ARQ 10-K & 10-Q changes, risk factors and insider trading
Arq, Inc. · Nasdaq · Miscellaneous Chemical Products · CIK 1515156 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our growth plans are dependent on the successful commercial production of our GAC products, and we may be unable to achieve our growth goals if we fail to identify a solution to the design flaws at our GAC Facility, or fail to meet any revised project costs and anticipated production ramp-up periods associated with any further capital upgrades to our GAC Facility at our Red River Plant that may be necessary to remedy such flaws.”
New heading “Executing on our business plan to produce GAC products at nameplate capacity has required, and may continue to require, significant capital, which may be more than anticipated and require us to seek additional financing.”
New heading “We may not realize the anticipated benefits of acquisitions, joint ventures, and divestitures, or these benefits may take longer to realize than expected.”
Removed heading “We may be unable to meet our projected commissioning timelines, costs and production ramp up for our capital upgrades at our Red River Plant, or we may experience difficulties in generating and maintaining demand for products manufactured there.”
Removed heading “Manufacturing Legacy Arq's products and GAC products requires significant capital.”
Removed heading “The Arq Acquisition has required significant technological changes in manufacturing that may adversely affect the market acceptance of Legacy Arq’s products.”
Removed heading “Our future financial results will suffer if we do not effectively manage our expanded operations following the Arq Acquisition.”
Removed heading “There can be no assurance that the Arq Acquisition will result in additional value for our stockholders.”
Removed heading “The failure to continue to successfully integrate the Legacy Arq businesses in the expected timeframe could adversely affect our future business and financial performance.”
Removed heading “The synergies attributable to the Arq Acquisition may vary from expectations.”
Removed heading “A pandemic, epidemic or outbreak of an infectious disease such as COVID-19 may materially adversely affect our business.”
Largest changes
“Although we conducted extensive due diligence in connection with the Arq Acquisition, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Further, as a result of the Arq Acquisition, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.”see in full comparison
Uncertain geopolitical conditions, including in connection withsee in full comparisontheuncertaintynewandU.S. presidential administration, the conflictschanges inthe Middle East, the invasion of Ukraine, sanctions against Russia, increaseddomestic and international U.S. policy, as well as with respect to current international conflicts, sanction regimes, multinational institutions, increased frequency of cyber-attacks, trade policies (including tariffs and trade sanctions) and other potential impacts on the world economy and currencies may cause disruptions in our business. Theseincludedisruptions may result in logistics delays or shortages inproducingproducing, shipping, andshippingreceiving certain of our raw materials, increases in energypricesprices,thatincreasescould increasein costs of certain of our raw materials, increases in transportation costs from overall highergasolinefuel prices, higher prices due to tariffs, andcyber-attacksothertargeted at U.S. power infrastructurechanges that could impact demand for our products.
“1.The implementation of environmental regulations regarding certain pollution control and permitting requirements has been delayed from time to time due to various lawsuits. In addition, the U.S. Supreme Court's overturning of the Chevron Doctrine in 2024 may result in further litigation challenging the validity of current or proposed environmental regulations. The uncertainty created by litigation and reconsideration of rule-making by the EPA or other regulatory agencies may negatively impact our business, results of operations and financial condition and will likely continue to do so.”see in full comparison
“A pandemic, epidemic or outbreak of an infectious disease such as COVID-19 may materially adversely affect our business.”see in full comparison
“Our growth plans are dependent on the successful commercial production of our GAC products, and we may be unable to achieve our growth goals if we fail to identify a solution to the design flaws at our GAC Facility, or fail to meet any revised project costs and anticipated production ramp-up periods associated with any further capital upgrades to our GAC Facility at our Red River Plant that may be necessary to remedy such flaws.”see in full comparison
“We may be unable to meet our projected commissioning timelines, costs and production ramp up for our capital upgrades at our Red River Plant, or we may experience difficulties in generating and maintaining demand for products manufactured there.”see in full comparison
Full comparison: every changed paragraph (105)
The following risks relate to us as of the date this Report is filed with the SEC. This list of risks is not intended to be exhaustive, but reflects what we believe are the material risks inherent in our business and the ownership of our securities as of the specified dates. A statement to the effect that the occurrence of a specified event may have a negative impact on our business, results of operations, profitability, financial condition, or the like, is intended to reflect the fact that such an event, if it occurs, would be likely to have a negative impact on your investment in Arq, but should not imply the likelihood of the occurrence of such specified event. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. The order in which the following risk factors are presented is not intended as an indication of the relative seriousness of any given risk.
Our growth plans are dependent on the successful commercial production of our GAC products, and we may be unable to achieve our growth goals if we fail to identify a solution to the design flaws at our GAC Facility, or fail to meet any revised project costs and anticipated production ramp-up periods associated with any further capital upgrades to our GAC Facility at our Red River Plant that may be necessary to remedy such flaws.
Our Company’s growth is dependent on our ability to successfully ramp-up production at our GAC Facility to nameplate capacity and to produce on-specification GAC products at such volumes on a consistent and sustained basis. Initial mechanical completion of construction of our GAC Facility occurred in January 2025, and on August 6, 2025, we announced that we had successfully commissioned the GAC Facility and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility, on a standalone basis as well as in combination with the inherent variability of Corbin Wetcake, which we planned to use to manufacture our GAC products. As a result, we have paused GAC production, idled the Corbin Facility as a cost saving measure, and have launched an engineering and production process optimization review, which will include an evaluation of potential GAC Facility design modifications and production economics at different scales. Additionally, we now expect to transition away from using Corbin Wetcake for the production of our GAC products to a bituminous proven performance coal feedstock, which we believe can more effectively overcome design constraints.
We may be unable to meet our projected commissioning timelines, costs and production ramp up for our capital upgrades at our Red River Plant, or we may experience difficulties in generating and maintaining demand for products manufactured there.
OurIn abilityaddition to increasethe productionforegoing issues experienced to date, any further construction and commissioning of GACpotential on a sustained basis is dependent on the construction, commissioning,modifications and ramp of upgrades at our Red River Plant. We have achieved mechanical completion of construction at our Red River Plant. However, the commissioning, commencement and rampramp-up of production at thisour facilityGAC areFacility will be subject to a number of other uncertainties inherent in all new construction and manufacturing operations.operations, Thesesuch includeas ongoingdelays in procurement or construction, shortages of materials or availability of qualified contractors, liquidity requirements for funding the expansionmodifications ofto theour facility,GAC Facility, ongoing compliance with regulatory requirements, environmental and operational licenses and approvals for additional GAC Facility expansion, supply chain constraints,constraints (including in the supply of bituminous coal), hiring, training and retention of qualified employees and the pace of commissioning and bringing production equipment and processes online with the capability to manufacture high-quality GAC products at scale.nameplate In September 2024, we terminated an existing contract we had previously entered into with a third-party contractor for the construction of the GAC Facility at our Red River Plant after a number of construction delays and cost overruns became apparent. We then moved the construction and project management functions for the GAC Facility internally in order to limit any further construction delays.capacity.
If we experience any further issues or delays in identifying a solution to the design issues at our GAC Facility, or meeting any revised projected timelines, cost estimates, or anticipated production capacities associated with potential GAC Facility modifications, our growth as a business, future prospects, operating results and financial condition will be harmed. Moreover, if further issues arise or the project becomes cost prohibitive, it could affect our overall business plans for the GAC Facility, which could have a material impact on our business and growth potential.
Executing on our business plan to produce GAC products at nameplate capacity has required, and may continue to require, significant capital, which may be more than anticipated and require us to seek additional financing.
To date, we have experienced construction delays and cost overruns in connection with the construction, initial commissioning and initial productions at our GAC Facility, which has caused the project to exceed the originally anticipated budget. Due to the issues experienced to date at our GAC Facility, we have undertaken an engineering and production process optimization review, and depending on the results of such review may be required to spend significant additional capital to construct and place into service certain potential modifications to our GAC Facility to address design flaws and reach nameplate capacity. To date, we have utilized cash on hand, issued common stock in multiple equity offerings and entered into a Revolving Credit Facility to meet these capital funding requirements. However, depending on the results of our optimization review, we may require additional financing for any additional capital costs associated with any potential GAC Facility modifications needed to resume GAC production and reach nameplate capacity. Such financing may come from cash on hand, additional debt financing, or additional equity raises. However, there can be no assurance that we will be successful in obtaining the required additional financing or, if financing is available to us, such financing may not be on terms that are favorable to us. The failure to maintain adequate liquidity to enable the Company to resume GAC production, reach nameplate capacity, and produce our GAC products consistently at those volumes on a go forward basis could result in a delay in executing our business plan, which could have a material adverse effect on our business, operating results and financial condition.
However, if we experience any further issues or delays in meeting our projected timelines, costs, or production capacity for the upgrades at our Red River Plant, or generating and maintaining demand for the products we manufacture there, our business, prospects, operating results and financial condition may be harmed. We anticipate financing the completion and ramp-up of the GAC Facility with cash on hand, cash generation, ongoing cost reduction initiatives, and through borrowings on our Revolving Credit Facility. Mechanical completion of construction of the GAC Facility was completed in January 2025. We expect to complete commissioning activities and commence production at the GAC Facility by the end of the first quarter of 2025. If we experience any further delays or unexpected additional costs such as those described above, the project timeline for our Red River Plant expansion may be delayed beyond the end of the first quarter of 2025.
Manufacturing Legacy Arq's products and GAC products requires significant capital.
Legacy Arq was a development stage entity that, prior to the Arq Acquisition, had not generated any revenue. Legacy Arq historically had operating losses and required multiple financing rounds to fund its business plan. We are currently spending significant capital to execute our business plan to manufacture Legacy Arq’s products as a feedstock for GAC products. We have issued common stock in multiple equity offerings and entered into our Revolving Credit Facility to assist with funding these capital requirements, in addition to utilizing cash on hand. We are targeting the end of the first quarter of 2025 for our first commercial production of Legacy Arq products and for our first commercial production of GAC products at our Red River Plant. To meet these production timing goals and to fund ongoing production of our GAC products, we may need to raise additional capital. We may not be successful in obtaining the required financing or, if financing is available to us, such financing may not be on terms that are favorable to us. The failure to maintain adequate liquidity to enable the Company to produce Legacy Arq products and GAC products by the end of the first quarter of 2025 on a going forward basis could result in a delay in executing our business plan, which could have a material adverse effect on our business, operating results and financial condition.
As of December 31, 2024,2025, we had approximately $13.8$19.0 million outstanding and $16.2$1.4 million available under our Revolving Credit Facility. In addition, upon completion of the Arq Acquisition,Further, we assumedhold aan amortized term loan (the "CTB Loan") held by Legacy Arqassociated with aour financialCorbin institutionFacility with Community Trust Bank, Inc. ("CTB") in the principal amount of $10.0 million. WeAs of December 31, 2025, we had $8.4 million outstanding under the CTB Loan. However, we may need to incur additional indebtedness. Our Revolving Credit Facility contains a floating interest rate. Our levels of indebtedness and higher interest rates could impact us as follows:
•require the consent of our existing lenders to incur certain additional indebtedness;
Our Revolving Credit Agreement and CTB Loan currently contain financial and other restrictive covenants. For example, the Revolving Credit Agreement includes financial covenants that require us to maintain a maximum leverage ratio and a minimum liquidity level (as these terms are defined in the Revolving Credit Agreement). These covenants could limit our ability to engage in activities that are in our long-term best interests. Our failure to comply with these covenants would result in an event of default that, if not waived, could result in the acceleration of all outstanding indebtedness. Our Revolving Credit Facility and CTB Loan have maturity dates of December 27, 2029 and January 27, 2036, respectively. In the future, we may be unable to obtain new financing or refinancing on acceptable terms. See Note 56 "Debt Obligations" to the Consolidated Financial Statements included in Item 8 of this Report for further information.
The Arq Acquisition has required significant technological changes in manufacturing that may adversely affect the market acceptance of Legacy Arq’s products.
Upon completion and commencement of commercial production at our GAC Facility we will be producing GAC products that we have not yet sold commercially. Legacy Arq’s manufacturing technology has been extensively tested at scale, but continuous operations represent risks including an inability to achieve the scale-up efficiencies that have been assumed in our business plan. In turn, this could impact throughput or yields at our Corbin Facility, which could lead to lower production and higher operating costs. There is also risk of delays that are product-specific. For example, we may not receive required state or municipal approval for our new GAC products in a timely manner, adequate customer acceptance of our new GAC products or achieve acceptable performance given the specification differentiation between some of Legacy Arq’s products and the industry’s existing conventional products. These risks could have a material adverse effect on our business, operating results and financial condition.
There could be no future demand for Legacyour Arq’sproducts, products.including for our Corbin Wetcake.
OurWe initialoriginally planned to use Corbin Wetcake to manufacture our GAC products. However, due to previously disclosed design challenges in our GAC Facility, we may be required to redesign, reconstruct and/or update the front-end of our GAC Facility to use a bituminous proven performance coal feedstock for Arqthe Powdermanufacture isof our GAC products. This would eliminate our internal usage requirements for Corbin Wetcake produced at our Corbin Facility, which has been temporarily idled as a feedstockcost-savings formeasure. AC,With andrespect althoughto our AC products, we believe current conditions are favorable as a result of excess demand versus supply,supply (especially in the GAC market), but there can be no guarantee that this will continue. Drivers of demand for our AC products include factors beyond our control such as population growth, regulatory requirements including federal emissions regulations such as the MATS Rules or state or municipal approval requirements specifically for our GAC products which we may not achieve in a timely manner or at all, and gross domestic product growth, amongstamong others.other factors. Any major global downturn could also materially negatively impact this demand. New AC supply is driven by new manufacturing sites being built, and we have little visibility on what additional manufacturing capacity our competitors or other manufacturers may add in the future.
Given that we no longer expect to use Corbin Wetcake to manufacture our GAC products at this time, our business plan and commercial success is now more dependent on selling Corbin Wetcake as an additive or feedstock into other markets, such as components for asphalt and asphalt emulsions, or for use in the purified coal and synthetic graphite industries. In addition, we are exploring uses for certain rare earth minerals and critical elements that can be isolated during the manufacturing process at our Corbin Facility for use in a variety of applications. These applications are currently in various stages of proof-of-concept testing or preliminary customer testing. Although testing data and feedback from potential customers have been generally positive to date, there can be no assurance that these products will become commercially viable. Our success in utilizing the Corbin Wetcake produced at our Corbin Facility will depend on our ability to gain market acceptance and to correctly forecast demand in these new markets. There can be no assurance that we will be able to successfully expand our business into these new markets, or that such expansion will prove to be beneficial. If we are unable to find demand for our Corbin Wetcake, it could have a material adverse effect on our business, operating results and financial condition.
Our business plan and commercial success also assumes selling Arq Powder into new markets, including as an additive into the asphalt market. Although testing data and feedback from potential customers have been generally positive to date, there can be no assurance that these products will be commercially viable. As we attempt to develop and grow Arq Powder utilization worldwide, our success will depend on our ability to gain market acceptance and to correctly forecast demand in these new markets. There is no assurance that we will be able to increase our business to meet targets globally, or that projections on which such targets are based will prove accurate, or that the pace of growth or coverage will meet customer expectations.
Our future financial results will suffer if we do not effectively manage our expanded operations following the Arq Acquisition.
Following the Arq Acquisition, the size of our business has increased. Our future results depend, in part, upon our ability to manage this expanded business, which poses substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurance that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Arq Acquisition.
Disruptions or underutilization at any of our facilities could negatively impact our ability to meet customer supply requirements due to damage to or insufficient production capacity of the Red River Plant and may have a material adverse effect on our business, results of operations and financial condition.
We own and operate the Red River Plant, which is our sole manufacturing plant for producing and selling AC products to our customers,customers. andWe also own and operate the Corbin Facility, the primary purpose of which iswas producing Corbin Wetcake for the manufacture of our soleGAC productionproducts, facilityas well as for manufacturingpotential Arquses Powder.in Ourother currentindustries. During 2025, in order to reduce operating costs and futuremanage inventory we periodically idled the Corbin Facility and it has been idled since January 1, 2026 in order to save on operating costs as we work to address ramp-up issues with our GAC Facility discussed above. Our ability to meet customer expectations, manage inventory, complete sales and achieve our objectives for operating efficiencies depends on the full-time operation of the Red River Plant, and the execution of our current business plan depends on the integrationsuccessful identification of thesolutions Corbin Facility asto the primaryissues sourceexperienced ofto date at our GAC Facility, the eventual ramp-up to nameplate capacity at our GAC Facility, and our ability to secure adequate feedstock for the GAC Facility's commissioning and ramp-up of commercial production. We cannot replicate our manufacturing methods at another plant due to the limited availability of similar manufacturing plants, the additional costs incurred in supplying raw materials such as lignite to another plant, and the risk of revealing our confidential and proprietary technologies and manufacturing processes.
If we experience aadditional disruptiondisruptions at theseour manufacturing facilities, due to natural disasters, extreme weather, other unanticipated problems such as labor difficulties, pandemics (includingor the COVID-19 pandemic),epidemics, equipment failure, cyberattacks or other cybersecurity incidents, capacity expansion difficulties or unscheduled maintenance, we would suffer a loss of inventory to supply customers, likely incur additional costs to deliver products to our customers, and disrupt the ordinary course of our business. In addition, if contractual demand exceeds manufacturing capacity, weit wouldcould jeopardize our ability to fulfill obligations under our contracts, which could, in turn, result in reduced sales, profitability, contract penalties or terminations and damage to our customer relationships and could have a material adverse effect on our business. While we have insured our facilities against damage or destruction as well as for losses from business interruptions, there can be no assurance that any insurance coverage will be sufficient to cover any such losses.
Further, a prolonged disruption in our operations at the Red River Plant due to downtime or having to meet customer requirements that exceed our maximum manufacturing capacity would require us to seek alternative customer supply arrangements, which may not be on attractive terms to us or could lead to delays in distribution of products to our customers,customers. eitherFor example, since pausing production at our GAC Facility, we have had to procure alternative GAC products for certain of whichour customers at our expense. These disruptions and requirements to procure alternative products for our customers could have a material adverse effect on our business, results of operations and financial condition.
There can be no assurance that the Arq Acquisition will result in additional value for our stockholders.
There can be no assurance that the Arq Acquisition will provide greater value to our stockholders than that reflected in the current price of our common stock. As a result of the Arq Acquisition, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock, which may make it more difficult for us to attract and retain qualified personnel and business partners.
InWe connectionhave withand may in the Arq Acquisition, we mayfuture be required to take write-downs or write-offs, restructuring and impairment or other charges that could negativelyhave affecta significant negative effect on our business, assets, liabilities, prospects, outlook, financial condition andcondition, results of operations.operations and our stock price.
There can be no assurance that issues or market conditions will not arise that may force us to write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses and harm our financial condition. Unexpected risks may arise, and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. We assess long-lived assets for impairment annually or more frequently if events or circumstances occur that indicate it is more likely than not that the carrying value of the long-lived assets exceeds their fair value. To the extent the value of any of our long-lived assets become impaired or are further impaired, we may be required to record non-cash impairment charges that could have a material adverse impact on our financial condition, results of operations and stock price.
As of December 31, 2025, we recorded an impairment on certain of our long-lived Corbin Facility assets and patents associated with the manufacturing process for producing Corbin Wetcake, which resulted in the Company recognizing an impairment charge of $44.8 million for the fiscal year ended December 31, 2025. This impairment was primarily attributable to our decision to idle the Corbin Facility and cease the use of Corbin Wetcake as feedstock in the manufacturing of our GAC products. See Note 2 - "Impairment" to the Consolidated Financial Statements included in Item 8 of this Report for further information.
We may not realize the anticipated benefits of acquisitions, joint ventures, and divestitures, or these benefits may take longer to realize than expected.
From time to time, we may make strategic acquisitions and divestitures and participate in joint ventures, such as the Arq Acquisition. Acquisitions and joint ventures may involve significant challenges and risks, including that the acquisitions or joint ventures do not advance our business strategy or fail to produce satisfactory returns on investment. Other risks include difficulties integrating acquisitions with our operations, applying internal control processes to these acquisitions (including those related to cybersecurity), assimilating new capabilities to meet our business needs, combining business cultures, failing to realize the anticipated benefits of acquisitions or joint ventures, or realized benefits being significantly delayed, including because the technologies or products acquired may not be complementary or compatible with our business strategy or product portfolio, may not broaden our market position, product portfolio or footprint, or enhance our ability to deliver value to our customers, and due diligence evaluations of potential transactions not identifying all of the business, legal, compliance, and financial risks to accurately estimate the impact of a particular acquisition or joint venture, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities or costs associated with any quality issues with an acquisition target’s products or services.
For example, we planned to use Corbin Wetcake produced at our Corbin Facility in the production of our GAC products. However, while the manufacturing technology has been extensively tested at scale, we encountered inherent variability of Corbin Wetcake during continuous operations that would require modifications of our manufacturing equipment and processes. Due to these issues and other design issues, we now expect to transition away from using Corbin Wetcake to bituminous proven performance coal feedstock to produce our GAC products, which we believe can more effectively overcome design constraints. As discussed elsewhere in this Report, these changes have negatively impacted our GAC production and will delay our ability to increase capacity.
Although we conducted extensive due diligence in connection with the Arq Acquisition, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Further, as a result of the Arq Acquisition, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.
The failure to continue to successfully integrate the Legacy Arq businesses in the expected timeframe could adversely affect our future business and financial performance.
The combination of two independent companies is a complex, costly and time-consuming process. As a result, we have devoted and continue to devote significant management attention and resources to integrate Legacy Arq's operations, including in connection with the completion of our GAC Facility. We may not be successful in integrating the operations of Legacy Arq or otherwise realizing the anticipated benefits of the Arq Acquisition. In addition, the continued integration of Legacy Arq may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management’s attention, and may cause our stock price to decline. The difficulties of combining the operations of the two companies include, among others:
•managing a larger company;
•coordinating geographically separate organizations;
•the potential diversion of management’s focus and resources from other strategic opportunities and from operational matters;
•performance shortfalls as a result of the diversion of management’s attention caused by integrating the combined companies’ operations;
•aligning and executing a new business strategy;
•retaining existing customers and attracting new customers;
•maintaining employee morale and retaining key members of management and other employees;
•the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, systems, procedures and policies;
•the possibility of faulty assumptions underlying expectations regarding the integration process;
•consolidating corporate and administrative infrastructures and eliminating duplicative operations;
•coordinating sales, distribution and marketing efforts;
•maintaining research and development technology momentum and leading customer technical collaboration progress;
•significant changes to current market conditions that may adversely affect the business plan;
•integrating IT, communications and other systems;
•changes in applicable laws and regulations;
•managing tax costs or inefficiencies associated with integrating Legacy Arq's operations;
•unforeseen expenses or delays associated with the Arq Acquisition, including the completion of the GAC Facility;
•creating a logistics network to reliably allow use of Arq Powder as a feedstock in the GAC Facility; and
•taking actions that may be required in connection with obtaining regulatory approvals.
Many of these factors are outside of our control and any one of them could result in increased costs, decreased revenue and diversion of management’s time and energy, which could materially impact our business, financial condition and results of operations. In addition, even if the operations of Legacy Arq are integrated successfully, we may not realize the full benefits from the Arq Acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated timeframe, or at all.
Specifically, the realization of the full benefits from the Arq Acquisition is dependent on our ability to construct expansions to existing facilities and to integrate Arq Powder on the projected timeline and within the projected budget. If these anticipated capital expenditures are delayed, whether as a result of unanticipated challenges in permitting, construction or economic conditions, the cost of such activities may increase and the timing of projected revenue may be impacted. Further, the costs of such construction activities have and may continue to significantly exceed the budgeted costs. The costs of construction or other anticipated capital expenditures are subject to the effects of the current inflationary environment and we may not be able to successfully offset the effects of inflation. See "Item 1A. Risk Factors - We may be unable to meet our projected construction timelines, costs and production ramp up for our capital upgrades at our Red River Plant, or we may experience difficulties in generating and maintaining demand for products manufactured there." above for further information.
The synergies attributable to the Arq Acquisition may vary from expectations.
We may fail to realize the anticipated benefits and synergies expected from the Arq Acquisition. Our success will depend, in significant part, on our ability to successfully integrate the Legacy Arq business and realize the anticipated strategic benefits and synergies. We continue to believe that the combination of the two businesses will allow us to enter into more diversified, higher margin markets with our products. However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the Arq Acquisition. These anticipated benefits and actual operating, technological, strategic and revenue opportunities may not be realized fully or at all, or may take longer to realize than expected. If we are not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Arq Acquisition within the anticipated timeframe or at all, our business, financial condition and operating results may be adversely impacted.
Management's Discussion & Analysis (MD&A)
New heading “GAC Engineering and Production Process Optimization Review”
New heading “Impairment of long-lived assets”
Removed heading “Tinuum Group and Tinuum Services Distributions”
Removed heading “Business Combinations, including asset acquisitions”
Largest changes
“As a result of the adverse impacts noted above related to the Corbin Facility and GAC production and as part of our periodic review of the carrying values of our long-lived assets, we performed an impairment analysis of the Corbin Facility long-lived assets (the "Corbin Asset Group") as of December 31, 2025. We determined that the estimated undiscounted cash flows for the Corbin Asset Group were less than its carrying value, and the Corbin Asset Group was impaired. …”see in full comparison
“We review and evaluate our long-lived assets and intangibles for impairment at least annually, or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. We evaluate our long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (defined as an "Asset Group"). We make various estimates and assumptions about an Asset Group to determine whether a quantitative impairment test is necessary. …”see in full comparison
“In addition, the Company concluded that the intangible asset, developed technology, which comprised a number of patents and other intellectual property attributable to the proprietary manufacturing process for Corbin Wetcake, was also impaired and that its estimated fair value as of December 31, 2025 was zero. Accordingly, the Company recorded an impairment charge and a corresponding write-down of the developed technology in the amount of $6.6 million as of December 31, 2025.”see in full comparison
“(1)Represents impairment charge recognized at our Corbin Facility of $44.8 million as well as the write-down of certain additional assets at the GAC Facility related to the use of product produced at the Corbin Facility that could not be reused or repurposed, resulting in an additional loss of $2.3 million during the year ended December 31, 2025.”see in full comparison
“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 a lignite mine located in Saline, Louisiana (the "Five Forks Mine") that currently supplies the primary raw material for the manufacturing of the majority of our products. …”see in full comparison
Full comparison: every changed paragraph (96)
The following discussion and analysis of our financial condition and results of our operations should be read together with the audited Condensed Consolidated Financial Statements and notes of Arq, Inc. included in Item 1 of Part II, Item 8 of this 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."
We are an environmental technology company andthat areis principally engaged in the sale of consumable air, water,water and soil treatment solutions primarily based on AC.activated carbon ("AC"). Our proprietary AC products enable customers to reduce air, soil,water, and watersoil contaminants, including mercury, per- and polyfluoroalkyl substances ("PFAS") and other pollutantspollutants, to meet the challenges of existing and pending air quality, soil,quality and water regulations. We manufacture and sell AC and other chemicals used to capture and remove impurities, contaminantscontaminants, 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 a lignite mine located in Saline, Louisiana (the "Five Forks Mine") that currently supplies the primary raw material for the manufacturing of the majority of our products. We also control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines. Using the Corbin Facility's manufacturing process, we convert coal waste into a purified, microfine carbon powder for high value applications ("Corbin Wetcake"). On August 6, 2025, we announced that we had successfully commissioned our Red River Plant’s GAC Facility (the "GAC Facility") and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility, on a standalone basis as well as in combination with the inherent variability of Corbin Wetcake, which we planned to use to manufacture our GAC products. As a result, we have paused GAC production, idled the Corbin Facility as a cost saving measure, and have launched an engineering and production process optimization review, which will include an evaluation of potential GAC Facility design modifications and production economics at different scales. Additionally, we now expect to transition away from using Corbin Wetcake for the production of our GAC products to a bituminous proven performance coal feedstock, which we believe can more effectively overcome design constraints. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Drivers of Demand and Key Factors Affecting Profitability" for further information.
As a result of the adverse impacts noted above related to the Corbin Facility and GAC production and as part of our periodic review of the carrying values of our long-lived assets, we performed an impairment analysis of the Corbin Facility long-lived assets (the "Corbin Asset Group") as of December 31, 2025. We determined that the estimated undiscounted cash flows for the Corbin Asset Group were less than its carrying value, and the Corbin Asset Group was impaired. The Company further determined that the GAC Facility assets were not impaired as the estimated undiscounted cash flows associated with the assets exceeded their carrying value. Accordingly, we completed a valuation of the Corbin Asset Group with the assistance of an independent third party to estimate its fair value. We estimated the fair value of the Corbin Asset Group at $10.9 million and recorded an impairment charge (the "Corbin Impairment Charge") and corresponding write-down of the Corbin Asset Group in the amount of $38.1 million. Included in this amount is also $0.3 million of Corbin Wetcake inventory that was written-off as of December 31, 2025.
In addition, the Company concluded that the intangible asset, developed technology, which comprised a number of patents and other intellectual property attributable to the proprietary manufacturing process for Corbin Wetcake, was also impaired and that its estimated fair value as of December 31, 2025 was zero. Accordingly, the Company recorded an impairment charge and a corresponding write-down of the developed technology in the amount of $6.6 million as of December 31, 2025.
Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials. Our AC products include both PAC and GAC, among others. Additionally, we own the Five Forks Mine, a lignite coal mine that currently supplies the primary raw material for the manufacturing of our products.
In February 2023, we acquired 100% of the equity interests, assets and liabilities of the subsidiaries of Arq Limited, an environmental technology company incorporated under the laws of Jersey (hereafter the Arq Limited subsidiaries referred to as "Legacy Arq", and the acquisition itself referred to as the "Arq Acquisition") to secure access to additional U.S. based bituminous coal feedstock, a manufacturing facility located in Corbin, Kentucky (the "Corbin Facility") and certain patented processes as a means to manufacture new advanced GAC products for sale into the APT and other markets. Under this manufacturing process, we convert high-quality recovered bituminous coal fines into a purified, microfine carbon powder known as Arq powderTM ("Arq Powder") for high value applications, such as for a raw material to produce GAC products. We expect to begin using Arq Powder as a feedstock to produce high-quality GAC products by the end of the first quarter of 2025 for sale into the APT and other markets. We anticipate that our GAC products made using these highly purified recovered bituminous coal fines will have a materially lower carbon footprint than other coal-based competitor alternatives.
We believe Arqthat PowderCorbin Wetcake has additionalthe potential to enable us to access new markets and applications. We intend to secure customer interest in ArqCorbin PowderWetcake as an additive into other markets, such as componentsa component for asphalt.asphalt, Theseor productsfor utilizinguse Arqin Powderthe purified coal and synthetic graphite industries. In addition, we are expectedexploring touses havefor certain rare earth minerals and critical elements that can be isolated during the manufacturing process at our Corbin Facility for use in a lowervariety carbonof footprint compared to similar products utilizing conventional materials and have demonstrated other beneficial performance attributes during lab-scale customer testing.applications. These applications are currently in various stages of proof of concept testing or preliminary customer testing.
In February 2024, as part of a larger rebranding, the Company changed its name to Arq, Inc., and on February 1, 2024, our common stock commenced trading on the Nasdaq Global Market under the ticker symbol, "ARQ."
Drivers of demand and 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 forof our new GAC products.products once production recommences.
GAC Engineering and Production Process Optimization Review
As previously disclosed, on August 6, 2025, we announced that we had successfully commissioned our GAC Facility and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility.
As a result, we have paused GAC production, idled the Corbin Facility as a cost saving measure, and have launched an engineering and production process optimization review, which will include an evaluation of potential GAC Facility design modifications and production economics at different scales. This decision follows independent testing results received in January 2026 demonstrating that our current thermal oxidizer can only support approximately 15 million pounds of annual GAC production, but will require additional modifications to achieve our original design capacity of 25 million pounds or higher. Our analysis indicates that a 15 million pound per year scenario on a stand-alone basis does not provide sufficient returns to make it economically attractive. The optimization review is expected to determine production scale, capital requirements, and return profiles before we commit to additional investment in our GAC Facility.
These constraints emerged as we prepared to transition from our Corbin Wetcake to bituminous proven performance coal, a solution which is expected to address previously announced design and feedstock variability challenges at our GAC Facility. The current issues that we are experiencing with our thermal oxidizer and their impact on the capacity of our GAC Facility stem from the previously disclosed design flaws by the firm originally engaged to design our GAC Facility, with whom litigation remains ongoing.
Due to the issues described above, we do not expect material GAC revenue in fiscal year 2026.
In December 2022, the Company and Tinuum Group entered into an agreement (the "Tinuum Group Royalty Agreement") whereby we pay Tinuum Group a royalty (the "Tinuum Group Royalty") for certain of our sales of M-ProveTM products after the expiration of the tax credit program under IRC Section 45 ("Section 45 Tax Credit Program") (beginning January 1, 2022) to certain refined coal production facilities owned and operated by Tinuum Group (the "Refined Coal Facilities"). The Tinuum Group Royalty is calculated based on "Net Profit" (as defined in the Tinuum Royalty Agreement) on our sales of M-ProveTM product to certain of the Refined Coal Facilities. The Tinuum Group Royalty Agreement is for an initial term of five years with automatic renewals of five years unless we and Tinuum Group agree to terminate it. The Tinuum Group Royalty is included in Consumables cost of revenue. The Tinuum Group Royalty Agreement expires at the end of 2027, with an option to extend.
Earnings from equity method investmentsinvestment
Earnings from equity method investmentsinvestment representrepresents our share of earnings related to equity method investments, and in 20232024 and 2024,2025, primarily from Tinuum Group. Through December 31, 2021, we had substantial earnings from Tinuum Group and Tinuum Services, LLC ("Tinuum Services").Group. With the expiration of the tax credit program under IRC Section 45 afforded to producers of refined coal as of December 31, 2021, both Tinuum Group and Tinuum Services commenced winding down their operations related to the Section 45 tax credit program. We have recognized earnings in both 2023 and 2024 related to residual cash distributions received from Tinuum Group. Tinuum Services ceased operations and completed its wind down in 2024.
Additionally, under an agreement executed in December 2022 amongst certain owners of Tinuum Group, we became party to a distribution and repayment agreement (the "Repayment Agreement"). Under the terms of the Repayment Agreement, we became contractually liable for up to $1.7 million of a contingent liability of Tinuum Group (the "Tinuum Group Obligation") and recorded a liability of $1.7 million which is presented in the "Other current liabilities" line item in the Consolidated Balance Sheet as of December 31, 2024. In December 2025, we were released from our obligation under the Repayment Agreement, largely based on the expiration of the contingency, and the Tinuum Group Obligation was discharged in full. We recognized a gain related to the release of the liability, which is presented in the "Earnings from equity method investment" line item for the year ended December 31, 2025.
For comparison purposes, the following tables set forth our results of operations for the years presented in the Consolidated Financial Statements included in Item 8 of this Report. The year-to-year comparison of financial results is not necessarily indicative of financial results that may be achieved in future years. This discussion and analysis compares 20242025 results to 20232024 results. For discussion and analysis that compares 20232024 results to 20222023 results, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.2024.
For the years ended December 31, 2025 and 2024, revenue increased year over year due to record activated carbon revenue. This increase was driven by both higher volumes sold and improved pricing for our products, which led to increases in revenue of $5.5 million and $5.4 million, respectively. Additionally, our revenue for the year ended December 31, 2025 benefited from favorable product mix, which contributed $0.5 million of the increase in revenue. The increase in product volumes was driven by sales to power generation customers during 2025, primarily due to higher natural gas prices compared to 2024 and overall increases in power demand.
Gross margin, exclusive of depreciation and amortization, decreased for the year ended December 31, 2025 compared to 2024, primarily driven by increases to cost of revenue, exclusive of depreciation and amortization due to fixed production costs associated with the GAC and Corbin Facilities and amounts recognized upon completion of the GAC Facility, as described above. The increase in fixed production costs were primarily a result of lower initial commercial phase GAC production volumes compared to higher fixed production costs at our Red River Plant and Corbin Facility, and the majority of the expenses were composed of direct labor, utilities, and equipment rental costs following the commencement of commercial operation of the GAC Facility.
During 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 instead of natural gas as a primary source for power generation, and the year to date impact of moderate to severe temperatures during the winter and summer seasons, which resulted in higher demand for power generation compared to 2024. Additionally, demand for power generation has and continues to grow driven by macroeconomic trends, such as increased consumption related to data and computer centers, electric vehicles, and other large scale power consumers.
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 were anticipated to phase in over an approximate five-year period; however, the EPA has indicated that it will potentially extend the compliance date from 2029 to 2031. We expect the implementation of the announced regulations will drive a material increase in GAC demand in the water purification market.
For the years ended December 31, 2024 and 2023, revenue increased year over year primarily driven by the impact of favorable product mix of approximately $6.9 million and improved pricing for our products of approximately $4.9 million. These increases were partially offset by lower volumes sold, which negatively impacted revenue by $2.2 million. Product volumes decreased among power generation customers in 2024, primarily due to lower natural gas prices compared to 2023, which contributed to decreased utilization of coal-fired generation and decreased demand for our products. Also offsetting the overall increase was a decrease in revenue recognized from the settlement of certain contracts with customers containing minimum quantity purchases ("MQ Contracts").
Consumables gross margin, exclusive of depreciation and amortization, increased for the year ended December 31, 2024 compared to 2023. The increase in gross margin was primarily driven by an increase in revenue resulting from increased pricing of our products, while the cost to manufacture our products increased between periods, partially due to increased variable production costs on lower production volumes during 2024. Our consumables gross margin was negatively impacted by a decrease in volumes sold and lower revenue recognized from MQ Contracts in 2024 compared to 2023.
We currently expect consumables revenue to increase in the coming years as a result of increased regulatory requirements finalized by the EPA in April 2024, especially with respect to PFAS substances. However, there is substantial uncertainty regarding the future of these regulations in light of the change in the U.S. presidential administration. See "Legislation and Environmental Regulations" included in Item 1 and our risk factor discussion in Item 1A of this Report for further information.
Consumables revenue continues to be affected by electricity demand, driven by seasonal weather and related power generation needs, as well as competitor prices related to alternative power generation sources such as natural gas and renewables.
Payroll and benefits expenses decreased year over year primarily driven by the allocation of expense related to payroll and benefits of $1.6 million associated with our Corbin Facility to Cost of revenue, exclusive of depreciation and amortization as well as overall decreased salaries and wages. The remaining $0.9 million decrease was primarily driven by lower than anticipated metric achievement during 2025 for our short-term incentive compensation and lower employer payroll tax expenses driven by decreases in other payroll expenses.
Payroll and benefits expenses decreased year over year primarily due to expenses recorded during the year ended December 31, 2023 relating to severance expense of former executives, which comprised $1.7 million of the total payroll and benefit expense, and $1.1 million related to severance expense of former executives of Legacy Arq. Additionally, salaries and wages and other benefit-related expenses decreased by $1.0 million year over year primarily as a result of lower CEO compensation beginning in July 2023.
Legal and professional fees remained flat year over year.
Legal and professional fees decreased year over year primarily from decreased consulting, legal, and accounting costs incurred related to the acquisition of Legacy Arq during 2023.
General and administrative expenses decreased year over year by approximately $3.5 million. This decrease was primarily due to lower rent and occupancy expenses of $1.4 million incurred during the year ended December 31, 2025, which was primarily due to allocation of expenses related to lease of the Corbin Facility site to Cost of revenue, exclusive of depreciation and amortization, as initial production runs began in early 2025. Additional decreases were due to lower expenses related to state franchise taxes, sales and use taxes, third-party services, licenses and fees, director fees, and advertising.
General and administrative expenses increased year over year by approximately $2.2 million, primarily due to increases in franchise & use tax expenses, rent and occupancy expenses, outside construction-related labor and license and fee expenses, partially offset by decreases in property and liability insurance.
Research and development expenses increased year over year by approximately $3.3 million. The increase was primarily due to increasedexpenses researchrelated to feedstock consumed and developmentoutside payrollservices costsengaged during initial testing of the GAC Facility of $2.9 million and $0.6 million, respectively, during the year ended December 31, 2025. The increases were partially offset by expenses incurred during the year ended December 31, 2024 in connection with conducting product qualification testing with potential lead-adopters as part of ourthe GAC contracting process.
Depreciation. amortization, depletion and accretion expense increased by approximately $3.2 million year over year primarily due to property, plant and equipment acquired and placed in service during 2025 as a result of completion of the GAC Facility, which contributed $2.3 million of additional depreciation expense in 2025. Also contributing to the increase was increased absorption of depreciation expense into cost of goods sold during 2025 compared to 2024, which resulted in higher expense of $1.1 million for the year ended December 31, 2025. The increases were partially offset by decreases related to accretion of our asset retirement obligation and lower amortization of leasehold improvements.
Impairment of long-lived assets
As referenced under this Item 7. above, we recorded an impairment charge of $44.8 million for the year ended December 31, 2025.
Depreciation. amortization, depletion and accretion expense decreased by approximately $1.9 million year over year primarily due to higher absorption of depreciation into cost of goods sold during 2024 compared to 2023, which resulted in lower expense of $2.0 million for the year ended December 31, 2024, and decreased amortization of leasehold improvements, customer relationships and developed technology of $0.6 million. These decreases were partially offset by an increase in depreciation expense for property, plant and equipment acquired and placed in service during 2024.
Loss (gain) on sale of assets
For the year ended December 31, 2023, we recognized a one-time gain of $2.7 million on the sale of Marshall Mine, LLC. Loss on sale of assets was not significant for the yearyears ended December 31, 2025 or 2024.
Earnings from equity method investments for the year ended December 31, 2025 primarily represented recognition of earnings related to the discharge of the Tinuum Group Obligation. Earnings from equity method investments for the year ended December 31, 2024 represented cash distributions received from Tinuum Group. Tinuum Group continues to wind down their services into 2026.
The following table presents the equity method earnings for the years ended December 31, 2024 and 2023:
Earnings from equity method investments for the year ended December 31, 2024 represented cash distributions from Tinuum Group. Earnings from equity method investments for the year ended December 31, 2023 represented cash distributions received from both Tinuum Group and Tinuum Services. Tinuum Group continues to wind down their services into 2025. The Tinuum Group Royalty Agreement expires at the end of 2027, with an option to extend. We do not expect further distributions from Tinuum Services as Tinuum Services has completed its wind-down.
Interest expense decreased for the year ended December 31, 2025 compared to 2024 primarily due to lower average interest rates on our outstanding debt facilities. In December 2024, we terminated our existing term loan with CF Global Credit, LP (the "CFG Loan") and established a new $30 million revolving credit facility with MidCap Financial (the "Revolving Credit Facility"), which reduced interest expense during the year ended December 31, 2025.
Interest expense increased for the year ended December 31, 2024 compared to the corresponding period in 2023 primarily due to paid in kind interest on the $10 million term loan with CF Global (the "CFG Loan"), which accrues to the principal portion and is payable upon the termination of the CFG Loan. The CFG Loan was paid in full in December 2024, and the loan agreement was terminated.
Loss on extinguishment of debt increasedfor the year overended yearDecember due31, 2024 was related to the write-off of deferred financing costs associated and unamortized debt discount associated with the termination of the CFG Loan.
Other income
The decrease in Other income year over year is primarily driven by a decrease in interest income of $0.7$1.0 million as a result of lower cash on hand in 2024,2025, andwhich was driven by increased capital expenditures during 2024.2024 and 2025. This decrease was partially offset by a gain related to an insurance claim related to equipment at our Five Forks Mine during the year ended December 31, 2025.
Income tax expense (benefit) expense
For the year ended December 31, 2024,2025, we reported income tax benefit of $0.2 millionzero and an effective tax rate of 3%.zero. The difference between our reported income tax benefit and the expected federal benefit of $1.1$11.0 million, as a result of pretax loss recognized for the year ended December 31, 2024,2025, was primarily due to an increase in the valuation allowance on our deferred tax assets offset by the benefit of permanent differences related to stock-based compensation.allowance.
For the year ended December 31, 2023,2024, we reported income tax expense of $0.2 million and an effective rate of (1)%.3%. The difference between our reported income tax expense and the expected federal benefit of 2.5$1.1 million, as a result of pretax loss recognized for the year ended December 31, 2024, was primarily due to the expense of permanent differences related to acquisition-related costs and an increase in the valuation allowance on our deferred tax assets.
As of December 31, 2024,2025, we had approximately $86.1 million in tax credit carryforwards. In the hypothetical event of an "ownership change," as defined by IRC Sections 382, utilization of general business credits ("Tax Credits") generated prior to the change would be subject to an annual limitation imposed by IRC Section 383 for Tax Credits. In connection with the equity offerings completed at various dates during 2024, we issued additional shares of our common stock. WeAs of December 31, 2025, we performed an IRC Section 382 analysis as of those dates and determined that we had not experienced an ownership change as of thosethat dates.date.
We completed the acquisition of 100% of the equity interest, assets and liabilities of the subsidiaries of Arq Limited, an environmental technology company incorporated under the laws of Jersey (the "Arq Acquisition" and hereafter the Arq Limited subsidiaries referred to as "Legacy Arq"), in which we acquired certain tax assets (the "Legacy Arq Tax Assets"), totaling approximately $12.5 million. The Legacy Arq Tax Assets are comprised of net operating loss carryforwards, of which $8.8 million were recognized in the U.S. Prior to the AcquisitionArq Date,Acquisition, Legacythe Arqacquiree completed numerous equity offerings that resulted in ownership changes. We have not completed a formal IRC Section 382 analysis of Legacythe Arqacquiree's equity changes from itsacquiree's inception through the Acquisitiondate Date,of however,the weArq Acquisition. We believe that one or more "ownership changes" occurred duringprior thisto timethe perioddate of the Arq Acquisition as defined under Sections 382 and 383 and that a portion or all the Legacy Arq Tax Assets may be subject to an annual limitation.
To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with GAAP. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by gains on insurance proceeds and the non-cash impact of equity earnings from equity method investment,investments, and increased by loss on extinguishmentimpairment, ofshare-based debt,compensation lossexpense, (gain)GAC onFacility salepre-production of assets, increased byfeedstock, cash distributions from equity method investments, loss on changeextinguishment inof estimate,debt, assetloss retirementon obligationssale of assets, and charges incurred in as a result of our financing activities. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. See below for a reconciliation from Net income, the nearest GAAP financial measure, to EBITDA and Adjusted EBITDA.
The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with GAAPGAAP, to EBITDA,(EBITDA AdjustedLoss), EBITDA and (Adjusted EBITDA Loss).EBITDA.
(1)Represents impairment charge recognized at our Corbin Facility of $44.8 million as well as the write-down of certain additional assets at the GAC Facility related to the use of product produced at the Corbin Facility that could not be reused or repurposed, resulting in an additional loss of $2.3 million during the year ended December 31, 2025.
(2)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 Consolidated Statements of Operations. Previously reported Adjusted EBITDA for the year ended December 31, 2024 has been revised to include non-cash stock-based compensation expense.
(3)Represents expenses related to feedstock utilized in pre-production testing of our GAC Facility during the year ended December 31, 2025 included within "Research and development" expense in the Consolidated Statements of Operations.
(4)Represents gain related to an insurance claim related to equipment at our Five Forks Mine during the year ended December 31, 2025 included within "Other income" in the Consolidated Statements of Operations. We received the proceeds in October 2025.
What changed in the latest 10-Q
Risk Factors
There have been no material updates to our risk factors as disclosed in the 2025 Form 10-K.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
New heading “Loss (gain) on sale of assets”
New heading “Comparison of the Six Months Ended June 30, 2026 and 2025”
New heading “Total Revenue and Cost of revenue”
New heading “Revenue and Cost of revenue”
New heading “Operating Expenses”
New heading “Selling, General and Administrative”
New heading “Payroll and benefits”
New heading “Legal and professional fees”
New heading “General and administrative”
New heading “Research and development”
New heading “Depreciation, amortization, depletion and accretion”
New heading “Loss on sale of assets”
New heading “Other (Expense) Income”
New heading “Interest expense”
New heading “Income tax expense”
Largest changes
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Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials. Our AC products include both powdered activated carbon ("PAC") and granular activated carbon ("GAC"). Additionally, we own the Five Forks Mine, a lignite mine located in Saline, Louisiana, that currently supplies the primary raw material for the manufacturing of our products. We also control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines. Using the Corbin Facility's manufacturing process, we convert coal waste into a purified, microfine carbon powder ("Corbin Wetcake") for use in high valuehigh-value applications. On August 6, 2025, we announced that we had successfully commissioned our Red River Plant’s GAC Facility (the "GAC Facility") and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility, on a standalone basis as well as in combination with the inherent variability of Corbin Wetcake, which we planned to use to manufacture our GAC products.Facility. In March 2026, we decided to pause GAC production, continue to idle the Corbin Facility as a cost saving measure, and launch an engineering and production process optimization review, including an evaluation of potential GAC Facility design modifications and production economics at different scales. Additionally, we now expect to transition away from using Corbin Wetcake for the production of our GAC products to a bituminous coal feedstock with proven performance coal feedstock, which we believe can more effectively overcome design constraints.performance.
We continue to believe that Corbin Wetcake has the potential to enable us to access new markets and applications. We intend to secure customer interest in Corbin Wetcake as an additive into other markets, such as a component for asphalt, or for use in the purified coal and synthetic graphite industries. In addition, we are exploring uses for certain rare earth minerals and critical elements that can be isolatedcontained duringwithin material from the manufacturing process at our Corbin Facility for usefurther inrecovery aand varietyconcentration ofby applications.others. These applications are currently in variousearly stages of proof of conceptproof-of-concept testing or preliminary customer testing.
Drivers of demand and current key factors affecting our profitability are sales of our AC products to the APT market. Our operating results are influenced by: (1) changes in our manufacturing production and sales volumes; (2) changes in price and product mix; (3) changes in coal-fired dispatch and electricity power generation sources; (4) changes in demand for contaminant removal within water treatment facilities; (5) changes in environmental regulations; and (6) state or municipal approval and customer acceptance of our new GAC products.
For the three and six months ended MarchJune 31,30, 2026, we experienced an increase in demand for our products from certain coal-fired dispatch and electricity power generation customers compared to the same period in 2025. This was primarily due to the continuedyear-to-date increaseimpact of moderate to severe temperatures during the winter and summer seasons, resulting in higher demand for power generation, and the impact of steady natural gas prices, resulting in several large utility customers opting to use coal versus natural gas as a primary source for power generation, and the year to date impact of moderate to severe temperatures during the winter and summer seasons, resulting in higher demand for power generation. Additionally, demand for power generation has grown and continues to grow driven by macroeconomic trends, such as increased consumption related to data and computer centers, electric vehicles, and other large scalelarge-scale power consumers. We expect that natural gas prices will remain relatively consistent through 2026 at an elevated level due to increased demand for liquid natural gas exports, and conflict in the Middle East impacting supply, partially offset by increases in anticipated natural gas inventory levels.
The decision to pause GAC production, continue idling the Corbin Facility as a cost saving measure, and launch an engineering and production process optimization review was made in March 2026, following the review of independent testing results received in January 2026. This testing demonstrated that our currentthe thermal oxidizer canin place could only support approximately 15 million pounds of annual GAC production, and would require additional modifications to achieve our original design capacity of 25 million pounds or higher. Our analysis indicates that a 15 million pound per year scenario on a stand-alone basis does not provide sufficient returns to make it economically attractive. The optimization review isremains underwayongoing and is expected to determine production scale, capital requirements, and return profiles before we commit to additional investment in our GAC Facility. We have since expanded the optimization review to include a broader operational assessment of our overall business, which has focused on maximizing furnace throughput and reducing unit costs for each of our products, including our PAC and GAC products.
These additional constraints emerged as we prepared to transition from our Corbin Wetcake to bituminous coal with proven performance coal,performance, a solution which is expected to address previously announced design flaws and feedstock variability challengesconstraints at our GAC Facility. The current issues that we are experiencingexperienced with our thermal oxidizer and their impact on the capacity of our GAC Facility stemstemmed from the previously disclosed design flaws by the engineering firm originally engaged to design our GAC Facility, with whom litigation remains ongoing.
Due to the issues described above, we do not expect GAC production in fiscal year 2026.2026 or 2027.
For the three and six months ended MarchJune 31,30, 2026, we recognized net loss of $0.8$0.7 million and $1.9 million, respectively, compared to net incomeloss of $0.2$2.4 million and $2.4 million, respectively, for the three and six months ended MarchJune 31,30, 2025. The most significant factors impacting results between periods for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 were increases in revenue due to increased pricing and demand for our products, offset by increases in certainseverance costs,expense includingrelated costto the previously disclosed departures of revenue,certain due to carry-over costs relating to GAC production, and general and administrative expenses relating to consulting, outside services, and severance associated with the pause in production at our Corbin Facility and assessment of the designmembers of our GACexecutive Facility at the Red River Plant.team.
Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025
A summary of the components of Revenue and Cost of revenue, exclusive of depreciation and amortization for the three months ended MarchJune 31,30, 2026 and 2025 is as follows:
For the three months ended MarchJune 31,30, 2026, revenue increased from the comparable quarter in 2025 primarily driven by the impact of increased pricing, which contributed additional revenues of $1.3 million, as well as higher sales volumes of our AC products, which contributed additional revenues of approximately $1.3 million, as well as increases in sales of our other chemical products, which also contributed $1.3$1.0 million of the total revenue increase. These increases were partially offset by a decrease in revenue attributable to lower pricing mixsales of our chemicals products sold,during the three months ended June 30, 2026, which caused revenue to decrease by $0.7$1.1 million from the comparable quarter in 2025. The increaseincreases indue to higher pricing and volumes sold waswere primarily attributable to sales to customers in the power-generation market, driven by continuedseasonal higherelectricity naturaldemand. gas prices between periods. The average Henry Hub natural gas spot prices ($/MMBtu) for the three months ended March 31, 2026 and 2025 were $4.79 and $4.15, respectively. Additionally,Notably, our revenues continue to be impacted by electricity demand driven by seasonal weather and power generation needs.
ForDuring the three months ended MarchJune 31,30, 2026, our gross margin,margin exclusivewas favorably impacted by both the pause in production at our Corbin Facility, which we idled indefinitely as of depreciationDecember 2025, and amortization,improved decreasedmix fromduring the comparablethree quartermonths inended 2025June primarily30, as2026 adue resultto of the increase inlower sales of our lower-margin chemicalschemical products,products compared to the impactsame period in 2025. These favorable impacts to gross margin were partially offset by an increase in our costs per unit during the three months ended June 30, 2026, which were primarily due to increases in salaries and wages of aour inventoryoperations revaluation charge,personnel and carry-overutilities ofcosts. operating costs of the GAC Facility before production was paused. The combination of theseThese factors resulted in the majority of the approximately $1.8$0.7 million increasedecrease in Cost of revenue, exclusive of depreciation and amortization for the three months ended MarchJune 31,30, 2026 compared to the comparable quarter in 2025.
We expect that revenue will continue to be positively impacted by demand for our PAC products. As we have paused production of our GAC products at our Red River Plant, we expect that gross margin will continue to improve as the impact of fixed production costs related to our GAC products on our gross margin lessens. Further, as we conduct a comprehensive engineering and production process optimization review related to our GAC products, we expect to improve the operational efficiency of PAC production at our Red River Plant and improve our product mix to higher margin products.
A summary of the components of our operating expenses for the three months ended MarchJune 31,30, 2026 and 2025 is as follows:
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion.
A summary of the components of selling, general and administrative expenses for the three months ended MarchJune 31,30, 2026 and 2025 is as follows:
Payroll and benefits expense increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.6 million, primarily due to severance expense related to the separation of three members of our executive leadership team, which was recorded during the three months ended June 30, 2026. The increase was partially offset by a decrease in incentive compensation expense.
Payroll and benefits expense decreased for the three months ended March 31, 2026 compared to the corresponding quarter in 2025 by approximately $0.1 million, primarily due to a decrease in incentive expense. The decrease is partially offset by an increase in severance expense, related to employees terminated at our Corbin Facility, as well as an increase in employee benefits expenses, driven by increased health insurance claims between periods.
Legal and professional fees increaseddecreased for the three months ended MarchJune 31,30, 2026 compared to the corresponding quarter in 2025 by approximately $0.5$0.1 million, primarily due to additionaldecreased legal and consultingrecruiting fees incurred in connection with ongoing litigation, including with our former engineering firm, during the three months ended MarchJune 31,30, 2026 compared to the three months ended June 30, 2025. The decrease was partially offset by increased accounting and audit fees and interim executive consulting costs during the three months ended June 30, 2026.
General and administrative expenses increased for the three months ended MarchJune 31,30, 2026 compared to the corresponding quarter in 2025 by approximately $0.9$0.4 million, primarily due to increases in general insurance and recruiting expenses. Also contributing to the increase in general and administrative expense are utilities costsexpenses related to theproperty Corbintaxes, Facility,software whichmaintenance arefees, includedsales, in generaluse, and administrativefranchise expenses, however, previously recorded to Cost of revenue, exclusive of depreciationtaxes, and amortization.outside labor.
Research and development expense increaseddecreased for the three months ended MarchJune 31,30, 2026 compared to the corresponding quarter in 2025 by $0.1$1.7 million.million, primarily due to expenses related to feedstock consumed during initial testing of the GAC Facility during the three months ended June 30, 2025.
Loss (gain) on sale of assets
Loss on sale of assets for the three months ended June 30, 2026 related to the disposal of a piece of machinery which was replaced during the biannual shutdown of our Red River Plant for maintenance.
Depreciation, amortizationamortization, depletion and accretion expense increased by approximately $0.4$0.8 million for the three months ended MarchJune 31,30, 2026 compared to the corresponding quarter in 2025, primarily due to a significant amount of plant and equipment placed in service during the second half of 2025, partially offset by decreased depreciation expense related to assets at our Corbin Facility, which were impaired during the fourth quarter of 2025.
Other Income (Expense) Income
A summary of the components of other (expense) income for the three months ended MarchJune 31,30, 2026 and 2025 is as follows:
* Percent change in excess of 100% not considered meaningful.
Interest expense decreasedincreased for the three months ended MarchJune 31,30, 2026 compared to the corresponding quarter in 2025 by $0.2 million primarily due to lowerhigher average interestoutstanding ratesbalances on the Company's outstanding debt facilities, partially offset by higher average outstanding balancesfacilities in the current quarter.
Other income increased for the three months ended MarchJune 31,30, 2026 compared to the corresponding quarter in 2025 primarily due to interest income recorded during the three months ended MarchJune 31,30, 2026.
For the three months ended MarchJune 31,30, 2026 and 2025, we had pretax loss of $0.8$0.7 million and pretax income of $0.2$2.4 million, respectively. For the three months ended MarchJune 31,30, 2026,2026 and 2025, we had an effective tax rate of zero and recorded no income tax benefit due to the recording of a full valuation allowance on our deferred tax assets. For the three months ended March 31, 2025, we recorded no income tax expense based on our forecast of pretax loss for the year ended December 31, 2025.
Comparison of the Six Months Ended June 30, 2026 and 2025
Total Revenue and Cost of revenue
A summary of the components of Revenue and Cost of revenue, exclusive of depreciation and amortization for the six months ended June 30, 2026 and 2025 is as follows:
Revenue and Cost of revenue
For the six months ended June 30, 2026, revenue increased from the comparable period in 2025 primarily driven by increased volumes and higher pricing, which contributed revenue increases of approximately $2.3 million and $0.6 million, respectively. The increase in volumes sold was primarily attributable to sales to customers in the industrial and municipal water markets, as well as the power-generation market, driven by continued higher natural gas prices between periods. The average Henry Hub natural gas spot prices ($/MMBtu) for the six months ended June 30, 2026 and 2025 were $3.87 and $3.67, respectively. Additionally, sales of our chemical products contributed an increase of $0.2 million in revenue for the six months ended June 30, 2026 compared to the comparable period in 2025.
For the six months ended June 30, 2026, gross margin, exclusive of depreciation and amortization, increased from the comparable period in 2025. During the six months ended June 30, 2026, our gross margin was favorably impacted by decreases in production expenses due to the pause in production at our Corbin Facility, which had begun production in April 2025 and which we idled indefinitely as of December 2025. This favorable impact was offset by an inventory revaluation charge during the first quarter of 2026. These factors were primarily responsible for the approximately $1.1 million increase in Cost of revenue, exclusive of depreciation and amortization for the six months ended June 30, 2026 compared to the comparable period in 2025.
Operating Expenses
A summary of the components of our operating expense for the six months ended June 30, 2026 and 2025 is as follows:
(1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion.
Selling, General and Administrative
A summary of the components of selling, general and administrative expenses for the six months ended June 30, 2026 and 2025 is as follows:
Payroll and benefits
Payroll and benefits increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $0.4 million, primarily due to severance expense related to the departure of three members of our executive leadership team, severance expense related to employees terminated at our Corbin Facility, and an increase of approximately $0.2 million of share-based compensation associated with executive transition and severance. The increase is partially offset by a decrease in incentive compensation expense.
Legal and professional fees
Legal and professional fees increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 primarily due to additional legal and consulting fees incurred in connection with ongoing litigation with our former engineering firm, increased accounting and audit fees, and executive transition costs incurred during the six months ended June 30, 2026.
General and administrative
General and administrative expenses increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $1.3 million, primarily due to increases in insurance, property tax and recruiting expenses. Also contributing to the increase in general and administrative expense were utilities costs related to the Corbin Facility, which are included in general and administrative expenses, however, previously were recorded to Cost of revenue, exclusive of depreciation and amortization.
Research and development
Research and development expense decreased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $1.6 million. The decrease was primarily due to expenses related to feedstock consumed and outside services engaged during initial testing of the GAC Facility during the six months ended June 30, 2025.
Depreciation, amortization, depletion and accretion
Depreciation, amortization, depletion and accretion expense increased by approximately $1.3 million for the six months ended June 30, 2026 compared to the corresponding period in 2025, primarily due to a significant amount of plant and equipment placed in service during the second half of 2025, partially offset by decreased depreciation expense related to assets at our Corbin Facility, which were impaired during the fourth quarter of 2025.
Loss on sale of assets
Loss on sale of assets for the six months ended June 30, 2026 related to the disposal of a piece of machinery, which was replaced during our biannual plant maintenance. Loss on sale of assets for the six months ended June 30, 2025 related to the disposal of construction assets no longer in use.
Other (Expense) Income
A summary of the components of other income (expense) for the six months ended June 30, 2026 and 2025 is as follows:
Interest expense
Interest expense increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 primarily due to higher average outstanding balances on the Company's outstanding debt facilities in the current period.
Other income
Other income increased for the six months ended June 30, 2026 compared to the corresponding period in 2025, which was primarily driven by interest income recorded during the six months ended June 30, 2026.
Income tax expense
ARQ insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 3 Form 4 filings (1 insider, 3 trade dates, 25,000 shares, about $56.3K) and open-market sales in 1 filing (1 insider, 1 trade date, 16,709 shares, about $37.9K). Net open-market shares: 8,291 (purchases minus sales); net value about $18.3K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-08 | Steinmetz Shimon |
Open-market purchase | 1,874 | $2.34 | $4.4K |
| 2026-09-08 | Steinmetz Shimon |
Open-market purchase | 1,098 | $2.34 | $2.6K |
| 2026-09-04 | Steinmetz Shimon |
Open-market purchase | 1,402 | $2.29 | $3.2K |
| 2026-09-04 | Steinmetz Shimon |
Open-market purchase | 4,356 | $2.27 | $9.9K |
| 2026-09-03 | Steinmetz Shimon |
Open-market purchase | 8,770 | $2.23 | $19.6K |
| 2026-09-03 | Steinmetz Shimon |
Open-market purchase | 7,500 | $2.22 | $16.6K |
| 2026-09-01 | Owino Peter Oluoch |
Grant/award | 100,000 | — | — |
| 2026-09-01 | Owino Peter Oluoch |
Grant/award | 61,047 | — | — |
| 2026-08-14 | Wong Joseph M |
Grant/award | 55,000 | — | — |
| 2026-08-01 | Steinmetz Shimon |
Grant/award | 93,023 | — | — |
| 2026-08-01 | Smith Claiborne Benson |
Grant/award | 61,047 | — | — |
| 2026-08-01 | Wong Joseph M |
Grant/award | 61,047 | — | — |
| 2026-07-31 | Steinmetz Shimon |
Grant/award | 250,000 | — | — |
| 2026-07-01 | Eicher Carol S |
Grant/award | 24,641 | — | — |
| 2026-07-01 | Blank Jeremy |
Grant/award | 49,283 | — | — |
| 2026-07-01 | Bergman Laurie |
Grant/award | 24,641 | — | — |
| 2026-07-01 | Mcintyre Julian Alexander |
Grant/award | 49,283 | — | — |
| 2026-07-01 | Campbell-Breeden Richard |
Grant/award | 49,283 | — | — |
| 2026-05-04 | Voncannon Jay Loring |
Open-market sale | 16,709 | $2.27 | $37.9K |
Well-known investors holding ARQ (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 1,814,114 | $4.6M | 0.0% | Added 67% |
| Renaissance Technologies | 2026-06-30 | 598,059 | $1.5M | 0.0% | Added 46% |
| D. E. Shaw & Co. | 2026-06-30 | 358,479 | $914.1K | 0.0% | Added 27% |
| Two Sigma Investments | 2026-06-30 | 251,777 | $642.0K | 0.0% | Added 777% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 163,201 | $416.2K | 0.0% | New position |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 57,582 | $146.8K | 0.0% | New position |
| Millennium Management (Israel Englander) | 2026-06-30 | 19,015 | $48.5K | 0.0% | Reduced 58% |