Midwest Energy Emission

Good day and welcome to the ME2C Environmental Third Quarter 2021 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, November 15, 2021, and the earnings press release accompanying this conference call was issued earlier today. On the call today is ME2C President and Chief Executive Officer Richard McPherson, as well as Chief Financial Officer Jamie Satterweith. Before we get started, I'll read the disclaimer about forward-looking statements. This conference call may contain, in addition to historic information, forward-looking statements within the meeting of the federal securities laws regarding ME2C environmental. Forward-looking statements include statements about plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are different than historical facts. 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. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from the statements made. 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 electrical demand, significant disruption in the supply of coal to our customers' units, loss of key management personnel, availability of capital, and any major litigation regarding the company. In addition, this conference call contains time-sensitive information that reflects management's best analysis only as a conference call. the company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after the date of this conference call. Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this presentation can be found in the company's periodic filings with the Securities and Exchange Commission, and we would also refer you to the company's website for more supporting industry information. At this time, I'd like to turn the call over to Richard McPherson, Chief Executive Officer of ME2C Environmental. Sir, please go ahead.

Thank you, Operator, and thank you to everybody for joining us on today's call. The third quarter of 2021 represented a key inflection point in ME2C Environmental's growth strategy as our efforts to monetize our proprietary suite of technologies translated to our highest revenue quarter in over three years. Our proprietary mercury emissions technologies continue to provide significant value across the U.S. coal-fired power industry due to their numerous operational environmental benefits. We saw notably heightened demand in our growing product supply business which continues to be driven by both our litigation successes and increased coal usage due in part to the rising natural gases and energy demands moving through 2021 and as are expected through 2022. As a company that is focused on providing innovative technologies to address the critical issues affecting our environment, we are motivated by our continued growth benefiting not only our customers and shareholders, but the public in general. Our multi-pronged litigation strategy continued to advance in this past third quarter. Allow me to quickly review some key details that prompted our team to take this approach before expanding on why MEQC is now uniquely positioned to continue benefiting from our patent portfolio and the current market position of strength. Our flagship technologies, SEA, or Sorbent Enhancement Additive Technologies, are the leading approach to mercury emissions capture. And that's reflected by the fact that over 40% of the coal-fired plants in the U.S. use it. This widespread adoption is due to the inherent superiority of these technologies and provides a very efficient means to capture mercury and stay in compliance if you're running a coal-fired plant. So we were able to, as a company, to scale up significantly in 2014 through 2016, but we were left out of the larger expansion of commercialism that took place with our technologies as suppliers and some of the utilities out there went ahead and installed systems utilizing our know-how without going through us. So in order to create the value that we needed in that technology adoption, we were compelled to initiate litigation to defend this property for our shareholders in order to receive the value and the recognition for this broad adoption. And that plan of action is now underway, and we're achieving results, some of which are starting to show now as it's reflected in these third quarter numbers. So we also believe that our patented technologies have enabled users of this refined coal program to benefit tremendously financially over the last 10 years. We initiated a lawsuit in 2019 against over 40 defendants, including the operators using refined coal and the owners of these operation entities. There are a few key factors in this refined coal program that are important to call out. The IRS section 45 tax credit program was introduced in 2011 to issue a tax credit to users of refined coal who achieved a certain level of efficiency in reducing harmful pollutants, including mercury. And this program generated approximately a billion dollars a year in annual tax credits for the producers and the operators of this refined coal program. So in September, we received approval from the district judge of the U.S. District Court in Delaware of the adoption of the report and recommendation of the magistrate judge, which allows our lawsuit to move forward against certain refined coal entities. With this discovery process now well underway, we're looking forward to seeing this through to resolution. Our legal counsel, Caldwell, Cassidy, and Curry, continue to be an exceptional partner through this process, providing valuable guidance supported by the team's expertise, our experience in this field. Since the commencement of the 2019 litigation, we've successfully signed license agreements with five major U.S. coal-fired utilities to allow the utilities to continue using our patented process for mercury capture. And by taking a business-first approach, we aim to secure supply-side agreements with utility customers rather than having to pursue long-term litigation, an approach that we believe leads to a win-win outcome for all parties. and we've demonstrated the efficacy of the approach in the third quarter as we secured significant incremental multi-year supply business with an existing technology licensee, one of the major utilities that entered into a license agreement with us last year. And we believe that we'll continue to grow our supply business with the other licensees in the coming months and seek to convert many more utilities into supply-side customers, And we have a number of those discussions underway as we speak. So importantly, the refined coal program will conclude at the end of 2021, at which point the power plants currently using that refined coal program will need to find a replacement to control their mercury emissions. And that places us, MEQC, in a very strong position, given our patented position with that process, as a natural replacement of the refined coal supplies that they have been obtaining. So we estimate that approximately 75% of the non-licensed power plants using our technology are part of that refined coal program and creates a significant potential for additional supply side business from these previous refined coal users as we move forward into 2022. To meet this expected increase in supply customers, we're now commissioning our batch plant in Texarkana, which has the capacity to support up to $100 million in annual revenue, and we have that underway as we speak. This batch plant, which is fully paid for by ME2C, will be operational in the first quarter of 2022 and enables us to scale up our production, not only to meet expected demand, but to be able to customize so that we can continue to outperform the competition. Now on the new technology side, we're very encouraged to see our patented monetizing efforts begin to materialize and look forward to the next stage of growth in our core product supply. But of course, this new area of technology that we're now working on is very important to us. The process has resulted in our identification of several key verticals on which we're focused over the last several years we've been working to develop the technologies in the processing of rare earth elements produced from either coal mining and coal-fired generation. Rare earth elements are extremely important to the applications in various industries, both in the private sector as well as at the government level. The Department of Energy has classified five of these elements as critical due to their core usage in national security and infrastructure needs. including but not limited to telecommunications, healthcare, heavy industrial materials, aircraft, and our national defense system. The widespread demand for rare earth elements has created a $13 billion annual global market and is growing rapidly. Now, while the U.S. is rich in these minerals and coal mines and coal ash ponds from coal-fired power plant operations, the process presently used to mine these elements has proven to be costly and environmentally unacceptable. And as a result, all of the rare earth elements consumed in the U.S. are now imported from other countries, with 80% of it coming from China. Importing and outsourcing has hindered the U.S.' 's ability to compete economically while leaving one of the largest environmental concerns facing the energy sector unaddressed, and that is the coal ash bombs. Of course, this issue extends to a global scale as highlighted by the World Bank's prediction that key minerals for clean energy technology could grow to over 450% by 2050. So we believe our new technologies will be instrumental in addressing this issue and we've been making significant headway in their development and advancement. In October of this year, we announced that we completed Phase 1, testing up our rare earth element technology with Penn State, in their Department of Earth and Mineral Sciences. They are a leader in this field, and they've confirmed 80 to 90 percent efficacy rate at extracting select REEs in our testing. Based on the strong results from this phase of testing, we're moving into a second phase of testing with Penn State during this fourth quarter, setting up our planned field trial testing. So early in 2022, we expect to commence the actual infield testing, a critical step to move this promising technology to a commercial scale. And we will advise, of course, as we move into that, of the continuing results that we're having. So I'll now move to provide a brief update on our capital markets initiatives. We continue to work forward in the uplifting effort to a major exchange. And with a fortified balance sheet, and simplified capital structure, we believe we're well positioned to graduate to a senior exchange, which will allow us to broaden Indy2C's exposure to both institutional investors and analysts, and ultimately assist in the achieving of a fair market valuation. So I'll turn the call over now to Jamie Satterwhite, our CFO, for an overview of our actual third quarter financial. Jamie? Jamie?

Thank you, Rick, and hello, everyone. We continue to make significant progress with returning to the growth we experienced prior to initiating the defense of our patents. We achieved our highest quarterly revenue in over three years and expect to continue this growth going forward as we secure additional supply agreements. Revenue in the third quarter of 2021 was just over $5 million, a 78% increase from $2.8 million in the same quarter last year. The increase is primarily driven by increased assortment product sales due to increased supply demands in the coal-fired market, as well as expansion of the company's customer base. The total costs and expenses in the third quarter of 2021 were $5.2 million compared to $3.9 million in the same quarter last year. The increase in cost and expenses is mainly attributed to the increase in cost of sales, principally due to the increase in sales. The loss in the third quarter of 2021 was $207,000 or zero per basic and diluted share compared to a net loss of $1.1 million or negative one cent per basic and diluted share in the same quarter last year. The decrease was primarily due to the increased sales and improved margin on those sales. Adjusted EBITDA in the third quarter of 2021 was approximately $562,000 compared to $24,000 in the same quarter last year. As of September 30th, 2021, the company had a cash balance of $866,000, which was 47% higher than cash on December 31st, 2020. The company has shown quarter-over-quarter growth through 2021 compared to the prior year period and expects to see continued growth moving through the fourth quarter. We remain focused on our efforts to realize the value of our patented technologies in the fourth quarter into 2022 and beyond. We continue to closely manage our operating costs to ensure that we are well positioned for the next phase of growth. With that, I will hand the call back over to Rick for his concluding remarks. Rick?