Executives: Richard MacPherson – President and Chief Executive Officer Rich Gross – Chief Financial Officer

Analysts: Steven Ralston – Zacks Tim Quinlisk – Colrain Capital Jeff Feinberg – Feinberg Investments

Operator: Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Midwest Energy Emissions Corporation Third Quarter 2018 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. [Operator Instructions] This conference is being recorded today November 13, 2018 and the earnings press release accompanying this conference call was issued after the close of market today. On our call today is ME2C’s President and CEO, Richard MacPherson; and Chief Financial Officer, Rich Gross. Before we get started, I will read a disclaimer about forward-looking statements. This conference call may contain in addition to historical information, forward-looking statements within the meaning of the Federal Securities laws regarding Midwest Energy Emissions Corporation. Forward-looking statements include statements about plans, objectives, goals, strategies, future events of performance and underlying assumptions and other statements that are different than historical facts. Forward-looking statements are generally identified by using words such as anticipate, believe, plan, expect, intend, will, and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. Matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the gain or loss of a major customer, change in environmental regulations, disruption and supply of materials, capacity factor fluctuations of power plant operations and power demands, a significant change in general economic conditions in any of the regions where our customer utilities might experience significant changes in electric demand, a significant disruption in the supply of coal to our customer units, the loss of key management personnel, availability of capital and any major litigation regarding the Company. In addition, this conference call contains time-sensitive information that reflects our management’s best analysis only as of the date of this conference call. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future current events, information or circumstances that arise after the date of this conference call. Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this presentation can be found in the Company’s periodic filings with the Securities and Exchange Commission. At this time, I would like to turn the call over to Richard MacPherson, the Company’s President and CEO. The floor is yours, sir.

Richard MacPherson: Thank you, Melisa, and thank you everyone for joining us today. This year has been transformational for our company. The first half of the year was highlighted by our internationals efforts, most notably the timing of an exclusive European licensing agreement with Cabot Corporation, a multinational company in the coal industry with an established footprint and immense sales network. This contact was significant, as it not only shows the strength and value of our patented technologies, but it allows us to quickly and efficiently expand our international footprint into the massive developing European markets. We’re pleased to announce that this momentum has continued into the second half of the year evidenced by several key announcements. First in October we announced that we secured a three year multi-million dollar per year supply contract extension with one of the largest utilities in North America and the long-term customer route. We also announced that we expanded into two additional coal fire boilers for the same customer, which is also expected to generate multi-million dollar revenue annually over the course of the next three years. Currently these wins seek to the value of our SEA technology and continued best-in-class performance we provide utility. Second over the course of the last several years, we have made significant strides to analyze and validate the strength of our extensive patent portfolio. As a result of these efforts, we have recently announced that we are now moving forward with our newly announced licensing and patent programs throughout the USA whereby we will offer licenses and other commercial opportunities to utility operations who have adopted our Sorbent Enhancement Additive technology. Monetizing our patented technologies is our key initiatives and well underway. To aiding these efforts, we have retained Caldwell Cassady & Curry, a leading IP law firm based out of Dallas, Texas, who have extensive experience with matters such as ours. As we move forward, we’re looking forward to leveraging our accretive technologies for the benefit of both the utility industry and our shareholders. Now before going any further, I would like to give a brief overview of our company for those of you who may be new to our story. Midwest Energy Emissions capture mercury emissions from coal fired power plants across North America and now with our licensed partnership with Cabot Corporation Europe as well. We captured Mercury Emissions using our patented Sorbent Enhancement Technologies, which is short for Sorbent Enhancement Technologies suit that will allow us and plans to achieve and maintain compliance with mercury emissions regulations effectively and at a low cost by carrying out a process of enhancing the main sorbent effectiveness with a halide-based substance. This approach has been widely adopted across the USA, our U.S. coal fleet. Another important component, a component in addition to our SEA technology, is the operational consulting services we provide by leveraging our team of tenured highly trained mercury control experts as the creators of our approach. We are the experts in this field of technologies and can optimize and enhance the performance of this system now widely-installed. We are a technologies company and as such we believe we offer the most elegant and effective mercury capture approach, much more successfully than our competitors who offer commodity-based solutions that do not work as well without our process. All of this technology is protected by our robust patent portfolio, which covers the U.S., Canada and most of Europe and Asia. Our core technologies come from one of the oldest research facilities for coal in the country called the Energy Environment Research Center, or EERC, with a large group of engineers and scientific team situated in North Dakota. The technology now has over 20 years and excess of $65 million invested into its development and several of the core individuals, specifically John Pavlish, who’s primarily responsible for this technology, continues to lead our technical team as our Senior Vice President and Chief Technical Officer. We as a company have invested and continue to invest significant resources in our intellectual property as it is what we believe to be the bedrock in biggest future of the company. Recent expenditures in the multiple millions have placed us in a position to monetize the vast adoption of our patented process across the nation by coal fired utility. To unlock this inherent value on our IP, we have taken steps, several steps through the year as I noted in my opening remarks, is supporting the patent, the SEA technology we have developed in the U.S. internationally. I'd now like to elaborate on how we're pursuing these international markets. In Europe, we are actively working to penetrate the market through our licensing agreement, Cabot Corporation, which we announced in April. This capital licensing model, we've established, leverages our proven two part mercury capture technology as well as our proprietary scrubber additive technology, both of which are expected to provide meaningful additions to the extensive Cabot Corporation product line. Paired with our partners reach and immense sales network, this agreement presents a massive opportunity for our technology to see relatively rapid wide-spread global adoption when we are already conducting initial plant visits and engaged into the demonstration process at a number of different sites across Europe. We're excited to partner with the corporate leader such as Cabot and offer technology solution to reduce costs and increase profits for boiler. This agreement is not only symbolic and reaffirming the strength of our technology, but it's expected to be a material positive tailwinds to our business from a financial perspective as we move forward with operations starting in 2020 and ramping up over the long-term. Aiding our efforts in Europe is regulation that's been imposed or being imposed such as the LCP BAT, which was organized and imposed by the Industrial Emissions Directive and published in December of 2017. We expect Europe could become a significant opportunity by 2021 with technical compliance with these standards expected to commence this year. Europe’s coal market is substantial, and includes over 1,300 coal fired boilers is growing. In other key global markets such as Asia and elsewhere, we're in different stages of negotiating for similar agreement such as the one thing with Cabot. We look forward to providing further updates on these initiatives as appropriate. As part of our efforts to broaden our reach, we've been presenting at several key industry specific conferences both domestically and internationally and we expect to continue being active on this front. In fact, in August, we presented at the major U.S. Technical Symposium in Baltimore, Maryland, which is the United States’ leading technical conference for particular matter and mercury control, which is produced by four major policy contributors to the energy sector: the Air & Waste Management Association, the Institute of Clean Air Companies, the U.S. Environmental Protection Agency, and U.S. Department of Energy. Our focus is currently to the U.S. market, which is what we presently, derived nearly all of our revenues and presence – and presents the massive opportunity for our company going forward. In early October, we announced that we secured the supply contract extension was our largest customer for full product supply to meet the mercury capture requirement. Also in October, we announced that we successfully expanded in this customer's fleet securing two additional coal fired boiler. Both the extension and the expansion are significant as they are expected to generate multi-million dollars in annual revenue over the next three years each. Our ability to expand into other borders for this client is a result of what we believe to be the best available control technology or BACT. We believe that our unique ability to bring boilers into emissions compliance with the most effective, cost effective system will continue to drive new business to the company in the coming months and years, both with current and new customers. There is still a significant amount of opportunity within this fleet. We're aggressively pushing forward to secure more contracts with this customer. One of the steps we've taken to derive significant value from our IP portfolio in the United States was first to analyze and validate the strength of our extensive patent portfolio and second to retain Caldwell Cassady & Curry, a leading IP firm based out of Dallas, who are now leading our licensing and patent program throughout the United States coal fleet. Our SEA technologies, which covered the enhancing of a sorbet with a halide-based substance, have been adopted by a significant number of coal fired utilities across the USA. The adoption of our SEA technologies continues to grow due to the effectiveness of this approach to mercury capture. The use of this EERC developed process, which ME2C introduced and brought to market, is the key to our future growth here in the USA. Our expertise in this field will assure the present uses of the technology as we will be able to offer optimization and improve the efficiencies once we partnered with them. We are actively engaged with several utilities in this effort to realize the true potential of this recognized technology across the team, which currently addresses nearly 50 borders. In total, we believe there are over 150 additional boilers we could pursue within this licensing and patented program. We're very comfortable with our resources to pursue this opportunity and look forward to updating you on this front in the near future. Given our current base of business, recent contract renewal, penetration into existing customers fleets as well as the anticipated future business; we are on firm financial footing. Now, I'd like to turn the call over to Rich to go through some of the financial details for the quarter before I wrap up the call with some closing statement. Rick?

Rich Gross: Thanks, Rick. As Rick touched upon earlier, we generated revenue from three primary sources at this time: demonstration and consulting services, equipment sales and product sales. These product sales are typically recurring in nature and recognized as we provide the supply of our proprietary SEA materials and sorbent materials to our customers. Total revenue in the third quarter of 2018 was $4.2 million compared to $8.4 million in the same year ago quarter. Costs and expenses were $4.2 million and $7.4 million during the three months ended September 30, 2018 and 2017 respectively. This decrease was primarily associated with the above decrease in revenue for the quarter ended September 30. Operating loss in the third quarter 2018 was $0.2 million compared to an operating income of $1 million in the third quarter of last year. Net loss in the third quarter of 2018 was $0.6 million or negative $0.01 per diluted share compared to net income of $0.8 million, or $0.01 per diluted share, in the third quarter of 2017. Adjusted EBITDA in the third quarter of 2018 was $97,000 compared to adjusted EBITDA of $1.6 million in the same year ago quarter. On September 30, 2018, we had cash and cash equivalents of $0.4 million compared to $0.5 million on June 30, 2018. We are mindful of our cash position and remain confident that we have enough resources to support planned operations moving forward. And with that, I'll turn the call back over to Rick.

Richard MacPherson: Thank you, Rich, and thank you all to join us on today's call. I'll conclude with sharing my enthusiasm and excitement about where we are now, but most importantly, where we're going. Our work to penetrate international markets such as Europe and Canada is paving the way for a significant opportunity as we move forward and is expected to pay dividends starting next year. Our major international partner, Cabot with their global reach and immense sales network, should accelerate this penetration throughout Europe. But most importantly, our technology had been adopted by approximately 60% to 70% of the entire U.S. coal fleet in one form or another. We're now actively engaged with several utilities which in total operate dozens of boiler utilizing our patented process with Caldwell Cassady & Curry leading the effort from a position of great strength given the IP portfolio we have and their expertise. So in closing, the creation of the Sorbent Enhancement Additive Technologies by the EERC, the subsequent commercial introduction of those technologies by us and the vast adoption of those technologies across the fleet have positioned ME2C to realize its true value in the coming years to both utility and shareholders alike. So with that operator, I will turn it back for any questions.

Operator: Thank you. [Operator Instructions] Our first question will come from Steven Ralston from Zacks.

Steven Ralston: Good afternoon. I was quite impressed with the bump up in the revenues for the third quarter. I assume the increased demand came from seasonal influences or did some worthy EGUs come online in the third quarter from the second?

Richard MacPherson: Mostly seasonal, Steven, in that regard. The new business that we announced is just subsequently started.

Steven Ralston: Okay. Looking at these certain line items, I saw quite a few improvements. Your cost of goods sold declined from 78% of revenues down to 73%. I looked through the 10-Q to see why your cost improved – your cost structure improved on that line and I didn't see any verbiage. Could you delve into that?

Richard MacPherson: Mostly that was covered by us renegotiating supply pricing on our core product and it's being reflected in that and also is allowing us as well to be more competitive in the field.

Steven Ralston: Thank you. Also noticed that interest expenses dropped almost 10%. Could you explain that also?

Richard MacPherson: Rich, would you address that please?

Rich Gross: Yes, Steven, that is a decrease based on principle payments during last year and into this year, decreasing the total amount of outstanding debt and decreasing the interest.

Steven Ralston: Thank you. When you mentioned that you had two additional EGUs under contract with your largest customer, I had to tally that they were nine before that and then two more would make it 11. Is that accurate?

Richard MacPherson: Rich, does that sounds like you?

Rich Gross: That's the U.S. number.

Richard MacPherson: Yeah.

Steven Ralston: That's you. So your largest customer now has 11 EGUs under contract.

Richard MacPherson: So those are spread out amongst all of our customers in the U.S.

Steven Ralston: Well, can I ask it a different way? How many EGUs are under your largest customer?

Richard MacPherson: Three at this time.

Steven Ralston: Thank you. And it's commendable that you haven't issued any equity and your balance sheet is improving sequentially. Any plans for funding through equity?

Richard MacPherson: We don't have any plans to do any funding through equity at this time. I'm not suggesting it's not a possibility, but at this time there's no direct need to do anything.

Steven Ralston: Understood. Thank you for your time.

Richard MacPherson: Thank you, Steven.

Operator: Our next question will come from Tim Quinlisk from Colrain Capital.

Tim Quinlisk : Good afternoon, Rick. Thanks for taking my call. I guess my question is – I'm trying to get my arms around the opportunity that you believe stems from the patent and licensing program. You've got an industry that for one reason or another is using a two part process using primarily from your competitors, which you’re providing commodity-based sorbents and for some reason don't feel the need to respect that technology. You've mentioned that a significant amount of these guys are infringing on your patent portfolio. Can you give us a better sense of how that came to be, how they're allowed to do that and sort of what the opportunity set is as you look forward whether you want to…

Richard MacPherson: Sure, thanks, Tim.

Tim Quinlisk : By us to use or – okay…

Richard MacPherson: Yeah, so, given the fact that we have Caldwell Cassady & Curry involved, I'll limit the response, but I'll give you a general overview. Back in the late 90s and the early 2000, the EERC were working aggressively in this area to develop technologies that would meet the upcoming expectation of capturing mercury. We acquired the license rights to all of the technologies they develop in the early 2000 and then acquired outright all of the patented packages in recent times. The general information of what was the best way to operate a sorbent technology system pervaded the market over the last six to eight years, while we were developing as a company. And so at this point in time when we introduced the technologies, we knew or expected that it would be widely accepted. But the utilities to their best efforts picked up on the ways and means of enhancing sorbent over time and we've been developing as well as a commercial entity to the point now where the processes have been adopted by huge piece of the market and we are advising the operators of the processes, how to best use them being the developers of it. And part of that process is offering licenses to people who want to continue doing it the way they have established, but also the opportunity and our desire would be to be able to provide direct service to them as the creators of the process and what we feel to be the ones that [indiscernible] the best. So we very much expect that because of all of the adoption of the technology over the last number of years, that there's a great opportunity for us to be able to enhance its performance and license those operations for the benefit of the shareholders.

Tim Quinlisk : Okay. And Rick, if you could just frame the opportunities that I think you've mentioned that it's somewhere between 50 units and 150 units in the U.S. alone that you think is using this process. Is that – am I on the right page there?

Richard MacPherson: Yeah, so we've identified well in excess of 150 boilers that are operating a system that we feel are taking advantage of the processes that we've developed and patented. And we're actively at this point directly involved with a number of them in full discussion as we go forward.

Tim Quinlisk : Okay. And you have never – have you ever framed what the potential opportunity is in terms of license revenues or at least maybe looking back under the old model what the per RGU unit would generate from a revenue or margin perspective in the past?

Richard MacPherson: I think we haven’t to the public. We have a very solid understanding ourselves of what the potential is, is very significant. And it's not something that we've made public at this time, again, due to the negotiations that are underway between us and utilities. But it is very significant, but at the same time very reasonable and very, I think, advantageous to both us and the utilities that we're approaching in that we have the expertise to optimize the systems even more and provide specialized sorbent and additives that can enhance what they're doing out from [indiscernible]. So it's an overall approach that we are most hopeful end up in being dealt with from a commercial point of view.

Tim Quinlisk : Sure.

Richard MacPherson: And so we're moving forward in that regard and we will be making announcements as we progress – as to the value statements necessary for shareholders to get a handle on the overall value. But when we introduced the technology years ago, we said it would be disruptive. We said it would be adoptive and certainly has been and we're in a position now where we are most likely to being able to monetize all of that adoption.

Tim Quinlisk : Okay. So your orientation is towards deploying a commercial model to realize the value of your technology, but having said that you've just hired a pretty successful law firm to go and try to be pretty much helps you to implement this process. How do you – how should I think about your ability to sort of have the resources to fund both of the license and the – licensing and the patent program initiative?

Richard MacPherson: Our licensing program, Tim was Caldwell Cassady & Curry is on track with all of the necessary resources in place.

Tim Quinlisk : Okay, okay, okay. And then just, Rick, if you could go back and help me rethink about your business model. If we went back two years, the nature of the business has changed dramatically. Is your competitors have commoditized their products because of the overcapacity? Can you help me understand what the business model looks like as you move forward from here based on the sort of a base of business that you have at this point and also in the context of how you've sized or might think about sizing your operating expense base to either generate breakeven or kind of operational success in that kind of new world?

Richard MacPherson: Sure. So, you know, I guess without getting too [indiscernible] Tim, so we introduced the technology that was very effective that had many, many years of development in it to the industry and we installed that and operated to the best of our ability as a small startup company. The technology itself, however, was recognized and adopted by a significant number of utilities across the country and continues to have further adoption. We recognized that our best approach going forward was to continue the development of the technologies and to make our offerings as much as possible going forward in the house that the utilities would recognize our overall investment and our inherent, what we deem to be ownership of these technologies. In the long run, the adoption is taking place. We focused on both creating and adding to our to our patent position with the technologies along with offering our own services to the utility market. And now at this point in time of our development rather than having to just compete on a commodity basis against utilities that were actually utilizing our process. We are now in a situation – in a position where we feel very confident in being able to monetize that adoption whether or not we're the providers of the process. Our main objective is to be the provider, but failing that, there's a huge recognizable value to the process whether they use it through us or on their own. But at the end of the day, that should still provide shareholder value to the technologies that we introduced to the industry.

Tim Quinlisk: Okay. Rick, I'm sorry just a little extension on that if you could. As I think about your business today, assuming that you – I'm trying to understand kind of the current run rate in terms of where we are from a profitability breakeven perspective. And had particularly given the extensions and the expansions in the additional boilers and customers that you mentioned, are you at a point where you're kind of self sustaining at this point? And then anything incremental as you add on these license agreements down the road, is that kind of just sort of fully dropped to the bottom line beyond that point?

Richard MacPherson: Yes.

Tim Quinlisk : Yes to what part is incremental or your – you've got a business model here currently where you're pretty comfortable with sort of operationally?

Richard MacPherson: Yes. We're very comfortable where we are right now. We've reduced our costs, we streamline, we're in a position right now that we can add a huge amount of new business, with the infrastructure we have in place, the manpower we have in place. We've also got our cost in line so that we are beyond the breakeven point going forward, with just the business in hand. All of this business that we have in front of us to be acquired through licensing will pretty much dropped to the bottom line. And this is a huge inflection point for the company is successful and we see the future as being very robust from this point of view, given the situation that we're in today with Caldwell Cassady & Curry partners, with no additional significant amount of financing required and our ability to be able to operate under the present business that we have in hand.

Tim Quinlisk : Okay, great. So I'll get back into queue. Thank you, Rick. Appreciate it.

Richard MacPherson: Thank you.

Operator: Next we have a question from Jeff Feinberg from Feinberg Investments.

Jeff Feinberg: Thank you very much. [Technical Difficulty]

Operator: Mr. Feinberg, your line is breaking up, could you repeat that question again please?

Richard MacPherson: Couldn’t hear you, Jeff.

Jeff Feinberg: Can you hear me now?

Richard MacPherson: Perfect.

Jeff Feinberg: Great, thank you. Can you please provide range of values for licensing and/or litigation resolution for successful licensing of your technology on a per boiler basis?

Richard MacPherson: Yes, I would prefer to use the first few agreements that are completed to provide that information going forward. But I can preface it by saying that the process saves utilities, average utility, millions of dollars a year between what they could do with or without our process. We've structured the licensing agreement so that it is a portion of that savings. But it's still amount to – a considerable amount of revenue for ME2C while at the same time bringing optimization efforts to that utility to offset those costs. I can say that the license model pretty much mirrors our operating model with regards to return on a particular customer. So that whether the client or boiler operator, he likes to take a license to operate the system on their own or whether they elect for us to come in and operate that for them. The results that win for the company, ME2C will be about the same. And I really would prefer not to be any more specific than that at this time.

Jeff Feinberg: Okay. The law firm that is representing you, its part of this on a contingency basis, evidencing their confidence in the process, how is that being structured?

Richard MacPherson: The arrangement between Caldwell Cassady & Curry and us has not been made public for strategic purposes. They are very much onboard with the rights and privileges that we presented to them for valuation. And as evidenced in the recent press release are very optimistic about what we do going forward. They are a very large firm with a lot of recent win and they would not have taken us on if they thought it was something that was small in nature. So I guess again, I would leave it at that, but there's a great deal of confidence placed in our position by them at this time.

Jeff Feinberg: Okay. Let me just follow-up on one final matter just to make sure, I’m thinking about this correctly. I mean, the market cap of the company now is $17 million. We're talking about millions of dollars of savings per year and a couple hundred of these boilers. I mean, just so I understand the conceptual math, even if you were to only get $0.5 million per boiler conceptually, we're talking about a $50 million to $100 million per year opportunity. If I'm thinking about the dynamics of the market marketplace correctly, and am I missing anything here?

Richard MacPherson: Jeff, I can't find any fault in your math, but it would be a bit forward for me to suggest that we're going to realize that kind of revenue. At this early stage is when we're just launched the initiative. But I can't find any fault with your math.

Jeff Feinberg: Okay. Thank you very much.

Operator: And that does conclude our question-and-answer session today. And I'd like to turn the conference back over to Richard MacPherson, the Company's President and CEO for closing remarks.

Richard MacPherson: Well folks, I want to say thank you very much, first and foremost to the shareholders that have been with us for a long period of time and the significant investors that have placed their faith in the company and its ability to grow. Years ago when we founded the company, we knew we were developing a technology that would very much impact the ability for the utility industry to be able to remove mercury at reasonable cost effectively. In that process those technologies proves out to be correct in our assumption of them being effective and had been adopted by the majority of the industry using the sorbent technology approach. We're now at a position where through all of the investment and time and effort in developing and patenting technologies that we should be able to monetize and see the value of those adopted technology come back to the company and be shared with the shareholders. So I very much look forward to the coming month and I'm looking forward to additional announcements in the next few weeks to help complete the picture of what we have going on right now that we'll see that through and recognize the value proposition. But thanks so much again for the interest and we look forward to getting back to you in the coming weeks. Thank you.

Operator: That concludes our conference for today. Thank you for your participation.