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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________ 
FORM 10-Q
 ______________________________________  
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37822
______________________________________  
Advanced Emissions Solutions, Inc.
(Exact name of registrant as specified in its charter)
______________________________________   
Delaware 27-5472457
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 8051 E. Maplewood Ave, Suite 210, Greenwood Village, CO
80111
(Address of principal executive offices)(Zip Code)

(720) 598-3500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
______________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Class Trading SymbolName of each exchange on which registered
Common stock, par value $0.001 per share ADESNASDAQ Global Market
As of May 5, 2021, there were 18,855,607 outstanding shares of Advanced Emissions Solutions, Inc. common stock, par value $0.001 per share.




INDEX
 PAGE




Part I. – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As of
(in thousands, except share data)March 31, 2021December 31, 2020
ASSETS
Current assets:
Cash, cash equivalents and restricted cash$42,234 $30,932 
Receivables, net10,349 13,125 
Receivables, related parties4,064 3,453 
Inventories, net8,040 9,882 
Prepaid expenses and other assets3,420 4,597 
Total current assets68,107 61,989 
Restricted cash, long-term10,000 5,000 
Property, plant and equipment, net of accumulated depreciation of $4,172 and $3,340, respectively
29,777 29,433 
Intangible assets, net1,804 1,964 
Equity method investments2,753 7,692 
Deferred tax assets, net7,553 10,604 
Other long-term assets, net31,576 29,989 
Total Assets$151,570 $146,671 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$7,908 $7,849 
Accrued payroll and related liabilities2,214 3,257 
Current portion of long-term debt9,913 18,441 
Other current liabilities14,888 12,996 
Total current liabilities34,923 42,543 
Long-term debt, net of current portion4,287 5,445 
Other long-term liabilities13,208 13,473 
Total Liabilities52,418 61,461 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none outstanding
  
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 23,481,648 and 23,141,284 shares issued, and 18,863,502 and 18,523,138 shares outstanding at March 31, 2021 and December 31, 2020, respectively
23 23 
Treasury stock, at cost: 4,618,146 and 4,618,146 shares as of March 31, 2021 and December 31, 2020, respectively
(47,692)(47,692)
Additional paid-in capital100,630 100,425 
Retained earnings46,191 32,454 
Total stockholders’ equity99,152 85,210 
Total Liabilities and Stockholders’ Equity$151,570 $146,671 

See Notes to the Condensed Consolidated Financial Statements.
1

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited) 

Three Months Ended March 31,
(in thousands, except per share data)
20212020
Revenues:
Consumables$17,031 $9,217 
License royalties, related party4,066 3,046 
Total revenues21,097 12,263 
Operating expenses:
Consumables cost of revenue, exclusive of depreciation and amortization12,474 11,491 
Payroll and benefits2,469 2,742 
Legal and professional fees1,803 2,043 
General and administrative1,915 2,331 
Depreciation, amortization, depletion and accretion2,106 2,297 
Total operating expenses20,767 20,904 
Operating income (loss)330 (8,641)
Other income (expense):
Earnings from equity method investments18,312 8,273 
Interest expense(837)(1,210)
Other421 43 
Total other income17,896 7,106 
Income (loss) before income tax expense18,226 (1,535)
Income tax expense4,489 358 
Net income (loss)$13,737 $(1,893)
Earnings (loss) per common share (Note 1):
Basic$0.76 $(0.11)
Diluted$0.75 $(0.11)
Weighted-average number of common shares outstanding:
Basic18,166 17,932 
Diluted18,274 17,932 


See Notes to the Condensed Consolidated Financial Statements.


2

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)

Common StockTreasury Stock
(Amounts in thousands, except share data)SharesAmountSharesAmountAdditional Paid-in CapitalRetained EarningsTotal Stockholders’
Equity
January 1, 202123,141,284 $23 (4,618,146)$(47,692)$100,425 $32,454 $85,210 
Stock-based compensation381,339 — — — 421 — 421 
Repurchase of common shares to satisfy minimum tax withholdings(40,975)— — — (216)— (216)
Net income— — — — — 13,737 13,737 
Balances, March 31, 202123,481,648 $23 (4,618,146)$(47,692)$100,630 $46,191 $99,152 

Common StockTreasury Stock
(Amounts in thousands, except share data)SharesAmountSharesAmountAdditional Paid-in CapitalRetained EarningsTotal Stockholders’
Equity
Balances, January 1, 202022,960,157 $23 (4,597,533)$(47,533)$98,466 $57,336 $108,292 
Stock-based compensation218,259 — — — 506 — 506 
Repurchase of common shares to satisfy minimum tax withholdings(64,198)— — — (376)— (376)
Cash dividends declared on common stock— — — — — (4,590)(4,590)
Repurchase of common shares— — (20,613)(159)— — (159)
Net loss— — — — — (1,893)(1,893)
Balances, March 31, 202023,114,218 $23 (4,618,146)$(47,692)$98,596 $50,853 $101,780 

See Notes to the Condensed Consolidated Financial Statements.

3

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended March 31,
(in thousands)20212020
Cash flows from operating activities
Net income (loss)$13,737 $(1,893)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income tax expense3,051 788 
Depreciation, amortization, depletion and accretion2,106 2,297 
Operating lease expense379 774 
Amortization of debt discount and debt issuance costs591 354 
Stock-based compensation expense421 506 
Earnings from equity method investments(18,312)(8,273)
Other non-cash items, net(273) 
Changes in operating assets and liabilities:
Receivables and related party receivables2,147 2,988 
Prepaid expenses and other assets1,178 226 
Inventories, net1,548 1,572 
Other long-term assets, net(1,817)(89)
Accounts payable(706)(1,477)
Accrued payroll and related liabilities(1,043)(973)
Other current liabilities1,305 (23)
Operating lease liabilities2,104 (634)
Other long-term liabilities(2,113)(22)
Distributions from equity method investees, return on investment17,644 17,116 
Net cash provided by operating activities21,947 13,237 
Cash flows from investing activities
Distributions from equity method investees in excess of cumulative earnings5,607  
Acquisition of property, plant, equipment, and intangible assets, net(1,321)(1,289)
Mine development costs(248)(447)
Proceeds from sale of property and equipment848  
Net cash provided by (used in) investing activities4,886 (1,736)
Cash flows from financing activities
Principal payments on term loan(10,000)(6,000)
Principal payments on finance lease obligations(315)(340)
Dividends paid (4,518)
Repurchase of common shares (159)
Repurchase of common shares to satisfy tax withholdings(216)(376)
Net cash used in financing activities(10,531)(11,393)
Increase in Cash and Cash Equivalents and Restricted Cash16,302 108 
Cash and Cash Equivalents and Restricted Cash, beginning of period35,932 17,080 
Cash and Cash Equivalents and Restricted Cash, end of period$52,234 $17,188 
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of property, plant and equipment through accounts payable$765 $1,890 
Dividends payable$ $105 
See Notes to the Condensed Consolidated Financial Statements.

4

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
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 the sale of consumable air and water treatment options including activated carbon ("AC") and chemical technologies. The Company's proprietary technologies in the advanced purification technologies ("APT") market enable customers to reduce air and water contaminants, including mercury and other pollutants, to 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"), the Company manufactures and sells AC used to capture and remove contaminants for coal-fired power plants and industrial and water treatment markets. Carbon Solutions also owns an associated lignite mine that supplies the primary raw material for manufacturing AC.
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. Both Tinuum Group and Tinuum Services expect to significantly wind down their operations by the end of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021.
The Company’s sales occur principally in the United States. See Note 16 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, 2020 (the "2020 Form 10-K"). Significant accounting policies disclosed therein have not changed.
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). 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.
5

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 restricted stock awards ("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 earnings (loss) per share:
 Three Months Ended March 31,
(in thousands, except per share amounts)20212020
Net income (loss)$13,737 $(1,893)
Less: Dividends and undistributed income (loss) allocated to participating securities (2)
Income (loss) attributable to common stockholders$13,737 $(1,891)
Basic weighted-average common shares outstanding18,166 17,932 
Add: dilutive effect of equity instruments108  
Diluted weighted-average shares outstanding18,274 17,932 
Earnings (loss) per share - basic$0.76 $(0.11)
Earnings (loss) per share - diluted$0.75 $(0.11)
For the three months ended March 31, 2021 and 2020, RSA's, PSU's and Stock Options convertible to 0.1 million and 0.7 million shares of common stock, respectively, were outstanding but were not included in the computation of diluted net income (loss) 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 2020 Form 10-K. 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 estimates 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 from Tinuum Group. As of March 31, 2021, Tinuum Group has 23 invested RC facilities of which 9 are leased to a single customer. Both Tinuum Group and Tinuum Services expect to significantly wind down their operations by the end of 2021 due to the expected expiration of the Section 45 tax credit period as of December 31, 2021. The loss of Tinuum Group's customers, reduction in revenue streams as a result of lease renewals and the expiration of Section 45 tax credits will have a significant adverse impact on Tinuum Group's financial position, results of operations and cash flows, which in turn will have a material adverse impact on the Company’s financial position, results of operations and cash flows.


6

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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
Adopted
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 clarify 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 adopted ASU 2019-12 effective January 1, 2021 and it did not have a material impact on the Company's financial statements and disclosures.
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. The Company is currently evaluating the provisions of this guidance and assessing the impact on its financial statements and disclosures and does not believe this standard will have a material impact on its financial statements and disclosures.
Note 2 - Customer Supply Agreement
On September 30, 2020, the Company and Cabot Norit Americas, Inc., ("Cabot") entered into a supply agreement (the "Supply Agreement") pursuant to which the Company agreed to sell and deliver to Cabot, and Cabot agreed to purchase and accept from the Company certain lignite-based AC products ("Furnace Products"). The term of the Supply Agreement is for 15 years with 10-year renewal terms that are automatic unless either party provides three years prior notice of intention not to renew before the end of any term.
As part of the Supply Agreement, the Company and Cabot agreed to additional terms whereby Cabot reimburses the Company for certain capital expenditures incurred by the Company that are necessary to manufacture the Furnace Products, and both the Company and Cabot must mutually agree on these capital expenditures in advance of procurement and commissioning. Capital expenditures incurred that benefit both the Company and Cabot ("Shared Capital") are partially reimbursable by Cabot and recognized as revenues based on a formula contained in the Supply Agreement. Revenues from, and reimbursements of, Shared Capital are recognized and billable, respectively, beginning on the first day of a half year (January 1 and July 1 of a calendar year) following the placed in service date of a Shared Capital asset(s).
Capital expenditures incurred that benefit Cabot exclusively ("Specific Capital") are fully reimbursable by Cabot and recognized as revenues based on a formula contained in the Supply Agreement. Revenues earned from Specific Capital are recognized beginning on the first day of a half year following the placed in service date of a Specific Capital asset(s). Reimbursements of Specific Capital are billable in quarterly installments beginning on the first day of a half year following the placed in service date of a Specific Capital asset(s). In the event that Cabot ceases to make purchases under the Supply Agreement, Cabot is obligated to pay the balance of any outstanding payments for Specific Capital.
Revenues earned from both Shared Capital and Specific Capital are reported in the Consumables revenue line item in the Statements of Operations.
7

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Acquisition of Marshall Mine
Concurrently with the execution of the Supply Agreement, on September 30, 2020, the Company entered into an agreement to purchase (the "Mine Purchase Agreement") from Cabot 100% of the membership interests in Marshall Mine, LLC (the "Marshall Mine Acquisition") for a nominal cash purchase price. Marshall Mine, LLC owns a lignite mine located outside of Marshall, Texas (the "Marshall Mine"). The Company independently determined to immediately commence activities to shutter the Marshall Mine and will incur the associated reclamation costs.
In conjunction with the execution of the Supply Agreement and the Mine Purchase Agreement, on September 30, 2020, the Company entered into a reclamation contract (the "Reclamation Contract") with a third party that provides a capped cost, subject to certain contingencies, in the amount of approximately $19.7 million plus an obligation to pay certain direct costs of approximately $3.6 million (collectively, the "Reclamation Costs") over the estimated reclamation period of 10 years (the "Reclamation Period"). Under the terms of the Supply Agreement, Cabot is obligated to reimburse the Company for $10.2 million of Reclamation Costs (the "Reclamation Reimbursements"), which are payable semi-annually over 13 years and inclusive of interest. In the event that Cabot has a change in control as described in the Supply Agreement, all outstanding balances of the Reclamation Reimbursements shall be due and payable in full. See further discussion of the Reclamation Costs and Reclamation Reimbursements in Note 4.
The Marshall Mine Acquisition included the acquisition of certain assets that will be consumed and the assumption of certain liabilities that will be paid in reclamation of the Marshall Mine in addition to the incurrence of an obligation for the Reclamation Costs. The Company accounted for the Marshall Mine Acquisition as an asset acquisition as it did not meet the definition of a business. That is, the Company concluded that the Marshall Mine does not have any economic reserves, as the Company had commenced full reclamation as of September 30, 2020, and therefore lacked inputs.
As the Marshall Mine Acquisition represents a transaction with a customer of net assets acquired and liabilities assumed from Cabot, the Company accounted for the excess of the fair value of liabilities assumed over assets acquired as upfront consideration transferred to a customer, Cabot (the "Upfront Customer Consideration"). The amount of the Upfront Customer Consideration was also recognized net of an additional asset recognized in the Marshall Mine Acquisition, which was comprised of a receivable from Cabot (the "Cabot Receivable") for the Reclamation Reimbursements. The Cabot Receivable is further discussed in Note 4.
The total Upfront Customer Consideration is being amortized on a straight-line basis over the expected 15-year contractual period of the Supply Agreement as a reduction to revenues.
As part of the Marshall Mine Acquisition, the Company assumed liabilities, whose fair value exceeded the fair value of assets acquired. A summary of the net assets acquired and liabilities assumed and the additional assets recorded in the Marshall Mine Acquisition as of September 30, 2020 are shown in the table below. Subsequent to this date, the Company completed additional analysis of the assets acquired and liabilities assumed and recorded adjustments as of December 31, 2020 as shown in the table below.
(in thousands)As Originally ReportedAdjustmentsAs Adjusted
Assets acquired:
Receivables$ $513 $513 
Property, plant and equipment3,863  3,863 
Spare parts100  100 
Liabilities assumed:
Accounts payable and accrued expenses(673)160 (513)
Asset retirement obligation(21,328) (21,328)
Net assets acquired and liabilities assumed from Marshall Mine acquisition(18,038)673 (17,365)
Cabot receivable9,749  9,749 
Upfront Customer Consideration$8,289 $(673)$7,616 
The Company also evaluated the Marshall Mine entity as a potential variable interest entity ("VIE"), and determined that because of its structure and closing-stage status, it did not have sufficient equity at-risk and would not likely be able to obtain additional subordinated financial support to complete its closing stage obligations. The Company purchased all of the
8

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
membership interests in Marshall Mine, LLC and determined that the Company was the primary beneficiary. Therefore, Marshall Mine, LLC was determined to be a VIE and Marshall Mine, LLC’s assets and liabilities were consolidated.
Note 4 - Marshall Mine Asset Retirement Obligation and Cabot Receivable
Asset Retirement Obligation
In connection with the Supply Agreement, Purchase Agreement and the Reclamation Contract, the Company assumed the obligation to reclaim and restore the land associated with the Marshall Mine. The Company determined that the Marshall Mine did not have any remaining economic reserves. As of September 30, 2020, the Company recorded an asset retirement obligation (the "Marshall Mine ARO") for the total Reclamation Costs of $21.3 million as measured at the expected future cash flows of $23.7 million, inclusive of contingency costs, discounted to their present value using a discount rate based on a credit-adjusted, risk-free rate of 7.0%. As of March 31, 2021 and December 31, 2020, the carrying value of the Marshall Mine ARO was $16.1 million and $21.3 million, respectively.
Cabot Receivable
As of September 30, 2020, the Company recorded the Cabot Receivable at its estimated fair value of $9.7 million, reflecting a discount rate of approximately 1.5% or $0.5 million. There were no significant related fees or costs associated with the Cabot Receivable.
The Cabot Receivable requires Cabot to pay the Reclamation Reimbursements to the Company in the amount of $10.2 million inclusive of interest over its term. Interest is accreted on the Cabot Receivable and recognized as interest income. An Allowance for the Cabot Receivable asset is assessed periodically, and no allowance was deemed necessary as of March 31, 2021 and December 31, 2020.
Surety Bond
As the owner of the Marshall Mine, the Company is required to post a surety bond to ensure performance of its reclamation activities. On September 30, 2020, the Company and a third party entered into a surety bond indemnification agreement (the "Surety Agreement") pursuant to which the Company secured and posted a $30.0 million surety bond (the "Bond") with the local regulatory agency. The Bond will remain in place until the Marshall Mine is fully reclaimed, and it may be reduced in amount from time to time as the Company progresses with its reclamation activities. As of March 31, 2021, for the obligations due under the Reclamation Contract, the Company was required to post collateral of $10.0 million, which is recorded as long-term restricted cash on the Condensed Consolidated Balance Sheet.
Note 5 - COVID-19
In March 2020, the federal government passed the Coronavirus Aid, Relief, and Security Act (the "CARES Act"), which provided among other things the creation of the Paycheck Protection Plan ("PPP"), which is sponsored and administered by the U.S. Small Business Administration ("SBA"). On April 20, 2020, the Company executed a loan agreement (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. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 (the "PPPFA") was signed into law and established the payment dates in the event that amounts borrowed under the PPP are not forgiven. The PPP Loan matures April 21, 2022 but 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 and is accruing interest over the term of the PPP Loan. There is no assurance that the PPP Loan will be forgiven.
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.
Under the PPPFA, monthly payments of principal and interest commence on the later of 10 months following the "covered period" (as defined in the PPPFA) or the date that BOK notifies the Company that the SBA has notified BOK that all or a portion of the PPP Loan has not been forgiven. In January 2021, the Company submitted its application to the SBA for forgiveness of the PPP Loan, and the Company is awaiting the SBA's response on its application for forgiveness. Accordingly, for any amounts not forgiven, the Company has determined that the PPP Loan principal and interest payments would commence in August 2021 and, as of March 31, 2021 and December 31, 2020, has classified a portion of the PPP Loan principal and accrued interest as current in the Condensed Consolidated Balance Sheets.
The CARES Act also provided for the deferral of payroll tax payments for all payroll taxes incurred through December 31, 2020. The Company elected to defer payments of payroll taxes for the periods allowed under the CARES Act and will repay
9

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
50% by December 31, 2021 and 50% by December 31, 2022. As of March 31, 2021, the Company has deferred $0.4 million of payroll tax payments under the CARES Act.
Note 6 - Equity Method Investments
Tinuum Group, LLC
As of March 31, 2021 and December 31, 2020, the Company's ownership interest in Tinuum Group was 42.5%. 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. The Company has determined that Tinuum Group is a 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 March 31,
(in thousands)20212020
Gross profit$2,675 $5,010 
Operating, selling, general and administrative expenses13,802 12,776 
Loss from operations(11,127)(7,766)
Other income (expenses), net853 3,643 
Loss attributable to noncontrolling interest35,578 19,271 
Net income available to members$25,304 $15,148 
ADES equity earnings from Tinuum Group$16,362 $6,438 
For the three months ended March 31, 2021, the Company recognized earnings from Tinuum Group's net income available to members that were different from its pro-rata share of Tinuum Group's net income available to members, as cash distributions for the three months ended March 31, 2021 exceeded the carrying value of the Tinuum Group equity investment. For 2021, the Company expects to recognize such excess contributions as equity method earnings in the period the distributions occur, limited to the carrying value of the Tinuum Group equity investment. For the three months ended March 31, 2020, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the respective period.
For the three months ended March 31, 2021 and March 31, 2020, the Company recognized equity earnings from Tinuum Group of $16.4 million and $6.4 million, respectively.
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 months ended March 31, 2021 and 2020 (in thousands):
DescriptionDate(s)Investment balanceADES equity earningsCash distributionsMemorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance12/31/2020$3,387 $ $ $ 
ADES proportionate share of income from Tinuum GroupFirst Quarter10,755 10,755   
Cash distributions from Tinuum GroupFirst Quarter(19,749)19,749  
Adjustment for current year cash distributions in excess of investment balanceFirst Quarter5,607 5,607  (5,607)
Total investment balance, equity earnings and cash distributions3/31/2021$ $16,362 $19,749 $(5,607)
10

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
DescriptionDate(s)Investment balanceADES equity earningsCash distributions
Beginning balance12/31/2019$32,280 $ $ 
ADES proportionate share of income from Tinuum GroupFirst Quarter6,438 6,438  
Cash distributions from Tinuum GroupFirst Quarter(13,764) 13,764 
Total investment balance, equity earnings and cash distributions3/31/2020$24,954 $6,438 $13,764 
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 further evaluated it for consolidation 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. As of March 31, 2021 and December 31, 2020, the Company’s investment in Tinuum Services was $2.7 million and $4.2 million, respectively.
The following table summarizes the results of operations of Tinuum Services:
 Three Months Ended March 31,
(in thousands)20212020
Gross loss$(18,522)$(22,259)
Operating, selling, general and administrative expenses54,366 45,753 
Loss from operations(72,888)(68,012)
Other income (expenses), net(427)(285)
Loss attributable to noncontrolling interest77,215 71,972 
Net income$3,900 $3,675 
ADES equity earnings from Tinuum Services$1,950 $1,838 
Included in the Consolidated Statements of Operations of Tinuum Services for the three months ended March 31, 2021 and 2020, respectively, were losses related to VIE entities that consolidated in Tinuum Services of $77.2 million and $72.0 million, respectively. These losses do not impact the Company's equity earnings from Tinuum Services as 100% of those losses are attributable to a noncontrolling interest and eliminated in the calculations of Tinuum Services' net income attributable to the Company's interest.
The following table details the carrying value of the Company's respective equity method investments included in the Equity method investments line item on the Condensed Consolidated Balance Sheets and indicates the Company's maximum exposure to loss:
 As of
(in thousands)March 31,
2021
December 31,
2020
Equity method investment in Tinuum Group$ $3,387 
Equity method investment in Tinuum Services2,690 4,242 
Equity method investment in other63 63 
Total equity method investments$2,753 $7,692 
11

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 March 31,
(in thousands)20212020
Earnings from Tinuum Group$16,362 $6,438 
Earnings from Tinuum Services1,950 1,838 
Earnings (loss) from other (3)
Earnings from equity method investments$18,312 $8,273 
The following table details the components of the cash distributions from the Company's respective equity method investments included as a component of cash flows from operating activities and investing activities 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 until such time as the carrying value in an equity method investee company is reduced to zero. Thereafter, such distributions are reported as "distributions in excess of cumulative earnings" as a component of cash flows from investing activities.
Three Months Ended March 31,
(in thousands)20212020
Distributions from equity method investees, return on investment
Tinuum Group$14,142 $13,764 
Tinuum Services3,502 3,352 
$17,644 $17,116 
Distributions from equity method investees in excess of investment basis
Tinuum Group$5,607 $ 
$5,607 $ 
Note 7 - Inventories, net
The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value as of March 31, 2021 and December 31, 2020:
As of
(in thousands)March 31, 2021December 31, 2020
Product inventory, net$7,185 $8,361 
Raw material inventory855 1,521 
$8,040 $9,882 

12

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 8 - Debt Obligations
As of
(in thousands)March 31, 2021December 31, 2020
Senior Term Loan due December 2021, related party$6,000 $16,000 
Less: net unamortized debt issuance costs(175)(465)
Less: net unamortized debt discount(180)(480)
Senior Term Loan due December 2021, net5,645 15,055 
Finance lease obligations5,250 5,526 
PPP Loan3,305 3,305 
14,200 23,886 
Less: Current maturities(9,913)(18,441)
Total long-term debt$4,287 $5,445 
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 Term Loan and Security Agreement (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 acquisition of Carbon Solutions. The Company also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan matures on December 7, 2021 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) As of the end of each fiscal quarter, 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) Annual collective dividends and buybacks of the Company shares of common stock in an aggregate amount, not to exceed $30.0 million, are 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 and Limited Consent 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.
On September 30, 2020, the Company and Apollo entered into a limited consent, which permitted the Company to (i) enter into the Surety Agreement, open the collateral bank accounts and post collateral required under the Surety Agreement, and (ii) acquire the membership interests in Marshall Mine, LLC., as described in Note 3.
Line of Credit
In September 2013, ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary of the Company, as borrower, and the Company, as guarantor, entered into a line credit (the "Line of Credit") with a bank (the "Lender") for an aggregate borrowing amount of $10.0 million, which was secured by certain amounts due to the Company from certain Tinuum Group RC leases. The Line of Credit has been amended 15 times from the period from December 2, 2013 through March 31, 2021 and included a reduction in the borrowing amount to $5.0 million in September 2018.
On March 23, 2021, ADA, the Company and the Lender entered into an amendment to the Line of Credit (the "Fifteenth Amendment"), which extended the maturity date of the Line of Credit to December 31, 2021 and increased the minimum cash requirement from $5.0 million to $6.0 million.
As of March 31, 2021 and December 31, 2020, there were no outstanding borrowings under the Line of Credit.
13

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9 - Leases
As of March 31, 2021 and December 31, 2020, the Company had obligations under finance leases of $5.3 million and $5.5 million, respectively, and obligations under operating leases of $5.1 million and $3.0 million, respectively. As of March 31, 2021 and December 31, 2020, the Company had right of use ("ROU") assets, net of accumulated amortization, under finance leases of $2.2 million and $2.4 million, respectively, and ROU assets, net of accumulated amortization, under operating leases of $4.2 million and $1.9 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 Sheets as of March 31, 2021 and December 31, 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 Statements of Operations for the three months ended March 31, 2021 and March 31, 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 Sheets as of March 31, 2021 and December 31, 2020.
Lease expense for operating leases for the three months ended March 31, 2021 was $1.0 million, of which $0.9 million is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.1 million is included in General and administrative in the Condensed Consolidated Statement of Operations. Lease expense for operating leases for the three months ended March 31, 2020 was $1.2 million, of which $1.0 million is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million is included in General and administrative in the Condensed Consolidated Statement of Operations.
Lease financial information as of and for the three months ended March 31, 2021 and 2020 is provided in the following table:
Three Months Ended March 31,
(in thousands)20212020
Finance lease cost:
Amortization of right-of-use assets$174 $514 
Interest on lease liabilities79 94 
Operating lease cost459 853 
Short-term lease cost567 282 
Variable lease cost (1)9 93 
Total lease cost$1,288 $1,836 
Other Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$79 $94 
Operating cash flows from operating leases$575 $634 
Financing cash flows from finance leases$315 $340 
Right-of-use assets obtained in exchange for new finance lease liabilities$ $ 
Right-of-use assets obtained in exchange for new operating lease liabilities$2,679 $60 
Weighted-average remaining lease term - finance leases3.3 years4.1 years
Weighted-average remaining lease term - operating leases1.6 years2.3 years
Weighted-average discount rate - finance leases6.18 %6.08 %
Weighted-average discount rate - operating leases8.46 %8.54 %
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
14

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 10 - Revenues
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 the Company's Trade receivables, net:
As of
(in thousands)March 31, 2021December 31, 2020
Trade receivables$9,481 $12,241 
Less: Allowance for doubtful accounts(53)(37)
Trade receivables, net$9,428 $12,204 
For the three months ended March 31, 2021 and 2020, the Company recognized zero and zero bad debt expense, respectively.
Cabot Receivable
The following table shows the components of the Cabot Receivable:
As of
(in thousands)March 31, 2021December 31, 2020
Receivables, net$921 $921 
Other long-term assets, net7,914 8,852 
Total Cabot Receivable$8,835 $9,773 

Disaggregation of Revenue and Earnings from Equity Method Investments
For the three months ended March 31, 2021 and 2020, 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 16 to the Condensed Consolidated Financial Statements. The following tables disaggregate revenues by major component for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31, 2021
Segment
APTRCTotal
Revenue component
Consumables$17,031 $ $17,031 
License royalties, related party 4,066 4,066 
Revenues from customers17,031 4,066 21,097 
Earnings from equity method investments 18,312 18,312 
Total revenues from customers and earnings from equity method investments$17,031 $22,378 $39,409 
15

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Three Months Ended March 31, 2020
Segment
APTRCTotal
Revenue component
Consumables$9,217 $ $9,217 
License royalties, related party 3,046 3,046 
Revenues from customers9,217 3,046 12,263 
Earnings from equity method investments 8,273 8,273 
Total revenues from customers and earnings from equity method investments$9,217 $11,319 $20,536 
Note 11 - Commitments and Contingencies
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 March 31, 2021.
Restricted Cash
As of March 31, 2021 and December 31, 2020, the Company had short-term restricted cash of $6.0 million and $5.0 million, respectively, as required under a minimum cash balance requirement of a Line of Credit covenant, and long-term restricted cash of $10.0 million and $5.0 million, respectively, as required under the Surety Agreement.
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.
Note 12 - Stockholders' Equity
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.
Under the Stock Repurchase Program, for the three months ended March 31, 2021 and March 31, 2020, 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. As of March 31, 2021, the Company had $7.0 million remaining under the Stock Repurchase Program.
Quarterly Cash Dividend
Dividends declared and paid quarterly on all outstanding shares of common stock during the three months ended March 31, 2021 and 2020 were as follows:
16

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
20212020
Per shareDate paidPer shareDate paid
Dividends declared during quarter ended:
March 31$ N/A$0.25 March 10, 2020
$ $0.25 
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 Sheets as of March 31, 2021 and December 31, 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, 2021, the Board approved the Fourth Amendment to the TAPP ("Fourth Amendment") that amends the TAPP, as previously amended by the First, Second and Third Amendments that were approved the Board on April 6, 2018, April 5, 2019 and April 9, 2020, respectively. The Fourth 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. Pursuant to the Fourth Amendment, the Final Expiration Date shall be the close of business on the earlier of (i) December 31, 2022 or (ii) December 31, 2021 if stockholder approval of the Fourth Amendment has not been obtained prior to such date.
Note 13 - Stock-Based Compensation
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 revenue 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 months ended March 31, 2021 and 2020 was as follows:
 Three Months Ended March 31,
(in thousands)20212020
RSA expense$407 $506 
PSU expense14  
Total stock-based compensation expense$421 $506 
The amount of unrecognized compensation cost as of March 31, 2021, and the expected weighted-average period over which the cost will be recognized is as follows:
As of March 31, 2021
(in thousands)Unrecognized Compensation CostExpected Weighted-
Average Period of
Recognition (in years)
RSA expense$3,383 2.46
PSU expense545 2.49
Total unrecognized stock-based compensation expense$3,928 2.46
17

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
A summary of RSA activity under the Company's various stock compensation plans for the three months ended March 31, 2021 is presented below:
Restricted StockWeighted-Average Grant Date Fair Value
Non-vested at January 1, 2021373,860 $7.25 
Granted385,631