What changed in this filing

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Item 1A. Risk Factors

2024-04-16 compared with 2023-05-15 · 60 added, 64 removed, 166 unchanged (43% of the section changed)

17 unchanged sentences

Our major competitors in the U.S.

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

and Canada include companies such as Arq, Inc.

(formerly Advanced Emissions Solutions, Inc.), Norit Activated Carbon, Calgon Carbon Corporation, and Nalco Company.

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

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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.

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

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.

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.

Patent litigation, like most types of commercial litigation, can be expensive, time-consuming, and unpredictable.

Any such litigation may require us to spend a substantial amount of time and money and could distract management from our day-to-day operations.

There is no assurance that we will be successful in any such litigation.

Moreover, 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.

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.

In July 2019, we initiated patent litigation against various defendants in the U.S.

Between July 2020 and January 2021, we entered into agreements with each of the four major utility defendants in this litigation, and in November 2023, we settled such matter with two other major groups in the litigation.

In addition, following a five-day trial, on March 1, 2024, a federal jury in the U.S.

District Court for the District of Delaware awarded a $57.1 million patent infringement verdict in favor of the Company against the remaining group of defendants.

Nevertheless, the ultimate success in this litigation against the remaining group of defendants still remains uncertain due to other possible factors including, but not limited to, the results of any post-trial motions and applications, appeals and any collectability issues.

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

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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.

While we are in the process of developing new technologies, such as in the area of improving the processing of REEs, no assurance can be made that any such new technologies currently under development will be commercialized or result in a significant revenue stream.

While we are in the process of developing new technologies, no assurance can be made that any such new technologies currently under development will be commercialized or result in a significant revenue stream.

Low gas prices can negatively impact our results of operations;

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In the event such disputes occur, we may not be able to resolve those disputes in a satisfactory manner which could have a material adverse effect on our business, financial condition, and results of operations.

Revenues are generated under contracts that must be renegotiated periodically.

Substantially all of our revenues are generated under contracts which expire periodically or which must be frequently renegotiated, extended, or replaced.

Whether these contracts are renegotiated, extended, or replaced is often subject to factors that may be beyond our control, including an extremely competitive marketplace for the services we offer.

We cannot assure you that the costs and pricing of our services can remain competitive in the marketplace or that we will be successful in renegotiating our contracts.

Business interruptions, including any interruptions resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on us.

The ongoing coronavirus disease (COVID-19) outbreak which began in China at the beginning of 2020 has impacted various businesses throughout the world, including the implementation of travel bans and restrictions and the extended shutdown of certain businesses in impacted geographic regions.

During this time, we have continued to conduct our operations while responding to the pandemic with actions to mitigate adverse consequences to our employees, business, supply chain, and customers.

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

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.

Revenues are generated under contracts or blanket purchase orders that must be renegotiated periodically.

Substantially all of our revenues are generated under contracts or blanket purchase orders which expire periodically or which must be frequently renegotiated, extended, or replaced.

Whether these contracts or blanket purchase orders are renegotiated, extended, or replaced is often subject to factors that may be beyond our control, including an extremely competitive marketplace for the services we offer.

We cannot assure you that the costs and pricing of our services can remain competitive in the marketplace or that we will be successful in renegotiating our contracts and blanket purchase orders.

Business interruptions could significantly disrupt our operations and could have a material adverse impact on us.

Our operations, and those of our suppliers, and other contractors and consultants, could be subject to geopolitical events, natural disasters, power and other infrastructure failures or shortages, public health pandemics or epidemics, and other natural or man-made disasters or business interruptions.

In the event of any of these occurrences, we may experience disruptions to our business including, but not limited to, the availability of raw materials and equipment, disruptions to our workforce, or to our business relationships with other third parties.

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.

Any disruptions to our information technology systems or breaches of our network security could interrupt our operations, compromise our reputation, and expose us to and costly response measures and could have a material adverse effect on our business operations.

We rely on information technology systems, including third-party hosted servers and cloud-based servers, to keep business, financial, and corporate records, communicate internally and externally, and operate other critical functions.

If any of our internal systems or the systems of our third-party providers are compromised due to computer virus, unauthorized access, malware, and the like, then sensitive documents could be exposed or deleted, and our ability to conduct business could be impaired.

Cyber incidents can result from deliberate attacks or unintentional events.

These incidents can include, but are not limited to, unauthorized access to our systems, computer viruses or other malicious code, denial of service attacks, malware, ransomware, phishing, human error, or other events that result in security breaches or give rise to the manipulation or loss of sensitive information or assets.

Cyber incidents can be caused by various persons or groups, including disgruntled employees and vendors, activists, organized crime groups, and state-sponsored and individual hackers.

Cyber incidents can also be caused or aggravated by natural events, such as earthquakes, floods, fires, power loss, and telecommunications failures.

The risk of cybersecurity breach has generally increased as the number, intensity, and sophistication of attempted attacks from around the world has increased.

While we have certain cyber security procedures in place, given the evolving nature of these threats, there can be no assurance that we will not suffer material losses in the future due to cyber-attacks.

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

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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 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 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

21 unchanged sentences

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.

On April 3, 2023, the EPA issued a proposal to strengthen and update MATS.

This proposal is currently pending.

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 .

Our strategic growth initiatives are reliant upon more restrictive environmental regulations being enacted for the purpose of mercury control from power plant emissions in Europe and in China and other Asian countries.

In May 2017, the European Union and seven of its member states ratified the Minamata Convention on Mercury, which triggered its entry into force with implementation starting in 2021.

Uncertainty and lack of international environmental regulations could restrict our ability to attract business in Europe and Asia .

In order to expand our business internationally, we would expect that more restrictive international environmental regulations will need to be enacted for the purpose of mercury control from power plant emissions in Europe and in China and other Asian countries.

In May 2017, the European Union and seven of its member states ratified the Minamata Convention on Mercury.

The Minamata Convention on Mercury is a global treaty to protect human health and the environment from the adverse effects of mercury.

Specific emissions limits are being developed by the European Union, although the timing of any enactment of such is uncertain.

With regard to business opportunities in China and other Asian countries, there currently exists no specific mandate for mercury capture that requires specific control technology, such as we offer.

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

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.

If stricter regulations are delayed or are not enacted, our sales growth targets in Europe and Asia could be adversely affected.

Any delay in enactment of more restrictive international regulations or the lack thereof could restrict any efforts and our ability to attract business in Europe and Asia for our emissions technologies.

Risks Associated with 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.

There is a limited trading market for our common stock.

Our common stock is currently traded in Canada on the TSX Venture Exchange (“TSXV”) under the symbol “MEEC” and is quoted in the United States on the OTCQB operated 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.

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.

Historically, the trading volume for our common stock has been limited.

Accordingly, investors may find it more difficult to buy and sell our shares.

These factors may have an adverse impact on the trading and price of our common stock.

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

9 unchanged sentences

lack of securities analyst coverage or speculation in the press or investment community about us or market opportunities in our industry or about the market for coal-fired power in the U.S.

changes in government policies in the United States and, as our international business increases, in other foreign countries;

changes in government policies in the United States and in foreign countries, if we are able to derive significant business outside of the United States;

changes in earnings estimates or recommendations by securities or research analysts who track our common stock or failure of our actual results of operations to meet those expectations;

15 unchanged sentences

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

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 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.

As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We may need to raise additional capital in the future.

Additional capital may not be available to us on commercially reasonable terms, if at all, when or as we require.

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.

We may need to raise additional capital in the future.

We have never declared or paid any cash dividends on our capital stock, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

Any determination to pay dividends in the future will be at the discretion of our Board of Directors.

Accordingly, capital appreciation, if any, of our common stock may be your sole source of gain for the foreseeable future.

We may need additional capital in the future, which may not be available on acceptable terms or at all, to continue investing in our business and to finance acquisitions and other strategic transactions.

We may need additional capital in the future, which may not be available on acceptable terms or at all, to among other things, continue investing in our business, pursue acquisitions and other strategic transactions.

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

These financings may not be available to us on commercially reasonable terms or at all when and as we require funding.

These financings may not be available to us on commercially reasonable terms or at all if and when we require funding.

If we are able to consummate such financings, the trading price of our common stock could be adversely affected and/or the terms of such financings may adversely affect the interests of our existing stockholders.

Any failure to obtain additional working capital when required would have a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, or exercisable or exchangeable for, our capital stock would have a dilutive effect on the voting and economic interest of our existing stockholders.

Any failure to obtain additional working capital, if and when required, could have a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Our officers and directors are entitled to indemnification from us for liabilities under our articles of incorporation, which could be costly to us and may discourage the exercise of stockholder rights.

19 unchanged sentences

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

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.

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 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.

If we cannot continue to satisfy the continued listing requirements, of the TSXV, our securities may be delisted from the TSXV, which could negatively impact the price of our securities and your ability to sell them.

On July 20, 2023, our shares of common stock began to trade on the TSXV.

We cannot assure you that our securities will continue to be listed on the TSXV.

In order to maintain our listing on the TSXV, we will be required to comply with certain rules of the TSXV, including those regarding a minimum public float, and various additional requirements.

We may not be able to continue to satisfy these requirements and applicable rules.

If we are unable to satisfy the TSXV criteria for maintaining our listing, our securities could be subject to delisting from the TSXV.

If the TSXV 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;

limited amount of news and analyst coverage;

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

Potential future sales pursuant to Rule 144.

4 unchanged sentences

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.

Unresolved Staff Comments.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

We lease a warehouse in Corsicana, Texas consisting of approximately 20,000 square feet which we use for manufacturing and distribution of our products.

As of December 2019, we relocated our corporate headquarters to such location which corporate headquarters prior thereto were maintained in Lewis Center, Ohio.

Such lease in Corsicana, Texas expires March 31, 2024.

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