ARQ

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, 2025 (the "2025 Form 10-K"). The results of operations discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are those of Arq, Inc. and its consolidated subsidiaries, collectively, the "Company," "we," "our" or "us." Overview We are an environmental technology company that is principally engaged in the sale of consumable air, water and soil treatment solutions primarily based on activated carbon ("AC"). Our proprietary AC products enable customers to reduce air, water, and soil contaminants, including mercury, per- and polyfluoroalkyl substances ("PFAS") and other pollutants, to meet the challenges of existing and pending air quality and water regulations. We manufacture and sell AC and other chemicals used to capture and remove impurities, contaminants, and pollutants for the coal-fired power generation, industrial, water treatment, and water and soil remediation markets, which we collectively refer to as the advanced purification technologies ("APT") market. Our primary products are comprised of AC, which is produced from a variety of carbonaceous raw materials. Our AC products include both powdered activated carbon ("PAC") and granular activated carbon ("GAC"). Additionally, we own the Five Forks Mine, a lignite mine located in Saline, Louisiana, that currently supplies the primary raw material for the manufacturing of our products. We also control bituminous coal waste reserves and own a manufacturing facility, both located in Corbin, Kentucky (the "Corbin Facility"), and a process to recover and purify the bituminous coal fines. Using the Corbin Facility's manufacturing process, we convert coal waste into a purified, microfine carbon powder ("Corbin Wetcake") for use in high-value applications. On August 6, 2025, we announced that we had successfully commissioned our Red River Plant’s GAC Facility (the "GAC Facility") and produced our first commercial volumes of on-specification GAC product. However, after initial production runs, in December 2025, it became clear that ramp-up to nameplate capacity could not be accomplished without further modifications to the existing systems because of design flaws in our GAC Facility. In March 2026, we decided to pause GAC production, continue to idle the Corbin Facility as a cost saving measure, and launch an engineering and production process optimization review, including 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 coal feedstock with proven performance. We continue to believe that Corbin Wetcake has the potential to enable us to access new markets and applications. We intend to secure customer interest in Corbin Wetcake as an additive into other markets, such as a component for asphalt, or for use in the purified coal and synthetic graphite industries. In addition, we are exploring uses for certain rare earth minerals and critical elements that can be contained within material from the manufacturing process at our Corbin Facility for further recovery and concentration by others. These applications are currently in early stages of proof-of-concept testing or preliminary customer testing. Drivers of Demand and Key Factors Affecting Profitability Drivers of demand and current key factors affecting our profitability are sales of our AC products to the APT market. Our operating results are influenced by: (1) changes in our manufacturing production and sales volumes; (2) changes in price and product mix; (3) changes in coal-fired dispatch and electricity power generation sources; (4) changes in demand for contaminant removal within water treatment facilities; (5) changes in environmental regulations; and (6) state or municipal approval and customer acceptance of our new products. For the three and six months ended June 30, 2026, we experienced an increase in demand for our products from certain coal-fired dispatch and electricity power generation customers compared to the same period in 2025. This was primarily due to the year-to-date impact of moderate to severe temperatures during the winter and summer seasons, resulting in higher demand for power generation, and the impact of steady natural gas prices, resulting in several large utility customers opting to use coal versus natural gas as a primary source for power generation. Additionally, demand for power generation has grown and continues to grow driven by macroeconomic trends, such as increased consumption related to data and computer centers, electric vehicles, and other large-scale power consumers. We expect that natural gas prices will remain relatively consistent through 2026 at an elevated level due to increased demand for liquid natural gas exports, and conflict in the Middle East impacting supply, partially offset by increases in anticipated natural gas inventory levels. 20 GAC Engineering and Production Process Optimization Review The decision to pause GAC production, continue idling the Corbin Facility as a cost saving measure, and launch an engineering and production process optimization review was made in March 2026, following the review of independent testing results received in January 2026. This testing demonstrated that the thermal oxidizer in place could only support approximately 15 million pounds of annual GAC production, and would require additional modifications to achieve our original design capacity of 25 million pounds or higher. Our analysis indicates that a 15 million pound per year scenario on a stand-alone basis does not provide sufficient returns to make it economically attractive. The optimization review remains ongoing and is expected to determine production scale, capital requirements, and return profiles before we commit to additional investment in our GAC Facility. We have since expanded the optimization review to include a broader operational assessment of our overall business, which has focused on maximizing furnace throughput and reducing unit costs for each of our products, including our PAC and GAC products. These additional constraints emerged as we prepared to transition from our Corbin Wetcake to bituminous coal with proven performance, a solution which is expected to address previously announced design flaws and constraints at our GAC Facility. The issues that we experienced with our thermal oxidizer and their impact on the capacity of our GAC Facility stemmed from the previously disclosed design flaws by the engineering firm originally engaged to design our GAC Facility, with whom litigation remains ongoing. Due to the issues described above, we do not expect GAC production in fiscal year 2026 or 2027. Results of Operations For the three and six months ended June 30, 2026, we recognized net loss of $0.7 million and $1.9 million, respectively, compared to net loss of $2.4 million and $2.4 million, respectively, for the three and six months ended June 30, 2025. The most significant factors impacting results between periods for the three months ended June 30, 2026 and June 30, 2025 were increases in revenue due to increased pricing and demand for our products, offset by increases in severance expense related to the previously disclosed departures of certain members of our executive team. The following sections provide additional information regarding these comparable periods. For comparability purposes, the following tables set forth our results of operations for the periods presented in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. The current year period to prior year period comparisons of financial results may not be indicative of financial results to be achieved in future periods. Comparison of the Three Months Ended June 30, 2026 and 2025 Revenue and Cost of revenue A summary of the components of Revenue and Cost of revenue, exclusive of depreciation and amortization for the three months ended June 30, 2026 and 2025 is as follows: Three Months Ended June 30, Change (in thousands, except percentages) 2026 2025 ($) (%) Revenue $ 29,883 $ 28,584 $ 1,299 5 % Cost of revenue, exclusive of depreciation and amortization $ 18,372 $ 19,066 $ (694) (4) % Revenue and Cost of revenue For the three months ended June 30, 2026, revenue increased from the comparable quarter in 2025 primarily driven by the impact of increased pricing, which contributed additional revenues of $1.3 million, as well as higher sales volumes of our AC products, which contributed additional revenues of approximately $1.0 million of the total revenue increase. These increases were partially offset by a decrease in revenue attributable to lower sales of our chemicals products during the three months ended June 30, 2026, which caused revenue to decrease by $1.1 million from the comparable quarter in 2025. The increases due to higher pricing and volumes sold were primarily attributable to sales to customers in the power-generation market, driven by seasonal electricity demand. Notably, our revenues continue to be impacted by electricity demand driven by seasonal weather and power generation needs. 21 During the three months ended June 30, 2026, our gross margin was favorably impacted by both the pause in production at our Corbin Facility, which we idled indefinitely as of December 2025, and improved mix during the three months ended June 30, 2026 due to lower sales of our lower-margin chemical products compared to the same period in 2025. These favorable impacts to gross margin were partially offset by an increase in our costs per unit during the three months ended June 30, 2026, which were primarily due to increases in salaries and wages of our operations personnel and utilities costs. These factors resulted in the majority of the approximately $0.7 million decrease in Cost of revenue, exclusive of depreciation and amortization for the three months ended June 30, 2026 compared to the comparable quarter in 2025. We expect that revenue will continue to be positively impacted by demand for our PAC products. As we have paused production of our GAC products at our Red River Plant, we expect that gross margin will continue to improve as the impact of fixed production costs related to our GAC products on our gross margin lessens. Further, as we conduct a comprehensive engineering and production process optimization review related to our GAC products, we expect to improve the operational efficiency of PAC production at our Red River Plant and improve our product mix to higher margin products. Operating Expenses A summary of the components of our operating expenses for the three months ended June 30, 2026 and 2025 is as follows: Three Months Ended June 30, Change (in thousands, except percentages) 2026 2025As Adjusted (1) ($) (%) Operating expenses: Selling, general and administrative $ 6,789 $ 5,918 $ 871 15 % Research and development 958 2,697 (1,739) (64) % Depreciation, amortization, depletion and accretion 3,542 2,721 821 30 % Loss (gain) on sale of assets 290 (27) 317 * $ 11,579 $ 11,309 $ 270 2 % (1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion. * Percent change in excess of 100% not considered meaningful. Selling, General and Administrative A summary of the components of selling, general and administrative expenses for the three months ended June 30, 2026 and 2025 is as follows: Three Months Ended June 30, Change (in thousands, except percentages) 2026 2025 ($) (%) Payroll and benefits $ 2,353 $ 1,802 $ 551 31 % Legal and professional fees 1,515 1,574 (59) (4) % General and administrative 2,921 2,542 379 15 % Total Selling, general and administrative $ 6,789 $ 5,918 $ 871 15 % Payroll and benefits Payroll and benefits expense increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.6 million, primarily due to severance expense related to the separation of three members of our executive leadership team, which was recorded during the three months ended June 30, 2026. The increase was partially offset by a decrease in incentive compensation expense. Legal and professional fees Legal and professional fees decreased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.1 million, primarily due to decreased legal and recruiting fees incurred during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The decrease was partially offset by increased accounting and audit fees and interim executive consulting costs during the three months ended June 30, 2026. 22 General and administrative General and administrative expenses increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by approximately $0.4 million, primarily due to increases in expenses related to property taxes, software maintenance fees, sales, use, and franchise taxes, and outside labor. Research and development Research and development expense decreased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by $1.7 million, primarily due to expenses related to feedstock consumed during initial testing of the GAC Facility during the three months ended June 30, 2025. Loss (gain) on sale of assets Loss on sale of assets for the three months ended June 30, 2026 related to the disposal of a piece of machinery which was replaced during the biannual shutdown of our Red River Plant for maintenance. Depreciation, amortization, depletion and accretion Depreciation, amortization, depletion and accretion expense increased by approximately $0.8 million for the three months ended June 30, 2026 compared to the corresponding quarter in 2025, primarily due to a significant amount of plant and equipment placed in service during the second half of 2025, partially offset by decreased depreciation expense related to assets at our Corbin Facility, which were impaired during the fourth quarter of 2025. Other (Expense) Income A summary of the components of other (expense) income for the three months ended June 30, 2026 and 2025 is as follows: Three Months Ended June 30, Change (in thousands, except percentages) 2026 2025 ($) (%) Other (expense) income: Interest expense $ (748) $ (594) $ (154) 26 % Other income 83 16 67 * Total other expense $ (665) $ (578) $ (87) 15 % * Percent change in excess of 100% not considered meaningful. Interest expense Interest expense increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 by $0.2 million primarily due to higher average outstanding balances on the Company's outstanding debt facilities in the current quarter. Other income Other income increased for the three months ended June 30, 2026 compared to the corresponding quarter in 2025 primarily due to interest income recorded during the three months ended June 30, 2026. Income tax expense For the three months ended June 30, 2026 and 2025, we had pretax loss of $0.7 million and $2.4 million, respectively. For the three months ended June 30, 2026 and 2025, we had an effective tax rate of zero and recorded no income tax benefit due to the recording of a full valuation allowance on our deferred tax assets. Comparison of the Six Months Ended June 30, 2026 and 2025 Total Revenue and Cost of revenue A summary of the components of Revenue and Cost of revenue, exclusive of depreciation and amortization for the six months ended June 30, 2026 and 2025 is as follows: Six Months Ended June 30, Change (in thousands, except percentages) 2026 2025 ($) (%) Revenue $ 58,936 $ 55,831 $ 3,105 6 % Cost of revenue, exclusive of depreciation and amortization $ 37,486 $ 36,398 $ 1,088 3 % 23 Revenue and Cost of revenue For the six months ended June 30, 2026, revenue increased from the comparable period in 2025 primarily driven by increased volumes and higher pricing, which contributed revenue increases of approximately $2.3 million and $0.6 million, respectively. The increase in volumes sold was primarily attributable to sales to customers in the industrial and municipal water markets, as well as the power-generation market, driven by continued higher natural gas prices between periods. The average Henry Hub natural gas spot prices ($/MMBtu) for the six months ended June 30, 2026 and 2025 were $3.87 and $3.67, respectively. Additionally, sales of our chemical products contributed an increase of $0.2 million in revenue for the six months ended June 30, 2026 compared to the comparable period in 2025. For the six months ended June 30, 2026, gross margin, exclusive of depreciation and amortization, increased from the comparable period in 2025. During the six months ended June 30, 2026, our gross margin was favorably impacted by decreases in production expenses due to the pause in production at our Corbin Facility, which had begun production in April 2025 and which we idled indefinitely as of December 2025. This favorable impact was offset by an inventory revaluation charge during the first quarter of 2026. These factors were primarily responsible for the approximately $1.1 million increase in Cost of revenue, exclusive of depreciation and amortization for the six months ended June 30, 2026 compared to the comparable period in 2025. Operating Expenses A summary of the components of our operating expense for the six months ended June 30, 2026 and 2025 is as follows: Six Months Ended June 30, Change (in thousands, except percentages) 2026 2025As Adjusted (1) ($) (%) Operating expenses: Selling, general and administrative $ 14,158 $ 11,971 $ 2,187 18 % Research and development 1,940 3,571 (1,631) (46) % Depreciation, amortization, depletion and accretion 6,407 5,138 1,269 25 % Loss on sale of assets 290 118 172 * $ 22,795 $ 20,798 $ 1,997 10 % (1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion. * Percent change in excess of 100% not considered meaningful. Selling, General and Administrative A summary of the components of selling, general and administrative expenses for the six months ended June 30, 2026 and 2025 is as follows: Six Months Ended June 30, Change (in thousands, except percentages) 2026 2025 ($) (%) Payroll and benefits $ 4,080 $ 3,663 $ 417 11 % Legal and professional fees 3,628 3,141 487 16 % General and administrative 6,450 5,167 1,283 25 % Total Selling, general and administrative $ 14,158 $ 11,971 $ 2,187 18 % Payroll and benefits Payroll and benefits increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $0.4 million, primarily due to severance expense related to the departure of three members of our executive leadership team, severance expense related to employees terminated at our Corbin Facility, and an increase of approximately $0.2 million of share-based compensation associated with executive transition and severance. The increase is partially offset by a decrease in incentive compensation expense. Legal and professional fees Legal and professional fees increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 primarily due to additional legal and consulting fees incurred in connection with ongoing litigation with our former engineering firm, increased accounting and audit fees, and executive transition costs incurred during the six months ended June 30, 2026. 24 General and administrative General and administrative expenses increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $1.3 million, primarily due to increases in insurance, property tax and recruiting expenses. Also contributing to the increase in general and administrative expense were utilities costs related to the Corbin Facility, which are included in general and administrative expenses, however, previously were recorded to Cost of revenue, exclusive of depreciation and amortization. Research and development Research and development expense decreased for the six months ended June 30, 2026 compared to the corresponding period in 2025 by approximately $1.6 million. The decrease was primarily due to expenses related to feedstock consumed and outside services engaged during initial testing of the GAC Facility during the six months ended June 30, 2025. Depreciation, amortization, depletion and accretion Depreciation, amortization, depletion and accretion expense increased by approximately $1.3 million for the six months ended June 30, 2026 compared to the corresponding period in 2025, primarily due to a significant amount of plant and equipment placed in service during the second half of 2025, partially offset by decreased depreciation expense related to assets at our Corbin Facility, which were impaired during the fourth quarter of 2025. Loss on sale of assets Loss on sale of assets for the six months ended June 30, 2026 related to the disposal of a piece of machinery, which was replaced during our biannual plant maintenance. Loss on sale of assets for the six months ended June 30, 2025 related to the disposal of construction assets no longer in use. Other (Expense) Income A summary of the components of other income (expense) for the six months ended June 30, 2026 and 2025 is as follows: Six Months Ended June 30, Change (in thousands, except percentages) 2026 2025 ($) (%) Other (expense) income: Interest expense $ (1,453) $ (1,318) $ (135) 10 % Other income 928 281 647 * Total other expense $ (525) $ (1,037) $ 512 (49) % * Percent change in excess of 100% not considered meaningful. Interest expense Interest expense increased for the six months ended June 30, 2026 compared to the corresponding period in 2025 primarily due to higher average outstanding balances on the Company's outstanding debt facilities in the current period. Other income Other income increased for the six months ended June 30, 2026 compared to the corresponding period in 2025, which was primarily driven by interest income recorded during the six months ended June 30, 2026. Income tax expense For the six months ended June 30, 2026 and 2025, we had pretax losses of $1.9 million and $2.4 million, respectively. For the six months ended June 30, 2026 and 2025, we had an effective tax rate of zero and recorded no income tax benefit due to the recording of a full valuation allowance on our deferred tax assets. 25 Non-GAAP Financial Measures 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 non-cash gains, increased by share-based compensation expense, executive transition and severance (2), GAC Facility pre-production feedstock, 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 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. We believe that the EBITDA and Adjusted EBITDA measures are less susceptible to variances that affect the Company's operating performance. We include these non-GAAP measures because management uses them in the evaluation of our operating performance, and believe they help to facilitate comparison of operating results between periods. We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses, gains, and losses which can vary widely across different industries or among companies within the same industry and may not be indicative of core operating results and business outlook. EBITDA and Adjusted EBITDA: The following table reconciles net loss, our most directly comparable as-reported financial measure calculated in accordance with U.S. GAAP, to EBITDA and Adjusted EBITDA. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2026 2025As Adjusted (1) 2026 2025As Adjusted (1) Net loss $ (733) $ (2,369) $ (1,870) $ (2,402) Depreciation, amortization, depletion and accretion 3,542 2,721 6,407 5,138 Amortization of Upfront Customer Consideration 180 127 360 254 Interest expense, net 693 585 638 1,256 Income tax expense — — — — EBITDA $ 3,682 $ 1,064 $ 5,535 $ 4,246 Share-based compensation 1,043 734 1,934 1,470 Executive transition and severance (2) 827 — 827 — Loss (gain) on sale of assets 290 (27) 290 118 GAC Facility pre-production feedstock (3) — 1,897 — 1,897 Adjusted EBITDA $ 5,842 $ 3,668 $ 8,586 $ 7,731 (1) Adjusted to reflect the retrospective change in accounting method for planned major maintenance costs. See Note 1 and Note 12 of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion. (2) Represents expenses related to executive severance and separation, as well as legal fees and recruiting costs associated with the CFO, COO and CAO transitions. In addition to these amounts, we also incurred approximately $0.2 million of share-based compensation associated with executive transition and severance during the three months ended June 30, 2026, which is included in the Share-based compensation adjustment above. (3) Represents expenses related to feedstock utilized in pre-production testing of our GAC Facility during the three months ended June 30, 2025 included within "Research and development" expense in the Condensed Consolidated Statements of Operations. 26 Liquidity and Capital Resources Current Resources and Factors Affecting Our Liquidity As of June 30, 2026, our principal sources of liquidity included: •cash on hand of $0.9 million, excluding $11.2 million of restricted cash primarily pledged as collateral under a surety bond agreement and escrow for our term loan with Community Trust Bank, Inc. (the "CTB Loan"), described in Note 4 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report; •availability under our secured revolving credit facility with MidCap Funding IV Trust (the "Revolving Credit Facility"), described in Note 4 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report; and •cash from operations. As of June 30, 2026, our principal uses of liquidity included: •capital expenditures; •business operating expenses; •payments on our lease obligations; and •payments on our debt obligations. Cash Flows Cash and restricted cash decreased from $15.0 million as of December 31, 2025 to $12.1 million as of June 30, 2026. The following table summarizes our cash flows for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, (in thousands) 2026 2025 Change Cash and restricted cash (used in) provided by: Operating activities $ (2,659) $ (5,276) $ 2,617 Investing activities (2,023) (5,530) 3,507 Financing activities 1,784 3,995 (2,211) Net change in cash and restricted cash $ (2,898) $ (6,811) $ 3,913 Cash flow from operating activities Cash flows used in operating activities for the six months ended June 30, 2026 were $2.7 million, which represented a decrease of $2.6 million from cash used in operating activities for the six months ended June 30, 2025 of $5.3 million. The net increase in cash flow from operating activities was primarily attributable to an increase in changes in net loss, exclusive of non-cash adjustments presented, and working capital, which contributed increases of $2.8 million and $0.4 million, respectively, in cash flow between periods. The increase in the change in working capital between periods was primarily driven by changes in accounts payable and accrued expense balances. These increases were offset by a decrease in the change in Other long-term assets, net, of $0.6 million in cash flow between periods. Cash flow from investing activities Cash flows used in investing activities decreased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 by $3.5 million primarily as a result of a decrease in property, plant and equipment additions of $3.6 million from construction activities during the six months ended June 30, 2025 related to the GAC Facility at our Red River Plant. Cash flow from financing activities Cash flows provided by financing activities for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 decreased by $2.2 million primarily due to a decrease in net borrowings on our Revolving Credit Facility of $2.2 million. 27 Material Cash Requirements Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations depends upon several factors. These include executing on our contracts and initiatives and increasing our share of the market for APT consumables, completing our engineering and production process optimization review in order to increase production to reach nameplate capacity at our Red River Plant, expanding our overall AC business into additional adjacent markets and increasing our gross margin by improving our customer and product mix. Based on current operating levels, we expect that our cash on hand and borrowing availability under the Revolving Credit Facility as of June 30, 2026 will provide sufficient liquidity to fund operations for the next 12 months. Capital expenditures During the remainder of 2026, we expect our capital expenditures to primarily relate to operational plant maintenance and improvements. Surety Bonds As of June 30, 2026, we had outstanding surety bonds with regulatory commissions totaling $11.2 million primarily related to the Five Forks Mine and the Corbin Facility. As of June 30, 2026, and as required by our surety bond provider, we held restricted cash of $9.3 million pledged as collateral related to performance requirements required under indemnity agreements for the Five Forks Mine and the Corbin Facility. We expect that the obligations secured by these surety bonds will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related surety bonds may be released and collateral requirements may be reduced. However, in the event any surety bond is called, our indemnity obligations could require us to reimburse the surety bond provider. Long Term Requirements For a discussion of our long-term cash requirements, see Note 4 and Note 5 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. Critical Accounting Policies and Estimates Effective April 1, 2026, we changed our accounting policy for costs incurred in connection with planned major maintenance activities ("turnaround" or "TAR") on the Red River Plant from the direct-expense method to the deferral method. Under the deferral method, qualifying costs, including maintenance materials, parts and direct labor directly attributable to the turnaround, are capitalized when incurred and amortized on a straight-line basis over the period until the next scheduled turnaround. We believe that the deferral method is preferable because it better matches qualifying turnaround costs with the periods benefited by the planned major maintenance activities and improves the comparability of our operating results between periods. Under the direct-expense method previously applied, qualifying turnaround costs were expensed entirely in the periods in which they were incurred, although the benefits of the turnaround activities extended through the period until the next scheduled turnaround. We applied the change retrospectively to all periods presented. Our other critical accounting policies and estimates are reported in Part II, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2025 Form 10-K. Recently Issued Accounting Standards Refer to Note 1 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report for information regarding recently issued accounting standards applicable to us. Forward-Looking Statements Found in this Quarterly Report This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that involve risks and uncertainties. Words or phrases such as "anticipates," "may," "believes," "expects," "intends," "plans," "estimates," "predicts," the negative expressions of such words, or similar expressions are used in this Quarterly Report to identify forward-looking statements. All statements that address activities, events or developments that the Company intends, expects or believes may occur in the future are forward-looking statements. These forward-looking statements include, but are not limited to, statements or expectations regarding: (a)the future of our GAC Facility and Corbin Facility and the anticipated timing, results, and conclusions of our overall business optimization review and the actions we may take upon the completion of such review, including efforts to maximize throughput and optimize unit costs; 28 (b)the anticipated commercial success and efficacy of our new product applications, including PAC for PFAS™; (c)the anticipated benefits of transitioning away from using Corbin Wetcake to a bituminous proven performance coal as a feedstock for our GAC products in the future; (d)financial guidance for fiscal year 2026; (e)the anticipated effects from fluctuations in the pricing of our AC products, including through expansion into higher-value end markets; (f)expected supply and demand for our AC products and services, including our GAC and PAC for PFAS™ products; (g)the seasonal impact on our customers and their demand for our products; (h)the future profitability and sustainability of our PAC business; (i)our ability to fund our business over the next twelve months; (j)our ability to monetize our Corbin Facility and access new markets for our feedstocks and other products, including renewable natural gas, asphalt, purified coal, rare earth minerals and synthetic graphite markets; (k)any future plant development projects, that may be necessary to remediate design flaws in our GAC Facility, and our ability to finance any such projects; (l)the effectiveness of our technologies and products and the benefits they provide; (m)probability of any loss occurring with respect to certain guarantees made by Tinuum Group; (n)the timing and amounts of or changes in future revenue, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures; (o)the performance of obligations secured by our surety bonds; (p)the amount, use and timing of future capital expenditures needed to fund our business plan and total anticipated capital expenditures for the current fiscal year; (q)the adoption and scope of regulations to control certain chemicals in drinking water and other environmental concerns and the impact of such regulations on our customers' and our businesses, including any increase or decrease in demand and sales of our AC products resulting from such regulations; (r)our near-term priorities and objectives and our long-term outlook regarding the growth of our business; and (s)the impact of prices of competing power generation sources such as natural gas and renewable energy on demand for our products. The forward-looking statements included in this Quarterly Report involve risks and uncertainties. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors including, but not limited to, the timing and scope of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government’s failure to promulgate new regulations or enforce existing regulations that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; availability, cost of and demand for alternative energy sources and other technologies and their impact on coal-fired power generation in the U.S.; technical, start up and operational difficulties; competition within the industries in which the Company operates; risks associated with our debt financing; our inability to effectively and efficiently commercialize new products, including our GAC products; our inability to effectively identify solutions to the design flaws in GAC Facility at our Red River Plant or execute on any remedial measures or modifications thereto; disruptions at any of our facilities, including by natural disasters or extreme weather; risks related to our information technology systems, including the risk of cyberattacks on our networks; failure to protect our intellectual property from infringement or claims that we have infringed on the intellectual property of others; our inability to obtain future financing or financing on terms that are favorable to us; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; ongoing effects of the inflation and macroeconomic uncertainty, including from increased domestic and international tariffs and armed conflicts around the world, and such uncertainty's effect on market demand and input costs; availability of materials and equipment for our business; intellectual property infringement claims from third parties; the impacts of any current or future write-downs or write-offs, restructuring, impairment or other charges; our failure to realize the anticipated benefits of acquisitions, joint ventures, and divestitures we may engage in; pending litigation; factors relating to our business strategy, goals and expectations, including our ability to execute on our GAC business plan; our ability to maintain relationships with customers, suppliers and others with whom the Company does business and meet supply 29 requirements; our results of operations and business generally; risks related to diverting management's attention from our ongoing business operations; costs related to the ongoing manufacturing of our products, including costs necessary to resume GAC production; opportunities for additional sales of our AC products and end-market diversification, including for our Corbin Wetcake; the rate of coal-fired power generation in the U.S.; the timing and cost of any future capital expenditures and the resultant impact to our liquidity and cash flows; and the other risk factors described in our filings with the SEC, including those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025. You are cautioned not to place undue reliance on the forward-looking statements made in this Quarterly Report and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this Quarterly Report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. The forward-looking statements contained in this Quarterly Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law.