10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

Commission file number 000-33067

MIDWEST ENERGY EMISSIONS CORP.

(Exact name of Registrant as Specified in its Charter)

Delaware	87-0398271
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1810 Jester Drive Corsicana, Texas	75109
(Address of principal Executive offices)	(Zip Code)

(614) 505-6115

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act: None.

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

State the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date: Common, $.001 par value per share, 89,871,132 outstanding as of August 15, 2022.

MIDWEST ENERGY EMISSIONS CORP.

TABLE OF CONTENTS

		Page
PART I ‑ FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements.	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	5
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	11
Item 4.	Controls and Procedures.	12
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	13
Item 1A.	Risk Factors	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	13
Item 3.	Default upon Senior Securities.	13
Item 4.	Mine Safety Disclosures.	13
Item 5.	Other Information.	13
Item 6.	Exhibits.	14
SIGNATURES		15

2

PART I – FINANCIAL INFOMATION

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. Forward-looking statements are generally identified by using words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “will,” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements in this report are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed under the caption “Risk Factors” in the Company’s 2021 Form 10-K. In addition, matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the gain or loss of a major customer, change in environmental regulations, disruption in supply of materials, capacity factor fluctuations of power plant operations and power demands, a significant change in general economic conditions in any of the regions where our customer utilities might experience significant changes in electric demand, a significant disruption in the supply of coal to our customer units, the loss of key management personnel, availability of capital and any major litigation regarding the Company.

Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the Company’s filings and with the Securities and Exchange Commission.

3

Item 1. Financial Statements.

MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES

Index to Condensed Consolidated Financial Information

As of and for the three and six months ended June 30, 2022

	Page
Condensed Consolidated Unaudited Balance Sheets	F-1
Condensed Consolidated Unaudited Statements of Operations	F-2
Condensed Consolidated Unaudited Statements of Stockholders’ Deficit	F-3
Condensed Consolidated Unaudited Statements of Cash Flows	F-4
Notes to Condensed Consolidated Unaudited Financial Statements	F-5

4

MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2022 (unaudited)			December 31, 2021
ASSETS
Current assets
Cash	$	508,614		$	1,388,307
Accounts receivable		2,963,012			1,015,053
Inventory		847,675			1,075,401
Prepaid expenses and other current assets (related party of $0 and $70,000)		611,105			312,008
Total current assets		4,930,406			3,790,769
Security deposits		10,175			10,175
Property and equipment, net		1,818,682			1,829,544
Right of use asset - operating lease		188,464			390,098
Intellectual property, net		2,011,897			2,114,197
Total assets	$	8,959,624		$	8,134,783
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued expenses (related party of $231,250 and $206,554)	$	2,859,133		$	2,267,711
Current portion of equipment notes payable		-			2,677
Current portion of operating lease liability		158,899			340,207
Customer credits		167,000			167,000
Accrued salaries		470,899			562,430
Short term debt – related party		250,000			-
Secured note payable – related party		271,686			271,686
Unsecured note payable, net of discount and issuance costs – related party		12,851,615			11,871,254
Total current liabilities		17,029,232			15,482,965
Operating lease liability		33,189			54,551
Profit share liability – related party		3,144,160			2,836,743
Total liabilities		20,206,581			18,374,259
COMMITMENTS AND CONTINGENCIES
Stockholders’ deficit
Preferred stock, $0.001 par value: 2,000,000 shares authorized, no shares issued		-			-
Common stock; $0.001 par value; 150,000,000 shares authorized; 89,871,132 and 89,115,951 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		89,871			89,116
Additional paid-in capital		57,284,933			56,788,321
Accumulated deficit		(68,621,761	)		(67,116,913	)
Total stockholders’ deficit		(11,246,957	)		(10,239,476	)
Total liabilities and stockholders’ deficit	$	8,959,624		$	8,134,783

See accompanying notes to these condensed consolidated financial statements.

F-1

MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(UNAUDITED)
	For the Three Months Ended June 30, 2022			For the Three Months Ended June 30, 2021			For the Six Months Ended June 30, 2022			For the Six Months Ended June 30, 2021
Revenues	$	5,128,882		$	2,270,696		$	8,470,467		$	5,297,334
Costs and expenses:
Cost of sales		3,363,447			1,489,833			5,705,478			2,980,566
Selling, general and administrative expenses (related party of $75,385, $75,373, $150,385, and $175,373)		1,459,759			1,261,689			2,960,178			2,718,154
Interest expense (related party of $503,887, $497,660, $1,000,850, and $1,000,851)		503,887			1,120,086			1,002,242			1,795,706
Gain on extinguishment of debt		-			-			-			(299,300	)
Loss on change in fair value of profit share		158,456			128,771			307,417			249,825
Total costs and expenses		5,485,549			4,000,379			9,975,315			7,444,951
Loss before provision for income taxes		(356,667	)		(1,729,683	)		(1,504,848	)		(2,147,617	)
Benefit (Provision) for income taxes		-			-			-			-
Net loss	$	(356,667	)	$	(1,729,683	)	$	(1,504,848	)	$	(2,147,617	)
Net loss per common share - basic and diluted:	$	(0.00	)	$	(0.02	)	$	(0.02	)	$	(0.03	)
Weighted average common shares outstanding - basic and diluted		89,371,132			84,190,073			89,245,211			82,320,840

See accompanying notes to these condensed consolidated financial statements.

F-2

MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED)

Three and Six Months Ended June 30, 2022
					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Par Value		Capital			Deficit			Total
Balance - January 1, 2022		89,115,951	$	89,116	$	56,788,321		$	(67,116,913	)	$	(10,239,476	)
Share based compensation expense		-		-		138,622			-			138,622
Stock issued for cashless exercise of options		5,181		5		(5	)		-			-
Net loss		-		-		-			(1,148,181	)		(1,148,181	)
Balance - March 31, 2022		89,121,132	$	89,121	$	56,926,938		$	(68,265,094	)	$	(11,249,035	)
Stock issued for consulting services		500,000		500		159,500			-			160,000
Issuance of stock for compensation		250,000		250		54,750			-			55,000
Share based compensation expense		-		-		143,745			-			143,745
Net loss		-		-		-			(356,667	)		(356,667	)
Balance – June 30, 2022		89,871,132		89,871		57,284,933			(68,621,761	)		(11,246,957	)

Three and Six Months Ended June 30, 2021
					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Par Value		Capital			Deficit			Total
Balance - January 1, 2021		78,096,326	$	78,096	$	50,202,478		$	(63,484,106	)	$	(13,203,532	)
Stock issued for interest payable on convertible notes		494,400		494		246,706			-			247,200
Stock issued for conversion of convertible notes		3,700,000		3,700		1,846,300			-			1,850,000
Stock issued for exercise of warrants		705,166		705		246,103			-			246,808
Stock issued for cashless exercise of warrants		194,690		195		(195	)		-			-
Stock issued for services		525,000		525		643,725			-			644,250
Share based compensation expense		-		-		5,878			-			5,878
Net loss		-		-		-			(417,934	)		(417,934	)
Balance - March 31, 2021		83,715,582		83,715		53,190,995			(63,902,040	)		(10,627,330	)
Stock issued for interest payable on convertible notes		229,500		230		367,909			-			368,139
Stock issued for conversion of convertible notes		5,160,000		5,160		2,574,840			-			2,580,000
Stock issued for exercise of stock options		125,000		125		101,125			-			101,250
Stock issued for cashless exercise of stock options		15,869		16		(16	)		-			-
Share based compensation expense		-		-		67			-			67
Net loss		-		-		-			(1,729,683	)		(1,729,683	)
Balance - June 30, 2021		89,245,951	$	89,246	$	56,234,920		$	(65,631,723	)	$	(9,307,557	)

See accompanying notes to these condensed consolidated financial statements.

F-3

MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(UNAUDITED)
	For the Six Months Ended June 30, 2022			For the Six Months Ended June 30, 2021
Cash flows from operating activities
Net loss	$	(1,504,848	)	$	(2,147,617	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation – amortization of prepaid services		112,916			249,963
Stock-based compensation		337,367			5,945
Amortization of discount of notes payable		919,884			1,314,760
Amortization of debt issuance costs		60,477			60,478
Amortization of right to use assets		201,634			200,398
Amortization of patent rights		102,300			102,300
Depreciation expense		10,862			44,379
Gain on forgiveness of debt		-			(299,300	)
Loss on change in fair value of profit share		307,417			249,825
Changes in operating assets and liabilities
(Increase) Decrease in accounts receivable		(1,947,959	)		3,898
Decrease in inventory		227,726			16,383
(Increase) Decrease in prepaid expenses and other assets		(252,013	)		1,775
Decrease in security deposits		-			2,080
Decrease in accrued salaries		(91,531	)		-
Increase in accounts payable and accrued liabilities		591,422			897,922
Decrease in operating lease liability		(202,670	)		(201,434	)
Net cash (used in) provided by operating activities		(1,127,016	)		501,755
Cash flows from financing activities
Payments of notes payable		-			(34,661	)
Payments of equipment notes payable		(2,677	)		(16,199	)
Proceeds from the issuance of short term debt – related party		250,000			-
Proceeds from exercise of warrants		-			246,808
Proceeds from exercise of stock options		-			101,250
Proceeds from the issuance of notes payable		-			299,380
Net cash provided by financing activities		247,323			596,578
Net (decrease) increase in cash and cash equivalents		(879,693	)		1,098,333
Cash and cash equivalents - beginning of period		1,388,307			591,019
Cash and cash equivalents - end of period	$	508,614		$	1,689,352
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	-		$	41,082
Taxes	$	14,163		$	4,518
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Stock issued for prepaid services	$	160,000		$	644,250
Stock issued for conversion of convertible notes	$	-		$	4,430,000
Stock issued for interest payable	$	-		$	615,339

See accompanying notes to these condensed consolidated financial statements.

F-4

MIDWEST ENERGY EMISSIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization

Midwest Energy Emissions Corp.

Midwest Energy Emissions Corp. is organized under the laws of the State of Delaware.

MES, Inc.

MES, Inc. is incorporated in the State of North Dakota. MES, Inc. is a wholly owned subsidiary of Midwest Energy Emissions Corp. and is engaged in the business of developing and commercializing state of the art control technologies relating to the capture and control of mercury emissions from coal fired boilers in the United States and Canada.

ME2C Sponsor LLC and ME2C Acquisition Corp.

ME2C Sponsor LLC is a limited liability company formed in the State of Delaware and is a wholly owned subsidiary of Midwest Energy Emissions Corp. and owns 85% of ME2C Acquisition Corp.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of Rule 8-03 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on April 5, 2022, from which the accompanying condensed consolidated balance sheet dated December 31, 2021 was derived.

In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly the financial position as of June 30, 2022, and results of operations, changes in stockholders’ deficit and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Midwest Energy Emissions Corp. and its wholly-owned subsidiaries, MES, Inc. and ME2C Sponsor LLC, and ME2C Acquisition Corp. which is 85% owned by ME2C Sponsor LLC (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, valuation of equity issuances and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company uses estimates in accounting for, among other items, profit share liability, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve and impairment of intellectual property. Actual results could differ from those estimates.

Recoverability of Long-Lived and Intangible Assets

Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived and/or intangible assets would be adjusted, based on estimates of future discounted cash flows. The Company evaluated the recoverability of the carrying value of the Company’s property and equipment, right of use asset and intellectual property. No impairment charges were recognized for the three and six months ended June 30, 2022 and 2021.

F-5

Fair Value of Financial Instruments

The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows:

☐	Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date.
☐	Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
☐	Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Cash was the only asset measured at fair value on a recurring basis by the Company at June 30, 2022 and December 31, 2021 and is considered to be Level 1.

Financial instruments include cash, accounts receivable, accounts payable, and short-term debt. The carrying amounts of these financial instruments approximated fair value at June 30, 2022 and December 31, 2021 due to their short-term maturities.

The fair value of the promissory notes payable at June 30, 2022 and December 31, 2021 approximated the carrying amount as the notes were recently issued at interest rates prevailing in the market and interest rates have not significantly changed as of June 30, 2022 and December 31, 2021. The fair value of the promissory notes payable was determined on a Level 2 measurement. Discounts on issued debt, as well as debt issuance costs, are amortized over the term of the individual promissory notes.

The fair value of the profit share liability at June 30, 2022 and December 31, 2021 was calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability was determined on a Level 3 measurement. These values are determined using pricing models for which the assumptions utilized management’s estimates.

The following tables present the Company’s liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

			Fair Value Measurement as of
			June 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		3,144,160		-		-		3,144,160
Total Liabilities	$	3,144,160	$	-	$	-	$	3,144,160

F-6

			Fair Value Measurement as of
			December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		2,836,743		-		-		2,836,743
Total Liabilities	$	2,836,743	$	-	$	-	$	2,836,743

Revenue Recognition

The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales and other taxes are excluded from revenues. Invoiced shipping and handling costs are included in revenue.

F-7

Disaggregation of Revenue

The Company generated revenue for the three and six months ended June 30, 2022 and 2021 by (i) delivering product to its commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites and (iii) performing demonstrations of its technology at customers with the intent of entering into long term supply agreements based on the performance of the Company’s products during the demonstrations and (iv) licensing its technology to customers.

Revenue for product sales is recognized at the point of time in which the customer obtains control of the product, at the time title passes to the customer upon shipment or delivery of the product based on the applicable shipping terms.

Revenue for equipment sales is recognized upon commissioning and customer acceptance of the installed equipment per the terms of the purchase contract.

Revenue for demonstrations and consulting services is recognized when performance obligations contained in the contract have been completed, typically the completion of necessary field work and the delivery of any required analysis per the terms of the agreement.

The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the three and six months ended June 30, 2022 and 2021.

	Three months ended June 30, 2022				Three months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	4,791,054	$	4,791,054	$	2,060,949	$	2,060,949
License revenue		163,125		163,125		145,547		145,547
Demonstrations & Consulting revenue		27,000		27,000		27,000		27,000
Equipment revenue		147,703		147,703		37,200		37,200
	$	5,128,882	$	5,128,882	$	2,270,696	$	2,270,696

	Six months ended June 30, 2022				Six months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	7,989,356	$	7,989,356	$	4,092,050	$	4,092,050
License revenue		233,408		233,408		1,091,094		1,091,094
Demonstrations & Consulting revenue		54,000		54,000		61,310		61,310
Equipment revenue		193,703		193,703		52,880		52,880
	$	8,470,467	$	8,470,467	$	5,297,334	$	5,297,334

F-8

Income Taxes

Income tax expense for the three and six months ended June 30, 2022 is for gross receipts tax in certain states in which the Company conducts business.

The Company recorded no income tax expense for the three and six months ended June 30, 2022 and 2021 because the estimated effective tax rate was zero.  In determining the estimated annual effective income tax rate, the Company analyses various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives. 

As of June 30, 2022, the Company continues to provide a 100% valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Basic and Diluted Loss Per Common Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding. Diluted loss per share reflects the potential dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. There were no dilutive potential common shares as of June 30, 2022 and 2021, because the Company incurred net losses and basic and diluted losses per common share are the same. The following common stock equivalents were excluded from the computation of diluted net loss per share of common stock because they were anti-dilutive. The exercise of these common stock equivalents would dilute earnings per share if the Company becomes profitable in the future.

	June 30,		June 30,
	2022		2021
Stock Options		19,108,576		16,068,326
Warrants		4,285,000		4,285,000
Convertible debt		-		42,000
Total common stock equivalents excluded from diluted net loss per share		23,393,576		20,395,326

F-9

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist of cash and equivalents on deposit with financial institutions and accounts receivable. The Company’s cash as of June 30, 2022 and December 31, 2021 is maintained at high-quality financial institutions and has not incurred any losses to date.

Customer and Supplier Concentration

For the six months ended June 30, 2022, four customers represented 16%, 16%, 13% and 11% of the Company’s revenues, and for the six months ended June 30, 2021, four customers represented 15%, 14%, 13% and 11% of the Company’s revenues. 

For the six months ended June 30, 2022, four customers represented 25%, 18%, 12% and 11% of the Company’s accounts receivable, and for the six months ended June 30, 2021, four customers represented 20%, 19%, 18% and 13% of the Company’s accounts receivable.

For the six months ended June 30, 2022, 92% of the Company’s purchases related to four suppliers. For the six months ended June 30, 2021, 94% of the Company’s purchases related to two suppliers.  At June 30, 2022 and 2021, 57% and 61% of the Company’s accounts payable and accrued expenses related to two vendors, respectively. The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.

Contingencies

Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed.

F-10

Recently Issued Accounting Standards

Issued in June 2021, FASB Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments adds to U.S. GAAP an impairment model known as the current expected credit loss (CECL) model, which is based on expected losses rather than incurred losses.  This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application of the amendments is permitted.

Management does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.

Note 3 – Going Concern and Financial Condition

Under ASC 205-40, Presentation of Financial Statements—Going Concern, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.

The accompanying condensed consolidated financial statements as of June 30, 2022 have been prepared assuming the Company will continue as a going concern. As reflected in the condensed consolidated financial statements, the Company had approximately $509,000 in cash at June 30, 2022, and cash used in operating activities of $1.1 million for the six months ended June 30, 2022. Further, the Company had a working capital deficit of $12.1 million, an accumulated deficit of $68.6 million at June 30, 2022, and had a net loss in the amount of approximately $1.5 million for the six months ended June 30, 2022. In addition, all existing secured and unsecured debt held by its principal lender, excluding the profit share liability, in the principal amount of $13.4 million matures on August 25, 2022, which is less than one month from the issuance of these condensed consolidated financial statements.

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 condensed consolidated financial statements. The Company has taken steps to alleviate the doubt raised by the application of ASC 205-40. During 2021, the Company 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 June 30, 2022. In addition, in June 2021, the Company announced that it had entered into a Debt Repayment and Exchange Agreement with its 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 June 30, 2022, was expected to repay all existing secured and unsecured debt obligations held by such lender. Such closing conditions were not met by June 30, 2022.  However, the Company is in the process of negotiating certain changes and modifications to the financing arrangements with such lender in view of the pending maturity date of the two notes. Although the Company anticipates that it will be able to finalize such arrangements prior to the current maturity date and that significant revenues will continue in its business operations, no assurances can be given that the Company will be able to finalize such changes and modifications or that the Company can obtain sufficient working capital through its business operations in order to sustain ongoing operations.

The accompanying condensed 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 the Company to continue as a going concern.

Note 4 - Inventory

Inventory was comprised of the following at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
Raw Materials	$	474,736	$	637,084
Spare Parts		86,118		86,118
Finished goods		286,821		352,199
	$	847,675	$	1,075,401

F-11

Note 5 - Property and Equipment, Net

Property and equipment at June 30, 2022 and December 31, 2021 are as follows:

	June 30,			December 31,
	2022			2021
Equipment & installation	$	1,976,634		$	1,976,634
Trucking equipment		834,375			834,375
Office equipment, computer equipment and software		20,295			20,295
Total equipment		2,831,304			2,831,304
Less: accumulated depreciation		(2,820,329	)		(2,809,467	)
Construction in process		1,807,707			1,807,707
Property and equipment, net	$	1,818,682		$	1,829,544

The Company uses the straight-line method of depreciation over estimated useful lives of 2 to 5 years. During the three months ended June 30, 2022 and 2021 depreciation expense was $2,118, and $20,575, respectively. During the six months ended June 30, 2022 and 2021 depreciation expense was $10,862, and $44,379, respectively.

Note 6 - Intellectual Property

On January 15, 2009, the Company entered into an “Exclusive Patent and Know-How License Agreement Including Transfer of Ownership” with the Energy and Environmental Research Center Foundation, a non-profit entity. Under the terms of the Agreement, the Company has been granted an exclusive license by the Energy and Environmental Research Center Foundation for the technology to develop, make, have made, use, sell, offer to sell, lease, and import the technology in any coal-fired combustion systems (power plant) worldwide and to develop and perform the technology in any coal-fired power plant in the world.

On April 24, 2017, the Company closed on the acquisition of all patent rights from the Energy and Environmental Research Center Foundation including all patents and patents pending, domestic and foreign, relating to the foregoing technology. A total of 42 domestic and foreign patents and patent applications were included in the acquisition. In accordance with the terms of the License Agreement, the patent rights were acquired for the purchase price of (i) $2,500,000 in cash, and (ii) 925,000 shares of common stock of which 628,998 shares were issued to the Energy and Environmental Research Center Foundation and 296,002 were issued to the inventors who had been designated by the Energy and Environmental Research Center Foundation. The shares issued were valued at $518,000 ($0.56 per share), representing the value as of the closing date.

License and patent costs capitalized as of June 30, 2022 and December 31, 2021 are as follows:

	June 30,			December 31,
	2022			2021
Licenses and patents	$	3,068,995		$	3,068,995
Less: Accumulated amortization		(1,057,098	)		(954,798	)
Intellectual property, net	$	2,011,897		$	2,114,197

F-12

Amortization expense for the three months ended June 30, 2022 and 2021 was $51,150 and $51,150, respectively. Amortization expense for the six months ended June 30, 2022 and 2021 was $102,300 and $102,300, respectively. Estimated annual amortization for each of the next five years is $204,600.

Note 7 - Notes Payable

On February 25, 2020, and pursuant to a Business Loan Agreement entered into with a banking institution, the Company’s wholly owned subsidiary, MES, Inc. closed on a one-year secured loan in the principal amount of $200,000 bearing interest at 8.75% per annum. Principal and interest is to be paid in equal monthly installments until the loan was paid in full on February 26, 2021. The note is secured by substantially all of the assets of MES, Inc. In February 2021, the loan was repaid in full.

On April 14, 2020, the Company received loan proceeds in the amount of $299,300 from First International Bank & Trust pursuant to the Paycheck Protection Program (the “PPP Loan”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. In January 2021, the PPP Loan was forgiven, and the Company recorded a gain in the first quarter of 2021 on extinguishment of debt of $299,300.

In February 2021, the Company received second draw loan proceeds in the amount of $299,380 from First International Bank & Trust pursuant to the Paycheck Protection Program (the “Second PPP Loan”) under the CARES Act. In October 2021, the Second PPP Loan was forgiven and the Company recorded a gain on extinguishment of debt of $301,377.

F-13

Note 8 - Convertible Notes Payable

From July 30, 2013 through December 24, 2013, the Company sold convertible notes and warrants to unaffiliated accredited investors totaling $1,902,500 (the “2013 Notes”). From February 8, 2021 to February 15, 2021, the Company issued 1,880,000 shares of common stock to certain holders of the 2013 Notes for the conversion of the outstanding principal of such notes in the aggregate amount of $940,000, based upon a conversion rate of $0.50 per share. On April 9, 2021, the Company issued 60,000 shares of common stock to another holder of such notes for the conversion of outstanding principal in the amount of $30,000, and on August 18, 2021, the Company issued 20,000 shares of common stock to another holder of such notes for the conversion of outstanding principal in the amount of $10,000, each based upon a conversion rate of $0.50 per share. On August 24, 2021, the Company prepaid the outstanding principal balance of another of such notes in the principal amount of $10,000. As of June 30, 2022 and December 31, 2021, total principal of $0, was outstanding on the 2013 Notes.

On June 15, 2018, the Company issued 2018 Unsecured Convertible Notes (the “2018 Unsecured Notes”) totaling $560,000 and warrants to certain then holders of the 2013 Notes in exchange for their secured 2013 Notes, and from August 31, 2018 through October 30, 2018, the Company issued additional 2018 Unsecured Notes totaling $300,000 and warrants to unaffiliated investors. Pursuant to the terms of the 2018 Unsecured Notes, if at any time after six months from the issuance of the 2018 Notes, the closing price of the Company’s common stock exceeds $1.00 per share for 10 consecutive trading days, the Company shall have the right to force conversion of all of the outstanding principal of such Notes. Pursuant to notice dated February 17, 2021, the Company notified all such holders that as a result closing price of the Company’s common stock having exceeded $1.00 per share for 10 consecutive trading days, the Company was electing to force conversion of all such outstanding principal. Between February 26, 2021 and March 8, 2021, the Company issued 690,000 shares of common stock to certain holders of the 2018 Unsecured Notes for conversion of the outstanding principal of such Notes in the aggregate amount of $345,000, and on March 17, 2021, the Company issued 1,030,000 shares of common stock to the remaining holders of the 2018 Unsecured Notes for the conversion of the remaining outstanding principal in the aggregate amount of $515,000, all based upon a conversion rate of $0.50 per share. As of June 30, 2022 and December 31, 2021, total principal of $0, was outstanding on the 2018 Unsecured Notes.

From June 18, 2019 through October 23, 2019, the Company sold 2019 Unsecured Convertible Notes (the “2019 Unsecured Notes”) totaling $2,600,000 and warrants to unaffiliated accredited investors. On February 26, 2021, the Company issued 100,000 shares of common stock to a certain holder of the 2019 Unsecured Notes for the conversion of outstanding principal in the amount of $50,000, based upon a conversion rate of $0.50 per share. Pursuant to a letter dated June 14, 2021, the Company offered each of the holders of the 2019 Unsecured Notes the opportunity to voluntarily convert the outstanding principal into shares of common stock at conversion ratio of 0.50 per share and, if converted prior to June 30, 2021, still be paid interest through September 30, 2021. With such offer, all accrued and unpaid interest, and additional interest through September 30, 2021, would be paid in shares of common stock at a rate of $1.00 per share, in lieu of payment in cash. As a result thereof, and between June 17, 2021 and June 23, 2021, (i) the outstanding principal totaling $2,550,000 was voluntarily converted by the holders thereof into an aggregate of 5,100,000 shares of common stock of the Company at a conversion price of $0.50 per share, and (ii) all accrued and unpaid interest thereon, together with additional interest through September 30, 2021, which together totaled $229,500, was converted into an aggregate of 229,500 shares of common stock of the Company. The Company recognized a conversion inducement cost of $98,515 related to the conversion. As of June 30, 2022 and December 31, 2021, total principal of $0, was outstanding on the 2019 Unsecured Notes. There is no further liability related to the profit share due to the voluntary conversion of all of the 2019 Unsecured Notes.

F-14

Note 9 - Related Party

Secured Note Payable

On November 29, 2016, pursuant to a new restated financing agreement entered with AC Midwest Energy, LLC (“AC Midwest”) on November 1, 2016, the Company closed on a new secured note with AC Midwest (the “AC Midwest Secured Note”) in the original principal amount of $9,646,686, which was to mature on December 15, 2018. AC Midwest is wholly-owned by a stockholder of the Company. The AC Midwest Secured Note is guaranteed by MES, is non-convertible and bears interest at a rate of 15.0% per annum, payable quarterly in arrears on or before the last day of each fiscal quarter. Interest expense for the years ended December 31, 2021 and 2020 was $41,319 and $41,432 respectively. On February 25, 2019, per Amendment No. 3 to the Amended and Restated Financing Agreement, AC Midwest agreed to waive compliance with a certain financial covenant of the Restated Financing Agreement and strike this covenant in its entirety as of the effective date of the amendment. Also, pursuant to Amendment No. 3, the parties agreed that the maturity date for the remaining principal balance due under the AC Midwest Secured Note would be extended from December 15, 2018 to August 25, 2022. The amendment was accounted for as an extinguishment in accordance with ASC 470-50 with no gain or loss recorded. As of both June 30, 2022 and December 31, 2021, total principal of $271,686 was outstanding on this note.

Unsecured Note Payable

The Company has the following unsecured note payable - related party outstanding as of June 30, 2022 and December 31, 2021:

	June 30,			December 31,
	2022			2021
Unsecured note payable	$	13,154,931		$	13,154,931
Less discounts and debt issuance costs		(303,316	)		(1,283,677	)
Total unsecured note payable		12,851,615			11,871,254
Less current portion		(12,851,615	)		(11,871,254	)
Unsecured note payable, net of current portion	$	-		$	-

F-15

On November 29, 2016, pursuant to a new restated financing agreement entered with AC Midwest on November 1, 2016, the Company closed on an unsecured note with AC Midwest (the “AC Midwest Subordinated Note”) in the principal amount of $13,000,000, which was to mature on December 15, 2020. On February 25, 2019, the Company, entered into an Unsecured Note Financing Agreement (the “Unsecured Note Financing Agreement”) with AC Midwest, pursuant to which AC Midwest issued an unsecured note in the principal amount of $13,154,931 (the “New AC Midwest Unsecured Note”), which represented the outstanding principal and accrued and unpaid interest at closing.

In accordance with ASC 470-60-15-5, since the present value of the cash flows under the new debt instrument was at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the amendment to note as a debt extinguishment. Accordingly, the Company wrote off the remaining debt discount on the original debentures of $1,070,819. Since the amendment was with a related party defined in ASC 470-50-40-2 the Company recorded a Capital contribution of $3,412,204 on this exchange which is primarily related to the difference in fair value of the note on the date of the exchange. The Company determined that the rate of interest on the AC Midwest Subordinated Note was a below market rate of interest and determined that a discount of $6,916,687 should be recorded. This discount is based on an applicable market rate for unsecured debt for the Company of 21% and will be amortized as interested expense over the life of the loan. Amortized discount recorded as interest expense for the six months ended June 30, 2022 and 2021 was $919,884 and $980,360, respectively. As of June 30, 2022, the unamortized balance of the discount was $284,605 and the unamortized balance of the debt issuance costs was $18,711.

The New AC Midwest Unsecured Note, which has been issued in exchange for the AC Midwest Subordinated Note which has now been cancelled, will mature on August 25, 2022 (the “Maturity Date”). It bears a zero cash interest rate.

AC Midwest shall be entitled to a profit participation preference equal to 1.0 times the original principal amount (the “Profit Share”). If the original principal amount had been paid in full on or prior to August 25, 2020, AC Midwest would have been entitled to a profit participation preference equal to 0.5 times the original principal amount.

The Profit Share is “non-recourse” and shall only be derived from and computed on the basis of, and paid from, Net Litigation Proceeds from claims relating to the Company’s intellectual property, Net Revenue Share and Adjusted Free Cash Flow (as such terms are defined in the Unsecured Note Financing Agreement).

The Profit Share

In connection with the New AC Midwest Unsecured Note the Company shall pay the principal outstanding, as well as the Profit Share, in an amount equal to 60.0% of Net Litigation Proceeds until such time as any litigation funder has been paid in full and, thereafter, in an amount equal to 75.0% of such Net Litigation Proceeds until the Unsecured Note and Profit Share have been paid in full. In addition, and within 30 days following the end of each fiscal quarter, the Company shall pay the principal outstanding and Profit Share in an aggregate amount equal to the Net Revenue Share (which means 60.0% of Net Licensing Revenue (as defined) from licensing the Company’s intellectual property) plus Adjusted Free Cash Flow until the Unsecured Note and Profit Share have been paid in full, provided, however, that such payments shall exclude the first $3,500,000 of Net Licensing Revenue and Adjusted Free Cash Flow achieved commencing with the fiscal quarter ending March 31, 2019. Any remaining principal balance due on the Unsecured Note shall be due and payable in full on the Maturity Date. The Profit Share, however, if not paid in full on or before the Maturity Date, shall remain subject to Unsecured Note Financing Agreement until full and final payment.

F-16

The Company is utilizing the methodology behind the ASC 815, Derivatives and Hedging and ASC 480, Distinguishing Liabilities from Equity to determine how to account for the profit-sharing portion of the note payable. Although the transaction is not indexed to MEEC’s common stock the profit sharing has the characteristics of a freestanding financial instrument because the profit sharing is not callable by the lender, it will be paid out past the maturity of the Unsecured Note Payable and, the fair value will fluctuate over time based on payment predictions. The Profit Share was determined to have a fair value of $1,954,383 upon grant. The discounted cash flow model assumptions used at June 30, 2022 to calculate the Profit Share liability included: estimated term of sixteen years with between $100,000 to $350,000 paid quarterly starting in February 2024, and an annual market interest rate of 21%. The profit share liability will be marked to market every quarter utilizing management’s estimates.

The following are the changes in the profit share liabilities during the six months ended June 30, 2022 and 2021.

Profit Share as of January 1, 2022	$	2,836,743
Addition		-
Loss on change in fair value of profit share		307,417
Profit Share as of June 30, 2022	$	3,144,160

Profit Share as of January 1, 2021	$	2,305,308
Addition		-
Loss on change in fair value of profit share		249,825
Profit Share as of June 30, 2021	$	2,555,133

Debt Repayment and Exchange Agreement

On June 1, 2021, the Company, along with MES, entered into a Debt Repayment and Exchange Agreement with AC Midwest, which was expected to repay all existing secured and unsecured debt obligations presently held by AC Midwest (the “Debt Repayment Agreement”).

Pursuant to the Debt Repayment Agreement, the Company was at closing to repay the principal balance outstanding on the AC Midwest Secured Note in cash, together with any other amounts due and owing under such note and repay the outstanding debt under the New AC Midwest Unsecured Note by paying and issuing a combination of cash and shares of common stock which AC Midwest had agreed to accept in full and complete repayment of the obligations thereunder.

At closing, and with regard to the New AC Midwest Unsecured Note, the Company was to pay AC Midwest $6,577,465 in cash representing 50.0% of the aggregate outstanding principal balance of such note, and issue shares of common stock to AC Midwest in exchange for the remaining 50.0% of the aggregate outstanding principal balance at an exchange price equal to 100% of the offering price of common stock in the Qualifying Offering (as defined below). With regard to the Profit Share, at closing the Company was to pay AC Midwest $2,305,308 in cash representing the Profit Share Valuation, and issue shares of common stock for $4,026,568 representing the Adjusted Profit Share Valuation (as such terms are defined in the Debt Repayment Agreement) at the same exchange price indicated above. The Company agreed to provide certain registration rights with respect to the shares issued thereunder.

The closing was subject to various 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 was extended to June 30, 2022 (the “Qualifying Offering”). Such closing conditions were not met by June 30, 2022. 

Short term debt

On June 13, 2022, the Company entered into a promissory note in the amount of $250,000 with the Company’s Chairman of the Board of Directors. The note bears interest at 6% and is due on the earlier of 90 days or the Company having cash of $1,200,000. $250,000 was outstanding as of June 30, 2022.

F-17

Related Party Transactions

Kaye Cooper Kay & Rosenberg, LLP provides certain legal services to the Company and was paid $125,688 and $137,500 for the six months ended June 30, 2022 and 2021, respectively, for legal services rendered and disbursement incurred. David M. Kaye, a Director and Secretary of the Company, is a partner of the law firm. At June 30, 2022 and December 31, 2021, $231,250 and $206,554, respectively, was owed to the firm for services rendered.

Note 10 - Operating Leases

In 2016, the Company entered into a six-year agreement to lease trailers used in the delivery of its products. Monthly payments currently total $32,820.

On July 1, 2015, the Company entered into a five-year lease for warehouse space in Corsicana, Texas. Rent is $3,750 monthly throughout the term of the lease. The Company is also responsible for the pro rata share of the projected monthly expenses for the property taxes. The current pro rata share is 882. The lease was extended on June 1, 2019 for five years. The Company recorded a right of use asset and an operating lease liability of $145,267. This amount represents the difference between the value from the remaining lease and the extended lease.

On September 1, 2019, the Company entered into a one-year lease for office space in Grand Forks, North Dakota. Monthly rent was $590 a month through August 2020. The lease was not renewed and the Company vacated the space.

Future remaining minimum lease payments under these non-cancelable leases are as follows:

For the twelve months ended June 30,
2023	$	163,260
2024		36,031
Total		199,291
Less discount		(7,203	)
Total lease liabilities		192,088
Less current portion		(158,899	)
Operating lease obligation, net of current portion	$	33,189

The weighted average remaining lease term for operating leases is 0.50 years and the weighted average discount rate used in calculating the operating lease asset and liability is 5.0%. For the six months ended June 30, 2022, payments on lease obligations were $143,780 and amortization on the right of use assets was $201,634.

For the six months ended June 30, 2022 and 2021, the Company’s lease cost consists of the following components, each of which is included in costs and expenses within the Company’s consolidated statements of operations:

F-18

	For the Six Months Ended June 30, 2022		For the Six Months Ended June 30, 2021
Operating lease cost	$	201,634	$	201,434
Short term lease costs		-		3,540
Total lease costs	$	201,634	$	204,974

Note 11 - Commitments and Contingencies

Fixed Price Contract

The Company’s multi-year contracts with its commercial customers contain fixed prices for product. These contracts expire between 2022 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period.

Legal proceedings

On July 17, 2019, the Company initiated patent litigation against certain defendants in the U.S. District Court for the District of Delaware for infringement of United States Patent Nos. 10,343,114 (the “‘114 Patent”) and 8,168,147 (the “‘147 Patent”) owned by the Company. These patents relate to the Company’s two-part Sorbent Enhancement Additive (SEA^®) process for mercury removal from coal-fired power plants. Named as defendants in the lawsuit are (i) Vistra Energy Corp., AEP Generation Resources Inc., NRG Energy, Inc., Talen Energy Corporation, and certain of their respective affiliated entities, all of which are owners and/or operators of coal-fired power plants in the United States, and (ii) Arthur J. Gallagher & Co., DTE REF Holdings, LLC, CERT Coal Holdings LLC, Chem-Mod LLC, and certain of their respective affiliated entities, and additional named and unnamed defendants, all of which operate or are involved in operations of coal facilities in the United States. In the lawsuit, the Company alleges that each of the defendants has willfully infringed the Company’s ‘114 Patent and ‘147 Patent and seeks a permanent injunction from further acts of infringement and monetary damages.

During 2020, each of the four major utility defendants in the above action filed petitions for Inter Partes Review with the United States Patent and Trademark Office, seeking to invalidate certain claims to the patents which are subject to the litigation.

Between July 2020 and January 2021, we entered into agreements with each of the four major utility defendants in such action which included certain monetary arrangements and pursuant to which we have dismissed all claims brought against each of them and their affiliates, and such parties have withdrawn from petitions for Inter Partes Review with the United States Patent and Trademark Office. Such agreements entered into with such parties provide each of them and their affiliates with a non-exclusive license to certain Company patents (related to the Company’s two-part Sorbent Enhancement Additive (SEA®) process) for use in connection with such parties’ coal-fired power plants.

The above described proceedings are continuing with respect to the other parties involved. On May 20, 2021, a U.S. District Court Magistrate Judge issued a report and recommendation that the above action should be permitted to proceed against 16 refined coal defendants named in the action directly involved in the refined coal program and operations, and be dismissed against 12 other defendants, primarily affiliated entities of the refined coal operators. Such report was issued in connection with certain motions to dismiss filed by the refined coal defendants. In September 2021, the Company received approval from the District Judge of the U.S. District Court in Delaware of the adoption of this report and recommendation of the Magistrate Judge to allow the Company to proceed with litigation claims against certain refined coal entities.

As a result of an application made by the Company to the Court in March 2022 to add additional parties to the action (all affiliated entities of the already named defendants), there are now 24 refined coal defendants named in the action. In connection with such application, the District Court Magistrate Judge ruled in April 2022 that certain parties could be added but denied the application with respect to certain others. A jury trial date has been scheduled for September 2023.

F-19

Except for the foregoing disclosures, the Company is not presently aware of any other material pending legal proceedings to which the Company is a party or of which any of its property is the subject.

Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that the Company will be successful in litigating and/or settling any of these claims.

Note 12 - Stock Based Compensation

Stock Based Compensation

Stock based compensation consists of the amortization of common stock, stock options and warrants issued to employees, directors and consultants. For the three months ended June 30, 2022 and 2021, stock based compensation expense amounted to $268,536 and $223,998, respectively. For the six months ended June 30, 2022 and 2021, stock based compensation expense amounted to $450,283 and $255,908, respectively. Such expense is classified in selling, general and administrative expenses.

Common Stock

On March 23, 2021, and pursuant to a consulting agreement dated November 1, 2020, as amended on March 19, 2021, with a nonaffiliated third party, the Company issued 500,000 shares of common stock to such party as part of its compensation thereunder. These shares of common stock were valued at $615,000 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over ten months. Pursuant to an amendment dated March 15, 2022 and effective as of December 31, 2021, the nonaffiliated party agreed to forfeit all of such shares which shares were cancelled effective as of December 31, 2021. As such, the previously recorded expense of $615,000 was reversed in December 2021.

On March 30, 2021, and pursuant to a business development agreement dated March 30, 2021 with a nonaffiliated third party, the Company issued 25,000 shares of common stock to such party for its compensation thereunder. These shares of common stock were valued at $29,250 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over three months.

On December 1, 2021, and pursuant to a consulting agreement dated December 1, 2021 with a nonaffiliated third party, the Company issued 250,000 shares of common stock to such party as part of its compensation thereunder. These shares of common stock were valued at $171,250 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over 12 months.

On May 31, 2022, and pursuant to a consulting agreement dated May 31, 2022 with a nonaffiliated third party, the Company issued 500,000 shares of common stock to such party as part of its compensation thereunder. These shares of common stock were valued at $160,000 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over 12 months.

On May 31, 2022, the Company issued a total of 250,000 shares of common stock to two Directors. These shares of common stock were valued at $55,000 in accordance with FASB ASC Topic 718. The fair value of the shares was expensed in full on the issuance date.

F-20

Stock Options

The Company accounts for stock-based compensation awards in accordance with the provisions of ASC 718, which addresses the accounting for employee stock options which requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the condensed consolidated financial statements over the vesting period based on the estimated fair value of the awards.

On May 1, 2021, the Company issued 15,869 shares of common stock to a certain option holder upon the cashless exercise of an option to purchase 25,000 shares of common stock at an exercise price off $0.42 based upon a market price of $1.15 per share as determined under the terms of the option. On June 30, 2021, the Company issued 125,000 shares of common stock to a certain option holder upon a cash exercise of an option to purchase 125,000 shares of common stock at an exercise price of $0.81 or $101,250 in the aggregate.

On January 24, 2022, the Company extended the expiration dates of certain fully expensed previously granted nonqualified stock options (which were due to expire in February 2022) which were granted to five individuals to acquire an aggregate of 700,000 shares of the Company’s common stock under the Company’s 2014 Equity Incentive Plan and the 2017 Equity Incentive Plan (the “2017 Plan”). Such extended options are exercisable at prices ranging from $1.15 to $1.20 per share, representing the original fair market value of the common stock on the dates of grant as determined under the applicable Equity Plan. The options are fully vested and exercisable and will now expire five years from their original expiration dates. Based on a Black-Scholes valuation model, these modified options were valued at $138,623, in accordance with FASB ASC Topic 718, which was expensed on the amendment date in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations. 

On February 2, 2022, the Company issued 5,181 shares of common stock to a certain option holder upon the cashless exercise of options to purchase an aggregate of 9,750 shares of common stock at exercise prices ranging from $0.20 to $0.33 per share based upon a market price of $0.54 per share as determined under the terms of the options.

On May 31, 2022, the Company granted nonqualified stock options to the following executive officers: John Pavlish (Senior Vice President and Chief Technology Officer) and James Trettel (Vice President of Operations) – nonqualified stock options to each acquire 500,000 shares of the Company’s common stock; and Jami Satterthwaite (Chief Financial Officer) – nonqualified stock options to acquire 100,000 shares of the Company’s common stock.  On such date, two other employees were also granted nonqualified stock options to each acquire 50,000 shares of the Company’s common stock.  All of such options were granted under the 2017 Plan and are exercisable at $0.21 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Plan.   The options are fully vested and exercisable and expire five years from their issuance date. Based on a Black-Scholes valuation model, these options were valued at $143,745, in accordance with FASB ASC Topic 718, which was expensed on the issuance date in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations. The valuation assumptions included an expected duration of 2.5 years, volatility of 96.83%, discount rate of 2.62% and dividends of $0.

A summary of stock option activity is presented below:

	Number of Shares			Weighted Average Exercise  Price		Weighted  Average  Remaining Contractual  Life (years)		Aggregate Intrinsic Value
December 31, 2021		18,318,326		$	0.53		2.89	$	2,961,965
Grants		1,200,000			0.21			$	-
Expirations		(400,000	)	$	1.03
Exercised		(9,750	)	$	0.25				-
June 30, 2022		19,108,576		$	0.50		2.79	$	954,329
Options exercisable at:
June 30, 2022		19,108,576		$	0.50		2.79	$	954,329

The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.345 as of June 30, 2022, which would have been received by the option holders had all option holders exercised their options as of that date.

F-21

Note 13 - Warrants

Sold and issued warrants are subject to the provisions of FASB ASC 815-10, the Company utilized a Black-Scholes options pricing model to value the warrants sold and issued. This model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected period until the warrants are exercised. When calculating the value of warrants issued, the Company uses a volatility factor, a risk-free interest rate and the life of the warrant for the exercise period.

From January 23, 2021 to February 16, 2021, the Company issued 705,166 shares of common stock to certain warrant holders upon the cash exercise of warrants to purchase an aggregate of 705,166 shares of common stock at an exercise price of $0.35 per share or $246,808 in the aggregate.

On February 17, 2021, the Company issued 97,675 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 150,000 shares of common stock at an exercise price of $0.45 per share based upon a market value of $1.29 per share as determined under the terms of the warrant.

On March 8, 2021, the Company issued an aggregate of 97,015 shares of common stock to certain warrant holders upon the cashless exercise of warrants to purchase an aggregate of 175,000 shares of common stock at an exercise price of $0.70 per share based upon market values from $1.44 to $1.63 per share as determined under the terms of the warrants.

The following is a summary of the Company’s warrant activity:

	Number of Shares		Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
December 31, 2021		4,285,000	$	0.63		2.47	$	-
Grants		-		-		-		-
Expirations		-		-		-		-
Exercised		-		-		-		-
June 30, 2022		4,285,000	$	0.70		1.98	$	-
Warrants exercisable at:
June 30, 2022		4,285,000	$	0.70		1.98	$	-

F-22

The following table summarizes information about common stock warrants outstanding at June 30, 2022:

Outstanding and Exercisable
Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	0.70		4,285,000		1.98	$	0.70
$	0.70		4,285,000		1.98	$	0.70

Note 14 - Subsequent Events

In August 2022, the Company signed of a three-year license agreement with a utility in the Midwest to provide a non-exclusive license to certain patents of the Company for mercury emissions capture for use in connection with the utility’s coal-fired power plants. The license agreement includes an annual sum payable over the three-year term. The agreement also provides the Company the opportunity to compete for the utility’s product supply going forward.

F-23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere within this report. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Forward-Looking Statements” in “Part I” preceding “Item 1 – Financial Statements.” You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021, as well as our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission.

Overview

Midwest Energy Emissions Corp. (the “Company”, “we”, “us” and “our”) is an environmental services and technologies company developing and delivering patented and proprietary solutions to the global power industry. Our leading-edge services have been shown to achieve mercury emissions removal at a significantly lower cost and with less operational impact to coal-fired power plants than currently used methods, while maintaining and/or increasing power plant output and preserving the marketability of byproducts for beneficial use.

North America is currently the largest market for our technology. The U.S. EPA MATS (Mercury and Air Toxics Standards) rule requires that all coal and oil-fired power plants in the U.S., larger than 25MWs, must limit mercury in its emissions to below certain specified levels, according to the type of coal burned. 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. MATS, along with many state and provincial regulations, form the basis for mercury emission capture at coal fired plants across North America. Under the MATS regulation, Electric Generating Units (“EGUs”) are required to remove about 90% of the mercury from their emissions. We believe that we continue to meet the requirements of the industry as a whole and our technologies have been shown to achieve mercury removal levels compliant with all state, provincial and federal regulations at a lower cost and with less plant impact than our competition.

As is typical in this market, we are paid by the EGU based on how much of our material is injected to achieve the needed level of mercury removal. Our current clients pay us as material is delivered to their facility. Clients will use our material whenever their EGUs operate, although EGUs are not always in operation. EGUs typically may not be in operation due to maintenance reasons or when the price of power in the market is less than their cost to produce power. Thus, our revenues from EGU clients will not typically be a consistent stream but will fluctuate, especially seasonally as the market demand for power fluctuates.

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

5

We remain focused on positioning the Company for short and long-term growth, including focusing on execution at our customer sites and on continual operation improvement. We continue to make refinements to all of our key products, as we continue to focus on the customer and its operations. As part of our overall strategy, we have a number of initiatives which we believe will be able to drive our short and long-term growth.

We continue to seek new utility customers for our technology in order for them to meet the MATS requirements as well as maintaining our contractual arrangements with our current customers. We also seek license agreements with utilities while allowing them to use our SEA® technologies without our supply of products. During 2021 and early 2022, we have announced various supply contract extensions, new supply business and license agreements. We expect additional supply business and license agreements during the remainder of 2022 and thereafter, including converting certain licensees to supply customers.

On February 25, 2019, we were able to complete the restructuring of our unsecured and secured debt obligations held by AC Midwest Energy LLC extending the maturity dates of these debts until August 2022 and eliminating quarterly principal payment requirements.  Pursuant thereto, AC Midwest was issued an unsecured note with a principal amount outstanding of $13.2 million which was issued on February 25, 2019 pursuant to an Unsecured Note Financing Agreement entered into on such date with AC Midwest, pursuant to which AC Midwest exchanged a previously issued subordinated unsecured note in the principal amount of $13.0 million, together with all accrued and unpaid interest thereon, for a new unsecured note in the principal amount of $13.2 million. The new unsecured note is scheduled to mature on August 25, 2022 and bears a zero cash interest rate. Pursuant to the Unsecured Note Financing Agreement, AC Midwest shall also be entitled to a profit participation preference equal to 1.0 times the original principal amount. The profit share is “non-recourse” and shall only be derived from and computed on the basis of, and paid from, Net Litigation Proceeds from claims relating to the Company’s intellectual property, Net Revenue Share and Adjusted Free Cash Flow (as such terms are defined in the Unsecured Note Financing Agreement).  In addition, there remains outstanding to AC Midwest a principal balance of approximately $272,000 due under a secured note issued on November 29, 2016, in the original principal amount of approximately $9.6 million which also has a maturity date of August 25, 2022. The secured note bears interest at a rate of 15.0% per annum, payable quarterly.  In view of the pending maturity date of these two notes, we are in the process of negotiating certain changes and modifications to such financing arrangements including but not limited to an extension of the maturity date.  We expect to be able to finalize such arrangements prior to the current maturity date.

In June 2021, we announced that we had entered into a Debt Repayment and Exchange Agreement with AC Midwest which was expected to repay all existing secured and unsecured debt obligations held by AC Midwest. Pursuant to such agreement, we were to repay the existing $272,000 principal amount outstanding under the secured note in cash as well as the existing $13.2 million principal amount outstanding under the unsecured note held by AC Midwest through a combination of cash and stock.  The non-recourse profit share under the unsecured note was to have been satisfied through a combination of cash and stock. The closing was subject to various 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 was extended to June 30, 2022.  Such closing conditions were not met by June 30, 2022.

From June through October 2019, we raised $2,600,000 in a private placement offering of 12.0% unsecured convertible promissory notes and warrants sold and issued to certain accredited investors. In February 2021, $50,000 of such principal was voluntarily converted into shares of common stock, and in June 2021, the remaining principal balance of $2,550,000 was voluntarily converted by the holders thereof into shares of common stock of the Company.

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. Between July 2020 and January 2021, we entered into agreements with each of the four major utility defendants in the patent litigation commenced in 2019 which agreements included certain monetary arrangements and pursuant to which we have dismissed all claims brought against each of them and their affiliates, and such parties have withdrawn from petitions for Inter Partes Review with the U.S. Patent and Trademark Office. Such agreements entered into with such parties provide each of them and their affiliates with a non-exclusive license to certain Company patents (related to our two-part Sorbent Enhancement Additive (SEA^®) process) for use in connection with such parties’ coal-fired power plants. One of the agreements has facilitated an ongoing business relationship with that party. The above-described proceedings are continuing with respect to the other parties involved. In May 2021, a U.S. District Court Magistrate Judge issued a report and recommendation that such litigation should be permitted to proceed against 16 refined coal defendants named in the action directly involved in the refined coal program and operations, and be dismissed against 12 other defendants, primarily affiliated entities of the refined coal operators. In September 2021, such report and recommendation was approved by the District Judge for the United States District Court for the District of Delaware which will allow us to proceed against certain refined coal entities named in the lawsuit. As a result of an application made by the Company to the Court in March 2022 to add additional parties to the action (all affiliated entities of the already named defendants), there are now 24 refined coal defendants named in the action. In connection with such application, the District Court Magistrate Judge ruled in April 2022 that certain parties could be added but denied the application with respect to certain others. A jury trial date has been scheduled for September 2023.

6

During the first quarter of 2021, we announced new technologies under development intended to improve the processing of rare earth elements (REEs) in North America. Such technologies are under development in conjunction with our collaboration with an Alabama third party entity and its affiliates. Such technologies focus on improving the cost of extracting rare earth minerals along with improving the environmental footprint of extracting those REEs from their solvent state. Such technologies have been evaluated and tested at Pennsylvania State University’s College of Earth and Mineral Sciences and are now being evaluated at another research institute in the State of Florida.  While there can be no assurance, we are hopeful that these technologies can be commercialized at a future date.

In addition to the $2.6 million in convertible notes which were converted into shares of common stock in the first and second quarters as described above, during the first quarter of 2021, we eliminated $1,830,000 of other convertible notes originally issued in 2013 and 2018 through conversions to shares of common stock. During the third quarter of 2021, we issued 20,000 shares of common stock to a certain holder of notes issued in 2013 for the conversion of outstanding principal in the amount of $10,000 and prepaid the outstanding principal balance of another of such notes issued in 2013 in the principal amount of $10,000. As a result, there are no convertible notes currently outstanding.

Although we face a host of challenges and risks, we are optimistic about our future and expect our business to grow substantially.

Effects of the COVID-19 Pandemic

It should be noted that the coronavirus (COVID-19) pandemic has impacted various businesses throughout the world since early 2020, including travel 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. In view of such uncertainty, disruptions to our business could still occur including, but not limited to, the availability of raw materials and equipment, and disruptions to our workforce, or to our business relationships with other third parties.

Results of Operations

Revenues

We generated revenues of approximately $5,129,000 and $2,271,000 for the three months ended June 30, 2022 and 2021, respectively and approximately $8,470,000 and $5,297,000 for the six months ended June 30, 2022 and 2021, respectively. Such revenues were primarily derived from sorbent product sales which were approximately $4,791,000 and $2,061,000 for the three months ended June 30, 2022 and 2021, respectively and approximately $7,989,000 and $4,092,000 for the six months ended June 30, 2022 and 2021, respectively. The increase in revenues from prior year period is primarily driven by increased sorbent product sales due to the increased supply demands in the coal-fired market as well as expansion of our customer base.

Costs and Expenses

Total costs and expenses were approximately $5,486,000 and $4,000,000 during the three months ended June 30, 2022 and 2021, respectively and approximately $9,975,000 and $7,445,000 during the six months ended June 30, 2022 and 2021, respectively. The increase in total costs and expenses from prior year period is primarily attributable to the increase in cost of sales. In addition, there was a gain on extinguishment of debt recognized in the six months ended June 30, 2021 in the approximate amount of $299,000, for which there was not a comparable item recognized in the current year.

Cost of sales were approximately $3,363,000 and $1,490,000 for the three months ended June 30, 2022 and 2021, respectively and approximately $5,705,000 and $2,981,000 for the six months ended June 30, 2022 and 2021, respectively. The year to date increase in cost of sales is primarily attributable to increased sales.

Selling, general and administrative expenses were approximately $1,460,000 and $1,262,000 for the three months ended June 30, 2022 and 2021, respectively and approximately $2,960,000 and $2,718,000 for the six months ended June 30, 2022 and 2021, respectively. The increase in selling, general and administrative expenses is primarily attributed to an increase in non-cash compensation.

7

Interest expense related to the financing of capital was approximately $504,000 and $1,120,000 for the three months ended June 30, 2022 and 2021, respectively and approximately $1,002,000 and $1,796,000 for the six months ended June 30, 2022 and 2021, respectively. The decrease is due to the 2021 stock conversion incentives provided to certain notes and accelerated interest expense upon conversion of notes, partially offset by the reduced interest on the notes payable as notes were converted to stock. The breakdown of interest expense for the three and six months ended June 30, 2022 and 2021 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Interest expense on notes payable	$	11	$	105	$	22	$	251
Accelerated interest expense upon conversion of notes		-		300		-		343
Additional interest upon conversion of notes		-		221		-		221
Amortization of discount of notes payable		463		463		920		920
Amortization of debt issuance costs		30		31		60		61
	$	504	$	1,120	$	1,002	$	1,796

Loss on change in fair value of profit share liability (relating to the restructured unsecured debt obligation held by AC Midwest Energy LLC) were approximately $158,000 and $307,000 for the three and six months ended June 30, 2022, respectively. The change is primarily attributed to an increase in the fair value of the profit share liability. There were no significant changes to the underlying model during the three and six months ended June 30, 2022.

Loss on change in fair value of profit share liability (relating to the restructured unsecured debt obligation held by AC Midwest Energy LLC) were approximately $129,000 and $250,000 for the three and six months ended June 30, 2021, respectively. The change is primarily attributed to an increase in the fair value of the profit share liability. There were no significant changes to the underlying model during the three and six months ended June 30, 2021.

Gain on forgiveness of debt of $299,300 relates to the loan proceeds we received in April 2020 pursuant to the Paycheck Protection Program (“PPP”) under the CARES Act. Such loan was forgiven in January 2021 pursuant to the applicable PPP requirements.

Net Loss

For the three months ended June 30, 2022 and 2021, we had a net loss of approximately $357,000 and $1,730,000, respectively. Such change was primarily due to an increase in sales and a decrease in interest expense.

For the six months ended June 30, 2022 and 2021, we had a net loss of approximately $1,505,000 and $2,148,000, respectively. Such change was primarily due to an increase in sales and a decrease in interest expense.

Liquidity and Capital Resources

We had approximately $509,000 in cash on our balance sheet at June 30, 2022 compared to approximately $1,388,000 at December 31, 2021. Total current assets were approximately $4,930,000 and total current liabilities were approximately $17,029,000 at June 30, 2022, resulting in working capital deficit of approximately $12,099,000. This compares to total current assets of approximately $3,791,000 and total current liabilities of approximately $15,483,000 at December 31, 2021, resulting in a working capital deficit of approximately $11,692,000. Our accumulated deficit was approximately $68.6 million at June 30, 2022 compared to $67.1 million at December 31, 2021. Additionally, we had a net loss in the amount of approximately $1,505,000 and cash used in operating activities of approximately $1,127,000 for the six months ended June 30, 2022.

8

The accompanying consolidated financial statements as of June 30, 2022 have been prepared assuming we will continue as a going concern. As reflected in the condensed consolidated financial statements, we had approximately $509,000 in cash at June 30, 2022, and cash used in operating activities of approximately $1.1 million for the six months ended June 30, 2022. Further, we had a working capital deficit of $12.1 million, an accumulated deficit of $68.6 million at June 30, 2022, and had a net loss in the amount of approximately $1,505,000 for the six months ended June 30, 2022.  In addition, all existing secured and unsecured debt held by our principal lender, excluding the profit share liability, in the principal amount of $13.4 million matures on August 25, 2022, which is less than one month from the issuance of these condensed 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 condensed consolidated financial statements. We have taken steps to alleviate such doubt. During 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 June 30, 2022. 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 June 30, 2022, was expected to repay all existing secured and unsecured debt obligations held by such lender. Such closing conditions were not met by June 30, 2022.  However, we are in the process of negotiating certain changes and modifications to the financing arrangements with such lender in view of the pending maturity date of the two notes. Although we anticipate that we will be able to finalize such arrangements prior to the current maturity date and that significant revenues will continue in our business operations, no assurances can be given that we will be able to finalize such changes and modifications or that we can obtain sufficient working capital through our business operations in order to sustain ongoing operations.

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.

Total Assets

Total assets were approximately $8,960,000 at June 30, 2022 versus approximately $8,135,000 at December 31, 2021. The change in total assets is primarily attributable to an increase in accounts receivable partially offset by a decrease in cash.

Total Liabilities

Total liabilities were approximately $20,207,000 at June 30, 2022 versus approximately $18,374,000 at December 31, 2021. The increase is primarily due to an increase in accounts payable and accrued expenses, together with an increase in outstanding debt as a result of the amortization of discount and issuance costs and new $250,000 short term loan obtained in the second quarter of 2022 from a related party.

Operating Activities

Net cash used in operating activities consists of net loss, adjusted by certain non-cash items, and changes in operating assets and liabilities.

Net cash used in operating activities was approximately $1,127,000 for the six months ended June 30, 2022 compared to net cash provided operating activities of approximately $502,000 for the six months ended June 30, 2021. The decrease in cash provided by operating activities of approximately $1,629,000 was primarily due to an approximate $1,952,000 change in accounts receivable, partially offset by changes in other operating assets and liabilities.

Investing Activities

There was no net cash provided or used in investing activities for the six months ended June 30, 2022 and June 30, 2021.

9

Financing Activities

Net cash provided by financing activities was approximately $247,000 for the six months ended June 30, 2022 compared to net cash provided by financing activities of approximately $597,000 for the six months ended June 30, 2021. During the six months ended June 30, 2022, we received a $250,000 short term loan from a related party. During the six months ended June 30, 2021, we received $299,000 from the issuance of a note pursuant to a Second PPP Loan we received under the CARES Act and $247,000 from the exercise of warrants.

Critical Accounting Policies and Estimates

For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K.

Non-GAAP Financial Measures

Adjusted EBITDA

To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we consider and are including herein Adjusted EBITDA, a Non-GAAP financial measure. We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net income (loss). We define Adjusted EBITDA as net income adjusted for interest and financing fees, income taxes, depreciation, amortization, stock based compensation, and other non-cash income and expenses. We believe that Adjusted EBITDA provides us an important measure of operating performance because it allows management, investors, debtholders and others to evaluate and compare ongoing operating results from period to period by removing the impact of our asset base, any asset disposals or impairments, stock based compensation and other non-cash income and expense items associated with our reliance on issuing equity-linked debt securities to fund our working capital.

10

Our use of Adjusted EBITDA has limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition. Additionally, our measure of Adjusted EBITDA may differ from other companies’ measure of Adjusted EBITDA. When evaluating our performance, Adjusted EBITDA should be considered with other financial performance measures, including various cash flow metrics, net income and other GAAP results. In the future, we may disclose different non-GAAP financial measures in order to help our investors and others more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.

The following table shows our reconciliation of net loss to adjusted EBITDA for the three and six months ended June 30, 2022 and 2021, respectively:

	For the Three Months Ended						For the Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
	(In thousands)						(In thousands)
Net loss	$	(357	)	$	(1,730	)	$	(1,505	)	$	(2,148	)
Non-GAAP adjustments:
Depreciation and amortization		53			72			113			147
Interest		504			1,120			1,002			1,796
Gain on extinguishment of debt		-			-			-			(299	)
Stock based compensation		268			224			450			256
Adjusted EBITDA	$	468		$	(314	)	$	60		$	(248	)

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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.

11

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective as a result of material weaknesses in our internal control over financial reporting. The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses in our internal control over financial reporting: (i) lack of a sufficient complement of personnel commensurate with the Company’s reporting requirements; and (ii) insufficient written documentation or training of our internal control policies and procedures which provide staff with guidance or framework for accounting and disclosing financial transactions.

Despite the existence of the material weaknesses above, we believe that the consolidated financial statements contained in this Form 10-Q fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

12

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 11 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this report for a summary of our legal proceedings, which is incorporated by reference herein.

Item 1A. Risk Factors.

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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On May 31, 2022, and pursuant to a consulting agreement dated May 31, 2022 with a nonaffiliated third party, the Company issued 500,000 shares of the Company’s common stock to such party as part of its compensation thereunder.  In addition, on May 31, 2022, the Company granted and agreed to issue 150,000 shares of the Company’s common stock to Christopher Greenberg (Chairman of the Board) and 100,000 shares of the Company’s common stock to David M. Kaye (director).

All of the foregoing securities were issued in reliance upon the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 3. Default Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

13

Item 6. Exhibits.

Exhibit Number	Description
31.1*	Certification by Principal Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
31.2*	Certification by Principal Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
32.1*	Certification by Principal Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code
32.2*	Certification by Principal Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

_______

* Filed herewith.

14

SIGNATURES

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

	MIDWEST ENERGY EMISSIONS CORP.
Dated: August 15, 2022	By:	/s/ Richard MacPherson
		Richard MacPherson
		President and Chief Executive Officer
		(Principal Executive Officer)
Dated: August 15, 2022	By:	/s/ Jami L. Satterthwaite
		Jami L. Satterthwaite
		Chief Financial Officer
		(Principal Financial Officer)

15

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Richard MacPherson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Midwest Energy Emissions Corp.;
2.	Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

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

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 15, 2022	By:	/s/ Richard MacPherson
		Richard MacPherson,
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Jami L. Satterthwaite, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Midwest Energy Emissions Corp.;
2.	Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

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

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 15, 2022	By:	/s/ Jami L. Satterthwaite
		Jami L. Satterthwaite
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Midwest Energy Emissions Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigned’s knowledge, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 15, 2022	By:	/s/ Richard MacPherson
		Richard MacPherson,
		President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Midwest Energy Emissions Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigned’s knowledge, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 15, 2022	By:	/s/ Jami L. Satterthwaite
		Jami L. Satterthwaite
		Chief Financial Officer
		(Principal Financial Officer)

XML

Cover - shares	6 Months Ended
	Jun. 30, 2022	Aug. 15, 2022
Cover [Abstract]
Entity Registrant Name	MIDWEST ENERGY EMISSIONS CORP.
Entity Central Index Key	0000728385
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Jun. 30, 2022
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2022
Entity Common Stock Shares Outstanding		89,871,132
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	000-33067
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	87-0398271
Entity Address Address Line 1	1810 Jester Drive
Entity Address City Or Town	Corsicana
Entity Address State Or Province	TX
Entity Address Postal Zip Code	75109
City Area Code	614
Local Phone Number	505-6115
Entity Interactive Data Current	Yes

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Current assets
Cash	$ 508,614	$ 1,388,307
Accounts receivable	2,963,012	1,015,053
Inventory	847,675	1,075,401
Prepaid expenses and other current assets (related party of $0 and $70,000)	611,105	312,008
Total current assets	4,930,406	3,790,769
Security deposits	10,175	10,175
Property and equipment, net	1,818,682	1,829,544
Right of use asset - operating lease	188,464	390,098
Intellectual property, net	2,011,897	2,114,197
Total assets	8,959,624	8,134,783
Current liabilities
Accounts payable and accrued expenses (related party of $231,250 and $206,554)	2,859,133	2,267,711
Current portion of equipment notes payable	0	2,677
Current portion of operating lease liability	158,899	340,207
Customer credits	167,000	167,000
Accrued salaries	470,899	562,430
Short term debt - related party	250,000	0
Secured note payable - related party	271,686	271,686
Unsecured note payable, net of discount and issuance costs - related party	12,851,615	11,871,254
Total current liabilities	17,029,232	15,482,965
Operating lease liability	33,189	54,551
Profit share liability - related party	3,144,160	2,836,743
Total liabilities	20,206,581	18,374,259
COMMITMENTS AND CONTINGENCIES	0	0
Stockholders' deficit
Preferred stock, $0.001 par value: 2,000,000 shares authorized, no shares issued	0	0
Common stock; $0.001 par value; 150,000,000 shares authorized; 89,871,132 and 89,115,951 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	89,871	89,116
Additional paid-in capital	57,284,933	56,788,321
Accumulated deficit	(68,621,761)	(67,116,913)
Total stockholders' deficit	(11,246,957)	(10,239,476)
Total liabilities and stockholders' deficit	$ 8,959,624	$ 8,134,783

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
CONDENSED CONSOLIDATED BALANCE SHEETS
Prepaid expenses and other current assets, related party	$ 0	$ 70,000
Accounts payable and accrued expenses, related party	$ 231,250	$ 206,554
Preferred stock, par value per share	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	89,871,132	89,115,951
Common stock, shares outstanding	89,871,132	89,115,951

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Revenues	$ 5,128,882	$ 2,270,696	$ 8,470,467	$ 5,297,334
Costs and expenses:
Cost of sales	3,363,447	1,489,833	5,705,478	2,980,566
Selling, general and administrative expenses (related party of $75,385, $75,373, $150,385, and $175,373)	1,459,759	1,261,689	2,960,178	2,718,154
Interest expense (related party of $503,887, $497,660, $1,000,850, and $1,000,851)	503,887	1,120,086	1,002,242	1,795,706
Gain on extinguishment of debt	0	0	0	(299,300)
Loss on change in fair value of profit share	158,456	128,771	307,417	249,825
Total costs and expenses	5,485,549	4,000,379	9,975,315	7,444,951
Loss before provision for income taxes	(356,667)	(1,729,683)	(1,504,848)	(2,147,617)
Benefit (Provision) for income taxes	0	0	0	0
Net loss	$ (356,667)	$ (1,729,683)	$ (1,504,848)	$ (2,147,617)
Net loss per common share - basic and diluted:	$ (0.00)	$ (0.02)	$ (0.02)	$ (0.03)
Weighted average common shares outstanding - basic and diluted	89,371,132	84,190,073	89,245,211	82,320,840

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT (UNAUDITED) - USD ($)	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Balance, shares at Dec. 31, 2020		78,096,326
Balance, amount at Dec. 31, 2020	$ (13,203,532)	$ 78,096	$ 50,202,478	$ (63,484,106)
Stock issued for interest payable on convertible notes, shares		494,400
Stock issued for interest payable on convertible notes, amount	247,200	$ 494	246,706	0
Stock issued for conversion of convertible notes, shares		3,700,000
Stock issued for conversion of convertible notes, amount	1,850,000	$ 3,700	1,846,300	0
Stock issued for exercise of warrants, shares		705,166
Stock issued for exercise of warrants, amount	246,808	$ 705	246,103	0
Stock issued for cashless exercise of warrants, shares		194,690
Stock issued for cashless exercise of warrants, amount	0	$ 195	(195)	0
Stock issued for services, shares		525,000
Stock issued for services, amount	644,250	$ 525	643,725	0
Share based compensation expense	5,878	0	5,878	0
Net loss	(417,934)	$ 0	0	(417,934)
Balance, shares at Mar. 31, 2021		83,715,582
Balance, amount at Mar. 31, 2021	(10,627,330)	$ 83,715	53,190,995	(63,902,040)
Balance, shares at Dec. 31, 2020		78,096,326
Balance, amount at Dec. 31, 2020	(13,203,532)	$ 78,096	50,202,478	(63,484,106)
Stock issued for services, amount	644,250
Net loss	(2,147,617)
Balance, shares at Jun. 30, 2021		89,245,951
Balance, amount at Jun. 30, 2021	(9,307,557)	$ 89,246	56,234,920	(65,631,723)
Balance, shares at Mar. 31, 2021		83,715,582
Balance, amount at Mar. 31, 2021	(10,627,330)	$ 83,715	53,190,995	(63,902,040)
Stock issued for interest payable on convertible notes, shares		229,500
Stock issued for interest payable on convertible notes, amount	368,139	$ 230	367,909	0
Stock issued for conversion of convertible notes, shares		5,160,000
Stock issued for conversion of convertible notes, amount	2,580,000	$ 5,160	2,574,840	0
Stock issued for exercise of warrants, amount	0	16	16	0
Share based compensation expense	67	0	67	0
Net loss	(1,729,683)	$ 0	0	(1,729,683)
Stock issued for exercise of stock options, shares		125,000
Stock issued for exercise of stock options, amount	101,250	$ 125	101,125	0
Stock issued for cashless exercise of stock options, shares		15,869
Balance, shares at Jun. 30, 2021		89,245,951
Balance, amount at Jun. 30, 2021	(9,307,557)	$ 89,246	56,234,920	(65,631,723)
Balance, shares at Dec. 31, 2021		89,115,951
Balance, amount at Dec. 31, 2021	(10,239,476)	$ 89,116	56,788,321	(67,116,913)
Share based compensation expense	138,622	0	138,622	0
Net loss	(1,148,181)	$ 0	0	(1,148,181)
Stock issued for cashless exercise of stock options, shares		5,181
Stock issued for cashless exercise of options, amount	0	$ 5	(5)	0
Balance, shares at Mar. 31, 2022		89,121,132
Balance, amount at Mar. 31, 2022	(11,249,035)	$ 89,121	56,926,938	(68,265,094)
Balance, shares at Dec. 31, 2021		89,115,951
Balance, amount at Dec. 31, 2021	(10,239,476)	$ 89,116	56,788,321	(67,116,913)
Stock issued for services, amount	0
Net loss	(1,504,848)
Balance, shares at Jun. 30, 2022		89,871,132
Balance, amount at Jun. 30, 2022	(11,246,957)	$ 89,871	57,284,933	(68,621,761)
Balance, shares at Mar. 31, 2022		89,121,132
Balance, amount at Mar. 31, 2022	(11,249,035)	$ 89,121	56,926,938	(68,265,094)
Stock issued for services, shares		500,000
Stock issued for services, amount	160,000	$ 500	159,500	0
Share based compensation expense	143,745	0	143,745	0
Net loss	(356,667)	$ 0	0	(356,667)
Issuance of stock for compensation, shares		250,000
Issuance of stock for compensation, amount	55,000	$ 250	54,750	0
Balance, shares at Jun. 30, 2022		89,871,132
Balance, amount at Jun. 30, 2022	$ (11,246,957)	$ 89,871	$ 57,284,933	$ (68,621,761)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from operating activities
Net loss	$ (1,504,848)	$ (2,147,617)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation - amortization of prepaid services	112,916	249,963
Stock-based compensation	337,367	5,945
Amortization of discount of notes payable	919,884	1,314,760
Amortization of debt issuance costs	60,477	60,478
Amortization of right to use assets	201,634	200,398
Amortization of patent rights	102,300	102,300
Depreciation expense	10,862	44,379
Gain on forgiveness of debt	0	(299,300)
Loss on change in fair value of profit share	307,417	249,825
Changes in operating assets and liabilities
(Increase) Decrease in accounts receivable	(1,947,959)	3,898
Decrease in inventory	227,726	16,383
(Increase) Decrease in prepaid expenses and other assets	(252,013)	1,775
Decrease in security deposits	0	2,080
Decrease in accrued salaries	(91,531)	0
Increase in accounts payable and accrued liabilities	591,422	897,922
Decrease in operating lease liability	(202,670)	(201,434)
Net cash (used in) provided by operating activities	(1,127,016)	501,755
Cash flows from financing activities
Payments of notes payable	0	(34,661)
Payments of equipment notes payable	(2,677)	(16,199)
Proceeds from the issuance of short term debt - related party	250,000	0
Proceeds from exercise of warrants	0	246,808
Proceeds from exercise of stock options	0	101,250
Proceeds from the issuance of notes payable	0	299,380
Net cash provided by financing activities	247,323	596,578
Net (decrease) increase in cash and cash equivalents	(879,693)	1,098,333
Cash and cash equivalents - beginning of period	1,388,307	591,019
Cash and cash equivalents - end of period	508,614	1,689,352
Cash paid during the period for:
Interest	0	41,082
Taxes	14,163	4,518
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Stock issued for prepaid services	160,000	644,250
Stock issued for conversion of convertible notes	0	4,430,000
Stock issued for interest payable	$ 0	$ 615,339

XML

Organization

6 Months Ended

Jun. 30, 2022

Organization

Organization

Note 1 - Organization

Midwest Energy Emissions Corp.

Midwest Energy Emissions Corp. is organized under the laws of the State of Delaware.

MES, Inc.

MES, Inc. is incorporated in the State of North Dakota. MES, Inc. is a wholly owned subsidiary of Midwest Energy Emissions Corp. and is engaged in the business of developing and commercializing state of the art control technologies relating to the capture and control of mercury emissions from coal fired boilers in the United States and Canada.

ME2C Sponsor LLC and ME2C Acquisition Corp.

ME2C Sponsor LLC is a limited liability company formed in the State of Delaware and is a wholly owned subsidiary of Midwest Energy Emissions Corp. and owns 85% of ME2C Acquisition Corp.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of Rule 8-03 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on April 5, 2022, from which the accompanying condensed consolidated balance sheet dated December 31, 2021 was derived.

In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly the financial position as of June 30, 2022, and results of operations, changes in stockholders’ deficit and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Midwest Energy Emissions Corp. and its wholly-owned subsidiaries, MES, Inc. and ME2C Sponsor LLC, and ME2C Acquisition Corp. which is 85% owned by ME2C Sponsor LLC (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, valuation of equity issuances and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company uses estimates in accounting for, among other items, profit share liability, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve and impairment of intellectual property. Actual results could differ from those estimates.

Recoverability of Long-Lived and Intangible Assets

Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived and/or intangible assets would be adjusted, based on estimates of future discounted cash flows. The Company evaluated the recoverability of the carrying value of the Company’s property and equipment, right of use asset and intellectual property. No impairment charges were recognized for the three and six months ended June 30, 2022 and 2021.

Fair Value of Financial Instruments

The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows:

☐	Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date.
☐	Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
☐	Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Cash was the only asset measured at fair value on a recurring basis by the Company at June 30, 2022 and December 31, 2021 and is considered to be Level 1.

Financial instruments include cash, accounts receivable, accounts payable, and short-term debt. The carrying amounts of these financial instruments approximated fair value at June 30, 2022 and December 31, 2021 due to their short-term maturities.

The fair value of the promissory notes payable at June 30, 2022 and December 31, 2021 approximated the carrying amount as the notes were recently issued at interest rates prevailing in the market and interest rates have not significantly changed as of June 30, 2022 and December 31, 2021. The fair value of the promissory notes payable was determined on a Level 2 measurement. Discounts on issued debt, as well as debt issuance costs, are amortized over the term of the individual promissory notes.

The fair value of the profit share liability at June 30, 2022 and December 31, 2021 was calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability was determined on a Level 3 measurement. These values are determined using pricing models for which the assumptions utilized management’s estimates.

The following tables present the Company’s liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

			Fair Value Measurement as of
			June 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		3,144,160		-		-		3,144,160
Total Liabilities	$	3,144,160	$	-	$	-	$	3,144,160

			Fair Value Measurement as of
			December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		2,836,743		-		-		2,836,743
Total Liabilities	$	2,836,743	$	-	$	-	$	2,836,743

Revenue Recognition

The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales and other taxes are excluded from revenues. Invoiced shipping and handling costs are included in revenue.

Disaggregation of Revenue

The Company generated revenue for the three and six months ended June 30, 2022 and 2021 by (i) delivering product to its commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites and (iii) performing demonstrations of its technology at customers with the intent of entering into long term supply agreements based on the performance of the Company’s products during the demonstrations and (iv) licensing its technology to customers.

Revenue for product sales is recognized at the point of time in which the customer obtains control of the product, at the time title passes to the customer upon shipment or delivery of the product based on the applicable shipping terms.

Revenue for equipment sales is recognized upon commissioning and customer acceptance of the installed equipment per the terms of the purchase contract.

Revenue for demonstrations and consulting services is recognized when performance obligations contained in the contract have been completed, typically the completion of necessary field work and the delivery of any required analysis per the terms of the agreement.

The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the three and six months ended June 30, 2022 and 2021.

	Three months ended June 30, 2022				Three months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	4,791,054	$	4,791,054	$	2,060,949	$	2,060,949
License revenue		163,125		163,125		145,547		145,547
Demonstrations & Consulting revenue		27,000		27,000		27,000		27,000
Equipment revenue		147,703		147,703		37,200		37,200
	$	5,128,882	$	5,128,882	$	2,270,696	$	2,270,696

	Six months ended June 30, 2022				Six months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	7,989,356	$	7,989,356	$	4,092,050	$	4,092,050
License revenue		233,408		233,408		1,091,094		1,091,094
Demonstrations & Consulting revenue		54,000		54,000		61,310		61,310
Equipment revenue		193,703		193,703		52,880		52,880
	$	8,470,467	$	8,470,467	$	5,297,334	$	5,297,334

Income Taxes

Income tax expense for the three and six months ended June 30, 2022 is for gross receipts tax in certain states in which the Company conducts business.

The Company recorded no income tax expense for the three and six months ended June 30, 2022 and 2021 because the estimated effective tax rate was zero.  In determining the estimated annual effective income tax rate, the Company analyses various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives. 

As of June 30, 2022, the Company continues to provide a 100% valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Basic and Diluted Loss Per Common Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding. Diluted loss per share reflects the potential dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. There were no dilutive potential common shares as of June 30, 2022 and 2021, because the Company incurred net losses and basic and diluted losses per common share are the same. The following common stock equivalents were excluded from the computation of diluted net loss per share of common stock because they were anti-dilutive. The exercise of these common stock equivalents would dilute earnings per share if the Company becomes profitable in the future.

	June 30,		June 30,
	2022		2021
Stock Options		19,108,576		16,068,326
Warrants		4,285,000		4,285,000
Convertible debt		-		42,000
Total common stock equivalents excluded from diluted net loss per share		23,393,576		20,395,326

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist of cash and equivalents on deposit with financial institutions and accounts receivable. The Company’s cash as of June 30, 2022 and December 31, 2021 is maintained at high-quality financial institutions and has not incurred any losses to date.

Customer and Supplier Concentration

For the six months ended June 30, 2022, four customers represented 16%, 16%, 13% and 11% of the Company’s revenues, and for the six months ended June 30, 2021, four customers represented 15%, 14%, 13% and 11% of the Company’s revenues. 

For the six months ended June 30, 2022, four customers represented 25%, 18%, 12% and 11% of the Company’s accounts receivable, and for the six months ended June 30, 2021, four customers represented 20%, 19%, 18% and 13% of the Company’s accounts receivable.

For the six months ended June 30, 2022, 92% of the Company’s purchases related to four suppliers. For the six months ended June 30, 2021, 94% of the Company’s purchases related to two suppliers.  At June 30, 2022 and 2021, 57% and 61% of the Company’s accounts payable and accrued expenses related to two vendors, respectively. The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.

Contingencies

Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed.

Recently Issued Accounting Standards

Issued in June 2021, FASB Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments adds to U.S. GAAP an impairment model known as the current expected credit loss (CECL) model, which is based on expected losses rather than incurred losses.  This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application of the amendments is permitted.

Management does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.

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Going Concern and Financial Condition

6 Months Ended

Jun. 30, 2022

Going Concern and Financial Condition

Going Concern and Financial Condition

Note 3 – Going Concern and Financial Condition

Under ASC 205-40, Presentation of Financial Statements—Going Concern, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.

The accompanying condensed consolidated financial statements as of June 30, 2022 have been prepared assuming the Company will continue as a going concern. As reflected in the condensed consolidated financial statements, the Company had approximately $509,000 in cash at June 30, 2022, and cash used in operating activities of $1.1 million for the six months ended June 30, 2022. Further, the Company had a working capital deficit of $12.1 million, an accumulated deficit of $68.6 million at June 30, 2022, and had a net loss in the amount of approximately $1.5 million for the six months ended June 30, 2022. In addition, all existing secured and unsecured debt held by its principal lender, excluding the profit share liability, in the principal amount of $13.4 million matures on August 25, 2022, which is less than one month from the issuance of these condensed consolidated financial statements.

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 condensed consolidated financial statements. The Company has taken steps to alleviate the doubt raised by the application of ASC 205-40. During 2021, the Company 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 June 30, 2022. In addition, in June 2021, the Company announced that it had entered into a Debt Repayment and Exchange Agreement with its 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 June 30, 2022, was expected to repay all existing secured and unsecured debt obligations held by such lender. Such closing conditions were not met by June 30, 2022.  However, the Company is in the process of negotiating certain changes and modifications to the financing arrangements with such lender in view of the pending maturity date of the two notes. Although the Company anticipates that it will be able to finalize such arrangements prior to the current maturity date and that significant revenues will continue in its business operations, no assurances can be given that the Company will be able to finalize such changes and modifications or that the Company can obtain sufficient working capital through its business operations in order to sustain ongoing operations.

The accompanying condensed 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 the Company to continue as a going concern.

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Inventory

6 Months Ended

Jun. 30, 2022

Inventory

Inventory

Note 4 - Inventory

Inventory was comprised of the following at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
Raw Materials	$	474,736	$	637,084
Spare Parts		86,118		86,118
Finished goods		286,821		352,199
	$	847,675	$	1,075,401

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2022

Property and Equipment, Net

Property and Equipment, Net

Note 5 - Property and Equipment, Net

Property and equipment at June 30, 2022 and December 31, 2021 are as follows:

	June 30,			December 31,
	2022			2021
Equipment & installation	$	1,976,634		$	1,976,634
Trucking equipment		834,375			834,375
Office equipment, computer equipment and software		20,295			20,295
Total equipment		2,831,304			2,831,304
Less: accumulated depreciation		(2,820,329	)		(2,809,467	)
Construction in process		1,807,707			1,807,707
Property and equipment, net	$	1,818,682		$	1,829,544

The Company uses the straight-line method of depreciation over estimated useful lives of 2 to 5 years. During the three months ended June 30, 2022 and 2021 depreciation expense was $2,118, and $20,575, respectively. During the six months ended June 30, 2022 and 2021 depreciation expense was $10,862, and $44,379, respectively.

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Intellectual Property

6 Months Ended

Jun. 30, 2022

Intellectual Property

Intellectual Property

Note 6 - Intellectual Property

On January 15, 2009, the Company entered into an “Exclusive Patent and Know-How License Agreement Including Transfer of Ownership” with the Energy and Environmental Research Center Foundation, a non-profit entity. Under the terms of the Agreement, the Company has been granted an exclusive license by the Energy and Environmental Research Center Foundation for the technology to develop, make, have made, use, sell, offer to sell, lease, and import the technology in any coal-fired combustion systems (power plant) worldwide and to develop and perform the technology in any coal-fired power plant in the world.

On April 24, 2017, the Company closed on the acquisition of all patent rights from the Energy and Environmental Research Center Foundation including all patents and patents pending, domestic and foreign, relating to the foregoing technology. A total of 42 domestic and foreign patents and patent applications were included in the acquisition. In accordance with the terms of the License Agreement, the patent rights were acquired for the purchase price of (i) $2,500,000 in cash, and (ii) 925,000 shares of common stock of which 628,998 shares were issued to the Energy and Environmental Research Center Foundation and 296,002 were issued to the inventors who had been designated by the Energy and Environmental Research Center Foundation. The shares issued were valued at $518,000 ($0.56 per share), representing the value as of the closing date.

License and patent costs capitalized as of June 30, 2022 and December 31, 2021 are as follows:

	June 30,			December 31,
	2022			2021
Licenses and patents	$	3,068,995		$	3,068,995
Less: Accumulated amortization		(1,057,098	)		(954,798	)
Intellectual property, net	$	2,011,897		$	2,114,197

Amortization expense for the three months ended June 30, 2022 and 2021 was $51,150 and $51,150, respectively. Amortization expense for the six months ended June 30, 2022 and 2021 was $102,300 and $102,300, respectively. Estimated annual amortization for each of the next five years is $204,600.

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Notes Payable

6 Months Ended

Jun. 30, 2022

Notes Payable

Notes Payable

Note 7 - Notes Payable

On February 25, 2020, and pursuant to a Business Loan Agreement entered into with a banking institution, the Company’s wholly owned subsidiary, MES, Inc. closed on a one-year secured loan in the principal amount of $200,000 bearing interest at 8.75% per annum. Principal and interest is to be paid in equal monthly installments until the loan was paid in full on February 26, 2021. The note is secured by substantially all of the assets of MES, Inc. In February 2021, the loan was repaid in full.

On April 14, 2020, the Company received loan proceeds in the amount of $299,300 from First International Bank & Trust pursuant to the Paycheck Protection Program (the “PPP Loan”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. In January 2021, the PPP Loan was forgiven, and the Company recorded a gain in the first quarter of 2021 on extinguishment of debt of $299,300.

In February 2021, the Company received second draw loan proceeds in the amount of $299,380 from First International Bank & Trust pursuant to the Paycheck Protection Program (the “Second PPP Loan”) under the CARES Act. In October 2021, the Second PPP Loan was forgiven and the Company recorded a gain on extinguishment of debt of $301,377.

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Convertible Notes Payable

6 Months Ended

Jun. 30, 2022

Convertible Notes Payable

Convertible Notes Payable

Note 8 - Convertible Notes Payable

From July 30, 2013 through December 24, 2013, the Company sold convertible notes and warrants to unaffiliated accredited investors totaling $1,902,500 (the “2013 Notes”). From February 8, 2021 to February 15, 2021, the Company issued 1,880,000 shares of common stock to certain holders of the 2013 Notes for the conversion of the outstanding principal of such notes in the aggregate amount of $940,000, based upon a conversion rate of $0.50 per share. On April 9, 2021, the Company issued 60,000 shares of common stock to another holder of such notes for the conversion of outstanding principal in the amount of $30,000, and on August 18, 2021, the Company issued 20,000 shares of common stock to another holder of such notes for the conversion of outstanding principal in the amount of $10,000, each based upon a conversion rate of $0.50 per share. On August 24, 2021, the Company prepaid the outstanding principal balance of another of such notes in the principal amount of $10,000. As of June 30, 2022 and December 31, 2021, total principal of $0, was outstanding on the 2013 Notes.

On June 15, 2018, the Company issued 2018 Unsecured Convertible Notes (the “2018 Unsecured Notes”) totaling $560,000 and warrants to certain then holders of the 2013 Notes in exchange for their secured 2013 Notes, and from August 31, 2018 through October 30, 2018, the Company issued additional 2018 Unsecured Notes totaling $300,000 and warrants to unaffiliated investors. Pursuant to the terms of the 2018 Unsecured Notes, if at any time after six months from the issuance of the 2018 Notes, the closing price of the Company’s common stock exceeds $1.00 per share for 10 consecutive trading days, the Company shall have the right to force conversion of all of the outstanding principal of such Notes. Pursuant to notice dated February 17, 2021, the Company notified all such holders that as a result closing price of the Company’s common stock having exceeded $1.00 per share for 10 consecutive trading days, the Company was electing to force conversion of all such outstanding principal. Between February 26, 2021 and March 8, 2021, the Company issued 690,000 shares of common stock to certain holders of the 2018 Unsecured Notes for conversion of the outstanding principal of such Notes in the aggregate amount of $345,000, and on March 17, 2021, the Company issued 1,030,000 shares of common stock to the remaining holders of the 2018 Unsecured Notes for the conversion of the remaining outstanding principal in the aggregate amount of $515,000, all based upon a conversion rate of $0.50 per share. As of June 30, 2022 and December 31, 2021, total principal of $0, was outstanding on the 2018 Unsecured Notes.

From June 18, 2019 through October 23, 2019, the Company sold 2019 Unsecured Convertible Notes (the “2019 Unsecured Notes”) totaling $2,600,000 and warrants to unaffiliated accredited investors. On February 26, 2021, the Company issued 100,000 shares of common stock to a certain holder of the 2019 Unsecured Notes for the conversion of outstanding principal in the amount of $50,000, based upon a conversion rate of $0.50 per share. Pursuant to a letter dated June 14, 2021, the Company offered each of the holders of the 2019 Unsecured Notes the opportunity to voluntarily convert the outstanding principal into shares of common stock at conversion ratio of 0.50 per share and, if converted prior to June 30, 2021, still be paid interest through September 30, 2021. With such offer, all accrued and unpaid interest, and additional interest through September 30, 2021, would be paid in shares of common stock at a rate of $1.00 per share, in lieu of payment in cash. As a result thereof, and between June 17, 2021 and June 23, 2021, (i) the outstanding principal totaling $2,550,000 was voluntarily converted by the holders thereof into an aggregate of 5,100,000 shares of common stock of the Company at a conversion price of $0.50 per share, and (ii) all accrued and unpaid interest thereon, together with additional interest through September 30, 2021, which together totaled $229,500, was converted into an aggregate of 229,500 shares of common stock of the Company. The Company recognized a conversion inducement cost of $98,515 related to the conversion. As of June 30, 2022 and December 31, 2021, total principal of $0, was outstanding on the 2019 Unsecured Notes. There is no further liability related to the profit share due to the voluntary conversion of all of the 2019 Unsecured Notes.

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Related Party

6 Months Ended

Jun. 30, 2022

Related Party

Related Party

Note 9 - Related Party

Secured Note Payable

On November 29, 2016, pursuant to a new restated financing agreement entered with AC Midwest Energy, LLC (“AC Midwest”) on November 1, 2016, the Company closed on a new secured note with AC Midwest (the “AC Midwest Secured Note”) in the original principal amount of $9,646,686, which was to mature on December 15, 2018. AC Midwest is wholly-owned by a stockholder of the Company. The AC Midwest Secured Note is guaranteed by MES, is non-convertible and bears interest at a rate of 15.0% per annum, payable quarterly in arrears on or before the last day of each fiscal quarter. Interest expense for the years ended December 31, 2021 and 2020 was $41,319 and $41,432 respectively. On February 25, 2019, per Amendment No. 3 to the Amended and Restated Financing Agreement, AC Midwest agreed to waive compliance with a certain financial covenant of the Restated Financing Agreement and strike this covenant in its entirety as of the effective date of the amendment. Also, pursuant to Amendment No. 3, the parties agreed that the maturity date for the remaining principal balance due under the AC Midwest Secured Note would be extended from December 15, 2018 to August 25, 2022. The amendment was accounted for as an extinguishment in accordance with ASC 470-50 with no gain or loss recorded. As of both June 30, 2022 and December 31, 2021, total principal of $271,686 was outstanding on this note.

Unsecured Note Payable

The Company has the following unsecured note payable - related party outstanding as of June 30, 2022 and December 31, 2021:

	June 30,			December 31,
	2022			2021
Unsecured note payable	$	13,154,931		$	13,154,931
Less discounts and debt issuance costs		(303,316	)		(1,283,677	)
Total unsecured note payable		12,851,615			11,871,254
Less current portion		(12,851,615	)		(11,871,254	)
Unsecured note payable, net of current portion	$	-		$	-

On November 29, 2016, pursuant to a new restated financing agreement entered with AC Midwest on November 1, 2016, the Company closed on an unsecured note with AC Midwest (the “AC Midwest Subordinated Note”) in the principal amount of $13,000,000, which was to mature on December 15, 2020. On February 25, 2019, the Company, entered into an Unsecured Note Financing Agreement (the “Unsecured Note Financing Agreement”) with AC Midwest, pursuant to which AC Midwest issued an unsecured note in the principal amount of $13,154,931 (the “New AC Midwest Unsecured Note”), which represented the outstanding principal and accrued and unpaid interest at closing.

In accordance with ASC 470-60-15-5, since the present value of the cash flows under the new debt instrument was at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the amendment to note as a debt extinguishment. Accordingly, the Company wrote off the remaining debt discount on the original debentures of $1,070,819. Since the amendment was with a related party defined in ASC 470-50-40-2 the Company recorded a Capital contribution of $3,412,204 on this exchange which is primarily related to the difference in fair value of the note on the date of the exchange. The Company determined that the rate of interest on the AC Midwest Subordinated Note was a below market rate of interest and determined that a discount of $6,916,687 should be recorded. This discount is based on an applicable market rate for unsecured debt for the Company of 21% and will be amortized as interested expense over the life of the loan. Amortized discount recorded as interest expense for the six months ended June 30, 2022 and 2021 was $919,884 and $980,360, respectively. As of June 30, 2022, the unamortized balance of the discount was $284,605 and the unamortized balance of the debt issuance costs was $18,711.

The New AC Midwest Unsecured Note, which has been issued in exchange for the AC Midwest Subordinated Note which has now been cancelled, will mature on August 25, 2022 (the “Maturity Date”). It bears a zero cash interest rate.

AC Midwest shall be entitled to a profit participation preference equal to 1.0 times the original principal amount (the “Profit Share”). If the original principal amount had been paid in full on or prior to August 25, 2020, AC Midwest would have been entitled to a profit participation preference equal to 0.5 times the original principal amount.

The Profit Share is “non-recourse” and shall only be derived from and computed on the basis of, and paid from, Net Litigation Proceeds from claims relating to the Company’s intellectual property, Net Revenue Share and Adjusted Free Cash Flow (as such terms are defined in the Unsecured Note Financing Agreement).

The Profit Share

In connection with the New AC Midwest Unsecured Note the Company shall pay the principal outstanding, as well as the Profit Share, in an amount equal to 60.0% of Net Litigation Proceeds until such time as any litigation funder has been paid in full and, thereafter, in an amount equal to 75.0% of such Net Litigation Proceeds until the Unsecured Note and Profit Share have been paid in full. In addition, and within 30 days following the end of each fiscal quarter, the Company shall pay the principal outstanding and Profit Share in an aggregate amount equal to the Net Revenue Share (which means 60.0% of Net Licensing Revenue (as defined) from licensing the Company’s intellectual property) plus Adjusted Free Cash Flow until the Unsecured Note and Profit Share have been paid in full, provided, however, that such payments shall exclude the first $3,500,000 of Net Licensing Revenue and Adjusted Free Cash Flow achieved commencing with the fiscal quarter ending March 31, 2019. Any remaining principal balance due on the Unsecured Note shall be due and payable in full on the Maturity Date. The Profit Share, however, if not paid in full on or before the Maturity Date, shall remain subject to Unsecured Note Financing Agreement until full and final payment.

The Company is utilizing the methodology behind the ASC 815, Derivatives and Hedging and ASC 480, Distinguishing Liabilities from Equity to determine how to account for the profit-sharing portion of the note payable. Although the transaction is not indexed to MEEC’s common stock the profit sharing has the characteristics of a freestanding financial instrument because the profit sharing is not callable by the lender, it will be paid out past the maturity of the Unsecured Note Payable and, the fair value will fluctuate over time based on payment predictions. The Profit Share was determined to have a fair value of $1,954,383 upon grant. The discounted cash flow model assumptions used at June 30, 2022 to calculate the Profit Share liability included: estimated term of sixteen years with between $100,000 to $350,000 paid quarterly starting in February 2024, and an annual market interest rate of 21%. The profit share liability will be marked to market every quarter utilizing management’s estimates.

The following are the changes in the profit share liabilities during the six months ended June 30, 2022 and 2021.

Profit Share as of January 1, 2022	$	2,836,743
Addition		-
Loss on change in fair value of profit share		307,417
Profit Share as of June 30, 2022	$	3,144,160

Profit Share as of January 1, 2021	$	2,305,308
Addition		-
Loss on change in fair value of profit share		249,825
Profit Share as of June 30, 2021	$	2,555,133

Debt Repayment and Exchange Agreement

On June 1, 2021, the Company, along with MES, entered into a Debt Repayment and Exchange Agreement with AC Midwest, which was expected to repay all existing secured and unsecured debt obligations presently held by AC Midwest (the “Debt Repayment Agreement”).

Pursuant to the Debt Repayment Agreement, the Company was at closing to repay the principal balance outstanding on the AC Midwest Secured Note in cash, together with any other amounts due and owing under such note and repay the outstanding debt under the New AC Midwest Unsecured Note by paying and issuing a combination of cash and shares of common stock which AC Midwest had agreed to accept in full and complete repayment of the obligations thereunder.

At closing, and with regard to the New AC Midwest Unsecured Note, the Company was to pay AC Midwest $6,577,465 in cash representing 50.0% of the aggregate outstanding principal balance of such note, and issue shares of common stock to AC Midwest in exchange for the remaining 50.0% of the aggregate outstanding principal balance at an exchange price equal to 100% of the offering price of common stock in the Qualifying Offering (as defined below). With regard to the Profit Share, at closing the Company was to pay AC Midwest $2,305,308 in cash representing the Profit Share Valuation, and issue shares of common stock for $4,026,568 representing the Adjusted Profit Share Valuation (as such terms are defined in the Debt Repayment Agreement) at the same exchange price indicated above. The Company agreed to provide certain registration rights with respect to the shares issued thereunder.

The closing was subject to various 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 was extended to June 30, 2022 (the “Qualifying Offering”). Such closing conditions were not met by June 30, 2022. 

Short term debt

On June 13, 2022, the Company entered into a promissory note in the amount of $250,000 with the Company’s Chairman of the Board of Directors. The note bears interest at 6% and is due on the earlier of 90 days or the Company having cash of $1,200,000. $250,000 was outstanding as of June 30, 2022.

Related Party Transactions

Kaye Cooper Kay & Rosenberg, LLP provides certain legal services to the Company and was paid $125,688 and $137,500 for the six months ended June 30, 2022 and 2021, respectively, for legal services rendered and disbursement incurred. David M. Kaye, a Director and Secretary of the Company, is a partner of the law firm. At June 30, 2022 and December 31, 2021, $231,250 and $206,554, respectively, was owed to the firm for services rendered.

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Operating Leases

6 Months Ended

Jun. 30, 2022

Operating Leases

Operating Leases

Note 10 - Operating Leases

In 2016, the Company entered into a six-year agreement to lease trailers used in the delivery of its products. Monthly payments currently total $32,820.

On July 1, 2015, the Company entered into a five-year lease for warehouse space in Corsicana, Texas. Rent is $3,750 monthly throughout the term of the lease. The Company is also responsible for the pro rata share of the projected monthly expenses for the property taxes. The current pro rata share is 882. The lease was extended on June 1, 2019 for five years. The Company recorded a right of use asset and an operating lease liability of $145,267. This amount represents the difference between the value from the remaining lease and the extended lease.

On September 1, 2019, the Company entered into a one-year lease for office space in Grand Forks, North Dakota. Monthly rent was $590 a month through August 2020. The lease was not renewed and the Company vacated the space.

Future remaining minimum lease payments under these non-cancelable leases are as follows:

For the twelve months ended June 30,
2023	$	163,260
2024		36,031
Total		199,291
Less discount		(7,203	)
Total lease liabilities		192,088
Less current portion		(158,899	)
Operating lease obligation, net of current portion	$	33,189

The weighted average remaining lease term for operating leases is 0.50 years and the weighted average discount rate used in calculating the operating lease asset and liability is 5.0%. For the six months ended June 30, 2022, payments on lease obligations were $143,780 and amortization on the right of use assets was $201,634.

For the six months ended June 30, 2022 and 2021, the Company’s lease cost consists of the following components, each of which is included in costs and expenses within the Company’s consolidated statements of operations:

	For the Six Months Ended June 30, 2022		For the Six Months Ended June 30, 2021
Operating lease cost	$	201,634	$	201,434
Short term lease costs		-		3,540
Total lease costs	$	201,634	$	204,974

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies

Commitments and Contingencies

Note 11 - Commitments and Contingencies

Fixed Price Contract

The Company’s multi-year contracts with its commercial customers contain fixed prices for product. These contracts expire between 2022 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period.

Legal proceedings

On July 17, 2019, the Company initiated patent litigation against certain defendants in the U.S. District Court for the District of Delaware for infringement of United States Patent Nos. 10,343,114 (the “‘114 Patent”) and 8,168,147 (the “‘147 Patent”) owned by the Company. These patents relate to the Company’s two-part Sorbent Enhancement Additive (SEA^®) process for mercury removal from coal-fired power plants. Named as defendants in the lawsuit are (i) Vistra Energy Corp., AEP Generation Resources Inc., NRG Energy, Inc., Talen Energy Corporation, and certain of their respective affiliated entities, all of which are owners and/or operators of coal-fired power plants in the United States, and (ii) Arthur J. Gallagher & Co., DTE REF Holdings, LLC, CERT Coal Holdings LLC, Chem-Mod LLC, and certain of their respective affiliated entities, and additional named and unnamed defendants, all of which operate or are involved in operations of coal facilities in the United States. In the lawsuit, the Company alleges that each of the defendants has willfully infringed the Company’s ‘114 Patent and ‘147 Patent and seeks a permanent injunction from further acts of infringement and monetary damages.

During 2020, each of the four major utility defendants in the above action filed petitions for Inter Partes Review with the United States Patent and Trademark Office, seeking to invalidate certain claims to the patents which are subject to the litigation.

Between July 2020 and January 2021, we entered into agreements with each of the four major utility defendants in such action which included certain monetary arrangements and pursuant to which we have dismissed all claims brought against each of them and their affiliates, and such parties have withdrawn from petitions for Inter Partes Review with the United States Patent and Trademark Office. Such agreements entered into with such parties provide each of them and their affiliates with a non-exclusive license to certain Company patents (related to the Company’s two-part Sorbent Enhancement Additive (SEA®) process) for use in connection with such parties’ coal-fired power plants.

The above described proceedings are continuing with respect to the other parties involved. On May 20, 2021, a U.S. District Court Magistrate Judge issued a report and recommendation that the above action should be permitted to proceed against 16 refined coal defendants named in the action directly involved in the refined coal program and operations, and be dismissed against 12 other defendants, primarily affiliated entities of the refined coal operators. Such report was issued in connection with certain motions to dismiss filed by the refined coal defendants. In September 2021, the Company received approval from the District Judge of the U.S. District Court in Delaware of the adoption of this report and recommendation of the Magistrate Judge to allow the Company to proceed with litigation claims against certain refined coal entities.

As a result of an application made by the Company to the Court in March 2022 to add additional parties to the action (all affiliated entities of the already named defendants), there are now 24 refined coal defendants named in the action. In connection with such application, the District Court Magistrate Judge ruled in April 2022 that certain parties could be added but denied the application with respect to certain others. A jury trial date has been scheduled for September 2023.

Except for the foregoing disclosures, the Company is not presently aware of any other material pending legal proceedings to which the Company is a party or of which any of its property is the subject.

Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that the Company will be successful in litigating and/or settling any of these claims.

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Stock Based Compensation

6 Months Ended

Jun. 30, 2022

Stock Based Compensation

Stock Based Compensation

Note 12 - Stock Based Compensation

Stock Based Compensation

Stock based compensation consists of the amortization of common stock, stock options and warrants issued to employees, directors and consultants. For the three months ended June 30, 2022 and 2021, stock based compensation expense amounted to $268,536 and $223,998, respectively. For the six months ended June 30, 2022 and 2021, stock based compensation expense amounted to $450,283 and $255,908, respectively. Such expense is classified in selling, general and administrative expenses.

Common Stock

On March 23, 2021, and pursuant to a consulting agreement dated November 1, 2020, as amended on March 19, 2021, with a nonaffiliated third party, the Company issued 500,000 shares of common stock to such party as part of its compensation thereunder. These shares of common stock were valued at $615,000 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over ten months. Pursuant to an amendment dated March 15, 2022 and effective as of December 31, 2021, the nonaffiliated party agreed to forfeit all of such shares which shares were cancelled effective as of December 31, 2021. As such, the previously recorded expense of $615,000 was reversed in December 2021.

On March 30, 2021, and pursuant to a business development agreement dated March 30, 2021 with a nonaffiliated third party, the Company issued 25,000 shares of common stock to such party for its compensation thereunder. These shares of common stock were valued at $29,250 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over three months.

On December 1, 2021, and pursuant to a consulting agreement dated December 1, 2021 with a nonaffiliated third party, the Company issued 250,000 shares of common stock to such party as part of its compensation thereunder. These shares of common stock were valued at $171,250 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over 12 months.

On May 31, 2022, and pursuant to a consulting agreement dated May 31, 2022 with a nonaffiliated third party, the Company issued 500,000 shares of common stock to such party as part of its compensation thereunder. These shares of common stock were valued at $160,000 in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over 12 months.

On May 31, 2022, the Company issued a total of 250,000 shares of common stock to two Directors. These shares of common stock were valued at $55,000 in accordance with FASB ASC Topic 718. The fair value of the shares was expensed in full on the issuance date.

Stock Options

The Company accounts for stock-based compensation awards in accordance with the provisions of ASC 718, which addresses the accounting for employee stock options which requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the condensed consolidated financial statements over the vesting period based on the estimated fair value of the awards.

On May 1, 2021, the Company issued 15,869 shares of common stock to a certain option holder upon the cashless exercise of an option to purchase 25,000 shares of common stock at an exercise price off $0.42 based upon a market price of $1.15 per share as determined under the terms of the option. On June 30, 2021, the Company issued 125,000 shares of common stock to a certain option holder upon a cash exercise of an option to purchase 125,000 shares of common stock at an exercise price of $0.81 or $101,250 in the aggregate.

On January 24, 2022, the Company extended the expiration dates of certain fully expensed previously granted nonqualified stock options (which were due to expire in February 2022) which were granted to five individuals to acquire an aggregate of 700,000 shares of the Company’s common stock under the Company’s 2014 Equity Incentive Plan and the 2017 Equity Incentive Plan (the “2017 Plan”). Such extended options are exercisable at prices ranging from $1.15 to $1.20 per share, representing the original fair market value of the common stock on the dates of grant as determined under the applicable Equity Plan. The options are fully vested and exercisable and will now expire five years from their original expiration dates. Based on a Black-Scholes valuation model, these modified options were valued at $138,623, in accordance with FASB ASC Topic 718, which was expensed on the amendment date in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations. 

On February 2, 2022, the Company issued 5,181 shares of common stock to a certain option holder upon the cashless exercise of options to purchase an aggregate of 9,750 shares of common stock at exercise prices ranging from $0.20 to $0.33 per share based upon a market price of $0.54 per share as determined under the terms of the options.

On May 31, 2022, the Company granted nonqualified stock options to the following executive officers: John Pavlish (Senior Vice President and Chief Technology Officer) and James Trettel (Vice President of Operations) – nonqualified stock options to each acquire 500,000 shares of the Company’s common stock; and Jami Satterthwaite (Chief Financial Officer) – nonqualified stock options to acquire 100,000 shares of the Company’s common stock.  On such date, two other employees were also granted nonqualified stock options to each acquire 50,000 shares of the Company’s common stock.  All of such options were granted under the 2017 Plan and are exercisable at $0.21 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Plan.   The options are fully vested and exercisable and expire five years from their issuance date. Based on a Black-Scholes valuation model, these options were valued at $143,745, in accordance with FASB ASC Topic 718, which was expensed on the issuance date in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations. The valuation assumptions included an expected duration of 2.5 years, volatility of 96.83%, discount rate of 2.62% and dividends of $0.

A summary of stock option activity is presented below:

	Number of Shares			Weighted Average Exercise  Price		Weighted  Average  Remaining Contractual  Life (years)		Aggregate Intrinsic Value
December 31, 2021		18,318,326		$	0.53		2.89	$	2,961,965
Grants		1,200,000			0.21			$	-
Expirations		(400,000	)	$	1.03
Exercised		(9,750	)	$	0.25				-
June 30, 2022		19,108,576		$	0.50		2.79	$	954,329
Options exercisable at:
June 30, 2022		19,108,576		$	0.50		2.79	$	954,329

The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.345 as of June 30, 2022, which would have been received by the option holders had all option holders exercised their options as of that date.

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Warrants

6 Months Ended

Jun. 30, 2022

Warrants

Warrants

Note 13 - Warrants

Sold and issued warrants are subject to the provisions of FASB ASC 815-10, the Company utilized a Black-Scholes options pricing model to value the warrants sold and issued. This model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected period until the warrants are exercised. When calculating the value of warrants issued, the Company uses a volatility factor, a risk-free interest rate and the life of the warrant for the exercise period.

From January 23, 2021 to February 16, 2021, the Company issued 705,166 shares of common stock to certain warrant holders upon the cash exercise of warrants to purchase an aggregate of 705,166 shares of common stock at an exercise price of $0.35 per share or $246,808 in the aggregate.

On February 17, 2021, the Company issued 97,675 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 150,000 shares of common stock at an exercise price of $0.45 per share based upon a market value of $1.29 per share as determined under the terms of the warrant.

On March 8, 2021, the Company issued an aggregate of 97,015 shares of common stock to certain warrant holders upon the cashless exercise of warrants to purchase an aggregate of 175,000 shares of common stock at an exercise price of $0.70 per share based upon market values from $1.44 to $1.63 per share as determined under the terms of the warrants.

The following is a summary of the Company’s warrant activity:

	Number of Shares		Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
December 31, 2021		4,285,000	$	0.63		2.47	$	-
Grants		-		-		-		-
Expirations		-		-		-		-
Exercised		-		-		-		-
June 30, 2022		4,285,000	$	0.70		1.98	$	-
Warrants exercisable at:
June 30, 2022		4,285,000	$	0.70		1.98	$	-

The following table summarizes information about common stock warrants outstanding at June 30, 2022:

Outstanding and Exercisable
Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	0.70		4,285,000		1.98	$	0.70
$	0.70		4,285,000		1.98	$	0.70

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Subsequent Events

6 Months Ended

Jun. 30, 2022

Subsequent Events

Subsequent Events

Note 14 - Subsequent Events

In August 2022, the Company signed of a three-year license agreement with a utility in the Midwest to provide a non-exclusive license to certain patents of the Company for mercury emissions capture for use in connection with the utility’s coal-fired power plants. The license agreement includes an annual sum payable over the three-year term. The agreement also provides the Company the opportunity to compete for the utility’s product supply going forward.

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Summary Of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of Rule 8-03 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on April 5, 2022, from which the accompanying condensed consolidated balance sheet dated December 31, 2021 was derived.

In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly the financial position as of June 30, 2022, and results of operations, changes in stockholders’ deficit and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Midwest Energy Emissions Corp. and its wholly-owned subsidiaries, MES, Inc. and ME2C Sponsor LLC, and ME2C Acquisition Corp. which is 85% owned by ME2C Sponsor LLC (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, valuation of equity issuances and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company uses estimates in accounting for, among other items, profit share liability, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve and impairment of intellectual property. Actual results could differ from those estimates.

Recoverability of Long-Lived and Intangible Assets

Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived and/or intangible assets would be adjusted, based on estimates of future discounted cash flows. The Company evaluated the recoverability of the carrying value of the Company’s property and equipment, right of use asset and intellectual property. No impairment charges were recognized for the three and six months ended June 30, 2022 and 2021.

Fair Value of Financial Instruments

The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows:

☐	Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date.
☐	Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
☐	Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Cash was the only asset measured at fair value on a recurring basis by the Company at June 30, 2022 and December 31, 2021 and is considered to be Level 1.

Financial instruments include cash, accounts receivable, accounts payable, and short-term debt. The carrying amounts of these financial instruments approximated fair value at June 30, 2022 and December 31, 2021 due to their short-term maturities.

The fair value of the promissory notes payable at June 30, 2022 and December 31, 2021 approximated the carrying amount as the notes were recently issued at interest rates prevailing in the market and interest rates have not significantly changed as of June 30, 2022 and December 31, 2021. The fair value of the promissory notes payable was determined on a Level 2 measurement. Discounts on issued debt, as well as debt issuance costs, are amortized over the term of the individual promissory notes.

The fair value of the profit share liability at June 30, 2022 and December 31, 2021 was calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability was determined on a Level 3 measurement. These values are determined using pricing models for which the assumptions utilized management’s estimates.

The following tables present the Company’s liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

			Fair Value Measurement as of
			June 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		3,144,160		-		-		3,144,160
Total Liabilities	$	3,144,160	$	-	$	-	$	3,144,160

			Fair Value Measurement as of
			December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		2,836,743		-		-		2,836,743
Total Liabilities	$	2,836,743	$	-	$	-	$	2,836,743

Revenue Recognition

The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales and other taxes are excluded from revenues. Invoiced shipping and handling costs are included in revenue.

Disaggregation of Revenue

The Company generated revenue for the three and six months ended June 30, 2022 and 2021 by (i) delivering product to its commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites and (iii) performing demonstrations of its technology at customers with the intent of entering into long term supply agreements based on the performance of the Company’s products during the demonstrations and (iv) licensing its technology to customers.

Revenue for product sales is recognized at the point of time in which the customer obtains control of the product, at the time title passes to the customer upon shipment or delivery of the product based on the applicable shipping terms.

Revenue for equipment sales is recognized upon commissioning and customer acceptance of the installed equipment per the terms of the purchase contract.

Revenue for demonstrations and consulting services is recognized when performance obligations contained in the contract have been completed, typically the completion of necessary field work and the delivery of any required analysis per the terms of the agreement.

The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the three and six months ended June 30, 2022 and 2021.

	Three months ended June 30, 2022				Three months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	4,791,054	$	4,791,054	$	2,060,949	$	2,060,949
License revenue		163,125		163,125		145,547		145,547
Demonstrations & Consulting revenue		27,000		27,000		27,000		27,000
Equipment revenue		147,703		147,703		37,200		37,200
	$	5,128,882	$	5,128,882	$	2,270,696	$	2,270,696

	Six months ended June 30, 2022				Six months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	7,989,356	$	7,989,356	$	4,092,050	$	4,092,050
License revenue		233,408		233,408		1,091,094		1,091,094
Demonstrations & Consulting revenue		54,000		54,000		61,310		61,310
Equipment revenue		193,703		193,703		52,880		52,880
	$	8,470,467	$	8,470,467	$	5,297,334	$	5,297,334

Income Taxes

Income tax expense for the three and six months ended June 30, 2022 is for gross receipts tax in certain states in which the Company conducts business.

The Company recorded no income tax expense for the three and six months ended June 30, 2022 and 2021 because the estimated effective tax rate was zero.  In determining the estimated annual effective income tax rate, the Company analyses various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives. 

As of June 30, 2022, the Company continues to provide a 100% valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Basic and Diluted Loss Per Common Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding. Diluted loss per share reflects the potential dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. There were no dilutive potential common shares as of June 30, 2022 and 2021, because the Company incurred net losses and basic and diluted losses per common share are the same. The following common stock equivalents were excluded from the computation of diluted net loss per share of common stock because they were anti-dilutive. The exercise of these common stock equivalents would dilute earnings per share if the Company becomes profitable in the future.

	June 30,		June 30,
	2022		2021
Stock Options		19,108,576		16,068,326
Warrants		4,285,000		4,285,000
Convertible debt		-		42,000
Total common stock equivalents excluded from diluted net loss per share		23,393,576		20,395,326

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist of cash and equivalents on deposit with financial institutions and accounts receivable. The Company’s cash as of June 30, 2022 and December 31, 2021 is maintained at high-quality financial institutions and has not incurred any losses to date.

Customer and Supplier Concentration

For the six months ended June 30, 2022, four customers represented 16%, 16%, 13% and 11% of the Company’s revenues, and for the six months ended June 30, 2021, four customers represented 15%, 14%, 13% and 11% of the Company’s revenues. 

For the six months ended June 30, 2022, four customers represented 25%, 18%, 12% and 11% of the Company’s accounts receivable, and for the six months ended June 30, 2021, four customers represented 20%, 19%, 18% and 13% of the Company’s accounts receivable.

For the six months ended June 30, 2022, 92% of the Company’s purchases related to four suppliers. For the six months ended June 30, 2021, 94% of the Company’s purchases related to two suppliers.  At June 30, 2022 and 2021, 57% and 61% of the Company’s accounts payable and accrued expenses related to two vendors, respectively. The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.

Contingencies

Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed.

Recently Issued Accounting Standards

Issued in June 2021, FASB Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments adds to U.S. GAAP an impairment model known as the current expected credit loss (CECL) model, which is based on expected losses rather than incurred losses.  This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application of the amendments is permitted.

Management does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2022

Summary of Significant Accounting Policies

Schedule of fair value assets and liabilities measured on recurring basis

			Fair Value Measurement as of
			June 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		3,144,160		-		-		3,144,160
Total Liabilities	$	3,144,160	$	-	$	-	$	3,144,160

			Fair Value Measurement as of
			December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Profit share liability – related party		2,836,743		-		-		2,836,743
Total Liabilities	$	2,836,743	$	-	$	-	$	2,836,743

Schedule of sales by operating segment

	Three months ended June 30, 2022				Three months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	4,791,054	$	4,791,054	$	2,060,949	$	2,060,949
License revenue		163,125		163,125		145,547		145,547
Demonstrations & Consulting revenue		27,000		27,000		27,000		27,000
Equipment revenue		147,703		147,703		37,200		37,200
	$	5,128,882	$	5,128,882	$	2,270,696	$	2,270,696

	Six months ended June 30, 2022				Six months ended June 30, 2021
	United States		Total		United States		Total
Product revenue	$	7,989,356	$	7,989,356	$	4,092,050	$	4,092,050
License revenue		233,408		233,408		1,091,094		1,091,094
Demonstrations & Consulting revenue		54,000		54,000		61,310		61,310
Equipment revenue		193,703		193,703		52,880		52,880
	$	8,470,467	$	8,470,467	$	5,297,334	$	5,297,334

Schedule of earnings per share basic and diluted

	June 30,		June 30,
	2022		2021
Stock Options		19,108,576		16,068,326
Warrants		4,285,000		4,285,000
Convertible debt		-		42,000
Total common stock equivalents excluded from diluted net loss per share		23,393,576		20,395,326

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Inventory (Tables)

6 Months Ended

Jun. 30, 2022

Inventory

Schedule of Inventory

	June 30, 2022		December 31, 2021
Raw Materials	$	474,736	$	637,084
Spare Parts		86,118		86,118
Finished goods		286,821		352,199
	$	847,675	$	1,075,401

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Property And Equipment Net (Tables)

6 Months Ended

Jun. 30, 2022

Property and Equipment, Net

Schedule of property and equipment

	June 30,			December 31,
	2022			2021
Equipment & installation	$	1,976,634		$	1,976,634
Trucking equipment		834,375			834,375
Office equipment, computer equipment and software		20,295			20,295
Total equipment		2,831,304			2,831,304
Less: accumulated depreciation		(2,820,329	)		(2,809,467	)
Construction in process		1,807,707			1,807,707
Property and equipment, net	$	1,818,682		$	1,829,544

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Intellectual Property (Tables)

6 Months Ended

Jun. 30, 2022

Property and Equipment, Net

Schedule of patent costs capitalized

	June 30,			December 31,
	2022			2021
Licenses and patents	$	3,068,995		$	3,068,995
Less: Accumulated amortization		(1,057,098	)		(954,798	)
Intellectual property, net	$	2,011,897		$	2,114,197

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Related Party (Tables)

6 Months Ended

Jun. 30, 2022

Related Party (Tables)

Schedule of Unsecured notes payable

	June 30,			December 31,
	2022			2021
Unsecured note payable	$	13,154,931		$	13,154,931
Less discounts and debt issuance costs		(303,316	)		(1,283,677	)
Total unsecured note payable		12,851,615			11,871,254
Less current portion		(12,851,615	)		(11,871,254	)
Unsecured note payable, net of current portion	$	-		$	-

Schedule of profit share liabilities

Profit Share as of January 1, 2022	$	2,836,743
Addition		-
Loss on change in fair value of profit share		307,417
Profit Share as of June 30, 2022	$	3,144,160

Profit Share as of January 1, 2021	$	2,305,308
Addition		-
Loss on change in fair value of profit share		249,825
Profit Share as of June 30, 2021	$	2,555,133

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Operating Leases (Tables)

6 Months Ended

Jun. 30, 2022

Operating Leases

Schedule of future minimum lease payments

For the twelve months ended June 30,
2023	$	163,260
2024		36,031
Total		199,291
Less discount		(7,203	)
Total lease liabilities		192,088
Less current portion		(158,899	)
Operating lease obligation, net of current portion	$	33,189

Schedule of lease cost

	For the Six Months Ended June 30, 2022		For the Six Months Ended June 30, 2021
Operating lease cost	$	201,634	$	201,434
Short term lease costs		-		3,540
Total lease costs	$	201,634	$	204,974

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Stock Based Compensation

Schedule of stock option activity

	Number of Shares			Weighted Average Exercise  Price		Weighted  Average  Remaining Contractual  Life (years)		Aggregate Intrinsic Value
December 31, 2021		18,318,326		$	0.53		2.89	$	2,961,965
Grants		1,200,000			0.21			$	-
Expirations		(400,000	)	$	1.03
Exercised		(9,750	)	$	0.25				-
June 30, 2022		19,108,576		$	0.50		2.79	$	954,329
Options exercisable at:
June 30, 2022		19,108,576		$	0.50		2.79	$	954,329

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Warrants (Tables)

6 Months Ended

Jun. 30, 2022

Convertible Notes Payable

Schedule of warrant

	Number of Shares		Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
December 31, 2021		4,285,000	$	0.63		2.47	$	-
Grants		-		-		-		-
Expirations		-		-		-		-
Exercised		-		-		-		-
June 30, 2022		4,285,000	$	0.70		1.98	$	-
Warrants exercisable at:
June 30, 2022		4,285,000	$	0.70		1.98	$	-

Summary of common stock warrants outstanding

Outstanding and Exercisable
Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	0.70		4,285,000		1.98	$	0.70
$	0.70		4,285,000		1.98	$	0.70

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Summary of Significant Accounting Policies (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Total Liabilities	$ 20,206,581	$ 18,374,259
Fair Value, Inputs, Level 1 [Member]
Profit share liability	0	0
Total Liabilities	0	0
Fair Value, Inputs, Level 2 [Member]
Profit share liability	0	0
Total Liabilities	0	0
Fair Value, Inputs, Level 3 [Member]
Profit share liability	3,144,160	2,836,743
Total Liabilities	3,144,160	2,836,743
Total [Member]
Profit share liability	3,144,160	2,836,743
Total Liabilities	$ 3,144,160	$ 2,836,743

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Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
United States [Member]
Product revenue	$ 4,791,054	$ 2,060,949	$ 7,989,356	$ 4,092,050
License revenue	163,125	145,547	233,408	1,091,094
Demonstrations & Consulting revenue	27,000	27,000	54,000	61,310
Equipment revenue	147,703	37,200	193,703	52,880
Total	5,128,882	2,270,696	8,470,467	5,297,334
Total [Member]
Product revenue	4,791,054	2,060,949	7,989,356	4,092,050
License revenue	163,125	145,547	233,408	1,091,094
Demonstrations & Consulting revenue	27,000	27,000	54,000	61,310
Equipment revenue	147,703	37,200	193,703	52,880
Total	$ 5,128,882	$ 2,270,696	$ 8,470,467	$ 5,297,334

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Summary of Significant Accounting Policies (Details 2) - shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Total common stock equivalents excluded from diluted net loss per share	23,393,576	20,395,326
Warrant [Member]
Total common stock equivalents excluded from diluted net loss per share	4,285,000	4,285,000
Stock Options [Member]
Total common stock equivalents excluded from diluted net loss per share	19,108,576	16,068,326
Convertible Debt [Member]
Total common stock equivalents excluded from diluted net loss per share	0	42,000

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Summary of Significant Accounting Policies (Details Narrative)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Two Vendors [Member] | Accounts Payable And Accrued Expenses [Member]
Concentration risk percentage	57.00%	61.00%
First Customer [Member] | Revenue [Member]
Concentration risk percentage	16.00%	15.00%
First Customer [Member] | Accounts Receivable [Member]
Concentration risk percentage	25.00%	20.00%
Second Customer [Member] | Revenue [Member]
Concentration risk percentage	16.00%	14.00%
Second Customer [Member] | Accounts Receivable [Member]
Concentration risk percentage	18.00%	19.00%
Third Customer [Member] | Revenue [Member]
Concentration risk percentage	13.00%	13.00%
Third Customer [Member] | Accounts Receivable [Member]
Concentration risk percentage	12.00%	18.00%
Fourth Customer [Member] | Revenue [Member]
Concentration risk percentage	11.00%	11.00%
Fourth Customer [Member] | Accounts Receivable [Member]
Concentration risk percentage	11.00%	13.00%
Purchase [Member] | Two Suppliers [Member]
Concentration risk percentage	92.00%	94.00%

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Going Concern and Financial Condition (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Maturity date	Aug. 25, 2022
Convertible notes	$ 4,440,000
Accumulated deficit	68,621,761		$ 67,116,913
Cash	508,614		$ 1,388,307
Cash provided by operating activities	(1,127,016)	$ 501,755
Going Concern [Member]
Convertible notes	10,000
Accumulated deficit	(68,600,000)
Cash	509,000
Net proceeds	12,000,000.0
Net loss	(1,500,000)
Working capital	12,100,000
Principal amount	13,400,000
Cash provided by operating activities	$ 1,100,000

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Inventory (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Inventory
Raw materials	$ 474,736	$ 637,084
Spare parts	86,118	86,118
Finished goods	286,821	352,199
Inventory total	$ 847,675	$ 1,075,401

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Property And Equipment Net (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Total property and equipment	$ 2,831,304	$ 2,831,304
Less: accumulated depreciation	(2,820,329)	(2,809,467)
Construction in process	1,807,707	1,807,707
Property and equipment, net	1,818,682	1,829,544
Trucking Equipment [Member]
Total Equipment	834,375	834,375
Office Equipment Computer Equipment and Software [Member]
Total Equipment	20,295	20,295
Equipment & Installation [Member]
Total Equipment	$ 1,976,634	$ 1,976,634

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Property And Equipment Net (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Property and Equipment, Net
Depreciation expense	$ 2,118	$ 20,575	$ 10,862	$ 44,379
Straight-line method description			The Company uses the straight-line method of depreciation over estimated useful lives of 2 to 5 years

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Intellectual Property (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Intellectual Property
Licenses and patents	$ 3,068,995	$ 3,068,995
Less: Accumulated amortization	(1,057,098)	(954,798)
Intellectual property, net	$ 2,011,897	$ 2,114,197

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Intellectual Property (Details Narrative)	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($) integer $ / shares shares	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) integer $ / shares shares	Jun. 30, 2021 USD ($)	Dec. 31, 2021 shares
Amortization expense charged to cost and expenses	$ 51,150	$ 51,150	$ 102,300	$ 102,300
Estimated amortization cost for 2022	204,600		204,600
Estimated amortization cost for 2023	204,600		204,600
Estimated amortization cost for 2024	204,600		204,600
Estimated amortization cost for 2025	204,600		204,600
Estimated amortization cost for 2026	$ 204,600		$ 204,600
Shares issued | shares	89,871,132		89,871,132		89,115,951
On April 24, 2017 [Member]
Purchase price of intellectual property			$ 2,500,000
Shares issued | shares	925,000		925,000
Shares issued, value	$ 518,000		$ 518,000
Shares issued, price per share | $ / shares	$ 56		$ 56
On April 24, 2017 [Member] | Inventors designated by EERCF [Member]
Shares issued | shares	296,002		296,002
On April 24, 2017 [Member] | EERCF [Member]
Shares issued | shares	628,998		628,998
Number of patent applications | integer	42		42

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Notes Payable (Details Narrative) - USD ($)	1 Months Ended				6 Months Ended
	Oct. 31, 2021	Feb. 28, 2021	Jan. 31, 2021	Feb. 25, 2020	Jun. 30, 2022	Apr. 14, 2020
Maturity date					Aug. 25, 2022
Paycheck Protection Program [Member]
Secured loan, principal amount						$ 299,300
Extinguishment of debt			$ 299,300
First International Bank & Trust [Member]
Extinguishment of debt	$ 301,377
Proceeds from loan		$ 299,380
Business Loan Agreement [Member] | MES, Inc. [Member]
Maturity date				Feb. 26, 2021
Secured loan, principal amount				$ 200,000
Rate of interest				8.75%

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Convertible Notes Payable (Details Narrative) - USD ($)			1 Months Ended		6 Months Ended
	Apr. 09, 2021	Mar. 07, 2021	Aug. 18, 2021	Jun. 15, 2018	Jun. 30, 2022	Dec. 31, 2021	Mar. 08, 2021	Feb. 17, 2021	Feb. 16, 2021
Common stock, price exceed						$ 1.00
Debt conversionof outstanding princcipal amount	$ 30,000
Exercise price							$ 0.70	$ 0.45	$ 0.35
Issuance of stock for conversion of convertible notes, Shares	60,000
Common stock, par value					$ 0.001	$ 0.001
June 18, 2019 through October 23, 2019 [Member]
Common stock, par value					$ 1.00
Debt term					5 years
Conversion ratio					0.50
Interest rate					0.12%
Unsecured convertible notes and warrants					$ 2,600,000
February 26, 2021 [Member]
Common stock, par value					$ 0.50
Common stock shares issued					100,000
Common stock shares issued, amount					$ 50,000
Principal outstanding on notes					$ 515,000
July 30, 2013 through December 24, 2013 [Member]
Common stock, par value					$ 1.00
Debt term					5 years
Convertible note					$ 1,902,500
February 8, 2021 to February 15, 2021 [Member]
Common stock, par value					$ 0.50
Common stock shares issued					1,880,000
Common stock shares issued, amount					$ 940,000
Notes issued 2013 [Member]
Debt conversionof outstanding princcipal amount					$ 10,000
Issuance of stock for conversion of convertible notes, Shares			20,000
Common stock, par value					$ 0.50
Principal outstanding on notes					$ 0	$ 0
Issuance of stock for conversion of convertible notes, Amount			$ 10,000
Notes 2013 [Member]
Exercise price				$ 0.70
Common stock, par value				$ 1.00
Debt term				5 years
Conversion ratio				equal to $0.50 per share
Interest rate				0.12%
Unsecured convertible notes and warrants				$ 560,000
February 26, 2021 and March 8, 2021 [Member]
Common stock, par value					$ 0.50
Common stock shares issued		1,030,000			690,000
Common stock shares issued, amount		$ 515,000			$ 345,000
Principal outstanding on notes					$ 515,000	0
June 17, 2021 and June 23, 2021 [Member]
Common stock shares issued					229,500
Common stock shares issued, amount					$ 5,100,000
Convertible note						$ 2,550,000
Conversion cost					98,515
Converted amount					229,500
August 31, 2018 through October 30, 2018 [Member]
Unsecured convertible notes and warrants					$ 300,000

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Related party (Details) - Note Payable Related Party [Member] - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Unsecured Note Payable	$ 13,154,931	$ 13,154,931
Less discounts and debt issuance costs	(303,316)	(1,283,677)
Total unsecured note payable	12,851,615	11,871,254
Less current portion	(12,851,615)	(11,871,254)
Unsecured note payable, net of current portion	$ 0	$ 0

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Related party (Details 1) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Related Party
Profit Share, Beginning balance	$ 2,836,743	$ 2,305,308
Addition	0	0
Loss on change in fair value of profit share	307,417	249,825
Profit Share, Ending balance	$ 3,144,160	$ 2,555,133

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Related party (Details Narrative) - USD ($)		3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 13, 2022	Mar. 31, 2019	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Dec. 31, 2020	Feb. 25, 2019	Nov. 29, 2016
Interest expenses			$ 919,884	$ 980,360	$ 41,319	$ 41,432
Notes receivable from related party					70,500
Investment in related party					25,000
Unamortized balance of discount			284,605
Debt issuance costs			18,711
Proceeds from issuance of equity securities					12,000,000.0
Remaining debt discount			$ 919,884	1,314,760
Maturity Date			Aug. 25, 2022
Related party debt			$ 250,000		0
Board of Directors Chairman [Member]
Promissory note amount	$ 250,000
Interest rate	6.00%
Cash	$ 1,200,000
Debt outstanding amount			250,000
Debt Repayment Agreement [Member]
Profit share valuation			2,305,308
Profit share valuation adjusted			$ 4,026,568
Secured Note [Member]
Maturity Date			Aug. 25, 2022
Interest rate			15.00%
Principal outstanding on notes			$ 271,686		271,686			$ 9,646,686
Kaye Cooper Kay & Rosenberg, LLP [Member]
Related party debt			231,250		206,554
Legal services expense			$ 125,688	$ 137,500
MEEC [Member]
Interest rate			21.00%
Fair Value of sharing profit			$ 1,954,383
Yearly payment description			estimated term of sixteen years with between $100,000 to $350,000 paid quarterly starting in February 2024, and an annual market interest rate of 21
AC Midwest Subordinated Note [Member]
Remaining debt discount			$ 1,070,819
Discount on debentures					$ 6,916,687
Related party debt restructuring resulting in capital contribution			$ 3,412,204
Market rate of interest			21.00%
AC Midwest Unsecured Note [Member]
Principal outstanding on notes							$ 13,154,931	$ 13,000,000
Net licensing revenue		$ 3,500,000
Repayment of debt description			in an amount equal to 60.0% of Net Litigation Proceeds until such time as any litigation funder has been paid in full and, thereafter, in an amount equal to 75.0% of such Net Litigation Proceeds until the Unsecured Note and Profit Share have been paid in full. In addition, and within 30 days following the end of each fiscal quarter
AC Midwest Unsecured Note [Member] | AC Midwest [Member]
Principal outstanding on notes			$ 6,577,465
Percentages of remaining outstanding principal balance			50.00%
Percentages of aggregate outstanding principal balance			50.00%

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Operating Leases (Details)	Jun. 30, 2022 USD ($)
Operating Leases
2023	$ 163,260
2024	36,031
Total	199,291
Less discount	(7,203)
Total lease liabilities	192,088
Less current portion	(158,899)
Operating lease obligation, net of current portion	$ 33,189

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Operating Leases (Details 1) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Operating Leases
Operating lease cost	$ 201,634	$ 201,434
Short-term lease cost (1)	0	3,540
Total lease cost	$ 201,634	$ 204,974

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Operating Leases (Details Narrative)	6 Months Ended
	Jun. 30, 2022 USD ($)
Weighted average discount rate	5.00%
Lease obligations	6 months
Right-of-use asset, amortization	$ 201,634
Operating lease liability	143,780
2016 [Member] | Trailers [Member]
Monthly payments	32,820
July 1, 2015 [Member] | Corsicana Warehouse [Member]
Operating lease liability	$ 145,267
Lease term	five-year
Monthly rent expenses	$ 3,750
Monthly expenses pro rata basis	$ 882
September 1, 2019 [Member] | Grand Forks Office [Member]
Lease term	one-year
Monthly rent expenses	$ 590

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Commitments and Contingencies (Details Narrative)	1 Months Ended	6 Months Ended
	Jul. 17, 2019	Jun. 30, 2022
Commercial Customers [Member]
Contracts expiry date, description	the Company initiated patent litigation against certain defendants in the U.S. District Court for the District of Delaware for infringement of United States Patent Nos. 10,343,114 (the “‘114 Patent”) and 8,168,147 (the “‘147 Patent”) owned by the	These contracts expire between 2022 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period

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Stock Based Compensation (Details)	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Number of shares
Number of shares, Beginning balance | shares	18,318,326
Number of shares, Grants | shares	1,200,000
Number of shares, Expirations | shares	(400,000)
Number of shares, Exercises | shares	(9,750)
Number of shares, Ending balance | shares	19,108,576
Options exercisable, Ending balance | shares	19,108,576
Weighted Average Exercise Price
Weighted Average Exercise Price, Beginning balance | $ / shares	$ 0.53
Weighted Average Exercise Price, Grants | $ / shares	0.21
Weighted Average Exercise Price, Expirations | $ / shares	1.03
Weighted Average Exercise Price, Exercises | $ / shares	0.25
Weighted Average Exercise Price, Ending balance | $ / shares	0.50
Options exercisable, Ending balance | $ / shares	$ 0.50
Weighted Average Remaining Contractual Life (years)
Weighted Average Remaining Contractual Life (years), Beginning balance	2 years 10 months 20 days
Weighted Average Remaining Contractual Life (years), Ending balance	2 years 9 months 14 days
Weighted Average Remaining Contractual Life exercisable, Ending balance	2 years 9 months 14 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value, Beginning balance | $	$ 2,961,965
Aggregate Intrinsic Value, Ending balance | $	954,329
Options exercisable, Ending balance, Intrinsic value | $	$ 954,329

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Stock Based Compensation (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	May 31, 2022	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Recorded expense							$ 615,000
Option expiry term					five years
Exercisable per share		$ 0.21			$ 0.21
Option value		$ 143,745			$ 143,745
Stock based compensation					$ 181,747	$ 31,910
Expected term					2 years 6 months
Volatility					96.83%
Discount rate					2.62%
Dividend rate					0.00%
Stock Issued During Period, Value		$ 160,000		$ 644,250	$ 0	644,250
Shares issued		89,871,132			89,871,132		89,115,951
Stock based compensation expense					$ 337,367	5,945
Jami Satterthwaite [Member]
Option to purchase share		$ 100,000			100,000
Two Employees [Member]
Option to purchase share		50,000			50,000
Two Director [Member]
Stock Issued During Period, Value	$ 55,000
Common stock, shares granted	250,000
James Trettel [Member] | John Pavlish [Member]
Option to purchase share		500,000			500,000
Selling, General and Administrative Expenses [Member]
Stock based compensation expense		$ 268,536	$ 223,998		450,283	$ 255,908
December 1, 2021 [Member]
Stock Issued During Period, Value					$ 171,250
Shares issued		250,000			250,000
February 2, 2022 [Member]
Shares issued		5,181			5,181
Stock issued for cashless exercise of stock options					9,750
January 24, 2022 [Member]
Acquire an aggregate of shares		700,000			700,000
Stock Option, valued					$ 138,623
Description of exercise price					exercisable at prices ranging from $1.15 to $1.20 per share
May 1, 2021 [Member]
Shares issued		15,869	125,000		15,869	125,000
Option to purchase share		$ 25,000	$ 125,000		$ 25,000	$ 125,000
Exercise price		$ 0.42	$ 0.81		$ 0.42	$ 0.81
Market price per share		1.15			$ 1.15
Aggregate amount			$ 101,250			$ 101,250
Consulting Agreement [Member]
Stock Issued During Period, Value	$ 160,000				$ 615,000
Common stock, shares granted	500,000				500,000
Business Development Agreement [Member] | March 30, 2021 [Member]
Stock Issued During Period, Value					$ 29,250
Common stock, shares granted					25,000
Intrinsic Value [Member]
Closing stock price		0.54			$ 0.54
Minimum [Member]
Option exercise price per share		0.20			0.20
Maximum [Member]
Option exercise price per share		$ 0.33			$ 0.33

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Warrants (Details) - Warrant [Member]	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Number of warrants, Beginning balance | shares	4,285,000
Number of warrants, Grants | shares	0
Number of warrants, Expiration | shares	0
Number of warrants, Exercised | shares	0
Number of warrants, Ending balance | shares	4,285,000
Warrants Exercisable, Ending balance | shares	4,285,000
Weighted Average Exercise Price, Beginning balance | $ / shares	$ 0.63
Weighted Average Exercise Price, Grants | $ / shares	0
Weighted Average Exercise Price, Expirations | $ / shares	0
Weighted Average Exercise Price, Exercised | $ / shares	0
Weighted Average Exercise Price, Ending balance | $ / shares	0.70
Weighted Average Exercise Price, Exercisable | $ / shares	$ 0.70
Weighted Average Remaining Contractual Life years, Beginning Balance	2 years 5 months 19 days
Weighted Average Remaining Contractual Life years, Ending Balance	1 year 11 months 23 days
Weighted Average Remaining Contractual Life years, Exercisable	1 year 11 months 23 days
Aggregate Intrinsic Value, Beginning balance | $	$ 0
Aggregate Intrinsic Value, Grants | $	0
Aggregate Intrinsic Value, Expirations | $	0
Aggregate Intrinsic Value, Exercised | $	0
Aggregate Intrinsic Value, Ending balance | $	0
Aggregate Intrinsic Value, Exercisable | $	$ 0

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Warrants (Details 1)	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Warrant [Member]
Number outstanding | shares	4,285,000
Weighted Average Exercise Price Outstanding	$ 0.70
Weighted Average Remaining Contractua Life (years)	1 year 11 months 23 days
Exercise Price	$ 0.70
Warrant One [Member]
Number outstanding | shares	4,285,000
Weighted Average Exercise Price Outstanding	$ 0.70
Weighted Average Remaining Contractua Life (years)	1 year 11 months 23 days
Exercise Price	$ 0.70

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Warrants (Details Narrative) - USD ($)		1 Months Ended		3 Months Ended
	Mar. 08, 2021	Feb. 17, 2021	Feb. 16, 2021	Jun. 30, 2021	Mar. 31, 2021
Warrants issued upon cashless exercise of warrants	97,015	97,675	705,166
Warrants purchase upon common stock shares	175,000	150,000	705,166
Warrants exercise price	$ 0.70	$ 0.45	$ 0.35
Fair value of warrants			$ 246,808	$ 0	$ 246,808
Warrants, market value		$ 1.29
Minimum [Member]
Warrants, market value	1.44
Maximum [Member]
Warrants, market value	$ 1.63