What changed in this filing

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Item 1A. Risk Factors

2021-04-05 compared with 2020-05-14 · 48 added, 47 removed, 151 unchanged (39% of the section changed)

4 unchanged sentences

Risks Related to our Business

Our business focus is mercury removal from power plant emissions, which is driven primarily by regulation.

Demand for our services and products is largely driven by coal consumption by North American electricity power generating plants.

Any significant changes that diminish the use of coal as a primary fuel source for electricity production may adversely affect our business.

North American coal-fired electricity generating units comprise the basis of the market for our services and products.

Regulations mandating or incentivizing the purchase of power from renewable energy sources (e.g.

wind, solar, hydroelectric, geothermal) and/or the phasing out of coal-fired power plants could lessen the demand for electricity from such plants and overall reduce the number of coal-fired electricity generating units and the amount of coal burned, thereby decreasing the demand for our services and products which could adversely affect our business.

The phasing out of coal-fired plants has already had a negative effect on our results of operations.

Continued promulgation of these regulations in North America is affected by, among other things, politics, perceived environmental impact, and public favor.

Our business focus has predominately been mercury removal from power plant emissions, which is driven primarily by regulation.

Any significant changes in mercury emission regulation could have a major impact on the Company.

Our business focus is mercury reduction in flue gas emissions from large coal-fired utility and industrial boilers.

Our business focus has predominately been mercury reduction in flue gas emissions from large coal-fired utility and industrial boilers.

This market is primarily based on air pollution control regulations and enforcement of those regulations.

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Power plants were required to begin complying with MATS on April 16, 2015, unless they were granted a one-year extension to begin to comply.

The MATS regulation has been subject to legal challenge, and in June 2015, the U.S.

Supreme Court held that the EPA unreasonably failed to consider costs in determining whether it is “appropriate and necessary” to regulate hazardous air pollutants, including mercury, from power plants.

The Court remanded the case back to the U.S.

Court of Appeals for the District of Columbia Circuit for further proceedings, but left the rule in place.

In December 2015, the D.C.

Circuit remanded the rule back to the EPA for further consideration while allowing MATS to remain in effect pending the EPA’s finding;

the Supreme Court later denied a petition challenging the lower court’s decision to remand without vacating.

On April 14, 2016, EPA issued a final supplemental finding reaffirming the MATS rule on the ground that it is supported by the cost analysis the Supreme Court required.

That supplemental finding is under review by the D.C.

Circuit, and the Company is unable to predict with certainty the outcome of these proceedings.

On April 18, 2017, EPA asked the court to place that litigation in abeyance, stating that the Agency is reviewing the supplemental finding to determine whether it should be reconsidered in whole or in part.

The court granted EPA’s abeyance request on April 27, 2017, and ordered EPA to file 90-day status reports starting July 26, 2017.

In February 2019, the EPA published a proposed revised supplemental cost-benefits finding for MATS in which EPA proposed to conclude that the 2016 supplemental finding was flawed in part due to its reliance on co-benefits to justify MATS.

Nevertheless, the EPA proposed to leave the MATS rule in place.

At the same time, EPA also requested public comment on whether MATS may or must be rescinded if EPA reversed its earlier conclusion that it is “appropriate and necessary” to regulate power plant emissions of mercury and other hazardous air pollutants under the statutory provision authorizing MATS.

Following the close of the public comment period, on April 16, 2020, the EPA issued a final rule which finalized the proposed supplemental cost-benefits finding in substantially the form proposed in 2019.

The final rule withdraws EPA’s 2016 “appropriate-and-necessary” determination as erroneous, but leaves the 2011 MATS rule in place pursuant to D.C.

The MATS regulation has been subject to legal challenge since being enacted.

In June 2015, the U.S.

On remand, following the Supreme Court’s instructions to consider costs, the EPA in April 2016 issued a final supplemental finding reaffirming the MATS rule on the ground that it is supported by the cost analysis the Supreme Court required.

That supplemental finding remains under review by the D.C.

In April 2017, the EPA asked the court to place that litigation in abeyance, stating that the Agency then under the Trump Administration was reviewing the supplemental finding to determine whether it should be reconsidered in whole or in part.

The court granted EPA’s abeyance request which has remained in place.

In April 2020, the EPA concluded that the 2016 supplemental finding was flawed in part due to its reliance on co-benefits to justify MATS and withdrew EPA’s 2016 “appropriate-and-necessary” determination as erroneous, but left the 2011 MATS rule in place pursuant to D.C.

Circuit case law holding that a source category may only be removed from the list of categories to be regulated through a rigorous delisting process that cannot currently be satisfied by EPA.

EPA’s final action will almost certainly be challenged in the courts, both by those who favor retention of MATS (such as the electric utility industry) and by those who oppose it (such as certain coal interests and deregulatory groups).

This litigation could extend uncertainty over the status of MATS for a number of years.

Upon taking office, the Biden Administration in January 2021 directed the EPA to review the previous Administration’s actions on various environmental matters including the withdrawal of the “appropriate and necessary” determination, for conformity with Biden Administration environmental policy.

Nevertheless, legal challenges may continue with respect to the MATS regulation which could extend uncertainty over the status of MATS for a number of years.

Investors should note that any changes to the MATS rule could have a negative impact on our business.

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There can be no assurance that outstanding patents will not be challenged or circumvented by competitors, or that such other protection provided by trade secret laws and confidentiality and licensing agreement will prove adequate.

We cannot assure you that we will have adequate remedies against contractual counterparties for disclosure of our trade secrets or violation of ME 2 C’s intellectual property rights.

We cannot assure you that we will have adequate remedies against contractual counterparties for disclosure of our trade secrets or violation of ME 2 C Environmental’s intellectual property rights.

As a result, we may not be able to successfully defend our patents or protect proprietary aspects of our technology.

We may not be successful in our current or any future patent litigation.

We may not be successful in patent litigation.

In July 2019, we announced that we had initiated patent litigation against defendants in the U.S.

District Court for the District of Delaware for infringement of certain patents which relate to our two-part Sorbent Enhancement Additive (SEA ® ) process for mercury removal from coal-fired power plants.

Such litigation is in its early stages.

Investors should note that patent litigation, like most types of commercial litigation, can be expensive, time-consuming and unpredictable.

There is no assurance that this litigation, or any future patent litigation which the Company may commence, will be successful.

Although we already entered into agreements with each of the four major utility defendants in this litigation, such action will continue with respect to the other defendants still involved.

There is no assurance that the continuing litigation with the remaining defendants, or any future patent litigation which the Company may commence, will be successful.

In addition, in an infringement proceeding, a court may decide that one or more of our patents are not valid or enforceable, or a court may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

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Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

We depend on third-party suppliers for materials needed to implement our technology.

We buy all the raw materials needed to implement our technology and provide uniquely formulated products for effective mercury removal from third-party suppliers.

We depend on third-party suppliers for materials needed to implement our emissions technologies.

We buy all the raw materials needed to implement our technologies and provide uniquely formulated products for effective mercury removal from third-party suppliers.

Suppliers of our raw materials include large companies that have provided materials for decades and have an international presence.

15 unchanged sentences

Our business lacks significant diversification and is dependent on the success of our mercury emission control technologies.

As a result, we are impacted more acutely by factors affecting our industry or the regions in which we operate that we would if our business were more diversified, enhancing our risk profile.

As a result, we are impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business were more diversified, enhancing our risk profile.

Low gas prices could negatively impact our results of operations;

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The ongoing coronavirus outbreak which began in China at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown of certain businesses in impacted geographic regions.

If the coronavirus outbreak situation should worsen, we may experience disruptions to our business including, but not limited to, the availability of raw materials, equipment, to our workforce, or to our business relationships with other third parties.

Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission (the “SEC”).

In this regard, on April 14, 2020, we filed a current report on Form 8-K with the SEC in part to avail ourselves of a 45-day grace period to file this Annual Report on Form 10-K provided by an SEC order issued on March 25, 2020 (which extended and superseded a prior order issued on March 4, 2020), which order allows a registrant up to an additional 45 days after the original due date of certain reports required to be filed with the SEC if a registrant’s ability to file such report timely is affected due to COVID-19.

In such Form 8-K, we acknowledged experiencing disruptions including, but not limited to, the limited availability of key Company personnel and professional advisors who are needed to prepare this Annual Report due in part to suggested and mandated social quarantining and work from home orders.

This has, in turn, delayed our ability to complete our audit and prepare this Annual Report.

Investors should be aware that such disruptions may impact our ability to file future SEC reports by their original due dates.

The extent to which the coronavirus impacts our operations in other areas or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

If the coronavirus situation does not improve during 2021 or should worsen, we may experience disruptions to our business including, but not limited to, the availability of raw materials, equipment, to our workforce, or to our business relationships with other third parties.

Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.

The extent to which the coronavirus impacts our operations in other areas or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Any such disruptions or losses we incur could have a material adverse effect on our financial results and our ability to conduct business as expected.

5 unchanged sentences

China is the largest producer and consumer of coal in the world.

Nevertheless, we are hopeful that as a result of the Minimata Convention, China as well as other countries will follow the U.S.

Nevertheless, we are hopeful that as a result of the Minamata Convention, China as well as other countries will follow the U.S.

in regulating mercury emissions.

8 unchanged sentences

As a result of this and similar activities, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

Our board of directors recently concluded that we needed to restate previously issued financial statements as a result of a change in accounting for a certain debt restructuring.

On April 13, 2020, our board of directors of the Company (which currently acts as our audit committee) concluded, after consultation with management and the Company’s recently retained financial consulting firm, that our previously issued unaudited financial statements for the periods ended March 31, 2019, June 30, 2019 and September 30, 2019, included in the Company’s Quarterly Reports of Form 10-Q for the periods ended March 31, 2019, June 30, 2019 and September 30, 2019, respectively, should no longer be relied upon as a result of the change in accounting for a certain debt restructuring.

Our board of directors concluded in 2020 that we needed to restate previously issued financial statements as a result of a change in accounting for a certain debt restructuring.

On April 13, 2020, our board of directors of the Company (which currently acts as our audit committee) concluded, after consultation with management and the Company’s financial consulting firm, that our previously issued unaudited financial statements for the periods ended March 31, 2019, June 30, 2019 and September 30, 2019, included in the Company’s Quarterly Reports of Form 10-Q for the periods ended March 31, 2019, June 30, 2019 and September 30, 2019, respectively, should no longer be relied upon as a result of the change in accounting for a certain debt restructuring.

We concluded that a gain on debt restructuring recognized during the first quarter of 2019 should have been accounted for as a capital transaction.

Specifically, on February 25, 2019, we entered into an Unsecured Note Financing Agreement with AC Midwest Energy LLC (“AC Midwest”), pursuant to which AC Midwest exchanged a previously issued subordinated unsecured note in the principal amount of $13,000,000, together with all accrued and unpaid interest thereon, for a new unsecured note in the principal amount of $13,154,931.

We recorded a gain of $3,412,402 on this exchange which we recently concluded should have been recorded as an equity transaction capital contribution.

The adjustments resulting therefrom, which are non-cash in nature, increase additional paid-in capital and increase our previously reported net loss, but has no impact on previously reported cash, working capital, total assets, total liabilities and revenues.

Nevertheless, such restatement could cause investors in our securities to lose confidence in our financial statements and management which could result in a decrease in our stock price and negative sentiment in the investment community.

We recorded a gain of $3,412,402 on this exchange which we concluded in April 2020 should have been recorded as an equity transaction capital contribution.

The adjustments resulting therefrom, which are non-cash in nature, increased additional paid-in capital and increased our previously reported net loss, but had no impact on previously reported cash, working capital, total assets, total liabilities and revenues.

Nevertheless, such restatement may have caused, or could in the future cause, investors in our securities to lose confidence in our financial statements and management which could result in a decrease in our stock price and negative sentiment in the investment community.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

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The accompanying consolidated financial statements as of December 31, 2020 have been prepared assuming the Company will continue as a going concern.

As reflected in the consolidated financial statements, we had an accumulated deficit of $57.7 million, $1.5 million in cash and negative working capital of $302,000 at December 31, 2019.

Additionally, we had a net loss in the amount of $6.1 million and cash used by operating activities of $1.6 million for the year ended December 31, 2019.

These factors raise substantial doubt about our ability to continue as a going concern for the next twelve months from the filing of this Annual Report on Form 10-K.

Although we anticipate continued significant revenues for products to be used in MATS compliance activities, no assurances can be given that we can obtain sufficient working capital through these activities and additional financing may be needed to meet its obligations.

As reflected in the consolidated financial statements, the Company had an accumulated deficit of $63 million and a negative working capital of $984,112 at December 31, 2020.

Additionally, the Company had a net loss in the amount of $5.8 million and cash used by operating activities of $1.2 million for the year ended December 31, 2020.

These factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these consolidated financial statements within the Company’s Annual Report on Form 10-K.

Although we anticipate continued significant revenues for products used in MATS compliance activities and from licensing of our technologies, no assurances can be given that the Company can obtain sufficient working capital through these activities and additional financing may be needed to meet its obligations.

In February 2020, we closed on a one-year secured loan with a bank in the principal amount of $200,000 and in April 2020, we received loan proceeds in the amount of $299,300 pursuant to the Paycheck Protection Program under the CARES Act which was enacted on March 27, 2020 as a result of the COVID-19 pandemic.

Nevertheless, we may need to raise additional equity or debt financing.

While we believe in our ability to raise additional funds, no assurances can be given that we can maintain sufficient working capital through these efforts, or that the continued implementation of our business plan will generate sufficient revenues in the future to sustain ongoing operations.

Such PPP loan was forgiven in January 2021 and the one-year secured loan was repaid in full in February 2021.

In February 2021, the Company received second draw loan proceeds in the amount of $299,380 pursuant to the Paycheck Protection Program.

In January and February 2021, certain warrant holders exercised warrants for cash and the Company received proceeds of approximately $246,808.

Also, in January and February 2021, the Company substantially reduced the aggregate principal amount outstanding on various debt obligations.

In this regard, $940,000 of the outstanding principal amount of convertible promissory notes issued in 2013 was converted to common stock, leaving $50,000 remaining outstanding on such notes issued in 2013.

In February and March 2021, the Company eliminated $860,000 of outstanding convertible notes issued in 2018 by force converting all of such notes based on the terms thereof.

Nevertheless, the Company may need to raise additional equity or debt financing.

While the Company believes in its ability to raise additional funds, no assurances can be given that the Company can maintain sufficient working capital through these efforts, or that the continued implementation of its business plan will generate sufficient revenues in the future to sustain ongoing operations.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

5 unchanged sentences

Any such conversion and/or exercise of such securities will have a dilutive effect on existing stockholders.

In this regard, investors should note that multiple issuances of common stock were made in the first quarter of 2021, due to such conversions and exercises, along with other matters.

In addition, if we were to raise additional funds through further issuances of equity or convertible debt securities in the future, our stockholders would suffer additional dilution.

44 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors