs as the sequestered employees received hazard pay. We used proceeds from the PPP Loan to fund our payroll costs.

~~Senior Term Loan~~

On December 7, 2018, we and ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, and certain other subsidiaries of the Company as guarantors, The Bank of New York Mellon as administrative agent, and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo”), affiliates of a beneficial owner of greater than five percent of our common stock and a related party, entered into the Senior Term Loan in the amount of $70.0 million, less original issue discount of $2.1 million. Proceeds from the Senior Term Loan were used to fund the acquisition of Carbon Solutions. We also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan bore interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which was adjusted quarterly to the current 3-month LIBOR rate, and interest was payable quarterly in arrears. The Senior Term Loan was secured by substantially all the assets of the Company, including the cash flows from the Tinuum Entities, but excluding our equity interests in the Tinuum entities.

On June 1, 2021 and prior to the Senior Term Loan's maturity date, we paid-off in its entirety the Senior Term Loan and all remaining accrued interest through this date in the amount of $6.1 million. The Company did not incur any prepayment fees associated with the early pay-off.

~~Line of Credit~~

In September 2013, ADA, as borrower, and us, as guarantor, entered into the Line of Credit with the Lender for an aggregate borrowing amount of $10.0 million, which was secured by certain amounts due to us from certain Tinuum Group RC leases. The Line of Credit has been amended 15 times from the period from December 2, 2013 through June 30, 2021 and included a reduction in the borrowing amount to $5.0 million in September 2018.

On March 23, 2021, we and the Lender entered into an amendment to the Line of Credit (the "Fifteenth Amendment"), which extended the maturity date of the Line of Credit to December 31, 2021 and increased the minimum cash requirement from $5.0 million to $6.0 million. On July 29, 2021, the Company and the Lender entered into the Sixteenth Amendment (the "Sixteenth Amendment") to the Line of Credit. The Sixteenth Amendment amends certain terms and conditions related to collateral securing the Line of Credit.

~~As of June 30, 2021, we have $3.7 million of borrowing availability and no outstanding borrowings under the Line of Credit.~~

Stock Repurchases and Dividends

In November 2018, the Board authorized us to purchase up to $20.0 million of our outstanding common stock under a stock repurchase program (the "Stock Repurchase Program"), which was to remain in effect until December 31, 2019 unless otherwise modified by the Board. As of November 2019, $2.9 million remained outstanding related to the Stock Repurchase Program. In November 2019, the Board authorized an incremental $7.1 million to the Stock Repurchase Program and provided that it will remain in effect until all amounts are utilized or it is otherwise modified by the Board.

~~Under the Stock Repurchase Program, for~~For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, we did not repurchase any ~~shares. For the three and six months ended June 30, 2020, we purchased zero and 20,613~~ shares ~~respectively, of our common stock for cash of zero and $0.2 million, respectively, inclusive of commissions and fees. As of June 30, 2021, we had $7.0 million remaining~~ under the Stock Repurchase ~~Program.~~

~~For the six months ended June 30, 2021 and 2020, we declared and paid quarterly~~Program or declare or pay any cash dividends to ~~stockholders of zero and $4.8 million, respectively.~~stockholders.

4126

~~Liquidity Outlook~~

~~Our ability~~Cash Flows

Three Months Ended March 31, 2022 vs. Three Months Ended March 31, 2021

Cash, cash equivalents and restricted cash increased from $88.8 million as of December 31, 2021 to ~~continue~~$89.8 million as of March 31, 2022. The following table summarizes our cash flows for the three months ended March 31, 2022 and 2021, respectively:


	Three Months Ended March 31,
(in thousands)	2022		2021		Change
Cash and cash equivalents and restricted cash provided by (used in):





































Operating activities	$	2,094	$	21,947	$	(19,853)




















Investing activities	(439)		4,886		(5,325)














Financing activities	(628)		(10,531)		9,903
Net change in cash and cash equivalents and restricted cash	$	1,027	$	16,302	$	(15,275)

Cash flow from operating activities

Cash flows provided by operating activities for the three months ended March 31, 2022 decreased by $19.9 million compared to ~~generate sufficient~~the three months ended March 31, 2021. The net decrease was primarily attributable to decreases in Earnings from equity method investees of $17.5 million, Deferred income tax expense of $3.1 million, and Depreciation, amortization, depletion and accretion of $0.6 million. Also contributing to the net decrease in cash flows provided by operating activities period over period was a decrease in Distributions from equity method investees, return on investment of $16.1 million. Offsetting the net decrease in cash flows provided by operating activities for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was a net decrease in net income of $16.8 million for the three months ended March 31, 2022 as a result of net loss recognized for the three months ended March 31, 2021. Further offsetting the net decrease in cash flows provided by operating activities was an increase related to a recognized loss of $0.5 million on the settlement of the Reclamation Reimbursement.

Cash flow ~~required~~from investing activities

Cash flows from investing activities decreased for the three months ended March 31, 2022 compared to meet ongoing operational needs and obligations, and make potential future dividend payments and share repurchases depends upon several factors, including executing on our contracts and initiatives, receiving M-45 License royalty payments from Tinuum Group andthe three months ended March 31, 2021 by $5.3 million primarily as a result of a reduction of distributions from ~~Tinuum Group and Tinuum Services, increasing our share~~equity earnings in excess of cumulative earnings.

Cash flow from financing activities

Cash flows used in financing activities for the ~~market for APT consumables, including expanding our overall AC business into additional adjacent markets and improving our customer and product mix.~~three months ended March 31, 2022 compared to the three months ended March 31, 2021 decreased by $9.9 million primarily from decreases in principal loan repayments on a senior term loan.

Material Cash Requirements

For the remainder of 2021, our primary source of liquidity is expected to be distributions from Tinuum Group and Tinuum Services. These distributions in 2021 will provide sufficient cash on hand to fund operations in 2021 and 2022. For 2021,2022, we expect to ~~spend $11.8~~incur $13.0 million in capital expenditures compared to ~~$7.1~~$7.6 million incurred in ~~2020.~~2021. This increase is primarily the result of forecasted capital improvements to the Red River Plant of approximately $7.0 million, product specific capital expenditures related to the Supply Agreement ~~which is estimated to be $3.7~~of approximately $1.0 million ~~for the second half of 2021,~~ and ~~routine~~ scheduled maintenance outages, which occurred in the second quarter of 2021. As a result of the Plant Incident, the Red River Plant was shut down for nine days for repair. The cash flow impact associated with the incident was $0.2 million for repairs and $0.7 million in purchased inventory.improvements.

~~During the three months ending June 30,~~In May 2021, we entered into the Retention Agreements ~~which are~~ for the purpose of retaining officers and key employees in order to maintain our current business operations, while we pursue and execute on our strategic initiatives. The total amount ~~due at time of payment~~owed pursuant to the Retention Agreements is ~~$2.4~~$2.0 million, which ~~will be a future use of cash.~~we expect to pay in 2022.

Due to the expiration of the Section 45 tax period as of December 31, 2021 and the resultant wind down of Tinuum Group's and Tinuum Services' operations by the end of 2021, distributions from Tinuum Group will no longer be a material source of liquidity after 2021.

~~As we look to 2022 and beyond, our primary sources of liquidity are expected to be from cash on hand and through our ongoing operations of our APT segment.~~ We believe the Supply Agreement will provide material incremental volume and lower operating cost efficiencies of our Red River plant, providing additional sources of operating cash flows in the future. Full and partial reimbursements on capital expenditures from Cabot will offset our uses of investing cash flows. Further, we intend to fund the remaining portion of the Reclamation Costs from cash on hand as well as cash flows generated from the Supply Agreement. We believe that as reclamation activities ~~occur~~proceed and the related bonded amounts required under the Surety Agreement are able to be reduced, there may be an opportunity to further reduce the collateral requirement. ~~In 2022 and beyond,~~On a normalized basis, our annual capital expenditures, exclusive of any capital specifically procured for Norit under the Supply Agreement or capital for major improvements to the Red River Plant, are expected to average approximately $5.0 million.

~~Sources and Uses of Cash~~

~~Six Months Ended June 30, 2021 vs. Six Months Ended June 30, 2020~~

~~Cash,~~We expect that our cash ~~equivalents and restricted cash increased from $35.9 million~~on hand as of ~~December~~March 31, ~~2020~~2022 will provide sufficient liquidity to ~~$57.3 million as of June 30, 2021. The following table summarizes our cash flows~~fund operations for the ~~six months ended June 30, 2021 and 2020, respectively:~~

Six Months Ended June 30,
(in thousands) 2021 2020 Change
Cash and cash equivalents and restricted cash provided by (used in):
Operating activities $ 18,151 $ 24,085 $ (5,934)
Investing activities 20,401 (4,696) 25,097
Financing activities (17,149) (14,736) (2,413)
Net change in cash and cash equivalents and restricted cash $ 21,403 $ 4,653 $ 16,750

~~Cash flow from operating activities~~

Cash flows provided by operating activities for the six months ended June 30, 2021 decreased by $5.9 million compared to the six months ended June 30, 2020. The net decrease was primarily attributable to a decrease in earnings from equity method investees of $23.3 million, impairment of long-lived assets of $26.1 million, and a decrease in Distributions from equity method investees, return on investment of $13.4 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Offsetting this net decrease in cash flows provided by operating activities was an increase in net income for the six months ended June 30, 2021 compared to net loss for the six months ended June 30, 2020 of $56.0 million.

~~Cash flow from investing activities~~

Cash flows provided by investing activities for the six months ended June 30, 2021 increased by $25.1 million compared to the six months ended June 30, 2020 primarily from distributions from equity earnings in excess of cumulative earnings.next 12 months.

4227

~~Cash flow from financing activities~~

~~Cash flows used in financing activities for~~For the ~~six~~three months ended June 30, 2021 increased by $2.4 million compared to the six months ended June 30, 2020 primarily from an increase in principal loan repayments on the Senior Term Loan of $4.0 million and proceeds received from the PPP Loan during the six months ended June 30, 2020 of $3.3 million. Offsetting these increases was a decrease period over period in dividends paid of $4.7 million and repurchases of common shares of $0.2 million.

~~Contractual Obligations~~

~~During the six months ended June 30, 2021,~~March 31, 2022, there were no material changes to our contractual obligations outside of the ordinary course of business from those reported as of December 31, ~~2020, except for a reduction in the Marshall Mine ARO of $1.9 million based on revised estimates from a reduction in scope of the reclamation work.~~

~~Off-Balance Sheet Arrangements~~2021.

As of ~~June 30, 2021,~~March 31, 2022, we had outstanding surety bonds of $24.1 million related to performance requirements under reclamation contracts associated with both the Five Forks Mine and the Marshall Mine. As of ~~June 30, 2021,~~March 31, 2022, we had restricted cash of $10.0 million ~~securing~~for the ~~Surety Agreement.~~surety bonds insuring the performance requirements for the reclamation of Marshall Mine. We expect that the obligations secured by these surety bonds will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related surety bonds should be released, and we should not have any continuing obligations. However, in the event any surety bond is called, our indemnity obligations could require us to reimburse the issuer of the surety bond.

Critical Accounting Policies and Estimates

Our ~~significant~~critical accounting policies and estimates have not changed from those reported in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the ~~2020~~2021 Form 10-K.

Recently Issued Accounting Standards

Refer to Note 1 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report for information regarding recently issued accounting standards applicable to us.

Forward-Looking Statements Found in this Report

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties. In particular, such forward-looking statements are found in this Part I, Item 2 above. 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 Quarterly Report to identify forward-looking statements, and such forward-looking statements include, but are not limited to, statements or expectations regarding:

(a)the ~~scheduled expiration~~anticipated effects from the increase in pricing of ~~the IRC Section 45 tax credit period in 2021 and the resulting wind down of the business of, and loss of revenue from, Tinuum Group and Tinuum Services;~~our AC products;

(b)the ~~production~~anticipated effects from the increase in costs of our AC products related cost increases in supply and ~~sale of RC by RC facilities through the remainder of 2021 that will qualify for Section 45 tax credits and associated cash flows from Tinuum Group expected through 2021;~~logistics;

(c)~~expected growth or contraction in and potential size of our target APT markets, including the water purification, food and beverage and pharmaceuticals markets;~~

~~(d)~~expected supply and demand for our ~~APT~~AC products and services;

~~(e)~~(d)increasing competition in the ~~APT~~AC market;

(e)the timing and effects of our review of strategic alternatives;

(f)future level of research and development activities;

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

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

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

(j)the timing and amounts of or changes in future revenues, ~~royalties earned,~~ 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;

(k)the amount of future capital expenditures needed for our business;

(l)awards of patents designed to protect our proprietary technologies both in the U.S. and other countries;

(m)the adoption and scope of regulations to control certain chemicals in drinking water; and

(n)opportunities to effectively provide solutions to U.S. coal-related businesses to comply with regulations, improve efficiency, lower costs and maintain reliability.

The forward-looking statements included in this Quarterly 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 sources and other technologies; technical, start up and operational difficulties; ~~decreases in the production of RC;~~ our inability to commercialize our APT technologies on favorable terms; our inability to ramp up our operations to effectively address recent and expected growth in our ~~APT~~ business; loss of key personnel; availability of materials and equipment for our ~~businesses;~~business; intellectual property infringement claims from third parties; pending litigation; as well as other factors relating to our business, 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 Quarterly 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 Quarterly Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law to do so.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information under this Item is not required to be provided by smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a‑15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we have evaluated, under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of ~~June 30, 2021.~~March 31, 2022 due to the material weakness described in Item 9A. "Controls and Procedures" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 related to the initial application of the adoption of ASC 606 related to the accounting for freight, which was previously immaterial; an inadequate monitoring of interpretative guidance of previously adopted accounting standards; and a lack of a control related to an annual review of policies and procedures related to material accounts.

Notwithstanding the material weaknesses, management has concluded that the Condensed Consolidated Financial Statements included in this Quarterly Report present fairly, in all material aspects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Changes in Internal Control Over Financial Reporting

~~There have been no~~Under the applicable SEC rules (Exchange Act Rules 13a-15(f) and 15d-15(f) management is required to evaluate any changes in ~~our~~ internal control over financial reporting ~~(as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act)~~that occurred during ~~the~~each fiscal quarter ~~ended June 30, 2021~~ that ~~have~~ materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting. As discussed in Item 9A. "Controls and Procedures" of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, we identified a material weakness in our internal control over financial reporting detailed above. During the fiscal quarter ended March 31, 2022, we commenced remediation efforts on our internal control over financial reporting related to the material weakness, which includes enhancements in the monitoring of interpretative guidance of previously adopted accounting standards and a periodic review of policies and procedures associated to material accounts. As of March 31, 2022, the remediation efforts continue and as a result, the material weakness has not yet been remediated. We expect to complete remediation procedures and enhance existing controls by the end of our fiscal quarter ended June 30, 2022, at such time we expect that these controls will be operating and in place for a sufficient period of time to conclude on their effectiveness as of December 31, 2022.

4429

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in litigation, claims and other proceedings related to the conduct of our business. Information with respect to this item may be found in Note 117 "Commitments and Contingencies" to the consolidated financial statements included in Item 1 of Part I of this Quarterly Report.

Item 1A. Risk Factors

There are no material updates to our risk factors as disclosed in the ~~2020 Form 10-K except as set forth below. This risk factor should be read together with the risk factors in the 2020~~2021 Form 10-K.

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

We own and operate a single activation-based manufacturing plant (the Red River Plant), which is our sole manufacturing plant for producing and selling products to our customers. Our ability to meet customer expectations, manage inventory, complete sales and achieve our objectives for operating efficiencies depends on the full-time operation of the Red River Plant. We cannot replicate our manufacturing methods at another plant due to the limited availability of similar manufacturing plants, the additional costs incurred in supplying raw materials such as lignite to another plant, and the risk of revealing our confidential and proprietary technologies and manufacturing processes.

If the Red River Plant was destroyed or damaged in a significant manner, we would suffer a loss of inventory to supply customers, likely incur additional costs to deliver products to our customers, and disrupt the ordinary course of our business. In addition, if contractual demand exceeds manufacturing capacity, we would jeopardize our ability to fulfill obligations under our contracts, which could, in turn, result in reduced sales, contract penalties or terminations, damage to our customer relationships and could have a material adverse effect on our business. While we have insured the Red River Plan for damage or destruction as well as for losses from business interruptions, there can be no assurance that any insurance coverage will be sufficient to cover any such losses.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

The statement concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Quarterly Report.

Item 5. Other Information

~~None.~~In May of 2021, the Company entered into agreements ("Retention Agreements") with all of its executive officers and certain other key employees of the organization for the benefit of retaining those officers and key employees in order to maintain the Company’s current business operations while it pursues and executes on its strategic initiatives.

On May 4, 2022, the Compensation Committee of the Board of Directors and the Board of Directors approved an amendment to the Retention Agreements ("Amended Retention Agreements") for its executive officers and certain other key employees of the organization. Under the Amended Retention Agreements, if accepted, the employees will receive (i) 40% of the original amount agreed to in the Retention Agreements ("Retention Pay") in August 2022; (ii) 60% of the Retention Pay on the earliest of (1) the date the employee’s employment is terminated without Cause or for Good Reason (as those terms are defined in the Retention Agreement or the employee’s employment agreement, as applicable), (2) 90 days after a Transaction Date or a Change in Control (as those terms are defined in the Retention Agreement or the employee’s employment agreement, as applicable), or (3) in January 2023; and (iii) an additional lump sum payment, ranging from 10% to 40% of the Retention Pay, will also be paid at the earliest of (1) the date the employee’s employment is terminated without Cause or for Good Reason (as those terms are defined in the Retention Agreement or the employee’s employment agreement, as applicable), (2) 90 days after a Transaction Date or a Change in Control (as those terms are defined in the Retention Agreement or the employee’s employment agreement, as applicable), or (3) in January 2023.

In order to receive the Amended Retention Agreements payments, the employees must remain employed at the Company through the dates above.

The total incremental amount payable pursuant to the Amended Retention Agreements is $0.5 million. Under the Amended Retention Agreements, the following executive officers will be paid the following amounts if they satisfy the conditions for payment: Greg Marken, Chief Executive Officer, $59,800; Morgan Fields, Chief Accounting Officer, $50,800; and Joe Wong, Chief Technology Officer, $52,020. The other key employees would be paid an aggregate amount of $0.3 million.

The foregoing description of the Amended Retention Agreements is qualified in its entirety by reference to the forms of Retention Agreement, copies of which are filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

4530

Item 6. Exhibits

Exhibit No.

Description

Form

File No.

Incorporated by Reference
Exhibit

Filing Date

Exhibit No.

Description

Form

File No.

Incorporated by Reference
Exhibit

Filing Date

4.6

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

8-K

001-37822

4.6

March 16, 2022

10.1

Sixteenth Amendment of 2013 Loan and Security Agreement by and among ADA-ES,Inc., Advanced Emissions Solutions, Inc., and BOK, NA d/b/a Bank of Oklahoma dated as of July 29, 2021

8-K

001-37822

10.1

July 29, 2021

10.1

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

31.1

Certification of Principal Executive Officer of Advanced Emissions Solutions, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)*

31.1

Certification of Principal Executive Officer of Advanced Emissions Solutions, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)*

31.2

Certification of Principal Financial Officer of Advanced Emissions Solutions, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)*

31.2

Certification of Principal Financial Officer of Advanced Emissions Solutions, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)*

32.1

Certification of Principal Executive Officer and Principal Financial Officer of Advanced Emissions Solutions, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.1

95.1

Mine Safety Disclosure Exhibit*

95.1

Mine Safety Disclosure Exhibit*

101. INS

XBRL Instance Document

101. INS

XBRL Instance Document*

101.SCH

XBRL Schema Document

101.SCH

XBRL Schema Document*

101.CAL

XBRL Calculation Linkbase Document

101.CAL

XBRL Calculation Linkbase Document*

101.LAB

XBRL Label Linkbase Document

101.LAB

XBRL Label Linkbase Document*

101.PRE

XBRL Presentation Linkbase Document

101.PRE

XBRL Presentation Linkbase Document*

101.DEF

Taxonomy Extension Definition Linkbase Document

101.DEF

Taxonomy Extension Definition Linkbase Document*

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

Notes:

* – Filed herewith.

4631

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Advanced Emissions Solutions, Inc.
	(Registrant)


~~August~~May 9, ~~2021~~2022	By:	/s/ Greg Marken
		Greg Marken
		~~Interim~~ Chief Executive Officer
		(Principal Executive Officer)


~~August~~May 9, ~~2021~~2022	By:	/s/ Morgan Fields
		Morgan Fields
		~~Vice President of~~Chief Accounting Officer
		(Principal Financial Officer)

4732


(in thousands)	As Originally Reported		Adjustments		As Adjusted
Assets acquired:
Receivables	$	0	$	513	$	513
Property, plant and equipment	3,863		0		3,863
Spare parts	100		0		100

Liabilities assumed:
Accounts payable and accrued expenses	(673)		160		(513)
Asset retirement obligation	(21,328)		0		(21,328)
Net assets acquired and liabilities assumed from Marshall Mine acquisition	(18,038)		673		(17,365)
Cabot Receivable	9,749		0		9,749
Upfront Customer Consideration	$	8,289	$	(673)	$	7,616


	As of
(in thousands)	June 30, 2021		December 31, 2020
Equity method investment in Tinuum Group	$	0	$	3,387
Equity method investment in Tinuum Services	3,501		4,242
Equity method investment in other	63		63


Total equity method investments	$	3,564	$	7,692


	Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
	Segment						Segment
	APT		RC		Total		APT		RC		Total
Revenue component
Consumables	$	15,976	$	0	$	15,976	$	33,007	$	0	$	33,007
License royalties, related party	0		3,657		3,657		0		7,723		7,723


Revenues from customers	15,976		3,657		19,633		33,007		7,723		40,730

Earnings from equity method investments	0		21,437		21,437		0		39,749		39,749

Total revenues from customers and earnings from equity method investments	$	15,976	$	25,094	$	41,070	$	33,007	$	47,472	$	80,479


	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Segment						Segment
	APT		RC		Total		APT		RC		Total
Revenue component
Consumables	$	8,170	$	0	$	8,170	$	17,387	$	0	$	17,387
License royalties, related party	0		3,313		3,313		0		6,359		6,359


Revenues from customers	8,170		3,313		11,483		17,387		6,359		23,746

Earnings from equity method investments	0		8,168		8,168		0		16,441		16,441

Total revenues from customers and earnings from equity method investments	$	8,170	$	11,481	$	19,651	$	17,387	$	22,800	$	40,187


	2021			2020
	Per share		Date paid	Per share		Date paid
Dividends declared during quarter ended:
March 31	$	0	N/A	$	0.25	March 10, 2020
June 30	$	0	N/A	$	0	N/A


	$	0		$	0.25


	Restricted Stock	Weighted-Average Grant Date Fair Value

Non-vested at January 1, 2021	373,860	$	7.25
Granted	387,632	$	5.28
Vested	(183,700)	$	7.45
Forfeited	(31,623)	$	5.75
Non-vested at June 30, 2021	546,169	$	5.88