Arq, Inc 10-Q for FY2023 Q3

Arq, Inc. (ARQ)

10-Q 2023-11-08 For: 2023-09-30

Added on April 10, 2026

About this 10-Q

Arq, Inc filed this 10-Q on November 8, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $29.83M; up 4.9% from $28.44M a year earlier
Net loss: $2.18M; compared with a net loss of $2.39M a year earlier
Diluted EPS: -$0.07; compared with -$0.13 a year earlier

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

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


		PAGE
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and September 30, 2022	2
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2023 and September 30, 2022	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

PART II. - OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1a.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	37
	Signatures	38


	As of
(in thousands, except share data)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash	$	52,529	$	66,432
Receivables, net	14,225		13,864

Inventories, net	18,549		17,828




Prepaid expenses and other current assets	6,171		7,538
Total current assets	91,474		105,662
Restricted cash, long-term	8,792		10,000
Property, plant and equipment, net of accumulated depreciation of $17,110 and $11,897, respectively	85,709		34,855





Other long-term assets, net	44,629		30,647
Total Assets	$	230,604	$	181,164
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	13,972	$	16,108
Current portion of debt obligations	1,991		1,131




Other current liabilities	6,061		6,645
Total current liabilities	22,024		23,884
Long-term debt obligations, net of current portion	19,179		3,450




Other long-term liabilities	15,107		13,851
Total Liabilities	56,310		41,185
Commitments and contingencies (Note 8)

Stockholders’ equity:
Preferred stock: par value of $0.001 per share, 50,000,000 shares authorized including Series A Convertible Preferred Stock: par value $0.001 per share, 8,900,000 shares authorized, none issued and outstanding	—		—
Common stock: par value of $0.001 per share, 100,000,000 shares authorized, 37,799,053 and 23,788,319 shares issued, and 33,180,907 and 19,170,173 shares outstanding at September 30, 2023 and December 31, 2022, respectively	38		24
Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of September 30, 2023 and December 31, 2022, respectively	(47,692)		(47,692)
Additional paid-in capital	153,695		103,698
Retained earnings	68,253		83,949

Total Stockholders’ Equity	174,294		139,979
Total Liabilities and Stockholders’ Equity	$	230,604	$	181,164


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenues:
Consumables	$	29,829	$	28,437	$	71,079	$	79,578




Total revenues	29,829		28,437		71,079		79,578
Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization	20,707		21,575		53,218		62,992


Payroll and benefits	4,228		2,313		12,482		7,458

Legal and professional fees	1,654		3,668		8,060		7,395
General and administrative	3,054		1,833		9,177		5,662
Depreciation, amortization, depletion and accretion	2,711		1,671		7,276		4,765
Gain on sale of Marshall Mine, LLC	—		—		(2,695)		—

Total operating expenses	32,354		31,060		87,518		88,272
Operating loss	(2,525)		(2,623)		(16,439)		(8,694)
Other income (expense):
Earnings from equity method investments	412		—		1,512		3,222

Interest expense	(787)		(83)		(2,155)		(259)




Other	725		315		1,510		(19)
Total other income	350		232		867		2,944
Loss before income taxes	(2,175)		(2,391)		(15,572)		(5,750)
Income tax benefit	—		—		33		—
Net loss	$	(2,175)	$	(2,391)	$	(15,539)	$	(5,750)
Loss per common share (Note 1):
Basic	$	(0.07)	$	(0.13)	$	(0.56)	$	(0.31)
Diluted	$	(0.07)	$	(0.13)	$	(0.56)	$	(0.31)
Weighted-average number of common shares outstanding:
Basic	31,807		18,487		27,894		18,435
Diluted	31,807		18,487		27,894		18,435


	Common Stock			Treasury Stock
(Amounts in thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
Balances, January 1, 2023	23,788,319	$	24	(4,618,146)	$	(47,692)	$	103,698	$	83,949	$	139,979

Stock-based compensation	483,242	—		—	—		563		—		563
Issuance of common stock pursuant to Arq Acquisition, net of offering costs	3,814,864	4		—	—		12,433		—		12,437
Issuance of common stock related to PIPE Investment, net of offering costs	3,842,315	4		—	—		15,216		—		15,220
Issuance of warrant	—	—		—	—		826		—		826
Repurchase of common shares to satisfy minimum tax withholdings	(74,104)	—		—	—		(146)		—		(146)



Preferred stock dividends declared on redeemable preferred stock	—	—		—	—		—		(157)		(157)

Net loss	—	—		—	—		—		(7,508)		(7,508)
Balances, March 31, 2023	31,854,636	$	32	(4,618,146)	$	(47,692)	$	132,590	$	76,284	$	161,214
Stock-based compensation	(16,430)	—		—	—		545		—		545
Issuance of common stock upon conversion of preferred stock	5,362,926	5		—	—		18,921		—		18,926

Repurchase of common shares to satisfy minimum tax withholdings	(6,973)	—		—	—		(14)		—		(14)


Net loss	—	—		—	—		—		(5,856)		(5,856)
Balances, June 30, 2023	37,194,159	$	37	(4,618,146)	$	(47,692)	$	152,042	$	70,428	$	174,815
Stock-based compensation	105,244	—		—	—		702		—		702
Issuance of common stock to related party	527,779	1		—	—		999		—		1,000
Repurchase of common shares to satisfy minimum tax withholdings	(28,129)	—		—	—		(48)		—		(48)


Net loss	—	—		—	—		—		(2,175)		(2,175)
Balances, September 30, 2023	37,799,053	$	38	(4,618,146)	$	(47,692)	$	153,695	$	68,253	$	174,294


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


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


	Nine Months Ended September 30,
(in thousands)	2023		2022
Cash flows from operating activities
Net loss	$	(15,539)	$	(5,750)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation, amortization, depletion and accretion	7,276		4,765
Gain on sale of Marshall Mine, LLC	(2,695)		—
Operating lease expense	2,061		1,953
Stock-based compensation expense	1,810		1,455
Earnings from equity method investments	(1,512)		(3,222)

Amortization of debt discount and debt issuance costs	395		—







Other non-cash items, net	—		438
Changes in operating assets and liabilities:
Receivables and related party receivables	(359)		1,199
Prepaid expenses and other assets	3,595		(991)
Inventories, net	(811)		(7,222)



Other long-term assets, net	(3,646)		2,136
Accounts payable and accrued expenses	(12,033)		1,827
Other current liabilities	148		(184)
Operating lease liabilities	(140)		1,445




Other long-term liabilities	305		206
Distributions from equity method investees, return on investment	—		2,297
Net cash (used in) provided by operating activities	(21,145)		352
Cash flows from investing activities
Acquisition of property, plant, equipment, and intangible assets, net	(17,008)		(6,178)
Cash and restricted cash acquired in business acquisition	2,225		—
Payment for disposal of Marshall Mine, LLC	(2,177)		—
Acquisition of mine development costs	(1,856)		(345)
Distributions from equity method investees in excess of cumulative earnings	1,512		3,316
Proceeds from sale of property and equipment	—		1,241




Net cash used in investing activities	(17,304)		(1,966)
Cash flows from financing activities
Net proceeds from common stock issued in PIPE	15,220		—
Net proceeds from Term Loan, related party, net of discount and issuance costs	8,522		—
Net proceeds from common stock issuance, related party	1,000		—
Principal payments on finance lease obligations	(855)		(913)
Principal payments on Arq Loan	(341)		—
Repurchase of common stock to satisfy tax withholdings	(208)		(385)
Dividends paid on common stock	—		(45)





Net cash provided by (used) in financing activities	23,338		(1,343)
Decrease in Cash and Restricted Cash	(15,111)		(2,957)
Cash and Restricted Cash, beginning of period	76,432		88,780
Cash and Restricted Cash, end of period	$	61,321	$	85,823



Supplemental disclosure of non-cash investing and financing activities:
Equity issued as consideration for acquisition of business	$	31,206	$	—
Change in accrued purchases for property and equipment	$	255	$	339
Paid-in-kind dividend on Series A Preferred Stock	$	157	$	—
Acquisition of property and equipment under finance lease	$	—	$	1,641


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2023		2022		2023		2022
Net loss	$	(2,175)	$	(2,391)	$	(15,539)	$	(5,750)
Less: Dividends declared on redeemable preferred stock	—		—		157		—
Loss attributable to common stockholders	$	(2,175)	$	(2,391)	$	(15,696)	$	(5,750)

Basic weighted-average common shares outstanding	31,807		18,487		27,894		18,435
Add: dilutive effect of equity instruments	—		—		—		—


Diluted weighted-average shares outstanding	31,807		18,487		27,894		18,435
Loss per share - basic	$	(0.07)	$	(0.13)	$	(0.56)	$	(0.31)
Loss per share - diluted	$	(0.07)	$	(0.13)	$	(0.56)	$	(0.31)


(in thousands)	Purchase Price Allocation
Fair value of assets acquired:
Cash	$	1,411

Prepaid expenses and other current assets	2,229
Restricted cash, long-term	814
Property, plant and equipment, net	39,159
Other long-term assets, net	11,717
Amount attributable to assets acquired	55,330

Fair Value of liabilities assumed:
Accounts payable and accrued expenses	9,806
Current portion of long-term debt	494
Other current liabilities	103
Long-term debt, net of current portion	9,199
Other long-term liabilities	4,523
Amount attributable to liabilities assumed	24,125

Net assets acquired	$	31,205


(in thousands)	Amount		Weighted Average Useful Life (years)

Developed technology	$	7,700	20


	As of
Leases	September 30, 2023		December 31, 2022
Operating Leases






Operating lease right-of-use assets, net of accumulated amortization (1)	$	10,673	$	7,734

Operating lease obligations, current	$	2,045	$	2,724
Long-term operating lease obligations	8,797		5,133
Total operating lease obligation	$	10,842	$	7,857

Finance Leases



Finance lease right-of-use assets, net of accumulated amortization (2)	$	1,904	$	2,565

Finance lease obligations, current	$	1,477	$	1,131
Long-term finance lease obligations	2,250		3,450
Total finance lease obligations	$	3,727	$	4,581


	As of
(in thousands)	September 30, 2023		December 31, 2022








Other long-term assets, net:
Right of use assets, operating leases, net	$	10,673	$	7,734
Intangible assets, net	8,053		847
Spare parts, net	8,523		6,789
Upfront Customer Consideration	6,094		6,475
Mine development costs, net	7,063		5,478
Mine reclamation asset, net	1,566		1,641
Other	2,657		1,683


Total other long-term assets, net	$	44,629	$	30,647


	As of September 30, 2023
(in thousands, expect years)	Unrecognized Compensation Cost		Expected Weighted- Average Period of Recognition (in years)
RSA expense	$	1,723	1.86

PSU expense	502		2.01
Stock option expense	679		2.79
Total unrecognized stock-based compensation expense	$	2,904	2.10


	Restricted Stock	Weighted-Average Grant Date Fair Value

Non-vested at January 1, 2023	652,962	$	5.58
Granted	773,327	$	1.91
Vested	(391,893)	$	4.89
Forfeited	(201,271)	$	3.29
Non-vested at September 30, 2023	833,125	$	3.04


	As of
(in thousands)	September 30, 2023		December 31, 2022
Asset retirement obligations, beginning of period	$	8,533	$	9,959
Asset retirement obligations assumed(1)	1,500		—
Accretion	441		611
Liabilities settled(2)	(4,854)		(2,071)
Changes due to scope and timing of reclamation	—		34
Asset retirement obligations, end of period	5,620		8,533
Less current portion	176		548
Asset retirement obligations, long-term	$	5,444	$	7,985


	Number of Options Outstanding and Exercisable	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (in years)

Options outstanding, January 1, 2023	—	$	—
Options granted	1,000,000	3.00
Options exercised	—	—
Options expired / forfeited	—	—
Options outstanding, September 30, 2023	1,000,000	$	3.00	$	—	9.79
Options vested and exercisable, September 30, 2023	—	$	—	$	—	0.00


	Units	Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)		Weighted-Average Remaining Contractual Term (in years)
PSUs outstanding, January 1, 2023	148,591	$	7.85
Granted	682,709	1.22
Vested / Settled(1)	—	—
Forfeited / Canceled	(162,382)	4.10
PSUs outstanding, September 30, 2023	668,918	$	1.99	$	1,191	2.01


	Three Months Ended September 30, 2023
Stock options granted:	1,000,000
Risk-free interest rate	4	%
Dividend yield	—	%
Volatility	62	%
Expected term (in years)	6


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except for rate)	2023			2022			2023			2022
Income tax benefit	$	—		$	—		$	(33)		$	—
Effective tax rate	—		%	—		%	—		%	—		%


	Three Months Ended September 30,				Change
(in thousands, except percentages)	2023		2022		($)		(%)
Revenues:
Consumables	$	29,829	$	28,437	$	1,392	5	%




Total revenues	$	29,829	$	28,437	$	1,392	5	%
Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization	$	20,707	$	21,575	$	(868)	(4)	%


	Advanced Emissions Solutions, Inc.
	(Registrant)


November 8, 2023	By:	/s/ Robert Rasmus
		Robert Rasmus
		Chief Executive Officer
		(Principal Executive Officer)


November 8, 2023	By:	/s/ Stacia Hansen
		Stacia Hansen
		Chief Accounting Officer
		(Principal Financial Officer)