XNAS:ADES Advanced Emissions Solutions Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Form 10-Q

 

 

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission File Number: 000-50216

 

 

ADA-ES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Colorado   84-1457385

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

9135 South Ridgeline Boulevard, Suite 200,

Highlands Ranch, Colorado

  80129
(Address of principal executive offices)   (Zip Code)

(303) 734-1727

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨      Accelerated filer   x
Non-accelerated filer   ¨      Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. (Check one):    Yes  ¨    No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ¨    No  ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

   Outstanding at July 31, 2012

Common Stock, no par value

   10,013,910

 

 

 


PART I - FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements.

ADA-ES, Inc. and Subsidiaries

Consolidated Balance Sheets

(Amounts in thousands, except share data)

 

     June 30,
2012
    December 31,
2011
 
     (Unaudited)     (Restated)  
ASSETS   

Current Assets

    

Cash and cash equivalents

     23,137      $ 40,879   

Receivables, net of allowance for doubtful accounts

     13,892        5,914   

Investment in securities

     735        508   

Prepaid expenses and other assets

     4,441        3,924   
  

 

 

   

 

 

 

Total current assets

     42,205        51,225   
  

 

 

   

 

 

 

Property and Equipment, at cost

     50,125        41,771   

Less accumulated depreciation and amortization

     (6,779     (4,651
  

 

 

   

 

 

 

Net property and equipment

     43,346        37,120   
  

 

 

   

 

 

 

Other Assets

    

Investment in unconsolidated entity

     1,257        590   

Deferred taxes

     16,076        16,233   

Other assets

     1,096        931   
  

 

 

   

 

 

 

Total other assets

     18,429        17,754   
  

 

 

   

 

 

 

Total Assets

   $ 103,980     $ 106,099   
  

 

 

   

 

 

 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT   

Current Liabilities

    

Accounts payable

     12,277      $ 10,058   

Accrued payroll and related liabilities

     1,408        2,545   

Line of credit

     18,000        10,873   

Deposits

     11,900        14,900   

Deferred revenue and other liabilities

     4,321        5,105   

Settlement awards and related accrued liabilities

     3,755        3,983   
  

 

 

   

 

 

 

Total current liabilities

     51,661        47,464   
  

 

 

   

 

 

 

Long-term Liabilities

    

Line of credit

     —          3,624   

Settlement awards and indemnity liability

     2,500        5,200   

Deferred revenue

     1,105        —     

Accrued warranty and other liabilities

     657        632   
  

 

 

   

 

 

 

Total long-term liabilities

     4,262        9,456   
  

 

 

   

 

 

 

Total liabilities

     55,923        56,920   
  

 

 

   

 

 

 

Commitments and Contingencies (Note 9)

    

Temporary Equity - Non-controlling Interest Subject to Possible Redemption

     61,707        60,994   
  

 

 

   

 

 

 

Stockholders’ Deficit

    

ADA-ES, Inc. stockholders’ deficit

    

Preferred stock: 50,000,000 shares authorized, none outstanding

     —          —     

Common stock: no par value, 50,000,000 shares authorized, 10,012,682 and 9,996,144 shares issued and outstanding, respectively

     63,458        63,184   

Accumulated deficit

     (52,092     (48,069
  

 

 

   

 

 

 

Total ADA-ES, Inc. stockholders’ equity

     11,366        15,115   

Non-controlling interest

     (25,016     (26,930
  

 

 

   

 

 

 

Total Stockholders’ Deficit

     (13,650     (11,815 )  
  

 

 

   

 

 

 

Total Liabilities, Temporary Equity and Stockholders’ Deficit

   $ 103,980      $ 106,099   
  

 

 

   

 

 

 

See accompanying notes.

 

1


ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2012     2011     2012     2011  

Revenue:

        

Refined coal

   $ 48,351      $ 4,748      $ 63,525      $ 10,834   

Emission control

     3,965        1,709        6,729        3,742   

CO2 capture

     195        569        477        917   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     52,511        7,026        70,731        15,493   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of Revenues:

        

Refined coal

     41,908        413        53,951        588   

Emission control

     3,087        962        5,155        1,798   

CO2 capture

     82        476        199        759   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     45,077        1,851        59,305        3,145   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Margin before Depreciation and Amortization

     7,434        5,175        11,426        12,348   

Other Costs and Expenses:

        

General and administrative

     4,040        6,847        7,679        11,664   

Research and development

     618        375        1,182        696   

Depreciation and amortization

     1,181        207        2,205        392   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     5,839        7,429        11,066        12,752   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

     1,595        (2,254     360        (404

Other Income (Expense):

        

Net equity in net income (loss) from unconsolidated entities

     132        (1,752     168        (3,711

Other income including interest

     42        1,498        141        2,090   

Interest expense

     (431     —          (901     —     

Settlement of litigation and arbitration award, net

     (469     —          (753     (39,502
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (726     (254     (1,345     (41,123
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) from Continuing Operations Before Income Tax Benefit and Non-controlling Interest

     869        (2,508     (985     (41,527

Income Tax Expense (Benefit)

     1,324        (2,313     305        (16,569
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss Before Non-controlling Interest

     (455     (195     (1,290     (24,958

Non-controlling Interest

     (2,167     (2,056     (2,733     (4,835
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss Attributable to ADA-ES, Inc.

   $ (2,622   $ (2,251   $ (4,023   $ (29,793
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss Per Common Share - Basic and Diluted Attributable to ADA-ES, Inc.

   $ (0.26   $ (0.30   $ (0.40   $ (3.91
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Common Shares Outstanding

     10,002        7,601        10,004        7,618   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

2


ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

Six Months Ended June 30, 2012 and 2011

(Amounts in thousands, except share data)

(Unaudited)

 

     Common Stock     Accumulated
Deficit
    Total ADA-ES
Stockholders’

Equity (Deficit)
    Non-
controlling

Interest
    Total
Equity

(Deficit)
 
     Shares      Amount          
            (Restated)           (Restated)     (Restated)     (Restated)  

Balances, January 1, 2011

     7,538,861       $ 39,627      $ (28,218   $ 11,409      $ 2,035      $ 13,444   

Stock-based compensation

     66,269         454        —          454        —          454   

Issuance of stock to 401(k) plan

     16,276         182        —          182        —          182   

Issuance of stock on exercise of options

     11,134         81        —          81        —          81   

Income tax impact of sale of temporary equity in joint venture (restated)

     —           (10,980     —          (10,980     —          (10,980

Equity contributions by non-controlling interest

     —           —          —          —          250        250   

Distributions to non-controlling interest

     —           —          —          —          (35,698     (35,698

Expense of stock issuance and registration

     —           (16     —          (16     —          (16

Accretion of net income allocated to temporary equity

     —           —          —          —          (269     (269

Net income (loss)

     —           —          (29,793     (29,793     4,835        (24,958
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances, June 30, 2011 (restated)

     7,632,540       $ 29,348      $ (58,011   $ (28,663   $ (28,847   $ (57,510
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances, January 1, 2012 (restated)

     9,996,144       $ 63,184      $ (48,069   $ 15,115      $ (26,930   $ (11,815

Stock-based compensation

     5,725         78        —          78        —          78   

Issuance of stock to 401(k) plan

     8,847         197        —          197        —          197   

Issuance of stock on exercise of options

     1,966         21        —          21        —          21   

Distributions to non-controlling interest

     —           —          —          —          (106     (106

Expense of stock issuance and registration

     —           (22     —          (22     —          (22

Accretion of net income allocated to temporary equity

     —           —          —          —          (713     (713

Net income (loss)

     —           —          (4,023     (4,023     2,733        (1,290
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances, June 30, 2012 (restated)

     10,012,682       $ 63,458      $ (52,092   $ 11,366      $ (25,016   $ (13,650
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

See accompanying notes.

 

3


ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

     Six Months Ended June 30,  
     2012     2011  
           (Restated)  

Cash Flows from Operating Activities:

    

Net loss

   $ (4,023   $ (29,793

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

    

Depreciation and amortization

     2,205        392   

Deferred tax benefit

     305        (16,569

Loss on disposal of assets

     —          37   

Expenses paid with stock, restricted stock and stock options

     275        636   

Net equity in net (income) loss from unconsolidated entities

     (168     3,711   

Non-controlling interest in income from subsidiaries

     2,733        4,835   

Changes in operating assets and liabilities:

    

Receivables, net

     (7,978     2,390   

Prepaid expenses and other assets

     (829     (674

Accounts payable

     625        371   

Accrued payroll, expenses and other related liabilities

     (1,137     3,586   

Deferred revenue and other liabilities

     (2,654 )     (2,488

Settlement awards and related accrued liabilities

     (2,928     39,502   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (13,574     5,936   
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Investment in securities

     (227     —     

Principal payments received on notes receivable

     —          1,580   

Capital expenditures for equipment, patents and development projects

     (6,837     (4,974
  

 

 

   

 

 

 

Net cash used in investing activities

     (7,064     (3,394
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Net borrowings under line of credit

     3,503        4,168   

Loan to unconsolidated entity

     (500     —     

Sale of temporary equity in joint venture

     —          60,000   

Non-controlling interest equity contributions

     —          250   

Distributions to non-controlling interest

     (106     (35,698

Exercise of stock options

     21        81   

Stock issuance and registration costs

     (22     (16
  

 

 

   

 

 

 

Net cash provided by financing activities

     2,896        28,785   
  

 

 

   

 

 

 

Increase (Decrease) in Cash and Cash Equivalents

     (17,742     31,327   

Cash and Cash Equivalents, beginning of period

     40,879        9,696   
  

 

 

   

 

 

 

Cash and Cash Equivalents, end of period

   $ 23,137      $ 41,023   
  

 

 

   

 

 

 

Supplemental Schedule of Non-Cash Flow Financing Activities:

    

Stock and stock options issued for services

   $ 275      $ 636   
  

 

 

   

 

 

 

Cash paid for interest

   $ 1,110      $ —     
  

 

 

   

 

 

 

Accrued capital expenditures

   $ 1,594      $ —     
  

 

 

   

 

 

 

Deposits transferred to deferred revenue

   $ 3,000      $ —     
  

 

 

   

 

 

 

See accompanying notes.

 

4


ADA-ES, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2012

 

(1) Basis of Presentation

Nature of Operations

ADA-ES, Inc. (“ADA”), its direct and indirect wholly-owned subsidiaries, Advanced Emissions Solutions, Inc., a Delaware corporation (“ADES”), BCSI, LLC, a Delaware limited liability company (“BCSI LLC”), ADA Intellectual Property, LLC, a Colorado limited liability company (“ADA IP”), all of which had no operations during the first six months of 2012, and ADA Environmental Solutions, LLC, a Colorado limited liability company (“ADA LLC”) and ADA’s joint venture interest in Clean Coal Solutions, LLC (“Clean Coal”) are collectively referred to as the “Company”. The Company is principally engaged in providing environmental technologies and specialty chemicals to the coal-burning electric power generation industry. The Company generates a substantial part of its revenue from the sale of refined coal (“RC”), the sale of Activated Carbon Injection (“ACI”) systems, contracts co-funded by the government and industry and the development and lease of equipment for the RC market. The Company’s sales occur principally throughout the United States.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The consolidated financial statements include the financial statements of ADA, ADES, BCSI LLC, ADA IP, ADA LLC and Clean Coal. All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the consolidated financial statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

These statements should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011. The accounting policies used in preparing these consolidated financial statements are the same as those described in our Form 10-K.

The Company prepares its consolidated financial statements in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts have been reclassified from the prior periods to conform to the current period financial statement presentation. Such reclassification had no effect on the net loss reported.

New Accounting Standard

In September 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company performs its annual goodwill impairment test in the fourth quarter and does not expect the adoption of this ASU to significantly impact its consolidated financial statements.

 

5


(2) Investment in Unconsolidated Entity

Clean Coal Solutions Services

On January 20, 2010, the Company, together with NexGen Resources Corporation (“NexGen”), formed Clean Coal Solutions Services, LLC (“CCSS”) for the purpose of operating RC facilities leased or sold to third parties by Clean Coal. The Company has a 50% ownership interest in CCSS (but does not have management control of it) and the Company’s investment in and advances to CCSS which totaled approximately $1.3 million as of June 30, 2012 includes its share of CCSS’ income since its formation and is accounted for under the equity method of accounting. The following schedule shows unaudited consolidated summarized information as to assets, liabilities and revenues and net income attributed to CCSS before consolidation. CCSS’ consolidated financial statements include the financial results of the entities that lease RC facilities and its revenues includes sale of RC and its cost of sales include raw coal purchases.

 

     As of
June 30, 2012
     As of
December 31, 2011
 
     (in thousands)  

Current assets

   $ 53,358       $ 22,609   

Property, equipment, and other long-term assets

     1,867         3,682   
  

 

 

    

 

 

 

Total Assets

   $ 55,225       $ 26,291   
  

 

 

    

 

 

 

Total Liabilities

   $ 34,367       $ 15,988   
  

 

 

    

 

 

 

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2012      2011      2012      2011  
     (in thousands)  

Net revenue

   $ 67,180       $ 34,364       $ 105,972       $ 82,949   

Net income-attributed to CCSS

   $ 262       $ 146       $ 335       $ 199   

 

(3) Joint Venture Investment in Clean Coal

In November 2006, the Company sold a 50% interest in its joint venture called Clean Coal Solutions, LLC, which was formed in 2006 with NexGen, to market RC technology. In May 2011, Clean Coal sold an effective 15% interest of its equity to an affiliate of The Goldman Sachs Group, Inc. (“GS”) (see Note 12 for restatement of equity held by GS). GS’s interest has certain preferences over ADA and NexGen as to liquidation and profit distribution. GS has no further capital call requirements and does not have a voting interest but does have approval rights over certain corporate transactions.

In September 2011, ADA, NexGen, and GS entered into the First Amendment to the Second Amended and Restated Operating Agreement pursuant to which ADA and NexGen each transferred their 2.5% member interests in each of Clean Coal’s subsidiaries back to Clean Coal. As a result of these transactions, ADA’s interest in Clean Coal’s net profits and losses is now 42.5%. This restructuring of ownership interests did not change the financial relationships of the parties and ADA still maintains a 50% controlling and governance interest in Clean Coal. Since its inception, ADA has been considered the primary economic beneficiary of this joint venture and has consolidated the accounts of Clean Coal.

Clean Coal’s function is to supply technology, equipment and technical services to cyclone-fired and other boiler users, but Clean Coal’s primary purpose is to put into operation facilities that produce RC that qualifies for tax credits that are available under Section 45 of the Internal Revenue Code (“Section 45 tax credits”). Clean Coal qualified two facilities in 2009 for such purposes and leased those facilities to a third party in 2010.

In December 2010, the Tax Relief and Job Creation Act of 2010 extended the placed in service deadline for the Section 45 tax credits to January 1, 2012. In consideration of the extension, Clean Coal built and qualified an additional 26 RC facilities in 2011, which met the extended placed in service date. In November and December 2011, the two leased RC facilities qualified in 2009 were exchanged with newly constructed, redesigned RC facilities. The new leases carry over most of the substantive terms and conditions of the initial leases. A third RC facility was leased to GS at the end of the first quarter of 2012.

 

6


The operating agreement of Clean Coal requires NexGen and ADA to each pay 50% of the costs of operating Clean Coal and specifies certain duties that both parties are obligated to perform. Pursuant to the Second Amended and Restated Operating Agreement and Exclusive Right to Lease Agreement, GS is in the process of exercising its exclusive right (but not the obligation) to lease facilities that will produce up to approximately 12 million tons of RC per year on pre-established lease terms similar to those currently in effect for Clean Coal’s first two leased facilities.

Following is unaudited summarized information as to assets, liabilities and results of operations of Clean Coal:

 

     As of
June 30, 2012
     As of
December 31, 2011
 
     (in thousands)  

Primary assets

     

Cash and cash equivalents

   $ 3,955       $ 8,804   

Accounts receivable, net

     9,145         3,177   

Prepaid expenses and other assets

     3,312         3,028   

Property, plant and equipment including assets under lease and assets placed in service, net

     41,952         36,751   

Primary liabilities

     

Accounts payable and accrued liabilities

   $ 11,901       $ 11,735   

Line of credit

     18,000         14,497   

Deferred revenue, current and deposits

     15,595         18,500   

Deferred revenue, long term

     1,105         —     

 

     Three Months Ended June 30,      Six Months Ended June 30,  
           2012                  2011                  2012                  2011        
     (in thousands)  

Net revenue

   $ 48,351       $ 4,723       $ 63,525       $ 10,802   

Net revenue excluding RC sales

   $ 10,611       $ 4,723       $ 16,013       $ 10,802   

Net income

   $ 3,767       $ 3,564       $ 4,752       $ 8,828   

Amounts due to CCSS

Clean Coal has recorded accounts payable due to CCSS totaling $2.1 million and $604,000 as of June 30, 2012 and December 31, 2011, respectively, which are included in accounts payable in the accompanying consolidated balance sheets.

 

(4) Deferred Revenue and Deposits

Deferred revenue consists of:

 

   

billings in excess of costs and earnings on uncompleted contracts; and

 

   

deferred rent revenue related to Clean Coal’s lease of its RC facilities.

Clean Coal Deferred Rent Revenue

In June 2010, Clean Coal executed agreements to lease two RC facilities. These agreements provided for, among other things, a “prepaid rent payment” of $9 million for both facilities that was received before June 30, 2010. In November and December 2011, Clean Coal entered into transactions to exchange the existing facilities. There was no change to the prepaid rent payment or amortization period as a result of the exchange. Prepaid rent of $3 million related to the third RC facility leased to GS in March 2012 will be amortized starting in the third quarter of 2012. Clean Coal received an additional $6.3 million in prepaid rent from GS related to this facility in July 2012.

Following is a table of current deferred revenue which is included in deferred revenue and other liabilities in the consolidated balances sheets and long-term deferred revenue which is included in deferred revenue in the consolidated balance sheets related to these rent revenues:

 

7


 

     As of
June 30, 2012
     As of
December 31, 2011
 
     (in thousands)  

Deferred revenue, short-term

   $ 3,695       $ 3,600   

Deferred revenue, long-term

   $ 1,105       $ —     

The following table presents total rent revenues recognized and amortization with respect to the prepaid rents:

 

     Three Months Ended June 30,      Six Months Ended June 30,  
           2012                  2011                  2012                  2011        
     (in thousands)  

Rent revenue recognized

   $ 10,590       $ 4,700       $ 15,980       $ 10,800   

Amortization of deferred revenues included in amounts above

   $ 900       $ 900       $ 1,800       $ 1,800   

Clean Coal Deposits

Clean Coal has deposits of $11.9 million towards RC facilities which may be leased upon attainment of certain milestones that are included in deposits in the consolidated balance sheets at June 30, 2012.

 

(5) Net Loss Per Share

Basic loss per share is computed based on the weighted average common shares outstanding in the period. Diluted loss per share is computed based on the weighted average common shares outstanding in the period and the effect of dilutive securities (stock options and awards) except where the inclusion is anti-dilutive.

All outstanding stock options (see Note 8) to purchase shares of common stock for the three months and six months ended June 30, 2012 and 2011 were excluded from the calculation of diluted shares as their effect is anti-dilutive.

 

(6) Property and Equipment

Property and equipment consisted of the following at the dates indicated:

 

     Years    As of
June 30, 2012
    As of
December 31, 2011
 
          (in thousands)        

Machinery and equipment

   3-10    $ 4,331      $ 3,937   

Leasehold improvements

   2-5      1,199        624   

Furniture and fixtures

   3-7      828        281   

RC assets under lease and placed in service

   10      43,767        36,929   
     

 

 

   

 

 

 
        50,125        41,771   

Less accumulated depreciation and amortization

        (6,779     (4,651
     

 

 

   

 

 

 

Total property and equipment, net

   $ 43,346      $ 37,120   
     

 

 

   

 

 

 

 

     Three Months Ended June 30,      Six Months Ended June 30,  
           2012                  2011                  2012                  2011        
     (in thousands)  

Depreciation and amortization

   $ 1,181       $ 207       $ 2,205       $ 392   

 

(7) Income Taxes

 

8


As of June 30, 2012, the Company recorded tax expense of $305,000 in its consolidated statement of operations for the six months then ended. The expected income tax rate on income or loss from operations at statutory rates varies from the expense or benefit recorded primarily due to the non-controlling interest recorded and the tax credits generated related to the joint venture investment in Clean Coal. Our tax rate can be volatile and may move up or down with changes in, among other things, the expected amount of net income, the source of income and changes in RC production. Due to those factors and due to the amount of anticipated tax credits for 2012, the estimated effective tax rate is a negative 31% which would represent a tax benefit for the year ending December 31, 2012.

Income taxes are accounted for under the asset and liability approach. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets may be reduced by a valuation allowance if and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. If the Company is unable to generate sufficient future taxable income or if there is a material change in the tax rates or time period within which the temporary differences and net operating loss carryforwards become taxable or deductible, the Company could be required to provide a valuation allowance against some or all of its deferred tax assets.

At each balance sheet and interim date, management reviews existing income tax assessments and, if necessary, revises them to reflect changed circumstances. In a situation where recent losses have been incurred, the accounting standards require convincing evidence that there will be sufficient future taxable income to realize deferred tax assets. Based on our assessment of our recent operating history, including the nature of the items that significantly contributed to our losses, as well as the positive developments at Clean Coal and increased level of interest in our ACI business as a result of the finalization of the mercury emission regulations, management believes it is more likely than not that the Company will realize its net deferred tax assets. More specifically, we expect that Clean Coal’s successful installment and long-term lease of its RC facilities in 2012 will generate significant future taxable income for the Company. In addition, based on our existing market share and the level of bidding activity we have recently experienced, we expect an increase in taxable income from both our emission control and carbon capture business segments. However, future developments and changes in laws or regulations could affect management’s judgment about the need for a valuation allowance for deferred tax assets.

 

(8) Share Based Compensation

Since 2003, ADA has had several stock and option plans, including the Amended and Restated 2007 Equity Incentive Plan dated as of August 31, 2010, as amended (the “2007 Plan”) and the ADA-ES, Inc. Profit Sharing Retirement Plan, which is a plan qualified under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) described below. These plans allow ADA to issue stock or options for shares of common stock to employees, Board of Directors and non-employees.

Following is a table of options activity for the six months ended June 30, 2012:

 

     Employee and
Director
Options
    Weighted
Average
Exercise Price
 

Options outstanding, January 1, 2012

     182,942      $ 9.95   

Options granted

     —          —     

Options expired

     —          —     

Options exercised

     (1,966     10.73   
  

 

 

   

 

 

 

Options outstanding and exercisable, June 30, 2012

     180,976      $ 9.94   
  

 

 

   

 

 

 

 

9


Following is a table of aggregate intrinsic value of options exercised and exercisable for the six months ended June 30, 2012:

 

     Intrinsic
Value
     Average
Market
Price
 

Exercised, June 30, 2012

   $ 26,437       $ 24.18   

 

     Intrinsic
Value
     Market
Price
 

Exercisable, June 30, 2012

   $ 2,792,686       $ 25.37   

Stock options outstanding and exercisable at June 30, 2012 are summarized in the table below:

 

Range of Exercise Prices

   Number of
Options
Outstanding and
Exercisable
     Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Lives
 

$8.60 - $10.20

     142,583       $ 8.66         3.4   

$13.80 - $15.20

     38,393       $ 14.70         3.0   
  

 

 

       
     180,976      

XNAS:ADES Quarterly Report 10-Q Filling

XNAS:ADES Stock - Get Quarterly Report SEC Filing of XNAS:ADES stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XNAS:ADES Quarterly Report 10-Q Filing - 6/30/2012
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