Arq, Inc 10-Q for FY2025 Q1
Arq, Inc. (ARQ)
10-Q
2025-05-07
For: 2025-03-31
View Original
Added on
April 10, 2026
About this 10-Q
Arq, Inc filed this 10-Q on May 7, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $27.25M
- up 25.3% from $21.74M a year earlier
- Net income
- $203K
- compared with a net loss of $3.42M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.09 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 March 31, 2025
or
| TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-37822
______________________________________
(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 May 5, 2025, there were 42,211,120 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) | March 31, 2025 | December 31, 2024 | ||||||||||||
| 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 March 31, | ||||||||||||||||||||||||||
(in thousands, except per share data) | 2025 | 2024 | ||||||||||||||||||||||||
| Revenue | $ | $ | ||||||||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | ||||||||||||||||||||||||||
| Loss on sale of assets | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating income (loss) | ( | |||||||||||||||||||||||||
| Other expense: | ||||||||||||||||||||||||||
| Earnings from equity method investments | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total other expense | ( | ( | ||||||||||||||||||||||||
| Income (loss) before income taxes | ( | |||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | |||||||||||||||||||||||
| Income (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, 2025 | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common shares to satisfy minimum tax withholdings | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2025 | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| 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, 2024 | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common shares to satisfy minimum tax withholdings | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrant, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2024 | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
3
Arq, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net income (loss) | $ | $ | ( | |||||||||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||
| Depreciation, amortization, depletion and accretion | ||||||||||||||
| Stock-based compensation expense | ||||||||||||||
| Operating lease expense | ||||||||||||||
| Loss on sale of assets | ||||||||||||||
| Amortization of debt discount and debt issuance costs | ||||||||||||||
| Earnings from equity method investments | ( | |||||||||||||
| Other non-cash items, net | ( | ( | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Receivables, net | ( | |||||||||||||
| Prepaid expenses and other assets | ( | |||||||||||||
| Inventories, net | ( | ( | ||||||||||||
| Other long-term assets, net | ( | ( | ||||||||||||
| Accounts payable and accrued expenses | ( | ( | ||||||||||||
| Other current liabilities | ( | |||||||||||||
| Operating lease liabilities | ( | |||||||||||||
| Other long-term liabilities | ( | ( | ||||||||||||
| Net cash (used in) provided by 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 investees 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 finance lease obligations | ( | ( | ||||||||||||
| Principal payments on notes payable | ( | ( | ||||||||||||
| Repurchase of common stock to satisfy tax withholdings | ( | ( | ||||||||||||
| Net cash provided by (used in) 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: | ||||||||||||||
| Change in accrued purchases for property and equipment | $ | $ | ||||||||||||
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"), 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 we collectively refer 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"). Additionally, the Company owns the Five Forks Mine, a lignite coal mine located in Saline, Louisiana, that currently supplies the primary raw material for the manufacturing of the Company’s products, and bituminous coal feedstock and a manufacturing facility located in Corbin, Kentucky (the "Corbin Facility").
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.
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, 2024 (the "2024 Form 10-K"). Significant accounting policies disclosed therein have not changed.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the weighted-average number of shares of the Company's common stock outstanding during the reporting period. Diluted earnings (loss) per share is computed in a manner consistent with that of basic earnings per share, while considering other potentially dilutive securities.
5
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table sets forth the calculations of basic and diluted earnings (loss) per share:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in thousands, except per share amounts) | 2025 | 2024 | ||||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | |||||||||||||||||||||||
| Basic weighted-average number of common shares outstanding | ||||||||||||||||||||||||||
| Add: dilutive effect of equity instruments | ||||||||||||||||||||||||||
| Diluted weighted-average shares outstanding | ||||||||||||||||||||||||||
| Earnings (loss) per share - basic | $ | $ | ( | |||||||||||||||||||||||
| Earnings (loss) per share - diluted | $ | $ | ( | |||||||||||||||||||||||
For the three months ended March 31, 2025 and 2024, potentially dilutive securities of 0.1 million and 2.6 million shares of common stock, respectively, are outstanding but are not included in the calculation of diluted net earnings (loss) per 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 2024 Form 10-K. Actual results could differ from these estimates.
Fair value measurements
Seasonality
The timing of the sale of the Company's 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 warmer and colder 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 during the summer season, higher temperatures may 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 the period in which an outage may occur, 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 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 products used in water treatment. One of the major uses for PAC is for the treatment of taste and odor impurities caused by increased degradation of organic contaminants and natural materials in water that occurs predominately during the summer months. Additionally, the rainy season generally results in more demand from water municipalities due to rain run-off and contaminant dilution.
6
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
New Accounting Standards
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ("ASU 2023-09"). ASU 2023-09 requires entities to disclose: (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. This update also makes several other changes to the income tax disclosure requirements. For public entities, the amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and are required to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its financial statement disclosures.
Note 2 - Inventories, net
The following table summarizes the Company's inventories as of March 31, 2025 and December 31, 2024:
| As of | ||||||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Product inventory, net | $ | $ | ||||||||||||
| Raw material inventory | ||||||||||||||
Total inventories, net | $ | $ | ||||||||||||
Note 3 - Revenue
For the three months ended March 31, 2025 and 2024, all material performance obligations related to revenue recognized were satisfied at a point in time.
Trade receivables
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
The following table shows the components of the Company's Receivables, net:
| As of | ||||||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Trade receivables, net | $ | $ | ||||||||||||
| Other | ||||||||||||||
| Receivables, net | $ | $ | ||||||||||||
7
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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
Note 4 - Debt Obligations
| As of | ||||||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Revolving credit agreement | $ | $ | ||||||||||||
| CTB Loan due January 2036 | ||||||||||||||
| Finance lease obligations | ||||||||||||||
| 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 accounts receivable and 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 Facility. 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.
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 under the Revolving Credit Facility 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 terminated 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.
8
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On May 6, 2025, the Company entered into the first amendment to the Revolving Credit Agreement (the "First Amendment"), which provides for, among other things, amendments to the borrowing availability calculation under the Revolving Loan Commitment, and an update to the Company's minimum liquidity covenant providing for decreased minimum liquidity required through certain applicable date ranges as shown in the table below:
| Applicable Dates | Minimum Liquidity Required | |||||||
May 6th, 2025 through June 30th, 2025 | $ | |||||||
July 1st, 2025 through July 31st, 2025 | $ | |||||||
August 1st, 2025 through August 31st, 2025 | $ | |||||||
September 1st, 2025 through September 30th, 2025 | $ | |||||||
October 1st, 2025 through October 31st, 2025 | $ | |||||||
November 1st, 2025 through November 30th, 2025 | $ | |||||||
December 1st, 2025 and at all times thereafter | $ | |||||||
As of March 31, 2025, the Company's net borrowings under the Revolving Credit Facility totaled $16.2 million.
CTB Loan
On February 1, 2023, the Company assumed a term loan (the "CTB Loan") 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 carry a prepayment penalty of 3.0 % of the outstanding principal if paid prior to January 27, 2024, 2.0 % of the outstanding principal if paid prior to January 27, 2025 and 1.0 % of the outstanding principal if paid prior to January 27, 2026. Thereafter, the Notes may be prepaid without penalty.
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.
The carrying value of the CTB Loan approximates its fair value as the instrument bears interest at rates indexed to market rates for similar instruments.
9
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5 - Leases
The Company's operating and finance lease right-of-use ("ROU") assets and liabilities as of March 31, 2025 and December 31, 2024 consisted of the following items:
| As of | ||||||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | ||||||||||||
| 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 obligation | $ | $ | ||||||||||||
| Finance Leases | ||||||||||||||
Finance lease right-of-use assets, net of accumulated amortization (2) | $ | $ | ||||||||||||
| Finance lease obligations, current | $ | $ | ||||||||||||
| Long-term finance lease obligations | ||||||||||||||
| Total finance lease obligations | $ | $ | ||||||||||||
(2) Finance lease ROU assets are reported net of accumulated amortization of $3.3 million and $3.2 million as of March 31, 2025 and December 31, 2024, respectively.
Operating leases
ROU assets under operating leases and operating lease liabilities are included in the "" and "" and "" line items, respectively, in the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024.
Lease expense for operating leases for the three months ended March 31, 2025 was $1.1 million, of which $1.0 million is included in the "Cost of revenue, exclusive of depreciation and amortization" line item, and $0.1 million is included in the "Selling, general and administrative" line item in the Condensed Consolidated Statements of Operations for those periods.
Lease expense for operating leases for the three months ended March 31, 2024 was $1.4 million, of which $1.0 million is included in the "Cost of revenue, exclusive of depreciation and amortization" line item, and $0.4 million is included in the "Selling, general and administrative" line item in the Condensed Consolidated Statements of Operations for those periods.
Finance leases
ROU assets under finance leases are included in the "Property, plant and equipment" line item, and finance lease liabilities are included in the "Current portion of long-term debt" and "Long-term debt, net of current portion" in the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024.
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 months ended March 31, 2025 and 2024.
10
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Lease financial information as of and for the three months ended March 31, 2025 and 2024 is provided in the following table:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||||||||||||||
| 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 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 March 31, 2025, 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 March 31, 2025, the amount of these surety bonds was $3.0 million.
The Company holds permits for an abandoned mine in West Virginia ("Mine 4") and is required to post a surety bond with a regulatory commission for reclamation. As of March 31, 2025, the amount of this surety bond was $0.7 million.
As of March 31, 2025 and December 31, 2024, the Company posted cash collateral of $8.5 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 March 31, 2025, 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 March 31, 2025.
The Company has a customer supply agreement that requires the Company to post a performance bond in an amount equal to the annual contract value of $4.0 million. As of March 31, 2025, the remaining commitment under this customer contract, which expires on December 31, 2025, was approximately $3.8 million.
11
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
As of March 31, 2025 and December 31, 2024, the Company had a contractual obligation (the "Tinuum Group Obligation") of $1.7
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.
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) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Prepaid expenses and other current assets: | ||||||||||||||
| Prepaid expenses | $ | $ | ||||||||||||
Prepaid lender fees, net (1) | ||||||||||||||
| Prepaid income taxes and income tax refunds | ||||||||||||||
| Other | ||||||||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||||||||
| Other long-term assets, net: | ||||||||||||||
| Spare parts, net | $ | $ | ||||||||||||
| Right of use assets, operating leases, net | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Mine development costs, net | ||||||||||||||
Upfront Customer Consideration (2) | ||||||||||||||
| Mine reclamation asset, net | ||||||||||||||
| Other | ||||||||||||||
| Total other long-term assets, net | $ | $ | ||||||||||||
12
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Represents legal and administrative costs incurred to obtain the Revolving Credit Agreement. This asset is being amortized on a straight-line basis over the five-year contractual period of the Revolving Credit Agreement.
(2) 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.
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 March 31, 2025 and December 31, 2024, Other includes the Highview Investment in the amount of $0.6
The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:
| As of | ||||||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | ||||||||||||
| Other current liabilities: | ||||||||||||||
| $ | $ | |||||||||||||
| Sales, use and other taxes payable | ||||||||||||||
| Current portion of mine reclamation liability | ||||||||||||||
Other (1) | ||||||||||||||
| Total other current liabilities | $ | $ | ||||||||||||
| Other long-term liabilities: | ||||||||||||||
| $ | $ | |||||||||||||
| Mine reclamation liabilities | ||||||||||||||
| Other | ||||||||||||||
| Total other long-term liabilities | $ | $ | ||||||||||||
(1) Included in Other current liabilities as of March 31, 2025 and December 31, 2024 is $1.7
As of March 31, 2025 and December 31, 2024, 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) | March 31, 2025 | December 31, 2024 | ||||||||||||
| 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 | $ | $ | ||||||||||||
13
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Supplemental Income Statement Information
Tinuum Group, LLC
As of March 31, 2025 and December 31, 2024, the Company's ownership interest in Tinuum Group, an equity method investment, was 42.5 0.2 million. In 2025, Tinuum Group, LLC has continued to wind down its operations.
For the three months ended March 31, 2024, the Company recognized expense of $0.2 million 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.
Note 8 - Stockholders' Equity
Stock Repurchase Program
As of March 31, 2025, the Company had $7.0 million remaining under a stock repurchase program, which will remain in effect until all amounts are utilized or is otherwise modified by the Board. The Company did no
Tax Asset Protection Plan
U.S. federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and tax credits if the Company experiences an "ownership change" (as defined in the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in the ownership of the Company by "5 percent stockholders" that exceeds 50 percentage points over a rolling three-year period.
An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax loss and credit carryforwards equal to the equity value of the entity immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the Internal Revenue Service (subject to certain adjustments). The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year.
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.
Note 9 - Stock-Based Compensation
The Company grants equity-based awards to employees, non-employee directors and consultants that may include, but are not limited to, RSAs, PSUs, restricted stock units and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included 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 and consultants 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 months ended March 31, 2025 and 2024 was as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||||||||||||||
| RSA expense | $ | $ | ||||||||||||||||||||||||
| PSU expense | ||||||||||||||||||||||||||
| Stock option expense | ||||||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | ||||||||||||||||||||||||
14
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The amount of unrecognized compensation cost as of March 31, 2025, and the expected weighted-average period over which the cost will be recognized is as follows:
| As of March 31, 2025 | ||||||||||||||
| (in thousands, expect 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.
A summary of RSA activity under the Company's various stock compensation plans for the three months ended March 31, 2025 is presented below:
| Restricted Stock | Weighted-Average Grant Date Fair Value | |||||||||||||||||||||||||
| Non-vested at January 1, 2025 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
| Vested | ( | $ | ||||||||||||||||||||||||
| Forfeited | ( | $ | ||||||||||||||||||||||||
| Non-vested at March 31, 2025 | $ | |||||||||||||||||||||||||
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 three months ended March 31, 2025 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, 2025 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
Vested / Settled (1) | ( | $ | ||||||||||||||||||||||||
| Forfeited / Canceled | ( | $ | ||||||||||||||||||||||||
| PSUs outstanding at March 31, 2025 | $ | $ | ||||||||||||||||||||||||
(1) The number of units shown in the table above are based on target performance. The final number of shares of common stock issued may vary depending on the achievement of market 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 three months ended March 31, 2025, 21,824 shares of common stock were issued upon vesting of PSUs.
15
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
A summary of stock option activity for the three months ended March 31, 2025 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, 2025 | $ | |||||||||||||||||||||||||
| Options granted | ||||||||||||||||||||||||||
| Options exercised | ||||||||||||||||||||||||||
| Options expired / forfeited | ||||||||||||||||||||||||||
| Options outstanding at March 31, 2025 | $ | $ | ||||||||||||||||||||||||
| Options vested and exercisable at March 31, 2025 | $ | $ | ||||||||||||||||||||||||
Note 10 - Income Taxes
For the three months ended March 31, 2025 and 2024, the Company's income tax expense and effective tax rates are presented below:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in thousands, except for rate) | 2025 | 2024 | ||||||||||||||||||||||||
| Income tax expense | $ | $ | ||||||||||||||||||||||||
| Effective tax rate | % | % | ||||||||||||||||||||||||
The Company recognized pretax income for the three months ended March 31, 2025, but recognized no income tax expense based on the Company's operating forecast for the year ending December 31, 2025. As a result, the effective rate for the three months ended March 31, 2025 was 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.
16
Arq, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 all 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 income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets.
The CODM uses net income to evaluate income generated from APT assets (return on assets) in deciding how to allocate cash flows from operations within the APT segment. Net income 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 to external customers represents sales of APT products and are presented in the Condensed Consolidated Statements of Operations.
Geographic areas
The Company is domiciled in the U.S. The table below shows revenue by country for the three months ended March 31, 2025 and 2024.
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||||||||||||||
| United States | $ | $ | ||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
Note 12 - Subsequent Events
Unless disclosed elsewhere in the notes to the Condensed Consolidated Financial Statements, there were no significant matters that occurred subsequent to March 31, 2025.
17
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, 2024 (the "2024 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. Additionally, we control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines for sale or further conversion to GAC products. Using the Corbin Facility's manufacturing process, we convert coal waste into a purified, microfine carbon powder known as Arq powderTM ("Arq Powder"). We expect to begin using Arq Powder as a feedstock to manufacture high-quality GAC products for sale in the APT and other markets during the second half of 2025.
We believe Arq Powder has additional potential to enable us to access new markets and applications. We intend to secure customer interest in Arq Powder as an additive into other markets, such as components for asphalt. These products utilizing Arq Powder are expected to have a lower carbon footprint compared to similar products utilizing conventional materials and have demonstrated other beneficial performance attributes during lab-scale customer testing. These applications are currently in various stages of proof of concept testing or preliminary customer testing.
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 for our new GAC products.
For the three months ended March 31, 2025, 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 2024. This was primarily due to higher natural gas prices in 2025, resulting in several large utility customers opting to use coal versus natural gas as a primary source for power generation, and the year to date impact of moderate to severe temperatures during the winter and spring seasons, resulting in higher demand for power generation compared to 2024. We expect that natural gas prices will remain relatively consistent through 2025 due to increased demand for liquid natural gas exports, which, we expect, will favorably impact sales of our products.
On April 10, 2024, the United States Environmental Protection Agency ("EPA") issued its first nationally enforceable PFAS National Primary Drinking Water Regulation, confirming a material tightening to an existing framework of guidance and regulations relating to the control and limitation of PFAS in municipal water. The regulatory changes are anticipated to phase in over an approximate five-year period. We expect the implementation of the announced regulations will drive a material increase in GAC demand in the water purification market.
Results of Operations
For the three months ended March 31, 2025, we recognized net income of $0.2 million, compared to net loss of $3.4 million for the three months ended March 31, 2024. The most significant factor impacting results for the three months ended March 31, 2025 was higher revenue as a result of increased volumes, average selling price, and product mix.
18
The following sections provide additional information regarding these comparable periods. For comparability purposes, the following tables set forth our results of operations for the periods presented in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. The current year period to prior year period comparisons of financial results may not be indicative of financial results to be achieved in future periods.
Comparison of the Three Months Ended March 31, 2025 and 2024
Revenue and Cost of revenue
A summary of the components of our Revenue and Cost of revenue for the three months ended March 31, 2025 and 2024 is as follows:
| Three Months Ended March 31, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2025 | 2024 | ($) | (%) | ||||||||||||||||||||||
| Revenue | $ | 27,247 | $ | 21,740 | $ | 5,507 | 25 | % | ||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | $ | 17,332 | $ | 13,713 | $ | 3,619 | 26 | % | ||||||||||||||||||
Revenue and Cost of revenue
For the three months ended March 31, 2025, revenue increased from the comparable quarter in 2024 primarily driven by an increase in volumes sold and higher pricing of approximately $2.2 million and $1.6 million, respectively. The increase was due in part to higher natural gas prices compared to the same quarter in 2024, which contributed to increased utilization of coal-fired generation and increased demand for our products by customers in the power generation market. The average Henry Hub natural gas spot prices ($/MMBtu) for the three months ended March 31, 2025 and 2024 were $4.15 and $2.13, respectively. Also contributing to an increase in revenue between periods was $1.2 million attributable to overall favorable product mix driven by sales to power generation customers, as well as a large non-power generation customer.
Gross margin, exclusive of depreciation and amortization, remained flat, as higher pricing and favorable customer mix was offset by start-up costs associated with the GAC line in during the three months ended March 31, 2025 and a one-time accounting adjustment during the three months ended March 31, 2024.
We expect that revenue and gross margin will continue to be positively impacted by our product price increases and our efforts to move our product mix to higher margin products. We anticipate that the product price increases will help offset fluctuations in volumes due to prices of competing alternative power generation sources or retirement of coal-fired power generating units impacting the demand for our AC and chemical products related to power generation. Additionally, our revenues continue to be impacted by electricity demand driven by seasonal weather and related power generation needs.
Operating Expenses
A summary of the components of our operating expenses for the three months ended March 31, 2025 and 2024 is as follows:
| Three Months Ended March 31, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2025 | 2024 | ($) | (%) | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling, general and administrative | $ | 6,053 | $ | 7,666 | $ | (1,613) | (21) | % | ||||||||||||||||||
| Research and development | 874 | 1,625 | (751) | (46) | % | |||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | 2,181 | 1,716 | 465 | 27 | % | |||||||||||||||||||||
| Loss on sale of assets | 145 | — | 145 | * | ||||||||||||||||||||||
| $ | 9,253 | $ | 11,007 | $ | (1,754) | (16) | % | |||||||||||||||||||
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Selling, General and Administrative
A summary of the components of selling, general and administrative expenses for the three months ended March 31, 2025 and 2024, exclusive of cost of revenue items (presented above), is as follows:
| Three Months Ended March 31, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2025 | 2024 | ($) | (%) | ||||||||||||||||||||||
| Payroll and benefits | $ | 1,861 | $ | 2,649 | $ | (788) | (30) | % | ||||||||||||||||||
| Legal and professional fees | 1,567 | 1,633 | (66) | (4) | % | |||||||||||||||||||||
| General and administrative | 2,625 | 3,384 | (759) | (22) | % | |||||||||||||||||||||
| Total Selling, general and administrative | $ | 6,053 | $ | 7,666 | $ | (1,613) | (21) | % | ||||||||||||||||||
Payroll and benefits
Payroll and benefits, which represent costs related to selling, general and administrative personnel, decreased for the three months ended March 31, 2025 compared to the corresponding quarter in 2024 primarily due to decreased wages in the current quarter, lower stock-based compensation expense due to timing of awards granted in 2024, and lower employer-related payroll tax expense.
Legal and professional fees
Legal and professional fees decreased for the three months ended March 31, 2025 compared to the corresponding quarter in 2024 primarily driven by lower general legal fees between periods, partially offset by increased accounting and audit fees, tax consulting fees, and IT consulting fees.
General and administrative
General and administrative expenses decreased for the three months ended March 31, 2025 compared to the corresponding quarter in 2024 by approximately $0.8 million, primarily due to a decrease in franchise taxes, rent and occupancy expenses, third party services expense, and recruiting expenses.
Research and development
Research and development expense decreased for the three months ended March 31, 2025 compared to the corresponding quarter in 2024, primarily due to lower expenses attributable to qualification testing pertaining to our GAC products conducted with potential lead-adopters during the three months ended March 31, 2024.
Depreciation, amortization, depletion and accretion
Depreciation, amortization depletion and accretion expense increased by approximately $0.5 million for the three months ended March 31, 2025 compared to the corresponding quarter in 2024, primarily due to increased absorption in inventory of $0.7 million, partially offset by decreased depreciation expense, amortization of leasehold improvements, accretion and depletion.
Loss on sale of assets
Loss on sale of assets for the three months ended March 31, 2025 related to the disposal of construction assets no longer in use.
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Other (Expense) Income, net
A summary of the components of other (expense) income, net for the three months ended March 31, 2025 and 2024 is as follows:
| Three Months Ended March 31, | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | 2025 | 2024 | ($) | (%) | ||||||||||||||||||||||
| Other (expense) income: | ||||||||||||||||||||||||||
| Earnings from equity method investments | $ | 155 | $ | — | $ | 155 | * | |||||||||||||||||||
| Interest expense | (724) | (791) | 67 | (8) | % | |||||||||||||||||||||
| Other | 110 | 352 | (242) | (69) | % | |||||||||||||||||||||
| Total other expense | $ | (459) | $ | (439) | $ | (20) | 5 | % | ||||||||||||||||||
* Percent change in excess of 100% not considered meaningful.
Earnings from equity method investments
Earnings from equity method investments for the three months ended March 31, 2025 represented cash distributions from Tinuum Group. Tinuum Group has continued its wind down of operations into 2025.
Interest expense
Interest expense decreased slightly for the three months ended March 31, 2025 compared to the corresponding quarter in 2024 primarily due to a higher average outstanding balance in the current period offset by a lower average interest rate.
Other
The decrease in Other for the three months ended March 31, 2025 as compared to the corresponding quarter in 2024 was primarily driven by a decrease in interest income of $0.3 million due to lower average balances in the Company's cash sweep accounts during the current quarter compared to the prior year quarter.
Income tax expense
For the three months ended March 31, 2025 and 2024, we had pretax income of $0.2 million and pretax loss of $3.4 million, respectively. For the three months ended March 31, 2025, we had a zero effective tax rate and recorded no income tax expense based our operating forecast for the year ending December 31, 2025. For the three months ended March 31, 2024, we had a zero effective tax rate and recorded no income tax benefit for the pretax loss for that period due to the recording of a full valuation allowance based on our forecast of pretax loss for the year ended December 31, 2024.
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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, 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 income (loss) in accordance with U.S. GAAP as a measure of performance. See below for a reconciliation from net income (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 income (loss), our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA (loss) and Adjusted EBITDA (loss).
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||||||||||||||
| Net income (loss) | $ | 203 | $ | (3,419) | ||||||||||||||||||||||
| Depreciation, amortization, depletion and accretion | 2,181 | 1,716 | ||||||||||||||||||||||||
| Amortization of Upfront Customer Consideration | 127 | 127 | ||||||||||||||||||||||||
| Interest expense, net | 671 | 432 | ||||||||||||||||||||||||
| EBITDA (loss) | 3,182 | (1,144) | ||||||||||||||||||||||||
Stock-based compensation expense (1) | 736 | 782 | ||||||||||||||||||||||||
| Loss on sale of assets | 145 | — | ||||||||||||||||||||||||
| Adjusted EBITDA (loss) | $ | 4,063 | $ | (362) | ||||||||||||||||||||||
(1)Represents non-cash stock-based compensation expenses that are included within "Cost of revenue, exclusive of depreciation and amortization" and "Selling, general and administrative" expenses in the Condensed Consolidated Statements of Operations. Adjusted EBITDA loss for the three months ended March 31, 2024 has been revised to include non-cash stock-based compensation expense as an adjustment to Adjusted EBITDA (loss).
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Liquidity and Capital Resources
Current Resources and Factors Affecting Our Liquidity
As of March 31, 2025, our principal sources of liquidity included:
•cash on hand of $6.3 million, excluding $8.5 million of restricted cash primarily pledged as collateral under a surety bond agreement;
•availability of $13.8 million under our recent $30.0 million secured revolving credit facility (the "Revolving Credit Facility"); and
•cash from operations.
As of March 31, 2025, our principal uses of liquidity included:
•capital expenditures, including those related to the Red River Plant expansion and commissioning of the Corbin Facility;
•our business operating expenses;
•payments on our lease obligations; and
•payments on our debt obligations.
Cash Flows
Three Months Ended March 31, 2025 vs. Three Months Ended March 31, 2024
Cash and restricted cash decreased from $22.2 million as of December 31, 2024 to $14.8 million as of March 31, 2025. The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024, respectively:
| Three Months Ended March 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | Change | |||||||||||||||||
| Cash and restricted cash provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | (5,803) | $ | 526 | $ | (6,329) | ||||||||||||||
| Investing activities | (3,598) | (9,647) | 6,049 | |||||||||||||||||
| Financing activities | 1,969 | (1,013) | 2,982 | |||||||||||||||||
| Net change in cash and restricted cash | $ | (7,432) | $ | (10,134) | $ | 2,702 | ||||||||||||||
Cash flow from operating activities
Cash flow used in operating activities for the three months ended March 31, 2025 was $5.8 million, which represented a net decrease of $6.3 million from cash provided by operating activities for the three months ended March 31, 2024 of $0.5 million. The net decrease was primarily attributable to net changes in working capital resulting in an increase of $9.7 million in cash outflows between periods, primarily due to increases in inventory and receivables balances. This decrease was partially offset by an increase in net income of $3.6 million.
Cash flow from investing activities
Cash flows used in investing activities decreased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 by $6.0 million primarily as a result of a decrease in property, plant and equipment additions of $5.9 million from construction activities related to the expansion of our Red River Plant.
Cash flow from financing activities
Cash flows provided by financing activities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 increased by $3.0 million primarily due to net borrowings on the Revolving Credit Facility of $2.4 million and a decrease in the repurchase of common stock to satisfy tax withholdings of $0.6 million in connection with the vesting of certain equity awards.
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, including expanding our overall AC business into additional adjacent markets and increasing our gross margin from improving our customer and product mix.
Based on current operating levels, we expect that our cash on hand and borrowing availability on the Revolving Credit Facility as of March 31, 2025 will provide sufficient liquidity to fund operations for the next 12 months.
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Capital expenditures
During the three months ended March 31, 2025, we continued to incur capital spend for additional equipment, labor, and project costs towards the completion of our Red River Plant expansion (the "Red River Project") which is necessary to commence production of our new GAC products. We expect to complete commissioning of the Red River Project by the end of the second quarter or early in the third quarter of 2025. To meet this target, we may continue to incur additional expense in excess of our originally forecasted amounts for additional equipment testing and project costs as we complete the expansion. The Company anticipates financing the completion of the project funded with cash on hand, borrowing availability on the Revolving Credit Facility, and ongoing cost reduction initiatives.
During 2025, we expect our capital expenditures to relate to commissioning of the Red River Project and plant maintenance. Capital expenditures planned for 2025 are dependent on many factors, including the pace and progression of the Red River Project, which may impact the timing and amount of capital expenditures.
In January 2025, we commissioned the Corbin Facility. In April 2025, after a review of required commissioning material and inventory requirements for the remainder of 2025, we elected to reduce operations at our Corbin Facility. We plan to resume normal operations at Corbin after the completion of commissioning of the Red River Project.
Surety Bonds
As of March 31, 2025, 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 March 31, 2025, and as required by our surety bond provider, we held restricted cash of $8.5 million pledged as collateral related to performance requirements required under a reclamation contract for the Five Forks Mine and the Corbin Facility. 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 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates have not changed from those reported in Part II, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2024 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," "believes," "expects," "intends," "plans," "estimates," "predicts," the negative expressions of such words, or similar expressions are used in this Quarterly Report to identify forward-looking statements, and such forward-looking statements include, but are not limited to, statements or expectations regarding:
(a)our ability to complete, and the anticipating timing of the completion of, commissioning of the GAC Facility, ramp-up to full nameplate capacity at our Red River Plant, and commercial production of our GAC products;
(b)the anticipated effects from fluctuations in the pricing of our AC products;
(c)expected supply and demand for our AC products and services, including our GAC products;
(d)the seasonal impact on our customers and their demand for our products;
(e)our ability to fund our business over the next twelve months;
(f)the anticipated timing for resuming operations at our Corbin Facility;
(g)our ability to access new markets for our GAC and other products;
(h)any future plant capacity expansions or site development projects and our ability to finance any such projects;
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(i)the effectiveness of our technologies and products and the benefits they provide;
(j)the timing of awards of, and work and related testing under, our contracts and agreements and their value;
(k)our ability to contract remaining GAC product volumes once commercial production is achieved;
(l)future cash flows, profitability and other potential benefits expected from our GAC business;
(m)the future profitability and sustainability of our PAC business;
(n)the timing and amounts of or changes in future revenue, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, working capital, liquidity and other financial and accounting measures;
(o)the performance of obligations secured by our surety bonds;
(p)the amount and timing of future capital expenditures needed to fund our business plan;
(q)the impact of domestic and international tariffs on our business and the wider AC market;
(r)our ability to capitalize on potentially favorable market conditions;
(s)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;
(t)our near-term priorities and objectives and our long-term outlook regarding the growth of our business; and
(u)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, Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors including, but not limited to, the timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government’s failure to promulgate new regulations or enforce existing regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; availability, cost of and demand for alternative energy sources and other technologies and their impact on coal-fired power generation in the U.S.; technical, start up and operational difficulties; competition within the industries in which the Company operates; risks associated with our debt financing; our inability to effectively and efficiently commercialize new products, including our GAC products; our inability to effectively manage commissioning and startup of the GAC Facility at our Red River Plant; disruptions at any of our facilities, including by natural disasters or extreme weather; risks related to our information technology systems, including the risk of cyberattacks on our networks; failure to protect our intellectual property from infringement or claims that we have infringed on the intellectual property of others; our inability to obtain future financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of the inflation and macroeconomic uncertainty, including from the new U.S. presidential administration, increased domestic and international tariffs, lingering effects of the pandemic and armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; pending litigation; factors relating to our business strategy, goals and expectations concerning the acquisition of Arq Limited; our ability to maintain relationships with customers, suppliers and others with whom the Company does business and meet supply requirements; our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; costs related to the ongoing manufacturing of our products, including our GAC products; opportunities for additional sales of our AC products and end-market diversification; the rate of coal-fired power generation in the U.S.; the timing and cost of any future capital expenditures and the resultant impact to our liquidity and cash flows; and the other risk factors described in our filings with the SEC, including those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024.. You are cautioned not to place undue reliance on the forward-looking statements made in this Quarterly Report and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. The forward-looking statements contained in this Quarterly Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information under this Item is not required to be provided by smaller reporting companies.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a‑15(b) under the 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 March 31, 2025.
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 March 31, 2025 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 2024 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchases
We maintain a program to repurchase up to $20.0 million of shares of our common stock under a stock repurchase program through open market transactions at prevailing market prices, of which $7.0 million remained available as of March 31, 2025. No repurchases were made during the three months ended March 31, 2025.
Tax Withholding
The following table contains information about common shares that we withheld from delivering to employees during the first quarter of 2025 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 | ||||||||||||||||||||||
| January 1 to January 31, 2025 | — | $ | — | N/A | N/A | |||||||||||||||||||||
| February 1 to February 29, 2025 | — | $ | — | N/A | N/A | |||||||||||||||||||||
| March 1 to March 31, 2025 | 214 | $ | 4.68 | 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
Amendment No. 1 to Revolving Credit Facility
On May 6, 2025, Arq, Inc. (the "Company") and certain of its subsidiaries, entered into the first amendment (the "First Amendment") to the Credit, Security and Guaranty Agreement (the "Revolving Credit Agreement"), dated December 27, 2024, with MidCap Funding IV Trust, in its capacity as agent, the lenders from time to time party thereto, and any entities that become party thereto as Guarantors, which provides for, among other things, amendments to the borrowing availability calculation included in the Revolving Credit Agreement, and an update to the Company's minimum liquidity covenant providing for decreased minimum liquidity required through certain applicable date ranges as shown in the table below:
| Applicable Dates | Minimum Liquidity Required | |||||||
May 6th, 2025 through June 30th, 2025 | $1.0 million | |||||||
July 1st, 2025 through July 31st, 2025 | $0.0 million | |||||||
August 1st, 2025 through August 31st, 2025 | $1.0 million | |||||||
September 1st, 2025 through September 30th, 2025 | $1.5 million | |||||||
October 1st, 2025 through October 31st, 2025 | $2.0 million | |||||||
November 1st, 2025 through November 30th, 2025 | $3.0 million | |||||||
December 1st, 2025 and at all times thereafter | $5.0 million | |||||||
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The foregoing description of the First Amendment is only a summary of its material terms and does not purport to be complete and is qualified in its entirety by reference to the full text of the First Amendment, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
Rule 10b5-1 Trading Plans
During the three months ended March 31, 2025, 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 | ||||||||||||||||||||||||||||
| 10.1 | 8-K | 001-37822 | 10.1 | January 2, 2025 | ||||||||||||||||||||||||||||
| 10.2 | ||||||||||||||||||||||||||||||||
| 31.1 | ||||||||||||||||||||||||||||||||
| 31.2 | ||||||||||||||||||||||||||||||||
| 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.
† Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the SEC.
*** 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Arq, Inc. | ||||||||
| (Registrant) | ||||||||
| May 7, 2025 | By: | /s/ Robert Rasmus | ||||||
| Robert Rasmus | ||||||||
| Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
| May 7, 2025 | By: | /s/ Jay Voncannon | ||||||
| Jay Voncannon | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
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Exhibit 10.2
[***] = Certain information that has been excluded from the exhibit because it is both not material and is the type that the registrant treats as private or confidential.
AMENDMENT NO. 1 TO CREDIT, SECURITY AND GUARANTY AGREEMENT
This AMENDMENT NO. 1 TO CREDIT, SECURITY AND GUARANTY AGREEMENT (this “Agreement”) is made as of May 6, 2025 (the “First Amendment Effective Date”), by and among ARQ, INC., a Delaware corporation (“Arq” and together with each of the direct and indirect Subsidiaries of Arq listed on the signature pages hereto and each additional borrower that may hereafter be added thereto and each of their successors and permitted assigns, each individually as a “Borrower”, and collectively as “Borrowers”), any entities that become party hereto as Guarantors and each of their successors and permitted assigns (each individually, a “Guarantor” and collectively, with each of their successors and assigns, the “Guarantors”), MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as Agent, and the financial institutions or other entities parties hereto, each as a Lender.
RECITALS
A. Agent, Lenders and the Credit Parties have entered into that certain Credit, Security and Guaranty Agreement, dated as of December 27, 2024 (the “Original Credit Agreement” and as amended hereby and as it may be further amended, modified, supplemented and restated from time to time, the “Credit Agreement”), pursuant to which the Lenders have agreed to make certain advances of money and to extend certain financial accommodations to Borrowers in the amounts and manner set forth in the Credit Agreement.
B. Credit Parties have requested, and Agent and all Lenders have agreed, to amend certain provisions of the Original Credit Agreement, all in accordance with the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the terms and conditions set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Agent, Lenders and Credit Parties hereby agree as follows:
1.Recitals. This Agreement shall constitute a Financing Document and the Recitals and each reference to the Credit Agreement, unless otherwise expressly noted, will be deemed to reference the Credit Agreement as amended hereby. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement (including those capitalized terms used in the Recitals hereto).
2.Amendments to Original Credit Agreement. Subject to the terms and conditions of this Agreement, including, without limitation, the conditions to effectiveness set forth in Section 4 below, the Original Credit Agreement is hereby amended as follows:
(a)The proviso at the end of the definition of “Borrowing Base” in Section 1.1 of the Original Credit Agreement is hereby amended and restated in its entirety as follows:
“provided that the Borrowing Base shall be adjusted down, if necessary, such that availability attributable to Eligible Inventory shall never exceed, as of any date, an amount equal to percentage of the Revolving Loan Limit set forth below with respect to such date:
| Applicable Dates | Applicable Percentage of Revolving Loan Limit for Inventory | ||||
| 5/06/2025 – 8/31/2025 | 50.00% | ||||
| 9/01/2025 – 9/30/2025 | 47.50% | ||||
| 10/01/2025 – 10/31/2025 | 45.00% | ||||
| 11/01/2025 – 11/30/2025 | 42.50% | ||||
| 12/1/2025 and at all times thereafter | 40.00% | ||||
(b)Clauses (k) and (l) of the definition of Eligible Accounts in Section 1.1 of the Original Credit Agreement is hereby amended and restated in their entirety as follows:
“(k) the total unpaid Accounts of the Account Debtor obligated on the Account, as of any applicable date of determination, exceed the percentage amount of the net amount of all Eligible Accounts owing from all Account Debtors set forth in the table located following the text of this clause (k) with respect to such date (but only the amount of the Accounts of such Account Debtor exceeding such percentage limitation shall be considered ineligible):
| Applicable Dates | Applicable Concentration Percentage (Individual) | ||||
| 5/06/2025 – 8/31/2025 | 40.00% | ||||
| 9/01/2025 – 9/30/2025 | 36.75% | ||||
| 10/01/2025 – 10/31/2025 | 32.50% | ||||
| 11/01/2025 – 11/30/2025 | 28.75% | ||||
| 12/1/2025 and at all times thereafter | 25.00% | ||||
;”
“(l) the total unpaid Accounts of any two (2) Account Debtors obligated on the Accounts, as of any applicable date of determination, exceed the percentage amount of the net amount of all Eligible Accounts owing from all Account Debtors set forth in the table located following the text of this clause (l) with respect to such date (but only the amount of the Accounts of such Account Debtors exceeding such percentage limitation shall be considered ineligible)
| Applicable Dates | Applicable Concentration Percentage (Top 2) | ||||
| 5/06/2025 – 8/31/2025 | 50.00% | ||||
| 9/01/2025 – 9/30/2025 | 47.50% | ||||
| 10/01/2025 – 10/31/2025 | 45.00% | ||||
2
| 11/01/2025 – 11/30/2025 | 42.50% | ||||
| 12/1/2025 and at all times thereafter | 40.00% | ||||
;”
(c)Clause (i) of the definition of Permitted Investments in Section 1.1 of the Original Credit Agreement is hereby amended and restated in its entirety as follows:
“(i) Investments of cash, Cash Equivalents and tangible personal property in any Restricted Subsidiary but solely to the extent that (i) no Default or Event of Default has occurred or would occur as a result of such Investments and (ii) the aggregate amount of such Investments made with respect to (a) the CTB Borrowers does not exceed (x) $4,500,000 in the 2025 fiscal year or (y) $2,500,000 in any other fiscal year; and (b) all other Restricted Subsidiaries does not exceed $1,500,000 in any fiscal year;”
(d)Section 1.1 of the Original Credit Agreement is hereby amended by adding the following defined terms in the appropriate alphabetical order therein:
““First Amendment” means that certain Amendment No. 1 to Credit, Security and Guaranty Agreement, dated as of May 6, 2025 among Credit Parties, Agent and Lenders.”
““First Amendment Effective Date” means May 6, 2025.”
(e)Section 4.1(j) of the Original Credit Agreement is hereby amended and restated in its entirety as follows:
“(j) Credit Parties shall deliver to the Agent:
(i)No later than May 19, 2025, a cash flow projection of Borrowers on a consolidated, line-item and weekly basis, which shall include projected cash receipts and disbursements, for the 13-week period commencing on May 12, 2025, in a form that matches the cash flow projections attached as Exhibit A to the First Amendment (each such cash flow projection, a “Cash Flow Projection” and the cash flow projection attached as Exhibit A to the First Amendment, the “Initial Cash Flow Projection”); and
(ii)On Monday of each calendar week (commencing on May 26, 2025), (i) an updated Cash Flow Projection for the 13-week period commencing on the prior Monday, in a form consistent with the Initial Cash Flow Projection, and (ii) a reconciliation report and a variance report with respect to each of the most recently delivered Cash Flow Projection and the Initial Cash Flow Projection, which shall (x) compare the actual aggregate cash receipts and aggregate cash disbursements against the projected cash receipts and disbursements in such Cash Flow Projection for such period, (y) indicate the percentage variance, if any, of actual aggregate cash receipts and aggregate cash disbursements versus projections therefor for such period, together with an explanation for such variance and (z) be in a form reasonably satisfactory to the Agent.”
(f)Section 6.1 of the Original Credit Agreement is hereby amended and restated in its entirety as follows:
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“Minimum Liquidity. Credit Parties shall not permit, at any time on any date, Liquidity to be less than the amount set forth below with respect to such date:
| Applicable Dates | Applicable Minimum Liquidity Threshold | ||||
| 5/06/2025 – 6/30/2025 | $1,000,000 | ||||
| 7/01/2025 – 7/31/2025 | $0 | ||||
| 8/01/2025 – 8/31/2025 | $1,000,000 | ||||
| 9/01/2025 – 9/30/2025 | $1,500,000 | ||||
| 10/01/2025 – 10/31/2025 | $2,000,000 | ||||
| 11/01/2025 – 11/30/2025 | $3,000,000 | ||||
| 12/1/2025 and at all times thereafter | $5,000,000 | ||||
(g)Paragraph 1 of Schedule 7.4 of the Original Credit Agreement is hereby amended by replacing the reference to “one hundred twenty (120) days” therein with “one hundred fifty (150) days”.
3.Representations and Warranties; Reaffirmation of Security Interest. Each Credit Party hereby confirms that all of the representations and warranties set forth in the Credit Agreement are true and correct in all material respects (without duplication of any materiality qualifier in the text of such representation or warranty) with respect to such Credit Party as of the date hereof except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. Nothing herein is intended to impair or limit the validity, priority or extent of Agent’s security interests in and Liens on the Collateral. Each Credit Party acknowledges and agrees that the Credit Agreement, the other Financing Documents and this Agreement constitute the legal, valid and binding obligation of such Credit Party, and are enforceable against such Credit Party in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.
4.Conditions to Effectiveness. This Agreement shall become effective as of the date on which each of the following conditions has been satisfied, as determined by Agent in its sole discretion:
(a)Each Credit Party shall have delivered to Agent this Agreement, dated as of even date herewith, executed by an authorized officer of such Credit Party;
(b)all representations and warranties of each Credit Party contained herein shall be true and correct in all material respects (without duplication of any materiality qualifier in the text of such representation or warranty) as of the date hereof except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct in all material respects as of such earlier date (and such parties’ delivery of their respective signatures hereto shall be deemed to be its certification thereof);
(c)prior to and after giving effect to the agreements set forth herein, no Default or Event of Default shall exist under any of the Financing Documents;
(d)an executed Borrowing Base Certificate, dated as of the date of this Agreement, reflecting the amendments set forth herein; and
(e)Agent shall have received the Amendment Fee in immediately available funds on the First Amendment Effective Date.
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5.Amendment Fee. In consideration of Agent’s agreement to enter into this Agreement, Borrowers agree to pay Agent, for the benefit of all Lenders in accordance with their Pro Rata Share of the Revolving Loan Commitments, an amendment fee in the amount of [***] (the “Amendment Fee”). The Amendment Fee shall be due and payable in cash on the First Amendment Effective Date. The Amendment Fee shall be deemed fully-earned on the First Amendment Effective Date and, once paid, is non-refundable.
6.Release. In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Credit Party, voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself and all of its respective parents, subsidiaries, affiliates, members, managers, predecessors, successors, and assigns, and each of their respective current and former directors, officers, shareholders, agents, and employees, and each of their respective predecessors, successors, heirs, and assigns (individually and collectively, the “Releasing Parties”) does hereby fully and completely release, acquit and forever discharge each of Agent, Lenders, and each their respective parents, subsidiaries, affiliates, members, managers, shareholders, directors, officers and employees, and each of their respective predecessors, successors, heirs, and assigns (individually and collectively, the “Released Parties”), of and from any and all actions, causes of action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent, choate or inchoate, known or unknown that the Releasing Parties (or any of them) has or may have against the Released Parties or any of them (whether directly or indirectly) as of the date hereof. Each Credit Party acknowledges that the foregoing release is a material inducement to Agent’s and each Lender’s decision to enter into this Agreement and agree to the modifications contemplated hereunder, and has been relied upon by Agent and Lenders in connection therewith.
7.No Waiver or Novation. The execution, delivery and effectiveness of this Agreement shall not, except as expressly provided in this Agreement, operate as a waiver of any right, power or remedy of Agent, nor constitute a waiver of any provision of the Credit Agreement, the Financing Documents or any other documents, instruments and agreements executed or delivered in connection with any of the foregoing. Nothing herein is intended or shall be construed as a waiver of any existing Defaults or Events of Default under the Credit Agreement or the other Financing Documents or any of Agent’s rights and remedies in respect of such Defaults or Events of Default. This Agreement (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Credit Agreement.
8.Affirmation. Except as specifically amended pursuant to the terms hereof, each Credit Party hereby acknowledges and agrees that the Credit Agreement and all other Financing Documents (and all covenants, terms, conditions and agreements therein) shall remain in full force and effect, and are hereby ratified and confirmed in all respects by such Credit Party. Each Credit Party covenants and agrees to comply with all of the terms, covenants and conditions of the Credit Agreement and the Financing Documents, notwithstanding any prior course of conduct, waivers, releases or other actions or inactions on Agent’s or any Lender’s part which might otherwise constitute or be construed as a waiver of or amendment to such terms, covenants and conditions.
9.Miscellaneous.
(a)Reference to the Effect on the Credit Agreement. Upon the effectiveness of this Agreement, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of similar import shall mean and be a reference to the Credit Agreement, as amended by this Agreement. Except as specifically amended above, the Credit Agreement, and all other Financing Documents (and all covenants, terms, conditions and agreements therein), shall remain in full force and effect, and are hereby ratified and confirmed in all respects by each Credit Party.
(b)Governing Law. THIS AGREEMENT AND ALL DISPUTES AND OTHER MATTERS RELATING HERETO OR ARISING THEREFROM (WHETHER SOUNDING IN
5
CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
(c)Incorporation of Credit Agreement Provisions. The provisions contained in Section 11.6 (Indemnification), Section 13.8(b) (Submission to Jurisdiction), and Section 13.9 (Waiver of Jury Trial) of the Credit Agreement are incorporated herein by reference to the same extent as if reproduced herein in their entirety.
(d)Headings. Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
(e)Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page shall bind the parties hereto. In furtherance of the foregoing, the words “execution”, “signed”, “signature”, “delivery” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby or thereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. As used herein, “Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or other record. This Agreement and the other Financing Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
(f)Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
(g)Severability. In case any provision of or obligation under this Agreement shall be invalid, illegal or unenforceable in any applicable jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
(h)Successors/Assigns. This Agreement shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the parties hereto, subject to the provisions of the Credit Agreement and the other Financing Documents.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
6
IN WITNESS WHEREOF, intending to be legally bound, each of the parties have caused this Agreement to be executed as of the day and year first above mentioned.
AGENT: MIDCAP FUNDING IV TRUST,
as Agent
By: Apollo Capital Management, L.P.,
its investment manager
By: Apollo Capital Management GP, LLC,
its general partner
By: /s/ Maurice Amsellem
Name: Maurice Amsellem
Title: Authorized Signatory
Name: Maurice Amsellem
Title: Authorized Signatory
LENDER: MIDCAP FUNDING IV TRUST,
as a Lender
By: Apollo Capital Management, L.P.,
its investment manager
By: Apollo Capital Management GP, LLC,
its general partner
By: /s/ Maurice Amsellem
Name: Maurice Amsellem
Title: Authorized Signatory
Name: Maurice Amsellem
Title: Authorized Signatory
[Signatures Continue on Following Page]
BORROWERS: ARQ, INC.
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Treasurer
ARQ LLC
WHARNCLIFFE ASSET MANAGEMENT LLC
MINE FOUR LLC
ARQ SERIES B, LLC
ADEQUITY, LLC
ARQ SOLUTIONS, LLC
ARQ SOLUTIONS (OPERATIONS), LLC
ARQ PURIFICATION, LLC
FIVE FORKS MINING, LLC
ARQ SOLUTIONS (RED RIVER), LLC
CROWFOOT SUPPLY COMPANY, LLC
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Treasurer
ARQ SOLUTIONS (ES), INC.
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Secretary
ADA ANALYTICS, LLC
By: ARQ SOLUTIONS (ES), INC., its sole member
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Secretary
ACS LAND COMPANY, LLC
By: ARQ SOLUTIONS (OPERATIONS), LLC,
its sole member
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Treasurer
ARQ SOLUTIONS (VORTEX IP), LLC
By: ARQ SOLUTIONS (OPERATIONS), LLC,
its sole member
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Treasurer
ARQ SOLUTIONS (VORTEX OPERATIONS), LLC
By: ARQ SOLUTIONS (VORTEX IP), LLC,
its sole member
By: ARQ SOLUTIONS (OPERATIONS), LLC,
its sole member
By: /s/ Stacia Hansen
Name: Stacia Hansen
Title: Chief Accounting Officer and Treasurer
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: May 7, 2025
| /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, Jay Voncannon, 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: May 7, 2025
| /s/ Jay Voncannon | |||||
| Jay Voncannon | |||||
| 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 March 31, 2025, 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 Jay Voncannon, 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 | |||||
| May 7, 2025 | |||||
| /s/ Jay Voncannon | |||||
| Jay Voncannon | |||||
| Chief Financial Officer | |||||
| May 7, 2025 | |||||
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 March 31, 2025, 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 March 31, 2025 were taken from the MSHA system as of May 5, 2025.
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 March 31, 2025, 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 March 31, 2025, 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 March 31, 2025, 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 March 31, 2025, there were no pending or legal actions before the Commission at Five Forks Mine, Corbin Project or Mine Four.