ADA-ES INC (Form: 10-Q, Received: 11/09/2012 13:09:43)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

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

For the transition period from to

Commission File Number: 000-50216

ADA-ES, INC.

(Exact name of registrant as specified in its charter)


Colorado		84-1457385
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9135 South Ridgeline Boulevard, Suite 200, Highlands Ranch, Colorado		80129
(Address of principal executive offices)		(Zip Code)

(303) 734-1727

(Registrant’s telephone number, including area code)

Not Applicable

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

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

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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


Class		Outstanding at October 31, 2012
Common Stock, no par value		10,026,469

Part I. - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ADA-ES, Inc. and Subsidiaries

Consolidated Balance Sheets

( Amounts in thousands, except share data )


	September 30, 2012			December 31, 2011
	(Unaudited)			(Restated, See Note 14)
ASSETS
Current Assets
Cash and cash equivalents	$	17,531		$	40,879
Receivables, net of allowance for doubtful accounts		10,042			5,914
Investment in securities		1,893			508
Prepaid expenses and other assets		2,792			1,532

Total current assets		32,258			48,833

Property and Equipment, at cost		52,724			41,771
Less accumulated depreciation and amortization		(7,769	)		(4,651	)

Net property and equipment		44,955			37,120

Other Assets
Investment in unconsolidated entity		1,490			590
Other assets		3,891			931

Total other assets		5,381			1,521

Total Assets	$	82,594		$	87,474

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	6,745		$	8,849
Accounts payable - related parties		3,327			1,209
Accrued payroll and related liabilities		1,611			2,545
Line of credit and current portion of notes payable		10,903			10,873
Deposits		11,900			14,900
Deferred revenue and other liabilities		10,914			5,105
Settlement awards and related accrued liabilities		3,801			3,983

Total current liabilities		49,201			47,464

Long-term Liabilities
Line of credit and long-term portion of notes payable		2,447			3,624
Settlement awards and indemnity liability		2,500			5,200
Deferred revenue		1,965			—
Accrued warranty and other liabilities		692			632

Total long-term liabilities		7,604			9,456

Total Liabilities		56,805			56,920

Commitments and Contingencies (Note 12)

Temporary Equity - Non-controlling Interest Subject to Possible Redemption		60,000			60,000

Stockholders’ Deficit
ADA-ES, Inc. stockholders’ deficit
Preferred stock: 50,000,000 shares authorized, none outstanding		—			—
Common stock: no par value, 50,000,000 shares authorized, 10,020,106 and 9,996,144 shares issued and outstanding, respectively		63,578			63,184
Accumulated deficit		(74,360	)		(66,694	)

Total ADA-ES, Inc. stockholders’ deficit		(10,782	)		(3,510	)
Non-controlling interest		(23,429	)		(25,936	)

Total Stockholders’ Deficit		(34,211	)		(29,446	)

Total Liabilities, Temporary Equity and Stockholders’ Deficit	$	82,594		$	87,474

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Operations

( Amounts in thousands, except per share data )

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
				(Restated, See Note 14)						(Restated, See Note 14)
Revenues
Refined coal	$	70,197		$	9,160		$	133,722		$	19,994
Emission control		3,480			3,095			10,209			6,837
CO ₂ capture		676			977			1,153			1,894

Total revenues		74,353			13,232			145,084			28,725

Cost of Revenues
Refined coal		67,269			3,487			121,220			4,075
Emission control		2,683			1,955			7,838			3,753
CO ₂ capture		444			636			643			1,201

Total cost of revenues		70,396			6,078			129,701			9,029

Gross Margin before Depreciation and Amortization		3,957			7,154			15,383			19,696

Other Costs and Expenses
General and administrative		5,173			2,932			12,852			14,596
Research and development		882			506			2,064			1,396
Depreciation and amortization		1,239			216			3,444			608

Total expenses		7,294			3,654			18,360			16,600

Operating Income (Loss)		(3,337	)		3,500			(2,977	)		3,096

Other Income (Expense):
Net equity in net income (loss) from unconsolidated entities		232			(2,050	)		400			(5,761	)
Other income (expense) including interest		(19	)		71			122			2,161
Interest expense		(144	)		(889	)		(1,045	)		(889	)
Settlement of litigation and arbitration award, net		(800	)		(2,182	)		(1,553	)		(41,684	)

Total other income (expense)		(731	)		(5,050	)		(2,076	)		(46,173	)

Loss from Continuing Operations Before
Income Tax Benefit and Non-controlling Interest		(4,068	)		(1,550	)		(5,053	)		(43,077	)
Income Tax Benefit		—			—			—			(10,980	)

Net Loss Before Non-controlling Interest		(4,068	)		(1,550	)		(5,053	)		(32,097	)
Non-controlling Interest		120			(3,053	)		(2,613	)		(7,888	)

Net Loss Attributable to ADA-ES, Inc.	$	(3,948	)	$	(4,603	)	$	(7,666	)	$	(39,985	)

Net Loss Per Common Share – Basic and Diluted Attributable to ADA-ES, Inc.	$	(0.39	)	$	(0.60	)	$	(0.77	)	$	(5.25	)

Weighted Average Common Basic and Diluted Shares Outstanding		10,017			7,661			10,008			7,621

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

Nine Months Ended September 30, 2012 and 2011

(Amounts in thousands, except share data)

(Unaudited)


									Total ADA-ES			Non-
	Common Stock					Accumulated			Stockholders’			controlling			Total
	Shares		Amount			Deficit			Deficit			Interest			Deficit
			(Restated)			(Restated)			(Restated)			(Restated)			(Restated)
Balances , January 1, 2011 (restated, See Note 14)		7,538,861	$	39,627		$	(43,875	)	$	(4,248	)	$	2,035		$	(2,213	)
Stock-based compensation		96,411		761			—			761			—			761
Issuance of stock to 401(k) plan		21,829		264			—			264			—			264
Issuance of stock on exercise of options		11,134		81			—			81			—			81
Income tax impact of sale of temporary equity in joint venture (restated)		—		(10,980	)		—			(10,980	)		—			(10,980	)
Equity contributions by non-controlling interest		—		—			—			—			250			250
Distributions to non-controlling interest		—		—			—			—			(36,203	)		(36,203	)
Expense of stock issuance and registration		—		(16	)		—			(16	)		—			(16	)
Net income (loss) (restated)		—		—			(39,985	)		(39,985	)		7,888			(32,097	)

Balances , September 30, 2011, as restated		7,668,235	$	29,737		$	(83,860	)	$	(54,123	)	$	(26,030	)	$	(80,153	)

Balances , January 1, 2012 (restated, See Note 14)		9,996,144	$	63,184		$	(66,694	)	$	(3,510	)	$	(25,936	)	$	(29,446	)
Stock-based compensation		8,818		103			—			103			—			103
Issuance of stock to 401(k) plan		13,178		292			—			292			—			292
Issuance of stock on exercise of options		1,966		21			—			21			—			21
Distributions to non-controlling interest		—		—			—			—			(106	)		(106	)
Expense of stock issuance and registration		—		(22	)		—			(22	)		—			(22	)
Net income (loss)		—		—			(7,666	)		(7,666	)		2,613			(5,053	)

Balances , September 30, 2012		10,020,106	$	63,578		$	(74,360	)	$	(10,782	)	$	(23,429	)	$	(34,211	)

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2012			2011
				(Restated, See Note 14)
Cash Flows from Operating Activities
Net loss	$	(7,666	)	$	(39,985	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,444			608
Deferred tax benefit		—			(10,980	)
Loss on disposal of assets		49			60
Expenses paid with stock, restricted stock and stock options		395			1,025
Net equity in net (income) loss from unconsolidated entities		(400	)		5,761
Non-controlling interest in income from subsidiaries		2,613			7,888
Changes in operating assets and liabilities:
Receivables, net		(4,128	)		(4,284	)
Prepaid expenses and other assets		(1,164	)		(1,536	)
Accounts payable		14			3,495
Accrued payroll, expenses and other related liabilities		(992	)		800
Deferred revenue and other liabilities		4,834			6,726
Settlement awards and related accrued liabilities		(2,882	)		8,703

Net cash used in operating activities		(5,883	)		(21,719	)

Cash Flows from Investing Activities
Investment in securities		(1,385	)		—
Acquistion of BCSI		(2,000	)		—
Proceeds from sale of property and equipment		32			—
Principal payments received on notes receivable		—			1,580
Capital expenditures for equipment, patents and development projects		(9,358	)		(11,975	)

Net cash used in investing activities		(12,711	)		(10,395	)

Cash Flows from Financing Activities
Net borrowings (repayments) under line of credit		(4,147	)		7,887
Loan to unconsolidated entity		(500	)		—
Sale of temporary equity in joint venture		—			60,000
Non-controlling interest equity contributions		—			250
Distributions to non-controlling interest		(106	)		(36,203	)
Exercise of stock options		21			81
Stock issuance and registration costs		(22	)		(16	)

Net cash provided by (used in) financing activities		(4,754	)		31,999

Decrease in Cash and Cash Equivalents		(23,348	)		(115	)
Cash and Cash Equivalents , beginning of period		40,879			9,696

Cash and Cash Equivalents , end of period	$	17,531		$	9,581

Supplemental Schedule of Non-Cash Flow Investing and Financing Activities
Stock and stock options issued for services	$	395		$	1,025

Cash paid for interest	$	1,328		$	889

Accrued capital expenditures	$	—		$	3,234

Deposits transferred to deferred revenue	$	3,000		$	—

Notes payable related to acquisition of BCSI	$	3,000		$	—

See accompanying notes.

ADA-ES, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2012

(1)

Basis of Presentation

Nature of Operations

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

The consolidated balance sheet as of December 31, 2011, which has been derived from restated audited financial statements, and the accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The consolidated financial statements include the financial statements of ADA, ADES, ADA IP, BCSI, ADA LLC and Clean Coal. All significant intercompany balances and transactions have been eliminated in consolidation.

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

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

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

Reclassifications

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

New Accounting Standard

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

(2)

Acquisition of BCSI

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

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

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

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

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

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


	(in thousands)
Assets acquired:
Inventory	$	109
Property and equipment		2,001
Intangible assets		2,748
Other assets		200

Total assets acquired		5,058

Liabilities assumed:
Accrued liabilities		58

Total liabilities assumed		58

Net assets acquired	$	5,000

Purchase consideration:
Deposit paid	$	200
Cash paid at closing		1,800
Notes payable		3,000

Total purchase consideration	$	5,000

(3)

Investment in Unconsolidated Entity

Clean Coal Solutions Services

On January 20, 2010, the Company, together with NexGen Resources Corporation (“NexGen”), formed Clean Coal Solutions Services, LLC (“CCSS”) for the purpose of operating RC facilities leased or sold to third parties by Clean Coal. The Company has a 50% ownership interest in CCSS (but does not have management control of it) and the Company’s investment in and advances to CCSS which totaled approximately $1.5 million as of September 30, 2012 includes its share of CCSS’ income since its formation and are accounted for under the equity method of accounting. The following schedule shows unaudited consolidated summarized information as to assets, liabilities and revenues and net income attributed to CCSS before consolidation. CCSS’ consolidated financial statements include the financial results of the entities that lease RC facilities and its revenues includes the sale of RC and its cost of sales include raw coal purchases.


	As of September 30, 2012		As of December 31, 2011
	(in thousands)
Current assets	$	68,336	$	22,609
Property, equipment, and other long-term assets		959		3,682

Total Assets	$	69,295	$	26,291

Total Liabilities	$	31,678	$	15,988


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

(4)

Joint Venture Investment in Clean Coal

In November 2006, the Company sold a 50% interest in its joint venture called Clean Coal Solutions, LLC, which was formed in 2006 with NexGen, to market RC technology. In May 2011, ADA and NexGen entered into a transaction in which Clean Coal sold an effective 15% interest of the equity in Clean Coal to an affiliate of The Goldman Sachs Group, Inc. (“GS”) which is included in temporary equity subject to possible redemption in the consolidated balance sheets (see Note 10). GS has certain preferences over ADA and NexGen as to liquidation and profit distribution. GS has no further capital call requirements and does not have a voting interest but does have approval rights over certain corporate transactions.

In September 2011, ADA, NexGen, and GS entered into the First Amendment to the Second Amended and Restated Operating Agreement (the “Operating Agreement”) pursuant to which ADA and NexGen each transferred their 2.5% member interests in each of Clean Coal’s subsidiaries back to Clean Coal. As a result of these transactions, ADA’s interest in Clean Coal’s net profits and losses is now 42.5%. This restructuring of ownership interests did not change the financial relationships of the parties and ADA still maintains a 50% governance interest in Clean Coal. In July 2012, ADA, NexGen and GS entered into the Second Amendment to the Operating Agreement which, among other things, expanded Clean Coal’s board of managers to allow for the appointment of an additional manager not directly representative of any of the members. Since its inception, ADA has been considered the primary economic beneficiary of this joint venture and has consolidated the accounts of Clean Coal.

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

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

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

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


	As of September 30, 2012		As of December 31, 2011
	(in thousands)
Primary assets
Cash and cash equivalents	$	4,722	$	8,804
Accounts receivable, net		5,457		3,177
Prepaid expenses and other assets		3,054		3,028
Property, plant and equipment including assets under lease and assets placed in service, net		41,047		36,751
Primary liabilities
Accounts payable and accrued liabilities	$	8,774	$	11,735
Line of credit		10,350		14,497
Deposits		11,900		14,900
Deferred revenue		11,700		3,600


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

Amounts due to CCSS

Clean Coal has recorded accounts payable due to CCSS totaling $2.4 million and $604,000 as of September 30, 2012 and December 31, 2011, respectively, which are included in accounts payable - related parties in the accompanying consolidated balance sheets.

(5)

Deferred Revenue and Deposits

Deferred revenue consists of:

•

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

•

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

Clean Coal Deferred Rent Revenue

In June 2010, Clean Coal executed agreements to lease two RC facilities. These agreements provided for, among other things, a “prepaid rent payment” of $9 million for both facilities that was received before June 30, 2010. In November and December 2011, Clean Coal entered into transactions to exchange the existing facilities. There was no change to the prepaid rent payment or amortization period as a result of the exchange. Clean Coal received an additional $6.3 million in prepaid rent from GS related to this facility and an additional $1.5 million from another financial party in July 2012.

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


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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(in thousands)
Rent revenue recognized	$	11,073	$	6,100	$	27,053	$	16,900
Amortization of deferred revenues included in amounts above	$	900	$	900	$	2,700	$	2,700

Clean Coal Deposits

Clean Coal has deposits of $11.9 million towards RC facilities which may be leased upon attainment of certain milestones that are included in deposits in the consolidated balance sheets at September 30, 2012. In October 2012, GS determined that it would not pursue leases on two particular RC facilities on which it had paid deposits totaling $4.7 million and concurrently gave notice for the return of the related deposits. While Clean Coal has not yet returned the deposits, it plans to do so by January 30, 2013 as required by the Lease Agreement unless GS selects other facilities in which to participate for which deposits could be applied.

(6)

Net Loss Per Share

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

All outstanding stock options (see Note 9) to purchase shares of common stock for the three months and nine months ended September 30, 2012 and 2011 were excluded from the calculation of diluted shares as their effect is anti-dilutive.

(7)

Property and Equipment

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


	Years	As of September 30, 2012			As of December 31, 2011
	(in thousands)
Machinery and equipment	3-10	$	6,397		$	3,937
Leasehold improvements	2-5		1,094			624
Furniture and fixtures	3-7		730			281
RC assets under lease and placed in service	10		44,503			36,929

			52,724			41,771

Less accumulated depreciation and amortization			(7,769	)		(4,651	)

Total property and equipment, net		$	44,955		$	37,120


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(in thousands)
Depreciation and amortization	$	1,239	$	216	$	3,444	$	608

(8)

Income Taxes

Income taxes are accounted for under the asset and liability approach. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided if and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. At each reporting date, management reviews existing income tax assessments and, if necessary, revises them to reflect changed circumstances. In a situation where recent losses have been incurred, the accounting standards require convincing evidence that there will be sufficient future taxable income to realize deferred tax assets.

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

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

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

(9)

Share Based Compensation

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

Following is a table of options activity for the nine months ended September 30, 2012:


	Employee and Director Options			Weighted Average Exercise Price
Options outstanding, January 1, 2012		182,942		$	9.95
Options granted		—			—
Options expired		—			—
Options exercised		(1,966	)		10.73

Options outstanding and exercisable, September 30, 2012		180,976		$	9.94

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


	Intrinsic Value		Average Market Price
Exercised, September 30, 2012	$	25,800	$	23.85
	Intrinsic Value		Market Price
Exercisable, September 30, 2012	$	2,474,200	$	23.61

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


Range of Exercise Prices	Number of Options Outstanding and Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Lives
$8.60 - $10.20		142,583	$	8.66		3.1
$13.80 - $15.20		38,393	$	14.70		2.8

		180,976	$	9.94		3.1

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

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

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

Following is a table summarizing the activity under various stock issuance plans for the nine months ended September 30, 2012:

Stock Issuance Plans


	2007 Plan			401(k) Plan			2005 Plan
Balance available, January 1, 2012		30,954			156,025			5,065
Evergreen addition		209,628			—			—
Additional shares authorized for issuance		300,000			—			—
Restricted stock issued to new and anniversary employees		(8,464	)		—			—
Restricted stock cancelled		510			—			—
Stock issued based on incentive and matching programs to employees		—			(13,178	)		—
Stock issued to executives, directors and non-employees		(864	)		—			—

Balance available, September 30, 2012		531,764			142,847			5,065

Expense recognized under the different plans for the periods ended September 30, 2012:
	(in thousands)
three months	$	25		$	95		$	—
nine months	$	103		$	292		$	—
Unrecognized expense under the different plans:
	(in thousands)
as of September 30, 2012	$	630		$	—		$	—

A summary of the status of the non-vested shares under the 2007 Plan as of September 30, 2012 is presented below:


	Shares			Weighted Average Grant Date Fair Value
Non-vested at January 1, 2012		107,991		$	6.98
Granted		8,464			24.18
Vested		(7,973	)		23.84
Forfeited		(510	)		11.51

Non-vested at September 30, 2012		107,972		$	8.07

(10)

Temporary Equity Subject to Possible Redemption

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

(11)

Stockholders’ Deficit

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

Non-Controlling Interest

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

(12)

Commitments and Contingencies

Line of Credit

Clean Coal has available a revolving line of credit with a bank for $15 million that is secured by substantially all the assets of Clean Coal (including its subsidiaries). The line of credit expires in March 2013 with payment due in four equal quarterly installments of principal of $3.75 million (plus all accrued interest at such time) beginning June 30, 2012. Borrowings under the line of credit bear interest at the higher of the “Prime Rate” (as defined in the related credit agreement) plus one percent (1%) or 5% per annum (effective rate of 5% at September 30, 2012).

In May 2012, an amendment was made to the line of credit agreement to increase the amount available by $3 million under an increased commitment note issued in conjunction with the line of credit. This amount is secured by a cash collateral account of $3 million held by the bank issuing the line of credit with funds received equally from ADA and NexGen. Interest is payable monthly at 3% over the rate paid by the bank on the cash collateral account and is due on or before December 1, 2012. At September 30, 2012, the outstanding balance on the line of credit was $10.4 million. On October 1, 2012, a payment of $3.75 million was made against the line of credit. Borrowings under the line of credit and increased commitment note are subject to certain financial covenants applicable to Clean Coal.

Retirement Plan

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(in thousands)

Matching contributions in stock	$	95	$	83	$	292	$	265

Performance Guarantee on Emission Control Systems

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


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

Ending balance	$	572		$	526		$	572		$	526

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

Clean Coal

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

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

Arbitration Award Liabilities

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

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

The Company has accrued a current liability as of September 30, 2012 of $3.3 million which is included in settlement awards and related accrued liabilities and a long-term liability of $2.5 million which is included in settlement awards and indemnity liability in the consolidated balance sheets related to this agreement.

Indemnity Liability Settlement

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

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

(13)

Business Segment Information

The following information relates to the Company’s three reportable segments: Refined coal (“RC”), Emission control (“EC”) and CO ₂ capture (“CC”). All assets are located in the U.S. and are not evaluated by management on a segment basis. All significant customers are U.S. companies and the U.S. Government.


	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
	(in thousands)
Revenue

RC
Rental income	$	11,072		$	6,239	$	27,053	$	16,907
Coal sales		59,021			2,580		106,533		2,580
Other revenues		104			341		136		507

		70,197			9,160		133,722		19,994

EC
Systems and equipment		2,299			906		6,456		2,047
Consulting and development		968			2,054		3,162		4,015
Chemicals		213			135		591		775

		3,480			3,095		10,209		6,837

CC		676			977		1,153		1,894

Total	$	74,353		$	13,232	$	145,084	$	28,725

Segment profit

RC	$	2,672		$	4,903	$	11,860	$	14,277
EC		(147	)		802		30		1,718
CC		(67	)		110		11		144

Total	$	2,458		$	5,815	$	11,901	$	16,139

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


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

Net loss attributable to ADA	$	(3,948	)	$	(4,603	)	$	(7,666	)	$	(39,985	)

Non-allocated general and administrative expenses include costs that benefit the business as a whole and are not directly related to any one of our segments. Such costs include but are not limited to accounting and human resources staff, information systems costs, facility costs, legal fees, audit fees and corporate governance expenses.

(14)

Restatement of Consolidated Financial Statements

The consolidated financial statements as of December 31, 2011 and for the three and nine months ended September 30, 2011 have been restated. The restatement resulted from management’s determination that the Company had not properly accounted for the interest held by GS in our joint venture, Clean Coal, since May 2011 and that a full valuation allowance against the Company’s deferred tax assets should have been recognized as of December 31, 2010 and all subsequent quarters thereafter. The restatement reflected non-cash adjustments and had no effect on previously reported operating income results or cash flows from operations. The Company amended its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 on October 19, 2012.

Financial Statement Effect of the Restatement

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


Effect on Consolidated Balance Sheet

				Restatement Adjustments
	As Previously Reported			Deferred Tax						As Restated
	December 31, 2011			Valuation Allowance			Temporary Equity			December 31, 2011
	(Amounts in thousands)
Current Assets
Cash and cash equivalents	$	40,879		$	—		$	—		$	40,879
Receivables, net of allowance for doubtful accounts		5,914			—			—			5,914
Investment in securities		508			—			—			508
Prepaid expenses and other assets		3,924			(2,392	)		—			1,532

Total current assets		51,225			(2,392	)		—			48,833

Property and Equipment , at cost		41,771			—			—			41,771
Less accumulated depreciation and amortization		(4,651	)		—			—			(4,651	)

Net property and equipment		37,120			—			—			37,120

Investment in unconsolidated entities		590			—			—			590
Other assets		931			—			—			931
Deferred taxes and other assets		16,233			(16,233	)		—			—

Total other assets		17,754			(16,233	)		—			1,521

Total Assets	$	106,099		$	(18,625	)	$	—		$	87,474

Total Liabilities	$	56,920		$	—		$	—		$	56,920

Temporary Equity - Non-controlling Interest Subject to Possible Redemption		—			—			60,000			60,000

Stockholders’ Equity (Deficit)
ADA-ES, Inc. stockholders’ equity (deficit)
Preferred stock: 50,000,000 shares authorized, none outstanding		—			—			—			—
Common stock: no par value, 50,000,000 shares authorized, 9,996,144 shares issued and outstanding		93,184			—			(30,000	)		63,184
Accumulated deficit		(48,069	)		(18,625	)		—			(66,694	)

Total ADA-ES, Inc. stockholders’ equity (deficit)		45,115			(18,625	)		(30,000	)		(3,510	)
Non-controlling interest		4,064			—			(30,000	)		(25,936	)

Total Stockholders’ Equity (Deficit)		49,179			(18,625	)		(60,000	)		(29,446	)

Total Liabilities, Temporary Equity and Stockholders’ Equity (Deficit)	$	106,099		$	(18,625	)	$	—		$	87,474

Effect on Consolidated Statement of Operations

Three Months Ended September 30, 2011

Restatement Adjustments

Deferred Tax

As Previously Reported

Valuation Allowance

Temporary Equity

As Restated

(Amounts in thousands)

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

(1,550

)

—

(1,550

)

Income Tax Expense (Benefit)

(792

)

792

—

Net Loss Before Non-controlling Interest

(758

)

(792

)

—

(1,550

)

Non-controlling Interest

(3,053

)

—

(3,053

)

Net Loss Attributable to ADA-ES, Inc.

(3,811

)

(792

)

—

(4,603

)

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

(0.50

)

(0.10

)

—

(0.60

)

Nine Months Ended September 30, 2011

Restatement Adjustments

Deferred Tax

As Previously Reported

Valuation Allowance

Temporary Equity

As Restated

(Amounts in thousands)

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

(43,077

)

—

(43,077

)

Income Tax Expense (Benefit)

(17,361

)

6,381

—

(10,980

)

Net Loss Before Non-controlling Interest

(25,716

)

(6,381

)

—

(32,097

)

Non-controlling Interest

(7,888

)

—

(7,888

)

Net Loss Attributable to ADA-ES, Inc.

(33,604

)

(6,381

)

—

(39,985

)

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

(4.41

)

(0.84

)

—

(5.25

)


Effect on Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
				Restatement Adjustments
	As Previously Reported			Deferred Tax						As Restated
	September 30, 2011			Valuation Allowance			Temporary Equity			September 30, 2011
	(Amounts in thousands)
ADA-ES Stockholders’ Equity (Deficit)
Balances, January 1, 2011	$	11,409		$	(15,657	)	$	—		$	(4,248	)
Stock-based compensation		761			—			—			761
Issuance of stock to 401(k) plan		264			—			—			264
Issuance of stock on exercise of options		81			—			—			81
Equity contribution from sale of interest in joint venture,net of income taxes		19,020			10,980			(30,000	)		—
Income tax impact of sale of temporary equity in joint venture		—			(10,980	)		—			(10,980	)
Expense of stock issuance and registration		(16	)		—			—			(16	)
Net loss		(33,604	)		(6,381	)					(39,985	)

Balance, September 30, 2011	$	(2,085	)	$	(22,038	)	$	(30,000	)	$	(54,123	)

Non-controlling Interest
Balance, January 1, 2011	$	2,035		$	—		$	—		$	2,035
Equity contributions by non-controlling interest		250			—			—			250
Distributions to non-controlling interest		(6,203	)		—			(30,000	)		(36,203	)
Net income		7,888			—			—			7,888

Balance, September 30, 2011	$	3,970		$	—		$	(30,000	)	$	(26,030	)

Total Stockholders’ Equity (Deficit)	$	1,885		$	(22,038	)	$	(60,000	)	$	(80,153	)

Effect on Consolidated Statement of Cash Flows



	Nine Months Ended September 30, 2011
				Restatement Adjustments
	As Previously Reported			Deferred Tax Valuation Allowance			Temporary Equity			As Restated
	(Amounts in thousands)
Net loss	$	(33,604	)	$	(6,381	)	$	—		$	(39,985	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		608			—			—			608
Deferred tax benefit		(17,361	)		6,381			—			(10,980	)
Loss on disposal of assets		60			—			—			60
Expenses paid with stock, restricted stock and stock options		1,025			—			—			1,025
Net equity in net loss from unconsolidated entities		5,761			—			—			5,761
Non-controlling interest in income from subsidiaries		7,888			—			—			7,888
Changes in operating assets and liabilities:											—
Receivables, net		(4,284	)		—			—			(4,284	)
Prepaid expenses and other		(1,536	)		—			—			(1,536	)
Accounts payable		3,495			—			—			3,495
Accrued payroll, expenses and other related liabilities		800			—			—			800
Deferred revenues and deposits		4,050			—			—			4,050
Accrued settlement and related liability		8,703			—			—			8,703
Accrued liabilities		2,576			—			—			2,576
Other liabilities		100			—			—			100

Net cash used in operating activities		(21,719	)		—			—			(21,719	)

Cash Flows from Investing Activities
Principal payments received on notes receivable		1,580			—			—			1,580
Equity contribution from sale of interest in joint venture		30,000			—			(30,000	)		—
Capital expenditures for equipment, patents and development projects		(11,975	)		—			—			(11,975	)

Net cash provided by (used in) investing activities		19,605			—			(30,000	)		(10,395	)

Cash Flows from Financing Activities
Net borrowings under line of credit		7,887			—			—			7,887
Sale of temporary equity in joint venture		—			—			60,000			60,000
Non-controlling interest equity contributions		250			—			—			250
Distributions to non-controlling interest		(6,203	)		—			(30,000	)		(36,203	)
Exercise of stock options		81			—			—			81
Stock issuance and registration costs		(16	)		—			—			(16	)

Net cash provided by financing activities		1,999			—			30,000			31,999

Decrease in Cash and Cash Equivalents		(115	)		—			—			(115	)
Cash and Cash Equivalents , beginning of period		9,696			—			—			9,696

Cash and Cash Equivalents, end of period	$	9,581		$	—		$	—		$	9,581

Item 2.

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

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

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

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

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

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

(e)	expected timing of conducting additional demonstrations of our technology;

(f)	the timing of awards of, and work under, our contracts and agreements and their value and their availability;

(g)	expected production levels at our refined coal (“RC”) facilities, when those RC facilities will be placed into permanent operation and expected use of the tax credits under Section 45 of the Internal Revenue Code (“Section 45 tax credits”) generated by the RC facilities;

(h)	our ability to profitably sell, lease and/or recognize the tax benefits from operating additional RC facilities;

(i)	timing and amounts of or changes in future revenues, funding for our business and projects, margins, expenses, earnings, tax rate, cash flow, working capital, liquidity and other financial and accounting measures;

(j)	the materiality of any future adjustments to previously recorded revenue as a result of Department of Energy (“DOE”) audits; and

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

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

Restatement

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

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

Overview

We develop, offer and implement proprietary environmental technology and market specialty chemicals to the coal-burning electric utility steam generating units (“EGU”) industry, to the Portland cement industry and to industrial boiler operators. We have three operating segments: RC (refined coal), EC (emission control) and CC (CO ₂ capture). The RC segment includes revenues from the leasing of RC facilities and RC sales which approximate the cost of raw coal acquired for RC facilities operated for our own account. The EC segment includes revenue from the supply of emissions control systems including powdered activated carbon injection (“ACI”) systems, dry sorbent injection (“DSI”) systems to control SO ₂ , SO ₃ and HCl and flue gas conditioning (“FGC”) systems, the licensing of certain technology and provision of consulting services. The CC segment includes revenue from projects relating to the CO ₂ capture and control market, including projects co-funded by government agencies, such as the DOE and industry supported contracts.

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

The primary drivers for many of our EC products and services are environmental laws and regulations impacting the electric power generation industry. Environmental regulations, such as the 1990 Clean Air Act Amendments, the MATS regulations, various Maximum-Achievable Control Technology (“MACT”) standards including the Industrial Boiler MACT (“IBMACT”) regulations, Cement MACT (as defined below) regulations, various state regulations and permitting requirements for coal-fired power plants are requiring electric power generators to reduce emissions of pollutants, such as particulate matter, SO _2, NO _x , mercury, and acid gases. We are a key supplier of mercury control equipment and services, which include ACI systems, to the EC market whose commercial equipment component first began in 2005 when several individual states began to require limits on mercury emissions. We also offer DSI systems to control SO ₂ and acid gases such as HCl and SO ₃ .

We conduct research and development efforts in CO ₂ capture and control from coal-fired boilers. In September 2010, we signed our second significant contract related to CO ₂ capture with the DOE, for a project that is expected to continue through the end of 2014.

Refined Coal

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

Environmental Legislation and Regulations

Clean Coal’s primary opportunity is based on Section 45 tax credits, established by the American Jobs Creation Act of 2004, and as amended by the Emergency Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act of 2009, and the Tax Relief and Job Creation Act of 2010, the last of which extended the placed in service deadline for the Section 45 tax credits from its original date to January 1, 2012. The 2012 tax credit amounts to $6.47 per ton of RC, and is expected to escalate annually through 2021. In December 2009, the IRS issued the initial guidance as to the specifics concerning how the emissions reductions are to be measured and certified to demonstrate compliance necessary to qualify for the Section 45 tax credits. The IRS provided subsequent guidance on October 4, 2010 to address various issues that had arisen. Additionally, the IRS has published a number of Private Letter Rulings (“PLRs) that provide approval to taxpayers on matters related to specific Section 45 tax credit issues. Although the approval in each PLR only applies to the taxpayer and the specific project mentioned in the PLR, other taxpayers can gain an understanding on how the IRS interprets certain matters based on the conclusions reached in the PLR.

Use of the tax credits is also subject to audits of the entity that claims the credit on its tax return and rulings by the United States Tax Court (the “Tax Court”), each of which can impact several aspects of the RC business including the viability of the market for Section 45 tax credits in general, the perceived risk involved in obtaining Section 45 Tax Credits and thus the price a third party would be willing to pay for them and the structure of contracts that we enter into to monetize our RC facilities.

Technology License Agreements and Operating Agreement

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

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

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

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

Leased and Operating RC Facilities

On June 29, 2010, Clean Coal executed contracts pursuant to which two RC facilities were leased by Clean Coal’s wholly owned subsidiaries (the “Lessors”) to GS RC Investment, LLC (the “Lessee”). The two facilities were installed at two different power plants in the Midwest each of which operates two cyclone boilers burning Powder River Basin (“PRB”) coal from Wyoming. On November 21 and December 15, 2011, Clean Coal, the Lessors and the Lessee entered into two Exchange Agreements pursuant to which the parties exchanged the leased RC facilities at each power plant with newly constructed, redesigned RC facilities which resulted in termination of the original leases and entry into new lease agreements. The new leases carry over most of the substantive terms and conditions of the initial leases and have annual terms that automatically renew through December 31, 2021.

As a result of the extension of the Section 45 tax credit placed in service deadline, Clean Coal built and qualified an additional 26 RC facilities that met the extended placed in service date. These facilities use a combination of our CyClean technology, which is limited to cyclone boilers, and M-45 technology, which can be used in non-cyclone boilers.

Based on the ten year term of the current Section 45 tax credits, we expect Clean Coal to generate revenues from leasing or selling RC facilities to financial parties and by generating tax credits by retaining and operating certain of the 28 RC facilities that met the placed in service deadline through December 31, 2021. Upon expiration of the tax credits on December 31, 2021, the leases of our RC facilities to financial parties will terminate. Clean Coal may then lease or sell the RC facilities directly to the utilities that own and operate the power plants at which the RC facilities are located or operate the facilities on behalf of utility customers given the significant benefit of the mercury reductions such facilities provide. After December 31, 2021, Section 45 tax credits would no longer be available absent further extension by Congress.

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

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

Pursuant to the Lease Agreement, Clean Coal leased a third RC facility to GS in the first quarter of 2012 and leased a fourth RC facility to another financial party during the third quarter. All agreements included substantially similar terms and conditions as those applicable to the first two leased RC facilities. With progress to date, currently a total of eight RC facilities are operating at full time status treating fifteen boilers that, in the aggregate, average more than twenty-one million tons of RC per year.

In addition to the four leased RC facilities, Clean Coal currently operates four additional RC facilities for its own account, resulting in its right to claim the Section 45 tax credits for the RC produced during those operations. Clean Coal plans to retain and operate one or two of these RC facilities permanently for its own account (with an ultimate goal of one of every five tons of RC produced) going forward and to lease or sell the other RC facilities currently in full time operation to financial institutions or others pending completion of definitive agreements. During the third quarter, the RC facilities operated for Clean Coal’s account generated $16.1 million in Section 45 tax credits that can be used to offset future tax expenses and $59 million in revenues from RC sales which are offset by $59 million in raw coal costs. Clean Coal has finalized monetization contracts for a ninth RC facility and the monetizer is waiting for a PLR and other approvals before full time operation can commence, which is expected in the

next few months. When these nine RC facilities are operating, Clean Coal will be producing about 25 million tons of RC per year based upon historical coal usage at these plants. Clean Coal is in negotiations to lease or sell several additional RC facilities and has the potential to be producing up to 60 million tons of RC by the end of 2014 utilizing the CyClean and M-45 technologies.

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

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

Status of Remaining RC Facilities

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

We are also in the process of increasing the number of potential financial parties and others that we are negotiating with to monetize the Section 45 tax credits. By the end of the year we expect that we will have leased or sold another RC facility to a new financial party bringing the total to three RC facilities monetized in 2012. As more of the RC facilities become operational and operate for longer periods, we believe the technical and tax credit risks are reduced. As a result, we expect the financial terms around future lease and/or sale transactions to generally improve for Clean Coal and result in higher per-ton profits over time. In addition, our RC business opportunities do not depend upon any new environmental or tax regulations. The current ten year term of the tax credits do not require any additional approval by Congress, which provides us with a high degree of confidence that the CyClean and M-45 technologies will generate long-term cash flows.

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

Based upon the status of operations and negotiations on RC facilities, we expect to report consolidated RC segment revenues of approximately $190 million in 2012, comprised of $40 million in rental revenues and $150 million in coal sales and RC purchases. Tax credit benefits and segment income for 2012 are projected to total approximately $22 million, which will include approximately $16 million of tax credits apportioned to ADA associated with the operations of RC facilities that have either yet to be monetized or are being operated by Clean Coal for its own account.

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

Emission Control

Environmental Legislation and Regulations

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

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

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

The Cement MACT requires cement plants to reduce HAPs by August 6, 2013 including 92% of mercury emissions and 83% of hydrocarbons emissions. This regulation could require ACI systems on up to 90 cement kilns in the U.S., which are owned by approximately 15 companies. We have been engaged in several testing programs for cement companies to define their emissions and evaluate how ACI equipment and sorbents will work in that industry. The tests were designed to evaluate the effectiveness of collecting mercury and organics from cement kiln exhaust gas streams. While we have seen limited actual inquiries to date for ACI systems from cement companies, we believe the Cement MACT has the potential to increase the market for ACI systems once additional clarity is in place on the technical requirements of those rules.

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

released on February 23, 2011 and issued on March 21, 2011, with compliance deadlines originally scheduled for early 2014. On December 23, 2011, the EPA issued proposed reconsiderations of certain aspects of the IBMACT, including clarification of applicability and implementation issues. We believe the EPA intends to finalize these reconsiderations and issue a revised rule by early 2013.

The IBMACT could impact over 600 existing coal-fired industrial boilers. The proposed emission limit (if maintained) of 3.1 pounds of mercury per trillion BTU for existing and 0.86 pounds per trillion BTU for new coal-fired industrial boilers will on average require greater than 50% capture of mercury from coal-fired boilers burning various coals. We believe the final IBMACT could increase the market for both ACI and DSI systems when considering the proposed requirements to control both mercury and HCl emissions,

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

The Cross State Air Pollution Rule (the “CSAPR”), formerly known as the “Transport Rule”, was finalized by the EPA on July 6, 2011. CSAPR was intended to replace the EPA’s 2005 Clean Air Interstate Rule (“CAIR”) and required 27 states in the Midwest and eastern half of the United States and the District of Columbia to significantly improve air quality by reducing power plant SO ₂ and NO _x emissions that contribute to ozone and fine particle pollution in other states. On December 30, 2011, the D.C. Circuit Court of Appeals issued a stay against implementation of the CSAPR in one of more than three dozen lawsuits challenging the CSAPR in order to hold a hearing on the issue of the potential for irreparable harm caused by the rule.

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

ADA’s total potential market may increase as a result of this ruling because CSAPR was driving many announced plant retirements. With the requirement to reduce SO ₂ emissions delayed for several years, certain plants that would have been retired had CSAPR remained in effect could instead have extended lives and will need to control acid gas and mercury emissions by 2015 in order to comply with the MATS.” Many power companies recognize the urgency of these issued and pending regulations, and as a result are contracting with us to evaluate mercury and acid gas emission control options at a number of their plants. Utilities need to know as soon as possible whether their existing EC components are sufficient to meet the new emissions standards when combined with the installation of low CAPEX systems such as ACI and DSI systems. If utilities need to upgrade their equipment with new large CAPEX equipment such as fabric filters or SO ₂ scrubbers, they will need to quickly begin procurement of these systems due to long required lead times in their implementation. As a result we expect additional near-term ACI and DSI demonstration revenue and bidding on related ACI and DSI equipment as discussed below.

Activated Carbon Injection and Dry Sorbent Injection Systems

ACI systems are currently the dominant control technology to address mercury emissions and have been widely deployed to meet the previously existing state and new plant regulations. We believe that this demand will significantly increase to meet the new MATS rules. ACI controls have historically been extensively evaluated by the DOE National Energy Technology Laboratory over the course of its three-phase mercury control field testing and demonstration program and have been demonstrated to reduce mercury emissions by up to 90% in many coal-fired power plants.

To date, we have obtained contracts for or are in the process of installing ACI systems intended to control mercury emissions from 56 coal-fired EGU boilers. We anticipate the need for 400 to 600 ACI systems to be supplied between 2012 and 2015, which would require rapid scale-up of our production capabilities to maintain our target and present 35% market share. The cost of the ACI equipment required to reduce emissions from an average-size EGU is between $600,000 and $1 million and in total we expect the MATS rules to create a market in excess of $1 billion for ACI and DSI systems. We expect to continue to expand our sales staff as well as our pre-contract and post-contract engineering design group and fabrication alliances to meet this anticipated market.

In addition to the mercury control applications for ACI systems, we have also developed and are offering commercial DSI systems to inject dry alkali sorbents for control of acid gases such as SO ₃ and HCl as well as for control of the criteria pollutant SO ₂ . The use of DSI for SO ₃ reduction can also enhance the capture of mercury on bituminous coal-fired boilers. DSI systems, which cost approximately $2 million to $3 million for an average size EGU, provide a low CAPEX alternative to scrubbers for meeting certain provisions of the MATS and CSAPR. The EPA predicts that about 200 DSI systems will be sold by 2015. We conducted full-scale tests of our DSI equipment in 2010 and 2011 for the control of HCl, SO ₂ and SO ₃ on plants burning bituminous, PRB, and lignite coals.

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

In order to integrate the acquisition, Aaron Prince, who previously served as Refined Coal Development Director for Clean Coal, became the General Manager of the new subsidiary. In addition, the former owner of Bulk Conveyor entered into an exclusive consulting agreement with BCSI, LLC. This acquisition provided ADA with capacity, experience and resources to provide customers with additional solutions for emissions compliance and the addition of Bulk Conveyor’s manufacturing facility also allowed ADA to expand its capacity for supplying ACI systems. We believe several contracts for ACI and DSI systems will be awarded during the remainder of this year and that MATS will eventually generate over $300 million in combined sales of ACI and DSI systems for the Company over the next three years. As an indication of progress in the development of this market, to date the Company has responded to greater than $259 million in bids for equipment of which $203 million is from this calendar year alone. The active bids for ACI and DSI systems do not include the recently announced contracts and bids that ADA has been notified to have won, but has not announced because the contracts have not yet been signed.

In early February of this year, we signed a $2 million contract for a DSI system for a power generator. On November 2, BCSI signed a contract to supply up to four DSI systems for a group of coal-fired generating plants. This contract has a total value of up to $14 million if the power company elects to purchase all of the contracted systems. The project will begin generating revenues immediately and deliveries are scheduled over the next 15 months. ADA has also signed two contracts for ACI systems, one for a power plant and one for a cement plant. In addition, we have been informed that we have been awarded a fleet-wide award for ACI systems that is expected to be in the $10 million to $20 million range. We will provide additional information on this once the contract is signed. We expect that all three contracts will be generating revenues starting in November of this year.

Enhanced Coal

A third ADA mercury-only coal treatment technology is also being marketed by the Company to meet mercury requirements currently existing in 19 states and the MATS requirements in 2015. Since 2004, we have been working with Arch Coal to explore certain unique characteristics of some types of coals mined by Arch Coal that allow them to be burned with lower emissions. We believe a technical breakthrough that involves the application of proprietary chemicals to Western coals such as PRB likely reduces emissions of mercury and other metals when this “enhanced” coal (“Enhanced Coal”) is burned at power plants. We believe our Enhanced Coal technology may provide a benefit to the customer of up to $4 per ton of coal burned when used on Western coals. U.S. power plants consume up to 600 million tons of Western coal per year.

We will be providing Enhanced Coal through two channels – (1) through Arch Coal for use on PRB coal at the mine and (2) through direct coal treatment applied on-site at power plants. On June 25, 2010, we entered into a Development and License Agreement (the “License Agreement”) with Arch Coal giving them an exclusive, non-transferable license to use certain technology to produce Enhanced Coal by the application of ADA’s proprietary coal treatment technology to Arch Coal’s PRB mined coal. We expect that use of this Enhanced Coal will help utilities meet the mercury emissions requirements in the MATS. Pursuant to the License Agreement, we are providing development services to Arch Coal aimed at applying the technology to the PRB coal. In addition, if we develop improvements to the technology that are related to the reduction of certain emissions from the burning of PRB coal, that technology will either be included in the license at no additional cost, or, under certain circumstances, we will negotiate with Arch Coal to determine if Arch Coal wants to use the additional improvements. We retain all right, title and interest, including all intellectual property rights, in and to any technology we license to Arch Coal. The initial demonstration of coal treated at the mine and shipped by rail to a power plant produced promising results.

In consideration for the development work and the license to Arch Coal, Arch Coal paid us an initial, non-refundable license and development fee in cash totaling $2 million in June 2010 which was recognized as revenue in 2010 and 2011. Under the

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

As a part of entering into the License Agreement, on November 1, 2012, we entered into a Supply Agreement under which Arch Coal will purchase the additives described in the License Agreement exclusively from us, and we will supply Arch Coal with the additives it needs. For customers that prefer to have the coal treatment applied on-site at their plants, ADA will be providing the technology directly to the power plants. We are in the process of planning several demonstrations of the technology both at the mine and at specific power plants.

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

CO ₂ Capture

In addition to our two key growth areas, RC and EC, we continue to demonstrate our position as a premier developer of innovative clean energy technologies. We expect that CO ₂ capture technologies will be required to control CO ₂ emissions from coal-fired power plants in the future as a result of the impact of CO ₂ emissions on climate change. A number of permits for new coal-fired plants were rejected by various state officials in response to protests by environmental groups. We see this as an opportunity and continue to develop technologies to address the long-term needs of our customers to reduce CO ₂ from their existing and new plants.

On December 15, 2009, EPA issued an endangerment finding that triggered a Clean Air Act requirement that the agency regulate CO ₂ emissions from stationary sources such as power plants. Industry and states have filed an extensive consolidated lawsuit before the U.S. Court of Appeals for the District of Columbia Circuit challenging numerous aspects of the EPA’s Greenhouse Gas (“GHG”) rules. The court is considering arguments regarding the EPA’s guidance memo on the timing of GHG regulations, such as when GHGs become a “regulated pollutant” under the Clean Air Act and thus New Source Review and Prevention of Significant Deterioration regulations apply.

On March 27, 2012, the EPA proposed its first new source performance standards for CO ₂ emissions from new power plants as a result of a separate settlement with states and environmental groups in 2010.

The DOE is providing partial funding for CO ₂ control projects and in September 2010 we signed a contract with the DOE to continue development of clean coal technology to capture CO ₂ from coal-fired power plants and other industrial sources of CO ₂ emissions. The agreements with the DOE provide that any inventions we create as a result of the work become our property and we retain the rights to commercialize any products we develop under the contracts. We participated in two such agreements in 2012 pursuant to which we are researching and developing a novel process to capture CO ₂ from coal-fired power plants.

In 2010 we began the first field tests of our CO ₂ control technology on a $3.8 million program co-funded by the DOE, as well as several major forward-thinking utility companies. The initial results at a plant confirmed the promising performance we had demonstrated in our laboratory. The pilot plant was moved to another plant for additional testing. Once captured, the CO ₂ could be either stored underground (sequestration) or beneficially used in processes such as enhanced oil recovery. This technology appears to offer potential cost and energy advantages over competing liquid-solvent-based technologies.

In October 2010, we began work on a second major CO ₂ project, which is expected to run for a total of 51 months to scale-up the technology to the one-megawatt level, which is a key step in the technology development process. We are the prime contractor for the approximately $20.5 million project (including expected contributions by other industry partners) administered by the DOE’s National Energy Technology Laboratory which is providing $15 million of the funding. The project provides funding to advance our commercialization plan for regenerable solid-sorbent technology.

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

We anticipate that DOE funded CO ₂ programs will continue to represent an important component of the revenue stream of the Company over the next several years as we position ourselves for the market growth for ACI systems, enhanced coal additives and related technology with Arch Coal and other technologies for emissions control.

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

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

Revenues totaled $74.4 million and $145.1 million for the three and nine months ended September 30, 2012 versus $13.2 million and $28.7 million for the three and nine months ended September 30, 2011, respectively, representing an increase of 462% and 405% for the quarter and year to date. The increase is due primarily to revenues from operations at the RC facilities we leased to third parties and RC sales from other facilities placed in service in 2011 that were operated by Clean Coal in 2012 prior to being leased or sold to third parties. The increase is also due in part to a 52% year to date increase in our EC segment revenues. We expect overall revenues for 2012 to be significantly higher than those reported for 2011.

Cost of revenues increased by $64.3 million and $120.7 million or 1058% and 1336% for the three and nine months ended September 30, 2012, respectively, from the same periods in 2011 primarily as a result of the costs of raw coal purchased for the RC facilities operated by Clean Coal and the operating costs incurred in those facilities. In addition, costs increased in the EC segment due to the increased activity in this segment and due to the hiring of additional staff required to meet expected growth.

Gross margins were 5% and 11% for the three and nine months ended September 30, 2012, respectively, compared to 54% and 69% for the same periods in 2011. This decrease primarily reflects such increased costs. If the RC coal sales and raw coal purchases ($59 million and $106.5 million for the three and nine months ended September 30, 2012, respectively, and $2.6 million for both the three and nine months ended September 30, 2011) and operating costs ($8.3 million and $15.4 million for the three and nine months ended September 30, 2012, respectively, and $2.4 million and $3.7 million for the three and nine months ended September 30, 2011, respectively) related to RC produced for Clean Coal’s account, which will not continue with respect to any facilities after they are monetized, are subtracted from the revenue and costs of revenue amounts reported for 2012, gross margins would be 80% for both the three and nine months ended September 30, 2012, compared to 90% for the same periods in 2011 with the same adjustments. The revenues and cost of revenues in 2011 included relatively small amounts of such revenues and costs. For the near term, we expect the lease and sale of RC facilities to represent an increasing source of revenues, for which the anticipated gross margins are higher than our EC and CC segments. As a result, we expect the gross margin when coal sales and purchases are disregarded for fiscal year 2012 to be higher than the overall margin realized in 2011.

Refined Coal

Revenues in our RC segment totaled $70.2 million and $133.7 million for the three and nine months ended September 30, 2012, respectively, compared to $9.2 million and $20 million for the three and nine months ended September 30, 2011, representing an increase of 666% and 569% for the quarter and year to date. Rental income totaled $11.1 million and $27.1 million from the leased RC facilities for the three and nine months ended September 30, 2012, respectively, compared to $6.2 million and $16.9 million for the same periods in 2011. Sales of RC totaled $59 million and $106.5 million for the three and nine months ended September 30, 2012, respectively, compared to $2.6 million for each of the same periods in 2011 as a result of raw coal purchases and RC sales at the several different RC facilities that Clean Coal operated for its own account during the periods shown.

Clean Coal incurs the operating costs for the RC facilities operated for its own account and retains for its owners the tax credits generated from the approximately 2.5 million tons and 3.9 million tons of RC produced for its own account during the three and nine months ended September 30, 2012, respectively. We expect our quarterly revenues to continue to fluctuate based on seasonal variations in electricity demand as well as planned and unplanned outages required by the power plants for equipment repair and maintenance. On an ongoing basis, we expect our four currently leased RC facilities to generate from $29 million to $36 million in revenue per year now through 2021 based on the Section 45 tax credits produced by their operations.

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

RC segment profits decreased by $2.2 million or 46% and $2.4 million or 17% for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011 primarily as a result of the cost of operating certain RC facilities for our own account and one-time costs incurred as we work through moving the placed in service facilities to full-time, long-term operations, offset by the two additional facilities leased during the first and third quarters of 2012 and an increase in the amount of coal burned at the utilities where the leased RC facilities are located due to seasonal changes in demand during the third quarter of 2012. These amounts are prior to the allocation of such profits to the non-controlling interests of Clean Coal.

Emission Control

Revenues in our EC segment totaled $3.5 million and $10.2 million for the three and nine months ended September 30, 2012, respectively, compared to $3.1 million and $6.8 million for the three and nine months ended September 30, 2011, respectively, representing an increase of 12% and 49% for the quarter and year to date.

The amounts reported exclude the work ADA has conducted for Clean Coal, as further described below, which was eliminated in our consolidation. Revenues from the EC segment for the nine months ended September 30, 2012 were comprised of sales of ACI and DSI systems and services (63%), consulting and demonstration services (31%) and flue gas chemicals and services (6%) compared to 30%, 59%, and 11%, respectively, for the same period in 2011. We expect our EC segment revenues related to ACI and DSI systems to continue to grow in 2013 when we expect utilities, cement plants and industrial boilers to start placing orders due to the MATS and other MACT regulations. We expect our gross margin percentage for our EC segment for 2012 will approximate 25%.

Our consulting revenues totaled $1 million and $3.2 million for the three and nine months ended September 30, 2012, respectively, compared to $2.1 million and $4 million for the same periods in 2011, representing a decrease of 53% and 21% from the same periods in 2011. Thus far in 2012 the size and scope of our consulting contracts has been lower than those we worked on in 2011. We are continuing with demonstrations and other work related to the MATS and we expect our consulting revenue to continue to be a significant part of EC revenues during 2013 as several customers are seeking alternatives on how best to comply with the MATS.

As of September 30, 2012, we had contracts in progress for work related to our EC segment totaling approximately $3.9 million, which we expect to recognize during the remainder of 2012 and during the first and second quarters of 2013. Our ACI and DSI systems revenues totaled $2.3 million and $6.5 million for the three and nine months ended September 30, 2012, respectively, representing an increase of 154% and 215% compared to the same periods in 2011. In the EC segment, we performed work related to RC facilities provided to Clean Coal valued at $199,000 and $2.2 million for the three and nine months ended September 30, 2012, respectively, compared to $1 million and $1.5 million for the same periods in 2011, which would otherwise be recognized as revenue but was eliminated in the consolidation of Clean Coal.

Cost of revenues for the EC segment increased by $728,000 and $4.1 million for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011, primarily as a result of the increased revenue-generating activities from our ACI and DSI system sales. Gross margins for the EC segment were 23% for both the three and nine months ended September 30, 2012, respectively, compared to 37% and 45% for the same periods in 2011. The decrease in gross margin from the prior year is primarily a result of a higher percent of work in this segment related to ACI systems that carry lower margin than our typical consulting work and increased costs related to our ACI systems activities including hiring additional staff required for expected growth.

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

CO ₂ Capture

Revenues in our CC segment totaled $676,000 and $1.2 million for the three and nine months ended September 30, 2012, respectively, representing a decrease of 31% and 39% from the same periods in 2011 due to a slower pace in activities associated with the DOE project during the first part of 2012. We had outstanding DOE contracts, including anticipated industry cost share in progress totaling approximately $14.6 million as of September 30, 2012. We expect to recognize approximately $2 million from these contracts during the remainder of 2012 including participation by other industry partners. We are seeking additional cost share participants for the remainder of projects.

Cost of revenues for the CC segment decreased by $192,000, or 30%, and $558,000, or 46%, for the three and nine months ended September 30, 2012, respectively, primarily related to the decrease in work being performed under these projects. Gross margins for this segment were 34% and 44% for the three and nine months ended September 30, 2012, respectively, compared to 35% and 37% for the same periods in 2011. The increase in gross margin from 2011 to 2012 is due primarily to the decrease in the use of subcontractors. We expect the overall gross margin for the CC segment for fiscal year 2012 to approximate the levels achieved in 2011, due to the relative mixture of direct and indirect costs (labor versus equipment) associated with this segment.

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

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

Other Items

General and administrative expenses increased by $2.2 million, or 76%, and decreased by $1.7 million, or 12%, to $5.2 million and $12.9 million for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. The increase for the quarter was primarily due to increased compensation due to our increased sales, marketing, bid and proposal staff and activities, increased occupancy costs from our expanded space and overlap in the approximately five months during which we transitioned out of our old lab and rental space, costs related to the acquisition of Bulk Conveyor’s assets and initiation of activities at the BCSI site, and increases in the staff expense and overhead costs of Clean Coal.

Legal expenses decreased $660,000 and $3.7 million for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. Legal expenses in 2011 resulted primarily from costs related to our legal proceedings and settlements as described in prior filings. We believe our legal expenses have now returned to more routine levels.

Compensation costs increased by $1.8 million or 280% and $760,000 or 15% for the three months and nine months ended September 30, 2012, respectively, compared to the same periods in 2011, which is primarily due to an increase in personnel in the third quarter of 2012 and incentive accruals related to our RC activity.

We expect general and administrative expenses for the remaining three months of 2012 to continue to be at a level between $4 million and $5 million. The general and administrative amounts for the first nine months of 2012 include approximately $2.6 million from the consolidation of Clean Coal.

We incur R&D expenses not only on direct activities we conduct but also by sharing a portion of the costs in the government and industry programs in which we participate. Total R&D expense increased by $376,000, or 74%, and $668,000, or 48%, for the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011 as a result of increases in EC and RC activities. The increase in R&D is related to preparing for growth in the delivery of our ACI and DSI systems, as well as our RC activities. We have also had approximately $326,000 in direct cost share for R&D under DOE-related contracts so far in 2012. Future consolidated research and development expenses, except for those anticipated to be funded by the DOE contracts and others that may be awarded, are expected to be higher in 2012 compared to 2011. We continue to anticipate that our future R&D expenses will grow in direct proportion to DOE funded CO ₂ work we perform for the next several years and other technology development we choose to pursue.

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

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

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

Liquidity and Capital Resources

Working Capital

Our principal sources of liquidity are our cash on hand at present and anticipated growing cash flows from RC activities and other operations. We had consolidated cash and cash equivalents totaling $17.5 million at September 30, 2012 compared to consolidated cash and cash equivalents of $40.9 million at December 31, 2011.

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

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

Our stockholders’ deficit was $34.2 million as of September 30, 2012 compared to $29.4 million (restated) as of December 31, 2011. The increase in stockholders’ deficit is primarily due to the net loss and is offset by the net income from the non-controlling interest for the nine months ended September 30, 2012.

Clean Coal Related Items

Clean Coal, our joint venture with NexGen, placed two RC production facilities into service in 2010 (which were exchanged for two newly constructed, redesigned RC facilities in November and December 2011), which are leased to a third party. In addition, Clean Coal leased another RC facility to a third party at the end of the first quarter of 2012. An additional RC facility was leased to another third party in the first week of August. On an ongoing basis, we expect our four currently leased RC facilities to generate from $29 million to $36 million in revenue per year from now through 2021 based on the Section 45 tax credits produced by their operations. We expect by the end of 2012 to have additional RC facilities under lease or sale such that total revenues from these activities will be at a run-rate of over $100 million per year and be at a level of producing pre-tax cash flows of as much as $50 million per year which we expect to occur in the first half of 2013. We would expect those levels to continue through 2021, the present term of the Section 45 tax credit, with an opportunity to double those amounts by the end of 2013 as we look to have all of our RC facilities operating on a continuous basis and leased or sold by that time. We believe that once all new and existing RC facilities are leased or sold to others and become fully operational, they will achieve an annualized segment rental revenue rate of approximately $200 million; excluding the approximately $250 million to $300 million in ongoing coal sales and raw coal purchases from RC facilities that Clean Coal is expected to operate in the long-term for its own account. These revenue rates would be expected to generate approximately $100 million in segment income to ADA after payments to minority partners, including an estimated $30 million in tax credits apportioned to ADA to be generated by RC facilities operated by Clean Coal.

Other Liquidity and Capital Resource Items

Our trade receivables balance is comprised of both amounts billed to customers as well as unbilled revenues that have been recognized. As of September 30, 2012 our trade receivables balance was $10 million compared to $5.9 million at December 31, 2011. Our trade receivables balance was higher at September 30, 2012 compared to December 31, 2011 primarily due to the nature and timing of billing milestones for our ACI systems contracts and increased receivables related to our RC activity.

Under our defined contribution and 401(k) retirement plan, we match up to 7% of limited salary amounts deferred by employees in the Plan. During the nine months ended September 30, 2012 and 2011, we recognized $292,000 and $264,000, respectively, of matching expense which payment was made with shares of our common stock. Our matching expense is expected to amount to $460,000 for 2012 depending on employee participation in the plan.

We had net current deferred tax assets of $2.4 million and net long-term deferred tax assets of $16.2 million as of December 31, 2011. The current and long-term amounts were subsequently reduced to zero by recording a valuation allowance against our deferred tax assets. As discussed in Note 14 to the consolidated financial statements, in August 2012, management determined that a full valuation allowance against the Company’s net deferred tax assets should have been recognized as of December 31, 2010 and for each subsequent quarter thereafter after reconsidering the original assessments regarding the potential for ultimate realization of the deferred tax assets.

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

Net cash used in investing activities was $12.7 million for the nine months ended September 30, 2012 compared to $10.4 million for the same period in 2011. The cash used consisted primarily of purchases of equipment, leasehold improvements, RC facility related costs of $9.4 million and a $2 million payment for the acquisition of Bulk Conveyor’s assets by BCSI.

Cash used in financing activities was $4.8 million for the nine months ended September 30, 2012 compared to $32 million provided by financing activities for the same period in 2011. The cash used consisted of net payments on the line of credit of $4.1 million, distributions by Clean Coal to the non-controlling interest of $106,000 and a loan by ADA to CCSS of $500,000.

Critical Accounting Policies and Estimates

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

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

•

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

•

our warranty costs;

•

our estimate of timing, amount and payment on contingent liabilities;

•

our percentage of completion method of accounting for significant long-term contracts, which is based on estimates of gross margins and of the costs to complete such contracts; and

•

the period over which we estimate we will earn up-front license payments.

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

Under certain contracts we may grant performance guaranties or equipment warranties for a specified period and the achievement of certain plant operating conditions. In the event the equipment fails to perform as specified, we are obligated to correct or replace the equipment. Estimated warranty costs are recorded at the time of sale based on current industry

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

Income taxes are accounted for under the asset and liability approach. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. At each reporting date, management reviews deferred tax assets and liabilities and any related valuation allowance and, if necessary, revises them to reflect changed circumstances. In a situation where recent losses have been incurred, the accounting standards require convincing evidence that there will be sufficient future taxable income to realize deferred tax assets. Deferred tax assets have been reduced to zero by a valuation allowance because, in the opinion of management, it is more likely than not that all of the deferred tax assets will not be realized. A change in laws can have a material effect on the amount of income tax we are subject to. We are not aware of anything that would cause us to believe that any material changes will be required in the near term.

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

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

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

Recently Issued Accounting Policies

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2012.

Item 4.

Controls and Procedures.

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

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

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

PART II. OTHER INFORMATION

Item 6.

Exhibits



10.58, *		Technology License Agreement between ADA-ES, Inc., as Licensor, and Clean Coal Solutions, LLC, as Licensee, dated July 27, 2012

10.59*		Second Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC by and among ADA-ES, Inc., NexGen Refined Coal, LLC and GSFS Investments I Corp. dated August 1, 2012

10.60		Amendment No. 1 to the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan approved by the ADA-ES, Inc. shareholders on July 19, 2012 (1)

10.61*		Forms of agreements for use under the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan, as amended

31.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)

31.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)

32.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101***		The following financial statements from ADA-ES, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Changes in Stockholders’ Deficit, (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. The information in Exhibit 101 is ”furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.

*	Filed herewith.

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

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

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

SIGNATURES

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


	ADA-ES, Inc. Registrant

Date: November 9, 2012		/s/ Michael D. Durham
		Michael D. Durham
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 9, 2012		/s/ Mark H. McKinnies
		Mark H. McKinnies
		Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX



10.58, *		Technology License Agreement between ADA-ES, Inc., as Licensor, and Clean Coal Solutions, LLC, as Licensee, dated July 27, 2012

10.59*		Second Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC by and among ADA-ES, Inc., NexGen Refined Coal, LLC and GSFS Investments I Corp. dated August 1, 2012

10.60		Amendment No. 1 to the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan approved by the ADA-ES, Inc. shareholders on July 19, 2012(1)

10.61*		Forms of agreements for use under the ADA-ES, Inc. Amended and Restated 2007 Equity Incentive Plan, as amended

31.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)

31.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)

32.1***		Certification of Chief Executive Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2***		Certification of Chief Financial Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101***		The following financial statements from ADA-ES, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Changes in Stockholders’ Deficit, (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. The information in Exhibit 101 is ”furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.

*	Filed herewith.

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

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

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

Exhibit 10.58

TECHNOLOGY LICENSE AGREEMENT

between

ADA-ES, INC.,

as Licensor,

and

CLEAN COAL SOLUTIONS, LLC,

as Licensee

dated as of July 27, 2012

*	Indicates portions of the exhibit that have been omitted pursuant to a request for confidential treatment. The non-public information will be separately filed with the Securities and Exchange Commission.

TABLE OF CONTENTS



ARTICLE I. DEFINITIONS		1

ARTICLE II. GRANT OF LICENSE		6

ARTICLE III. ROYALTIES AND PAYMENTS		8

ARTICLE IV. TECHNICAL ASSISTANCE; IMPROVEMENTS		11

ARTICLE V. TERM AND TERMINATION		14

ARTICLE VI. REPRESENTATIONS AND WARRANTIES		15

ARTICLE VII. LIMITATION OF LIABILITY		17

ARTICLE VIII. MAINTENANCE OF PATENT RIGHTS		17

ARTICLE IX. PROTECTION OF LICENSED PROPERTY		18

ARTICLE X. CONFIDENTIALITY		22

ARTICLE XI. GENERAL		23

EXHIBIT A	M-45 TECHNOLOGY
EXHIBIT B	FORM OF TECHNOLOGY SUBLICENSE

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TECHNOLOGY LICENSE AGREEMENT

This TECHNOLOGY LICENSE AGREEMENT (this “ Agreement ”), dated as of July 27, 2012 (the “ Effective Date ”), is by and between ADA-ES, Inc., a Colorado corporation (“ Licensor ”), and Clean Coal Solutions, LLC, a Colorado limited liability company (“ Licensee ”). Licensor and Licensee are referred to herein individually as a “ Party ” and together as the “ Parties .”

RECITALS

Licensor is the owner of all right, title and interest in and to (a) the technology commonly referred to as the M-45 technology, which technology includes two separate inorganic chemicals used to reduce emissions of nitrogen oxide (NOx) and mercury emissions and is further described in Exhibit A hereto, which shall be amended on an annual basis to capture Improvements (as defined below) (the “ M-45 Technology ”), and (b) the Patents and Know-How (each as defined below);

The Parties have agreed to expand the current venture between them to produce refined coal that qualifies for Section 45 Tax Credits or Similar Tax Credits (each as defined below) by utilizing the M-45 Technology; and

In connection therewith, Licensor desires to license the Technology (as defined below) to Licensee, and Licensee desires to receive a license under and to the Technology from Licensor for the sole purpose of making the Licensed Property (as defined below) and producing Refined Coal (as defined below), all on the terms and conditions set forth in this Agreement.

AGREEMENTS

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I.

DEFINITIONS.

Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms below:

“ Additional Facility Deposit ” has the meaning set forth in Section 3.3(d).

“ Affiliate ” means, with respect to any Person, any other Person controlling, controlled by or under common control with such first Person. For purposes of this definition and the Agreement, the term “control” (and correlative terms) means (a) the ownership of fifty percent (50%) or more of the equity interest in a Person, or (b) the power, by contract, equity ownership or otherwise, to direct or cause the direction of the policies or management of a Person.

“ Agreement ” has the meaning set forth in the opening paragraph hereof.

“ Amortization Reduction Event ” has the meaning set forth in Section 3.4.

“ Applicable Law ” means all applicable provisions of all (a) constitutions, treaties, statutes, laws, rules, regulations, ordinances, codes or orders of any Governmental Authority, (b) any consent, approval, authorization, waiver, permit, grant, franchise, concession, notification, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Governmental Authority, and (c) decisions, injunctions, judgments, awards and decrees of, or agreements with, any Governmental Authority.

“ Arch Agreement ” has the meaning set forth in Section 2.4.

“ Arch Coal ” has the meaning set forth in Section 2.4.

“ Assignment ” has the meaning set forth in Section 11.5.

“ Bankruptcy Code ” means Title 11 of the United States Code, 11 U.S.C. §§ 101 et. seq. , or any similar federal or state law.

“ CCSS ” has the meaning set forth in Section 4.4.

“ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder and guidance issued in conjunction therewith.

“ Claims Notice ” has the meaning set forth in Section 9.4.

“ Deposit ” or “ Deposits ” has the meaning set forth in Section 3.3(e).

“ Effective Date ” has the meaning set forth in the opening paragraph of this Agreement.

“ Excluded Licensee Improvements ” has the meaning set forth in Section 4.3(b).

“ Facility ” has the meaning set forth in Section 3.3(b).

“ Governmental Authority ” means a federal, state, or local governmental authority; a state, province, commonwealth, territory or district thereof; a county or parish; a city, town, township, village or other municipality; a district, ward or other subdivision of any of the foregoing; any executive, legislative or other governing body of any of the foregoing; any agency, authority, board, department, system, service, office, commission, committee, council or other administrative body of any of the foregoing; any court or other judicial body; and any officer, official or other representative of any of the foregoing.

“ Improvements ” means those modifications, revisions, derivations, updates, enhancements and improvements of and to the Technology or the Licensed Property (but excluding New Technology) made during the term of this Agreement. As a point of clarification, so long as both Chemical Reagents (as defined in Exhibit A) are being used in some form * formulation or purity *, an Improvement could include the development or use of one or more additional additives, or handling equipment, to be used along with both Chemical Reagents to enhance the reduction of NOx and/or mercury emissions (in the context of the overall intention to reduce both NOx and mercury emissions) or to improve the process related to storage, handling or application of the Chemical Reagents.

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“ Indemnified Party ” means a Party entitled to indemnification by an Indemnifying Party hereunder.

“ Indemnifying Party ” means a Party obligated to indemnify an Indemnified Party hereunder.

“ Initial Deposit ” has the meaning set forth in Section 3.3(a).

“ Know-How ” means technical information, ideas, concepts, confidential information, trade secrets, know-how, discoveries, inventions, processes, methods, formulas, source and object codes, data, programs, other works of authorship, improvements, developments, designs and techniques related to the production of Refined Coal or Mercury Only Emission Control (excluding New Technology) other than as embodied in the Patents, that are owned or controlled by Licensor during the Term and that are necessary or desirable to use the Technology or the Licensed Property for the purpose of the Technology License.

“ Licensed Property ” means any products, processes or methods solely related to the production of Refined Coal (excluding New Technology) and intended (other than in the case of Mercury Only Emission Control) to achieve both nitrogen oxide (NOx) and mercury emission reductions, whether such products, processes or methods are owned or licensed by Licensor now or hereafter, that are (a) covered by any Valid Claim(s) contained in any of the Patents, (b) based on the Know-How, and/or (c) based on the products, processes or methods developed using the Technology.

“ Licensee ” has the meaning set forth in the opening paragraph of this Agreement.

“ Licensee Improvements ” has the meaning set forth in Section 4.3(b).

“ Licensee Indemnified Party ” has the meaning set forth in Section 9.2.

“ Licensor ” has the meaning set forth in the opening paragraph of this Agreement.

“ Licensor Improvements ” has the meaning set forth in Section 4.2.

“ Licensor Indemnified Party ” has the meaning set forth in Section 9.3(b).

“ Loss ” means losses (but expressly excluding any lost or disallowed tax credits), liabilities, demands, assessments, cleanup, removal, remediation and restoration obligations, judgments, awards, damages, natural resource damages, contribution, cost-recovery and compensation obligations, fines, fees, penalties, costs and expenses (including litigation and arbitration costs and reasonable attorneys’ and experts’ fees and expenses).

“ Mercury Only Emission Control ” means the use of the Technology or Licensed Property for the primary purpose of decreasing the emissions of mercury from coal-fired boilers using any type of coal or blend of coals, but without the intention of also decreasing emissions of nitrogen oxide (NOx) or otherwise for qualifying for Section 45 Tax Credits or a Similar Tax Credit.

“ Mercury Control Royalty ” has the meaning set forth in Section 3.1(c).

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“ Mercury Control Royalty Payment ” has the meaning set forth in Section 3.2.

“ Mercury Control Royalty Period ” has the meaning set forth in Section 3.2.

“ Monetization Condition ” has the meaning set forth in Section 3.3(e).

“ Monetization Deposit ” has the meaning set forth in Section 3.3(e).

“ Net Deposit Amount ” has the meaning set forth in Section 3.5.

“ New Patents ” has the meaning set forth in Section 8.1.

“ New Technology ” means any know-how, technology, or process (a) that does not include the use of both Chemical Reagents described in Exhibit A in some form *, formulation or purity * or (b) replaces one or both of the of the Chemical Reagents; or (c) is intended to effect reduction of emissions other than NOx and/or mercury.

“ Non-Coal Application ” has the meaning set forth in Section 2.5.

“ Non-Coal Fuel ” has the meaning set forth in Section 2.5.

“Operating Agreement” means the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC, dated as of May 27, 2011, amended effective as of July 31, 2011, and as it may be further amended from time to time.

“ Other Contractual Arrangements ” has the meaning set forth in Section 3.4.

“ Party ” or “ Parties ” has the meaning set forth in the opening paragraph of this Agreement.

“ Patents ” means:

(a) U.S. Patent Application No 13/471,015, entitled “Process to reduce emissions of nitrogen oxides and mercury from coal-fired boilers,” filed May 14, 2012, which Application claims the benefits of U.S. Provisional Application Serial No. 61/486,217, filed May 13, 2011, and Serial No. 61/543,196, filed October 4, 2011, of the same title, each of which was incorporated into the Application by reference.

(b) any and all continuations, continuations-in-part, and divisionals, and all patents issuing which are based on such applications, and all reissues, reexaminations, or extensions thereof, as well as any foreign counterparts, continuations, continuations-in-part or divisions thereof and patents and patent applications on any improvements, advancements, modifications, revisions or developments to the subject matter claimed in the aforesaid patents that are developed by or for Licensor, together with any other patents (U.S. or foreign and even if not listed herein) that share a common claim of priority with said patents or that, as mutually agreed upon in good faith by the Parties, cover inventions substantially similar to said patents.

“ Person ” means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization or other entity.

-4-

“ PRB ” means sub-bituminous coals mined from the Powder River Basin.

“ * Deposit ” has the meaning set forth in Section 3.3(c).

“ * Facility ” has the meaning set forth in Section 3.3(c).

“ Refined Coal ” means a liquid, gaseous or solid fuel produced from coal solely through application of the Technology or use of the Licensed Property that achieves both nitrogen oxide (NOx) and mercury emission reductions, and that produces valid Section 45 Tax Credits or a Similar Tax Credit.

“ Refined Coal Royalty ” has the meaning set forth in Section 3.1(a).

“ Refined Coal Royalty Payment ” has the meaning set forth in Section 3.2.

“ Refined Coal Royalty Period ” has the meaning set forth in Section 3.2.

“ Repayment Agreement ” means that certain Agreement Regarding Repayment, dated November 3, 2011, by and between Licensor and Licensee.

“ Royalty Stoppage ” has the meaning set forth in Section 3.5.

“ Secondary Deposit ” has the meaning set forth in Section 3.3(b).

“ Section 45 Tax Credits ” means the tax credits provided for under Section 45 of the Code and/or under any amendment or re-codification of Section 45 of the Code for the production and sale of Refined Coal and otherwise meeting all the requirements of Section 45 of the Code.

“ Side Letter ” has the meaning set forth in Section 11.3.

“ Similar Tax Credit ” has the meaning set forth in Section 2.1(a).

“ Subject Utility ” has the meaning set forth in Section 2.1(b).

“ Sublicensee ” has the meaning set forth in Section 2.2.

“ Tax Credit Term ” has the meaning set forth in Section 2.1(a).

“ Technology ” means the M-45 Technology (which requires both Chemical Reagents described in Exhibit A), the Patents, the Know-How, and any and all Improvements (excluding Excluded Licensee Improvements and New Technology), as well as any Know-How (excluding Excluded Licensee Improvements and New Technology) developed or acquired after the Effective Date which is related to the subject matter in any of the Patents, whether or not such Know-How becomes the subject of a patent application during the Term.

“ Technology License ” has the meaning set forth in Section 2.1(c).

“ Technology Sublicense ” has the meaning set forth in Section 2.2.

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“ Term ” means the period commencing on the Effective Date and ending on the date provided in Section 5.1.

“ Territory ” means the United States of America and its territories and possessions.

“ Third Party Claim ” has the meaning set forth in Section 9.4.

“ Third Party Rights Holder ” has the meaning set forth in Section 9.2.

“ Trade Secrets ” has the meaning set forth in Section 9.5.

“ Valid Claim(s) ” means any claim contained in an issued and unexpired patent included within the Patents that has not been held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, or unappealable or unappealed within the time allowed for appeal, and that has not been admitted to be invalid or unenforceable through reissue or disclaimer.

ARTICLE II.

GRANT OF LICENSE.

2.1 License Grant . Licensor hereby grants to Licensee the following:

(a) an exclusive (subject to Section 2.3), non-transferable (except as set forth in Section 11.5), royalty-bearing right and license during the period between the Effective Date of this Agreement until the expiration of the later of (i) the Section 45 Tax Credits for the production of Refined Coal (taking into account any extensions or the pendency of any proposed extension thereof) (the “ Tax Credit Term ”), or (ii) any similar tax credit enacted after the Effective Date, but within one (1) year of the expiration of the Section 45 Tax Credits, which tax credit (a “ Similar Tax Credit ”) provides for the production of a coal-based fuel (pre-combustion) that emits, when combusted, a lower level of both NOx and mercury emissions, in the Territory, with the right to sublicense through multiple tiers of Sublicensees (as defined in Section 2.2 below), in, to and under the Technology to make or have made the Licensed Property and to use the Technology and Licensed Property in connection with any rank of coal or blends of one or more ranks of coal (except to the extent excluded below) and in any type of coal-fired boiler for the sole purpose of the production of Refined Coal; provided, however, that the foregoing license shall not include the right of Licensee to use the Technology or Licensed Property in connection with the application of additives included in the Technology or Licensed Property (including Improvements) to any PRB at mines and sites (including coal processing sites) in the Powder River Basin or during transportation of the PRB from such mines and sites to the first delivery point (i.e. during the originating mode of transportation by train, railcar or other methods), and

(b) subject to Section 2.4, during the Term of this Agreement, a limited, non-exclusive, non-transferable, royalty-bearing right and license, in the Territory, with the right to sublicense (through multiple tiers of Sublicensees (as defined in Section 2.2. below)) to any utility that (i) burns or has burned Refined Coal produced by (A) one or more of the twenty-eight (28) Facilities placed in service by Licensee or one or more of its Affiliates on or before December 31, 2011, or (B) a Facility placed in service after December 31, 2011 by Licensee or one or more of its Affiliates, pursuant to any extensions of the placed in service deadline of the

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Section 45 Tax Credits or the enactment of a Similar Tax Credit; and (ii) generated Section 45 Tax Credits or a Similar Tax Credit thereon pursuant to a long-term agreement for the use of Refined Coal (each, a “ Subject Utility ”), in, to and under the Technology to make or have made the Licensed Property and to use the Technology and Licensed Property solely in connection with coal that has been delivered to a Subject Utility, for use in the same Subject Utility boiler that burns or burned the Refined Coal, for the purpose of Mercury Only Emission Control, and

(c) for each of Section 2.1(a) and 2.1(b), the license grant includes without limitation the marketing, distribution, sale, offer for sale, lease, import, or other disposition thereof (subsections (a), (b), and (c) of this Section 2.1, collectively, the “ Technology License ”).

2.2 Sublicensing . Licensee may, from time to time, sublicense to one or more third parties, including without limitation a Subject Utility (each, a “ Sublicensee ” and collectively “ Sublicensees ”), any or all rights under the license grant specified in Section 2.1(a) and/or Section 2.1(b) above pursuant to a written sublicense agreement, in form substantially similar to the form attached hereto as Exhibit B (each, a “ Technology Sublicense ”), except in the event Licensee proposes to enter into a Technology Sublicense under the license grant specified in Section 2.1(b) above, Licensor must give advance written approval of the final version of the Technology Sublicense (including the pricing and duration) and Licensor shall not indemnify or defend Licensee or any Sublicensee against Third Party Claims by Third Party Rights Holders as defined in Sections 9.2 and 9.4 herein with respect to such Sublicensee or the Technology Sublicense. Subject to Licensor’s approval, which shall not be unreasonably withheld, conditioned, or delayed, a Sublicensee may, from time to time, sublicense to any third party involved in the production of Refined Coal or a third party involved in the production of coal on behalf of a Subject Utility, for the purpose of Mercury Only Emissions Control (as described in Section 2.1(b)), any or all rights that said Sublicensee has under a Technology Sublicense.

2.3 Exclusivity . The Technology License specified in Section 2.1(a) above shall be exclusive, including as to Licensor, except with respect to Licensor’s use of the Technology and Licensed Property to create Improvements and to provide technical assistance to Licensee pursuant to Section 4.1.

2.4 Clarification to Exclusive License . The Parties acknowledge the existence of that certain license agreement (the “ Arch Agreement ”) dated June 25, 2010 by and between Licensor and Arch Coal, Inc. (“ Arch Coal ”), which has been publicly disclosed, whereby Licensor has granted to Arch Coal an exclusive license to apply additives to PRB at certain specified locations for the purpose of reducing emissions of mercury from PRB burned in coal-fired boilers. Licensor represents, warrants, and covenants that the Arch Agreement shall not be modified in any manner which would grant Arch Coal any license or other rights or which would materially infringe or impair the rights that have been exclusively granted to Licensee under this Agreement, without Licensee’s prior written consent, which consent Licensee may grant or withhold in its sole and absolute discretion. Licensee agrees that the Technology and Licensed Property may be licensed by Licensor to any third party (including Arch Coal) for use on any type of coal, applied in any location, for any type of coal fired boiler for the purpose of Mercury Only Emissions Control, except that Licensor may not license the Technology and Licensed Property to a Subject Utility that is then sublicensing the Technology and Licensed Property from Licensee in accordance with Section 2.1(b), above, for use in the same Subject Utility boiler for which such Technology Sublicense was granted for the purpose of Mercury Only Emissions Control.

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2.5 Non Coal Fuel . The Parties acknowledge that in connection with Licensee’s use of the Technology and Licensed Property in accordance with the Technology License, Licensee or one or more Sublicensees may, at one or more Facilities, apply the additives included in the Technology or Licensed Property to combustible materials or fuels (other than coal) that the operator of the coal-fired boiler has chosen to add along with the coal being used to produce the Refined Coal (such materials or fuels other than coal hereafter referred to as “ Non-Coal Fuel ”). Licensor and Licensee acknowledge and agree that with respect to the application of such additives to any Non-Coal Fuel occurring while the additives are added to the coal (“ Non-Coal Application ”), by Licensee or any Sublicensee in connection with the Technology License or any Technology Sublicense: (a) such Non-Coal Application shall not constitute or be deemed a breach or violation of the Technology License or any Technology Sublicense by Licensee, (b) Licensor gives no representations, warranties or other assurance of any type or nature as to the benefit, detriment or any other effect or impact of such Non-Coal Application on the Technology, Licensed Property, equipment (including the boiler) or physical facilities; and (c) Licensor will not indemnify any Loss for which Licensor has an indemnification obligation under Section 9.2 of this Agreement to the extent such Loss is based upon a claim that would not have arisen but for the Non-Coal Application.

ARTICLE III.

ROYALTIES AND PAYMENTS.

3.1 Subject to all other terms and conditions of this Agreement, Licensee will pay to Licensor:

(a) subject to Section 3.4 below and during the Tax Credit Term, a royalty (the “ Refined Coal Royalty ”) of * on the per-ton, pre-tax margin of Refined Coal that (a) is produced pursuant to the Technology License or any Technology Sublicense, and (b) produces a valid and verifiable Section 45 Tax Credit; provided, however, that such per-ton, pre-tax margin of Refined Coal shall (i) be net of all directly allocable operating expenses and all utility payments incurred by Licensee or a Sublicensee, as applicable, in connection with the production and sale of the Refined Coal, and (ii) exclude any and all closing payments of cash or prepayments of applicable lease rents and any associated non-cash amortization thereof (or similar payments under non-lease structures). For the avoidance of doubt, an example of how the Refined Coal Royalty would be calculated in accordance with Section 3.1(a) is included in Schedule 3.1(a) hereto.

(b) subject to Section 3.4 below and during the Tax Credit Term, in the event that Licensee (or a Licensee Affiliate) does not monetize a Facility with a third party and instead opts to retain the Section 45 Tax Credits from that Facility for Licensee’s (or Licensee Affiliate’s) own benefit, such that there is no per-ton, pre-tax margin for the Refined Coal produced by such Facility, the Refined Coal Royalty for the Refined Coal produced by such Facility will be * of the Section 45 Tax Credits claimed by Licensee (or a Licensee Affiliate), or their respective owners, on the Refined Coal produced by such Facility net of all directly allocable operating expenses and all utility payments incurred by Licensee (or a Licensee

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Affiliate) in connection with the production and sale of such Refined Coal. For the avoidance of doubt, an example of how the Refined Coal Royalty would be calculated in accordance with Section 3.1(b) is included as part of Schedule 3.1(a) hereto.

(c) during the Term of this Agreement, a royalty (the “ Mercury Control Royalty ”) of * of the revenue, net of all direct expenses, received by Licensee as a direct result of Licensee’s exercise of the license specified in Section 2.1(b) above. For the avoidance of doubt, an example of how the Mercury Control Royalty would be calculated in accordance with Section 3.1(c) is included in Schedule 3.1(c) hereto.

3.2 Subject to Sections 3.3 and 3.4 below, Licensee will pay to Licensor the Refined Coal Royalty (each, a “ Refined Coal Royalty Payment ”) on a quarterly basis during the Tax Credit Term within sixty (60) days of the end of each quarter of a calendar year commencing with the calendar quarter ending June 30, 2012 (each such period, a “ Refined Coal Royalty Period ”) on Refined Coal with respect to which a Refined Coal Royalty Payment obligation has accrued during the immediately preceding Refined Coal Royalty Period. During the Term of this Agreement, Licensee will pay to Licensor the Mercury Control Royalty (each, a “ Mercury Control Royalty Payment ”) on a quarterly basis within sixty (60) days of the end of each quarter of a calendar year (each period, a “ Mercury Control Royalty Period ”) with respect to Licensee’s exercise of the license specified in Section 2.1(b) and for which a Mercury Control Royalty Payment obligation has accrued during the immediately preceding Mercury Control Royalty Period. Each Refined Coal Royalty Payment and Mercury Control Royalty Payment will be accompanied by a report identifying in reasonable detail the calculation of the royalty due for the relevant royalty period. Notwithstanding any provision to the contrary herein, Licensee has the right to offset any amounts that Licensee has the right to recover pursuant to this Agreement against any Refined Coal Royalty Payments and/or Mercury Control Royalty Payments due and owing under this Agreement, the application of which shall be determined by Licensee in its sole discretion.

3.3 Subject to the conditions set forth in this Section 3.3, Licensee shall pre-pay the Refined Coal Royalty up to an amount of ten million dollars ($10,000,000) by paying to Licensor the following deposit amounts, of which a total of two million dollars ($2,000,000) has been paid by Licensee as of the Effective Date of this Agreement in accordance with Section 3.3(a) below, and all of which shall be refundable pursuant to and in accordance with the provisions of Section 3.5 of this Agreement:

(a) a deposit in the amount of two million dollars ($2,000,000) (the “ Initial Deposit ”), which amount was paid by Licensee on or about November 4, 2011;

(b) subject to Licensee’s receipt of a deposit of at least * in connection with the placing-in-service by Licensee of any facility producing Refined Coal (each, a “ Facility ”), a deposit in the amount of * (the “ Secondary Deposit ”);

(c) following completion of successful performance testing of the Technology and Licensed Property in a Facility at the power plant known as the * located near * (the * Facility ”) (including successful completion of CEMS testing no less stringent than that undertaken at the power plant known as the * located near * and the power plant known as the *

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located near * a deposit in the amount of * (the “ * Deposit ”) upon the first to occur of the following events: (i) the execution of a letter of intent with * or other authorized entity for the long-term use of the Technology and Licensed Property at the * Facility, or (ii) if Licensee (or one of its Affiliates) elects to operate the * Facility on its own behalf (rather than monetize the Section 45 Tax Credits that would be produced by the * Facility through a third party), the execution of documentation with any power generating company allowing long-term use of the Technology and Licensed Property at such power generating company’s site;

(d) since Licensee placed in service, prior to December 31, 2011, an additional five (5) Facilities that use the Technology and Licensed Property, a deposit in the amount of * (the “ Additional Facility Deposit ”); and

(e) upon Licensee closing transactions for the monetization of Section 45 Tax Credits no later than December 31, 2012, for an approximate capacity of * tons of Refined Coal per year, generated at Facilities using the Technology and Licensed Property, at a monetization rate which provides a total economic benefit to Licensee of not less than * per * of Section 45 Tax Credits (the “ Monetization Condition ”), a deposit in the amount of * (the “ Monetization Deposit ,” and collectively with the Initial Deposit, the Secondary Deposit, the * Deposit, and the Additional Facility Deposit, the “ Deposits ,” and each individually, a “ Deposit ”).

The Parties acknowledge and agree that Licensee has paid the Initial Deposit, but owes Licensor the Secondary Deposit and the Additional Facility Deposit in a total amount of *. Licensee shall be entitled to defer payment of any Deposit, in the event Licensee determines, in its sole discretion, that such deferral is necessary in order to provide Licensee a reasonable amount of capital to continue to operate its business and to timely pay its obligations to third parties. Pursuant to the foregoing, Licensee has determined to defer payment of the Secondary Deposit and the Additional Facility Deposit pending availability of increased working capital and will pay interest on such amounts as set forth below. Without limiting the foregoing, and subject to the Operating Agreement (defined in Section 3.4 below), Licensee agrees that it will not make any discretionary distributions to its Members (as defined in the Operating Agreement) until Licensee pays in full all Deposits due and owing pursuant to this Article III. In the event that Licensee elects to defer payment when a Deposit is due, Licensee shall pay interest on the deferred Deposit at the rate of * per annum, commencing on January 1, 2012 or on such later date that such Deposit would have become due had Licensee not elected to defer payment of such Deposit, until such Deposit is paid in full.

3.4 Notwithstanding any other provision in this Article III, until such time as the amount of the Deposits actually paid by Licensee have been fully amortized, (i) the Refined Coal Royalty shall be reduced by thirty-three and one-third percent (33 1/3%) upon the documented closing of a monetization transaction or commencement of operation by Licensee (or a Licensee Affiliate) on its own behalf involving Section 45 Tax Credits produced by Facilities utilizing the Technology and the Licensed Property and producing more than * tons of Refined Coal per year (the “ Amortization Reduction Event ”), and (ii) until the occurrence of the Amortization Reduction Event, the amount of the Refined Coal Royalty otherwise payable pursuant to this Agreement shall be reduced by fifty percent (50%). Notwithstanding the foregoing, if, for any reason, Licensee reasonably expects that the reduction in the amount of the Refined Coal Royalty otherwise payable to Licensor pursuant to this Section 3.4 will not fully amortize the

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remaining Deposits within the projected remaining cash flows from the active refined coal projects of Licensee or its affiliates utilizing the Technology and the Licensed Property, each of (a) the Refined Coal Royalty Payments, and (b) any royalties or other payments payable by Licensee to Licensor on and subject to the terms agreed in any agreements that may be entered into between Licensee and Licensor (“ Other Contractual Arrangements ”), shall be adjusted as appropriate to ensure that the remaining amount of such Deposits shall fully amortize so as to match the remaining projected payments that would otherwise be due to Licensor under the Refined Coal Royalty Payments or any Other Contractual Arrangements. If Licensee reasonably expects that adjustments pursuant to the previous sentence (including without limitation increasing the amortization percentages against Refined Coal Royalty Payments pursuant to this Section 3.4 to an amount equaling 100% of such payments) are insufficient to fully amortize the remaining Deposits, then the Parties will agree the method and amount by which distributions payable to Licensor pursuant to the Operating Agreement may be adjusted as appropriate to ensure that the remaining amount of such Deposits shall fully amortize within the projected remaining active operation of projects of Licensee or its affiliates utilizing the Technology and the Licensed Property.

3.5 The aggregate amount of all Deposits actually paid by Licensee pursuant to Section 3.3 above less the amount of such Deposits applied toward Refined Coal Royalty Payments pursuant to the amortization required by Section 3.4 above (the “Net Deposit Amount”) shall be required to be repaid in full by Licensor upon written notice from Licensee in the event that no Refined Coal Royalties have been accrued or paid for a period of six (6) consecutive months and, in the reasonable opinion of Licensee, no Refined Coal Royalties are expected to be paid or accrued in the next ninety (90) day period (a “Royalty Stoppage”). Upon the occurrence of a Royalty Stoppage, Licensee shall notify Licensor in writing, together with a calculation of the Net Deposit Amount. Licensor shall have thirty (30) days to review the calculation of the Net Deposit Amount and if there is no disagreement over the calculated amount, Licensor shall pay the calculated amount within thirty (30) days after completion of Licensor’s review. In the event that there is a disagreement with regard to the correct calculation of the Net Deposit Amount, the parties agree to work together in good faith to resolve the disagreement and agree as to the Net Deposit Amount. Upon mutual agreement of the Net Deposit Amount, Licensor shall pay the agreed amount within thirty (30) days. Licensor shall be entitled to defer payment of all or part of the agreed Net Deposit Amount for up to ninety (90) days after the due date in the event Licensor determines, in its sole discretion, that such deferral is necessary in order to provide Licensor a reasonable amount of capital to continue to operate its business and to timely pay its obligations to third parties. In the event that Licensor elects to defer payment of all or part of the Net Deposit Amount, Licensor shall pay interest on the deferred Net Deposit Amount at the rate of * per annum, commencing on the date the parties have agreed the Net Deposit Amount until the Net Deposit Amount is paid in full.

ARTICLE IV.

TECHNICAL ASSISTANCE; IMPROVEMENTS.

4.1 Technical Assistance . Licensor’s executive team shall be available and use commercially reasonable efforts to provide any technical assistance to Licensee relating to the use of the Technology and the development, marketing and deployment of the Licensed Property without charge to Licensee. In the event that Licensee requires additional technical assistance, or

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the assistance of Licensor’s technical services personnel, then Licensor shall provide such assistance at the preferred rates and under the terms mutually agreed by the Parties at the time such assistance is requested.

4.2 Licensor Improvements . All Improvements conceived, discovered, created, developed or acquired by or on behalf of Licensor (including by Licensee and Licensor jointly) after the Effective Date (collectively, “ Licensor Improvements ”) shall be owned by Licensor and shall, automatically without any further action by either Party, be included within the Licensed Property and the Technology and thereby made a part of the Technology License and any Technology Sublicense. Licensee hereby assigns to Licensor all of its right, title and interest in and to all such Licensor Improvements. Licensor shall promptly and fully advise Licensee in writing of any Licensor Improvements created by Licensor without Licensee, but in no event less frequently than annually. The expenses of filing and prosecuting any patent application relating to Licensor Improvements will be borne by Licensor.

4.3 Licensee Improvements .

(a) Any Improvements conceived, discovered, created, developed or acquired by or on behalf of Licensee (except those Improvements made jointly with Licensor which are addressed in Section 4.2 above), during the Term, and any other ideas or inventions created or discovered by Licensee pursuant to its exercise of the Technology License (collectively, “ Licensee Improvements ”) shall be owned by Licensor and shall, automatically without any further action by either Party, be included within the Licensed Property and the Technology and thereby made a part of the Technology License and any Technology Sublicense. In the event that Licensee intends to pursue or create an Improvement that will be deemed to be a Licensee Improvement if Licensor does not participate in creating the Improvement, Licensee shall provide Licensor with advance written notice of its intention to create an Improvement, and the Parties will discuss whether or not such Improvement should be developed by Licensor, or by Licensee and Licensor jointly, rather than being a Licensee Improvement, provided that following such notice and discussion Licensee’s Board (in accordance with the requirements of the Operating Agreement) may in its sole discretion determine to pursue such Improvement as a Licensee Improvement. Licensee’s failure to inform Licensor of its intention to create an Improvement as stated above, or to inform Licensor of Improvements of which it becomes aware as stated below, will not impact Licensor’s ownership of such Licensee Improvements, but Licensor shall not indemnify or defend Licensee or any Sublicensee against Third Party Claims by Third Party Rights Holders as defined in Sections 9.2 and 9.4 herein to the extent such Third Party Claim is attributable to Licensee Improvements that Licensee did not disclose to Licensor in accordance with this Agreement.

(b) In the event that Licensee conceives, discovers, creates, develops or acquires a Licensee Improvement in accordance with this Agreement, Licensee will advise Licensor in writing that it has developed such Licensee Improvement, including reasonable details describing such Licensee Improvement. Thereafter Licensor has the option to waive its right to require the assignment of any such Licensee Improvement by providing written notice to Licensee of such waiver within one hundred twenty (120) days after receipt of notice and details of such Licensee Improvement from Licensee. If Licensor does not exercise such option Licensee shall assign to Licensor all of Licensee’s right, title and interest in and to such Licensee

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Improvement. If Licensor exercises such option by transmitting written notice thereof to Licensee, then upon the receipt of such written notice by Licensee of Licensor’s election to waive title to such Licensee Improvement, such Licensee Improvement shall thereafter be an “Excluded Licensee Improvement” and (i) Licensee shall retain exclusive ownership of the Excluded Licensee Improvement, and Licensee shall have the unencumbered right to use, sell, license, sublicense, and otherwise exploit such Excluded Licensee Improvement; and (ii) Licensor hereby grants to Licensee a non-exclusive, perpetual, irrevocable, non-transferrable (except as set forth in Section 11.5) royalty-bearing license to use the Technology and/or Licensed Property in the Territory to the extent necessary for Licensee’s use and exploitation of any Excluded Licensee Improvements solely for the purpose of the production of Refined Coal by a Facility that (A) uses the Licensed Property, (B) was placed in service by Licensee or one or more of its Affiliates and (C) is eligible to generate Section 45 Tax Credits or a Similar Tax Credit pursuant to a long-term agreement.

(c) Licensee shall promptly and fully advise Licensor in writing of any Licensee Improvements that are material and of which Licensee becomes aware. The expenses of filing and prosecuting any patent application relating to any Licensor Improvements and any Licensee Improvements (except for Excluded Licensee Improvement) will be borne by Licensor; provided, however that Licensee shall reasonably assist Licensor, at Licensor’s sole expense, in obtaining Licensor’s full ownership rights, including patent rights, in and to the subject Improvements. The expenses of filing and prosecuting any patent application relating to any Excluded Licensee Improvement will be borne by Licensee.

4.4 Updates Regarding Improvements to M-45 Technology . The Parties agree to use reasonable efforts to keep each other informed with regard to the existence and details around Licensor Improvements and Licensee Improvements and otherwise update the Exhibit A description of the M-45 Technology on a timely basis to reflect all such Improvements. The Parties acknowledge that Licensor Improvements may be made in connection with Licensor’s services to Licensee or to Clean Coal Solutions Services, LLC (“ CCSS ”) and that the standard communication between the Parties and CCSS with regard to such services will serve as notice of Improvements as required by this Agreement. The Parties further acknowledge that if Licensor receives information with respect to proposed Licensee Improvements during the standard communication between the Parties in connection with Licensor providing services to Licensee or to CCSS, such discussions will serve as discussion of proposed Licensee Improvements as required by Section 4.3 of this Agreement. Annually or more frequently upon either Party’s written request, either Party may provide the other Party with a listing of all Improvements conceived, discovered, created, developed or acquired by such Party (whether jointly by Licensor and Licensee or otherwise) or of which such Party is aware since the date of the last such update of Exhibit A. The receiving Party shall review such submission of Improvements and notify the initial Party in writing within thirty (30) days of receipt if the receiving Party disagrees with any identified Improvement, or details thereof, or proposes to add additional Improvements or details. Thereafter the Parties will negotiate in good faith to develop an agreed listing of Improvements, which listing will be incorporated into Exhibit A to describe the M-45 Technology.

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ARTICLE V.

TERM AND TERMINATION.

5.1 Term . The Term shall commence on the Effective Date and terminate upon the latest to occur of (i) (A) the expiration of the Tax Credit Term, or (B) the expiration of any Similar Tax Credit; or (ii) the date on which Licensee and all Sublicensees permanently cease to provide Mercury Only Emissions Control to all Subject Utilities pursuant to the license grant specified in Section 2.1(b) herein; or (iii) such other date as provided herein.

5.2 Other Termination . Either Party may terminate this Agreement prior to the end of the Term by providing written notice to the other Party if such other Party commits a material default or breach of any representation, warranty, covenant or agreement contained herein and fails to remedy any such default or breach within thirty (30) days after receiving written notice describing in reasonable detail the material default or breach from the non-defaulting or non-breaching Party.

5.3 Effect of Termination .

(a) Upon termination of the Term pursuant to Section 5.1 or by Licensor pursuant to Section 5.2, all license rights granted to Licensee under the Technology License will terminate immediately. Upon termination of the Term by Licensee under Section 5.2, all license rights granted to Licensee under the Technology License will extend for what would have been the remainder of the Term but for such termination, except, however, that (i) Licensee shall continue to pay the Refined Coal Royalty and Mercury Control Royalty for so long as such license rights are used by Licensee, (ii) no license rights shall be exclusive as set forth in Sections 2.1(a) and 2.3 herein, and (iii) subject to Section 11.10 with regard to claims that arose prior to the date of such termination, Licensor shall have no obligations to Licensee with regard to the Agreement, the Licensed Property, the Technology, or the Technology License which accrue or arise after the date of such termination.

(b) Upon the termination of the Term pursuant to Section 5.1, each Technology Sublicense will terminate. Upon the termination of the Term pursuant to Section 5.2, Licensor will be deemed to have licensed the Technology and Licensed Property to each Sublicensee upon the same terms and conditions and as a continuation of the Technology Sublicense between Licensee and each such Sublicensee, without any further action on the part of any party and without interruption, and Licensor will execute an agreement memorializing such continuation of the Technology Sublicense upon the request of Licensee or such Sublicensee.

(c) Upon termination of the Term pursuant to this Article V, and subject to Sections 3.3 and 3.4 of this Agreement, Licensee will pay to Licensor, within ninety (90) days of the effective date of such termination, any Refined Coal Royalty Payments and Mercury Control Royalty Payments due and owing as of the date of termination.

5.4 Effect of Bankruptcy of Licensor . Licensor acknowledges and agrees that the intellectual property rights licensed to Licensee hereunder constitute “intellectual property” as such term is defined in the Bankruptcy Code and that Licensee is entitled to all of the rights of a licensee of intellectual property under Section 365(n) of the Bankruptcy Code with respect to all of such licensed rights, which rights under the Bankruptcy Code include, without limitation, the right, upon the rejection of this Agreement in any case filed under the Bankruptcy Code with

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respect to Licensor, to treat this Agreement as terminated or to retain Licensee’s rights under this Agreement, and under any agreements supplemental to this Agreement, with respect to such rights (including any embodiment of the rights to the extent protected by applicable non-bankruptcy law), as such rights existed immediately before Licensor’s bankruptcy case commenced. If Licensee elects to retain such licensed rights under this Agreement, then Licensee may exercise such licensed rights in accordance with the terms and conditions of this Agreement. Nothing contained herein shall limit any other rights provided to Licensee under the Bankruptcy Code, including Section 365(n) thereof.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES.

6.1 By Licensee . Licensee hereby represents and warrants to Licensor that as of the Effective Date:

(a) it has the full right, power and authority to enter into this Agreement and perform its obligations hereunder;

(b) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and is qualified to conduct its business in those jurisdictions necessary to perform this Agreement;

(c) when executed by the Parties, this Agreement constitutes the legal, valid and binding obligation of Licensee enforceable against Licensee in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect, as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(d) all necessary limited liability company action has been taken to authorize, and all necessary authorizations, notices and consents of any third party which are required to authorize, Licensee to execute and deliver, and to perform the transactions contemplated by, this Agreement have been obtained and remain in full force and effect; and

(e) the execution, delivery and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms or conditions in its limited liability company agreement or other formation or governing documents or any contract to which it is a party or by which any of its properties is bound or any law, rule, regulation, order, writ, judgment, decree or other legal or regulatory determination of any Governmental Authority applicable to it.

6.2 By Licensor . Licensor represents and warrants to Licensee that as of the Effective Date:

(a) it has the full right, power and authority to enter into this Agreement and perform its obligations hereunder;

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(c) when executed by the Parties, this Agreement constitutes the legal, valid and binding obligation of Licensor enforceable against Licensor in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect, as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(d) all necessary corporate action has been taken to authorize, and all necessary authorizations, notices and consents of any third party which are required to authorize, Licensor to execute and deliver, and to perform the transactions contemplated by, this Agreement have been obtained and remain in full force and effect;

(e) the execution, delivery and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms or conditions in its bylaws or other formation or governing documents or any contract to which it is a party or by which any of its properties is bound (including, without limitation, the Arch Agreement), or any law, rule, regulation, order, writ, judgment, decree or other legal or regulatory determination of any Governmental Authority applicable to it;

(f) Licensor owns all right, title and interest in and to the Technology;

(g) there are no outstanding agreements, assignments or encumbrances inconsistent or in conflict with the provisions of this Agreement;

(h) the Patents are in good standing in the United States Patent and Trademark Office and any of its foreign equivalents, and to the knowledge of Licensor, no events or circumstances exist that could have an adverse effect on the prosecution of the Patents to issuance;

(i) the manufacture, use, sale, and offer for sale of the Licensed Property and Refined Coal and the practice of the Patents and the Know-How do not infringe or misappropriate any patent, trade secret or other intellectual property right of any third party;

(j) Licensor has not received any notice alleging its noncompliance with any Applicable Law with respect to the Technology or Licensed Property or alleging that the manufacture, use, sale, and offer for sale of the Licensed Property and Refined Coal and the practice of the Patents and the Know-How infringe or misappropriate the patent, trade secret or other intellectual property right of any third party;

(k) Licensor has not threatened or initiated any claim, suit or proceeding against any third party alleging that such third party has infringed or misappropriated any rights under, in or to the Technology or the Licensed Property and, to the knowledge of Licensor, no third party is infringing or misappropriating any such rights; and

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(l) the Patents and Know-How, along with know-how generally available in the coal-fired power generation industry, are all the intellectual property rights necessary for the manufacture of the Licensed Property and the production of Refined Coal.

ARTICLE VII.

LIMITATION OF LIABILITY.

WITH THE EXCEPTION OF THE PARTIES’ OBLIGATIONS UNDER ARTICLE IX OR ANY FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY EITHER PARTY, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY WHETHER OR NOT THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING IN ANY WAY OUT OF THIS AGREEMENT.

ARTICLE VIII.

MAINTENANCE OF PATENT RIGHTS.

At all times hereunder, Licensor shall be solely responsible for and shall pay all fees, costs or expenses of any nature required to prosecute, defend or maintain the Patents as follows:

8.1 Prosecution and Maintenance . Licensor will, at its sole expense, continue to diligently prosecute any and all patent applications in the Patents and, with respect to any Patents that issue during the Term, maintain such Patents in good standing. In connection with the prosecution of such patent applications and maintenance of the Patents, Licensor will provide to Licensee copies of all filings and material correspondence sent and received by Licensor related thereto. In addition, Licensor will, throughout the Term, use reasonable commercial efforts to maintain and enhance the scope of the Valid Claim(s) and, if any claim contained in an issued and unexpired patent included within the Patents is held unenforceable, unpatentable or invalid by a decision of a tribunal, court, or other governmental agency of competent jurisdiction, then Licensor will, at its sole expense, use reasonable commercial efforts to create, develop and/or secure functionally equivalent workarounds and, where commercially appropriate, prosecute patent applications and/or patents for the same, which patent applications and/or patents will automatically be included within the Patents. Upon Licensee’s request and at Licensee’s expense, Licensor shall file, prosecute and maintain new patent applications and/or new patents (“ New Patents ”) on the Technology and any Licensed Property, including any Improvements thereto, except for any Excluded Licensee Improvements. Such New Patents shall be owned by Licensor and will be deemed Patents, as defined herein, for all purposes hereof.

8.2 Failure to Prosecute or Maintain . If Licensor determines, for any reason, not to diligently prosecute or maintain any Patent(s), then Licensor shall (a) promptly give Licensee written notification of such determination at least ninety (90) days before any due date related to such prosecution or maintenance, and (b) upon Licensee’s request, prosecute or maintain such Patent(s) at Licensee’s expense. If Licensee believes that Licensor, for any reason, is not diligently prosecuting or maintaining any Patent(s), as required hereunder, then Licensee may exercise its right as Licensor’s attorney in fact, and Licensor hereby appoints Licensee as its attorney in fact for purposes of this Section 8.2, to make any filing, pay any fee (including filing

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and maintenance fees), and take any other actions, in Licensor’s name, to prosecute or maintain such Patent(s), and, except as relates to any New Patent(s), Licensor will promptly reimburse Licensee for all costs and expenses associated with any such actions.

ARTICLE IX.

PROTECTION OF LICENSED PROPERTY.

9.1 Enforcement of Patents .

(a) It shall be the obligation of Licensor, at its sole cost and expense, in Licensor’s name, to protect and enforce the Patents and to prosecute or settle any third party infringement of the Patents during the Term of this Agreement. At no cost to Licensee, Licensee shall join any proceeding as necessary for Licensor to protect and enforce the Patents as described above. Any recovery obtained in an action brought by Licensor shall be distributed as follows: (i) Licensor shall first be reimbursed for any and all expenses and attorneys’ fees incurred by Licensor in connection with the action; and (ii) Licensor shall be entitled to any award, whether it be for ordinary, special or punitive damages. Notwithstanding any language to the contrary, in the event that Licensee is a party to the proceeding described above, Licensee shall be entitled to the portion of any award attributable to losses or damages suffered by Licensee as a result of the third party infringement.

(b) If Licensor determines not to diligently enforce the Patents (in which case Licensor shall promptly notify Licensee in writing of the same) or if it comes to the attention of Licensee that Licensor is not diligently enforcing the Patents then, subject to the rights of Licensor and any Sublicensees of the Patents (i) Licensee will have the right to enforce the Patents and to prosecute or settle any third party infringement of the Patents during the Term of this Agreement, at Licensee’s sole expense, (ii) if requested by Licensee, Licensor will cooperate in Licensee’s prosecution or defense of any dispute resolution, litigation or settlement activities hereunder, provided that Licensee will reimburse Licensor for all reasonable costs incurred by Licensor as a result of such cooperation, and (iii) Licensee shall be entitled to the portion of any recovery obtained in an action brought by Licensee hereunder, which portion shall be distributed as follows: (A) Licensee shall first be reimbursed for any and all expenses and attorneys’ fees incurred by Licensee in connection with such action; and (B) Licensee shall be entitled to the portion of the recovery that is attributable to losses or damages suffered by Licensee as a result of the third party infringement.

9.2 Indemnity by Licensor . Licensor shall defend, indemnify and hold harmless Licensee, its Affiliates, and each of their respective members, managers, stockholders, officers, employees, agents, representatives and attorneys (each, a “ Licensee Indemnified Party ”) against any Loss (including without limitation any Loss first suffered by a customer of a Licensee Indemnified Party for which the Licensee Indemnified Party becomes responsible) arising from or in connection with (i) any claim that the Technology, including any Improvements (other than Excluded Licensee Improvements), the Licensed Property, the Know-How, or the manufacture, sale or use of Refined Coal produced using the Technology or the Licensed Property, in accordance with the exercise of the license specified in Section 2.1(a), infringes or misappropriates, directly or indirectly, a patent, trade secret, copyright, trademark or other intellectual property right of any third party (a “ Third Party Rights Holder ”); (ii) any challenge to

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the validity of any of the Patents or the rights granted to Licensee in Section 2.1(a); and (ii) any breach by Licensor of the representations and warranties in Sections 2.4 or 6.2 or any covenant by Licensor in this Agreement.

(a) Notwithstanding the foregoing, Licensor will not indemnify any Loss to the extent based upon an infringement or misappropriation of an intellectual property right of a Third Party Rights Holder that would not exist but for:

(1) with regard to the operation of the boiler: the addition, use, or presence of any material, chemical, or other type of additives that is not (i) included as an element of the Refined Coal produced using the Technology or the Licensed Property as introduced into the boiler (excluding any element present in the coal prior to such coal being converted to Refined Coal, such as bromine); or (ii) present and inherent as the result of the conventional combustion of the Refined Coal in a boiler (e.g., oxygen or other constituents inherently produced in the combustion process) being operated in a manner typical of operations prior to the date Refined Coal is first combusted in such boiler; or (iii) the use of a process step or equipment in conjunction with the operation of the boiler that is unconventional or unique to the operator of the boiler; or

(2) with regard to the production of the Refined Coal, operation of the Refined Coal Facility, or post-combustion operations, processes or activities which occur after the Refined Coal has been combusted in the boiler: the addition, use, or presence of any material, chemical, additive, product, service, equipment, component, process, design, specification, or information that is not included as an element of the Licensed Property, Know-How or Technology (including any instructions, drawings, or specifications provided by Licensor to Licensee) whether used alone or in combination with the Licensed Property, Know-How or Technology; or

(3) the addition, use, or presence of an Excluded Licensee Improvement.

(b) Licensor will also not indemnify any Loss to the extent based upon the use of the Licensed Property, Know-How or Technology after Licensor has provided the Licensee Indemnified Party with replacement for or a modification of the Licensed Property, Know-How or Technology if the alleged infringement or misappropriation would have been avoided by implementation of such replacement or modification and such replacement or modification does not adversely affect the emissions control functionality of the Refined Coal in a boiler.

(c) If any portion of the Licensed Property, Know-How or Technology becomes, or in Licensor’s opinion is likely to become, the subject of a Loss arising from this Section 9.2, then Licensor may, at its sole option and expense, either procure the right to continue using the Licensed Property, Know-How or Technology or replace or modify the Licensed Property, Know-How or Technology so it becomes non-infringing.

9.3 Indemnity by Licensee .

(a) Licensee shall defend, indemnify and hold harmless Licensor, its Affiliates and their respective members, managers, stockholders, officers, directors, employees,

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agents, representatives and attorneys (each, a “ Licensor Indemnified Party ”) against any Loss arising from or in connection with (i) any breach by Licensee of the representations and warranties in Section 6.1, or (ii) Licensee’s failure to comply with the terms of the grant of license specified in Article II herein.

(b) Licensee shall defend, indemnify and hold harmless each Licensor Indemnified Party against any Loss (including without limitation any Loss first suffered by a customer of a Licensor Indemnified Party for which the Licensor Indemnified Party becomes responsible) arising from or in connection with any claim that the Excluded Licensee Improvements, used alone or in combination with the Licensed Property, Technology, or Know-How infringes or misappropriates, directly or indirectly, a patent, trade secret, copyright, trademark or other intellectual property right of Third Party Rights Holder. Notwithstanding the foregoing, Licensee will not indemnify any Loss to the extent based upon: (1) an infringement or misappropriation of an intellectual property right of a Third Party Rights Holder that would not exist but for the addition, use, or presence of any material, chemical, or other type of additives that is not included as part of the Excluded Licensee Improvements used alone or in combination with the Licensed Property, Technology, or Know-How ; or (2) the use of the Excluded Licensee Improvements after Licensee has provided the Licensor Indemnified Party with replacement for or a modification of the Excluded Licensee Improvements if the alleged infringement or misappropriation would have been avoided by implementation of such replacement or modification and such replacement or modification does not adversely affect the efficacy or functionality of the Excluded Licensee Improvements. If any portion of the Excluded Licensee Improvements becomes, or in Licensee’s opinion is likely to become, the subject of a Loss arising from this Section 9.3, then Licensee may, at its sole option and expense, either procure the right to continue using the Excluded Licensee Improvements or replace or modify the Excluded Licensee Improvements so it becomes non-infringing.

9.4 Defense of Third-Party Claims . If an Indemnified Party’s claim for indemnification under Section 9.2 or Section 9.3 is based on a claim brought by a third party (including without limitation a customer of the Indemnified Party with respect to a claim brought against such customer by a Third Party Rights Holder) (a “ Third Party Claim ”), the Indemnifying Party shall have the right, at its sole cost and expense, to defend such Third Party Claim in the name or on behalf of the Indemnified Party. The Indemnified Party will give the Indemnifying Party prompt written notice of any such Third Party Claim (a “ Claims Notice ”) and reasonably cooperate with the Indemnifying Party in the defense and settlement of the Third Party Claim. The Indemnified Party’s failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation which Licensor would otherwise have pursuant to this Agreement except to the extent that the Indemnifying Party has been materially prejudiced by such failure to so notify. Notwithstanding the foregoing, an Indemnified Party shall have the right (following notice to the Indemnifying Party) to retain its own counsel (which counsel is reasonably acceptable to the Indemnifying Party) and control its defense of any such Third Party Claim, with the reasonable fees and expenses to be paid by the Indemnifying Party if the Indemnifying Party shall have failed promptly to employ counsel to defend such proceeding or otherwise failed to prosecute such defense with reasonable diligence. The Indemnified Party and Indemnifying Party will enter into a joint representation agreement with counsel reasonably acceptable to both parties, specifying that the Indemnifying Party shall at all times control the defense, unless the Indemnified Party agrees otherwise, in writing, that the Indemnifying Party

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shall have sole authority to settle or compromise the Third Party Claim, and the reasonable fees and expenses for such counsel to be paid by the Indemnifying Party; provided, however, in the event it is not legally possible for the same counsel to represent both the Indemnified Party and the Indemnifying Party because of conflicts of interest (e.g., the conflict of interest is non-waivable), then the Indemnifying Party shall pay the reasonable fees and expenses of both counsels to the extent such fees and expenses are directly related to defending the claims for which the Indemnifying Party is responsible. The Indemnified Party shall have the right to employ separate counsel at its own cost and expense in the proceeding and, in such event, shall and shall have the right to, consult with the Indemnifying Party regarding the defense thereof; provided that, except as otherwise provided herein, the Indemnifying Party shall at all times control such defense of such proceeding. The Indemnifying Party may not settle or compromise the claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), unless the settlement or compromise includes a full release of all of the Indemnified Parties. The Indemnifying Party shall pay to or for the benefit of the Indemnified Parties in cash the amount for which such Indemnified Parties are entitled to be indemnified within thirty (30) days after the settlement or compromise of such Third Party Claim or the final nonappealable judgment of a court of competent jurisdiction. An Indemnifying Party shall not be liable for any settlement or compromise of any Third Party Claim without its consent.

9.5 Protection and Enforcement of Know-How and Trade Secrets . Licensor and Licensee will at all times during the Term use commercially reasonable efforts to preserve and protect the confidentiality of all portions of the Know-How and any other information that constitutes “trade secrets” as that term is defined in the Uniform Trade Secrets Act (the “ Trade Secrets ”). Furthermore, if it comes to the attention of Licensor that any Trade Secret has been misappropriated by any third party, then Licensor will use all reasonable efforts, including legal actions, to preserve and protect the confidentiality of the Trade Secret and to prevent such third party from any and all uses of the Trade Secret, so long as doing so is commercially reasonable to benefit either Licensor or Licensee.

9.6 Licensee’s Obligation to Notify Licensor of Possible Infringement or Misappropriation . Licensee shall promptly notify Licensor, in writing, if it comes to the attention of Licensee that any of the Patents is being infringed or any Trade Secret has been or is in danger of being misappropriated by any third party. Any such notice shall include a summary of relevant facts underlying Licensee’s belief as to such infringement or misappropriation.

9.7 Customers . If a customer of Licensee or a Sublicensee is contacted or sued by a Third Party Rights Holder with regard to an allegation of intellectual property infringement or misappropriation attributable to the use of the Licensed Property in accordance with the license granted in Section 2.1(a) herein (but not an Excluded Licensee Improvement), Licensee shall give Licensor prompt written notice that its customer has been so contacted or sued. Licensor shall promptly discuss with the Licensee’s or Sublicensee’s customer the nature and purpose of the claim or contact and negotiate with Licensee’s or Sublicensee’s customer, in good faith, the terms under which Licensor would undertake the defense and indemnity of the matter on Licensee’s or Sublicensee’s customer’s behalf, including, but not limited to, terms similar to those set forth in Section 9.2 and 9.4 of this Agreement.

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ARTICLE X.

CONFIDENTIALITY.

10.1 Each Party shall maintain the terms of this Agreement in confidence and shall not disclose any information concerning the terms, performance or administration of this Agreement to any other Person; provided that either Party may disclose such information: (a) to any of such Party’s Affiliates or to such Party’s officers, directors, employees and contractors to the extent such Persons need to know such information for the purposes of performing this Agreement, (b) to any prospective member of such Party’s Affiliates, and (c) to any Person providing or evaluating a proposal to provide financing to the recipient Party or any direct or indirect owner of such Party; provided in each case that the recipient Party shall provide to each Person to which disclosure is made a copy of this Article X and direct such Person to treat such information confidentially in accordance with this Article X, and the recipient Party shall be liable for any breach of the terms of this Article X by such Persons to which it makes any such disclosure. The foregoing restrictions will not apply (i) to information that is or becomes generally available to the public otherwise than as a result of disclosure by the recipient Party in violation of this Agreement, (ii) to information that is already in, or subsequently comes into, the recipient Party’s possession, provided that the source of such information was not, to the recipient Party’s knowledge, obligated to keep such information confidential and the information was not received solely pursuant to a previous agreement between the Parties, (iii) to information that is required to be disclosed pursuant to Law or stock exchange rules and regulations or is otherwise subject to legal, judicial, regulatory or self-regulatory requests for information or documents, or (iv) subject to Section 10.2 below, to the tax treatment or tax structure of the transactions contemplated by this Agreement.

10.2 Notwithstanding anything to the contrary herein, either Party may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement, provided, however , that any such information is required to be kept confidential to the extent necessary to comply with any applicable securities laws. The tax structure and tax treatment of the transactions contemplated by this Agreement includes only those facts that may be relevant to understanding the purported or claimed U.S. federal and state income tax treatment or tax structure of the transaction and, to eliminate any doubt, therefore specifically does not include information that either reveals or standing alone or in the aggregate with other information so disclosed tends of itself to reveal or allow the recipient of the information to ascertain the identity of any parties involved in any of the transactions contemplated by this Agreement or any of the documents to be delivered in connection herewith.

10.3 If either Party is required to disclose any information required by this Article X to be maintained as confidential in a judicial, administrative or governmental proceeding, such Party shall give the other Party at least ten (10) days’ prior written notice (unless less time is permitted by the applicable proceeding) before disclosing any such information in any said proceeding and, in making such disclosure, the Party required to disclose the information shall disclose only that portion thereof required to be disclosed and shall cooperate with the other Party in such Party’s attempts to seek to preserve the confidentiality thereof, including if such other Party seeks to obtain protective orders and/or any intervention.

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ARTICLE XI.

GENERAL.

11.1 Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, by a nationally recognized overnight courier, by facsimile or electronic mail, or mailed by registered or certified mail (return receipt requested) to the Parties at the following addresses (or at such other address for either Party as shall be specified by like notice):

If to Licensor:

ADA-ES, Inc.

9135 S. Ridgeline Blvd., Ste 200

Highlands Ranch, CO 80129

Attn: Mike Durham

Fax: (303) 734-0330

Email: miked@adaes.com

If to Licensee:

Clean Coal Solutions, LLC

3300 South Parker Road, Suite 615

Aurora, CO 80014

Attn: Jim Zerefos

Fax: (303) 751-4777

Email: jzerefos@cleancoalsolutions.com

With a copy (which shall not constitute notice) to:

Hogan Lovells US LLP

1200 Seventeenth Street, Suite 1500

Denver, CO 80202

Attention: Tyler Harvey

Fax: (303) 899-7333

Email: tyler.harvey@hoganlovells.com

All notices and other communications given in accordance herewith shall be deemed given (i) on the date of delivery, if hand delivered, (ii) on the date of receipt, if faxed or e-mailed (provided a hard copy of such transmission is dispatched by first class mail within 48 hours), (iii) three (3) business days after the date of mailing, if mailed by registered or certified mail, return receipt requested, and (iv) one (1) business day after the date of sending, if sent by a nationally recognized overnight courier; provided, however , that a notice given in accordance with this Section 11.1 but received on any day other than a business day or after business hours in the place of receipt will be deemed given on the next business day in that place.

11.2 Governing Law; Choice of Forum; Waiver of Jury Trial . This Agreement shall be construed in accordance with and governed by the internal laws of the State of Colorado, without

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regard to conflicts of law principles. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE COUNTY OF ARAPAHOE IN THE STATE OF COLORADO, OR THE FEDERAL COURT LOCATED NEAREST THERETO, WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND CONSENT TO THE SERVICE OF PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.

11.3 Integration . This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior representations, assurances, courses of dealing, agreements, and undertakings, whether written or oral, between the Parties concerning such subject matter. Notwithstanding any provision to the contrary in that certain Side Letter Agreement Regarding License of M-45 Technology, dated November 7, 2011, between the Parties (the “ Side Letter ”) or the Repayment Agreement, the Parties agree and acknowledge that this Agreement supersedes and replaces the Side Letter in its entirety, subject to the survival provisions specified in paragraph 1 thereof, and supersedes and replaces the Repayment Agreement in its entirety.

11.4 Titles and Headings . Titles and headings as used in this Agreement are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of any provision.

11.5 Assignment . Neither Party shall assign, sublease or otherwise transfer (collectively, an “ Assignment ”) this Agreement or any of its rights or obligations hereunder without the prior written consent of the other Party, and any purported Assignment made without such prior written consent shall be void. Notwithstanding the foregoing:

(a) either Party may, without the need for consent from the other Party, make an Assignment of this Agreement to an Affiliate of such Party provided that such Affiliate assumes in writing all of the obligations of the Party making the Assignment, and in such event the assigning Party shall be released from its obligations under this Agreement, except for those obligations that arose prior to such Assignment; and

(b) Licensee may, without the need for consent from Licensor, make an Assignment of this Agreement to any Person succeeding to the business of Licensee (whether by merger, equity purchase, or similar transaction) or to all or substantially all of Licensee’s assets.

11.6 Amendment; Modification, and Waiver . This Agreement may not be amended or modified except by an instrument in writing signed by both Parties. Any failure of either Party to comply with any obligation, covenant, agreement, or condition contained herein may be waived only if set forth in an instrument in writing signed by the Party to be bound thereby, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any other failure.

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11.7 Severability of Provisions . If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of Applicable Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible.

11.8 Binding Effect; Third Parties . The terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the Parties and their successors and permitted assigns. Except with respect to the rights granted to Sublicensees pursuant to Section 5.3(b), nothing in this Agreement shall be deemed to grant any third party beneficiary or similar rights to any Person not a signatory to this Agreement.

11.9 Counterparts . This Agreement may be executed and delivered (including by facsimile or other electronic transmission) in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when such counterparts have been signed by each Party and delivered to the other Party, it being understood that the Parties need not sign the same counterpart.

11.10 Survivability on Termination . The provisions of Sections 9.2, 9.3, 9.4, and 9.7, and Articles V (Term and Termination), VI (Representations and Warranties), VII (Limitation of Liability), X (Confidentiality), and XI (General) shall survive the termination of the Term for any reason.

11.11 Remedies Cumulative; Injunctive Relief . Any and all remedies expressly conferred on a Party by this Agreement will be deemed cumulative with and not exclusive of any other remedy or remedies conferred hereby or available to such Party at law or in equity, and the exercise by a Party of any one remedy (or forbearance with respect to one or more available remedies) will not preclude the exercise of any other remedy. Each Party acknowledges and agrees that any violation or threatened violation of this Agreement may cause irreparable injury to the other Party, for which money damages are an insufficient remedy. Thus, the Parties shall be entitled to seek injunctive relief in addition to all other remedies available at law in such event.

11.12 Further Assurances . Each Party shall execute and deliver to the other Party such further documents, instruments and assurances, and take such further actions, as may be reasonably requested by such other Party to fulfill the intent of the Parties hereto.

11.13 Construction . The words “this Agreement,” “herein,” “hereby,” “hereunder,” and “hereof,” and words of similar import, refer to this Agreement as a whole (including all Annexes, Exhibits and Schedules) and not to any particular subdivision unless expressly so limited. The words “this Section,” “this subsection,” and words of similar import, refer only to the Sections or subsections hereof in which such words occur. The word “or” is not exclusive, and the word “including” (in its various forms) means “including without limitation.” Pronouns in masculine,

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feminine, or neuter genders shall be construed to state and include any other gender, and words, terms, and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise expressly requires. Unless the context otherwise requires, all defined terms contained herein shall include the singular and plural and the conjunctive and disjunctive forms of such defined terms, and the term “Annex,” “Exhibit” or “Schedule” shall refer to an Annex, Exhibit or Schedule attached to this Agreement.

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the Effective Date.


ADA-ES, Inc.						Clean Coal Solutions, LLC

By:						By:
Name:						Name:
Title:						Title:

[ Signature Page to Technology License Agreement ]

EXHIBIT A

M-45 Technology

The Patents:

See the information contained in U.S. Patent Application No 13/471,015, entitled “Process to reduce emissions of nitrogen oxides and mercury from coal-fired boilers,” filed May 14, 2012, which Application claims the benefits of U.S. Provisional Application Serial No. 61/486,217, filed May 13, 2011, and Serial No. 61/543,196, filed October 4, 2011, of the same title, each of which was incorporated into the Application by reference.

The Process:

The M-45 Technology process involves the use of * (the “Chemical Reagents”) which are applied to the coal at the * as described below. The first Chemical Reagent, referred to as M-45 A, is a *. M-45 A mixes * with the coal *.

The second Chemical Reagent, referred to as M-45 B, is an * which reacts with the mercury in coal, resulting in *. As a result, more of the mercury is *.

As further described below, the * transports M-45 A and M-45 B to a *, where they are applied * to the coal. The Chemical Reagents are combined with the coal at a rate *. The application of each Chemical Reagent (M-45 A and M-45 B) is * and the rate of application is based on the *. After the coal is *, the resulting Refined Coal is transported to the power plant’s boiler(s) where it will be burned to produce steam for electricity production.

The System:

The M-45 Chemical Reagents can be delivered via a * or a *. The * consists of a * M-45 A NOx system and a * M-45 B Hg system. The * consists of a * M-45 A NOx system and the * M45 B Hg system described above.

For the *, the M-45 A NOx Chemical Reagent is delivered and placed in a * until it is transported to the delivery system, which adds the Chemical Reagent in a specified amount to the coal. The M-45 B Hg system stores the * Chemical Reagent in a *. The M-45 B Hg feed rate is added to the coal at a specified amount

For the *, the M-45 A NOx system stores the * Chemical Reagent in a * until it is transported to the delivery system. The M-45 A Chemical Reagent feed rate set point is determined by the * and the *.

Schedule 3.1(a)

Determination of Refined Coal Royalty Payment Calculation

Example

For the Calendar Quarter ended

Facility

Total

Tons produced

Tax Credit per ton

6.46

Self Operated

Revenues:

Fixed and Contingent Lease Payments

Amortization of Prepaid Rents

Tax Credits Earned

Total Revenues

Operating Costs:

Payments to CCSS for direct costs

$* per ton Chemical and Op cost

Site License

$* per ton site fee

Depreciation of Equipment

Assumes 60 month depreciation of *Cap Ex

Other Direct Costs incurred by CCS

Perhaps insurance and other misc.

Total Costs

Pre-Tax Margin

Royalty Rate

* M-45 Royalty Amount

Royalty earned per ton

Schedule 3.1(c)

Determination of Mercury Control Royalty Payment Calculation

Example

For the Calendar Quarter ended

Facility

Total

Tons produced

Per Ton Rate for Mercury Only Control

Revenues:

Earnings from Hg Control

Total Revenues

Operating Costs:

Payments to CCSS for direct costs

* per ton chem and Op cost assumed

Depreciation of Equipment

Fully depreciated

Other Direct Costs incurred by CCS

Perhaps insurance and other misc.

Total Costs

Pre-Tax Margin

Royalty Rate

* Mercury Control Royalty Amount

Royalty earned per ton

Exhibit 10.59

SECOND AMENDMENT

SECOND AMENDED AND RESTATED OPERATING AGREEMENT OF

CLEAN COAL SOLUTIONS, LLC

This Second Amendment to the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC (this “ Amendment ”) is agreed to, approved and entered into as of July 31, 2012. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC, dated as of May 27, 2011 and amended effective as of July 31, 2011 (the “ LLC Agreement ”).

RECITALS

WHEREAS , ADA-ES, Inc., a Colorado corporation (“ ADA ”), NexGen Refined Coal, LLC, a Wyoming limited liability company (“ NexGen ”), and GSFS Investments I Corp., a Delaware corporation (“ GS ,” and collectively with ADA and NexGen, the “ Members ”), constitute all of the members of Clean Coal Solutions, LLC, a Colorado limited liability company (the “ Company ”), and each of the Members is party to the LLC Agreement;

WHEREAS , ADA has given notice of a change in one ADA Manager effective January 1, 2012;

WHEREAS , the Members desire to expand the Board of Managers to allow for the appointment of an additional Manager, not directly representative of any of the Members;

WHEREAS , the Members desire to make certain other changes to the LLC Agreement as set forth in this Amendment; and

WHEREAS , the Members and the Company desire to execute this Amendment to evidence their consent to, and approval of, the amendments to the LLC Agreement set forth in this Amendment.

NOW THEREFORE , in consideration of the foregoing, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Members and the Company hereby agree as follows:

AGREEMENT

1. Amendments to Section 1.1 .

a. The following definitions are hereby added to Section 1.1 of the LLC Agreement in the appropriate alphabetic locations:

“ At Large Manager ” has the meaning given such term in Section 5.1(c)(ii) .

“ Technology License Agreements ” means, collectively, (i) that certain Technology License Agreement, dated as of July 26, 2012, by and between ADA and the Company pursuant to which ADA granted the Company a license to the Company’s M-45 Technology including the Licensed Property (as such terms are defined in the Technology License Agreement), as the same may be amended or restated from time to time, and (ii) that certain Amended and Restated License Agreement, dated as of October 30, 2009, by and between ADA and the Company pursuant to which ADA granted the Company a license to the Company’s CyClean™ technology and Licensed Property (as the term “Licensed Property” is defined in such Amended and Restated License Agreement), as the same may be amended or restated from time to time.”

b. The following definitions in Section 1.1 of the LLC Agreement and the specified Exhibits are hereby deleted in their entirety:

Chemicals and Additives;

ii.

Chemicals Business;

iii.

Technical Engineering Services;

iv.

Exhibit C; and

Exhibit D.

c. The definitions of the following terms in Section 1.1 of the LLC Agreement are hereby deleted in their entirety and replaced with the following:

“ Know-How ” means technical information, ideas, concepts, confidential information, trade secrets, know-how, discoveries, inventions, processes, methods, formulas, source and object codes, data, programs, other works of authorship, improvements, developments, designs and techniques related to the production of Refined Coal or Mercury Only Emissions Control other than as embodied in the Patents, that are owned or controlled by ADA and that are necessary or desirable to use the Technology or the Licensed Property for the purposes, and for the term, specified in the Technology License Agreements.

“ Licensed Property ” has the meaning given to such term in the respective Technology License Agreements, including the other related defined terms contained therein.

“ Patents ” means:

(a) U.S. Patent No. 6,773,471 B2 entitled “Low Sulfur Coal Additive for Improved Furnace Operation” issued on August 10, 2004;

(b) U.S. Patent No. 6,729,248 B2 entitled “Low Sulfur Coal Additive for Improved Furnace Operation” issued on May 4, 2004;

(c) U.S. Patent Application No. 12/785,184 entitled “Additives for Mercury Oxidation in Coal-fired Power Plants” filed May 21, 2010 which is a continuation in part of Patent Application No. 10/209,083 entitled “Low Sulfur Coal Additive for Improved Furnace Operation” filed July 30, 2002;

(d) U.S. Patent No. 8,124,036 entitled “Additives for Mercury Oxidation in Coal-Fired Power Plants” issued on February 28, 2012 which claims the benefits of U.S. Provisional Patent Application Serial No. 60/730,971 entitled “Additives for Catalysis of Mercury Oxidation in Coal-Fired Power Plants” filed October 27, 2005;

(e) U.S. Patent Application No 13/471,015, entitled “Process to reduce emissions of nitrogen oxides and mercury from coal-fired boilers,” filed May 14, 2012, which Application claims the benefits of U.S. Provisional Application Serial No. 61/486,217, filed May 13, 2011, and Serial No. 61/543,196, filed October 4, 2011, of the same title, each of which was incorporated into the Application by reference; and;

(f) any and all continuations, continuations-in-part, and divisionals, and all patents issuing which are based on such applications, and all reissues, reexaminations, or extensions thereof, as well as any foreign counterparts, continuations, continuations-in-part or divisions thereof and patents and patent applications on any improvements, advancements, modifications, revisions or developments to the subject matter claimed in the aforesaid patents that are developed by or for ADA, together with any other patents (U.S. or foreign and even if not listed herein) that share a common claim of priority with said patents or that cover inventions substantially similar to said patents.

“ Technology ” has the meaning given to such term in the respective Technology License Agreements, including the other related defined terms contained therein.

d. The first sentence of the definition of Section 45 Business in Section 1.1 of the LLC Agreement is hereby deleted in its entirety and replaced with the following:

“ Section 45 Business ” means each business of the Company or a Subsidiary of the Company in respect of which, inter alia, the Company shall have “placed in service” (within the meaning of Section 45(d)(8)(A) of the Code) a Facility prior to January 1, 2012, for the production of Refined Coal to be used to reduce NOx and mercury emissions in coal-fired boilers, and as to which the Company has either (a) entered into an agreement or agreements to sell or lease a Facility to a third party, and such third party would be thereafter entitled to Tax Credits for the Refined Coal produced from such Facility, or (b) determined to operate such Facility and retain the Tax Credits for the Refined Coal produced from such Facility for the benefit of the Company and its Members.”

2. Amendment to Section 2.6(a) . The first sentence of Section 2.6(a) of the LLC Agreement is hereby deleted in its entirety and replaced with the following:

“The purposes and character of the business of the Company shall be to (i) enter into the Transaction Agreements, (ii) accept contributions by the Members in accordance with the provisions of this Agreement and the Purchase Agreement, (iii) engage in Mercury Only Emission Control to the extent permitted by the Technology License Agreements and the Section 45 Business, and (iv) engage in other business consistent with or in furtherance

of the foregoing related to Refined Coal, as may be necessary or appropriate to accomplish the purposes set forth herein or as may be approved by the Board from time to time (collectively, the “ Business ”).”

3. Amendments to Section 5.1(c) .

a. The first sentence of Section 5.1(c) of the LLC Agreement is hereby deleted in its entirety and replaced with the following:

“(i) Managers Appointed by Members . The Board shall consist of seven (7) Managers.”

b. A new subparagraph (ii), as set forth below, is hereby added to the end of Section 5.1(c) of the LLC Agreement, which section is redesignated as Section 5.1(c)(i);

“(ii) At Large Manager . In addition to the ADA Managers and the NexGen Managers, the Board shall include one (1) additional Manager not directly representative of any of the Members (the “ At Large Manager ”). The At Large Manager shall be selected by the affirmative vote of the Board pursuant to Section 5.2. The At Large Manager shall be appointed annually for the term beginning with the annual meeting of the Board as described in Section 5.2(a)(ii), and such At Large Manager shall hold office until his or her successor shall have been appointed and qualified or until his or her earlier death, resignation or removal. The Board may determine at any point, and for such duration as the Board may approve, to leave the position of At Large Manager unfilled, in which case the ADA Managers and the NexGen Managers shall constitute the entire Board for all purposes. The At Large Manager shall be a natural person, over the age of eighteen (18), but the At Large Manager need not be a Member of the Company or a resident of the State of Colorado. The At Large Manager shall not be an employee of any Member, but shall be permitted to be an employee, contractor or consultant to the Company and to have such other background, training, and affiliations as determined in the discretion of the Board.”

4. Amendment to Section 5.1(e) . A new sentence, as set forth below, is hereby added prior to the last sentence of Section 5.1(e) of the LLC Agreement:

“In the event of a vacancy in the office of the At Large Manager and subject to Section 5.1(c) , a successor shall be appointed by action of the Board to hold office for the unexpired term of such At Large Manager.”

5. Amendment to Section 5.1(f) . A new sentence, as set forth below, is hereby added at the end of Section 5.1(f) of the LLC Agreement:

“The At Large Manager may be removed at any time by the affirmative vote of the Board pursuant to Section 5.2 in the sole discretion of the Board and independent of the circumstances set forth in the prior sentence.”

6. Amendments to Section 5.2(a) .

a. The first sentence of subparagraph (vi) of Section 5.2(a) of the LLC Agreement is hereby deleted in its entirety and replaced with the following:

“A majority of the Managers shall constitute a quorum for the conduct of business at a meeting of the Board; provided, however, that if at such time the Board consists of seven (7) Managers, then a minimum of five (5) Managers shall constitute a quorum; provided further, that if any Managers have been disqualified from participation in the consideration of and voting on any matter to be acted upon by the Board pursuant to Section 5.2(a)(x) , solely with respect to such matter the number of Managers required for a quorum shall be reduced by the number of Managers so disqualified. A majority of the members of any committee of the Board shall constitute a quorum for the conduct of business at a meeting of such committee; provided, however, that if any committee members have been disqualified from participation in the consideration of and voting on any matter to be acted upon by a committee pursuant to Section 5.2(a)(x) , solely with respect to such matter the number of committee members required for a quorum shall be reduced by the number of committee members so disqualified.”

The first sentence of subparagraph (vii) of Section 5.2(a) of the LLC Agreement is hereby deleted in its entirety and replaced with the following:

“At any meeting of the Board or a committee thereof at which a quorum is present, the affirmative vote of a majority of the Managers or committee members, as applicable, shall be the act of the Board or committee, unless the vote of a greater number is required by this Agreement; provided, however, that if any Managers or committee members have been disqualified from participation in the consideration of and voting on any matter to be acted upon by the Board or any committee pursuant to Section 5.2(a)(x) , solely with respect to such matter the affirmative vote of a majority of the Managers or committee members, as applicable, not so disqualified shall be the act of the Board or committee.”

A new sentence, as set forth below, is hereby added following the first sentence of subparagraph (vii) of Section 5.2(a) of the LLC Agreement:

“Notwithstanding the foregoing, at any time at which the Board consists of seven (7) Managers, the affirmative vote of a minimum of five (5) Managers shall be required for action by the Board; provided, however, that if any Managers have been disqualified from participation in the consideration of and voting on any matter to be acted upon by the Board pursuant to Section 5.2(a)(x) , solely with respect to such matter the number of affirmative votes required by this sentence shall be reduced by the number of Managers so disqualified.”

A new subparagraph (x), as set forth below, is hereby added following subparagraph (ix) of Section 5.2(a) of the LLC Agreement:

“(x) Notwithstanding any other provision hereof, except as may be waived by unanimous consent of each other Manager, any Manager shall be disqualified from

participating in the consideration of and voting on any matter to be acted upon by the Board or any committee thereof with respect to which (i) such Manager has any direct or indirect interest or benefit, financial or otherwise, which is different from or in addition to the interest of the Company or any of its Subsidiaries (other than compensation received or to be received from such Manager’s employer tied to performance or financial results of the Company, any Subsidiary of the Company, or Clean Coal Solutions Services, LLC), or (ii) in the case of any ADA Manager or NexGen Manager, the Member by which he or she was appointed, or any Affiliate of such Member (other than the Company, any Subsidiary of the Company or Clean Coal Solutions Services, LLC), has any direct or indirect interest or benefit, financial or otherwise, in the matter different from or in addition to its interest as a Member.”

7. Amendment to Section 6.1 . A new paragraph (d), as set forth below, is hereby added following paragraph (c) of Section 6.1 of the LLC Agreement:

“(d) Except as may be waived by unanimous consent of each other Member, any Member shall be disqualified from participating in the consideration and approval of any matter submitted to the Members for approval pursuant to Section 6.1(a) with respect to which such Member or any of its Affiliates (other than the Company, any Subsidiary of the Company or Clean Coal Solutions Services, LLC) has any direct or indirect interest or benefit, financial or otherwise, in the matter different from or in addition to its interest as a Member, and the affirmative vote or written consent of any Member disqualified pursuant to this Section 6.1(d) shall not be required for approval of such matter pursuant to Section 6.1(a) .

8. Amendment to Section 11.8 . A new paragraph (l), as set forth below, is hereby added following paragraph (k) of Section 11.8 of the LLC Agreement:

“To the extent that any Confidential Information may include material subject to the attorney-client privilege, work product doctrine or any other applicable privilege, the parties understand and agree that they have a commonality of legal interest with respect to such matters and it is their desire, intention and mutual understanding that the sharing of such information is not intended to, and shall not, waive or diminish in any way the confidentiality of such material or its continued protection under the attorney-client privilege, work product doctrine or other applicable privilege.”

9. Amendment to Section 11.1 . The final sentence of Section 11.1 of the LLC Agreement is hereby deleted in its entirety and replaced with the following:

“Notice or other required communication to any ADA Manager shall be effective if delivered to ADA, and to any NexGen Manager if delivered to NexGen, in each case pursuant to the requirements of this Section 11.1 . Notice or other required communication to the At Large Manager shall be effective if delivered pursuant to the requirements of this Section 11.1 to such address as the At Large Manager shall provide to the parties to this Agreement. A party may change its address by notice to the other parties and the At Large Manager, and the At Large Manager may change its address by notice to the parties to this Agreement.”

10. Amendment to Schedule 5.1(c) . Schedule 5.1(c) to the LLC Agreement is hereby deleted in its entirety and replaced with Exhibit 1 attached hereto.

11. Miscellaneous .

a. Sections 11.1 through 11.7, 11.11 and 11.13 through 11.15 of the LLC Agreement are hereby incorporated into, and made applicable to, this Amendment as if set forth herein.

b. Except as expressly set forth in this Amendment, all terms, conditions and provisions of the LLC Agreement shall continue in full force and effect.

[ Signature page follows ]

IN WITNESS WHEREOF , the Members have caused this Amendment to be duly executed on their behalf as of the date first set forth above.


COMPANY:

CLEAN COAL SOLUTIONS, LLC

By:
Name:
Title:

MEMBERS:

ADA-ES, Inc.

By:
Name:
Title:

NexGen Refined Coal, LLC

By: NexGen Refined Coal Holdings, LLC, its manager By: NexGen Synfuel Management, Inc., its manager

By:
Name:
Title:

GSFS Investments I Corp.

By:
Name:
Title:

[Signature Page to Second Amendment to Second Amended and Restated Operating Agreement of Clean Coal Solutions, LLC]

EXHIBIT 1

SCHEDULE 5.1(c)

Managers

ADA Managers: Dr. Michael Durham, Mark McKinnies, Jean Bustard

NexGen Managers: Charles S. McNeil, Brian C. Humphrey, W. Randall Dietrich

At Large Manager: Dr. Nina Bergan French

Exhibit 10.61

ADA-ES AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION AWARD


Grantee’s Name and Address:

You (the “Grantee”) have been granted an option to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (the “Notice”), the ADA-ES Amended and Restated 2007 Equity Incentive Plan, as amended from time to time (the “Plan”) and the Stock Option Award Agreement (the “Option Agreement”) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.


Award Number

Date of Award

Vesting Commencement Date

Exercise Price per Share		$

Total Number of Shares Subject to the Option (the “Shares”)

Total Exercise Price		$

Type of Option:		Incentive Stock Option

		Non-Qualified Stock Option

Expiration Date:

Post-Termination Exercise Period:		Three (3) Months

Vesting Schedule:

Subject to the Grantee’s Continuous Service and other limitations set forth in this Notice, the Plan and the Option Agreement, the Option may be exercised, in whole or in part, in accordance with the following schedule:


Period of Grantee’s Continuous Relationship With the Company or Affiliate From the Date the Option is Granted	Portion of Total Option Which is Exercisable
End of months			%
Each month thereafter			%
months		100

During any authorized leave of absence, the vesting of the Option as provided in this schedule shall be suspended after the leave of absence exceeds a period of ninety (90) days. Vesting of the Option shall resume upon the Grantee’s termination of the leave of absence and return to service to the Company or a Related Entity. The Vesting Schedule of the Option shall be extended by the length of the suspension.

In the event of termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Option shall terminate concurrently with the termination of the Grantee’s Continuous Service, except as otherwise determined by the Administrator.

In the event of the Grantee’s change in status from Employee to Consultant or from an Employee whose customary employment is 20 hours or more per week to an Employee whose customary employment is fewer than 20 hours per week, vesting of the Option shall continue only to the extent determined by the Administrator as of such change in status, provided that in no case shall such change in status be considered a “separation of service” as defined in Code Section 409A.

[Signature page follows]

IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Option is to be governed by the terms and conditions of this Notice, the Plan and the Option Agreement.


ADA-ES, INC., a Colorado corporation

By:

Title:

The Grantee acknowledges and agrees that the Shares subject to the Option shall vest, if at all, only during the period of the Grantee’s Continuous Service (not through the act of being hired, being granted the Option or acquiring Shares hereunder). The Grantee further acknowledges and agrees that nothing in this Notice, the Option Agreement or the Plan shall confer upon the Grantee any right with respect to future Awards or continuation of the Grantee’s Continuous Service or interfere in any way with the Grantee’s right or the right of the Company or Related Entity to which the Grantee provides services to terminate the Grantee’s Continuous Service, with or without cause and with or without notice. The Grantee acknowledges that unless the Grantee has a written employment agreement with the Company to the contrary, the Grantee’s status is at will.

The Grantee acknowledges receipt of a copy of the Plan and the Option Agreement and represents that he or she:

(a) is familiar with the terms and provisions thereof and hereby accepts the Option, effective as of the date of grant stated above, subject to all of the terms and provisions hereof and thereof;

(b) has reviewed this Notice, the Plan and the Stock Option Award Option Agreement being executed and delivered herewith in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice, the Plan and the Option Award Agreement.

Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Plan and the Option Agreement shall be resolved in accordance with Section 18 of the Option Agreement.

Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

Grantee agrees, as a condition precedent to any exercise of the Option, to deliver to the Company:

(a) an executed Exercise Notice in the form provided by the Company, which notice may include (i) written assurances satisfactory to the Company as to Grantee’s knowledge and experience in financial and business matters and/or that Grantee has employed a purchaser representative who has such knowledge and experience in financial and business matters, and that Grantee is capable of evaluating, alone or together with a purchaser representative engaged by Grantee, the merits and risks of exercising the Option; and (ii) written assurances satisfactory to the Company stating that Grantee is acquiring the Common Stock subject to the Option for such person’s own account and not with any present intention of selling or otherwise distributing the Common Stock. (These requirements, and any assurances given pursuant to such requirements, shall be inoperative if, and only if: (x) the issuance of the Shares upon the exercise of the Option has been registered under a then currently effective registration statement under the Securities Act of 1933, as amended; or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities law.); and

(b) an executed Shareholders Agreement (if any) in the form existing at the time of exercise of the Option (as modified by the Company in its discretion).


Dated:	Signed:
		Grantee

Award Number:

ADA-ES INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

STOCK OPTION AWARD AGREEMENT

1. Grant of Option . ADA-ES, Inc., a Colorado corporation (the “Company”), hereby grants to the Grantee (the “Grantee”) named in the Notice of Stock Option Award (the “Notice”), an option (the “Option”) to purchase the Total Number of Shares of Common Stock subject to the Option (the “Shares”) set forth in the Notice, at the Exercise Price per Share set forth in the Notice (the “Exercise Price”) subject to the terms and provisions of the Notice, this Stock Option Award Agreement (the “Option Agreement”) and the Company’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time (the “Plan”), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.

If designated in the Notice as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by the Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date the Option with respect to such Shares is awarded.

If designated in the Notice as a Nonqualified Stock Option, the Option is NOT intended to qualify as an Incentive Stock Option.

To the extent any Stock Option is designated as an Incentive Stock Option, but for any reason (including the reason described above) fails to qualify as an Incentive Stock Option, such option shall be treated as a Nonqualified Stock Option.

2. Exercise of Option.

(a) Right to Exercise . The Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or termination of the Option in the event of a Corporate Transaction or Change in Control. The Grantee shall be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Administrator. In no event shall the Company issue fractional Shares.

(b) Method of Exercise . The Option shall be exercisable by delivery of an exercise notice (a form of which is attached hereto as Exhibit A ) or by such other procedure as specified from time to time by the Administrator which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised and such other provisions as may be required by the Administrator. The exercise notice shall be delivered in person, by certified mail or by such other method (including electronic transmission) as determined from time to time by the Administrator to the Company accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the Company of such notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 4(d) below.

(c) Shareholders Agreement . As a condition precedent to any exercise of the Option, the Grantee shall deliver to the Company at the time of exercise, an executed Shareholders Agreement in the form existing at the time of exercise of the Option (as modified by the Company in its discretion as of such time).

(d) Taxes . No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax and employment tax withholding obligations, including, without limitation, such other tax obligations of the Grantee incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of the Option, the Company or the Grantee’s employer may offset or withhold (from any amount owed by the Company or the Grantee’s employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax obligations and/or the employer’s withholding obligations.

3. Grantee’s Representations . The Grantee understands that neither the Option nor the Shares exercisable pursuant to the Option have been registered under the Securities Act of 1933, as amended or any United States securities laws. If the Shares purchasable pursuant to the exercise of the Option have not been registered under the Securities Act of 1933, as amended, at the time the Option is exercised, the Grantee shall, if requested by the Company, concurrently with the exercise of all or any portion of the Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B .

4. Method of Payment . Payment of the Exercise Price shall be made by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such exercise method does not then violate any Applicable Law:

(a) cash;

(b) check;

(c) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Option) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is being exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); or

(d) payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) provides written instructions to a Company-designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) provides written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction.

5. Restriction on Exercise . The Option may not be exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable Laws.

6. Termination or Change of Continuous Service . If the Grantee’s Continuous Service terminates other than for Cause, the Grantee may, but only during the Post-Termination Exercise Period, exercise the portion of the Option that was vested at the date of such termination (the “Termination Date”). If the Grantee’s Continuous Service is terminated for Cause, the Grantee’s right to exercise the Option shall, except as otherwise determined by the Administrator, terminate concurrently with the termination of the Grantee’s Continuous Service (also the “Termination Date”). In no event may the Option be exercised later than the Expiration Date set forth in the Notice. If the Grantee’s status changes from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and vesting of the Option shall continue only to the extent determined by the Administrator as of such change in status; provided, however, with respect to any Incentive Stock Option that remains in effect after a change in status from Employee to Director or Consultant, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following such change in status. Except as provided in Sections 7 and 8 below, to the extent that the Option was unvested on the Termination Date, such unvested portion of the Option shall terminate. In addition, except as provided in Sections 7 and 8 below, if the Grantee does not exercise the vested portion of the Option within the Post-Termination Exercise Period, such vested portion of the Option shall terminate.

7. Disability of Grantee . If the Grantee’s Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within twelve (12) months from the Termination Date (and in no event later than the Expiration Date), exercise the portion of the Option that was vested on the Termination Date; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code and the Option is an Incentive Stock Option, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the Termination Date. To the extent that the Option was unvested on the Termination Date, such unvested portion of the Option shall terminate. In addition, if the Grantee does not exercise the vested portion of the Option within the time specified herein, such vested portion of the Option shall terminate. Section 22(e)(3) of the Code provides that an individual is permanently and totally disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

8. Death of Grantee . If the Grantee’s Continuous Service terminates as a result of his or her death, or in the event of the Grantee’s death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the portion of the Option that was vested at the Termination Date, within twelve (12) months from the date of death (but in no event later than the Expiration Date). To the extent that the Option was unvested on the date of death, such unvested portion of the Option shall terminate. In addition, if the vested portion of the Option is not exercised within the time specified herein, such vested portion of the Option shall terminate.

9. Transferability of Option . The Option, if an Incentive Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee. The Option, if a Non-Qualified Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution, provided, however, that a Non-Qualified Stock Option may be transferred to members of the Grantee’s Immediate Family to the extent and in the manner authorized by the Administrator. The terms of the Option shall be binding upon the executors, administrators, heirs and successors of the Grantee.

10. Term of Option . The Option must be exercised no later than the Expiration Date set forth in the Notice or such earlier date as otherwise provided herein. After the Expiration Date or such earlier date, the Option shall be of no further force or effect and may not be exercised.

11. Stop-Transfer Notices . In order to ensure compliance with the restrictions on transfer set forth in this Option Agreement, the Notice or the Plan, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

12. Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Option Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

13. Tax Consequences . Set forth below is a brief summary as of the date of this Option Agreement of some of the federal tax consequences of exercise of the Option and disposition of the Shares. This summary is necessarily incomplete, and the tax laws and regulations are subject to change. The Grantee should consult a tax adviser before exercising the Option or disposing of the Shares.

(a) Exercise of Incentive Stock Option . If the Option qualifies as an Incentive Stock Option, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as income for purposes of the alternative minimum tax for federal tax purposes and may subject the Grantee to the alternative minimum tax in the year of exercise.

(b) Exercise of Incentive Stock Option Following Disability . If the Grantee’s Continuous Service terminates as a result of Disability that is not permanent and total disability as such term is defined in

Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Grantee must exercise an Incentive Stock Option within three (3) months of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option. Section 22(e)(3) of the Code provides that an individual is permanently and totally disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

(c) Exercise of Non-Qualified Stock Option . On exercise of a Non-Qualified Stock Option, the Grantee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Grantee is an Employee or a former Employee, the Company will be required to withhold from the Grantee’s compensation or collect from the Grantee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

(d) Disposition of Shares . In the case of a Non-Qualified Stock Option, if Shares are held for more than one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an Incentive Stock Option, if Shares transferred pursuant to the Option are held for more than one year after receipt of the Shares and are disposed more than two years after the Date of Award, any gain realized on disposition of the Shares also will be treated as capital gain for federal income tax purposes and subject to the same tax rates and holding periods that apply to Shares acquired upon exercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock Option are disposed of prior to the expiration of such one-year or two-year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares.

14. Lock-Up Agreement .

(a) Agreement . The Grantee, if such person is an officer, director or owner of greater than 5% of the Common Stock of the Company at such time (including, for purposes of determining stock ownership, shares of Common Stock issuable upon exercise of options or warrants, or conversion of securities convertible into shares of Common Stock), and if requested by the Company and the lead underwriter of any public offering of the Common Stock (the “Lead Underwriter”), hereby irrevocably agrees not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of any interest in any Common Stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act of 1933, as amended, or such shorter period of time as the Lead Underwriter may specify. The Grantee further agrees to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agrees that the Company may impose stop-transfer instructions with respect to such Common Stock subject to the lock-up period until the end of such period. The Company and the Grantee acknowledge that each Lead Underwriter of a public offering of the Company’s stock, during the period of such offering and for the 180-day period thereafter, is an intended beneficiary of this Section 14.

(b) No Amendment Without Consent of Underwriter . During the period from identification of a Lead Underwriter in connection with any public offering of the Company’s Common Stock until the earlier of (i) the expiration of the lock-up period specified in Section 14(a) in connection with such offering or (ii) the abandonment of such offering by the Company and the Lead Underwriter, the provisions of this Section 14 may not be amended or waived except with the consent of the Lead Underwriter.

15. Code Section 409A Matters . This option is not intended to constitute “nonqualified deferred compensation” within the meaning of Code Section 409A, but rather is intended to be exempt from the application of Code Section 409A. To the extent that this option is nevertheless deemed to be subject to Code Section 409A for any reason, this option shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date on which this option was granted (the “Grant Date”).

Notwithstanding any provision herein to the contrary, in the event that following the Grant Date, the Administrator (as defined in the Plan) determines that this option may be or become subject to Code Section 409A, the Administrator may adopt such amendments to the Plan and/or this option or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Administrator determines are necessary or appropriate to (a) exempt the Plan and/or this option from the application of Code Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to this option, or (b) comply with the requirements of Code Section 409A. Any such action may include, but is not limited to, delaying payment, to the extent required in order to avoid accelerated taxation and/or tax penalties under Code Section 409A, to a Grantee who is a “specified employee” within the meaning of Code Section 409A to the first day following the six-month period (or, if earlier, the date of the Grantee’s death) on the date of the Grantee’s “separation of service” as defined in Code Section 409A. The Company shall use commercially reasonable efforts to implement the provisions of this Section 15 in good faith; provided that neither the Company, the Administrator nor any Employee, Director or representative of the Company or of any of its Affiliates shall have any liability to Grantee with respect to this Section 15. In the event this Option and or the Award is deemed to be “nonqualified deferred compensation” as defined in Code Section 409A, the value of such nonqualified deferred compensation could become taxable to Grantee, and Grantee agrees to assume and take full responsibility for any such tax consequences.

16. Entire Agreement: Governing Law . The Notice, the Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing or writings (including an electronic or facsimile transmission) signed by the Company and the Grantee. Nothing in the Notice, the Plan or this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of Colorado without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Colorado to the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

17. Headings . The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation.

18. Dispute Resolution . The provisions of this Section 18 shall be the exclusive means of resolving disputes arising out of or relating to the Notice, the Plan and this Option Agreement. The Company, the Grantee and the Grantee’s assignees (the “parties”) shall attempt in good faith to resolve any disputes arising out of or relating to the Notice, the Plan and this Option Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party’s position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute is not resolved by negotiation within ninety (90) days of the written notification, the parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the District of Colorado (or should such court lack jurisdiction to hear such action, suit or proceeding, in a Colorado state court in Arapahoe County, Colorado) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. The parties also expressly waive any right they have or may have to a jury trial of any such suit, action or proceeding. If any one or more provisions of this Section 18 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

19. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given, (i) when delivered personally; (ii) when sent by facsimile, with written confirmation of receipt by the sending facsimile machine; (iii) when sent by electronic transmission, upon written confirmation of receipt by the receiving party; (iv) five business days after being sent by registered or certified mail, return receipt requested,

postage prepaid; or (v) two business days after deposit with a private industry express courier, with written confirmation of receipt, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.

EXHIBIT A

ADA-ES AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

EXERCISE NOTICE

ADA-ES, Inc.

9135 South Ridgeline Boulevard, Suite 200

Highlands Ranch, Colorado 80129

Attention: Secretary

1. Effective as of today, , the undersigned (“Grantee”) hereby elects to exercise the Grantee’s option to purchase shares of the Common Stock (the “Shares”) of ADA-ES, Inc. (the “Company”) under and pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time (the “Plan”) and the [ ] Incentive [ ] Non-Qualified Stock Option Award Agreement (the “Option Agreement”) and Notice of Stock Option Award (the “Notice”) dated , . Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Exercise Notice.

2. Representations of the Grantee . The Grantee acknowledges that the Grantee has received, read and understood the Notice, the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. Grantee further represents and warrants that: Grantee has such knowledge and experience in financial and business matters and/or that Grantee has employed a purchaser representative who has such knowledge and experience in financial and business matters such that Grantee is capable of evaluating, either alone or together with such purchaser representative engaged by Grantee, the merits and risks of exercising the Option and owning the Shares; and (ii) that Grantee is acquiring the Shares subject to the Option for his or her own account and not with any present intention of selling or otherwise distributing the Shares, unless the Shares are registered under the Securities Act of 1933, as amended, in which case Grantee will be free to immediately sell the Shares into any market which may exist therefor.

3. Rights as Shareholder . Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan. The Grantee shall enjoy rights as a shareholder until such time as the Grantee disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal or the Repurchase Right. Upon such exercise, the Grantee shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of the Option Agreement, and the Grantee shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.

4. Shareholders Agreement . As a condition precedent to the exercise of the Option, the Grantee agrees to deliver to the Company an executed Shareholders Agreement in the form existing at the time of exercise of the Option (as modified by the Company in its discretion).

5. Delivery of Payment . The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 4(d) of the Option Agreement.

6. Tax Consultation . The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.

7. Taxes . The Grantee agrees to satisfy all applicable federal, state and local income and employment tax withholding obligations and herewith delivers to the Company the full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations. In the case of an Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of the Option as an Incentive Stock Option, to notify the Company in writing within thirty (30) days of any disposition of any shares acquired by exercise of the Option if such disposition occurs within two (2) years from the Date of Award or within one (1) year from the date the Shares were transferred to the Grantee. If the Company is required to satisfy any federal, state or local income or employment tax withholding obligations as a result of such an early disposition, the Grantee agrees to satisfy the amount of such withholding in a manner that the Administrator prescribes.

8. Restrictive Legends . The Grantee understands and agrees that unless the Shares are presently registered under the Securities Act of 1933, as amended, the Company may cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

9. Successors and Assigns . The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.

10. Headings . The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation.

11. Dispute Resolution . The provisions of Section 18 of the Option Agreement shall be the exclusive means of resolving disputes arising out of or relating to this Exercise Notice.

12. Governing Law; Severability . This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of Colorado without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Colorado to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

13. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (i) when delivered personally; (ii) when sent by facsimile, with written confirmation of receipt by the sending facsimile machine; (iii) when sent by electronic transmission, upon written confirmation of receipt by the receiving party; (iv) five business days after being sent by registered or certified mail, return receipt requested, postage prepaid; or (v) two business days after deposit with a private industry express courier, with written confirmation of receipt, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.

14. Further Instruments . The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement.

15. Entire Agreement . The Notice, the Plan, the Option Agreement and Shareholders Agreement, if any, are incorporated herein by reference and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing or writings (including an electronic or facsimile

transmission) signed by the Company and the Grantee. Nothing in the Notice, the Plan, the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties.


Submitted by:						Accepted by:

GRANTEE						ADA-ES, INC., a Colorado corporation

						By:
(Signature)

						Title:


Address:								Address:

								9135 South Ridgeline Boulevard, Suite 200
								Highlands Ranch, Colorado 80129


Email:
Facsimile:

EXHIBIT B

ADA-ES AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

INVESTMENT REPRESENTATION STATEMENT

GRANTEE:

COMPANY: ADA-ES, INC.

SECURITY: COMMON STOCK

AMOUNT:

DATE:

In connection with the purchase of the above-described securities (the “Shares”), the undersigned Grantee represents to the Company the following:

(a) Grantee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Grantee is acquiring these Shares for investment for Grantee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

(b) Grantee acknowledges and understands that unless the Shares are registered under the Securities Act, the shares will constitute “restricted securities” under the Securities Act and will have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon among other things, the bona fide nature of Grantee’s investment intent as expressed herein. Grantee further understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the Shares. Grantee understands that unless the Shares are registered under the Securities Act at the time of issuance, the certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company.

(c) Grantee is familiar with the provisions of Rule 144 promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Subject to the availability of certain public information about the Company, if the Shares are not registered for resale under an effective registration statement on file with the Securities and Exchange Commission at the time of the exercise of the Option, then the Shares may be resold in certain limited circumstances subject to the provisions of Rule 144 if Grantee is not an affiliate of the Company and has not been an affiliate for the preceding three months. If Grantee is or has been an affiliate of the Company in the preceding three months, Grantee may resell the Shares pursuant to Rule 144 subject to the satisfaction of certain conditions specified in the rule, including: (1) the resale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended), (2) the availability of certain public information about the Company, (3) the amount of Shares being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. The resale must occur not less than six months after the later of the date the Shares were sold by the Company or the date the Shares were sold by an affiliate of the Company (within the meaning of Rule 144). Other restrictions may also apply to sales of the Shares, and Grantee understands that the Shares may not be readily resold, and that delays may occur in selling the Shares even if they are eligible for sale under Rule 144.

(d) Grantee further understands that if all of the applicable requirements of Rule 144 are not satisfied, that registration under the Securities Act, compliance with Regulation A or some other registration exemption will be required and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Grantee understands that no assurances can be given that any such other registration exemption will be available in such event, and that the Shares may not be salable by Grantee.

(e) Grantee represents that Grantee is a resident of the state of .

Signature of Grantee:

[Print Name of Grantee]

Date: ,

EXHIBIT C

Addendum to the ADA-ES, Inc.

Amended and Restated 2007 Equity Incentive Plan

Option Agreement

For California Residents Only

This Addendum is intended to comply with Section 25102(o) of the California Corporations Code and any rules or regulations promulgated thereunder by the California Department of Corporations. Any provision of the Plan or any Option Agreement which is otherwise inconsistent with this Addendum or Section 25102(o) of the California Securities Code shall, without further act or amendment by the Company, be reformed to comply with Section 25102(o) of the California Securities Code. Both the Common Stock and the Options that are the subject of this Addendum if not yet qualified with the California Department of Corporations and not yet exempt from such qualification, are subject to such qualification, and the issuance of the Options prior to the qualification is unlawful unless such issuance is exempt. The rights of the Company and the Option holder with respect to Options that are the subject of this Addendum are expressly conditioned on such exemption being available.

In addition to those provisions set forth in the Plan, any Option Agreement and/or the Shareholders Agreement, Options granted to employees of the Company or an Affiliate resident in California (“California Employees”) will be subject to the following provisions:

Each California Employee will receive financial statements of the Company annually during the period such California Employee has Options outstanding. This requirement does not apply to California Employees who are key employees whose duties in connection with the Company or an Affiliate assure them access to equivalent information.

Unless employment of a California Employee is terminated “for cause” under applicable law, the terms of the Plan, the Option Agreement, the Option grant or the California Employee’s contract of employment, the right to exercise the California Employee’s Option in the event of termination of his or her employment, to the extent the California Employee is entitled to exercise such Option on the date his or her employment terminates, shall be as follows:

(i)	Such Option may be exercised for at least 6 months from the date of such termination, if termination was caused by death or Disability.

(ii)	Such Option may be exercised for at least 30 days from the date of such termination if termination was caused by other than death or Disability.

Notwithstanding the foregoing, such Option may not be exercised after the expiration of the stated period of the Option.

At the discretion of the Committee, the Company may reserve to itself and/or its assignee in the Option Agreement, or any other agreement with the California Employee, a right to repurchase Common Stock held by a California Employee or his or her transferee in the event of such California Employee’s termination of employment with the Company or an Affiliate at any time within 90 days after the date of such termination (or in the case of Common Stock issued upon exercise of an Option after such termination date, within 90 days after the date of such exercise) for cash or cancellation of purchase money indebtedness, at:

(A)	no less than the Fair Market Value of such Common Stock as of the date of such termination of employment, provided that such right to repurchase Common Stock terminates when the common Stock has become publicly traded; or

(B)

the California Employee’s original purchase price, provided that such right to repurchase Common Stock at the original purchase price lapses at the rate of at least 20% of the Common Stock subject to the Option per year over 5 years from the date the Option is granted (without respect to the date the Option was exercised or became exercisable).

Notwithstanding the foregoing, the Common Stock held by a California Employee who is an officer, director, manager or consultant of the Company or an Affiliate may be subject to additional or greater restrictions than those set forth in this item 3 above.

RESTRICTED STOCK PURCHASE AGREEMENT

ADA-ES, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

[Preliminary Note: Language appearing in boldface and brackets in both the Notice and the Agreement refers to provisions that are electable, and the language must be reviewed and either included or removed, as appropriate, in the process of finalizing all agreements.]

NOTICE OF RESTRICTED STOCK PURCHASE AWARD


Grantee’s Name and Address:

You have been granted the right to purchase shares of Common Stock of the Company, subject to the terms and conditions of this Notice of Restricted Stock Purchase Award (the “Notice”), under the ADA-ES, INC. Amended and Restated 2007 Equity Incentive Plan, as amended from time to time (the “Plan”) and the Restricted Stock Purchase Award Agreement (the “Agreement”) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.


Award Number

Grant Date

Vesting Commencement Date

Purchase Price per Share

Total Number of Shares of Common Stock Awarded

Total Purchase Price

Vesting Schedule:

Subject to Grantee’s Continuous Service and other limitations set forth in this Notice, the Agreement and the Plan, the Shares will “vest” in accordance with the following schedule:

NOTE: CHOOSE ONE OF THE FOLLOWING ALTERNATIVES OR SOME OTHER VESTING SCHEDULE. ANY INAPPLICABLE LANGUAGE SHOULD BE DELETED FOR FINALIZING THE DOCUMENTS FOR THE GRANT.

[25% of the Total Number of Shares of Common Stock Awarded shall vest twelve (12) months after the Vesting Commencement Date, and 1/48 of the Total Number of Shares of Common Stock Awarded shall vest each month thereafter until the Shares are fully vested.]

[25% of the Total Number of Shares of Common Stock Awarded shall vest twelve (12) months after the Vesting Commencement Date, and an additional 25% of the Total Number of Shares of Common Stock Awarded shall vest on each yearly anniversary of the Vesting Commencement Date thereafter.]

[25% of the Total Number of Shares of Common Stock Awarded shall vest twelve (12) months after the Vesting Commencement Date, and 1/16 of the Total Number of Shares of Common Stock Awarded shall vest on each three (3) month anniversary of the Vesting Commencement Date thereafter.]

[During any authorized leave of absence, the vesting of the Shares shall be suspended [after the leave of absence exceeds a period of [ninety (90)] days]. Vesting of the Shares shall resume upon the Grantee’s termination of the leave of absence and return to Continuous Service. The Vesting Schedule of the Shares shall be extended to the length of the suspension.]

[In the event of Grantee’s change in status from Employee or Director to Consultant, the vesting of the Shares shall continue only to the extent determined by the Administrator as of such change in status.]

For purposes of this Notice and the Agreement, the term “vest” shall mean, with respect to any Shares, that such Shares are no longer subject to repurchase at the Purchase Price per Share; provided, however, that such Shares shall remain subject to other restrictions on transfer set forth in the Agreement or the Plan. Shares that have not vested are deemed “Restricted Shares.” If the Grantee would become vested in a fraction of a Restricted Share, such Restricted Share shall not vest until the Grantee becomes vested in the entire Share. Notwithstanding the foregoing, the Shares subject to this Notice will be subject to the provisions of the Agreement and Section 11 of the Plan relating to the release of repurchase and forfeiture provisions in the event of a Corporate Transaction or Change of Control.

[Signature page follows]

IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Award is to be governed by the terms and conditions of this Notice, the Plan, and the Agreement, and that signed copies of this Notice and the Agreement (including signed copies of Exhibits A, B and C thereto, as applicable) have been exchanged between the parties.


ADA-ES, INC.

By:

Title:

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE AGREEMENT, NOR IN THE PLAN, SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE GRANTEE’S CONTINUOUS SERVICE AT ANY TIME, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, GRANTEE’S STATUS IS AT WILL.

The Grantee acknowledges receipt of a copy of the Plan and the Agreement (including Exhibits A, B & C thereto) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice, the Agreement and the Plan. The Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Plan and the Agreement shall be resolved in accordance with Section 21 of the Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.


Dated:						Signed:

						Print Name:

Award Number:

ADA-ES INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

RESTRICTED STOCK PURCHASE AWARD AGREEMENT

16. Purchase of Shares . ADA-ES INC., a Colorado corporation (the “Company”), hereby issues and sells to the Grantee (the “Grantee”) named in the Notice of Restricted Stock Purchase Award (the “Notice”), the Total Number of Shares of Common Stock Awarded set forth in the Notice (the “Shares”) for a Purchase Price per Share set forth in the Notice (the “Total Purchase Price”), subject to the Notice, this Restricted Stock Purchase Award Agreement (the “Agreement”) and the terms and provisions of the Company’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time (the “Plan”), which is incorporated herein by reference. Payment for the Shares in the amount of the Total Purchase Price set forth in the Notice shall be made to the Company upon execution of the Notice. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement. All Shares sold hereunder will be deemed issued to the Grantee as fully paid and nonassessable shares and the Grantee will have the right to vote the Shares at meetings of the Company’s shareholders. The Company shall pay any applicable stock transfer taxes imposed upon the issuance of the Shares to the Grantee hereunder.

17. Method of Payment . Payment of the Total Purchase Price shall be by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such payment method does not then violate an Applicable Law:

(a) cash;

(b) check; or

(c) [provided that the Total Purchase Price for the Shares being purchased exceeds [ thousand dollars ($ ,000)], payment pursuant to a promissory note as described below.

(i) The promissory note shall have a term of ( ) years with principal and interest payable in ( ) equal annual installments;

(ii) The promissory note shall bear interest at the minimum rate required by the federal tax laws to avoid the imputation of interest income to the Company and compensation income to the Grantee;

(iii) The Grantee shall be personally liable for payment of the promissory note and the promissory note shall be secured by the Shares purchased upon delivery of the promissory note, or such other collateral of equal or greater value, in a manner satisfactory to the Administrator with such documentation as the Administrator may request; and

(iv) The promissory note shall become due and payable upon the occurrence of any or all of the following events: (A) the sale or transfer of the Shares purchased with the promissory note; (B) termination of the Grantee’s Continuous Service for any reason other than death or disability; or (C) the first anniversary of the termination of the Grantee’s Continuous Service due to death or disability.]

[NOTE: If the Company is going to extend credit, it must confirm that it complies with any applicable Federal Reserve requirements relating to the extension of credit.]

18. Transfer Restrictions . The Shares sold to the Grantee hereunder may not be sold, transferred by gift, pledged, hypothecated, or otherwise transferred or disposed of by the Grantee prior to the date when the Shares become vested pursuant to the Vesting Schedule set forth in the Notice. Any attempt to transfer Restricted Shares in violation of this Section 3 will be null and void and will be disregarded. Before the Shares fully vest, the Shares will be subject to the Company’s Repurchase Rights as set forth in Section 8 below.

19. Escrow of Stock . For purposes of facilitating the enforcement of the provisions of this Agreement, the Grantee agrees, immediately upon receipt of the certificate(s) for the Restricted Shares, to deliver such certificate(s), together with an Assignment Separate from Certificate in the form attached hereto as Exhibit A , executed in blank by the Grantee and the Grantee’s spouse (if required for transfer) with respect to each such stock certificate, to the Secretary or Assistant Secretary of the Company, or their designee, to hold in escrow for so long as such Restricted Shares have not vested pursuant to the Vesting Schedule set forth in the Notice and continue to be subject to the Company’s Repurchase Rights, with the authority to take all such actions and to effectuate all such transfers and/or releases as may be necessary or appropriate to accomplish the objectives of this Agreement in accordance with the terms hereof. The Grantee hereby acknowledges that the appointment of the Secretary or Assistant Secretary of the Company (or their designee) as the escrow holder hereunder with the stated authorities is a material inducement to the Company to make this Agreement and that such appointment is coupled with an interest and is accordingly irrevocable. The Grantee agrees that such escrow holder shall not be liable to any party hereto (or to any other party) for any actions or omissions unless such escrow holder is grossly negligent relative thereto. The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Upon the vesting of all Restricted Shares and termination of the Company’s [Right of First Refusal] [and Repurchase Right] , the escrow holder will, without further order or instruction, transmit to the Grantee the certificate evidencing such Shares, subject, however, to satisfaction of any withholding obligations provided in Section 6 below [, and subject to the terms of any security agreement executed in connection with the purchase of the Shares by means of a promissory note] .

20. Distributions . Except as set forth in Section 10(ii), the Company shall disburse to the Grantee all dividends and other distributions paid or made in cash with respect to the Shares and Additional Securities (whether vested or not), less any applicable withholding obligations.

21. Section 83(b) Election and Withholding of Taxes . The Grantee shall provide the Administrator with a copy of any timely election made pursuant to Section 83(b) of the Internal Revenue Code or similar provision of state law (collectively, an “83(b) Election”), a form of which is attached hereto as Exhibit B . If the Grantee makes a timely 83(b) Election, the Grantee shall immediately pay the Company the amount necessary to satisfy any applicable foreign, federal, state, and local income and employment tax withholding obligations. If the Grantee does not make a timely 83(b) Election, the Grantee shall, as Restricted Shares vest, or at the time withholding is otherwise required by any Applicable Law, pay the Company the amount necessary to satisfy any applicable foreign, federal, state, and local income and employment tax withholding obligations. The Grantee may satisfy his or her withholding obligations by authorizing the Company to transfer to the Company the number of vested Shares held in escrow that have an aggregate Fair Market Value equal to the withholding obligations. The Grantee hereby represents that he or she understands (a) the contents and requirements of the 83(b) Election, (b) the application of Section 83(b) to the receipt of the Shares by the Grantee pursuant to this Agreement, (c) the nature of the election to be made by the Grantee under Section 83(b) and the consequences of either making or not making the 83(b) Election, and (d) the effect and requirements of the 83(b) Election under relevant state and local tax laws. The Grantee further represents that he or she intends OR does not intend to file an election pursuant to Section 83(b) with the Internal Revenue Service within thirty (30) days following the date of this Agreement, and submit a copy of such election with his or her federal tax return for the calendar year in which the date of this Agreement falls.

[NOTE: Grantee must cross through the inapplicable language in the preceding paragraph, and initial here: .]

22. Additional Securities . Any securities received as the result of ownership of the Restricted Shares (the “Additional Securities”), including, but not by way of limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the Company’s capital structure, shall be retained in escrow in the same manner and subject to the same conditions and restrictions as the Restricted Shares with respect to which they were issued, including, without limitation, the Vesting Schedule set forth in the Notice and the Company’s Repurchase Rights. The Grantee shall be entitled to direct the Company to exercise any warrant, option or other right received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but the Grantee may not direct the Company to sell any such warrant, option or right. If Additional Securities consist of a convertible security, the Grantee may exercise any conversion right, and any securities so acquired shall constitute Additional Securities. Appropriate adjustments to reflect the distribution of Additional Securities shall be made to

the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such transaction upon the Company’s capital structure. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of any recapitalization, reorganization or other transaction that results in the creation of Additional Securities, the escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional Securities in exchange for the certificates of the replacement securities.

23. Company’s Repurchase Rights .

(f) Grant of Repurchase Rights . The Company is hereby granted the right to repurchase all or any portion of the Shares that are Restricted Shares (the “Repurchase Right”) exercisable at any time during the period commencing on the date the Grantee’s Continuous Service terminates for any reason, with or without cause (including death or disability) (the “Termination Date”) and ending ninety (90) days after the first date on which the Repurchase Right may be exercised without incurring an accounting expense with respect to such exercise (the “Share Repurchase Period”).

(g) Exercise of the Repurchase Right . The Repurchase Right shall be exercisable by written notice delivered to the Grantee prior to the expiration of the Share Repurchase Period. The notice shall indicate the number of Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not later than the last day of the Share Repurchase Period. On the date on which the repurchase is to be effected, the Company and/or its assigns shall pay to the Grantee in cash or cash equivalents (including the cancellation of any purchase-money indebtedness) for Restricted Shares being repurchased, the Purchase Price per Share previously paid by the Grantee to the Company for such Shares. Upon such payment to the Grantee or into escrow for the benefit of the Grantee, the Company and/or its assigns shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest thereon or related thereto, and the Company shall have the right to transfer to its own name or its assigns the number of Shares being repurchased, without further action by the Grantee.

(h) Assignment . Whenever the Company shall have the right to purchase Shares under this Repurchase Right, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations, to exercise all or a part of the Company’s Repurchase Right.

(i) Termination of the Repurchase Right . The Repurchase Right shall terminate with respect to any Shares for which it is not timely exercised. In addition, the Repurchase Right shall terminate, and cease to be exercisable, with respect to all vested Shares upon the date on which such shares cease to be Restricted Shares.

(j) Corporate Transaction/ Change of Control . Immediately prior to the consummation of a Corporate Transaction described in Section 2(q)(i), (ii) or (iii) of the Plan or a Change of Control, the Repurchase Right as to all vested Shares shall automatically lapse in its entirety, except to the extent this Agreement is Assumed, in which case the Repurchase Right shall apply to the new capital stock or other property received in exchange for the vested Shares in consummation of the Corporate Transaction or Change of Control, but only to the extent the vested Shares are at the time covered by such right. The Repurchase Right as to Restricted Shares shall apply to the new capital stock or other property (including cash paid other than as a regular cash dividend) received in exchange for the Shares in consummation of the Corporate Transaction and such stock or property shall be deemed Additional Securities for purposes of this Agreement, but only to the extent the Shares are at the time covered by such Repurchase Right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Right to reflect the effect of the Corporate Transaction or Related Entity Disposition.

[NOTE: This section does not contemplate the termination of the Repurchase Right for unvested Shares upon a Corporate Transaction or Related Entity Disposition. If the Repurchase Right for unvested Shares were to terminate on an acquisition, the Award is in effect “accelerated” in that the Grantee would receive full consideration for the shares on a Corporate Transaction although the vesting time periods have not elapsed. Consideration should be given to whether either of the following provisions should be added to all agreements or to agreements for specific individuals. [To the extent that this Agreement will not be Assumed, the Repurchase Right as to such Restricted Shares shall automatically lapse.] Another possibility is to give the Company the option to repurchase the unvested Shares (at the Exercise Price per Share for the unvested

Shares) in a Corporate Transaction if the Agreement is not Assumed. [Such a provision would mean that the Grantee only receives the acquisition consideration for the vested shares and results in the Grantee receiving the consideration that he would have received if he had vested options rather than purchased shares.] [To the extent that this Agreement is not Assumed, the Company shall have the Repurchase Right as to such Restricted Shares pursuant to Section 8(a) of this Agreement, except that the Share Repurchase Period shall be the sixty (60) day period immediately preceding the consummation of the Corporate Transaction or Related Entity Disposition.]

24. Stop-Transfer Notices . In order to ensure compliance with the restrictions on transfer set forth in this Agreement, the Notice or the Plan, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

25. Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

26. Restrictive Legends . Grantee understands and agrees that the Company may cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares, as applicable, together with any other legends that may be required by the Company or by state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, A REPURCHASE RIGHT HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER SUCH TRANSFER RESTRICTIONS AND REPURCHASE RIGHT ARE BINDING ON TRANSFEREES OF THESE SHARES.

27. Lock-Up Agreement .

(a) Agreement . Grantee, if such person is an officer, director or owner of greater than 5% of the Common Stock of the Company at such time (including, for purposes of determining stock ownership, shares of Common Stock issuable upon exercise of options or warrants, or conversion of securities convertible into shares of Common Stock), and if requested by the Company and the lead underwriter of any public offering of the Common Stock or other securities of the Company (the “Lead Underwriter”), hereby irrevocably agrees not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of any interest in any Common Stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act of 1933, as amended, or such shorter period of time as the Lead Underwriter shall specify. Grantee further agrees to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agrees that the Company may impose stop-transfer instructions with respect to such Common Stock subject until the end of such period. The Company and Grantee acknowledge that each Lead Underwriter of a public offering of the Company’s stock, during the period of such offering and for the 180-day period thereafter, is an intended beneficiary of this Section 12.

(b) No Amendment Without Consent of Underwriter . During the period from identification as a Lead Underwriter in connection with any public offering of the Company’s Common Stock until the earlier of (i) the expiration of the lock-up period specified in Section 12(a) in connection with such offering or (ii) the abandonment of such offering by the Company and the Lead Underwriter, the provisions of this Section 12 may not be amended or waived except with the consent of the Lead Underwriter.

28. Grantee’s Representations . In the event the Shares purchasable pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, at the time of purchase, the Grantee shall, if required by the Company, concurrently with the purchase of the Shares, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit C .

29. Transferability . No benefit payable under, or interest in, this Agreement or in the shares of Common Stock that are scheduled to be issued hereunder shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such benefit or interest shall be, in any manner, liable for, or subject to, your or your beneficiary’s debts, contracts, liabilities or torts; provided, however , nothing in this Section 14 shall prevent transfer (i) by will, (ii) by applicable laws of descent and distribution or (iii) to an Alternate Payee to the extent that a QDRO so provides, as further described in Section 20 of the Plan.

30. No Contract for Employment . This Agreement is not an employment or service contract and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation of the Grantee to continue in the employ or service of the Company, or of the Company to continue to employ Grantee.

31. Applicability of Plan . This Agreement is subject to all the provisions of the Plan, which provisions are hereby made a part of this Agreement, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall control.

32. No Compensation Deferral . This Award is not intended to constitute “nonqualified deferred compensation” within the meaning of Code Section 409A, but rather is intended to be exempt from the application of Code Section 409A. To the extent that the Award is nevertheless deemed to be subject to Code Section 409A for any reason, this Award shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date. Notwithstanding any provision herein to the contrary, in the event that following the Grant Date, the Administrator (as defined in the Plan) determines that the Award may be or become subject to Code Section 409A, the Administrator may adopt such amendments to the Plan and/or this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Plan and/or the Award from the application of Code Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to this option, or (b) comply with the requirements of Code Section 409A. Any such action may include, but is not limited to, delaying payment, to the extent required in order to avoid accelerated taxation and/or tax penalties under Code Section 409A, to a Grantee who is a “specified employee” within the meaning of Code Section 409A to the first day following the six-month period (or, if earlier, the date of the Grantee’s death) on the date of the Grantee’s “separation of service” as defined in Code Section 409A. The Company shall use commercially reasonable efforts to implement the provisions of this Section 17 in good faith; provided that neither the Company, the Administrator nor any Employee, Director or representative of the Company or of any of its Affiliates shall have any liability to Grantee with respect to this Section 17.

33. Acknowledgement . By electing to accept this Agreement, you acknowledge receipt of this Agreement and hereby confirm your understanding that the terms set forth in this Agreement constitute, subject to the terms of the Plan, which terms shall control in the event of any conflict between the Plan and this Agreement, the entire agreement and understanding of the parties with respect to the matters contained herein and supersede any and all prior agreements, arrangements and understandings, both oral and written, between the parties concerning the subject matter of this Agreement. The Company may, in its sole discretion, decide to deliver any documents related to Awards awarded under the Plan or future Awards that may be awarded under the Plan by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

34. Entire Agreement: Governing Law . The Notice, the Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. These agreements are to be construed in accordance with and governed by the internal laws of the State of Colorado, without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Colorado to the rights and duties of the parties. Should any provision of the Notice or this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

35. Headings . The captions used in this Agreement are inserted for convenience and shall not be deemed a part of this Agreement for construction or interpretation.

36. Dispute Resolution The provisions of this Section 21 shall be the exclusive means of resolving disputes arising out of or relating to the Notice, the Plan and this Agreement. The Company, the Grantee, and the Grantee’s assignees (the “parties”) shall attempt in good faith to resolve any disputes arising out of or relating to the Notice, the Plan and this Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party’s position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Agreement shall be brought in the Courts of the State of Colorado, and the parties shall submit to the jurisdiction of such courts. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 21 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

37. Compliance with Laws . Notwithstanding anything contained in this Agreement or the Plan, the Company may not take any actions hereunder, and no award shall be granted, that would violate the Securities Act of 1933, as amended (the “Act”), the Securities Exchange Act of 1934, as amended, the Code, or any other securities or tax or other applicable law or regulation. Notwithstanding anything to the contrary contained herein, the shares issuable upon vesting shall not be issued unless such shares are then registered under the Act, or, if such shares are not then so registered, the Company has determined that such vesting and issuance would be exempt from the registration requirements of the Act.

38. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other address as such party may designate in writing from time to time to the other party.

[Signature page follows]


Signature of Grantee:




[Printed Name of Grantee]

Date: ,

ADA-ES, Inc.:

By:


[Printed Name and Title of Officer]

Date: ,

EXHIBIT A

STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

[Please sign this document but do not date it. The date and information of the transferee will be completed if and when the shares are assigned.]

FOR VALUE RECEIVED, hereby sells, assigns and transfers unto , ( ) shares of the Common Stock of ADA-ES, Inc., a Colorado corporation (the “Company”), standing in his name on the books of, the Company represented by Certificate No. herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company attorney to transfer the said stock in the books of the Company with full power of substitution.

DATED:

The undersigned spouse of joins in this assignment.

Dated:



(Spouse of )

EXHIBIT B

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to the Internal Revenue Code, to include in gross income for 20 the amount of any compensation taxable in connection with the taxpayer’s receipt of the property described below:

1.	The name, address, taxpayer identification number and taxable year of the undersigned are:

TAXPAYER’S NAME:

SPOUSE’S NAME:

TAXPAYER’S SOCIAL SECURITY NO.:

SPOUSE’S SOCIAL SECURITY NO.:

TAXABLE YEAR: Calendar Year 20

ADDRESS:

2.	The property which is the subject of this election is shares of common stock of ADA-ES, Inc.

3.	The property was transferred to the undersigned on , 20 .

4.	The property is subject to the following restrictions.

5.	The fair market value of the property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is:

$ per share × shares = $ .

6.	The undersigned paid $ per share × shares for the property transferred or a total of $ .

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The undersigned taxpayer is the person performing the services in connection with the transfer of said property.

The undersigned will file this election with the Internal Revenue Service office to which he files his annual income tax return not later than 30 days after the date of transfer of the property. A copy of the election also will be furnished to the person for whom the services were performed. Additionally, the undersigned will include a copy of the election with his income tax return for the taxable year in which the property is transferred. The undersigned understands that this election will also be effective as an election under law.


Dated:
								Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated:
								Spouse of Taxpayer

EXHIBIT C

ADA-ES, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

INVESTMENT REPRESENTATION STATEMENT



GRANTEE	:

COMPANY	:	ADA-ES, INC.

SECURITY	:	COMMON STOCK

AMOUNT	:

DATE	:

In connection with the purchase of the above-listed securities (the “Shares”), the undersigned Grantee represents to the Company the following:

(b) Grantee acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon among other things, the bona fide nature of Grantee’s investment intent as expressed herein. In this connection, Grantee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Grantee’s representation was predicated solely upon a present intention to hold these Shares for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Shares, or for a period of one year or any other fixed period in the future. Grantee further understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the Shares. Grantee understands that the certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company.

(c) Grantee is familiar with the provisions of Rule 144 promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Subject to the availability of certain public information about the Company, Grantee may resell the Shares pursuant to Rule 144 if Grantee is not an affiliate of the Company and has not been an affiliate for the preceding three months. If Grantee is or has been an affiliate of the Company in the preceding three months, Grantee may resell the Shares pursuant to Rule 144 subject to the satisfaction of certain conditions specified in the rule, including: (1) the resale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended), (2) the availability of certain public information about the Company, (3) the amount of Shares being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. The resale must occur not less than six months after the later of the date the Shares were sold by the Company or the date the Shares were sold by an affiliate of the

Company (within the meaning of Rule 144). Other restrictions may also apply to sales of the Shares, and Grantee understands that the Shares may not be readily resold, and that delays may occur in selling the Shares even if they are eligible for sale under Rule 144.

(d) Grantee further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Grantee understands that no assurances can be given that any such other registration exemption will be available in such event, and that the Shares may not be salable by Grantee.

(e) Grantee represents that he is a resident of the State of .


Signature of Grantee:




[Print Name]

Date:

ADA-ES, INC.

By:

Title:

Exhibit 31.1

Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as Amended

I, Michael D. Durham, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ADA-ES, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2012


/s/ Michael D. Durham
Name: Michael D. Durham

Exhibit 31.2

Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as Amended

I, Mark H. McKinnies, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ADA-ES, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2012

/s/ Mark H. McKinnies

Name: Mark H. McKinnies

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Michael D. Durham, as President and Chief Executive Officer of ADA-ES, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Michael D. Durham
Name:		Michael D. Durham
Title:		President and Chief Executive Officer

Date: November 9, 2012

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Mark H. McKinnies, as Chief Financial Officer of ADA-Es, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Mark H. McKinnies
Name:		Mark H. McKinnies
Title:		Chief Financial Officer

Date: November 9, 2012