What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-02-25 · 90 added, 72 removed, 117 unchanged (58% of the section changed)

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early 2018, our chief executive officer (“CEO”) Ben Slager invented a new technology system referred to as Cellulose-to-Sugar

or CTS 2.0, and the Company filed, and recently received, a patent application for this technology.

The CTS 2.0 process is a continuous

mechanical/chemical dry process for converting cellulose material into sugar and lignin.

CTS 2.0 system converts plant-based feedstock into two product streams, soluble sugars and lignin, each of which can be converted into

multiple products:

(1) sugars can be further processed into cellulosic ethanol and other biofuels like jet fuel, and potentially into

bio chemicals;

and (2) Lignin can be used in ion exchange resins, specialty chemicals, or to create bioplastics.

Lignin can also be burned

as a renewable fuel.

Company expects to have its 5 th generation CTS 2.0 prototype, along with auxiliary equipment, completed in 2022.

of the 5 th generation system is to prove larger volume production, and to be an intermediate step to the final 6 th

generation which is intended to be a commercial volume system.

or CTS, and the Company filed, and received, two patents for this technology.

The CTS process is a continuous mechanical/chemical dry

process for converting cellulose material into sugar and lignin.

CTS system converts plant-based feedstock into one primary product, soluble sugars, which can be further processed into cellulosic ethanol

and other biofuels like jet fuel, and potentially into bio chemicals.

primary co-product of the CTS system is sulfur-free lignin.

Our lignin potentially can be used in ion exchange resins or specialty chemicals.

Lignin can also be burned as a renewable fuel.

2022, the Company partnered with K.R.

Komarek to build its CTS machines going forward.

Komarek is an industry leading manufacturing company

that builds briquetting machines and compaction/granulation systems with throughput capacities up to 50 tons per hour.

The Company has

begun successful testing on a Komarek-made machine at a throughput processing rate of 2.5 tons per day.

The Company has designed a pilot

plant around that machine and is in the process of completing the buildout of the plant.

We anticipate having the pilot plant completed

in Q1, 2023 and anticipate to continue testing it and optimizing parameters and sugar production in the first half of 2023.

plant is designed to show successful volume production and scalability.

Company expects to engage an engineering firm to design a semi-commercial scale pilot plant that integrates a larger CTS system into

the pre-processing and post-processing elements of the plant.

It is anticipated that the semi-commercial plant will have the capacity

to produce sugar at a rate sufficient to make around 500,000 – 1,000,000 gallons of ethanol per year.

The goal of the semi-commercial

plant is to provide operating cost estimates of a full commercial volume system.

Due to its mechanical nature and modularity, we anticipate

that one plant would have multiple modular CTS systems, and that the semi-commercial plant would contain one such module.

expects to have the semi-commercial system ready in 2024.

Company’s strategy is to diversify its product portfolio to include a number of product lines.

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exchange resin producers;

(3) making bioplastics from lignin;

or, (3) using the sugars and lignin to make biochemicals.

We believe that

one or more of these co-products could potentially be profitable for the Company.

goal is to develop our CTS 2.0 technology to a commercial scale and then seek to either enter into a joint venture or acquire existing

We believe that one or more of these co-products

could potentially be profitable for the Company.

goal is to develop our CTS technology to a commercial scale and then seek to either enter into a joint venture with or acquire existing

corn ethanol plants to install the CTS technology.

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to shareholders, we will seek project-based financing to build (or acquire and retrofit) or joint venture with existing ethanol producers

to produce cellulosic ethanol and lignin/bioplastics and other specialty chemicals from our CTS 2.0 system.

We believe retrofitting existing

plants with the CTS 2.0 technology may achieve more rapid commercialization than building new plants.

If its first plant is profitable,

the Company intends to grow with additional plants in the United States and explore international growth by either licensing the technology

or forming joint ventures with foreign domestic partners to build plants ourselves.

to produce cellulosic ethanol and lignin and other specialty chemicals from our CTS system.

We believe retrofitting existing plants with

the CTS technology may achieve more rapid commercialization than building new plants.

If its first plant is profitable, the Company intends

to grow with additional plants in the United States and explore international growth by either licensing the technology or forming joint

ventures with foreign domestic partners to build plants ourselves.

Energy Policy Act of 2005, which included the Renewable Fuel Standard Program enforced by the US Environmental Protection Agency (“EPA”),

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January 1, 2022 through the date of filing, 12,450,148 warrants were exercised for proceeds of $177,251.

January 1, 2022 through the date of filing, 350,000 options were exercised for proceeds of $15,900.

January 1, 2022, through the date of filing, the Company issued 11,671,662 shares at prices ranging from $0.15 to $0.15 per share for

proceeds of $1,750,750.

January 1, 2021, through the date of filing, 500,000 options were exercised for proceeds of $20,400.

January 1, 2022 through the date of filing, the Company issued an aggregate of 952,119 shares of its common stock for services valued

January 1, 2022 through the date of filing, the Company issued an aggregate of 77,333 warrants for services.

Using a Black-Scholes

asset-pricing model, these warrants were valued at $72,090.

These warrant have all been exercised.

January 1, 2021 through the date of filing, the company issued 7,080,000 shares in exchange for convertible debt of $279,000.

of Equity Securities

Company has never purchased, nor does it own, any equity securities of any other issuer.

Company has incurred losses since inception, and although it currently has a working capital surplus, it may be unable to raise further

At December 31, 2021 the Company had a working capital surplus of $713,554 and had incurred accumulated losses of $48,821,403

since its inception.

The Company expects to incur significant additional losses in connection with its continued start-up activities.

As disclosed in Note 2 to the financial statements, there is substantial doubt as to the Company’s ability to continue as a going

concern based upon recurring operating losses and its need to obtain additional financing to sustain operations.

The Company’s

ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay

its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses.

Using a Black-Scholes asset-pricing

model, these warrants were valued at $9,773.

of Operations

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the year ended December 31, 2022, the Company recognized $0 in revenue and also $0 in 2021.

the year ended December 31, 2021, the Company’s general and administrative expenses decreased by $192,826 to $1,034,948 from $1,227,776

This decrease is primarily due to non-cash options packages valued at $876,291 in 2020 as compared to $31,104 non-cash stock

compensation in 2021, partially offset by increased salaries to $942,522 from $396,394 in 2020.

the year ended December 31, 2022, the Company’s general and administrative expenses increased by $507,011 to $1,541,959 from $1,034,948

This increase is primarily due to the vesting and expensing of options in 2022 valued at $526,636, as compared to $31,104 non-cash

stock compensation in 2021.

expense decreased in the year ended December 31, 2022 by $4,366 to $29,406 from $33,772 in 2021.

This decrease is due to the Company’s

decision to accrue interest on the back pay due to management in 2020 followed by the repayment of most back pay in 2021.

the year ended December 31, 2022, the Company received a loan forgiveness of $0 versus $66,330 in 2021.

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to research and development expenses were $2,350,218 and $1,103,436, respectively.

increase is due to the Company hiring additional laboratory personnel after successfully raising additional capital.

The increase is largely due to the vesting of options

in 2022 valued at $1,038,953, versus $0 in 2021.

and Capital Resources

of December 31, 2021 the Company had $1,164,664 in cash and total stockholders’ equity at December 31, 2021 was negative $1,396,046.

of December 31, 2022, the Company had $211,901 in cash and total stockholders’ equity December 31, 2022, was negative $2,356,917.

As of December 31, 2021 the Company had $1,164,664 in cash and total stockholders’ equity at December 31, 2021 was negative $1,396,046.

Total debt, including advances, accounts payable and other notes payable at December 31, 2022, together with interest payable thereon

and contingent liabilities, was $3,234,293, a decrease of $994,973 from December 31, 2020, where it stood at $4,229,266.

This decrease

is primarily attributable to paying down back pay and $279,000 of convertible notes having converted.

$2,738,132 of the remaining debt

was renegotiated to be payable out of future revenue or future profits and otherwise does not come due.

and contingent liabilities, was $3,462,835 an increase of $228,542 from December 31, 2021, where it stood at $3,234,293.

This increase

is primarily attributable to a renewal of the lease which increased liabilities by $108,809.

$2,738,132 of the remaining debt was renegotiated

to be payable out of future revenue or future profits and otherwise does not come due.

the fiscal year ended December 31, 2022, the Company’s operating expenses increased $1,760,408 to $3,932,276 from $2,171,868 in

This increase can primarily be attributed to an increase in salaries.

This increase can primarily be attributed to equity based compensation of $1,565,589 in 2022 due to the vesting of options.

the fiscal year ended December 31, 2022, the Company’s investing activities used $205,502 in cash.

This can be attributed to $138,170

used to purchase machinery and equipment, and $16,742 in patent expenses.

used to purchase machinery and equipment, and $67,350 in patent costs.

These are to be compared with $233,132 in cash used in fiscal

year ended December 31, 2021, which consisted of $216,390 used to purchase machinery and equipment, and $16,742 in patent expenses.

the fiscal year ended December 31, 2022, the Company generated an aggregate of $1,288,900 through its financing activities, which is

an increase of $2,272,757 from $1,303,710 during the fiscal year ended December 31, 2020.

This increase from the prior year can be attributed

to $2,260,750 raised in private placements as compared to $887,380 in 2020, and $1,315,717 received from the exercise of warrants as

compared to $350,000 in 2020.

a decrease of $2,287,567 from $3,576,467 raised during fiscal year ended December 31, 2021.

This decrease from the prior year can be

attributed to $1,168,000 raised in private placements as compared to $2,260,750 in 2021, and $120,900 received from the exercise of warrants

as compared to $1,315,717 in 2021.

this time, the Company has limited liquidity and capital resources.

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revenue or obtain additional financing for current and future operations.

The Company anticipates needing around $7.5 to $10 million

to optimize and scale up its CTS 2.0 system to be commercially ready.

The Company anticipates needing around $15 million to optimize

and scale up its CTS system to be commercially ready.

The Company anticipates reaching this stage in around 12-18 months.

There is no guarantee that we will achieve all of the additional funding that is needed.

of the date of filing, the Company has raised $7,500 through the exercise of warrants in 2022, $3,576,467 in 2021, through the issuance

of common stock and the exercise of warrants and options, in addition to $10,692,293 raised through the end of 2020 through its private

placement offerings, and in addition to capital raised through debt or convertible notes.

However, there is no guarantee that the company

will be able to raise any additional capital on terms acceptable to the Company.

guarantee that we will achieve all of the additional funding that is needed.

of the date of filing, the Company has raised $655,001 through a private placement and the exercise of warrants in 2023, $1,288,900 in

2022, through the issuance of common stock and the exercise of warrants and options, in addition to $14,826,952 raised through the end

of 2021 through its private placement offerings, and in addition to capital raised through debt or convertible notes.

However, there

is no guarantee that the company will be able to raise any additional capital on terms acceptable to the Company.

inability to obtain this funding either in the near term and/or longer term will materially affect the ability of the Company to implement

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its operations.

Company has incurred losses since inception, and it may be unable to raise further capital.

At December 31, 2022, the Company had a working

capital deficit of $383,700 and had incurred accumulated losses of $52,781,586 since its inception.

The Company expects to incur significant

additional losses in connection with its continued start-up activities.

As disclosed in Note 2 to the financial statements, there is

substantial doubt as to the Company’s ability to continue as a going concern based upon recurring operating losses and its need

to obtain additional financing to sustain operations.

The Company’s ability to continue as a going concern is dependent upon its

ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient

revenues from its operations to pay its operating expenses.

of December 31, 2022, shareholders’ equity was negative $(2,356,917).

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or other applicable authoritative guidance.

Company’s operating results are not affected by seasonality.

Company’s business and operating results are not currently affected in any material way by inflation.

a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Sheet Arrangements

Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its

financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or

capital resources that is material to investors.

of Long-Lived Assets

assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may

not be recoverable.

If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable,

the Company compares the carrying amount of the asset group to future undiscounted net cash flows, excluding interest costs, expected

to be generated by the asset group and their ultimate disposition.

If the sum of the undiscounted cash flows is less than the carrying

value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value

of the asset group.

Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

Company monitors its investment for impairment at least annually and makes appropriate reductions in the carrying value if it determines

that an impairment charge is required based on qualitative and quantitative information.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 7. Management’s Discussion and Analysis