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 September 30, 2022March 31, 2023
or
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, CO80111
(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 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "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 SymbolName of each exchange on which registered
Common stock, par value $0.001 per share ADESNasdaq Global Market
As of NovemberMay 2, 2022,2023, there were 19,110,91027,228,984 outstanding shares of Advanced Emissions Solutions, Inc. common stock, par value $0.001 per share.




INDEX
 PAGE




Part I. – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As ofAs of
(in thousands, except share data)(in thousands, except share data)September 30, 2022December 31, 2021(in thousands, except share data)March 31, 2023December 31, 2022
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
CashCash$75,823 $78,753 Cash$68,026 $66,432 
Receivables, netReceivables, net13,903 12,622 Receivables, net10,061 13,864 
Receivables, related parties— 2,481 
Inventories, netInventories, net15,261 7,850 Inventories, net20,232 17,828 
Prepaid expenses and other current assets7,653 6,661 
Prepaid expenses and other current assetsPrepaid expenses and other current assets6,405 7,538 
Total current assetsTotal current assets112,640 108,367 Total current assets104,724 105,662 
Restricted cash, long-termRestricted cash, long-term10,000 10,027 Restricted cash, long-term11,064 10,000 
Property, plant and equipment, net of accumulated depreciation of $10,704 and $7,684, respectively33,286 30,171 
Other long-term assets, net29,529 36,871 
Property, plant and equipment, net of accumulated depreciation of $13,477 and $11,897, respectivelyProperty, plant and equipment, net of accumulated depreciation of $13,477 and $11,897, respectively76,378 34,855 
Other long-term assets, netOther long-term assets, net41,785 30,647 
Total AssetsTotal Assets$185,455 $185,436 Total Assets$233,951 $181,164 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payable and accrued expensesAccounts payable and accrued expenses$18,652 $16,486 Accounts payable and accrued expenses$12,245 $16,108 
Current portion of finance lease obligations1,182 1,011 
Other current liabilities5,361 5,124 
Current portion of debt obligationsCurrent portion of debt obligations1,611 1,131 
Other current liabilitiesOther current liabilities6,188 6,645 
Total current liabilitiesTotal current liabilities25,195 22,621 Total current liabilities20,044 23,884 
Long-term finance lease obligations, net of current portion3,731 3,152 
Long-term debt obligations, net of current portionLong-term debt obligations, net of current portion20,119 3,450 
Other long-term liabilitiesOther long-term liabilities13,906 12,362 Other long-term liabilities13,647 13,851 
Total LiabilitiesTotal Liabilities42,832 38,135 Total Liabilities53,810 41,185 
Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)
Redeemable preferred stock - Series A Convertible Preferred subject to redemption: par value $0.001 per share, 8,900,000 shares authorized, 5,362,926 shares issued and outstandingRedeemable preferred stock - Series A Convertible Preferred subject to redemption: par value $0.001 per share, 8,900,000 shares authorized, 5,362,926 shares issued and outstanding18,927 — 
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
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, 23,730,499 and 23,460,212 shares issued, and 19,112,353 and 18,842,066 shares outstanding at September 30, 2022 and December 31, 2021, respectively24 23 
Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of September 30, 2022 and December 31, 2021, respectively(47,692)(47,692)
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none issued and outstanding except for Series A Convertible Preferred StockPreferred stock: par value of $.001 per share, 50,000,000 shares authorized, none issued and outstanding except for Series A Convertible Preferred Stock— — 
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 31,854,636 and 23,788,319 shares issued, and 27,236,490 and 19,170,173 shares outstanding at March 31, 2023 and December 31, 2022, respectivelyCommon stock: par value of $.001 per share, 100,000,000 shares authorized, 31,854,636 and 23,788,319 shares issued, and 27,236,490 and 19,170,173 shares outstanding at March 31, 2023 and December 31, 2022, respectively32 24 
Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of March 31, 2023 and December 31, 2022, respectivelyTreasury stock, at cost: 4,618,146 and 4,618,146 shares as of March 31, 2023 and December 31, 2022, respectively(47,692)(47,692)
Additional paid-in capitalAdditional paid-in capital103,175 102,106 Additional paid-in capital132,590 103,698 
Retained earningsRetained earnings87,116 92,864 Retained earnings76,284 83,949 
Total Stockholders’ EquityTotal Stockholders’ Equity142,623 147,301 Total Stockholders’ Equity161,214 139,979 
Total Liabilities and Stockholders’ EquityTotal Liabilities and Stockholders’ Equity$185,455 $185,436 Total Liabilities and Stockholders’ Equity$233,951 $181,164 

See Notes to the Condensed Consolidated Financial Statements
1

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited) 

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
(in thousands, except per share data)(in thousands, except per share data)2022202120222021(in thousands, except per share data)20232022
Revenues:Revenues:Revenues:
ConsumablesConsumables$28,437 $26,693 $79,578 $62,642 Consumables$20,805 $26,402 
License royalties, related party— 4,165 — 11,888 
Total revenuesTotal revenues28,437 30,858 79,578 74,530 Total revenues20,805 26,402 
Operating expenses:Operating expenses:Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortizationConsumables cost of revenue, exclusive of depreciation and amortization21,575 19,956 62,992 48,672 Consumables cost of revenue, exclusive of depreciation and amortization17,175 21,507 
Payroll and benefitsPayroll and benefits2,313 2,637 7,458 8,014 Payroll and benefits4,699 2,626 
Legal and professional feesLegal and professional fees3,668 1,106 7,395 4,340 Legal and professional fees4,538 2,172 
General and administrativeGeneral and administrative1,833 1,715 5,628 5,223 General and administrative2,778 1,926 
Depreciation, amortization, depletion and accretionDepreciation, amortization, depletion and accretion1,671 2,145 4,765 6,155 Depreciation, amortization, depletion and accretion2,137 1,506 
Gain on sale of Marshall Mine, LLCGain on sale of Marshall Mine, LLC(2,695)— 
Loss (gain) on change in estimate, asset retirement obligation— — 34 (1,942)
Total operating expensesTotal operating expenses31,060 27,559 88,272 70,462 Total operating expenses28,632 29,737 
Operating (loss) income(2,623)3,299 (8,694)4,068 
Operating lossOperating loss(7,827)(3,335)
Other income (expense):Other income (expense):Other income (expense):
Earnings from equity method investmentsEarnings from equity method investments— 22,195 3,222 61,944 Earnings from equity method investments638 833 
Gain on extinguishment of debt— 3,345 — 3,345 
Interest expenseInterest expense(83)(86)(259)(1,416)Interest expense(534)(86)
Other315 81 (19)652 
OtherOther182 (445)
Total other incomeTotal other income232 25,535 2,944 64,525 Total other income286 302 
(Loss) income before income tax expense(2,391)28,834 (5,750)68,593 
Income tax (benefit) expense— 4,581 — 14,013 
Net (loss) income$(2,391)$24,253 $(5,750)$54,580 
(Loss) earnings per common share (Note 1):
Loss before income taxesLoss before income taxes(7,541)(3,033)
Income tax benefitIncome tax benefit33 — 
Net lossNet loss$(7,508)$(3,033)
Loss per common share (Note 1):Loss per common share (Note 1):
BasicBasic$(0.13)$1.33 $(0.31)$2.99 Basic$(0.32)$(0.17)
DilutedDiluted$(0.13)$1.31 $(0.31)$2.96 Diluted$(0.32)$(0.17)
Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:
BasicBasic18,487 18,292 18,435 18,243 Basic23,770 18,344 
DilutedDiluted18,487 18,489 18,435 18,416 Diluted23,770 18,344 


See Notes to the Condensed Consolidated Financial Statements.


2

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)

Common StockTreasury StockCommon StockTreasury Stock
(Amounts in thousands, except share data)(Amounts in thousands, except share data)SharesAmountSharesAmountAdditional Paid-in CapitalRetained EarningsTotal Stockholders’
Equity
(Amounts in thousands, except share data)SharesAmountSharesAmountAdditional Paid-in CapitalRetained EarningsTotal Stockholders’
Equity
Balances, January 1, 202223,460,212 $23 (4,618,146)$(47,692)$102,106 $92,864 $147,301 
Balances, January 1, 2023Balances, January 1, 202323,788,319 $24 (4,618,146)$(47,692)$103,698 $83,949 $139,979 
Stock-based compensationStock-based compensation323,742 — — 463 — 464 Stock-based compensation483,242 — — — 563 — 563 
Issuance of common stock pursuant to Arq Acquisition, net of offering costsIssuance of common stock pursuant to Arq Acquisition, net of offering costs3,814,864 — — 12,433 — 12,437 
Issuance of common stock related to PIPE Investment, net of offering costsIssuance of common stock related to PIPE Investment, net of offering costs3,842,315 — — 15,216 — 15,220 
Issuance of warrantsIssuance of warrants— — — — 826 — 826 
Repurchase of common shares to satisfy minimum tax withholdingsRepurchase of common shares to satisfy minimum tax withholdings(74,104)— — — (146)— (146)
Repurchase of common shares to satisfy minimum tax withholdings(59,736)— — — (382)— (382)
Preferred stock dividends declared on redeemable preferred stockPreferred stock dividends declared on redeemable preferred stock— — — — — (157)(157)
Net lossNet loss— — — — — (7,508)(7,508)
Balances, March 31, 2023Balances, March 31, 202331,854,636 $32 (4,618,146)$(47,692)$132,590 $76,284 $161,214 
Net loss— — — — — (3,033)(3,033)
Balances, March 31, 202223,724,218 24 (4,618,146)(47,692)102,187 89,831 144,350 
Stock-based compensation(30,459)— — — 484 — 484 
Repurchase of common shares to satisfy minimum tax withholdings(551)— — — (3)— (3)
Net loss— — — — — (326)(326)
Balances, June 30, 202223,693,208 24 (4,618,146)(47,692)102,668 89,505 144,505 
Stock-based compensation37,291 — — — 507 — 507 
Cash dividends canceled on common stock— — — — — 
Net loss— — — — — (2,391)(2,391)
Balances, September 30, 202223,730,499 $24 (4,618,146)$(47,692)$103,175 $87,116 $142,623 


Common StockTreasury Stock
(Amounts in thousands, except share data)SharesAmountSharesAmountAdditional Paid-in CapitalRetained EarningsTotal Stockholders’
Equity
Balances, January 1, 202123,141,284 $23 (4,618,146)$(47,692)$100,425 $32,454 $85,210 
Stock-based compensation381,339 — — — 421 — 421 
Repurchase of common shares to satisfy minimum tax withholdings(40,975)— — — (216)— (216)
Net income— — — — — 13,737 13,737 
Balances, March 31, 202123,481,648 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, 202123,452,485 23 (4,618,146)(47,692)101,171 62,781 116,283 
Stock-based compensation30,801 — — — 489 — 489 
Net income— — — — — 24,253 24,253 
Balances, September 30, 202123,483,286 $23 (4,618,146)$(47,692)$101,660 $87,034 $141,025 
Common StockTreasury Stock
(Amounts in thousands, except share data)SharesAmountSharesAmountAdditional Paid-in CapitalRetained EarningsTotal Stockholders’
Equity
Balances, January 1, 202223,460,212 $23 (4,618,146)$(47,692)$102,106 $92,864 $147,301 
Stock-based compensation323,742 — — 463 — 464 
Repurchase of common shares to satisfy minimum tax withholdings(59,736)— — — (382)— (382)
Net loss— — — — — (3,033)(3,033)
Balances, March 31, 202223,724,218 $24 (4,618,146)$(47,692)$102,187 $89,831 $144,350 

See Notes to the Condensed Consolidated Financial Statements.

3

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in thousands)(in thousands)20222021(in thousands)20232022
Cash flows from operating activitiesCash flows from operating activitiesCash flows from operating activities
Net (loss) income$(5,750)$54,580 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net lossNet loss$(7,508)$(3,033)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation, amortization, depletion and accretionDepreciation, amortization, depletion and accretion4,765 6,155 Depreciation, amortization, depletion and accretion2,137 1,506 
Gain on sale of Marshall Mine, LLCGain on sale of Marshall Mine, LLC(2,695)— 
Operating lease expenseOperating lease expense738 663 
Earnings from equity method investmentsEarnings from equity method investments(3,222)(61,944)Earnings from equity method investments(638)(833)
Operating lease expense1,953 1,481 
Stock-based compensation expenseStock-based compensation expense1,455 1,476 Stock-based compensation expense563 464 
Deferred income tax expense— 9,046 
Amortization of debt discount and debt issuance costs— 945 
Loss (gain) on change in estimate, asset retirement obligation34 (1,942)
Gain on extinguishment of debt— (3,345)
Other non-cash items, netOther non-cash items, net404 (352)Other non-cash items, net11 550 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Receivables and related party receivablesReceivables and related party receivables1,199 (2,835)Receivables and related party receivables3,867 2,095 
Prepaid expenses and other assetsPrepaid expenses and other assets(991)(16)Prepaid expenses and other assets3,360 (725)
Inventories, netInventories, net(7,222)3,658 Inventories, net(2,312)(2,359)
Other long-term assets, netOther long-term assets, net2,136 (4,009)Other long-term assets, net(479)3,116 
Accounts payable and accrued expensesAccounts payable and accrued expenses1,827 2,388 Accounts payable and accrued expenses(14,025)(3,210)
Other current liabilitiesOther current liabilities(184)(3,489)Other current liabilities(210)(1,231)
Operating lease liabilitiesOperating lease liabilities1,445 3,878 Operating lease liabilities(787)2,680 
Other long-term liabilitiesOther long-term liabilities206 (3,031)Other long-term liabilities273 910 
Distributions from equity method investees, return on investmentDistributions from equity method investees, return on investment2,297 22,044 Distributions from equity method investees, return on investment— 1,501 
Net cash provided by operating activities352 24,688 
Net cash (used in) provided by operating activitiesNet cash (used in) provided by operating activities(17,705)2,094 
Cash flows from investing activitiesCash flows from investing activitiesCash flows from investing activities
Acquisition of property, plant, equipment, and intangible assets, netAcquisition of property, plant, equipment, and intangible assets, net(3,545)(1,359)
Cash and restricted cash acquired in business acquisitionCash and restricted cash acquired in business acquisition2,225 — 
Disposal of Marshall Mine, LLCDisposal of Marshall Mine, LLC(2,177)— 
Distributions from equity method investees in excess of cumulative earningsDistributions from equity method investees in excess of cumulative earnings3,316 44,707 Distributions from equity method investees in excess of cumulative earnings638 1,013 
Acquisition of property, plant, equipment, and intangible assets, net(6,178)(5,403)
Mine development costsMine development costs(345)(1,262)Mine development costs(38)(93)
Proceeds from sale of property and equipment1,241 895 
Net cash (used in) provided by investing activities(1,966)38,937 
Net cash used in investing activitiesNet cash used in investing activities(2,897)(439)
Cash flows from financing activitiesCash flows from financing activitiesCash flows from financing activities
Net proceeds from common stock issuanceNet proceeds from common stock issuance15,220 — 
Term Loan, related party, net of discount and issuance costsTerm Loan, related party, net of discount and issuance costs8,522 — 
Principal payments on finance lease obligationsPrincipal payments on finance lease obligations(913)(1,085)Principal payments on finance lease obligations(295)(226)
Repurchase of common shares to satisfy tax withholdings(385)(241)
Dividends paid(45)(92)
Principal payments on term loan— (16,000)
Repurchase of common stock to satisfy tax withholdingsRepurchase of common stock to satisfy tax withholdings(146)(382)
Principal payments on notes payablePrincipal payments on notes payable(41)— 
Dividends paid on common stockDividends paid on common stock— (20)
Net cash used in financing activities(1,343)(17,418)
(Decrease) increase in Cash and Restricted Cash(2,957)46,207 
Net cash provided by (used) in financing activitiesNet cash provided by (used) in financing activities23,260 (628)
Increase in Cash and Restricted CashIncrease in Cash and Restricted Cash2,658 1,027 
Cash and Restricted Cash, beginning of periodCash and Restricted Cash, beginning of period88,780 35,932 Cash and Restricted Cash, beginning of period76,432 88,780 
Cash and Restricted Cash, end of periodCash and Restricted Cash, end of period$85,823 $82,139 Cash and Restricted Cash, end of period$79,090 $89,807 
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 and equipment through finance lease$1,641 $— 
Equity issued as consideration for acquisition of businessEquity issued as consideration for acquisition of business$31,205 $— 
Change in accrued purchases for property and equipmentChange in accrued purchases for property and equipment$520 $10 
Paid-in-kind dividend on redeemable preferred stockPaid-in-kind dividend on redeemable preferred stock$157 $— 
Acquisition of property and equipment through accounts payable$339 $128 
See Notes to the Condensed Consolidated Financial Statements.
4

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 manufacturing mining and logistics operations located in Louisiana.Louisiana and a manufacturing facility in Kentucky. The Company is an environmental technology company and has been principally engaged in the sale of consumable air and water treatment 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 air quality and water regulations. The Company manufactures and sells AC and other chemicals used to capture and remove contaminants for coal-fired power generation, industrial and water treatment markets. The Company also owns an associated lignite mine ("Five Forks Mine") whichthat currently supplies the primary raw material for manufacturing AC.
Through December 31, 2021,Acquisition
On February 1, 2023 (the "Acquisition Date"), the Company generated substantial earnings from itsentered into a Securities Purchase Agreement (the "Purchase Agreement") with Arq Limited ("Arq Ltd."), a company incorporated under the laws of Jersey, pursuant to which the Company acquired all of the direct and indirect equity ownershipinterests of Arq Ltd.'s subsidiaries (the "Arq Acquisition," and hereafter referred to as "Arq") in Tinuum Group, LLC ("Tinuum Group"exchange for consideration (the "Purchase Consideration") totaling $31.2 million, and consisting of (i) 3,814,864 shares of the Company's common stock, par value $0.001 per share (the "Common Stock") and Tinuum Services, LLC ("Tinuum Services"(ii) 5,294,462 shares (the "Preferred Shares"), both of which are unconsolidated entities. Both Tinuum Group and Tinuum Services ceased material operations effective December 31, 2021 as a result of the expirationCompany's Series A Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock").
Arq's principal office is located in London, United Kingdom with an additional office located in Corbin, Kentucky near its production facility ("the Corbin Facility"). The Corbin location consists of bituminous coal reserves and a tax credit program under Internal Revenue Code Section 45 - Production Tax Credit (the "Section 45 Tax Credit Program"). Tinuum Group provided reduction of mercurymanufacturing facility to recover and nitrogen oxidepurify the bituminous coal fines for sale or further conversion to value-added specialty chemicals. Arq is a pre-revenue, environmental technology company that has developed a process for transforming coal waste into a purified, microfine carbon powder, known as Arq powderTM ("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"Arq Powder"). The Company expects to begin using Arq Powder to produce granular activated carbon ("GAC") products in the second half of 2024.
See further discussion of the Arq Acquisition in Note 2.
Loan Agreement
As required under the Purchase Agreement, and on February 1, 2023 (the "Closing Date"), the Company, as borrower, certain of its subsidiaries, as guarantors, and CF Global ("CFG"), a related party, as administrative agent and lender (the "Lender"), entered into a term loan (the "Term Loan") in the amount of $10.0 million, less original issue discount ("OID") of $0.2 million, upon execution of a Term Loan and Security Agreement (the "Loan Agreement"). The Company received net cash proceeds of $8.5 million after deducting the OID and debt issuance costs of $1.3 million.
The Loan Agreement also earned royaltiesprovides for technologiesthe issuance of a warrant (the "Warrant") to CFG to purchase 325,457 shares of Common Stock (the "Warrant Shares"), which represents 1% of the post-Arq Acquisition and PIPE Investment (as defined below) fully diluted share capital (as defined in the Loan Agreement), at an exercise price of $0.01 per share. The Warrant has a term of 7 years and contains a cashless exercise provision.
See further discussion of the Term Loan in Note 6.
Equity Financing
On February 1, 2023, the Company entered into Subscription Agreements (the "Subscription Agreements") with certain persons (the "Subscribers"), which included existing shareholders of Arq Ltd., three of which were licensedappointed to Tinuum Groupthe Company's Board of Directors (the "Board"), pursuant to which the Subscribers subscribed for and usedpurchased shares of Common Stock for an aggregate purchase price of $15.4 million and at certain RC facilities to enhance combustion and reduce emissionsa price per share of NOx and mercury from coal burned to generate electrical power. Tinuum Services operated and maintained$4.00 (such transaction, the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees"PIPE Investment").
See further discussion of the RC facilities. Presently, both Tinuum GroupPIPE Investment in Note 11.
5

Advanced Emissions Solutions, Inc. and Tinuum Services continueSubsidiaries
Notes to wind-down their operations, and the Company has received what it anticipates to be final cash distributions from these entities.Condensed Consolidated Financial Statements
(Unaudited)
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, 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 should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 (the "2021"2022 Form 10-K"). Significant accounting policies disclosed therein have not changed.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the 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 nine months ended September 30,March 31, 2023 and 2022, and 2021, potentially dilutive securities consist of unvested restricted stock awards ("RSAs") and contingent performance stock units ("PSUs").
5

Advanced Emissions Solutions, Inc. For the three months ended March 31, 2023 potentially dilutive securities also consist of outstanding shares of Series A Preferred Stock, which contain non-forfeitable rights to earnings and Subsidiaries
Notesdividends in the form of cash or shares of Series A Preferred Stock (the "Preferred Dividends"), determined at the option of the Company, and are deemed to Condensedbe participating securities ("Participating Securities"). As permitted, the Company has elected not to separately present basic or diluted earnings (loss) per share attributable to Participating Securities in the Consolidated Financial Statements
(Unaudited)
Statement of Operations for the three months ended March 31, 2023.
The following table sets forth the calculations of basic and diluted (loss) earningsloss per share:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended March 31,
(in thousands, except per share amounts)(in thousands, except per share amounts)2022202120222021(in thousands, except per share amounts)20232022
Net (loss) income$(2,391)$24,253 $(5,750)$54,580 
Net lossNet loss$(7,508)$(3,033)
Less: Dividends declared on redeemable preferred stockLess: Dividends declared on redeemable preferred stock157 — 
Loss attributable to common stockholdersLoss attributable to common stockholders$(7,665)$(3,033)
Basic weighted-average common shares outstandingBasic weighted-average common shares outstanding18,487 18,292 18,435 18,243 Basic weighted-average common shares outstanding23,770 18,344 
Add: dilutive effect of equity instrumentsAdd: dilutive effect of equity instruments— 197 — 173 Add: dilutive effect of equity instruments— — 
Diluted weighted-average shares outstandingDiluted weighted-average shares outstanding18,487 18,489 18,435 18,416 Diluted weighted-average shares outstanding23,770 18,344 
(Loss) earnings per share - basic$(0.13)$1.33 $(0.31)$2.99 
(Loss) earnings per share - diluted$(0.13)$1.31 $(0.31)$2.96 
Loss per share - basicLoss per share - basic$(0.32)$(0.17)
Loss per share - dilutedLoss per share - diluted$(0.32)$(0.17)
For the three and nine months ended September 30,March 31, 2023 and 2022, potentially dilutive securities of 0.84.2 million and 0.70.3 million shares of common stock, respectively, were outstanding but were not included in the calculation of diluted net loss per share because the effect would have been anti-dilutive. Further, for the three
6

Advanced Emissions Solutions, Inc. and nine months ended 2021, potentially dilutive securities of zero and 0.1 million shares of common stock, respectively, were outstanding but were not included in the calculation of diluted net (loss) income per share because the effect would have been anti-dilutive.Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 20212022 Form 10-K. Actual results could differ from these estimates.
Risks and Uncertainties
The loss of earnings and cash distributions from both Tinuum Group and Tinuum Services will continue to have a material adverse impact on the Company’s financial position, results of operations and cash flows. For 2022,2023, the Company is principally dependent on the operations of its APT business and its cash on hand to 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 for purposes of power generation 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, there is an increase in coal consumption and thus demand for the Company's products also increases.
In addition, coal consumption for purposes of power generation and demand for the Company's products are affected by the demand for electricity, which is higher in the warmer and colder months of the year. As a result, the Company's interim period results are subject to seasonal variations whereby its revenues and cost of revenues tend to be higher in its first and third fiscal quarters compared to its second and fourth fiscal quarters. 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.
Concentration of credit risk
The Company is exposed to concentrations of credit risk primarily related to cash held at financial institutions and accounts receivable. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. Historically, the losses related to credit risk have been immaterial.
The Company evaluates the creditworthiness of its customers prior to entering into agreements to sell its products and, as necessary, throughout the life of the customer relationship.
The Company holds substantially all of its cash at twoone financial institutionsinstitution as of September 30, 2022.March 31, 2023. If a financial institution 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.
The Company evaluates the creditworthiness of its customers prior to entering into an agreement to sell its products and, as necessary, through the life of the customer relationship.
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.
6

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Segments
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 September 30, 2022, the Company's CODM was the Company's Chief Executive Officer, and the Company concluded that APT was its one reportable segment.
Given the wind-down of Tinuum Group and Tinuum Services and the 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 one reportable segment and therefore has removed its segment disclosures for this Quarterly Report.
New Accounting Standards
In June 2016,Effective January 1, 2023, the FASB issuedCompany adopted 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 inThe adoption of 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. The Company doesdid not believe this standard will have a material impact on itsthe Company's financial statements and disclosures.
Note 2 - Proposed MergerArq Acquisition
On August 19, 2022,The Company accounted for the Company entered intoArq Acquisition as an acquisition of a Transaction Agreement (the "Transaction Agreement") with Elbert Holdings, Inc., a Delaware corporation and wholly owned subsidiarybusiness as of the Company ("New ADES"), Elbert Merger Sub 1, Inc., a Delaware corporationAcquisition Date. The total Purchase Consideration was $31.2 million and wholly owned subsidiaryhas been preliminarily allocated to the acquired assets and assumed liabilities of New ADES ("Merger Sub"), and Arq Limited, a company incorporated under the laws of Jersey ("Arq"), pursuant to which (i) New ADES will acquire 100%based on their estimated fair values as of the outstanding equity interestsAcquisition Date. The Purchase Consideration was comprised of Arq (the "Arq Share Acquisition"), and (ii) stockholdersthe fair values as of ADES will have the right to receiveAcquisition Date of 3,814,864 shares of New ADESCommon Stock, valued at $12.4 million, and either their pro rata share of a $10.05,294,462 Preferred Shares, valued at $18.8 million. The Company also incurred $8.7 million aggregate cash payment or additional shares in New ADES ((i)acquisition-related costs, which were expensed as incurred and (ii) collectively, the "Merger").
The transactions contemplated by the Transaction Agreement, including but not limited to the ADES Merger (defined below), the Arq Share Acquisition, and the PIPE Investment (defined below), (collectively, the "Transactions") will occur through multiple steps at the time of closing. First, Merger Sub 1 will be merged into ADES, with ADES surviving as a wholly owned subsidiary of New ADES (the "ADES Merger").
In the ADES Merger, stockholders of the Company will be given the election to exchange each share of common stock of the Company for either (i) 1.11 shares of New ADES common stock plus $0.52 in cash (the "Mixed ADES Consideration") or (ii) 1.22 shares of New ADES common stock (the "All-Stock ADES Consideration," and such conversion rate, the "All Stock Conversion Rate"). Stockholders that do not make an affirmative election to receive the Mixed ADES Consideration or the All-Stock ADES Consideration will receive the All-Stock ADES Considerationincluded in the ADES Merger.
Second, following"General and administrative" line item in the completionStatements of the ADES Merger pursuant to a Scheme of Arrangement (the "Scheme of Arrangement") and in accordance with the Laws of the Bailiwick of Jersey, existing shareholders of Arq will transfer all of their equity interests in Arq to New ADES in exchange for an aggregate number of 19,729,235 newly issued shares of New ADES common stock (the "Arq Share Acquisition"). The Scheme of Arrangement will become effective at such time as an act of the Royal Court of Jersey sanctioning the Scheme of Arrangement has been delivered to the Registrar of Companies in Jersey. Concurrently with the execution of the Transaction Agreement, persons holding more than 75% of the voting rights of the Arq shareholders delivered irrevocable voting agreements to Arq and ADES pursuant to which those shareholders agreed to vote in favor of the Scheme of Arrangement.Operations.
7

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table provides the preliminary estimated fair values of the assets acquired and liabilities assumed as of the Acquisition Date:
(in thousands)Purchase Price Allocation
Fair value of assets acquired:
Cash$1,411 
Prepaid expenses and other current assets2,229 
Restricted cash, long-term814 
Property, plant and equipment, net39,159 
Other long-term assets, net11,717 
Amount attributable to assets acquired55,330 
Fair Value of liabilities assumed:
Accounts payable and accrued expenses9,806 
Current portion of long-term debt494 
Other current liabilities103 
Long-term debt, net of current portion9,199 
Other long-term liabilities4,523 
Amount attributable to liabilities assumed24,125 
Net assets acquired$31,205 
The following represents the intangible asset identified as part of the Arq Acquisition and which is included in "Other long-term-assets, net" in the table above:
(in thousands)AmountWeighted Average Useful Life (years)
Developed technology$7,700 20
Redeemable Preferred Stock
In connection with the Transactions, each ADES equity award made or otherwise denominated in sharesissuance of the Company’s common stock that is outstanding immediately priorSeries A Preferred Stock pursuant to the ADES MergerPurchase Agreement, the Company filed the Certificate of Designations of Preferred Stock for the Series A Preferred Stock (the "Certificate of Designations") with the Secretary of State of the State of Delaware. Under the Certificate of Designations, 8.9 million preferred shares were designated as Series A Preferred Stock.
Each outstanding share of Series A Preferred Stock will be assumed by New ADES. Such equity awards will continue to have the same terms and conditions of such awards immediately prior to the ADES Merger, except that each equity award will become exercisable for shares of New ADES common stock, and the number of shares subject to such award will be equal toautomatically converted into the number of shares of ADES common stockCommon Stock described below upon approval by the stockholders of the Company. Each share of Series A Preferred Stock is deemed to have an original issue price of $4.00 per share (the "Original Issue Amount"). The number of shares of Common Stock issued upon conversion of each share of Series A Preferred Stock shall be equal to the product of (i) the sum of (A) the Original Issue Amount plus (B) an amount equal to the cumulative amount of the accrued and unpaid dividends on such share at such time divided by (ii) the Original Issue Amount, subject to such award multiplied by the All Stock Conversion Rate.adjustment.
The closingHolders of the Transactions (the "Closing") is conditionedSeries A Preferred Stock are entitled to receive cumulative dividends, which accrue quarterly on the absencelast day of any order, laweach applicable quarter (whether or injunction preventing the consummation of the Transactions; approvalnot declared or funds for listing of the shares of New ADES common stock issuedtheir payment are lawfully available) and are payable quarterly, in the ADES Merger and the Arq Share Acquisition (subject to official notice of issuance)arrears, on the Nasdaq Global Market; approvalearlier to occur of (a) the Transaction Agreement bydate any dividend is paid to holders of Common Stock with respect to such quarter and (b) 30 days after the end of each quarter (the "Series A Quarterly Dividend") at the rate per share of Series A Preferred Stock equal to the greater of (i) if the Company declares a majority ofcash dividend on the outstanding common shares of ADES; the approval of the Scheme of Arrangement by resolution of a majority in number of the Arq shareholders representing three-fourths (75%) or more of the voting rights of the Arq shareholders; expiration of the waiting period under the Hart-Scott-Rodino Act; subjectCommon Stock with respect to certain qualifications, the accuracy of representations and warranties of the other party set forth in the Transaction Agreement; the performance by the other party in all material respects of its obligations under the Transaction Agreement, and other customary conditions. In addition, ADES’ obligation to consummate the Transactions is conditioned upon the consummation of term debt financing insuch quarter, the amount of $10.0 million providedthe cash dividend that would be received by a third-party financial institutionholder of Common Stock in which such share of Series A Preferred Stock would be convertible on the record date for such cash dividend and (ii) an annual rate (the "Debt Financing""Rate") and a PIPE Investment in the amount of $20.0 million from current Arq shareholders (the "PIPE Investment").
On August 18, 2022, the ADES Board unanimously approved and adopted the Transaction Agreement and the Transactions and recommends that the ADES shareholders approve and adopt the Transaction Agreement, subject to certain exceptions set forth in the Transaction Agreement.
Assuming the Merger is consummated, the Company has determined that it will be the accounting acquirer.
Note 3 - Customer Supply Agreement
On September 30, 2020, the Company and Norit Activated Carbon - Americas (f/k/a Cabot Norit Americas, Inc.) ("Norit"), entered into a supply agreement (the "Supply Agreement") pursuant to which the Company agreed to sell and deliver to Norit, and Norit agreed to purchase and accept from the Company certain lignite-based AC products ("Furnace Products"). The term8.0% of the Supply Agreement is for 15 yearsOriginal Issue Amount compounded quarterly with 10-year renewal terms that are automatic unless either party provides three years prior notice of intention notrespect to renew beforesuch quarter. The Rate will increase by 2.0% on the 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. Reimbursements are comprised ofrevenues earned from capital expenditures incurred that will benefit both the Company and Norit (referred to as "Shared Capital") and revenues earned from capital expenditures incurred that will benefit Norit exclusively (referred to as "Specific Capital"). In the event that Norit ceases to make purchases under the Supply Agreement, Norit is obligated to pay the balance of any outstanding payments for Specific Capital.
Further, under the termsfirst day of the Supply Agreement, Norit was obligated to payfirst quarter ending on or after the Reclamation Reimbursement (defined in Note 4 below) to635th day following the Company for $10.2 millionclosing date of the Reclamation Costs (defined in Note 4 below), inclusivefirst issuance 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 Norit (the "Norit Payment") as a resultSeries A Preferred Stock and on each subsequent anniversary 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 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 (defined in Note 4 below), the Company was obligated to remit payment for the Norit Reclamation Costs to the third-party operator of Marshall Mine (defined in Note 4 below), and such payment was remitted in March 2022. The Change in Control did not impact any other provisions of the Supply Agreement.date.
8

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
AsThe Series A Quarterly Dividend is payable in cash or in additional shares of February 25, 2022,Series A Preferred Stock (the "Series A PIK Shares"), at the carryingoption of the Company. The number of Series A PIK Shares to be issued is determined by dividing (i) the Series A Quarterly Dividend payable with respect to all shares of Series A Preferred Stock held by a holder thereof by (ii) the aggregate Original Issue Amount of all shares of Series A Preferred Stock held by a holder thereof, and each fractional Series A PIK Share is rounded to the nearest whole Series A PIK Share (with 0.5 of a share being rounded down to 0.0).
On March 31, 2023, the Company declared a dividend of 68,464 Series A PIK Shares with respect to the accrued dividends on the Series A Preferred Stock for the first quarter of 2023 (the "First Quarter PIK Dividend"). The First Quarter PIK Dividend was recorded at the estimated fair value of $0.2 million as of March 31, 2023 and was paid on April 21, 2023.
In the Reclamation Reimbursement was $9.0 million, which includedevent of the principal balance, adjustedCompany's liquidation, dissolution or winding up, after payment or provision 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 paymentits debt and other liabilities, a holder of Series A Preferred Stock will receive a receivable based on a change in contractual terms and accounted forliquidating distribution equal to the difference between the cash proceeds received and the carrying amount of the Reclamation Reimbursementcumulative accrued but unpaid dividends on each share of $0.5 million as a lossSeries A Preferred Stock held by such holder. After the payment to the holders of Series A Preferred Stock of such liquidation preference, the holders of outstanding shares of Series A Preferred Stock will participate pari passu with the holders of Common Stock on an as-converted basis in any remaining distributions out of the Company’s assets available for the three months ended March 31, 2022, which is included in the "Other Income (Expense)" line item in the Condensed Consolidated Statementdistribution to stockholders.
Holders of Operations for the nine months ended September 30, 2022.
Also, under the Change in Control,shares of Series A Preferred Stock generally have no voting rights. However, the Company received $1.3 million in advance of revenue to be recognized in future periods related to Specific Capital and recorded this amount as deferred revenue, which is recognized ratably overrestricted from taking certain actions without the remaining contractual term as stipulated in the Supply Agreement.
Note 4 - Marshall Mine
Acquisition
Concurrently with the executionwritten consent or affirmative vote of the Supply Agreement, on September 30, 2020,holders of at least a majority of the then outstanding shares of Series A Preferred Stock, including, but not limited to, amending the Company's Certificate of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred Stock or consummating a merger of the Company enteredwith or into an agreement to purchase from Norit 100%another party or a sale of substantially of its assets.
If the approval by the stockholders of the membership interests in Marshall Mine, LLC (the "Marshall Mine Acquisition") for a nominal cash purchase price. Marshall Mine, LLC owns a lignite mine located outsideCompany of Marshall, Texas (the "Marshall Mine"). The Company concluded thatconversion of the Marshall Mine didSeries A Preferred Stock has not have any remaining economic reserves and independently determined to immediately commence activities to shutter it. Accordingly, on September 30, 2020,been obtained, each outstanding share of Series A Preferred Stock will be redeemed by the Company on February 1, 2028 for cash, at a redemption price equal to the sum of (i) the product of (x) 140% and a third party entered into a reclamation contract (the "Reclamation Contract") for full reclamation(y) the Original Issue Amount, plus (ii) an amount equal to the cumulative amount of the Marshall Mine, which was expected to be completed by 2030. accrued and unpaid dividends on such share of Series A Preferred Stock.
Under the terms of the SupplyPurchase Agreement, Norit was obligated to reimburse the Company for $10.2 milliona total of 833,914 Preferred Shares, are being held in escrow (the "Reclamation Reimbursement""Escrow Shares") forbased on a portioncontingent redemption feature, (the "Contingent Redemption Feature," as defined below). The fair value of the total costs incurred underPreferred Shares issued was determined to be $3.46 per Preferred Share on the Reclamation ContractAcquisition Date (the "Reclamation Costs""Preferred Share Price"), which was payable semi-annually over 13 years and inclusive of interest. As discussed in Note 3, on February 25, 2022 as part plus the value of the Change in Control, Norit fully paid the outstanding amount owed under the Reclamation Reimbursement and has no further liabilityContingent Redemption Feature related to the Marshall Mine.Escrow Shares.
The Company accounted forEscrow Shares are being withheld pending a determination by the Marshall Mine Acquisition as an asset acquisition, and it includedIRS that no tax withholding is required on the acquisition of certain assets and assumption of certain liabilities as well as the incurrence of an obligation for the Reclamation CostsPurchase Consideration issued to Arq Ltd. (the "Marshall Mine ARO""Arq Ltd. Tax Liability"). As of September 30, 2022 and December 31, 2021, the carrying value of the Marshall Mine ARO was $4.6 million and $6.3 million, respectively.
As the Marshall Mine Acquisition represented a transaction with a customer of net assets acquired and liabilities assumed from Norit, theThe Company accounted for the excess ofestimated the fair value of liabilities assumed over assets acquired as upfront consideration transferredthe potential Arq Ltd. Tax Liability at $3.3 million. In the event that the IRS determines that no withholding is required by Arq Ltd. in connection with the Purchase Consideration received by Arq Ltd., all of the Escrow Shares will be released and delivered to a customer, Norit (the "Upfront Customer Consideration"). TheArq Ltd. In the event that the IRS determines that any amount of the Upfront Customer Consideration was also recognized net of the Reclamation Reimbursement. The total Upfront Customer Considerationwithholding is being amortized as a reduction to revenues on a straight-line basis over the expected 15-year contractual period of the Supply Agreement. Amortization of the Upfront Customer Consideration is approximately $0.5 million per year.
Disposition
On September 2, 2022, (the "Agreement Date")required by Arq Ltd., the Company has agreed to redeem a sufficient number of Escrow Shares to fund the required payment to the IRS, and that number of Escrow Shares will be returned to the Company (the "Seller""Contingent Redemption Feature"), entered. The number of Escrow Shares to be returned to the Company is equal to the required withholding amount divided by the Original Issue Amount, not to exceed a maximum of 833,914 Escrow Shares, and is equal to $3.3 million based on the Original Issue Amount (the "Maximum Contingent Redemption Amount"). The fair value of the Escrow Shares is the Maximum Contingent Redemption Amount and the fair value of the non-escrowed Preferred Shares ("Non Escrow Shares") is the Preferred Share Price.
The Series A Preferred Stock contains a mandatory redemption feature in the event the Preferred Shares, including future Preferred Shares issued under dividend requirements, are not converted into shares of Common Stock prior to February 1, 2028. The Company has determined that both the Escrow Shares and the Non Escrow Shares do not meet the definition ofmandatorily redeemable financial instruments as there is a Membership Interest Purchase Agreement (the "Purchase Agreement") with a third party (the "MM Buyer") to sellsubstantive conversion feature, and are therefore not classified as liabilities. As both the Escrow Shares and Non Escrow Shares represent financial instruments that are redeemable for cash, SEC guidance mandates that preferred securities which are redeemable upon the occurrence of an event that is not solely within the control of the issuer be classified outside of permanent equity as "temporary equity." Accordingly, the Company has classified all of its membership intereststhe Preferred Shares as temporary equity and reported them as "Redeemable preferred stock" in Marshall Mine, LLC to the MM Buyer (the "MM Sale") in exchange for a cash payment to be made by the Seller to the MM Buyer of approximately $2.4 million (the "Purchase Price") and the assumption by the MM Buyer of certain liabilities of Marshall Mine, LLC. The MM Buyer previously operated the Marshall Mine on behalf of Marshall Mine, LLC and is currently performing reclamation under the Reclamation Contract.
The Purchase Price is subject to adjustments for certain events that may occur during the period from the Agreement Date and the Closing Date (as defined below) as follows: (1) increased or reduced as agreed upon by the Seller and the MM Buyer (collectively, the "Parties"); (2) increased or decreased by income, proceeds, receipts and credits earned with respect to the assets and operations of Marshall Mine, LLC between signing and closing of the MM Sale, (3) increased by any amounts that are, or under US GAAP should be, accrued as liabilities of Marshall Mine LLCConsolidated Balance Sheet as of the closingas of the MM Sale, as more fully described in the Purchase Agreement; and (4) decreased by agreed amounts which escalate depending on the timing of closing if it occurs after January 1,March 31, 2023.
9

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Other
The amounts of revenues and net loss for Arq for the period from the Acquisition Date to March 31, 2023 are as follows:
Three Months Ended March 31,
(in thousands)2023
Revenues$— 
Net loss$(3,650)
The following represents the pro forma effects of the Arq Acquisition as if it had occurred on January 1, 2022. The pro forma net loss for each of the two years presented has been calculated after applying the Company’s accounting policies in effect for those years. In addition, pro forma net loss includes: (1) for the three months ended March 31, 2022, an increase in Payroll and benefits for compensation expense of $1.9 million payable to certain Arq employees, triggered by change in control provisions in employment agreements, as well as in employee severance agreements that has not been recognized in the historical financial statements, assuming such amounts will be paid in cash; (2) for each of the three months ended March 31, 2023 and 2022, a decrease in depreciation and amortization of $0.2 million and $0.6 million, respectively, resulting from fair value adjustments to Property, plant, equipment; (3) for each of the three months ended March 31, 2023 and 2022, an increase in amortization of $0.1 million and $0.1 million, respectively, resulting from fair value adjustments to intangible assets; (4) for each of the three months ended March 31, 2023 and 2022, increases to Interest expense of $0.2 million and $0.3 million, respectively for: (a) the issuance of the Term Loan (as defined below) including stated interest and the amortization of the Term Loan's discount and issuance costs and (b) amortization of debt discount related to a fair value adjustment to an assumed term loan of Arq; and (5) the removal of $6.6 million of transaction costs incurred for the period from April 1, 2022 to March 31, 2023 but included as additional transaction costs for the three months ended March 31, 2022, together with the income tax effects on (1) through (5). Since Arq had no revenues for the three months ended March 31, 2023 or 2022, pro forma revenues are the same as the Company's reported revenues for those periods.
Three Months Ended March 31,
(in thousands)20232022
Revenues$20,805 $26,402 
Net loss$(4,069)$(13,009)
Note 3 - Marshall Mine
On September 2, 2022, (the "MM Purchase Date"), a subsidiary of Advanced Emissions Solutions, Inc., ADA Carbon Solutions (Operations), LLC (the "Seller"), entered into a Membership Interest Purchase Agreement (the "MM Purchase Agreement") with Caddo Creek Resources Company, L.L.C. (the "Buyer") to sell all of its membership interests in Marshall Mine, LLC to the Buyer (the "MM Transaction") in exchange for a cash payment to be made by the Seller to the Buyer and the assumption by the Buyer of certain liabilities of Marshall Mine, LLC. The Buyer previously operated the Marshall Mine on behalf of Marshall Mine, LLC and was performing final mine reclamation under a fixed price contract.
The obligations of the PartiesSeller and the Buyer to close the MM Sale (the "Closing Date") isTransaction were subject to certain events,customary closing conditions (the "Conditions") as set forth in the Purchase Agreement, including, but not limited to, (1) obtaining the approval of the Railroad Commission of Texas (the "Commission") for an operating permita change in the namecontrol of the MMMarshall Mine from Seller to Buyer or an affiliate of the MM Buyer; and (2) the MM Buyer replacing the Seller’s surety bond with a reclamation performance bond, letter of credit or other form of security to which the MM Buyer or an affiliate of the MM Buyer is the principal that is satisfactory to the Commission. The
On March 27, 2023, (the "MM Closing Date") all of the Conditions for closing the MM Transaction were satisfied, and the Company made a cash payment to the Buyer in the amount of $2.2 million (the "MM Purchase Agreement may be terminated: (1) by mutual consentPrice"). As of the MM Buyer and the Seller at any time prior to the Closing Date; (2) by the MM Buyer or Seller, if the Closing has not occurred within one year after the Agreement Date, unless the failure of the consummation of the Closing shall be due to the failure of the party wishing to terminate to comply in all material aspects with the agreements and covenants contained therein; (3) if there is a material breach (by either the MM Buyer or Seller) of any representation, warranty, covenant or agreement contained in the Purchase Agreement that is not cured within a specified time frame; and (4) if the MM Sale is prohibited by governmental authority in a final, non-appealable order or applicable law.
As of September 30, 2022, Marshall Mine, LLC had outstanding liabilities of approximately $5.1$4.9 million which the Company expects to be fullythat were discharged upon payment of the MM Purchase Price. BecausePrice by the Closing Date is uncertain, primarily due toCompany, and the Company recognized a date uncertaingain of approximately $2.7 million in the Statement of Operations for the Partiesthree months ended March 31, 2023.
Subsequent to receive approval of the MM Buyer's operating permit and surety bond by the Commission,March 31, 2023, the Company is unablewas permitted to determine the accounting period in which it will recognize the MM Sale.reduce its restricted cash requirement by $2.3 million to $7.7 million.
The following tables summarize the assets
10

Advanced Emissions Solutions, Inc. and liabilities of Marshall Mine, LLC and their classification in the Company'sSubsidiaries
Notes to Condensed Consolidated Balance Sheets:Financial Statements
(in thousands)September 30, 2022December 31, 2021Balance sheet component
Cash$— $914 Current assets
Norit receivable, short-term— 2,056 Current assets
Restricted cash10,000 10,027 Non-current assets
Property and equipment, net— 1,968 Non-current assets
Norit receivable, long-term— 6,846 Non-current assets
$10,000 $21,811 
Accounts payable and accrued liabilities$525 $1,065 Current liabilities
Asset retirement obligation, short-term418 1,775 Current liabilities
Asset retirement obligation, long-term4,180 4,546 Non-current liabilities
$5,123 $7,386 
(Unaudited)
Note 54 - 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 - 45 days 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.
Contract liabilities are comprised of deferred revenue, which represents an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer and, if deliverable within one year or less, is included in "Other current liabilities" in the Condensed Consolidated Balance Sheets and, if deliverable outside of one year, is included in "Other long-term liabilities" in the Condensed Consolidated Balance Sheets.
The following table shows the components of the Company's Receivables, net:
As of
(in thousands)September 30, 2022December 31, 2021
Trade receivables, net$13,824 $10,476 
Other receivables79 — 
Norit Receivable - current— 2,146 
Receivables, net$13,903 $12,622 
10

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of
(in thousands)March 31, 2023December 31, 2022
Trade receivables, net$9,989 $13,789 
Other receivables72 75 
Receivables, net$10,061 $13,864 
For the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, all material performance obligations related to revenues recognized were satisfied at a point in time. For the three and nine months ended September 30,March 31, 2023 and 2022, approximately 7%14% and 9%, respectively, of Consumables revenues were generated in Canada, and all other revenues were generated in the U.S. For the three and nine months ended September 30, 2021, approximately 8% and 12%11%, respectively, of Consumables revenues were generated in Canada, and all other revenues were generated in the U.S.
Note 65 - Inventories, net
The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value, as of September 30, 2022March 31, 2023 and December 31, 2021:2022:
As ofAs of
(in thousands)(in thousands)September 30, 2022December 31, 2021(in thousands)March 31, 2023December 31, 2022
Product inventory, netProduct inventory, net$6,723 $4,901 Product inventory, net$10,356 $9,479 
Raw material inventoryRaw material inventory8,538 2,949 Raw material inventory9,876 8,349 
Total inventories, netTotal inventories, net$15,261 $7,850 Total inventories, net$20,232 $17,828 

Note 6 - Debt Obligations

As of
(in thousands)March 31, 2023December 31, 2022
Term Loan due February 2027, related party$10,000 $— 
Arq Loan due January 20369,960 — 
Finance lease obligations4,287 4,581 
24,247 4,581 
Unamortized debt discounts(1,288)— 
Unamortized debt issuance costs(1,229)— 
21,730 4,581 
Less: Current maturities(1,611)(1,131)
Total long-term debt obligations$20,119 $3,450 

Term Loan
The Term Loan has a term of 48 months and bears interest at a rate equal to either (a) Adjusted Term SOFR (subject to a 1.00% floor and a cap of 2.00%) plus a margin of 9.00% paid in cash and 5.00% paid in kind or (b) Base Rate plus a margin of 8.00% paid in cash and 5.00% paid in kind, which interest on the Term Loan in each case shall be payable (or capitalized, in the case of in kind interest) quarterly in arrears.
11

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company may prepay the Term Loan at any time subject to the following prepayment premium: (i) prior to the twelve month anniversary of the Closing Date, the Make-Whole Amount (as defined below), (ii) thereafter but prior to the thirty-six month anniversary of the Closing Date, 2.00% of the outstanding principal amount of the Term Loan being repaid or prepaid or (iii) thereafter until the maturity date, 1.00% of the outstanding principal amount of the Term Loan being repaid or prepaid. The "Make-Whole Amount," with respect to any repayment or prepayment, is (i) an amount equal to all required interest payable (except for currently accrued and unpaid interest) on the aggregate principal amount of the Term Loan subject to such prepayment or repayment from the date of such prepayment or repayment through but excluding the date that is the first anniversary of the Closing Date calculated using an interest rate equal to (x) Adjusted Term SOFR for an interest period of one month in effect on the third U.S. Government Securities Business Day prior to such prepayment or repayment plus (y) 14.00% per annum and assuming all interest was paid in cash, plus (ii) a prepayment premium of 2.00% on the aggregate principal amount of the Term Loan subject to such prepayment or repayment.
The Term Loan is secured by substantially all of the assets of the Company and its subsidiaries (including those acquired in the Acquisition, but excluding those pledged as collateral under the Arq Loan, as defined and described below), subject to customary exceptions. The Loan Agreement includes, among others, the following covenants: (1) beginning with the first fiscal quarter after March 31, 2023 and as of the end of each fiscal quarter thereafter, the Company must maintain a minimum unrestricted cash balance of $5.0 million; (2) (x) as of December 31, 2023, for the fiscal year then ended, the Company must have a minimum annual revenue, on a consolidated basis, of $70.0 million, (y) as of December 31, 2024, for the fiscal year then ended, the Company must have a minimum annual revenue, on a consolidated basis, of $85.0 million and (z) for any fiscal year thereafter, the Company must have a minimum annual revenue, on a consolidated basis, of $100.0 million; (3) (x) as of December 31, 2024, for the fiscal year then ended, the Company must have a minimum Consolidated EBITDA of $3.0 million and (y) for any fiscal year thereafter, the Company must have a minimum Consolidated EBITDA of $16.0 million; and (4) beginning after the fiscal quarter ending September 30, 2023, during an LTV Trigger Period, ADES must not exceed a loan to value (based on the consolidated total assets of the Company and its subsidiaries) ratio of 0.40:1.00.
The Company allocated the cash proceeds of the Term Loan to both the Term Loan and the Warrant based on their relative fair values. The amount allocated to the Warrant was recorded as a debt discount and is amortized to interest expense over the term of the Term Loan. The standalone fair value of the Term Loan was based on a comparison of borrowings and associated credit ratings consistent with those of the Company. As the Warrant is exercisable for $0.01 per share, the fair value is deemed to be equal to the fair value of the underlying shares, and accordingly, the fair value of the Warrant was determined as the number of shares issuable from the exercise of the Warrant (based on 1.0% of post-transaction fully diluted share capital, as defined in the Purchase Agreement) multiplied by the closing share price of the Company's common stock on the Acquisition Date.
Arq Loan
As consideration in the Arq Acquisition, the Company assumed a term loan (the "Arq Loan") held by certain Arq subsidiaries as set out in the Arq Loan (the "Arq Borrowers") with a financial institution in the principal amount of $10.0 million. The Company recorded the Arq Loan on the Acquisition Date at its estimated fair value of $9.7 million, with the difference between the estimated fair value and the principal amount of $0.3 million recorded as a debt discount. This debt discount is recognized as interest expense over the term of the Arq Loan.
The Arq Loan was executed on January 27, 2021 and is comprised of two promissory notes (the "Notes"): (1) "Note A" in the principal amount of $8.0 million, which is guaranteed by the U.S. Department of Agriculture; and (2) "Note B" in the principal of $2.0 million. The Notes expire on January 27, 2036 and bear interest at 6.0% per annum through January 2026 and at prime plus 2.75% thereafter. Beginning January 27, 2023 and for the balance of the term of the Arq Loan, the Arq Borrowers are required to make combined interest and principal payments monthly in the fixed amount of $0.1 million. Interest is computed and payable on the outstanding principal as of the end of the prior month and the balance of the fixed monthly payment amount is applied to the outstanding principal. The Notes carry a prepayment penalty of 3.0% of the outstanding principal if paid prior to January 27, 2024, 2.0% of the outstanding principal if paid prior to January 27, 2025 and 1.0% of the outstanding principal if paid prior to January 27, 2026. Thereafter, the Arq Loan may be prepaid without penalty.
The Arq Loan is secured by substantially all assets of the Arq Borrowers and includes among others, the following covenants with respect to the Arq Borrowers, which are tested annually (Capitalized terms are defined in the Arq Loan): (a) Total Indebtedness to Net Worth greater than 4 to 1; (b) Balance Sheet Equity greater than or equal to 20% of the book value of all assets of the Arq Borrowers; (c) (i) net income plus interest, taxes, depreciation and amortization divided by (ii) interest expense plus current maturities on long-term debt greater than or equal to 1.25 to 1.

12

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7 - Leases
The Company's operating and finance lease right-of-use ("ROU") assets and liabilities as of September 30, 2022March 31, 2023 and December 31, 20212022 consisted of the following items (in thousands):
As ofAs of
LeasesLeasesSeptember 30, 2022December 31, 2021LeasesMarch 31, 2023December 31, 2022
Operating LeasesOperating LeasesOperating Leases
Operating lease right-of-use assets, net of accumulated amortization (1)
Operating lease right-of-use assets, net of accumulated amortization (1)
$7,610 $6,000 
Operating lease right-of-use assets, net of accumulated amortization (1)
$10,122 $7,734 
Operating lease obligations, currentOperating lease obligations, current$2,654 $2,157 Operating lease obligations, current$2,554 $2,724 
Long-term operating lease obligationsLong-term operating lease obligations5,127 4,178 Long-term operating lease obligations7,642 5,133 
Total operating lease obligationTotal operating lease obligation$7,781 $6,335 Total operating lease obligation$10,196 $7,857 
Finance LeasesFinance LeasesFinance Leases
Finance lease right-of-use assets, net of accumulated amortization (2)
Finance lease right-of-use assets, net of accumulated amortization (2)
$2,806 $1,743 
Finance lease right-of-use assets, net of accumulated amortization (2)
$2,343 $2,565 
Finance lease obligations, currentFinance lease obligations, current$1,182 $1,011 Finance lease obligations, current$1,117 $1,131 
Long-term finance lease obligationsLong-term finance lease obligations3,731 3,152 Long-term finance lease obligations3,170 3,450 
Total finance lease obligationsTotal finance lease obligations$4,913 $4,163 Total finance lease obligations$4,287 $4,581 
(1) Operating lease ROU assets are reported net of accumulated amortization of $3.6$5.1 million and $1.9$4.4 million as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
(2) Finance lease ROU assets are reported net of accumulated amortization of $1.7$2.2 million and $1.1$2.0 million as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
Operating leases
ROU assets under operating leases and operating lease liabilities are included in the "Other long-term assets" and "Other current liabilities" and "Other long-term liabilities" line items, respectively, in the Condensed Consolidated Balance Sheets as of September 30, 2022March 31, 2023 and December 31, 2021.2022.
11

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Lease expense for operating leases for the three and nine months ended September 30, 2022March 31, 2023 was $1.2$1.4 million, and $3.2 million, respectively, of which $1.1 million and $2.9 million, respectively, is included in the "Consumables - cost of revenue, exclusive of depreciation and amortization" line item, and $0.1 million and $0.3 million respectively, is included in the "General and administrative" line item in the Condensed Consolidated Statements of Operations for those periods. Lease expense for operating leases for the three and nine months ended September 30, 2021March 31, 2022 was $1.1 million, and $3.1 million, respectively of which $1.0 million, and $2.7 million, respectively, is included in the "Consumables - cost of revenue, exclusive of depreciation and amortization" line item, and $0.1 million, and $0.4 million, respectively, is included in "General and administrative" line item in the Condensed Consolidated Statements of Operations for those periods.
Finance leases
ROU assets under finance leases are included in the "Property, plant and equipment" line item in the Condensed Consolidated Balance Sheets as of September 30, 2022March 31, 2023 and December 31, 2021.2022. Interest expense related to finance lease obligations and amortization of ROU assets under finance leases are included in the "Interest expense" and "Depreciation, amortization, depletion and accretion" line items, respectively, in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022.
13

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Lease financial information as of and for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 is provided in the following table:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
(in thousands)(in thousands)2022202120222021(in thousands)20232022
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets$236 $152 $607 $500 Amortization of right-of-use assets$223 $141 
Interest on lease liabilitiesInterest on lease liabilities76 74 240 223 Interest on lease liabilities307 78 
Operating lease costOperating lease cost805 647 2,389 1,732 Operating lease cost982 806 
Short-term lease costShort-term lease cost373 493 832 1,293 Short-term lease cost409 243 
Variable lease cost (1)Variable lease cost (1)12 30 
Variable lease cost (1)
Total lease costTotal lease cost$1,495 $1,375 $4,080 $3,778 Total lease cost$1,929 $1,277 
Other Information:Other Information:Other Information:
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leasesOperating cash flows for finance leases$240 $223 Operating cash flows for finance leases$307 $78 
Operating cash flows for operating leasesOperating cash flows for operating leases$2,118 $2,514 Operating cash flows for operating leases$787 $738 
Financing cash flows for finance leasesFinancing cash flows for finance leases$913 $1,085 Financing cash flows for finance leases$295 $226 
Right-of-use assets obtained in exchange for new finance lease liabilitiesRight-of-use assets obtained in exchange for new finance lease liabilities$1,641 $— Right-of-use assets obtained in exchange for new finance lease liabilities$— $— 
Right-of-use assets obtained in exchange for new operating lease liabilitiesRight-of-use assets obtained in exchange for new operating lease liabilities$3,563 $6,392 Right-of-use assets obtained in exchange for new operating lease liabilities$— $3,418 
Weighted-average remaining lease term - finance leasesWeighted-average remaining lease term - finance leases2.9 years3.1 yearsWeighted-average remaining lease term - finance leases2.5 years2.7 years
Weighted-average remaining lease term - operating leasesWeighted-average remaining lease term - operating leases4.2 years3.1 yearsWeighted-average remaining lease term - operating leases7.7 years4.4 years
Weighted-average discount rate - finance leasesWeighted-average discount rate - finance leases5.9 %6.4 %Weighted-average discount rate - finance leases5.9 %6.3 %
Weighted-average discount rate - operating leasesWeighted-average discount rate - operating leases6.1 %6.6 %Weighted-average discount rate - operating leases9.8 %6.0 %
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
1214

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 8 - Commitments and Contingencies
Retention Agreements
OnAs of December 31, 2022, the Company had an outstanding liability of $1.4 million (the "Retention Liability"), which was included in the "Other current liabilities" line item in the Condensed Consolidated Balance Sheet, related to retention agreements (the "Retention Agreements") executed between the Company and its executive officers and certain other key employees in May 4,2021 and amended in May 2022 in order to maintain the Company's business operations while it pursued and executed on its strategic initiatives. The Retention Agreements were approved by the Compensation Committee of the Board of Directors and the Board of Directors (the "Board") approved the amendment to retention agreements (the "Retention Agreements" and each a "Retention Agreement"), which had been executed in May 2021 between the Company and its executive officers and certain other key employees in order to maintain the Company's business operations while it pursues and executes on its strategic initiatives (the "Amended Retention Agreements"). Under the Amended Retention Agreements, 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) January 18, 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, employees must remain employed at the Company through the dates above.May 2022. In August 2022, the Company paid out $1.0 million pursuant to the payment terms of the Amended Retention Agreements. As of September 30, 2022, the total cash payable pursuant to the Amended Retention Agreements is $1.1 million and is includedthe Retention Liability was paid in the "Other current liabilities" line itemfull in the Condensed Consolidated Balance Sheet.January 2023.
Surety Bonds and Restricted Cash
As the owner of the Marshall Mine, the Company iswas required to post a surety bond with a regulatory commission. As of September 30, 2022 and December 31, 2021,2022, the Company had posted a $16.6 million surety bond (the "MM Surety Bond")that was released upon all of the Conditions for closing the MM Transaction being satisfied, 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.occurred on March 27, 2023.
As the owner of the Five Forks Mine, the Company is required to post a surety bond with a regulatory commission. As of September 30, 2022March 31, 2023 and December 31, 20212022, the Company had posted a $7.5 million surety bond related to performance requirements associated with the Five Forks Mine.
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company posted cash collateral of $10.0 million for both the Marshall Mine and Five Forks Mine as required by the Company's surety bond provider, which is reported as long-term restricted cash on the Condensed Consolidated Balance Sheets. In April 2023, the Company and the surety bond provider agreed to reduce the cash collateral to $7.7 million.
As the lessee of the land adjacent to the Corbin Facility, the Company was required to post surety bonds with a regulatory commission for reclamation. As of March 31, 2023, the amount of these surety bonds was $3.0 million.
Tinuum Group
TheIn addition to those obligations described in Note 10, 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 two 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 committed by Tinuum Group. 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 not 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.
Legal Proceedings
The Company is from time to time subject to 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 September 30, 2022.March 31, 2023.
1315

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9 - Supplemental Financial Information
Supplemental Balance Sheet Information
The following table summarizes the components of Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:
As of
(in thousands)September 30,
2022
December 31,
2021
Other long-term assets, net:
Right of use assets, operating leases, net$7,610 $6,000 
Upfront Customer Consideration6,602 6,982 
Mine development costs, net5,369 5,330 
Spare parts, net5,500 4,598 
Mine reclamation asset, net1,666 1,742 
Intangible assets, net947 1,237 
Other1,835 1,745 
Equity method investments— 2,391 
Norit Receivable— 6,846 
Total other long-term assets, net$29,529 $36,871 
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.
As of
(in thousands)March 31,
2023
December 31,
2022
Other long-term assets, net:
Right of use assets, operating leases, net$10,122 $7,734 
Intangible assets, net8,424 847 
Spare parts, net7,444 6,789 
Upfront Customer Consideration6,348 6,475 
Mine development costs, net5,657 5,478 
Mine reclamation asset, net1,616 1,641 
Other2,174 1,683 
Total other long-term assets, net$41,785 $30,647 
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 September 30, 2022. March 31, 2023.
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 reclamation asset, net represents an asset retirement obligation ("ARO") asset related to the Five Forks Mine and is depreciated over its estimated life.
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, Other includes the Highview Investment in the amount of $0.6 million and $0.6 million, respectively, that is carried 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 Level 2 measurements. 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 the investment. There were no changes to the carrying value of the Highview Investment for the three and nine months ended September 30, 2022March 31, 2023 as there were no indicators of impairment or observable price changes for identical or similar investments.
1416

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 As of
(in thousands)(in thousands)September 30,
2022
December 31,
2021
(in thousands)March 31,
2023
December 31,
2022
Other current liabilities:Other current liabilities:Other current liabilities:
Current portion of operating lease obligationsCurrent portion of operating lease obligations$2,654 $2,157 Current portion of operating lease obligations$2,554 $2,724 
Income and other taxes payableIncome and other taxes payable1,286 807 Income and other taxes payable866 1,039 
Current portion of mine reclamation liabilityCurrent portion of mine reclamation liability163 548 
Other(1)Other(1)1,421 2,160 Other(1)2,605 2,334 
Total other current liabilitiesTotal other current liabilities$5,361 $5,124 Total other current liabilities$6,188 $6,645 
Other long-term liabilities:Other long-term liabilities:Other long-term liabilities:
Operating lease obligations, long-termOperating lease obligations, long-term$7,642 $5,133 
Mine reclamation liabilitiesMine reclamation liabilities$7,979 $8,184 Mine reclamation liabilities5,259 7,985 
Operating lease obligations, long-term5,127 4,178 
OtherOther800 — Other746 733 
Total other long-term liabilitiesTotal other long-term liabilities$13,906 $12,362 Total other long-term liabilities$13,647 $13,851 
The(1) Included in Other current liabilities is $1.7 million related to the Repayment Agreement as defined in Note 10.
As of March 31, 2023 and December 31, 2022, the Mine reclamation liability related to the Five Forks Mine is included in Other long-term liabilities. TheAs of December 31, 2022, the Mine reclamation liability related to Marshall Mine iswas included in Other current liabilities and Other long-term liabilities.
As part of the Arq Acquisition, the Company assumed asset retirement obligations related to two sites; a coal waste site adjacent to the Corbin Facility (the "Corbin ARO") and an inactive mine located in West Virginia (the "Mine 4 ARO"). The Company recorded these AROs at their estimated fair values and periodically adjusts them to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation costs. The Corbin ARO was included in Other long-term liabilities and the current portion of the Mine 4 ARO was included in Other current liabilities with the long-term portion included in Other long-term liabilities.
The Mine reclamation liabilities represent AROs and changes for the three and nine months ended September 30, 2022March 31, 2023 and year ended December 31, 20212022 were as follows:
As of
(in thousands)September 30, 2022December 31, 2021
Asset retirement obligations, beginning of period$9,959 $21,447 
Accretion460 1,102 
Liabilities settled(2,056)(10,010)
Changes due to scope and timing of reclamation (1)34 (2,580)
Asset retirement obligations, end of period8,397 9,959 
Less current portion418 1,775 
Asset retirement obligations, long-term$7,979 $8,184 
As of
(in thousands)March 31, 2023December 31, 2022
Asset retirement obligations, beginning of period$8,533 $9,959 
Asset retirement obligations assumed(1)
1,500 — 
Accretion168 611 
Liabilities settled(2)
(4,779)(2,071)
Changes due to scope and timing of reclamation— 34 
Asset retirement obligations, end of period5,422 8,533 
Less current portion163 548 
Asset retirement obligations, long-term$5,259 $7,985 
(1) Represents two asset retirement obligations assumed as part of the Arq Acquisition; $0.5 million related to Corbin ARO and $1.0 million related to Mine 4 ARO.
(2) Represent reductions tothe removal of the Marshall Mine ARO primarily based on scope reductions relatedas a result of the MM Transaction as further discussed in Note 3.
17

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to future reclamation requirements for Marshall Mine. Amounts recorded as changes in estimatesCondensed Consolidated Financial Statements
(Unaudited)
The following table details the components of "Interest expense" in the Condensed Consolidated Statement of Operations for the corresponding periods.Operations:
Three Months Ended March 31,
(in thousands)20232022
Interest on Term Loan$261 $— 
Interest on Arq Loan98 — 
Amortization of debt discounts and debt issuance costs94 — 
Other81 86 
$534 $86 
Note 10 - Equity Method Investments
Tinuum Group, LLC
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, 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 produced and sold RC that lowered emissions and also qualified for Section 45 tax credits. The Company concluded that Tinuum Group was a VIE, but the Company did not have the power to direct the activities that most significantly impacted 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 was shared. Accordingly, the Company accounted for its investment in Tinuum Group under the equity method of accounting since inception.
15

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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Gross (loss) profit$— $(3,226)$964 $8,269 
Operating, selling, general and administrative expenses457 12,077 4,705 38,308 
Loss from operations(457)(15,303)(3,741)(30,039)
Other income (expenses), net6,027 534 10,030 
(Income) loss attributable to noncontrolling interest— 34,551 (874)99,167 
Net (loss) income available to members$(451)$25,275 $(4,081)$79,158 
ADES equity earnings from Tinuum Group$— $19,975 $3,137 $55,462 
For the ninethree months ended September 30, 2022March 31, 2023 and the three and nine months ended September 30, 2021,March 31, 2022, the Company recognized earnings from Tinuum Group's net (loss) income availableGroup of $0.6 million and $1.0 million, respectively, which was comprised solely of cash distributions received during these periods.
In December 2022, the Company, certain of the other owners of Tinuum Group (collectively, the "Tinuum Group Owners") and Tinuum Group executed the Distribution and Repayment Agreement (the "Repayment Agreement"). Under the terms of the Repayment Agreement, the Tinuum Group Owners receive cash distributions (the "Distributions") equal to members that were different fromtheir percentage ownership and also are contractually liable for certain contingent liabilities of Tinuum Group (the "Tinuum Group Obligation") in amounts equal to their percentage ownership. In December 2022, the Company received its pro-ratapercentage share of Tinuum Group's net (loss) income available to membersthe Distributions in the amount of $2.0 million and became contractually liable for those periods, as cash distributions for the nine months ended September 30, 2022 and three and nine months ended September 30, 2021 exceeded the carrying value$1.7 million of the Tinuum Group equity investment.
16

Advanced Emissions Solutions, Inc.Obligation. As of March 31, 2023 and Subsidiaries
Notes toDecember 31, 2022, the Company' portion of the Tinuum Group Obligation is $1.7 million and $1.7 million, respectively and is included in the "Other current liabilities" line item in the Condensed Consolidated Financial Statements
(Unaudited)
The following tables presentBalance Sheets. In the Company's investment balance,event that the Tinuum Group Obligation is discharged in its entirety or settled for an amount that is less than the total Tinuum Group Obligation, the Company will recognize future equity earnings and cash distributionsfor the difference in excessits portion of the investment balance,Tinuum Group Obligation and its pro rata share of the actual payment made by Tinuum Group, if any, for the threeTinuum Group Obligation.
In December 2022, the Company and nineTinuum Group entered into an agreement (the "Tinuum Group Royalty Agreement") whereby the Company pays Tinuum Group a royalty (the "Tinuum Group Royalty") for certain of the Company's sales of its M-ProveTM products after the expiration of the Section 45 Tax Credit Program (beginning January 1, 2022) to certain of the former refined coal facilities owned by Tinuum Group and operated by Tinuum Services (the "M-45 Facilities"). The Tinuum Group Royalty is calculated based on "Net Profit" (as defined in the Tinuum Royalty Agreement) on the Company's sales of M-ProveTM product to certain of the M-45 Facilities. The Tinuum Group Royalty Agreement is for an initial term of five years with automatic renewals of five years unless the Company and Tinuum Group agree to terminate it.
For the three months ended September 30, 2022March 31, 2023, the Company recognized $0.2 million of Tinuum Group Royalties, which are included in the "Consumables cost of revenues, excluding depreciation and 2021 (amortization" line item in thousands):
DescriptionDate(s)Investment balanceADES equity earningsCash distributionsMemorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance12/31/2021$— $— $— $(21,779)
ADES proportionate share of net loss from Tinuum GroupFirst Quarter(861)(861) — 
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)First Quarter(21,779)(21,779)— 21,779 
Cash distributions from Tinuum GroupFirst Quarter(1,012)— 1,012 — 
Adjustment for current year cash distributions in excess of investment balanceFirst Quarter23,652 23,652 — (23,652)
Total investment balance, equity earnings and cash distributions3/31/2022$— $1,012 $1,012 $(23,652)
ADES proportionate share of net loss from Tinuum GroupSecond Quarter(682)$(682)$— — 
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)Second Quarter(23,652)(23,652)— 23,652 
Cash distributions from Tinuum GroupSecond Quarter(2,125)— 2,125 — 
Adjustment for current year cash distributions in excess of investment balanceSecond Quarter26,459 26,459 — (26,459)
Total investment balance, equity earnings and cash distributions6/30/2022$— $2,125 $2,125 $(26,459)
ADES proportionate share of net loss from Tinuum GroupThird Quarter(192)$(192)$— — 
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)Third Quarter(26,459)(26,459)— 26,459 
Adjustment for current year cash distributions in excess of investment balanceThird Quarter26,651 26,651 (26,651)
Total investment balance, equity earnings and cash distributions9/30/2022$— $— $— $(26,651)
17

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensedthe Consolidated Financial Statements
(Unaudited)
DescriptionDate(s)Investment balanceADES equity earningsCash distributionsMemorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance12/31/2020$3,387 $— $— $— 
ADES proportionate share of net income from Tinuum GroupFirst Quarter10,755 10,755 — — 
Cash distributions from Tinuum GroupFirst Quarter(19,749)— 19,749 — 
Adjustment for current year cash distributions in excess of investment balanceFirst Quarter5,607 5,607 — (5,607)
Total investment balance, equity earnings and cash distributions3/31/2021$— $16,362 $19,749 $(5,607)
ADES proportionate share of net income from Tinuum GroupSecond Quarter12,146 $12,146 $— — 
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)Second Quarter(5,607)(5,607) 5,607 
Cash distributions from Tinuum GroupSecond Quarter(19,125)— 19,125 — 
Adjustment for current year cash distributions in excess of investment balanceSecond Quarter12,586 12,586 — (12,586)
Total investment balance, equity earnings and cash distributions6/30/2021$— $19,125 $19,125 $(12,586)
ADES proportionate share of net income from Tinuum GroupThird Quarter10,742 $10,742 $— — 
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)Third Quarter(12,586)(12,586)— 12,586 
Cash distributions from Tinuum GroupThird Quarter(19,975)— 19,975 — 
Adjustment for current year cash distributions in excess of investment balanceThird Quarter21,819 21,819 — (21,819)
Total investment balance, equity earnings and cash distributions9/30/2021$— $19,975 $19,975 $(21,819)
Statement of Operations.
Tinuum Services, LLC
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company has a 50% voting and economic interest in Tinuum Services. The Company determined that Tinuum Services was not a VIE and further evaluated it for consolidation under the voting interest model. Because the Company did not own greater than 50%carrying value 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 September 30, 2022 and December 31, 2021, the Company’s investment in Tinuum Services was zero and $2.4zero, respectively. For the three months ended March 31, 2023 and the three months ended March 31, 2022, the Company recognized losses from Tinuum Services of zero and $0.2 million, respectively.
18

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the results of operations of Tinuum Services:
 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Gross profit (loss)$16 $(20,389)$1,062 $(61,552)
Operating, selling, general and administrative expenses68 42,346 2,785 144,068 
Loss from operations(52)(62,735)(1,723)(205,620)
Other income (expenses), net3,204 1,159 2,810 
(Income) loss attributable to noncontrolling interest— 63,977 323 215,779 
Net (loss) income$(50)$4,446 $(241)$12,969 
ADES equity earnings from Tinuum Services$— $2,223 $84 $6,485 
Included in the Condensed Consolidated Statements of Operations of Tinuum Services for the three and nine months ended September 30, 2022 and 2021 was income (loss) attributable to noncontrolling interests of Tinuum Services' VIE entities, which was eliminated in the calculation of Tinuum Services' net income (loss) attributable to the Company's interest.
For the three and nine months ended September 30, 2022, the Company recognized earnings from Tinuum Services' net income (loss) available to members that were different from its pro-rata share of Tinuum Services' net income (loss) available to members for those periods, as cash distributions for the three and nine months ended September 30, 2022 exceeded the carrying value of the Tinuum Services' equity investment.Cash Distributions
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 nine months ended September 30, 2022 (in thousands):
DescriptionDate(s)Investment balanceADES equity earningsCash distributionsMemorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance12/31/2021$2,391 $— $— $— 
ADES proportionate share of net loss from Tinuum ServicesFirst Quarter(180)(180)— — 
Cash distributions from Tinuum ServicesFirst Quarter(1,501)— 1,501 — 
Total investment balance, equity earnings and cash distributions3/31/2022$710 $(180)$1,501 $— 
ADES proportionate share of net income from Tinuum ServicesSecond Quarter85 $85 $— — 
Cash distributions from Tinuum ServicesSecond Quarter(974)— 974 — 
Adjustment for current year cash distributions in excess of investment balanceSecond Quarter179 179 — (179)
Total investment balance, equity earnings and cash distributions6/30/2022$— $264 $974 $(179)
ADES proportionate share of loss from Tinuum ServicesThird Quarter(25)$(25)$— — 
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)Third Quarter(179)(179)— 179 
Adjustment for current year cash distributions in excess of investment balanceThird Quarter204 204 (204)
Total investment balance, equity earnings and cash distributions9/30/2022$— $— $— $(204)
19

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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)September 30,
2022
December 31,
2021
Equity method investment in Tinuum Services$— $2,391 
Total equity method investments$— $2,391 
The following table details the components of the Company's respective equity method investments included in the "Earnings from equity method investments" line item on the Condensed Consolidated Statements of Operations:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Earnings from Tinuum Group$— $19,975 $3,137 $55,462 
Earnings from Tinuum Services— 2,223 84 6,485 
(Loss) earnings from other— (3)(3)
Earnings from equity method investments$— $22,195 $3,222 $61,944 
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.
Nine Months Ended September 30,
(in thousands)20222021
Distributions from equity method investees, return on investment
Tinuum Services$2,297 $7,902 
Tinuum Group— 14,142 
$2,297 $22,044 
Distributions from equity method investees in excess of investment basis
Tinuum Services$179 $— 
Tinuum Group3,137 44,707 
$3,316 $44,707 
Three Months Ended March 31,
(in thousands)20232022
Distributions from equity method investees, return on investment
Tinuum Services$— $1,501 
Tinuum Group— — 
$— $1,501 
Distributions from equity method investees in excess of investment basis
Tinuum Group$638 $1,012 
Other— 
$638 $1,013 
Note 11 - Stockholders' Equity
Arq Acquisition and PIPE Investment
On February 1, 2023, the Company issued 3,814,864 and 3,842,315 shares of its Common Stock pursuant to the Arq Acquisition and the PIPE Investment, respectively. In addition, the Company issued 5,294,462 Preferred Shares pursuant to the Arq Acquisition, which is classified and presented outside of Stockholders' Equity as Redeemable preferred stock in the Consolidated Balance Sheet as of March 31, 2023.
As consideration for the Term Loan, the Company issued 325,857 Warrant Shares, which were deemed to be equity securities and were recorded at their estimated fair value of $0.8 million to Additional paid in capital, with a corresponding amount recorded as debt discount on the Term Loan.
Dividend
On March 31, 2023, the Company declared a dividend of 68,464 Series A PIK Shares with respect to the accrued dividends on the Series A Preferred Stock for the first quarter of 2023 (the "First Quarter PIK Dividend"). The First Quarter PIK Dividend was recorded at the estimated fair value of $0.2 million as of March 31, 2023 and was paid on April 21, 2023.
Stock Repurchase Program
As of September 30, 2022,March 31, 2023, the Company had $7.0 million remaining under a stock repurchase program, which will remain in effect until all amounts are utilized or is otherwise modified by the Board.
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 tax 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.
An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax loss and credit carryforwards equal to the equity value of the entity immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the Internal Revenue Service (subject to certain adjustments). The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year.
20
19

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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"), which is 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 March 15, 2022,April 11, 2023, the Board approved the FifthSixth Amendment to the TAPP (the "Fifth"Sixth Amendment"), which amends the TAPP, as previously amended by the First, Second, Third, Fourth and FourthFifth Amendments that were approved the Board on April 6, 2018, April 5, 2019, April 9, 2020, and April 9, 2021 and March 15, 2022, respectively. The FifthSixth 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. Pursuant to the FifthSixth Amendment, the Final Expiration Date shall be the close of business on the earlier of (i) December 31, 20232024 or (ii) December 31, 20222023 if stockholder approval of the FifthSixth Amendment has not been obtained prior to such date. At the Company's 2022 annual meeting of stockholders, the Company's stockholders approved the Fifth Amendment, thus the Final Expiration Date will be the close of business on December 31, 2023.
Note 12 - Stock-Based Compensation
The Company grants equity-based awards to employees, non-employee directors and consultants that may include, but are not limited to, RSAs, PSUs, restricted stock units 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 nine months ended September 30,March 31, 2023 and 2022 and 2021 was as follows:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended March 31,
(in thousands)(in thousands)2022202120222021(in thousands)20232022
RSA expenseRSA expense$420 $435 $1,240 $1,353 RSA expense$488 $427 
PSU expensePSU expense87 54 215 123 PSU expense75 37 
Total stock-based compensation expenseTotal stock-based compensation expense$507 $489 $1,455 $1,476 Total stock-based compensation expense$563 $464 
The amount of unrecognized compensation cost as of September 30, 2022,March 31, 2023, and the expected weighted-average period over which the cost will be recognized is as follows:
As of September 30, 2022As of March 31, 2023
(in thousands, expect years)(in thousands, expect years)Unrecognized Compensation CostExpected Weighted-
Average Period of
Recognition (in years)
(in thousands, expect years)Unrecognized Compensation CostExpected Weighted-
Average Period of
Recognition (in years)
RSA expenseRSA expense$2,767 1.86RSA expense$2,897 2.45
PSU expensePSU expense648 1.57PSU expense485 2.49
Total unrecognized stock-based compensation expenseTotal unrecognized stock-based compensation expense$3,415 1.81Total unrecognized stock-based compensation expense$3,382 2.46
Restricted Stock
Restricted stock is typically granted with vesting terms of three years. The fair value of RSAs is determined based on the closing price of the Company’s common stock on the authorization date of the grant multiplied by the number of shares subject to the stock award. Compensation expense for RSAs is generally recognized on a straight-line basis over the entire vesting period.
2120

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A summary of RSA activity under the Company's various stock compensation plans for the ninethree months ended September 30, 2022March 31, 2023 is presented below:
Restricted StockWeighted-Average Grant Date Fair ValueRestricted StockWeighted-Average Grant Date Fair Value
Non-vested at January 1, 2022531,623 $5.94 
Non-vested at January 1, 2023Non-vested at January 1, 2023652,962 $5.58 
GrantedGranted400,301 $6.12 Granted498,541 $1.97 
VestedVested(249,620)$6.44 Vested(237,185)$5.67 
ForfeitedForfeited(69,737)$5.94 Forfeited(15,299)$5.45 
Non-vested at September 30, 2022612,567 $5.84 
Non-vested at March 31, 2023Non-vested at March 31, 2023899,019 $3.55 
Performance Share Units
Compensation expense is recognized for PSUs 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 ninethree months ended September 30, 2022March 31, 2023 is presented below:
UnitsWeighted-Average
Grant Date
Fair Value
Aggregate Intrinsic Value (in thousands)Weighted-Average
Remaining
Contractual
Term (in years)
UnitsWeighted-Average
Grant Date
Fair Value
Aggregate Intrinsic Value (in thousands)Weighted-Average
Remaining
Contractual
Term (in years)
PSU's outstanding, January 1, 202288,026 $6.65 
PSUs outstanding, January 1, 2023PSUs outstanding, January 1, 2023148,591 $7.85 
GrantedGranted60,565 9.59 Granted231,242 2.48 
Vested / Settled(1)Vested / Settled(1)— — Vested / Settled(1)(41,855)6.17 
Forfeited / CanceledForfeited / Canceled— — Forfeited / Canceled— — 
PSU's outstanding, September 30, 2022148,591 $7.85 $406 1.57
PSUs outstanding, March 31, 2023PSUs outstanding, March 31, 2023337,978 $4.38 $669 2.49
(1) The number of units shown in the table above are based on target performance. The final number of shares of common stock issued may vary depending on the achievement of market conditions established within the awards, which could result in the actual number of shares issued ranging from zero to a maximum of two times the number of units shown in the above table. For the three months ended March 31, 2023, no shares of common stock were issued upon vesting of PSUs.
Note 13 - Income Taxes
For the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, the Company's income tax expense and effective tax rates were:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
(in thousands, except for rate)(in thousands, except for rate)2022202120222021(in thousands, except for rate)20232022
Income tax (benefit) expense$— $4,581 $— $14,013 
Income tax benefitIncome tax benefit$33 $— 
Effective tax rateEffective tax rate— %16 %— %14 %Effective tax rate— %— %
The Company incurred pretax loss for the ninethree months ended September 30, 2022March 31, 2023 and expects to incur pretax loss for the year ending December 31, 2022.2023. As a result, the effective rate for the three and nine months ended September 30, 2022March 31, 2023 was zero as the resultant tax benefit was offset by a valuation allowance recorded as of September 30, 2022. The effective rate for the three and nine months ended September 30, 2021 was lower than the federal statutory rate primarily from the impact of a decrease in the valuation allowance recorded against deferred tax assets as of September 30, 2021.March 31, 2023.
The Company assesses 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.


2221



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 20212022 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 ADES and its consolidated subsidiaries, collectively, the "Company," "we," "our" or "us."
Overview
We sellare an environmental technology company that sells consumable products that utilize AC and chemical-based technologies to a broad range of customers, including coal-fired utilities, industrials, water treatment plants, and other diverse markets through a customer supply agreement described below.served by one of our major customers. Our primary products are comprised of AC, which is produced from 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 which supplies the primary raw material for the manufacturing of our current products.
Through December 31, 2021,Acquisition
On February 1, 2023 (the "Acquisition Date"), we generated substantial earnings from our equity investmentscompleted the Arq Acquisition in Tinuum Group and Tinuum Services. Both entities ceased operations effective December 31, 2021 as a resultexchange for the Purchase Consideration of $31.2 million, which consisted of (i) 3,814,864 shares of the expiration of a tax credit program under the Section 45 Tax Credit Program. Tinuum Group provided reduction of mercuryCompany's common stock, par value $0.001 per share (the "Common Stock") and nitrogen oxide ("NOx"(ii) 5,294,462 shares (the "Preferred Shares") emissions at select coal-fired power generators through the production and sale of refined coal ("RC") which 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 GroupCompany's Series A Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock").
Loan Agreement
On February 1, 2023, we and Tinuum Services continueCF Global ("CFG"), a related party, as administrative agent and lender (the "Lender"), entered into a term loan (the "Term Loan") in the amount of $10.0 million, less original issue discount of $0.2 million. The Term Loan has a term of 48 months and bears interest at a rate equal to wind-down their operations,either (a) Adjusted Term SOFR (subject to a 1.00% floor and we have received what we anticipate area cap of 2.00%) plus a margin of 9.00% paid in cash and 5.00% paid in kind or (b) Base Rate plus a margin of 8.00% paid in cash and 5.00% paid in kind, which interest on the final distributions from these equity-method investments.Term Loan in each case is payable (or capitalized, in the case of in kind interest) quarterly in arrears. The Term Loan is secured by substantially all of the assets of ADES and its subsidiaries (including those acquired in the Acquisition), subject to customary exceptions. We incurred issuance costs of $1.3 million associated with the Loan Agreement.
GivenThe Loan Agreement also provided for the wind-downissuance of Tinuum Groupthe Warrant to CFG to purchase 325,457 shares of Common Stock, which represents 1% of the post-Arq Acquisition and Tinuum ServicesPIPE Investment (as defined below) fully diluted share capital (as defined in the Loan Agreement), at an exercise price of $0.01 per share. The Warrant has a term of 7 years and contains a cashless exercise provision.
Equity Financing
Also on February 1, 2023, we and the impact on our financial statements, we determinedSubscribers, which included existing shareholders of Arq Ltd., entered into the historical RC segment no longer metPIPE Investment for the qualitative or quantitative criteria to be consideredpurchase of 3,842,315 shares of Common Stock for an aggregate purchase price of $15.4 million and at a reporting segment under U.S. GAAP. As a result, as well as the method in which the chief operating decision maker allocates resources, beginning January 1, 2022, we determined that we had one reportable segment, and therefore have removed segment disclosures for this Quarterly Report.price per share of $4.00.
Drivers of Demand and Key Factors Affecting Profitability
Drivers of demand and key factors affecting our profitability are sales of our consumables-based solutions for coal-fired power
generation, industrials, municipal water customers and other diverse markets served by Norit, whom we supply through the Supply Agreement as discussed below.one of our major customers. Our operating results are influenced by: (1) changes in our manufacturing production and sales volumes; (2) changes in price and product mix; (3) changes in coal-fired dispatch and electricity power generation sources and (4) changes in demand for contaminant removal within water treatment facilities. During
For the three months ended September 30, 2022,March 31, 2023, we have continued to see highexperienced a decrease in demand for our AC products. As such,product from certain coal-fired dispatch and electricity power generation customers. This was primarily due to unexpectedly low natural gas prices, resulting in certain customers opting to use natural gas versus coal for power generation, and abnormally warm temperatures during the majority of the winter season, resulting in less demand for power generation. We expect that natural gas prices will remain at current lows through 2023, and we continue to purchase inventory to supplement customer demands in excessexpect this will significantly and negatively impact sales of our production capacityproduct. Further, lower average temperatures in the spring and to achievesummer season would also negatively impact sales of our target inventory levels. Although we expect to continue to supplement inventories throughout 2023, we expect those purchases to be at reduced levels compared to 2022.
Proposed Merger
As more fully discussed in Note 2 to the Condensed Consolidated Financial Statements, on August 19, 2022, we and Arq entered into the Transaction Agreement, which if approved, would combine both companies under New ADES, which will be renamed Advanced Emissions Solutions, Inc. and trade under the ticker symbol ADES. New ADES will acquire 100% of the outstanding equity interests of Arq (the "Arq Share Acquisition"), and our stockholders will receive shares of New ADES and the right to receive either their pro rata share of a $10.0 million aggregate cash payment or additional shares in New ADES.
As part of the Transaction Agreement, we have entered into subscription agreements from existing Arq shareholders for the purchase of $20.0 million of shares of New ADES' common stock (the "PIPE Investment") and a term debt commitment letter for $10.0 million (the "Debt Financing"), both of which will fund at Closing.product.
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The Closing is conditioned on the absence of any order, law or injunction preventing the consummation of the Transactions; approval for listing of the shares of New ADES common stock issued to our stockholders and the Arq shareholders (subject to official notice of issuance) on the Nasdaq Global Market; approval of the Transaction Agreement by holders of a majority of the outstanding common shares of ADES; the approval of the Scheme of Arrangement by resolution of a majority in number of the Arq shareholders representing three-fourths (75%) or more of the voting rights of the Arq shareholders; expiration of the waiting period under the Hart-Scott-Rodino Act; subject to certain qualifications, the accuracy of representations and warranties of the other party set forth in the Transaction Agreement; the performance by the other party in all material respects of its obligations under the Transaction Agreement, and other customary conditions. In addition, ADES’ obligation to consummate the Transactions is conditioned upon the consummation Debt Financing and the PIPE Investment.
Arq developed and owns a novel, patent-protected manufacturing process for producing carbon products through remediating coal waste sites. The Merger creates a North American based, integrated environmental technology company with access to diverse growth markets and a competitively advantaged position supported by patent-protected intellectual property ("IP") and products. We believe Arq’s technology and unique, waste-derived feedstock provide significant growth opportunities into high-growth GAC markets as well as large, adjacent markets including, but not limited to, additives to be utilized within the Carbon Black, Asphalt and Marine Fuel markets. The combined company will seek to leverage Arq’s existing strategic partnerships with Peabody, Vitol, Hafnia and Mitsubishi.
The utilization of a waste-derived feedstock results in lower manufacturing emissions and promotes the reclamation of property for future use. Further, with Arq’s feedstock, we believe New ADES’ vertically integrated supply chain will enable highly efficient production and distribution of an expanded portfolio of both GAC and PAC products.
We believe the combination of ADES and Arq provides entry into broader, higher performance and higher value AC markets by applying our existing organizational infrastructure, large scale manufacturing capabilities, established distribution network, world-class research, technical support, market-leading sales channels and customer base, while integrating Arq’s unique patent-protected and environmentally sustainable feedstock. The Merger also provides for the optimization of the Red River plant to produce additional GAC products made from Arq’s feedstock, thereby allowing entrance into growing and diverse markets, as well as improving the plant’s economics. We believe this combination provides ADES with end-market opportunities that may not be available to us without more diverse feedstocks and provides economic growth opportunities within AC markets that may not be available without the Merger.
Supply Agreement
On February 25, 2022, we received $10.6 million in cash from Norit as a result of the Change in Control, of which $8.5 million represented full payment of the outstanding Reclamation Reimbursement. As a result of the Change in Control, we recognized a loss of $0.5 million, which is included within the "Other income (expense)" line item in the Condensed Consolidated Statement of Operation for the nine months ended September 30, 2022. The Change in Control did not impact any other provisions of the Supply Agreement.
Marshall Mine
On September 2, 2022,March 27, 2023, we entered into a Purchase Agreement with a third party (the "MM Buyer") to sell all of our membership interests in Marshall Mine, LLC toclosed the MM Buyer in exchange for a cash payment to be made by the Seller to the MM Buyer of approximately $2.4 million and the assumption by the MM Buyer of certain liabilities of Marshall Mine, LLC (the "MM Sale"). The MM Buyer previously operated the Marshall Mine on behalfsale of Marshall Mine, LLC and is currently performing reclamation underwe remitted a cash payment to the Reclamation Contract. The Purchase Price is subject to adjustments for certain events that may occur during the period from the Agreement Date and the Closing Date.
The obligations of the Parties to close the MM Sale is subject to certain events, including (1) obtaining the approval of the Commission for an operating permitBuyer in the nameamount of $2.2 million in connection with the MM Buyer or an affiliate of the MM Buyer; and (2) the MM Buyer replacing the Seller’s surety bond with a reclamation performance bond, letter of credit or other form of security to which the MM Buyer or an affiliate of the MM Buyer is the principal that is satisfactory to the Commission.sale. As of September 30, 2022,March 27, 2023, Marshall Mine, LLC had outstanding liabilities of approximately $5.1$4.9 million which we expect to be fullythat were discharged upon paymentthe closing, and as a result, we recognized a gain of the Purchase Price. Because the Closing Date is uncertain, primarily due to the uncertain dateapproximately $2.7 million for the Parties to receive approval of the MM Buyer's operating permit and surety bond by the Commission, we are unable to determine the accounting period in which we will recognize the MM Sale.
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three months ended March 31, 2023.
Results of Operations
For the three and nine months ended September 30, 2022,March 31, 2023, we recognized net loss of $2.4$7.5 million, and $5.8 million, respectively, compared to net incomeloss of $24.3 million and $54.6$3.0 million for the three and nine months ended September 30, 2021, respectively.March 31, 2022. The most significant factorfactors impacting results period over period waswere increased expenses related to the Arq Acquisition as well as the decrease in equity earnings from Tinuum Groupdemand for our AC and chemical products related to power generation as the ability to generate Section 45 tax credits, the driver for Tinuum Group's operations, ceased asa result of December 31, 2021.prices of alternative energy sources.
The following sections provide additional information regarding these comparable periods. For comparability purposes, the following tables set forth our results of operations for the periods presented in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. The current year period to prior year period comparisons of financial results may not be indicative of financial results to be achieved in future periods.
Comparison of the Three Months Ended September 30,March 31, 2023 and 2022 and 2021
Total Revenue and Cost of Revenue
A summary of the components of our revenues and cost of revenue for the three months ended September 30,March 31, 2023 and 2022 and 2021 is as follows:
Three Months Ended September 30,ChangeThree Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20222021($)(%)(in thousands, except percentages)20232022($)(%)
Revenues:Revenues:Revenues:
ConsumablesConsumables$28,437 $26,693 $1,744 %Consumables$20,805 $26,402 $(5,597)(21)%
License royalties, related party— 4,165 (4,165)(100)%
Total revenuesTotal revenues$28,437 $30,858 $(2,421)(8)%Total revenues$20,805 $26,402 $(5,597)(21)%
Operating expenses:Operating expenses:Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortizationConsumables cost of revenue, exclusive of depreciation and amortization$21,575 $19,956 $1,619 %Consumables cost of revenue, exclusive of depreciation and amortization$17,175 $21,507 $(4,332)(20)%
Consumables and consumables cost of revenue
For the three months ended September 30, 2022,March 31, 2023, consumables revenues increaseddecreased from the comparable quarter in 20212022 primarily driven by highera decrease in volumes sold, which comprised $1.5$5.9 million of the total change. Product volumes were higherlower among power generation customers primarily due to higherlow natural gas prices and higher demand for electricity compared to the same quarter in 2021,2022, which contributed to increaseddecreased utilization of coal-fired generation and increaseddecreased demand for our products. The average natural gas spot prices ($MMBtu) for the three months ended March 31, 2023 and 2022 were $2.65 and $4.66, respectively. Total consumables revenues also increaseddecreased for the three months ended March 31, 2023 by approximately $1.0 million from the comparable quarter due to unfavorable product mix. Offsetting these decreases to Consumables revenues were overall higher pricing of our products by approximately $1.5$1.6 million from the comparable quarter in 2021. Offsetting these increases to Consumable revenue was unfavorable product mix of approximately $1.3million for the three months ended September 30, 2022 compared to 2021.2022.
Consumables gross margin, exclusive of depreciation and amortization, remained flatdecreased for the three months ended September 30, 2022,March 31, 2023, compared to the correspondingcomparable quarter in 2021. For2022. Driving the three months ended September 30, 2022, our consumablesdecrease in gross margin was negatively impacted byquarter over quarter were sales volume changes as discussed above, higher prices for key raw materials, transportation, including fuel, and other operational costs to produce and deliver our products including an increase in the amount of third-party carbons purchased in order to meet customer demand for our products and supplement the higher operating utilization of the Red River Plant.a negative impact from net electricity generated. Offsetting these negative impacts was an increase in the prices of our products, most of which were in place as of the beginning of April 2022.
For 2023, and based on current market estimates, we believe there will be a slight increase in Consumables revenue in the second half of 2023 compared to the first half of 2023, driven by changes to customer and product mix, and overall improvements in pricing. However, we expect to see slight decreases in volumes compared to 2022 due to prices of alternative energy sources impacting the demand for our AC and chemical products related to power generation. There is risk to our volumes outlook driven by inflationary pressures that may increase our overall operating costs for our manufacturing operations as well as sales volume remaining consistent quarter over quarter, and incremental positivethe impact from net electricity generated.
We expect that consumables revenues and gross margin will continue to be positively impacted by our product price increases related to new or renewed contracts and our efforts to move our product mix to higher margin products. We anticipate thatof the product price increases will help offset both the inflation we are experiencing in many of our operating costs and the higher operating costs from purchasing third-party carbon. We expect consumables cost of revenue and gross margin to be negatively impacted due to routine scheduled maintenance outages planned for the second quarter of 2023.2023 Red River Plant turnaround.
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 and renewables.
License royalties, related party
As discussed above, Tinuum Group ceased operations as of December 31, 2021 and as a result, we did not recognize any revenues from license royalties from Tinuum Group for the three months ended September 30, 2022.
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Other Operating Expenses
A summary of the components of our operating expenses for the three months ended September 30,March 31, 2023 and 2022, and 2021, exclusive of cost of revenue items (presented above), is as follows:
Three Months Ended September 30,ChangeThree Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20222021($)(%)(in thousands, except percentages)20232022($)(%)
Operating expenses:Operating expenses:Operating expenses:
Payroll and benefitsPayroll and benefits$2,313 $2,637 $(324)(12)%Payroll and benefits$4,699 $2,626 $2,073 79 %
Legal and professional feesLegal and professional fees3,668 1,106 2,562 232 %Legal and professional fees4,538 2,172 2,366 109 %
General and administrativeGeneral and administrative1,833 1,715 118 %General and administrative2,778 1,926 852 44 %
Depreciation, amortization, depletion and accretionDepreciation, amortization, depletion and accretion1,671 2,145 (474)(22)%Depreciation, amortization, depletion and accretion2,137 1,506 631 42 %
Gain on sale of Marshall Mine, LLCGain on sale of Marshall Mine, LLC(2,695)— (2,695)*
$11,457 $8,230 $3,227 39 %
$9,485 $7,603 $1,882 25 %
* Calculation not meaningful.
Payroll and benefits
Payroll and benefits expenses, which represent costs related to selling, general and administrative personnel, decreasedincreased for the three months ended September 30, 2022March 31, 2023 compared to the corresponding quarter in 2021,2022 primarily due to the addition of Arq employees, which increased expenses by $2.2 million, of which $1.3 million related to severance expense of former executives of Arq. These increases were offset by a decrease in payroll-related expensesexpense relate to retention agreements with our executive officers and certain other key employees of employees$0.3 million, as our headcount decreased quarter over quarter.these bonuses were paid in January 2023.
Legal and professional fees
Legal and professional fees increased for the three months ended September 30, 2022March 31, 2023 compared to the corresponding quarter in 20212022 as a result of an increase in costs incurred related to the Merger,Arq Acquisition, and was comprised mostly of legal and consulting fees. For the three months ended March 31, 2023, $2.4 million of legal and professional fees related to non-recurring transactions costs incurred as a result of the Arq Acquisition.
General and administrative
General and administrative expenses had no significant changesincreased for the three months ended March 31, 2023 compared to the corresponding quarter in 2022 as a result of $0.6 million expenses incurred by Arq for quarter, which includes $0.3 million related to rent and occupancy expense from additional leased space. Additional increases of approximately $0.3 million quarter over quarter.quarter related to increases in travel, recruiting and Board compensation, as three new board members were added to our Board in connection with the Arq Acquisition.
Depreciation, amortization, depletion and accretion
Depreciation and amortization expense decreasedincreased for the three months ended September 30, 2022March 31, 2023 compared to the corresponding quarter in 20212022 primarily due to higher production volumes compared to sales volumesdepreciation and amortization of approximately $0.6 million from the addition of long-lived assets and intangible assets acquired as part of the Arq Acquisition.
Gain on sale of Marshall Mine, LLC
As discussed above, for the three months ended September 30, 2022, resulting in $0.2March 31, 2023, we recognized a gain of $2.7 million less absorptionon the sale of depreciation in inventory. Further driving the decrease was a reduction in accretion expense of $0.1 million related to the Marshall Mine, ARO and amortization expense of $0.1 million related to patents.LLC.
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Other Income (Expense), net
A summary of the components of other income (expense), net for the three months ended September 30,March 31, 2023 and 2022 and 2021 is as follows:
Three Months Ended September 30,ChangeThree Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20222021($)(%)(in thousands, except percentages)20232022($)(%)
Other income (expense):Other income (expense):Other income (expense):
Earnings from equity method investmentsEarnings from equity method investments$— $22,195 $(22,195)(100)%Earnings from equity method investments$638 $833 $(195)(23)%
Gain on extinguishment of debt— 3,345 (3,345)(100)
Interest expenseInterest expense(83)(86)(3)%Interest expense(534)(86)(448)521 %
Other315 81 234 289 %
OtherOther182 (445)627 (141)%
Total other incomeTotal other income$232 $25,535 $(25,303)(99)%Total other income$286 $302 $(16)(5)%
Earnings from equity method investments
As discussed above, bothEarnings from equity method investments for the three months ended March 31, 2023 and 2022 represented cash distributions. The decrease was primarily due to Tinuum Group and Tinuum Services ceased operations as of December 31, 2021, and as a result we recognized zero earnings from Tinuum Group and Tinuum Services for the three months ended September 30, 2022. The following table details the components of our respective equity method investments included in the Earnings from equity method investments line item in the Condensed Consolidated Statements of Operations:
Three Months Ended September 30,
(in thousands)20222021
Earnings from Tinuum Group$— $19,975 
Earnings from Tinuum Services— 2,223 
(Loss) earnings from other— (3)
Earnings from equity method investments$— $22,195 
For the three months ended September 30, 2022, we did not recognize any equity earnings from Tinuum Group comparedcontinuing to our proportionate share of Tinuum Group's net loss of $0.2 million for the quarter. For the three months ended September 30, 2021, we recognized $20.0 million in equity earnings from Tinuum Group compared to our proportionate share of Tinuum Group's net income of $10.7 million for the quarter. For both of these quarters, the difference between our pro-rata share of Tinuum Group's net (loss) income and our earnings from the 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 September 30, 2022, we did not recognize any equity earnings from Tinuum Services compared to our proportionate share of Tinuum Services' net loss of less than $0.1 million for the quarter. For the three months ended September 30, 2021, we recognized $2.2 million in equity earnings from Tinuum Services, which was our proportionate share of Tinuum Services' net income of $4.4 million for the quarter. The difference between our pro-rata share of Tinuum Services' net loss and our earnings from the Tinuum Services equity method investment as reported on the Condensed Consolidated Statements of Operations is the result of cumulative distributions received from Tinuum Services 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.wind down their services into 2023.
Additional information related to equity method investments is included in Note 10 to the Condensed Consolidated Financial Statements included in Item 1 of this Report.
Gain on extinguishment of debt
For the three months ended September 30, 2021, we recorded a gain on extinguishment of a loan obtained through the Paycheck Protection Program (the "PPP Loan"), administered by Small Business Administration ("SBA"), in the amount of $3.3 million.
Interest expense
Interest expense had no significant changes quarter over quarter.
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Other
Other increased for the three months ended September 30, 2022March 31, 2023 compared to the corresponding quarter in 20212022 due to interest expense of $0.3 million related to the Term Loan, which was entered into on February 1, 2023 in connection with the Arq Acquisition. Additional interest expense of $0.1 million related to the Arq Loan, which we assumed as a result of a recognizing a gain on the sale of a right of way easement at the Marshall Mine of $0.2 million for the three months ended September 30, 2022.Arq Acquisitions.
Income tax expense
For the three months ended September 30, 2022,March 31, 2023, we had pretax loss of $7.5 million and recorded income tax benefit related to out-of-period state income tax refunds received during the quarter. We recorded no additional income tax expense or benefit compared to income tax expense of $4.6 million for the three months ended September 30, 2021, primarily due to pretax loss for the three months ended September 30, 2022 of $2.4 million compared to pretax income for the three months ended September 30, 2021 of $28.8 million. We did not recognize a tax benefit for the three months ended September 30, 2022 relatedthis quarter due to the pretax loss for this period, as we recordedrecording of a full valuation allowance as of September 30, 2022 primarily based on our forecast of pretax loss for the year endedending December 31, 2022.
Comparison of the Nine Months Ended September 30, 2022 and 2021
Total Revenue and Cost of Revenue
A summary of the components of our revenues and cost of revenue for the nine months ended September 30, 2022 and 2021 is as follows:
Nine Months Ended September 30,Change
(in thousands, except percentages)20222021($)(%)
Revenues:
Consumables$79,578 $62,642 $16,936 27 %
License royalties, related party— 11,888 (11,888)(100)%
Total revenues$79,578 $74,530 $5,048 %
Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization$62,992 $48,672 $14,320 29 %
Consumables and consumables cost of revenue
For the nine months ended September 30, 2022, consumables revenues increased from the comparable period in 2021 primarily driven by higher product volumes, which comprised approximately $11.2 million of the total change. Product volumes in 2022 were higher in power generation primarily due to higher natural gas prices compared to the prior year period, which contributed to increased demand for our products. Total consumables revenues also increased due to favorable selling prices of our products by approximately $4.3 million and favorable product mix of $0.6 million.
Consumables gross margin, exclusive of depreciation and amortization, decreased for the nine months ended September 30, 2022 compared to the corresponding period in 2021. For the nine months ended September 30, 2022, our consumables gross margin was negatively impacted by higher prices for key raw materials, transportation, including fuel, and other operational costs to produce and deliver our products, including an increase in the amount of third-party carbons purchased in order to meet customer demand for our products and supplement the higher operating utilization of the Red River Plant. Offsetting these negative impacts were higher product volumes, which resulted in lower fixed costs per pound, as well as increases in the prices of our products implemented during the first half of 2022, sales volume remaining consistent quarter over quarter and incremental positive impact from net electricity generated.
License royalties, related party
As discussed above, Tinuum Group ceased operations as of December 31, 2021 and as a result, for the nine months ended September 30, 2022, we did not recognize any revenues from license royalties from Tinuum Group.
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Other Operating Expenses
A summary of the components of our operating expenses, exclusive of cost of revenue items (presented above), for the nine months ended September 30, 2022 and 2021 is as follows:
Nine Months Ended September 30,Change
(in thousands, except percentages)20222021($)(%)
Operating expenses:
Payroll and benefits$7,458 $8,014 $(556)(7)%
Legal and professional fees7,395 4,340 3,055 70 %
General and administrative5,628 5,223 405 %
Depreciation, amortization, depletion and accretion4,765 6,155 (1,390)(23)%
Loss (gain) on change in estimate, asset retirement obligation34 (1,942)1,976 (102)%
$25,280 $21,790 $3,490 16 %
Payroll and benefits
Payroll and benefits expenses decreased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to a decrease in payroll-related expenses of employees of approximately $0.8 million as our headcount decreased period over period. Partially offsetting these decreases was an increase in expense of $0.2 million related to the Amended Retention Agreements.
Legal and professional fees
Legal and professional fees increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily as a result of an increase in costs incurred related to the Merger, and was comprised mostly of legal and consulting fees.
General and administrative
General and administrative expenses increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to an increase in rent and occupancy expense of $0.1 million, research and development expense of $0.1 million, travel of $0.1 million and recruiting fees of $0.1 million.
Depreciation, amortization, depletion and accretion
Depreciation and amortization expense decreased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to higher production volumes during the nine months ended September 30, 2022, resulting in $0.7 million less absorption of depreciation in inventory. Further driving the decrease was a reduction in accretion expense of $0.4 million related to the reduction of the Marshall Mine ARO compared to prior year period and a decrease in amortization expense of $0.3 million related to patents.
Loss (gain) on change in estimate, asset retirement obligation
We recorded a loss on change in estimate of $34.0 thousand primarily based on a change in the timing of estimated payments for future reclamation requirements of the Marshall Mine, which is included in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022.
We recorded a gain on change in estimate of $1.9 million related to a reduction in scope of our future reclamation efforts of the Marshall Mine, which is included in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021.
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Other Income (Expense), net
A summary of the components of our other income (expense), net for the nine months ended September 30, 2022 and 2021 is as follows:
Nine Months Ended September 30,Change
(in thousands, except percentages)20222021($)(%)
Other income (expense):
Earnings from equity method investments$3,222 $61,944 $(58,722)(95)%
Gain on extinguishment of debt— 3,345 (3,345)(100)
Interest expense(259)(1,416)1,157 (82)%
Other(19)652 (671)(103)%
Total other income$2,944 $64,525 $(61,581)(95)%

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:
Nine Months Ended September 30,
(in thousands)20222021
Earnings from Tinuum Group$3,137 $55,462 
Earnings from Tinuum Services84 6,485 
Earnings (loss) from other(3)
Earnings from equity method investments$3,222 $61,944 
For the nine months ended September 30, 2022, we recognized $3.1 million in equity earnings from Tinuum Group compared to our proportionate share of Tinuum Group's net loss of $1.7 million for the period. For the nine months ended September 30, 2021, we recognized $55.5 million in equity earnings from Tinuum Group compared to our proportionate share of Tinuum Group's net income of $33.6 million for the period. For both of these periods, the difference between our pro-rata share of Tinuum Group's net (loss) 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 nine months ended September 30, 2022, we recognized $0.1 million in equity earnings from Tinuum Services compared to our proportionate share of Tinuum Services' net loss of $0.1 million for this period. The difference between our pro-rata share of Tinuum Services' net loss and our earnings from the Tinuum Services equity method investment as reported on the Condensed Consolidated Statements of Operations is the result of cumulative distributions received from Tinuum Services 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.2023. For the three months ended September 30, 2021,March 31, 2022, we recognized $6.5 million in equity earnings from Tinuum Services, which was our proportionate share of Tinuum Services' net income of $13.0 million for the quarter.
See additional information related to equity method investments is included in Note 10 to the Condensed Consolidated Financial Statements included in Part I - Item 1 of this Report.
Gain on extinguishment of debt
As previously discussed, for the nine months ended September 30, 2021, we recorded a gain on extinguishment of debt in the amount of $3.3 million related to the SBA forgiveness of the PPP Loan.
Interest expense
For the nine months ended September 30, 2022, interest expense decreased $1.2 million primarily due to the pay-off of a senior term loan as of June 1, 2021.
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Other
For the nine months ended September 30, 2022, Other is primarily comprised of ahad pretax loss of $0.5$3.0 million recognized on the settlement of the Reclamation Reimbursement related to the Change in Control on February 25, 2022, which was partially offset by a gain on sale of right of way easement of $0.2 million at the Marshall Mine and gain on sale of property plant and equipment of $0.2 million.
Income tax expense
For the nine months ended September 30, 2022, we recorded no income tax expense or benefit compared to income tax expense of $14.0 million for the nine months ended September 30, 2021, primarily due to pretax loss for the nine months ended September 30, 2022recording of $5.8 million compared to pretax income for the nine months ended September 30, 2021 of $68.6 million. We did not recognize a tax benefit for the nine months ended September 30, 2022 related to the pretax loss for this period, as we recorded afull valuation allowance as of September 30, 2022 primarily based on our forecast of pretax loss for the year ended December 31, 2022.
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Non-GAAP Financial Measures
To supplement our financial information presented in accordance with U.S. GAAP (or "GAAP"), we provide non-GAAP measures of certain financial performance. These non-GAAP measures include Consolidated EBITDA (EBITDA Loss) and Consolidated Adjusted EBITDA.EBITDA (Adjusted EBITDA Loss). We have included these non-GAAP measures because management believes that they help to facilitate period to period comparisons of our operating results and provide useful information to both management and users of the financial statements by excluding certain expenses, gains and losses which 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 (EBITDA Loss) as net 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, amortization of upfront customer consideration which was recorded in conjunction with the Marshall Mine Acquisition ("Upfront Customer Consideration"), interest expense, net and income taxes. We define Consolidated Adjusted EBITDA (Adjusted EBITDA Loss) as Consolidated EBITDA (EBITDA Loss), reduced by the non-cash impact of equity earnings from equity method investments and gain on extinguishmentsale of debt,Marshall Mine, LLC, increased by cash distributions from equity method investments and loss on early settlement of the Norit Receivable and the change in ARO as a result of a change in estimate.long-term 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.
When used in conjunction with GAAP financial measures, we believe these non-GAAP measures are supplemental measures of operating performance which explain our operating performance for our 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 EBITDA and 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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Net (loss) income$(2,391)$24,253 $(5,750)$54,580 
Depreciation, amortization, depletion and accretion1,671 2,145 4,765 6,155 
Amortization of Upfront Customer Consideration127 127 381 381 
Interest expense, net44 25 163 1,188 
Income tax expense— 4,581 — 14,013 
Consolidated ( EBITDA loss) EBITDA(549)31,131 (441)76,317 
Cash distributions from equity method investees— 22,875 5,613 66,751 
Equity earnings— (22,195)(3,222)(61,944)
Gain on extinguishment of debt— (3,345)— (3,345)
Loss (gain) on change in estimate, asset retirement obligation— 34 (1,942)
Loss on early settlement of Norit Receivable— — 535 — 
Consolidated (Adjusted EBITDA loss) Adjusted EBITDA$(549)$28,466 $2,519 $75,837 
Three Months Ended March 31,
(in thousands)20232022
Net loss(1)
$(7,508)$(3,033)
Depreciation, amortization, depletion and accretion2,137 1,506 
Amortization of Upfront Customer Consideration127 127 
Interest expense, net289 64 
Income tax benefit(33)— 
(EBITDA loss)(4,988)(1,336)
Cash distributions from equity method investees638 2,514 
Equity earnings(638)(833)
Gain on sale of Marshall Mine, LLC(2,695)— 
Loss on early settlement of long-term receivable— 535 
(Adjusted EBITDA loss) Adjusted EBITDA$(7,683)$880 
(1) Included in Net loss for the three months ended March 31, 2023 and 2022, is $4.4 million and $0.8 million, respectively, of transactions and integration costs incurred related to the Arq Acquisition. Additionally, for the three months ended March 31, 2023, Net loss included $0.9 million of Arq payroll and benefit costs.
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Liquidity and Capital Resources
Current Resources and Factors Affecting Our Liquidity
As of September 30, 2022,March 31, 2023, our principal sources of liquidity included:
cash on hand, excluding restricted cash of $10.0 million pledged as collateral under a surety bond agreement; and
our operations.
As of September 30, 2022,March 31, 2023, our principal uses of liquidity included:
our business operating expenses;
capital and spare parts expenditures;
payments on our lease obligations;
payments on our debt obligations; and
payments of AROs 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 are no longer a significant source of liquidity.
Tinuum Group and Tinuum Services Distributions
The following table summarizes the cash distributions from our equity method investments for the nine months ended September 30, 2022 and 2021:
Nine Months Ended September 30,
(in thousands)20222021
Tinuum Services$2,476 $7,902 
Tinuum Group3,137 58,849 
Distributions from equity method investees$5,613 $66,751 
Cash distributions from Tinuum for the nine months ended September 30, 2022 decreased by $61.1 million compared to the nine months ended September 30, 2021 primarily due to Tinuum Group and Tinuum Services ceasing material operations as of December 31, 2021.
Cash Flows
NineThree Months Ended September 30, 2022March 31, 2023 vs. NineThree Months Ended September 30, 2021March 31, 2022
Cash and restricted cash decreasedincreased from $88.8$76.4 million as of December 31, 20212022 to $85.8$79.1 million as of September 30, 2022.March 31, 2023. The following table summarizes our cash flows for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively:
Nine Months Ended September 30, Three Months Ended March 31,
(in thousands)(in thousands)20222021Change(in thousands)20232022Change
Cash and restricted cash provided by (used in):Cash and restricted cash provided by (used in):Cash and restricted cash provided by (used in):
Operating activitiesOperating activities$352 $24,688 $(24,336)Operating activities$(17,705)$2,094 $(19,799)
Investing activitiesInvesting activities(1,966)38,937 (40,903)Investing activities(2,897)(439)(2,458)
Financing activitiesFinancing activities(1,343)(17,418)16,075 Financing activities23,260 (628)23,888 
Net change in cash and restricted cashNet change in cash and restricted cash$(2,957)$46,207 $(49,164)Net change in cash and restricted cash$2,658 $1,027 $1,631 
Cash flow from operating activities
Cash flows provided byused in operating activities for the ninethree months ended September 30, 2022March 31, 2023 decreased by $24.3$19.8 million compared to the ninethree months ended September 30, 2021.March 31, 2022. The net decrease was primarily attributable to net loss of $5.8$7.5 million recognized for the ninethree months ended September 30, 2022March 31, 2023 compared to net incomeloss of $54.6$3.0 million recognized for the ninethree months ended September 30, 2021,March 31, 2022; the add-back of a non-cash gain of $2.7 million recognized from the sale of Marshall Mine, LLC for the three months ended March 31, 2023; a decrease in Deferred income tax expenseaccounts payable and accrued expenses of $9.0$10.8 million, primarily from payments of Arq assumed liabilities comprised of accrued employee-related compensation and accrued transaction costs associated with the Arq Acquisition; payment of the balance of the Retention Bonuses; and a decrease in Distributions from equity method investees, return on investment of $19.7 million and an increase in net working capital of $5.1$1.5 million. Offsetting the net decrease in cash flows provided by operating activities for the ninethree months ended September 30, 2022March 31, 2023 compared to the ninethree months ended September 30, 2021March 31, 2022 were decreasesan increase in net working capital, excluding accounts payable and accrued expenses, of $3.5 million, a decrease in Earnings from equity method investments of $58.7$0.2 million, and a decrease in Other long-term assets, net of $6.1$3.6 million, primarily from the Norit Paymentpayment received from settlement on a long-term receivable in settlement of the Reclamation Reimbursement, and the non-cash gain recognized from the change in estimate of the Marshall Mine ARO of $2.0 million.
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prior period.
Cash flow from investing activities
Cash flows provided by (used in)used in investing activities decreasedincreased for the ninethree months ended September 30, 2022March 31, 2023 compared to the ninethree months ended September 30, 2021March 31, 2022 by $40.9$2.5 million primarily as a result of an increase in property, plant and equipment additions of $2.2 million and the sale of Marshall Mine, LLC, which required a decrease incash payment of $2.2 million. Additionally, distributions from equity earnings in excess of cumulative earnings of $41.4 million.decreased $0.4 million quarter over quarter. Offsetting the net decreaseincrease in cash flows provided by (used in)used in investing activities was an increase$2.2 million of cash acquired in property, plant and equipment additions of $0.8 million.the Arq Acquisition.
Cash flow from financing activities
Cash flows used inprovided by financing activities for the ninethree months ended September 30, 2022March 31, 2023 compared to the ninethree months ended September 30, 2021 decreasedMarch 31, 2022 increased by $16.1$23.9 million primarily due to the net borrowings, net of debt issuance costs paid, of $8.5 million on the Term Loan and net proceeds from a decrease in principal loan repayments on a senior term loan.the PIPE Investment of $15.2 million.
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Material Cash Requirements
ForWith the nineArq Acquisition, we have assumed liabilities, including the Arq Loan, that will increase our cash requirements for the next 12 months ended September 30, 2022, there were no material changes toand beyond. In addition, our contractual obligations outsidesuccess with the Arq acquisition will require significant capital expenditures as quantified below. With the execution of the ordinary courseTerm Loan in February 2023, we are required to make quarterly interest payments beginning in March 2023 through February 2027, and a balloon payment of business from those reported asprincipal and PIK interest totaling approximately $12.4 million on the expiration date of December 31, 2021.the Term Loan. We expect that our cash on hand as of September 30, 2022March 31, 2023 will provide sufficient liquidity to fund operationsour required contractual obligations due and operating loss incurred for the next 12 months.
Capital Expenditures
For 2022,2023, we expect to incur $11.4between $40.0 million and $45.0 million in capital expenditures, compared to $7.6including:
Between $13.0 million incurred in 2021. This increaseand $15.0 million is primarily the result of forecastedforecast for capital improvements toat the Red River Plant of approximately $4.4 million, product specific capital expenditures related to the Supply Agreement of approximately $0.7scheduled maintenance improvements and to complete current capital projects; and
Between $27.0 million and scheduled maintenance improvements. $30.0 million is forecast for growth capital for the modification of the both the Red River Plant and Corbin Plant in order to incorporate Arq Powder as feedstock.
We expect to fund all capital expenditures for 20222023 from cash on hand.
Retention Agreements
In August 2022, the Company paid out $1.0 million pursuant to the payment terms of the Amended Retention Agreements. As of September 30, 2022, the remaining outstanding amount due under the Amended Retention Agreements is $1.1 million.
Five Forks MineSurety Bonds and Marshall Mine Obligations
As of September 30, 2022,March 31, 2023, we had outstanding surety bonds with regulatory commissions totaling $24.1$7.5 million related to bothreclamation of the Marshall Mine and Five Forks Mine. As of September 30, 2022,March 31, 2023, and as required by our surety bond provider, we also held restricted cash of $10.0 million pledged as collateral for such surety bonds related to performance requirements required underthe Five Forks Mine and other surety obligations. Prior to March 31, 2023, and as a result of the sale of Marshall Mine, LLC, we reduced our surety bonds by $16.6 million in discharge of all future obligations for reclamation contracts for bothof the Marshall Mine and Five Forks Mine. Subsequent to March 31, 2023, we reduced our required restricted cash to $7.7 million.
As March 31, 2023, we had outstanding surety bonds with a regulatory commission totaling $3.0 million for reclamation obligations of the land adjacent to the Corbin Facility.
We expect that the obligations secured by these surety bonds associated with Five Forks 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 collateral requirements reduced. However, in the event any surety bond is called, our indemnity obligations could require us to reimburse the surety bond provider.
We intend to fund our mine reclamation costs associated with both the Five Forks Mine and Marshall Mine from cash on hand. As discussed above, on September 2, 2022, we executed the sale of all of our equity interests in Marshall Mine, LLC and upon the expected closing of this transaction, we expect to fully discharge the liability associated with the Reclamation Costs and also reduce both the surety bond and collateral requirements as we will only be obligated for future remediation costs for the Five Forks Mine.
Critical Accounting Policies and Estimates
Our 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 20212022 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, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended or the Exchange Act,(the "Exchange Act") that involve risks and uncertainties. In particular such forward-looking statements are found in this Part I and under the heading in Part II, Item 2 above.7 below. Words or phrases such as "anticipates," "believes," "expects," "intends," "plans," "estimates," "predicts," the negative expressions of such words, or similar expressions are used in this Quarterly Report to identify forward-looking statements, and such forward-looking statements include, but are not limited to, statements or expectations regarding:
(a)the anticipated effects from thean increase in pricing of our AC products;
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(b)the anticipated effects from thean increase in costs of our AC products and related cost increases in supply and logistics;
(c)expected supply and demand for our AC products and services;
(d)increasing competition in the AC market;
(e)the timing and effects of the proposed merger with Arq Limited;Acquisition;
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(f)the ability to successfully integrate Arq's business;
(f)(g)the ability to develop and utilize Arq’s products and technology;
(h)the ability to make Arq's products commercially viable;
(i)the expected future demand of Arq's products;
(j)future level of research and development activities;
(g)(k)future plant capacity expansions and site development projects;
(l)the effectiveness of our technologies and the benefits they provide;
(h)(m)probability of any loss occurring with respect to certain guarantees made by Tinuum Group;
(i)(n)the timing of awards of, and work and related testing under, our contracts and agreements and their value;
(j)(o)the timing and amounts of or changes in future revenues, backlog, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures;
(k)(p)the amount of future capital expenditures needed for our business;APT business and Arq to fund our business plan;
(l)(q)awards of patents designed to protect our proprietary technologies both in the U.S. and other countries;
(m)(r)the adoption and scope of regulations to control certain chemicals in drinking water;water and other environmental concerns;
(n)(s)the impact of adverse global macroeconomic conditions, including rising interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts; and
(o)(t)opportunities to effectively provide solutions to U.S. coal-related businesses to comply with regulations, improve efficiency, lower costs and maintain reliability.reliability;

(u)
the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products; and
(v)bank failures or other events affecting financial institutions.
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; 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 business; loss of key personnel; availability of materials and equipment for our business; intellectual property infringement claims from third parties; pending litigation; as well as other factors relating to our business strategy, goals and expectations concerning the Arq Acquisition (including future operations, future performance or results); the effect of the Arq Acquisition on our ability to hire key personnel; our ability to maintain relationships with customers, suppliers and other with whom we do business, or our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; the ability to meet Nasdaq's listing standards following the consummation of the Arq Acquisition; costs related to the Arq Acquisition; opportunities for additional sales of our lignite AC products and end-market diversification; our ability to meet customer supply requirements; the rate of coal-fired power generation in the U.S., as described in our filings with the SEC, with particular emphasis on the risk factor disclosures contained in those filings. 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.
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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 September 30, 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 DecemberMarch 31, 2021 for 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 for 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.
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2023.
Changes in Internal Control Over Financial Reporting
Under the applicable SEC rules (Exchange Act Rules 13a-15(f)On February 1, 2023, we acquired Arq and 15d-15(f) management is required to evaluate any changes inexcluded their business from our assessment of internal control over financial reporting that occurredas of March 31, 2023, as allowed under general guidance issued by the Staff of the Securities and Exchange Commission. There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during eachthe fiscal quarter ended March 31, 2023 that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. As discussed in Item 9A. "Controls and Procedures"The Company is evaluating the impacts of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, we identified a material weakness inArq Acquisition to our internal control over financial reporting described above. Asas allowed under general guidance issued by the Staff of September 30, 2022, we designedthe Securities and implemented remediation procedures which enhanced existing controls that were ineffective in the prior year and implemented new controls to address the design gaps related to the material weakness. The updates to the internal controls framework include enhanced monitoring of interpretative guidance of previously adopted accounting standards and a periodic review of policies and procedures associated to material accounts. For the fiscal quarter ended September 30, 2022, the new controls were in place and remediation procedures continued, and, accordingly, we believe the controls will beExchange Commission.


in place for a sufficient period of time to conclude on their effectiveness as of December 31, 2022.




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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 8 "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 20212022 Form 10-K except as described below.
Risks Related toBank failures or other events affecting financial institutions could have a material adverse effect on our Pending Business Combination
We are subject to a numberbusiness, results of risks and uncertainties related to the pending Transactions including, but not limited to, the risks discussed below in this section of the risk factors. For additional information about the pending Transactions and the additional risks and uncertainties related to the Transactions, see New ADES’ registration statement on Form S-4, filed with the SEC on November 3, 2022.
Completion of the Transactions is subject to certain conditions, some of which are outside of the parties’ control, and if these conditions are not satisfiedoperations or waived, the Transactions will not be completed.
The closing of the Transactions is subject to certain conditions, including (i) ADES stockholder approval of the merger proposal and related matters at our special meeting of stockholders, (ii) Arq shareholder approval of the Scheme of Arrangement and certain related matters, (iii) the expiration or termination of all waiting periods applicable to the Contemplated Transactions under the HSR Act, (v) the effectiveness of the registration statement on Form S-4 for the New ADES Shares, (vi) receipt of Nasdaq listing approval for the New ADES Shares and the shares of New ADES to be issued in the Arq Acquisition, (vii) subject to certain materiality exceptions, the accuracy of each of our and Arq’s representations and warranties in the Transaction Agreement and performance by us and Arq of obligations under the Transaction Agreement and (viii) the sanctioning of the Scheme of Arrangement by the Royal Court of Jersey and the delivery of the order of the Royal Court of Jersey sanctioning the Scheme of Arrangement to the Registrar of Companies in Jersey.
The requirement to satisfy each of the foregoing conditions could delay completion of the Transactions for a significant period of time or prevent them from occurring at all. Any delay in completing the Transactions could cause New ADES not to realize some or all of the benefits that the parties expect New ADES to achieve if the Transactions are successfully completed within the expected timeframe. Additionally, any delay in completing the Transactions could lead to increased costs for us and Arq. Further, as a condition to approving the Transactions, governmental authorities may impose conditions, terms, obligations or restrictions on the conduct of the parties’ business after the completion of the Transactions. Notwithstanding the provisions of the Transaction Agreement, if the parties were to become subject to any conditions, terms, obligations or restrictions (whether because such conditions, terms, obligations and restrictions do not rise to the specified level of materiality or because the parties consent to their imposition), it is possible that such conditions, terms, obligations or restrictions will delay completion of the Transactions or otherwise adversely affect the parties’ business, financial condition, or have other adverse consequences.
We primarily use one U.S. bank for our operations. Furthermore, governmental authoritiesThe majority of our cash deposits are held by this bank and exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limits. The failure of this bank or events involving limited liquidity, non-performance or other adverse conditions in the financial or credit markets impacting this bank, or concerns or rumors about such events, may require thatlead to disruptions in access to our cash balances, adversely impact our liquidity or limit our ability to process transactions related to our customers. In the parties divest assets or businesses asevent of a condition to the closingfailure of the Transactions. If we are required to divest assets or businesses,this bank, there can be no assurance that weour deposits in excess of the FDIC or other comparable insurance limits will be ablerecoverable or, even if ultimately recoverable, there may be significant delays in our ability to negotiate such divestitures expeditiouslyaccess those funds. Furthermore, bank failures, non-performance, or other adverse developments that affect other financial institutions could impair the ability of this bank to honor its commitments. Such events could have a material adverse effect on favorable termsour financial condition or that the governmental authorities will approve the termsresults of such divestitures. There canoperations.
Similarly, our customers may be no assurance that the conditions to the closing of the Transactions will be satisfiedadversely affected by any bank failure or where applicable, waivedother event affecting financial institutions. If our customers are unable, or that the Transactions will be completed.
In addition, if the Transactions shall not have occurred by April 30, 2023 (subject to certain extension rights), either we or Arq may choose not to proceed with the Transactions. We and Arq may also terminate the Transaction Agreement under certain specified circumstances.
Failure to complete the Transactions could negatively impact our stock price andcustomers in the future business and financial results.
If the Transactions are not completed for any reason, includingunable, to meet their obligations to us as a result of our stockholders failing to adopt the Transaction Agreement and approve the transactions contemplated thereby,a bank failure or Arq shareholders failing to approve the Scheme of Arrangement, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Transactions, we would be subject to a number of risks, including the following:
other event affecting financial institutions, we may be required, under certain circumstances,exposed to pay Arqpotential risks that could impact our financial condition or results of operations. Furthermore, a termination fee of approximately $3 million and/significant change in the liquidity or reimburse Arq for certain fees and expenses in an amount of up to $3 million;
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we are subject to certain restrictions on the conductfinancial position of our businesses prior to completing the Transactions,customers could cause unfavorable trends in cash collections, which may adversely affect our ability to execute certain of our respective business strategies going forward if the Transactions are not completed;
wecould have incurred and will continue to incur significant costs and fees associated with the proposed Transactions, such as legal, accounting, financial advisor and printing fees, regardless of whether the Transactions are completed;
we may experience negative reactions from the financial markets, including negative impactsa material adverse effect on our stock prices;
we may experience negative reactions from our customers, regulators and employees; and
matters relating to the Transactions (including integration planning) will require substantial commitments of time and resources by our management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to us as an independent company.
In addition, we could be subject to litigation related to any failure to complete the Transactions or related to any enforcement proceeding commenced against us to perform our obligations under the Transaction Agreement. If the Transactions are not completed, these risks may materialize and may adversely affect our business, financial condition financial results and stock price.
The Transaction Agreement limits our ability to pursue alternatives to the Transaction, may discourage other companies from making a favorable alternative transaction proposal and, in specified circumstances, could require us to pay Arq a termination fee and/or reimburse Arq for certain of its expenses.
The Transaction Agreement contains certain provisions that restrict our ability to solicit, initiate, knowingly encourage induce or facilitate any inquiry, proposal or offer with respect to, or making or completion of, any acquisition proposal, or any inquiry, proposal or offer that would reasonably be expected to lead to, an acquisition proposal with respect to the Company, and we have agreed to certain terms and conditions relating to our ability to enter into, continue or otherwise participate in any discussions or negotiations regarding or otherwise cooperate in any way with, any acquisition proposal. In addition, Arq generally has an opportunity to offer to modify the terms of the Transaction Agreement in response to any competing acquisition proposals or intervening events before our Board may withdraw, modify or qualify its recommendation. The Transaction Agreement further provides that under specified circumstances, including after receipt of certain alternative acquisition proposals, we may be required to pay Arq a cash termination fee equal to $3 million and/or reimburse Arq for certain fees and expenses in an amount of up to $3 million.
These provisions could discourage a potential third-party acquirer or other strategic transaction partner that might have an interest in acquiring all or a significant portion of our Company from considering or pursuing an alternative transaction with us or proposing such a transaction, even if it were prepared to pay consideration with a higher per share value than the total value proposed to be paid or received in the mergers. These provisions might also result in a potential third-party acquirer or other strategic transaction partner proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
We will incur significant transaction and merger-related costs in connection with the Transactions.
We have incurred and expect to incur a number of non-recurring direct and indirect costs associated with the Transactions. These costs and expenses include fees paid to financial, legal and accounting advisors, severance and other potential employment-related costs, including payments that may be made to certain of our executives, filing fees, printing expenses and other related charges. Some of these costs are payable by us regardless of whether the Transactions are completed. There are also processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Transactions and the integration of the two companies’ businesses. While we have assumed that a certain level of expenses would be incurred in connection with the Transactions and the other transactions contemplated by the Transaction Agreement and continue to assess the magnitude of these costs, there are many factors beyond our control that could affect the total amount or the timing of the integration and implementation expenses.
There may also be additional unanticipated significant costs in connection with the Transactions that we may not recoup. These costs and expenses could reduce the realization of efficiencies and strategic benefits we expect New ADES to achieve from the Transactions. Although we expect that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.
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In connection with the Transactions, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.
Although we have conducted extensive due diligence in connection with the Transactions and related transactions, we cannot assure stockholders that this diligence revealed all material issues that may be present, that it would be possible to uncover all material issues through a customary amount of due diligence or that factors outside of our control will not later arise. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Further, as a result of the Transactions, purchase accounting and the proposed operation of New ADES going forward, we may be required to take write-offs or write-downs, restructuring and impairment or other charges. As a result, we may be forced to write-down or write-off assets, restructure its operations or incur impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.
We may have difficulty attracting, motivating and retaining executives and other key employees due to uncertainty associated with the Transactions.
New ADES’ success after completion of the Transactions will depend in part upon the ability of New ADES to retain our key employees. Competition for qualified personnel can be intense. Our current and prospective employees may experience uncertainty about the effect of the Transactions, which may impair our ability to attract, retain and motivate key management, sales, marketing, manufacturing, technical and other personnel prior to and following the Transactions. Employee retention may be particularly challenging during the pendency of the Transactions, as our employees may experience uncertainty about their future roles with New ADES.
In addition, pursuant to severance provisions in our executive employment agreements, certain of our key employees are entitled to receive severance payments upon certain qualifying terminations of their employment. Certain of our key employees potentially could terminate their employment following specified circumstances set forth in the applicable executive severance scheme or employment agreement, including certain changes in such key employees’ title, status, authority, duties, responsibilities or compensation, and be entitled to receive severance. Such circumstances could occur in connection with the Transactions as a result of changes in roles and responsibilities.
While we may employ the use of certain retention programs, there can be no guarantee that they will prove to be successful. If our key employees depart, the integration of the companies may be more difficult and New ADES’ business following the Transactions may be harmed. Furthermore, New ADES may be required to incur significant costs in identifying, hiring, training and retaining replacements for departing employees and may lose significant expertise and talent relating to our business, which may adversely affect New ADES’ ability to realize the anticipated benefits of the Transactions. Accordingly, no assurance can be given that New ADES will be able to attract or retain our key employees to the same extent that we have been able to attract or retain our own employees in the past.
Our business relationships may be subject to disruption due to uncertainty associated with the Transactions.
Companies with which we do business may experience uncertainty associated with the Transactions, including with respect to current or future business relationships with us or New ADES. Our business relationships may be subject to disruption as customers, distributors, suppliers, vendors and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us or New ADES. These disruptions could have an adverse effect on the businesses, financial condition, results of operations or prospects of New ADES, including an adverse effect on New ADES’ ability to realize the anticipated benefits of the Transactions. The risk and adverse effect of such disruptions could be exacerbated by a delay in completion of the Transactions.
Completion of the Transactions may trigger change-in-control or other provisions in certain agreements to which we are a party.
The completion of the Transactions may trigger change-in-control or other provisions in certain agreements to which we are a party. If we are unable to negotiate waivers of those provisions, the respective counterparties may exercise their rights and remedies under the applicable agreements, including in some instances potentially terminating the agreements or seeking monetary damages. Even if we are able to negotiate waivers, the respective counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to the combined business.


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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.On February 1, 2023, we entered into Subscription Agreements (the "Subscription Agreements") with certain persons (the "Subscribers"), which included existing shareholders of Arq Ltd., three of which were appointed to our Board of Directors, pursuant to which the Subscribers subscribed for and purchased shares of our common stock for an aggregate purchase price of $15.4 million and at a price per share of $4.00 (such transaction, the "PIPE Investment").
The securities issued to the Subscribers under the Subscription Agreements were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act, Rule 506 of Regulation D, which is promulgated thereunder, and Regulations S of the Securities Act. We are relying on this exemption from registration based in part on representations made by each of the Subscribers under the Subscription Agreements. The sale of the securities pursuant to the Subscription Agreements has not been registered under the Securities Act or any state securities laws. The securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
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.

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Item 6. Exhibits
Exhibit No.Exhibit No.DescriptionFormFile No.Incorporated by Reference
 Exhibit
Filing DateExhibit No.DescriptionFormFile No.Incorporated by Reference
 Exhibit
Filing Date
2.18-K001-378222.1August 19, 2022
10.110.18-K001-3782210.1September 6, 202210.18-K001-378222.1February 1, 2023
10.210.28-K001-3782210.1February 1, 2023
10.310.38-K001-3782210.2February 1, 2023
31.131.131.1
31.231.231.2
32.132.132.1
95.195.195.1
101. INSXBRL Instance Document*
101.SCH101.SCHXBRL Schema Document*101.SCHXBRL Schema Document*
101.CAL101.CALXBRL Calculation Linkbase Document*101.CALXBRL Calculation Linkbase Document*
101.LAB101.LABXBRL Label Linkbase Document*101.LABXBRL Label Linkbase Document*
101.PRE101.PREXBRL Presentation Linkbase Document*101.PREXBRL Presentation Linkbase Document*
101.DEF101.DEFTaxonomy Extension Definition Linkbase Document*101.DEFTaxonomy Extension Definition Linkbase Document*
104104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*
Notes:
*    Filed herewith.
**    Portions of this exhibit have been omitted pursuant to a request for confidential treatment.




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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)
November 8, 2022May 9, 2023By:/s/ Greg Marken
Greg Marken
Chief Executive Officer
(Principal Executive Officer)
November 8, 2022May 9, 2023By:/s/ Morgan Fields
Morgan Fields
Chief Accounting Officer
(Principal Financial Officer)

 
 

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