ADAES Inc. (ADES, Financial) filed Quarterly Report for the period ended 2009-09-30.
ADA-ES, Inc. develops and implements proprietary environmental technology and specialty chemicals that mitigate the environmental impact from electric power and industrial companies while reducing operating costs. Adaes Inc. has a market cap of $17.42 million; its shares were traded at around $2.48 with and P/S ratio of 1.08.
Under the terms of the Limited Liability Agreement (the LLC Agreement) of Carbon Solutions among ECP and ADA, ADA has contributed $25.6 million in cash and other property and ECP has contributed cash of $140.0 million, including preferred equity contributions of $88.5 million, through September 30, 2009. Effective June 30, 2009, ECP converted some of its preferred equity contributions to ordinary capital contributions resulting in a dilution of our ownership percentage down below 50%. In the third quarter of 2009, ECP converted additional preferred equity contributions to ordinary capital contributions resulting in a dilution of our ownership percentage to 33% as of September 30, 2009. We do not have any further capital commitments to Carbon Solutions, and expect that all future funding for the AC Facility will come from ECP and third-party debt financing. Through November 1, 2009, ECP had contributed cash in total of $142.1 million to Carbon Solutions and had loaned $36.9 million to Red River pursuant to secured convertible demand notes. As of September 30, 2009, the principal balances of the demand notes issued by Red River to ECP totaled $36.3 million. See Liquidity and Capital Resources for additional information.
Revenues totaled $3.7 million and $13.5 million for the three and nine months ended September 30, 2009, respectively, versus $5.0 million and $12.9 million for the three and nine months ended September 30, 2008, representing a decrease of 26% and an increase of 5% for the quarter and year to date, respectively. We expect overall revenues will show little additional growth until revised mercury control regulations are implemented or legislation is enacted. Revenues in our MEC segment for 2009 decreased for the third quarter and first nine months by $1.5 million and $400,000, respectively (31% and 3%), primarily due to lower ACI system sales as a result of industry uncertainty surrounding the likely of Federal mercury regulation FGC and other activities increased by $223,000 and $995,000, respectively (126% and 270%) as compared to the same periods in 2008.
General and administrative expenses increased by $6.3 million and $8.9 million or 384% or 194% for the three and nine months ended September 30, 2009, respectively, from the same periods in 2008 to approximately $7.9 million and $13.5 million for the three and nine months ended September 30, 2009. The dollar increases in both the three and nine months ended September 30, 2009 resulted primarily from increased legal costs of $6.4 million and $9.0 million respectively, related to our litigation with Norit Americas, Inc. (Norit) and Calgon Carbon Corporation (Calgon) described in Part II, Item 1 of this Report. Under terms of the Joint Development Agreement executed with ECP on October 1, 2008, related to the formation of Carbon Solutions, we have agreed to indemnify ECP and Carbon Solutions for certain costs and damages they incur related to the Norit matter. Our legal expense for the three and nine months ended September 30, 2009 includes estimates of such indemnity obligations for legal fees. We expect legal
Our net operating loss for the three and nine months ended September 30, 2009 includes net costs of $134,000 and $281,000, respectively, related to our refined coal efforts and $153,000 and $464,000 loss of the Clean Coal joint venture. In addition, our net operating loss includes our equity in the losses incurred by Carbon Solutions totaling $1.5 million and $2.8 million for the three and nine months ended September 30, 2009, respectively. We expect to report continued equity in the losses of Carbon Solutions until the AC Facility is operational.
We had cash and cash equivalents of $800,000 and positive working capital of $2.3 million as of September 30, 2009, compared to cash and cash equivalents of $3.0 million and working capital of $4.4 million at December 31, 2008 when the previously consolidated balances of Carbon Solutions are excluded. The decrease in working capital (excluding the previously consolidated Carbon Solutions amounts) resulted primarily from the significant legal expenses we incurred in 2009 relating to the Norit litigation. As described in Part II, Item 1 of our Form 10-Q for the quarter ended June 30, 2009, Hudson Specialty Insurance Company (Hudson) our general liability insurance carrier, filed a declaratory judgment suit against us and the other defendants in the Norit litigation, asking the court to declare that Hudson is not responsible for defending any of such parties in the Norit litigation or paying any amounts that may become owing to Norit by the parties in the Norit litigation, including attorney fees that Norit is claiming. In July 2009, we and Hudson settled the first of such claims for a $1.25 million payment to us. This settlement did not include damages we could seek from Hudson if we were to become liable to Norit. Legal costs incurred by Carbon Solutions have been paid to date by Carbon Solutions and are subject to indemnification by us, resulting in an obligation payable by us to Carbon Solutions of approximately $5.8 million as of September 30, 2009. This obligation is recognized in the accompanying consolidated financial statements as a long-term liability under accrued liabilities because we do not expect the use of current assets to satisfy this obligation. Under the LLC Agreement of Carbon Solutions, if we fail to promptly pay our indemnity obligations to ECP, ECP has the right to decrease our capital contributions (and increase ECPs capital contributions) in Carbon Solutions by such amount and adjust each partys percentage ownership accordingly. We do not currently have any outstanding indemnity obligations to ECP, and we are unable to estimate the total amount of any future indemnity obligations at this time. ECP has notified us that it believes such obligations include any losses it suffers due to its loss of potential customers and diminution in the value of its businesses. We have notified ECP that we disagree with its interpretation as to our indemnification liability, and we are currently in discussions with ECP concerning this issue.
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ADA-ES, Inc. develops and implements proprietary environmental technology and specialty chemicals that mitigate the environmental impact from electric power and industrial companies while reducing operating costs. Adaes Inc. has a market cap of $17.42 million; its shares were traded at around $2.48 with and P/S ratio of 1.08.
Highlight of Business Operations:
In order to maintain our 50% interest in Clean Coal, we are obligated to fund half of its operating costs and capital expenditures, which we expect to increase due to cost-sharing of full-scale demonstrations, which we believe will qualify as permanent refined coal installations if demonstrations currently being planned are completed. Clean Coal is planning to put at least two facilities into operation to produce refined coal prior to the January 1, 2010 qualification deadline and is presently in negotiations with numerous parties to that end. The total capital expenditures for those facilities are expected to be approximately $2.5 million, most of which we expect would be incurred in the fourth quarter of 2009. Clean Coal may pursue additional facilities if the qualification deadline is extended. If qualifying facilities are placed in service in time to qualify them for Section 45 tax credits and the refined coal product qualifies for the Section 45 tax credit, we estimate that these facilities will produce profits for Clean Coal in excess of $3.0 million per year per facility for up to ten years. The decision to proceed through completion on such facilities depends on the outcome of planned demonstrations, the status of negotiations with third parties, receiving explicit guidance from the IRS and other milestones that we are closely monitoring. Our net operating loss for the quarter ended September 30, 2009 includes net costs of $281,000 related to our refined coal efforts and $464,000 from Clean Coal. If Clean Coal succeeds in obtaining approval for the Section 45 tax credits and sells a facility to a third party, NexGen has the right to maintain its 50% interest by paying us a total of $4.0 million commencing after Clean Coal receives such qualification. NexGen is not obligated to make those payments, but if it fails to do so once Clean Coal has qualified for the Section 45 tax credits, it will forfeit a part of its interest in Clean Coal in direct proportion to the amount of the $4.0 million that it elects not to pay, if any.Under the terms of the Limited Liability Agreement (the LLC Agreement) of Carbon Solutions among ECP and ADA, ADA has contributed $25.6 million in cash and other property and ECP has contributed cash of $140.0 million, including preferred equity contributions of $88.5 million, through September 30, 2009. Effective June 30, 2009, ECP converted some of its preferred equity contributions to ordinary capital contributions resulting in a dilution of our ownership percentage down below 50%. In the third quarter of 2009, ECP converted additional preferred equity contributions to ordinary capital contributions resulting in a dilution of our ownership percentage to 33% as of September 30, 2009. We do not have any further capital commitments to Carbon Solutions, and expect that all future funding for the AC Facility will come from ECP and third-party debt financing. Through November 1, 2009, ECP had contributed cash in total of $142.1 million to Carbon Solutions and had loaned $36.9 million to Red River pursuant to secured convertible demand notes. As of September 30, 2009, the principal balances of the demand notes issued by Red River to ECP totaled $36.3 million. See Liquidity and Capital Resources for additional information.
Revenues totaled $3.7 million and $13.5 million for the three and nine months ended September 30, 2009, respectively, versus $5.0 million and $12.9 million for the three and nine months ended September 30, 2008, representing a decrease of 26% and an increase of 5% for the quarter and year to date, respectively. We expect overall revenues will show little additional growth until revised mercury control regulations are implemented or legislation is enacted. Revenues in our MEC segment for 2009 decreased for the third quarter and first nine months by $1.5 million and $400,000, respectively (31% and 3%), primarily due to lower ACI system sales as a result of industry uncertainty surrounding the likely of Federal mercury regulation FGC and other activities increased by $223,000 and $995,000, respectively (126% and 270%) as compared to the same periods in 2008.
General and administrative expenses increased by $6.3 million and $8.9 million or 384% or 194% for the three and nine months ended September 30, 2009, respectively, from the same periods in 2008 to approximately $7.9 million and $13.5 million for the three and nine months ended September 30, 2009. The dollar increases in both the three and nine months ended September 30, 2009 resulted primarily from increased legal costs of $6.4 million and $9.0 million respectively, related to our litigation with Norit Americas, Inc. (Norit) and Calgon Carbon Corporation (Calgon) described in Part II, Item 1 of this Report. Under terms of the Joint Development Agreement executed with ECP on October 1, 2008, related to the formation of Carbon Solutions, we have agreed to indemnify ECP and Carbon Solutions for certain costs and damages they incur related to the Norit matter. Our legal expense for the three and nine months ended September 30, 2009 includes estimates of such indemnity obligations for legal fees. We expect legal
Our net operating loss for the three and nine months ended September 30, 2009 includes net costs of $134,000 and $281,000, respectively, related to our refined coal efforts and $153,000 and $464,000 loss of the Clean Coal joint venture. In addition, our net operating loss includes our equity in the losses incurred by Carbon Solutions totaling $1.5 million and $2.8 million for the three and nine months ended September 30, 2009, respectively. We expect to report continued equity in the losses of Carbon Solutions until the AC Facility is operational.
We had cash and cash equivalents of $800,000 and positive working capital of $2.3 million as of September 30, 2009, compared to cash and cash equivalents of $3.0 million and working capital of $4.4 million at December 31, 2008 when the previously consolidated balances of Carbon Solutions are excluded. The decrease in working capital (excluding the previously consolidated Carbon Solutions amounts) resulted primarily from the significant legal expenses we incurred in 2009 relating to the Norit litigation. As described in Part II, Item 1 of our Form 10-Q for the quarter ended June 30, 2009, Hudson Specialty Insurance Company (Hudson) our general liability insurance carrier, filed a declaratory judgment suit against us and the other defendants in the Norit litigation, asking the court to declare that Hudson is not responsible for defending any of such parties in the Norit litigation or paying any amounts that may become owing to Norit by the parties in the Norit litigation, including attorney fees that Norit is claiming. In July 2009, we and Hudson settled the first of such claims for a $1.25 million payment to us. This settlement did not include damages we could seek from Hudson if we were to become liable to Norit. Legal costs incurred by Carbon Solutions have been paid to date by Carbon Solutions and are subject to indemnification by us, resulting in an obligation payable by us to Carbon Solutions of approximately $5.8 million as of September 30, 2009. This obligation is recognized in the accompanying consolidated financial statements as a long-term liability under accrued liabilities because we do not expect the use of current assets to satisfy this obligation. Under the LLC Agreement of Carbon Solutions, if we fail to promptly pay our indemnity obligations to ECP, ECP has the right to decrease our capital contributions (and increase ECPs capital contributions) in Carbon Solutions by such amount and adjust each partys percentage ownership accordingly. We do not currently have any outstanding indemnity obligations to ECP, and we are unable to estimate the total amount of any future indemnity obligations at this time. ECP has notified us that it believes such obligations include any losses it suffers due to its loss of potential customers and diminution in the value of its businesses. We have notified ECP that we disagree with its interpretation as to our indemnification liability, and we are currently in discussions with ECP concerning this issue.
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