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What changed in Arq, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Arq, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+351 added−301 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-12)

Top changes in Arq, Inc.'s 2024 10-K

351 paragraphs added · 301 removed · 243 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+45 added−24 removed28 unchanged
Biggest changeIn some cases, forward-looking statements can be identified by words or phrases such as "anticipates," "believes," "expects," "intends," "plans," "estimates,", "may", "predicts," the negative expressions of such words, or similar expressions, and such forward-looking statements include, but are not limited to, statements or expectations regarding: (a) the anticipated effects from an increase in pricing of our AC products; (b) the anticipated effects from an increase in costs of our AC products and related cost increases in supply and logistics; (c) expected supply and demand for our AC products and services; (d) increasing competition in the AC market; 7 (e) the ability to successfully integrate Legacy Arq's business; (f) the ability to develop and utilize Legacy Arq’s products and technology; (g) the ability to make Legacy Arq's products commercially viable; (h) the expected future demand of Legacy Arq's products; (i) future level of research and development activities; (j) future plant capacity expansions and site development projects, including the GAC Facility; (k) the effectiveness of our technologies and the benefits they provide; (l) probability of any loss occurring with respect to certain guarantees made by Tinuum Group; (m) the timing of awards of, and work and related testing under, our contracts and agreements and their value; (n) the timing and amounts of or changes in future revenue, backlog, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures; (o) the amount of future capital expenditures needed to fund our business plan; (p) awards of patents designed to protect our proprietary technologies both in the U.S. and other countries; (q) the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns; (r) the impact of adverse global macroeconomic conditions, including rising interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts; (s) opportunities to effectively provide solutions to U.S. coal-related businesses to comply with regulations, improve efficiency, lower costs and maintain reliability; (t) the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products; and (u) bank failures or other events affecting financial institutions.
Biggest changeIn some cases, forward-looking statements can be identified by words or phrases such as "anticipates," "believes," "expects," "intends," "plans," "estimates,", "may," "predicts," the negative expressions of such words, or similar expressions, and such forward-looking statements include, but are not limited to, statements or expectations regarding: (a) the anticipating timing of the completion of commissioning of the GAC Facility, ramp-up to full nameplate capacity at our Red River Plant, and commercial production of our GAC products; (b) the anticipated effects from fluctuations in the pricing of our AC products; (c) expected supply and demand for our AC products and services, including our GAC products; (d) the seasonal impact on our customers and their demand for our products; (e) the ability to continue to successfully integrate Legacy Arq's business and recognize the benefits and synergies from the Arq Acquisition; (f) the ability to continue to develop and utilize Legacy Arq’s products and technology and the anticipated timing for bringing such products to market; (g) our ability to access new markets for our GAC and other products; (h) any future plant capacity expansions or site development projects and our ability to finance any such projects; (i) the effectiveness of our technologies and the benefits they provide; (j) the timing of awards of, and work and related testing under, our contracts and agreements and their value; (k) probability of any loss occurring with respect to certain guarantees made by Tinuum Group; (l) the timing and amounts of or changes in future revenue, 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; (m) the performance of obligations secured by our surety bonds; (n) the amount and timing of future capital expenditures needed to fund our business plan; (o) the impact of capital expenditure overruns on our business; (p) awards of patents designed to protect our proprietary technologies both in the U.S. and other countries; (q) the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns and the impact of such regulations on our customers' and our businesses, including any increase or decrease in sales of our AC products resulting from such regulations; (r) the impact of adverse global macroeconomic conditions, including rising interest rates, recession fears and inflationary pressures, and geopolitical events or conflicts; (s) opportunities to effectively provide solutions to our current and future customers to comply with regulations, improve efficiency, lower costs and maintain reliability; and (t) the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products.
AC, in various forms, has and will continue to play a key role in these remediation efforts. Our current products (also referred to as "consumables") are used to purify contaminated liquid, soil, and gas streams from a variety of industrial sources including coal-fired power plants and wastewater treatment plants and other end markets.
AC, in various forms, has and will continue to play a key role in these remediation efforts. Our current products (also referred to as "consumables") are used to purify contaminated liquid, soil, and gas streams from a variety of industrial sources including wastewater treatment plants, coal-fired power plants and other end markets.
We offer AC and other chemical products and work with customers as they develop and implement a compliance control strategy that utilizes the consumables solutions that fit with their unique operating and pollution control configuration. Coal-fired power plants continue to be a significant, though declining, source of electricity generation in the United States ("U.S.").
We offer AC and other chemical products and work with customers as they develop and implement a compliance control strategy that utilizes the consumables solutions that fit their unique operating and pollution control configuration. Coal-fired power plants continue to be a significant, though declining, source of electricity generation in the United States ("U.S.").
State Mercury and Air Toxics Regulations Affecting EGUs In addition, certain states have their own mercury rules that are similar to or more stringent than the MATS Rule. Coal-fired electricity generating units in the U.S. are subject to consent decrees that require the control of acid gases and particulate matter, in addition to mercury emissions. U.S.
State Mercury and Air Toxics Regulations Affecting EGUs In addition, certain states have their own mercury rules that are similar to or more stringent than the MATS Rule. Coal-fired electricity generating units in the U.S. are subject to consent decrees that require the control of acid gases and particulate matter, in addition to mercury emissions.
Additionally, we believe enhanced environmental and health advisory issues will continue to drive demand for AC in rapidly developing countries. We pursue opportunities to expand and diversify our customer base into markets for our purification products including industrial applications, water treatment plants and other end markets.
Additionally, we believe enhanced environmental and health advisory issues will continue to drive demand for AC in rapidly developing countries. We continuously pursue opportunities to expand and diversify our customer base into markets for our purification products including industrial applications, water treatment plants and other end markets.
In particular statements about our beliefs, plans, objectives, expectations, assumptions, future events or future performance contained in this report, including certain statements found in this Part I and under the heading in Part II, Item 7 below, are forward-looking statements.
In particular statements about our beliefs, plans, objectives, expectations, assumptions, future events or future performance contained in this report, including certain statements found in this Part I and 8 under the heading in Part II, Item 7 below, are forward-looking statements.
AC has been adopted as the most widely-used technology to capture mercury due to product efficiency and 1 effectiveness, and currently accounts for the majority of the mercury control consumables in the North American market.
AC has been adopted as the most widely used technology to capture mercury due to product efficiency and effectiveness, and currently accounts for the majority of the mercury control consumables in the North American market.
You are cautioned not to place undue reliance on the forward-looking statements made in this Report and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities.
Risk Factors of this Report. You are cautioned not to place undue reliance on the forward-looking statements made in this Report and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities.
The manufacturing of AC is dependent upon these various additives, which are subject to price fluctuations and supply constraints. In addition, the number of suppliers who provide the necessary additives needed to manufacture our ACs is limited. We purchase these additives through supply agreements or spot purchases with the producers.
The manufacturing of AC is dependent upon these various additives, which are subject to price fluctuations and supply constraints. In addition, the number of suppliers who provide the necessary additives needed to manufacture our AC products is limited. We purchase these additives through supply agreements or spot purchases with the producers.
In October 2022, the European Commission proposed new directives for better and more cost-effective treatment of urban wastewater, which included amongst other things new standards on micropollutants and new monitoring requirements for microplastics. In January of 2024, there was a provisional agreement that revised the October 2022 proposed directives.
In October 2022, the European Commission proposed new directives for better and more cost-effective treatment of urban wastewater, which included among other things new standards on micropollutants and new monitoring requirements for microplastics. In January 2024, there was a provisional agreement that revised the October 2022 proposed directives.
Between the Corbin Facility and the Five Forks Mine, we will have a fully integrated supply chain in multiple feedstocks - bituminous coal fines (Corbin Facility) and lignite coal (Five Forks Mine) to produce both GAC and PAC products. We purchase various additives utilized in the production of AC.
Between the Corbin Facility and the Five Forks Mine, we have a fully integrated supply chain in multiple feedstocks - bituminous coal fines (Corbin Facility) and lignite coal (Five Forks Mine) to produce both GAC and PAC products. We purchase various additives utilized in the production of our AC products.
Facilities We own and operate a manufacturing plant (the "Red River Plant"), located in Coushatta, Louisiana. We also operate a production and distribution facility located on land we lease in Coushatta. In addition, we own and operate the Corbin Facility, where we process bituminous coal waste and apply patented technology to produce Arq Powder.
Facilities We own and operate a manufacturing plant (the "Red River Plant"), located in Coushatta, Louisiana. We also operate a production and distribution facility located on land we lease in Coushatta. In addition, we own and operate the Corbin Facility, where we process bituminous coal fines and apply patented technology to produce Arq Powder.
Although surety bonds are usually non-cancelable during their term, many of these bonds are renewable on an annual basis and collateral requirements may change. As of December 31, 2023, we posted a surety bonds of approximately $7.5 million and $3.0 million for reclamation of the Five Forks Mine and the Corbin Facility, respectively.
Although surety bonds are usually non-cancelable during their term, many of these bonds are renewable on an annual basis and collateral requirements may change. As of December 31, 2024, we posted surety bonds of approximately $7.5 million and $3.0 million for reclamation of the Five Forks Mine and the Corbin Facility, respectively.
On February 1, 2023, and pursuant to the Arq Acquisition, we entered into subscription agreements with certain persons (the "Subscribers"), which included existing shareholders of Arq Ltd., three of which were appointed to our board of directors, pursuant to which the Subscribers subscribed for and purchased 3,842,315 shares of Common Stock for an aggregate purchase price of approximately $15.4 million and at a price per share of $4.00 (the "PIPE Investment").
PIPE Investment and Loan Agreement On February 1, 2023, and in connection with the Arq Acquisition, we entered into subscription agreements with certain persons (the "Subscribers"), which included existing shareholders of Arq Ltd., three of which were appointed to our board of directors (the "Board"), pursuant to which the Subscribers subscribed for and purchased 3,842,315 shares of common stock for an aggregate purchase price of approximately $15.4 million and at a price per share of $4.00 (the "PIPE Investment").
The EPA structured the MATS Rule as a Maximum Achievable Control Technology-based ("MACT-based") hazardous pollutant regulation applicable to coal and oil-fired Electric Utility Steam Generating Units ("EGU").
The EPA structured the MATS Rule as a Maximum Achievable Control Technology-based ("MACT-based") hazardous pollutant regulation applicable to coal and oil-fired Electric Utility Steam Generating Units ("EGUs").
Key markets for AC products include removal of pollutants from coal-fired electrical generation and other industrial processes, treatment of drinking and waste waters, industrial and renewable gas purification and odor removal, automotive gasoline emission control, soil and ground water remediation and food and beverage process and product purification.
Key markets for AC products include treatment of drinking and waste waters, industrial and renewable gas purification and odor removal, automotive gasoline emission control, soil and ground water remediation, food and beverage process and product purification and removal of pollutants from emissions produced by coal-fired electrical generation and other industrial processes.
In addition, we see significant opportunities emerging in the soil, sediment and groundwater treatment markets. Increased attention has been drawn to the monitoring and treatment of heavy metals, organic and inorganic compounds in groundwater to improve overall ground and drinking water quality across North America.
In addition, we see significant opportunities emerging in the soil, sediment and groundwater treatment markets. Increased attention has been drawn to the monitoring and treatment of heavy metals, organic and inorganic compounds, including PFAS substances, in groundwater to improve overall ground and drinking water quality across North America.
According to our estimates, the MATS Rule sets a limit that we believe requires the capture of 80-90% plus of the mercury in the coal burned in electric power generation boilers as measured at the exhaust stack outlet for most plants. The MACT-based standards are also known as National Emission Standards for Hazardous Air Pollutants ("NESHAP").
The MATS Rule sets a limit that we believe requires the capture of 80-90% plus of the mercury in the coal burned in electric power generation boilers as measured at the exhaust stack outlet for most plants. The MACT-based standards are also known as National Emission Standards for Hazardous Air Pollutants ("NESHAP").
The securities issued to the Subscribers under the Subscription Agreements were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), Rule 506 of Regulation D, which is promulgated thereunder, and Regulations S of the Securities Act.
The 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.
In May 2020, the EPA reconsidered and found that it was not "appropriate and necessary" to regulate HAPs emissions from coal- and oil-fired EGUs.
In May 2020, the EPA reconsidered and found that it was not "appropriate and necessary" to regulate Hazardous Air Pollutants ("HAPs") emissions from coal- and oil-fired EGUs.
Plants generally had four years to comply with the MATS Rule, and implementation of the MATS Rule is now largely completed. We estimate that 58% of the coal-fired units that were operating in December 2012 when the MATS Rule was finalized have been permanently shut down, leaving approximately 406 units in operation in the U.S. as of December 31, 2023.
Plants generally had four years to comply with the MATS Rule, and implementation of the MATS Rule is now largely completed. We estimate that 59% of the coal-fired units that were operating in December 2012 when the MATS Rule was finalized have been permanently shut down, leaving approximately 405 units in operation in the U.S. as of December 31, 2024.
Our expectations are based on certain assumptions, including without limitation, that: (a) coal will continue to be a significant source of fuel for electrical generation in the U.S.; (b) we will continue as a key supplier of consumables to the coal-fired power generation industry as it seeks to implement reduction of mercury emissions; (c) we will be able to obtain adequate capital and personnel resources to meet our operating needs and to fund anticipated growth and our indemnity obligations; (d) significant customers will continue to purchase consumables from us; (e) we will be able to establish and retain key business relationships with current and other companies; (f) orders we anticipate receiving will be received; (g) we will be able to formulate new consumables that will be useful to, and accepted by, the markets; (h) we will be able to effectively compete against others; (i) we will be able to meet any technical requirements of projects we undertake; and (j) existing environmental regulations such as MATS stay in place.
Our expectations are based on certain assumptions, including without limitation, that: (a) coal will continue to be a significant source of fuel for electrical generation in the U.S.; (b) we will continue as a key supplier of consumables to the coal-fired power generation industry as it seeks to implement reduction of mercury emissions; (c) we will successfully complete commissioning of our GAC Facility and our GAC products will be accepted by the APT market; 9 (d) we will be able to obtain adequate capital and personnel resources to meet our operating needs and to fund anticipated growth and our indemnity obligations; (e) significant customers will continue to purchase consumables from us; (f) we will be able to establish and retain key business relationships with current and other companies; (g) orders we anticipate receiving will be received; (h) we will be able to formulate new consumables that will be useful to, and accepted by, the markets; (i) we will be able to effectively compete against others; (j) we will be able to meet any technical requirements of projects we undertake; and (k) existing environmental regulations stay in place and are adequately enforced.
Demand for AC products has been, and is expected to continue to be driven by increasing environmental regulations pertaining to water, soil, and air quality, especially in the developed and more industrialized areas of the world, and general consumer attention towards environmental issues.
Demand for AC products has been, and is expected to continue to be driven by environmental regulations pertaining to water, soil, and air quality, especially in the developed and more industrialized areas of the world, and increased consumer attention towards environmental, health and safety issues.
The forward-looking statements contained in this Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law to do so. 9
The forward-looking statements contained in this Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law. 10
Revenue from our top three customers comprised approximately 37% of our consumables revenue for the year ended December 31, 2023, and the loss of any of these customers would have a material adverse effect on our operating results. Seasonality The timing of the sale of our consumable products is dependent upon several factors.
Revenue from our top three customers comprised approximately 36% of our revenue for the year ended December 31, 2024, and the loss of any of these customers would have a material adverse effect on our operating results. 2 Seasonality The timing of the sale of our consumable products is dependent upon several factors.
The CFG Loan has a term of 48 months and bears interest at a rate equal to either (a) Adjusted Term SOFR (subject to a 1.00% floor and a 2.00% cap) plus a margin of 9.00% paid in cash and 5.00% paid in kind or (b) Base Rate plus a margin of 8.00% paid in cash and 5.00% paid in kind, which interest on the CFG Loan in each case shall be payable (or capitalized, in the case of in kind interest) quarterly in arrears.
The CFG Loan had a term of 48 months and bore interest at a rate equal to either (a) Adjusted Term SOFR (subject to a 1.00% floor and a 2.00% cap) plus a margin of 9.00% paid in cash and 5.00% paid in kind or (b) Base Rate plus a margin of 8.00% paid in cash and 5.00% paid in kind, which interest on the CFG Loan in each case was payable (or capitalized, in the case of in kind interest) quarterly in arrears.
In 2018, we acquired ADA Carbon Solutions, LLC ("Carbon Solutions") to enter into the broader AC market and to expand our product offerings in the mercury control industry and other applicable AC markets.
In 2018, we acquired ADA Carbon Solutions, LLC to expand our product offerings in the mercury control industry and enter into other applicable APT markets.
Legacy Arq Products and Markets With the acquisition of Legacy Arq in February 2023, we now control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin Kentucky (the "Corbin Facility").
Legacy Arq Products and Markets With the acquisition of Legacy Arq in February 2023, we now control reserves of high-quality recovered bituminous coal fines and own a manufacturing facility, both located in Corbin Kentucky (the "Corbin Facility").
Loan Agreement On February 1, 2023, and pursuant to the Arq Acquisition, we, as borrower, certain of subsidiaries, as guarantors, and CF Global Credit, as administrative agent and lender, entered into a $10.0 million term loan (the "CFG Loan") upon execution of a Term Loan and Security Agreement (the "Loan Agreement").
Also on February 1, 2023, and in connection with the Arq Acquisition, we, as borrower, certain of our subsidiaries, as guarantors, and CF Global Credit, as administrative agent and lender, entered into a $10.0 million term loan (the "CFG Loan") upon execution of a Term Loan and Security Agreement (the "Loan Agreement").
With the Arq Acquisition, in 2023, we secured a second feedstock, Arq Powder, which is made from bituminous coal waste, used in manufacturing of GAC products. Through internal testing, we have demonstrated that Arq Powder can be shaped and successfully activated using industrially available equipment and technology with our proprietary know-how.
With the acquisition of Legacy Arq in 2023, we secured a second feedstock, Arq Powder, which is made from high-quality recovered bituminous coal fines, for use in manufacturing of GAC products. Through internal testing, we have demonstrated that Arq Powder can be shaped and successfully activated using industrially available equipment and technology with our proprietary know-how.
Our facility will remediate these reserves, using a patented manufacturing process to convert bituminous coal waste into a purified, microfine carbon powder known as Arq powder TM ("Arq Powder") for high value applications, such as for a raw material to produce GAC products.
Our facility remediates these reserves, using a patented manufacturing process to convert the recovered bituminous coal fines into a purified, microfine carbon powder known as Arq powder TM ("Arq Powder") for high value applications, such as for a raw material to produce GAC products.
Arq Acquisition On February 1, 2023 (the "Acquisition Date"), we entered into a Securities Purchase Agreement (the "Purchase Agreement") with Arq Limited ("Arq Ltd."), a company incorporated under the laws of Jersey, pursuant to which we acquired all of the direct and indirect equity interests of Arq Ltd.'s subsidiaries (the "Arq Acquisition," and hereafter referred to as "Legacy Arq") in exchange for consideration (the "Purchase Consideration") totaling $31.2 million and consisting of (i) 3,814,864 shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), valued at $12.4 million and (ii) 5,294,462 shares of the Company's Series A Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), valued at 6 $18.8 million.
Arq Acquisition On February 1, 2023 (the "Acquisition Date"), we entered into a Securities Purchase Agreement (the "Purchase Agreement") with Arq Ltd., pursuant to which we acquired all of the direct and indirect equity interests, assets and liabilities of Legacy Arq in exchange for consideration (the "Purchase Consideration") totaling $31.2 million and consisting of (i) 3,814,864 shares of our common stock, valued at $12.4 million and (ii) 5,294,462 shares of our Series A Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), valued at $18.8 million.
On March 14, 2023, the EPA proposed a National Primary Drinking Water Regulation ("NPDWR") for six specific PFAS substances. NPDWR seeks to establish legally enforceable maximum contaminant levels ("MCL") for the 6 PFAS substances, including a proposed MCL for Perfluorooctane Acid ("PFOA") and Perfluorooctane Sulfonate ("PFOS") of 4.0 parts per trillion.
On March 14, 2023, the EPA proposed a National Primary Drinking Water Regulation ("NPDWR") for six specific PFAS substances. On April 10, 2024, the EPA announced the final NPDWR, which established legally enforceable maximum contaminant levels ("MCL") for six PFAS substances, including a MCL for Perfluorooctane Acid ("PFOA") and Perfluorooctane Sulfonate ("PFOS") of 4.0 parts per trillion.
Intellectual Property As of December 31, 2023, we held 83 U.S. patents and 8 international patents that were issued or allowed, 13 additional U.S. provisional patents or applications that were pending, and 2 international patent applications that were either pending or filed relating to different aspects of our technology.
Intellectual Property As of December 31, 2024, we held 84 U.S. patents and 10 international patents that were issued or allowed, 15 additional U.S. provisional patents or applications that were pending, and 36 international patent applications that were either pending or filed relating to different aspects of our technology.
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 8 sources and other technologies; technical, start up and operational difficulties; competition within the industries in which the Company operates; our inability to commercialize our APT products on favorable terms; our inability to effectively and efficiently commercialize new products; changes in construction costs or availability of construction materials; our inability to effectively manage construction and startup of the Red River GAC Facility or Corbin Facility; our inability to obtain required financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of the inflation and macroeconomic uncertainty, including from the ongoing pandemic and armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; intellectual property infringement claims from third parties; pending litigation; as well as other factors relating to our business strategy, goals and expectations concerning the Arq Acquisition (including future operations, future performance or results); our ability to maintain relationships with customers, suppliers and others with whom it does business and meet supply requirements, or its results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; the ability to meet Nasdaq's listing standards following the consummation of the Transaction; costs related to the Arq Acquisition; opportunities for additional sales of our activated carbon products and end-market diversification; the timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them; our ability to meet customer supply requirements; the rate of coal-fired power generation in the U.S., the timing and cost of capital expenditures and the resultant impact to our liquidity and cash flows as described in our filings with the SEC, with particular emphasis on the risk factor disclosures contained in those filings.
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, the timing and scope 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 new regulations or enforce existing regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; availability, cost of and demand for alternative energy sources and other technologies and their impact on coal-fired power generation in the U.S.; technical, start up and operational difficulties; competition within the industries in which the Company operates; risks associated with our debt financing; our inability to effectively and efficiently commercialize new products, including our GAC products; our inability to effectively manage commissioning and startup of the GAC Facility at our Red River Plant; disruptions at any of our facilities, including by natural disasters or extreme weather; risks related to our information technology systems, including the risk of cyberattacks on our networks; failure to protect our intellectual property from infringement or claims that we have infringed on the intellectual property of others; our inability to obtain future financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of the inflation and macroeconomic uncertainty, including from the new U.S. presidential administration, increased domestic and international tariffs, lingering effects of the pandemic and armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; intellectual property infringement claims from third parties; pending litigation; factors relating to our business strategy, goals and expectations concerning the Arq Acquisition; our ability to maintain relationships with customers, suppliers and others with whom the Company does business and meet supply requirements; our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; costs related to the ongoing manufacturing of our products, including our GAC products; opportunities for additional sales of our AC products and end-market diversification; the rate of coal-fired power generation in the U.S.; the timing and cost of any future capital expenditures and the resultant impact to our liquidity and cash flows; and the other risk factors described in our filings with the SEC, including those described in Item 1A.
In January 2024, the Company executed a contract with a third-party contractor for the construction of a GAC facility at the Red River Plant, (the "GAC Facility") and immediately commenced construction operations.
In January 2024, we executed a contract with a third-party contractor for the construction of a GAC facility at the Red River Plant, (the "GAC Facility") and immediately commenced construction operations. In September 2024, we terminated the contract with the third-party contractor and moved the construction and project management functions for the GAC Facility internally.
On April 3, 2023, the EPA issued a proposed update to MATS that, amongst other potential modifications, proposed a reduction to the mercury emission limits for lignite coal-fired EGUs. This proposal is currently pending.
On April 3, 2023, the EPA issued a proposed update to MATS that, amongst other potential modifications, proposed a reduction to the mercury emission limits for lignite coal-fired EGUs. The EPA adopted the final rule on April 25, 2024.
Item 1. Business General Arq, Inc. ("Arq", the "Company," "we," "us", "our," or similar pronouns) is an environmental technology company principally engaged in the sale of consumable air, water, and soil treatment solutions including activated carbon ("AC") and chemical technologies.
Item 1. Business General Arq, Inc., together with its consolidated subsidiaries ("Arq", the "Company," "we," "us", or "our") is an environmental technology company principally engaged in the sale of consumable air, water, and soil treatment solutions, primarily based on activated carbon ("AC").
In addition, the number of suppliers who provide the necessary additives needed to manufacture our chemical products are limited. We purchase these chemical products through spot purchases with the producers.
In addition, the number of suppliers who provide the necessary additives needed to manufacture our chemical products are limited.
The Warrant has an exercise price of $0.01 per share, subject to adjustment as set forth in the Warrant, is exercisable immediately, contains a cashless exercise provision and expires on February 1, 2030.
The Warrant had an exercise price of $0.01 per share, subject to adjustment as set forth in the Warrant, was exercisable immediately, contained a cashless exercise provision and was set to expire on February 1, 2030. On March 29, 2024, the Warrant was exercised in full.
Also, our revenue and sales volumes are highly dependent upon the level of coal consumption at coal-fired power plants, which in turn is significantly affected by the prices of competing power generation sources, such as natural gas and renewables. 2 During periods of low natural gas prices, natural gas provides a competitive alternative to coal-fired power generation and therefore, coal consumption for power generation may be reduced, which in turn reduces the demand for our products.
Also, our revenue and sales volumes are highly dependent upon the level of coal consumption at coal-fired power plants, which in turn is significantly affected by the prices of competing power generation sources, such as natural gas and renewables.
Further, 22 international patents and applications from the Legacy Arq patent portfolio were abandoned in jurisdictions that were determined to no longer represent future markets or economic opportunities for us. As of December 31, 2023, we owned over 50 trademark registrations and applications globally.
During the year ended December 31, 2024, 19 U.S. and 41 international patents and applications from our patent portfolio were abandoned or allowed to expire, as we determined that they no longer represent future markets or economic opportunities for us. As of December 31, 2024, we owned over 50 trademark registrations and applications globally.
In response to this market opportunity, in late 2021, we developed a new Colloidal Carbon Product ("CCP") platform, FluxSorb RC, which is currently in the initial stages of field testing at multiple contaminated soil and groundwater remediation treatment sites.
In response to this market opportunity, in late 2021, we developed a new CCP platform, FluxSorb RC, which is a treatment option in certain contaminated soil and groundwater remediation treatment sites.
The PFAS Strategic Roadmap sets timelines by which the EPA plans to take certain actions through 2024, including establishing a national primary drinking water regulation for certain PFAS and taking Effluent Limitations Guidelines actions to regulate certain PFAS discharges from industrial categories.
Federal National Primary Drinking Water Regulation and other PFAS Regulations In October 2021, the EPA released its PFAS Strategic Roadmap, laying out its approach to addressing PFAS and other pollutants, which set a timeline by which the EPA planned to take certain actions through 2024, including establishing a national primary drinking water regulation for certain PFAS and taking Effluent Limitations Guidelines actions to regulate certain PFAS discharges from industrial categories.
Groundwater contamination has become a matter of increasing concern to federal and state governments as well as to the public, especially over recent years. The U.S. AC market may see significant growth from water purification markets, especially if future regulations are passed controlling certain chemicals in drinking water.
Groundwater contamination has become a matter of increasing concern to federal and state governments as well as to the public, especially over recent years. The U.S. AC market may see significant growth from water purification markets, especially as implementation dates for new regulations issued by the EPA in April 2024 are nearing, with full compliance currently required by April 2029.
In February 2023, we acquired 100% of the equity of the subsidiaries of Arq Limited (the "Arq Acquisition," and hereafter the Arq Limited subsidiaries referred to as "Legacy Arq") to secure access to a feedstock, a manufacturing facility and certain patented processes to manufacture new advanced granular activated carbon ("GAC") products for sale into markets to the APT and other markets.
In February 2023, we acquired 100% of the equity interests, assets and liabilities of the subsidiaries of Arq Limited, an environmental technology company incorporated under the laws of Jersey (the "Arq Acquisition" or the "Transaction," and hereafter the Arq Limited subsidiaries referred to as "Legacy Arq") to secure access to additional U.S. based bituminous coal feedstock, a manufacturing facility located in Corbin, Kentucky (the "Corbin Facility") and certain patented processes to manufacture new advanced GAC products for sale into the APT and other markets.
The information contained on our website shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act.
Alternatively, these reports can be accessed at the SEC’s website at www.sec.gov. The information contained on our website shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.
Most of the North American coal-fired power generators installed equipment to control air pollutants, such as mercury, prior to or since the implementation of the Mercury and Air Toxics Standards ("MATS"). However, many power generators need consumable products to complement the operation of installed equipment on a recurring basis to more effectively capture mercury and other contaminants.
However, many power generators need consumable products to complement the operation of installed equipment on a recurring basis to more effectively capture mercury and other contaminants.
We expect to secure customer interest in Arq Powder as an additive into other markets, such as components for asphalt. These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials. These applications are currently in various stages of proof of concept testing or preliminary customer testing.
These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials and have demonstrated other beneficial performance attributes during lab-scale customer testing. These applications are currently in various stages of proof of concept testing or preliminary customer testing.
Sales and Customers We sell consumables primarily though our internal sales group and are generally under contracts ranging from one to five years. We generally recognize revenue on an order-by-order basis.
Sales and Customers We sell consumables primarily through our internal sales group and generally enter into customer contracts ranging from one to five years in duration. We generally recognize revenue as orders are fulfilled.
Based on the existing and potential regulations, we believe the international market for activated carbon products may expand in the coming years. 5 Mining Environmental and Reclamation Matters Federal, state and local authorities regulate the U.S. coal mining industry with respect to matters such as employee health and safety and the environment, including the protection of air quality, water quality, wetlands, special status species of plants and animals, land uses, cultural and historic properties and other environmental resources identified during the permitting process.
The revised directive was adopted by the European Parliament and the Council on November 5, 2024, and is enforceable on European Union Member States, subject to the revised directive’s implementation period, which requires European Union Member State compliance by mid-2027. 5 Mining Environmental and Reclamation Matters Federal, state and local authorities regulate the U.S. coal mining industry with respect to matters such as employee health and safety and the environment, including the protection of air quality, water quality, wetlands, special status species of plants and animals, land uses, cultural and historic properties and other environmental resources identified during the permitting process.
Additionally, the rainy season generally results in more demand for PAC products to water municipalities due to rain run-offs and contaminant dilution. Competition Our primary competitors in the AC consumables industry include Cabot Norit Americas, Inc., which is owned by One Equity Partners, Calgon Carbon, which is owned by Kuraray Co., Ltd. and Donau Carbon Company.
Competition Our primary competitors in the AC consumables industry include Norit Americas, Inc., which is owned by One Equity Partners, and Calgon Carbon, which is owned by Kuraray Co., Ltd.
We manufacture and sell AC and other chemicals used to capture and remove contaminants for the coal-fired power generation, industrial, municipal water and air, water and soil treatment and remediation markets (collectively, the advanced purification technologies or "APT" market). Our predecessor, ADA-ES, Inc. ("ADA"), a Colorado corporation, was incorporated in 1997.
We manufacture and sell AC and other chemicals used to capture and remove impurities, contaminants and pollutants for the coal-fired power generation, industrial, water treatment, and water and soil remediation markets, which we collectively refer to as the advanced purification technologies ("APT") market. Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials.
Depending on weather conditions and other environmental factors, the summer months historically have the highest demand for our PAC products in water treatment. One of the major uses for PAC is for the treatment of taste and odor episodes caused by increased degradation of organic contaminants and natural materials in water that occurs during the summer months.
One of the major uses for PAC is for the treatment of taste and odor impurities caused by increased degradation of organic contaminants and natural materials in water that occurs predominately during the summer months. Additionally, the rainy season generally results in more demand for PAC products to water municipalities due to rain run-offs and contaminant dilution.
Our existing patents generally have terms of 20 years from the effective date of filing, with our next patents expiring in 2024. During the year ended December 31, 2023, 7 U.S. and 6 international patents and applications from our patent portfolio were abandoned, as we determined that they no longer represent future markets or economic opportunities for us.
During the year ended December 31, 2024, we were granted 3 new patents. Our existing patents generally have terms of 20 years from the effective date of filing, with our next patents expiring in 2025.
Properties such as surface area, pore volume, surface chemical functionalities and particle size and form can be specifically engineered to selectively target various contaminants to meet end-use application requirements. Our AC products are manufactured in several different forms that are important for the end-use application, including powdered activated carbon ("PAC"), granular activated carbon, and colloidal carbon product ("CCP").
AC is produced by activating carbonaceous raw materials, including wood, coal, nut shells, resins and petroleum pitch. Properties such as surface area, pore volume, surface chemical functionalities and particle size and form can be specifically engineered to selectively target various contaminants to meet end-use application requirements.
In contrast, during periods of higher prices for competing power generation sources, coal consumption generally increases and thus demand for our products also increases. In water purification, the sale of our products depends on demand from municipal water treatment facilities that use these products.
During periods of low natural gas prices, natural gas provides a competitive alternative to coal-fired power generation and therefore, coal consumption for power generation may be reduced, which in turn reduces the demand for our products. In contrast, during periods of higher prices for competing power generation sources, coal consumption generally increases and thus demand for our products also increases.
In May 2017, the EU ratified the Minimata Convention on Mercury, triggering mercury control regulations with implementation starting in 2021.
For example, in Canada, the Canada-Wide Standard ("CWS") was initially implemented in 2010, with increasingly stringent limits through 2020 and varying mercury emissions caps for each province. In May 2017, the EU ratified the Minimata Convention on Mercury, triggering mercury control regulations with implementation starting in 2021.
For the years ended December 31, 2023 and 2022, we incurred research and development costs of $3.3 million and $2.1 million, respectively. Legislation and Environmental Regulations Our products and services are used for the reduction of pollutants and other contaminants. Legislation and regulations limit the amount of pollutants and other contaminants permitted and may increase the need for our products.
Additionally, our products and services are used for the reduction of certain pollutants and other contaminants and legislation and regulations that limit the amount of pollutants and other contaminants permitted in air, water and soil may increase or decrease the need for our products.
Due to the seasonality of our business, which is primarily driven by our high concentration of customers in the coal-fired plant market, our sales and inventory levels may vary throughout the year. We are able to supplement the available production at our Red River Plant by purchasing third party consumables to meet customer demand for our consumables.
We purchase these chemical products through spot purchases with the producers. 3 Due to the seasonality of our business, which is primarily driven by our high concentration of customers in the coal-fired power generation and municipal water treatment markets, our sales and inventory levels may vary throughout the year.
At present, individual states are primarily responsible for the protection of groundwater and drinking water. The existing technologies for treatment of groundwater, including removal of the soil for external treatment or landfill, pumping the groundwater above surface for treatment and/or installing treatment trenches or barriers all utilize PAC and GAC products.
Please note, U.S. regulations are subject to continuing change, as further discussed in "Legislation and Environmental Regulations" included in Item 1 of this Report. The existing technologies for treatment of groundwater, including removal of contaminated soil for external treatment or landfill, pumping groundwater above the surface for treatment and/or installing treatment trenches or barriers often utilize PAC and GAC products.
In February 2024, as part of a larger rebranding, the Company changed its name to Arq, Inc., and on February 1, 2024, our common stock commenced trading under the ticker symbol, "ARQ".
In February 2024, as part of a larger rebranding, the Company changed its name to Arq, Inc., and on February 1, 2024, our common stock commenced trading on the Nasdaq Global Market under the ticker symbol, "ARQ." This Annual Report on Form 10-K is referred to herein as the "Form 10-K" or the "Report." Products and Markets AC is a specialized sorbent material that is used widely in a host of industrial and consumer applications to remove impurities, pollutants and contaminants from gas, water, soil and other product or waste streams.
We expect by the end of 2024 to begin using Arq Powder as a feedstock to produce high-quality GAC products for sale in the APT and other markets. We believe Arq Powder has additional potential for us to access new markets and applications.
We expect to begin using Arq Powder as a feedstock to produce high-quality GAC products by the end of the first quarter of 2025 for sale into the APT and other markets. We anticipate that our GAC products made using these highly purified recovered bituminous coal fines will have a materially lower carbon footprint than other coal-based competitor alternatives.
Below is a summary of the primary legislation and regulation that currently affects the market for our current products. Federal MATS Affecting Electric Utility Steam Generating Units The U.S. Environmental Protection Agency ("EPA") final "MATS Rule" went into effect in April 2012.
Below is a summary of the primary legislation and regulation that currently affects our business and the market for our current products. See “Item 1A. Risk Factors” below for further information on the uncertainty surrounding current U.S. regulatory landscape.
Removed
This Annual Report on Form 10-K is referred to as the "Form 10-K" or the "Report." As used in this Report, the terms the "Company," "we," "us" and "our" means Arq, Inc. and its consolidated subsidiaries.
Added
Our AC products include both powdered activated carbon ("PAC") and granular activated carbon ("GAC"), among others. Additionally, we own the Five Forks Mine, a lignite coal mine that currently supplies the primary raw material for the manufacturing of our products. Our predecessor, ADA-ES, Inc. ("ADA"), a Colorado corporation, was incorporated in 1997.
Removed
Products and Markets AC is a specialized sorbent material that is used widely in a host of industrial and consumer applications to remove impurities, contaminants and pollutants from gas, water, soil and other product or waste streams. AC is produced by activating carbonaceous raw materials, including wood, coal, nut shells, resins and petroleum pitch.
Added
Our AC products are manufactured in several different forms that are important for the end-use application, including PAC, GAC, and colloidal carbon product ("CCP").
Removed
The Company expects to complete commissioning activities at the GAC Facility by the end of 2024 and estimates that total construction costs including all equipment purchases will be in the range of $62 to $67 million. 3 As of January 2024, major construction work at the Corbin Facility remains on track to be completed on time.
Added
Most of the North American coal-fired power generators and other industrial customers installed equipment to control air pollutants, such as 1 mercury, prior to or since the implementation of the Mercury and Air Toxics Standards ("MATS") by the U.S. Environmental Protection Agency ("EPA").
Removed
We expect to commence commissioning activities during the first half of 2024 and estimate that total construction and commissioning costs at the Corbin Facility will be in the range of $10 to $15 million.
Added
In addition, certain states and certain municipal water treatment systems across the U.S. require pre-approval for the use of GAC products in their public water systems. Approval processes can vary in length from a number of days to multiple months. We have commenced the pre-approval process with a number of relevant state and municipal agencies.
Removed
In March 2023, we sold 100% of the membership interests in Marshall Mine, LLC, which owned a shuttered lignite mine located outside of Marshall, Texas to a third party. Research and Development Activities We conduct research and product development activities for further enhancement of our consumables.
Added
We believe Arq Powder has additional potential to enable us to access new markets and applications. We intend to secure customer interest in Arq Powder as an additive into other markets, such as components for asphalt.
Removed
EGUs generate electricity through steam turbines and have a capacity of 25 megawatts or greater and provide for, among other provisions, control of mercury, control of acid gases such as hydrochloric acid and other Hazardous Air Pollutants ("HAPs"). Approximately 1,260 units in the U.S. were coal-fired EGUs when the rule was enacted.
Added
In water purification, the sale of our products depends on demand from municipal water treatment facilities that use these products. Depending on weather conditions and other environmental factors, the summer months historically have the highest demand for our PAC products in water treatment.
Removed
Federal Industrial Boiler MACT In January 2013, the EPA issued the final set of adjustments to the MACT-based air toxics standards for industrial boilers, including mercury, particulate matter and acid gas emission limits. Existing boilers typically had until January 31, 2017 to comply with the rule.
Added
Mechanical completion of our GAC Facility was completed in January 2025. We expect to commence initial production of our proprietary GAC product at the GAC Facility by the end of the first quarter of 2025. For the year ended December 31, 2024, construction costs for the GAC Facility were approximately $80 million.
Removed
The EPA published an amended final rule of the industrial boiler MACT ("IBMACT"), representing technical corrections and clarifications. On July 21, 2022, the EPA issued a further update of the IBMACT, which, among other things, updated emission limits to certain HAPs.
Added
We completed commissioning at our Corbin Facility in January 2025. Total construction and commissioning costs at the Corbin Facility were approximately $7 million for the year ended December 31, 2024. Research and Development Activities We conduct research and product development activities for further enhancement of our consumables.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRequire the affirmative vote of the "disinterested" holders of a majority of our common stock to approve certain business combinations involving an "interested stockholder" or its affiliates, unless either minimum price criteria or procedural requirements are met, or the transaction is approved by a majority of our "continuing directors" (known as "fair price provisions"). 20 These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of our common stock, or could limit the ability of our stockholders to approve transactions that they may deem to be in their best interest.
Biggest changeThese provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of our common stock, or could limit the ability of our stockholders to approve transactions that they may deem to be in their best interest.
The global or national outbreak of an infectious disease, such as COVID-19, may cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) inefficiencies, delays and additional costs in our manufacturing, sales and customer service efforts, (iii) recommendations of, or restrictions imposed by, government and health authorities, including quarantines, to address an infectious disease, such as the COVID-19 pandemic, and (iv) restrictions that 13 we impose, including facility shutdowns, to ensure the safety of employees and others.
The global or national outbreak of an infectious disease, such as COVID-19, may cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) inefficiencies, delays and additional costs in our manufacturing, sales and customer service efforts, (iii) recommendations of, or restrictions imposed by, government and health authorities, including quarantines, to address an infectious disease, such as the COVID-19 pandemic, and (iv) restrictions that we impose, including facility shutdowns, to ensure the safety of employees and others.
Risk related to tax matters Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change." In general, under IRC Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, ("IRC') a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs") and tax credits to offset future taxable income.
Risk related to tax matters Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change." In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, ("IRC') a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs") and tax credits to offset future taxable income.
To the extent federal, state and local legislation mandating that electric power generating companies serving a state or region purchase a minimum amount of power from renewable energy sources such as wind, hydroelectric, solar and geothermal, and such amount lessens demand for electricity from coal-fired plants, the demand for our products and services would likely decrease.
To the extent federal, state and local legislation mandating that electric power generating companies serving a state or region purchase a minimum amount of power from renewable energy sources such as wind, hydroelectric, solar and geothermal, and such amount lessens demand for electricity from coal-fired plants, the demand for our products and services would likely decrease. 3.
We have agreed to indemnify licensees of our technologies (including Tinuum Group) and purchasers of our products, and we may enter into additional agreements with others under which we agree to indemnify and hold them harmless from losses they 18 may incur as a result of the alleged infringement of third-party rights caused by the use of our technologies and products.
We have agreed to indemnify licensees of our technologies (including Tinuum Group) and purchasers of our products, and we may enter into additional agreements with others under which we agree to indemnify and hold them harmless from losses they may incur as a result of the alleged infringement of third-party rights caused by the use of our technologies and products.
At the Five Forks Mine, the risks are primarily operational risks associated with the maintenance and operation of the heavy equipment required to dig and haul the lignite and risks relating to producing lower than expected lignite quality or recovery rates. Additionally, the cost of inputs in our mining operation, most notably fuel cost, can create operational risks.
At the Five Forks Mine, the risks are primarily operational risks associated with the maintenance and operation of the heavy equipment required to dig and haul the lignite and risks relating to producing lower than expected lignite quality or unfavorable recovery rates. Additionally, the cost of inputs in our mining operation, most notably fuel cost, can create operational risks.
An entity that experiences an ownership change generally is subject to an annual limitation on its pre-ownership change tax asset carryforwards. The annual limitation is increased each year to the extent that there is an unused limitation in a prior year. We acquired certain tax assets (the "Legacy Arq Tax Assets") in the Arq Acquisition, totaling approximately $12.5 million.
An entity that experiences an ownership change generally is subject to an annual limitation on its pre-ownership change tax asset carryforwards. The annual limitation is increased each year to the extent that there is an unused limitation in a prior year. 21 We acquired certain tax assets (the "Legacy Arq Tax Assets") in the Arq Acquisition, totaling approximately $12.5 million.
We cannot be certain that our efforts to develop and maintain an effective system of internal controls will be successful, will be able to maintain adequate controls over our financial processes and reporting in the future, or will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
We cannot be certain that our efforts to maintain an effective system of internal controls will be successful, will be able to maintain adequate controls over our financial processes and reporting in the future, or will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
A significant market driver for our existing products and services and those planned in the future are existing and expected environmental laws and regulations, particularly those addressing the reduction of mercury and other emissions from coal-fired electricity generating units and proposed regulation of PFAS and other pollutants.
A significant market driver for our existing products and services and those planned in the future are existing and expected environmental laws and regulations, particularly those addressing the reduction of mercury and other emissions from coal-fired electricity generating units and regulation of PFAS and other pollutants.
To mitigate the risk of an "ownership change," on May 5, 2017, our board of directors (the "Board") approved the Tax Asset Protection Plan (the "TAPP") and declared a dividend of one preferred share purchase right (each, a "Right") for each outstanding share of our common stock.
To mitigate the risk of an "ownership change," on May 5, 2017, our Board approved the Tax Asset Protection Plan (the "TAPP") and declared a dividend of one preferred share purchase right (each, a "Right") for each outstanding share of our common stock.
Our ability to bring new products to the market will depend on various factors, including, but not limited to, solving potential technical or manufacturing difficulties, competition and market acceptance, which may hinder the timeliness and cost to bring such products to production.
Our ability to bring new products to the market will depend on various factors, including, but not limited to, solving potential technical or manufacturing difficulties, competition and market acceptance, which may hinder the timeliness and cost to bring 19 such products to production.
If the actual funding required to implement growth initiatives should exceed funding estimates significantly, or our funds generated from our operations from such growth initiatives prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements.
If the actual funding required to implement growth initiatives should exceed funding estimates significantly, or our funds generated from our operations from such growth 23 initiatives prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements.
The Corbin Facility's operations are governed by extensive laws and regulations, including: • laws and regulations related to exports, taxes and fees; • labor standards and regulations related to the MSHA; and • environmental standards and regulations related to waste disposal, toxic substances, land use and environmental protection, including environmental protection regulations related to water and air.
The Corbin Facility's operations are governed by extensive laws and regulations, including: • laws and regulations related to exports, taxes and fees; 16 • labor standards and regulations related to the MSHA; and • environmental standards and regulations related to waste disposal, toxic substances, land use and environmental protection, including environmental protection regulations related to water and air.
If we experience any issues or delays in meeting our projected timelines, costs, or production capacity for the upgrades at the Red River Plant, or generating and maintaining demand for the products we manufacture there, our business, prospects, operating results and financial condition may be harmed.
However, if we experience any further issues or delays in meeting our projected timelines, costs, or production capacity for the upgrades at our Red River Plant, or generating and maintaining demand for the products we manufacture there, our business, prospects, operating results and financial condition may be harmed.
Disruptions of supply chains may affect volatility in price and availability of raw materials. The continuation of geopolitical conflicts in 2023 has continued to disrupt supply chains, resulting in cost increases for commodities, goods and services in many parts of the world. Disruptions of supply chains and higher costs may continue into 2024 and beyond.
Disruptions of supply chains may affect volatility in price and availability of raw materials. The continuation of geopolitical conflicts in 2024 has continued to disrupt supply chains, resulting in cost increases for commodities, goods and services in many parts of the world. Disruptions of supply chains and higher costs may continue into 2025 and beyond.
Risks Related to Our Business We may be unable to meet our projected construction timelines, costs and production ramp up for our capital upgrades at our Red River Plant, or we may experience difficulties in generating and maintaining demand for products manufactured there.
Risks Related to Our Business We may be unable to meet our projected commissioning timelines, costs and production ramp up for our capital upgrades at our Red River Plant, or we may experience difficulties in generating and maintaining demand for products manufactured there.
The TAPP was adopted in an effort to protect stockholder value by attempting to diminish the risk that our ability to use the ADES Tax Credits to reduce potential future federal income tax obligations may become substantially limited (the "Protection Plan").
The TAPP was adopted in an effort to protect stockholder value by attempting to diminish the risk that our ability to use the existing Tax Credits to reduce potential future federal income tax obligations may become substantially limited (the "Protection Plan").
Our operating performance is largely dependent upon demand for mercury removal-related product, which is largely affected by the amount of coal-based power generation used in the U.S. and the continued regulation of utilities under MATS. In May 2020, the EPA reconsidered and withdrew its 2016 "supplemental finding" associated with the cost benefit analysis of the MATS Rule.
Our operating performance is largely dependent upon demand for mercury removal-related products, which is largely affected by the amount of coal-based power generation used in the U.S. and the continued regulation of utilities under the EPA's MATS Rule. In May 2020, the EPA reconsidered and withdrew its 2016 "supplemental finding" associated with the cost benefit analysis of the MATS Rule.
In addition, public utility commissions may not allow utilities to charge consumers for, and pass on the cost of, emissions control technologies without federal or state mandates. Our development operations at the Corbin Facility are subject to environmental permitting and regulations that can make operations expensive, or prohibit them altogether.
In addition, public utility commissions may not allow utilities to charge consumers for, and pass on the cost of, emissions control technologies without federal or state mandates. Our development operations at our facilities are subject to environmental permitting and regulations that can make operations expensive, or prohibit them altogether.
These include logistics delays or shortages in producing and shipping certain of our raw materials, increases in energy prices that could increase costs of certain of our raw materials, increases in transportation costs from overall higher gasoline prices and cyber-attacks targeted at U.S. power infrastructure that could impact demand for our products.
These include logistics delays or shortages in producing and shipping certain of our raw materials, increases in energy prices that could increase costs of certain of our raw materials, increases in transportation costs from overall higher gasoline prices, higher prices due to tariffs, and cyber-attacks targeted at U.S. power infrastructure that could impact demand for our products.
The most recent TAPP Amendment was approved at our 2023 annual meeting of stockholders and extended the Final Expiration Date to the close of business on December 31, 2024.
The most recent TAPP Amendment was approved at our 2024 annual meeting of stockholders and extended the Final Expiration Date to the close of business on December 31, 2025.
If these anticipated capital expenditures are delayed, whether as a result of unanticipated challenges in permitting, construction or economic conditions, the cost of such activities may increase and the timing of projected revenue may be impacted. Further, the costs of such construction activities may significantly exceed the budgeted costs.
If these anticipated capital expenditures are delayed, whether as a result of unanticipated challenges in permitting, construction or economic conditions, the cost of such activities may increase and the timing of projected revenue may be impacted. Further, the costs of such construction activities have and may continue to significantly exceed the budgeted costs.
Further, if we raise additional funds through the issuance of new shares of our common stock, any shareholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution of their investment.
Further, if we raise additional funds through the issuance of new shares of our common stock, any existing stockholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution of their investment.
Our business plan and commercial success also assumes selling Arq Powder into new markets, including as an additive into the carbon black and asphalt markets. Although testing data and feedback from potential customers have been positive to date, there can be no assurance that these products will be commercially viable.
Our business plan and commercial success also assumes selling Arq Powder into new markets, including as an additive into the asphalt market. Although testing data and feedback from potential customers have been generally positive to date, there can be no assurance that these products will be commercially viable.
The Legacy Arq Tax Assets are comprised of NOL carryforwards, of which $8.8 million were incurred in the U.S. Further, as of December 31, 2023, we had approximately $86.1 million of general business credit carryforwards (the "Tax Credits"), totaling approximately 77% of consolidated tax assets. Under the IRC and regulations promulgated by the U.S.
The Legacy Arq Tax Assets are comprised of NOL carryforwards, of which $8.8 million were incurred in the U.S. Further, as of December 31, 2024, we had approximately $86.1 million of general business credit carryforwards (the "Tax Credits"), totaling approximately 75% of consolidated tax assets. Under the IRC and regulations promulgated by the U.S.
Any future regulations regarding CO 2 emissions of coal reclamation and product manufacturing could also impact our future business. 14 Action by the EPA related to Mercury and Air Toxics Standards ("MATS") that decreases demand for our mercury removal products could have a material adverse effect on our business.
Any future regulations regarding CO 2 emissions of coal reclamation and product manufacturing could also impact our future business. Action by the EPA related to MATS that decreases demand for our mercury removal products could have a material adverse effect on our business.
During the years 2018-2023, we executed amendments to the TAPP (the "TAPP Amendments"), which amended the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith.
During the years 2018 through 2024, we executed amendments to the TAPP (the "TAPP Amendments"), which amended the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith.
These include ongoing liquidity requirements for funding the expansion of the facility, ongoing compliance with regulatory requirements, procurement and maintenance of construction materials and services, environmental and operational licenses and approvals for additional expansion, supply chain constraints, hiring, training and retention of qualified employees and the pace of bringing production equipment and processes online with the capability to manufacture high-quality GAC products at scale.
These include ongoing liquidity requirements for funding the expansion of the facility, ongoing compliance with regulatory requirements, environmental and operational licenses and approvals for additional expansion, supply chain constraints, hiring, training and retention of qualified employees and the pace of bringing production equipment and processes online with the capability to manufacture high-quality GAC products at scale.
We may experience a shortage of reliable and adequate transport capacity and any material increase in transportation costs could have a material adverse effect on our results of operations. We currently plan to transport our Arq Powder based filter cake produced at the Corbin Facility ("Wet Cake") to the Red River Plant by rail and truck.
We may experience a shortage of reliable and adequate transport capacity and any material increase in transportation costs could have a material adverse effect on our results of operations. We plan to transport our Arq Powder based feedstock produced at the Corbin Facility to the Red River Plant by rail and truck.
As we attempt to develop and grow Arq Powder utilization worldwide, our success will depend on our ability to correctly forecast demand in these new markets.
As we attempt to develop and grow Arq Powder utilization worldwide, our success will depend on our ability to gain market acceptance and to correctly forecast demand in these new markets.
Our initial use for Arq Powder is as a feedstock for AC, and although we believe current conditions are favorable as a result of excess demand versus supply, there can be no guarantee that this will continue. Drivers of demand include factors beyond our control such as population growth and GDP growth, amongst others.
Our initial use for Arq Powder is as a feedstock for AC, and although we believe current conditions are favorable as a result of excess demand versus supply, there can be no guarantee that this will continue. Drivers of demand include factors beyond our control such as population growth, regulatory requirements and gross domestic product growth, amongst others.
Our future results depend, in part, upon our ability to manage this expanded business, which poses substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
Following the Arq Acquisition, the size of our business has increased. Our future results depend, in part, upon our ability to manage this expanded business, which poses substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
The difficulties of combining the operations of the two companies include, among others: • managing a larger company; • coordinating geographically separate organizations; • the potential diversion of management’s focus and resources from other strategic opportunities and from operational matters; • performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the Arq Acquisition and integrating the combined companies’ operations; • aligning and executing a new business strategy; • retaining existing customers and attracting new customers; • maintaining employee morale and retaining key management and other employees; • the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, systems, procedures and policies; • integrating two unique business cultures, which may prove to be incompatible; • the possibility of faulty assumptions underlying expectations regarding the integration process; • consolidating corporate and administrative infrastructures and eliminating duplicative operations; • coordinating sales, distribution and marketing efforts; • maintaining research and development technology momentum and leading customer technical collaboration progress; • significant changes to current market conditions that may adversely affect the business plan; • integrating IT, communications and other systems; • changes in applicable laws and regulations; • managing tax costs or inefficiencies associated with integrating Legacy Arq's operations; • unforeseen expenses or delays associated with the Arq Acquisition; and • taking actions that may be required in connection with obtaining regulatory approvals.
The difficulties of combining the operations of the two companies include, among others: • managing a larger company; • coordinating geographically separate organizations; • the potential diversion of management’s focus and resources from other strategic opportunities and from operational matters; • performance shortfalls as a result of the diversion of management’s attention caused by integrating the combined companies’ operations; • aligning and executing a new business strategy; • retaining existing customers and attracting new customers; • maintaining employee morale and retaining key members of management and other employees; • the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, systems, procedures and policies; • the possibility of faulty assumptions underlying expectations regarding the integration process; • consolidating corporate and administrative infrastructures and eliminating duplicative operations; • coordinating sales, distribution and marketing efforts; • maintaining research and development technology momentum and leading customer technical collaboration progress; • significant changes to current market conditions that may adversely affect the business plan; • integrating IT, communications and other systems; • changes in applicable laws and regulations; • managing tax costs or inefficiencies associated with integrating Legacy Arq's operations; • unforeseen expenses or delays associated with the Arq Acquisition, including the completion of the GAC Facility; • creating a logistics network to reliably allow use of Arq Powder as a feedstock in the GAC Facility; and • taking actions that may be required in connection with obtaining regulatory approvals.
Our business faces competition in the U.S. from low-priced imports of AC products. If the volumes of these low-priced imports increase, especially if they are sold at less than fair value, our sales of competing products could decline, which could have an adverse effect our earnings. In addition, sales of these low-priced imports may negatively impact our pricing.
If the volumes of these low-priced imports increase, especially if they are sold at less than fair value, our sales of competing products could decline, which could have an adverse effect our earnings. In addition, sales of these low-priced imports may negatively impact our pricing.
The market price of our common stock may continue to be affected by numerous factors, including: a. market perception of the Arq Acquisition; b. actual or anticipated fluctuations in our operating results and financial condition; c. changes in laws or regulations and court rulings and trends in our industry; d. announcements of sales awards; e. changes in supply and demand of components and materials; f. adoption of new tax regulations or accounting standards affecting our industry; g. changes in financial estimates by securities analysts; h. trends in social responsibility and investment guidelines; i. whether we are able and elect to pay cash dividends; j. the continuation of repurchasing shares of common stock under stock repurchase programs; and k. the degree of trading liquidity in our common stock and general market conditions.
The market price of our common stock may continue to be affected by numerous factors, including: • market perception of the Arq Acquisition; • actual or anticipated fluctuations in our operating results and financial condition; • changes in laws or regulations and court rulings and trends in our industry; • announcements of sales awards; 22 • changes in supply and demand of our products and raw materials; • adoption of new tax regulations or accounting standards affecting our industry; • changes in financial estimates by securities analysts; • trends in social responsibility and investment guidelines; • whether we are able and elect to pay cash dividends; • the continuation of repurchasing shares of common stock under our stock repurchase programs; and • the degree of trading liquidity in our common stock and general market conditions.
Failure to effectively monitor and respond to environmental, social or governance (“ESG”) matters, including our ability to set and meet reasonable goals related to climate change and sustainability efforts, may negatively affect our business and operations. Regulatory developments and stakeholder expectations relating to ESG matters are rapidly changing.
We are subject to risks related to environmental, social or governance (“ESG”) matters, including our ability to set and meet reasonable goals related to climate change and sustainability efforts, may negatively affect our business and operations. Regulatory developments and stakeholder expectations relating to ESG matters are rapidly changing.
Further, in the event of railway transport shortages, there can be no assurance that road transportation will be able to satisfy the shortfall. Potential transportation classifications of raw materials may require permitting, and special care and handling to transport such materials.
Further, in the event of railway transport shortages, there can be no assurance that road transportation will be able to satisfy the shortfall. Potential transportation classifications of raw materials or spent product may require permitting, and special care and handling to transport such materials, including the transportation of spent PFAS filtration media.
The economic effects from these events over longer terms could negatively impact our business and results of operations. The manufacturing and processing of our consumable products requires significant amounts of raw materials. The price and availability of those raw materials can be impacted by factors beyond our control. Our consumable products, exclusive of lignite coal, use a variety of additives.
The economic effects from these events over longer terms could negatively impact our business and results of operations. 18 The manufacturing and processing of our consumable products requires significant amounts of raw materials. The price and availability of those raw materials can be impacted by factors beyond our control.
Despite the TAPP, our projections of what will effect an ownership change could be wrong, and with a waiver in place for certain shareholders, there is a risk that we experience an ownership change for purposes of IRC Sections 382 and 383 because of future acquisitions of our common stock.
Despite the TAPP, our projections of what will effect an ownership change could be wrong, and with a waiver in place for certain stockholders, there is a risk that we experience an ownership change for purposes of IRC Sections 382 and 383 because of future acquisitions of our common stock, which would limit the use of our existing Tax Assets.
The loss of, or significant reduction in, revenue from our largest customers could adversely affect our business, financial condition or results of operations. For 2023, we derived approximately 48% of our total consumable revenue from our five largest customers. Our top three customers accounted for approximately 37% of our total consumable revenue for 2023.
The loss of, or significant reduction in, revenue from our largest customers could adversely affect our business, financial condition or results of operations. For 2024, we derived approximately 45% of our total revenue from our five largest customers. Our top three customers accounted for approximately 36% of our total revenue for 2024.
Significant movements or volatility in the costs of additives could have an adverse effect on our working capital or results of operations. Additionally, we purchase certain raw materials from selected key suppliers.
Our consumable products, exclusive of lignite coal, use a variety of additives. Significant movements or volatility in the costs of additives could have an adverse effect on our working capital or results of operations. Additionally, we purchase certain raw materials from selected key suppliers.
In addition, even if the operations of Legacy Arq are integrated successfully, we may not realize the full benefits from the Arq Acquisition, including the synergies, cost savings or growth opportunities that we expect.
In addition, even if the operations of Legacy Arq are integrated successfully, we may not realize the full benefits from the Arq Acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated timeframe, or at all.
We performed an IRC Section 382 analysis as of the Acquisition Date and determined that we had not experienced an "ownership change" as of that date.
With respect to the Arq Acquisition and PIPE Investment, we performed an IRC Section 382 analysis as of the Acquisition Date and determined that we had not experienced an "ownership change" as of that date.
Demand for our products and services depends significantly on environmental laws and regulations related to emissions. Uncertainty as to the future of such laws and regulations, changes to such laws and regulations or granting of extensions of compliance deadlines has had, and will likely continue to have, a material effect on our business.
Uncertainty as to the future of such laws and regulations, changes to such laws and regulations or granting of extensions of compliance deadlines has had, and will likely continue to have, a material effect on our business.
Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results or cause us to fail to meet our reporting obligations.
As we continue to integrate Legacy Arq's operations, any failure to maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results or cause us to fail to meet our reporting obligations.
From January 1, 2023 to December 31, 2023, the closing price of our common stock ranged from $1.25 to $3.66 per share. Stock price volatility over a given period may cause the average price at which we repurchase shares of our common stock to exceed the stock’s price at a given point in time.
From January 1, 2024 to December 31, 2024, the closing price of our common stock ranged from $2.59 to $8.02 per share. Stock price volatility over a given period may cause the average price at which we repurchase shares of our common stock under our existing stock repurchase program to exceed the stock’s price at a given point in time.
We have provided limited, joint and several guarantees of Tinuum Group’s obligations under those leases. To date, we have not been required to make any payments under such guarantees and are not aware of any actual or threatened requests or claims for payment under such guarantees.
To date, we have not been required to make any payments under such guarantees and are not aware of any actual or threatened requests or claims for payment under such guarantees.
If we fail to obtain additional financing on terms that are acceptable to us, we may not be able to implement such plans fully.
We cannot assure you that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we may not be able to implement such plans fully.
Stockholders who beneficially owned 4.99% or more of our outstanding common stock upon execution of the Protection Plan will not trigger the Protection Plan so long as they do not acquire beneficial ownership of additional shares of our common stock.
Stockholders who beneficially owned 4.99% or more of our outstanding common stock upon execution of the Protection Plan will not trigger the Protection Plan so long as they do not acquire beneficial ownership of additional shares of our common stock. The Board may, in its sole discretion, also exempt any person from triggering the Protection Plan.
Uncertain geopolitical conditions, including the conflicts in the Middle East, the invasion of Ukraine, sanctions against Russia and other potential impacts on the world economy and currencies may cause disruptions in our business.
Uncertain geopolitical conditions, including in connection with the new U.S. presidential administration, the conflicts in the Middle East, the invasion of Ukraine, sanctions against Russia, increased domestic and international tariffs and other potential impacts on the world economy and currencies may cause disruptions in our business.
If such laws and regulations are delayed, or are not enacted or are repealed or amended to be less strict, or include prolonged phase-in periods, or are not enforced, our business would be adversely affected by declining demand for such products and services. For example: 1.
If, as a result of the new U.S. presidential administration or developments in administrative law jurisprudence, such laws and regulations are delayed, not enacted, repealed, amended to be less strict, or include prolonged phase-in periods, or are not enforced, our business would be adversely affected by declining demand for such products and services. For example: 1.
To the extent that the Tax Assets do not otherwise become limited, we believe that we will have available a significant amount of Tax Assets in future years, and therefore the Tax Assets could be a substantial asset to us. In connection with the Arq Acquisition and PIPE Investment, we issued additional shares of our common stock.
To the extent that the Tax Assets do not otherwise become limited, we believe that we will have available a significant amount of Tax Assets in future years, and therefore the Tax Assets could be a substantial asset to us.
The failure to successfully integrate the Legacy Arq businesses in the expected timeframe could adversely affect our future business and financial performance. The combination of two independent companies is a complex, costly and time-consuming process. As a result, we have devoted significant management attention and resources to integrate Legacy Arq's business practices and operations.
The failure to continue to successfully integrate the Legacy Arq businesses in the expected timeframe could adversely affect our future business and financial performance. The combination of two independent companies is a complex, costly and time-consuming process.
We own and operate the Red River Plant, which is our sole manufacturing plant for producing and selling AC products to our customers, and are completing construction and commissioning activities on the Corbin Facility.
We own and operate the Red River Plant, which is our sole manufacturing plant for producing and selling AC products to our customers, and own and operate the Corbin Facility, which is our sole production facility for manufacturing Arq Powder.
Our current and future ability to meet customer expectations, manage inventory, complete sales and achieve our objectives for operating efficiencies depends on the full-time operation of the Red River Plant, and the execution of our business plan depends on the completion of the Corbin Facility and the GAC expansion at the Red River Plant.
Our current and future ability to meet customer expectations, manage inventory, complete sales and achieve our objectives for operating efficiencies depends on the full-time operation of the Red River Plant, and the execution of our business plan depends on the integration of the Corbin Facility as the primary source of feedstock for the GAC Facility's commissioning and ramp-up of commercial production.
The timing and content of the proposed updates to the rule are unknown. The failure of tariffs placed on U.S. imports of Chinese AC to adequately address the impact of low-priced imports from China could have a material adverse effect on the competitiveness and financial performance of our business.
The failure of tariffs or duties placed on U.S. imports of Chinese AC to adequately address the impact of low-priced imports from China could have a material adverse effect on the competitiveness and financial performance of our business. Our business faces competition in the U.S. from low-priced imports of AC products.
These benefits may not be achieved within the anticipated timeframe, or at all. 12 Specifically, the realization of the full benefits from the Arq Acquisition is dependent on our ability to construct expansions to existing facilities and to integrate Arq Powder on the projected timeline and within the projected budget.
Specifically, the realization of the full benefits from the Arq Acquisition is dependent on our ability to construct expansions to existing facilities and to integrate Arq Powder on the projected timeline and within the projected budget.
We may not be successful in integrating the operations of Legacy Arq or otherwise realizing the anticipated benefits of the Arq Acquisition. In addition, the integration of Legacy Arq may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management’s attention, and may cause our stock price to decline.
In addition, the continued integration of Legacy Arq may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management’s attention, and may cause our stock price to decline.
There is no assurance that we will be able to increase our business to meet targets globally, or that projections on which such targets are based will prove accurate, or that the pace of growth or coverage will meet customer expectations.
There is no assurance that we will be able to increase our business to meet targets globally, or that projections on which such targets are based will prove accurate, or that the pace of growth or coverage will meet customer expectations. 12 Our future financial results will suffer if we do not effectively manage our expanded operations following the Arq Acquisition.
Such events could disrupt our supply of raw materials or otherwise affect production, transportation and delivery of our products or affect demand for our products. In addition, extreme and unusually cold or hot temperatures throughout the U.S. could result in abnormally high loads on geographic electrical grids that could result in the failure of coal-fired power plants to produce electricity.
In addition, extreme and unusually cold or hot temperatures throughout the U.S. could result in abnormally high loads on geographic electrical grids that could result in the failure of coal-fired power plants to produce electricity.
We are targeting the end of 2024 for our first commercial production of Legacy Arq products and the end of 2024 for our first commercial production of GAC products. To meet these production timing goals, we will need to raise additional capital in 2024.
We are targeting the end of the first quarter of 2025 for our first commercial production of Legacy Arq products and for our first commercial production of GAC products at our Red River Plant. To meet these production timing goals and to fund ongoing production of our GAC products, we may need to raise additional capital.
Certain provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These include provisions that: a. Limit the business at special meetings of stockholders to the purpose stated in a notice of the meeting; b.
Certain provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.
The costs of construction or other anticipated capital expenditures are subject to the effects of the current inflationary environment and we may not be able to successfully offset the effects of inflation. The synergies attributable to the Arq Acquisition may vary from expectations. We may fail to realize the anticipated benefits and synergies expected from the Arq Acquisition.
The costs of construction or other anticipated capital expenditures are subject to the effects of the current inflationary environment and we may not be able to successfully offset the effects of inflation. See "Item 1A.
The price of natural gas has remained relatively competitive for power generation and the use of natural gas is perceived as having a lower environmental impact than burning coal.
The price of natural gas has remained relatively competitive for power generation and the use of natural gas is perceived as having a lower environmental impact than burning coal. Natural gas-fired plants are cheaper to construct, and permits to construct these plants are easier to obtain, and ongoing costs of natural gas-fired plants associated with meeting environmental compliance are lower.
If these strategic relationships are not established or maintained, our business prospects may be limited, which could negatively impact our business and results of operations.
If these strategic relationships are not established or maintained, our business prospects may be limited, which could negatively impact our business and results of operations. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the Arq Acquisition. These anticipated benefits and actual operating, technological, strategic and revenue opportunities may not be realized fully or at all, or may take longer to realize than expected.
These anticipated benefits and actual operating, technological, strategic and revenue opportunities may not be realized fully or at all, or may take longer to realize than expected.
The Board may, in its sole discretion, also exempt any person from triggering the Protection Plan. 19 In connection with the Arq Acquisition and PIPE Investment, we granted a waiver under the TAPP for certain shareholders to acquire more shares of our stock in the future, provided that such acquisition is not expected to, and does not, effect an "ownership change" under IRC Sections 382 and 383.
In connection with the Arq Acquisition and PIPE Investment, the May 2024 Private Placement and the September 2024 Offering, we granted waivers under the TAPP for certain stockholders to allow such stockholders to acquire the shares offered in the respective offerings and acquire more shares of our stock in the future, provided that such acquisition is not expected to, and does not, effect an "ownership change" under IRC Sections 382 and 383.
In turn, this could 10 impact throughput in the Corbin Facility, which could lead to lower production and higher operating costs. There is also risk of delays that are product-specific. For example, we may not receive adequate customer acceptance or achieve acceptable performance given the specification differentiation between some of Legacy Arq’s products and the industry’s existing conventional products.
There is also risk of delays that are product-specific. For example, we may not receive required state or municipal approval for our new GAC products in a timely manner, adequate customer acceptance of our new GAC products or achieve acceptable performance given the specification differentiation between some of Legacy Arq’s products and the industry’s existing conventional products.
There can be no assurance that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Arq Acquisition. Manufacturing Legacy Arq's products and GAC products requires significant capital. Legacy Arq was a development stage entity that to date has not generated any revenue.
There can be no assurance that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Arq Acquisition.
We may experience roadway or railway transportation disruptions that could have a material adverse effect on our operations or financial condition. There can be no assurance that we will be able to secure sufficient truck or railway transport capacity to transport raw materials from the Corbin Facility to the Red River Plant.
There can be no assurance that we will be able to secure sufficient truck or railway transport capacity to transport raw materials from the Corbin Facility to the Red River Plant or our finished commercial products to our customers.
In addition, any material increase in transportation costs could have a negative effect on the competitiveness of our future products, which may in turn have a material adverse effect on our business and results of operations. 16 We face operational risks inherent in mining operations, and our mining operations have the potential to cause safety issues, including those that could result in significant personal injury.
In addition, any material increase in transportation costs could have a negative effect on the competitiveness of our future products, which may in turn have a material adverse effect on our business and results of operations.
As a result of the Arq Acquisition, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock, which may make it more difficult for us to attract and retain qualified personnel and business partners. 11 In connection with the Arq Acquisition, 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.
As a result of the Arq Acquisition, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock, which may make it more difficult for us to attract and retain qualified personnel and business partners.
On April 3, 2023, the EPA issued a proposed update to MATS that amongst other potential modifications, proposed a reduction to the mercury emission limits for lignite coal-fired EGUs. Any final action taken by the EPA related to MATS that decreases demand for our products for mercury removal will have a negative effect on our financial results.
On April 3, 2023, the EPA issued a proposed update to MATS that amongst other potential modifications, proposed a reduction to the mercury emission limits for lignite coal-fired EGUs. The EPA adopted the final rule on April 25, 2024.
Techniques used to obtain unauthorized access to or sabotage systems change frequently and often are not recognized until after they are launched against a target, and we may be unable to anticipate these techniques or to implement adequate preventative measures.
These perpetrators of cyberattacks also may be able to develop and deploy viruses, worms, malware and other malicious software programs that attack our information and networks or otherwise exploit any security vulnerabilities of our information and networks. 20 Techniques used to obtain unauthorized access to or sabotage systems change frequently and often are not recognized until after they are launched against a target, and we may be unable to anticipate these techniques or to implement adequate preventative measures.
Our ability to increase production of GAC on a sustained basis is dependent on the construction and ramp of upgrades at our Red River Plant. The construction of and commencement and ramp of production at this facility are subject to a number of uncertainties inherent in all new manufacturing operations.
However, the commissioning, commencement and ramp of production at this facility are subject to a number of uncertainties inherent in all new manufacturing operations.
The financial effects of Tinuum Group providing indemnification under performance guarantees of its RC facilities are largely unknown and could adversely affect our financial condition. Tinuum Group, LCC ("Tinuum Group"), of which we hold a 42.5% ownership interest, indemnifies certain utilities and lessees of RC facilities for particular risks associated with the operations and tax treatment of those facilities.
Tinuum Group, LLC ("Tinuum Group"), of which we hold a 42.5% ownership interest, indemnifies certain utilities and lessees of RC facilities for particular risks associated with the operations and tax treatment of those facilities. We have provided limited, joint and several guarantees of Tinuum Group’s obligations under those leases.
We use coal waste as a feedstock to produce Arq Powder, and the majority of coal waste sites targeted by us for development contain potential environmental liabilities.
For example, at our Corbin Facility, we use high-quality recovered bituminous coal fines as a feedstock to produce Arq Powder, and the majority of sites we target for development and extraction of such fines contain potential environmental liabilities.
If any of our five largest customers were to significantly reduce the quantities of consumables they purchase from us, it may adversely affect our business, financial condition and results of operations. Uncertain geopolitical conditions could adversely affect our business.
While we attempt to mitigate such risk by entering into long-term contracts with minimum purchase obligations, if any of our five largest customers were to significantly reduce the quantities of consumables they purchase from us or cease purchasing from us altogether, it may adversely affect our business, financial condition and results of operations.
Natural gas-fired plants are cheaper to construct, and permits to construct these plants 15 are easier to obtain, and ongoing costs of natural gas-fired plants associated with meeting environmental compliance are lower. Possible advances in technologies and incentives, such as tax credits that enhance the economics of renewable energy sources, could make those sources more competitive than coal.
Possible advances in technologies and incentives, such as tax credits that enhance the economics of renewable energy sources, could make those sources more competitive than coal.
In addition, market competition could negatively impact our ability to maintain or raise prices or maintain or grow our market position. Additionally, our competitors are significantly larger and/or more established companies in the market for consumables and other products that provide mercury emissions reduction, water treatment and air purification.
Additionally, our competitors are significantly larger and/or more established companies in the market for consumables and other products that provide mercury emissions reduction, water treatment and air purification. 17 Reduction of coal consumption by North American electricity power generators could result in less demand for our products and services.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe processes by which our audit committee is informed about and monitors the Company’s strategy regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents includes the following: Our VP of IT provides quarterly briefings to the audit committee regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, emerging threats and updates, cybersecurity systems testing, activities of third parties, and the like.
Biggest changeOur VP of IT provides quarterly briefings to the audit committee regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, emerging threats and updates, cybersecurity systems testing, activities of third parties, and the like. Our audit committee and VP of IT provide regular updates to the Board on such reports.
As part of our overall risk management, we monitor and test our safeguards and train our employees on the importance of these safeguards. We maintain a formal information security awareness training program for all employees that includes training on matters such as phishing, email security best practices and data protection.
As part of our overall risk management program, we monitor and test our safeguards and train our employees on the importance of these safeguards. We maintain a formal information security awareness training program for all employees that includes training on matters such as phishing, email security best practices and data protection.
Our VP of IT is primarily responsible for assessing and managing our material risks from cybersecurity threats, including monitoring and assessing strategic risk exposure. While management is responsible for the day-to-day management of cybersecurity policies and procedures, our audit committee is tasked with oversight of our risk management process, which includes risks from cybersecurity threats.
Our VP of IT is primarily responsible for assessing and managing our material risks from cybersecurity threats, including monitoring and assessing strategic risk exposure. While management is responsible for the day-to-day management of cybersecurity policies and procedures, the audit committee of our Board is tasked with oversight of our risk management process, which includes risks from cybersecurity threats.
We conduct risk assessments in the event of a material change in our business processes that may affect information systems that are vulnerable to such cybersecurity threats through our normal change control processes.
We conduct risk assessments in the event of a material change in our business processes that may affect information systems that are vulnerable to such 24 cybersecurity threats through our normal change control processes.
We require each third-party service provider to adhere to our internal security policies and certify that it has the ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of its security measures that may affect our company.
We require each third-party service provider to adhere to our internal security policies and certify that it has the ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of its security measures that may affect our systems.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards. We devote resources and personnel, including our VP of IT, who reports to our VP of Finance, to manage the risk assessment and mitigation process.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards. We devote resources and personnel, including our VP of IT, who reports to our Chief Accounting Officer, to manage the risk assessment and mitigation process.
Despite security measures we have implemented, there is always the risk that certain cybersecurity incidents could materially disrupt operational systems limiting our ability to manufacture and deliver products to customers. Governance Our VP of IT has approximately five years of experience in cybersecurity and oversees our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Despite security measures we have implemented, there is always the risk that certain cybersecurity incidents could materially disrupt operational systems limiting our ability to manufacture and deliver products to customers. Governance Our VP of IT has more than six years of experience in cybersecurity and oversees our cybersecurity policies and processes, including those described in "Risk Management and Strategy" above.
The Response Plan includes (1) detection, (2) analysis, which may include timely notice to our management and audit committee chair, (3) containment, (4) eradication, (5) recovery and (6) post-incident review. We also maintain cybersecurity insurance to manage potential liabilities resulting from specific cybersecurity incidents.
The response plan includes (1) detection, (2) analysis, which may include timely notice to our management and audit committee chair, (3) containment, (4) eradication, (5) recovery and (6) post-incident review. Annually, we execute a tabletop exercise to test our incident response plan documentation and process execution. We also maintain cybersecurity insurance to manage potential liabilities resulting from specific cybersecurity incidents.
Cybersecurity Definitions • Cybersecurity incident means an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through a registrant's information systems that jeopardizes the confidentiality, integrity, or availability of a registrant's information systems or any information residing therein. • Cybersecurity threat means any potential unauthorized occurrence on or conducted through a registrant's information systems that may result in adverse effects on the confidentiality, integrity, or availability of a registrant's information systems or any information residing therein. • Information systems means electronic information resources, owned, or used by the registrant, including physical or virtual infrastructure controlled by such information resources, or components thereof, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of the registrant's information to maintain or support the registrant's operations. 21 Risk Management and Strategy We have established policies and processes for assessing, identifying, and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management processes.
Cybersecurity Definitions • Cybersecurity incident means an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through the Company's information systems that jeopardizes the confidentiality, integrity, or availability of the Company's information systems or any information residing therein. • Cybersecurity threat means any potential unauthorized occurrence on or conducted through the Company's information systems that may result in adverse effects on the confidentiality, integrity, or availability of the Company's information systems or any information residing therein. • Information systems means electronic information resources, owned, or used by the Company, including physical or virtual infrastructure controlled by such information resources, or components thereof, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of the Company's information to maintain or support the registrant's operations.
Our audit committee and VP of IT provide regular updates to the board of directors on such reports. In the event of an actual cybersecurity threat or incident, management is notified in accordance with the cybersecurity response plan above. 22
In the event of an actual cybersecurity threat or incident, management and the audit committee are notified in accordance with the Company's cybersecurity response plan detailed above.
Added
Risk Management and Strategy We have established policies and processes for assessing, identifying, and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management processes.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBased on current operating assumptions, we intend to renew this lease for an additional five-year term. Based on the materiality and the vertically-integrated company guidelines contained in Regulation S-K of the Securities Act and the Exchange Act, we have concluded that no additional disclosures related to our mining operations are required under this Item.
Biggest changeBased on the materiality and the vertically-integrated company guidelines contained in Regulation S-K of the Securities Act and the Exchange Act, we have concluded that no additional disclosures related to our mining operations are required under this Item.
Mining As of December 31, 2023, we owned or controlled, primarily through long-term leases, approximately 1,975 acres of coal land for surface mining located in Natchitoches Parish, Louisiana ("Five Forks"). The majority of the Five Forks land is leased for mineral rights and right-of-use purposes that expire at varying dates over the next 30 years and contain options to renew.
Mining As of December 31, 2024, we owned or controlled, primarily through long-term leases, approximately 1,975 acres of land for surface coal mining located in Natchitoches Parish, Louisiana ("Five Forks"). The majority of the Five Forks land is leased for mineral rights and right-of-use purposes that expire at varying dates over the next 30 years and contain options to renew.
Item 2. Properties Office and Facilities We own or lease land and facilities in the following States: Colorado - We lease approximately 24,000 square feet for our corporate headquarters and primary research and development laboratory. Louisiana - We own the Red River Plant, which is located on approximately 61 acres.
Item 2. Properties Office and Facilities We own or lease land and facilities in the following States: Colorado - We lease approximately 24,000 square feet for our corporate headquarters and primary research and development laboratory, located in Greenwood Village, Colorado. Louisiana - We own the Red River Plant, which is located on approximately 61 acres in Coushatta, Louisiana.
We also lease approximately 141,000 square feet in various locations that is used for production, distribution and storage. Kentucky - We lease approximately 470 acres in Corbin, Kentucky where we operate the Corbin Facility.
We also lease approximately 141,000 square feet in various locations in Louisiana that are used for production, distribution and storage. Kentucky - We lease approximately 470 acres in Corbin, Kentucky where we operate the Corbin Facility.
The remaining land is owned by us. We also have approximately 380 acres of land containing bituminous coal waste at the Corbin Facility for recovery of bituminous coal fines, which is leased through August 31, 2025 and contains options to renew for successive five year terms until all merchantable fines are removed from the premises.
The remaining land is owned by us. 25 We also have approximately 380 permitted acres of land at the Corbin Facility from which we recover a bituminous coal fine feedstock, which is leased through August 31, 2030 and contains options to renew for successive five year terms until all merchantable fines are removed from the premises.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine 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 to this Report. 23 PART II
Biggest changeMine Safety Disclosures The statement concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Report. 26 PART II
Item 3. Legal Proceedings From time to time, we are involved in various litigation matters arising in the ordinary course 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 8 of this Report. Item 4.
Item 3. Legal Proceedings From time to time, we are involved in various litigation matters arising in the ordinary course of our business. Information with respect to this item may be found in Note 7 "Commitments and Contingencies" to the Consolidated Financial Statements included in Item 8 of this Report. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere is no assurance that an active trading market will provide adequate liquidity for our existing stockholders or for persons who may acquire our common stock in the future. Dividends Our most recent dividend payment was in March 2020. We do not intend to declare or pay cash dividends in the foreseeable future.
Biggest changeDividends Our most recent dividend payment was in March 2020. We do not intend to declare or pay cash dividends in the foreseeable future. Holders The Company had 805 holders of record of our common stock as of March 3, 2025.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Share Repurchases We maintain a program to repurchase up to $20.0 million of shares of our common stock under a stock repurchase program (the "Stock Repurchase Program") through open market transactions at prevailing market prices, of which $7.0 million remained available at December 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Share Repurchases We maintain a program to repurchase up to $20.0 million of shares of our common stock under a stock repurchase program (the "Stock Repurchase Program") through open market transactions at prevailing market prices, of which $7.0 million remained available at December 31, 2024.
No purchases were made during the three months ended December 31, 2023. It is unlikely for the foreseeable future that we will resume repurchasing shares of our common stock under the Stock Repurchase Program.
No purchases were made during the three months ended December 31, 2024. It is unlikely for the foreseeable future that we will resume repurchasing shares of our common stock under the Stock Repurchase Program.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Our Common Stock Effective February 1, 2024, our common stock is quoted on the Nasdaq Global Market under the symbol "ARQ." Prior to that, our common stock was quoted on the Nasdaq Global Market under the symbol "ADES." The trading volume for our common stock is relatively limited.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Our Common Stock Effective February 1, 2024, our common stock is quoted on the Nasdaq Global Market under the symbol "ARQ." Prior to that, our common stock was quoted on the Nasdaq Global Market under the symbol "ADES." There is no assurance that an active trading market will provide adequate liquidity for our existing stockholders or for persons who may acquire our common stock in the future.
Tax Withholding The following table contains information about common shares that we withheld from delivering to employees during the fourth quarter of 2023 to satisfy their respective tax obligations related to stock-based awards. 24 Period Total Number of Common Shares Purchased Average Price Paid per Common Share Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 to October 31, 2023 — — N/A N/A November 1, 2023 to November 30, 2023 — $ — N/A N/A December 1, 2023 to December 31, 2023 7,969 $ 2.71 N/A N/A Item 6.
Period Total Number of Common Shares Purchased Average Price Paid per Common Share Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2024 to October 31, 2024 — — N/A N/A November 1, 2024 to November 30, 2024 — $ — N/A N/A December 1, 2024 to December 31, 2024 2,319 $ 7.71 N/A N/A Item 6.
Removed
Holders The Company had 875 holders of record of our common stock as of March 5, 2024.
Added
Tax Withholding The following table contains information about common shares that we withheld from delivering to employees during the fourth quarter of 2024 to satisfy their respective tax obligations related to stock-based awards.
Removed
Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities On February 1, 2023, we entered into subscription agreements with certain persons (the "Subscribers"), which included existing shareholders of Arq Ltd., three of which were appointed to our Board of Directors, pursuant to which the Subscribers subscribed for and purchased 3,842,315 shares of 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").
Removed
On July 17, 2023, we entered into a subscription agreement (the "Subscription Agreement") with Mr. Robert "Bob" Rasmus and entities controlled by Mr. Rasmus, in connection with his appointment as our President and Chief Executive Officer. Pursuant to the Subscription Agreement, Mr.
Removed
Rasmus subscribed for and agreed to purchase 950,000 shares of our common stock, par value $0.001 per share, from the Company for an aggregate purchase price of $1.8 million (at a price per share of approximately $1.90). The securities issued to the Subscribers and Mr.
Removed
Rasmus under the PIPE Investment and the Subscription Agreement, respectively, 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.
Removed
We are relying on this exemption from registration based in part on representations made by each of the Subscribers and Mr. Rasmus under their respective subscription agreements. The sale of the securities pursuant to the PIPE Investment has been subsequently registered under the Securities Act on Registration No. 333-276375, which was declared effective on January 31, 2024.
Removed
The sale of the securities pursuant to the Subscription Agreement (the "Subscriber Shares") has not been registered under the Securities Act or any state securities laws. The Subscriber Shares may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2023 2022 Net loss (1) $ (12,249) $ (8,917) Depreciation, amortization, depletion and accretion 10,543 6,416 Amortization of Upfront Customer Consideration 508 508 Interest expense, net 1,168 97 Income tax expense 153 209 EBITDA (EBITDA Loss) 123 (1,687) Cash distributions from equity method investees 1,623 5,933 Equity earnings (1,623) (3,541) Gain on sale of Marshall Mine, LLC (2,695) — Loss (gain) on change in estimate, asset retirement obligation (37) 34 Loss on early settlement of an account receivable — 535 Adjusted (EBITDA Loss) EBITDA $ (2,609) $ 1,274 (1) Included in Net loss for the year ended December 31, 2023 and 2022 was $4.9 million and $5.0 million, respectively, of transaction and integration costs incurred related to the Arq Acquisition.
Biggest changeYear ended December 31, (in thousands) 2024 2023 Net loss (1) $ (5,109) $ (12,249) Depreciation, amortization, depletion and accretion 8,594 10,543 Amortization of Upfront Customer Consideration 508 508 Interest expense, net 2,154 1,168 Income tax (benefit) expense (164) 153 EBITDA 5,983 123 Cash distributions from equity method investees 127 1,623 Equity earnings (127) (1,623) Loss on extinguishment of debt 1,422 — Loss (gain) on sale of assets 64 (2,695) Gain on change in estimate, asset retirement obligation — (37) Financing costs 275 — Adjusted EBITDA (Adjusted EBITDA Loss) $ 7,744 $ (2,609) (1) Included in Net loss for the year ended December 31, 2023 was $4.9 million of transaction and integration costs incurred related to the Arq Acquisition, $4.9 million of Legacy Arq payroll and benefit costs and $1.7 million of severance expense related to three executive employees. 34 Liquidity and Capital Resources Current Capital Resources and Factors Affecting Our Liquidity For the year ended December 31, 2024, our principal sources of liquidity consisted of: • cash on hand, excluding restricted cash of $8.7 million primarily pledged as collateral under a surety bond agreement; • cash flows from operations of $10.5 million; • proceeds received from issuance and sale of our common stock, which totaled $42.4 million in the current year; and • availability of $16.2 million under our recent $30.0 million secured revolving credit facility (the "Revolving Credit Facility").
Examples of critical estimates in valuing certain of long-lived assets, including intangible assets, we have acquired or may acquire in the future include but are not limited to: • future expected cash flows from revenue; • the acquired company’s developed technology as well as assumptions about the period of time the acquired developed technology will continue to be used in the combined company's product portfolio; • the expected use and useful lives of the acquired assets; and • valuation methods and discount rates used in estimating the values of the assets acquired and liabilities assumed.
Examples of critical estimates in valuing certain of long-lived assets, including intangible assets, we have acquired or may acquire in the future include but are not limited to: • future expected cash flows from revenue; • the acquired company’s developed technology as well as assumptions about the period of time the acquired developed technology will continue to be used in the combined company's product portfolio; • the expected use and useful lives of the acquired assets; and 37 • valuation methods and discount rates used in estimating the values of the assets acquired and liabilities assumed.
We review, on at least an annual basis, the future expected costs and the timing of such costs for AROs. 36 Income Taxes We account for income taxes under the asset and liability method, which requires judgment in determining income tax expense and the related balance sheet amounts.
We review, on at least an annual basis, the future expected costs and the timing of such costs for AROs. Income Taxes We account for income taxes under the asset and liability method, which requires judgment in determining income tax expense and the related balance sheet amounts.
Other income (expense) The remaining components of other income (expense) include interest income, interest expense and other miscellaneous items. Results of Operations Presentation of Financial Results For comparison purposes, the following tables set forth our results of operations for the years presented in the Consolidated Financial Statements included in Item 8 of this Report.
Other (expense) income The remaining components of other (expense) income include interest income, interest expense and other miscellaneous items. 29 Results of Operations Presentation of Financial Results For comparison purposes, the following tables set forth our results of operations for the years presented in the Consolidated Financial Statements included in Item 8 of this Report.
We expect that the obligations secured by these surety bonds will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related surety bonds may be released and collateral requirements may be reduced.
We expect that the obligations secured by these surety bonds will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the 36 obligations are performed, the related surety bonds may be released and collateral requirements may be reduced.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are an environmental technology company and are principally engaged in the sale of consumable air and water treatment solutions primarily based on AC.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are an environmental technology company and are principally engaged in the sale of consumable air, water, and soil treatment solutions primarily based on AC.
Components of Revenue, Expenses and Equity Method Investees The following briefly describes the components of revenue and expenses as presented in the Consolidated Statements of Operations. Descriptions of the revenue recognition policies are included in Note 1 to the Consolidated Financial Statements included in Item 8 of this Report.
Components of Revenue, Expenses and Equity Method Investees The following narrative briefly describes the components of revenue and expenses as presented in the Consolidated Statements of Operations. Descriptions of the revenue recognition policies are included in Note 1 to the Consolidated Financial Statements included in Item 8 of this Report.
We have not completed a formal IRC Section 382 analysis of Legacy Arq equity changes from its inception through the Acquisition Date, however, we believe that one or more "ownership changes" occurred during this time period as defined under Sections 382 and 383 and that a portion or all the Legacy Arq Tax Assets may subject to an annual limitation. 31 Non-GAAP Financial Measures To supplement our financial information presented in accordance with U.S.
We have not completed a formal IRC Section 382 analysis of Legacy Arq equity changes from its inception through the Acquisition Date, however, we believe that one or more "ownership changes" occurred during this time period as defined under Sections 382 and 383 and that a portion or all the Legacy Arq Tax Assets may be subject to an annual limitation. 33 Non-GAAP Financial Measures To supplement our financial information presented in accordance with U.S.
In February 2024, as part of a larger rebranding, the Company changed its name to Arq, Inc., and on February 1, 2024, our common stock commenced trading under the ticker symbol, "ARQ". Drivers of Demand and Key Factors Affecting Profitability Drivers of demand and current key factors affecting our profitability are sales of our AC products to the APT market.
In February 2024, as part of a larger rebranding, the Company changed its name to Arq, Inc., and on February 1, 2024, our common stock commenced trading on the Nasdaq Global Market under the ticker symbol, "ARQ." Drivers of Demand and Key Factors Affecting Profitability Drivers of demand and current key factors affecting our profitability are sales of our AC products to the APT market.
Conversely, better than expected results and continued positive results and trends could result in a decrease to a valuation allowance, and any such decreases could have a material positive effect on our financial condition and results of operations. See additional discussion in Note 13 of the Consolidated Financial Statements included in Item 8 of this Report.
Conversely, better than expected results and continued positive results and trends could result in a decrease to a valuation allowance, and any such decreases could have a material positive effect on our financial condition and results of operations. See additional discussion in Note 12 of the Consolidated Financial Statements included in Item 8 of this Report.
As of December 31, 2023, and as required by our surety bond provider, we held restricted cash of $8.5 million pledged as collateral related to performance requirements required under a reclamation contract for the Five Forks Mine and the Corbin Facility.
As of December 31, 2024, and as required by our surety bond provider, we held restricted cash of $8.5 million pledged as collateral related to performance requirements required under a reclamation contract for the Five Forks Mine and the Corbin Facility.
However, in the event any surety bond is called, our indemnity obligations could require us to reimburse the surety bond provider. Long Term Requirements For a discussion of our long-term cash requirements, see Item 8. Note 6 of this Report.
However, in the event any surety bond is called, our indemnity obligations could require us to reimburse the surety bond provider. Long Term Requirements For a discussion of our long-term cash requirements, see Item 8, Note 5 of this Report.
The Tinuum Group Royalty is calculated based on "Net Profit" (as defined in the Tinuum Royalty Agreement) on our sales of M-Prove TM 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 we and Tinuum Group agree to terminate it.
The Tinuum Group Royalty is calculated based on "Net Profit" (as defined in the Tinuum Royalty Agreement) on our sales of M-Prove TM product to certain of the Refined Coal Facilities. The Tinuum Group Royalty Agreement is for an initial term of five years with automatic renewals of five years unless we and Tinuum Group agree to terminate it.
Generally Accepted Accounting Principles ("GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
Generally Accepted Accounting Principles ("GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with GAAP.
Consumables cost of revenue Consumables cost of revenue is comprised of all labor, fringe benefits, subcontract labor, additive and coal costs, materials, equipment, supplies, travel costs and any other costs and expenses directly related to the cost of production of consumables. 26 License royalties payable to Tinuum Group In December 2022, the Company and Tinuum Group entered into an agreement (the "Tinuum Group Royalty Agreement") whereby we pay Tinuum Group a royalty (the "Tinuum Group Royalty") for certain of our sales of M-Prove TM products after the expiration of the tax credit program under IRC Section 45 ("Section 45 Tax Credit Program") (beginning January 1, 2022) to certain of the M-45 Facilities.
Cost of revenue Cost of revenue is comprised of all labor, fringe benefits, subcontract labor, additive and coal costs, materials, equipment, supplies, travel costs and any other costs and expenses directly related to the cost of production of consumables. 28 License Royalties Payable to Tinuum Group In December 2022, the Company and Tinuum Group entered into an agreement (the "Tinuum Group Royalty Agreement") whereby we pay Tinuum Group a royalty (the "Tinuum Group Royalty") for certain of our sales of M-Prove TM products after the expiration of the tax credit program under IRC Section 45 ("Section 45 Tax Credit Program") (beginning January 1, 2022) to certain refined coal production facilities owned and operated by Tinuum Group (the "Refined Coal Facilities").
Our AC products include both PAC and GAC. Additionally, we own the Five Forks Mine, a lignite mine that currently supplies the primary raw material for the manufacturing of our products.
Our AC products include both PAC and GAC, among others. Additionally, we own the Five Forks Mine, a lignite coal mine that currently supplies the primary raw material for the manufacturing of our products.
Revenue and cost of revenue Consumables Our revenue is comprised of the sale of AC products and other chemical-based technology products in the APT market, as well as the sale of other AC products to our largest customer, who services other diverse markets.
Revenue and cost of revenue Revenue Our revenue is comprised of the sale of AC products and other chemical-based technology products into the APT market, as well as the sale of other AC products to our largest customer, who services other diverse markets.
We believe that the EBITDA and Adjusted EBITDA measures are less susceptible to variances that affect the Company's operating performance. We include these non-GAAP measures because management uses them in the evaluation of our operating performance, and believe they help to facilitate comparison of operating results between periods.
We believe that the EBITDA and Adjusted EBITDA measures are less susceptible to variances that affect our operating performance. We include these non-GAAP measures because management uses them in the evaluation of our operating performance, and believe such measures facilitate comparison of operating results between periods.
The difference between our reported income tax expense and the expected federal benefit, as a result of pretax loss recognized for the year ended December 31, 2023, was primarily due to permanent differences related to acquisition-related costs and an increase in the valuation allowance on our deferred tax assets.
The difference between our reported income tax expense and the expected federal benefit of 2.5 million, as a result of pretax loss recognized for the year ended December 31, 2024, was primarily due to the expense of permanent differences related to acquisition-related costs and an increase in the valuation allowance on our deferred tax assets.
As of December 31, 2023, we had approximately $86.1 million in Section 45 tax credit carryforwards. 30 In the hypothetical event of an "ownership change," as defined by IRC Sections 382, utilization of general business credits ("Tax Credits") generated prior to the change would be subject to an annual limitation imposed by IRC Section 383 for Tax Credits.
Tax Assets As of December 31, 2024, we had approximately $86.1 million in tax credit carryforwards. In the hypothetical event of an "ownership change," as defined by IRC Sections 382, utilization of general business credits ("Tax Credits") generated prior to the change would be subject to an annual limitation imposed by IRC Section 383 for Tax Credits.
Additionally, the table above excludes construction costs related to the Red River Plant expansion and Corbin Facility commissioning referred to under "Capital Expenditures" caption above, as the timing and amount of payments 35 to satisfy these obligations are conditional and based on numerous factors including, but not limited to, the pace of construction activities and the timing of mechanical completion of the Red River Plant expansion and commissioning activities at the Corbin Facility.
Additionally, the table above excludes construction costs related to the Red River Plant expansion referred to under the "Capital Expenditures" caption above, as the timing and amount of payments to satisfy these obligations are conditional and based on numerous factors including, but not limited to, the pace of construction activities and the timing of mechanical completion of the Red River Plant expansion.
Refer to Note 13 of our Consolidated Financial Statements included in Item 8 of this Report for additional information regarding our deferred tax assets and liabilities. Recently Issued Accounting Standards Refer to Note 1 of the Consolidated Financial Statements included in Item 8 of this Report for information regarding recently issued accounting standards. 37
Refer to Note 12 of our Consolidated Financial Statements included in Item 8 of this Report for additional information regarding our deferred tax assets and liabilities. Recently Issued Accounting Standards Refer to Note 1 of the Consolidated Financial Statements included in Item 8 of this Report for information regarding recently issued accounting standards. 38
Surety Bonds As of December 31, 2023, we had outstanding surety bonds with regulatory commissions totaling $11.2 million primarily related to the Five Forks Mine and the Corbin Facility.
Surety Bonds As of December 31, 2024, we had outstanding surety bonds with regulatory commissions totaling $11.1 million primarily related to the Five Forks Mine and the Corbin Facility.
We manufacture and sell AC and other chemicals used to capture and remove contaminants for coal-fired power generation, industrial and water treatment markets, which we collectively refer to as the advanced purification technologies or "APT" market. Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials.
We manufacture and sell AC and other chemicals used to capture and remove impurities, contaminants and pollutants for the coal-fired power generation, industrial, water treatment, and water and soil remediation markets, which we collectively refer to as the APT market. Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials.
The difference between our reported income tax expense and the expected federal benefit, as a result of pretax loss recognized for the year ended December 31, 2023, was primarily due to permanent differences related to acquisition-related costs, an increase in the valuation allowance on our deferred tax assets and stock-based compensation.
The difference between our reported income tax benefit and the expected federal benefit of $1.1 million, as a result of pretax loss recognized for the year ended December 31, 2024, was primarily due to an increase in the valuation allowance on our deferred tax assets offset by the benefit of permanent differences related to stock-based compensation.
Our proprietary AC products enable customers to reduce air, soil, and water contaminants, including mercury, PFAS and other pollutants, to help our customers maximize utilization effectiveness and to improve operating efficiencies to meet the challenges of existing and pending air quality, soil, and water regulations.
Our proprietary AC products enable customers to reduce air, soil, and water contaminants, including mercury, PFAS and other pollutants to meet the challenges of existing and pending air quality, soil, and water regulations.
Cash flows from investing activities Cash flows used in investing activities for the year ended December 31, 2023 was $28.5 million compared to cash flows used in investing activities of $4.6 million for the year ended December 31, 2022.
Cash flows from investing activities Cash flows used in investing activities for the year ended December 31, 2024 was $85.1 million compared to cash flows used in investing activities of $28.5 million for the year ended December 31, 2023.
The increase in cash used in operating activities was primarily due to the following: (1) an increase in net loss of $3.3 million year over year; (2) a $2.7 million gain on the sale of the Marshall Mine, LLC; (3) a decrease in Distributions from equity method investees, return on investment of $2.3 million year over year; and (4) a net decrease in working capital of $8.9 million primarily as a result of significant payments made in 2023 on accounts payable and accrued expenses assumed in the Arq Acquisition.
The increase in cash provided by operating activities was primarily due to the following: (1) a decrease in net loss of $7.1 million year over year; (2) a net increase in working capital of $17.8 million primarily as a result of significant payments made in 2023 on accounts payable and accrued expenses assumed in the Arq Acquisition, (3) a one-time $2.7 million gain on the sale of the Marshall Mine, LLC in 2023, and (4) a decrease in Earnings from equity method investments of $1.5 million.
As of December 31, 2023, we concluded it is more likely than not we will not generate sufficient taxable income within the allowable carryforward periods to realize any of our net deferred tax assets, and fully reserved for such assets as of December 31, 2023. In reaching this conclusion, we primarily considered forecasts of future taxable losses.
As of December 31, 2024, we concluded it is more likely than not we will not generate sufficient taxable income within the allowable carryforward periods to realize any of our net deferred tax assets, and fully reserved for such assets as of December 31, 2024.
Cash Flows Cash and restricted cash decreased from $76.4 million as of December 31, 2022, to $54.2 million as of December 31, 2023, a decrease of $22.3 million.
Cash Flows Cash and restricted cash decreased from $54.2 million as of December 31, 2023, to $22.2 million as of December 31, 2024, a decrease of $31.9 million.
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.
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; (4) changes in demand for contaminant removal within water treatment facilities; (5) changes in environmental regulations; and (6) state or municipal approval and customer acceptance for our new GAC products.
The Tinuum Group Royalty is included in Consumables cost of revenue. Other Operating Expenses Payroll and benefits Payroll and benefits costs include payroll costs, payroll related fringe benefits and stock based compensation expense of research and development, sales and administrative personnel, but exclude such costs related to direct labor that are included in Cost of revenue.
Payroll and benefits costs include payroll costs, payroll-related fringe benefits and stock-based compensation expense of sales and administrative personnel, but exclude such costs related to direct labor that are included in Cost of revenue.
We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses, gains, and losses which can vary widely across different industries or among companies within the same industry and may not be indicative of core operating results and business outlook. 32 EBITDA and Adjusted EBITDA The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with GAAP to EBITDA, (EBITDA Loss), (Adjusted EBITDA Loss) and Adjusted EBITDA.
We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses, gains, and losses which can vary widely across different industries or among companies within the same industry and may not be indicative of core operating results and business outlook.
For the year ended December 31, 2022, our reported income tax expense was $0.2 million and was based on an effective rate of (2)%.
For the year ended December 31, 2023, we reported income tax expense of $0.2 million and an effective rate of (1)%.
With the expiration of the tax credit program under IRC Section 45 afforded to producers of refined coal as of December 31, 2021, both Tinuum Group and Tinuum Services commenced winding down their operations related to the Section 45 tax credit program, although we have recognized earnings in both 2022 and 2023 related to residual cash distributions received.
Through December 31, 2021, we had substantial earnings from Tinuum Group and Tinuum Services, LLC ("Tinuum Services"). With the expiration of the tax credit program under IRC Section 45 afforded to producers of refined coal as of December 31, 2021, both Tinuum Group and Tinuum Services commenced winding down their operations related to the Section 45 tax credit program.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by the non-cash impact of equity earnings from equity method investments and gain on sale of the Marshall Mine, increased by cash distributions from equity method investments, loss on early settlement of a long-term receivable and loss on change in estimate, asset retirement obligations.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by the non-cash impact of equity earnings from equity method investment, loss on extinguishment of debt, loss (gain) on sale of assets, increased by cash distributions from equity method investments, loss on change in estimate, asset retirement obligations and charges incurred in as a result of our financing activities.
Offsetting the net increase in cash flows used in operating activities year over year were (1) an increase in Depreciation, amortization, depletion and accretion of $4.1 million; and (2) a decrease in Earnings from equity method investments of $1.9 million.
Partially offsetting the net increase in cash flows used in operating activities year over year was a decrease in Depreciation, amortization, depletion and accretion of $1.9 million.
Capital expenditures planned for 2024 are dependent on many factors, including the ability to raise additional funding and approval of certain environmental permits, both of which may impact the timing and amount of capital expenditures.
Capital expenditures planned for 2025 are dependent on many factors, including the approval of certain environmental permits, and the pace and progression of the project, which may impact the timing and amount of capital expenditures.
In February 2023, we acquired 100% of the equity of the subsidiaries of Arq Limited (hereafter the Arq Limited subsidiaries referred to as "Legacy Arq", and the acquisition itself referred to as the "Arq Acquisition") to secure access to a feedstock, a manufacturing facility and certain patented processes as a means to manufacture additional GAC products for sale into the APT and other markets.
In February 2023, we acquired 100% of the equity interests, assets and liabilities of the subsidiaries of Arq Limited, an environmental technology company incorporated under the laws of Jersey (hereafter the Arq Limited subsidiaries referred to as "Legacy Arq", and the acquisition itself referred to as the "Arq Acquisition") to secure access to additional U.S. based bituminous coal feedstock, a manufacturing facility located in Corbin, Kentucky (the "Corbin Facility") and certain patented processes as a means to manufacture new advanced GAC products for sale into the APT and other markets.
In connection with the Arq Acquisition and PIPE Investment, we issued additional shares of our common stock. We performed an IRC Section 382 analysis as of the Acquisition Date and determined that we had not experienced an ownership change as of that date. Prior to the Acquisition Date, Legacy Arq completed numerous equity offerings that resulted in ownership changes.
In connection with the equity offerings completed at various dates during 2024, we issued additional shares of our common stock. We performed an IRC Section 382 analysis as of those dates and determined that we had not experienced an ownership change as of those dates.
Product volumes decreased among power generation customers, primarily due to lower natural gas prices compared to 2022, which contributed to decreased utilization of coal-fired generation and decreased demand for our products.
These increases were partially offset by lower volumes sold, which negatively impacted revenue by $2.2 million. Product volumes decreased among power generation customers in 2024, primarily due to lower natural gas prices compared to 2023, which contributed to decreased utilization of coal-fired generation and decreased demand for our products.
Contractual Obligations Contractual obligations as of December 31, 2023 are as follows: Payment Due by Period (in thousands) Total Less than 1 year 1-3 years 4-5 years After 5 years CFG Loan $ 12,199 $ — $ — $ 12,199 $ — CTB Loan 13,413 1,110 2,220 2,220 7,863 Finance lease obligations 3,666 2,274 1,307 85 — Operating lease obligations 18,559 3,139 5,747 2,595 7,078 $ 47,837 $ 6,523 $ 9,274 $ 17,099 $ 14,941 The table above excludes our asset retirement obligation ("ARO") related to reclamation of the Five Forks Mine, as the timing and amount of payments to satisfy the ARO are uncertain and are based on numerous factors including, but not limited to, the expected closure date of the Five Forks Mine.
Contractual Obligations Contractual obligations as of December 31, 2024 are as follows: Payment Due by Period (in thousands) Total Less than 1 year 1-3 years 4-5 years After 5 years CTB Loan $ 12,303 $ 1,110 $ 2,220 $ 2,220 $ 6,753 Finance lease obligations 1,392 935 457 — — Operating lease obligations 16,206 3,128 4,606 2,438 6,034 $ 29,901 $ 5,173 $ 7,283 $ 4,658 $ 12,787 The table above excludes our asset retirement obligation ("ARO") related to reclamation of the Five Forks Mine, as the timing and amount of payments to satisfy the ARO are uncertain and are based on numerous factors including, but not limited to, the expected closure date of the Five Forks Mine.
The following table summarizes our cash flows for the years ended December 31, 2023 and 2022, respectively: Years Ended December 31, (in thousands) 2023 2022 Change Cash provided by (used in): Operating activities $ (16,653) $ (6,061) $ (10,592) Investing activities (28,535) (4,608) (23,927) Financing activities 22,909 (1,679) 24,588 Net change in Cash and Restricted Cash $ (22,279) $ (12,348) $ (9,931) Cash flows from operating activities Cash flows used in operating activities for the year ended December 31, 2023 was $16.7 million compared to cash flows used in operating activities of $6.1 million for the year ended December 31, 2022.
The following table summarizes our cash flows for the years ended December 31, 2024 and 2023, respectively: Years Ended December 31, (in thousands) 2024 2023 Change Cash provided by (used in): Operating activities $ 10,477 $ (16,653) $ 27,130 Investing activities (85,074) (28,535) (56,539) Financing activities 42,679 22,909 19,770 Net change in Cash and Restricted Cash $ (31,918) $ (22,279) $ (9,639) 35 Cash flows from operating activities Cash flows provided by operating activities for the year ended December 31, 2024 was $10.5 million compared to cash flows used in operating activities of $16.7 million for the year ended December 31, 2023.
The year-to-year comparison of financial results is not necessarily indicative of financial results that may be achieved in future years.
The year-to-year comparison of financial results is not necessarily indicative of financial results that may be achieved in future years. This discussion and analysis compares 2024 results to 2023 results. For discussion and analysis that compares 2023 results to 2022 results, see Item 7.
We expect to secure customer interest in Arq Powder as an additive into other markets, such as components for asphalt. These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials. These applications are currently in various stages of proof of concept testing or preliminary customer testing.
These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials and have demonstrated other beneficial performance attributes during lab-scale customer testing. These applications are currently in various stages of proof of concept testing or preliminary customer testing.
Legal and professional fees Legal and professional costs include external legal, audit and consulting expenses. General and administrative General and administrative costs include director fees and expenses, bad debt expense, research and development expense and other general costs of conducting business.
General and administrative costs include director fees and expenses, bad debt expense, rent and occupancy expense and other general costs of conducting business. Research and development Research and development costs include payroll expenses related to research and development personnel and other expenses incurred related to research and development activities.
Based on current operating levels, we expect that our cash on hand as of December 31, 2023 will provide sufficient liquidity to fund operations for the next 12 months. Capital expenditures We have targeted the end of 2024 for the completion of our Red River Plant expansion that is necessary to commence production of our new GAC products.
Based on current operating levels, we expect that our cash on hand and borrowing availability on the Revolving Credit Facility as of December 31, 2024 will provide sufficient liquidity to fund operations for the next 12 months.
Research and development costs provided by third parties, net of reimbursements from cost-sharing arrangements, are charged to expense in the period incurred and are reported in the General and administrative line item in the Consolidated Statements of Operations.
Research and development costs provided by third parties, net of reimbursements from cost-sharing arrangements, are charged to expense in the period incurred. Depreciation, amortization, depletion and accretion Depreciation and amortization expense consists of depreciation expense related to property, plant and equipment and the amortization of long-lived intangible assets.
Under this manufacturing process, we convert coal waste into a purified, microfine carbon powder known as Arq powder TM ("Arq Powder").
Under this manufacturing process, we convert high-quality recovered bituminous coal fines into a purified, microfine carbon powder known as Arq powder TM ("Arq Powder") for high value applications, such as for a raw material to produce GAC products.
Other Income (Expense), net Earnings from equity method investments Earnings from equity method investments represent our share of earnings (losses) related to equity method investments, and in 2023, primarily from Tinuum Group. Through December 31, 2021, we had substantial earnings from Tinuum Group and Tinuum Services, LLC ("Tinuum Services").
Depletion and accretion expense consists of depletion expense related to the depletion of mine development costs and the accretion of mine reclamation liabilities. Other (Expense) Income, net Earnings from equity method investments Earnings from equity method investments represent our share of earnings related to equity method investments, and in 2023 and 2024, primarily from Tinuum Group.
Further, on February 1, 2023 we entered into the CFG Loan Agreement for $10.0 million, of which we received $8.5 million net proceeds. 33 Tinuum Group and Tinuum Services Distributions The following table summarizes the cash distributions from our equity method investments for the years ended December 31, 2023 and 2022: Year ended December 31, (in thousands) 2023 2022 Tinuum Group $ 1,148 $ 3,455 Tinuum Services 475 2,476 Other — 2 Distributions from equity method investees $ 1,623 $ 5,933 Cash distributions from Tinuum Group and Tinuum Services for 2023 decreased by $4.3 million compared to 2022 primarily due to Tinuum Group and Tinuum Services ceasing material operations as of December 31, 2021.
Tinuum Group and Tinuum Services Distributions The following table summarizes the cash distributions from our equity method investments for the years ended December 31, 2024 and 2023: Year ended December 31, (in thousands) 2024 2023 Tinuum Group $ 127 $ 1,148 Tinuum Services — 475 Distributions from equity method investees $ 127 $ 1,623 Cash distributions from Tinuum Group and Tinuum Services for 2024 decreased by $1.5 million compared to 2023, as both Tinuum Group and Tinuum Services ceased material operations as of December 31, 2021, and began wind-down of their business at that time.
The increase was primarily due to an increase in acquisition of property, equipment and intangibles, net, of $18.6 million primarily related to acquisition costs related to the Arq Acquisition, a payment of $2.2 million related to the disposal of Marshall Mine, LLC, increased mine development costs of $2.1 million, and a decrease in distributions from equity earnings in excess of cumulative earnings of $2.0 million.
The increase in cash used was primarily due to an increase in acquisition of property, equipment and intangibles, net, of $57.7 million primarily related to capital expenditures for our Red River Plant expansion, $2.2 million cash acquired as part of the Legacy Arq Acquisition in 2023, and a decrease in distributions from equity earnings in excess of cumulative earnings of $1.5 million.
To meet this target, we will incur substantial capital spend in excess of our originally forecasted amount for additional equipment, labor, and project costs.
Capital expenditures We are targeting the first quarter of 2025 for the completion of our Red River Plant expansion which is necessary to commence production of our new GAC products. To meet this target, we have incurred and may continue to incur substantial capital spend in excess of our originally forecasted amount for additional equipment, labor, and project costs.
As of December 31, 2023 and 2022, we had a valuation allowance of $98.8 million and $88.3 million, respectively, on our deferred tax assets.
In reaching this conclusion, we primarily considered our pretax losses incurred over a cumulative three-year look-back period. As of December 31, 2024 and 2023, we had a valuation allowance of $101.6 million and $98.8 million, respectively, on our deferred tax assets.
Cash flows from financing activities Cash flows provided by (used in) financing activities for the year ended December 31, 2023 increased by $24.6 million compared to the year ended December 31, 2022 primarily due to proceeds from common stock issued of $16.2 million, 34 including $1.0 million of proceeds from common stock issued to related parties, and net proceeds from the issuance of the CFG Loan Agreement of $8.5 million.
Cash flows from financing activities Cash flows provided by financing activities for the year ended December 31, 2024 increased by $19.8 million compared to the year ended December 31, 2023 primarily due to proceeds from the issuance and sale of our common stock in a public offering of $26.7 million and a net increase in borrowings year over year of $5.3 million associated with a borrowing on the Revolving Credit Facility in 2024 that exceeded proceeds from the CFG Loan in 2023.
Material Cash Requirements Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors.
Additional decreases in cash flows year over year provided by financing activities were due to costs associated with extinguishment of the CFG Loan and associated financing costs for the Revolving Credit Facility, both in 2024. Material Cash Requirements Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors.
Offsetting the net increase in cash flows used in investing activities year over year was $2.2 million cash acquired as part of the Arq Acquisition.
Partially offsetting the net increase in cash flows used in investing activities year over year was a payment of $2.2 million related to the disposal of Marshall Mine, LLC in 2023 and a decrease in mine development costs of $2.5 million.
Interest expense Interest expense increased for the year ended December 31, 2023 compared to the corresponding period in 2022 primarily due to interest expense of $2.0 million related to the $10 million CFG Loan and interest expense of $0.5 million incurred for the same period related to the $10 million CTB Loan assumed by us in the Arq Acquisition.
Interest expense Interest expense increased for the year ended December 31, 2024 compared to the corresponding period in 2023 primarily due to paid in kind interest on the $10 million term loan with CF Global (the "CFG Loan"), which accrues to the principal portion and is payable upon the termination of the CFG Loan.
Our Annual Report on Form 10-K for the year ended December 31, 2023 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, disclosed in Item 7 of Part II, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." 27 Year ended December 31, 2023 Compared to Year ended December 31, 2022 Total Revenue and Cost of Revenue A summary of the components of revenue and cost of revenue for the years ended December 31, 2023 and 2022 is as follows: Years Ended December 31, Change ( Amounts in thousands except percentages ) 2023 2022 ($) (%) Revenue: Consumables $ 99,183 $ 102,987 $ (3,804) (4) % Total revenue $ 99,183 $ 102,987 $ (3,804) (4) % Consumables cost of revenue, exclusive of depreciation and amortization $ 67,323 $ 80,465 $ (13,142) (16) % Consumables revenue and consumables cost of revenue For the years ended December 31, 2023 and 2022, consumables revenue decreased year over year primarily driven by lower volumes sold, which comprised $20.0 million of the total change.
Year ended December 31, 2024 Compared to Year ended December 31, 2023 Total Revenue and Cost of Revenue A summary of the components of revenue and cost of revenue for the years ended December 31, 2024 and 2023 is as follows: Years Ended December 31, Change ( Amounts in thousands except percentages ) 2024 2023 ($) (%) Revenue $ 108,959 $ 99,183 $ 9,776 10 % Cost of revenue, exclusive of depreciation and amortization $ 69,515 $ 67,323 $ 2,192 3 % Revenue and cost of revenue For the years ended December 31, 2024 and 2023, revenue increased year over year primarily driven by the impact of favorable product mix of approximately $6.9 million and improved pricing for our products of approximately $4.9 million.
Gain on sale of Marshall Mine, LLC As discussed above, for the year ended December 31, 2023, we recognized a gain of $2.7 million on the sale of Marshall Mine, LLC.
These decreases were partially offset by an increase in depreciation expense for property, plant and equipment acquired and placed in service during 2024. Loss (gain) on sale of assets For the year ended December 31, 2023, we recognized a one-time gain of $2.7 million on the sale of Marshall Mine, LLC.
Other The increase in Other is primarily driven by interest income of $1.8 million generated from the use of cash sweep accounts in 2023. Income tax expense For the year ended December 31, 2023, our reported income tax expense was $0.2 million and was based on an effective rate of (1)%.
Income tax (benefit) expense For the year ended December 31, 2024, we reported income tax benefit of $0.2 million and an effective tax rate of 3%.
Other Income (Expense), net A summary of the components of our other income (expense), net for the years ended December 31, 2023 and 2022 is as follows: Years Ended December 31, Change (Amounts in thousands, except percentages) 2023 2022 ($) (%) Other income, net: Earnings from equity method investments $ 1,623 $ 3,541 $ (1,918) (54) % Interest expense (3,014) (336) (2,678) 797 % Other 2,630 155 2,475 1,597 % Total other income, net $ 1,239 $ 3,360 $ (2,121) (63) % Earnings from equity method investments The following table presents the equity method earnings by investee for the years ended December 31, 2023 and 2022: Years Ended December 31, Change (in thousands) 2023 2022 ($) (%) Earnings from Tinuum Group $ 1,148 $ 3,455 $ (2,307) (67) % Earnings from Tinuum Services 475 85 390 459 % Earnings from other — 1 (1) (100) % Earnings from equity method investments $ 1,623 $ 3,541 $ (1,918) (54) % 29 Earnings from equity method investments for the year ended December 31, 2023 and 2022 represented cash distributions received from Tinuum Group and Tinuum Services.
Other (Expense) Income, net A summary of the components of our other (expense) income, net for the years ended December 31, 2024 and 2023 is as follows: Years Ended December 31, Change (Amounts in thousands, except percentages) 2024 2023 ($) (%) Other (expense) income: Earnings from equity method investments $ 127 $ 1,623 $ (1,496) (92) % Interest expense (3,257) (3,014) (243) 8 % Loss on extinguishment of debt (1,422) — (1,422) * Other 1,238 2,630 (1,392) (53) % Total other (expense) income $ (3,314) $ 1,239 $ (4,553) * * Percent change in excess of 100% not considered meaningful.
Consumables gross margin, exclusive of depreciation and amortization, increased for the year ended December 31, 2023 compared to 2022. Driving the increase in gross margin were the impact of the MQ contracts and decreased cost of our feedstock and additives, primarily as a result of decreased production volumes during 2023.
Also offsetting the overall increase was a decrease in revenue recognized from the settlement of certain contracts with customers containing minimum quantity purchases ("MQ Contracts"). Consumables gross margin, exclusive of depreciation and amortization, increased for the year ended December 31, 2024 compared to 2023.
We expect to begin using Arq Powder as a feedstock to begin manufacturing GAC products by the end of 2024 to begin using Arq Powder as a feedstock to produce high-quality GAC products for sale in the APT and other markets. We believe Arq Powder has additional potential for us to access new markets and applications.
We expect to begin using Arq Powder as a feedstock to produce high-quality GAC products by the end of the first quarter of 2025 for sale into the APT and other markets. We anticipate that our GAC products made using these highly purified recovered bituminous coal fines will have a materially lower carbon footprint than other coal-based competitor alternatives.
Other Operating Expenses A summary of the components of our operating expenses, exclusive of cost of revenue items (presented above), for the years ended December 31, 2023 and 2022 is as follows: Years Ended December 31, Change (in thousands, except percentages) 2023 2022 ($) (%) Operating expenses: Payroll and benefits $ 15,154 $ 10,540 $ 4,614 44 % Legal and professional fees 9,588 9,455 133 1 % General and administrative 12,641 8,145 4,496 55 % Depreciation, amortization, depletion and accretion 10,543 6,416 4,127 64 % Gain on sale of Marshall Mine, LLC (2,695) — (2,695) * Other (36) 34 (70) (206) % $ 45,195 $ 34,590 $ 10,605 31 % * Calculation not meaningful Payroll and benefits Payroll and benefits expenses increased year over year primarily due to the addition of Legacy Arq employees, which increased expenses by $4.9 million for the year, of which $1.1 million related to severance expense of former executives of Legacy Arq.
Selling, general and administrative A summary of the components of selling, general and administrative expenses for the years ended December 31, 2024 and 2023, exclusive of cost of revenue items (presented above), is as follows: Years Ended December 31, Change (in thousands, except percentages) 2024 2023 ($) (%) Payroll and benefits $ 9,507 $ 13,491 $ (3,984) (30) % Legal and professional fees 5,587 9,210 (3,623) (39) % General and administrative 13,601 11,368 2,233 20 % Total Selling, general and administrative $ 28,695 $ 34,069 $ (5,374) (16) % Payroll and benefits Payroll and benefits expenses decreased year over year primarily due to expenses recorded during the year ended December 31, 2023 relating to severance expense of former executives, which comprised $1.7 million of the total payroll and benefit expense, and $1.1 million related to severance expense of former executives of Legacy Arq.
The Company anticipates financing the timely completion of the project funded with cash on hand, cash generation, ongoing cost reduction initiatives, potential customer prepayments for GAC contracts, and a planned refinancing and potential expansion of our term loan.
The Company anticipates financing the timely completion of the project funded with cash on hand, borrowing availability on the Revolving Credit Facility, and ongoing cost reduction initiatives. During 2025, we expect our capital expenditures to primarily relate to the completion of the Red River Project.
Removed
With the Arq Acquisition, we now control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines for sale or further conversion to GAC products.
Added
We believe Arq Powder has additional potential to enable us to access new markets and applications. We intend to secure customer interest in Arq Powder as an additive into other markets, such as components for asphalt.
Removed
Depreciation, amortization, depletion and accretion Depreciation and amortization expense consists of depreciation expense related to property, plant and equipment and the amortization of long-lived intangible assets. Depletion and accretion expense consists of depletion expense related to the depletion of mine development costs and the accretion of mine reclamation liabilities.
Added
The Tinuum Group Royalty is included in Consumables cost of revenue. Other Operating Expenses Selling, general and administrative Selling, general and administrative costs include payroll and benefits costs, legal and professional fees, and general and administrative expenses.
Removed
Partially offsetting the decrease was an increase due to improved pricing for our products of approximately $10.6 million, $4.7 million of revenue recognized from the settlement of certain contracts with customers containing minimum quantity purchases ("MQ Contacts") and the impact of favorable product mix of approximately $0.7 million.
Added
Payroll costs, payroll-related fringe benefits, and stock-based compensation expense of research and development personnel are reported in the Research and development line item in the Consolidated Statements of Operations. Legal and professional costs include external legal, audit and consulting expenses.
Removed
Our consumables gross margin was negatively impacted by a decrease in volumes sold. Consumables revenue 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.
Added
We have recognized earnings in both 2023 and 2024 related to residual cash distributions received from Tinuum Group. Tinuum Services ceased operations and completed its wind down in 2024.
Removed
In addition, for the year ended December 31, 2023, we incurred severance related costs of $1.7 million associated with the termination of three executive employees. These increases were partially offset by a decrease in incentive compensation related 28 to non-Legacy Arq employees for the year ended December 31, 2023 of $1.3 million compared to the corresponding period in 2022.
Added
Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.
Removed
An additional decrease in payroll and benefits was due to retention bonuses with our executive officers and certain other key employees of $1.2 million, which were paid in full in January 2023. Legal and professional fees Legal and professional fees remained flat year over year.
Added
The increase in gross margin was primarily driven by an increase in revenue resulting from increased pricing of our products, while the cost to manufacture our products increased between periods, partially due to increased variable production costs on lower production volumes during 2024.
Removed
General and administrative General and administrative expenses increased for the year ended December 31, 2023 compared to the corresponding period in 2022 as a result of $2.5 million of expenses incurred on behalf of Legacy Arq, which included $1.2 million from rent and occupancy expense from additional leased space.
Added
Our consumables gross margin was negatively impacted by a decrease in volumes sold and lower revenue recognized from MQ Contracts in 2024 compared to 2023. We currently expect consumables revenue to increase in the coming years as a result of increased regulatory requirements finalized by the EPA in April 2024, especially with respect to PFAS substances.

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Other ARQ 10-K year-over-year comparisons