CHRA

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____________________________

FORM 10-Q

____________________________

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

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

____________________________

____________________________

Delaware			82-4228671
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
12601 Plantside Drive Louisville, Kentucky			40299
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (502) 245-1353

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CHRA

New York Stock Exchange

8.50% Senior Notes due 2026

CHRB

New York Stock Exchange

____________________________

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 every Interactive Data File required to be submitted 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 such files). Yes x No ¨

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

Smaller reporting company ☒

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No x

			Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			ii
PART I - FINANCIAL INFORMATION			1
Item 1. Financial Statements (Unaudited)			1
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021			1
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021			2
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021			3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021			5
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 4. Controls and Procedures			34
PART II - OTHER INFORMATION			35
Item 1. Legal Proceedings			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 6. Exhibits			35
SIGNATURES			37

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form 10‑Q (this “Quarterly Report”) includes “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward‑looking statements. When used in this Quarterly Report, the words “may,” “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward‑looking statements. However, not all forward‑looking statements contain such identifying words. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. When considering forward‑looking statements, you should keep in mind the risk factors and other cautionary statements included in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and in Part II, “Item 1A. Risk Factors” of this Quarterly Report and elsewhere herein. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

Forward‑looking statements may include statements about:

•the impacts of the COVID-19 pandemic on the Company's business;

•our business strategy;

•our operating cash flows, the availability of capital and our liquidity;

•our future revenue, income, operating performance and backlog;

•our ability to sustain and improve our utilization, revenue and margins;

•our ability to maintain acceptable pricing for our services;

•our future capital expenditures;

•our ability to finance equipment, working capital and capital expenditures;

•competition and government regulations;

•our ability to obtain permits and governmental approvals;

•pending legal or environmental matters or liabilities;

•environmental hazards;

•industrial accidents;

•business or asset acquisitions;

•general economic conditions;

•credit markets;

•our ability to successfully develop our research and technology capabilities and to implement technological developments and enhancements;

•uncertainty regarding our future operating results;

•our ability to obtain additional financing on favorable terms, if required, to fund the operations and growth of our business;

•timely review and approval of permits, permit renewals, extensions and amendments by regulatory authorities;

•our ability to comply with our debt covenants;

•our expectations relating to dividend payments and our ability to make such payments, if any; and

•plans, objectives, expectations and intentions, as well as any other statement contained in this Quarterly Report that are not statements of historical fact.

We caution you that these forward‑looking statements are subject to a number of risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, the risks described under Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and under Part II, “Item 1A. Risk Factors” of this Quarterly Report and elsewhere herein. Should one or more of the risks or uncertainties described occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward‑looking statements.

All forward‑looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary note. This cautionary note should also be considered in connection with any subsequent written or oral forward‑looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward‑looking statements, all of which are expressly qualified by the statements in this cautionary note, to reflect events or circumstances after the date of this Quarterly Report.

(Unaudited)

			June 30, 2022						December 31, 2021
Assets
Current assets:
Cash			$	7,071					$	24,266
Restricted cash			50,576						34,908
Trade accounts receivable, net			43,951						49,303
Contract assets			34,000						26,844
Inventory			5,168						6,289
Prepaid expenses and other current assets			9,514						6,113
Total current assets			150,280						147,723
Real estate, property and equipment, net			106,197						70,473
Goodwill			62,193						62,193
Intangible assets, net			49,584						53,531
Equity method investments			7						7
Other assets			10,373						10,180
Total assets			$	378,634					$	344,107
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Accounts payable			40,951						30,641
Contract liabilities			5,702						6,199
Capital lease obligations, current portion			9,737						6,979
Notes payable, current maturities			8,010						7,567
Asset retirement obligations, current portion			47,542						27,534
Accrued liabilities			28,220						36,874
Other current liabilities			460						460
Total current liabilities			140,622						116,254
Deferred tax liabilities			1,309						949
Contingent payments for acquisitions			1,950						1,950
Asset retirement obligations			36,187						14,879
Capital lease obligations, less current portion			26,563						19,444
Notes payable, less current maturities			130,942						133,661
Deferred gain and other liabilities			5,118						641
Total liabilities			342,691						287,778
Commitments and contingencies (see Note 14)
Mezzanine equity
Series A Preferred Stock — $0.01 par value; 50,000 shares authorized, 26 shares issued and outstanding as of June 30, 2022 and December 31, 2021; aggregate liquidation preference of $34,873 and $32,712 as of June 30, 2022 and December 31, 2021, respectively			39,915						35,532
Stockholders’ equity
Retained losses			(116,322)						(94,679)
Common Stock — $0.01 par value; 200,000 shares authorized 33,722 and 33,408 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			337						334
Additional paid-in capital			111,754						114,880
Total stockholders’ equity			(4,231)						20,535
Non-controlling interest			259						262
Total equity			(3,972)						20,797
Total liabilities, mezzanine equity and stockholders’ equity			$	378,634					$	344,107

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Revenue			$	77,110					$	63,518					$	143,161					$	115,625
Cost of sales			(74,436)						(56,598)						(144,254)						(103,120)
Gross profit			2,674						6,920						(1,093)						12,505
General and administrative expenses			(9,238)						(9,379)						(18,190)						(18,811)
Gain on sales-type lease			—						—						—						5,568
Gains on sales of real estate, property and equipment, net			2,798						2,696						6,341						3,243
Gain on ARO settlement			1,557						—						4,008						—
Other operating expenses from ERT services			(2,586)						(1,007)						(3,253)						(1,297)
Operating (loss) income			(4,795)						(770)						(12,187)						1,208
Interest expense, net			(4,467)						(3,314)						(9,040)						(6,549)
Income (loss) from equity method investment			—						(11)						—						191
Loss before income taxes			(9,262)						(4,095)						(21,227)						(5,150)
Income tax expense			341						72						419						229
Net loss			(9,603)						(4,167)						(21,646)						(5,379)
Less (loss) income attributable to non-controlling interest			—						(1)						(3)						74
Net loss attributable to Charah Solutions, Inc.			(9,603)						(4,166)						(21,643)						(5,453)
Deemed and imputed dividends on Series A Preferred Stock			(150)						(148)						(299)						(295)
Series A Preferred Stock dividends			(1,571)						(2,148)						(3,661)						(4,215)
Net loss attributable to common stockholders			$	(11,324)					$	(6,462)					$	(25,603)					$	(9,963)
Net loss attributable to common stockholders per common share:
Basic			$	(0.34)					$	(0.21)					$	(0.76)					$	(0.33)
Diluted			$	(0.34)					$	(0.21)					$	(0.76)					$	(0.33)
Weighted-average shares outstanding used in loss per common share:
Basic			33,642						30,450						33,526						30,282
Diluted			33,642						30,450						33,526						30,282

			For the Six Months Ended June 30, 2022
			Mezzanine Equity															Permanent Equity
			Preferred Stock (Shares)						Preferred Stock (Amount)									Common Stock (Shares)						Common Stock (Amount)						Additional Paid-In Capital						Retained Losses						Total						Non-Controlling Interest						Total
Balance, December 31, 2021			26,000						$	35,532								33,407,806						$	334					$	114,880					$	(94,679)					$	20,535					$	262					$	20,797
Net loss			—						—									—						—						—						(21,643)						(21,643)						(3)						(21,646)
Shares issued under share-based compensation plans			—						—									480,453						5						(5)						—						—						—						—
Taxes paid related to the net settlement of shares			—						—									(166,554)						(2)						(698)						—						(700)						—						(700)
Share-based compensation expense			—						—									—						—						1,537						—						1,537						—						1,537
Deemed and imputed dividends on Series A Preferred Stock			—						4,383									—						—						(299)						—						(299)						—						(299)
Series A Preferred Stock dividends			—						—									—						—						(3,661)						—						(3,661)						—						(3,661)
Balance, June 30, 2022			26,000						$	39,915								33,721,705						$	337					$	111,754					$	(116,322)					$	(4,231)					$	259					$	(3,972)

			For the Six Months Ended June 30, 2021
			Mezzanine Equity															Permanent Equity
			Preferred Stock (Shares)						Preferred Stock (Amount)									Common Stock (Shares)						Common Stock (Amount)						Additional Paid-In Capital						Retained Losses						Total						Non-Controlling Interest						Total
Balance, December 31, 2020			26,000						$	27,423								30,077,018						$	300					$	108,471					$	(88,865)					$	19,906					$	410					$	20,316
Net (loss) income			—						—									—						—						—						(5,453)						(5,453)						74						(5,379)
Distributions			—						—									—						—						—						—						—						(165)						(165)
Share-based compensation expense			—						—									—						—						998						—						998						—						998
Shares issued under share-based compensation plans			—						—									535,417						6						(6)						—						—						—						—
Taxes paid related to the net settlement of shares			—						—									(93,518)						(1)						(511)						—						(512)						—						(512)
Deemed and imputed dividends on Series A Preferred Stock			—						295									—						—						(295)						—						(295)						—						(295)
Series A Preferred Stock dividends			—						3,423									—						—						(4,215)						—						(4,215)						—						(4,215)
Balance, June 30, 2021			26,000						$	31,141								30,518,917						$	305					$	104,442					$	(94,318)					$	10,429					$	319					$	10,748

CHARAH SOLUTIONS, INC.

			For the Three Months Ended June 30, 2022
			Mezzanine Equity															Permanent Equity
			Preferred Stock (Shares)						Preferred Stock (Amount)									Common Stock (Shares)						Common Stock (Amount)						Additional Paid-In Capital						Retained Losses						Total						Non-Controlling Interest						Total
Balance, March 31, 2022			26,000						$	37,676								33,408,296						$	334					$	113,432					$	(106,719)					$	7,047					$	259					$	7,306
Net loss			—						—									—						—						—						(9,603)						(9,603)						—						(9,603)
Share-based compensation expense			—						—									—						—						746						—						746						—						746
Shares issued under share-based compensation plans			—						—									479,703						5						(5)						—						—						—						—
Taxes paid related to the net settlement of shares			—						—									(166,294)						(2)						(698)						—						(700)						—						(700)
Deemed and imputed dividends on Series A Preferred Stock			—						2,239									—						—						(150)						—						(150)						—						(150)
Series A Preferred Stock dividends			—						—									—						—						(1,571)						—						(1,571)						—						(1,571)
Balance, June 30, 2022			26,000						$	39,915								33,721,705						$	337					$	111,754					$	(116,322)					$	(4,231)					$	259					$	(3,972)

			For the Three Months Ended June 30, 2021
			Mezzanine Equity															Permanent Equity
			Preferred Stock (Shares)						Preferred Stock (Amount)									Common Stock (Shares)						Common Stock (Amount)						Additional Paid-In Capital						Retained Losses						Total						Non-Controlling Interest						Total
Balance, March 31, 2021			26,000						$	28,926								30,228,385						$	302					$	106,552					$	(90,152)					$	16,702					$	485					$	17,187
Net loss			—						—									—						—						—						(4,166)						(4,166)						(1)						(4,167)
Distributions			—						—									—						—						—						—						—						(165)
Share-based compensation expense			—						—									—						—						699						—						699						—						699
Shares issued under share-based compensation plans			—						—									383,080						4						(4)						—						—						—						—
Taxes paid related to the net settlement of shares			—						—									(92,548)						(1)						(509)						—						(510)						—						(510)
Deemed and imputed dividends on Series A Preferred Stock			—						2,215									—						—						(148)						—						(148)						—						(148)
Series A Preferred Stock dividends			—						—									—						—						(2,148)						—						(2,148)						—						(2,148)
Balance, June 30, 2021			26,000						$	31,141								30,518,917						$	305					$	104,442					$	(94,318)					$	10,429					$	319					$	10,748

			Six Months Ended
			June 30,
			2022						2021
Cash flows from operating activities:
Net loss			$	(21,646)					$	(5,379)
Adjustments to reconcile net loss to net cash and restricted cash (used in) provided by operating activities:
Depreciation and amortization			13,390						12,315
Paid-in-kind interest on long-term debt			—						2,448
Impairment expense			—						127
Amortization of debt issuance costs			1,141						331
Deferred income taxes			361						229
Gain on sales-type lease			—						(5,568)
Gains on sales of real estate, property and equipment			(5,982)						(4,140)
Income from equity method investment			—						(191)
Non-cash share-based compensation			1,537						998
Gain on interest rate swap			—						(201)
Gain on ARO settlements			(4,008)						—
Increase (decrease) in cash and restricted cash due to changes in:
Trade accounts receivable			5,640						4,695
Contract assets and liabilities			(8,931)						20,479
Inventory			1,121						(607)
Accounts payable			11,327						1,986
Asset retirement obligation			(19,156)						(3,387)
Other assets and liabilities			(11,675)						(13,893)
Net cash and restricted cash (used in) provided by operating activities			(36,881)						10,242
Cash flows from investing activities:
Net proceeds from the sales of real estate, property and equipment			8,394						4,232
Purchases of property and equipment			(3,148)						(2,829)
Cash and restricted cash received from ERT transactions			38,239						34,900
Payments of working capital adjustment and other items for the sale of subsidiary			—						(7,367)
Distribution received from equity method investment			—						1,015
Net cash and restricted cash provided by investing activities			43,485						29,951
Cash flows from financing activities:
Net proceeds on the line of credit			—						778
Proceeds on asset-based lending credit agreement			2,000						—
Payments on asset-based lending credit agreement			(2,000)						—
Proceeds from long-term debt			1,824						1,009
Principal payments on long-term debt			(5,059)						(11,631)
Payments of debt issuance costs			(178)						—
Principal payments on capital lease obligations			(4,018)						(1,224)
Taxes paid related to net settlement of shares			(700)						(512)
Distributions to non-controlling interest			—						(165)
Net cash and restricted cash used in financing activities			(8,131)						(11,745)
Net (decrease) increase in cash and restricted cash			(1,527)						28,448
Cash and restricted cash, beginning of period			59,174						29,211
Cash and restricted cash, end of period			$	57,647					$	57,659

			Six Months Ended
			June 30,
			2022						2021
Supplemental disclosures of cash flow information:
Cash paid during the period for interest			$	7,779					4,049
Cash paid during the period for taxes			98						534
Supplemental disclosures and non-cash investing and financing transactions:
Gross proceeds from lines of credit			$	—					$	60,590
Gross payments on lines of credit			—						(59,812)
Sale of structural fill asset through a sales-type lease			—						6,000
Proceeds from the sale of equipment in accounts receivable, net			288						1,109
Series A Preferred Stock dividends payable included in accrued expenses			1,571						2,148
Deemed and imputed dividends on Series A Preferred Stock			4,383						295
Equipment acquired through capital leases			13,895						7,137
Property and equipment included in accounts payable and accrued expenses			376						205
As reported within the unaudited condensed consolidated balance sheet:
Cash			$	7,071					$	18,081
Restricted cash			50,576						39,578
Total cash and restricted cash as presented in the balance sheet			$	57,647					$	57,659

1. Nature of Business and Basis of Presentation

Organization

Charah Solutions, Inc. (together with its wholly-owned subsidiaries, “Charah Solutions,” the “Company,” “we,” “us, or “our”) is a holding company formed in Delaware in January 2018. The Company's majority shareholder is Bernhard Capital Partners Management, LP and its affiliates (collectively, “BCP”). BCP owns approximately 59% of the total voting power of our outstanding shares of common stock and the outstanding Series A Preferred Stock (“Preferred Stock”) on an as-converted basis. BCP owns all of the outstanding shares of Preferred Stock, and it is convertible at BCP's option at any time into shares of common stock.

Description of Business Operations

The Company is a leading national service provider of mission-critical environmental services and byproduct recycling to the power generation industry, enabling our customers to address challenges related to the remediation of coal ash ponds and landfills at open and closed power plant sites while continuously operating and providing necessary electric power to communities nationwide. Services offered include a suite of remediation and compliance services, byproduct services, raw material sales and Environmental Risk Transfer (“ERT”) services. The Company has corporate offices in Kentucky and North Carolina and principally operates in the eastern and mid-central United States.

Under the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company meets the definition of an “emerging growth company,” which allows the Company to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company intends to take advantage of the reduced reporting requirements and exemptions, including the longer phase-in periods for adopting new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 and our disclosure obligations regarding executive compensation may be reduced. We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the IPO, or December 31, 2023. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.

Basis for Presentation

The Company’s fiscal year ends December 31. The accompanying unaudited condensed consolidated financial statements include the assets, liabilities, stockholders’ equity and results of operations of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, which consist of normal recurring adjustments. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Segment Information

The Company operates as one reportable segment, reflecting the suite of end-to-end services we offer our utility partners and how our Chief Operating Decision Maker (“CODM”) reviews consolidated financial information to evaluate results of operations, assess performance and allocate resources. Due to the nature of the Company’s business, the Company's Chief Executive Officer, who is also the CODM, evaluates the performance of the Company and allocates resources of the Company based on consolidated gross profit, general and administrative expenses, balance sheet, liquidity, capital spending, safety statistics and business development reports for the Company as a whole. Since the Company has a single operating segment, all required financial segment information can be found in the unaudited condensed consolidated financial statements.

We provide the following services through our one segment: remediation and compliance services, byproduct services, raw material sales and ERT services. Remediation and compliance services are associated with our customers’ need for multi-year environmental improvement and sustainability initiatives, whether driven by regulatory requirements, power generation customer initiatives or consumer expectations and standards. Byproduct services consist of recurring and mission-critical coal ash management and operations for coal-fired power generation facilities while also supporting both our power generation customers’ desire to recycle their recurring and legacy volumes of coal combustion residuals (“CCRs”), commonly known as coal ash, and our ultimate end customers’ need for high-quality, cost-effective supplemental cementitious materials (“SCMs”) that provide a sustainable, environmentally-friendly substitute for Portland cement in concrete. Our raw material sales provide customers with the raw materials essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw material transactions around the globe. ERT services represent an innovative solution designed to meet our coal fired plant energy providers’ evolving and increasingly complex plant closure and environmental remediation needs. These customers need to retire and decommission older or underutilized assets while maximizing the assets value and improving the

environment. Our ERT services manage the sites' environmental remediation requirements, benefiting the communities and lowering the coal fired plant energy providers’ costs.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization categorized the disease caused by a novel coronavirus (“COVID-19”) to be a pandemic. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which includes modifications to the limitation on business interest expense and net operating loss carryforward provisions and provided a payment delay of certain employer payroll taxes during 2020. The Company deferred $1,637 of employer payroll taxes otherwise due in 2020, with 50% paid in the year ended December 31, 2021 and the remaining 50% due by December 31, 2022.

2. Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), requiring all leases to be recognized on the balance sheet as a right-of-use asset and a lease liability unless the lease is a short-term lease (generally a lease with a term of 12 months or less). At the commencement date of the lease, the Company will recognize: (i) a lease liability for the Company’s obligation to make payments under the lease agreement, measured on a discounted basis; and (ii) a right-of-use asset that represents the Company’s right to use, or control the use of, the specified asset for the lease term. This ASU originally required recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective transition method. In July 2018, the FASB issued ASU No. 2018-11, which provided an additional (and optional) transition method that permits the application of this ASU at the adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, the FASB issued ASU No. 2020-05 and delayed the effective date of this ASU, extending the effective date for non-public business entities, and making the ASU effective for the Company for the fiscal year ending December 31, 2022, and interim periods within the fiscal year ending December 31, 2023, with early adoption permitted. The Company has not yet selected a transition method and, while we are still in the process of assessing the impact of this new standard on our consolidated financial position, results of operations and cash flows, we expect the adoption of this standard will have a material impact on our consolidated financial position due to the recognition of the right-of-use asset and lease liability related to operating leases. We had operating leases with remaining rental payments of approximately $24,077 as of June 30, 2022. The discounted minimum remaining rental payments will be the starting point for determining the right-of-use asset and lease liability.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. The amendments contained in this ASU will be applied through a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2018, the FASB issued ASU No. 2018-19, which amended the effective date of ASU No. 2016-13 and clarified that receivables arising from operating leases are not within the scope of Subtopic 326-20. In October 2019, the FASB delayed the effective date of this ASU, extending the effective date for non-public business entities and making the ASU effective for the Company for the fiscal year ending December 31, 2023, and interim periods therein, with early adoption permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-bank Offered Rate (“LIBOR”) or another rate that is expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848). This ASU provides supplemental guidance and clarification to ASU No. 2020-04, and these updates must be adopted concurrently, cumulatively referred to as “Topic 848.” The amendments in Topic 848 are currently effective for all entities, and upon adoption, may be applied prospectively to contract modifications made on or before December 31, 2022. The Company is still assessing the impact of Topic 848 on its consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the guidance on accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible debt with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock unless certain other conditions are met. Also, the ASU requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock

method will no longer be available. This ASU will be effective for the Company for the fiscal year ending December 31, 2024, and interim periods therein, with early adoption permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.

The Company closed on two acquisitions during the six months ended June 30, 2022 and one acquisition during the six months ended June 30, 2021 as part of its ERT service offerings.

As each asset group lacked the necessary elements of a business, these transactions were accounted for as asset acquisitions in accordance with ASC 805, Business Combinations, with the assumed liabilities, plus expenses and cash paid by or owed to the seller, comprising the purchase price. Since the fair value of the net assets acquired was different than the purchase price of the assets, the Company allocated the difference pro rata on the basis of relative fair values to reduce land, land improvements and structural fill sites, property and equipment and other assets acquired. For one acquisition, the Company recognized a deferred gain representing the difference between the fair value of the assets acquired and the consideration given (including transaction costs incurred).

The Company has identified asset retirement obligations within the assumed liabilities to be initially measured and valued in accordance with ASC 410, Asset Retirement and Environmental Obligations. We developed our estimates of these obligations using input from our operations personnel. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. We use professional engineering judgment and estimated prices based on quotes rates from third parties and amounts paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

Once we determined the estimated closure and post-closure costs for each asset retirement obligation, we inflation-adjusted those costs to the expected time of payment using an estimated inflation rate and discounted those expected future costs back to present value using the credit-adjusted, risk-free rate effective at the time the obligation was incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate, while downward revisions are discounted at the historical weighted average rate of the recorded obligation. The credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each specific asset retirement obligation. Gains on ARO settlements result from the requirement to record costs plus an estimate of third-party profit in determining the ARO. When we perform the work using internal resources and reduce the ARO for work performed, we recognize a gain if actual costs are less than the estimated costs plus the third-party profit.

Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future closure, demolition, and post-closure activities could result in a material change in these liabilities, related assets, and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually or more often if conditions warrant. Changes in timing or extent of future final closure and post-closure activities typically result in a current adjustment to the recorded liability and land, land improvements and structural fill sites asset.

Avon Lake Asset Acquisition

On April 4, 2022, the Company, through its wholly-owned special purpose vehicle subsidiary Avon Lake Environmental Redevelopment Group, LLC (“ALERG”), completed the full acquisition of the Avon Lake Generating Station and adjacent property (the "Avon Lake Property") from GenOn Power Midwest, LP, (“GenOn”) and has begun environmental remediation and sustainable redevelopment of the property.

As part of this agreement, the Company acquired the Avon Lake Property, which is a 40-acre area located on Lake Erie that consists of multiple parcels of land adjacent to the retired generating plant, including the generating station, which ceased electric generation in March 2022, submerged lands lease in Lake Erie, substation/switch gear and transformers, administrative offices and structures, coal rail and storage yard parcels. ALERG assumed all liabilities related to the Avon Lake Property and will be responsible for the shutdown and decommissioning of the coal power plant and performing all environmental remediation and redevelopment work at the site. The decommissioning of the coal power plant and redevelopment of the property are expected to be completed within 36 months from the date of acquisition.

The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:

Consideration and direct transaction costs:
Asset retirement obligations			$	(34,300)
Direct transaction costs			(1,345)
Total consideration and transaction costs incurred			$	(35,645)
Assets Acquired:
Restricted Cash			$	2,900
Land, land improvements and structural fill sites			32,109
Plant, machinery and equipment			623
Vehicles			13
Total allocated value of assets acquired			$	35,645

A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:

Other Assumptions:
Inflation rate			2.50		%
Weighted average rate applicable to our long-term asset retirement obligations			7.35		%

As part of the acquisition, the Company acquired certain plant, machinery and equipment and vehicles for which management committed to a plan to sell. Property and equipment of $415 that was initially classified as held for sale were sold to third parties as of June 30, 2022. The Company received proceeds of $844 and recorded a gain of $429 within gains on sales of real estate, property and equipment, net, in the Company's condensed consolidated statements of operations. The proceeds were recorded in cash flows from investing activities in the Company's condensed consolidated statements of cash flows. The amount of land, land improvements and structural fill sites acquired includes fair value estimates for real estate and scrap to be sold from the demolition of the coal power plant.

Restricted cash is exclusively used to fund initial costs related to the acquisition and the remaining balance will be used to fund a portion of the asset retirement obligations. Restricted cash is held and will be disbursed by an escrow agent. Funds will be released to the Company as asset retirement obligation costs are incurred and performance of remediation activities are certified by an authorized representative of GenOn.

Cheswick Generating Station Asset Acquisition

On April 6, 2022, the Company, through its wholly-owned special purpose vehicle subsidiaries, Cheswick Plant Environmental Redevelopment Group, LLC, Cheswick Lefever, LLC and Harwick Operating Company, LLC (collectively, “CPERG”), completed the full acquisition of the Cheswick Generating Station, the Lefever Ash Landfill and the Monarch Wastewater Treatment Facility (the "Cheswick Property") from GenOn and will begin environmental remediation and sustainable redevelopment of the Pennsylvania properties immediately. The Cheswick Generating Station ceased electrical generation operations on March 31, 2022.

As part of this agreement, the Company, through CPERG, has acquired properties consisting of:

▪The retired Cheswick Generating Station, a 565 MW coal-fired plant previously operated by GenOn, located in Springdale, PA. The 56-acre primary generating station site, along with an adjacent 27-acre parcel, consists of an operating rail line, a coal yard, bottom ash emergency and recycle ponds, waste ponds and a coal pile runoff pond, coal delivery equipment, and an ash handling parcel. CPERG will be responsible for the shutdown and decommissioning of the coal power plant, the remediation of the two ash ponds and performing all environmental remediation and redevelopment work at the site.

▪The Lefever Ash Landfill in Cheswick, PA. The 182-acre site, including the 50-acre landfill facility, provided disposal of coal combustion residuals (CCR) and residual waste from the Cheswick Generating Station. CPERG will be responsible for the closure design, remediation closure work and post-closure monitoring of the landfill.

▪The Monarch Wastewater Treatment Facility in Allegheny County, PA. CPERG will be responsible for management and compliance with all applicable environmental regulations.

In the process of accounting for this transaction, the basis of the land, property and equipment acquired was reduced to zero, resulting in an excess of financial assets over and above the purchase price. The Company recognized a deferred gain of $4,476, representing the difference between the fair value of the assets acquired and the consideration given (including transaction costs incurred). This deferred gain will be recognized ratably over the entire project as remediation costs are incurred in proportion to total estimated remediation costs. The decommissioning of the coal power plant and redevelopment of these properties are expected to be completed within 42 months from the date

of acquisition, and the post-closure monitoring associated with the Lefever Ash Landfill and Monarch Wastewater Treatment Facility will occur for 30 years after the closure of the sites.

The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:

Consideration and direct transaction costs:
Asset retirement obligations			$	(30,179)
Direct transaction costs and accrued expenses			(684)
Total consideration and transaction costs incurred			$	(30,863)
Assets Acquired:
Cash			$	5,577
Restricted cash			29,762
Total allocated value of assets acquired			$	35,339
Excess of fair value of assets acquired over total consideration – deferred gain			$	(4,476)

A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:

Other Assumptions:
Inflation rate			2.50		%
Weighted average rate applicable to our long-term asset retirement obligations			7.45		%

Restricted cash is exclusively used to fund initial costs related to the acquisition and the remaining balance will be used to fund a portion of the asset retirement obligations. Restricted cash is held and will be disbursed by an escrow agent. Funds will be released to the Company as certain project milestones are met and performance of remediation activities are certified by an authorized representative of GenOn.

Gibbons Creek Asset Acquisition

In February 2021, the Company, through its wholly-owned special purpose vehicle subsidiary Gibbons Creek Environmental Redevelopment Group (“GCERG”), closed on an Asset Purchase Agreement (the “APA” or the “Agreement”) with Texas Municipal Power Agency to acquire, remediate and redevelop the Gibbons Creek Steam Electric Station and Reservoir (the “Gibbons Creek Transaction”). As part of this Agreement, GCERG took ownership of the 6,166 acre area (collectively, the “Purchased Assets”), which includes the closed power station and adjacent property, the 3,500 acre reservoir, dam and floodway. GCERG assumed all environmental responsibilities and became responsible for decommissioning the coal power plant and performing all environmental remediation work for the site landfills and ash ponds. At closing of the APA, GCERG became liable for and expressly fully assumed any and all environmental liabilities and environmental compliance, as well as, without limitation, any remediation, investigation, management, mitigation, closure, maintenance, reporting, removal, disposal of and any other actions with respect to any hazardous substances at, on, in, under, or emanating from the Purchased Assets.

GCERG, at its discretion, is redeveloping the property in an environmentally conscious manner which the Company expects to expand economic activity and benefit the surrounding communities as well as restore the property to a state that will enable it to be put to its best potential use. The existing power plant has been demolished, and GCERG is working with the Texas Commission on Environmental Quality to complete all environmental remediation required for the property and then plans to redevelop the remediated property within all zoning restrictions. The redevelopment of the property is expected to be completed within 34 months from the date of acquisition.

The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:

Consideration and direct transaction costs:
Asset retirement obligations			$	(50,590)
Bond and insurance accrued expenses, net			(2,229)
Direct transaction costs			(2,336)
Total consideration and transaction costs incurred			$	(55,155)
Assets Acquired:
Cash			$	6,354
Restricted cash			28,546
Water rights			5,196
Land, land improvements and structural fill sites			14,385
Plant, machinery and equipment			610
Vehicles			64
Total allocated value of assets acquired			$	55,155

A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:

Other Assumptions:
Inflation rate			3.00		%
Weighted average rate applicable to our long-term asset retirement obligations			4.50		%

Demolition costs will be capitalized as part of land, land improvements and structural fill sites as incurred as part of preparing the site for sale since, at the acquisition date, (i) we planned to demolish the existing structure as part of the redevelopment plan for the acquired property, (ii) demolition is expected to occur within a reasonable period of time after acquisition, and (iii) such expected costs will be incurred to make the land saleable to a third party.

As part of the acquisition, the Company acquired certain plant, machinery and equipment and vehicles for which management committed to a plan to sell. Property and equipment of $193 that was initially classified as held for sale was subsequently sold to third parties.

To date, the Company has completed the sale of nearly 80% of the real property acreage acquired through the Gibbons Creek Transaction. The sale of property included 4,860 acres of the 6,166-acre area, the 3,500-acre reservoir, dam and spillway. There were no sales of real property acreage for the three and six months ended June 30, 2022 and 2021, respectively.

We disaggregate our revenue from customers by customer arrangement as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the table below.

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Construction contracts			$	36,096					$	31,713					$	66,936					$	51,652
Byproduct services			27,405						23,392						51,423						49,865
Raw material sales			13,609						8,413						24,802						14,108
Total revenue			$	77,110					$	63,518					$	143,161					$	115,625

As of June 30, 2022, the Company had remaining performance obligations with an aggregate transaction price of $432,332 on construction contracts for which we recognize revenue over time. We expect to recognize approximately 18% of our remaining performance obligations as revenue during the remainder of 2022, 11% in 2023, 8% in 2024, and 62% thereafter. Revenue associated with our remaining performance obligations includes performance obligations related to our construction contracts. The balance of remaining performance obligations does not include variable consideration that was determined to be constrained as of June 30, 2022. As of June 30, 2022, there were $1,579 of unapproved change orders associated with project scope changes included in determining the profit or loss on certain construction contracts, of which $0 were approved subsequent to quarter-end.

The Company did not have any foreign revenue for the three and six months ended June 30, 2022 and 2021.

Real estate, property and equipment, net

The following table shows the components of real estate, property and equipment, net:

			June 30, 2022						December 31, 2021
Plant, machinery and equipment			$	61,963					$	63,937
Structural fill site improvements			55,760						55,760
Vehicles			12,028						11,718
Office equipment			600						600
Buildings and leasehold improvements			267						267
Land, land improvements and structural fill sites			43,994						12,231
Capital lease assets			45,068						31,172
Construction in progress			616						1,522
Total real estate, property and equipment			$	220,296					$	177,207
Less: accumulated depreciation			(114,099)						(106,734)
Real estate, property and equipment, net			$	106,197					$	70,473

Land, land improvements and structural fill sites include $5,677 of real property acquired in the Gibbons Creek Transaction that the Company is actively demolishing and for which depreciation expense is not being recorded. During the three and six months ended June 30, 2022, the Company capitalized $768 and $1,610, respectively, of demolition costs and sold scrap with a cost basis of $966 and $1,956, respectively. During the three and six months ended June 30, 2021, the Company capitalized $882 and $1,030, respectively, of demolition costs and sold scrap with a cost basis of $339.

Depreciation expense was $4,846 and $4,195 for the three months ended June 30, 2022 and 2021, respectively, and $9,443 and $8,368 for the six months ended June 30, 2022.

Capital leases

The following table shows the components of capital lease assets, net:

			June 30, 2022						December 31, 2021
Capital lease assets			$	45,068					$	31,172
Less: accumulated depreciation			(7,800)						(3,606)
Capital lease assets, net			$	37,268					$	27,566

The Company's depreciation of capital lease assets is included within depreciation expense as disclosed above.

Sales-type lease

In March 2021, the Company amended an existing ground lease with a third party concerning one of the Company's structural fill assets with a 30-year term expiring on December 31, 2050. The lease includes multiple options that may be exercised at any time during the lease term for the lessee to purchase all or a portion of the premises as well as a put option (the “Put Option”) that provides the Company the option to require the lessee to purchase all of the premises at the end of the lease term.

In accordance with ASC 840, Leases, the Company considered whether this lease, as amended, met any of the following four criteria as part of classifying the lease at the amendment date: (a) the lease transfers ownership of the property to the lessee by the end of the lease term; (b) the lease contains a bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the lease property; and (d) the present value of the minimum lease payments, excluding executory costs, equals or exceeds 90 percent of the excess of the fair value of the lease property to the lessor at lease inception. This lease was recorded as a sales-type capital lease due to the Put Option provision contained within the lease agreement that represents a transfer of ownership of the property by the end of the lease term. Additionally, the Company determined that collectability of the lease payments was reasonably assured and that there were not any significant uncertainties related to costs that it has yet to incur with respect to the lease.

At the amendment date of the lease, a discount rate of 3.9% implicit in the sales-type lease was used to calculate the present value of the minimum lease payments, which the Company recorded as a lease receivable. The Company recognized a gain of $5,568 within operating income in the accompanying unaudited condensed consolidated statements of operations for the six months ended June 30, 2021.

The following table reflects the classification of the lease receivable within our accompanying unaudited condensed consolidated balance sheet:

			June 30, 2022						December 31, 2021
Lease receivable			$	5,905					$	5,937
Less: current portion in prepaid expenses and other current assets			(66)						(65)
Non-current portion in other assets			$	5,839					$	5,872

Asset Sale Agreement

In June 2021, the Company consummated an asset sale with an unrelated third party in which the Company assigned a lease agreement to the purchaser and sold certain grinding-related inventory and fixed assets for an aggregate sale price of $2,852. The Company received $1,250 in cash at closing, with the remaining portion to be paid over time on specified dates, with the final payment to be received 36 months from the closing date.

The Company determined that the note receivable included a significant financing component. As a result, the sale price and gain on sale were determined on a discounted cash flow basis.

The following table reflects the classification of the note receivable within our unaudited condensed consolidated balance sheet:

			June 30, 2022						December 31, 2021
Note receivable			$	1,102					$	1,352
Less: current portion in prepaid expenses and other current assets			(500)						(500)
Non-current portion in other assets			$	602					$	852

Accrued liabilities

The following table shows the components of accrued liabilities:

			June 30, 2022						December 31, 2021
Accrued expenses			$	21,418					$	25,074
Accrued interest			2,250						2,008
Accrued preferred stock dividends			1,571						1,994
Accrued payroll and bonuses			2,981						7,798
Accrued liabilities			$	28,220					$	36,874

As of June 30, 2022, the Company owns two structural fill sites with continuing maintenance and monitoring requirements after their closure, one wastewater treatment facility with continuing maintenance and monitoring requirements, and eight tracts of real property with decommissioning, remediation and monitoring requirements. As of June 30, 2022 and December 31, 2021, the Company has accrued $83,729 and $42,413, respectively, for the asset retirement obligations (“ARO”).

			Three Months Ended June 30,												Six Months Ended June 30,
			2022						2021						2022						2021
Balance, beginning of period			$	33,969					$	54,112					$	42,413					$	5,159
Liabilities incurred			64,479						—						64,479						50,590
Liabilities settled			(13,489)						(2,305)						(19,883)						(4,175)
Accretion			327						554						728						787
Gain on ARO settlement			(1,557)						—						(4,008)						—
Balance, end of period			83,729						52,361						83,729						52,361
Less: current portion			(47,542)						(21,395)						(47,542)						(21,395)
Non-current portion			$	36,187					$	30,966					$	36,187					$	30,966

ATC Group Services LLC (“ATC”), an entity owned by BCP, our majority stockholder, provided environmental consulting and engineering services at certain service sites. Expenses to ATC were $7 and $25 for the three months ended June 30, 2022 and 2021, respectively, and $25 and $79 for the six months ended June 30, 2022 and 2021. The Company had no receivables outstanding from ATC at June 30, 2022 and December 31, 2021. The Company had payables and accrued expenses, net of credit memos, due to ATC of $4 and $4 at June 30, 2022 and December 31, 2021, respectively.

As further discussed in Note 9, Long-term Debt, in August 2021, the Company completed an offering of $135,000, in the aggregate, of the Company’s 8.50% Senior Notes due 2026 (the “Notes”), which amount included the exercise by the underwriters of their option to purchase an additional $5,000 aggregate principal amount of Notes. B. Riley Securities, Inc. (“B. Riley”), a shareholder of the Company with board representation, served as the lead book-running manager and underwriter for this offering, purchasing a principal amount of $80,325 of the Notes. Fees paid to B. Riley related to this offering were $7,914. These fees were capitalized as debt issuance costs within notes payable, less current maturities in the accompanying unaudited condensed consolidated balance sheets and will be amortized prospectively through interest expense, net in the accompanying unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Notes.

As further discussed in Note 11, Mezzanine Equity, in March 2020, the Company entered into an agreement with an investment fund affiliated with BCP to sell 26,000 shares of Preferred Stock.

As further discussed in Note 9, Long-term Debt, on August 15, 2022, the Company, through its GCERG subsidiary, entered into a term loan agreement (the “Term Loan Agreement”) with BCP that provides for a delayed-draw term loan in an aggregate principal amount of $20.0 million.

Goodwill and indefinite-lived intangible assets are not amortized but instead are tested for impairment annually or more often if events or changes in circumstances indicate that the fair value of the asset may have decreased below its carrying value. We perform our impairment test effective October 1st of each year and evaluate for impairment indicators between annual impairment tests, of which there were none. There was no goodwill activity during the six months ended June 30, 2022.

Indefinite-Lived and Definite-Lived Intangible Assets

Our intangible assets, net include a trade name that is considered to have an indefinite life and customer relationships that are considered to have a definite life. Our customer relationships are amortized on a straight-line basis over their estimated useful lives of 10 years. The amortization expense of our definite-lived intangible assets was $1,973 for the three months ended June 30, 2022 and 2021 and $3,947 for the six months ended June 30, 2022 and 2021.

The Company’s intangible assets consist of the following:

			June 30, 2022																		December 31, 2021
			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Definite-lived intangibles
Customer relationships			$	78,942					$	(42,674)					$	36,268					$	78,942					$	(38,727)					$	40,215
Indefinite-lived intangibles
Charah trade name															13,316																		13,316
Total															$	49,584																	$	53,531

9. Long-term Debt

Senior Notes

On August 25, 2021, the Company completed a public offering of $135,000, in the aggregate, of the Company’s Notes, which amount includes the exercise by the underwriters of their option to purchase an additional $5,000 aggregate principal amount of Notes.

The Notes were issued pursuant to the First Supplemental Indenture (the “First Supplemental Indenture”), dated as of August 25, 2021, between the Company and Wilmington Savings Fund Society, FSB, as trustee (the “Trustee”). The First Supplemental Indenture supplements the Indenture entered into by and between the Company and the Trustee, dated as of August 25, 2021 (the “Base Indenture” and, together with the First Supplemental Indenture, the “Indenture”).

The public offering price of the Notes was 100.0% of the principal amount. The Company received proceeds before payment of expenses and other fees of $135,000. The Company used the proceeds, along with cash from the sale of equity to B. Riley, to fully repay and

terminate the Company’s Credit Facility, as defined below, with any remaining proceeds to be used for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital.

The Notes bear interest at the rate of 8.50% per annum. Interest on the Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing October 31, 2021. The Notes will mature on August 31, 2026.

The Company may redeem the Notes for cash in whole or in part at any time (i) on or after August 31, 2023 and prior to August 31, 2024, at a price equal to 103% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after August 31, 2024 and prior to August 31, 2025, at a price equal to 102% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii) on or after August 31, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Notes. If the Company is redeeming less than all of the Notes, the Trustee will select the Notes to be redeemed by such method as the Trustee deems fair and appropriate in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances.

The Indenture also contains customary event of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes may declare the Notes to be immediately due and payable.

The Notes are senior unsecured obligations of the Company and rank equal in right of payment with the Company’s existing and future senior unsecured indebtedness.

As a result of the issuance of the Notes, $12,116 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the accompanying unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Notes.

Asset-Based Lending Credit Agreement

On November 9, 2021, the Company entered into a new Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement provides for a four-year senior secured revolving credit facility with initial aggregate commitments from the lenders of $30,000, which includes $5,000 available for swingline loans, plus an additional $5,000 of capacity available for the issuance of letters of credit if supported by cash collateral provided by the Company (with a right to increase such amount by up to an additional $5,000) (“Aggregate Revolving Commitments”). Availability under the Credit Agreement is subject to a borrowing base calculated based on the value of certain eligible accounts receivable, inventory, and equipment of the Company and subject to redeterminations made in good faith and in the exercise of permitted discretion of JPMorgan. Proceeds of the Credit Agreements may be used for working capital and general corporate purposes.

The Credit Agreement provides for borrowings of either base rate loans or Eurodollar loans. Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable (i) with respect to base rate loans, monthly and (ii) with respect to Eurodollar loans, the last day of each Interest Period (as defined below); provided that if any Interest Period for a Eurodollar loan exceeds three months, interest will be payable on the respective dates that fall every three months after the beginning of such Interest Period. Eurodollar Loans bear interest at a rate per annum equal to the Adjusted LIBOR for one, three or six months (the “Interest Period”), plus an applicable margin of 2.25%. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the rate for one month Adjusted LIBOR loans plus 100 basis points, plus an applicable rate of 125 basis points. The Credit Agreement contains a provision for sustainability adjustments annually that will impact the applicable margin by between positive 0.05% and negative 0.05% based on the achievement, or lack thereof, of certain metrics agreed upon between JPMorgan and the Company and publicly reported through the Company’s annual non-financial sustainability report.

The Credit Agreement is guaranteed by certain of the Company’s subsidiaries and is secured by substantially all of the Company’s and such subsidiaries’ assets. The Credit Agreement contains customary restrictive covenants for asset-based loans that may limit the Company’s ability to, among other things: incur additional indebtedness, sell assets, make loans to others, make investments, enter into mergers, make certain restricted payments, incur liens, and engage in certain other transactions without the prior consent of the lenders.

A covenant testing period (“Covenant Testing Period”) is a period in which excess availability (which is defined in the Credit Agreement as the sum of availability and an amount up to $1,000) is less than the greater of (a) 12.5% of the lesser of the aggregate revolving commitments and the borrowing base, (b) the lesser of $7,500 and the PP&E Component as defined in the Credit Agreement, and (c) $3,500, for three consecutive business days. During a Covenant Testing Period, the Credit Agreement requires the Company to maintain a fixed charge coverage ratio as defined in the Credit Agreement, determined for any period of twelve (12) consecutive months ending on the last day of each fiscal quarter, of at least 1.00 to 1.00.

As of June 30, 2022, the Company has no outstanding draw on the Credit Agreement. Outstanding letters of credit were $12,487 and $19,027 as of June 30, 2022 and December 31, 2021. As of June 30, 2022, all outstanding letters of credit were issued with JPMorgan.

On August 15, 2022, the Company entered into Amendment No. 1 to the Credit Agreement (the “Credit Agreement Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement Amendment, among other things, permitted the Company (and certain of its subsidiaries) to execute the Term Loan Agreement and guarantee the Term Loan Agreement borrower’s obligations under the Term Loan Agreement. Additionally, the Credit

Agreement Amendment permits the Company to include certain gains on ARO settlements and cash received for deferred gains from ERT projects in the calculation of the Company’s fixed charge coverage ratio under the Credit Agreement's financial covenant. As of June 30, 2022, after taking into account the terms of the Credit Agreement Amendment, the Company would have met the financial covenant had it been in effect.

As of August 19, 2022, based on the undrawn letters of credit utilization of $10,687, borrowings of $9,500 under the Credit Agreement and applicable financial covenant requirements, springing covenants would become applicable if the Company were to borrow additional amounts in excess of approximately $1,834 under the Credit Agreement.

As a result of entering into the Credit Agreement, $1,443 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the unaudited condensed consolidated Statements of Operations using the effective interest method through the maturity date of the Credit Agreement. Unamortized debt issuance costs as of June 30, 2022 and December 31, 2021 were $1,232 and $1,338, respectively.

Term Loan Agreement

On August 15, 2022, the Company, through its GCERG subsidiary (the “Term Loan Borrower”), entered into a term loan agreement (the “Term Loan Agreement”) with Charah Preferred Stock Aggregator, LP, an affiliate of Bernhard Capital Partners Management, LP (“BCP”). As a result of unexpected operating losses, an increase in contract assets and accelerated cash outflows for remediation activities on an ERT project that led to a decrease in cash during the six months ended June 30, 2022, the Company sought additional financing options to fund ongoing operations and project level investment. The Term Loan Agreement was executed to provide additional liquidity for the Company and accelerate the timing of the Company's cash flows for anticipated sales of the GCERG real estate parcels. The Term Loan Agreement provides for a delayed-draw term loan in an aggregate principal amount of $20,000. Borrowings can be requested at any date before October 24, 2022. The Term Loan Agreement is scheduled to mature on the earlier of the sale of the remaining GCERG real estate parcels or April 15, 2024. Borrowings under the Term Loan Agreement accrue interest at a percentage per annum equal to 12.0%, with interest payments due on the first business day of each calendar quarter following the effective date of the Term Loan Agreement and on the maturity date. The Term Loan Borrower agreed to pay a commitment fee equal to $1,000 that is payable on the earliest of (i) April 15, 2024, (ii) the date on which the loans are redeemed in full and all commitments are terminated and (iii) the date on which all commitments are terminated in full. The Term Loan Agreement is secured by a lien on, and security interest in, substantially all of the Term Loan Borrower’s assets, including real property, and is guaranteed on an unsecured basis by the Company and Charah, LLC. Voluntary prepayments are permitted at any time, without premium or penalty.

The Term Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject to customary exceptions, limitations on indebtedness, investments and acquisitions, mergers and consolidations, restricted payments, transactions with affiliates, liens and dispositions. The Term Loan Agreement allows the Term Loan Borrower to make distributions to its equity holders with the proceeds of the loans made thereunder. The Term Loan Agreement contains customary events of default. If an event of default occurs and is continuing, the lenders may declare all loans to be immediately due and payable.

As of August 19, 2022, the Term Loan Borrower had made no borrowings under the Term Loan Agreement.

Previous Credit Facility

On September 21, 2018, we entered into a credit agreement (the “Credit Facility”) by and among us, the lenders party thereto from time to time and Bank of America, N.A., as administrative agent (the “Administrative Agent”). The Credit Facility included:

•A revolving loan not to exceed $50,000 (the “Revolving Loan”);

•A term loan of $205,000 (the “Closing Date Term Loan”); and

•A commitment to loan up to a further $25,000 in term loans, which expired in March 2020 (the “Delayed Draw Commitment” and the term loans funded under such Delayed Draw Commitment, the “Delayed Draw Term Loan,” together with the Closing Date Term Loan, the “Term Loan”).

Pursuant to the terms of the Credit Facility and its related amendments, all amounts associated with the Revolving Loan and the Term Loan under the Credit Facility were set to mature in July 2022. The interest rates per annum applicable to the loans under the Credit Facility were based on a fluctuating rate of interest measured by reference to, at our election, either (i) the Eurodollar rate, currently LIBOR, or (ii) an alternative base rate. Various margins were added to the interest rate based upon our consolidated net leverage ratio (as defined in the Credit Facility). Customary fees were payable regarding the Credit Facility and included (i) commitment fees for the unused portions of the Credit Facility and (ii) fees on outstanding letters of credit. Amounts borrowed under the Credit Facility were secured by substantially all of the assets of the Company.

The Credit Facility contained various customary representations, warranties, restrictive covenants, certain affirmative covenants, including reporting requirements, and customary events of default.

The following table summarizes the major components of debt at each balance sheet date and provides maturities and interest rate ranges for each major category as of June 30, 2022 and December 31, 2021: 

			June 30, 2022						December 31, 2021
Various equipment notes entered into in November 2017, payable in monthly installments ranging from $6 to $24, including interest at 5.2%, maturing in December 2022 through December 2023. The notes are secured by equipment with a net book value of $385 as of June 30, 2022.			$	1,126					$	1,748
Various equipment notes entered into in 2018, payable in monthly installments ranging from $1 to $39, including interest ranging from 5.6% to 6.8%, maturing in March 2023 through May 2025. The notes are secured by equipment with a net book value of $4,427 as of June 30, 2022.			4,901						5,952
Various equipment notes entered into in 2019, payable in monthly installments ranging from $2 to $23, including interest ranging from 3.9% to 6.4%, maturing in April 2024 through December 2024. The notes are secured by equipment with a net book value of $1,813 as of June 30, 2022.			2,196						2,633
Various equipment notes entered into in 2020, payable in monthly installments ranging from $9 to $10, including interest of 5.4%, maturing in August 2025. The notes are secured by equipment with a net book value of $1,528 as of June 30, 2022.			1,423						1,624
Various equipment notes entered into in 2021, payable in monthly installments ranging from $3 to $9, including interest ranging from 4.0% to 6.5%, maturing in February 2026 through August 2026. The notes are secured by equipment with a net book value of $1,867 as of June 30, 2022.			1,675						1,861
Various commercial insurance premium financing agreements entered into in 2021, payable in monthly installments ranging from $24 to $117, including interest ranging from 3.0% to 3.9%, maturing in October 2021 through April 2022.			—						467
A commercial insurance premium financing agreement entered into in 2022, payable in monthly installments of $143, including interest of 4.2%, maturing in November 2022.			1,045						—
A $10,000 equipment line with a bank, entered into in December 2017, secured by all equipment purchased with the proceeds of the loan. Interest is calculated on any outstanding amounts using a fixed rate of 4.5%. The equipment line converted to a term loan in September 2018 with a maturity date of June 22, 2023. The term loan is secured by equipment with a net book value of $1,486 as of June 30, 2022.			2,071						3,387
Senior Unsecured Notes, issued August 2021 (see Note 9). The Notes are senior unsecured obligations of the Company, bearing stated interest at 8.5%, and rank equal in right of payment with the Company’s existing and future senior unsecured indebtedness.			135,000						135,000
Total			149,437						152,672
Less debt issuance costs, net			(10,485)						(11,444)
			138,952						141,228
Less current maturities			(8,010)						(7,567)
Notes payable due after one year			$	130,942					$	133,661

In March 2020, the Company entered into an agreement with an investment fund affiliated with BCP to sell 26 (twenty-six thousand) shares of Series A Preferred Stock, par value $0.01 per share (the “Preferred Stock”), with an initial aggregate liquidation preference of $26,000, net of a 3% Original Issue Discount (“OID”) of $780 for net proceeds of $25,220 in a private placement (the “Preferred Stock Offering”). Proceeds from the Preferred Stock Offering were used for liquidity and general corporate purposes. In connection with the issuance of the Preferred Stock, the Company incurred direct expenses of $966, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. The Preferred Stock was initially recorded net of OID and direct expenses, which will be accreted through paid-in-capital as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2023. As of June 30, 2022 and December 31, 2021, the Company had accrued dividends of $1,098 and $1,030, respectively, associated with the Preferred Stock, which was recorded at a fair value of $1,571 and $1,994, respectively, using observable information for similar items and is classified as a level 2 fair value measurement.

Dividend Rights The Preferred Stock ranks senior to the Company’s common stock with respect to dividend rights and rights on the distribution of assets in any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Preferred Stock had an initial liquidation preference of $1 (one thousand dollars) per share.

The holders of the Preferred Stock are entitled to a cumulative dividend paid in cash at the rate of 10.0% per annum, payable on a quarterly basis. If we do not declare and pay a dividend to the holders of the Preferred Stock, the dividend rate will increase to 13.0% per annum, and the dividends are paid-in-kind by adding such amount to the liquidation preference. The Company’s intention is to pay dividends in-kind for the foreseeable future. The dividend rate will increase to 16.0% per annum upon the occurrence and during the continuance of an event of default. As of June 30, 2022, the liquidation preference of the Preferred Stock was $34,873.

Conversion Features The Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $2.77 per share (the “Conversion Price”), which represents a 30% premium to the 20-day volume-weighted average price ended March 4, 2020. As of June 30, 2022, the maximum number of common shares that could be required to be issued if converted is 12,589 (twelve million five hundred eighty-nine thousand). The conversion rate is subject to the following customary anti-dilution and other adjustments:

•the issuance of common stock as a dividend or the subdivision, combination, or reclassification of common stock into a greater or lesser number of shares of common stock;

•the dividend, distribution or other issuance of rights, options or warrants to holders of common stock entitling them to subscribe for or purchase shares of common stock at a price per share that is less than the market value for such issuance;

•the issuance of a dividend or similar distribution in-kind, which can include shares of any class of capital stock, evidences of the Company’s indebtedness, assets or other property or securities, to holders of common stock;

•a transaction in which a subsidiary of the Company ceases to be a subsidiary of the Company as a result of the distribution of the equity interests of the subsidiary to the holders of the Company’s common stock; and

•the payment of a cash dividend to the holders of common stock.

On or after the three-year anniversary of the date of issuance, if the holders have not elected to convert all their shares of Preferred Stock, the Company may give 30 days’ notice to the holders giving the holders the option to choose, in their sole discretion, to have all outstanding shares of Preferred Stock converted into shares of common stock or redeemed in cash at the then applicable Redemption Price (as defined below). The Company may not issue this conversion notice unless (i) the average volume-weighted average price per share of the Company’s common stock during each of the 20 consecutive trading days before the conversion is greater than 120% of the conversion price; (ii) the Company’s common stock is listed on a national securities exchange; (iii) a registration statement for the re-sale of the common stock is then effective; and (iv) the Company is not then in possession of material non-public information as determined by Regulation FD promulgated under the Exchange Act.

The Preferred Stock and the associated dividend payable on March 31, 2020, did not generate a beneficial conversion feature (“BCF”) upon issuance as the fair value of the Company’s common stock was less than the conversion price. If a BCF is recognized, a reduction to paid-in capital and the Preferred Stock will be recorded and subsequently accreted through the first redemption date.

Additionally, the Company determined that the nature of the Preferred Stock was more akin to an equity instrument and that the economic characteristics and risks of the embedded conversion options were clearly and closely related to the Preferred Stock. As such, the conversion options were not required to be bifurcated from the host under ASC 815, Derivatives and Hedging.

Redemption Rights If the Company undergoes certain change of control transactions, the Company will be required to immediately make an offer to repurchase all of the then-outstanding shares of Preferred Stock for cash consideration per share equal to the greater of (i) 100% of the Liquidation Preference, plus accrued and unpaid dividends, if any, plus, if applicable for a transaction occurring before the third anniversary of the closing, a make-whole premium determined pursuant to a calculation of the present value of the dividends that would have accrued through such anniversary, discounted at a rate equal to the applicable treasury rate plus 0.50% (the “Make-Whole Premium”); provided that if the transaction occurs before the first anniversary of the closing, the Make-Whole Premium shall be no greater than $4,000 and (ii) the closing sale price of the common stock on the date of such redemption multiplied by the number of shares of common stock issuable upon conversion of the outstanding Preferred Stock.

On or after the three-year anniversary of the issuance of the Preferred Stock, the Company may redeem the Preferred Stock, in whole or in part, for an amount in cash equal to the greater of (i) the closing sale price of the common stock on the date the Company delivers such notice multiplied by the number of shares of common stock issuable upon conversion of the outstanding Preferred Stock and (ii) (x) if the redemption occurs before the fourth anniversary of the date of the closing, 103% of the Liquidation Preference, plus accrued and unpaid dividends, or (y) if the redemption occurs on or after the fourth anniversary of the date of the closing, the Liquidation Preference plus accrued and unpaid dividends (the foregoing clauses (i) or (ii), as applicable, the “Redemption Price”).

On or after the seven-year anniversary of the date of issuance, the holders have the right, subject to applicable law, to require the Company to redeem the Preferred Stock, in whole or in part, into cash consideration equal to the liquidation preference, plus all accrued and unpaid dividends, from any source of funds legally available for such purpose.

Since the redemption of the Preferred Stock is contingently or optionally redeemable and therefore not certain to occur, the Preferred Stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Preferred Stock is redeemable in certain circumstances at the option of the holder and is redeemable in certain circumstances upon the occurrence of an event that is not solely within our control, we have classified the Preferred Stock in mezzanine equity in the accompanying unaudited condensed consolidated balance sheets. 

Liquidation Rights In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, the holders of the Preferred Stock would receive an amount in cash equal to the greater of (i) 100% of the liquidation preference plus a Make-Whole Premium and (ii) the amount such holders would be entitled to receive at such time if the Preferred Stock were converted into Company common stock immediately before the liquidation event. The Make-Whole Premium is removed from the calculation for a liquidation event occurring after the third anniversary of the issuance date.

Voting Rights The holders of the Preferred Stock are entitled to vote with the holders of the common stock on an as-converted basis in addition to voting as a separate class as provided by applicable Delaware law and the Company’s organizational documents. The holders, acting exclusively and as a separate class, shall have the right to appoint either a non-voting observer to the Company’s Board of Directors or one director to the Company’s Board of Directors.

Registration Rights The holders of the Preferred Stock have certain customary registration rights with respect to the shares of common stock into which the Preferred Stock is converted, pursuant to the terms of a registration rights agreement.

The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets, and contract liabilities on the accompanying unaudited condensed consolidated balance sheets.

Our contract assets are as follows:

			June 30, 2022						December 31, 2021
Costs and estimated earnings in excess of billings			$	23,984					$	17,163
Retainage			10,016						9,681
Total contract assets			$	34,000					$	26,844

Our contract liabilities are as follows:

			June 30, 2022						December 31, 2021
Billings in excess of costs and estimated earnings			$	3,941					$	5,716
Deferred revenue			1,761						483
Total contract liabilities			$	5,702					$	6,199

We recognized revenue of $57 and $5,829 for the three and six months ended June 30, 2022 that was previously included in contract liabilities at December 31, 2021.

The Company's net position on uncompleted contracts is as follows:

			June 30, 2022						December 31, 2021
Costs incurred on uncompleted contracts			$	269,613					$	227,195
Estimated earnings			19,518						22,331
Total costs and estimated earnings			289,131						249,526
Less billings to date			(269,088)						(238,079)
Net balance in process			$	20,043					$	11,447

The net balance in process classified on the accompanying unaudited condensed consolidated balance sheets is as follows: 

			June 30, 2022						December 31, 2021
Costs and estimated earnings in excess of billings			$	23,984					$	17,163
Billings in excess of costs and estimated earnings			(3,941)						(5,716)
Net balance in process			$	20,043					$	11,447

Anticipated losses on long-term contracts are recognized when such losses become evident. As of June 30, 2022 and December 31, 2021, accruals for anticipated losses on long-term contracts were $7 and $159, respectively.

13. Stock-Based Compensation

The Company adopted the Charah Solutions, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”), pursuant to which employees, consultants, and directors of the Company and its affiliates, including named executive officers, are eligible to receive awards. The 2018 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards, and performance awards intended to align the interests of participants with those of Company's stockholders. The Company has reserved 5,007 shares of common stock for issuance under the 2018 Plan.

A summary of the Company’s non-vested share activity for the six months ended June 30, 2022 is as follows:

			Restricted Stock												Performance Stock												Total
			Shares						Weighted-Average Grant Date Fair Value						Shares						Weighted-Average Grant Date Fair Value						Shares						Weighted-Average Grant Date Fair Value
Balance as of December 31, 2021			885						$	4.62					648						$	4.24					1,533						$	4.46
Granted			729						4.10						313						2.97						1,042						3.76
Forfeited			(7)						3.21						(231)						6.14						(238)						6.05
Vested			(480)						4.73						—						—						(480)						4.73
Balance as of June 30, 2022			1,127						$	4.24					730						$	3.11					1,857						$	3.79

			Restricted Stock												Performance Stock												Total
			Weighted Average Remaining Contractual Terms (Years)						Aggregate Intrinsic Value						Weighted Average Remaining Contractual Terms (Years)						Aggregate Intrinsic Value						Weighted Average Remaining Contractual Terms (Years)						Aggregate Intrinsic Value
Balance as of December 31, 2021			0.88						$	4,072					1.26						$	2,979					1.04						$	7,051
Balance as of June 30, 2022			1.40						$	4,215					1.93						$	2,730					1.61						$	6,945

Stock-based compensation expense related to the restricted stock issued was $577 and $501 during the three months ended June 30, 2022 and 2021, respectively and $1,148 and $758 for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, total unrecognized stock-based compensation expense related to non-vested awards of restricted stock, net of estimated forfeitures, was $3,496, and is expected to be recognized over a weighted-average period of 1.54 years. The total fair value of awards vested for the three and six months ended June 30, 2022 was $2,015 and $2,018, respectively.

Stock-based compensation expense related to the performance stock issued was $169 and $198 during the three months ended June 30, 2022 and 2021, respectively and $389 and $240 for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, total unrecognized stock-based compensation expense related to non-vested awards of performance stock, net of estimated forfeitures, was $1,369, and is expected to be recognized over a weighted-average period of 2.24 years.

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. For all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Although it is difficult to predict the ultimate outcome of these lawsuits, claims and proceedings, we do not believe that the ultimate disposition of any of these matters, individually or in the aggregate, would have a material adverse effect on our results of operations, financial position or cash flows. We maintain liability insurance for certain risks that is subject to certain self-insurance limits.

We believe amounts previously recorded are sufficient to cover any liabilities arising from the proceedings with all outstanding legal claims. Except as reflected in such accruals, we are currently unable to estimate a range of reasonably possible loss or a range of reasonably possible loss in excess of the amount accrued for outstanding legal matters.

15. Income Taxes

The Company had income tax expense of $341 and $72 for the three months ended June 30, 2022 and 2021, respectively, and $419 and $229 for the six months ended June 30, 2022 and 2021, respectively, due to current state income tax expense and adjustments to the valuation allowance on deferred tax assets.

The effective income tax rate for the three months ended June 30, 2022 was 23.0% without regard to the impact of the valuation allowance and includes the effect of state income taxes and nondeductible items. The Company’s income is subject to a federal statutory rate of 21.0% and an estimated state statutory rate of 4.2% before considering the valuation allowance.

The Company evaluates its effective income tax rate at each interim period and adjusts it accordingly as facts and circumstances warrant. The determination of the annual estimated effective income tax rate at each interim period requires certain estimates and judgments

including, but not limited to, the expected operating income for the year, estimated permanent differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur and additional information is obtained.

At June 30, 2022, deferred tax liabilities, net of deferred tax assets, was $1,309. A valuation allowance has been recorded for the deferred tax assets as the Company has determined that it is not more likely than not that the tax benefits related to all the deferred tax assets will be realized. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on its deferred tax assets.

16. Loss Per Share

Basic loss per share is computed by dividing net loss attributable to the Company’s stockholders by the weighted-average number of shares outstanding during the period. Diluted loss per share reflects all potentially dilutive ordinary shares outstanding during the period and is computed by dividing net loss attributable to the Company’s stockholders by the weighted-average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.

Basic and diluted loss per share is determined using the following information:

			Three months ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Numerator:
Net loss attributable to Charah Solutions, Inc.			$	(9,603)					$	(4,166)					$	(21,643)					$	(5,453)
Deemed and imputed dividends on Series A Preferred Stock			(150)						(148)						(299)						(295)
Series A Preferred Stock dividends			(1,571)						(2,148)						(3,661)						(4,215)
Net loss attributable to common stockholders			$	(11,324)					$	(6,462)					$	(25,603)					$	(9,963)
Denominator:
Weighted average shares outstanding			33,642						30,450						33,526						30,282
Dilutive share-based awards			—						—						—						—
Total weighted average shares outstanding, including dilutive shares			33,642						30,450						33,526						30,282
Net loss attributable to common stockholders per common share
Basic			$	(0.34)					$	(0.21)					$	(0.76)					$	(0.33)
Diluted			$	(0.34)					$	(0.21)					$	(0.76)					$	(0.33)

The holders of the Preferred Stock have non-forfeitable rights to common stock dividends or common stock dividend equivalents. Accordingly, the Preferred Stock qualifies as participating securities.

As a result of the net loss per share for the three and six months ended June 30, 2022 and 2021, the inclusion of all potentially dilutive shares would be anti-dilutive. Therefore, dilutive shares of 14,159 and 12,018 were excluded from the computation of the weighted-average shares for diluted net loss per share for the three months ended June 30, 2022 and 2021, respectively and dilutive shares of 13,640 and 11,903 were excluded from the computation of the weighted-average shares for diluted net loss per share for the six months ended June 30, 2022 and 2021, respectively.

A summary of securities excluded from the computation of diluted earnings per share is presented below:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2022						2021						2022						2021
Diluted earnings per share:
Anti-dilutive restricted and performance stock units			1,962						1,285						1,633						1,338
Anti-dilutive Series A Preferred Stock convertible into common stock			12,197						10,733						12,007						10,565
Potentially dilutive securities, excluded as anti-dilutive			14,159						12,018						13,640						11,903

The following discussion and analysis should be read in conjunction with the historical financial statements and related notes included in Part I, “Item 1. Financial Statements” of this Quarterly Report. This discussion contains “forward‑looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward‑looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, public health threats or outbreaks of communicable diseases, such as the ongoing novel coronavirus “COVID-19” pandemic and its impact on our business, customers, employees or customers' facilities, capital expenditures, economic and competitive conditions, and regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report. Please read “Cautionary Note Regarding Forward‑Looking Statements” included elsewhere in this Quarterly Report. Except as otherwise required by applicable law, we assume no obligation to update any of these forward‑looking statements.

Charah Solutions, Inc.

Charah Solutions, Inc. (together with its subsidiaries, “Charah Solutions,” the “Company,” “we,” “us” or “our”) was incorporated in Delaware in 2018 in connection with our initial public offering in June 2018 and, together with its predecessors, has been in business since 1987. Since our founding, we have continuously worked to anticipate our customers’ evolving environmental needs, increasing the number of services we provide through our embedded presence at their power generation facilities. Our multi-service platform allows customers to gain efficiencies from sourcing multiple required offerings from a single, trusted partner compared to service providers with a more limited scope.

Overview

We are a leading national service provider of mission-critical environmental services and byproduct recycling to the power generation industry. We offer a suite of remediation and compliance services, byproduct services, raw material sales and Environmental Risk Transfer (“ERT”) services. We also design and implement solutions for complex environmental projects (such as coal ash pond closures) and facilitate coal ash recycling through byproduct marketing and other beneficial use services. We believe we are a partner of choice for the power generation industry due to our quality, safety, domain experience, and compliance record, all of which are key criteria for our customers. In 2021, we performed work at more than 40 coal-fired generation sites nationwide.

We operate as a single operating segment, reflecting the suite of end-to-end services we offer our utility partners and how our chief operating decision maker reviews consolidated financial information to evaluate results of operations, assess performance and allocate resources for these services. We provide the following services through our one segment: remediation and compliance services, byproduct services, raw material sales and ERT services. Remediation and compliance services are associated with our customers’ need for multi-year environmental improvement and sustainability initiatives, whether driven by regulatory requirements, power generation customer initiatives or consumer expectations and standards. Byproduct services consist of recurring and mission-critical coal ash management and operations for coal-fired power generation facilities while also supporting both our power generation customers’ desire to recycle their recurring and legacy volumes of coal combustion residuals (“CCRs”), commonly known as coal ash, and our ultimate end customers’ need for high-quality, cost-effective supplemental cementitious materials (“SCMs”) that provide a sustainable, environmentally-friendly substitute for Portland cement in concrete. Our raw material sales provide customers with the raw materials that are essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw material transactions around the globe. ERT services represent an innovative solution designed to meet coal fired plant energy providers’ evolving and increasingly complex plant closure and environmental remediation needs. These customers need to retire and decommission older or underutilized assets while maximizing the assets value and improving the environment. Our ERT services manage the sites' environmental remediation requirements, benefiting the communities and lowering the coal fired plant energy providers’ costs.

COVID-19 Update

The pandemic caused by a novel coronavirus (“COVID-19”) has impacted many aspects of our operations, directly and indirectly, including our employees, the services we provide at our customers’ power generation facilities, our suppliers and the overall market. We, along with our utility partners, have implemented the precautionary health and safety measures recommended by the Centers for Disease Control and Prevention (the “CDC”) in response to the COVID-19 pandemic and we follow current CDC guidelines and recommendations. Understanding that the COVID-19 challenge is evolving, we continue to monitor the situation and update our proactive measures in coordination with our customers based on new information and feedback. We continue to work closely with our utility partners and concrete producer customers to meet their needs and monitor any potential slowdowns of byproduct recycling and marketing services if there is decreased demand for construction materials.

The COVID-19 pandemic presents potential new risks to the Company’s business, including logistical, supply chain and other challenges that may continue to affect demand for services, which are driven by construction activity, and the timing of our remediation and compliance services projects, due to delays in new contract awards and increasing costs and declining availability for certain machinery and equipment.

We use a variety of financial and operational metrics to assess the performance of our operations, including:

•Revenue;

•Gross Profit;

•Operating Income;

•Adjusted EBITDA; and

•Adjusted EBITDA Margin.

Revenue

We analyze our revenue by comparing actual revenue to our internal projections for a given period and to prior periods to assess our performance. We believe that revenue is a meaningful indicator of the demand and pricing for our services.

Gross Profit

We analyze our gross profit, which we define as revenue less cost of sales, to measure our financial performance. We believe that gross profit is a meaningful metric because it provides insight on financial performance of our revenue streams without consideration of company overhead. When analyzing gross profit, we compare actual gross profit to our internal projections for a given period and to prior periods to assess our performance.

Operating Income

Adjusted EBITDA and Adjusted EBITDA Margin

We view Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures, as important indicators of performance because they allow for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure.

We define Adjusted EBITDA as net loss attributable to Charah Solutions, Inc. before income from discontinued operations, net of tax, interest expense, net, loss on extinguishment of debt, income taxes, depreciation and amortization, equity-based compensation, impairment expense (including inventory reserves), gain on change in contingent payment liability and transaction-related expenses and other items. Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenue. See “—Non-GAAP Financial Measures” below for more information and a reconciliation of Adjusted EBITDA to net loss attributable to Charah Solutions, Inc., the most directly comparable financial measure calculated and presented in accordance with GAAP.

Key Factors Affecting Our Business and Financial Statements