In short, the acquisition of Arq provides long-term strategic shareholder value by:

i. Enabling commercial growth opportunities into expanded activated carbon and additional diverse and emerging markets;

ii. Creating long-term cost and competitive advantages through technology, vertical integration and environmental benefits; and

iii. Enhancing long-term profitability through entry into higher margin markets, by leveraging existing operational and commercial capabilities

As depicted in the table below, the acquisition of Arq provides ADES with the ability to produce higher-margin bituminous-based Granulated Activated Carbon in addition to those lignite-based activated carbon products that we currently produce, and opens the door to new, non-activated carbon markets that Arq is currently pursuing and that otherwise would not be available to us within our existing business.

a. The production of high-performing Granular Activated Carbon requires a high-quality feedstock like Arq Powder™ to compete effectively. The manufacturing of GAC requires special heat treatment and shaping equipment and additional processes that are not currently part of the Company’s Red River facility or operations. Although ADES would have needed to include many of the same capital upgrades to its plant in order to enable the processing of alternative feedstocks for standalone growth, the opportunity to immediately secure a vertically integrated and patent protected feedstock makes this opportunity unique. This diversification and growth opportunities are important as longer-term pressures likely will remain related to the coal-fired power generation market.

b. The acquisition provides ADES with a sustainable competitive advantage compared to other activated carbon producers by securing reliable access and availability of a high-quality, domestically sourced feedstock that is cost competitive, vertically integrated into the combined operations and has been shown to create high-performance products that are consistently activated and extremely porous.

c. The competitive value of securing our own domestic source of bituminous feedstock is significant, as alternative high-quality sources are difficult and expensive to obtain.We will be the only North American activated carbon manufacturer that controls 100% of its primary feedstock needs.

a. ADES evaluated a number of different deal structures and is confident that the acquisition of Arq provides the most value-enhancing path forward. The value of this acquisition lies in the ownership of the entire combined infrastructure, which captures funding for the capital improvements that would be necessary to utilize any bituminous based feedstock, the long-term cost advantage and security of owning the feedstock and production process, and the growth opportunities available outside of activated carbon that would not otherwise have been available to us through an alternative structure. By acquiring Arq, the combined Company will become the only North American activated carbon producer that owns and controls its bituminous feedstock source, providing insulation from much of the price and supply risk that competitors are exposed to by purchasing feedstock on the open market.

b. Likewise, Arq did not desire a licensing model and wanted to have direct exposure to the value of endmarkets. As such, the most suitable alternatives were a business acquisition or joint venture. Given the benefits of co-owned infrastructure and feedstock, the acquisition of Arq was determined to be the preferred alternative.

a. The following individuals will serve as executive officers of ADES

- Greg Marken, Chief Executive Officer

- Joe Wong, Chief Technology Officer

- Morgan Fields, Chief Accounting Officer

b. The following individuals will serve as the directors of ADES

- Spencer Wells, Chairman of the board

- Jeremy Blank

- Richard Campbell-Breeden

- Carol Eicher

- Gilbert Li

- Julian McIntyre

- Taylor Simonton

See biographies for all individuals on our ADES website (found here).

a. Prior to the effects of the new capital, legacy ADES and Arq shareholders owned 67.9% and 32.1% of the combined Company, respectively.

b. After giving effect to the PIPE investment and the warrants provided to the lenders, legacy ADES and Arq shareholders owned 59.2% and 28.0% of the Company, respectively while new PIPE investors and the lenders (assuming exercise of the warrants) owned 11.8% and 1.0% of the new Company respectively. 

The Preferred Stock issued to legacy Arq investors will automatically convert into common stock upon approval by ADES’ shareholders. Prior to conversion, the Preferred Stock will accrue quarterly dividends in an amount equal to the greater of the dividend paid on ADES’ common shares and 8% of the original issuance amount of $4 per share.If the conversion of the Preferred Shares is not approved within 635 days of closing, the coupon rate will increase by 200 basis points, and will subsequently increase by an additional 200 basis points on each subsequent anniversary. See preferred stock terms (located here).

a. In-house and external testing have consistently demonstrated that Arq Powder™ can be used to create highperformance GAC products that have targeted activated carbon properties as well as strong market application performance.

b. In addition, Arq Powder™ is derived from coal mine waste, which is both inexpensive to obtain and abundant in quantity.

c. The conversion of previously mined coal waste provides a number of environmental benefits such as a lower emissions footprint and the reclamation of previously unusable coal mine sites.

The Arq technology (product and process) is patent protected and has been applied to make a variety of carbon-rich products. The Corbin plant has been commissioned and produced Arq powder™ in sufficient volume to conduct large-scale product testing. Production volume will be increased significantly upon completion of certain upgrades contemplated in the combined company business plan, with increased production operations scheduled for 2024.