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Nature of Operations

Advanced Emissions Solutions, Inc. ("ADES" or the "Company") is a Delaware corporation with its principal office located in Greenwood Village, Colorado and operations located in Louisiana. The Company is principally engaged in consumable mercury control options including powdered activated carbon ("PAC") and chemical technologies. The Company's proprietary environmental technologies in the power generation and industrial ("PGI") market enable customers to reduce emissions of mercury and other pollutants, maximize utilization levels and improve operating efficiencies to meet the challenges of existing and pending emission control regulations. Through its wholly-owned subsidiary, ADA Carbon Solutions, LLC ("Carbon Solutions"), which the Company acquired on December 7, 2018 (the "Acquisition Date"), the Company manufactures and sells activated carbon ("AC") used in mercury capture for the coal-fired power plant, industrial and water treatment markets. Carbon Solutions also owns an associated lignite mine that supplies the primary raw material for manufacturing PAC.

Through its equity ownership in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services"), both of which are unconsolidated entities, the Company generates substantial earnings. Tinuum Group provides reduction of mercury and nitrogen oxide ("NOx") emissions at select coal-fired power generators through the production and sale of refined coal ("RC") that qualifies for tax credits under the Internal Revenue Code ("IRC") Section 45 - Production Tax Credit ("Section 45 tax credits"). The Company also earns royalties for technologies that are licensed to Tinuum Group and used at certain RC facilities to enhance combustion and reduced emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services operates and maintains the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities.

The Company’s sales occur principally in the United States. See Note 15 for additional information regarding the Company's operating segments.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of ADES are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and with Article 10 of Regulation S-X of the Securities and Exchange Commission. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

The unaudited Condensed Consolidated Financial Statements of ADES in this quarterly report ("Quarterly Report") are presented on a consolidated basis and include ADES and its wholly-owned subsidiaries (collectively, the "Company"). Also included within the unaudited Condensed Consolidated Financial Statements are the Company's unconsolidated equity investments: Tinuum Group, Tinuum Services and GWN Manager, LLC ("GWN Manager"), which are accounted for under the equity method of accounting, and Highview Enterprises Limited (the "Highview Investment"), which is accounted for in accordance with U.S. GAAP applicable to equity investments that do not qualify for the equity method of accounting.

Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts were eliminated in consolidation for all periods presented in this Quarterly Report.

In the opinion of management, these Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary for a fair presentation of the results of operations, financial position, stockholders' equity and cash flows for the interim periods presented. These Condensed Consolidated Financial Statements of ADES should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K"). Significant accounting policies disclosed therein have not changed, except as described later in Note 1.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using the two-class method, which is an earnings allocation formula that determines earnings (loss) per share for common stock and any participating securities according to dividend and participating rights in undistributed earnings (losses). The Company's restricted stock awards ("RSA's") granted prior to December 31, 2016 contain non-forfeitable rights to dividends or dividend equivalents and are deemed to be participating securities. RSA's granted subsequent to December 31, 2016 do not contain non-forfeitable rights to dividends and are not deemed to be participating securities.

Under the two-class method, net income for the period is allocated between common stockholders and the holders of the participating securities based on the weighted-average number of common shares outstanding during the period, excluding

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participating, unvested RSA's ("common shares"), and the weighted-average number of participating, unvested RSA's outstanding during the period, respectively. The allocated, undistributed income for the period is then divided by the weighted-average number of common shares and participating, unvested RSA's outstanding during the period to arrive at basic earnings per common share and participating security for the period, respectively. Pursuant to U.S. GAAP, the Company has elected not to separately present basic or diluted earnings per share attributable to participating securities in the Condensed Consolidated Statements of Operations.

Diluted earnings (loss) per share is computed in a manner consistent with that of basic earnings per share, while considering other potentially dilutive securities. Potentially dilutive securities consist of both unvested, participating and non-participating RSA's, as well as outstanding options to purchase common stock ("Stock Options") and contingent performance stock units ("PSU's") (collectively, "Potential dilutive shares"). The dilutive effect, if any, for non-participating RSA's, Stock Options and PSU's is determined using the greater of dilution as calculated under the treasury stock method or the two-class method. Potential dilutive shares are excluded from diluted earnings per share when their effect is anti-dilutive. When there is a net loss for a period, all Potential dilutive shares are anti-dilutive and are excluded from the calculation of diluted loss per share for that period.

The following table sets forth the calculations of basic and diluted (loss) earnings per share:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except per share amounts)		2020				2019				2020				2019
Net (loss) income		$	(23,814	)		$	8,114			$	(25,707	)		$	22,516
Less: Dividends and undistributed (loss) income allocated to participating securities		(17		)		11				(19		)		31
(Loss) income attributable to common stockholders		$	(23,797	)		$	8,103			$	(25,688	)		$	22,485
Basic weighted-average common shares outstanding		18,014				18,172				17,974				18,219
Add: dilutive effect of equity instruments		—				205				—				193
Diluted weighted-average shares outstanding		18,014				18,377				17,974				18,412
(Loss) earnings per share - basic		$	(1.32	)		$	0.45			$	(1.43	)		$	1.23
(Loss) earnings per share - diluted		$	(1.32	)		$	0.44			$	(1.43	)		$	1.22

For the three and six months ended June 30, 2020 and 2019, RSA's and Stock Options convertible to 0.7 million and 0.7 million, and 0.3 million and 0.3 million shares of common stock, respectively, were outstanding but were not included in the computation of diluted net (loss) income per share because the effect would have been anti-dilutive.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There have been no changes in the Company’s critical accounting estimates from those that were disclosed in the 2019 Form 10-K except for assumptions regarding impairment of long-lived assets. Actual results could differ from these estimates.

Due to the coronavirus ("COVID-19") pandemic, there has been uncertainty and disruption in the global economy and financial markets. Additionally, due to COVID-19, overall power generation and coal-fired power demand may change, which could also have a material adverse effect on the Company. The Company is not aware of any specific event or circumstance due to COVID-19 that would require an update to its estimate or judgments or a revision of the carrying values of its assets or liabilities through the date of this Quarterly Report. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Risks and Uncertainties

The Company’s earnings are significantly affected by equity earnings it receives from Tinuum Group. As of June 30, 2020, Tinuum Group has 20 invested RC facilities of which 8 are leased to a single customer. A majority of these leases are periodically renewed. Further, the ability to generate Section 45 tax credits related to Tinuum's RC facilities expires in 2021. The loss of a single customer by Tinuum Group or the expiration of Section 45 tax credits would have a significant adverse impact on Tinuum Group's financial position, results of operations and cash flows, which in turn would have a material adverse impact on the Company’s financial position, results of operations and cash flows.

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The Company's revenues, sales volumes, earnings and cash flows are significantly affected by prices of competing power generation sources such as natural gas and renewable energy. Low natural gas prices make it a competitive alternative to coal-fired power generation and therefore, coal consumption may be reduced, which reduces the demand for our products. In addition, coal consumption and demand for our products is also affected by the demand for electricity, which is higher in the warmer and colder months of the year. Abnormal temperatures during the summer and winter months may significantly reduce coal consumption and thus the demand for the Company's products.

Reclassifications

Certain balances have been reclassified from the prior year to conform to the current year presentation. Such reclassifications had no effect on the Company’s results of operations or financial position in any of the periods presented.

New Accounting Standards

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for "smaller reporting companies" (as defined by the Securities and Exchange Commission) for fiscal years beginning after December 15, 2022, including interim periods within those years, and must be adopted under a modified retrospective method approach. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The amendments in ASU 2019-12 simplify various aspects related to accounting for income taxes by removing certain exceptions contained in Topic 740 and also clarifies and amends existing guidance in Topic 740 to improve consistent application. ASU 2019-12 is effective for public business entities beginning after December 15, 2020, including interim periods within those years, and early adoption is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.

As part of its periodic review of the carrying value of long-lived assets, the Company assessed its long-lived assets for potential impairment. In assessing impairment of its Power Generation and Industrials ("PGI") segment's and certain other long-lived asset groups, the Company considered factors such as the significant decline in both PGI’s trailing twelve months revenues and current and future years’ forecasted revenues, which are largely due to the significant drop in coal-fired power dispatch that began in 2019 and is anticipated to continue in the near term largely due to the current and forecasted historical low prices of alternative power generation sources such as natural gas and an increase in supply from other competing energy sources.

The Company completed an undiscounted cash flow analysis of its PGI segment's and certain other long-lived assets (the "Asset Group"), which are comprised of its manufacturing plant and related assets and its lignite mine assets, and estimated the undiscounted cash flows from the Asset Group at $54.7 million, which was less than the carrying value of the Asset Group of $58.3 million. Accordingly, the Company completed an assessment of the Asset Group’s fair value and estimated the fair value of the Asset Group at $32.2 million. This resulted in an impairment and write-down of the Asset Group of $26.1 million, which is reflected as "Impairment" in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020. The total impairment charge was allocated to the PGI segment and Other in the amounts of $23.2 million and $2.9 million, respectively.

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The following table summarizes the allocation of the impairment and write-down of $26.1 million to the Asset Group components during the three months ended June 30, 2020:

(in thousands)
Property, plant and equipment, net		$	18,986
Intangible assets, net		1,445
Other long-term assets, net		5,672
Total impairment		$	26,103

The Company engaged an independent third party to perform the valuation of the Asset Group in order to determine the estimated fair value of the Asset Group. This valuation was based on the use of several established valuation models including an expected future discounted cash flow model using Level 3 inputs under ASC 820 - Fair Value Measurement. The cash flows are those expected to be generated by market participants discounted at the risk-free rate of interest. Because of the continued future uncertainty surrounding the level of coal-fired dispatch, the impact of historically low natural gas prices and other estimates impacting the expected future cash flow, it is reasonably possible that the expected future cash flows may change in the near term and may result in the Company recording additional impairment of the Asset Group.

In response to the COVID-19 outbreak, in March 2020, the federal government passed the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The CARES Act provided, among other things, the creation of the Paycheck Protection Program ("PPP"), which is sponsored and administered by the U.S. Small Business Administration ("SBA").

On April 20, 2020, the Company entered into a loan (the "PPP Loan") under the PPP, evidenced by a promissory note, with BOK, NA dba Bank of Oklahoma ("BOK") providing for $3.3 million in proceeds, which was funded to the Company on April 21, 2020. The PPP Loan matures April 21, 2022 and provides for 18 monthly payments of principal and interest commencing on November 21, 2020. The interest rate on the PPP Loan is 1.00%. The PPP Loan is unsecured and contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or BOK, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. The PPP Loan principal may be forgiven subject to the terms of the PPP and approval by the SBA.

The Company recorded the PPP Loan as a debt obligation under the guidance of ASC 470 - Debt and will accrue interest over the 18-month term of the PPP Loan beginning November 21, 2020.

The CARES Act also provided the deferral of payroll tax payments for all payroll taxes incurred through December 31, 2020. The Company has elected to defer payments of payroll taxes for the periods allowed under the CARES Act and will repay 50% by December 31, 2021 and 50% by December 31, 2022. For the three months ended June 30, 2020, total payroll tax payments deferred under the CARES Act were $0.1 million.

As described in Note 1, on the Acquisition Date, the Company completed the acquisition of Carbon Solutions (the "Carbon Solutions Acquisition") for a total purchase price of $75.0 million (the "Purchase Price"). The fair value of the purchase consideration totaled $66.5 million, less cash acquired of $3.3 million, and the assumption of debt and contractual commitments of $11.8 million. The Company also paid $4.5 million in acquisition-related costs (or transaction costs). The Company funded the cash consideration from cash on hand and the proceeds from the Term Loan and Security Agreement (the "Senior Term Loan") in the principal amount of $70.0 million, as more fully described in Note 7.

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The following table summarizes the final purchase price allocation. Subsequent to the Acquisition Date, the Company completed additional analysis and adjustments were made to the preliminary purchase price allocations as noted in the table below:

Fair value of assets acquired:		As Originally Reported				Adjustments				As Adjusted
Cash		$	3,284			$	—			$	3,284
Receivables		6,409				—				6,409
Inventories		22,100				(356		)		21,744
Prepaid expenses and other current assets		2,992				61				3,053
Spare parts		3,359				—				3,359
Property, plant and equipment		43,033				(377		)		42,656
Mine leases and development		2,500				200				2,700
Mine reclamation asset		—				2,402				2,402
Intangible assets		4,000				100				4,100
Other assets		168				—				168
Amount attributable to assets acquired		87,845				2,030				89,875
Fair value of liabilities assumed:
Accounts payable		4,771				—				4,771
Accrued liabilities		7,354				254				7,608
Equipment lease liabilities		8,211				—				8,211
Mine reclamation liability		626				1,776				2,402
Other liabilities		437				—				437
Amount attributable to liabilities assumed		21,399				2,030				23,429
Net assets acquired		$	66,446			$	—			$	66,446

Adjustments to the preliminary purchase price allocation primarily related to changes in fair values assigned to property, plant and equipment, intangible assets, mine reclamation liability and the related mine reclamation asset as a result of the final valuation report from the Company's third-party valuation firm issued in May 2019. During the three months ended June 30, 2019 based on new information of facts and circumstances that existed as of the Acquisition Date, the Company revised its estimates used as of the Acquisition Date related to the net realizable value of certain finished goods inventory items as well as values assigned to certain prepaid and accrued expense items.

The following table represents the intangible assets, as adjusted for purchase price adjustments noted above, identified as part of the Carbon Solutions Acquisition:

(in thousands)		Amount				Weighted Average Useful Life (years)
Customer relationships		$	2,200			5
Developed technology		1,600				5
Trade name		300				2
Total intangibles acquired		$	4,100

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The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value as of June 30, 2020 and December 31, 2019:

		As of
(in thousands)		June 30, 2020				December 31, 2019
Product inventory		$	14,081			$	13,515
Raw material inventory		2,003				1,945
		$	16,084			$	15,460

Tinuum Group, LLC

The Company's ownership interest in Tinuum Group was 42.5% as of June 30, 2020 and December 31, 2019. Tinuum Group supplies technology equipment and technical services at select coal-fired generators, but its primary purpose is to put into operation facilities that produce and sell RC that lower emissions and also qualify for Section 45 tax credits. Tinuum Group has been determined to be a variable interest entity ("VIE"); however, the Company does not have the power to direct the activities that most significantly impact Tinuum Group's economic performance and has therefore accounted for the investment under the equity method of accounting. The Company determined that the voting partners of Tinuum Group have identical voting rights, equity control interests and board control interests, and therefore, concluded that the power to direct the activities that most significantly impact Tinuum Group's economic performance was shared.

The following table summarizes the results of operations of Tinuum Group:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Gross profit		$	6,868			$	38,180			$	11,878			$	79,380
Operating, selling, general and administrative expenses		11,919				5,763				24,695				12,345
(Loss) income from operations		(5,051		)		32,417				(12,817		)		67,035
Other income (expenses)		2,144				(28		)		5,787				23
Loss attributable to noncontrolling interest		18,823				12,891				38,094				28,667
Net income available to members		$	15,916			$	45,280			$	31,064			$	95,725
ADES equity earnings from Tinuum Group		$	6,764			$	19,244			$	13,202			$	39,011

For the three and six months ended June 30, 2020 and the three months ended June 30, 2019, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the respective period. For the six months ended June 30, 2019, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the period, less the amount necessary to recover the cumulative earnings short-fall balance as of the end of the immediately preceding period, which was December 31, 2018. For the six months ended June 30, 2019, the difference between the Company's proportionate share of Tinuum Group's net income available to members (at its equity interest of 42.5%) and the Company's earnings from its Tinuum Group equity method investment as reported in the Condensed Consolidated Statements of Operations relates to the Company receiving distributions in excess of the carrying value of the equity investment, and therefore recognizing such excess distributions as equity method earnings in the period the distributions occur.

For the three and six months ended June 30, 2020, the Company recognized equity earnings from Tinuum Group of $6.8 million and $13.2 million, respectively. For the three and six months ended June 30, 2019, the Company recognized equity earnings from Tinuum Group of $19.2 million and $39.0 million, respectively.

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The following tables present the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, if any, for the three and six months ended June 30, 2020 and 2019 (in thousands):

Description		Date(s)		Investment balance				ADES equity earnings				Cash distributions				Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance		12/31/2019		$	32,280			$	—			$	—			$	—
ADES proportionate share of income from Tinuum Group		First Quarter		6,438				6,438				—				—
Cash distributions from Tinuum Group		First Quarter		(13,764		)		—				13,764				—
Total investment balance, equity earnings (loss) and cash distributions		3/31/2020		$	24,954			$	6,438			$	13,764			$	—
ADES proportionate share of income from Tinuum Group		Second Quarter		$	6,764			$	6,764			$	—			$	—
Cash distributions from Tinuum Group		Second Quarter		(13,600		)		—				13,600				—
Total investment balance, equity earnings and cash distributions		6/30/2020		$	18,118			$	6,764			$	13,600			$	—

Description		Date(s)		Investment balance				ADES equity earnings (loss)				Cash distributions				Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance		12/31/2018		$	—			$	—			$	—			$	(1,672	)
Impact of adoption of accounting standards (1)		First Quarter		37,232				—				—				—
ADES proportionate share of income from Tinuum Group		First Quarter		21,439				21,439				—				—
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)		First Quarter		(1,672		)		(1,672		)		—				1,672
Cash distributions from Tinuum Group		First Quarter		(16,788		)		—				16,788				—
Total investment balance, equity earnings and cash distributions		3/31/2019		$	40,211			$	19,767			$	16,788			$	—
ADES proportionate share of income from Tinuum Group		Second Quarter		$	19,244			$	19,244			$	—			$	—
Cash distributions from Tinuum Group		Second Quarter		(17,000		)		—				17,000				—
Total investment balance, equity earnings and cash distributions		6/30/2019		$	42,455			$	19,244			$	17,000			$	—

(1) Tinuum Group adopted Accounting Standards Codification Topic ("ASC") 606 - Revenue from Contracts with Customers and ASC 842 - Leases as of January 1, 2019. As a result of Tinuum Group’s adoption of these standards, the Company recorded a cumulative adjustment of $27.4 million, net of the impact of income taxes, related to the Company's percentage of Tinuum Group's cumulative effect adjustment, which increased the Company's Retained earnings as of January 1, 2019.

Tinuum Services, LLC

The Company has a 50% voting and economic interest in Tinuum Services. The Company has determined that Tinuum Services is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Tinuum Services under the equity method of accounting. The Company’s investment in Tinuum Services as of June 30, 2020 and December 31, 2019 was $4.9 million and $6.8 million, respectively.

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The following table summarizes the results of operations of Tinuum Services:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Gross loss		$	(20,418	)		$	(25,192	)		$	(42,677	)		$	(49,927	)
Operating, selling, general and administrative expenses		43,515				50,412				89,268				99,862
Loss from operations		(63,933		)		(75,604		)		(131,945		)		(149,789		)
Other income (expenses)		(330		)		(316		)		(615		)		(558		)
Loss attributable to noncontrolling interest		67,071				79,307				139,043				157,577
Net income		$	2,808			$	3,387			$	6,483			$	7,230
ADES equity earnings from Tinuum Services		$	1,404			$	1,693			$	3,242			$	3,615

Included in the Consolidated Statements of Operations of Tinuum Services for the three and six months ended June 30, 2020 and 2019, respectively, were losses related to VIE's of Tinuum Services. These losses do not impact the Company's equity earnings from Tinuum Services as 100% of those losses are attributable to a noncontrolling interest and eliminated in the calculations of Tinuum Services' net income attributable to the Company's interest.

The following table details the components of the Company's respective equity method investments included in the Earnings from equity method investments line item on the Condensed Consolidated Statements of Operations:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Earnings from Tinuum Group		$	6,764			$	19,244			$	13,202			$	39,011
Earnings from Tinuum Services		1,404				1,693				3,242				3,615
Loss from other		—				(2		)		(3		)		(1		)
Earnings from equity method investments		$	8,168			$	20,935			$	16,441			$	42,625

The following table details the components of the cash distributions from the Company's respective equity method investments included in the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported in the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" within Operating cash flows.

		Six Months Ended June 30,
(in thousands)		2020				2019
Distributions from equity method investees, return on investment
Tinuum Group		$	27,364			$	33,788
Tinuum Services		5,152				4,300
		$	32,516			$	38,088

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		As of
(in thousands)		June 30, 2020				December 31, 2019
Senior Term Loan due December 2021, related party		$	28,000			$	40,000
Less: net unamortized debt issuance costs		(815		)		(1,163		)
Less: net unamortized debt discount		(840		)		(1,200		)
Senior Term Loan due December 2021, net		26,345				37,637
Finance lease obligations		6,053				6,729
PPP Loan		3,305				—
		35,703				44,366
Less: Current maturities		(25,583		)		(23,932		)
Total long-term debt		$	10,120			$	20,434

Senior Term Loan

On December 7, 2018, the Company, and ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, and certain other subsidiaries of the Company as guarantors, The Bank of New York Mellon as administrative agent, and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo"), affiliates of a beneficial owner of greater than five percent of the Company's common stock and a related party, entered into the Senior Term Loan in the amount of $70.0 million less original issue discount of $2.1 million. Proceeds from the Senior Term Loan were used to fund the Carbon Solutions Acquisition as disclosed in Note 4. The Company also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan has a term of 36 months and bears interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which is adjusted quarterly to the current 3-month LIBOR rate, and interest is payable quarterly in arrears. Quarterly principal payments of $6.0 million were required beginning in March 2019, and the Company may prepay the Senior Term Loan at any time without penalty. The Senior Term Loan is secured by substantially all the assets of the Company, including the cash flows from Tinuum Group and Tinuum Services (collectively, the "Tinuum Entities"), but excluding the Company's equity interests in the Tinuum entities.

The Senior Term Loan includes, among others, the following covenants: (1) Beginning December 31, 2018 and as of the end of each fiscal quarter thereafter, the Company must maintain a minimum cash balance of $5.0 million and shall not permit "expected future net cash flows from the refined coal business" (as defined in the Senior Term Loan) to be less than 1.75 times the outstanding principal amount of the Senior Term Loan; (2) Beginning in January 2019, annual collective dividends and buybacks of Company shares in an aggregate amount, not to exceed $30.0 million, is permitted so long as (a) no default or event of default exists under the Senior Term Loan and (b) expected future net cash flows from the refined coal business as of the end of the most recent fiscal quarter exceed $100.0 million.

Waiver on Senior Term Loan

Pursuant to entering into the PPP Loan, on April 20, 2020, the Company and Apollo executed the First Amendment to the Senior Term Loan, which permitted the Company to enter into the PPP Loan.

Line of Credit

On December 7, 2018, ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary of the Company, as borrower, the Company, as guarantor, and a bank (the "Lender") entered into an amendment to the 2013 Loan and Security Agreement (the "Line of Credit"). This amendment provided, among other things, for ADA to be able to enter into the Senior Term Loan as a guarantor so long as the principal amount of the Senior Term Loan did not exceed $70.0 million. Additionally, the financial covenants in the Line of Credit were amended and restated to be consistent with the Senior Term Loan covenants, including maintaining a minimum cash balance of $5.0 million. The maturity date of the Line of Credit is September 30, 2020.

As of June 30, 2020, there were no outstanding borrowings under the Line of Credit.

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As of June 30, 2020, the Company has obligations under finance and operating leases in the amounts of $6.1 million and $4.0 million, respectively. As of June 30, 2020, the Company has right of use ("ROU") assets, net of accumulated amortization, under finance leases and operating leases of $2.8 million and $2.5 million, respectively.

Finance leases

ROU assets under finance leases and finance lease liabilities are included in Property, plant and equipment and Current portion and Long-term portion of borrowings, respectively, in the Condensed Consolidated Balance Sheet as of June 30, 2020. Interest expense related to finance lease liabilities and amortization of ROU assets under finance leases are included in Interest expense and Depreciation, amortization, depletion and accretion, respectively, in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2020.

Operating leases

ROU assets under operating leases and operating lease liabilities are included in Other long-term assets and Other liabilities and Other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheet as of June 30, 2020.

Lease expense for operating leases for the three and six months ended June 30, 2020 was $1.1 million and $2.4 million, respectively, of which $1.0 million and $2.0 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million and $0.4 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations. Lease expense for operating leases for the three and six months ended June 30, 2019 was $1.2 million and $2.4 million, respectively, of which $1.0 million and $2.1 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million and $0.3 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations.

Lease financial information as of and for the three and six months ended June 30, 2020 and 2019 is provided in the following table:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Finance lease cost:
Amortization of right-of-use assets		$	465			$	558			$	979			$	1,094
Interest on lease liabilities		93				57				187				188
Operating lease cost		676				927				1,529				1,856
Short-term lease cost		424				189				706				360
Variable lease cost (1)		44				93				137				175
Total lease cost		$	1,702			$	1,824			$	3,538			$	3,673
Other Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases										$	187			$	187
Operating cash flows from operating leases										$	1,213			$	1,901
Financing cash flows from finance leases										$	676			$	681
Right-of-use assets obtained in exchange for new operating lease liabilities										$	60			$	49
Weighted-average remaining lease term - finance leases										3.8 years				4.7 years
Weighted-average remaining lease term - operating leases										2.1 years				2.4 years
Weighted-average discount rate - finance leases										6.1		%		6.1		%
Weighted-average discount rate - operating leases										8.5		%		8.6		%

(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.

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Trade receivables represent an unconditional right to consideration in exchange for goods or services transferred to a customer. The Company invoices its customers in accordance with the terms of the contract. Credit terms are generally net 30 from the date of invoice. The timing between the satisfaction of performance obligations and when payment is due from the customer is generally not significant. The Company records allowances for doubtful trade receivables when it is probable that the balances will not be collected.

Trade receivables, net

The following table shows the components of Trade receivables, net:

		As of
(in thousands)		June 30, 2020				December 31, 2019
Trade receivables		$	5,922			$	8,057
Less: Allowance for doubtful accounts		(603		)		(627		)
Trade receivables, net		$	5,319			$	7,430

For the three and six months ended June 30, 2020 and 2019, the Company recognized zero bad debt expense, respectively.

Disaggregation of Revenue and Earnings from Equity Method Investments

During the three and six months ended June 30, 2020 and 2019, all performance obligations related to revenues recognized were satisfied at a point in time. The Company disaggregates its revenues by major components as well as between its two reportable segments, which are further discussed in Note 15 to the Condensed Consolidated Financial Statements. The following tables disaggregate revenues by major component for the three and six months ended June 30, 2020 and 2019 (in thousands):

		Three Months Ended June 30, 2020																Six Months Ended June 30, 2020
		Segment																Segment
		PGI				RC				Other				Total				PGI				RC				Other				Total
Revenue component
Consumables		$	7,070			$	—			$	1,100			$	8,170			$	15,545			$	—			$	1,842			$	17,387
License royalties, related party		—				3,313				—				3,313				—				6,359				—				6,359
Revenues from customers		7,070				3,313				1,100				11,483				15,545				6,359				1,842				23,746
Earnings from equity method investments		—				8,168				—				8,168				—				16,441				—				16,441
Total revenues from customers and earnings from equity method investments		$	7,070			$	11,481			$	1,100			$	19,651			$	15,545			$	22,800			$	1,842			$	40,187

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		Three Months Ended June 30, 2019																Six Months Ended June 30, 2019
		Segment																Segment
		PGI				RC				Other				Total				PGI				RC				Other				Total
Revenue component
Consumables		$	11,049			$	—			$	337			$	11,386			$	25,602			$	—			$	893			$	26,495
License royalties, related party		—				4,191				—				4,191				—				8,411				—				8,411
Revenues from customers		11,049				4,191				337				15,577				25,602				8,411				893				34,906
Earnings from equity method investments		—				20,935				—				20,935				—				42,625				—				42,625
Total revenues from customers and earnings from equity method investments		$	11,049			$	25,126			$	337			$	36,512			$	25,602			$	51,036			$	893			$	77,531

Legal Proceedings

The Company is from time to time subject to, and is presently involved in, various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and outcomes, the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements, and judgments where management has assessed that a loss is probable and an amount can be reasonably estimated. There were no significant legal proceedings as of June 30, 2020.

Restricted Cash

As of June 30, 2020 and December 31, 2019, the Company had long-term restricted cash of $5.0 million and $5.0 million, respectively, which primarily consisted of minimum cash balance requirements under the Senior Term Loan.

Other Commitments and Contingencies

The Company has certain limited obligations contingent upon future events in connection with the activities of Tinuum Group. The Company, NexGen Refined Coal, LLC ("NexGen") and two entities affiliated with NexGen have provided an affiliate of the Goldman Sachs Group, Inc. with limited guaranties (the "Tinuum Group Party Guaranties") related to certain losses it may suffer as a result of inaccuracies or breach of representations and covenants. The Company also is a party to a contribution agreement with NexGen under which any party called upon to pay on a Tinuum Group Party Guaranty is entitled to receive contributions from the other party equal to 50% of the amount paid. The Company has not recorded a liability or expense provision related to this contingent obligation as it believes that it is not probable that a loss will occur with respect to the Tinuum Group Party Guaranties.

Stock Repurchase Programs

In November 2018, the Company's Board of Directors (the "Board") authorized the Company to purchase up to $20.0 million of its outstanding common stock under a stock repurchase program (the "Stock Repurchase Program"), which was to remain in effect until December 31, 2019 unless otherwise modified by the Board. As of November 2019, $2.9 million remained outstanding related to the Stock Repurchase Program. In November 2019, the Board authorized an incremental $7.1 million to the Stock Repurchase Program and provided that it will remain in effect until all amounts are utilized or it is otherwise modified by the Board.

For the three and six months ended June 30, 2020, under the Stock Repurchase Program, the Company purchased zero and 20,613 shares, respectively, of its common stock for cash of zero and $0.2 million, respectively, inclusive of commissions and fees. For the three and six months ended June 30, 2019, under the Stock Repurchase Program, the Company purchased 184,715 and 248,591 shares, respectively, of its common stock for cash of $2.1 million and $2.8 million, respectively, inclusive of commissions and fees. As of June 30, 2020, the Company had $7.0 million remaining under the Stock Repurchase Program.

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Quarterly Cash Dividend

Dividends declared and paid quarterly on all outstanding shares of common stock during the three and six months ended June 30, 2020 and 2019 were as follows:

		2020						2019
		Per share				Date paid		Per share				Date paid
Dividends declared during quarter ended:
March 31		$	0.25			March 10, 2020		$	0.25			March 7, 2019
June 30		$	—					$	0.25			June 7, 2019
		$	0.25					$	0.50

A portion of the dividends declared remains accrued subsequent to the payment dates and represents dividends accumulated on nonvested shares of common stock held by employees and directors of the Company that contain forfeitable dividend rights that are not payable until the underlying shares of common stock vest. These amounts are included in both Other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheet as of June 30, 2020.

Tax Asset Protection Plan

U.S. federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and other tax assets if the Company experiences an "ownership change" (as defined in the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in the ownership of the Company by "5 percent stockholders" that exceeds 50 percentage points over a rolling three-year period.

On May 5, 2017, the Board approved the declaration of a dividend of rights to purchase Series B Junior Participating Preferred Stock for each outstanding share of common stock as part of a tax asset protection plan (the "TAPP") designed to protect the Company’s ability to utilize its net operating losses and tax credits. The TAPP is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of the Company’s outstanding common stock.

On April 9, 2020, the Board approved the Third Amendment to the TAPP ("Third Amendment") that amends the TAPP, as previously amended by the First and Second Amendments that were approved the Board on April 6, 2018 and April 5, 2019, respectively. The Third Amendment amends the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith. At the Company's 2020 annual meeting of stockholders, the Company's stockholders approved the Second Amendment, thus the Final Expiration Date will be the close of business on December 31, 2021.

The Company grants equity-based awards to employees, non-employee directors, and consultants that may include, but are not limited to, RSA's, restricted stock units ("RSU's"), performance stock units ("PSU's") and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included within the Cost of goods sold and Payroll and benefits line items, respectively, in the Condensed Consolidated Statements of Operations. Stock-based compensation expense related to non-employee directors and consultants is included within the General and administrative line item in the Condensed Consolidated Statements of Operations.

Total stock-based compensation expense for the three and six months ended June 30, 2020 and 2019 was as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
RSA expense		$	975			$	541			$	1,481			$	858
PSU expense		163				—				163				—
Total stock-based compensation expense		$	1,138			$	541			$	1,644			$	858

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The amount of unrecognized compensation cost as of June 30, 2020, and the expected weighted-average period over which the cost will be recognized is as follows:

		As of June 30, 2020
(in thousands)		Unrecognized Compensation Cost				Expected Weighted- Average Period of Recognition (in years)
RSA expense		$	2,173			2.18
PSU expense		146				2.69
Total unrecognized stock-based compensation expense		$	2,319			2.21

Restricted Stock

Restricted stock is typically granted with vesting terms of three years. The fair value of RSA's and RSU's is determined based on the closing price of the Company’s common stock on the authorization date of the grant multiplied by the number of shares subject to the stock award. Compensation expense for RSA's is generally recognized on a straight-line basis over the entire vesting period. Compensation expense for RSU's is generally recognized on a straight-line basis over the service period of the award.

A summary of RSA activity under the Company's various stock compensation plans for the six months ended June 30, 2020 is presented below:

		Restricted Stock			Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2020		451,344			$	10.65
Granted		218,524			$	5.34
Vested		(195,884	)		$	10.48
Forfeited		(3,814	)		$	8.48
Non-vested at June 30, 2020		470,170			$	8.27

Stock Options

Stock options generally vest over three years or upon satisfaction of performance-based conditions and have a contractual limit of five years from the date of grant to exercise. The fair value of stock options granted is determined on the date of grant using the Black-Scholes option pricing model and the related expense is recognized on a straight-line basis over the entire vesting period.

A summary of stock option activity for the six months ended June 30, 2020 is presented below:

		Number of Options Outstanding and Exercisable			Weighted-Average Exercise Price				Aggregate Intrinsic Value (in thousands)				Weighted-Average Remaining Contractual Term (in years)
Options outstanding, January 1, 2020		300,000			$	13.87
Options granted		—			—
Options exercised		—			—
Options expired / forfeited		(300,000	)		13.87
Options outstanding, June 30, 2020		—			$	—			$	—			0
Options vested and exercisable, June 30, 2020		—			$	—			$	—			0

Performance Share Units

Compensation expense is recognized for PSU awards on a straight-line basis over the applicable service period, which is generally three years, based on the estimated fair value at the date of grant using a Monte Carlo simulation model. A summary of PSU activity for the six months ended June 30, 2020 is presented below:

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		Units			Weighted-Average Grant Date Fair Value				Aggregate Intrinsic Value (in thousands)				Weighted-Average Remaining Contractual Term (in years)
PSU's outstanding, January 1, 2020		—			$	—
Granted		50,127			6.17
Vested / Settled		—			—
Forfeited / Canceled		—			—
PSU's outstanding, June 30, 2020		50,127			$	6.17			$	243			2.69

Supplemental Balance Sheet Information

The following table summarizes the components of Prepaid expenses and other assets and Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:

		As of
(in thousands)		June 30, 2020				December 31, 2019
Prepaid expenses and other assets:
Federal and state income tax benefits		$	11,416			$	—
Prepaid federal and state income taxes		4,215				4,228
Prepaid expenses		1,987				1,708
Other		1,341				1,896
		$	18,959			$	7,832
Other long-term assets, net:
Right of use assets, operating leases, net		$	2,529			$	5,073
Spare parts, net		3,559				3,453
Mine development costs, net		4,139				7,084
Mine reclamation asset, net		1,323				2,451
Highview Investment		552				552
Other long-term assets		1,779				1,718
		$	13,881			$	20,331

Spare parts include critical spares required to support plant operations. Parts and supply costs are determined using the lower of cost or estimated replacement cost. Parts are recorded as maintenance expenses in the period in which they are consumed.

Mine development costs include acquisition costs, the cost of other development work and mitigation costs related to the Company's mining operations and are depleted over the estimated life of the related mine reserves, which is 21 years. The Company performs an evaluation of the recoverability of the carrying value of mine development costs to determine if facts and circumstances indicate that their carrying value may be impaired and if any adjustment is warranted. Indicators of impairment were present as of June 30, 2020. See Note 2 for further discussion. Mine reclamation asset, net represents an asset retirement obligation asset and is depreciated over the estimated life of the mine.

The Company holds a long-term investment (the "Highview Investment") in Highview Enterprises Limited ("Highview"), a London, England based developmental stage company specializing in power storage. The Company accounts for the Highview Investment as an investment recorded at cost, less impairment, plus or minus observable changes in price for identical or similar investments of the same issuer.

The Highview Investment is evaluated for indicators of impairment such as an event or change in circumstances that may have a significant adverse effect on the fair value of the investment. There were no changes to the carrying value of the Highview Investment for the three and six months ended June 30, 2020 as there were no indicators of impairment or observable price changes for identical or similar investments.

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The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:

		As of
(in thousands)		June 30, 2020				December 31, 2019
Other current liabilities:
Current portion of operating lease obligations		$	2,025			$	2,382
Accrued interest		116				213
Income and other taxes payable		708				678
Other		528				1,038
		$	3,377			$	4,311
Other long-term liabilities:
Operating lease obligations, long-term		$	1,954			$	2,810
Mine reclamation liability		2,804				2,721
Other		58				229
		$	4,816			$	5,760

Supplemental Condensed Consolidated Statements of Operations Information

The following table details the components of Interest expense in the Condensed Consolidated Statements of Operations:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Interest on Senior Term Loan		$	484			$	1,134			$	1,114			$	2,404
Debt discount and debt issuance costs		355				470				709				851
453A interest		28				326				160				648
Other		95				57				189				188
		$	962			$	1,987			$	2,172			$	4,091

For the three and six months ended June 30, 2020 and 2019, the Company's income tax expense and effective tax rates based on forecasted pretax income were:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except for rate)		2020				2019				2020				2019
Income tax expense		$	103			$	6,634			$	461			$	8,333
Effective tax rate		—		%		45		%		(2		)%		27		%

The effective rate for the three and six months ended June 30, 2020 was different from the federal statutory rate primarily from an increase in the valuation allowance on deferred tax assets of $4.5 million and $5.4 million, respectively. The increase in the valuation allowance was a result of a reduction in forecasts as of June 30, 2020 of current and future years' taxable income.

The Company assesses the 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 income taxes, the Company assesses the relative merits and risks of the appropriate income tax treatment of transactions taking into account statutory, judicial, and regulatory guidance.

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Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision-making group, in deciding how to allocate resources and in assessing financial performance. As of June 30, 2020, the Company's CODM was the Company's CEO. The Company's operating and reportable segments are identified by products and services provided.

As of June 30, 2020, the Company has two reportable segments: (1) Refined Coal ("RC"); and (2) Power Generation and Industrials ("PGI").

The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below:

•	The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2019 Form 10-K.

•	Segment revenues include equity method earnings and losses from the Company's equity method investments.

•	Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Legal and professional fees and General and administrative.

•	RC segment operating income includes interest expense directly attributable to the RC segment.

As of June 30, 2020 and December 31, 2019, substantially all of the Company's material assets are located in the U.S. and substantially all of significant customers are U.S. companies. The following table presents the Company's operating segment results for the three and six months ended June 30, 2020 and 2019:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Revenues:
Refined Coal:
Earnings in equity method investments		$	8,168			$	20,935			$	16,441			$	42,625
License royalties, related party		3,313				4,191				6,359				8,411
		11,481				25,126				22,800				51,036
Power Generation and Industrials:
Consumables		7,070				11,049				15,545				25,602
		7,070				11,049				15,545				25,602
Total segment reporting revenues		18,551				36,175				38,345				76,638
Adjustments to reconcile to reported revenues:
Earnings in equity method investments		(8,168		)		(20,935		)		(16,441		)		(42,625		)
Corporate and other		1,100				337				1,842				893
Total reported revenues		$	11,483			$	15,577			$	23,746			$	34,906
Segment operating income (loss):
Refined Coal (1)		$	10,777			$	24,596			$	21,637			$	49,979
Power Generation and Industrials (2)		(25,737		)		(3,862		)		(32,314		)		(7,324		)
Total segment operating income		$	(14,960	)		$	20,734			$	(10,677	)		$	42,655

(1) Included in RC segment operating income for the three and six months ended June 30, 2020 is 453A interest expense of zero and $0.2 million, respectively. Included in RC segment operating income for the three and six months ended June 30, 2019 is 453A interest expense of $0.3 million and $0.6 million, respectively.

(2) Included in PGI segment operating loss for the three and six months ended June 30, 2020 is $23.2 million and $23.2 million, respectively, of impairment expense on the Asset Group, and $0.4 million and $0.4 million, respectively, of expenses related to sequestration of certain of our employees at our manufacturing plant in Louisiana. Included in PGI segment operating loss for the three and six months ended June 30, 2020 and 2019 is $1.4 million and $3.4 million, and $0.7 million and $2.6 million, respectively, of depreciation, amortization, and depletion

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expense on mine and plant long-lived assets. Included in PGI segment operating loss for the three and six months ended June 30, 2019 was $1.3 million and $4.7 million, respectively, of costs recognized as a result of the step-up in inventory fair value recorded from the Carbon Solutions Acquisition.

A reconciliation of reportable segment operating income to the Company's consolidated (loss) income before income tax expense is as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2019				2020				2019
Total reported segment operating income		$	(14,960	)		$	20,734			$	(10,677	)		$	42,655
Other operating loss (1)		(4,262		)		(353		)		(5,055		)		(751		)
		(19,222		)		20,381				(15,732		)		41,904
Adjustments to reconcile to (loss) income before income tax expense attributable to the Company:
Corporate payroll and benefits		(1,148		)		(804		)		(1,857		)		(1,236		)
Corporate legal and professional fees		(925		)		(1,556		)		(2,674		)		(3,517		)
Corporate general and administrative		(1,558		)		(1,715		)		(3,157		)		(3,149		)
Corporate depreciation and amortization		(163		)		(7		)		(189		)		(20		)
Corporate interest (expense) income, net		(824		)		(1,604		)		(1,766		)		(3,255		)
Other income (expense), net		129				53				129				122
(Loss) income before income tax expense		$	(23,711	)		$	14,748			$	(25,246	)		$	30,849

(1) Included in Other operating loss for the three and six months ended June 30, 2020 was $2.9 million and $2.9 million, respectively, of impairment expense on the Asset Group.

Corporate general and administrative expenses include certain costs that benefit the business as a whole but are not directly related to one of the Company's segments. Such costs include, but are not limited to, accounting and human resources staff, information systems costs, legal fees, facility costs, audit fees and corporate governance expenses. 

A reconciliation of reportable segment assets to the Company's consolidated assets is as follows:

		As of
(in thousands)		June 30, 2020				December 31, 2019
Assets:
Refined Coal (1)		$	27,070			$	43,953
Power Generation and Industrials		54,022				80,912
Total segment assets		81,092				124,865
All Other and Corporate (2)		52,238				48,934
Consolidated		$	133,330			$	173,799

(1) Includes $23.1 million and $39.2 million of investments in equity method investees, respectively.

(2) Includes the Company's deferred tax assets.

Fair value of financial instruments

The carrying amounts of financial instruments, including cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturity of these instruments. Accordingly, these instruments are not presented in the table below. The following table provides the estimated fair values of the remaining financial instruments:

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		As of June 30, 2020								As of December 31, 2019
(in thousands)		Carrying Value				Fair Value				Carrying Value				Fair Value
Financial Instruments:
Highview Investment		$	552			$	552			$	552			$	552
Highview Obligation		$	210			$	210			$	220			$	220

Concentration of credit risk

The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company holds cash and cash equivalents at three financial institutions as of June 30, 2020. If an institution was unable to perform its obligations, the Company would be at risk regarding the amount of cash and investments in excess of the Federal Deposit Insurance Corporation limits (currently $250 thousand) that would be returned to the Company.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of June 30, 2020 and December 31, 2019, the Company had no financial instruments carried and measured at fair value on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

As disclosed in Note 4, the Company completed the Carbon Solutions Acquisition for purchase consideration of $66.5 million. The estimated fair values of the assets acquired and liabilities assumed were determined based on Level 3 inputs.

As disclosed in Note 2, the Company recorded an impairment charge related to the Asset Group based on a valuation models that included an expected future discounted cash flow model using Level 3 inputs.

Restructuring

In December 2018, the Company recorded restructuring charges in connection with the departures of certain executives of Carbon Solutions in conjunction with the Carbon Solutions Acquisition. As part of the Carbon Solutions Acquisition, the Company also assumed a salary severance liability for an additional executive of Carbon Solutions in the amount of $0.6 million. There were no material restructuring activities during the three and six months ended June 30, 2020.

Restructuring accruals are included within the Accrued payroll and related liabilities line item in the Condensed Consolidated Balance Sheets. Restructuring expenses are included within the Payroll and benefits line item in the Condensed Consolidated Statements of Operations.

Other Compensation

On March 27, 2020, the Company's CEO resigned from the Company effective June 30, 2020. Pursuant to a settlement agreement executed between the Company and the CEO, the Company was obligated to pay severance compensation to the CEO in the form of salary continuance, cash bonus, contingent upon the Company achieving a performance metric, healthcare benefits, RSAs and PSUs, which in the aggregate was $1.4 million. As of June 30, 2020, the Company recorded a liability for the total severance compensation and corresponding expense for the three and six months ended June 30, 2020 under the caption "Payroll and benefits" in the Condensed Consolidated Statements of Operations.

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The following table summarizes the Company's change in restructuring and other compensation accruals for the six months ended June 30, 2020:

(in thousands)		Severance
Remaining accrual as of December 31, 2019		$	254
Expense provision		1,403
Cash payments and other		(817		)
Change in estimates		—
Remaining accrual as of June 30, 2020		$	840

Unless disclosed elsewhere within the notes to the Condensed Consolidated Financial Statements, the following are the significant matters that occurred subsequent to June 30, 2020.

Invested RC Facilities

On July 2, 2020, the Company announced that Tinuum Group sold its 49.9% ownership in a RC project to a new third party investor. The RC facility is located at a coal plant that has historically burned in excess of 2.5 million tons of coal per year. This facility is a royalty bearing facility to the Company. 

Additionally, on July 15, 2020, the Company announced that Tinuum Group completed a lease for an additional RC facility. The RC facility is located at a coal plant that has historically burned in excess of 2.0 million tons of coal per year. With this addition, Tinuum Group has 21 invested facilities in full-time operation.

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•	Continued performance in our RC business segment, principally related to equity earnings and license royalties;

•	Performance in our PGI business segment, principally related to Carbon Solutions;

•	Impairment recorded related to our PGI segment's and certain other long-lived asset groups; and

•	Impacts related to changes in income tax expense.

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•	The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2019 Form 10-K.

•	Segment revenues include equity method earnings and losses from our equity method investments.

•	Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Rent and occupancy, Legal and professional fees, and General and administrative.

•	RC segment operating income includes interest expense directly attributable to the RC segment.

1.

RC - Our RC segment derives its earnings from equity method investments as well as royalty payment streams and other revenues related to enhanced combustion of and reduced emissions of both NOX and mercury from the burning of coal. Our equity method investments related to the RC segment include Tinuum Group, Tinuum Services and other immaterial equity method investments. Segment revenues include our equity method earnings (losses) from our equity method investments and royalty earnings from Tinuum Group. These earnings are included within the Earnings from equity method investments and License royalties, related party line items in the Condensed Consolidated Statements of Operations. Key drivers to the RC segment performance are the produced and sold RC from both operating and retained RC facilities, royalty-bearing tonnage and the number of operating (leased or sold) and retained RC facilities. These key drivers impact our earnings and cash distributions from equity method investments.

2.

PGI - Our PGI segment includes revenues and related expenses from the sale of consumable products that utilize PAC and chemical technologies. These options provide coal-powered utilities and industrial boilers with mercury control solutions working in conjunction with pollution control equipment systems, generally without the requirement for significant ongoing capital outlays. These amounts are included within the respective revenues and cost of revenue line items in the Condensed Consolidated Statements of Operations.

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•	cash on hand;

•	distributions from Tinuum Group and Tinuum Services;

•	royalty payments from Tinuum Group; and

•	cash proceeds received from under the Paycheck Protection Program ("PPP") administered by th U.S. Small Business Administration ("SBA").

•	payment of dividends;

•	payment of debt principal and interest;

•	repurchases of shares of common stock; and

•	our business operating expenses, including federal and state tax payments, cash severance payments and costs associated with COVID-19.

•	20 invested facilities as of June 30, 2020 and inclusive of all net Tinuum cash flows (distributions and license

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•	Tinuum Group continues to not operate retained facilities;

•	Tinuum Group does not have material unexpected capital expenditures or unusual operating expenses;

•	Tax equity lease renewals on invested facilities are not terminated or repriced; and

•	Coal-fired power generation remains consistent with contractual expectations.

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(a)	the scope and impact of mercury and other regulations or pollution control requirements, including the impact of the final MATS;

(b)	the production and sale of RC by RC facilities that will qualify for Section 45 tax credits;

(c)	expected growth or contraction in and potential size of our target markets;

(d)	expected supply and demand for our products and services;

(e)	increasing competition in the PGI market;

(f)	future level of research and development activities;

(g)	the effectiveness of our technologies and the benefits they provide;

(h)	Tinuum Group’s ability to profitably sell and/or lease additional RC facilities and/or RC facilities that may be returned to Tinuum Group, or to recognize the tax benefits from production and sale of RC on retained RC facilities and the effect of these factors on Tinuum Group's future earnings and distributions;

(i)	probability of any loss occurring with respect to certain guarantees made by Tinuum Group;

(j)	the timing of awards of, and work and related testing under, our contracts and agreements and their value;

(k)	the timing and amounts of or changes in future revenues, royalties earned, backlog, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures;

(l)	the outcome of current legal proceedings;

(m)	awards of patents designed to protect our proprietary technologies both in the U.S. and other countries;

(n)	whether any legal challenges or EPA actions will have a material impact on the implementation of the MATS or other regulations and on our ongoing business;

(o)	the evolving impact and duration of the COVID-19 pandemic to our business;

(p)	whether any amounts under the PPP loan will be forgiven;

(q)	the tax impact of the use of or forgiveness of funds received or forgiven under the PPP loan; and

(r)	the future output of coal-fired power dispatch which affects that demand and future cash flow for our PGI products and may result in future additional impairment of the Asset Group.

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*	– Filed herewith.

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