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 ~~September~~March 3031, ~~2012~~2013

¨	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)

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):

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:~~

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 ~~atOctober~~at 31April 30, ~~2012~~2013
Common Stock, no par value		10,~~026~~063,~~469~~936

Part I. -– FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ADA-ES, Inc. and Subsidiaries

Consolidated Balance Sheets

(Amounts in thousands, except share data)

	September 30,2012			December 31,2011
	March 31,			December 31,
	(Unaudited)			(Restated, See Note 14)
	2013			2012
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	1721,~~531~~945		$	409,~~879~~737
Receivables, net of allowance for doubtful accounts		1015,~~042~~659			511,~~914~~025
Investment in securities		12,~~893~~634			~~508~~1,641
Prepaid expenses and other assets		2,~~792~~119			12,~~532~~888
Total current assets		3242,~~258~~357			4825,~~833~~291
Property and Equipment, at cost		5254,~~724~~318			4153,~~771~~542
Less accumulated depreciation and amortization		(710,~~769~~337	)		(48,~~651~~931	)
Net property and equipment		4443,~~955~~981			3744,~~120~~611
Other Assets
Investment in unconsolidated entity		2,173			1,850
Investment in unconsolidated entity		1,490			590
Other assets		3,975			3,997
Other assets		3,891			931
Total other assets		6,148			5,847
Total other assets		5,381			1,521
Total Assets	$	92,486		$	75,749
Total Assets	$	82,594		$	87,474
LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	68,~~745~~964		$	86,~~849~~615
Accounts payable - related parties		3,327			1,209
Accounts payable to related parties		4,267			5,082
Accrued payroll and related liabilities		12,~~611~~479			2,~~545~~569
Line of credit and current portion of notes payable		10,903			10,873
Line of credit		—			3,000
Deposits		11,900			14,900
Current portion of notes payable		564			559
Deferred revenue and other liabilities		10,914			5,105
Deposits		16,500			21,200
Settlement awards and related accrued liabilities		3,801			3,983
Deferred revenue and other liabilities		17,407			6,919
Total current liabilities		49,201			47,464
Settlement awards and related accrued liabilities		3,179			3,453
Total current liabilities		53,360			49,397
Long-term Liabilities
Line of credit and long-term portion of notes payable		2,447			3,624
Long-term portion of notes payable		2,162			2,305
Settlement awards and indemnity liability		2,500			52,~~200~~500
Deferred revenue		113,~~965~~259			—875
Accrued warranty and other liabilities		~~692~~995			~~632~~809
Total long-term liabilities		718,~~604~~916			96,~~456~~489
Total Liabilities		5672,~~805~~276			5655,~~920~~886
Commitments and Contingencies (Note 12)
Commitments and Contingencies (Note 10)
Temporary Equity - Non-controlling Interest Subject to Possible Redemption		60,000			60,000
Temporary Equity—Non-controlling Interest Subject to Possible Redemption		60,000			60,000
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, 10,020,106 and 9,996,144 shares issued and outstanding, respectively		63,578			63,184
Common stock: no par value, 50,000,000 shares authorized, 10,063,135 and 10,028,269 shares issued and outstanding, respectively		64,428			63,724
Accumulated deficit		(7481,~~360~~934	)		(6679,~~694~~765	)
Total ADA-ES, Inc. stockholders’ deficit		(1017,~~782~~506	)		(316,~~510~~041	)
Non-controlling interest		(2322,~~429~~284	)		(2524,~~936~~096	)
Total Stockholders’ Deficit		(3439,~~211~~790	)		(2940,~~446~~137	)
Total Liabilities, Temporary Equity and Stockholders’ Deficit	$	8292,~~594~~486		$	8775,~~474~~749

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	For the Quarter Ended
	2012			2011			2012			2011
	March 31,
				(Restated, See Note 14)						(Restated, See Note 14)
	2013			2012
Revenues
Refined coal	$	7058,~~197~~123		$	915,~~160~~174		$	~~133,722~~		$	~~19,994~~
Emission control		38,~~480~~769			32,~~095~~764			~~10,209~~			~~6,837~~
CO2 capture		~~676~~1,422			~~977~~282			~~1,153~~			~~1,894~~
Total revenues		7468,~~353~~314			1318,~~232~~220			~~145,084~~			~~28,725~~
Cost of Revenues
Refined coal		6751,~~269~~469			312,~~487~~043			~~121,220~~			~~4,075~~
Emission control		26,~~683~~253			12,~~955~~068			~~7,838~~			~~3,753~~
CO2 capture		~~444~~848			~~636~~117			~~643~~			~~1,201~~
Total cost of revenues		7058,~~396~~570			614,~~078~~228			~~129,701~~			~~9,029~~
Gross Margin before Depreciation and Amortization		39,~~957~~744			73,~~154~~992			~~15,383~~			~~19,696~~
Other Costs and Expenses
General and administrative		57,~~173~~313			23,~~932~~639			~~12,852~~			~~14,596~~
Research and development		~~882~~703			~~506~~564			~~2,064~~			~~1,396~~
Depreciation and amortization		1,~~239~~422			~~216~~1,024			~~3,444~~			~~608~~
Total expenses		79,~~294~~438			35,~~654~~227			~~18,360~~			~~16,600~~
Operating Income (Loss)		~~(3,337~~306	)		3(1,~~500~~235	)		~~(2,977~~	)		~~3,096~~
Other Income (Expense):
Other Income (Expense)
Net equity in net income (loss) from unconsolidated entities		232			(2,050	)		400			(5,761	)
Net equity in net income from unconsolidated entity		323			36
Other income (expense) including interest		(19	)		71			122			2,161
Other income including interest		70			99
Interest expense		(~~144~~383	)		(~~889~~470	)		~~(1,045~~	)		~~(889~~	)
Settlement of litigation and arbitration award, net		(800	)		(2,182	)		(1,553	)		(41,684	)
Settlement of litigation and arbitration award		(673	)		(284	)
Total other income (expense)		(~~731~~663	)		(~~5,050~~619	)		~~(2,076~~	)		~~(46,173~~	)
Loss from Continuing Operations Before
Loss Before Income Taxes and Non-controlling Interest		(357	)		(1,854	)
Income Tax Benefit and Non-controlling Interest		(4,068	)		(1,550	)		(5,053	)		(43,077	)
Income Taxes		—			—
Income Tax Benefit		—			—			—			(10,980	)
Net Loss Before Non-controlling Interest		(357	)		(1,854	)
Net Loss Before Non-controlling Interest		(4,068	)		(1,550	)		(5,053	)		(32,097	)
Income Attributable to Non-controlling Interest		(1,812	)		(566	)
Non-controlling Interest		120			(3,053	)		(2,613	)		(7,888	)
Net Loss Attributable to ADA-ES, Inc.	$	(2,169	)	$	(2,420	)
Net Loss Attributable to ADA-ES, Inc.	$	(3,948	)	$	(4,603	)	$	(7,666	)	$	(39,985	)
Net Loss Per Common Share – Basic and Diluted Attributable to ADA-ES, Inc.	$	(0.22	)	$	(0.24	)
Net Loss Per Common Share – Basic and Diluted Attributable to ADA-ES, Inc.	$	(0.39	)	$	(0.60	)	$	(0.77	)	$	(5.25	)
Weighted Average Common Shares Outstanding		10,050			9,999
Weighted Average Common Basic and Diluted Shares Outstanding		10,017			7,661			10,008			7,621
Weighted Average Diluted Common Shares Outstanding		10,050			9,999

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

~~Nine~~For ~~Months~~the Quarters Ended ~~September~~March 3031, ~~2012~~2013 and ~~2011~~2012

(Amounts in thousands, except share data)

(Unaudited)

									Total ADA-ES			Non-
									Total ADA-ESStockholders’Deficit			Non- controllingInterest
	Common Stock					~~Accumulated~~(AccumulatedDeficit)			~~Stockholders’~~			~~controlling~~			~~Total~~TotalDeficit
	Shares		Amount			~~Deficit~~			~~Deficit~~			~~Interest~~			~~Deficit~~
			(Restated)			(Restated)			(Restated)			(Restated)			(Restated)
Balances, January 1, 2012		9,996,144	$	63,184		$	(66,694	)	$	(3,510	)	$	(25,936	)	$	(29,446	)
Balances, January 1, 2011 (restated, See Note 14)		7,538,861	$	39,627		$	(43,875	)	$	(4,248	)	$	2,035		$	(2,213	)
Stock-based compensation		2,235		47			—			47			—			47
Stock-based compensation		96,411		761			—			761			—			761
Issuance of stock to 401(k) plan		3,859		84			—			84			—			84
Issuance of stock to 401(k) plan		21,829		264			—			264			—			264
Issuance of stock on exercise of options		1,667		17			—			17			—			17
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		—		—			—			—			(36,203	)		(36,203	)
Expense of stock issuance and registration		—		(16	)		—			(16	)		—			(16	)
Net income (loss) (restated)		—		—			(39,985	)		(39,985	)		7,888			(32,097	)
Balances, September 30, 2011, as restated		7,668,235	$	29,737		$	(83,860	)	$	(54,123	)	$	(26,030	)	$	(80,153	)
Balances, January 1, 2012 (restated, See Note 14)		9,996,144	$	63,184		$	(66,694	)	$	(3,510	)	$	(25,936	)	$	(29,446	)
Stock-based compensation		8,818		103			—			103			—			103
Issuance of stock to 401(k) plan		13,178		292			—			292			—			292
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	)
Net income (loss)		—		—			(72,~~666~~420	)		(72,~~666~~420	)		~~2,613~~566			(51,~~053~~854	)
Balances, September 30, 2012		10,020,106	$	63,578		$	(74,360	)	$	(10,782	)	$	(23,429	)	$	(34,211	)
Balances, March 31, 2012		10,003,905	$	63,310		$	(69,114	)	$	(5,804	)	$	(25,476	)	$	(31,280	)
Balances, January 1, 2013		10,028,269	$	63,724		$	(79,765	)	$	(16,041	)	$	(24,096	)	$	(40,137	)
Stock-based compensation		23,201		522			—			522			—			522
Issuance of stock to 401(k) plan		6,205		113			—			113			—			113
Issuance of stock on exercise of options		5,460		69			—			69			—			69
Net income (loss)		—		—			(2,169	)		(2,169	)		1,812			(357	)
Balances, March 31, 2013		10,063,135	$	64,428		$	(81,934	)	$	(17,506	)	$	(22,284	)	$	(39,790	)

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	For the Quarter EndedMarch 31,
	2012			2011
	2013			2012
				(Restated, See Note 14)
Cash Flows from Operating Activities
Net loss	$	(72,~~666~~169	)	$	(392,~~985~~420	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		31,~~444~~422			~~608~~1,024
Deferred tax benefit		—			(10,980	)
Expenses paid with stock, restricted stock and stock options		635			131
Loss on disposal of assets		49			60
Net equity in net income from unconsolidated entity		(323	)		(36	)
Expenses paid with stock, restricted stock and stock options		395			1,025
Non-controlling interest in income from subsidiary		1,812			566
Net equity in net (income) loss from unconsolidated entities		(400	)		5,761
Non-controlling interest in income from subsidiaries		2,613			7,888
Changes in operating assets and liabilities:
Receivables, net		(4,~~128~~634	)		(41,~~284~~643	)
Prepaid expenses and other assets		~~(1,164~~791	)		(~~1,536~~62	)
Accounts payable		141,534			(3,~~495~~427	)
Accrued payroll, expenses and other related liabilities		(~~992~~90	)		~~800~~(1,425	)
Deferred revenue and other liabilities		4,834			6,726
Deposits		(4,700	)		(3,000	)
Settlement awards and related accrued liabilities		(2,882	)		8,703
Deferred revenue and other liabilities		23,058			1,434
Net cash used in operating activities		(5,883	)		(21,719	)
Settlement awards and related accrued liabilities		(274	)		(300	)
Net cash provided by (used in) operating activities		17,062			(9,158	)
Cash Flows from Investing Activities
Investment in securities		(~~1,385~~993	)		—105
Acquistion of BCSI		(2,000	)		—
Capital expenditures for equipment, patents and development projects		(792	)		(6,033	)
Proceeds from sale of property and equipment		32			—
Net cash used in investing activities		(1,785	)		(5,928	)
Principal payments received on notes receivable		—			1,580
Capital expenditures for equipment, patents and development projects		(9,358	)		(11,975	)
Net cash used in investing activities		(12,711	)		(10,395	)
Cash Flows from Financing Activities
Net borrowings (repayments) under line of credit		(4,147	)		7,887
Net borrowings (repayment) under line of credit		(3,000	)		3,146
Loan to unconsolidated entity		(~~500~~138	)		—(500	)
Sale of temporary equity in joint venture		—			60,000
Distributions to non-controlling interest		—			(106	)
Non-controlling interest equity contributions		—			250
Exercise of stock options		69			17
Distributions to non-controlling interest		(106	)		(36,203	)
Stock issuance and registration costs		—			(22	)
Exercise of stock options		21			81
Net cash provided by (used in) financing activities		(3,069	)		2,535
Stock issuance and registration costs		(22	)		(16	)
Increase (Decrease) in Cash and Cash Equivalents		12,208			(12,551	)
Net cash provided by (used in) financing activities		(4,754	)		31,999
Cash and Cash Equivalents, beginning of period		9,737			40,879
Decrease in Cash and Cash Equivalents		(23,348	)		(115	)
Cash and Cash Equivalents, end of period	$	21,945		$	28,328
Cash and Cash Equivalents, beginning of period		40,879			9,696
Supplemental Schedule of Non-Cash Flow Financing Activities
Cash and Cash Equivalents, end of period	$	17,531		$	9,581
Stock and stock options issued for services	$	635		$	131
Supplemental Schedule of Non-Cash Flow Investing and Financing Activities
Cash paid for interest	$	683		$	686
Stock and stock options issued for services	$	395		$	1,025
Accrued capital expenditures	$	—		$	1,920
Cash paid for interest	$	1,328		$	889
Accrued capital expenditures	$	—		$	3,234
Deposits transferred to deferred revenue	$	3,000		$	—
Notes payable related to acquisition of BCSI	$	3,000		$	—

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~September~~March 3031, 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”) and ADA Intellectual Property, LLC, a Colorado limited liability company (“ADA IP”), both of which had no operations during the first ~~nine~~quarter ~~months~~ of ~~2012~~2013, BCSI, LLC, a Delaware limited liability company (“BCSI”), 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”) and Dry Sorbent Injection (“DSI”) systems, contracts co-funded by the government and industry and the development and lease or sale of equipment for the RC market. The Company’s sales occur principally throughout the United States.

The ~~consolidated balance sheet as of December 31, 2011, which has been derived from restated audited financial statements, and 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, ADA IP, BCSI, 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~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012~~2013 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2012~~2013.

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/A for the year ended December 31, ~~2011, as amended and restated~~2012. The accounting policies used in preparing these consolidated financial statements are the same as those described in our Form 10-K ~~and its amendments~~. The financial information included in these Notes relating to the Company’s financial position as of December 31, 2011, and results of operations for the interim periods ended September 30, 2011 have been restated to give effect to the accounting adjustments discussed in Note 14.

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.

(2) ~~Acquisition~~Property ofand ~~BCSI~~Equipment

OnProperty August 31, 2012, pursuant to an Asset Purchase Agreement (“Purchase Agreement”) executed on July 26, 2012, BCSI acquired certain assets of two related privately held companies (“Seller Companies”) that fabricated and ~~supplied DSI systems and other material handling~~ equipment ~~and~~consisted ~~provided testing and related DSI services for a purchase price~~ of ~~$2 million and other amounts payable over~~ the ~~next~~following ~~five~~at ~~years as described below. This acquisition provided~~ the ~~Company~~dates ~~with~~indicated: ~~DSI market experience and expanded manufacturing capabilities for ACI systems.~~

In conjunction with the Purchase Agreement, the Seller Companies’ sole stockholder (“Sellers’ Stockholder”) and BCSI also executed a personal goodwill purchase agreement and goodwill promissory note whereby BCSI agreed to pay the Sellers’ Stockholder a total of $2.8 million (subject to adjustment pursuant to the terms of the Purchase Agreement) as payment for the personal goodwill generated in connection with the Seller Companies.


	Life in Years	As of March 31, 2013			As of December 31, 2012
		(in thousands)
Machinery and equipment	3-10	$	8,322		$	7,522
Leasehold improvements	2-5		1,111			1,106
Furniture and fixtures	3-7		798			781
RC assets	10		44,087			44,133

			54,318			53,542
Less accumulated depreciation and amortization			(10,337	)		(8,931	)

Total property and equipment, net		$	43,981		$	44,611

In addition, the Sellers’ Stockholder and BCSI entered into a consulting and non-competition agreement and non-compete promissory note whereby BCSI will pay the Sellers’ Stockholder $200,000 plus a monthly consulting fee of approximately $21,000 per month for five years beginning August 31, 2012 in exchange for professional services provided by the Sellers’ Stockholder, subject to terms and conditions as specified in the Purchase Agreement.


	Quarter Ended March 31,
	2013		2012
	(in thousands)
Depreciation and amortization	$	1,422	$	1,024

The terms for both the $2.8 million and $200,000 promissory notes include interest at an annual rate of 4%, with interest and principal payable in twenty quarterly installments of approximately $154,000 and $11,000, respectively, beginning in November 2012, with the final installment of outstanding principal and interest due on September 30, 2017. The Notes are guaranteed by ADA and are secured by letters of credit in the amounts of $308,000 and $20,000, respectively, with August 31, 2017 expiration dates.

The transaction was accounted for using the purchase method of accounting and the operating results related to the acquired assets have been consolidated into the Company’s results of operations beginning August 31, 2012.

The purchase price was allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The following table summarizes the fair value of the Seller Companies’ assets acquired and liabilities assumed as of August 31, 2012:

	(in thousands)
Assets acquired:
Inventory	$	109
Property and equipment		2,001
Intangible assets		2,748
Other assets		200
Total assets acquired		5,058
Liabilities assumed:
Accrued liabilities		58
Total liabilities assumed		58
Net assets acquired	$	5,000
Purchase consideration:
Deposit paid	$	200
Cash paid at closing		1,800
Notes payable		3,000
Total purchase consideration	$	5,000

(3) Investment in Unconsolidated Entity

Clean Coal Solutions Services

On January 20, 2010, ~~the Company~~ADA, together with NexGen Resources Corporation (“NexGen”), formed Clean Coal Solutions Services, LLC (“CCSS”) for the purpose of operating RCRefined Coal (“RC”) facilities leased or sold to third parties ~~by Clean Coal~~. ~~The~~ADA ~~Company~~ has a 50% ownership interest in CCSS (but does not have management control of it) and ~~the Company~~ADA’s investment in and advances to CCSS which totaled ~~approximately~~ $12.5 2 million as of ~~September~~March 3031, ~~2012~~ 2013 includes its share of CCSS’ income since its formation and ~~are~~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 the sale of RC and its cost of sales include raw coal purchases.

The following schedule shows CCSS’ unaudited consolidated summarized information as to assets, liabilities and revenues and ADA’s share of 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 include the sale of RC and its cost of sales includes raw coal purchases.


	As of March 31, 2013		As of December 31, 2012
	(in thousands)
Current assets	$	70,583	$	55,109
Property, equipment, and other long-term assets		609		768

Total Assets	$	71,192	$	55,877

Total Liabilities	$	26,205	$	31,904


	Quarter Ended March 31,
	2013		2012
	(in thousands)
Net revenue	$	66,822	$	38,792
ADA’s share of net income attributed to CCSS	$	323	$	36

	As ofSeptember 30, 2012		As ofDecember 31, 2011
	(in thousands)
Current assets	$	68,336	$	22,609
Property, equipment, and other long-term assets		959		3,682
Total Assets	$	69,295	$	26,291
Total Liabilities	$	31,678	$	15,988

4) Joint Venture Investment in Clean Coal

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(in thousands)
Net revenue	$	66,692	$	46,769	$	172,664	$	129,718
Net income- attributed to CCSS	$	466	$	93	$	801	$	292

In November 2006, ADA sold a 50% interest in its joint venture Clean Coal to NexGen, which was formed in 2006 to market RC technology. In May 2011, ADA and NexGen entered into a transaction in which Clean Coal sold an effective 15% interest of the equity in Clean Coal to GSFS Investments I Corp. (“GSFS”), an affiliate of the Goldman Sachs Group, Inc. (“GS”), which is included in temporary equity subject to possible redemption in the consolidated balance sheets (see Note 8). GSFS has certain preferences over ADA and NexGen as to liquidation and profit distribution. GSFS 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 GSFS entered into a First Amendment to 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 42.5%. This restructuring of ownership interests did not change the financial relationships of the parties and ADA still maintains a 50% governance interest in Clean Coal. In July 2012, ADA, NexGen and GSFS entered into a Second Amendment to the Operating Agreement (4the “Operating Agreement”) ~~Joint~~which, ~~Venture~~among ~~Investment~~other inthings, expanded Clean Coal’s board of managers to allow for the appointment of an additional manager not directly representative of any of the members. Since its inception, ADA has been considered the primary economic beneficiary of this joint venture and has consolidated the accounts of Clean Coal.

~~In November 2006, the Company sold a 50% interest in its joint venture called~~ Clean Coal’s ~~Solutions,~~function ~~LLC,~~is ~~which was formed in 2006 with NexGen,~~ to ~~market~~supply RC technology~~. In May 2011~~, ~~ADA~~equipment and ~~NexGen~~technical ~~entered~~services ~~into~~to acyclone-fired ~~transaction~~and inother ~~which~~boiler ~~Clean~~users, ~~Coal~~but ~~sold an effective 15% interest of the equity in~~ Clean Coal’s primary topurpose anis ~~affiliate~~to ofput ~~The~~into ~~Goldman~~operation ~~Sachs~~facilities ~~Group,~~that ~~Inc.~~produce ~~(“GS”)~~RC ~~which~~that ~~is included~~qualifies infor ~~temporary~~tax ~~equity~~credits ~~subject~~that toare ~~possible~~available ~~redemption~~under inSection 45 of the ~~consolidated~~Internal ~~balance~~Revenue ~~sheets~~Code (~~see~~“Section ~~Note~~45 10tax credits”). GSClean ~~has~~Coal ~~certain~~qualified ~~preferences~~two ~~over~~facilities ~~ADA~~in 2009 ~~and~~for ~~NexGen~~such aspurposes ~~to liquidation~~ and ~~profit~~in ~~distribution.~~June GS2010 ~~has~~leased nothose ~~further~~facilities ~~capital~~to ~~call~~GS ~~requirements~~RC ~~and does~~Investments, ~~not~~LLC ~~have~~(“GS RC”), a ~~voting~~related ~~interest~~entity ~~but~~of ~~does have approval rights over certain corporate transactions~~GS.

In December ~~September 2011~~2010, ~~ADA,~~the ~~NexGen,~~Tax Relief and ~~GS entered~~Job ~~into~~Creation Act of 2010 extended the ~~First~~placed ~~Amendment~~in toservice deadline for the ~~Second~~Section 45 ~~Amended~~tax ~~and~~credits ~~Restated~~to ~~Operating~~January 1, ~~Agreement~~2012. (In consideration of the ~~“Operating~~extension, ~~Agreement”)~~Clean ~~pursuant~~Coal tobuilt and qualified an additional 26 RC facilities in 2011, which ~~ADA~~met ~~and~~the ~~NexGen~~extended ~~each~~placed ~~transferred~~in ~~their~~service 2date.5% ~~member~~In ~~interests~~November inand ~~each~~December of2011, ~~Clean~~the ~~Coal’s~~two ~~subsidiaries back~~leased toRC ~~Clean~~facilities ~~Coal.~~qualified Asin a2009 ~~result~~were ofexchanged ~~these~~with ~~transactions~~newly constructed, ~~ADA’s~~redesigned ~~interest~~RC infacilities. ~~Clean~~The ~~Coal’s~~new ~~net~~leases ~~profits~~carried over most of the substantive terms and ~~losses~~conditions isof ~~now~~the 42initial leases.~~5%.~~ ~~This~~In ~~restructuring~~December of2012, ~~ownership~~the ~~interests~~parties ~~did~~amended ~~not~~the ~~change~~leases to modify the ~~financial~~lease ~~relationships~~term ofto month-to-month and in March 2013 the parties amended and ~~ADA~~restated ~~still~~the lease agreements to modify the structure and ~~maintains~~timing aof ~~50%~~the ~~governance~~lease ~~interest~~payments. The payments are due quarterly in ~~Clean~~advance ~~Coal~~and are subject to adjustments for inflation. InEach ~~July~~lease ~~2012,~~has ~~ADA,~~an ~~NexGen~~initial non-cancellable term of two years and GSwill ~~entered~~automatically ~~into~~renew ~~the~~unless ~~Second~~terminated ~~Amendment~~at tothe option of the lessee ~~Operating~~thereof, ~~Agreement~~for ~~which~~successive one-year terms through November 9, ~~among~~2021 ~~other~~and ~~things~~December 10, ~~expanded~~2021, ~~Clean~~as ~~Coal’s~~applicable. ~~board~~The ofparties ~~managers~~also toamended ~~allow~~and ~~for~~restated the ~~appointment~~two ~~of an~~Operating ~~additional~~and ~~manager~~Maintenance ~~not~~Agreements ~~directly~~pursuant ~~representative~~to ofwhich ~~any~~CCSS of(subject to oversight by the ~~members.~~lessee) ~~Since~~operates ~~its~~and ~~inception,~~maintains ~~ADA~~the ~~has~~RC ~~been~~facilities ~~considered~~to ~~the~~provide ~~primary~~for ~~economic~~the ~~beneficiary~~payment of ~~this~~a ~~joint~~fixed ~~venture~~fee ~~and~~under ~~has~~the ~~consolidated~~agreements instead of payments based on the ~~accounts~~production of ~~Clean~~RC ~~Coal~~as had previously been in place.

Clean Coal’s ~~function~~leased istwo toadditional ~~supply~~RC ~~technology,~~facilities ~~equipment~~in ~~and~~2012, ~~technical~~the ~~services~~third to ~~cyclone-fired~~an ~~and~~entity ~~other~~related ~~boiler~~to ~~users,~~GS ~~but~~and ~~Clean~~the ~~Coal’s primary~~fourth ~~purpose is~~ to ~~put~~a ~~into~~third ~~operation~~party ~~facilities~~investor. ~~that~~All ~~produce~~agreements included RCterms ~~that~~and ~~qualifies~~conditions ~~for~~substantially ~~tax~~similar ~~credits~~to ~~available~~those ~~under~~applicable ~~Section 45~~to of the ~~Internal~~first ~~Revenue~~two ~~Code~~leased ~~(“Section~~RC 45facilities. ~~tax~~On ~~credits”).~~February 28, 2013, Clean Coal ~~qualified~~sold ~~two~~an ~~facilities~~RC infacility ~~2009~~to ~~for such~~a ~~purposes~~new ~~and~~third ~~leased~~party ~~those~~investor, ~~facilities~~bringing tothe atotal ~~third~~number ~~party~~of inRC ~~2010~~facilities leased or sold to five.

InThe ~~December~~Operating ~~2010,~~Agreement ~~the~~requires ~~Tax~~NexGen ~~Relief~~ and ~~Job~~ADA ~~Creation~~to ~~Act~~each ofpay ~~2010~~50% ~~extended the~~of ~~placed in service deadline for~~ the ~~Section 45~~costs ~~tax credits to January 1, 2012. In consideration~~ of ~~the~~operating ~~extension,~~ Clean Coal ~~built~~ and ~~qualified~~specifies ancertain duties ~~additional~~that 26both RCparties ~~facilities~~are inobligated ~~2011~~to ~~which met the extended placed in service date~~perform. ~~In November~~Pursuant ~~and~~to ~~December 2011,~~ the ~~two~~Operating ~~leased~~Agreement RCand ~~facilities~~Exclusive ~~qualified~~Right into ~~2009~~Lease ~~were exchanged with newly constructed~~Agreement, ~~redesigned~~GSFS RCis ~~facilities.~~in ~~The~~the ~~new~~process ~~leases carry over most~~ of ~~the~~exercising ~~substantive~~its ~~terms~~exclusive ~~and~~right ~~conditions~~(but ofnot the ~~initial~~obligation) ~~leases.~~to Alease ~~third~~facilities ~~RC facility~~that ~~was~~will ~~leased~~produce up to GSapproximately at12 million ~~the~~tons ~~end~~ of ~~the~~RC ~~first~~per ~~quarter~~year ofon ~~2012~~pre-established ~~and~~lease aterms ~~fourth~~similar ~~facility was leased~~ to athose ~~third~~currently ~~party~~in ~~investor~~effect ~~during~~for ~~the~~Clean ~~third~~Coal’s ~~quarter~~first oftwo ~~2012~~leased facilities.

The Operating Agreement 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 Operating Agreement and Exclusive Right to Lease Agreement, GS is in the process of exercising its exclusive right (but not the obligation) to lease additional 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 ofSeptember 30, 2012		As ofDecember 31, 2011
	As of March 31,2013		As of December 31,2012
	(in thousands)
Primary assets
Cash and cash equivalents	$	49,~~722~~920	$	~~8,804~~994
Accounts receivable, net		53,~~457~~798		3,~~177~~275
Prepaid expenses and other assets		310,~~054~~277		32,~~028~~546
Property, plant and equipment including assets under lease and assets placed in service, net		41,047		36,751
Primary liabilities
Accounts payable and accrued liabilities	$	8,774	$	11,735
Line of credit		10,350		14,497
Deposits		11,900		14,900
Deferred revenue		11,700		3,600

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
	(in thousands)
Net revenue	$	70,197		$	8,843	$	133,722	$	19,645
Net revenue excluding RC sales	$	11,176		$	6,263	$	27,189	$	17,065
Net income (loss)	$	(208	)	$	4,668	$	4,544	$	13,496


Property, plant and equipment including assets under lease and assets placed in service		39,471		40,096
Primary liabilities
Accounts payable and accrued liabilities	$	4,351	$	5,728
Accounts payable to related parties		4,267		5,082
Line of credit		—		3,000
Deposits		16,500		21,200
Deferred revenue, current		11,514		625
Deferred revenue, long-term		13,259		875


	Quarter Ended March 31,
	2013		2012
	(in thousands)
Net revenue	$	58,123	$	15,174
Net income	$	3,151	$	985

Amounts due to CCSS

Clean Coal has recorded accounts payable ~~due~~ to CCSS totaling $23.47 million and $~~604,000~~3.5 million as of ~~September~~March 3031, ~~2012~~2013 and December 31, ~~2011~~2012, respectively, which are included in accounts payable -to related parties in the accompanying consolidated balance sheets.

(5) 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 and sale of its RC facilities.

Clean Coal Deferred Rent Revenue

InAs discussed in Note 4, in June 2010, Clean Coal executed agreements to lease two RC facilities to GS RC. These agreements provided for, among other things, a “prepaid rent payment” of $9 million for both RC 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. Clean Coal received an$1.5 ~~additional~~million and $~~6.3~~20 million in prepaid ~~rent~~rents ~~from~~in GS2012 and 2013, respectively, related to ~~this~~the ~~facility and an~~ additional ~~$1.5~~leased ~~million~~and ~~from~~sold ~~another~~RC ~~financial party in July 2012~~facilities.

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:

	As ofSeptember 30, 2012		As ofDecember 31, 2011
	(in thousands)
Deferred revenue, short-term	$	10,084	$	3,600
Deferred revenue, long-term	$	1,965	$	—

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


	As of March 31, 2013		As of December 31, 2012
	(in thousands)
Deferred revenue, short-term	$	11,514	$	625
Deferred revenue, long-term	$	13,259	$	875

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	Quarter Ended March 31,
	2012		2011		2012		2011
	2013		2012
	(in thousands)
Rent revenue recognized	$	1112,~~073~~213	$	65,~~100~~391	$	~~27,053~~	$	~~16,900~~
Amortization of deferred revenues included in amounts above	$	900	$	900	$	2,700	$	2,700
Amortization of prepaid rent included in amounts above	$	574	$	900

Clean Coal Deposits

During 2012 and 2011, Clean Coal ~~has~~received deposits of $116.3 million and $14.9 million, respectively from GSFS towards RC facilities which may be leased upon attainment of certain milestones ~~that are included in deposits in the consolidated balance sheets at September 30, 2012~~. In October 2012, GSGSFS determined that it would not pursue leases on two particular RC facilities on which it had paid deposits totaling $4.7 million and concurrently gave notice for the return of the related deposits. ~~While Clean~~In ~~Coal~~March ~~has~~2013, ~~not~~Clean ~~yet~~Coal returned the $4.7 ~~deposits,~~million itin ~~plans~~deposits toplus doaccrued sointerest byto ~~January~~GSFS. ~~30,~~Deposits ~~2013~~of as$16.5 ~~required~~million byand ~~the~~$21.2 ~~Lease~~million ~~Agreement~~are ~~unless~~included GSin ~~selects~~the ~~other~~consolidated ~~facilities~~balance insheets ~~which~~as toof ~~participate~~March 31, ~~for~~2013 ~~which~~and ~~deposits~~December 31, ~~could~~2012, ~~be applied~~respectively.

(6) Net Loss Per Share

Basic net loss per share is computed based on the weighted average common shares outstanding in the period. Diluted net loss per share is 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 97) to purchase shares of common stock for the ~~three~~quarters ~~months and nine months~~ ended ~~September~~March 3031, ~~2012~~2013 and ~~2011~~2012 were excluded from the calculation of diluted shares, as their effect is anti-dilutive.

(7) ~~Property~~Share ~~and~~Based ~~Equipment~~Compensation

~~Property~~Since 2003, ADA has had several stock and ~~equipment~~option ~~consisted~~plans, including the 2005 Directors’ Compensation Plan (the “2005 Plan”), the Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”), the Amended and Restated 2010 Non-Management Compensation and Incentive Plan (the “2010 Plan”) and the ADA-ES, Inc. Profit Sharing Retirement Plan, which is a plan qualified under Section 401(k) of the ~~following~~Internal atRevenue Code (the ~~dates~~“401(k) ~~indicated:~~Plan”) as described below. These plans allow ADA to issue stock or options for shares of common stock to employees, Board of Directors and non-employees.

	Years	As ofSeptember 30, 2012			As ofDecember 31, 2011
	(in thousands)
Machinery and equipment	3-10	$	6,397		$	3,937
Leasehold improvements	2-5		1,094			624
Furniture and fixtures	3-7		730			281
RC assets under lease and placed in service	10		44,503			36,929
			52,724			41,771
Less accumulated depreciation and amortization			(7,769	)		(4,651	)
Total property and equipment, net		$	44,955		$	37,120

Following is a table of options activity for the quarter ended March 31, 2013:

	Three Months Ended September 30,					Nine Months Ended September 30,
	Employee andDirector Options			WeightedAverage Exercise Price
	2012			2011		2012		2011
Options outstanding, January 1, 2013		185,976		$	10.20
	(in thousands)
Options granted		5,000			23.85
Depreciation and amortization	$	1,239		$	216	$	3,444	$	608
Options expired		—			—
Options exercised		(5,460	)		12.70
Options outstanding and exercisable, March 31, 2013		185,516		$	10.49

(8) Income Taxes

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 the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided 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. 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. At each reporting 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.

InFollowing ~~August~~is ~~2012,~~a ~~after~~table ~~extensive discussions with the SEC’s Division~~ of ~~Corporation~~aggregate ~~Finance~~intrinsic ~~and~~value ~~Office~~ of ~~the~~options ~~Chief~~exercised ~~Accountant~~ and ~~the~~exercisable Company’s outside tax experts, independent registered public accounting firm, Audit Committee and Board of Directors, management determined that the objective and verifiable negative evidence represented by historical losses outweighed more subjective positive evidence of anticipated future income. As a result, management determined it necessary to record a full valuation allowance against the Company’s net deferred tax assets and has restated the consolidated financial statements for the ~~quarterly~~quarter ~~period~~ ended ~~September~~ March ~~30, 2011 and as of December~~ 31, ~~2011.~~2013: ~~See Note 14 for additional discussion.~~

The Company has provided a full valuation allowance against the net deferred tax assets of $27.6 million and $18.6 million as of September 30, 2012 and December 31, 2011, respectively.


	Intrinsic Value		Average Market Price
Exercised, March 31, 2013	$	61,800	$	24.01

The tax benefit included in the consolidated statement of operations for the nine months ended September 30, 2011 was recorded as a result of the sale of the equity interest in Clean Coal to GS in May 2011. Since the transaction did not result in a change in control of Clean Coal, the $11 million tax effect of the amount received from this transaction was recorded directly to stockholders’ deficit.


	Intrinsic Value		Market Price
Exercisable, March 31, 2013	$	2,982,900	$	26.57

~~(9)~~Stock ~~Share~~options ~~Based~~outstanding ~~Compensation~~and exercisable at March 31, 2013 are summarized in the table below:

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.


Range of Exercise Prices	Number of Options Outstanding and Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Lives
$8.60 - $10.20		141,423	$	8.66		2.7
$13.80 - $15.20		34,093	$	14.82		2.4
$19.54 - $23.85		10,000	$	21.70		4.7

		185,516	$	10.49		2.7

~~Following~~During is2005, aADA ~~table~~adopted the 2005 Plan, which authorized the issuance of shares of common stock and the grant of options to purchase shares of common stock to non-management directors. Under the 2005 Plan, the award of stock is limited to not more than 1,000 shares per individual per year, and the grant of options ~~activity~~is limited to 5,000 per individual in total. The aggregate number of shares of common stock reserved for issuance under the ~~nine~~2005 ~~months~~Plan ~~ended~~totals ~~September 30~~90,000 shares (50,000 in the form of stock awards and 40,000 in the form of options). In October 2012: and February 2013, two new Board members were issued 5,000 options each under the 2005 Plan.

	Employee andDirectorOptions			WeightedAverageExercise Price
Options outstanding, January 1, 2012		182,942		$	9.95
Options granted		—			—
Options expired		—			—
Options exercised		(1,966	)		10.73
Options outstanding and exercisable, September 30, 2012		180,976		$	9.94

The 2007 Plan, which was adopted by ADA in 2007, was amended and restated as of August 31, 2010 to make non-material changes to assure Internal Revenue Code Section 409A compliance and to increase the non-management director annual grant limit to 15,000 shares of common stock from 10,000 shares. On July 19, 2012, the stockholders of ADA approved an amendment to the 2007 Plan to increase the number of shares presently issuable to 1.3 million and increase the number of shares authorized for issuance to 1.8 million. In addition, the stockholders also approved an increase in the number of shares with respect to which awards may be granted in any fiscal year from 30,000 to 50,000 and the annual grant limit for the non-management director annual grant was increased to 30,000 shares. The 2007 Plan authorizes the issuance to employees, directors and non-employees shares of common stock, either as restricted stock grants or to underlie options to purchase shares of ADA’s common stock.

In 2009, ADA revised its 401(k) Plan. The revision permits ADA to issue shares of its common stock to employees to satisfy its obligation to match employee contributions under the terms of the plan in lieu of matching contributions in cash. ADA reserved 300,000 shares of its common stock for this purpose. The value of common stock issued as matching contributions under the plan is determined based on the per share market value of ADA’s common stock on the authorization date.

The 2010 Plan, which was adopted by ADA in 2010, was amended and restated as of July 19, 2012 to make non-material changes to assure Internal Revenue Code Section 409A compliance. The Plan permits grants of awards, which may be shares, rights to purchase restricted stock or bonuses of restricted stock or other rights or benefits under the Plan.

Following is a table ofsummarizing ~~aggregate~~the ~~intrinsic~~activity ~~value~~under ofvarious ~~options~~stock ~~exercised~~issuance ~~and~~plans ~~exercisable~~ for the ~~nine~~quarter ~~months~~ ended ~~September~~ March 3031, ~~2012~~2013:

	IntrinsicValue			AverageMarketPrice
	Stock Issuance Plans
Exercised, September 30, 2012	$	25,800		$	23.85
	2007 Plan			401(k) Plan			2010 Plan			Other Stock Plans
	IntrinsicValue			MarketPrice
Shares available, January 1, 2013		531,764			136,582			298,102			5,065
Exercisable, September 30, 2012	$	2,474,200		$	23.61
Evergreen addition		3,487			—			—			—
Restricted stock issued to new and anniversary employees		—			—			(1,713	)		—
Stock issued based on incentive and matching programs to employees		—			(6,205	)		(2,354	)		—
Stock issued to executives, directors and non-employees		(19,537	)		—			—			—
Forfeited shares		403			—			—			—
Balance available, March 31, 2013		516,117			130,377			294,035			5,065
Expense recognized under the different plans for the quarter ended:
	(in thousands)
March 31, 2013	$	471		$	113		$	44		$	8
March 31, 2012	$	47		$	84		$	—		$	—
Unrecognized expense under the different plans for the quarter ended:
	(in thousands)
March 31, 2013	$	579		$	—		$	74		$	—
March 31, 2012	$	518		$	—		$	—		$	—

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

Range of Exercise Prices	Number ofOptionsOutstanding andExercisable		WeightedAverageExercisePrice		WeightedAverageRemainingContractualLives
$8.60 - $10.20		142,583	$	8.66		3.1
$13.80 - $15.20		38,393	$	14.70		2.8
		180,976	$	9.94		3.1

No options were granted and/or vested during the three or nine months ended September 30, 2012.

Although ADA adopted the 2007 Plan in 2007, it was further amended and restated as of August 31, 2010 to make non-material changes to assure Internal Revenue Code Section 409A compliance and to increase the non-management director annual grant limit to 15,000 shares of common stock from 10,000 shares. The 2007 Plan authorized the issuance to employees, directors and non-employees of up to 1 million shares of common stock, either as restricted stock grants or to underlie options to purchase shares of ADA’s common stock. On July 19, 2012, the stockholders of ADA approved an amendment to the 2007 Plan to increase the number of shares presently issuable to 1.3 million and increase the number of shares authorized for issuance to 1.8 million. In addition, the stockholders also approved an increase in the number of shares with respect to which awards may be granted in any fiscal year increased from 30,000 to 50,000 and the annual grant limit for the non-management director annual grant was increased to 30,000 shares.

In 2009, the Company revised its 401(k) Plan. The revision permits ADA to issue shares of its common stock to employees to satisfy its obligation to match employee contributions under the terms of the Plan in lieu of matching contributions in cash. ADA reserved 300,000 shares of its common stock for this purpose. The value of common stock issued as matching contributions under the Plan is determined based on the per share market value of ADA’s common stock on the authorization date.

~~Following~~A issummary aof ~~table~~the ~~summarizing~~status of the ~~activity~~non-vested shares under ~~various~~the ~~stock~~2007 ~~issuance~~Plan ~~plans~~as ~~for~~of ~~the~~March 31, ~~nine~~2013 ~~months~~is ~~ended~~presented ~~September 30, 2012~~below:

Stock Issuance Plans


Non-vested at January 1, 2013	107,563		$	8.26
Granted	1,713			20.53
Vested	(1,077	)		9.72
Forfeited	(403	)		11.55

Non-vested at March 31, 2013	107,796		$	8.30

	2007 Plan			401(k)Plan			2005 Plan
Balance available, January 1, 2012		30,954			156,025			5,065
Evergreen addition		209,628			—			—
Additional shares authorized for issuance		300,000			—			—
Restricted stock issued to new and anniversary employees		(8,464	)		—			—
Restricted stock cancelled		510			—			—
Stock issued based on incentive and matching programs to employees		—			(13,178	)		—
Stock issued to executives, directors and non-employees		(864	)		—			—
Balance available, September 30, 2012		531,764			142,847			5,065
Expense recognized under the different plans for the periods ended September 30, 2012:
	(in thousands)
three months	$	25		$	95		$	—
nine months	$	103		$	292		$	—
Unrecognized expense under the different plans:
	(in thousands)
as of September 30, 2012	$	630		$	—		$	—

(8) Temporary Equity Subject to Possible Redemption

AAs ~~summary~~described in Note 4, in May 2011, ADA and NexGen entered into a transaction in which Clean Coal sold an effective 15% interest of the equity in Clean Coal to GSFS. Approximately 15.8 units of non-voting Class B membership interests were issued to GSFS for $60 million in cash. ADA and NexGen each received $30 million as a result of the ~~status~~sale. The terms of the ~~non-vested~~Operating ~~shares~~Agreement permit ~~under~~GSFS to require redemption of the ~~2007~~unreturned ~~Plan~~portion asof its initial $60 million investment in Clean Coal plus a return of ~~September 30~~15% in 2021 and under certain limited circumstances. As a result, ~~2012~~$60 million is ~~presented~~classified ~~below:~~as temporary equity subject to possible redemption in the consolidated balance sheets.

	Shares			WeightedAverageGrant DateFair Value
Non-vested at January 1, 2012		107,991		$	6.98
Granted		8,464			24.18
Vested		(7,973	)		23.84
Forfeited		(510	)		11.51
Non-vested at September 30, 2012		107,972		$	8.07

(9) Stockholders’ Deficit

~~(10)~~The ~~Temporary~~non-controlling ~~Equity~~interest ~~Subject~~portion of stockholders’ deficit includes the non-controlling interest related to ~~Possible~~Clean ~~Redemption~~Coal.

As(10) ~~described~~Commitments ~~in Note 4, in May 2011, ADA~~ and NexGen entered into a transaction in which Clean Coal sold an effective 15% interest of the equity in Clean Coal to GS. Approximately 15.8 units of non-voting Class B membership interests were issued to GS for $60 million in cash. ADA and NexGen each received $30 million as a result of the sale. The terms of the Operating Agreement permit GS to require redemption of the unreturned portion of its initial $60 million investment in Clean Coal plus a return of 15% under certain limited circumstances. As a result, $60 million is classified as temporary equity subject to possible redemption in the consolidated balance sheets. Contingencies

(11) Stockholders’ Deficit

As described in Note 14, the consolidated financial statements as of December 31, 2011 and for the three and nine months ended September 30, 2011 were restated to properly account for GS’s interest in Clean Coal and to recognize a full valuation allowance against the Company’s deferred tax assets. The restated ADA portion of stockholders’ deficit for the nine months ended September 30, 2011 includes a $22 million reduction attributable to the recognition of a valuation allowance against the Company’s deferred tax assets. The restated ADA portion of stockholders’ deficit for the fiscal year ended December 31, 2011 includes a $30 million reduction attributable to the reclassification of temporary equity and an $18.6 million reduction attributable to the recognition of a valuation allowance against the Company’s deferred tax assets. See Notes 8 and 14 for additional discussion.

Non-Controlling Interest

The non-controlling interest portion of stockholders’ deficit consists of the non-controlling interest related to Clean Coal. The amounts for the periods ended September 30 and December 31, 2011 have been restated for the restatement of equity held by GS (see Note 14).

(12) Commitments and Contingencies

Line of Credit

Clean Coal has ~~available~~ a revolving line of credit with a bank for $15 million ~~that is~~ secured by ~~substantially all~~ the ~~assets~~equity ofinterests ~~Clean~~and ~~Coal~~proceeds ~~(including its~~related ~~subsidiaries).~~to ~~The~~such ~~line~~equity interests of each ~~credit~~subsidiary ~~expires~~owned inby ~~March~~Clean Coal. In January 2013, ~~with~~the ~~payment~~revolving ~~due~~line inof ~~four~~credit ~~equal~~agreement ~~quarterly~~was ~~installments~~amended ofto ~~principal~~provide ofa $~~3.75~~2 million ~~(plus~~revolver ~~all~~with ~~accrued~~any ~~interest~~borrowings atunder ~~such~~the ~~time)~~amended ~~beginning~~agreement ~~June~~due on December 3031, ~~2012~~2013. ~~Borrowings~~The ~~under~~increased ~~the~~commitment ~~line of~~is ~~credit~~secured ~~bear~~by ~~interest~~the atequity ~~the~~interests ~~higher~~and ofproceeds ~~the~~related ~~“Prime~~to ~~Rate”~~such ~~(as~~equity ~~defined~~interests inof ~~the~~each ~~related~~subsidiary ~~credit~~owned ~~agreement)~~by ~~plus~~Clean ~~one~~Coal. ~~percent~~There ~~(1%) or~~was ~~5% per~~no ~~annum~~outstanding ~~(effective~~balance ~~rate~~under ofthis 5%agreement at ~~September~~March 3031, ~~2012)~~2013.

In May 2012, an amendment was made to the line of credit agreement to increase the amount available by $3 million under an increased commitment note issued in conjunction with the line of credit. This amount iswas secured by a cash collateral account of $3 million held by the bank issuing the line of credit with funds received equally from ADA and NexGen. ~~Interest~~The isagreement ~~payable~~was ~~monthly~~amended atin 3%December ~~over the~~2012 ~~rate~~to ~~paid~~extend by the ~~bank~~term onof the ~~cash~~agreement ~~collateral~~until ~~account and is due on or before December~~June 1, ~~2012~~2013. AtThere ~~September 30,~~was ~~2012,~~no ~~the~~ outstanding balance onunder ~~the~~this ~~line~~amendment ofat ~~credit was $10.4 million. On October~~March 131, ~~2012,~~2013 aand ~~payment~~outstanding ofcash ~~$3.75~~collateral ~~million~~deposits ~~was made~~were ~~against~~returned during the ~~line~~quarter ofthen ~~credit~~ended. Borrowings under the ~~line of credit and~~ increased commitment ~~note~~notes are subject to certain financial covenants applicable to Clean Coal.

Retirement Plan

ADA assumed the 401(k) plan covering all eligible employees as of January 1, 2003 which was revised in 2009, and makes matching contributions to the plan in the form of cash and its common stock. Such contributions are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Quarter Ended March 31,
	2012		2011		2012		2011
	2013		2012
	(in thousands)
Matching contributions in stock	$	95113	$	8384	$	~~292~~	$	~~265~~
Matching contributions in cash		—		—
Total	$	113	$	84

Performance Guarantee on Emission Control Systems

Under certain contracts to supply emission control systems, the Company may guarantee certain aspects of the performance of the associated equipment for a specified period to the owner of the power plant. The Company may also guarantee the achievement of a certain level of mercury removal ifbased ~~certain~~upon ~~conditions~~the ~~around~~injection ~~injecting~~of ~~the~~a specified quantity of a qualified activated carbon (“AC”) at ~~the~~a specified ~~injection~~ rate ~~and~~given other plant operating conditions ~~are met~~. In the event the equipment fails to perform as specified, the Company may have an obligation to correct or replace the equipment. In the event the level of mercury removal is not achieved, the Company may have a “make right” obligation within the contract limits. The Company assesses the risks inherent in each applicable contract and accrues an amount that is based on estimated costs that may be incurred over the performance period of the contract. Such costs are included in the Company’s accrued warranty and other liabilities in the ~~accompanying~~ consolidated balance sheets. Any warranty costs paid out in the future will be charged against the accrual. The adequacy of the warranty accrual balance is assessed at least ~~quarterly~~ quarterly based on the then current facts and circumstances and adjustments are made as needed. ~~The changes in the carrying amount of the Company’s performance guaranties are as follows:~~

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Beginning balance	$	562		$	547		$	547		$	612
Performance guaranties accrued		37			44			54			82
Expenses paid		(27	)		(65	)		(29	)		(168	)
Ending balance	$	572		$	526		$	572		$	526

The changes in the carrying amount of the Company’s performance guaranties are as follows:


	Quarter Ended March 31,
	2013			2012
	(in thousands)
Beginning balance	$	668		$	547
Performance guaranties accrued		154			1
Expenses paid		(8	)		(2	)

Ending balance	$	814		$	546

In some cases, a performance bond may be purchased and held for the period of the warranty ~~that~~as ~~can~~an bealternative ~~used~~ to satisfy the obligation.

Clean Coal

The Company also has certain obligations in connection with the activities of Clean Coal. ~~The Company~~ADA, NexGen and two entities affiliated with NexGen have provided GS ~~and the GS affiliate that is the lessee for certain~~ RC ~~facilities~~ with joint and several guaranties (the “CCS Party Guaranties”) guaranteeing all payments and performance due under the related transaction agreements. ~~The~~ADA ~~Company~~ also entered into a contribution agreement with NexGen under which any party called upon to pay on a CCS Party Guaranty is entitled to receive contribution from the other party equal to 50% of the amount paid.

~~The~~GS ~~parent of the lessee in the~~ RC ~~facilities lease transactions~~ has provided Clean Coal with a guaranty as to the payment only ofif all the initial term fixed rent payments and the renewal term fixed rent payments under the related leases, which, although terminable at any time, cannot be terminated without the substitution of such guaranty with another guaranty on similar terms from a creditworthy guarantor.

Arbitration Award Liabilities

As previously reported in various filings, ADA had been engaged in litigation with Norit Americas, Inc. and Norit International N.V. f/k/a Norit N.V . (“Norit”). The Norit lawsuit initially filed in Texas was moved to arbitration, and on April 8, 2011, the arbitration panel issued an interim award holding ADA liable for approximately $37.9 million for a non-solicitation breach of contract claim and held ADA and certain other defendants liable for royalties of 10.5% for the first three years beginning in mid-2010 and 7% for the following five years based on adjusted sales of AC from the Red River plant. The Company recorded $679,000 and $284,000 in royalty expense for the quarters ended March 31, 2013 and 2012, respectively, related to this award.

~~On August 29,~~13 2011, ADA and Norit entered into a settlement agreement whereby the Company paid a lump-sum payment to Norit totaling $33 million on August 30, 2011. In addition, the Company agreed to pay an additional $7.5 million over a three-year period commencing on June 1, 2012, payable in three installments without interest of $2.5 million. Under the terms of the settlement agreement, ADA is also required to pay the royalty noted above and a lesser royalty on certain treated activated carbons. Payments of amounts due under the royalty award for each quarter are payable three months after such quarter ends. On October 18, 2011, the arbitration panel endorsed and confirmed the terms of the settlement agreement.

~~The~~On ~~Company~~August 29, ~~has~~2011, ~~accrued~~ADA and Norit entered into a ~~current~~settlement ~~liability~~agreement aswhereby ofADA ~~September~~paid a lump-sum payment to Norit totaling $33 million on August 30, ~~2012~~2011. ofIn addition, ADA agreed to pay an additional $37.35 million ~~which~~over isa ~~included~~three-year inperiod ~~settlement~~commencing ~~awards and~~on ~~related~~June 1, ~~accrued~~2012, ~~liabilities~~payable ~~and~~in athree ~~long-term~~installments ~~liability~~without interest of $2.5 million. ~~which~~Under the isterms ~~included~~of inthe settlement ~~awards~~agreement, ADA is also required to pay the royalty noted above and ~~indemnity~~a ~~liability~~lesser inroyalty on certain treated activated carbons. Payments of amounts due under the ~~consolidated~~royalty ~~balance~~award ~~sheets~~for ~~related~~each toquarter ~~this~~are payable three months after such quarter ends. On October 18, 2011, the arbitration panel endorsed and confirmed the terms of the settlement agreement.

The Company has accrued a current liability as of March 31, 2013 of $3.2 million which is included in settlement awards and related accrued liabilities and a long-term liability of $2.5 million which is included in settlement awards and indemnity liability in the consolidated balance sheets related to this agreement.

Indemnity Liability Settlement

As previously reported in various filings, in November 2011, ADA entered into an Indemnity Settlement Agreement whereby ADA agreed to settle certain indemnity obligations asserted against ADA related to the Norit litigation. ~~and~~Under ~~relinquish~~the ~~all~~terms of ~~its~~the ~~interest~~Indemnity inSettlement Agreement, ADA paid ADA Carbon Solutions, LLC (“Carbon Solutions”). Our net investment in Carbon Solutions was accounted for under the equity method of accounting and our respective share of Carbon Solutions’ losses of $2.1 million and $5.9 million for the three and nine months ended September 30, 2011, respectively, is included in the consolidated statements of operations. Under the terms of the Indemnity Settlement Agreement, ADA paid a $2 million payment on November 28, 2011 and agreed to make 16 additional monthly payments of $100,000 with the first one paid on November 28, 2011, and the remaining 15 payments commencing on December 1, 2011, relinquished all of its equity interest in Carbon Solutions to Carbon Solutions and amended the Intellectual Property License Agreement dated October 1, 2008 between ADA and Carbon Solutions. The final payment under this agreement was made in February 2013.

~~The~~(11) ~~Company~~Income has accrued a current liability as of September 30, 2012 of $500,000 which is included in settlement awards and related accrued liabilities in the consolidated balance sheets related to this agreement. Taxes

The Company has provided a full valuation allowance against the deferred tax assets of $40.1 million and $39.5 million as of March 31, 2013 and December 31, 2012 respectively, to reflect the estimated amount of deferred tax assets that may not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Management considers both positive and negative evidence and tax planning strategies in making this assessment.

(1312) Business Segment Information

The following information relates to the Company’s three reportable segments: Refined coal (“RC”), Emission control (“EC”) and CO2 capture (“CC”). ~~All assets are located in the U.S. and are not evaluated by management on a segment basis. All significant customers are U.S. companies and the U.S. Government.~~

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
	(in thousands)
Revenue
RC
Rental income	$	11,072		$	6,239	$	27,053	$	16,907
Coal sales		59,021			2,580		106,533		2,580
Other revenues		104			341		136		507
		70,197			9,160		133,722		19,994
EC
Systems and equipment		2,299			906		6,456		2,047
Consulting and development		968			2,054		3,162		4,015
Chemicals		213			135		591		775
		3,480			3,095		10,209		6,837
CC		676			977		1,153		1,894
Total	$	74,353		$	13,232	$	145,084	$	28,725
Segment profit
RC	$	2,672		$	4,903	$	11,860	$	14,277
EC		(147	)		802		30		1,718
CC		(67	)		110		11		144
Total	$	2,458		$	5,815	$	11,901	$	16,139

All assets are located in the U.S. and are not evaluated by management on a segment basis. All significant customers are U.S. companies and the U.S Government.

A reconciliation of the reported total segment profit to the net loss attributable to ADA for the periods shown above is as follows:


	Quarter Ended March 31,
	2013			2012
	(in thousands)
Revenue
RC
Rental income	$	12,213		$	5,391
Coal sales		44,960			9,773
Other revenues		950			10

		58,123			15,174

EC
Systems and equipment		7,525			1,412
Consulting and development		1,004			1,135
Chemicals		240			217

		8,769			2,764


CC		1,422			282

Total	$	68,314		$	18,220

Segment profit
RC	$	6,040		$	1,786
EC		1,622			75
CC		(80	)		62

Total	$	7,582		$	1,923

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011 (restated)			2012			2011 (restated)
	(in thousands)
Total segment profit	$	2,458		$	5,815		$	11,901		$	16,139
Non-allocated general and administrative expenses		(4,556	)		(2,099	)		(11,434	)		(12,435	)
Depreciation and amortization		(1,239	)		(216	)		(3,444	)		(608	)
Other income (expense) including interest		(19	)		71			122			2,161
Interest expense		(144	)		(889	)		(1,045	)		(889	)
Settlement of litigation and arbitration award, net		(800	)		(2,182	)		(1,553	)		(41,684	)
Net equity in net income (loss) of unconsolidated entities		232			(2,050	)		400			(5,761	)
Deferred income tax benefit		—			—			—			10,980
Net (income) loss attributable to non-controlling interest		120			(3,053	)		(2,613	)		(7,888	)
Net loss attributable to ADA	$	(3,948	)	$	(4,603	)	$	(7,666	)	$	(39,985	)

~~Non-allocated~~A ~~general~~reconciliation ~~and~~of ~~administrative expenses include costs that benefit~~ the ~~business~~reported astotal asegment ~~whole~~profit ~~and are not directly related~~ to ~~any~~net ~~one~~loss offor ~~our~~the ~~segments.~~periods ~~Such~~shown ~~costs~~above ~~include~~is ~~but~~as ~~are not limited to accounting and human resources staff, information systems costs, facility costs, legal fees, audit fees and corporate governance expenses.~~ follows:

(14) Restatement of Consolidated Financial Statements


	Quarter Ended March 31,
	2013			2012
	(in thousands)
Total segment profit	$	7,582		$	1,923
Non-allocated general and administrative expenses		(5,854	)		(2,134	)
Depreciation and amortization		(1,422	)		(1,024	)
Interest and other income		70			99
Interest expense		(383	)		(470	)
Settlement of litigation and arbitration award, net		(673	)		(284	)
Net equity in net income of unconsolidated entity		323			36
Net income attributable to non-controlling interest		(1,812	)		(566	)

Net loss attributable to ADA-ES, Inc.	$	(2,169	)	$	(2,420	)

~~The~~Non-allocated ~~consolidated~~general ~~financial~~and ~~statements~~administrative asexpenses ofinclude ~~December 31,~~costs ~~2011~~that ~~and~~benefit ~~for~~ the ~~three~~business ~~and~~as ~~nine~~a ~~months~~whole ~~ended~~and ~~September 30,~~include ~~2011~~but ~~have~~are ~~been restated. The restatement resulted from management’s determination that the Company had~~ not ~~properly~~limited ~~accounted~~to ~~for~~accounting ~~the~~and ~~interest~~human ~~held~~resources bystaff, GSinformation insystems ~~our~~costs, ~~joint~~facility ~~venture~~costs, ~~Clean Coal~~insurance, ~~since~~legal ~~May 2011 and that a full valuation allowance against the Company’s deferred tax assets should have been recognized as of December 31~~fees, ~~2010~~audit ~~and~~fees ~~all subsequent quarters thereafter. The restatement reflected non-cash adjustments~~ and ~~had~~corporate nogovernance ~~effect on previously reported operating income results or cash flows from operations~~expenses. ~~The Company amended its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 on October 19, 2012.~~

Financial Statement Effect of the Restatement

The tables below show the effect of the above restatement on the Consolidated Balance Sheet as of December 31, 2011, the Consolidated Statement of Operations for the three and nine months ended September 30, 2011, Consolidated Statement of Changes in Stockholders’ Deficit for the nine months ended September 30, 2011 and Consolidated Statement of Cash Flows for the nine months ended September 30, 2011.

Effect on Consolidated Balance Sheet
				Restatement Adjustments
	As Previously Reported			Deferred Tax						As Restated
	December 31, 2011			Valuation Allowance			Temporary Equity			December 31, 2011
	(Amounts in thousands)
Current Assets
Cash and cash equivalents	$	40,879		$	—		$	—		$	40,879
Receivables, net of allowance for doubtful accounts		5,914			—			—			5,914
Investment in securities		508			—			—			508
Prepaid expenses and other assets		3,924			(2,392	)		—			1,532
Total current assets		51,225			(2,392	)		—			48,833
Property and Equipment, at cost		41,771			—			—			41,771
Less accumulated depreciation and amortization		(4,651	)		—			—			(4,651	)
Net property and equipment		37,120			—			—			37,120
Investment in unconsolidated entities		590			—			—			590
Other assets		931			—			—			931
Deferred taxes and other assets		16,233			(16,233	)		—			—
Total other assets		17,754			(16,233	)		—			1,521
Total Assets	$	106,099		$	(18,625	)	$	—		$	87,474
Total Liabilities	$	56,920		$	—		$	—		$	56,920
Temporary Equity - Non-controlling Interest Subject to Possible Redemption		—			—			60,000			60,000
Stockholders’ Equity (Deficit)
ADA-ES, Inc. stockholders’ equity (deficit)
Preferred stock: 50,000,000 shares authorized, none outstanding		—			—			—			—
Common stock: no par value, 50,000,000 shares authorized, 9,996,144 shares issued and outstanding		93,184			—			(30,000	)		63,184
Accumulated deficit		(48,069	)		(18,625	)		—			(66,694	)
Total ADA-ES, Inc. stockholders’ equity (deficit)		45,115			(18,625	)		(30,000	)		(3,510	)
Non-controlling interest		4,064			—			(30,000	)		(25,936	)
Total Stockholders’ Equity (Deficit)		49,179			(18,625	)		(60,000	)		(29,446	)
Total Liabilities, Temporary Equity and Stockholders’ Equity (Deficit)	$	106,099		$	(18,625	)	$	—		$	87,474

Effect on Consolidated Statement of Operations

	Three Months Ended September 30, 2011
				Restatement Adjustments
				Deferred Tax
	As Previously Reported			Valuation Allowance			Temporary Equity		As Restated
	(Amounts in thousands)
Loss from Continuing Operations Before Income Tax Expense (Benefit) and Non-controlling Interest	$	(1,550	)	$	—		$	—	$	(1,550	)
Income Tax Expense (Benefit)		(792	)		792			—		—
Net Loss Before Non-controlling Interest		(758	)		(792	)		—		(1,550	)
Non-controlling Interest		(3,053	)		—			—		(3,053	)
Net Loss Attributable to ADA-ES, Inc.	$	(3,811	)	$	(792	)	$	—	$	(4,603	)
Net Loss Per Common Share - Basic and Diluted Attributable to ADA-ES, Inc.	$	(0.50	)	$	(0.10	)	$	—	$	(0.60	)
	Nine Months Ended September 30, 2011
				Restatement Adjustments
				Deferred Tax
	As Previously Reported			Valuation Allowance			Temporary Equity		As Restated
	(Amounts in thousands)
Loss from Continuing Operations Before Income Tax Expense (Benefit) and Non-controlling Interest	$	(43,077	)	$	—		$	—	$	(43,077	)
Income Tax Expense (Benefit)		(17,361	)		6,381			—		(10,980	)
Net Loss Before Non-controlling Interest		(25,716	)		(6,381	)		—		(32,097	)
Non-controlling Interest		(7,888	)		—			—		(7,888	)
Net Loss Attributable to ADA-ES, Inc.	$	(33,604	)	$	(6,381	)	$	—	$	(39,985	)
Net Loss Per Common Share - Basic and Diluted Attributable to ADA-ES, Inc.	$	(4.41	)	$	(0.84	)	$	—	$	(5.25	)

Effect on Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
				Restatement Adjustments
	As Previously Reported			Deferred Tax						As Restated
	September 30, 2011			Valuation Allowance			Temporary Equity			September 30, 2011
	(Amounts in thousands)
ADA-ES Stockholders’ Equity (Deficit)
Balances, January 1, 2011	$	11,409		$	(15,657	)	$	—		$	(4,248	)
Stock-based compensation		761			—			—			761
Issuance of stock to 401(k) plan		264			—			—			264
Issuance of stock on exercise of options		81			—			—			81
Equity contribution from sale of interest in joint venture,net of income taxes		19,020			10,980			(30,000	)		—
Income tax impact of sale of temporary equity in joint venture		—			(10,980	)		—			(10,980	)
Expense of stock issuance and registration		(16	)		—			—			(16	)
Net loss		(33,604	)		(6,381	)					(39,985	)
Balance, September 30, 2011	$	(2,085	)	$	(22,038	)	$	(30,000	)	$	(54,123	)
Non-controlling Interest
Balance, January 1, 2011	$	2,035		$	—		$	—		$	2,035
Equity contributions by non-controlling interest		250			—			—			250
Distributions to non-controlling interest		(6,203	)		—			(30,000	)		(36,203	)
Net income		7,888			—			—			7,888
Balance, September 30, 2011	$	3,970		$	—		$	(30,000	)	$	(26,030	)
Total Stockholders’ Equity (Deficit)	$	1,885		$	(22,038	)	$	(60,000	)	$	(80,153	)

Effect on Consolidated Statement of Cash Flows

	Nine Months Ended September 30, 2011
				Restatement Adjustments
	As Previously Reported			Deferred TaxValuation Allowance			Temporary Equity			As Restated
	(Amounts in thousands)
Net loss	$	(33,604	)	$	(6,381	)	$	—		$	(39,985	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		608			—			—			608
Deferred tax benefit		(17,361	)		6,381			—			(10,980	)
Loss on disposal of assets		60			—			—			60
Expenses paid with stock, restricted stock and stock options		1,025			—			—			1,025
Net equity in net loss from unconsolidated entities		5,761			—			—			5,761
Non-controlling interest in income from subsidiaries		7,888			—			—			7,888
Changes in operating assets and liabilities:											—
Receivables, net		(4,284	)		—			—			(4,284	)
Prepaid expenses and other		(1,536	)		—			—			(1,536	)
Accounts payable		3,495			—			—			3,495
Accrued payroll, expenses and other related liabilities		800			—			—			800
Deferred revenues and deposits		4,050			—			—			4,050
Accrued settlement and related liability		8,703			—			—			8,703
Accrued liabilities		2,576			—			—			2,576
Other liabilities		100			—			—			100
Net cash used in operating activities		(21,719	)		—			—			(21,719	)
Cash Flows from Investing Activities
Principal payments received on notes receivable		1,580			—			—			1,580
Equity contribution from sale of interest in joint venture		30,000			—			(30,000	)		—
Capital expenditures for equipment, patents and development projects		(11,975	)		—			—			(11,975	)
Net cash provided by (used in) investing activities		19,605			—			(30,000	)		(10,395	)
Cash Flows from Financing Activities
Net borrowings under line of credit		7,887			—			—			7,887
Sale of temporary equity in joint venture		—			—			60,000			60,000
Non-controlling interest equity contributions		250			—			—			250
Distributions to non-controlling interest		(6,203	)		—			(30,000	)		(36,203	)
Exercise of stock options		81			—			—			81
Stock issuance and registration costs		(16	)		—			—			(16	)
Net cash provided by financing activities		1,999			—			30,000			31,999
Decrease in Cash and Cash Equivalents		(115	)		—			—			(115	)
Cash and Cash Equivalents, beginning of period		9,696			—			—			9,696
Cash and Cash Equivalents, end of period	$	9,581		$	—		$	—		$	9,581

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 that involve risks and uncertainties. Words or phrases such as “anticipates,” “believes,” “hopes,” “expects,” “intends,” “plans,” the negative expressions of such words, or similar expressions are used in this Report to identify forward-looking statements, and such forward-looking statements include, but are not limited to, statements or expectations regarding:

(a) ~~when~~the scope and impact of mercury and other regulations or pollution control requirements ~~will become effective and the scope and impact of such regulations~~, including the impact of the final Mercury and Air Toxics Standards (“MATS”);

(b)	expected growth in and potential size of our target markets;

(c)	expected supply and demand for our products and services;

(d)	the effectiveness of our technologies and the benefits they provide;

(e) ~~expected~~the timing of ~~conducting~~awards ~~additional~~of, ~~demonstrations~~and ofwork under, our ~~technology~~contracts and agreements and their value and their availability;

(f) expected production levels at our refined coal (“RC”) facilities, when those RC facilities will be placed into continous operation, the ~~timing~~expected use of ~~awards~~the tax credits under Section 45 of, ~~and~~the ~~work~~Internal ~~under,~~Revenue ~~our~~Code ~~contracts~~(“Section ~~and~~45 ~~agreements~~tax credits”) generated by the RC facilities and ~~their~~the expected future value ~~and~~of ~~their~~Section ~~availability~~45 tax credits;

(g) ~~expected production levels at~~ our ~~refined~~ability ~~coal~~to ~~(“RC”)~~profitably ~~facilities~~sell, ~~when~~lease ~~those RC facilities will be placed into permanent operation~~ and/or ~~expected~~recognize ~~use of~~ the tax ~~credits~~benefits ~~under~~from ~~Section~~operating 45additional ~~of the Internal Revenue Code (“Section 45 tax credits”) generated by the~~ RC facilities;

(h) ~~our~~timing ~~ability~~and toamounts ~~profitably~~of ~~sell~~or changes in future revenues, ~~lease~~funding for our business and~~/or~~ ~~recognize~~projects, ~~the~~margins, expenses, earnings, tax ~~benefits~~rate, ~~from~~cash ~~operating~~flow, ~~additional~~working RCcapital, ~~facilities~~liquidity and other financial and accounting measures;

(i) ~~timing~~the ~~and~~materiality ~~amounts~~ of orany ~~changes~~future inadjustments ~~future~~to ~~revenues,~~previously ~~funding~~recorded ~~for~~revenue ~~our~~as ~~business~~a ~~and~~result ~~projects,~~of ~~margins,~~Department ~~expenses,~~of ~~earnings,~~Energy ~~tax~~(“DOE”) ~~rate,~~audits ~~cash~~and ~~flow,~~the ~~working~~amount ~~capital,~~of ~~liquidity~~contributions ~~and~~from ~~other~~the ~~financial~~DOE and ~~accounting~~others ~~measures~~towards project demonstrations;

(j) the ~~materiality~~ability of ~~any~~third ~~future~~parties ~~adjustments~~ to ~~previously~~which ~~recorded~~we ~~revenue~~lease asor asell ~~result~~RC offacilities ~~Department~~to ofobtain ~~Energy~~any requested Private Letter Rulings (“~~DOE~~PLRs”) ~~audits~~from the Internal Revenue Service (“IRS”); and

(k)	whether any legal challenges or Environmental Protection Agency (“EPA”) actions will have a material impact on the implementation of the MATS or other regulations.

The forward-looking statements included in this 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, timing of new and pending regulations and any legal challenges to them; the government’s failure to promulgate regulations or appropriate funds that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; impact of competition; availability, cost of and demand for alternative energy sources and other technologies; technical, start up and operational difficulties; inability to commercialize our technologies on favorable terms; our inability to ramp up our operations to effectively address expected growth in our target markets; loss of key personnel; failure to satisfy performance guaranties; the failure of the facilities operated, leased or sold by Clean Coal Solutions, LLC (“Clean Coal”) to continue to produce coal that qualifies for Section 45 ~~tax~~ tax credits; termination of the leases ofor other agreements related to such facilities; rulings by the courts on, interpretations by the IRS of and other official pronouncements on tax credit regulations adverse to our RC business; decreases in the coal available for treatment at Clean Coal’s RC facilities; plant outages; seasonality; failure to ~~monetize~~sell ~~the~~or ~~new~~lease ~~CyCleanTM~~the ~~and~~RC ~~M-45TM~~ facilities; inability to put into permanent operation our available RC facilities and obtain necessary agreements, permits and private letter rulings from the IRS; adverse market impacts that may result from IRS audits of entities that claim Section 45 tax credits on their tax returns; availability of raw materials and equipment for our businesses; intellectual ~~property~~ property infringement claims from third parties; as well as other factors relating to our business, as described in our filings with the U.S. Securities and Exchange Commission, with particular emphasis on the risk factor disclosures contained in ~~those~~ those filings and in Item 1A of our Annual Report on Form 10-K. You are cautioned not to place undue reliance on the forward-looking statements made in this 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. The forward-looking statements contained in this Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law to do so.

Restatement

The following Management Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) incorporates restated figures related to the following previously filed amended consolidated financial statements, data and related disclosures: Consolidated Balance Sheet as of December 31, 2011, Consolidated Statement of Operations for the three and nine months ended September 30, 2011 and Consolidated Statement of Changes in Stockholders’ Deficit and Consolidated Statement of Cash Flows for the nine months ended September 30, 2011. For this reason, the following MD&A should be read in conjunction with the amended financial statements and notes thereto and the MD&A included in the Company’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2011 and in the Company’s Amendment No. 2 to its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, which were both filed on October 19, 2012, as well as the Company’s other filings with the SEC.

The restatement resulted from management’s determination that the Company had not properly accounted for the interest held by an affiliate of the Goldman Sachs Group (“GS”) in our joint venture, Clean Coal since May 2011 and that a full valuation allowance against the Company’s deferred tax assets should have been recognized as of December 31, 2010 and all subsequent quarters thereafter.

Overview

WeThe ~~develop,~~Company ~~offer~~is ~~and~~a ~~implement~~leader ~~proprietary~~in ~~environmental~~clean ~~technology~~coal technologies and ~~market~~associated specialty chemicals, toprimarily serving the coal-~~burning~~fueled ~~electric utility~~power ~~steam~~plant ~~generating units (“EGU”)~~ industry,. toOur ~~the~~proprietary ~~Portland~~environmental ~~cement~~technologies ~~industry~~ and tospecialty chemicals ~~industrial~~enable ~~boiler~~power ~~operators.~~and Wecoal-fired ~~have~~plants ~~three~~to ~~operating~~enhance ~~segments:~~existing RCair ~~(refined~~pollution ~~coal), EC (emission~~ control) ~~and~~equipment, CCminimize (mercury, CO2 ~~capture).~~and ~~The~~other RCemissions, ~~segment~~maximize ~~includes~~capacity ~~revenues~~and ~~from the leasing of RC~~improve ~~facilities~~operating ~~and~~efficiencies RCto ~~sales~~meet ~~which approximate~~ the ~~cost~~challenges of ~~raw~~existing ~~coal~~and ~~acquired~~pending ~~for~~emission RCcontrol ~~facilities operated for our own account~~regulations. ~~The~~We EChave ~~segment~~three ~~includes~~operating ~~revenue~~segments: ~~from~~RC ~~the supply of emissions control systems including powdered activated carbon injection~~ (~~“ACI”)~~refined ~~systems~~coal), ~~dry~~EC ~~sorbent injection~~ (~~“DSI”)~~emission ~~systems to~~ control ~~SO2, SO3 and HCl and flue gas conditioning (“FGC”~~) ~~systems, the licensing of certain technology~~ and ~~provision of consulting services. The~~ CC ~~segment includes revenue from projects relating to the~~ (CO2 capture ~~and control market, including projects co-funded by government agencies, such as the DOE and industry supported contracts~~).

~~Our~~17 RC segment generates revenues through the lease or sale of RC facilities, which qualify for Section 45 tax credits, to third party financial institutions or others, as well as operating RC facilities and keeping the tax credits for our own and our partners’ accounts. To date, 28 RC facilities that qualify for the Section 45 tax credits have been “placed in service” through Clean Coal, our RC joint venture with NexGen Refined Coal, LLC (“NexGen”), an affiliate of NexGen Resources Corporation, and with an affiliate of The Goldman Sachs Group, Inc. (“GS”).

The ~~primary~~RC ~~drivers~~segment ~~for~~includes ~~many~~revenues offrom ~~our~~the EClease ~~products~~or ~~and~~sale ~~services~~of ~~are~~RC ~~environmental~~facilities ~~laws~~ and ~~regulations~~RC ~~impacting~~sales which approximate the ~~electric~~ ~~power~~cost ~~generation~~of ~~industry.~~raw ~~Environmental~~coal ~~regulations,~~acquired ~~such~~for asRC ~~the~~facilities ~~1990~~operated ~~Clean~~for ~~Air~~our ~~Act~~own ~~Amendments,~~account. ~~the~~The ~~MATS~~EC ~~regulations,~~segment ~~various~~includes ~~Maximum-Achievable~~revenue ~~Control~~from ~~Technology~~the ~~(“MACT”)~~supply ~~standards~~of emissions control systems including ~~the~~activated ~~Industrial~~carbon ~~Boiler~~injection ~~MACT~~ (“~~IBMACT~~ACI”) ~~regulations~~systems, ~~Cement~~dry ~~MACT~~sorbent injection (~~as defined below~~“DSI”) ~~regulations,~~systems ~~various state regulations and permitting requirements for coal-fired power plants are requiring electric power generators~~ to ~~reduce~~control ~~emissions of pollutants, such as particulate matter,~~ SO2, ~~NOx,~~SO3 ~~mercury,~~ and ~~acid~~HCl ~~gases. We are a key supplier of mercury control equipment~~ and ~~services,~~flue ~~which~~gas ~~include~~conditioning ~~ACI~~ systems, to the EClicensing ~~market~~of ~~whose~~certain technology ~~commercial~~and ~~equipment~~provision ~~component~~of ~~first~~consulting ~~began~~services. inThe ~~2005~~CC ~~when~~segment ~~several~~includes ~~individual~~revenue ~~states~~from ~~began~~projects relating to ~~require~~the CO2 ~~limits~~capture onand ~~mercury~~control ~~emissions.~~market, Weincluding ~~also~~projects ~~offer~~co-funded by ~~DSI~~government ~~systems~~agencies, ~~to control SO2 and acid gases~~ such as ~~HCl~~the DOE and ~~SO3~~industry supported contracts.

WeOur ~~conduct~~RC ~~research~~segment generates revenues through the lease or sale of RC facilities that produce RC intended to qualify for Section 45 tax credits to third party investors, as well as operating RC facilities and ~~development~~keeping ~~efforts~~the intax ~~CO2~~credits ~~capture~~for our own and ~~control~~our ~~from~~partners’ ~~coal~~accounts. To date, 28 RC facilities have been “placed-~~fired~~in-service” ~~boilers.~~through InClean ~~September~~Coal, ~~2010~~our RC joint venture with NexGen Refined Coal, weLLC ~~signed~~(“NexGen”), ~~our~~an ~~second~~affiliate ~~significant~~of ~~contract~~NexGen ~~related~~Resources ~~to CO2~~Corporation, ~~capture~~and with ~~the~~GSFS ~~DOE~~Investments I Corp. (“GSFS”), an affiliate of The Goldman Sachs Group, Inc. (“GS”). Unless Congress again extends the placed-in-service deadline for asuch ~~project~~facilities, ~~that~~which ishas ~~expected~~passed, we have no ability to ~~continue~~ ~~through~~place ~~the~~any ~~end~~more ofRC ~~2014~~facilities into service.

The primary drivers for many of our EC products and services are environmental laws and regulations impacting the electric power generation industry and other coal users. Environmental regulations, such as the 1990 Clean Air Act Amendments, the MATS regulations, various Maximum-Achievable Control Technology (“MACT”) standards including the Industrial Boiler MACT (“IBMACT”) regulations, the Cement MACT regulation, various state regulations and permitting requirements for coal-fired power plants are requiring electric power generators and others to reduce emissions of pollutants, such as particulate matter, SO_2,NO_x, mercury and acid gases. We are a key supplier of mercury control equipment and services, which includes ACI systems and chemical additives, to the EC market whose commercial equipment component first began in 2005 when several individual states began to require limits on mercury emissions. We also offer DSI systems to control SO₂ and acid gases such as HCl and SO₃.

We conduct research and development efforts in CO₂ capture and control from coal-fired boilers and other technologies that we believe may have future commercial markets. In September 2010, we signed our second significant contract related to CO₂ capture with the DOE, for a project that is expected to continue through the end of 2014.

Refined Coal

We are marketing our CyClean and M-45 technologies, services and equipment exclusively through our joint venture in Clean Coal. ~~Since its inception, ADA has been considered the primary economic beneficiary of Clean Coal and has consolidated its accounts.~~

Environmental Legislation and Regulations

Clean Coal’s primary opportunity is based on the availability of Section 45 tax credits, established by the American Jobs Creation Act of 2004, and as amended by the Emergency Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act of 2009, and the Tax Relief and Job Creation Act of 2010, the last of which extended the placed -in -service deadline for the Section 45 tax credits from its original date to January 1, 2012. The ~~2012~~2013 tax credit amounts to $6.4759 per ton of RC, and is expected to escalate annually through 2021. In December 2009, the Internal Revenue Service (the “IRS”) issued the initial guidance as to the specifics concerning how the emissions reductions are to be measured and certified to demonstrate compliance necessary for RC production to qualify for the Section 45 tax credits. The IRS provided subsequent guidance on October 4, 2010 to address various issues that had arisen. Additionally, the IRS has published a number of ~~Private Letter Rulings (“~~PLRs) that provide approval to specific taxpayers on matters related to ~~specific~~the Section 45 tax credit issues addressed in the PLRs. Although the approval in each PLR only applies to the taxpayer and the specific project mentioned in the PLR, other taxpayers can gain an understanding on how the IRS interprets certain matters based on the conclusions reached in the PLR.

Use of ~~the~~any tax credits is ~~also~~ subject to potential IRS audits of the entity that claims the ~~credit~~credits on its tax return. ~~and~~If such ~~rulings~~use byis ~~the~~challenged, ~~United~~negotiated/structured ~~States~~settlements ~~Tax~~may ~~Court~~be (reached with the ~~“Tax~~IRS. ~~Court”)~~In some cases, ~~each~~where ofthe ~~which~~parties ~~can~~cannot reach agreement and the matter is litigated, court rulings may impact ~~several~~ various aspects of the RC business including the viability of the market for Section 45 tax credits in general, the perceived risk involved in ~~obtaining~~the ~~Section~~allocation of Section 45 ~~Tax~~tax ~~Credits~~credits and thus the ~~price~~amount a third party would be willing to ~~pay~~invest for ~~them~~the opportunity to produce RC and generate tax credits and the structure of contracts that we enter into to ~~monetize~~recognize value from our RC facilities.

22Technology License Agreements

Technology License Agreements and Operating Agreement

ADA licensed to Clean Coal, on an exclusive basis, the CyClean technology in November 2006. On July 27, 2012 ADA licensed the M-45 technology (the “M-45 License”) to Clean Coal in order to leverage Clean Coal’s operating expertise and take advantage of the other synergies that can be obtained by Clean Coal having the ability to provide and use either the CyClean or M-45 technology.

In addition, the M-45 License gives Clean Coal, on a limited, non-exclusive, non-transferable, royalty-bearing basis, ~~with~~ the right to sublicense (under specified terms to be approved by ADA prior to the sublicense being granted) to limited utilities that ~~burn~~purchase or have ~~burned~~purchased RC produced using the M-45 technology, the right to ~~continue to~~ use the M-45 technology under certain circumstances for the purpose of “Mercury Only Emission Control”.

~~The~~18 M-45 License runs from July 27, 2012, through the later of the expiration of (i) the Section 45 tax credits, (ii) any similar tax credit subsequently enacted, after the effective date of the agreement up to within one year of the expiration of the Section 45 tax credits, which tax credit provides for the production of a coal-based fuel (pre-combustion) that emits, when combusted, a lower level of both NOx and mercury emissions, or (iii) the date on which Clean Coal and all sublicensees have permanently ceased to provide Mercury Only Emission Control.

~~Pursuant~~The ~~to the~~ M-45 License, weruns ~~will~~from ~~receive royalties equal to (i)~~July a27, ~~percent~~2012, ofthrough the ~~per-ton, pre-tax~~latest ~~margin~~of ~~from RC produced with~~ the ~~M-45~~expiration ~~technology~~of ~~from leased or sold RC facilities,~~ (iii) ~~a percentage of~~ the Section 45 tax credits, ~~claimed by Clean Coal~~ (~~or a Clean Coal affiliate~~ii), any orsimilar ~~their~~tax ~~respective~~credit ~~owners~~subsequently enacted, onafter RCthe ~~produced~~effective bydate ~~a facility~~of ~~that~~the ~~Clean~~agreement ~~Coal~~up ~~does~~to ~~not~~within ~~monetize~~one ~~with~~year aof ~~third~~the ~~party~~expiration ~~and~~of ~~instead opts to retain~~ the Section 45 tax credits ~~from that facility for its (or an affiliate’s) own benefit~~, ~~net~~which oftax ~~all~~credit ~~directly~~provides ~~allocable~~for ~~operating expenses and all utility payments incurred by Clean Coal (or an affiliate) in connection with~~ the production ~~and sale~~ of a ~~such~~coal-based ~~RC,~~fuel ~~and~~ (~~iii~~pre-combustion) a ~~percent~~that ~~of the revenue~~emits, ~~net~~when ~~of all direct expenses~~combusted, ~~received by Clean Coal as~~ a ~~direct~~lower ~~result~~level of ~~Clean~~both ~~Coal’s exercise~~NOx ofand ~~the~~mercury ~~license~~emissions, ~~for~~and ~~Mercury Only Emission Control described above. ADA is entitled to receive up to $10 million in prepaid royalty deposits upon~~ (iii) the ~~attainment~~date byon ~~Clean Coal of certain milestones,~~ which amount includes the initial payment of $2 million made upon signing of the non-binding term sheet for the M-45 License Agreement in November, 2011. We have certain obligations to provide technical assistance to Clean Coal and ~~its~~all sublicensees ~~during the term~~ of the M-45 ~~License,~~technology ashave ~~well as~~permanently ~~certain~~ceased ~~obligations~~ to ~~protect~~provide ~~and~~Mercury ~~maintain~~Only Emission ~~the patents that underlie the M-45 technology and to indemnify Clean Coal against certain claims related to the technology~~Control.

Pursuant to the M-45 License, we receive royalties equal to (i) a percentage of the per-ton, pre-tax margin from RC produced with the M-45 technology from leased or sold RC facilities, (ii) a percentage of the Section 45 tax credits claimed by Clean Coal (or a Clean Coal affiliate), or their respective owners, on RC produced by a facility that Clean Coal does not sell or lease to a third party and instead operates to retain the Section 45 tax credits from that facility for its (or an affiliate’s) own benefit, net of all directly allocable operating expenses and all utility payments incurred by Clean Coal (or an affiliate) in connection with the production and sale of such RC, and (iii) a percentage of the revenue, net of all direct expenses, received by Clean Coal as a direct result of Clean Coal’s exercise of the license for Mercury Only Emission Control described above. ADA received $10 million in prepaid royalty deposits as a result of attainment by Clean Coal of certain milestones, consisting of the initial payment of $2 million made at signing of the non-binding term sheet for the M-45 License in November 2011 and an additional $8 million received in March 2013. We have certain obligations to provide technical assistance to Clean Coal and its sublicensees during the term of the M-45 License, as well as certain obligations to protect and maintain the patents that underlie the M-45 technology and to indemnify Clean Coal against certain claims related to the technology. The income and expense related to these royalties are eliminated in consolidation of the financial results of Clean Coal.

Leased and Operating RC Facilities

Clean Coal initially placed two RC facilities in service prior to the initial placed-in-service deadline of January 1, 2010 and demonstrated the required emission reductions for their RC product to qualify for the Section 45 tax credits. On June 29, 2010, Clean Coal ~~executed~~signed ~~contracts pursuant~~agreements to ~~which~~lease these two RC facilities ~~were~~through ~~leased~~its ~~by Clean Coal’s~~ wholly owned subsidiaries (the “Lessors”) to GS RC ~~Investment~~Investments, LLC (~~the~~ “~~Lessee~~GS RC”). ~~The~~with ~~two~~initial ~~facilities were installed at~~ two ~~different~~and ~~power~~one ~~plants~~half inyear ~~the Midwest~~terms ~~each~~and ofannual ~~which~~renewals ~~operates~~that ~~two~~were ~~cyclone~~set ~~boilers~~to ~~burning~~expire ~~Powder~~in ~~River Basin (“PRB”) coal from Wyoming~~2019. OnIn November 21 and December ~~15,~~ 2011, Clean Coal, the Lessors and ~~the~~GS ~~Lessee~~RC entered into two Exchange Agreements ~~pursuant~~ pursuant to which the parties exchanged the leased RC facilities at each power plant with newly constructed, redesigned RC facilities which resulted in termination of the original leases and entry into new lease agreements (the “Exchange Transactions”). The new leases ~~carry~~carried over most of the substantive terms and conditions of the initial leases and ~~have~~initially had annual terms that would have automatically ~~renew~~renewed through December 31, 2021. The two facilities are installed at two different power plants in the Midwest each of which operates two cyclone boilers burning Powder River Basin (“PRB”) coal from Wyoming.

AsGS aRC ~~result~~also ofentered ~~the~~into ~~extension~~supply ofagreements ~~the~~for ~~Section 45~~each ~~tax~~RC ~~credit~~facility ~~placed~~pursuant into ~~service~~which ~~deadline,~~it supplies RC to the applicable power plant owner. Clean Coal ~~built~~Solution Services (“CCSS”), a Colorado limited liability company owned 50% by us and ~~qualified~~50% anby ~~additional~~NexGen, 26(subject to oversight by GS RC) ~~facilities~~operates ~~that~~and ~~met~~maintains the ~~extended~~RC ~~placed~~facilities under two Operating and Maintenance Agreements entered into with GS RC in ~~service~~June ~~date~~2010. ~~These~~CCSS also arranges for the purchase ~~facilities~~and ~~use~~delivery aof ~~combination~~certain chemical additives necessary for GS RC’s production of ~~our~~RC ~~CyClean~~under ~~technology,~~the ~~which~~supply isagreements. ~~limited~~The toterm ~~cyclone~~of ~~boilers,~~each ~~and~~such ~~M-45~~agreement ~~technology,~~runs ~~which~~coincident ~~can~~with bethe ~~used~~leases. These agreements were amended in ~~non-cyclone~~November ~~boilers~~and December 2011 in connection with the Exchange Transactions.

23In addition, pursuant to the Exchange Transactions, we, NexGen and two entities affiliated with NexGen provided GS RC with joint and several guaranties (the “CCS Guaranties”) guaranteeing all payments and performance due under the agreements described above. We also entered into a contribution agreement with NexGen under which any party called upon to pay on a CCS Guaranty is entitled to receive contribution from the other party equal to 50% of the amount paid. GSFS, GS RC’s parent, provided Clean Coal with a guaranty as to the payment of all fixed rent payments under the leases, which, although terminable at any time, cannot be terminated without the substitution of such guaranty with another guaranty on similar terms from a creditworthy guarantor.

~~Based~~In onMarch 2013 the ~~ten~~parties ~~year~~amended ~~term~~and ofrestated the ~~current~~Exchange ~~Section 45~~Transaction ~~tax~~lease ~~credits,~~agreements weto ~~expect~~change ~~Clean~~certain ~~Coal~~terms toand ~~generate revenues~~timing ~~from~~of ~~leasing~~the orlease ~~selling~~payments. RCThe ~~facilities~~payments toare ~~financial~~now ~~parties~~due ~~and~~quarterly byin ~~generating~~advance ~~tax~~and ~~credits~~are subject byto ~~retaining~~adjustments ~~and~~for ~~operating~~inflation. ~~certain~~Each oflease ~~the~~has 28an RCinitial ~~facilities~~non-cancellable ~~that~~term ~~met~~of ~~the~~two ~~placed~~years inand ~~service~~will ~~deadline~~automatically ~~through~~renew ~~December 31,~~unless ~~2021.~~terminated ~~Upon~~at ~~expiration~~the option of the ~~tax~~lessee ~~credits~~for onsuccessive one-year terms through November 9, 2021 and December 3110, 2021, ~~the~~as ~~leases~~applicable. ofRevenues ~~our RC facilities~~ to ~~financial parties will terminate.~~ Clean Coal ~~may~~are ~~then~~expected ~~lease~~to orremain ~~sell~~at ~~the~~similar RClevels ~~facilities~~as ~~directly~~seen tounder the ~~utilities~~prior ~~that~~written ~~own~~agreements. ~~and~~The ~~operate~~parties ~~the~~also ~~power~~amended ~~plants~~and atrestated ~~which~~ the ~~RC facilities~~two ~~are~~Operating ~~located~~and orMaintenance ~~operate~~Agreements ~~the~~to ~~facilities~~provide onfor ~~behalf~~the payment of ~~utility~~a ~~customers~~fixed ~~given~~fee under the ~~significant~~agreements ~~benefit~~instead of ~~the~~variable ~~mercury~~payments ~~reductions~~based ~~such~~on ~~facilities~~the ~~provide.~~production ~~After~~of ~~December 31, 2021, Section 45 tax credits would no longer be available absent further extension by Congress~~RC.

~~Eight~~In ofconnection ~~the~~with ~~28 total RC facilities are currently in routine operations on 15 coal-fired boilers. Once the final utility site and financing party have been determined, it takes~~ an ~~average~~Exclusive ~~of approximately six~~ Right to ~~twelve~~Lease ~~months~~Agreement tobetween ~~obtain~~Clean ~~environmental~~Coal ~~permits for full-time operation, secure necessary approvals from state Public Utility Commissions,~~ and ~~negotiate~~ ~~and~~GSFS ~~complete all necessary contracts. Since~~ (the ~~IRS~~“Lease ~~did not provide explicit guidance on the blending of coal to qualify for Section 45 tax credits~~Agreement”), ~~PLRs~~Clean ~~may~~Coal begranted ~~needed~~GSFS ~~from~~ the ~~IRS~~exclusive ifright ~~requested~~(but bynot the ~~applicable~~obligation) ~~utility~~to orlease ~~financing party, which may take an~~ additional ~~two to four months to obtain after formal contracts are completed. We expect that the requesting party will eventually be able to obtain all required PLRs necessary for operating the~~ RC facilities. ~~We expect~~ that ~~the~~ ~~transactions for the new RC facilities may be either leases or sales transactions with the purchase price payable over time, but that regardless of their form the final transaction structures~~ will ~~provide~~produce ~~long-term~~up ~~economic benefits substantially similar~~ to ~~those~~approximately provided by the prior lease transactions. However, the economics of each facility will be somewhat unique as the revenue and expected margins will differ from one RC facility to another depending upon: size of the power plant being served, the annual RC burned at each plant, the cost of chemicals, labor costs, negotiated payments to the utility, upfront prepaid rent payments, royalty payments for certain technologies, and the payment structure for the tax credits. As is generally the case in these transactions, the sale or lease of the RC facilities and the monetization of the Section12 45million ~~tax~~tons ~~credits involve a relationship between the utility, a financial party and Clean Coal. By buying or~~(+/- ~~leasing~~10%) (the RC“Target ~~facility~~Tons”) ~~and producing RC, the financial institution or other party becomes the producer~~ of RC, ~~receives the benefit of the annually escalating~~ per ~~ton~~year ~~Section 45~~on ~~tax~~pre-established ~~credit and is able to deduct depreciation and/or a portion or all of the~~ lease ~~payments.~~terms Insimilar ~~return it pays, and may also deduct, a fee~~ to ~~the~~those ~~utility~~in ~~for~~effect ~~coal~~at ~~handling and land use to site~~ the RCtime ~~facility and operational costs. In addition, the financial party pays a mutually agreed combination of fixed and contingent rents to Clean Coal~~ for the lease of the RC facility or, in the case of a sale, payments that are substantially similar to fixed and contingent rents. In addition to the site and coal handling payments, the utility receives the benefit of the resulting mercury reductions which have an estimated value of between $1.00- $4.00 per ton.

In19 connection with the Exclusive Right to Lease Agreement (“Lease Agreement”) among ADA, NexGen and Clean Coal as discussed in prior filings, Clean Coal granted GS the exclusive right (but not the obligation) to lease facilities that will produce up to approximately 12 million tons (+/- 10%) (the “Target Tons”) of RC per year on pre-established lease terms similar to those currently in effect for Clean Coal’s two then-existing leased facilities, but which are more economically favorable to Clean Coal than the rates in the leases for the existing RC facilities that Clean Coal leased to another GS affiliate in June 2010. Under this arrangement, Clean Coal is required to submit a package to GS with respect to each RC facility it proposes that GS consider for leasing (being all RC facilities developed by Clean Coal until the Target Tons are met), and upon certification and acceptance of the certification for a given RC facility by GS, GS is required to pay Clean Coal, as a deposit, an agreed amount for each 1 million tons of projected annual RC production. Upon closing of such a lease of an RC facility from Clean Coal, GS is required to pay Clean Coal an additional amount per 1 million tons of projected annual RC production. These payments will be paid as advance rent, and actual amounts due under the leases (with true-ups) will be paid in accordance with the operative lease and related agreements. If GS determines that it will not lease a RC facility after it has paid the deposit, it can provide notice requesting the return of the deposit paid for that RC facility, and the deposit must be paid within 30 days of the end of the quarter in which the notice is given . The amount of any deposit will earn interest from the date of the notice until the deposit is paid. Clean Coal received $14.9 million from GS in 2011 as initial deposits for more than the Target Tons, which according to the Lease Agreement reserves GS’s right to negotiate for specific RC facilities. In October 2012, GS determined that it would not pursue leases on two particular RC facilities on which it had paid deposits totaling $4.7 million and concurrently gave notice for the return of the related deposits. While Clean Coal has not yet returned the deposit, it plans to do so by January 30, 2013 as required by the Lease Agreement unless GS selects other facilities in which to participate for which deposits could be applied. We are currently in discussions with a number of other major financial institutions, corporations and other investors with respect to a number of the remaining facilities.

~~Pursuant~~ Clean toCoal’s ~~the~~two ~~Lease~~then-existing ~~Agreement~~leased RC facilities, but which are more economically favorable to Clean Coal ~~leased~~than athe ~~third~~rates in the leases for the existing RC ~~facility~~facilities that Clean Coal leased to GS RC in June 2010. Under the ~~first~~Lease ~~quarter~~Agreement, ofClean ~~2012~~Coal ~~and~~is ~~leased~~required to submit a ~~fourth~~package RCto ~~facility~~GSFS with respect to ~~another financial~~each ~~party~~RC ~~during~~facility ~~the~~it ~~third~~proposes ~~quarter.~~that ~~All~~GSFS ~~agreements~~consider ~~included~~for ~~substantially~~leasing ~~similar~~(being ~~terms~~all ~~and~~RC ~~conditions~~facilities asdeveloped ~~those~~by ~~applicable~~Clean toCoal until the ~~first~~Target Tons ~~two~~are ~~leased~~met), RCand ~~facilities.~~upon ~~With~~certification ~~progress~~and toacceptance ~~date,~~of ~~currently~~the acertification ~~total~~for ofa ~~eight~~given RC ~~facilities~~facility ~~are~~by ~~operating~~GSFS, ~~at full~~GSFS ~~time~~is ~~status~~required ~~treating~~to ~~fifteen~~pay ~~boilers~~Clean ~~that~~Coal, inas ~~the~~a ~~aggregate~~deposit, ~~average~~an ~~more~~agreed ~~than~~amount ~~twenty-one~~for each 1 million tons of RCprojected ~~per~~annual ~~year~~RC production.

InUpon ~~addition~~closing ~~to the~~of ~~four~~such ~~leased~~a RClease ~~facilities,~~of ~~Clean~~an ~~Coal currently operates four additional~~ RC ~~facilities~~facility ~~for~~from ~~its~~Clean ~~own account~~Coal, ~~resulting~~GSFS inis ~~its~~required ~~right~~ to ~~claim~~pay ~~the Section 45 tax credits for the RC produced during those operations.~~ Clean Coal ~~plans~~an toadditional ~~retain and~~amount ~~operate~~per ~~one~~1 million ortons ~~two~~ of projected ~~these~~annual RC ~~facilities~~production ~~permanently~~from ~~for~~the ~~its~~leased ~~own~~RC ~~account~~facility. ~~(with~~These anpayments ~~ultimate~~are ~~goal~~paid ofas ~~one~~advance ofrent, ~~every five tons of RC produced) going forward~~ and toactual ~~lease~~amounts ordue ~~sell~~under the ~~other~~leases RC(with ~~facilities~~true-ups) ~~currently~~are paid in ~~full~~accordance ~~time~~with ~~operation~~the tooperative ~~financial institutions~~lease orand ~~others~~related ~~pending completion of definitive~~ agreements. ~~During~~If ~~the~~GSFS ~~third~~determines that ~~quarter,~~it ~~the~~will RCnot ~~facilities~~lease ~~operated~~an ~~for~~RC ~~Clean~~facility ~~Coal’s~~after ~~account~~it ~~generated~~has ~~$16.1~~paid ~~million~~the indeposit, ~~Section 45~~it ~~tax credits that~~ can beprovide ~~used~~notice torequesting ~~offset~~the ~~future~~return ~~tax expenses~~of ~~and~~the ~~$59~~deposit ~~million~~paid infor ~~revenues~~that ~~from~~ RC ~~sales~~facility, ~~which~~and ~~are~~the ~~offset~~deposit bymust ~~$59~~be ~~million~~returned inwithin ~~raw~~30 ~~coal~~days ~~costs.~~of ~~Clean~~the ~~Coal~~end ~~has~~of ~~finalized~~the ~~monetization~~quarter ~~contracts~~in ~~for~~which athe ~~ninth~~notice is RCgiven. ~~facility~~The ~~and~~amount ~~the~~of ~~monetizer~~any isdeposit ~~waiting~~will ~~for~~earn ainterest ~~PLR~~from ~~and~~the ~~other~~date ~~approvals~~of ~~before~~the ~~full~~notice ~~time operation~~until ~~can~~the ~~commence,~~deposit ~~which~~ is ~~expected~~returned. ~~in the~~

24Clean Coal received $14.9 million from GSFS in 2011 as initial deposits for more than the Target Tons. In October 2012, GSFS determined that it would not pursue leases on two specific RC facilities on which it had paid deposits totaling $4.7 million and concurrently gave notice for the return of the related deposits. In December 2012, GSFS agreed to defer the return of the deposits until April 30, 2013. In March 2013, Clean Coal returned the $4.7 million in deposits plus accrued interest to GSFS.

~~next~~Pursuant ~~few~~to ~~months.~~the ~~When~~Lease ~~these~~Agreement, ~~nine~~Clean Coal leased a third RC ~~facilities~~ ~~are~~facility ~~operating,~~in the first quarter of 2012 to another entity related to GS. Clean Coal ~~will~~leased bea fourth ~~producing~~RC ~~about~~facility ~~25 million~~to ~~tons~~another third party investor during the third quarter of RC2012. ~~per~~All ~~year~~agreements ~~based~~included ~~upon~~terms ~~historical~~and ~~coal~~conditions ~~usage~~substantially atsimilar ~~these~~to ~~plants~~those applicable to initial leases for the first two leased RC facilities. ~~Clean~~On February 28, 2013, Clean Coal issold inan ~~negotiations~~RC facility to ~~lease~~a ornew ~~sell~~third ~~several~~party ~~additional~~investor, bringing the total number of RC facilities ~~and~~leased ~~has~~or sold to five. The structure of the ~~potential~~sale was similar to bethat ~~producing~~of upthe initial leases and provided the buyer with the right to ~~60 million~~require ~~tons~~Clean ofCoal to repurchase the RC byfacility for a nominal fee in certain situations. The terms of the ~~end~~sale included $20 million paid immediately to Clean Coal and a combination of ~~2014~~fixed ~~utilizing~~and variable payments going forward. An additional $5 million is to be paid to Clean Coal when the ~~CyClean~~buyer ~~and~~receives Man applied-45for ~~technologies~~PLR from the IRS, which is expected later this year.

In ~~those~~addition ~~cases where Clean Coal chooses~~ to ~~operate an RC facility for its own account, either on an interim basis or for~~ the ~~long-term,~~four itleased ~~receives~~RC ~~the benefit~~facilities ofand the ~~Section 45~~fifth ~~tax credits from the~~ RC ~~produced at the~~ facility. Assold ~~part~~to ofa ~~those~~third ~~operations~~party investor, Clean Coal ~~purchases~~currently ~~raw~~operates ~~coal~~three ~~from~~additional ~~the utility, refines the raw coal into~~ RC ~~and then sells the RC back to the utility, generally at the~~ ~~same~~facilities ~~price per ton, recognizing revenue from the RC sale and costs of revenue~~ for ~~the~~its ~~raw~~own ~~coal~~account, ~~purchased.~~resulting ~~These~~in ~~amounts~~its ~~may~~owners’ beability ~~significant~~to asclaim the ~~average~~Section 45 ~~per~~tax ~~ton~~credits ~~price~~ for the ~~raw coal purchased and~~ RC ~~sold~~produced ~~has~~during ~~historically ranged from $20 to $40 per ton. In~~ those operations. ~~Clean~~We ~~Coal~~expect ~~also~~the ~~pays,~~largest ~~recognizing~~of anthose ~~expense,~~facilities ~~and~~to ~~may~~be ~~also~~leased ~~deduct~~to ~~for~~one ~~tax~~of ~~purposes, operational costs, a fee to~~ the ~~utility~~existing ~~for~~third ~~coal~~party investors ~~handling~~within ~~and a fee for~~ the ~~land~~first ~~used~~half toof ~~site the RC facility~~2013.

~~Closings~~With ofthe ~~several~~four ~~deals~~leased ~~with~~RC ~~utilities~~facilities, ~~and~~the ~~tax~~fifth ~~equity~~RC ~~partners~~facility ~~for~~sold ~~our~~to RCa ~~facilities~~third ~~were~~party ~~delayed~~investor inand the three ~~second~~RC ~~and~~facilities ~~third~~currently ~~quarters~~operated ofby ~~2012~~Clean Coal for ~~various reasons,~~its ~~including:~~own ~~permitting~~account, ~~regulatory~~there ~~approval,~~are ~~corporate~~currently ~~financial~~eight ~~restructuring~~RC offacilities ~~third parties involved~~ in ~~some~~routine ~~aspect~~operations ofon ~~the~~15 ~~transaction,~~coal-fired ~~changes~~boilers ~~in plant ownership~~that, ~~changes and retirements of personnel involved~~ in the ~~negotiations~~aggregate, ~~involvement~~ ofhave ~~additional~~historically ~~parties~~burned inmore ~~the~~than ~~transactions,~~20 million ~~and~~tons ~~uncertainties~~of incoal per ~~the~~year. ~~tax~~One ~~credit~~of ~~community.~~Clean AsCoal’s ~~our~~goals ~~previous~~is ~~disclosures~~to ~~have~~process ~~indicated,~~RC ~~because~~as ofhigh ~~the~~a ~~complexities~~percentage of ~~each~~coal RCmade ~~deal~~available ~~and~~to ~~the~~it ~~number~~as ofpossible. ~~externalities~~During ~~that~~the ~~are~~first ~~outside~~quarter ~~our~~of ~~direct control and involvement~~2013, ~~there~~RC ~~was~~facilities ~~potential~~operated ~~for~~by ~~and~~Clean weCoal ~~are~~for ~~experiencing~~its ~~delays~~own ~~beyond~~account ~~our~~produced ~~initial~~approximately two million ~~estimates~~tons of ~~six to nine months to close the transactions~~RC.

Clean Coal plans to retain and operate one or two of the currently operating RC facilities continously for its own account and in the longer term a number sufficient to claim Section 45 tax credits for one of every five tons of RC produced by all RC facilities going forward. During the first quarter of 2013, the RC facilities operated for Clean Coal’s account generated $45 million in revenues from RC sales which were offset by $45 million in raw coal costs and generated $12.6 million in Section 45 tax credits that can be used to offset future tax expenses of its owners. ADA’s portion of these credits amounts to $5.4 million. Clean Coal is in negotiations to lease or sell several additional RC facilities with a goal to have all RC facilities in operation by the end of 2014 utilizing the CyClean and M-45 technologies.

In those cases where Clean Coal chooses to operate an RC facility for its own account, either on an interim basis or for the long-term, it receives the benefit of the Section 45 tax credits from the RC produced at the facility. As part of those operations Clean Coal purchases raw coal, refines the raw coal into RC and then sells the RC to the power plant, generally at the same price per ton, recognizing revenue from the RC sale and costs of revenue for the raw coal purchased. These amounts may be significant as the average per ton price for the raw coal purchased and RC sold has historically ranged from $20 to $40 per ton. In those operations Clean Coal also pays, recognizing as an expense, and may also deduct for tax purposes, operational costs, a fee to the utility for coal handling and a fee for the land used to site the RC facility. For the RC facilities that Clean Coal operates for its own account, it incurs operating expenses of approximately $3 per ton of coal treated and generates approximately $7.50 per ton in tax benefits.

In those cases where Clean Coal chooses to lease or sell an RC facility to a third party investor, once the final utility site and the third party investor have been determined, it takes approximately six to twelve months to obtain environmental permits for full-time operation, secure necessary approvals from state Public Utility Commissions, and negotiate and complete all necessary contracts. PLRs may be needed from the IRS if requested by the third party investor, which may take several additional months to obtain after formal contracts are completed.

Closings of several deals with utilities and third party investors for our RC facilities were delayed in 2012 for various reasons, including: permitting, regulatory approval, corporate financial restructuring of utilities or third parties involved in some aspect of the transaction, changes in plant ownership, changes and retirements of personnel involved in the negotiations, involvement of additional parties in the transactions, and uncertainties in the tax credit community. As our previous disclosures have indicated, because of the complexities of each RC deal and the number of externalities that are outside our direct control and involvement, we may experience delays beyond our initial estimates of six to twelve months to close the transactions.

We expect that future transactions for RC facilities not presently operating may be either lease or sale transactions with the purchase price payable over time. However, regardless of the form the final transaction structures will provide long-term economic benefits substantially similar to those provided by the prior lease transactions. However, the economics of each facility will be unique as the revenue and expected margins will differ from one RC facility to another depending upon, among other factors, the size of the power plant that the facility serves, the amount of RC produced at the plant and the expenses incurred, including the cost of chemicals, labor costs, negotiated payments to the utility, upfront prepaid rent payments and royalty payments for the license of certain technologies. As is generally the case in these transactions, the sale or lease of the RC facilities involves a relationship between the utility, a third party investor and Clean Coal. By buying or leasing the RC facility and producing RC, the third party investor becomes the producer of RC, receives the benefit of the annually escalating per ton Section 45 tax credit and is able to deduct depreciation and/or a portion or all of the lease payments. In return it pays, and may also deduct, a portion or all of the fees to the utility for coal handling and land use to site the RC facility and operational costs. In addition, the third party investor pays a mutually agreed combination of fixed and contingent rents or fixed rents only, to Clean Coal for the lease of the RC facility. In the case of a sale, the overall economics of the payments made are substantially similar to the fixed and/or contingent rents paid under the initial leases. In addition to the site and coal handling payments, the utility receives the benefit of the resulting mercury and NOx reductions which have an estimated value of between $1.00- $4.00 per ton of RC burned.

Since its inception, ADA has been considered the primary economic beneficiary of Clean Coal and has consolidated its accounts in our financial statements, but we do not consolidate the accounts of CCSS because NexGen controls the entity pursuant to the operating agreement of the entity. Clean Coal’s total annual contribution to our operating income will ultimately depend on the utilities’ use of coal in the generation of electricity, which use will likely fluctuate over the term of the Section 45 tax credits. In order to maintain our interest in Clean Coal, we are obligated to fund half of its operating costs and capital expenditures.

Status of Remaining RC Facilities

Our goal is to place into full time operations the ~~majority~~ ~~of the~~ remaining RC facilities as soon as possible with an expectation that all will be in operation inby the end of 2014. For the remaining facilities, there are a number of possible locations all with different sizes and characteristics. As a result, it is difficult to provide explicit guidance at this time ~~for~~as to the timing, location and likelihood of their permanent placement. For example, we are holding five facilities in reserve for placement at five very large potential RC production sites. Each of these sites has its own unique set of circumstances and issues that will likely require some change in operations at the utility or other changes such as technology improvements, switch in coal rank, or obtaining a PLR from the IRS, in order for those facilities to begin full time operation. In this regard we have made significant progress in expanding the potential target market by extending ~~the~~our RC technologies beyond cyclone boilers and PRB coals. Clean Coal is currently operating two RC facilities using the M-45 technology at plants burning Gulf Coast lignite and one ~~CyClean~~ RC facility using the CyClean technology at a plant burning North Dakota lignite. In addition, tests have demonstrated the potential to apply ~~the~~these RC technologies to bituminous coals. Clean Coal ishas ~~also~~successfully ~~conducting~~conducted tests on an improvement to the M-45 technology ~~that~~(referred ~~would~~to as M-45-PCTM ~~potentially~~technology) ~~make~~that itwas ~~available~~certified by an independent professional engineer as eligible for ~~use~~the onSection 45 ~~different~~tax ~~types~~credit ofin late 2012 and is available for use on pulverized coal (“PC”) boilers. ~~This~~The ~~would~~ability to use the M-45 technology on PC boilers significantly ~~increase~~increases the potential market for locations where the RC facilities could be located as PC boilers represent over 80% of the 1,200 electricity generating boilers in the U.S. and there are over 50 plants where it may be possible to treat five to ten million tons of coal per year with a single RC facility. The tax credit rules further ~~ease~~allows ~~the transition by allowing~~ us to change the process by which coal is refined and use the RC facilities at plants other than those at which they were originally placed into service. We believe that the first RC facilities using M-45-PC technology could be put into full-time operation later this year.

We ~~are~~believe ~~also~~that inonce ~~the process~~all ofnew ~~increasing the number of potential financial parties~~ and ~~others~~existing ~~that~~RC wefacilities, ~~are~~other ~~negotiating~~than ~~with~~those toretained ~~monetize~~by ~~the~~Clean ~~Section 45~~Coal ~~tax~~and ~~credits.~~operated Byfor ~~the~~its ~~end~~own ofaccount, ~~the~~are ~~year we expect that we will have~~ leased or sold ~~another RC facility~~ to ~~a new~~ ~~financial~~third party ~~bringing~~investors ~~the~~and ~~total~~become tofully ~~three~~operational, RCthey ~~facilities~~will ~~monetized~~achieve inan ~~2012.~~annualized Assegment ~~more~~rental ofrevenue ~~the~~rate RCof ~~facilities~~approximately ~~become~~$200 ~~operational~~million; ~~and~~this ~~operate~~revenue ~~for~~figure ~~longer~~excludes ~~periods,~~approximately we$250 ~~believe~~million ~~the~~to ~~technical~~$300 ~~and~~million ~~tax~~in ~~credit~~ongoing ~~risks~~coal ~~are~~sales ~~reduced.~~and Asraw acoal purchases ~~result,~~for weRC ~~expect~~facilities ~~the financial~~that ~~terms~~Clean ~~around~~Coal ~~future~~is ~~lease~~expected ~~and/or~~to ~~sale~~operate ~~transactions~~in tothe ~~generally~~long-term ~~improve~~ for ~~Clean~~its ~~Coal~~own ~~and~~account. ~~result~~These inrevenue ~~higher~~rates ~~per-ton~~would ~~profits~~be ~~over~~expected ~~time.~~to Ineventually ~~addition,~~generate ~~our~~approximately RC$100 ~~business~~million ~~opportunities~~in dosegment ~~not~~income ~~depend~~to ~~upon~~the ~~any~~Company ~~new~~after ~~environmental~~payments orto ~~tax regulations.~~joint ~~The~~venture ~~current~~partners, ~~ten~~including ~~year~~an ~~term~~estimated of$30 ~~the~~million in tax credits do(the ~~not~~Company’s ~~require~~share) ~~any~~to ~~additional~~be ~~approval~~generated by ~~Congress,~~RC ~~which~~facilities ~~provides~~operated usby ~~with~~Clean aCoal. ~~high~~The ~~degree~~projected ofsegment ~~confidence~~revenue ~~that the CyClean~~ and ~~M-45~~income ~~technologies~~are ~~will~~expected ~~generate~~to ~~long-term~~continue ~~cash~~through ~~flows~~2021.

~~Despite~~21 the recent delays in closings, we do not expect any changes that may result from variables outside our control to have a material impact on the expected size of our market or the future long term economics for our RC business segment. ADA expects to generate pre-tax income of greater than $1.60 per ton of RC produced per year for facilities leased or sold to others after payments to its joint venture partners, over the remaining nine-year life of the Section 45 tax credits. We expect that if all 28 RC facilities become fully operational, after obtaining environmental permits for full-time operation and completing all necessary contracts, they will produce a total of approximately 60 million tons or more of RC per year. We believe that once all new and existing RC facilities are leased or sold to others and become fully operational, they will achieve an annualized segment rental revenue rate of approximately $200 million; this revenue figure excludes approximately $250 million to $300 million in ongoing coal sales and raw coal purchases for RC facilities that Clean Coal is expected to operate in the long-term for its own account. These revenue rates would be expected to generate approximately $100 million in segment income to ADA after payments to joint venture partners, including an estimated $30 million in tax credits (ADA’s share) to be generated by RC facilities operated by Clean Coal. The projected segment revenue and income are expected to continue through 2021.

~~Based~~From ~~upon~~now ~~the status~~through of2014, ~~operations~~we expect leases and ~~negotiations~~sales onof new RC facilities, weto ~~expect~~generate tosignificant ~~report~~cash ~~consolidated~~receipts from RCprepaid ~~segment~~rent ~~revenues~~and ofupfront ~~approximately~~purchase ~~$190~~price ~~million~~payments infor ~~2012,~~Clean ~~comprised~~Coal. ofFor ~~$40~~the ~~million~~RC infacilities ~~rental~~that ~~revenues~~it retains and ~~$150~~operates ~~million~~for inits own account, Clean Coal will record operating costs, coal sales and RCcosts ~~purchases~~of coal that may be significant. ~~Tax~~This will ~~credit~~result ~~benefits~~in ~~and~~increased ~~segment~~expenses ~~income~~and ~~for~~revenues ~~2012~~over ~~are~~and ~~projected~~above tothe ~~total~~increased ~~approximately~~revenue ~~$22~~recognized ~~million,~~from ~~which~~the ~~will~~lease ~~include~~and ~~approximately~~sale ~~$16~~of ~~million~~additional ofRC ~~tax~~facilities ~~credits~~and ~~apportioned~~will toreduce ~~ADA~~gross ~~associated~~margin ~~with~~as ~~the~~a ~~operations~~percent of RCtotal ~~facilities~~revenues. ~~that~~The ~~have~~ultimate ~~either~~benefit ~~yet~~from tothese beretained ~~monetized~~facilities oris ~~are~~derived ~~being~~from ~~operated~~the bytax ~~Clean~~benefits ~~Coal~~they ~~for~~generate ~~its~~which ~~own~~amounts ~~account~~to approximately $7.50 per ton of RC produced.

From now through 2014, we expect leases and sales of new facilities to generate significant cash receipts from prepaid rent for Clean Coal. For the RC facilities that it operates, Clean Coal will record operating costs, coal sales and costs of coal that may be significant. This will result in increased expenses and revenues over and above revenue increases from the monetization of additional RC facilities and will likely keep the level of gross margin dollars similar to that which we would expect if the RC facilities were not retained. As a result of the tax credits that we expect to flow through to ADA from Clean Coal, we expect that ADA’s effective corporate tax rate will decrease to approximately 10% looking forward through 2021.

Emission Control

Power companies have started to procure ACI and DSI systems to comply with new emission regulations and the Company is currently maintaining its market leading positions in both ACI and DSI awards. We continue to receive requests to evaluate mercury and acid gas control options at a number of plants. We expect to see additional ACI and DSI revenues as contracts are awarded on the outstanding proposals (see discussion below).

Environmental Legislation and Regulations

Mercury has been identified as a toxic substance and, pursuant to a court order, the U.S. Environmental Protection Agency (“EPA”) issued regulations for its control from power plants in March 2005, which was known as the “Clean Air Mercury Rule” or “CAMR.” CAMR was subject to significant challenges and was ultimately declared invalid. In April 2010, the U.S. District Court of Appeals of the District of Columbia approved the consent agreement reached between the EPA and a coalition of public health and environmental groups that sued in 2008 to force the agency to set tighter emission limits. That settlement required the EPA to issue a draft rule in March 2011 and a final rule requiring strict plant-specific controls for power plants’ toxic air pollutants no later than November 16, 2011. On March 16, 2011, the EPA issued the draft of the proposed MATS rule, a MACT-based hazardous pollutant regulation applicable to coal and oil-fired electric utility steam generating units (“EGU”), which provides for, among other provisions, control of mercury and volatile metals such as arsenic, selenium and control of acid gases such as HCl and other Hazardous Air Pollutants (“HAPs”). On October 28, 2011, the EPA, with approval of the environmental groups who were parties to the Court of Appeals consent, extended the deadline and the final rule was issued on December 16, 2011, and took effect on April 16, 2012. ~~Prior~~After toreconsidering ~~April 16,~~certain ~~2012, several industry groups filed multiple lawsuits against the EPA with the U.S. Circuit Court of Appeals for the District of Columbia challenging various~~ aspects of the MATS. Onrelating ~~July 20, 2012, Assistant EPA Administrator Gina McCarthy issued a letter indicating that the EPA intended~~ to ~~grant reconsideration of certain~~ new ~~HAP~~ source ~~issues~~standards ~~and~~due ~~that they intended~~ to ~~complete~~various ~~the rulemaking by March 2013. On July 27~~lawsuits, ~~2012~~the EPA ~~Administrator, Lisa P. Jackson, signed a notice that was published in the~~issued ~~Federal Register on August 2, 2012. The action stayed~~ the ~~effectiveness of the~~ final rule ~~relating~~for to new source standards until November 2, 2012 and addressed certain technical issues including issues related to the measurement of mercury emissions and the applicable data set used in the variability calculation performed to establish the new emission source standards for particulate matter and HCl. This rule was recently stayed again until December 24, 2012. The EPA recently provided an update and reported that it remains on ~~track to complete the rulemaking by~~ March 28, of 2013. We ~~expect that the reconsideration will reduce emissions limits for new HAP sources. The EPA action does not affect existing HAP sources and at this time we do not~~ believe ~~any~~these ~~of the~~ lawsuits will ~~have~~not ~~a material~~ impact onour ~~the~~ongoing ~~implementation~~business, ofwhich ~~the~~is ~~mercury~~focused ~~standards~~on ~~of MATS for~~ existing ~~generating~~sources ~~units~~of ~~and therefore our ongoing business~~HAPs.

The ~~final~~MATS ~~rule~~for existing HAP sources establishes standards for all HAPs emitted by coal and oil fired ~~EGU’s~~EGUs with a capacity of 25 megawatts ~~(“MW”)~~ or greater. Units with lower generating capacities will instead fall under the IBMACT rule ~~once~~scheduled itto ~~goes~~go into effect on January 31, 2016. The standards are based upon the average of the best performing 12% of existing applicable power plants. The MATS provides the option to use facility-wide averaging of 90 days to meet the limits for ~~mercury.~~ ~~The MATS limits~~ mercury emissions, ~~from~~which ~~existing~~is ~~units to~~ 1.2 pounds per trillion BTU (1.0 pound per trillion BTU if 90 day averaging is used). This emission limit corresponds to the capture of up to 80-90% of the mercury in the coal burned in in electric power generation boilers as measured at the exhaust stack outlet for most coals having a greater than 8,500 BTU per pound heat rate. For plants burning lower rank coals such as lignite, the emission limit is 4.0 pounds per trillion BTU. ~~The~~ The EPA estimates that there are approximately 1,200 coal-fired units and 300 oil-fired units affected by the MATS. Existing sources must comply with the MATS standards by April 16, 2015. An authorized ~~State~~state permitting authority has the ability to to grant sources up to a one year extension, on a case by case basis, if such additional time is necessary for the installation of controls.

In addition to issuing standards covering electric power generators, the EPA has developed a MACT-based mercury emissions regulation for the Portland ~~Cement~~ ~~Manufacturing~~cement ~~Industry~~industry through amendments to the National Emission Standards for HAPs (the “Cement MACT”). The Cement MACT regulation was initially finalized on August 6, 2010. On May 11, 2011, the EPA denied requests to issue an administrative stay on the Cement MACT and denied in part and granted in part various petitions to reconsider the final revised Cement MACT. WeThe ~~believe the~~ EPA ispublished ~~not delaying~~ the ~~implementation~~final ~~of the~~ Cement MACT ~~and~~regulation ison ~~only~~February 12, ~~reconsidering~~2013 ~~various technical~~with ~~standards~~compliance ~~and~~required ~~issues~~by ~~contained in the final regulation~~September 9, ~~which we do not believe will have a material impact on the regulation and its eventual implementation~~2015. The standards for new kilns apply to facilities where construction, modification, or reconstruction commenced after May 6, 2009.

The Cement MACT requires cement plants to reduce HAPs by ~~August~~September 69, ~~2013~~2015 including 92% of mercury emissions and 83% of hydrocarbons emissions. This regulation could require ACI systems on up to 90 cement kilns in the U.S., which are owned by approximately 15 companies. We have been engaged in several testing programs for cement companies to define their emissions and evaluate how ACI equipment and sorbents will work in that industry. The tests were designed to evaluate the effectiveness of collecting mercury and organics from cement kiln exhaust gas streams. The ~~While~~EPA wealso ~~have~~issued ~~seen~~a ~~limited~~new ~~actual~~IBMACT ~~inquiries~~regulation tofor ~~date~~coal-fired boilers that provide mostly steam and/or electricity for ~~ACI~~small ~~systems~~industrial ~~from~~and ~~cement~~institutional ~~companies,~~power weneeds ~~believe~~with ~~the~~no ~~Cement~~more ~~MACT~~than ~~has~~25 ~~the~~megawatts ~~potential~~of toelectricity ~~increase~~sold to the ~~market~~grid ~~for~~per ~~ACI~~year. The ~~systems~~final ~~once~~regulation ~~additional~~was ~~clarity~~released ison inFebruary 23, ~~place~~2011 and issued on March 21, 2011, with compliance deadlines originally scheduled for early 2014. On December 23, 2011, the ~~technical~~EPA ~~requirements~~issued proposed reconsiderations of certain aspects of the IBMACT, including clarification of ~~those~~applicability ~~rules~~and implementation issues.

~~The~~22 EPA also issued a new IBMACT regulation for coal-fired boilers that provide mostly steam and/or electricity for small industrial and institutional power needs with no more than 25 MW of electricity sold to the grid per year. The final regulation was

26The final IBMACT rule which was published on January 31, 2013 could impact over 600 existing coal-fired industrial boilers, which have until January 31, 2016 to comply. The final emission limit of 5.7 pounds of mercury per trillion BTU of heat input for existing and 0.80 pounds per trillion BTU of heat input for new coal-fired industrial boilers on average requires no less than 50% capture of mercury from coal-fired boilers burning various coals. However, we believe the final IBMACT could significantly increase the market for DSI systems when considering the requirements to also limit HCl emissions to levels of 0.022 pounds per million BTU.

The Clean Air Act requires that all emission control-related regulations be met within ~~released~~three onyears ~~February 23,~~from ~~2011~~the ~~and~~final ~~issued~~date onthe ~~March 21,~~new ~~2011~~rule is posted in the Federal Register, with ~~compliance~~the ~~deadlines~~potential ~~originally~~extension ~~scheduled~~of ~~for~~one ~~early~~year ~~2014~~granted by individual states on a case by case basis. OnWe ~~December 23,~~believe ~~2011,~~that substantial long-term growth of the ~~EPA~~EC ~~issued~~market ~~proposed~~for the ~~reconsiderations~~electric ofpower ~~certain~~generation ~~aspects~~industry ofwill most likely depend on how industry chooses to respond to the ~~IBMACT~~pending and new federal regulations. In general, ~~including~~all ~~clarification~~three of ~~applicability~~these regulations are less stringent than originally expected, meaning more flexibility for operators subject to the rules in choosing low capital expenditure (“CAPEX”) emissions control technologies and ~~implementation~~likely ~~issues~~fewer forced plant retirements from having to install large CAPEX emission control equipment such as scrubbers and baghouses. We believe the ~~EPA~~MATS ~~intends~~and toMACT ~~finalize~~rules ~~these~~will ~~reconsiderations~~create ~~and~~a ~~issue~~large amarket ~~revised~~for ~~rule~~our byemission ~~early~~control ~~2013~~and RC products.

~~The~~On ~~IBMACT~~December 15, ~~could~~2009, ~~impact~~the ~~over~~EPA ~~600~~issued ~~existing~~an ~~coal-fired~~endangerment ~~industrial~~finding ~~boilers.~~that ~~The~~triggered ~~proposed~~a ~~emission~~Clean ~~limit~~Air ~~(if~~Act ~~maintained)~~requirement ofthat ~~3.1~~the ~~pounds~~agency ofregulate ~~mercury~~CO2 ~~per trillion~~emissions ~~BTU~~from ~~for~~stationary ~~existing~~sources ~~and~~such 0as power plants.86 ~~pounds~~Industry ~~per~~and ~~trillion~~states ~~BTU~~have ~~for~~filed ~~new~~an ~~coal-fired~~extensive ~~industrial~~consolidated litigation ~~boilers~~before ~~will~~the onU.S. ~~average~~Court ~~require~~of ~~greater~~Appeals ~~than~~for ~~50%~~the ~~capture~~District of ~~mercury~~Columbia ~~from~~Circuit ~~coal-fired~~challenging ~~boilers~~numerous ~~burning~~aspects ~~various~~of ~~coals~~EPA’s Greenhouse Gas (“GHG”) rules. WeThe ~~believe~~court is considering arguments regarding the ~~final~~EPA’s ~~IBMACT~~guidance ~~could~~memo ~~increase~~ on the timing ~~market~~of ~~for~~GHG ~~both~~regulations, ~~ACI~~such as when GHGs become a “regulated pollutant” under the Clean Air Act and ~~DSI~~thus ~~systems~~if and when ~~considering~~New Source Review and Prevention of Significant Deterioration regulations would apply. On March 27, 2012, the EPA proposed ~~requirements~~its tofirst ~~control~~new ~~both~~source ~~mercury~~performance ~~and~~standards ~~HCl~~for CO2 emissions, from new power plants as a result of a separate settlement with states and environmental groups in 2010.

The Clean Air Act requires that all emission control related regulations be met within three years from the final date the new rule is posted in the Federal Register, with the potential extension of one year granted by individual states on a case by case basis. We believe that substantial long-term growth of the EC market for the electric power generation industry will most likely depend on how industry chooses to respond to the pending and new federal regulations. In general, all three of these regulations are less stringent than originally expected, meaning more flexibility for operators subject to the rules in choosing low capital expenditure (“CAPEX”) emissions control technologies and likely fewer forced plant retirements from having to install large CAPEX emission control equipment such as scrubbers and baghouses. We believe the final MATS will create a large market for our emission control and refined coal products.

The Cross State Air Pollution Rule (the “CSAPR”), formerly known as the “Transport Rule”, was finalized by the EPA on July 6, 2011. CSAPR was intended to replace the EPA’s 2005 Clean Air Interstate Rule (“CAIR”) and required 27 states in the Midwest and eastern half of the United States and the District of Columbia to significantly improve air quality by reducing power plant SO2 and NOx emissions that contribute to ozone and fine particle pollution in other states. On December 30, 2011, the D.C. Circuit Court of Appeals issued a stay against implementation of the CSAPR in one of more than three dozen lawsuits challenging the CSAPR in order to hold a hearing on the issue of the potential for irreparable harm caused by the rule.

On August 21, 2012, in a 2-1 decision, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating the CSAPR, ruling that the EPA exceeded its statutory authority in promulgating the rule. The court said the Clean Air Act gives the EPA the authority to require upwind states to reduce “only their own significant contributions to a downwind state’s nonattainment. Yet under CSAPR, upwind states may be required to reduce emissions by more than their own significant contributions to a downwind state’s nonattainment.” Furthermore, court found that the Clean Air Act presents the states an initial opportunity to implement the required reductions, but under CSAPR, the EPA issued federal implementation plans (“FIPs”) without first providing states with the opportunity to put together their own implementation plans. The court thus vacated CSAPR and the CSAPR FIPs and remanded the case to the EPA for action consistent with the decision. The court directed the EPA to continue administering the CAIR “pending the promulgation of a valid replacement.”

ADA’s total potential market may increase as a result of this ruling because CSAPR was driving many announced plant retirements. With the requirement to reduce SO2 emissions delayed for several years, certain plants that would have been retired had CSAPR remained in effect could instead have extended lives and will need to control acid gas and mercury emissions by 2015 in order to comply with the MATS.” Many power companies recognize the urgency of these issued and pending regulations, and as a result are contracting with us to evaluate mercury and acid gas emission control options at a number of their plants. Utilities need to know as soon as possible whether their existing EC components are sufficient to meet the new emissions standards when combined with the installation of low CAPEX systems such as ACI and DSI systems. If utilities need to upgrade their equipment with new large CAPEX equipment such as fabric filters or SO2 scrubbers, they will need to quickly begin procurement of these systems due to long required lead times in their implementation. As a result we expect additional near-term ACI and DSI demonstration revenue and bidding on related ACI and DSI equipment as discussed below.

Activated Carbon Injection and Dry Sorbent Injection Systems

ACI systems are currently the ~~dominant~~most ~~control~~established and accepted technology to specifically ~~address~~control mercury emissions and have been widely deployed to meet the ~~previously~~ existing state and new plant regulations. WeIn ~~believe~~addition ~~that~~to ~~this demand~~ACI ~~will~~systems ~~significantly~~for ~~increase~~mercury tocontrol, ~~meet~~we ~~the~~have ~~new~~developed ~~MATS~~and ~~rules.~~are ~~ACI~~providing ~~controls~~commercial ~~have~~DSI ~~historically~~systems ~~been~~that ~~extensively~~inject ~~evaluated~~dry alkaline bysorbents ~~the~~to ~~DOE~~control ~~National~~acid ~~Energy~~gases ~~Technology~~such ~~Laboratory~~as ~~over~~SO3 ~~the~~and ~~course~~HCl. Our ofDSI ~~its~~technology ~~three-phase~~is ~~mercury~~also used to control ~~field~~SO2, ~~testing~~one ~~and~~of six ~~demonstration~~criteria ~~program~~air ~~and~~pollutants. ~~have~~The ~~been~~use ~~demonstrated~~of toDSI ~~reduce~~for ~~mercury~~SO3 ~~emissions~~reduction byhas also upbeen shown to ~~90%~~enhance inthe ~~many~~capture of mercury from bituminous coal-fired ~~power plants~~boilers.

ToIn ~~date,~~order weto ~~have obtained~~meet ~~contracts~~the ~~for~~expected demand ~~or are~~ in the ~~process of installing~~ ACI ~~systems~~and ~~intended~~DSI tomarkets, ~~control~~on ~~mercury~~August 31, ~~emissions~~2012, ~~from~~our 56wholly ~~coal-fired~~owned ~~EGU~~subsidiary ~~boilers.~~BCSI, WeLLC ~~anticipate~~acquired the ~~need~~assets ~~for~~of ~~400~~Bulk toConveyor ~~600~~Specialist ~~ACI~~Inc., ~~systems~~a toleading beprivately ~~supplied~~held ~~between~~fabricator ~~2012~~ and ~~2015,~~supplier ~~which would require rapid scale-up~~ of ~~our~~DSI ~~production~~systems ~~capabilities~~and toother ~~maintain~~material ~~our~~handling equipment, ~~target~~ and ~~present~~Bulk ~~35%~~Conveyor ~~market~~Services, ~~share~~Inc. ~~The~~(together, ~~cost~~“Bulk ofConveyor”). ~~the~~This ~~ACI~~acquisition ~~equipment~~provided ~~required~~us towith ~~reduce~~the ~~emissions~~capacity, ~~from~~experience anand ~~average-size~~resources ~~EGU~~to isprovide ~~between~~customers ~~$600,000~~with ~~and~~additional $1solutions ~~million~~for ~~and~~emissions incompliance ~~total~~and ~~we expect~~ the ~~MATS~~addition of ~~rules~~Bulk toConveyor’s ~~create~~manufacturing afacility ~~market~~also inallowed ~~excess~~us ofto $1expand ~~billion~~our capacity for supplying ACI ~~and DSI~~ systems. WeCurrently ~~expect~~BCSI tois ~~continue~~executing toa ~~expand~~large ~~our~~fleet ~~sales~~utility ~~staff~~contract asfor ~~well~~several asDSI ~~our~~systems ~~pre-contract~~for ~~and~~SO3 ~~post-contract~~control ~~engineering design group~~ and ~~fabrication~~has ~~alliances~~several tooutstanding ~~meet~~proposals ~~this~~for ~~anticipated market.~~additional systems.

27Since 2005, we have completed or are in the process of executing awarded projects for approximately 80 ACI systems intended to control mercury emissions from approximately 90 coal-fired EGU boilers. The ACI and DSI capital equipment we provide for the larger utility coal-boilers generally ranges from approximately $600,000 to $2 million per coal-fired boiler unit and in total we expect the MATS rule to create a market in excess of $1 billion for the combination of ACI and DSI systems. DSI systems, which sell at approximately $1.5 million to $3 million for an average size EGU, provide a low CAPEX alternative to scrubbers for meeting certain provisions of the MATS. The EPA predicts that about 200 DSI systems will be sold by 2015.

InSince ~~addition to~~ the ~~mercury~~MATS ~~control~~market ~~applications~~commenced ~~for ACI systems~~in 2011, weADA ~~have~~has ~~also~~won ~~developed and~~or ~~are~~received ~~offering~~letters ~~commercial~~of ~~DSI~~intent ~~systems~~ to ~~inject~~award ~~dry~~contracts ~~alkali~~currently ~~sorbents~~valued ~~for~~at ~~control~~approximately of$75 ~~acid~~million ~~gases~~for ~~such~~ACI ~~as SO3~~ and ~~HCl~~DSI assystems, ~~well~~with asmost ~~for control~~ of ~~the~~these ~~criteria~~systems ~~pollutant~~scheduled ~~SO2.~~to ~~The~~be ~~use~~delivered ofby ~~DSI for SO3 reduction can also enhance~~ the ~~capture~~end of ~~mercury on bituminous coal-fired boilers~~2014. ~~DSI~~There ~~systems,~~has ~~which~~been ~~cost~~indication ~~approximately~~that $2some generators ~~million~~have toobtained $3extensions ~~million~~ for anMATS ~~average size EGU~~compliance, ~~provide~~which acould ~~low~~result ~~CAPEX~~in ~~alternative to~~the ~~scrubbers~~consummation ~~for meeting certain provisions~~ of ~~the~~these ~~MATS~~sales ~~and~~being ~~CSAPR.~~delayed ~~The~~for ~~EPA~~an ~~predicts~~additional ~~that~~one ~~about~~to ~~200~~two ~~DSI systems will be sold by 2015~~years. WeAs ~~conducted~~an ~~full-scale~~indication ~~tests~~ of ~~our~~progress ~~DSI equipment~~ in ~~2010~~the ~~and~~development ~~2011~~of ~~for~~this market, the ~~control~~Company ofis ~~HCl,~~in discussion ~~SO2~~on ~~and~~or ~~SO3~~submitting bids on ~~plants~~approximately ~~burning~~$180 ~~bituminous,~~million ~~PRB,~~of ACI and ~~lignite~~DSI ~~coals~~systems.

InMercury ~~order~~Control toAdditives meet the expected demand in the ACI and DSI markets, on August 31, 2012, our newly formed, wholly owned subsidiary BCSI, LLC, acquired the assets of Bulk Conveyor Specialist Inc., a leading privately held fabricator and supplier of DSI systems and other material handling equipment, and Bulk Conveyor Services, Inc. (together, “Bulk Conveyor”). We purchased the assets in exchange for $2 million in cash and $3 million in notes payable over the next five years as evidenced by two promissory notes of $2.8 million and $200,000, with payment under the larger note guaranteed by ADA. Since completing the acquisition, we have operated, and plan to continue to operate, the business of the former Bulk Conveyor through BCSI, LLC by providing testing and related services.

InAnother ~~order~~ADA tomercury-only ~~integrate~~coal ~~the~~treatment ~~acquisition, Aaron~~technology ~~Prince,~~(formerly ~~who~~referred ~~previously~~to ~~served~~ as ~~Refined~~Enhanced Coal) ~~Development~~is ~~Director~~in ~~for Clean Coal, became~~ the ~~General~~initial ~~Manager~~stages of ~~the~~being ~~new~~marketed by ~~subsidiary. In addition,~~ the ~~former~~Company ~~owner~~as ofM-Prove™ ~~Bulk Conveyor entered into an exclusive consulting agreement with BCSI, LLC. This acquisition provided ADA with capacity, experience and resources~~ to ~~provide~~meet ~~customers~~mercury ~~with~~requirements ~~additional~~currently ~~solutions~~existing ~~for~~in ~~emissions~~19 ~~compliance~~states and the ~~addition~~MATS requirements ofset ~~Bulk Conveyor’s manufacturing facility also allowed ADA~~ to ~~expand~~go ~~its~~into ~~capacity~~effect ~~for supplying~~in ~~ACI systems~~2015. WeSince ~~believe~~2004, ~~several~~we ~~contracts~~have ~~for~~been ~~ACI~~working ~~and~~with ~~DSI~~Arch ~~systems~~Coal ~~will~~to beexplore ~~awarded~~certain ~~during~~unique ~~the~~characteristics ~~remainder~~ of ~~this~~some ~~year~~types ~~and~~of ~~that~~coals ~~MATS~~mined ~~will~~by ~~eventually~~Arch ~~generate~~Coal ~~over~~that ~~$300~~allow ~~million~~the incoal ~~combined~~to ~~sales~~be ofburned ~~ACI~~with ~~and~~lower ~~DSI~~mercury ~~systems~~emissions. ~~for~~We ~~the Company over the~~believe ~~next~~that ~~three~~a ~~years.~~technical Asbreakthrough anthat ~~indication~~involves ~~of progress in~~ the ~~development~~application of ~~this~~proprietary ~~market,~~chemicals to ~~date~~Western ~~the~~coals ~~Company~~such ~~has~~as ~~responded~~PRB toreduces ~~greater~~emissions ~~than~~of ~~$259~~mercury ~~million~~when inthis ~~bids~~pre-combustion ~~for~~additive ~~equipment of which $203 million~~ is ~~from~~burned ~~this~~at ~~calendar~~power ~~year alone~~plants. ~~The~~We ~~active~~believe ~~bids~~M-Prove ~~for~~may ~~ACI and~~provide ~~DSI~~a ~~systems~~benefit doto the ~~not~~customer ~~include~~of ~~the~~up ~~recently~~to ~~announced~~$4 ~~contracts~~per ~~and~~ton ~~bids~~of ~~that~~coal ~~ADA~~burned ~~has~~when ~~been~~used ~~notified~~on toWestern ~~have won~~coals, ~~but~~of ~~has~~which ~~not~~U.S. ~~announced~~power ~~because~~plants ~~the~~burn ~~contracts~~up ~~have~~to ~~not~~600 million ~~yet~~tons ~~been~~per ~~signed~~year.

InWe ~~early~~provide ~~February~~M-Prove ofthrough ~~this~~two ~~year,~~channels we– ~~signed~~(1) through aArch $2Coal ~~million contract~~ for ause ~~DSI~~on ~~system~~PRB ~~for~~coal aat ~~power~~the ~~generator.~~mine Onand ~~November~~ (2,) through ~~BCSI~~direct ~~signed~~coal atreatment ~~contract~~applied ~~to supply up to four DSI systems for a group of coal~~on-~~fired~~site ~~generating~~at ~~plants. This contract has a total value of up to $14 million if the~~ power ~~company elects to purchase all of the contracted systems~~plants. ~~The~~In ~~project~~June ~~will~~2010, ~~begin~~we entered ~~generating~~into ~~revenues~~a ~~immediately~~Development and ~~deliveries~~License ~~are~~Agreement ~~scheduled over~~ (the ~~next~~ 15“License ~~months.~~Agreement”) ~~ADA~~with ~~has~~Arch ~~also~~Coal ~~signed~~giving ~~two~~them ~~contracts~~an ~~for ACI systems~~exclusive, ~~one for a power plant and one for a cement plant. In addition, we have been informed that we have been awarded a fleet~~non-~~wide~~transferable ~~award~~license ~~for ACI systems that is expected~~ to beuse incertain ~~the~~technology ~~$10 million~~through ~~to $20 million range. We will provide additional information on this once~~ the ~~contract~~application ~~is signed. We expect that all three contracts will be generating revenues starting in November~~ of ~~this year.~~

~~Enhanced~~23 ~~Coal~~

~~A third~~ ADA’s ~~mercury~~proprietary pre-~~only coal~~combustion ~~treatment~~additive ~~technology~~to isArch ~~also~~Coal’s ~~being~~PRB ~~marketed~~mined bycoal. ~~the~~We ~~Company~~expect tothat ~~meet~~use ~~mercury~~of ~~requirements~~M-Prove ~~currently~~will ~~existing~~help inutilities 19meet ~~states and~~ the ~~MATS~~mercury emissions requirements in ~~2015~~the MATS. ~~Since~~Pursuant to ~~2004~~the License Agreement, we ~~have~~are ~~been~~providing ~~working~~development ~~with~~services to Arch Coal toaimed ~~explore~~at ~~certain~~applying ~~unique~~M-Prove ~~characteristics of~~to ~~some~~PRB ~~types~~coal. ofIn ~~coals~~addition, ~~mined~~if bywe ~~Arch~~develop ~~Coal~~improvements to M-Prove that ~~allow~~are ~~them~~related to bethe ~~burned~~reduction ~~with~~of ~~lower~~certain emissions. Wefrom ~~believe~~the aburning ~~technical~~of ~~breakthrough~~PRB coal, that ~~involves~~improvement ~~the~~will ~~application~~either ofbe ~~proprietary~~included ~~chemicals~~in tothe ~~Western~~license ~~coals~~at ~~such~~no asadditional ~~PRB~~cost, ~~likely~~or, ~~reduces~~under ~~emissions~~certain ofcircumstances, ~~mercury and~~we ~~other~~will ~~metals~~negotiate ~~when~~with ~~this~~Arch ~~“enhanced”~~Coal ~~coal~~to ~~(“Enhanced~~determine if Arch Coal”) iswants ~~burned~~to atuse ~~power~~the ~~plants~~additional improvements. We ~~believe~~retain ~~our~~all ~~Enhanced~~right, ~~Coal~~title ~~technology~~and interest, ~~may~~including ~~provide~~all aintellectual ~~benefit~~property rights, in and to ~~the~~any ~~customer~~technology ofwe uplicense to $4Arch ~~per~~Coal. ~~ton~~The initial demonstration of coal ~~burned~~treated ~~when~~at ~~used~~the onmine ~~Western~~and ~~coals. U.S.~~shipped by rail to a power ~~plants~~plant ~~consume~~produced uppromising toresults, ~~600 million~~and ~~tons~~we have completed several additional demonstrations of ~~Western~~M-Prove ~~coal~~at ~~per~~specific ~~year~~power plants.

WePursuant ~~will~~to bethe ~~providing~~License ~~Enhanced~~Agreement ~~Coal~~we ~~through~~license ~~two~~to ~~channels – (1) through~~ Arch Coal ~~for~~certain technology ~~use~~to onproduce ~~PRB~~this treated coal, atand ~~the~~we ~~mine~~also ~~and~~provide ~~(2) through~~Arch ~~direct~~Coal ~~coal~~with ~~treatment~~development ~~applied~~services ~~on-site~~aimed at ~~power~~applying ~~plants.~~the Ontechnology ~~June 25,~~to ~~2010,~~PRB wecoal. ~~entered~~In ~~into~~consideration afor ~~Development~~this development work and ~~License~~the ~~Agreement~~license (provided under the “License Agreement”), ~~with~~ Arch Coal paid ~~giving~~us ~~them~~ an ~~exclusive~~initial, non-~~transferable~~refundable license toand ~~use~~development ~~certain~~fee ~~technology~~in tocash ~~produce~~totaling ~~Enhanced~~$2 ~~Coal~~million byin ~~the~~June ~~application~~2010 ofwhich ~~ADA’s~~was ~~proprietary~~recognized ~~coal~~as ~~treatment~~revenue ~~technology~~in to2010 ~~Arch~~and ~~Coal’s PRB mined coal~~2011. ~~We expect~~Under ~~that use of this Enhanced Coal will help utilities meet~~ the ~~mercury emissions requirements in the MATS. Pursuant to the~~ License Agreement, we are ~~providing~~entitled ~~development services~~ to ~~Arch~~royalties ~~Coal~~of ~~aimed~~as atmuch ~~applying~~as ~~the~~$1 ~~technology~~per toton ~~the~~of ~~PRB~~a ~~coal. In~~portion ~~addition,~~of ifthe wepremium ~~develop~~for ~~improvements to~~ the ~~technology~~treated ~~that~~coal ~~are~~sold ~~related~~by toArch ~~the~~Coal, ~~reduction~~depending ofupon ~~certain emissions from~~ the ~~burning~~premium ofArch ~~PRB~~Coal ~~coal,~~is ~~that~~able ~~technology~~to ~~will~~charge ~~either~~on besales ~~included~~of insuch ~~the~~coal. ~~license~~Any atroyalty noultimately ~~additional~~payable ~~cost, or,~~ under ~~certain circumstances,~~the weLicense Agreement will ~~negotiate~~first ~~with~~be ~~Arch~~subject ~~Coal~~ to ~~determine~~credit ifto Arch Coal ~~wants~~of toan ~~use~~amount equal to the ~~additional~~initial ~~improvements.~~license ~~We retain all right~~fee, ~~title~~other ~~and~~development ~~interest, including all intellectual property rights, in~~ and tooperational ~~any~~costs ~~technology~~paid weby ~~license to~~ Arch Coal. ~~The~~plus ~~initial~~a ~~demonstration~~rate of ~~coal~~return ~~treated~~on atsuch ~~the mine and shipped by rail to a power plant produced promising results~~payments.

InSubsequent ~~consideration for~~to entering into the ~~development~~License ~~work~~Agreement, ~~and~~on ~~the~~November 1, ~~license~~2012, towe ~~Arch~~entered ~~Coal,~~into a related Supply Agreement under which Arch Coal ~~paid~~will purchase usthe anadditives ~~initial,~~used ~~non-refundable~~in ~~license~~conjunction ~~and~~with ~~development~~the ~~fee~~technology inlicensed ~~cash~~under ~~totaling~~the $2License ~~million~~Agreement inexclusively ~~June~~from ~~2010~~us, ~~which~~and ~~was~~we ~~recognized~~will assupply ~~revenue~~Arch inCoal ~~2010~~with ~~and~~the ~~2011~~additives it needs. ~~Under~~For customers that prefer to have the coal treatment applied on-site at their plants, the Company will provide the technology directly to the power plants.

28The MATS will likely create a market for chemicals to be used for the reduction in mercury emissions for much of the 600 million tons of western coals burned annually. One of the advantages of the chemical used in M-Prove is that it does not use bromine which is the basis of many other competing chemical additive technologies. The power industry is beginning to experience corrosion issues in their plants that they attribute to bromine that was used to enhance the capture of mercury. Thus, we have found the industry open to considering a new technology that could help avoid what could be very expensive repairs on the plants. In October of 2012 we were awarded the first of what we believe will be a family of patents designed to protect M-Prove both in the U.S. and abroad.

~~License~~Flue ~~Agreement,~~Gas weChemicals ~~are entitled to royalties of as much as $1 per ton of a portion of the premium for Enhanced Coal sold by Arch Coal, depending upon the successful implementation of the technology~~ and ~~the~~Services premium Arch Coal is able to charge on future sales of the Enhanced Coal product. Any royalty ultimately payable under the License Agreement will first be subject to credit to Arch Coal of an amount equal to the initial license fee, other development and operational costs paid by Arch Coal plus a rate of return on such payments.

AsWe ahave developed ~~part~~and ofdeployed ~~entering~~technologies ~~into~~for ~~the~~conditioning ~~License Agreement,~~flue ongas ~~November~~streams 1,from ~~2012,~~coal-fired wecombustion ~~entered~~sources ~~into~~that aallow ~~Supply~~existing ~~Agreement~~air ~~under~~pollution ~~which~~control ~~Arch~~devices ~~Coal~~such ~~will~~as ~~purchase~~electrostatic ~~the~~precipitators ~~additives~~(“ESPs”) ~~described~~to inoperate ~~the~~more ~~License~~efficiently. ~~Agreement~~Through various ~~exclusively~~suppliers ~~from~~and uscontractors, ~~and~~ we ~~will~~manufacture ~~supply~~engineered ~~Arch~~units ~~Coal~~for ~~with~~each individual application. The units mix, pump and monitor the ~~additives~~feed itof ~~needs~~proprietary chemical blends. ~~For~~The ~~customers~~chemical ~~that prefer~~blends toare ~~have~~applied to the ~~coal~~flue ~~treatment~~gas ~~applied~~streams ~~on-site~~by ata ~~their~~pressurized system ~~plants,~~of ~~ADA~~specially ~~will~~designed belances ~~providing~~and ~~the~~nozzles. ~~technology~~Such ~~directly~~treatment toof the ~~power~~flue ~~plants.~~gas Westream ~~are~~allows infor ~~the~~more ~~process~~effective collection of ~~planning~~fly ~~several~~ash ~~demonstrations~~particles ofthat ~~the~~would ~~technology~~otherwise ~~both~~escape atinto the ~~mine~~atmosphere and atmay ~~specific~~aid ~~power~~in the control of mercury emissions using ~~plants~~ACI equipment and help existing ESPs continue to operate effectively when applying other chemicals such as hydrated lime (DSI systems) exclusively or in combination with activated carbon products.

~~The~~Other ~~MATS~~Consulting ~~will~~Services likely create a market for reduction in mercury emissions for a significant percentage of the greater than 100 million tons per year of PRB coal mined by Arch Coal. One of the advantages of our technology is that it does not use bromine. The power industry is beginning to experience and report significant corrosion issues in their plants that they attribute to bromine that was used to enhance the capture of mercury. Thus, we have found the industry open to considering a new technology such as Enhanced Coal which avoids what could be a very expensive impact on the plants. Last month we were awarded the first of what we believe will be a family of patents designed to protect our technology both in the U.S. and abroad.

We also offer consulting services to assist electric power generators and others in planning and implementing strategies to meet the new and increasing government emission standards requiring reductions in SO₂, NO_x, particulates, acid gases and mercury. This includes demonstrations of our commercial products. We often receive funding for consulting and a portion of our development and testing activities from industry partners that have a strategic interest in the technology.

CO₂ Capture

In addition to our two key growth areas, RC and EC, we continue to demonstrate our position as a premier developer of innovative clean energy technologies. We expect that CO2 capture technologies will be required to control CO2 emissions from coal-fired power plants in the future ~~as a result of the impact of CO2 emissions on climate change~~. ~~A number of permits for new coal-fired plants were rejected by various state officials in response to protests by environmental groups.~~ We see this as an opportunity and continue to develop technologies to address the long-term needs of our customers to reduce CO2 from their existing and new plants.

OnIn ~~December 15,~~2010 ~~2009,~~we ~~EPA~~began ~~issued~~the anfirst ~~endangerment~~field ~~finding~~tests ~~that~~of ~~triggered~~our ~~a Clean Air Act requirement that the agency regulate~~ CO2 ~~emissions~~control ~~from~~technology ~~stationary~~on ~~sources~~a ~~such as power plants~~$3.8 ~~Industry~~million ~~and~~program ~~states~~co-funded ~~have~~by ~~filed an extensive consolidated lawsuit before~~ the ~~U.S.~~DOE, ~~Court~~as ofwell ~~Appeals~~as ~~for~~several ~~the~~major ~~District~~utility ~~of Columbia Circuit challenging numerous aspects of the EPA’s Greenhouse Gas (“GHG”) rules~~companies. The ~~court~~initial results isat ~~considering~~a ~~arguments~~plant ~~regarding~~confirmed the ~~EPA’s~~promising ~~guidance~~performance ~~memo~~we onhad ~~the~~demonstrated ~~timing~~in ~~of GHG~~our ~~regulations,~~laboratory. ~~such~~The aspilot ~~when~~plant ~~GHGs~~was ~~become~~moved ato ~~“regulated~~another ~~pollutant”~~plant ~~under~~for ~~the~~additional ~~Clean Air Act and thus New Source Review and Prevention of Significant Deterioration regulations apply~~testing.

On24 ~~March 27, 2012, the EPA proposed its first new source performance standards for CO2 emissions from new power plants as a result of a separate settlement with states and environmental groups in 2010.~~

~~The~~In ~~DOE~~October is2010, ~~providing~~we ~~partial~~began ~~funding~~work ~~for~~on ~~CO2~~a ~~control~~second ~~projects~~major ~~and~~CO2 inproject, ~~September~~which ~~2010~~is weexpected ~~signed~~to arun ~~contract~~for ~~with~~a ~~the~~total ~~DOE to continue development~~ of ~~clean~~51 ~~coal~~months ~~technology~~ to ~~capture CO2~~develop ~~from coal~~a full-~~fired~~scale ~~power~~conceptual ~~plants~~design and ~~other~~validate ~~industrial~~the ~~sources of~~design ~~CO2~~at ~~emissions.~~the ~~The~~pilot-scale, ~~agreements~~which ~~with~~is ~~the~~a ~~DOE~~key ~~provide~~step ~~that any~~in ~~inventions~~the wetechnology ~~create~~development asprocess. aWe ~~result~~are of the ~~work~~prime ~~become~~contractor ~~our~~for ~~property~~the ~~and~~approximately we$20.5 ~~retain~~million ~~the~~project ~~rights~~(including toexpected ~~commercialize~~contributions ~~any~~by ~~products~~other industry wepartners) ~~develop~~administered ~~under~~by the ~~contracts.~~DOE’s WeNational ~~participated~~Energy inTechnology ~~two~~Laboratory ~~such~~which ~~agreements~~is inproviding ~~2012~~$15 ~~pursuant~~million toof ~~which~~the wefunding. ~~are~~The ~~researching~~project ~~and developing~~provides afunding ~~novel~~to ~~process~~advance toour ~~capture~~commercialization ~~CO2~~plan ~~from~~for ~~coal~~regenerable solid-~~fired power~~sorbent ~~plants~~technology.

In ~~2010~~June 2012, we ~~began~~initiated the ~~first~~fabrication ~~field~~and ~~tests~~construction ofphase ~~our~~for ~~CO2~~the ~~control~~pilot ~~technology~~plant onwhich awill ~~$3.8~~treat ~~million~~a ~~program~~slipstream ~~co-funded~~of flue bygas ~~the~~equivalent ~~DOE,~~to asthat ~~well~~generated asfrom ~~several~~producing ~~major forward~~one-~~thinking~~megawatt ~~utility companies~~of electricity. ~~The~~We ~~initial~~anticipate ~~results~~that atDOE afunded CO2 ~~plant~~programs ~~confirmed~~will ~~the~~continue ~~promising~~to ~~performance~~represent wean ~~had~~important component ~~demonstrated~~of inthe ~~our~~revenue ~~laboratory.~~stream ~~The~~of ~~pilot~~the ~~plant~~Company ~~was~~over ~~moved~~the tonext ~~another~~several ~~plant for additional testing~~years. ~~Once~~We ~~captured,~~are ~~the~~considering ~~CO2~~different ~~could~~potential befuture ~~either~~commercial ~~stored~~markets ~~underground~~for ~~(sequestration)~~carbon orcapture ~~beneficially~~technology ~~used~~including producing inCO2 ~~processes~~for ~~such~~use asin enhanced oil recovery. This technology appears to offer potential cost and energy advantages over competing liquid-solvent-based technologies.

InResults ~~October 2010, we began work on a second major CO2 project, which is expected to run for a total~~ of 51Operations ~~months~~– to1st ~~scale-up the technology to the one-megawatt level, which is a key step in the technology development process. We are the prime contractor for~~Quarter ~~the~~2013 ~~approximately~~versus ~~$20.5~~1st ~~million~~Quarter ~~project~~2012 (including expected contributions by other industry partners) administered by the DOE’s National Energy Technology Laboratory which is providing $15 million of the funding. The project provides funding to advance our commercialization plan for regenerable solid-sorbent technology.

In June 2012, we initiated the fabrication and construction phase for the pilot plant to treat a slipstream of flue gas equivalent to that generated from producing one-megawatt of electricity. The pilot plant, which is scheduled to commence operations in October 2013, will be installed at Southern Company subsidiary Alabama Power’s Miller Electric Generating Plant outside Birmingham, Alabama.

We anticipate that DOE funded CO2 programs will continue to represent an important component of the revenue stream of the Company over the next several years as we position ourselves for the market growth for ACI systems, enhanced coal additives and related technology with Arch Coal and other technologies for emissions control.

Results of Operations – 3rd Quarter and YTD 2012 versus 3rd Quarter and YTD 2011

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this Form 10-Q.

Revenues totaled $7468.~~4 million~~3 ~~and $145.1~~ million for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012 versus~~2013 versus $1318.2 million ~~and $28.7 million~~ for the ~~three~~same ~~and~~period ~~nine~~in ~~months ended September 30~~2012, ~~2011, respectively,~~ representing an increase of ~~462~~275%. ~~and~~Our ~~405%~~RC ~~for~~segment ~~the~~revenue ~~quarter~~increased ~~and~~primarily ~~year~~due to ~~date.~~the ~~The~~increased ~~increase~~rental isincome ~~due primarily to revenues~~ from ~~operations at the~~ RC facilities we leased or sold to third parties and increased RC sales from other facilities ~~placed in service in 2011~~ that were operated by Clean Coal ~~in 2012~~ prior to being leased or sold to third parties. The increase is also due ~~in part~~ to a 52217% ~~year to date~~ increase in our EC segment revenues. We expect overall revenues and costs for ~~2012~~2013 to be ~~significantly~~somewhat ~~higher~~lower than ~~those~~for ~~reported~~2012 given our plans to sell or lease additional RC facilities including one currently being operated by Clean Coal for ~~2011~~its own account which is expected to reduce RC sales and raw coal costs.

Cost of revenues for the quarter ended March 31, 2013 increased by $6444.34 million ~~and~~from $~~120~~14.72 million orto ~~1058%~~$58.6 ~~and~~million ~~1336% for the three and nine months ended September 30, 2012, respectively,~~ from the same ~~periods~~period in ~~2011~~2012 primarily as a result of ~~the~~ costs of ~~raw~~ coal purchased for ~~the RC~~ ~~facilities~~operations ~~operated~~ by Clean Coal and ~~the~~ operating costs ~~incurred~~related into ~~those~~RC facilities operated by Clean Coal during the quarter. In addition, costs increased by 202% from $2.1 million to $6.3 million in the EC segment due to the increased activity inon ~~this~~contracts awarded ~~segment~~for ACI and ~~due~~DSI tosystems in the ~~hiring~~fourth quarter of ~~additional~~2012 ~~staff~~and ~~required~~first toquarter ~~meet~~of ~~expected growth~~2013.

Gross margins were 514.3% ~~and 11%~~ for the ~~three~~quarter ~~and nine months~~ ended ~~September~~ March 3031, ~~2012,~~2013 ~~respectively,~~ compared to 5422% ~~and 69%~~ for the ~~same~~quarter ~~periods~~ended inMarch 31, ~~2011~~2012. ~~This~~The decrease primarily reflects such increased costs. If the RC ~~coal~~ sales and raw coal purchases ~~($59~~of ~~million and~~ $~~106.5~~45 million ~~for the three~~ and ~~nine months ended September 30, 2012, respectively, and $2.6 million for both the three and nine months ended September 30, 2011) and~~ operating costs ~~($8.3~~of ~~million and~~ $156.45 million ~~for the three and nine months ended September 30, 2012, respectively, and $2.4 million and $3.7 million for the three and nine months ended September 30, 2011, respectively)~~ related to RC produced for Clean Coal’s account, which will not continue with respect to any facilities after they are ~~monetized~~leased or sold, are subtracted from the revenue and costs of revenue amounts reported for ~~2012~~the first quarter of 2013, adjusted gross ~~margins~~margin would behave been 8070% for ~~both~~ the ~~three~~first ~~and~~quarter ~~nine~~of ~~months~~2013 ~~ended September 30, 2012,~~ compared to ~~90%~~a ~~for~~similarly ~~the~~adjusted ~~same~~gross ~~periods~~margin inof ~~2011~~76% ~~with~~for the ~~same~~first ~~adjustments~~quarter of 2012. The revenues and cost of revenues infor ~~2011~~the first quarter of 2012 included ~~relatively~~RC ~~small~~sales ~~amounts~~and raw coal purchases of ~~such~~$9.8 million ~~revenues~~ and operating costs of $2.4 million ~~For~~related ~~the~~to ~~near~~RC ~~term,~~produced wefor ~~expect~~Clean ~~the~~Coal’s ~~lease~~account. ~~and~~Adjusted ~~sale~~gross ofprofit RCmargin ~~facilities~~percentage is a non-GAAP financial measure which is used to ~~represent~~provide aninvestors ~~increasing~~with ~~source~~greater oftransparency ~~revenues,~~with ~~for~~respect ~~which~~to the effect ~~anticipated~~on gross ~~margins~~margin ~~are~~from ~~higher~~Clean ~~than~~Coal’s ~~our~~operation ECof ~~and~~certain CCRC ~~segments.~~facilities Asfor aits ~~result,~~own weaccount. ~~expect~~We ~~the~~believe ~~gross margin~~this ~~when~~non-GAAP ~~coal~~financial ~~sales~~measure ~~and~~provides ~~purchases~~meaningful ~~are~~supplemental ~~disregarded~~information for ~~fiscal~~investors ~~year~~regarding ~~2012~~the toperformance beof ~~higher~~our ~~than~~business and the ~~overall~~effect on gross margin ~~realized~~of inthe ~~2011~~operation of these RC facilities by Clean Coal for its own account.

For the near term, we expect the lease and sale of RC facilities to represent an increasing source of revenues, for which the anticipated gross margins are higher than our EC and CC segments. As a result, we expect the gross margin for fiscal year 2013 to be higher than the overall margin realized in 2012.

Refined Coal

Revenues in our RC segment totaled $7058.21 million ~~and $133.7 million~~ for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012, respectively,~~2013 compared to $915.2 million ~~and $20 million~~ for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2011~~2012, representing an increase of ~~666~~283%. ~~and~~Rental income ~~569%~~from ~~for~~ the ~~quarter~~leased and ~~year~~sold toRC ~~date.~~facilities ~~Rental income~~ totaled $1112.12 million ~~and~~in ~~$27.1 million from~~ the ~~leased~~first RCquarter ~~facilities~~of ~~for~~2013 ~~the three and nine months ended September 30, 2012, respectively,~~ compared to $65.24 million ~~and $16.9 million~~ for the same ~~periods~~period in ~~2011~~2012. ~~Sales~~RC ofcoal RCsales totaled $5945 million ~~and $106.5 million~~ for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012,~~2013 ~~respectively,~~ compared to $29.6 8 million for ~~each of~~ the same ~~periods~~period in ~~2011 as a result of raw coal purchases and RC sales at the several different RC facilities that Clean Coal operated for its own account during the periods shown~~2012.

Clean Coal incurs the operating costs for the RC facilities operated for its own account and retains for its owners the tax credits generated from the approximately 2.5 million tons ~~and 3.9 million tons of RC~~ produced for its own account during the ~~three~~first ~~and~~quarter ~~nine~~of ~~months~~2013 ~~ended~~compared ~~September 30,~~to ~~2012~~268,000 ~~respectively~~tons during the first quarter of 2012. We expect our quarterly revenues to continue to fluctuate based on seasonal variations in electricity demand as well as planned and unplanned outages required by the power plants for equipment repair and maintenance. On an ongoing basis, we expect ~~our~~the ~~four~~five ~~currently~~RC facilities leased RCor sold third party ~~facilities~~investors to generate ~~from~~approximately $2950 million to $3660 million in revenue per year now through 2021 ~~based on the Section 45 tax credits produced by their operations~~.

~~Cost~~25 of revenues for the RC segment totaled $67.3 million and $121.2 million for the three and nine months ended September 30, 2012, respectively, compared to $3.5 million and $4.1 million for the same periods in 2011. Costs increased due primarily to the cost of coal acquired to operate RC facilities placed in service which costs approximate the revenues realized on its sale noted above. We expect future RC margins excluding those coal purchases and RC sales for the RC facilities leased or sold to others to be at a level near 85%.

RCCost ~~segment~~of ~~profits~~revenues ~~decreased~~for bythe ~~$2.2~~RC ~~million or~~segment ~~46%~~increased ~~and~~by $239.4 million or 17327% for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, 2013 ~~2012, respectively,~~ compared to the same ~~periods~~period in ~~2011~~2012. ~~primarily~~Costs asincreased adue ~~result~~primarily ofto the cost of ~~operating~~coal ~~certain~~acquired RCto ~~facilities~~operate ~~for~~RC ~~our own account and one-time costs incurred as we work through moving the placed in service~~ facilities towhich ~~full-time,~~cost ~~long-term~~approximates ~~operations, offset by~~ the ~~two~~revenues ~~additional~~realized ~~facilities~~on ~~leased~~its ~~during~~sale ~~the~~as ~~first~~noted ~~and~~above. ~~third~~We ~~quarters~~expect offuture ~~2012~~RC ~~and~~margins anfor ~~increase in~~ the ~~amount~~RC ~~of coal burned at~~facilities ~~the utilities where the~~ leased RCor ~~facilities~~sold ~~are located due~~ to ~~seasonal~~others ~~changes in demand during the third quarter of 2012. These amounts are prior~~ to ~~the~~be ~~allocation~~at ofa ~~such~~level ~~profits~~near ~~to the non-controlling interests of Clean Coal~~95%.

30RC segment profits increased by $4.3 million or 238% for the quarter ended March 31, 2013 compared to the same period in 2012 primarily as a result of the additional RC facilities leased and sold during 2013, offset by the costs of operating certain RC facilities for our own account and one-time transactional costs incurred as we continue to work through moving the placed-in-service facilities to full-time, long-term operations. These amounts are prior to the allocation of such profits to the non-controlling interests of Clean Coal.

Emission Control

Revenues in our EC segment totaled $38.58 million ~~and~~for the quarter ended March 31, 2013 compared to $~~10.~~2.8 million for the ~~three~~same ~~and~~period ~~nine~~in ~~months~~2012, ~~ended~~representing ~~September 30,~~an ~~2012,~~increase ~~respectively~~of 217%, ~~compared~~primarily due to ~~$3.1~~increased ~~million~~sales of ACI and $6DSI systems and the recognition of revenues for previously awarded sales contracts as well as revenues resulting from our acquisition of the assets of Bulk Conveyor.8 ~~million~~Revenues from the EC segment for the ~~three~~quarter ended March 31, 2013 were comprised of sales of ACI and DSI systems and ~~nine~~services ~~months~~(86%), ~~ended~~consulting ~~September~~and demonstration services (11%) 30and flue gas chemicals and services (3%) compared to 51%, ~~2011~~41%, and 8%, respectively, ~~representing~~for anthe ~~increase~~same ofperiod ~~12%~~in 2012. We expect our EC segment revenues related to ACI and ~~49%~~DSI ~~for~~systems to continue to grow significantly in 2013 as we expect utilities, cement plants and industrial boilers to continue placing orders in response to the ~~quarter~~MATS and ~~year~~other MACT regulations. We expect our gross margin percentage for our EC segment for 2013 will approximate 20% to ~~date~~25%.

~~The amounts~~Our ~~reported~~consulting ~~exclude~~revenues ~~the~~totaled ~~work~~$1 ~~ADA~~million ~~has conducted~~ for ~~Clean Coal, as further described below, which was eliminated in our consolidation. Revenues from~~ the ECquarter ~~segment for the nine months~~ ended ~~September~~March 3031, ~~2012~~2013 ~~were comprised of sales of ACI and DSI systems and services (63%), consulting and demonstration services (31%) and flue gas chemicals and services (6%)~~ compared to ~~30%,~~$1.1 ~~59%, and 11%, respectively,~~ million for the same period in ~~2011~~2012. We ~~expect~~are ~~our~~continuing ECwith ~~segment~~demonstrations ~~revenues related to ACI~~ and ~~DSI~~other ~~systems~~work torelated ~~continue~~ to ~~grow~~the inMATS ~~2013~~and ~~when~~ we expect ~~utilities,~~our ~~cement~~consulting ~~plants~~revenue ~~and~~to ~~industrial~~continue ~~boilers~~ to ~~start~~be ~~placing~~a ~~orders~~significant ~~due~~part toof ~~the~~EC ~~MATS~~revenues ~~and~~during ~~other~~2013 ~~MACT~~as ~~regulations.~~several Wecustomers ~~expect~~are ~~our~~seeking ~~gross~~alternatives on ~~margin~~how ~~percentage~~best ~~for~~to ~~our~~comply ECwith ~~segment~~the ~~for 2012 will approximate 25%~~MATS.

~~Our~~As ~~consulting~~of ~~revenues~~March 31, ~~totaled~~2013, $1we ~~million~~had ~~and~~contracts ~~$3.2~~in ~~million~~progress for ~~the~~work ~~three~~related ~~and~~to ~~nine~~our ~~months~~EC ~~ended~~segment ~~September 30, 2012,~~totaling ~~respectively,~~approximately ~~compared to~~ $232.17 million, ~~and~~which $4we ~~million~~expect ~~for~~to ~~the~~recognize ~~same~~as ~~periods~~revenue in ~~2011,~~2013 ~~representing~~and a2014. ~~decrease~~Our ofACI ~~53%~~ and ~~21%~~DSI ~~from~~systems ~~the~~revenues ~~same~~totaled ~~periods in 2011~~$7.5 ~~Thus~~million ~~far~~for ~~in 2012~~ the ~~size~~quarter ~~and~~ended ~~scope~~March 31, of2013, ~~our~~representing ~~consulting~~an ~~contracts~~increase ~~has~~of ~~been~~433% ~~lower~~compared ~~than~~to ~~those~~the ~~we worked~~same onperiod in 2012, ~~2011.~~primarily Wedue ~~are~~to ~~continuing~~increased ~~with~~sales ~~demonstrations~~of ACI and ~~other~~DSI ~~work~~systems ~~related~~and to the ~~MATS~~recognition ~~and~~of werevenues ~~expect~~on ~~our~~previously ~~consulting~~awarded ~~revenue~~sales tocontracts ~~continue~~as towell beas ~~a significant part of EC~~ revenues ~~during~~resulting ~~2013~~from asour ~~several~~acquisition ~~customers~~of ~~are~~the ~~seeking~~assets ~~alternatives~~of onBulk ~~how best~~Conveyor toas ~~comply~~discussed ~~with the MATS~~above.

AsCost of ~~September 30,~~revenues ~~2012, we had contracts in progress~~ for ~~work~~the ~~related to our~~ EC segment ~~totaling approximately~~increased by $34.92 million, ~~which~~for ~~we expect to recognize during~~ the ~~remainder of 2012 and during the~~ first ~~and~~quarter ~~second quarters~~ of 2013. ~~Our~~compared ~~ACI~~to ~~and DSI systems revenues totaled $2.3 million and $6.5 million for~~ the ~~three~~same ~~and~~period ~~nine~~in ~~months ended September 30,~~ 2012, ~~respectively,~~primarily ~~representing~~as ana ~~increase~~result of the ~~154%~~increased ~~and~~revenue-generating ~~215%~~activities ~~compared~~from toour ~~the~~ACI ~~same~~and ~~periods~~DSI insystem ~~2011~~sales. InGross margin for the EC segment, wewas ~~performed~~29% ~~work related to RC facilities provided to Clean Coal valued at $199,000 and $2.2 million~~ for the ~~three~~ ~~and~~first ~~nine~~quarter ~~months~~of ~~ended~~2013 ~~September 30, 2012, respectively,~~ compared to $125% ~~million and $1.5 million~~ for the same ~~periods~~period in ~~2011, which would otherwise be recognized as revenue but was eliminated in the consolidation of Clean Coal~~2012.

~~Cost of revenues for the~~ EC segment profits increased by $~~728,000 and $4.~~1.5 million for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012, respectively,~~2013 compared to the same ~~periods~~period in 2011, primarily as a result of the increased revenue-generating activities from our ACI and DSI system sales. Gross margins for the EC segment were 23% for both the three and nine months ended September 30, 2012~~, respectively, compared to 37% and 45% for the same periods in 2011~~. The ~~decrease~~increase inwas ~~gross margin from the prior year is~~ primarily a result of a higher ~~percent~~margins ofon ~~work~~recent incontract ~~this~~awards ~~segment~~and ~~related~~a toreduction ~~ACI~~in ~~systems~~overhead ~~that carry lower margin than our typical consulting work and increased~~ costs ~~related~~from ~~to our ACI systems activities including hiring additional staff required for expected growth~~2012.

EC segment profits decreased by $950,000, or 118%, and $1.7 million, or 98%, for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. The decrease was primarily a result of lower margins and hiring of additional staff for expected growth as discussed above.

CO₂ Capture

Revenues in our CC segment totaled $~~676,000 and $~~1.24 million for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012~~2013, ~~respectively,~~ representing ~~a decrease~~an increase of 31404% ~~and 39%~~ from the same ~~periods~~period in ~~2011~~2012, primarily due to ~~a slower pace in activities associated with~~ the ~~DOE~~billing ~~project~~milestones ~~during~~for ~~the~~these ~~first part of 2012~~projects. We had outstanding DOE contracts, including anticipated industry cost share in progress totaling ~~approximately~~ $1411.63 million as of ~~September~~March 3031, ~~2012~~2013. We expect to recognize approximately $28.3 million from these contracts during the remainder of ~~2012~~2013 ~~including~~if ~~participation~~the byanticipated ~~other~~schedule ~~industry~~of ~~partners~~activities is maintained. We are seeking additional cost share participants for the ~~remainder~~remaining ofwork ~~projects~~under the contracts.

Cost of revenues for the CC segment ~~decreased~~increased by $~~192~~731,000, or 30625%, ~~and $558,000, or 46%,~~ for the ~~three~~ ~~and~~quarter ~~nine months~~ ended ~~September~~March 3031, ~~2012~~2013, ~~respectively,~~ primarily related to the ~~decrease~~increase in work being performed under these projects. Gross ~~margins~~margin for this segment ~~were~~was 3440% ~~and 44%~~ for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012,~~ ~~respectively,~~2013 compared to 3559% ~~and 37%~~ for the same ~~periods~~period in ~~2011~~2012. The ~~increase~~Company records its estimated cost share portion of the DOE contracts as research and development (“R&D”) expense. The margin amounts shown are net of that allocation to R&D expense. The decrease in gross margin from ~~2011~~2013 to 2012 is due primarily to the ~~decrease~~increase in the use of subcontractors and purchasing of equipment, both of which typically have lower cost mark-ups than our internal labor under these contracts. Lower cost share participation from third parties also contributed to higher costs and lower margins. We expect the overall gross margin for the CC segment for fiscal year ~~2012~~2013 to ~~approximate~~be lower than the levels achieved in ~~2011~~2012, due to ~~the~~our ~~relative~~likely ~~mixture~~share of ~~direct~~costs and ~~indirect~~the mixture of direct costs (labor versus equipment and subcontractors) and indirect costs associated with this segment.

CC segment profits decreased by $142,000 to a loss of $80,000 for the quarter ended March 31, 2013 compared to the same period in 2012. The decrease was primarily the result of no cost share participation by others so far this year and greater use of subcontractors and purchasing of equipment for construction of the pilot-scale technology validation unit required to further develop our CO2 capture technology.

CC26 segment profits decreased by $177,000, or 161%, and $133,000, or 92%, for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. The decrease was primarily the result of lower cost share participation from third parties.

Our contracts with the government are subject to audit by the federal government, which could result in adjustments to previously recognized revenue. Our historical experience with these audits has not resulted in significant adverse adjustments to amounts previously received; however the audits for the years 2005 and later have not been finalized. Revenues Werecognized from 2005 through 2012 that are subject to government audit totaled approximately $31 million. In addition, we had $11.3 million of remaining unearned amounts under contracts subject to audit as of March 31, 2013. We believe, however, that we have complied with all requirements of the contracts and future adjustments, if any, will likely not be material. In addition, the federal government must appropriate funds on an annual basis to support DOE contracts, and funding is always subject to unknown and uncontrollable contingencies.

Other Items

General and administrative expenses increased by $23.~~2 million, or 76%, and decreased by $1.~~7 million, or 12101%, to ~~$5.2~~approximately ~~million and~~ $127.93 million for the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2012,~~2013 ~~respectively,~~ compared to the same ~~periods~~period in ~~2011~~2012. The increase ~~for the~~from first quarter ~~was~~of 2012 is primarily due to increased compensation due to our increased sales, marketing, bid and proposal staff and activities, increased occupancy ~~costs~~cost from our expanded space, ~~and overlap in~~ the ~~approximately five months during which we~~addition ~~transitioned out~~ of ~~our~~activities ~~old lab and rental space, costs related to the acquisition~~ of ~~Bulk Conveyor’s assets and initiation of activities at the~~ BCSI ~~site,~~ and ~~increases~~increased inoverhead ~~the staff expense~~ and ~~overhead~~transactional costs of Clean Coal.

~~Legal~~We incur R&D expenses ~~decreased~~not only on direct activities we conduct but also by sharing a portion of the costs in the government and industry programs in which we participate. Total R&D expense increased by $~~660~~139,000 or 25% for the quarter ended March 31, 2013 compared to the same period in 2012 as a result of increases in EC and $3RC activities.7 ~~million~~The increase in total R&D is related to preparing for growth in the ~~three~~delivery ~~and~~of ~~nine~~our ~~months~~ACI ~~ended~~and ~~September 30,~~DSI ~~2012~~systems, ~~respectively,~~as ~~compared~~well toas our RC activities. We had no significant cost share for R&D under DOE related contracts so far in 2013 or for the same ~~periods~~ period in ~~2011~~2012. ~~Legal~~Future ~~expenses~~consolidated inresearch ~~2011~~and ~~resulted~~development ~~primarily~~expenses, ~~from~~except ~~costs~~for ~~related~~those anticipated to ~~our~~be ~~legal~~funded ~~proceedings~~by the DOE contracts and ~~settlements~~others asthat ~~described~~may be awarded, are expected to be higher in ~~prior~~2013 ~~filings~~compared to 2012. We ~~believe~~continue to anticipate that our ~~legal~~future R&D expenses ~~have~~will ~~now~~grow ~~returned~~in direct proportion to ~~more~~DOE ~~routine~~funded ~~levels~~CO2 work we perform for the next several years and other technology development we choose to pursue.

~~Compensation~~We ~~costs~~had ~~increased~~other byincome including interest of $~~1.8~~70,000 ~~million~~for orthe ~~280%~~quarter ~~and~~ended ~~$760~~March 31,~~000~~ or2013 ~~15%~~compared to $99,000 for the ~~three~~same ~~months~~period in 2012. We recognized $673,000 in expenses related to royalty payments to Norit Americas, Inc. and ~~nine~~Norit ~~months~~International N.V. f/k/a Norit N.V. (“Norit”) for the quarter ended ~~September~~March 3031, ~~2012~~2013 and $284,000 for the same period in 2012. We expect that ~~respectively~~these royalty payments to Norit will amount to between approximately $2 million and $4 million per year for the near future. We had interest expense of $383,000 for the quarter ended March 31, 2013 compared to $470,000 for the same ~~periods~~period in 2012. ~~2011,~~The ~~which~~expense in 2013 is ~~primarily~~related ~~due~~to interest paid on the deposit repayment made to anGS ~~increase~~RC inand ~~personnel~~due into the ~~third~~deferred ~~quarter~~gain resulting from Clean Coal’s tax treatment of ~~2012~~leased and ~~incentive~~sold ~~accruals~~RC facilities. The 2012 amount is related to ~~our~~the line of credit agreements and the deferred gain resulting from Clean Coal’s tax treatment of leased RC ~~activity~~facilities.

WeThe ~~expect~~net ~~general~~operating ~~and~~loss ~~administrative~~from continuing ~~expenses~~operations ~~for~~before ~~the~~income ~~remaining~~tax ~~three~~benefit ~~months~~and ofnon-controlling ~~2012~~interest towas ~~continue~~$357,000 tofor bethe atquarter aended ~~level~~March 31, ~~between~~2013 compared to $41.9 million ~~and~~for $5the ~~million.~~same ~~The~~period ~~general~~in ~~and~~2012. ~~administrative~~The ~~amounts~~decrease ~~for~~in the ~~first nine~~net ~~months~~operating ofloss ~~2012~~in ~~include~~2013 ~~approximately~~is ~~$2.6~~due ~~million~~in ~~from~~large part to the ~~consolidation~~increase in activity in all three of ~~Clean~~our ~~Coal~~segments.

We incur R&D expenses not only on direct activities we conduct but also by sharing a portion of the costs in the government and industry programs in which we participate. Total R&D expense increased by $376,000, or 74%, and $668,000, or 48%, for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011 as a result of increases in EC and RC activities. The increase in R&D is related to preparing for growth in the delivery of our ACI and DSI systems, as well as our RC activities. We have also had approximately $326,000 in direct cost share for R&D under DOE-related contracts so far in 2012. Future consolidated research and development expenses, except for those anticipated to be funded by the DOE contracts and others that may be awarded, are expected to be higher in 2012 compared to 2011. We continue to anticipate that our future R&D expenses will grow in direct proportion to DOE funded CO2 work we perform for the next several years and other technology development we choose to pursue.

Other income (expense) including interest income totaled a net expense of $19,000 and net income of $122,000 for the three and nine months ended September 30, 2012, respectively, compared to net income of $71,000 and $2.2 million for the same periods in 2011. The 2011 amount was higher due to the notes receivable and other amounts due from NexGen received in 2011. We recognized $800,000 and $1.6 million in expenses related to royalty payments to Norit Americas, Inc. and Norit International N.V. f/k/a Norit N.V (“Norit”) for the three and nine months ended September 30, 2012, respectively. We expect that these royalty payments to Norit will amount to between approximately $1 million and $2 million per year for the next several years. We recognized $41.7 million in expenses related to legal proceedings and settlements for the nine months ended September 30, 2011 as discussed in prior filings. We had interest expense of $144,000 and $1 million for the three and nine months ended September 30, 2012, respectively, related to Clean Coal’s line of credit agreement and the deferred gain resulting from the tax treatment of the RC facilities leased by Clean Coal during such periods.

The deferred income tax benefit of $11 million (restated) for the nine months ended September 30, 2011 represents the income tax effect of the sale of the equity interest in Clean Coal to GS in May 2011. The consolidated financial statements have been restated to include a full valuation allowance against the deferred tax assets as discussed in Note 14 of the notes to the consolidated financial statements.

The net operating loss from continuing operations before income tax expense (benefit) and non-controlling interest was $5.1 million for the nine months ended September 30, 2012 compared to $43.1 million for the same period in 2011. The decrease in the net operating loss in 2012 is due in large part to the decrease in legal and settlement costs associated with our arbitration and litigation and a decrease in our net loss from unconsolidated entities as a result of the relinquishment of our interest in ADA Carbon Solutions, LLC in the fourth quarter of 2011.

Liquidity and Capital Resources

Working Capital

Our principal sources of liquidity are ~~our~~ cash on hand ~~at present~~ and ~~anticipated~~our ~~growing~~ cash flows from RC activities and other operations. We had consolidated cash and cash equivalents totaling $1721.5 9 million at ~~September~~March 3031, ~~2012~~2013 compared to consolidated cash and cash equivalents of $~~40.~~9.7 million at December 31, ~~2011~~2012.

32At March 31, 2013, we had a working capital deficit of $11 million compared to a working capital deficit of $24.1 million at December 31, 2012. The decrease in deficit was in part due to an increase in cash and cash equivalents from the the sale of the fifth RC facility and the elimination of the outstanding balance on Clean Coal’s line of credit. In addition, included in the March 31, 2013 amount are $16.5 million in deposits from GSFS on RC facilities and $16.6 million in deferred revenues which will not require the use of cash but will generate revenue when amounts are earned. The deposit amount from 2012 decreased $4.7 million as discussed below.

At September 30, 2012, we had a working capital deficit of $16.9 million compared to working capital of $1.4 million (restated) at December 31, 2011. Included in that September 30, 2012 amount are $11.9 million in deposits and $10.1 million in deferred revenues. If GSGSFS determines that it will not lease aan RC facility after it has paid the deposit, it can provide notice requesting the return of the deposit paid for that RC facility, and the deposit must be paid within 30 days of the end of the quarter in which the notice is given. ~~The amount of any deposit will earn interest from the date of the notice until the deposit is paid.~~ In October 2012, GSGSFS ~~gave~~determined ~~notice for the return of $4.7 million of the deposit amount above~~ that it ~~had previously paid to secure their right to monetize certain RC facilities.~~ ~~While~~would ~~we have~~ not ~~yet~~pursue ~~returned~~leases ~~the~~on ~~deposits,~~two weparticular ~~plan~~RC ~~to do so by January 30, 2013 as required by the Lease Agreement unless GS selects other~~ facilities inon which toit ~~participate~~had ~~for~~paid ~~which the~~ deposits ~~could~~totaling ~~be applied. The Clean Coal line of credit of~~ $~~15 million requires four equal quarterly installments of principal to be paid beginning June 30, 2012~~4.7 ~~The second installment payment of $3.75~~ million ~~was made on October 1, 2012. Our ability to generate the financial liquidity required to meet ongoing operational needs~~ and toconcurrently ~~meet~~gave ~~our~~notice ~~obligations will likely depend upon our ability to maintain a significant share of the market~~ for ~~mercury control equipment,~~ the ~~continued~~return ~~operation~~ of ~~the~~related RC facilities leased to third parties to date and success in monetizing Section 45 tax credits through the sale or lease of additional RC facilities to third party investors and our ability to raise additional financingdeposits. WeIn ~~believe~~December 2012, ~~with~~GSFS ~~the~~agreed ~~monetization of four RC facilities~~ to ~~date and~~defer the ~~expected~~return ~~monetization~~ of athese RCdeposits ~~facility Clean Coal is presently operating for its own account in the fourth quarter~~until April 30, ~~that we have sufficient working capital to meet the operational needs of the Company for the next twelve months~~2013. ~~While,~~In ~~as previously~~March ~~noted~~2013, GSClean ~~has~~Coal ~~given~~returned ~~notice for~~ the ~~return of deposits in the amount of~~ $4.7 million, ~~which we are obligated to return by January 30, 2013, we anticipate that this amount may be offset by deposits for additional RC facilities that we expect to receive from GS~~ in ~~the near future. If there was a default under the Clean Coal line of credit, or if GS does not place~~ deposits onplus ~~additional~~accrued RCinterest ~~facilities, we could be forced~~ to seek additional sources of financing to meet those obligations if they became immediately due and payable and/or decide to suspend operations at one or more of the RC facilities that Clean Coal is operating for its own accountGSFS.

We27 have recorded long-term liabilities of $2.5 million related to litigation settlement obligations, $2.5 million in notes payable related to the acquisition of BCSI and $692,000 for accrued warranty and other liabilities as of September 30, 2012. Decreases in working capital during the nine months ended September 30, 2012 resulted primarily from $9.4 million in capital expenditures related to RC facilities and leasehold improvements, a $2 million payment for the acquisition of BCSI, a scheduled $2.5 million payment related to a litigation settlement, a $500,000 loan to Clean Coal Solution Services, LLC (“CCSS”), a Colorado limited liability company owned 50% by us and 50% by NexGen and net repayments of $4.2 million under the Clean Coal line of credit.

~~Our~~On ~~stockholders’~~February 28, ~~deficit~~2013, ~~was~~Clean ~~$34~~Coal sold an RC facility to a new third party investor.2 ~~million~~The asterms of the ~~September 30,~~sale ~~2012~~included ~~compared~~$20 million paid immediately to ~~$29.4~~Clean ~~million~~Coal ~~(restated)~~and asa combination of ~~December 31,~~fixed ~~2011.~~and ~~The~~variable ~~increase~~payments ingoing ~~stockholders’~~forward. ~~deficit~~An additional $5 million is ~~primarily~~to ~~due~~be paid to ~~the~~Clean ~~net~~Coal ~~loss~~when ~~and~~the isbuyer ~~offset~~receives byan ~~the~~applied ~~net~~for ~~income~~PLR from the ~~non-controlling~~IRS, ~~interest~~which ~~for~~is ~~the nine~~expected ~~months~~later ~~ended~~this ~~September 30, 2012~~year.

Our ability to generate the financial liquidity required to meet ongoing operational needs and to meet our obligations will likely depend upon our ability to maintain a significant share of the market for mercury control equipment, the continued operation of the RC facilities leased or sold to third parties to date, success in the sale or lease of additional RC facilities to third party investors and our ability to raise additional financing. We believe, with the lease of four RC facilities to date, and the sale of the fifth RC facility, that we have sufficient sources of working capital to meet the operational needs of the Company for the next 12 months. If GSFS requires the return of its remaining deposits or does not place deposits on additional RC facilities, we may need to seek additional sources of financing to meet those obligations if they became immediately due and payable and/or decide to suspend operations at one or more of the RC facilities that Clean Coal is operating for its own account.

We have recorded long-term liabilities of $2.5 million related to litigation settlement obligations, $2.2 million in notes payable related to the acquisition of Bulk Conveyor’s assets and $14.3 for accrued warranty, deferred revenue and other liabilities as of March 31, 2013. Our stockholders’ deficit was $39.8 million as of March 31, 2013 compared to $40.1 million as of December 31, 2012. The decrease in stockholders’ deficit is due to the net loss and is offset by the net income from the non-controlling interest for 2013.

Clean Coal Related Items

Clean Coal, our joint venture with NexGen, placed two RC ~~production~~ facilities into service in 2010 (which were exchanged for two newly constructed, redesigned RC facilities in November and December 2011), which are leased to a third party. In ~~addition~~2012, ~~Clean~~two ~~Coal~~additional ~~leased another~~ RC ~~facility~~facilities towere aleased, ~~third~~one ~~party~~to at the ~~end~~lessee of the first ~~quarter~~two offacilities ~~2012~~and one to a new third party investor. AnIn ~~additional~~addition, in February 2013, a fifth RC facility was ~~leased~~sold towhich ~~another~~Clean ~~third~~Coal ~~party~~had inbeen ~~the~~previously ~~first~~operating ~~week~~for ofits ~~August~~own account. On an ongoing basis, we expect our ~~four~~five currently leased and sold RC facilities to generate from $2950 million to $3660 million in revenue per year from now through 2021 based on ~~the~~their ~~Section 45~~operations ~~tax~~and ~~credits~~periodic ~~produced~~payments bywe ~~their~~expect ~~operations~~to receive. We expect by the end of ~~2012~~ 2013 to have additional RC facilities under lease or ~~sale~~sold such that total revenues from these activities will be at a run-rate of over $100 million per year and be at a level of producing pre-tax cash flows of as much as $50 million per year ~~which we expect to occur in the first half of 2013~~. We would expect those levels to continue through 2021, the present term of the Section 45 tax credit, with an opportunity to double those amounts by the end of ~~2013~~2014 as we look to have all of our RC facilities operating on a continuous basis and leased or sold by that time. We believe that once ~~all~~most ~~new~~of ~~and~~the ~~existing~~ RC facilities are leased or sold to others and become fully operational, they will achieve an annualized segment rental revenue rate of approximately $200 million; excluding the approximately $250 million to $300 million in ongoing coal sales and raw coal purchases from RC facilities that Clean Coal is expected to operate in the long-term for its own account. These revenue rates would be expected to generate approximately $100 million in segment income to ~~ADA~~the Company after payments to minority partners, including an estimated $30 million in tax credits apportioned to ~~ADA~~the Company to be generated by RC facilities operated by Clean Coal.

Other Liquidity and Capital Resource Items

Our trade receivables balance is comprised of both amounts billed to customers as well as unbilled revenues that have been recognized. As of ~~September~~March 3031, ~~2012~~2013 our trade receivables balance was $10 15.7 million compared to $~~5.9~~11 million at December 31, ~~2011~~2012. Our trade receivables balance was higher at ~~September~~March 3031, ~~2012~~2013 compared to December 31, ~~2011~~2012 primarily due to the nature and timing of ~~billing~~our ~~milestones~~progress ~~for~~on ~~our~~contracts ~~ACI~~as ~~systems contracts~~impacted ~~and~~by ~~increased~~our ~~receivables~~billing ~~related~~milestones tofor our RCincreased ~~activity~~ACI and DSI systems contracts.

Under our defined contribution and 401(k) retirement plan, we match up to 7% of limited salary amounts deferred by employees in the Plan. During the quarter ~~nine months~~ ended ~~September~~March 3031, ~~2012 and 2011~~2013, we recognized $~~292~~113,000 ~~and $264,000, respectively,~~ of matching expense which payment was made with ~~shares of~~ our ~~common~~ stock. Our matching expense is expected to amount to $~~460~~475,000 for ~~2012~~2013 depending on employee participation in the plan.

33We had net current deferred tax assets of $2.3 million and long-term deferred tax assets of $37.8 million as of March 31, 2013 compared to net current deferred tax assets of $2.3 million and long-term deferred tax assets of $37.2 million as of December 31, 2012. The current period tax rate used to calculate deferred income taxes reflects our estimate of our full-year tax rate. We believe that our effective tax rate may vary significantly quarter to quarter as actual earnings or losses are realized and tax credits are generated. The current and long-term amounts for both periods have been reduced to zero by recording a valuation allowance as discussed in Note 11 to the consolidated financial statements. Management determined that it was necessary to record the valuation allowance against the Company’s deferred tax assets after reconsidering the weight given in the original assessment to the relevant information used to measure the positive and negative evidence regarding the potential for ultimate realization of the net deferred tax assets.

WeThe ~~had net~~ current ~~deferred tax assets of $2.4 million~~ and ~~net~~ long-term ~~deferred~~amounts ~~tax~~for ~~assets~~both ofperiods ~~$16.2 million~~have asbeen ~~of December 31, 2011. The current and long-term amounts were subsequently~~ reduced to zero by recording a valuation allowance ~~against~~as ~~our deferred tax assets. As~~ discussed in Note 1411 to the consolidated financial statements,. inManagement ~~August~~determined that ~~2012,~~it ~~management~~was ~~determined~~necessary ~~that~~to arecord ~~full~~the valuation allowance against the Company’s ~~net~~ deferred tax assets ~~should~~after ~~have~~reconsidering ~~been~~the ~~recognized~~weight asgiven ofin ~~December 31,~~the ~~2010~~original ~~and~~assessment ~~for~~to ~~each~~the ~~subsequent~~relevant ~~quarter~~information ~~thereafter~~used ~~after~~to ~~reconsidering~~measure the ~~original assessments~~positive and negative evidence regarding the potential for ultimate realization of the net deferred tax assets.

~~Cash~~28 flow used in operations totaled $5.9 million for the first nine months of 2012 compared to $21.7 million for the same period in 2011. The decrease in operating cash flow primarily resulted from an increase in accounts receivable of $4.1 million, a decrease in accrued payroll and related liabilities of $1 million, a decrease in settlement awards and related accrued liabilities of $2.9 million and an increase in deferred revenues and other liabilities of $4.8 million. These changes in our operating assets and liabilities correspond to the nature and timing of our procurement and billing cycle and development activities. In addition, adjustments related to non-cash operating activities included expenses paid with stock and restricted stock of $395,000, depreciation and amortization of $3.4 million and non-controlling interest in Clean Coal of $2.6 million, each of which increased our cash flow provided by operations.

~~Net~~Cash ~~cash~~flows ~~used~~provided inby ~~investing~~operations ~~activities~~totaled ~~was~~ $1217.71 million for the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2012~~2013 compared to cash flows used in operations of $109.42 million for the same period in ~~2011~~2012. The ~~cash~~increase ~~used~~in ~~consisted~~operating cash flows primarily resulted from increases in deferred revenues and other liabilities of $23.1 million, accounts receivable of $4.6 million and ~~purchases~~accounts payable of ~~equipment~~$1.5 million, ~~leasehold~~and ~~improvements,~~was RCoffset by a decrease in deposits of $4.7 million. These changes in our operating assets and liabilities correspond to the facility leasing and sale activities and the nature and timing of our procurement and billing cycle and development activities. In addition, adjustments related ~~costs~~to non-cash operating activities included expenses paid with stock and restricted stock of $9635,000, depreciation and amortization of $1.4 million and anon-controlling interest $2in ~~million~~Clean ~~payment~~Coal ~~for~~of ~~the~~$1.8 ~~acquisition~~million, each of ~~Bulk~~which ~~Conveyor’s~~increased ~~assets~~our bycash ~~BCSI~~flow from operations.

~~Cash~~Net cash used in ~~financing~~investing activities was $41.8 million for the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2012~~2013 compared to $325.9 million ~~provided by financing activities~~ for the same period in ~~2011~~2012. The cash used consisted ofprimarily ~~net payments on the line~~ of ~~credit~~purchases of ~~$4.1 million~~equipment, ~~distributions~~leasehold byimprovements ~~Clean Coal to the non-controlling interest of $106,000~~ and acertificates ~~loan by ADA to CCSS~~ of ~~$500,000~~deposit.

Cash used in financing activities was $3.1 million for the quarter ended March 31, 2013 compared to $2.5 million used in financing activities for the same period in 2012. The cash used consisted of net payments on Clean Coal’s line of credit of $3 million and payments on notes payable of $138,000.

Critical Accounting Policies and Estimates

Revenue Recognition – We follow the percentage of completion method of accounting for all significant contracts excluding ~~government~~RC ~~contracts~~leases, ~~chemical~~government ~~sales~~contracts, ~~technology~~coal ~~licenses~~ and ~~related~~chemical ~~royalties~~sales and RCtechnology license ~~leases~~royalties. The percentage of completion method of reporting income takes into account the estimated costs to complete and estimated gross margin for contracts in progress. ~~We recognize revenue on government contracts generally based on the time and expenses incurred to date.~~ RC base rents, which are fixed, are recognized over the life of the lease. ~~Contingent~~RC contingent rents are recognized as they are earned. We recognize revenue on government contracts generally based on the time and expenses incurred to date. Royalties from technology licenses are recognized when earned.

Significant estimates are used in preparation of our financial statements and include:

• our allowance for doubtful accounts, which is based on historical experience;

•

our warranty costs;

• our ~~estimate~~percentage of ~~timing~~completion method of accounting for significant long-term contracts, ~~amount~~which ~~and~~is ~~payment~~based on ~~contingent~~estimates ~~liabilities~~of gross margins and of the costs to complete such contracts;

• ~~our~~the ~~percentage~~period ofover ~~completion~~which ~~method~~we ofestimate ~~accounting~~we ~~for~~will ~~significant~~earn ~~long~~up-~~term~~front ~~contracts,~~license ~~which is based on estimates of gross margins and of the costs to complete such contracts~~payments; and

• ~~the~~estimated ~~period~~future ~~over~~royalty ~~which~~obligations weassociated ~~estimate~~with weour ~~will~~settlement ~~earn~~with ~~up-front license payments~~Norit.

In addition, amounts invoiced for government contracts are subject to change based on the results of future audits by the federal government. We have not experienced significant adjustments in the past, and we do not expect significant adjustments will be required in the future. We also use our judgment to support the current fair value of goodwill and other intangible assets of $3.8 million in our consolidated balance sheets. Management believes the value of other recorded intangibles is not impaired, although market demand for our products and services could change in the future, which would require a write-down in recorded values. As with all estimates, the amounts described above are subject to change as additional information becomes available, although we are not aware of anything that would cause us to believe that any material changes will be required in the near term.

Under certain contracts we may grant performance guaranties or equipment warranties for a specified period and the achievement of certain plant operating conditions. In the event the equipment fails to perform as specified, we are obligated to correct or replace the equipment. Estimated warranty costs are recorded at the time of sale based on current industry factors. The amount of the warranty liability accrued reflects our best estimate of expected future costs of honoring our obligations under the warranty section of each contract. We believe the accounting estimate related to warranty costs is a critical accounting estimate because changes in it can materially affect net income, it requires us to forecast the amount of equipment that might fail to perform in the future, and it requires a large degree of judgment.

factors. The amount of the warranty liability accrued reflects our best estimate of expected future costs of honoring our obligations under the warranty section of each contract. We believe the accounting estimate related to warranty costs is a critical accounting estimate because changes in it can materially affect net income, it requires us to forecast the amount of equipment that might fail to perform in the future, and it requires a large degree of judgment.

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. At each reporting date, management reviews deferred tax assets and liabilities and any related valuation allowance 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. Deferred tax assets have been reduced to zero by a valuation allowance because, in the opinion of management, it is more likely than not that all of the deferred tax assets will not be realized. A change in laws can have a material effect on the amount of income tax we are subject to. We are not aware of anything that would cause us to believe that any material changes will be required in the near term.

We recognize all share-based payments, including grants of stock options, restricted stock units and employee stock purchase rights in our financial statements based upon their respective grant date fair values. Under this standard, the fair value of each employee stock option and employee stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements. We currently use the Black-Scholes option pricing model to estimate the fair value of our stock options and stock purchase rights. The Black-Scholes model meets the requirements of FASB Topic 718 but the fair values generated by the model may not be indicative of the actual fair values of our equity awards, as it does not consider certain factors important to those awards to employees, such as continued employment and periodic vesting requirements. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life and risk-free interest rate. We use a historical volatility rate on our stock options. The fair value of our restricted stock is based on the closing market price of our ~~common~~Common ~~stock~~Stock on the date of grant. If there are any modifications or cancellations of the underlying securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. To the extent that we grant additional equity securities to employees or we assume unvested securities in connection with any acquisitions, our stock-based compensation expense will be increased by the additional unearned compensation resulting from those additional grants or acquisitions.

Consolidation of Subsidiaries –Since inception, ADA has been considered the primary economic beneficiary of the joint venture with Clean Coal and, therefore, we have consolidated its accounts with ours.

We30 hold a 50% interest in CCSS. However, we control only two of the five seats on the board of managers and our equity partner controls the other three seats. Therefore, we believe our 50% interest does not constitute control of CCSS and we have recorded our interest under the equity method of accounting.

We hold a 50% interest in CCSS. However, we control only two of the five seats on the board of managers and our equity partner controls the other three seats. Therefore, we believe our 50% interest does not constitute control of CCSS and we have recorded our interest under the equity method.

Recently Issued Accounting Policies

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 impairmentNone. 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.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of ~~September~~March 3031, ~~2012~~2013.

Item 4. Controls and Procedures.

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and under supervision of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their review and evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective to ensure that material information related to our financial statements are made known to them by others in a timely manner, particularly during the period in which this quarterly report on Form 10-Q was being prepared, and that no changes are required at this time.

Changes in Internal Control Over Financial Reporting

There ~~were~~have been no changes in our internal ~~controls~~ control over financial reporting during the ~~quarter~~most ~~ended~~recently ~~September 30,~~completed ~~2012~~fiscal quarter that have materially affected, or are ~~reasonably~~ likely to materially affect, our internal control over financial reporting.

As previously disclosed, the Company is in the process of creating a formal process related to the design and implementation of controls and establishment of adequate criteria to assess the positive and negative evidence over the establishment and maintenance of a valuation allowance against net deferred tax assets. Management anticipates that this process will include periodic oversight by the Audit Committee and anticipates completing this remediation effort before the filing of ADA’s Annual Report on Form 10-K for the fiscal year ending December 31, 2012.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There are no updates to our risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended March 31, 2013, we issued 6,285 unregistered shares of our common stock under our Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”), which was originally adopted by our Board of Directors on April 27, 2007 and approved by our shareholders on June 19, 2007. The 2007 Plan was amended and restated by our Board of Directors to make non-material changes on August 31, 2010 and amended pursuant to Amendment No. 1 and approved by our Board of Directors on January 25, 2011. The 2007 Plan was re-approved by our Board of Directors on February 24, 2012 and approved by our shareholders on July 19, 2012. Such shares were issued to the following affiliated companies in the following amounts on January 18, 2013 as fees for their service on the Board of Directors of the Company:


Director	Shares
Robert Shanklin (shares issued to Arch Coal, Inc.)		1,964
Robert Caruso (shares issued to B/3 Management Resources, LLC)		2,357
Ronald Johnson (shares issued to Twin-Kem International)		1,964

		6,285

The issuances of these shares were exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, as sales of securities that do not involve a public offering or distribution. No underwriters were involved, no sales commission or other remuneration was paid, and we did not receive any cash proceeds in connection with these issuances.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

10.58, *		Technology License Agreement between ADA-ES, Inc., as Licensor, and Clean Coal Solutions, LLC, as Licensee, dated July 27, 2012
2.1*		Agreement and Plan of Merger, dated as of March 25, 2013, among ADA-ES, Inc., Advanced Emissions Solutions, Inc. and ADA Merger Corp.
10.59*		Second Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC by and among ADA-ES, Inc., NexGen Refined Coal, LLC and GSFS Investments I Corp. dated August 1, 2012
10.55,*		Amended and Restated Equipment Lease by and between AEC-NM, LLC and GS RC Investments LLC, dated March 8, 2013.
10.60		Amendment No. 1 to the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan approved by the ADA-ES, Inc. shareholders on July 19, 2012 (1)
10.56,*		Amended and Restated Equipment Lease by and between AEC-TH, LLC and GS RC Investments LLC, dated March 8, 2013.
10.61*		Forms of agreements for use under the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan, as amended
10.57*		Amendment to Exchange Agreement by and between AEC-NM, LLC and GS RC Investments LLC, dated March 8, 2013.
10.58*		Amendment to Exchange Agreement by and between AEC-TH, LLC and GS RC Investments LLC, dated March 8, 2013.
10.59*		Fourth Amendment to 2011 Loan and Security Agreement by and between Clean Coal Solutions, LLC and CoBiz Bank, dated January 31, 2013.
31.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)
31.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)
32.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101***		The following financial statements from ADA-ES, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Changes in Stockholders’ Deficit, (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. The information in Exhibit 101 is ”furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.
101		The following financial statements, from ADA-ES, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Cash Flows; (iv) Consolidated Statements of Stockholders’ Deficit; and (v) Notes to the Consolidated Financial Statements. The information in Exhibit 101 is “furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.

*	Filed herewith.

**	Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The non-public information has been separately filed with the Securities and Exchange Commission.

***	These certifications are “furnished” and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

~~(1)~~32 ~~Incorporated by reference to Exhibit 10.53 to the Form 10-K for the year ended December 31, 2011 filed on March 15, 2012 (File No. 000-50216).~~

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ADA-ES, Inc. Registrant
Date: November 9, 2012		/s/ Michael D. Durham
Date: May 10, 2013	/s/ Michael D. Durham
	Michael D. Durham	~~Michael D. Durham~~
	President and Chief Executive Officer (Principal Executive Officer)	~~President and Chief Executive Officer (Principal Executive Officer)~~
Date: November 9, 2012		/s/ Mark H. McKinnies
		Mark H. McKinnies
		Chief Financial Officer (Principal Financial and Accounting Officer)




Date: May 10, 2013				/s/ Mark H. McKinnies
				Mark H. McKinnies
				Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

10.58, *		Technology License Agreement between ADA-ES, Inc., as Licensor, and Clean Coal Solutions, LLC, as Licensee, dated July 27, 2012
2.1*		Agreement and Plan of Merger, dated as of March 25, 2013, among ADA-ES, Inc., Advanced Emissions Solutions, Inc. and ADA Merger Corp.
10.59*		Second Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC by and among ADA-ES, Inc., NexGen Refined Coal, LLC and GSFS Investments I Corp. dated August 1, 2012
10.55,*		Amended and Restated Equipment Lease by and between AEC-NM, LLC and GS RC Investments LLC, dated March 8, 2013.
10.60		Amendment No. 1 to the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan approved by the ADA-ES, Inc. shareholders on July 19, 2012(1)
10.56,*		Amended and Restated Equipment Lease by and between AEC-TH, LLC and GS RC Investments LLC, dated March 8, 2013.
10.61*		Forms of agreements for use under the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan, as amended
10.57,*		Amendment to Exchange Agreement by and between AEC-NM, LLC and GS RC Investments LLC, dated March 8, 2013.
10.58*		Amendment to Exchange Agreement by and between AEC-TH, LLC and GS RC Investments LLC, dated March 8, 2013.
10.59*		Fourth Amendment to 2011 Loan and Security Agreement by and between Clean Coal Solutions, LLC and CoBiz Bank, dated January 31, 2013.
31.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)
31.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)
32.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101***		The following financial statements from ADA-ES, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Changes in Stockholders’ Deficit, (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. The information in Exhibit 101 is ”furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.
101		The following financial statements, from ADA-ES, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Cash Flows; (iv) Consolidated Statements of Stockholders’ Deficit; and (v) Notes to the Consolidated Financial Statements. The information in Exhibit 101 is “furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.

*	Filed herewith.

**	Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The non-public information has been separately filed with the Securities and Exchange Commission.

***	These certifications are “furnished” and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

~~(1)~~34 ~~Incorporated by reference to Exhibit 10.53 to the Form 10-K for the year ended December 31, 2011 filed on March 15, 2012 (File No. 000-50216).~~

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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