Arq Inc.

03/10/2026 | Press release | Distributed by Public on 03/10/2026 04:02

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of our operations should be read together with the 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."
Overview
We are an environmental technology company that is principally engaged in the sale of consumable air, water and soil treatment solutions primarily based on activated carbon ("AC"). Our proprietary AC products enable customers to reduce air, water, and soil contaminants, including mercury, per- and polyfluoroalkyl substances ("PFAS") and other pollutants, to meet the challenges of existing and pending air quality and water regulations. We manufacture and sell AC and other chemicals used to capture and remove impurities, contaminants, and pollutants for the coal-fired power generation, industrial, water treatment, and water and soil remediation markets, which we collectively refer to as the advanced purification technologies ("APT") market.
Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials. Our AC products include both powdered activated carbon ("PAC") and granular activated carbon ("GAC"). Additionally, we own 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.
We 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 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.
Drivers of Demand and Key Factors Affecting Profitability
Drivers of demand and current key factors affecting our profitability are sales of our AC products to the APT market. Our operating results are influenced by: (1) changes in our manufacturing production and sales volumes; (2) changes in price and product mix; (3) changes in coal-fired dispatch and electricity power generation sources; (4) changes in demand for contaminant removal within water treatment facilities; (5) changes in environmental regulations; and (6) state or municipal approval and customer acceptance of our new GAC 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.
Components of Revenue, Expenses and Equity Method Investees
The following narrative briefly describes the components of revenue and expenses as presented in the Consolidated Statements of Operations. Descriptions of the revenue recognition policies are included in Note 1 to the Consolidated Financial Statements included in Item 8 of this Report.
Revenue and cost of revenue
Revenue
Our revenue is comprised of the sale of AC products and other chemical-based technology products into the APT market, as well as the sale of other AC products to our largest customer, who services other diverse markets.
Cost of revenue
Cost of revenue is comprised of all labor, fringe benefits, subcontract labor, additive and coal costs, materials, equipment, supplies, travel costs and any other costs and expenses directly related to the cost of production of consumables.
License Royalties Payable to Tinuum Group
In December 2022, the Company and Tinuum Group entered into an agreement (the "Tinuum Group Royalty Agreement") whereby we pay Tinuum Group a royalty (the "Tinuum Group Royalty") for certain of our sales of M-ProveTMproducts 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-ProveTMproduct 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.
Other Operating Expenses
Selling, general and administrative
Selling, general and administrative costs include payroll and benefits costs, legal and professional fees, and general and administrative expenses.
Payroll and benefits costs include payroll costs, payroll-related fringe benefits and stock-based compensation expense of sales and administrative personnel, but exclude such costs related to direct labor that are included in Cost of revenue. Payroll costs, payroll-related fringe benefits, and stock-based compensation expense of research and development personnel are reported in the Research and development line item in the Consolidated Statements of Operations.
Legal and professional costs include external legal, audit and consulting expenses.
General and administrative costs include director fees and expenses, bad debt expense, rent and occupancy expense and other general costs of conducting business.
Research and development
Research and development costs include payroll expenses related to research and development personnel and other expenses incurred related to research and development activities. Research and development costs provided by third parties, net of reimbursements from cost-sharing arrangements, are charged to expense in the period incurred.
Depreciation, amortization, depletion and accretion
Depreciation and amortization expense consists of depreciation expense related to property, plant and equipment and the amortization of long-lived intangible assets. Depletion and accretion expense consists of depletion expense related to the depletion of mine development costs and the accretion of mine reclamation liabilities.
Other (Expense) Income, net
Earnings from equity method investment
Earnings from equity method investment represents our share of earnings related to equity method investments, and in 2024 and 2025, primarily from Tinuum Group. Through December 31, 2021, we had substantial earnings from Tinuum Group. With the expiration of the tax credit program under IRC Section 45 afforded to producers of refined coal as of December 31, 2021, Tinuum Group commenced winding down their operations related to the Section 45 tax credit program.
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 $1.7 million which is presented in the "Other current liabilities" line item in the Consolidated Balance Sheet as of December 31, 2024. In December 2025, we were released from our obligation under the Repayment Agreement, largely based on the expiration of the contingency, and the Tinuum Group Obligation was discharged in full. We recognized a gain related to the release of the liability, which is presented in the "Earnings from equity method investment" line item for the year ended December 31, 2025.
Other (expense) income
The remaining components of other (expense) income include interest income, interest expense and other miscellaneous items.
Results of Operations
Presentation of Financial Results
For comparison purposes, the following tables set forth our results of operations for the years presented in the Consolidated Financial Statements included in Item 8 of this Report. The year-to-year comparison of financial results is not necessarily indicative of financial results that may be achieved in future years. This discussion and analysis compares 2025 results to 2024 results. For discussion and analysis that compares 2024 results to 2023 results, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2024.
Year ended December 31, 2025 Compared to Year ended December 31, 2024
Total Revenue and Cost of Revenue
A summary of the components of revenue and cost of revenue for the years ended December 31, 2025 and 2024 is as follows:
Years Ended December 31, Change
(Amounts in thousands except percentages)
2025 2024 ($) (%)
Revenue $ 120,336 $ 108,959 $ 11,377 10 %
Cost of revenue, exclusive of depreciation and amortization $ 86,804 $ 69,515 $ 17,289 25 %
Revenue and cost of revenue
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.
Operating Expenses
A summary of the components of our operating expenses, exclusive of cost of revenue items (presented above), for the years ended December 31, 2025 and 2024 is as follows:
Years Ended December 31, Change
(in thousands, except percentages)
2025 2024 ($) (%)
Operating expenses:
Selling, general and administrative $ 22,554 $ 28,695 $ (6,141) (21) %
Research and development 7,337 4,050 3,287 81 %
Depreciation, amortization, depletion and accretion 11,747 8,594 3,153 37 %
Impairment of long-lived assets 44,756 - 44,756 *
Loss on sale of assets 96 64 32 50 %
$ 86,490 $ 41,403 $ 45,087 *
* Percent change in excess of 100% not considered meaningful.
Selling, general and administrative
A summary of the components of selling, general and administrative expenses for the years ended December 31, 2025 and 2024, exclusive of cost of revenue items (presented above), is as follows:
Years Ended December 31, Change
(in thousands, except percentages)
2025 2024 ($) (%)
Payroll and benefits $ 6,876 $ 9,507 $ (2,631) (28) %
Legal and professional fees 5,543 5,587 (44) (1) %
General and administrative 10,135 13,601 (3,466) (25) %
Total Selling, general and administrative $ 22,554 $ 28,695 $ (6,141) (21) %
Payroll and benefits
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.
Legal and professional fees
Legal and professional fees remained flat year over year.
General and administrative
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.
Research and development
Research and development expenses increased year over year by approximately $3.3 million. The increase was primarily due to expenses related to feedstock consumed and outside services engaged 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 the GAC contracting process.
Depreciation, amortization, depletion and accretion
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 $44.8 million for the year ended December 31, 2025.
Loss on sale of assets
Loss on sale of assets was not significant for the years ended December 31, 2025 or 2024.
Other (Expense) Income, net
A summary of the components of our other (expense) income, net for the years ended December 31, 2025 and 2024 is as follows:
Years Ended December 31, Change
(Amounts in thousands, except percentages)
2025 2024 ($) (%)
Other income (expense):
Earnings from equity method investment $ 1,951 $ 127 $ 1,824 *
Interest expense (2,449) (3,257) 808 (25) %
Loss on extinguishment of debt - (1,422) 1,422 (100) %
Other income 858 1,238 (380) (31) %
Total other income (expense) $ 360 $ (3,314) $ 3,674 *
* Percent change in excess of 100% not considered meaningful.
Earnings from equity method investments
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.
Interest expense
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.
Loss on extinguishment of debt
Loss on extinguishment of debt for the year ended December 31, 2024 was related to the write-off of deferred financing costs 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 $1.0 million as a result of lower cash on hand in 2025, which was driven by increased capital expenditures during 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)
For the year ended December 31, 2025, we reported income tax benefit of zero and an effective tax rate of zero. The difference between our reported income tax benefit and the expected federal benefit of $11.0 million, as a result of pretax loss recognized for the year ended December 31, 2025, was primarily due to an increase in the valuation allowance.
For the year ended December 31, 2024, we reported income tax expense of $0.2 million and an effective rate of 3%. The difference between our reported income tax expense and the expected federal benefit of $1.1 million, as a result of pretax loss recognized for the year ended December 31, 2024, was primarily due to an increase in the valuation allowance on our deferred tax assets.
Accounting for income taxes requires that companies assess whether a valuation allowance should be recorded against their deferred tax asset based on an assessment of the amount of the deferred tax asset that is "more likely than not" to be realized. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.
We assess a valuation allowance recorded against deferred tax assets at each reporting date. The determination of whether a valuation allowance for deferred tax assets is appropriate requires the evaluation of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income available to realize the deferred tax asset, including, as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating taxes, we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial, and regulatory guidance.
As of December 31, 2025, we concluded it is more likely than not we will not generate sufficient taxable income within the allowable carryforward periods to realize any of our net deferred tax assets, and fully reserved for such assets as of December 31, 2025. In reaching this conclusion, we primarily considered our pretax losses incurred over a cumulative three-year look-back period. As of December 31, 2025 and 2024, we had a valuation allowance of $114.0 million and $101.6 million, respectively, on our deferred tax assets.
The ability to recognize the remaining deferred tax assets that continue to be subject to a valuation allowance is evaluated on a quarterly basis to determine if there are any significant events that would affect the ability to utilize those deferred tax assets. Our estimate of future taxable income or losses is based on internal projections that consider historical performance, assumptions on future performance and external data. If events are identified that affect our ability to utilize our deferred tax assets, or if additional deferred tax assets are generated, we update our analysis to determine if an increase to a valuation allowance is required. Such an increase could have a material adverse effect on our financial condition and results of operations. Conversely, better than expected results and continued positive results and trends could result in a decrease to a valuation allowance, and any such decreases could have a material positive effect on our financial condition and results of operations.
See additional discussion in Note 12 of the Consolidated Financial Statements included in Item 8 of this Report.
Tax Assets
As of December 31, 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. As of December 31, 2025, we performed an IRC Section 382 analysis and determined that we had not experienced an ownership change as of that 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 Arq Acquisition, the acquiree completed numerous equity offerings that resulted in ownership changes. We have not completed a formal IRC Section 382 analysis of the acquiree's equity changes from acquiree's inception through the date of the Arq Acquisition. We believe that one or more "ownership changes" occurred prior to the date of the Arq Acquisition as defined under Sections 382 and 383 and that a portion or all the Legacy Arq Tax Assets may subject to an annual limitation.
Non-GAAP Financial Measures
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 earnings from equity method investments, and increased by loss on impairment, share-based compensation expense, GAC Facility pre-production feedstock, cash distributions from equity method investments, loss on extinguishment of debt, loss on sale of assets, and charges incurred 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.
We believe that the EBITDA and Adjusted EBITDA measures are less susceptible to variances that affect our operating performance. We include these non-GAAP measures because management uses them in the evaluation of our operating performance, and believe such measures facilitate comparison of operating results between periods. We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses, gains, and losses which can vary widely across different industries or among companies within the same industry and may not be indicative of core operating results and business outlook.
EBITDA and Adjusted EBITDA
The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with GAAP, to (EBITDA Loss), EBITDA and Adjusted EBITDA.
Years ended December 31,
(in thousands) 2025 2024
Net loss $ (52,610) $ (5,109)
Depreciation, amortization, depletion and accretion 11,747 8,594
Amortization of Upfront Customer Consideration 620 508
Interest expense, net 2,383 2,154
Income tax expense (benefit) 12 (164)
(EBITDA Loss) EBITDA (37,848) 5,983
Corbin Facility impairment and write-down of related assets(1)
47,027 -
Share-based compensation(2)
3,363 2,715
GAC Facility pre-production feedstock(3)
2,911 -
Earnings from equity method investment (1,951) (127)
Cash distributions from equity method investment 251 127
Gain on insurance proceeds(4)
(685) -
Loss on sale of assets 96 64
Financing costs - 275
Loss on extinguishment of debt - 1,422
Adjusted EBITDA $ 13,164 $ 10,459
(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.
Liquidity and Capital Resources
Current Capital Resources and Factors Affecting Our Liquidity
For the year ended December 31, 2025, our principal sources of liquidity consisted of:
•cash on hand, excluding restricted cash of $8.5 million primarily pledged as collateral under a surety bond agreement;
•availability under the Revolving Credit Facility, which as of December 31, 2025 had $1.4 million available; and
•cash from operations.
For the year ended December 31, 2025, our principal uses of liquidity included:
•capital expenditures, including those related to the Red River Plant expansion;
•our business operating expenses;
•payments on our lease obligations; and
•payments on our debt obligations.
Cash Flows
Cash and restricted cash decreased from $22.2 million as of December 31, 2024, to $15.0 million as of December 31, 2025, a decrease of $7.2 million. The following table summarizes our cash flows for the years ended December 31, 2025 and 2024, respectively:
Years Ended December 31,
(in thousands) 2025 2024 Change
Cash provided by (used in):
Operating activities $ (2,730) $ 10,477 $ (13,207)
Investing activities (8,161) (85,074) 76,913
Financing activities 3,696 42,679 (38,983)
Net change in Cash and Restricted Cash $ (7,195) $ (31,918) $ 24,723
Cash flows from operating activities
Cash flows used in operating activities for the year ended December 31, 2025 was $2.7 million compared to cash flows provided by operating activities of $10.5 million for the year ended December 31, 2024. This decrease in cash flows from operating activities was primarily due to the following: (1) an increase in net loss of $47.5 million year over year; (2) a net decrease in working capital of $11.3 million primarily as a result of significant payments made in 2025 on accounts payable and accrued expenses, as well as increases in prepaid expenses and other assets, and (3) an increase in Earnings from equity method investment of $1.8 million. Partially offsetting the net increase in cash flows used in operating activities year over year were increases in Impairment of long-lived assets of $44.8 million and Depreciation, amortization, depletion and accretion of $3.2 million.
Cash flows from investing activities
Cash flows used in investing activities for the year ended December 31, 2025 was $8.2 million compared to cash flows used in investing activities of $85.1 million for the year ended December 31, 2024. The decrease in cash used was primarily due to a decrease in acquisition of property, equipment and intangibles, net, of $76.6 million primarily related to capital expenditures for our Red River Plant expansion in 2024. Partially offsetting the net decrease in cash flows used in investing activities year over year was an increase in mine development costs of $0.4 million.
Cash flows from financing activities
Cash flows provided by financing activities for the year ended December 31, 2025 decreased by $39.0 million compared to the year ended December 31, 2024 primarily due to significant equity financing activities completed in 2024. These include proceeds from the issuance and sale of our common stock in both private and public offerings totaling $42.4 million and a net increase in borrowings year over year of $8.7 million on the Revolving Credit Facility. These increases were offset by a net decrease in principal payments on notes payable of $9.9 million due to the prepayment of the principal of the CFG Loan of
$10.0 million in 2024. Additional increases in cash flows year over year provided by financing activities were due to costs associated with extinguishment of the CFG Loan and associated financing costs for the Revolving Credit Facility, both in 2024.
Material Cash Requirements
Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors. These include executing on our contracts and initiatives and increasing our share of the market for APT consumables, including expanding our overall AC business into additional adjacent markets and increasing our gross margin from improving our customer and product mix.
Based on current operating levels, we expect that our cash on hand and borrowing availability under the Revolving Credit Facility as of December 31, 2025 will provide sufficient liquidity to fund operations for the next 12 months.
Capital expenditures
During 2026, we expect our capital expenditures to primarily relate to routine maintenance on our Red River Plant and potential modifications to our GAC Facility, pending the results of our engineering and production process review as described above in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview". Capital expenditures planned for 2026 are dependent on many additional factors, including delays in procurement or construction, shortages of materials or availability of qualified contractors, liquidity requirements for funding the modifications to our GAC Facility, ongoing compliance with regulatory requirements, and environmental and operational licenses and approvals for additional GAC Facility expansion, which may impact the timing and amount of capital expenditures. The Company anticipates financing the capital expenditures with cash on hand, borrowing availability under the Revolving Credit Facility, and ongoing cost reduction initiatives.
Surety Bonds
As of December 31, 2025, we had outstanding surety bonds with regulatory commissions totaling $11.2 million primarily related to the Five Forks Mine and the Corbin Facility. As of December 31, 2025, and as required by our surety bond provider, we held restricted cash of $8.5 million pledged as collateral related to performance requirements required under a reclamation contract for the Five Forks Mine and the Corbin Facility. We expect that the obligations secured by these surety bonds will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related surety bonds may be released and collateral requirements may be reduced. However, in the event any surety bond is called, our indemnity obligations could require us to reimburse the surety bond provider.
Long Term Requirements
For a discussion of our long-term cash requirements, see Item 8, Note 5 of this Report.
Contractual Obligations
Contractual obligations as of December 31, 2025 are as follows:
Payment Due by Period
(in thousands) Total Less than 1 year 1-3 years 4-5 years After 5 years
CTB Loan $ 11,193 $ 1,110 $ 2,220 $ 2,220 $ 5,643
Finance lease obligations 337 250 87 - -
Operating lease obligations 10,739 3,862 4,029 2,606 242
$ 22,269 $ 5,222 $ 6,336 $ 4,826 $ 5,885
The table above excludes our asset retirement obligations ("AROs") related to reclamation of the Five Forks Mine, for which we have recorded a liability of $4.9 million within our Consolidated Balance Sheet as of December 31, 2025, as the timing and amount of payments to satisfy the AROs are uncertain and are based on numerous factors including, but not limited to, the expected closure date of the Five Forks Mine. The table above also excludes amounts outstanding under our Revolving Credit Facility, as the timing and amount of repayments are uncertain and are based on the nature and timing of our operating cash flows. Our outstanding borrowings under the Revolving Credit Facility were $19.0 million as of December 31, 2025.
Critical Accounting Policies and Estimates
Our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements included in Item 8 of this Report. In presenting our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. Our estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the accounting estimates discussed below are critical to understanding our historical and future performance, as these estimates relate to the more significant areas involving management's judgments and estimates.
Carrying value of long-lived assets and intangibles
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. Our qualitative assessment includes evaluating the following indicators of impairment for an Asset Group:
•Significant decrease in its market price;
•Significant adverse change in the extent or manner in which it is being used or its physical condition;
•Significant adverse change in legal factors or in the business climate;
•Accumulation of costs significantly in excess of its original acquisition or construction estimates;
•Operating or cash flow losses (current results, combined with either historical or forecasted); and
•Whether it is more likely than not that it will be disposed of significantly before the end of its previously estimated life.
If indicators of impairment are determined to exist for an Asset Group, we perform a recoverability test using undiscounted cash flows. The forecast of an Asset Group's undiscounted cash flows requires the use of estimates and assumptions. An impairment loss exists if the carrying value of an Asset Group exceeds its undiscounted cash flows.
An impairment loss is measured as the excess of the carrying value of an Asset Group over its estimated fair value. Fair value is determined based on various valuation models, including an income approach, a market approach and a cost approach. The use of these models entails the use of estimates and assumptions.
Asset Retirement Obligations
Accounting for AROs requires us to make estimates of future costs unique to a specific mining operation that we will incur to complete the reclamation and remediation work required to comply with existing laws and regulations. Any such changes in future costs, the timing of reclamation activities, scope or the exclusion of certain costs not considered reclamation and remediation costs could materially impact the amounts charged to earnings for reclamation and remediation. Additionally, future changes to environmental laws and regulations could increase the scope of reclamation and remediation work required.
Reclamation costs related to AROs are allocated to expense over the life of the related mine assets and are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation costs. Remediation costs are accrued based on management's best estimate of the costs expected to be incurred. Such cost estimates may include ongoing care, maintenance and monitoring costs. Reclamation obligations are based on the timing of estimated spending for an existing environmental disturbance. We review, on at least an annual basis, the future expected costs and the timing of such costs for AROs.
Income Taxes
We account for income taxes under the asset and liability method, which requires judgment in determining income tax expense and the related balance sheet amounts. This includes estimating and analyzing historical and projected future operating results, the reversal of taxable temporary differences, tax planning strategies, and the ultimate outcome of uncertain income tax positions. Actual income taxes paid may vary from estimates depending on changes in income tax laws, actual results of operations, state apportionment and, if applicable, final audits of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. Changes in the estimates and assumptions used for calculating income tax expense and potential differences in actual results from estimates could have a material impact on our results of operations and financial condition.
We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations.
We establish a valuation allowance against our deferred tax assets when, based upon the weight of all available evidence, we believe it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we consider the relative impact of all of the available positive and negative evidence regarding future sources of taxable income and tax planning strategies. However, there could be a material impact to our effective tax rate if there is a significant change in our estimates of future taxable income. If and when our estimates change, or there is a change in the value of deferred tax assets or liabilities warranting the need to reassess the realizability of deferred tax assets, we adjust a valuation allowance through the provision for income taxes in the period in which this determination is made. Refer to Note 12 of our Consolidated Financial Statements included in Item 8 of this Report for additional information regarding our deferred tax assets and liabilities.
Recently Issued Accounting Standards
Refer to Note 1 of the Consolidated Financial Statements included in Item 8 of this Report for information regarding recently issued accounting standards.
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