Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 19, 2020 | |
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, 2020 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 | |
Entity Common Stock Shares Outstanding | 77,747,750 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash | $ 595,338 | $ 1,499,287 |
Accounts receivable | 934,048 | 1,222,874 |
Inventory | 461,398 | 513,498 |
Prepaid expenses and other assets | 272,509 | 316,199 |
Total current assets | 2,263,293 | 3,551,858 |
Property and equipment, net | 1,956,159 | 2,082,343 |
Right of use asset | 913,889 | 1,106,575 |
Intellectual property | 2,421,096 | 2,532,462 |
Total assets | 7,554,437 | 9,273,238 |
Current liabilities | ||
Accounts payable and accrued expenses (related party of $93,750 and $43,750) | 1,199,045 | 1,676,757 |
Current portion of equipment notes payable | 39,287 | 53,304 |
Current portion of operating lease liability | 399,581 | 383,307 |
Note payable | 135,309 | 0 |
Current portion of convertible notes payable | 0 | 990,000 |
Accrued interest | 268,034 | 226,065 |
Customer credits | 167,000 | 167,000 |
Accrued salaries | 525,019 | 357,095 |
Total current liabilities | 2,733,275 | 3,853,528 |
Equipment notes payable, less current portion | 13,844 | 22,386 |
Operating lease liability | 596,386 | 807,409 |
Note payable | 299,300 | 0 |
Convertible notes payable, net of discount and issuance costs | 3,997,634 | 2,951,137 |
Profit share liability - related party | 2,076,455 | 2,328,845 |
Secured note payable - related party | 271,686 | 271,686 |
Unsecured note payable, net of discount and issuance costs - related party | 8,897,675 | 7,911,898 |
Total liabilities | 18,886,255 | 18,146,889 |
Stockholders' deficit | ||
Preferred stock, $0.001 par value: 2,000,000 shares authorized | 0 | 0 |
Common stock; $0.001 par value; 150,000,000 shares authorized; 77,747,750 and 76,747,750 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 77,748 | 76,748 |
Additional paid-in capital | 48,927,006 | 48,708,085 |
Accumulated deficit | (60,336,572) | (57,658,484) |
Total stockholders' deficit | (11,331,818) | (8,873,651) |
Total liabilities and stockholders' deficit | $ 7,554,437 | $ 9,273,238 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts payable and accrued expenses related party | $ 93,750 | $ 43,750 |
Stockholders' deficit | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 77,747,750 | 76,747,750 |
Common stock, shares outstanding | 77,747,750 | 76,747,750 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||
Revenues | $ 1,883,502 | $ 2,509,749 | $ 3,000,178 | $ 5,297,070 |
Costs and expenses: | ||||
Cost of sales | 1,385,849 | 1,794,985 | 2,316,383 | 3,961,325 |
Selling, general and administrative expenses (related party of $62,500, $69,289, $125,000, and $144,289) | 1,133,470 | 2,790,011 | 2,305,445 | 3,930,206 |
Interest expense & letter of credit fees (related party of $503,190, $503,077, $1,006,015, and $941,722) | 650,359 | 565,611 | 1,314,747 | 1,067,619 |
(Gain) loss on change in fair value of profit share | (376,040) | 105,715 | (252,390) | 143,272 |
Gain on sale of equipment | (5,919) | 0 | (5,919) | 0 |
Total costs and expenses | 2,787,719 | 5,256,322 | 5,678,266 | 9,102,422 |
Loss before provision for income taxes | (904,217) | (2,746,573) | (2,678,088) | (3,805,352) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (904,217) | $ (2,746,573) | $ (2,678,088) | $ (3,805,352) |
Net loss per common share-basic and diluted: | $ (0.01) | $ (0.04) | $ (0.03) | $ (0.05) |
Weighted average common shares outstanding - basic and diluted | 77,747,750 | 76,278,400 | 77,742,225 | 76,327,455 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT (UNAUDITED) - USD ($) | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Balance, shares at Dec. 31, 2018 | 76,246,113 | |||
Balance, amount at Dec. 31, 2018 | $ (8,621,096) | $ 76,246 | $ 42,785,990 | $ (51,483,332) |
Cumulative effect of change in accounting principle related to accounting for leases | (77,866) | 0 | 0 | (77,866) |
Capital contribution related to debt restructuring | 3,412,204 | 0 | 3,412,204 | 0 |
Net loss | (1,058,779) | $ 0 | 0 | (1,058,779) |
Balance, shares at Mar. 31, 2019 | 76,246,113 | |||
Balance, amount at Mar. 31, 2019 | (6,345,537) | $ 76,246 | 46,198,194 | (52,619,977) |
Net loss | (2,746,573) | 0 | 0 | (2,746,573) |
Issuance of stock options | 898,207 | $ 0 | 898,207 | 0 |
Stock issued per resignation agreements, shares | 464,517 | |||
Stock issued per resignation agreements, amount | 118,540 | $ 464 | 118,076 | 0 |
Extension of certain stock option expiration dates | 745,989 | 0 | 745,989 | 0 |
Issuance of warrants, recorded as discount on convertible notes payable | 197,664 | $ 0 | 197,664 | 0 |
Balance, shares at Jun. 30, 2019 | 76,710,630 | |||
Balance, amount at Jun. 30, 2019 | (7,131,710) | $ 76,710 | 48,158,130 | (55,366,550) |
Balance, shares at Dec. 31, 2019 | 76,747,750 | |||
Balance, amount at Dec. 31, 2019 | (8,873,651) | $ 76,748 | 48,708,085 | (57,658,484) |
Stock issued for prepaid services, shares | 1,000,000 | |||
Stock issued for prepaid services, amount | 200,000 | $ 1,000 | 199,000 | 0 |
Net loss | (1,773,871) | $ 0 | 0 | (1,773,871) |
Balance, shares at Mar. 31, 2020 | 77,747,750 | |||
Balance, amount at Mar. 31, 2020 | (10,447,522) | $ 77,748 | 48,907,085 | (59,432,355) |
Balance, shares at Dec. 31, 2019 | 76,747,750 | |||
Balance, amount at Dec. 31, 2019 | (8,873,651) | $ 76,748 | 48,708,085 | (57,658,484) |
Balance, shares at Jun. 30, 2020 | 77,747,750 | |||
Balance, amount at Jun. 30, 2020 | (11,331,818) | $ 77,748 | 48,927,006 | (60,336,572) |
Balance, shares at Mar. 31, 2020 | 77,747,750 | |||
Balance, amount at Mar. 31, 2020 | (10,447,522) | $ 77,748 | 48,907,085 | (59,432,355) |
Net loss | (904,217) | 0 | 0 | (904,217) |
Issuance of stock options | 19,921 | $ 0 | 19,921 | 0 |
Balance, shares at Jun. 30, 2020 | 77,747,750 | |||
Balance, amount at Jun. 30, 2020 | $ (11,331,818) | $ 77,748 | $ 48,927,006 | $ (60,336,572) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | |
Cash flows from operating activities | |||||
Net loss | $ (904,217) | $ (2,746,573) | $ (2,678,088) | $ (3,805,352) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||
Stock-based compensation - amortization of prepaid services | 135,109 | 1,762,736 | 249,749 | 1,762,736 | |
Amortization of discount of notes payable | 981,462 | 713,084 | |||
Amortization of debt issuance costs | 60,812 | 70,036 | |||
Amortization of right to use assets | 192,686 | 188,841 | |||
Amortization of customer acquisition costs | 0 | 34,467 | |||
Amortization of patent rights | 111,366 | 100,602 | |||
Depreciation expense | 56,015 | 80,438 | 122,604 | 163,035 | |
Gain on sale of equipment | (5,919) | 0 | (5,919) | 0 | |
(Gain) Loss on change in fair value of profit share | (376,040) | 105,715 | (252,390) | 143,272 | |
Changes in operating assets and liabilities | |||||
Decrease in accounts receivable | 288,826 | 401,972 | |||
(Increase) Decrease in inventory | 52,100 | (62,136) | |||
(Increase) Decrease in prepaid expenses and other assets | 13,862 | (7,329) | |||
Decrease in accounts payable and accrued liabilities | (267,820) | (21,097) | |||
Decrease in operating lease liability | (194,749) | (188,805) | |||
Net cash used in operating activities | (1,325,499) | (506,674) | |||
Cash flows from investing activities | |||||
Cash received from sale of equipment | 9,500 | 0 | |||
Net cash provided by investing activities | 9,500 | 0 | |||
Cash flows from financing activities | |||||
Payment of debt issuance costs | 0 | (26,683) | |||
Payments of notes payable | (64,691) | (30,646) | |||
Payments of equipment notes payable | (22,559) | 0 | |||
Proceeds from the issuance of convertible promissory notes and related warrants | 0 | 1,300,000 | |||
Proceeds from the issuance of notes payable | 499,300 | 0 | |||
Cash flows from financing activities | 412,050 | 1,242,671 | |||
Net increase (decrease) in cash and cash equivalents | (903,949) | 735,997 | |||
Cash and cash equivalents - beginning of period | 1,499,287 | 584,877 | $ 1,320,874 | ||
Cash and cash equivalents - end of period | $ 595,338 | $ 1,320,874 | 595,338 | 1,320,874 | $ 595,338 |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||
Interest | 228,458 | 121,084 | |||
Taxes | 0 | 0 | |||
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS | |||||
Cumulative effect on accumulated deficit of lease accounting change | 0 | 77,866 | |||
Stock issued for prepaid services | 200,000 | 0 | |||
Discount on convertible promissory notes payable | 0 | 197,664 | |||
Net adjustment for extension of lease | 0 | 145,267 | |||
Capital contribution related to debt restructuring | $ 0 | $ 3,412,204 |
Organization
Organization | 6 Months Ended |
Jun. 30, 2020 | |
Organization | |
Note 1 - Organization | Midwest Energy Emissions Corp. Midwest Energy Emissions Corp. (the “Company”) is organized under the laws of the State of Delaware with 150,000,000 authorized shares of common stock, par value $0.001 per share and 2,000,000 authorized shares of preferred stock, par value $0.001 per share. 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
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, 2019 filed on May 14, 2020, from which the accompanying condensed consolidated balance sheet dated December 31, 2019 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, 2020, 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 subsidiary, MES, Inc. Intercompany balances and transactions have been eliminated in consolidation. Restatement of previously issued financial statements (unaudited) On April 13, 2020, the Company concluded that a gain on debt restructuring recognized during the first quarter of 2019 (relating to the New AC Midwest Unsecured Note) should have been accounted for as a capital transaction. Since the New AC Midwest Unsecured Note was held by a related party, the gain should have been recorded as a capital transaction under ASC 470-50-40. The profit-sharing portion also should have been bifurcated from the loan and shown separately on the consolidated balance sheets of the financial statements. For more information please review Note 14 in the Form 10-K filed on May 14, 2020 which includes the restated financial statements. Accordingly, the restated amounts are reflected in the results of operations in this Form 10-Q for the three and six months ended June 30, 2019. Use of Estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 both of the three and six months ended June 30, 2020 and 2019. 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 ☐ Level 2 ☐ Level 3 — 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, 2020 and December 31, 2019 and is considered to be Level 1. Financial instruments include cash, accounts receivable, accounts payable, customer credits and short-term debt. The carrying amounts of these financial instruments approximated fair value at June 30, 2020 and December 31, 2019 due to their short-term maturities. The fair value of the promissory notes payable at June 30, 2020 and December 31, 2019 approximated the carrying amount as the notes were issued during the six months ended June 30, 2020 and 2019 at interest rates prevailing in the market and interest rates have not significantly changed as of June 30, 2020. 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, 2020 and December 31, 2019 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 assets and 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, 2020 Total Level 1 Level 2 Level 3 Assets: Cash 595,338 595,338 - - Total Assets $ 595,338 $ 595,338 $ - $ - Liabilities Promissory notes 13,654,735 - 13,654,735 - Profit share liability – related party 2,076,455 - - 2,076,455 Total Liabilities $ 15,731,190 $ - $ 13,654,735 $ 2,076,455 Fair Value Measurement as of December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Cash 1,499,287 1,499,287 - - Total Assets $ 1,499,287 $ 1,499,287 $ - $ - Liabilities Promissory notes 12,200,411 - 12,200,411 - Profit share liability 2,328,845 - - 2,328,845 Total Liabilities $ 14,529,256 $ - $ 12,200,411 $ 2,328,845 Foreign Currency Transactions The Company’s functional currency is the United States Dollar (the “U.S. Dollar”). Transactions denominated in currencies other than the U.S. Dollar are re-measured to the U.S. Dollar at the period-end exchange rates. Any associated transactional currency re-measurement gains and losses are recognized in current operations. At both June 30, 2020 and 2019, there were no material gains or losses recognized. Revenue Recognition The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers 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. The adoption of this standard did not have a material impact on the Company’s financial statements. Disaggregation of Revenue The Company generated revenue for the three and six months ended June 30, 2020, and 2019 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. 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 months ended June 30, 2020, and 2019. Three months ended June 30, 2020 Three months ended June 30, 2019 United States International Total United States International Total Product revenue $ 1,809,115 $ 28,400 $ 1,837,515 $ 2,149,468 $ 170,040 $ 2,319,508 Demonstrations & Consulting revenue 39,335 - 39,335 81,832 95,543 177,375 Equipment revenue 2,895 3,757 6,652 12,866 - 12,866 $ 1,851,345 $ 32,157 $ 1,883,502 $ 2,244,166 $ 265,583 $ 2,509,749 The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the six months ended June 30, 2020, and 2019. Six months ended June 30, 2020 Six months ended June 30, 2019 United States International Total United States International Total Product revenue $ 2,793,485 $ 113,600 $ 2,907,085 $ 4,864,749 $ 212,640 $ 5,077,389 Demonstrations & Consulting revenue 81,892 - 81,892 105,832 95,543 201,375 Equipment revenue 7,444 3,757 11,201 18,306 - 18,306 $ 2,882,821 $ 117,357 $ 3,000,178 $ 4,988,887 $ 308,183 $ 5,297,070 Income Taxes The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, Income Taxes FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“ CARES Act 2017 Tax Act NOLs In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision. 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, 2020 and 2019, 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, 2020 2019 Stock Options 12,447,326 12,563,326 Warrants 5,690,378 4,102,098 Convertible debt 9,414,200 6,300,000 Total common stock equivalents excluded from diluted net loss per share 27,551,904 22,965,424 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, 2020 and December 31, 2019 is maintained at high-quality financial institutions and has not incurred any losses to date. Customer and Supplier Concentration For each of the six months ended June 30, 2020 and 2019, 100% of the Company’s revenue related to nine and eight customers respectively. At June 30, 2020 and 2019, 100% of the Company’s accounts receivable related to seven customers, respectively. For each of the six months ended June 30, 2020 and 2019, 83% and 91% of the Company’s purchases related to two suppliers, respectively. At June 30, 2020 and 2019, 59% and 71% 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 Adopted Accounting Standards Effective January 1, 2020, the Company adopted ASU No. 2018-07, Compensation — Stock Compensation (Topic 718) Effective January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820) Recently Issued Accounting Standards In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods (beginning with the quarter ended March 31, 2021 for the Company). The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements. |
Going Concern and Financial Con
Going Concern and Financial Condition | 6 Months Ended |
Jun. 30, 2020 | |
Going Concern and Financial Condition | |
Note 3 - Going Concern and Financial Condition | Under ASC 205-40, Presentation of Financial Statements—Going Concern The accompanying condensed consolidated financial statements as of June 30, 2020 have been prepared assuming the Company will continue as a going concern. As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of $60.3 million and a negative working capital of $469,982 at June 30, 2020. Additionally, the Company had a net loss in the amount of $2.7 million and cash used by operating activities of $1.3 million for the six months ended June 30, 2020. 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 within the Company’s Quarterly Report on Form 10-Q. Although we anticipate continued significant revenues for products in be used in MATS compliance activities, no assurances can be given that the Company can obtain sufficient working capital through these activities and additional financing may be needed to meet its obligations. In April 2020, the Company received loan proceeds in the amount of $299,300 pursuant to the Paycheck Protection Program under the Cares Act which was enacted on March 27, 2020 as a result of the COVID-19 pandemic. Nevertheless, the Company may need to raise additional equity or debt financing. While the Company believes in its ability to raise additional funds, no assurances can be given that the Company can maintain sufficient working capital through these efforts, or that the continued implementation of its business plan will generate sufficient revenues in the future to sustain ongoing operations. The accompanying condensed consolidated financial statements do not include any 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. |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2020 | |
Inventory | |
Note 4 - Inventory | Inventory was comprised of the following at June 30, 2020 and December 31, 2019: June 30, 2020 December 31, 2019 Raw Materials $ 216,758 $ 223,790 Work in Process 16,397 43,814 Spare Parts 27,632 27,632 Finished goods 200,611 218,262 $ 461,398 $ 513,498 |
Property And Equipment, Net
Property And Equipment, Net | 6 Months Ended |
Jun. 30, 2020 | |
Property And Equipment, Net | |
Note 5 - Property and Equipment, Net | Property and equipment at June 30, 2020 and December 31, 2019 are as follows: June 30, December 31, 2020 2019 Equipment & installation $ 1,965,659 $ 1,965,659 Trucking equipment 895,587 922,441 Computer equipment and software 67,126 67,126 Office equipment 27,155 27,155 Total equipment 2,955,527 2,982,381 Less: accumulated depreciation (2,807,075 ) (2,707,745 ) Construction in process 1,807,707 1,807,707 Property and equipment, net $ 1,956,159 $ 2,082,343 The Company uses the straight-line method of depreciation over 2 to 5 years. During the three months ended June 30, 2020 and 2019 depreciation expense was $56,015, and $80,438, respectively. During the six months ended June 30, 2020 and 2019 depreciation expense was $122,604, and $163,035, respectively. |
Intellectual Property
Intellectual Property | 6 Months Ended |
Jun. 30, 2020 | |
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 (“EERCF”). Under the terms of the Agreement, the Company has been granted an exclusive license by EERCF 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 EERCF 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 EERCF and 296,002 were issued to the inventors who had been designated by EERCF. 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, 2020 and December 31,2019 are as follows: June 30, December 31, 2020 2019 Patents $ 3,068,995 $ 3,068,995 Less: Accumulated amortization (647,899 ) (536,533 ) License, net $ 2,421,096 $ 2,532,462 Amortization expense for the three months ended June 30, 2020 and 2019 was $61,066 and $50,301, respectively. Amortization expense for the six months ended June 30, 2020 and 2019 was $111,366 and $100,602, respectively. Estimated annual amortization for each of the next five years is $204,600. |
Note Payable
Note Payable | 6 Months Ended |
Jun. 30, 2020 | |
Note 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 is paid in full on February 26, 2021. The note is secured by substantially all of the assets of MES, Inc. During the six months ended June 30, 2020 the Company repaid $64,691of principal and $5,216 of interest. 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. The loan, which is in the form of a Note dated April 14, 2020, matures on April 14, 2022 and bears interest at a rate of 1.0% per annum, with one interest payment on April 14, 2021 and one principal and interest payment on maturity. The principal and accrued interest under the PPP Loan is forgivable after eight or twenty-four weeks if the Company uses the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and otherwise complies with the PPP requirements. In order to obtain forgiveness of the PPP Loan, the Company must submit a request and provide satisfactory documentation regarding its compliance with applicable requirements. |
Convertible Notes Payable
Convertible Notes Payable | 6 Months Ended |
Jun. 30, 2020 | |
Convertible Notes Payable | |
Note 8 - Convertible Notes Payable | The Company has the following convertible notes payable outstanding as of June 30, 2020 and December 31, 2019: June 30, December 31, 2020 2019 Secured convertible promissory notes which mature upon the retirement of the New AC Midwest Secured Debt (see Note 9), bear interest at 10% per annum, are convertible into shares of common stock at $0.50 per share, and are secured by the assets of the Company. $ 990,000 $ 990,000 Unsecured convertible promissory notes which mature beginning on June 15, 2023 through October 31, 2023, bear interest at 12% per annum, and are convertible into shares of common stock at $0.50 per share. 860,000 860,000 Unsecured convertible promissory notes which mature beginning on June 18, 2024 through October 23, 2024, bear interest at 12% per annum, and are convertible into shares of common stock at $0.50 per share. 2,600,000 2,600,000 Total convertible notes payable before discount 4,450,000 4,450,000 Less discounts and debt issuance costs (452,366 ) (508,863 ) Total convertible notes payable 3,997,634 3,941,137 Less current portion - (990,000 ) Convertible notes payable, net of current portion $ 3,997,634 $ 2,951,137 As of June 30, 2020, remaining scheduled principal payments due on convertible notes payable are as follows: Twelve months ended June 30, 2021 $ - 2022 - 2023 1,550,000 2024 1,600,000 2025 1,300,000 $ 4,450,000 As of June 30, 2020, the remaining future amortization of discounts are as follows: Twelve months ended June 30, Discounts 2021 $ 114,040 2022 114,040 2023 113,742 2024 98,149 2025 12,395 $ 452,366 |
Related Party
Related Party | 6 Months Ended |
Jun. 30, 2020 | |
Convertible Notes Payable | |
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 “New 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 New 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 three months ended June 30, 2020 and 2019 was $10,301. Interest expense for the six months ended June 30, 2020 and 2019 was $20,238 and $20,490 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, 2020 and December 31, 2019, 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, 2020 and December 31, 2019: June 30, December 31, 2020 2019 Unsecured note payable $ 13,154,931 $ 13,154,931 Less discounts and debt issuance costs (4,257,256 ) (5,243,033 ) Total unsecured note payable 8,897,675 7,911,898 Less current portion - - Unsecured note payable, net of current portion $ 8,897,675 $ 7,911,898 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, 2020 and 2019 was $985,777 and $766,415, respectively. As of June 30, 2020, the unamortized balance of the discount was $4,257,256. 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. If the original principal amount is paid in full on or before August 25, 2020 (18 months from issuance), AC Midwest shall be entitled to a profit participation preference equal to 0.5 times the original principal amount, and if the original principal amount is paid in full after August 25, 2020, AC Midwest shall be entitled to a profit participation preference equal to 1.0 times the original principal amount (the “Profit Share”). 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 (see Note 11), 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 Distinguishing Liabilities from Equity The following are the changes in the profit share liabilities during the six months ended June 30, 2020 and 2019. Profit Share as of January 1, 2020 $ 2,328,845 Addition - Gain on change in fair value of profit share (252,390 ) Profit Share as of June 30, 2020 $ 2,076,455 Profit Share as of January 1, 2019 $ - Addition 1,954,383 Loss on change in fair value of profit share 143,272 Profit Share as of June 30, 2019 $ 2,097,655 Related Party Transactions Kaye Cooper Kay & Rosenberg, LLP provides certain legal services to the Company and was paid $100,000 in 2020 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, 2020 and December 31, 2019, $93,750 and $43,750, respectively, was owed to the firm for services rendered. |
Operating Leases
Operating Leases | 6 Months Ended |
Jun. 30, 2020 | |
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 January 27, 2015, the Company entered into a lease for office space in Lewis Center, Ohio, commencing February 1, 2015 which lease as amended expired in February 2020. The lease provides for the option to extend the lease for up to five additional years. Monthly rent is $1,575 through February 2020. The Company did not renew this lease. 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 is $590 a month through August 2020. Future remaining minimum lease payments under these non-cancelable leases are as follows: For the twelve months ended June 30, 2021 $ 438,840 2022 429,760 2023 163,187 2024 30,000 Total 1,061,787 Less discount (65,820 ) Total lease liabilities 995,967 Less current portion (399,581 ) Operating lease obligation, net of current portion $ 596,386 The weighted average remaining lease term for operating leases is 2.69 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, 2020, payments on lease obligations were $219,420 and amortization on the right of use assets was $192,686. For the three and six months ended June 30, 2020, 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: Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Operating lease cost $ 101,908 $ 197,130 Short-term lease cost (1) 1,770 3,540 Total lease cost $ 103,678 $ 200,670 _____________ (1) Short-term lease costs includes any lease with a term of less than 12 months |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES (Note 11) | |
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 2020 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period. Revenue reported during interim periods were recorded based on the facts and circumstances at the time and any differences noted when the final revenue is determined is considered to be a change in estimate for the 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 ® On April 21, 2020, NRG Energy, Inc., Talen Energy Corporation and Vistra Energy Corp., three of the defendants in the above action, filed two petitions for Inter Partes Review (“IPR”) with the United States Patent and Trademark Office (“USPTO”), seeking to invalidate certain claims to the ‘114 Patent on May 27, 2020, such defendants filed two additional petitions for IPR with the USPTO, seeking to invalidate certain claims to the ‘147 Patent. On or about July 15, 2020, AEP Generation Resources, Inc., another defendant in the above action, filed four petitions for IPR with the USPTO, seeking to invalidate certain claims to the ‘114 Patent and ‘147 Patent. The Company believes that all of the foregoing claims of invalidity are without merit. (See Note 14 for information on the fleetwide license and supply agreement executed on July 30, 2020 with Vistra Corp.) 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. |
Stock Based Compensation
Stock Based Compensation | 6 Months Ended |
Jun. 30, 2020 | |
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 for prepaid services. For the three months ended June 30, 2020 and 2019, stock based compensation amounted to $135,109 and $1,762,736, respectively. For the six months ended June 30, 2020 and 2019, stock based compensation amounted to $249,749 and $1,762,736, respectively. Such expense is classified in selling, general and administrative expenses. Common Stock As of January 1, 2020, and pursuant to an advisory agreement dated as of November 20, 2019 and effective as of January 1, 2020 for a term of one year with a nonaffiliated third party, the Company issued 1,000,000 shares of common stock of the Company to such third party as and for the entire compensation to be paid for all services to be rendered during the term. These shares of common stock were valued at $200,000 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 condensed consolidated statements of operations over one year. 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. A summary of stock option activity for the six months ended June 30, 2020 is presented below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value January 1, 2020 12,553,326 $ 0.55 4.02 $ 927 Grants 250,000 0.19 5.00 Expirations (356,000 ) 0.59 - June 30, 2020 12,447,326 $ 0.54 3.60 $ 1,734 Options exercisable at: June 30, 2020 12,322,326 $ 0.54 3.59 $ 1,734 The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.19 as of June 30, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. The Company utilized the Black-Scholes options pricing model to value its options granted. The assumptions used for options granted during the six months ended June 30, 2020 and 2019 are as follows: June 30, June 30, Exercise price $ 0.19 $ 0.27 Expected dividends 0 % 0 % Expected volatility 103 % 100 % Risk free interest rate 0.33 % 3 % Expected life 5 years 5 years On June 15, 2020, the Company granted nonqualified stock options to acquire an aggregate of 250,000 shares of the Company’s common stock under the Company’s 2017 Equity Plan to an employee. The options granted are exercisable at $0.19 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Equity Plan. Fifty percent of the options are fully vested and exercisable as of the date of grant and fifty percent of the options vest on April 1, 2021. The options will expire five years from the date of grant. Based on a Black-Scholes valuation model, these options were valued at $37,882 in accordance with FASB ASC Topic 718 which will be expensed over the vesting period in selling, general and administrative expenses within the Company’s consolidated statements of operations. |
Warrants
Warrants | 6 Months Ended |
Jun. 30, 2020 | |
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 of 100%, a risk-free interest rate and the life of the warrant for the exercise period. 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 January 1, 2020 5,690,378 $ 0.63 3.72 $ - Grants - - - Expirations - - - June 30, 2020 5,690,378 $ 0.63 3.23 $ - Warrants exercisable at: June 30, 2020 5,690,378 $ 0.63 3.23 $ - The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.19 as of June 30, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. The following table summarizes information about common stock warrants outstanding at June 30, 2020: Outstanding and Exercisable Exercise Price Number Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price $ 0.70 4,460,000 3.95 $ 0.70 0.45 150,000 0.42 0.45 0.35 1,080,378 * 0.63 0.35 $ 0.35-$0.70 5,690,378 3.23 $ 0.63 __________ * 205,000 warrants exercisable at $0.35 contain dilution protections that increase the number of shares purchasable at exercise upon the issuance of securities at a price below the current exercise price. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events | |
Note 14 - Subsequent Events | On July 8, 2020, the Board of Directors of the Company approved an amendment to the 2017 Equity Incentive Plan (the “2017 Plan”) to increase the maximum number of shares of common stock that may be issued under the 2017 Plan from 8,000,0000 to 12,000,000 shares. On the same date, the Company granted nonqualified stock options to the following executive officers to each acquire 500,000 shares of the Company’s common stock: Richard MacPherson (President and Chief Executive Officer), John Pavlish (Senior Vice President and Chief Technology Officer) and James Trettel (Vice President of Operations); and, also granted nonqualified stock options to the following persons to each acquire 250,000 shares of the Company’s common stock: Christopher Greenberg (Chairman of the Board) and David M. Kaye (director). All of such options were granted under the 2017 Plan and are exercisable at $0.19 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 as of the date of grant and will expire five years thereafter. On July 30, 2020, the Company and Vistra Corp. executed a multi-year fleetwide license and supply agreement to provide Vistra a non-exclusive license to certain Company patents for use in connection with Vistra’s coal-fired power plants, and to facilitate the parties’ ongoing business relationship. Such patents licensed to Vistra relate to the Company’s two-part Sorbent Enhancement Additive (SEA ® process for mercury removal from coal-fired power plants. The Company has dismissed all claims brought against Vistra in the patent litigation initiated by the Company and Vistra has agreed to withdraw from petitions for IPR filed with the USPTO. See Note 11. These proceedings will continue with respect to the other parties involved. |
Summary Of Significant Accoun_2
Summary Of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
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, 2019 filed on May 14, 2020, from which the accompanying condensed consolidated balance sheet dated December 31, 2019 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, 2020, 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 subsidiary, MES, Inc. Intercompany balances and transactions have been eliminated in consolidation. |
Restatement of previously issued financial statements (unaudited) | On April 13, 2020, the Company concluded that a gain on debt restructuring recognized during the first quarter of 2019 (relating to the New AC Midwest Unsecured Note) should have been accounted for as a capital transaction. Since the New AC Midwest Unsecured Note was held by a related party, the gain should have been recorded as a capital transaction under ASC 470-50-40. The profit-sharing portion also should have been bifurcated from the loan and shown separately on the consolidated balance sheets of the financial statements. For more information please review Note 14 in the Form 10-K filed on May 14, 2020 which includes the restated financial statements. Accordingly, the restated amounts are reflected in the results of operations in this Form 10-Q for the three and six months ended June 30, 2019. |
Use of Estimates | The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 both of the three and six months ended June 30, 2020 and 2019. |
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 ☐ Level 2 ☐ Level 3 — 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, 2020 and December 31, 2019 and is considered to be Level 1. Financial instruments include cash, accounts receivable, accounts payable, customer credits and short-term debt. The carrying amounts of these financial instruments approximated fair value at June 30, 2020 and December 31, 2019 due to their short-term maturities. The fair value of the promissory notes payable at June 30, 2020 and December 31, 2019 approximated the carrying amount as the notes were issued during the six months ended June 30, 2020 and 2019 at interest rates prevailing in the market and interest rates have not significantly changed as of June 30, 2020. 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, 2020 and December 31, 2019 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 assets and 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, 2020 Total Level 1 Level 2 Level 3 Assets: Cash 595,338 595,338 - - Total Assets $ 595,338 $ 595,338 $ - $ - Liabilities Promissory notes 13,654,735 - 13,654,735 - Profit share liability – related party 2,076,455 - - 2,076,455 Total Liabilities $ 15,731,190 $ - $ 13,654,735 $ 2,076,455 Fair Value Measurement as of December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Cash 1,499,287 1,499,287 - - Total Assets $ 1,499,287 $ 1,499,287 $ - $ - Liabilities Promissory notes 12,200,411 - 12,200,411 - Profit share liability 2,328,845 - - 2,328,845 Total Liabilities $ 14,529,256 $ - $ 12,200,411 $ 2,328,845 |
Foreign Currency Transactions | The Company’s functional currency is the United States Dollar (the “U.S. Dollar”). Transactions denominated in currencies other than the U.S. Dollar are re-measured to the U.S. Dollar at the period-end exchange rates. Any associated transactional currency re-measurement gains and losses are recognized in current operations. At both June 30, 2020 and 2019, there were no material gains or losses recognized. |
Revenue Recognition | The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers 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. The adoption of this standard did not have a material impact on the Company’s financial statements. |
Disaggregation of Revenue | The Company generated revenue for the three and six months ended June 30, 2020, and 2019 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. 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 months ended June 30, 2020, and 2019. Three months ended June 30, 2020 Three months ended June 30, 2019 United States International Total United States International Total Product revenue $ 1,809,115 $ 28,400 $ 1,837,515 $ 2,149,468 $ 170,040 $ 2,319,508 Demonstrations & Consulting revenue 39,335 - 39,335 81,832 95,543 177,375 Equipment revenue 2,895 3,757 6,652 12,866 - 12,866 $ 1,851,345 $ 32,157 $ 1,883,502 $ 2,244,166 $ 265,583 $ 2,509,749 The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the six months ended June 30, 2020, and 2019. Six months ended June 30, 2020 Six months ended June 30, 2019 United States International Total United States International Total Product revenue $ 2,793,485 $ 113,600 $ 2,907,085 $ 4,864,749 $ 212,640 $ 5,077,389 Demonstrations & Consulting revenue 81,892 - 81,892 105,832 95,543 201,375 Equipment revenue 7,444 3,757 11,201 18,306 - 18,306 $ 2,882,821 $ 117,357 $ 3,000,178 $ 4,988,887 $ 308,183 $ 5,297,070 |
Income Taxes | The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, Income Taxes FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“ CARES Act 2017 Tax Act NOLs In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision. |
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, 2020 and 2019, 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, 2020 2019 Stock Options 12,447,326 12,563,326 Warrants 5,690,378 4,102,098 Convertible debt 9,414,200 6,300,000 Total common stock equivalents excluded from diluted net loss per share 27,551,904 22,965,424 |
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, 2020 and December 31, 2019 is maintained at high-quality financial institutions and has not incurred any losses to date. |
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 Adopted Accounting Standards | Effective January 1, 2020, the Company adopted ASU No. 2018-07, Compensation — Stock Compensation (Topic 718) Effective January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820) |
Recently Issued Accounting Standards | In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods (beginning with the quarter ended March 31, 2021 for the Company). The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Summary of Significant Accounting Policies | |
Schedule of fair value assets and liabilities measured on recurring basis | The following tables present the Company’s assets and 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, 2020 Total Level 1 Level 2 Level 3 Assets: Cash 595,338 595,338 - - Total Assets $ 595,338 $ 595,338 $ - $ - Liabilities Promissory notes 13,654,735 - 13,654,735 - Profit share liability – related party 2,076,455 - - 2,076,455 Total Liabilities $ 15,731,190 $ - $ 13,654,735 $ 2,076,455 Fair Value Measurement as of December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Cash 1,499,287 1,499,287 - - Total Assets $ 1,499,287 $ 1,499,287 $ - $ - Liabilities Promissory notes 12,200,411 - 12,200,411 - Profit share liability 2,328,845 - - 2,328,845 Total Liabilities $ 14,529,256 $ - $ 12,200,411 $ 2,328,845 |
Schedule of earnings per share basic and diluted | June 30, June 30, 2020 2019 Stock Options 12,447,326 12,563,326 Warrants 5,690,378 4,102,098 Convertible debt 9,414,200 6,300,000 Total common stock equivalents excluded from diluted net loss per share 27,551,904 22,965,424 |
Schedule of sales by operating segment | The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the three months ended June 30, 2020, and 2019. Three months ended June 30, 2020 Three months ended June 30, 2019 United States International Total United States International Total Product revenue $ 1,809,115 $ 28,400 $ 1,837,515 $ 2,149,468 $ 170,040 $ 2,319,508 Demonstrations & Consulting revenue 39,335 - 39,335 81,832 95,543 177,375 Equipment revenue 2,895 3,757 6,652 12,866 - 12,866 $ 1,851,345 $ 32,157 $ 1,883,502 $ 2,244,166 $ 265,583 $ 2,509,749 The following table presents sales by operating segment disaggregated based on the type of product and geographic region for the six months ended June 30, 2020, and 2019. Six months ended June 30, 2020 Six months ended June 30, 2019 United States International Total United States International Total Product revenue $ 2,793,485 $ 113,600 $ 2,907,085 $ 4,864,749 $ 212,640 $ 5,077,389 Demonstrations & Consulting revenue 81,892 - 81,892 105,832 95,543 201,375 Equipment revenue 7,444 3,757 11,201 18,306 - 18,306 $ 2,882,821 $ 117,357 $ 3,000,178 $ 4,988,887 $ 308,183 $ 5,297,070 |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Inventory (Tables) | |
Schedule of Inventory | June 30, 2020 December 31, 2019 Raw Materials $ 216,758 $ 223,790 Work in Process 16,397 43,814 Spare Parts 27,632 27,632 Finished goods 200,611 218,262 $ 461,398 $ 513,498 |
Property And Equipment, Net (Ta
Property And Equipment, Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Property And Equipment, Net | |
Schedule of property and equipment | June 30, December 31, 2020 2019 Equipment & installation $ 1,965,659 $ 1,965,659 Trucking equipment 895,587 922,441 Computer equipment and software 67,126 67,126 Office equipment 27,155 27,155 Total equipment 2,955,527 2,982,381 Less: accumulated depreciation (2,807,075 ) (2,707,745 ) Construction in process 1,807,707 1,807,707 Property and equipment, net $ 1,956,159 $ 2,082,343 |
Intellectual Property (Tables)
Intellectual Property (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Intellectual Property | |
Schedule of patent costs capitalized | June 30, December 31, 2020 2019 Patents $ 3,068,995 $ 3,068,995 Less: Accumulated amortization (647,899 ) (536,533 ) License, net $ 2,421,096 $ 2,532,462 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Note Payable | |
scheduled of principal payments due on convertible notes payable | Twelve months ended June 30, 2021 $ - 2022 - 2023 1,550,000 2024 1,600,000 2025 1,300,000 $ 4,450,000 |
Schedule of future amortization of discounts | Twelve months ended June 30, Discounts 2021 $ 114,040 2022 114,040 2023 113,742 2024 98,149 2025 12,395 $ 452,366 |
Schedule of payments due on convertible notes payable | June 30, December 31, 2020 2019 Secured convertible promissory notes which mature upon the retirement of the New AC Midwest Secured Debt (see Note 9), bear interest at 10% per annum, are convertible into shares of common stock at $0.50 per share, and are secured by the assets of the Company. $ 990,000 $ 990,000 Unsecured convertible promissory notes which mature beginning on June 15, 2023 through October 31, 2023, bear interest at 12% per annum, and are convertible into shares of common stock at $0.50 per share. 860,000 860,000 Unsecured convertible promissory notes which mature beginning on June 18, 2024 through October 23, 2024, bear interest at 12% per annum, and are convertible into shares of common stock at $0.50 per share. 2,600,000 2,600,000 Total convertible notes payable before discount 4,450,000 4,450,000 Less discounts and debt issuance costs (452,366 ) (508,863 ) Total convertible notes payable 3,997,634 3,941,137 Less current portion - (990,000 ) Convertible notes payable, net of current portion $ 3,997,634 $ 2,951,137 |
Related Party (Tables)
Related Party (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Convertible Notes Payable | |
Schedule of profit share liabilities | The following are the changes in the profit share liabilities during the six months ended June 30, 2020 and 2019. Profit Share as of January 1, 2020 $ 2,328,845 Addition - Gain on change in fair value of profit share (252,390 ) Profit Share as of June 30, 2020 $ 2,076,455 Profit Share as of January 1, 2019 $ - Addition 1,954,383 Loss on change in fair value of profit share 143,272 Profit Share as of June 30, 2019 $ 2,097,655 |
Schedule of Unsecured notes payable | June 30, December 31, 2020 2019 Unsecured note payable $ 13,154,931 $ 13,154,931 Less discounts and debt issuance costs (4,257,256 ) (5,243,033 ) Total unsecured note payable 8,897,675 7,911,898 Less current portion - - Unsecured note payable, net of current portion $ 8,897,675 $ 7,911,898 |
Operating Leases (Tables)
Operating Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Operating Leases | |
Schedule of lease cost | Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Operating lease cost $ 101,908 $ 197,130 Short-term lease cost (1) 1,770 3,540 Total lease cost $ 103,678 $ 200,670 |
Schedule of future minimum lease payments | For the twelve months ended June 30, 2021 $ 438,840 2022 429,760 2023 163,187 2024 30,000 Total 1,061,787 Less discount (65,820 ) Total lease liabilities 995,967 Less current portion (399,581 ) Operating lease obligation, net of current portion $ 596,386 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Stock Based Compensation | |
Schedule of options granted | June 30, 2020 June 30, 2019 Exercise price $ 0.19 $ 0.27 Expected dividends 0 % 0 % Expected volatility 103 % 100 % Risk free interest rate 0.33 % 3 % Expected life 5 years 5 years |
Schedule of stock option activity | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value January 1, 2020 12,553,326 $ 0.55 4.02 $ 927 Grants 250,000 0.19 5.00 Expirations (356,000 ) 0.59 - June 30, 2020 12,447,326 $ 0.54 3.60 $ 1,734 Options exercisable at: June 30, 2020 12,322,326 $ 0.54 3.59 $ 1,734 |
Warrants (Tables)
Warrants (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Warrants (Tables) | |
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 4,460,000 3.95 $ 0.70 0.45 150,000 0.42 0.45 0.35 1,080,378 * 0.63 0.35 $ 0.35-$0.70 5,690,378 3.23 $ 0.63 |
Schedule of warrant | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value January 1, 2020 5,690,378 $ 0.63 3.72 $ - Grants - - - Expirations - - - June 30, 2020 5,690,378 $ 0.63 3.23 $ - Warrants exercisable at: June 30, 2020 5,690,378 $ 0.63 3.23 $ - |
Organization (Details Narrative
Organization (Details Narrative) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
Organization | ||
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Cash | $ 595,338 | $ 1,499,287 |
Total Assets | 7,554,437 | 9,273,238 |
Promissory notes | 0 | 990,000 |
Total Liabilities | 18,886,255 | 18,146,889 |
Level 1 [Member] | ||
Cash | 595,338 | 1,499,287 |
Total Assets | 595,338 | 1,499,287 |
Promissory notes | 0 | 0 |
Profit share liability | 0 | 0 |
Total Liabilities | 0 | 0 |
Level 2 [Member] | ||
Cash | 0 | 0 |
Total Assets | 0 | 0 |
Promissory notes | 13,654,735 | 12,200,411 |
Profit share liability | 0 | |
Total Liabilities | 13,654,735 | 12,200,411 |
Level 3 [Member] | ||
Cash | 0 | 0 |
Total Assets | 0 | 0 |
Promissory notes | 0 | 0 |
Profit share liability | 2,076,455 | 2,328,845 |
Total Liabilities | 2,076,455 | 2,328,845 |
Fair Value [Member] | ||
Cash | 595,338 | 1,499,287 |
Total Assets | 595,338 | 1,499,287 |
Promissory notes | 13,654,735 | 12,200,411 |
Profit share liability | 2,076,455 | 2,328,845 |
Total Liabilities | $ 15,731,190 | $ 14,529,256 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Total [Member] | ||||
Product revenue | $ 1,837,515 | $ 2,319,508 | $ 2,907,085 | $ 5,077,389 |
Demonstrations & Consulting revenue | 39,335 | 177,375 | 81,892 | 201,375 |
Equipment revenue | 6,652 | 12,866 | 11,201 | 18,306 |
Total | 1,883,502 | 2,509,749 | 3,000,178 | 5,297,070 |
United States [Member] | ||||
Product revenue | 1,809,115 | 2,149,468 | 2,793,485 | 4,864,749 |
Demonstrations & Consulting revenue | 39,335 | 81,832 | 81,892 | 105,832 |
Equipment revenue | 2,895 | 12,866 | 7,444 | 18,306 |
Total | 1,851,345 | 2,244,166 | 2,882,821 | 4,988,887 |
International [Member] | ||||
Product revenue | 28,400 | 170,040 | 113,600 | 212,640 |
Demonstrations & Consulting revenue | 0 | 95,543 | 0 | 95,543 |
Equipment revenue | 3,757 | 0 | 3,757 | 0 |
Total | $ 32,157 | $ 265,583 | $ 85,200 | $ 308,183 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - shares | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Total common stock equivalents excluded from diluted net loss per share | 27,551,904 | 22,965,424 |
Warrants [Member] | ||
Total common stock equivalents excluded from diluted net loss per share | 5,690,378 | 4,102,098 |
Stock Options [Member] | ||
Total common stock equivalents excluded from diluted net loss per share | 12,447,326 | 12,563,326 |
Convertible Debt [Member] | ||
Total common stock equivalents excluded from diluted net loss per share | 9,414,200 | 6,300,000 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details Narrative) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Description of corporate charitable deduction of taxable income | The corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. | |
Two Suppliers [Member] | Purchase [Member] | ||
Concentration risk percentage | 83.00% | 91.00% |
Revenue [Member] | Nine Customers [Member] | ||
Concentration risk percentage | 100.00% | 100.00% |
Revenue [Member] | Eight Customers [Member] | ||
Concentration risk percentage | 100.00% | 100.00% |
Accounts Payable And Accrued Expenses [Member] | Two Vendors [Member] | ||
Concentration risk percentage | 59.00% | 71.00% |
Accounts Receivable [Member] | Seven Customers [Member] | ||
Concentration risk percentage | 100.00% | 100.00% |
Going Concern and Financial C_2
Going Concern and Financial Condition (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Accumulated deficit | $ (60,336,572) | $ (60,336,572) | $ (57,658,484) | ||
Net loss | (904,217) | $ (2,746,573) | (2,678,088) | $ (3,805,352) | |
Working capital | $ (469,982) | (469,982) | |||
Cash provided by operating activities | (1,300,000) | ||||
April 2020 [Member] | |||||
Proceeds from issuance of debt | $ 299,300 |
Inventory (Details)
Inventory (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Inventory | ||
Raw materials | $ 216,758 | $ 223,790 |
Work in process | 16,397 | 43,814 |
Spare parts | 27,632 | 27,632 |
Finished goods | 200,611 | 218,262 |
Inventory | $ 461,398 | $ 513,498 |
Property And Equipment Net (Det
Property And Equipment Net (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Total Equipment | $ 2,955,527 | $ 2,982,381 |
Less: accumulated depreciation | (2,807,075) | (2,707,745) |
Construction in process | 1,807,707 | 1,807,707 |
Property and equipment, net | 1,956,159 | 2,082,343 |
Equipment & Installation [Member] | ||
Total Equipment | 1,965,659 | 1,965,659 |
Trucking Equipment [Member] | ||
Total Equipment | 895,587 | 922,441 |
Computer Equipment and Software [Member] | ||
Total Equipment | 67,126 | 67,126 |
Office Equipment [Member] | ||
Total Equipment | $ 27,155 | $ 27,155 |
Property And Equipment Net (D_2
Property And Equipment Net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Property And Equipment, Net | ||||
Straight-line method description | The Company uses the straight-line method of depreciation over 2 to 5 years | |||
Depreciation expense | $ 56,015 | $ 80,438 | $ 122,604 | $ 163,035 |
Intellectual Property (Details)
Intellectual Property (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Intellectual Property | ||
Patents | $ 3,068,995 | $ 3,068,995 |
Less: accumulated amortization | (647,899) | (536,533) |
License, net | $ 2,421,096 | $ 2,532,462 |
Intellectual Property (Details
Intellectual Property (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020USD ($)integer$ / sharesshares | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($)integer$ / sharesshares | Jun. 30, 2019USD ($) | |
Amortization expense charged to cost and expenses | $ 61,066 | $ 50,301 | $ 111,306 | $ 100,602 |
Estimated amortization cost for 2020 | 204,600 | 204,600 | ||
Estimated amortization cost for 2021 | 204,600 | 204,600 | ||
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 | ||
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 | $ 0.56 | $ 0.56 | ||
On April 24, 2017 [Member] | EERCF [Member] | ||||
Shares issued | shares | 628,998 | 628,998 | ||
Number of patent applications | integer | 42 | 42 | ||
On April 24, 2017 [Member] | Inventors designated by EERCF [Member] | ||||
Shares issued | shares | 296,002 | 296,002 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Feb. 25, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Secured loan, principal amount | $ 299,300 | $ 299,300 | |||
Repaid Principal Amount | 64,691 | ||||
Interest expenses | $ 10,301 | $ 10,301 | 20,238 | $ 20,490 | |
Business Loan Agreement [Member] | MES, Inc. [Member] | |||||
Secured loan, principal amount | $ 200,000 | ||||
Term of loan | 1 year | ||||
Rate of interest | 8.75% | ||||
Maturity date | Feb. 26, 2021 | ||||
Interest expenses | $ 5,216 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Total convertible notes payable before discount | $ 4,450,000 | $ 4,450,000 |
Less discounts and debt issuance costs | (452,366) | (508,863) |
Total convertible notes payable | 3,997,634 | 3,941,137 |
Less current portion | 0 | (990,000) |
Convertible notes payable, net of current portion | 3,997,634 | 2,951,137 |
Secured Convertible Promissory Notes [Member] | ||
Total convertible notes payable before discount | 990,000 | 990,000 |
Unsecured Convertible Promissory Notes [Member] | ||
Total convertible notes payable before discount | 860,000 | 860,000 |
Unsecured Convertible Promissory Notes One [Member] | ||
Total convertible notes payable before discount | $ 2,600,000 | $ 2,600,000 |
Convertible Notes Payable (De_2
Convertible Notes Payable (Details 1) | Jun. 30, 2020USD ($) |
Note Payable | |
2021 | $ 0 |
2022 | 0 |
2023 | 1,550,000 |
2024 | 1,600,000 |
2025 | 1,300,000 |
Total | $ 4,450,000 |
Convertible Notes Payable (De_3
Convertible Notes Payable (Details 2) - USD ($) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | |
Amortization of discounts | $ 452,366 | ||
Amortization of discounts | $ 981,462 | $ 713,084 | |
2021 [Member] | |||
Amortization of discounts | 114,040 | ||
2022 [Member] | |||
Amortization of discounts | 114,040 | ||
2023 [Member] | |||
Amortization of discounts | 113,742 | ||
2024 [Member] | |||
Amortization of discounts | 98,149 | ||
2025 [Member] | |||
Amortization of discounts | $ 12,395 |
Related party (Details)
Related party (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Convertible Notes Payable | ||
Unsecured Note Payable | $ 13,154,931 | $ 13,154,931 |
Less discounts and debt issuance costs | (4,257,256) | (5,243,033) |
Total unsecured note payable | 8,897,675 | 7,911,898 |
Less current portion | 0 | 0 |
Unsecured note payable, net of current portion | $ 8,897,675 | $ 7,911,898 |
Related party (Details 1)
Related party (Details 1) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Convertible Notes Payable | ||
Profit Share, Beginning balance | $ 2,328,845 | $ 0 |
Addition | 0 | 1,954,383 |
Loss on change in fair value of profit share | (252,390) | 143,272 |
Profit Share, Ending balance | $ 2,076,455 | $ 2,097,655 |
Related party (Details Narrativ
Related party (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Feb. 25, 2019 | Nov. 29, 2016 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Interest expenses | $ 10,301 | $ 10,301 | $ 20,238 | $ 20,490 | |||
Amortized discount | 985,777 | 766,415 | |||||
Unamortized balance of discount | 4,257,256 | ||||||
Remaining debt discount | 981,462 | $ 713,084 | |||||
AC Midwest Subordinated Note [Member] | |||||||
Discount on debentures | 6,916,687 | 6,916,687 | |||||
Related party debt restructuring resulting in capital contribution | 3,412,204 | ||||||
Remaining debt discount | $ 1,070,819 | ||||||
Market rate of interest | 21.00% | ||||||
AC Midwest Unsecured Note [Member] | |||||||
Principal outstanding on notes | $ 13,154,931 | $ 13,000,000 | |||||
Maturity Date | Aug. 25, 2022 | Dec. 15, 2020 | |||||
Repayment of debt description | 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. | ||||||
Secured Note [Member] | |||||||
Interest rate | 15.00% | ||||||
Principal outstanding on notes | $ 9,646,686 | 271,686 | $ 271,686 | $ 271,686 | |||
Maturity Date | Dec. 15, 2018 | Aug. 25, 2022 | |||||
David M. Kaye [Member] | |||||||
Related party debt | $ 93,750 | $ 93,750 | $ 43,750 | ||||
MEEC [Member] | |||||||
Interest rate | 21.00% | ||||||
Fair Value of sharing profit | $ 1,954,383 | ||||||
Estimated time of profit sharing | 18 years | ||||||
Yearly payment to be made | $ 1,000,000 | ||||||
AC Midwest [Member] | |||||||
Equity ownership, percentage | 5.00% | ||||||
Kaye Cooper Kay & Rosenberg, LLP [Member] | |||||||
Legal services expense | $ 100,000 |
Operating Leases (Details)
Operating Leases (Details) | Jun. 30, 2020USD ($) |
Operating Leases | |
2021 | $ 438,840 |
2022 | 429,860 |
2023 | 163,187 |
2024 | 30,000 |
Total | 1,061,787 |
Less discount | (65,820) |
Total lease liabilities | 995,967 |
Less current portion | (399,581) |
Operating lease obligation, net of current portion | $ 596,386 |
Operating Leases (Details 1)
Operating Leases (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2020 | Jun. 30, 2020 | |
Operating Leases | ||
Operating lease cost | $ 101,908 | $ 197,130 |
Short-term lease cost (1) | 1,770 | 3,540 |
Total lease cost | $ 103,678 | $ 200,670 |
Operating Leases (Details Narra
Operating Leases (Details Narrative) | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Weighted average discount rate | 5.00% |
Weighted average remaining lease term | 2 years 8 months 9 days |
Lease obligations | $ 219,420 |
Right-of-use asset, amortization | 192,686 |
Short Term Lease | $ 12 |
Grand Forks Office [Member] | |
Lease term | 1 year |
Monthly rent expenses | $ 590 |
Corsicana Warehouse [Member] | |
Short Term Lease | $ 145,267 |
Lease term | 5 years |
Monthly rent expenses | $ 3,750 |
Monthly expenses pro rata basis | 882 |
Lewis Center Office [Member] | |
Monthly rent expenses | $ 1,575 |
Lease commencement date | Feb. 1, 2015 |
Lease expiry date | February 2020 |
Trailers [Member] | |
Monthly payments | $ 32,820 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Jun. 30, 2020 | |
Commercial Customers [Member] | |
Contracts expiry date, description | Contracts expire between 2020 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period |
Stock Based Compensation (Detai
Stock Based Compensation (Details) | 6 Months Ended |
Jun. 30, 2020USD ($)$ / sharesshares | |
Number of shares | |
Number of shares, Beginning balance | shares | 12,553,326 |
Number of shares, Grants | shares | 250,000 |
Number of shares, Expiration | shares | (356,000) |
Options exercisable, Ending balance | shares | 12,322,326 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning balance | $ / shares | $ 0.55 |
Weighted Average Exercise Price, Grants | $ / shares | 0.19 |
Weighted Average Exercise Price, Expiration | $ / shares | 0.59 |
Options exercisable, Ending balance | $ / shares | $ 0.54 |
Weighted Average Remaining Contractual Life (years) | |
Weighted Average Remaining Contractual Life (years), Beginning balance | 4 years 7 days |
Weighted Average Remaining Contractual Life (years), Grants | 5 years |
Weighted Average Remaining Contractual Life (years), Expiration | |
Weighted Average Remaining Contractual Life (years), Ending balance | 3 years 7 months 6 days |
Options exercisable, Ending balance | 3 years 7 months 2 days |
Aggregate Intrinsic Value | |
Aggregate Intrinsic Value, Beginning balance | $ | $ 927 |
Options exercisable, Ending balance, Intrinsic value | $ | $ 1,734 |
Stock Based Compensation (Det_2
Stock Based Compensation (Details 1) - Stock Options [Member] - $ / shares | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Expected dividends | 0.00% | 0.00% |
Expected volatility | 103.00% | 100.00% |
Risk free interest rate | 0.33% | 3.00% |
Exercise price | $ 0.19 | $ 0.27 |
Expected life | 5 years | 5 years |
Stock Based Compensation (Det_3
Stock Based Compensation (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Jun. 15, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Stock based compensation | $ 135,109 | $ 1,762,736 | $ 249,749 | $ 1,762,736 | ||
Stock Issued During Period, Value | $ 200,000 | |||||
January 1, 2020 [Member] | ||||||
Common stock, shares granted | 1,000,000 | |||||
Stock Issued During Period, Value | $ 200,000 | |||||
Intrinsic Value[Member] | ||||||
Closing stock price | $ 0.19 | $ 0.19 | ||||
Nonqualified Stock Options[Member] | ||||||
Common stock, shares granted | 250,000 | |||||
Stock Issued During Period, Value | $ 37,882 | |||||
Exercise price | $ 0.19 | |||||
Debt conversion description | The options granted are exercisable at $0.19 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Equity Plan. Fifty percent of the options are fully vested and exercisable as of the date of grant and fifty percent of the options vest on April 1, 2021. |
Warrants (Details)
Warrants (Details) - Warrants [Member] | 6 Months Ended |
Jun. 30, 2020USD ($)$ / sharesshares | |
Number of Shares | |
Number of warrants, Beginning balance | shares | 5,690,378 |
Number of warrants, grants | shares | |
Number of warrants, Expiration | shares | |
Number of warrants, Ending balance | shares | 5,690,378 |
Warrants Exercisable, Ending balance | shares | 5,690,378 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning balance | $ / shares | $ 0.63 |
Weighted Average Exercise Price, Grants | $ / shares | 0 |
Weighted Average Exercise Price, Expiration | $ / shares | 0 |
Weighted Average Exercise Price, Ending balance | $ / shares | 0.63 |
Warrants Exercisable, Ending balance | $ / shares | $ 0.63 |
Weighted Average Remaining Contractual Life (years) | |
Beginning Balance | 3 years 8 months 19 days |
Grants | |
Expiration | |
Ending Balance | 3 years 2 months 23 days |
Warrants Exercisable, Ending balance | 3 years 2 months 23 days |
Aggregate Intrinsic Value | |
Beginning Balance | $ | $ 0 |
Ending Balance | $ | $ 0 |
Warrants (Details 1)
Warrants (Details 1) | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Warrants [Member] | |
Number outstanding | shares | 5,690,378 |
Weighted Average Exercise Price Outstanding | $ 0.63 |
Weighted Average Remaining Contractual Life (years) | 3 years 2 months 23 days |
Warrants [Member] | Minimum [Member] | |
Exercise Price | $ 0.35 |
Warrants [Member] | Maximum [Member] | |
Exercise Price | $ 0.70 |
Warrant One [Member] | |
Number outstanding | shares | 4,460,000 |
Weighted Average Exercise Price Outstanding | $ 0.70 |
Weighted Average Remaining Contractual Life (years) | 3 years 11 months 12 days |
Exercise Price | $ 0.70 |
Warrant Two [Member] | |
Number outstanding | shares | 150,000 |
Weighted Average Exercise Price Outstanding | $ 0.45 |
Weighted Average Remaining Contractual Life (years) | 5 months 1 day |
Exercise Price | $ 0.45 |
Warrant Three [Member] | |
Number outstanding | shares | 1,080,378 |
Weighted Average Exercise Price Outstanding | $ 0.35 |
Weighted Average Remaining Contractual Life (years) | 7 months 17 days |
Exercise Price | $ 0.35 |
Warrants (Details Narrative)
Warrants (Details Narrative) | 6 Months Ended |
Jun. 30, 2020$ / shares | |
Warrants [Member] | |
Volatility factor rate | 100.00% |
Intrinsic Value[Member] | |
Closing stock price | $ 0.19 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - 2017 Equity Plan [Member] - $ / shares | Jul. 08, 2020 | Jun. 30, 2020 |
Stock option shares issued | 250,000 | |
Stock options granted upon shares purchase | 500,000 | |
Share price | $ 0.19 | |
Amendment to Equity Incentive Plan | The Board of Directors of the Company approved an amendment to the 2017 Equity Incentive Plan (the “2017 Plan”) to increase the maximum number of shares of common stock that may be issued under the 2017 Plan from 8,000,0000 to 12,000,000 shares. |