Arq Inc

Previous wording

The following discussion and analysis of our financial condition and results of our operations should be read together with the unaudited Condensed Consolidated Financial Statements and notes of Arq, Inc. ("Arq" or the "Company") included elsewhere in Item 1 of Part I ("Item 1") of this Quarterly Report and with the audited consolidated financial statements and the related notes of Arq included in the 2023 Form 10-K.

Current wording

The following discussion and analysis of our financial condition and results of our operations should be read together with the unaudited Condensed Consolidated Financial Statements and notes of Arq, Inc. ("Arq" or the "Company") included elsewhere in Item 1 of Part I ("Item 1") of this Quarterly Report and with the audited consolidated financial statements and the related notes of Arq included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K").

Previous wording

We are an environmental technology company and are principally engaged in the sale of consumable air and water treatment solutions primarily based on Activated Carbon ("AC"). Our proprietary AC products enable customers to reduce air, soil, and water contaminants, including mercury, per - and polyfluoroalkyl substances ("PFAS") and other pollutants, to help our customers maximize effectiveness and to improve operating efficiencies to meet the challenges of existing and pending air quality, soil, and water regulations. We manufacture and sell AC and other chemicals used to capture and remove contaminants for coal-fired power generation, industrial and water treatment markets, which we collectively refer to as the advanced purification technologies ("APT") market.

Current wording

We are an environmental technology company that is principally engaged in the sale of consumable air and water treatment solutions primarily based on Activated Carbon ("AC"). Our proprietary AC products enable customers to reduce air, water, and soil contaminants, including mercury, per- and polyfluoroalkyl substances ("PFAS") and other pollutants, to help our customers maximize effectiveness and to improve operating efficiencies to meet the challenges of existing and pending air quality, soil, and water regulations. We manufacture and sell AC and other chemicals used to capture and remove contaminants for coal-fired power generation, industrial and water treatment markets, which we collectively refer to as the advanced purification technologies ("APT") market.

Previous wording

In February 2023, we acquired 100% of the equity of the subsidiaries of Arq Limited (hereafter the Arq Limited subsidiaries referred to as "Legacy Arq", and the acquisition itself referred to as the "Arq Acquisition") to secure access to a feedstock, a manufacturing facility and certain patented processes as a means to manufacture additional GAC products for sale into the APT market and other markets. With the Arq Acquisition, we now control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines for sale or further conversion to GAC products. Under this manufacturing process, we convert coal waste into a purified, microfine carbon powder known as Arq powder TM("Arq Powder"). We expect to begin using Arq Powder as a feedstock to manufacture high-quality GAC products for sale in the APT and other markets by the end of 2024.

Current wording

In February 2023, we acquired 100% of the equity of the subsidiaries of Arq Limited (the "Arq Acquisition," and hereafter the Arq Limited subsidiaries are referred to as "Legacy Arq") to secure access to a feedstock, a manufacturing facility and certain patented processes as a means to manufacture additional GAC products for sale into the APT market and other markets. With the Arq Acquisition, we now control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines for sale or further conversion to GAC products. Using the Corbin Facility's manufacturing process, we convert coal waste into a purified, microfine carbon powder known as Arq powder TM("Arq Powder"). We expect to begin using Arq Powder as a feedstock to manufacture high-quality GAC products for sale in the APT and other markets during the first quarter of 2025.

Previous wording

For the three and six months ended June 30, 2024, we experienced a decrease in demand for our products from certain coal-fired dispatch and electricity power generation customers. This was primarily due to lower natural gas prices, resulting in several large utility customers opting to use natural gas versus coal as a primary source for power generation, and mild temperatures during the winter and spring seasons, resulting in lower demand for power generation compared to 2023. We expect that natural gas prices will remain relatively consistent through 2024 due to surplus natural gas reserves in storage, which, we expect, will negatively impact sales of our products even with higher than average summer temperatures.

Current wording

For the three and nine months ended September 30, 2024, we experienced a decrease in demand for our products from certain coal-fired dispatch and electricity power generation customers compared to the same periods in 2023. This was primarily due to lower natural gas prices, resulting in several large utility customers opting to use natural gas versus coal as a primary source for power generation, and the year to date impact of mild temperatures during the winter and spring seasons, resulting in lower demand for power generation compared to 2023. We expect that natural gas prices will remain relatively consistent through 2024 due to surplus natural gas reserves in storage, which, we expect, will negatively impact sales of our products even with higher than average summer temperatures.

Previous wording

For the three and six months ended June 30, 2024, we recognized net loss of $2.0 million and $5.4 million compared to net loss of $5.9 million and $13.4 million for the three and six months ended June 30, 2023. The most significant factors impacting results for the comparable prior year period were expenses related to the Arq Acquisition during 2023 that did not occur in 2024, and higher revenue as a result of increased average selling price, partially offset by a decrease in demand for our AC and chemical products with power generation customers, primarily due to continued low prices of alternative energy sources for power generation.

Current wording

For the three and nine months ended September 30, 2024, we recognized net income of $1.6 million and net loss of $3.8 million, respectively, compared to net loss of $2.2 million and $15.5 million for the three and nine months ended September 30, 2023. The most significant factor impacting results for the three months ended September 30, 2024 was higher revenue as a result of increased average selling price, which was partially offset by a decrease in demand for our AC and chemical products with power generation customers, when compared to the three months ended September 30, 2023. The decrease in demand from our power generation customers was primarily driven by continued low prices of alternative energy sources for power generation. These factors also impacted our results for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Additionally, during the nine months ended September 30, 2023, we recorded expenses related to the Arq Acquisition that did not occur in 2024.

Previous wording

For the three months ended June 30, 2024, revenue increased from the comparable quarter in 2023 primarily driven by overall favorable product mix, higher pricing, and increased volumes of approximately $1.5 million, $1.2 million and $0.8 million, respectively. Product volumes increased most notably from a large non-power generation customer and from municipal water customers, partially offset by lower volumes among power generation customers primarily due to low natural gas prices compared to the same quarter in 2023, which contributed to decreased utilization of coal-fired generation and decreased demand for our products. The average Henry Hub natural gas spot prices ($/MMBtu) for the three months ended June 30, 2024 and 2023 were $2.08 and $2.16, respectively.

Current wording

For the three months ended September 30, 2024, revenue increased from the comparable quarter in 2023 primarily driven by overall favorable product mix and higher pricing of approximately $2.7 million and $1.2 million, respectively. The increase from favorable product mix was primarily driven by sales to municipal water customers and a large non-power generation customer. Also contributing to an increase in revenue between periods was $0.2 million attributable to volumes sold, despite lower natural gas prices compared to the same quarter in 2023, which contributed to decreased utilization of coal-fired generation and decreased demand for our products by customers in the power generation market. The average Henry Hub natural gas spot prices ($/MMBtu) for the three months ended September 30, 2024 and 2023 were $2.11 and $2.59, respectively.

Previous wording

Gross margin, exclusive of depreciation and amortization, increased for the three months ended June 30, 2024 compared to the corresponding quarter in 2023. Driving the increase in gross margin was a decrease in the price of our feedstock and additives, primarily as a result of lower raw material input costs and lower fixed costs as a percentage of total cost of revenue primarily due to higher production volumes for the three months ended June 30, 2024 compared to the corresponding quarter in 2023.

Current wording

Gross margin, exclusive of depreciation and amortization, increased for the three months ended September 30, 2024 compared to the corresponding quarter in 2023. The increase in gross margin was primarily due to favorable product mix as described above, as well as lower fixed costs as a percentage of total cost of revenue due to higher production volumes for the three months ended September 30, 2024 compared to the corresponding quarter in 2023.

Previous wording

Payroll and benefits, which represent costs related to selling, general and administrative personnel, decreased for the three months ended June 30, 2024 compared to the corresponding quarter in 2023 primarily due to decreased salaries and wages in the current year primarily from lower executive compensation, which was a result of personnel changes between periods.

Current wording

Payroll and benefits, which represent costs related to selling, general and administrative personnel, decreased for the three months ended September 30, 2024 compared to the corresponding quarter in 2023 primarily due to severance related costs of $1.0 million associated with the termination of an executive officer during the three months ended September 30, 2023, and decreased salaries and wages in the current quarter primarily from lower executive compensation, which was a result of personnel changes implemented in 2023.

Previous wording

Legal and professional fees decreased for the three months ended June 30, 2024 compared to the corresponding quarter in 2023 primarily from consulting and accounting costs incurred related to the Arq Acquisition during the period ended June 30, 2023.

Current wording

Legal and professional fees decreased for the three months ended September 30, 2024 compared to the corresponding quarter in 2023 primarily from legal and accounting costs incurred related to the Arq Acquisition during the period ended September 30, 2023, partially offset by increased consulting fees.

Previous wording

General and administrative expenses decreased for the three months ended June 30, 2024 compared to the corresponding quarter in 2023 by approximately $0.1 million, primarily related to decreases in banking costs, franchise tax, and travel, which were partially offset by increases in rent and occupancy expense.

Current wording

General and administrative expenses increased for the three months ended September 30, 2024 compared to the corresponding quarter in 2023 by approximately $1.0 million, primarily due to an increase in rent and occupancy expenses, third-party services at the Corbin Facility, and franchise taxes.

Previous wording

Research and development expense increased for the three months ended June 30, 2024 compared to the corresponding quarter in 2023, primarily due to conducting product qualification testing with potential lead-adopters as part of our ongoing GAC contracting process.

Current wording

Research and development expense increased for the three months ended September 30, 2024 compared to the corresponding quarter in 2023, primarily due to conducting product qualification testing with potential lead-adopters as part of our ongoing GAC contracting process, and increased research and development payroll costs.

Previous wording

Gain on sale of Marshall Mine, LLC

Current wording

Gain on sale of assets

Previous wording

A summary of the components of other income (expense), net for the three months ended June 30, 2024 and 2023 is as follows:

Current wording

A summary of the components of other (expense) income, net for the three months ended September 30, 2024 and 2023 is as follows:

Previous wording

Earnings from equity method investments for the six months ended June 30, 2024 and 2023 represented cash distributions from Tinuum Group and Tinuum Services. Tinuum Group and Tinuum Services continue to wind down their services into 2024, and we have not received any cash distributions from either entity in 2024.

Current wording

Earnings from equity method investments for the three months ended September 30, 2024 represented cash distributions from Tinuum Group. Earnings from equity method investments for the three months ended September 30, 2023 represented cash distributions from both Tinuum Group and Tinuum Services. Tinuum Group continues to wind down their services into 2024. We do not expect further distributions from Tinuum Services as Tinuum Services has completed its wind-down.

Previous wording

The decrease in Other for the three months ended June 30, 2024 is primarily driven by a decrease in interest income of $0.3 million due to lower balances in the Company's cash sweep accounts during the current quarter compared to the prior quarter.

Current wording

The decrease in Other for the three months ended September 30, 2024 as compared to the corresponding quarter in 2023 was primarily driven by a decrease in interest income of $0.4 million due to lower average balances in the Company's cash sweep accounts during the current quarter compared to the prior year quarter.

Previous wording

For the three months ended June 30, 2024 and 2023, we had pretax loss of $1.9 million and $5.9 million, respectively, and recorded no income tax benefit for the pretax loss due to the recording of a full valuation allowance based on our forecast of pretax loss for the years ending December 31, 2024 and 2023. For the three months ended June 30, 2024, we recorded out of period state income tax expense related to an assessment.

Current wording

For the three months ended September 30, 2024 and 2023, we had pretax income of $1.6 million and pretax loss of $2.2 million, respectively. For the three months ended September 30, 2024, we recorded no income tax expense as we expect to incur pretax loss for the year ending December 31, 2024. For the three months ended September 30, 2023, we recorded no income tax benefit for the pretax loss due to the recording of a full valuation allowance based on our forecast of pretax loss for the year ended December 31, 2023.

Previous wording

A summary of the components of our revenues and cost of revenue for the six months ended June 30, 2024 and 2023 is as follows:

Current wording

A summary of the components of our revenues and cost of revenue for the nine months ended September 30, 2024 and 2023 is as follows:

Previous wording

For the six months ended June 30, 2024, revenue increased from the comparable quarter in 2023 primarily driven by overall favorable product mix and higher pricing of approximately $2.8 million and $2.7 million, respectively. Offsetting these increases to revenue were approximately $1.0 million attributable to lower volumes sold. Product volumes were lower among power generation customers primarily due to low natural gas prices compared to the same period in 2023, which contributed to decreased utilization of coal-fired generation and decreased demand for our products. The average Henry Hub natural gas spot prices ($/MMBtu) for the six months ended June 30, 2024 and 2023 were $2.11 and $2.41, respectively.

Current wording

For the nine months ended September 30, 2024, revenue increased from the comparable period in 2023 primarily driven by overall favorable product mix and higher pricing of approximately $5.4 million and $3.9 million, respectively. The increase from favorable product mix was primarily driven by sales to municipal water customers and a large non-power generation customer. These increases to revenue were partially offset by approximately $0.4 million attributable to lower volumes sold. Product sale volumes were lower among power generation customers primarily due to lower natural gas prices compared to the same period in 2023, which contributed to decreased utilization of coal-fired generation and decreased demand for our products. The average Henry Hub natural gas spot prices ($/MMBtu) for the nine months ended September 30, 2024 and 2023 were $2.11 and $2.47, respectively.

Previous wording

A summary of the components of our operating expense for the six months ended June 30, 2024 and 2023 is as follows:

Current wording

A summary of the components of our operating expense for the nine months ended September 30, 2024 and 2023 is as follows:

Previous wording

A summary of the components of selling, general and administrative expenses for the six months ended June 30, 2024 and 2023, exclusive of cost of revenue items (presented above), is as follows:

Current wording

A summary of the components of selling, general and administrative expenses for the nine months ended September 30, 2024 and 2023, exclusive of cost of revenue items (presented above), is as follows:

Previous wording

Payroll and benefits decreased for the six months ended June 30, 2024 compared to the corresponding period in 2023 primarily due to $1.3 million related to severance expense of former executives of Arq, Limited incurred during the six months ended June 30, 2023, and decreased salaries and wages primarily from reduced executive salaries and lower headcount, as well as lower benefits and insurance costs in the current year.

Current wording

Payroll and benefits decreased for the nine months ended September 30, 2024 compared to the corresponding period in 2023 primarily due to $1.1 million related to severance expense of former executives of Arq Limited and $1.0 million of severance related costs associated with the termination of an executive officer incurred during the nine months ended September 30, 2023, as well as decreased salaries and wages in the current year primarily from lower executive compensation, which was a result of personnel changes implemented in 2023.

Previous wording

Legal and professional fees decreased for the six months ended June 30, 2024 compared to the corresponding period in 2023 primarily from consulting, legal, and accounting costs incurred related to the Arq Acquisition during the six months ended June 30, 2023.

Current wording

Legal and professional fees decreased for the nine months ended September 30, 2024 compared to the corresponding period in 2023 primarily from decreased consulting, legal, and accounting costs incurred related to the Arq Acquisition during the nine months ended September 30, 2023.

Previous wording

General and administrative expenses increased for the six months ended June 30, 2024 compared to the corresponding period in 2023 by approximately $0.8 million, primarily related to increases in rent and occupancy expense, license and fee expense, franchise tax, and advertising costs.

Current wording

General and administrative expenses increased for the nine months ended September 30, 2024 compared to the corresponding period in 2023 by approximately $1.8 million, primarily due to increases in rent and occupancy expenses, franchise tax expenses, outside construction-related labor and license and fee expenses.

Previous wording

Research and development expense increased for the six months ended June 30, 2024 compared to the corresponding period in 2023, primarily due to conducting product qualification testing with potential lead-adopters as part of our ongoing GAC contracting process.

Current wording

Research and development expense increased for the nine months ended September 30, 2024 compared to the corresponding period in 2023, primarily due to conducting product qualification testing with potential lead-adopters as part of our ongoing GAC contracting process, and increased research and development payroll costs.

Previous wording

Depreciation, amortization depletion and accretion expense decreased by approximately $1.2 million for the six months ended June 30, 2024 compared to the corresponding period in 2023, primarily due to increased absorption in inventory of $1.2 million, decreased amortization of leasehold improvements, customer relationships and developed technology of $0.4 million, and decreased depletion of $0.2 million, partially offset by increased depreciation, primarily related to Legacy Arq assets purchased in February 2023.

Current wording

Depreciation, amortization, depletion and accretion expense decreased by approximately $1.2 million for the nine months ended September 30, 2024 compared to the corresponding period in 2023, primarily due to increased absorption in inventory of $1.4 million, decreased amortization of leasehold improvements, customer relationships and developed technology of $0.5 million, and decreased depletion of $0.2 million, partially offset by increased depreciation expense, primarily related to Legacy Arq assets purchased in February 2023.

Previous wording

On March 27, 2023, the Company completed the sale of all of its membership interests in Marshall Mine, LLC to a third party. During the six months ended June 30, 2023, we recognized a gain of $2.7 million on the sale of Marshall Mine, LLC.

Current wording

On March 27, 2023, we completed the sale of all of our membership interests in Marshall Mine, LLC to a third party. During the nine months ended September 30, 2023, we recognized a gain of $2.7 million on the sale of Marshall Mine, LLC. Gain on sale of assets for the nine months ended September 30, 2024 was primarily due to a gain on the sale of equipment.

Previous wording

A summary of the components of other income (expense), net for the six months ended June 30, 2024 and 2023 is as follows:

Current wording

A summary of the components of other income (expense), net for the nine months ended September 30, 2024 and 2023 is as follows:

Previous wording

Earnings from equity method investments for the three months ended June 30, 2023 represented cash distributions from Tinuum Group and Tinuum Services. Tinuum Group and Tinuum Services continue to wind down their services into 2024, and we have not received any cash distributions from either entity during the three months ended June 30, 2024.

Current wording

Earnings from equity method investments for the nine months ended September 30, 2024 represented cash distributions from Tinuum Group. During the nine months ended September 30, 2023, the amount represented cash distributions from both Tinuum Group and Tinuum Services. Tinuum Group continues to wind down their services into 2024. We do not expect further distributions from Tinuum Services as Tinuum Services has completed its wind-down.

Previous wording

The decrease in Other for the six months ended June 30, 2024 is primarily driven by a decrease in interest income of $0.2 million due to lower balances in the Company's cash sweep accounts during the current period compared to the prior period.

Current wording

The decrease in Other for the nine months ended September 30, 2024 was primarily driven by a decrease in interest income of $0.5 million due to lower balances in the Company's cash sweep accounts during the current period compared to the prior year period.

Previous wording

For the six months ended June 30, 2024 and 2023, we had pretax loss of $5.4 million and $13.4 million, respectively, and recorded no income tax benefit for the pretax loss due to the recording of a full valuation allowance based on our forecast of pretax loss for the years ending December 31, 2024 and 2023. For the six months ended June 30, 2024, we recorded out of period state income tax expense related to a state assessment.

Current wording

For the nine months ended September 30, 2024 and 2023, we had pretax losses of $3.7 million and $15.6 million, respectively, and recorded no income tax benefit for the pretax losses due to the recording of a full valuation allowance based on our forecast of pretax losses for the year ending December 31, 2024 and the year ended December 31, 2023. For the nine months ended September 30, 2024, we recorded out of period state income tax expense related to a state assessment.

Previous wording

To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with U.S. GAAP. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by the non-cash impact of equity earnings from equity method investments and other non-cash gains, increased by cash distributions from equity method investments and other non-cash losses. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income (loss) in accordance with U.S. GAAP as a measure of performance. See below for a reconciliation from net loss, the nearest U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA.

Current wording

To supplement our financial information presented in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we provide certain supplemental financial measures, including EBITDA and Adjusted EBITDA, which are measurements that are not calculated in accordance with U.S. GAAP. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA reduced by the non-cash impact of equity earnings from equity method investments and other non-cash gains, increased by cash distributions from equity method investments, other non-cash losses and non-recurring costs and fees. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income (loss) in accordance with U.S. GAAP as a measure of performance. See below for a reconciliation from net income (loss), the nearest U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA.

Previous wording

The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA loss and Adjusted EBITDA loss.

Current wording

The following table reconciles net income (loss), our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA (loss) and Adjusted EBITDA (loss).

Previous wording

(1) Included in Net loss for the three and six months ended June 30, 2023 are $0.6 million and $4.9 million, respectively of transaction and integration costs incurred related to the Arq Acquisition. Additionally, for the three and six months ended June 30, 2023, Net loss included $0.8 million and $1.7 million of Legacy Arq payroll and benefit costs.

Current wording

(1) Included in Net loss for the three and nine months ended September 30, 2023 are zero and $4.9 million, respectively of transaction and integration costs incurred related to the Arq Acquisition. Additionally, for the three and nine months ended September 30, 2023, Net loss included $2.5 million and $4.2 million of Legacy Arq payroll and benefit costs. Further included in Net Loss for the three and nine months ended September 30, 2023 is $1.3 million of severance expense related to two executive employees.

Previous wording

•cash on hand of $28.5 million, excluding $8.7 million of restricted cash; and

Current wording

•cash on hand of $48.7 million, excluding $8.7 million of restricted cash, including net proceeds received from issuance and sale of our common stock of $42.4 million in the current year; and

Previous wording

Cash and restricted cash decreased from $54.2 million as of December 31, 2023 to $37.2 million as of June 30, 2024. The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023, respectively:

Current wording

Cash and restricted cash increased from $54.2 million as of December 31, 2023 to $57.4 million as of September 30, 2024. The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023, respectively:

Previous wording

Cash flows used in operating activities for the six months ended June 30, 2024 decreased by $18.7 million compared to the six months ended June 30, 2023. The net decrease was primarily attributable to a decrease in cash used in accounts payable and accrued expenses of $8.3 million, primarily from payments of Legacy Arq assumed liabilities, comprised of accrued employee-related compensation and accrued transaction costs related to the Arq Acquisition in 2023; net loss of $5.4 million recognized for the six months ended June 30, 2024 compared to net loss of $13.4 million recognized for the six months ended June 30, 2023; and the add-back of a non-cash gain of $2.7 million recognized from the sale of Marshall Mine, LLC for the six months ended June 30, 2023.

Current wording

Cash flow from operating activities for the nine months ended September 30, 2024 were $5.3 million and represented a net increase of $26.4 million from cash used in operating activities for the nine months ended September 30, 2023 of $21.1 million. The net increase was primarily attributable to a decrease in cash payments on accounts payable and accrued expenses of $9.4 million, primarily due to payments made in 2023 of Legacy Arq assumed liabilities, comprised of accrued employee-related compensation and accrued transaction costs related to the Arq Acquisition in 2023; a decrease in net loss of $11.8 million; and a decrease in non-cash items primarily from a gain of $2.7 million recognized from the sale of Marshall Mine, LLC for the nine months ended September 30, 2023.

Previous wording

Cash flows used in investing activities increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 by $18.4 million primarily as a result of an increase in property, plant and equipment additions of $18.4 million from construction activities at our Red River Plant expansion; $2.2 million of cash acquired in the Arq Acquisition during the prior year; and a decrease in distributions from equity earnings in excess of cumulative earnings of $1.1 million. Partially offsetting the net increase in cash flows used in investing activities was a cash payment of $2.2 million made during the six months ended June 30, 2023 required in the sale of Marshall Mine, LLC.

Current wording

Cash flows used in investing activities increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 increased by $24.8 million primarily as a result of an increase in property, plant and equipment additions of $25.2 million from construction activities related to the expansion of our Red River Plant; $2.2 million of cash acquired in the Arq Acquisition during the prior year; and a decrease in distributions from equity earnings in excess of cumulative earnings of $1.4 million. Partially offsetting the net increase in cash flows used in investing activities were a cash payment of $2.2 million made in the prior year required in the sale of Marshall Mine, LLC, a decrease in expenditures on mine development costs of $1.7 million, and cash received in 2024 of $0.2 million from the sale of equipment.

Previous wording

Cash flows provided by financing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 decreased by $8.5 million primarily due to the proceeds from the CFG Loan of $8.5 million, net of debt issuance costs paid, which were received during the six months ended June 30, 2023. During the six months ended June 30, 2024, we received proceeds of $15.0 million, net of offering costs, related to issuance of our common stock pursuant to a securities purchase agreement with certain accredited investors. During the six months ended June 30, 2023, cash flows from financing activities included the receipt of proceeds of $15.2 million, net, from issuance of our common stock pursuant to subscription agreements with certain individuals, including existing shareholders of Arq Ltd. These decreases were partially offset by an increase of $0.8 million pursuant to a subscription agreement between the Company and its CEO executed in July 2023, whose shares were issued during the second quarter of 2024.

Current wording

Cash flows provided by financing activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 increased by $16.7 million primarily due to proceeds of $42.4 million, net of offering costs, we received related to issuance and sale of our common stock in both the Public Offering and the Private Placement, including $0.8 million received in April 2024 pursuant to a subscription agreement between the Company and its CEO executed in July 2023. During the nine months ended September 30, 2023, cash flows from financing activities included the receipt of proceeds of $15.2 million, net, from the PIPE Investment and proceeds from the CFG Loan of $8.5 million, net of debt issuance costs paid.

Previous wording

Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors. These include executing on our contracts and initiatives and increasing our share of the market for APT consumables, including expanding our overall AC business into additional adjacent markets and increasing our gross margin from improving our customer and product mix.

Current wording

Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors. These include executing on our contracts and initiatives and increasing our share of the market for APT consumables, including expanding our overall AC business into additional adjacent markets and increasing our gross margin by improving our customer and product mix.

Previous wording

We expect that our cash on hand as of June 30, 2024 and anticipated proceeds from additional debt financing will provide sufficient liquidity to fund operations for the next 12 months while maintaining the cadence of our capital expenditures.

Current wording

We expect that our cash on hand as of September 30, 2024 and proceeds from additional debt financing, if needed, will provide sufficient liquidity to fund operations for the next 12 months while maintaining the cadence of our capital expenditures.