Arq, Inc 10-Q for FY2026 Q2
Arq, Inc. (ARQ)
10-Q
2026-08-10
For: 2026-06-30
View Original
Added on
August 10, 2026
About this 10-Q
Arq, Inc filed this 10-Q on August 10, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $29.88M
- up 4.5% from $28.58M a year earlier
- Net loss
- $733K
- compared with a net loss of $2.37M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.06 a year earlier
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-Q
______________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2026
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-37822
______________________________________
(Exact name of registrant as specified in its charter)
______________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(720 ) 598-3500
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
______________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | ||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of August 6, 2026, there were 43,668,483 outstanding shares of Arq, Inc. common stock, par value $0.001 per share.
INDEX
| PAGE | ||||||||
Part I. – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Arq, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| As of | ||||||||||||||
| (in thousands, except share data) | June 30, 2026 | December 31, 2025 As Adjusted (1) | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash | $ | $ | ||||||||||||
| Receivables, net | ||||||||||||||
| Inventories, net | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Restricted cash, long-term | ||||||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | ||||||||||||||
| Other long-term assets, net | ||||||||||||||
| Total Assets | $ | $ | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||||||||
| Revolving credit facility | ||||||||||||||
| Current portion of long-term debt obligations | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt obligations, net of current portion | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total Liabilities | ||||||||||||||
| Commitments and contingencies (Note 6) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
Preferred stock: par value of $ | ||||||||||||||
Common stock: par value of $ | ||||||||||||||
Treasury stock, at cost: | ( | ( | ||||||||||||
| Additional paid-in capital | ||||||||||||||
| Retained earnings | ||||||||||||||
| Total Stockholders’ Equity | ||||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
1
Arq, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
(in thousands, except per share data) | 2026 | 2025 As Adjusted (1) | 2026 | 2025 As Adjusted (1) | ||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | ||||||||||||||||||||||||||
| Loss (gain) on sale of assets | ( | |||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||
| Total other expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Loss per common share (Note 1): | ||||||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
2
Arq, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
| Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except share data) | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||
Balances, January 1, 2026, as adjusted (1) | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common shares to satisfy minimum tax withholdings | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
Net loss, as adjusted (1) | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Balances, March 31, 2026, as adjusted (1) | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2026 | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs as described in Note 1. See Note 12 for reconciliation to previously reported amounts.
| Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except share data) | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||
Balances, January 1, 2025, as adjusted (1) | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common shares to satisfy minimum tax withholdings | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
Net loss, as adjusted (1) | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Balances, March 31, 2025, as adjusted (1) | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common shares to satisfy minimum tax withholdings | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
Net loss, as adjusted (1) | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Balances, June 30, 2025, as adjusted (1) | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs as described in Note 1. See Note 12 for reconciliation to previously reported amounts.
See Notes to the Condensed Consolidated Financial Statements.
3
Arq, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2026 | 2025 As Adjusted (1) | ||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation, amortization, depletion and accretion | ||||||||||||||
| Stock-based compensation expense | ||||||||||||||
| Operating lease expense | ||||||||||||||
| Loss on sale of long-term assets, net | ||||||||||||||
| Amortization of debt discount and debt issuance costs | ||||||||||||||
| Other non-cash items, net | ( | ( | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Receivables | ( | ( | ||||||||||||
| Prepaid expenses and other assets | ( | ( | ||||||||||||
| Inventories | ( | ( | ||||||||||||
| Other long-term assets, net | ( | ( | ||||||||||||
| Accounts payable and accrued expenses | ( | |||||||||||||
| Other current liabilities | ||||||||||||||
| Operating lease liabilities | ( | |||||||||||||
| Other long-term liabilities | ( | ( | ||||||||||||
| Net cash used in operating activities | ( | ( | ||||||||||||
| Cash flows from investing activities | ||||||||||||||
| Acquisition of property, plant, equipment and intangible assets, net | ( | ( | ||||||||||||
| Acquisition of mine development costs | ( | ( | ||||||||||||
| Distributions from equity method investee in excess of cumulative earnings | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities | ||||||||||||||
| Borrowings on revolving credit facility | ||||||||||||||
| Repayments of revolving credit facility | ( | ( | ||||||||||||
| Principal payments on notes payable | ( | ( | ||||||||||||
| Repurchase of common stock to satisfy tax withholdings | ( | ( | ||||||||||||
| Principal payments on finance lease obligations | ( | ( | ||||||||||||
| Net cash provided by financing activities | ||||||||||||||
| Decrease in Cash and Restricted Cash | ( | ( | ||||||||||||
| Cash and Restricted Cash, beginning of period | ||||||||||||||
| Cash and Restricted Cash, end of period | $ | $ | ||||||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||||
| Accrued purchases for property and equipment | $ | $ | ||||||||||||
| Acquisition of property and equipment under finance lease | $ | $ | ||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs as described in Note 1. See Note 12 for reconciliation to previously reported amounts.
See Notes to the Condensed Consolidated Financial Statements.
4
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Organization and Basis of Presentation
Arq, Inc., together with its consolidated subsidiaries ("Arq" or the "Company", formerly known as Advanced Emissions Solutions, Inc.) is a Delaware corporation with its principal office located in Greenwood Village, Colorado, with manufacturing, mining and logistics operations located in Louisiana and coal recovery and manufacturing operations located in Kentucky.
The Company is an environmental technology company that is principally engaged in the sale of consumable air, water, and soil treatment solutions, primarily based on activated carbon ("AC"). The Company's proprietary AC products enable customers to reduce air, water, and soil contaminants, including mercury, per and polyfluoroalkyl substances ("PFAS") and other pollutants, to meet the challenges of existing and pending air quality and water regulations. The Company manufactures and sells 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 are collectively referred to as the advanced purification technologies ("APT") market.
The Company’s primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials. The Company’s AC products include powdered activated carbon ("PAC") and granular activated carbon ("GAC").
The Company owns a lignite coal mine located in Saline, Louisiana (the "Five Forks Mine") that currently supplies the primary raw material for the manufacturing of the majority of the Company’s products at its facility in Coushatta, Louisiana (the "Red River Plant"). In addition, the Company leases land in Corbin, Kentucky, where it holds an idled manufacturing facility (the "Corbin Facility") capable of processing bituminous coal fines into a purified, microfine carbon powder (the "Corbin Wetcake") for high value applications.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of Arq are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and with Article 10 of Regulation S-X of the Securities and Exchange Commission. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The unaudited Condensed Consolidated Financial Statements of Arq in this Quarterly Report on Form 10-Q ("Quarterly Report") are presented on a consolidated basis and include Arq and its wholly-owned subsidiaries. Also included within the unaudited Condensed Consolidated Financial Statements are the Company's unconsolidated equity investments, Tinuum Group, which is accounted for under the equity method of accounting, and Highview Enterprises Limited (the "Highview Investment"), which is accounted for in accordance with U.S. GAAP applicable to equity investments that do not qualify for the equity method of accounting.
Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts were eliminated in consolidation for all periods presented in this Quarterly Report.
In the opinion of management, these Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary for a fair presentation of the results of operations, financial position, stockholders' equity and cash flows for the interim periods presented. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"). Other than the change in accounting principle discussed below, significant accounting policies disclosed therein have not changed.
Change in Accounting Principle
Effective April 1, 2026, the Company changed its method of accounting for costs incurred in connection with planned major maintenance activities (“turnaround” or "TAR") on its Red River Plant from the direct-expense method to the deferral method. Turnarounds are scheduled and required shutdowns of Red River Plant operations during which the Company performs planned major maintenance activities. Under the deferral method, qualifying costs, including maintenance materials, parts and direct labor directly attributable to the turnaround, are capitalized when incurred and amortized on a straight-line basis over the period until the next scheduled turnaround. Routine repair and maintenance costs are expensed as incurred.
The Company believes that the deferral method is preferable because it better matches qualifying turnaround costs with the periods benefited by the planned major maintenance activities and improves the comparability of the Company’s operating results between periods. Under the direct-expense method previously applied, qualifying turnaround costs were expensed
5
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
entirely in the periods in which they were incurred, although the benefits of the turnaround activities extended through the period until the next scheduled turnaround.
The Company applied the change retrospectively to all periods presented. See Note 12 for additional information regarding the effect of the change in accounting principle.
Loss Per Common Share
Basic loss per common share is computed using the weighted-average number of shares of the Company's common stock outstanding during the reporting period. Diluted loss per common share is computed in a manner consistent with that of loss per common share, while considering the impact of common stock equivalents from other potentially dilutive securities.
The following table sets forth the calculations of basic and diluted loss per common share:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands, except per share amounts) | 2026 | 2025 As Adjusted (1) | 2026 | 2025 As Adjusted (1) | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Basic weighted-average number of common shares outstanding | ||||||||||||||||||||||||||
| Add: dilutive effect of equity instruments | ||||||||||||||||||||||||||
| Diluted weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Income (loss) per common share - basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Income (loss) per common share - diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs as described in Note 1. See Note 12 for reconciliation to previously reported amounts.
For the three and six months ended June 30, 2026, potentially dilutive securities of 2.0 million and 2.2 million shares of common stock, respectively, are outstanding but are not included in the calculation of diluted loss per common share because the effect would be anti-dilutive. For the three and six months ended June 30, 2025, potentially dilutive securities of 2.6 million and 2.5 million shares of common stock, respectively, are outstanding but are not included in the calculation of diluted loss per common share because the effect would be anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There have been no changes in the Company's critical accounting estimates from those that were disclosed in the 2025 Form 10-K. Actual results could differ from these estimates.
Fair value measurements
Seasonality
The timing of the sale of the Company's consumable products is dependent upon several factors. Power generation is weather dependent, with electricity and steam production varying in response to heating and cooling demands. As a result, the Company's revenue is generally higher in the first and third fiscal quarters during the colder and warmer months of the year. Abnormally high and low temperatures during the summer and winter months, respectively, may significantly increase coal consumption for electricity generation and cause increased impurities within various municipalities' water sources, and thus increase the demand for the Company's products. Additionally, power generating units routinely schedule maintenance outages in the spring and/or fall depending on the operation of their boilers. During such outages, which may range from one week to over a month, the Company's product sales may decrease.
Also, the Company's revenue and sales volumes are highly dependent upon the level of coal consumption at coal-fired power plants, which in turn is significantly affected by the prices of competing power generation sources, such as natural gas and renewables. During periods of low natural gas prices, natural gas provides a competitive alternative to coal-fired power
6
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
generation and therefore, coal consumption for power generation may be reduced, which in turn reduces the demand for the Company's products. In contrast, during periods of higher prices for competing power generation sources, coal consumption generally increases, which generally increases demand for the Company's products.
Demand for the Company's water purification products is driven largely from municipal water treatment facilities. Depending on weather conditions and other environmental factors, the summer months historically have the highest demand for the Company's water treatment products. One of the major uses for PAC is for the treatment of taste and odor impurities caused by organic contaminants and natural materials in water that predominantly degrade during the summer months. Additionally, the rainy season generally results in more demand from water municipalities due to increased contaminated water volume from rain run-off.
Reclassifications
Certain balances have been reclassified from the prior year to conform to the current year presentation. Such reclassifications had no effect on the Company’s results of operations or financial position in any of the periods presented.
New Accounting Standards
Recently Adopted
In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company adopted ASU 2025-05 effective January 1, 2026. The adoption of this new accounting standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.
Recently Issued
Note 2 - Inventories, net
The following table summarizes the Company's inventories as of June 30, 2026 and December 31, 2025:
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Product inventory, net | $ | $ | ||||||||||||
| Raw material inventory | ||||||||||||||
Total inventories, net | $ | $ | ||||||||||||
Note 3 - Revenue
For the three and six months ended June 30, 2026 and 2025, all material performance obligations related to revenue recognized were satisfied at a point in time.
Trade receivables
7
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Trade receivables represent an unconditional right to consideration in exchange for goods or services transferred to a customer. The Company invoices its customers in accordance with the terms of the contract. Credit terms are generally net 30 - 45 days from the date of invoice. The timing between the satisfaction of performance obligations and when payment is due from the customer is generally not significant.
Contract assets
Contract assets comprise unbilled receivables from customers and are included in Receivables, net in the Condensed Consolidated Balance Sheets. Unbilled receivables represent a conditional right to consideration in exchange for goods or services transferred to a customer. The Company did not have material unbilled receivables or other contract assets outstanding as of June 30, 2026 and December 31, 2025.
The following table shows the components of the Company's Receivables, net:
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Trade receivables, net | $ | $ | ||||||||||||
| Other | ||||||||||||||
| Receivables, net | $ | $ | ||||||||||||
As of January 1, 2025, Trade receivables, net and Other receivables were $13.3 million and $1.6 million, respectively.
Contract liabilities
Contract liabilities comprise deferred revenue, which represents an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer and, if deliverable within one year or less, are included in "Other current liabilities" in the Condensed Consolidated Balance Sheets and, if deliverable outside of one year, are included in "Other long-term liabilities" in the Condensed Consolidated Balance Sheets. The Company did not have material contract liabilities outstanding as of June 30, 2026 and December 31, 2025.
Note 4 - Debt Obligations
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Revolving credit agreement | $ | $ | ||||||||||||
| CTB Loan due January 2036 | ||||||||||||||
| Other | ||||||||||||||
| Unamortized debt discounts | ( | ( | ||||||||||||
| Unamortized debt issuance costs | ( | ( | ||||||||||||
| Less: Current maturities | ( | ( | ||||||||||||
| Total long-term debt obligations | $ | $ | ||||||||||||
Revolving Credit Agreement
In December 2024, the Company and certain of its subsidiaries entered into a credit agreement (the "Revolving Credit Agreement") with MidCap Funding IV Trust (the "Lender"), providing for a five-year $30.0 million secured revolving credit facility (the "Revolving Credit Facility"). Pursuant to the terms of the Revolving Credit Facility, Arq may borrow up to $30.0 million, the availability of which is determined based on a borrowing base equal to percentages of certain eligible equipment, eligible accounts receivable and eligible inventory carrying balances of the Company and certain of its subsidiaries, less applicable reserves established under the Revolving Credit Facility (together, the "Revolving Loan Commitment"), in accordance with a formula set forth in the Revolving Credit Agreement. All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of default, the accuracy of representations and warranties in all material respects and the delivery of an updated borrowing base certificate on a periodic basis. The Company's obligations under the Revolving Credit Facility are secured by first-priority liens on substantially all of the Company's assets, including, without limitation, all inventory, equipment, accounts, intellectual property and other assets, subject to certain negotiated exceptions.
8
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Borrowings under the Revolving Credit Facility bear interest at the Standard Overnight Financing Rate (SOFR) plus an applicable margin of 4.50 % per annum, subject to a SOFR floor of 2.50 % per annum. In addition to paying interest on the outstanding loans under the Revolving Credit Facility, the Company is also required to pay an unused line fee equal to 0.50 % per annum in respect of unused commitments under the Revolving Credit Facility, a fee for failure to maintain a minimum balance under the Revolving Credit Facility, a collateral management fee equal to 0.25 % per annum of the amount outstanding under the Revolving Credit Facility, and certain other customary fees related to the Lender's administration of the Revolving Credit Facility. If the Revolving Loan Commitment is paid down prior to its maturity date, the Company is required to make certain prepayment fees in an amount equal to (i) 2.00 % of the terminated amount of the Revolving Loan Commitment in the first year following the Closing Date, (ii) 1.00 % of the terminated amount of the Revolving Loan Commitment in the second year following the Closing Date, (iii) 0.50 % of the terminated amount of the Revolving Loan Commitment in the third year following the Closing Date and (iv) 0.00 % at any time thereafter.
The Revolving Credit Facility contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including, without limitation, covenants that, among other things, require delivery of certain financial statements, projections and reports, require maintenance of property and insurance, limit or restrict the ability of the Company, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. In addition, the Revolving Credit Facility requires the Company and certain of its subsidiaries party thereto to maintain their aggregate Total Leverage Ratio at or below a maximum leverage ratio and to maintain minimum liquidity of $5.0 million, in each case as specified in the Revolving Credit Facility.
On each of May 6, 2025, December 9, 2025, January 28, 2026, and February 27, 2026, the Company entered into amendments to the Revolving Credit Agreement, all of which provided for, among other things, a revision to the borrowing availability calculation and a reduction in the minimum liquidity requirement for the period beginning May 6, 2025 through March 31, 2026. On March 31, 2026, the Company entered into an amendment to the Revolving Credit Agreement, which provided for, among other things, the replacement of the existing minimum liquidity covenant with a $2.5 million availability reserve requirement, which will increase to $5.0 million beginning in January 2027, the addition of certain eligible equipment and Rolling Stock (as defined in the Revolving Credit Agreement) to the borrowing availability calculation included in the Revolving Credit Agreement, and certain amendments to the definition of Eligible Accounts to allow for higher single customer concentration until August 2026.
As of June 30, 2026, the Company's net borrowings under the Revolving Credit Facility totaled $21.4 million.
CTB Loan
On February 1, 2023, the Company assumed a term loan (the "CTB Loan") with Community Trust Bank, Inc. ("CTB") as lender in the principal amount of $10.0 million held by certain subsidiaries acquired by the Company on that date (the "Borrowers"). The Company initially recorded the CTB Loan at its estimated fair value of $9.7 million, with the difference of $0.3 million between the estimated fair value and the principal amount recorded as a debt discount and recognized as interest expense over the term of the CTB Loan.
The CTB Loan was originally entered into on January 27, 2021 and is comprised of two promissory notes (the "Notes"): (1) "Note A" in the principal amount of $8.0 million, which is guaranteed by the U.S. Department of Agriculture; and (2) "Note B" in the principal amount of $2.0 million. The Notes mature on January 27, 2036 and bear interest at 6.0 % per annum through January 2026 and at the prime rate plus 2.75 % thereafter. The Company is required to make combined interest and principal payments monthly in the fixed amount of $0.1 million. Interest is computed and payable on the outstanding principal as of the end of the prior month and the balance of the fixed monthly payment amount is applied to the outstanding principal. The Notes may be prepaid without penalty as of January 27, 2026, when the prepayment penalty expired.
The CTB Loan is secured by substantially all assets of the Borrowers and includes among others, the following covenants with respect to the Borrowers, which are tested annually (capitalized terms are defined in the CTB Loan Agreement): (a) Total Indebtedness to Net Worth greater than 4 to 1; (b) Balance Sheet Equity greater than or equal to 20 % of the book value of all assets of the Borrowers; (c) (i) net income plus interest, taxes, depreciation and amortization divided by (ii) interest expense plus current maturities on long-term debt greater than or equal to 1.25 to 1.
On March 5, 2026, the Company entered into an amendment to the CTB Loan (the "CTB Second Amendment"). Under the CTB Second Amendment, the lender waived the Company’s obligation to satisfy certain financial covenants for the fiscal year ending December 31, 2025 and suspended financial covenant testing for the fiscal year ending December 31, 2026. As a condition of the waiver, the Company was required to increase its deposits held in reserve at CTB.
9
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The carrying values of both the Revolving Credit Facility and the CTB Loan approximate their fair values as both instruments bear interest at rates indexed to market rates for similar instruments.
Note 5 - Leases
The Company's operating and finance lease right-of-use ("ROU") assets and liabilities as of June 30, 2026 and December 31, 2025 consisted of the following items:
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Operating Leases | ||||||||||||||
Operating lease right-of-use assets, net of accumulated amortization (1) | $ | $ | ||||||||||||
| Operating lease obligations, current | $ | $ | ||||||||||||
| Long-term operating lease obligations | ||||||||||||||
| Total operating lease obligations | $ | $ | ||||||||||||
| Finance Leases | ||||||||||||||
Finance lease right-of-use assets, net of accumulated amortization (2) | $ | $ | ||||||||||||
| $ | $ | |||||||||||||
| Long-term finance lease obligations | ||||||||||||||
| Total finance lease obligations | $ | $ | ||||||||||||
(2) Finance lease ROU assets are reported net of accumulated amortization of $2.6 million and $2.8 million as of June 30, 2026 and December 31, 2025, respectively.
Operating leases
ROU assets under operating leases are included in the "" line item, and operating lease liabilities are included in "" and "" line items, respectively, in the Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025.
Lease expense for operating leases for the three and six months ended June 30, 2026 was $1.3 million and $2.8 million, respectively. Of these amounts, $1.1 million and $2.3 million were included in the "Cost of revenue, exclusive of depreciation and amortization" line item, and $0.2 million and $0.5 million were included in the "Selling, general and administrative" line item in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026, respectively.
Comparatively, lease expense for operating leases for the three and six months ended June 30, 2025 was $1.3 million and $2.4 million, respectively. Of these amounts, $1.0 million and $2.0 million were included in the "Cost of revenue, exclusive of depreciation and amortization" line item, and $0.3 million and $0.4 million were included in the "Selling, general and administrative" line item in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025, respectively.
In 2025, the Company renewed its lease of land where the Corbin Facility is located (the "Corbin Lease") through August 31, 2030 in accordance with the Corbin Lease renewal term, which allows for automatic five-year renewals by the Company. As of December 31, 2025 and based on the Company's decision to idle the Corbin Facility indefinitely, the Company revalued the Corbin Lease liability and the related ROU asset (the "Corbin ROU Asset") based on a reduction from its estimated expected termination date of August 31, 2040, to August 31, 2030. The revaluation resulted in a reduction to both the Corbin Lease Liability and the Corbin ROU Asset in the amount of $0.8
Finance leases
ROU assets under finance leases are included in the "Property, plant and equipment" line item, and finance lease liabilities are included in the "Current portion of long-term debt" and "Long-term debt, net of current portion" line items, respectively, in the Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025.
10
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Interest expense related to finance lease obligations and amortization of ROU assets under finance leases are included in the "Interest expense" and "Depreciation, amortization, depletion and accretion" line items, respectively, in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025.
Lease financial information as of and for the three and six months ended June 30, 2026 and 2025 is provided in the following table:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest on lease liabilities | ||||||||||||||||||||||||||
| Operating lease cost | ||||||||||||||||||||||||||
| Short-term lease cost | ||||||||||||||||||||||||||
Variable lease cost (1) | ||||||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Other Information: | ||||||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||||||||
| Operating cash flows from finance leases | $ | $ | ||||||||||||||||||||||||
| Operating cash flows from operating leases | $ | $ | ||||||||||||||||||||||||
| Financing cash flows from finance leases | $ | $ | ||||||||||||||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | $ | $ | ||||||||||||||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||||||||||||||||||||
| Weighted-average remaining lease term - finance leases | ||||||||||||||||||||||||||
| Weighted-average remaining lease term - operating leases | ||||||||||||||||||||||||||
| Weighted-average discount rate - finance leases | % | % | ||||||||||||||||||||||||
| Weighted-average discount rate - operating leases | % | % | ||||||||||||||||||||||||
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
Note 6 - Commitments and Contingencies
Surety Bonds and Restricted Cash
As the owner of the Five Forks Mine, the Company is required to post a surety bond with a regulatory commission related to performance requirements associated with the Five Forks Mine. As of June 30, 2026, the amount of this surety bond was $7.5 million.
The Company leases land adjacent to the Corbin Facility and is required to post surety bonds with a regulatory commission for reclamation. As of June 30, 2026, the amount of these surety bonds was $3.0 million.
The Company holds permits for an inactive mine in West Virginia ("Mine 4") and is required to post a surety bond with a regulatory commission for reclamation. As of June 30, 2026, the amount of this surety bond was $0.7 million.
As of June 30, 2026 and December 31, 2025, the Company posted cash collateral of $9.3 million and $8.5 million, respectively, as required by the Company's surety bond providers, which is reported as long-term restricted cash in the Condensed Consolidated Balance Sheets. As of June 30, 2026, the Company holds a deposit of $0.4 million with a third party for collateral as required under a bonding arrangement for Mine 4. This deposit is included in "Other long-term assets, net" in the Condensed Consolidated Balance Sheets as of June 30, 2026.
From time to time, the Company will enter into customer supply agreements which require the Company to obtain performance bonds equal to the annual contract values. The most significant of these was renewed January 1, 2026 and requires the Company to post a performance bond in an amount equal to the annual contract value of $4.0 million. As of June 30, 2026, the
11
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
remaining commitment under this customer contract, which expires on December 31, 2026, was approximately $2.4 million. As of June 30, 2026, the amount of performance bonds outstanding as required by other customer supply agreements was $0.3 million.
The Company currently holds $1.9 million of deposits held in reserve with CTB related to the CTB loan, which is reported as long-term restricted cash in the Condensed Consolidated Balance Sheets as of June 30, 2026.
Tinuum Group
The Company has certain limited obligations contingent upon future events in connection with the activities of Tinuum Group. The Company, along with certain other owners of Tinuum Group, have provided another Tinuum Group owner with limited guarantees (the "Tinuum Group Party Guarantees") related to certain losses it may suffer as a result of inaccuracies or breach of representations and covenants. The Company also is a party to a contribution agreement under which any party called upon to pay on a Tinuum Group Party Guaranty is entitled to receive contribution from the other party equal to 50 % of the amount paid. No liability or expense provision has been recorded by the Company related to this contingent obligation as the Company believes that it is not probable that a loss will occur with respect to Tinuum Group Party Guarantees.
Legal Proceedings
The Company is from time to time subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and outcomes, the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements and judgments where management has assessed that a loss is probable and an amount can be reasonably estimated.
On February 7, 2025, the Company announced that it had commenced legal proceedings against the firm engaged for design of the GAC facility constructed at the Red River Plant (the "GAC Facility"). The Company believes that the design firm was, among other things, negligent and breached its contract with the Company and as a direct result, the Company suffered material damages including a material increase in costs and time delays associated with the project versus original forecasts. The Company is now seeking to recover damages resulting from such negligence and contractual breaches. On April 11, 2025, the design firm filed a counterclaim to recover certain fees associated with the services provided. Litigation remains ongoing.
12
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7 - Supplemental Financial Information
Supplemental Balance Sheet Information
The following table summarizes the components of Prepaid expenses and other current assets and Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 As Adjusted (1) | ||||||||||||
| Prepaid expenses and other current assets: | ||||||||||||||
| Prepaid expenses | $ | $ | ||||||||||||
Prepaid lender fees, net (2) | ||||||||||||||
| Prepaid taxes and tax refunds | ||||||||||||||
| Other | ||||||||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||||||||
| Other long-term assets, net: | ||||||||||||||
| Spare parts, net | $ | $ | ||||||||||||
| Mine development costs, net | ||||||||||||||
| Right of use assets, operating leases, net | ||||||||||||||
Upfront Customer Consideration (3) | ||||||||||||||
Deferred plant turnaround costs, net (4) | ||||||||||||||
| Mine reclamation asset, net | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Total other long-term assets, net | $ | $ | ||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs as described in Note 1. See Note 12 for reconciliation to previously reported amounts.
(2) Represents legal and administrative costs incurred to obtain the Revolving Credit Facility. This asset is being amortized on a straight-line basis over the five-year contractual period of the Revolving Credit Facility.
(3) Represents remaining balance on consideration paid to a customer under a long-term supply contract executed in 2020. This asset is being amortized as a reduction to revenue on a straight-line basis over the expected 15-year contractual period of the contract.
(4) Represents costs incurred in connection with planned major maintenance activities, which currently includes maintenance materials, parts and direct labor directly attributable to the Company's plant turnaround in April 2026 for the period ended June 30, 2026, and the trailing deferred plant turnaround costs, net directly attributable to the Company's plant turnaround in April 2024 for the period ended December 31, 2025 (as adjusted). This asset is being amortized on a straight-line basis over the expected two-year period until the Company's next planned turnaround event.
Spare parts include critical spares required to support plant operations.
Mine development costs include acquisition costs, the cost of other development work and mitigation costs related to the Five Forks Mine and are depleted over the estimated life of the related mine reserves.
Mine reclamation asset, net represents an asset retirement obligation ("ARO") asset related to the Five Forks Mine and is depreciated over its estimated life.
As of June 30, 2026 and December 31, 2025, Other includes the Highview Investment in the amount of $0.6
13
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Other current liabilities: | ||||||||||||||
| $ | $ | |||||||||||||
Sales, use and other taxes payable | ||||||||||||||
| Current portion of mine reclamation liability | ||||||||||||||
| Other | ||||||||||||||
| Total other current liabilities | $ | $ | ||||||||||||
| Other long-term liabilities: | ||||||||||||||
| Mine reclamation liabilities | $ | $ | ||||||||||||
| Other | ||||||||||||||
| Total other long-term liabilities | $ | $ | ||||||||||||
As of June 30, 2026 and December 31, 2025, the ARO related to the Five Forks Mine is included in Other long-term liabilities.
The Mine reclamation liabilities represent AROs. Changes in the AROs were as follows:
| As of | ||||||||||||||
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Asset retirement obligations, beginning of period | $ | $ | ||||||||||||
| Accretion | ||||||||||||||
| Liabilities settled | ( | ( | ||||||||||||
| Changes due to scope and timing of reclamation | ||||||||||||||
| Asset retirement obligations, end of period | ||||||||||||||
| Less current portion | ||||||||||||||
| Asset retirement obligations, long-term | $ | $ | ||||||||||||
Supplemental Income Statement Information
Tinuum Group, LLC
As of June 30, 2026 and December 31, 2025, the Company's ownership interest in Tinuum Group, an equity method investment, was 42.5 zero and $0.1 million, respectively, in Other income. For the three and six months ended June 30, 2025, the Company recognized earnings from Tinuum Group of zero and $0.2 million, respectively. These amounts are presented as a component of Other income on the Condensed Consolidated Statements of Operations. In 2026, Tinuum Group, LLC has continued to wind down its operations.
For the three and six months ended June 30, 2026, the Company recognized expense of zero and $0.2 million, respectively, in Cost of revenue, exclusive of depreciation and amortization, related to royalties owed to Tinuum Group under an agreement for certain of the Company's sales of M-ProveTM products. Comparatively, for the three and six months ended June 30, 2025, the Company recognized expense of $0.2 million and $0.2 million, respectively, in Cost of revenue, exclusive of depreciation and amortization, related to these royalties.
Note 8 - Stockholders' Equity
Tax Asset Protection Plan
U.S. federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and tax credits if the Company experiences an "ownership change" (as defined in the Internal Revenue
14
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Code). In general, an ownership change occurs if there is a cumulative change in the ownership of the Company by "5 percent stockholders" that exceeds 50 percentage points over a rolling three-year period.
An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax loss and credit carryforwards equal to the equity value of the entity immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the Internal Revenue Service (subject to certain adjustments). The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year.
On May 5, 2017, the Board approved the declaration of a dividend of rights to purchase Series B Junior Participating Preferred Stock for each outstanding share of common stock as part of a tax asset protection plan (the "TAPP"), which is designed to protect the Company’s ability to utilize its net operating losses and tax credits. The TAPP is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99 % or more of the Company’s outstanding common stock.
On April 15, 2026, the Board approved the Ninth Amendment to the TAPP (the "Ninth Amendment"), which amends the TAPP, as previously amended by the First, Second, Third, Fourth, Fifth, Sixth, Seventh, and Eighth Amendments that were approved by the Board on April 6, 2018, April 5, 2019, April 9, 2020, April 9, 2021, March 15, 2022, April 13, 2023, April 12, 2024, and April 8, 2025, respectively. The Ninth Amendment amends the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith. Pursuant to the Ninth Amendment, the Final Expiration Date shall be the close of business on the earlier of (i) December 31, 2027 or (ii) December 31, 2026 if stockholder approval of the Ninth Amendment has not been obtained prior to such date. On June 10, 2026, the Company's stockholders approved the Ninth Amendment, and therefore the Final Expiration Date is the close of business on December 31, 2027, unless the TAPP is further amended.
Note 9 - Stock-Based Compensation
The Company grants equity-based awards to employees and non-employee directors that may include, but are not limited to, RSAs, PSUs, restricted stock units and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included in the "Cost of revenue, exclusive of depreciation and amortization" and "Selling, general and administrative" line items, respectively, in the Condensed Consolidated Statements of Operations. Stock-based compensation expense related to non-employee directors is included in the "Selling, general and administrative" line item in the Condensed Consolidated Statements of Operations.
Total stock-based compensation expense for the three and six months ended June 30, 2026 and 2025 was as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| RSA expense | $ | $ | $ | $ | ||||||||||||||||||||||
| PSU expense | ||||||||||||||||||||||||||
| Stock option expense | ||||||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
The amount of unrecognized compensation cost as of June 30, 2026, and the expected weighted-average period over which the cost will be recognized is as follows:
| As of June 30, 2026 | ||||||||||||||
(in thousands, except years) | Unrecognized Compensation Cost | Expected Weighted- Average Period of Recognition (in years) | ||||||||||||
| RSA expense | $ | |||||||||||||
| PSU expense | ||||||||||||||
| Stock option expense | ||||||||||||||
| Total unrecognized stock-based compensation expense | $ | |||||||||||||
Restricted Stock Awards
RSAs are typically granted with vesting terms of three years . The fair value of RSAs is determined based on the closing price of the Company's common stock on the authorization date of the grant multiplied by the number of shares subject to the stock award. Compensation expense for RSAs is generally recognized on a straight-line basis over the entire vesting period.
15
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A summary of RSA activity under the Company's various stock compensation plans for the six months ended June 30, 2026 is presented below:
| Restricted Stock | Weighted-Average Grant Date Fair Value | |||||||||||||||||||||||||
| Non-vested at January 1, 2026 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
| Vested | ( | $ | ||||||||||||||||||||||||
| Forfeited | ( | $ | ||||||||||||||||||||||||
| Non-vested at June 30, 2026 | $ | |||||||||||||||||||||||||
Performance Share Units
Compensation expense for PSUs is recognized on a straight-line basis over the applicable service period, which is generally three years , based on the estimated fair value at the date of grant. The estimated fair value at the date of grant is determined using a Monte Carlo simulation model for those PSUs with market-based performance conditions. A summary of PSU activity for the six months ended June 30, 2026 is presented below:
| Units | Weighted-Average Grant Date Fair Value | Aggregate Intrinsic Value (in thousands) | Weighted-Average Remaining Contractual Term (in years) | |||||||||||||||||||||||
| PSUs outstanding at January 1, 2026 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
Vested / Settled (1) | ( | $ | ||||||||||||||||||||||||
| Forfeited / Canceled | ( | $ | ||||||||||||||||||||||||
| PSUs outstanding at June 30, 2026 | $ | $ | ||||||||||||||||||||||||
(1) The number of units shown in the table above is based on target performance. The final number of shares of common stock issued may vary depending on the achievement of market or performance conditions established within the awards, which could result in the actual number of shares issued ranging from zero to a maximum of two times the number of units shown in the above table. For the six months ended June 30, 2026, 136,408 shares of common stock were issued upon vesting of PSUs, net of shares withheld for settlement of payroll tax withholding obligations.
Stock Options
Stock options vest over three years and have a contractual limit of ten years from the date of grant to exercise. The fair value of stock options granted is determined on the date of grant using the Black-Scholes option pricing model, and the related expense is recognized on a straight-line basis over the entire vesting period. The determination of the grant date fair value of stock options issued is affected by a number of variables, including the fair value of the Company’s common stock, the expected common stock price volatility over the expected term of the stock option, the expected term of the stock option, risk-free interest rates, and the expected dividend yield of the Company’s common stock.
Risk-free interest rate - The risk-free interest rate for stock options granted was determined by using a zero-coupon U.S. Treasury rate for the periods that coincided with the expected term of the options.
Dividend yield - An expected dividend yield of zero was included in the calculations, as the Company does not currently pay nor does it anticipate paying dividends on its common stock as of the grant date of the stock options.
Expected volatility - To calculate expected volatility, the historical volatility of the Company's common stock was used.
Expected term - The Company’s expected term of stock options was calculated using a simplified method whereby the midpoint between the vesting date and the end of the contractual term is utilized to compute the expected term, as the Company does not have sufficient historical data for options with similar vesting and contractual terms.
16
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A summary of stock option activity for the six months ended June 30, 2026 is presented below:
| Number of Options Outstanding and Exercisable | Weighted-Average Exercise Price | Aggregate Intrinsic Value (in thousands) | Weighted-Average Remaining Contractual Term (in years) | |||||||||||||||||||||||
| Options outstanding at January 1, 2026 | $ | |||||||||||||||||||||||||
| Options granted | ||||||||||||||||||||||||||
| Options exercised | ||||||||||||||||||||||||||
| Options expired / forfeited | ||||||||||||||||||||||||||
| Options outstanding at June 30, 2026 | $ | $ | ||||||||||||||||||||||||
| Options vested and exercisable at June 30, 2026 | $ | $ | ||||||||||||||||||||||||
Note 10 - Income Taxes
For the three and six months ended June 30, 2026 and 2025, the Company's income tax expense and effective tax rates are presented below:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands, except for rate) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Income tax expense | $ | $ | $ | $ | ||||||||||||||||||||||
| Effective tax rate | % | % | % | % | ||||||||||||||||||||||
The Company recognized pretax losses for the three and six months ended June 30, 2026, and for the three and six months ended June 30, 2025, but recognized no zero
The Company assesses a valuation allowance recorded against deferred tax assets at each reporting date. The determination of whether a valuation allowance for deferred tax assets is appropriate requires the evaluation of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income available to realize deferred tax assets, including, as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating income taxes, the Company assesses the relative merits and risks of the appropriate income tax treatment of transactions taking into account statutory, judicial and regulatory guidance.
Note 11 - Segment Reporting
Overall
The Company has one reportable segment – advanced purification technologies or "APT." The APT segment primarily manufactures and sells AC-based environmental remediation products, comprised of PAC and GAC, and other chemicals used to capture and remove contaminants for coal-fired power generation, industrial, municipal water and air, water, and soil treatment and remediation markets. The Company derives revenue primarily in the U.S. and manages the business activities on a consolidated basis. The Company manufactures the majority of its finished goods at the Red River Plant.
The Company's chief executive officer is its chief operating decision maker ("CODM"). The CODM assesses performance for the APT segment and decides how to allocate resources based on net loss that also is reported on the Condensed Consolidated Statements of Operations as consolidated net loss. The measure of segment assets is reported on the Condensed Consolidated Balance Sheets as total consolidated assets.
The CODM uses net loss to evaluate income generated from APT assets (return on assets) in deciding how to allocate cash flows from operations within the APT segment. Net loss is used to monitor budget versus actual operating results in assessing performance of the APT segment.
The level of detail used in reviewing operating financial performance and managing the business is contained in the Company's Condensed Consolidated Statements of Operations.
Products and services
The Company operates in one segment, APT, and all revenue reported represents sales of APT products to external customers and are presented in the Condensed Consolidated Statements of Operations.
17
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Geographic areas
The Company is domiciled in the U.S. The table below shows revenue by country for the three and six months ended June 30, 2026 and 2025.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Note 12 - Change in Accounting Principle
Effective April 1, 2026, the Company changed its method of accounting for costs incurred in connection with planned major maintenance activities, or “turnarounds”, on its Red River Plant from the direct-expense method to the deferral method. The Company retrospectively applied this change in accounting principle to all prior periods resulting in a cumulative effect adjustment at January 1, 2025 to increase Other long-term assets, net and Retained earnings by $1.3 million. The impact of this change on certain financial statement line items in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and the Condensed Consolidated Balance Sheets as of June 30, 2026, were as follows:
(in thousands, except per share data) | As Computed (using Direct-Expense Method) | Effect of Change | As Reported (using Deferral Method) | |||||||||||||||||
| Condensed Consolidated Statements of Operations, three months ended June 30, 2026 | ||||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | $ | $ | ( | $ | ||||||||||||||||
| Depreciation, amortization, depletion and accretion | ||||||||||||||||||||
| Net loss | ( | ( | ||||||||||||||||||
| Loss per common share - basic | ( | ( | ||||||||||||||||||
| Loss per common share - diluted | ( | ( | ||||||||||||||||||
| Condensed Consolidated Statements of Operations, six months ended June 30, 2026 | ||||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | $ | $ | ( | $ | ||||||||||||||||
| Depreciation, amortization, depletion and accretion | ||||||||||||||||||||
| Net loss | ( | ( | ||||||||||||||||||
| Loss per common share - basic | ( | ( | ||||||||||||||||||
| Loss per common share - diluted | ( | ( | ||||||||||||||||||
| Condensed Consolidated Balance Sheets, as of June 30, 2026 | ||||||||||||||||||||
| Inventories, net | $ | $ | ( | $ | ||||||||||||||||
| Other long-term assets, net | ||||||||||||||||||||
| Retained earnings | ||||||||||||||||||||
18
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Certain financial statement line items in our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025 and the Condensed Consolidated Balance Sheets as of December 31, 2025 were adjusted as follows:
(in thousands, except per share data) | As Previously Reported | Effect of Change | As Adjusted | |||||||||||||||||
| Condensed Consolidated Statements of Operations, three months ended June 30, 2025 | ||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | $ | $ | $ | |||||||||||||||||
| Net loss | ( | ( | ( | |||||||||||||||||
| Loss per common share - basic | ( | ( | ( | |||||||||||||||||
| Loss per common share - diluted | ( | ( | ( | |||||||||||||||||
| Condensed Consolidated Statements of Operations, six months ended June 30, 2025 | ||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | $ | $ | $ | |||||||||||||||||
| Net loss | ( | ( | ( | |||||||||||||||||
| Loss per common share - basic | ( | ( | ( | |||||||||||||||||
| Loss per common share - diluted | ( | ( | ( | |||||||||||||||||
| Condensed Consolidated Balance Sheets, as of December 31, 2025 | ||||||||||||||||||||
| Other long-term assets, net | $ | $ | $ | |||||||||||||||||
| Retained earnings | ||||||||||||||||||||
Note 13 - Subsequent Events
Unless disclosed elsewhere in the notes to the Condensed Consolidated Financial Statements, there were no significant matters that occurred subsequent to June 30, 2026.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of our operations should be read together with the unaudited Condensed Consolidated Financial Statements and notes of Arq, Inc. ("Arq" or the "Company") included elsewhere in Item 1 of Part I ("Item 1") of this Quarterly Report and with the audited consolidated financial statements and the related notes of Arq included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K").
The results of operations discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are those of Arq, Inc. and its consolidated subsidiaries, collectively, the "Company," "we," "our" or "us."
Overview
We are an environmental technology company that is principally engaged in the sale of consumable air, water and soil treatment solutions primarily based on activated carbon ("AC"). Our proprietary AC products enable customers to reduce air, water, and soil contaminants, including mercury, per- and polyfluoroalkyl substances ("PFAS") and other pollutants, to meet the challenges of existing and pending air quality and water regulations. We manufacture and sell AC and other chemicals used to capture and remove 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. Our AC products include both powdered activated carbon ("PAC") and granular activated carbon ("GAC"). Additionally, we own the Five Forks Mine, a lignite mine located in Saline, Louisiana, that currently supplies the primary raw material for the manufacturing of our products. We also 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. Using the Corbin Facility's manufacturing process, we convert coal waste into a purified, microfine carbon powder ("Corbin Wetcake") for use in high-value applications. On August 6, 2025, we announced that we had successfully commissioned our Red River Plant’s GAC Facility (the "GAC Facility") and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility. In March 2026, we decided to pause GAC production, continue to idle the Corbin Facility as a cost saving measure, and launch an engineering and production process optimization review, including an evaluation of potential GAC Facility design modifications and production economics at different scales. Additionally, we now expect to transition away from using Corbin Wetcake for the production of our GAC products to a bituminous coal feedstock with proven performance.
We continue to believe that Corbin Wetcake has the potential to enable us to access new markets and applications. We intend to secure customer interest in Corbin Wetcake as an additive into other markets, such as a component for asphalt, or for use in the purified coal and synthetic graphite industries. In addition, we are exploring uses for certain rare earth minerals and critical elements that can be contained within material from the manufacturing process at our Corbin Facility for further recovery and concentration by others. These applications are currently in early stages of proof-of-concept testing or preliminary customer testing.
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. 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 of our new products.
For the three and six months ended June 30, 2026, we experienced an increase in demand for our products from certain coal-fired dispatch and electricity power generation customers compared to the same period in 2025. This was primarily due to the year-to-date impact of moderate to severe temperatures during the winter and summer seasons, resulting in higher demand for power generation, and the impact of steady natural gas prices, resulting in several large utility customers opting to use coal versus natural gas as a primary source for power generation. Additionally, demand for power generation has grown and continues to grow driven by macroeconomic trends, such as increased consumption related to data and computer centers, electric vehicles, and other large-scale power consumers. We expect that natural gas prices will remain relatively consistent through 2026 at an elevated level due to increased demand for liquid natural gas exports, and conflict in the Middle East impacting supply, partially offset by increases in anticipated natural gas inventory levels.
20
GAC Engineering and Production Process Optimization Review
The decision to pause GAC production, continue idling the Corbin Facility as a cost saving measure, and launch an engineering and production process optimization review was made in March 2026, following the review of independent testing results received in January 2026. This testing demonstrated that the thermal oxidizer in place could only support approximately 15 million pounds of annual GAC production, and would require additional modifications to achieve our original design capacity of 25 million pounds or higher. Our analysis indicates that a 15 million pound per year scenario on a stand-alone basis does not provide sufficient returns to make it economically attractive. The optimization review remains ongoing and is expected to determine production scale, capital requirements, and return profiles before we commit to additional investment in our GAC Facility. We have since expanded the optimization review to include a broader operational assessment of our overall business, which has focused on maximizing furnace throughput and reducing unit costs for each of our products, including our PAC and GAC products.
These additional constraints emerged as we prepared to transition from our Corbin Wetcake to bituminous coal with proven performance, a solution which is expected to address previously announced design flaws and constraints at our GAC Facility. The issues that we experienced with our thermal oxidizer and their impact on the capacity of our GAC Facility stemmed from the previously disclosed design flaws by the engineering firm originally engaged to design our GAC Facility, with whom litigation remains ongoing.
Due to the issues described above, we do not expect GAC production in fiscal year 2026 or 2027.
Results of Operations
For the three and six months ended June 30, 2026, we recognized net loss of $0.7 million and $1.9 million, respectively, compared to net loss of $2.4 million and $2.4 million, respectively, for the three and six months ended June 30, 2025. The most significant factors impacting results between periods for the three months ended June 30, 2026 and June 30, 2025 were increases in revenue due to increased pricing and demand for our products, offset by increases in severance expense related to the previously disclosed departures of certain members of our executive team.
The following sections provide additional information regarding these comparable periods. For comparability purposes, the following tables set forth our results of operations for the periods presented in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. The current year period to prior year period comparisons of financial results may not be indicative of financial results to be achieved in future periods.
Comparison of the Three Months Ended June 30, 2026 and 2025
Revenue and Cost of revenue
A summary of the components of Revenue and Cost of revenue, exclusive of depreciation and amortization for the three months ended June 30, 2026 and 2025 is as follows:
| Three Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 | ($) | (%) | ||||||||||||||||||||||
| Revenue | $ | 29,883 | $ | 28,584 | $ | 1,299 | 5 | % | ||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | $ | 18,372 | $ | 19,066 | $ | (694) | (4) | % | ||||||||||||||||||
Revenue and Cost of revenue
For the three months ended June 30, 2026, revenue increased from the comparable quarter in 2025 primarily driven by the impact of increased pricing, which contributed additional revenues of $1.3 million, as well as higher sales volumes of our AC products, which contributed additional revenues of approximately $1.0 million of the total revenue increase. These increases were partially offset by a decrease in revenue attributable to lower sales of our chemicals products during the three months ended June 30, 2026, which caused revenue to decrease by $1.1 million from the comparable quarter in 2025. The increases due to higher pricing and volumes sold were primarily attributable to sales to customers in the power-generation market, driven by seasonal electricity demand. Notably, our revenues continue to be impacted by electricity demand driven by seasonal weather and power generation needs.
21
During the three months ended June 30, 2026, our gross margin was favorably impacted by both the pause in production at our Corbin Facility, which we idled indefinitely as of December 2025, and improved mix during the three months ended June 30, 2026 due to lower sales of our lower-margin chemical products compared to the same period in 2025. These favorable impacts to gross margin were partially offset by an increase in our costs per unit during the three months ended June 30, 2026, which were primarily due to increases in salaries and wages of our operations personnel and utilities costs. These factors resulted in the majority of the approximately $0.7 million decrease in Cost of revenue, exclusive of depreciation and amortization for the three months ended June 30, 2026 compared to the comparable quarter in 2025.
We expect that revenue will continue to be positively impacted by demand for our PAC products. As we have paused production of our GAC products at our Red River Plant, we expect that gross margin will continue to improve as the impact of fixed production costs related to our GAC products on our gross margin lessens. Further, as we conduct a comprehensive engineering and production process optimization review related to our GAC products, we expect to improve the operational efficiency of PAC production at our Red River Plant and improve our product mix to higher margin products.
Operating Expenses
A summary of the components of our operating expenses for the three months ended June 30, 2026 and 2025 is as follows:
| Three Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 As Adjusted (1) | ($) | (%) | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling, general and administrative | $ | 6,789 | $ | 5,918 | $ | 871 | 15 | % | ||||||||||||||||||
| Research and development | 958 | 2,697 | (1,739) | (64) | % | |||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | 3,542 | 2,721 | 821 | 30 | % | |||||||||||||||||||||
| Loss (gain) on sale of assets | 290 | (27) | 317 | * | ||||||||||||||||||||||
| $ | 11,579 | $ | 11,309 | $ | 270 | 2 | % | |||||||||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion.
* Percent change in excess of 100% not considered meaningful.
Selling, General and Administrative
A summary of the components of selling, general and administrative expenses for the three months ended June 30, 2026 and 2025 is as follows:
| Three Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 | ($) | (%) | ||||||||||||||||||||||
| Payroll and benefits | $ | 2,353 | $ | 1,802 | $ | 551 | 31 | % | ||||||||||||||||||
| Legal and professional fees | 1,515 | 1,574 | (59) | (4) | % | |||||||||||||||||||||
| General and administrative | 2,921 | 2,542 | 379 | 15 | % | |||||||||||||||||||||
| Total Selling, general and administrative | $ | 6,789 | $ | 5,918 | $ | 871 | 15 | % | ||||||||||||||||||
Payroll and benefits
Payroll and benefits expense increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.6 million, primarily due to severance expense related to the separation of three members of our executive leadership team, which was recorded during the three months ended June 30, 2026. The increase was partially offset by a decrease in incentive compensation expense.
Legal and professional fees
Legal and professional fees decreased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.1 million, primarily due to decreased legal and recruiting fees incurred during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The decrease was partially offset by increased accounting and audit fees and interim executive consulting costs during the three months ended June 30, 2026.
22
General and administrative
General and administrative expenses increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.4 million, primarily due to increases in expenses related to property taxes, software maintenance fees, sales, use, and franchise taxes, and outside labor.
Research and development
Research and development expense decreased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by $1.7 million, primarily due to expenses related to feedstock consumed during initial testing of the GAC Facility during the three months ended June 30, 2025.
Loss (gain) on sale of assets
Loss on sale of assets for the three months ended June 30, 2026 related to the disposal of a piece of machinery which was replaced during the biannual shutdown of our Red River Plant for maintenance.
Depreciation, amortization, depletion and accretion
Depreciation, amortization, depletion and accretion expense increased by approximately $0.8 million for the three months ended June 30, 2026 compared to the corresponding quarter in 2025, primarily due to a significant amount of plant and equipment placed in service during the second half of 2025, partially offset by decreased depreciation expense related to assets at our Corbin Facility, which were impaired during the fourth quarter of 2025.
Other (Expense) Income
A summary of the components of other (expense) income for the three months ended June 30, 2026 and 2025 is as follows:
| Three Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 | ($) | (%) | ||||||||||||||||||||||
| Other (expense) income: | ||||||||||||||||||||||||||
| Interest expense | $ | (748) | $ | (594) | $ | (154) | 26 | % | ||||||||||||||||||
| Other income | 83 | 16 | 67 | * | ||||||||||||||||||||||
| Total other expense | $ | (665) | $ | (578) | $ | (87) | 15 | % | ||||||||||||||||||
* Percent change in excess of 100% not considered meaningful.
Interest expense
Interest expense increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by $0.2 million primarily due to higher average outstanding balances on the Company's outstanding debt facilities in the current quarter.
Other income
Other income increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 primarily due to interest income recorded during the three months ended June 30, 2026.
Income tax expense
For the three months ended June 30, 2026 and 2025, we had pretax loss of $0.7 million and $2.4 million, respectively. For the three months ended June 30, 2026 and 2025, we had an effective tax rate of zero and recorded no income tax benefit due to the recording of a full valuation allowance on our deferred tax assets.
Comparison of the Six Months Ended June 30, 2026 and 2025
Total Revenue and Cost of revenue
A summary of the components of Revenue and Cost of revenue, exclusive of depreciation and amortization for the six months ended June 30, 2026 and 2025 is as follows:
| Six Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 | ($) | (%) | ||||||||||||||||||||||
| Revenue | $ | 58,936 | $ | 55,831 | $ | 3,105 | 6 | % | ||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | $ | 37,486 | $ | 36,398 | $ | 1,088 | 3 | % | ||||||||||||||||||
23
Revenue and Cost of revenue
For the six months ended June 30, 2026, revenue increased from the comparable period in 2025 primarily driven by increased volumes and higher pricing, which contributed revenue increases of approximately $2.3 million and $0.6 million, respectively. The increase in volumes sold was primarily attributable to sales to customers in the industrial and municipal water markets, as well as the power-generation market, driven by continued higher natural gas prices between periods. The average Henry Hub natural gas spot prices ($/MMBtu) for the six months ended June 30, 2026 and 2025 were $3.87 and $3.67, respectively. Additionally, sales of our chemical products contributed an increase of $0.2 million in revenue for the six months ended June 30, 2026 compared to the comparable period in 2025.
For the six months ended June 30, 2026, gross margin, exclusive of depreciation and amortization, increased from the comparable period in 2025. During the six months ended June 30, 2026, our gross margin was favorably impacted by decreases in production expenses due to the pause in production at our Corbin Facility, which had begun production in April 2025 and which we idled indefinitely as of December 2025. This favorable impact was offset by an inventory revaluation charge during the first quarter of 2026. These factors were primarily responsible for the approximately $1.1 million increase in Cost of revenue, exclusive of depreciation and amortization for the six months ended June 30, 2026 compared to the comparable period in 2025.
Operating Expenses
A summary of the components of our operating expense for the six months ended June 30, 2026 and 2025 is as follows:
| Six Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 As Adjusted (1) | ($) | (%) | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling, general and administrative | $ | 14,158 | $ | 11,971 | $ | 2,187 | 18 | % | ||||||||||||||||||
| Research and development | 1,940 | 3,571 | (1,631) | (46) | % | |||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | 6,407 | 5,138 | 1,269 | 25 | % | |||||||||||||||||||||
| Loss on sale of assets | 290 | 118 | 172 | * | ||||||||||||||||||||||
| $ | 22,795 | $ | 20,798 | $ | 1,997 | 10 | % | |||||||||||||||||||
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion.
* Percent change in excess of 100% not considered meaningful.
Selling, General and Administrative
A summary of the components of selling, general and administrative expenses for the six months ended June 30, 2026 and 2025 is as follows:
| Six Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 | ($) | (%) | ||||||||||||||||||||||
| Payroll and benefits | $ | 4,080 | $ | 3,663 | $ | 417 | 11 | % | ||||||||||||||||||
| Legal and professional fees | 3,628 | 3,141 | 487 | 16 | % | |||||||||||||||||||||
| General and administrative | 6,450 | 5,167 | 1,283 | 25 | % | |||||||||||||||||||||
| Total Selling, general and administrative | $ | 14,158 | $ | 11,971 | $ | 2,187 | 18 | % | ||||||||||||||||||
Payroll and benefits
Payroll and benefits increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $0.4 million, primarily due to severance expense related to the departure of three members of our executive leadership team, severance expense related to employees terminated at our Corbin Facility, and an increase of approximately $0.2 million of share-based compensation associated with executive transition and severance. The increase is partially offset by a decrease in incentive compensation expense.
Legal and professional fees
Legal and professional fees increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 primarily due to additional legal and consulting fees incurred in connection with ongoing litigation with our former engineering firm, increased accounting and audit fees, and executive transition costs incurred during the six months ended June 30, 2026.
24
General and administrative
General and administrative expenses increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $1.3 million, primarily due to increases in insurance, property tax and recruiting expenses. Also contributing to the increase in general and administrative expense were utilities costs related to the Corbin Facility, which are included in general and administrative expenses, however, previously were recorded to Cost of revenue, exclusive of depreciation and amortization.
Research and development
Research and development expense decreased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $1.6 million. The decrease was primarily due to expenses related to feedstock consumed and outside services engaged during initial testing of the GAC Facility during the six months ended June 30, 2025.
Depreciation, amortization, depletion and accretion
Depreciation, amortization, depletion and accretion expense increased by approximately $1.3 million for the six months ended June 30, 2026 compared to the corresponding period in 2025, primarily due to a significant amount of plant and equipment placed in service during the second half of 2025, partially offset by decreased depreciation expense related to assets at our Corbin Facility, which were impaired during the fourth quarter of 2025.
Loss on sale of assets
Loss on sale of assets for the six months ended June 30, 2026 related to the disposal of a piece of machinery, which was replaced during our biannual plant maintenance. Loss on sale of assets for the six months ended June 30, 2025 related to the disposal of construction assets no longer in use.
Other (Expense) Income
A summary of the components of other income (expense) for the six months ended June 30, 2026 and 2025 is as follows:
| Six Months Ended June 30, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2026 | 2025 | ($) | (%) | ||||||||||||||||||||||
| Other (expense) income: | ||||||||||||||||||||||||||
| Interest expense | $ | (1,453) | $ | (1,318) | $ | (135) | 10 | % | ||||||||||||||||||
| Other income | 928 | 281 | 647 | * | ||||||||||||||||||||||
| Total other expense | $ | (525) | $ | (1,037) | $ | 512 | (49) | % | ||||||||||||||||||
* Percent change in excess of 100% not considered meaningful.
Interest expense
Interest expense increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 primarily due to higher average outstanding balances on the Company's outstanding debt facilities in the current period.
Other income
Other income increased for the six months ended June 30, 2026 compared to the corresponding period in 2025, which was primarily driven by interest income recorded during the six months ended June 30, 2026.
Income tax expense
For the six months ended June 30, 2026 and 2025, we had pretax losses of $1.9 million and $2.4 million, respectively. For the six months ended June 30, 2026 and 2025, we had an effective tax rate of zero and recorded no income tax benefit due to the recording of a full valuation allowance on our deferred tax assets.
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Non-GAAP Financial Measures
To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with U.S. GAAP. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by non-cash gains, increased by share-based compensation expense, executive transition and severance (2), GAC Facility pre-production feedstock, other non-cash losses and non-recurring costs and fees. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net loss in accordance with U.S. GAAP as a measure of performance. See below for a reconciliation from net loss, the nearest U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA.
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 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.
EBITDA and Adjusted EBITDA:
The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA and Adjusted EBITDA.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 As Adjusted (1) | 2026 | 2025 As Adjusted (1) | ||||||||||||||||||||||
| Net loss | $ | (733) | $ | (2,369) | $ | (1,870) | $ | (2,402) | ||||||||||||||||||
| Depreciation, amortization, depletion and accretion | 3,542 | 2,721 | 6,407 | 5,138 | ||||||||||||||||||||||
| Amortization of Upfront Customer Consideration | 180 | 127 | 360 | 254 | ||||||||||||||||||||||
| Interest expense, net | 693 | 585 | 638 | 1,256 | ||||||||||||||||||||||
| Income tax expense | — | — | — | — | ||||||||||||||||||||||
| EBITDA | $ | 3,682 | $ | 1,064 | $ | 5,535 | $ | 4,246 | ||||||||||||||||||
| Share-based compensation | 1,043 | 734 | 1,934 | 1,470 | ||||||||||||||||||||||
Executive transition and severance (2) | 827 | — | 827 | — | ||||||||||||||||||||||
| Loss (gain) on sale of assets | 290 | (27) | 290 | 118 | ||||||||||||||||||||||
GAC Facility pre-production feedstock (3) | — | 1,897 | — | 1,897 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 5,842 | $ | 3,668 | $ | 8,586 | $ | 7,731 | ||||||||||||||||||
(2) Represents expenses related to executive severance and separation, as well as legal fees and recruiting costs associated with the CFO, COO and CAO transitions. In addition to these amounts, we also incurred approximately $0.2 million of share-based compensation associated with executive transition and severance during the three months ended June 30, 2026, which is included in the Share-based compensation adjustment above.
(3) Represents expenses related to feedstock utilized in pre-production testing of our GAC Facility during the three months ended June 30, 2025 included within "Research and development" expense in the Condensed Consolidated Statements of Operations.
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Liquidity and Capital Resources
Current Resources and Factors Affecting Our Liquidity
As of June 30, 2026, our principal sources of liquidity included:
•cash on hand of $0.9 million, excluding $11.2 million of restricted cash primarily pledged as collateral under a surety bond agreement and escrow for our term loan with Community Trust Bank, Inc. (the "CTB Loan"), described in Note 4 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report;
•availability under our secured revolving credit facility with MidCap Funding IV Trust (the "Revolving Credit Facility"), described in Note 4 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report; and
•cash from operations.
As of June 30, 2026, our principal uses of liquidity included:
•capital expenditures;
•business operating expenses;
•payments on our lease obligations; and
•payments on our debt obligations.
Cash Flows
Cash and restricted cash decreased from $15.0 million as of December 31, 2025 to $12.1 million as of June 30, 2026. The following table summarizes our cash flows for the six months ended June 30, 2026 and 2025:
| Six Months Ended June 30, | ||||||||||||||||||||
(in thousands) | 2026 | 2025 | Change | |||||||||||||||||
| Cash and restricted cash (used in) provided by: | ||||||||||||||||||||
| Operating activities | $ | (2,659) | $ | (5,276) | $ | 2,617 | ||||||||||||||
| Investing activities | (2,023) | (5,530) | 3,507 | |||||||||||||||||
| Financing activities | 1,784 | 3,995 | (2,211) | |||||||||||||||||
| Net change in cash and restricted cash | $ | (2,898) | $ | (6,811) | $ | 3,913 | ||||||||||||||
Cash flow from operating activities
Cash flows used in operating activities for the six months ended June 30, 2026 were $2.7 million, which represented a decrease of $2.6 million from cash used in operating activities for the six months ended June 30, 2025 of $5.3 million. The net increase in cash flow from operating activities was primarily attributable to an increase in changes in net loss, exclusive of non-cash adjustments presented, and working capital, which contributed increases of $2.8 million and $0.4 million, respectively, in cash flow between periods. The increase in the change in working capital between periods was primarily driven by changes in accounts payable and accrued expense balances. These increases were offset by a decrease in the change in Other long-term assets, net, of $0.6 million in cash flow between periods.
Cash flow from investing activities
Cash flows used in investing activities decreased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 by $3.5 million primarily as a result of a decrease in property, plant and equipment additions of $3.6 million from construction activities during the six months ended June 30, 2025 related to the GAC Facility at our Red River Plant.
Cash flow from financing activities
Cash flows provided by financing activities for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 decreased by $2.2 million primarily due to a decrease in net borrowings on our Revolving Credit Facility of $2.2 million.
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Material Cash Requirements
Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors. These include executing on our contracts and initiatives and increasing our share of the market for APT consumables, completing our engineering and production process optimization review in order to increase production to reach nameplate capacity at our Red River Plant, expanding our overall AC business into additional adjacent markets and increasing our gross margin by improving our customer and product mix.
Based on current operating levels, we expect that our cash on hand and borrowing availability under the Revolving Credit Facility as of June 30, 2026 will provide sufficient liquidity to fund operations for the next 12 months.
Capital expenditures
During the remainder of 2026, we expect our capital expenditures to primarily relate to operational plant maintenance and improvements.
Surety Bonds
As of June 30, 2026, we had outstanding surety bonds with regulatory commissions totaling $11.2 million primarily related to the Five Forks Mine and the Corbin Facility. As of June 30, 2026, and as required by our surety bond provider, we held restricted cash of $9.3 million pledged as collateral related to performance requirements required under indemnity agreements for the Five Forks Mine and the Corbin Facility. 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. 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 Note 4 and Note 5 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report.
Critical Accounting Policies and Estimates
Effective April 1, 2026, we changed our accounting policy for costs incurred in connection with planned major maintenance activities ("turnaround" or "TAR") on the Red River Plant from the direct-expense method to the deferral method. Under the deferral method, qualifying costs, including maintenance materials, parts and direct labor directly attributable to the turnaround, are capitalized when incurred and amortized on a straight-line basis over the period until the next scheduled turnaround. We believe that the deferral method is preferable because it better matches qualifying turnaround costs with the periods benefited by the planned major maintenance activities and improves the comparability of our operating results between periods. Under the direct-expense method previously applied, qualifying turnaround costs were expensed entirely in the periods in which they were incurred, although the benefits of the turnaround activities extended through the period until the next scheduled turnaround. We applied the change retrospectively to all periods presented.
Our other critical accounting policies and estimates are reported in Part II, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2025 Form 10-K.
Recently Issued Accounting Standards
Refer to Note 1 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report for information regarding recently issued accounting standards applicable to us.
Forward-Looking Statements Found in this Quarterly Report
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that involve risks and uncertainties. Words or phrases such as "anticipates," "may," "believes," "expects," "intends," "plans," "estimates," "predicts," the negative expressions of such words, or similar expressions are used in this Quarterly Report to identify forward-looking statements. All statements that address activities, events or developments that the Company intends, expects or believes may occur in the future are forward-looking statements. These forward-looking statements include, but are not limited to, statements or expectations regarding:
(a)the future of our GAC Facility and Corbin Facility and the anticipated timing, results, and conclusions of our overall business optimization review and the actions we may take upon the completion of such review, including efforts to maximize throughput and optimize unit costs;
28
(b)the anticipated commercial success and efficacy of our new product applications, including PAC for PFAS™;
(c)the anticipated benefits of transitioning away from using Corbin Wetcake to a bituminous proven performance coal as a feedstock for our GAC products in the future;
(d)financial guidance for fiscal year 2026;
(e)the anticipated effects from fluctuations in the pricing of our AC products, including through expansion into higher-value end markets;
(f)expected supply and demand for our AC products and services, including our GAC and PAC for PFAS™ products;
(g)the seasonal impact on our customers and their demand for our products;
(h)the future profitability and sustainability of our PAC business;
(i)our ability to fund our business over the next twelve months;
(j)our ability to monetize our Corbin Facility and access new markets for our feedstocks and other products, including renewable natural gas, asphalt, purified coal, rare earth minerals and synthetic graphite markets;
(k)any future plant development projects, that may be necessary to remediate design flaws in our GAC Facility, and our ability to finance any such projects;
(l)the effectiveness of our technologies and products and the benefits they provide;
(m)probability of any loss occurring with respect to certain guarantees made by Tinuum Group;
(n)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;
(o)the performance of obligations secured by our surety bonds;
(p)the amount, use and timing of future capital expenditures needed to fund our business plan and total anticipated capital expenditures for the current fiscal year;
(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 demand and sales of our AC products resulting from such regulations;
(r)our near-term priorities and objectives and our long-term outlook regarding the growth of our business; and
(s)the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products.
The forward-looking statements included in this Quarterly Report involve risks and uncertainties. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors including, but not limited to, 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 identify solutions to the design flaws in GAC Facility at our Red River Plant or execute on any remedial measures or modifications thereto; 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 increased domestic and international tariffs 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; the impacts of any current or future write-downs or write-offs, restructuring, impairment or other charges; our failure to realize the anticipated benefits of acquisitions, joint ventures, and divestitures we may engage in; pending litigation; factors relating to our business strategy, goals and expectations, including our ability to execute on our GAC business plan; our ability to maintain relationships with customers, suppliers and others with whom the Company does business and meet supply
29
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 costs necessary to resume GAC production; opportunities for additional sales of our AC products and end-market diversification, including for our Corbin Wetcake; 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. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025. You are cautioned not to place undue reliance on the forward-looking statements made in this Quarterly Report and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this Quarterly Report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. The forward-looking statements contained in this Quarterly Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information under this Item is not required to be provided by smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a‑15(b) under the Exchange Act, we have evaluated, under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in litigation, claims and other proceedings related to the conduct of our business. Information with respect to this item may be found in Note 6 "Commitments and Contingencies" to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report.
Item 1A. Risk Factors
There have been no material updates to our risk factors as disclosed in the 2025 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Tax Withholding
The following table contains information about common shares that we withheld from delivering to employees during the second quarter of 2026 to satisfy their respective tax obligations related to stock-based awards.
| 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 | ||||||||||||||||||||||
| April 1 to April 30, 2026 | — | $ | — | N/A | N/A | |||||||||||||||||||||
| May 1 to May 31, 2026 | — | $ | — | N/A | N/A | |||||||||||||||||||||
| June 1 to June 30, 2026 | — | $ | — | N/A | N/A | |||||||||||||||||||||
Item 4. Mine Safety Disclosures
The information 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 (17 CFR 229.104) is included in Exhibit 95.1 to this Quarterly Report.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the three months ended June 30, 2026, no director or officer of the Company adopted terminated
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Item 6. Exhibits
| Exhibit No. | Description | Form | File No. | Incorporated by Reference Exhibit | Filing Date | |||||||||||||||||||||||||||
| 3.1 | 10-Q | 001-37822 | 3.1 | May 8, 2024 | ||||||||||||||||||||||||||||
| 3.2 | 10-Q | 000-54992 | 3.1 | August 9, 2013 | ||||||||||||||||||||||||||||
| 3.3 | 8-K | 001-37822 | 3.1 | January 31, 2024 | ||||||||||||||||||||||||||||
| 3.4 | 8-K | 001-37822 | 3.1 | February 1, 2023 | ||||||||||||||||||||||||||||
| 3.5 | 8-K | 001-37822 | 3.1 | May 8, 2017 | ||||||||||||||||||||||||||||
| 4.1 | 8-K | 001-37822 | 4.1 | April 17, 2026 | ||||||||||||||||||||||||||||
| 10.1 | 8-K | 001-37822 | 10.1 | May 1, 2026 | ||||||||||||||||||||||||||||
| 10.2 | 8-K | 001-37822 | 10.2 | May 1, 2026 | ||||||||||||||||||||||||||||
| 10.3 | 8-K | 001-37822 | 10.1 | May 27, 2026 | ||||||||||||||||||||||||||||
| 10.4 | S-8 | 001-37822 | 10.1 | June 26, 2026 | ||||||||||||||||||||||||||||
| 10.5 | S-8 | 001-37822 | 10.2 | June 26, 2026 | ||||||||||||||||||||||||||||
| 10.6 | 8-K | 001-37822 | 10.1 | June 11, 2026 | ||||||||||||||||||||||||||||
| 10.7 | 8-K | 001-37822 | 10.1 | July 2, 2026 | ||||||||||||||||||||||||||||
| 10.8 | 8-K | 001-37822 | 10.1 | July 23, 2026 | ||||||||||||||||||||||||||||
| 10.9 | 8-K | 001-37822 | 10.2 | July 23, 2026 | ||||||||||||||||||||||||||||
| 10.10 | 8-K | 001-37822 | 10.3 | July 23, 2026 | ||||||||||||||||||||||||||||
| 10.11 | 8-K | 001-37822 | 10.4 | July 23, 2026 | ||||||||||||||||||||||||||||
| 18.1 | ||||||||||||||||||||||||||||||||
| 31.1 | ||||||||||||||||||||||||||||||||
| 31.2 | ||||||||||||||||||||||||||||||||
32
| 32.1 | ||||||||||||||||||||||||||||||||
| 95.1 | ||||||||||||||||||||||||||||||||
| 101.SCH | XBRL Schema Document* | |||||||||||||||||||||||||||||||
| 101.CAL | XBRL Calculation Linkbase Document* | |||||||||||||||||||||||||||||||
| 101.LAB | XBRL Label Linkbase Document* | |||||||||||||||||||||||||||||||
| 101.PRE | XBRL Presentation Linkbase Document* | |||||||||||||||||||||||||||||||
| 101.DEF | Taxonomy Extension Definition Linkbase Document* | |||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* | |||||||||||||||||||||||||||||||
Notes:
* Filed herewith.
** Management contract or compensatory plan or arrangement.
*** Portions of this exhibit have been omitted pursuant to Item 601(b)(10) as information that the Company customarily and actually treats that information as private or confidential and is not material.
Filings for the Company were made under the name ADA-ES, Inc. (File No. 000-50216) prior to July 1, 2013, the effective date of our reorganization, and under the name Advanced Emissions Solutions, Inc. (File No. 000-54992) starting on July 1, 2013. Filings for the Company were made under the name Advanced Emissions Solutions, Inc. (File No. 001-37822) starting on July 6, 2016. On February 1, 2024, the Company changed its name to Arq, Inc.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Arq, Inc. | ||||||||
| (Registrant) | ||||||||
| August 10, 2026 | By: | /s/ Robert Rasmus | ||||||
| Robert Rasmus | ||||||||
| Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
| August 10, 2026 | By: | /s/ Shimon Steinmetz | ||||||
| Shimon Steinmetz | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
34
Exhibit 18.1
August 10, 2026
The Board of Directors
Arq, Inc.
8051 East Maplewood Avenue, Suite 210
Greenwood Village, CO 80111
Dear Directors:
We are providing this letter solely for inclusion as an exhibit to the Arq, Inc. (the “Company”) Form 10-Q filing pursuant to Item 601 of Regulation S-K.
As stated in Note 1 and Note 12 to the unaudited condensed consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026, the Company changed its method of accounting for costs incurred in connection with planned major maintenance activities (“turnaround” or “TAR”) on its Red River Plan from the direct-expense method to the deferral method. Note 1 also states management's belief that the newly adopted accounting principle is preferable in the circumstances because it better matches qualifying turnaround costs with the periods benefited by the planned major maintenance activities and improves the comparability of the Company’s operating results between periods.
With regard to the aforementioned accounting change, it should be understood that authoritative criteria have not been established for evaluating the preferability of one acceptable method of accounting over another acceptable method and, in expressing our concurrence below, we have relied on management's business planning and judgment and on management's determination that this change in accounting principle is preferable.
Based on our reading of management's stated reasons and justification for this change in accounting principle in the Form 10-Q, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that the newly adopted method of accounting is preferable in the Company's circumstances.
We have not audited the application of the aforementioned accounting change to the financial statements included in Part I of the Company’s Form 10-Q. We also have not audited any consolidated financial statements of the Company as of any date or for any period subsequent to December 31, 2025. Accordingly, we do not express an opinion on whether the accounting for the change in accounting principle has been properly applied or whether the aforementioned financial statements are fairly presented in conformity with accounting principles generally accepted in the United States of America.
Sincerely,
/s/ Baker Tilly US, LLP
Denver, Colorado
Exhibit 31.1
Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as Amended
I, Robert Rasmus, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Arq, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 10, 2026
| /s/ Robert Rasmus | |||||
| Robert Rasmus | |||||
| Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Exhibit 31.2
Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as Amended
I, Shimon Steinmetz, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Arq, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 10, 2026
| /s/ Shimon Steinmetz | |||||
| Shimon Steinmetz | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
Exhibit 32.1
Certification
Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Arq, Inc. (the "Company") for the quarterly period ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert Rasmus, as the Principal Executive Officer of the Company, and Shimon Steinmetz, as the Principal Financial Officer of the Company, each hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of their knowledge and belief, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Robert Rasmus | |||||
| Robert Rasmus | |||||
| Chief Executive Officer | |||||
| August 10, 2026 | |||||
| /s/ Shimon Steinmetz | |||||
| Shimon Steinmetz | |||||
| Chief Financial Officer | |||||
| August 10, 2026 | |||||
EXHIBIT 95.1
Mine Safety and Health Administration Safety Data
We are committed to maintaining a safe work environment and working to ensure environmental compliance across all of our operations. The health and safety of our employees and limiting the impact to communities in which we operate are critical to our long-term success. We employ practices and conduct training to help ensure that our employees work safely. Furthermore, we utilize processes for managing, monitoring and improving safety and environmental performance.
The following disclosures are provided pursuant to Securities and Exchange Commission (SEC) regulations, which require certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate coal mines regulated under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). The disclosures reflect United States (U.S.) mining operations only.
Mine Safety Information. Whenever the Mine Safety and Health Administration (MSHA) believes that a violation of the Mine Act, any health or safety standard, or any regulation has occurred, it may issue a violation which describes the associated condition or practice and designates a time frame within which the operator must abate the violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order removing miners from the area of the mine affected by the condition until hazards are corrected. Whenever MSHA issues a citation or order, it generally proposes a civil penalty, or fine, as a result of the violation that the operator is ordered to pay. Citations and orders can be contested and appealed and, as part of that process, are often reduced in severity and amount, and are sometimes vacated. The number of citations, orders and proposed assessments vary depending on the size and type (underground or surface) of the company and mine.
We are required to report citations and orders issued to us by MSHA during the three months ended June 30, 2026, as reflected in our systems. Our required disclosure covers only those mines that were issued orders or citations during the period presented and, commensurate with SEC regulations, does not reflect orders or citations issued to independent contractors working at our mines. Due to timing and other factors, our data may not agree with the mine data retrieval system maintained by MSHA. The proposed assessments for the three months ended June 30, 2026 were taken from the MSHA system as of August 7, 2026.
Additional information about MSHA references we are required to report is as follows:
•Section 104 S&S Violations: The total number of violations received from MSHA under section 104(a) of the Mine Act that could significantly and substantially contribute to a serious injury if left unabated.
•Section 104(b)Orders: The total number of orders issued by MSHA under section 104(b) of the Mine Act, which represents a failure to abate a citation under section 104(a) within the period of time prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.
•Section 104(d) Citations and Orders: The total number of citations and orders issued by MSHA under section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards.
•Section 104(e) Notices: The total number of notices issued by MSHA under section 104(e) of the Mine Act for a pattern of violations that could contribute to mine health or safety hazards.
•Section 110(b)(2)Violations: The total number of flagrant violations issued by MSHA under section 110(b)(2) of the Mine Act.
•Section 107(a) Orders: The total number of orders issued by MSHA under section 107(a) of the Mine Act for situations in which MSHA determined an imminent danger existed.
•Proposed MSHA Assessments: The total dollar value of proposed assessments from MSHA.
•Fatalities: The total number of mining-related fatalities.
Our first mine is located in the Gulf Coast Lignite Region, in Natchitoches Parish, Louisiana (the "Five Forks Mine"). For the three months ended June 30, 2026, there were no reportable citations or orders issued to the Five Forks Mine. Our second mine is located in Knox, Kentucky ("Corbin Project"). For the three months ended June 30, 2026, there were no reportable citations or orders issued to Corbin Project. Our third mine is located in Mingo, West Virginia ("Mine Four"). For the three months ended June 30, 2026, there were no reportable citations or orders issued to Mine Four.
Pending Legal Actions. The Federal Mine Safety and Health Review Commission (the Commission) is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. These cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under section 105 of the Mine Act. The following is a brief description of the types of legal actions that may be brought before the Commission.
•Contests of Citations and Orders: A contest proceeding may be filed with the Commission by operators, miners or miners’ representatives to challenge the issuance of a citation or order issued by MSHA, including citations related to disputed provisions of operators' emergency response plans.
•Contests of Proposed Penalties (Petitions for Assessment of Penalties): A contest of a proposed penalty is an administrative proceeding before the Commission challenging a civil penalty that MSHA has proposed for the violation. Such proceedings may also involve appeals of judges' decisions or orders to the Commission on proposed penalties, including petitions for discretionary review and review by the Commission on its own motion.
•Complaints for Compensation: A complaint for compensation may be filed with the Commission by miners entitled to compensation when a mine is closed by certain withdrawal orders issued by MSHA. The purpose of the proceeding is to determine the amount of compensation, if any, due miners idled by the orders.
•Complaints of Discharge, Discrimination or Interference: A discrimination proceeding is a case that involves a miner’s allegation that he or she has suffered a wrong by the operator because he or she engaged in some type of activity protected under the Mine Act, such as making a safety complaint. This category includes temporary reinstatement proceedings, which involve cases in which a miner has filed a complaint with MSHA stating he or she has suffered discrimination and the miner has lost his or her position.
•Applications for Temporary Relief: An application for temporary relief from any modification or termination of any order or from any order issued under certain subparts of section 104 of the Mine Act may be filed with the Commission at any time before such order becomes final.
•Appeals of Judges' Decisions or Orders.
For the three months ended June 30, 2026, there were no pending or legal actions before the Commission at Five Forks Mine, Corbin Project or Mine Four.