What changed in this filing

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Item 1A. Risk Factors

2023-05-15 compared with 2022-04-05 · 53 added, 70 removed, 177 unchanged (41% of the section changed)

17 unchanged sentences

Our major competitors in the U.S.

and Canada include companies such as Advanced Emissions Solutions, Inc., Albemarle Corporation, Cabot Corporation, Calgon Carbon Corporation, Carbonxt, Inc., Environmental Energy Services Inc., and Nalco Company.

and Canada include companies such as Advanced Emissions Solutions, Inc., Cabot Corporation, Calgon Carbon Corporation, and Nalco Company.

These companies employ large sales staff and are well positioned in the market.

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Certain critical technology related to our systems and products is protected by trade secret laws and confidentiality and licensing agreements.

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 ME2C Environmental’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 ME2C’s intellectual property rights.

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

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

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.

In fact, we recently received approval from the District Judge of the U.S.

District Court in Delaware of the adoption of the report and recommendation of the Magistrate Judge to allow us to proceed with litigation claims against certain refined coal entities as named in the 2019 lawsuit.

Although we have 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 we may commence, will be successful.

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An adverse result in any litigation could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing.

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 emissions technologies;

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If any of our suppliers should become unavailable to us for any reason, there are a number of other suppliers that we believe can be contracted with to supply the raw materials that we need.

However, the availability and price of those raw materials can be impacted by factors beyond our control.

If such suppliers cannot meet our demand for such raw materials on a timely basis or at acceptable prices, such could have a negative effect on our operations.

However, the availability and price of those raw materials can be impacted by factors beyond our control including any price increases due to inflation.

If such suppliers cannot meet our demand for such raw materials on a timely basis or at acceptable prices or if we are unable to offset any such increases that might occur with price adjustments to our customers, such could have a negative effect on our operations.

We are dependent on key customers.

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Our mercury-emissions control technologies are used by coal-fired power plants primarily in the United States.

At such times that gas prices remain low for an extended period of time or drop substantially, power suppliers will likely rely more upon gas-fired units rather than coal plants in meeting their power needs.

Gas prices can be very volatile and are influenced by numerous factors beyond our control.

Although market prices for natural gas have increased substantially in the last twelve months, such prices were relatively low in recent years which likely caused a weaker demand for our products.

At such times that gas prices remain low for sustained periods of time or such prices drop substantially, power suppliers will likely rely more upon gas-fired units rather than coal plants in meeting their power needs.

Historically, gas prices have been volatile and are likely to remain volatile in the future due to numerous factors beyond our control.

Although market prices for natural gas have recently remained relatively high, we cannot predict when such prices may decline and remain low for an extended period of time which, in such event, will likely cause a weaker demand for our products.

In addition, mild winter months in the U.S.

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Nevertheless, the duration and scope of the COVID-19 pandemic continues to be uncertain.

If the coronavirus situation does not improve during 2022 or should worsen, we may experience disruptions to our business including, but not limited to, the availability of raw materials and equipment, to our workforce, or to our business relationships with other third parties.

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

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.

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Maintaining and improving our financial controls may divert management’s attention and increase costs.

We are subject to the requirements of the Securities Exchange Act of 1934, including the requirements of the Sarbanes-Oxley Act of 2002.

We are subject to the requirements of the Exchange Act, including the requirements of the Sarbanes-Oxley Act of 2002.

The requirements of these rules and regulations have increased in recent years, causing an increase in legal and financial compliance costs, and make some activities more difficult, time-consuming, or costly and may also place undue strain on our personnel, systems, and resources.

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Relatedly, if we fail to remediate any such material weakness in the future, we may not be able to accurately report our financial condition or results of operations.

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 (which currently acts as our audit committee) concluded, after consultation with management and our 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 our 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, 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 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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As a result, such liquidity risk could impair our ability to funds operations and jeopardize our financial condition.

Doubt regarding our ability to continue as a going concern.

Doubt regarding our ability to continue as a going concern has been expressed in the past.

The accompanying consolidated financial statements as of December 31, 2022 have been prepared assuming we will continue as a going concern.

As reflected in the consolidated financial statements, we had $1,388,000 in cash at December 31, 2021, along with cash provided by operating activities of $206,000 for the year ended December 31, 2021.

However, we had a working capital deficit of $11,692,000 and an accumulated deficit of $67.1 million at December 31, 2021, and we also had a net loss in the amount of $3.6 million for the year ended December 31, 2021.

In addition, all existing secured and unsecured debt held by our principal lender in the principal amount of $13.4 million matures on August 25, 2022, other than the profit share liability, which is within one year from the issuance of these consolidated financial statements.

These factors raise substantial doubt about our ability to continue as a going concern for the next twelve months from the issuance of these consolidated financial statements.

We have taken steps to alleviate such doubt.

During the year ended December 31, 2021, we eliminated $4,440,000 of convertible notes through conversions to shares of common stock and repaid $10,000 of convertible notes, leaving no convertible notes outstanding as of December 31, 2021.

In addition, in June 2021, we announced that we had entered into a Debt Repayment and Exchange Agreement with our principal lender which, subject to various closing conditions, including but not limited to the completion of an offering of equity securities resulting in net proceeds of at least $12.0 million by December 31, 2021, which has been extended to June 30, 2022, will repay all existing secured and unsecured debt obligations held by such lender.

Although we anticipate continued significant revenues in our business operations and that we will be able to raise the funds necessary to complete the transaction contemplated by the Debt Repayment and Exchange Agreement, no assurances can be given that we can obtain sufficient working capital through our business operations or that we will be able to raise the funds necessary to close under the Debt Repayment Agreement by June 30, 2022, or at all, in order to sustain ongoing operations.

In November 2021, we filed a registration statement on Form S-1 with the SEC for a proposed offering of common stock.

Such registration statement has not yet become effective.

The accompanying consolidated financial statements do not include 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 us to continue as a going concern.

As reflected in the consolidated financial statements for the year ended December 31, 2022, we had approximately $1.5 million in cash at December 31, 2022.

In addition, we had cash provided by operating activities of $0.1 million for the year ended December 31, 2022, had working capital of $2.3 million and an accumulated deficit of $68.7 million at December 31, 2022.

On October 28, 2022, our principal lender agreed to extend the maturity date of all of its existing secured and unsecured debt in the principal amount of $13.4 million from October 31, 2022 to August 25, 2025.

As a result, such liabilities have been classified as long-term liabilities in the accompanying consolidated financial statements as of December 31, 2022.

Based upon such extension of the maturity date of such secured and unsecured debt, our current cash position and our recent revenue growth, management believes substantial doubt regarding the Company’s ability to continue as a going concern has been mitigated.

We believe we will have sufficient working capital to fund operations for at least the next twelve months from the date of issuance of these financial statements.

As reflected in the consolidated financial statements for the year ended December 31, 2021, we had $1,388,000 in cash at December 31, 2021, along with cash provided by operating activities of $206,000 for the year ended December 31, 2021.

However, we had a working capital deficit of $11,692,000 and an accumulated deficit of $67.1 million at December 31, 2021.

In addition, all existing secured and unsecured debt held by our principal lender in the principal amount of $13.4 million was to mature on August 25, 2022, other than the profit share liability, which was within one year from the issuance of such consolidated financial statements.

Investors should note that such evaluation is performed by management each annual and interim reporting period.

Discretion in the use of available funds

Management has discretion concerning the use of our available funds, as well as the timing of their expenditure.

As a result, investors will be relying on the judgment of management for the application of our available funds.

The results and the effectiveness of the application of the available funds are uncertain.

If the available funds are not applied effectively, the results of our operations may suffer.

Stockholders may not agree with the manner in which management chooses to allocate and spend our available funds.

Risks Related to Regulation

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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, but left the rule in place.

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 such judicial review 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, which abeyance request was granted.

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 the 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 the EPA.

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.

In February 2021, the Biden Administration requested that the judicial review of the supplemental finding withdrawal be held in abeyance which was granted by the court and remains in place.

On January 31, 2022, the EPA issued a proposal to revoke the reconsideration step made by the EPA in April 2020 and affirm that it is appropriate and necessary to regulate hazardous pollutants for coal and oil-fired EGUs.

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.

Supreme Court, in Michigan v.

EPA , 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, but left the rule in place.

In April 2016, the EPA issued a supplemental finding in response to the Michigan decision and found that, after a consideration of costs, it remained appropriate and necessary to regulate such emissions from coal- and oil-fired power plants.

In May 2020, the EPA, then under the Trump Administration, reversed the determination, finding that, after weighing the costs of compliance against certain benefits of the regulation, the 2016 supplemental finding was erroneous but left the MATS rule in place.

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 May 2020 "appropriate and necessary" determination, for conformity with Biden Administration environmental policy.

On February 9, 2022, the EPA proposed to revoke the May 2020 finding and reaffirm the EPA’s 2016 finding.

On February 15, 2023, the EPA reaffirmed that it remains appropriate and necessary to regulate hazardous air pollutants, including mercury, from power plants after considering cost, and revoked the May 2020 finding.

Nevertheless, legal challenges may continue in the future with respect to the MATS regulation.

Delays in enactment of foreign regulations could restrict our ability to reach our strategic growth targets in Europe and Asia .

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Risks Associated with our Common Stock

Our common stock has a limited trading market, which could affect your ability to sell shares of our common stock and the price you may receive for our common stock.

Our common stock currently has a limited trading market, which could affect your ability to sell shares of our common stock and the price you may receive for our common stock.

Our common stock is currently traded in the over-the-counter market on the OTCQB maintained by OTC Markets Group Inc.

under the symbol “MEEC.” However, as the OTCQB is an unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than Nasdaq or other national securities exchanges, there has been only limited trading activity in our common stock, and we have a relatively small public float compared to the number of our shares outstanding.

Further, while we have applied to list our common stock on the Nasdaq Capital Market, even if our common stock is listed on the Nasdaq Capital Market, we cannot predict the extent to which investors’ interest in our common stock will provide an active and liquid trading market.

Our ability to raise capital to continue to fund operations by selling shares of our common stock and our ability to acquire other companies or technologies by using shares of our common stock as consideration may also be impaired.

under the symbol "MEEC.

" However, as the OTCQB is an unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than Nasdaq or other national securities exchanges, there has been only limited trading activity in our common stock, and we have a relatively small public float compared to the number of our shares outstanding.

While we have applied to list our common stock on the TSX-V and have obtained conditional approval, we cannot predict the extent to which investors’ interest in our common stock will provide an active and liquid trading market if our common stock is listed on the TSX-V.

Our stock price may be volatile, which could result in substantial losses to investors and litigation.

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We currently intend to retain all of our future earnings to finance the growth and development of our business, and therefore, we do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

We believe it is likely that our board of directors will continue to conclude that it is in the best interests of the Company and its shareholders to retain all earnings (if any) for the development of our business.

We believe it is likely that our Board of Directors will continue to conclude that it is in the best interests of the Company and its stockholders to retain all earnings (if any) for the development of our business.

In addition, the terms of any future debt agreements may preclude us from paying dividends.

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If we issue additional shares of our common stock or other securities that may be convertible into, or exercisable or exchangeable for, our common stock, our existing stockholders would experience further dilution and could trigger anti-dilution provisions in outstanding warrants.

In November 2021, we filed a registration statement on Form S-1 with the SEC for a proposed offering of common stock.

Such registration statement has not yet become effective and no assurances can be given that the contemplated offering will be completed.

Even if completed, we may need to raise additional capital in the future.

We may need to raise additional capital in the future.

Future financings may involve the issuance of debt, equity, and/or securities convertible into or exercisable or exchangeable for our equity securities.

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Our articles of incorporation provide that we possess and may exercise all powers of indemnification of our officers, directors, employees, agents, and other persons and our bylaws also require us to indemnify our officers and directors as permitted under the provisions of the Delaware General Corporate Law.

The foregoing indemnification obligations could result in our Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers.

These provisions and resultant costs may also discourage our Company from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors, officers, and employees even though such actions, if successful, might otherwise benefit our Company and stockholders.

The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers.

These provisions and resultant costs may also discourage us from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors, officers, and employees even though such actions, if successful, might otherwise benefit the Company and stockholders.

Our common stock is currently characterized as a "penny stock" under SEC rules.

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We can give no assurance at what time, if ever, our common stock will not be classified as a "penny stock" in the future.

If we cannot satisfy the initial listing standards, or continue to satisfy the continued listing standards, of the Nasdaq Capital Market, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them.

We have applied to list our common stock on the Nasdaq Capital Market.

There can be no assurance that the Nasdaq Capital Market will approve our application for listing.

Even if approved and our securities are listed on the Nasdaq Capital Market, we cannot assure you that our securities will continue to be listed on the Nasdaq Capital Market.

In order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum shareholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements.

Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules.

If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including:

a limited availability for market quotations for our securities;

reduced liquidity with respect to our securities;

a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stock;

limited amount of news and analyst coverage;

a decreased ability to issue additional securities or obtain additional financing in the future.

The proposed reverse stock split could cause our stock price to decline relative to its value before the split and decrease the liquidity of shares of our common stock.

A reverse stock split, if ever implemented, could cause our stock price to decline relative to its value before the split and decrease the liquidity of shares of our common stock.

At a special meeting of stockholders held on February 24, 2022, our stockholders approved a proposal which authorizes our Board of Directors, in its sole and absolute discretion, to effect a reverse stock split of our common stock at a ratio to be determined by the Board, ranging from one-for-two to one-for-seven, at such time and date, if at all, as determined by the Board in its sole discretion, but no later than December 31, 2023.

In the event a reverse stock split is implemented, there is no assurance that that the reverse stock split will not cause an actual decline in the value of our outstanding common stock.

As of the date of this report, we do not have any plans to effectuate a reverse stock split.

Nevertheless, in the event a reverse stock split is implemented at any time in the future, there is no assurance that that the reverse stock split will not cause an actual decline in the value of our outstanding common stock.

The liquidity of the shares of our common stock may be affected adversely by the reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase as a result of the reverse stock split.

In addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

In addition, the reverse stock split may increase the number of stockholders who own odd lots of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

Potential future sales pursuant to Rule 144.

Many of the shares of our common stock presently held by management and others are "restricted securities" as that term is defined in Rule 144, promulgated under the United States Securities Act of 1933, as amended.

Under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a certain holding period, may, under certain circumstances, sell such shares or a portion of such shares.

Such holding periods have already been satisfied in many instances.

Therefore, actual sales or the prospect of sales of such shares under Rule 144 in the future may depress the price of our common stock.

Except as required by the Federal Securities Law, we do not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or for any other reason.

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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