Item 1A. Risk Factors
The following risks relate to us as of the date this Report is filed with the SEC. This list of risks is not intended to be exhaustive, but reflects what we believe are the material risks inherent in our business and the ownership of our securities as of the specified dates. A statement to the effect that the occurrence of a specified event may have a negative impact on our business, results of operations, profitability, financial condition, or the like, is intended to reflect the fact that such an event, if it occurs, would be likely to have a negative impact on your investment in Arq, but should not imply the likelihood of the occurrence of such specified event. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. The order in which the following risk factors are presented is not intended as an indication of the relative seriousness of any given risk.
Risks Related to Our Business
Our growth plans are dependent on the successful commercial production of our GAC products, and we may be unable to achieve our growth goals if we fail to identify a solution to the design flaws at our GAC Facility, or fail to meet any revised project costs and anticipated production ramp-up periods associated with any further capital upgrades to our GAC Facility at our Red River Plant that may be necessary to remedy such flaws.
Our Company’s growth is dependent on our ability to successfully ramp-up production at our GAC Facility to nameplate capacity and to produce on-specification GAC products at such volumes on a consistent and sustained basis. Initial mechanical completion of construction of our GAC Facility occurred in January 2025, and on August 6, 2025, we announced that we had successfully commissioned the GAC Facility and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility, on a standalone basis as well as in combination with the inherent variability of Corbin Wetcake, which we planned to use to manufacture our GAC products. As a result, we have paused GAC production, idled the Corbin Facility as a cost saving measure, and have launched an engineering and production process optimization review, which will include an evaluation of potential GAC Facility design modifications and production economics at different scales. Additionally, we now expect to transition away from using Corbin Wetcake for the production of our GAC products to a bituminous proven performance coal feedstock, which we believe can more effectively design constraints.
In addition to the foregoing issues experienced to date, any further construction and commissioning of potential modifications and ramp-up of production at our GAC Facility will be subject to a number of other uncertainties inherent in all new construction and manufacturing operations, such as delays in procurement or construction, shortages of materials or availability of qualified contractors, liquidity requirements for funding the modifications to our GAC Facility, ongoing compliance with regulatory requirements, environmental and operational licenses and approvals for additional GAC Facility expansion, supply chain constraints (including in the supply of bituminous coal), hiring, training and retention of qualified employees and the pace of commissioning and bringing production equipment and processes online with the capability to manufacture high-quality GAC products at nameplate capacity.
If we experience any further issues or delays in identifying a solution to the design issues at our GAC Facility, or meeting any revised projected timelines, cost estimates, or anticipated production capacities associated with potential GAC Facility modifications, our growth as a business, future prospects, operating results and financial condition will be harmed. Moreover, if further issues arise or the project becomes cost prohibitive, it could affect our overall business plans for the GAC Facility, which could have a material impact on our business and growth potential.
Executing on our business plan to produce GAC products at nameplate capacity has required, and may continue to require, significant capital, which may be more than anticipated and require us to seek additional financing.
To date, we have experienced construction delays and cost overruns in connection with the construction, initial commissioning and initial productions at our GAC Facility, which has caused the project to exceed the originally anticipated budget. Due to the issues experienced to date at our GAC Facility, we have undertaken an engineering and production process optimization review, and depending on the results of such review may be required to spend significant additional capital to construct and place into service certain potential modifications to our GAC Facility to address design flaws and reach nameplate capacity. To date, we have utilized cash on hand, issued common stock in multiple equity offerings and entered into a Revolving Credit
Facility to meet these capital funding requirements. However, depending on the results of our optimization review, we may require additional financing for any additional capital costs associated with any potential GAC Facility modifications needed to resume GAC production and reach nameplate capacity. Such financing may come from cash on hand, additional debt financing, or additional equity raises. However, there can be no assurance that we will be successful in obtaining the required additional financing or, if financing is available to us, such financing may not be on terms that are favorable to us. The failure to maintain adequate liquidity to enable the Company to resume GAC production, reach nameplate capacity, and produce our GAC products consistently at those volumes on a go forward basis could result in a delay in executing our business plan, which could have a material adverse effect on our business, operating results and financial condition.
Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business.
As of December 31, 2025, we had approximately $19.0 million outstanding and $1.4 million available under our Revolving Credit Facility. Further, we hold an amortized term loan (the "CTB Loan") associated with our Corbin Facility with Community Trust Bank, Inc. ("CTB") in the principal amount of $10.0 million. As of December 31, 2025, we had $8.4 million outstanding under the CTB Loan. However, we may need to incur additional indebtedness. Our Revolving Credit Facility contains a floating interest rate. Our levels of indebtedness and higher interest rates could impact us as follows:
• require us to dedicate a substantial portion of our cash flow from operations to service indebtedness, thereby reducing the availability of cash flow to fund acquisitions or working capital;
• limit our flexibility in planning for, or reacting to, changes in our business;
• restrict us from exploiting business opportunities;
• make us more vulnerable to a downturn in our business or the economy;
• place us at a competitive disadvantage compared to our competitors with less indebtedness;
• require the consent of our existing lenders to incur certain additional indebtedness;
• limit our ability to borrow additional funds for acquisitions, working capital, or debt-service requirements;
• increase our cost of capital, including as a result of higher interest rates;
• decrease our future earnings; or
• increase our exposure to the credit risks of bank group lenders or those institutions with which we maintain deposits.
Our Revolving Credit Agreement and CTB Loan currently contain financial and other restrictive covenants. For example, the Revolving Credit Agreement includes financial covenants that require us to maintain a maximum leverage ratio and a minimum liquidity level (as these terms are defined in the Revolving Credit Agreement). These covenants could limit our ability to engage in activities that are in our long-term best interests. Our failure to comply with these covenants would result in an event of default that, if not waived, could result in the acceleration of all outstanding indebtedness. Our Revolving Credit Facility and CTB Loan have maturity dates of December 27, 2029 and January 27, 2036, respectively. In the future, we may be unable to obtain new financing or refinancing on acceptable terms. See Note 6 "Debt Obligations" to the Consolidated Financial Statements included in Item 8 of this Report for further information.
There could be no future demand for our products, including for our Corbin Wetcake.
We originally planned to use Corbin Wetcake to manufacture our GAC products. However, due to previously disclosed design challenges in our GAC Facility, we may be required to redesign, reconstruct and/or update the front-end of our GAC Facility to use a bituminous proven performance coal feedstock for the manufacture of our GAC products. This would eliminate our internal usage requirements for Corbin Wetcake produced at our Corbin Facility, which has been temporarily idled as a cost-savings measure. With respect to our AC products, we believe current conditions are favorable as a result of excess demand versus supply (especially in the GAC market), but there can be no guarantee that this will continue. Drivers of demand for our AC products include factors beyond our control such as population growth, regulatory requirements including federal emissions regulations such as the MATS Rules or state or municipal approval requirements specifically for our GAC products which we may not achieve in a timely manner or at all, and gross domestic product growth, among other factors. Any major global downturn could also materially negatively impact this demand. New AC supply is driven by new manufacturing sites being
built, and we have little visibility on what additional manufacturing capacity our competitors or other manufacturers may add in the future.
Given that we no longer expect to use Corbin Wetcake to manufacture our GAC products at this time, our business plan and commercial success is now more dependent on selling Corbin Wetcake as an additive or feedstock into other markets, such as components for asphalt and asphalt emulsions, or for use in the purified coal and synthetic graphite industries. In addition, we are exploring uses for certain rare earth minerals and critical elements that can be isolated during the manufacturing process at our Corbin Facility for use in a variety of applications. These applications are currently in various stages of proof-of-concept testing or preliminary customer testing. Although testing data and feedback from potential customers have been generally positive to date, there can be no assurance that these products will become commercially viable. Our success in utilizing the Corbin Wetcake produced at our Corbin Facility will depend on our ability to gain market acceptance and to correctly forecast demand in these new markets. There can be no assurance that we will be able to successfully expand our business into these new markets, or that such expansion will prove to be . If we are to find demand for our Corbin Wetcake, it could have a material effect on our business, operating results and financial condition.
Disruptions or underutilization at any of our facilities could negatively impact our ability to meet customer supply requirements due to damage to or insufficient production capacity of the Red River Plant and may have a material adverse effect on our business, results of operations and financial condition.
We own and operate the Red River Plant, which is our sole manufacturing plant for producing and selling AC products to our customers. We also own and operate the Corbin Facility, the primary purpose of which was producing Corbin Wetcake for the manufacture of our GAC products, as well as for potential uses in other industries. During 2025, in order to reduce operating costs and manage inventory we periodically idled the Corbin Facility and it has been idled since January 1, 2026 in order to save on operating costs as we work to address ramp-up issues with our GAC Facility discussed above. Our ability to meet customer expectations, manage inventory, complete sales and achieve our objectives for operating efficiencies depends on the full-time operation of the Red River Plant, and the execution of our current business plan depends on the successful identification of solutions to the issues experienced to date at our GAC Facility, the eventual ramp-up to nameplate capacity at our GAC Facility, and our ability to secure adequate feedstock for GAC production. We cannot replicate our manufacturing methods at another plant due to the limited availability of similar manufacturing plants, the additional costs incurred in supplying raw materials such as lignite to another plant, and the risk of revealing our confidential and proprietary technologies and manufacturing processes.
If we experience additional disruptions at our manufacturing facilities, due to natural disasters, extreme weather, other unanticipated problems such as labor difficulties, pandemics or epidemics, equipment failure, cyberattacks or other cybersecurity incidents, capacity expansion difficulties or unscheduled maintenance, we would suffer a loss of inventory to supply customers, likely incur additional costs to deliver products to our customers, and disrupt the ordinary course of our business. In addition, if contractual demand exceeds manufacturing capacity, it could jeopardize our ability to fulfill obligations under our contracts, which could, in turn, result in reduced sales, profitability, contract or and to our customer relationships and could have a material effect on our business. While we have insured our facilities or as well as for from business , there can be no assurance that any insurance coverage will be sufficient to cover any such .
Further, a prolonged disruption in our operations at the Red River Plant due to downtime or having to meet customer requirements that exceed our maximum manufacturing capacity would require us to seek alternative customer supply arrangements, which may not be on attractive terms to us or could lead to delays in distribution of products to our customers. For example, since pausing production at our GAC Facility, we have had to procure alternative GAC products for certain of our customers at our expense. These disruptions and requirements to procure alternative products for our customers could have a material adverse effect on our business, results of operations and financial condition.
We have and may in the future be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price.
There can be no assurance that issues or market conditions will not arise that may force us to write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses and harm our financial condition. Unexpected risks may arise, and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. We assess long-lived assets for impairment annually or more frequently if events or circumstances occur that indicate it is more likely than not that the carrying value of the long-lived assets exceeds their fair value. To the extent the value of any
of our long-lived assets become impaired or are further impaired, we may be required to record non-cash impairment charges that could have a material adverse impact on our financial condition, results of operations and stock price.
As of December 31, 2025, we recorded an impairment on certain of our long-lived Corbin Facility assets and patents associated with the manufacturing process for producing Corbin Wetcake, which resulted in the Company recognizing an impairment charge of $44.8 million for the fiscal year ended December 31, 2025. This impairment was primarily attributable to our decision to idle the Corbin Facility and cease the use of Corbin Wetcake as feedstock in the manufacturing of our GAC products. See Note 2 - "Impairment" to the Consolidated Financial Statements included in Item 8 of this Report for further information.
We may not realize the anticipated benefits of acquisitions, joint ventures, and divestitures, or these benefits may take longer to realize than expected.
From time to time, we may make strategic acquisitions and divestitures and participate in joint ventures, such as the Arq Acquisition. Acquisitions and joint ventures may involve significant challenges and risks, including that the acquisitions or joint ventures do not advance our business strategy or fail to produce satisfactory returns on investment. Other risks include difficulties integrating acquisitions with our operations, applying internal control processes to these acquisitions (including those related to cybersecurity), assimilating new capabilities to meet our business needs, combining business cultures, failing to realize the anticipated benefits of acquisitions or joint ventures, or realized benefits being significantly delayed, including because the technologies or products acquired may not be complementary or compatible with our business strategy or product portfolio, may not broaden our market position, product portfolio or footprint, or enhance our ability to deliver value to our customers, and due diligence evaluations of potential transactions not identifying all of the business, legal, compliance, and financial risks to accurately estimate the impact of a particular acquisition or joint venture, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities or costs associated with any quality issues with an acquisition target’s products or services.
For example, we planned to use Corbin Wetcake produced at our Corbin Facility in the production of our GAC products. However, while the manufacturing technology has been extensively tested at scale, we encountered inherent variability of Corbin Wetcake during continuous operations that would require modifications of our manufacturing equipment and processes. Due to these issues and other design issues, we now expect to transition away from using Corbin Wetcake to bituminous proven performance coal feedstock to produce our GAC products, which we believe can more effectively overcome design constraints. As discussed elsewhere in this Report, these changes have negatively impacted our GAC production and will delay our ability to increase capacity.
Failure to establish strategic relationships in new industries may diminish our ability to conduct operations at our Corbin Facility.
Our ability to successfully utilize Corbin Wetcake depends on developing and maintaining close working relationships within new industries, including in the asphalt, asphalt emulsion, and synthetic graphite industries, among others. In addition, the dynamics of creating new and maintaining these relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to do. If these strategic relationships are not established or maintained, we may be unable to utilize the Corbin Wetcake produced at our Corbin Facility, which could negatively impact our business and results of operations.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock.
Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We cannot be certain that our efforts to maintain an effective system of internal controls will be successful, will be able to maintain adequate controls over our financial processes and reporting in the future, or will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results, cause us to to meet our reporting obligations or allow to occur or go . internal controls could additionally lead to increased costs to remediate any and could cause investors to confidence in our reported financial information, which would likely have a effect on the trading price of our common stock.
The financial effects of Tinuum Group providing indemnification under performance guarantees of its refined coal ("RC") facilities are largely unknown and could adversely affect our financial condition.
Tinuum Group, LLC ("Tinuum Group"), of which we hold a 42.5% ownership interest, indemnifies certain utilities and lessees of RC facilities for particular risks associated with the operations and tax treatment of those facilities. We have provided limited, joint and several guarantees of Tinuum Group’s obligations under those leases. To date, we have not been required to make any payments under such guarantees and are not aware of any actual or threatened requests or claims for payment under such guarantees. Nevertheless, if any such obligations are triggered in the future, any substantial payments made under such guarantees could have a material adverse effect on our financial condition, results of operations and cash flows.
Demand for our products and services depends significantly on environmental laws and regulations related to emissions and water quality. Uncertainty as to the future of such laws and regulations, changes to such laws and regulations or granting of extensions of compliance deadlines has had, and will likely continue to have, a material effect on our business.
A significant market driver for our existing products and services and those planned in the future are existing and expected environmental laws and regulations, particularly those addressing the reduction of mercury and other emissions from coal-fired electricity generating units and regulation of PFAS and other pollutants. For example, we expect consumables revenue to increase in the coming years as a result of EPA regulations of PFAS substances in drinking water finalized in April 2024. However, in May 2025, the EPA announced that, along with extending the compliance deadline from April 2029 to April 2031, it intends to narrow the final rule to apply to only PFOA and PFOS, eliminating the other six PFAS substances from the final rule. If, as a result of changes in agency priorities or developments in administrative law jurisprudence, such laws and regulations are delayed further, not enacted, repealed, amended to be less strict, or include prolonged phase-in periods, or are not enforced, our business would be adversely affected by declining demand for such products and services.
Federal and state laws or regulations addressing emissions from coal-fired electricity generating units, climate change or other actions to limit emissions, including public opposition to new coal-fired electricity generating units, has caused and could continue to cause electricity generators to transition from coal to other fuel and power sources, such as natural gas, nuclear, wind, hydroelectric and solar. The potential financial impact on us of future laws or regulations or public pressure will depend upon the degree to which electricity generators diminish their reliance on coal as a fuel source. That, in turn, will depend on a number of factors, including the specific requirements imposed by any such laws or regulations, the periods over which those laws or regulations are or will be phased in, the amount of public opposition and the state and cost of commercial development of related technologies and processes. In addition, public utility commissions may not allow utilities to charge consumers for, and pass on the cost of, emissions control technologies without federal or state mandates.
Our development operations at our facilities are subject to environmental permitting and regulations that can make operations expensive or prohibit them altogether. For example, prior to idling our Corbin Facility, the majority of sites we targeted for development and extraction of coal fines contain potential environmental liabilities. Additionally, new CERCLA regulations and further regulations of PFAS substances may increase the costs of handling, transport, and disposal of PFAS-containing materials, including water treatment waste, such as spent GAC. Therefore, we may be subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products that could occur as a result of these development and production activities. Further, we cannot reasonably predict the impact that any such future laws or regulations or public opposition may have on our results of operations, financial condition or cash flows. See “Item 1. Business – Legislation and Environmental Regulations” for further information.
Our Corbin Facility is subject to additional significant governmental regulations, which may negatively impact our operations and costs of conducting business.
The Corbin Facility's operations are governed by extensive laws and regulations, including:
• laws and regulations related to exports, taxes and fees;
• labor standards and regulations related to the MSHA; and
• environmental standards and regulations related to waste disposal, toxic substances, land use and environmental protection, including environmental protection regulations related to water and air.
During 2025, in order to reduce operating costs and manage inventory we periodically idled the Corbin Facility. The Corbin Facility has been idled since January 1, 2026, as we work to address ramp-up issues with our GAC Facility discussed elsewhere in this Report. However, even when idled, the Corbin Facility is subject to such laws and regulations. Existing and possible
future laws, regulations and permits governing operations and activities of energy waste companies, or more stringent implementation, could have a material adverse impact on our business and cause increases in capital expenditures or require abandonment or delays in our products. Any future regulations regarding CO 2 emissions of coal reclamation and product manufacturing could also impact our future business.
Any action by the EPA related to the MATS Rule that decreases demand for our mercury removal products could have a material adverse effect on our business.
Our operating performance is largely dependent upon demand for mercury removal-related products, which is largely affected by the amount of coal-based power generation used in the U.S. and the continued regulation of Hazardous Air Pollutants ("HAP") emissions from coal- and oil-fired Electric Utility Steam Generating Units ("EGUs") and other utilities under the EPA's MATS Rule.
On February 15, 2023, the EPA issued a final rule re-affirming that it is "appropriate and necessary" to regulate HAP emissions from coal- and oil-fired EGUs. On April 3, 2023, the EPA issued a proposed amendment to the MATS rule that, among other potential modifications, proposed a reduction to the mercury emission limits for lignite coal-fired EGUs. The EPA adopted the final rule on April 25, 2024. However, on June 17, 2025, the EPA proposed to repeal three provisions of the 2024 amendment to the MATS Rule, including loosening requirements for particulate matter and mercury emissions to pre-2024 levels (including for lignite coal-fired EGUs), as well as provisions relating to emissions monitoring systems. On February 19, 2026, the EPA followed through with its proposal and finalized the repeal of the 2024 MATS amendment, reverting required compliance standards back to the existing standards set in 2012. This, and any other action taken by the EPA related to MATS that decreases demand for our products for mercury removal may have a negative effect on our financial results.
The failure of tariffs or duties placed on U.S. imports of Chinese AC to adequately address the impact of low-priced imports from China could have a material adverse effect on the competitiveness and financial performance of our business.
Our business faces competition in the U.S. from low-priced imports of AC products. If the volumes of these low-priced imports increase, especially if they are sold at less than fair value, our sales of competing products could decline, which could have an adverse effect our earnings. In addition, sales of these low-priced imports may negatively impact our pricing. To limit these activities, regulators in the U.S. have enacted an anti-dumping duty order on steam AC products from China. In November 2023, the order was extended for an additional five years. The amount of anti-dumping duties collected on imports of steam AC from China is reviewed annually by the U.S. Department of Commerce. In addition, China and other countries have been the subject of further tariffs by the current presidential administration. To the extent the anti-dumping margins and new tariffs do not adequately address the degree to which imports are unfairly traded, the anti-dumping order and new tariffs may be less effective in reducing the volume of these low-priced AC imports in the U.S., which could negatively affect demand and/or pricing for our products.
The market for consumables and other products that provide pollutant reduction is highly competitive, and some of our competitors are significantly larger and more established than we are, which could adversely impede our growth opportunities and financial results.
We operate in a highly competitive marketplace. Our ability to compete successfully depends in part upon our ability to maintain a production cost advantage, competitive technological capabilities and to continue to identify, develop and commercialize new and innovative products for existing and future customers. We may face increased competition from existing or newly developed products offered by industry competitors or other companies whose products offer a similar functionality as our products and could be substituted for our products, which may negatively affect demand for our products. In addition, market competition could negatively impact our ability to maintain or raise prices or maintain or grow our market position. Additionally, some of our competitors are significantly larger and/or more established companies in the overall market for consumables and other products that provide mercury emissions reduction, water treatment and air purification.
Reduction of coal consumption by North American electricity power generators could result in less demand for our products and services. If utilities significantly reduce the number of coal-fired electricity generating units or the amount of coal burned without a corresponding increase in the services required at the remaining units, this could reduce our revenue and materially and adversely affect our business, financial condition and results of operations.
The amount of coal consumed for North American electricity power generation is affected by, among other things, (1) the location, availability, quality and price of alternative energy sources for power generation, such as natural gas, fuel oil, nuclear,
hydroelectric, wind, biomass and solar power; and (2) technological developments, including those related to competing alternative energy sources.
Natural gas-fueled generation and renewable energy generation have displaced and may continue to displace coal-fueled generation, particularly from older, less efficient coal-powered generators. We expect that a significant amount of the new power generation necessary to meet increasing demand for electricity generation will be fueled by these sources. The price of natural gas has remained relatively competitive for power generation and the use of natural gas is perceived as having a lower environmental impact than burning coal. Natural gas-fired plants are cheaper to construct, and permits to construct these plants are easier to obtain, and ongoing costs of natural gas-fired plants associated with meeting environmental compliance are lower. Further advances in technologies and incentives, such as tax credits that enhance the economics of renewable energy sources, could make those sources more competitive than coal. Any reduction in the amount of coal consumed by North American electricity power generators, whether as a result of new power plants utilizing alternative energy sources or as a result of technological advances, could reduce the demand for our current products and services, thereby reducing our revenue and materially and affecting our business and results of operations.
Additionally, long-term changes in environmental regulation that threaten or preclude the use of coal or other fossil fuels as a primary fuel source for electricity production may result in the reduction or closure of a significant number of coal-fired electric generating units, and may adversely affect our business, financial condition and results of operations.
The loss of, or significant reduction in, revenue from our largest customers could adversely affect our business, financial condition or results of operations.
For 2025, we derived approximately 50% of our total revenue from our five largest customers. Our top three customers accounted for approximately 42% of our total revenue for 2025. While we attempt to mitigate such risk by entering into long-term contracts with minimum purchase obligations, if any of our five largest customers were to significantly reduce the quantities of consumables they purchase from us or cease purchasing from us altogether, it may adversely affect our business, financial condition and results of operations.
We depend on the services of our executives and other key employees, and the loss of one or more of these individuals could harm our business.
We believe that our success depends on retaining qualified executives and other key employees, especially in light of the specialized nature of our business. These individuals have significant industry and Company-specific experience. If we are unsuccessful at retaining or attracting qualified personnel, our business could be disrupted and our reputation could be harmed, adversely affecting our ability to achieve our business objectives.
Uncertain geopolitical conditions could adversely affect our business.
Uncertain geopolitical conditions, including in connection with uncertainty and changes in domestic and international U.S. policy, as well as with respect to current international conflicts, sanction regimes, multinational institutions, increased frequency of cyber-attacks, trade policies (including tariffs and trade sanctions) and other potential impacts on the world economy and currencies may cause disruptions in our business. These disruptions may result in logistics delays or shortages in producing, shipping, and receiving certain of our raw materials, increases in energy prices, increases in costs of certain of our raw materials, increases in transportation costs from overall higher fuel prices, higher prices due to tariffs, and other changes that could impact demand for our products.
Disruptions of supply chains may affect volatility in price and availability of raw materials.
The continuation of geopolitical conflicts in 2025 has continued to disrupt some supply chains, resulting in cost increases for commodities, goods and services in many parts of the world. Disruptions of supply chains and higher costs may continue into 2026 and beyond. The economic effects from these events over longer terms could negatively impact our business and results of operations.
The manufacturing and processing of our consumable products requires significant amounts of raw materials, including bituminous proven performance coal feedstocks for our GAC products. The price and availability of those raw materials can be impacted by factors beyond our control. Additionally, our consumable products, exclusive of lignite coal, use a variety of additives. Significant movements or volatility in the costs of these raw materials or additives could have an adverse effect on our working capital or results of operations. Additionally, we purchase certain raw materials from selected key suppliers. While we have inventory of such raw materials, if any of these suppliers are unable to meet their obligations with us on a timely basis
or at an acceptable price, we may be forced to incur higher costs to obtain the necessary raw materials or be unable to obtain the materials.
We may attempt to offset the increase in raw material costs or challenges in the supply of raw materials with price increases allowed in our contractual relationships, or through cost reduction efforts. If we are unable to fully offset the increased cost of raw materials through price increases, it could significantly impact our business, financial condition and results of operations.
We may experience a shortage of reliable and adequate transport capacity and any material increase in transportation costs could have a material adverse effect on our results of operations.
We use rail and truck transport to deliver our products to our customers and to receive the raw materials needed to manufacture our products at our Red River Plant. We may experience roadway or railway transportation disruptions that could have a material adverse effect on our operations or financial condition. There can be no assurance that we will be able to secure sufficient truck or railway transport capacity to transport raw materials to the Red River Plant or our finished commercial products to our customers. Further, in the event of railway transport shortages, there can be no assurance that road transportation will be able to satisfy the shortfall. Potential transportation classifications of raw materials or spent product may require permitting, and special care and handling to transport such materials, including the transportation of spent PFAS filtration media. In addition, any material increase in transportation costs could have a negative effect on the competitiveness of our future products, which may in turn have a material adverse effect on our business and results of operations.
We face operational risks inherent in mining operations, and our mining operations have the potential to cause safety issues, including those that could result in significant personal injury.
We own the Five Forks Mine, a lignite coal mine located in Louisiana, which is operated for us by a third party. Our Corbin Facility is also a mining operation. Mining operations by their nature involve a high level of uncertainty and are often affected by risks and hazards outside of our control. At the Five Forks Mine, the risks are primarily operational risks associated with the maintenance and operation of the heavy equipment required to dig and haul the lignite and risks relating to producing lower than expected lignite quality or unfavorable recovery rates. At our Corbin Facility, in addition to traditional mining operations risks, we face additional risks pertaining to reclamation requirements and related bonding. Additionally, the cost of inputs in our mining operation, most notably fuel cost, can create operational risks. The failure to adequately manage these risks could result in significant personal injury, loss of life, damage to mineral properties, production facilities or mining equipment, damage to the environment, delays in or reduced production and potential legal liabilities.
Our operations and products are subject to extensive safety, health and environmental requirements that could increase our costs and/or impair our ability to manufacture and sell certain products.
Our ongoing operations are subject to extensive federal, state and local laws, regulations, rules and ordinances relating to safety, health and environmental matters, many of which provide for substantial monetary fines and potential criminal sanctions for violations. These include requirements to obtain and comply with various environmental-related permits for constructing any new facilities (or modifications to existing facilities) and operating all of our existing facilities. Our mining operations are also subject to permitting requirements. Costs of complying with regulations could increase, as concerns related to greenhouse gas emissions, climate change, and land use, among other things, continue to develop and impact the regulatory regime applicable to our operations.
The enactment of new environmental laws and regulations and/or the more aggressive interpretation of existing requirements could require us to incur significant costs for compliance or capital improvements or limit our current or planned operations, any of which could have a material adverse effect on our earnings or cash flow. We may attempt to offset the effects of these compliance costs through price increases, productivity improvements, changed operations or processes, and cost reduction efforts. Our success in offsetting any such increased regulatory costs is largely influenced by competitive and economic conditions and could vary significantly depending on the market segment served. Such increases may not be accepted by our customers, may not be sufficient to compensate for increased regulatory costs or may decrease demand for our products and our volume of sales.
We may not be successful in achieving our growth expectations related to new products in our existing or new markets.
Our ability to bring new products to the market will depend on various factors, including, but not limited to, solving potential technical or manufacturing difficulties, competition and market acceptance, which may hinder the timeliness and cost to bring such products to production. In addition, our anticipated production capacity for any new product, including our GAC products, may be limited if we continue to experience further material delays in identifying solutions to the design issues in our GAC
Facility and the eventual ramp-up to nameplate capacity at our GAC Facility, such as those we have experienced to date. Further, there can be no assurance that costs incurred to develop new products will result in an increase in revenue. These factors or delays could affect our future financial condition and operating results. Additionally, if we are unable to secure customer interest in Corbin Wetcake as an additive into other markets, such as a component for asphalt or for use in the purified coal and synthetic graphite industries or are unable to secure uses for certain rare earth minerals and critical elements that can be isolated during the manufacturing process at our Corbin Facility, our business prospects would be harmed.
Natural disasters or extreme weather could affect our operations and financial results.
We operate facilities, including the Red River Plant, Five Forks Mine and the Corbin Facility, that are exposed to natural hazards, such as floods, freezes, windstorms and hurricanes. Extreme weather events present physical risks that may become more frequent as a result of factors related to climate change. Such events could disrupt our supply of raw materials or otherwise affect production, transportation and delivery of our products or affect demand for our products.
In addition, extreme and unusually cold or hot temperatures throughout the U.S. could result in abnormally high loads on geographic electrical grids that could result in the failure of coal-fired power plants to produce electricity. If these plants were off-line for a significant period of time, the demand for our products could be less, which would impact our operations and financial results. Conversely, abnormally high loads on geographic electrical grids, resulting in increased demand of coal-fired power plants to produce electricity, could impact our ability to meet customer contracts and demands.
We are subject to risks related to environmental, social or governance (“ESG”) matters, including our ability to set and meet reasonable goals related to climate change and sustainability efforts, may negatively affect our business and operations.
Regulatory developments and stakeholder expectations relating to ESG matters are rapidly changing and are largely dependent on the stakeholder, customer, market, and/or government instrumentality in question. For certain stakeholders, customers, markets and government instrumentalities, concern over climate change has increased focus on the sustainability of practices and products in some of the markets we serve or may potentially serve, and changes to laws and regulations regarding climate change mitigation may result in increased costs and disruption to operations. Moreover, stakeholder expectations are not uniform, and both opponents and proponents of various ESG matters have increasingly engaged in a range of activism and action to advocate for their positions. Navigating varying expectations of policymakers and other stakeholders has inherent costs, and any failure to successfully navigate such expectations may expose us to negative publicity, shareholder activism, and litigation or other engagement from stakeholders with opposing views, as well as the potential for civil investigations and enforcement by federal governmental authorities. If we are to recognize and respond to such developments, or if our existing practices and procedures are not adequate to meet changing regulatory requirements, market standards or investor expectations, some of which may be , we may corporate , become subject to regulatory , or third-party , or incur costs to revise operations to meet new or revised standards. Moreover, any to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material effect on our business, results of operations and cash flows.
We publish an annual Sustainability Report to address the impact of our operations on and to discuss material social, governance and environmental issues. Any failure or perceived failure to act responsibly with respect to such matters may negatively impact our operations and/or financial condition. While we monitor a broad range of ESG issues, there can be no assurance that we will manage such issues successfully, or that we will successfully meet the expectations of our stakeholders, consumers and employees.
Information technology vulnerabilities and cyberattacks on our networks could have a material adverse impact on our business.
We rely on information technology ("IT") to manage and conduct business, both internally and externally, with our customers, suppliers and other third parties. Internet transactions involve the transmission and storage of data including customer and supplier business information. Therefore, maintaining the security of computers and other electronic devices, computer networks and data storage resources is a critical issue for us and our customers and suppliers because security breaches could result in reduced or lost ability to carry on our business and loss of, and/or unauthorized access to, confidential information.
We have limited personnel and other resources to address information technology reliability and security of our computer networks, and to respond to known security incidents to minimize potential adverse impact. Experienced hackers, cybercriminals and perpetrators of threats may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. These perpetrators of
cyberattacks also may be able to develop and deploy viruses, worms, malware and other malicious software programs that attack our information and networks or otherwise exploit any security vulnerabilities of our information and networks.
Techniques used to obtain unauthorized access to or sabotage systems change frequently and often are not recognized until after they are launched against a target, and we may be unable to anticipate these techniques or to implement adequate preventative measures. A breach of our IT systems and security measures or those of our third party partners as a result of third party action, malware, employee error, malfeasance or otherwise could materially adversely impact our business and results of operations and expose us to customer, supplier and other third party liabilities.
Risks Related to Intellectual Property
Failure to protect our intellectual property or infringement of our intellectual property by a third party could have an adverse impact on our financial condition.
We rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. Such means of protecting our proprietary rights may not be adequate because they provide only limited protection or such protection may be prohibitively expensive to enforce. We also enter into confidentiality and non-disclosure agreements with our employees, consultants and many of our customers and vendors, and generally control access to and distribution of our proprietary information. Notwithstanding these measures, a third party could copy or otherwise obtain and use our proprietary information without authorization. We cannot provide assurance that the steps we have taken will prevent misappropriation of our technology and intellectual property, which could negatively impact our business and financial condition. In addition, such actions taken by third parties could divert the attention of our management from the operation of our business.
We may be subject to intellectual property infringement claims from third parties that are costly to defend and that may limit our ability to use the disputed technologies.
If our technologies are alleged to infringe the intellectual property rights of others, we may be forced to mount a defense to such claims, which may be expensive and time consuming. During the pendency of litigation, we could be prevented from marketing and selling existing products or services and from pursuing research, development or commercialization of new or complimentary products or services. Further, we may be required to obtain licenses to third party intellectual property or be forced to develop or obtain alternative technologies. Our failure to obtain a license to a technology that we may require, or the need to develop or obtain alternative technologies, could significantly and negatively affect our business.
Indemnification of third-party licensees of our technologies against intellectual property infringement claims concerning our licensed technology and our products could be financially significant to us.
We have agreed to indemnify licensees of our technologies (including Tinuum Group) and purchasers of our products, and we may enter into additional agreements with others under which we agree to indemnify and hold them harmless from losses they may incur as a result of the alleged infringement of third-party rights caused by our technologies and products. Infringement claims, which may be expensive and time-consuming to defend, could have a material adverse effect on our business, operating results and financial condition, even if we are successful in defending ourselves (and the indemnified parties) against them.
Our future success depends in part on our ongoing identification and development of intellectual property and our ability to invest in and deploy new products, services and technologies into the marketplace efficiently and cost effectively.
The process of identifying customer needs and developing and enhancing products, services and solutions for our customer markets is complex, costly and uncertain. Any failure by us to identify and anticipate changing needs, emerging trends and new regulations could significantly harm our future market share and results of operations.
Risk related to tax matters
Our ability to utilize our tax assets to offset future income tax liability could be limited from an "ownership change."
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, ("IRC') a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs") and tax credits to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders (generally 5% stockholders (as defined in IRC Section 382), applying certain look-through rules) increases by more than 50 percentage points during the testing period (generally a three-year lookback period). An entity that experiences an
ownership change generally is subject to an annual limitation on its pre-ownership change tax asset carryforwards. The annual limitation is increased each year to the extent that there is an unused limitation in a prior year.
We acquired certain tax assets (the "Legacy Arq Tax Assets") in the Arq Acquisition, totaling approximately $12.5 million. The Legacy Arq Tax Assets are comprised of NOL carryforwards, of which $8.8 million were incurred in the U.S. Prior to the Arq Acquisition, Legacy Arq completed numerous equity offerings that resulted in ownership changes. We have not completed a formal IRC Section 382 analysis of Legacy Arq's equity changes from Legacy Arq's inception through the date of the Arq Acquisition. We believe that one or more "ownership changes" occurred prior to the date of the Arq Acquisition as defined under Sections 382 and 383 and that a portion or all of the Legacy Arq Tax Assets may be subject to an annual limitation.
Further, as of December 31, 2025, we had approximately $86.1 million of general business credit carryforwards (the "Tax Credits"), totaling approximately 73% of consolidated tax assets. Under the IRC and regulations promulgated by the U.S. Treasury Department and the IRS, we may carry forward or otherwise utilize our NOLs and Tax Credits (collectively, "Tax Assets") in certain circumstances to offset current and future federal income tax liabilities, subject to certain requirements and restrictions. However, our ability to use our Tax Assets to offset future federal income tax liability is limited if Legacy Arq or Arq, or both, experience an "ownership change" as discussed above. To the extent that the Tax Assets do not otherwise become limited, we believe that we will have available a significant amount of Tax Assets in future years, and therefore the Tax Assets could be a substantial asset to us.
To mitigate the risk of an "ownership change," on May 5, 2017, our Board approved the Tax Asset Protection Plan (the "TAPP") and declared a dividend of one preferred share purchase right (each, a "Right") for each outstanding share of our common stock. The TAPP was adopted in an effort to protect stockholder value by attempting to diminish the risk that our ability to use the existing Tax Credits to reduce potential future federal income tax obligations may become substantially limited (the "Protection Plan"). During the years 2018 through 2025, we executed amendments to the TAPP (the "TAPP Amendments"), which amended the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith. The most recent TAPP Amendment was approved at our 2025 annual meeting of stockholders and extended the Final Expiration Date to the close of business on December 31, 2026.
The TAPP, as amended, is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of our outstanding common stock without the approval of the Board. Stockholders who beneficially owned 4.99% or more of our outstanding common stock upon execution of the Protection Plan will not trigger the Protection Plan so long as they do not acquire beneficial ownership of additional shares of our common stock. The Board may, in its sole discretion, also exempt any person from triggering the Protection Plan.
In connection with various recent equity issuances, we granted waivers under the TAPP for certain stockholders to allow such stockholders to acquire the shares offered in the respective offerings and acquire more shares of our stock in the future, provided that such acquisition is not expected to, and does not, effect an "ownership change" under IRC Sections 382 and 383. Despite the TAPP, our projections of what will effect an ownership change could be wrong, and with a waiver in place for certain stockholders, there is a risk that we experience an ownership change for purposes of IRC Sections 382 and 383 because of future acquisitions of our common stock, which would limit the use of our existing Tax Assets.
Risks Related to Our Common Stock
Our stock price is subject to volatility.
The market price of our common stock has experienced substantial price volatility in the past and may continue to do so. The market price of our common stock may continue to be affected by numerous factors, including:
• the market’s perception of our ability to execute on our business plan with respect to our GAC products, GAC Facility and Corbin Wetcake;
• actual or anticipated fluctuations in our operating results and financial condition;
• changes in laws or regulations and court rulings and trends in our industry;
• announcements of sales awards;
• changes in supply and demand of our products and raw materials;
• adoption of new tax regulations or accounting standards affecting our industry;
• changes in financial estimates by securities analysts;
• trends in social responsibility and investment guidelines;
• whether we are able and elect to pay cash dividends;
• the continuation of repurchasing shares of common stock under our stock repurchase programs; and
• the degree of trading liquidity in our common stock and general market conditions.
From January 1, 2025 to December 31, 2025, the closing price of our common stock ranged from $3.20 to $7.73 per share. We believe our stock price should reflect both current business operations as well as expectations of future growth and profitability. Future dividends are subject to declaration by the Board, which we are not obligated to declare. If we fail to meet expectations related to future growth, profitability, dividends, or other market expectations, our stock price may decline significantly, which could have a material adverse impact on our ability to obtain additional capital and erode investor confidence, which could further reduce the liquidity of our common stock. On August 12, 2025, our Board terminated our existing stock repurchase plan. We do not expect to adopt a stock repurchase program or declare a dividend in the near term.
Our certificate of incorporation and bylaws contain provisions that may delay or prevent an otherwise beneficial takeover attempt of our Company.
Certain provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These include provisions that:
• Limit the business at special meetings of stockholders to the purpose stated in a notice of the meeting;
• Authorize the issuance of "blank check" preferred stock, which is preferred stock with voting or other rights or preferences that could impede a takeover attempt and that the Board can create and issue without prior stockholder approval;
• Establish advance notice requirements for submitting nominations for election to the Board and for proposing matters that can be acted upon by stockholders at a meeting; and
• Require the affirmative vote of the "disinterested" holders of a majority of our common stock to approve certain business combinations involving an "interested stockholder" or its affiliates, unless either minimum price criteria or procedural requirements are met, or the transaction is approved by a majority of our "continuing directors" (known as "fair price provisions").
These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of our common stock, or could limit the ability of our stockholders to approve transactions that they may deem to be in their best interest.
An increased focus on environmental, social and governance factors by institutional investors may negatively impact our access to capital and the liquidity of our stock price.
Some institutional investors have recently adopted ESG investing guidelines that may prevent them from increasing or taking new stakes with companies with exposure to fossil fuels. Additional institutional investors may adopt similar ESG investment guidelines. This could limit both the demand for owning our common stock and/or our access to capital. If such capital is desired, we cannot assure you that we will be able to obtain any additional equity or debt financing on terms that are acceptable to us. Given these emerging trends, liquidity in our common stock and our stock price may be negatively impacted.
We require additional funding for our growth plans, and such funding may require us to issue additional shares of our common stock resulting in a dilution of your investment.
We estimate our funding requirements in order to implement our growth plans. If the actual funding required to implement growth initiatives should exceed funding estimates significantly, or our funds generated from our operations from such growth initiatives prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements. For example, as previously disclosed, capital expenditures related to the GAC Facility were above what was originally budgeted, bringing fiscal year 2025 capital expenditures to approximately $9.1 million.
Any additional funds required may be raised by issuing equity or debt securities or by borrowing from banks or other resources. We cannot assure you that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we may not be able to implement such plans fully. Such financing, even if obtained, may be accompanied by conditions that limit our ability to pay dividends or require us to seek lenders’ consent for payment of dividends, or restrict our ability to operate our business by requiring lender’s consent for certain corporate actions. Further, if we raise additional funds through the issuance of new shares of our common stock, any existing stockholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution of their investment.
Certain members of our management team and Board hold a significant portion of the voting power of our common stock.
Certain members of our management team and Board hold a significant percentage of our outstanding common stock, and such persons, acting individually or together, could have the ability to exert a substantial influence on actions requiring a stockholder vote. The influence of these significant stockholders may be used in a manner that other stockholders may not support. Any such concentration of ownership may have the effect of delaying certain corporate actions, and may consequently impact the ability of other stockholders to influence the management and policies of the Company.
