APRIL 2020 UPDATE

As I write this update the COVID19 pandemic continues to disrupt individual lives as well as commerce worldwide. The first several months of 2020 have been a challenge with some regions, industries and families impacted more severely than others. While the scope of the economic shutdown has yet to fully play out, we're expecting the environmental “green” energy sector and capital markets to recover over the rest of the year. All of us at Catalytec send out our hopes and prayers that you and your loved ones stay healthy in body and mind. Rest assured our management team is healthy and we continue to work on behalf of our shareholders to realize the potential of our unique catalyst technologies.

In order to bring you Catalytec’s latest business developments I’ll pick up where our last update in May 2019 left off. Our business goals remain the same: (i) building and operation of a full scale CFC™ 700 liters/hour system; (ii) continuing the joint research and development relationship we have with Arconic; (iii) continue our target marketing to generate sales in the United States of our catalytic systems for the cleaning of airborne volatile organic compounds (“VOC”); (iv) recovering Catalytec’s Phase One system that was installed at Alcoa’s Warrick Operations in Evansville, Indiana; (v) generate operating revenues necessary before we can list Catalytec’s shares on a public stock exchange; and (vi) most importantly arranging funding to achieve these goals.

CATALYTEC CFC™ SYSTEMS

The Catalytec Phase One system that was installed at Alcoa’s Warwick operations is still in storage. Please read our May 2019 update on the Catalytec website to refresh your understanding of the Alcoa project. We are continuing our efforts to find a relocation site for the system where it can be connected to a Phase Two system.

Unfortunately, with the continuing drop in petroleum prices, the economic viability of having a standalone Phase One system for the sole purpose of separating water and solid particulate from waste watery-oil was lost. The market price/gallon for dewatered used oil has deteriorated to such a level that petroleum resellers now require collection fees before they will pickup cleaned used oil. As a result, break even operating revenues currently cannot be achieved solely from a Phase One system by itself. Further, the petroleum industry is struggling with what is increasingly the biggest demand slump in the history of petroleum crude oil. As an example, British multinational investment bank and financial services company Barclays Financial Services slashed its oil price estimates for 2020 for WTI crude to an average price of $28 a barrel due to the demand shock from COVID 19 and the supply shock from the Saudi-Russian oil price war. Therefore, before we can put our Phase One system back into operation it must be connected to our Phase Two 700 liters/hour CFC™ system.

This does not mean our Phase Two 700 liters/hour CFC™ system by itself cannot be profitable producing sustainable fuel oils. I want to remind you that our Phase One system is a liquid dynamic system that was designed for Alcoa’s liquid waste. A Phase Two 700 liters/hour CFC™ system can produce sustainable fuels from either liquid or solid feedstocks. So we are confident the production of sustainable fuel oils with our Phase Two system from non-recyclable solid waste feedstocks remains a profitable business model.

One reason for our optimism is that the price of crude oil will at some point increase because many countries that are net exporters of crude oil require higher prices to support their government spending and balance their budgets. According to the IMF Saudi Arabia needs oil prices at approximately $83 a barrel in 2020 just to meet its government spending and balance its budget. And according to the investment bank Morgan Stanley, even the private shale oil industry needs $51 a barrel just to fund their debt payments and capex budgets for 2020. Even the crude oil majors Exxon, Chevron, Eni, Shell, BP, Total, and Equinor have an average corporate cash flow break-even price of $53 a barrel for 2020, according to Wood Mackenzie a global energy research and consultancy group.

A second reason is reports by global energy research firms that published estimates of production costs for crude oil worldwide remain higher than Catalytec’s Phase Two CFC™ system’s production costs. For example, Russia’s crude oil production costs average an estimated $42 to $44 per barrel. Costs are even more expensive in the USA, as well as in India, China, Azerbaijan, Angola, Thailand, and Kazakhstan. Even the lowest cost crude oil producers in the world Saudi Arabia and Kuwait have estimated production costs of $17 per barrel. By comparison, Catalytec’s CFC™ 700 liters/hour systems have estimated production costs of approximately $12 per barrel.

In addition, as I mentioned before, we have shifted our focus from the use of liquid waste oil as a feedstock. We are transitioning to environmentally undesirable non-recyclable solid commodities. Many of these items that are collected, such as plastic straws, bags, eating utensils, yogurt and takeout containers often cannot be recycled. Plastic waste containers have seven different codes stamped on them to indicate different resin types, however only those with “1”s and “2”s are easy to recycle. The rest usually end up being incinerated, deposited in landfills or dumped in the ocean. China’s continuing refusal to accept most plastic waste from the United States has dramatically heightened awareness of this issue. Without the Chinese market to accept plastic waste the recycling industry was upended. Without a market for plastic waste the economics does not work. As a result, plastic waste processing facilities in the United States have either had to pay more to recycle or simply send the plastic waste to landfills. As an example, Bakersfield, California had been able to sell its recyclables for $65 a ton; after 2018 the municipality had a cost of $25 a ton to dispose of its recyclables. This is the reason why we continue approaching municipalities and environmental groups for potential financial support for our very low emissions catalytic CFC™ systems. Our systems can potentially generate lost revenues by conversion of plastic waste into sustainable fuels.

According to the latest data published by the United States EPA, of the 267.8 million tons of municipal waste generated in American in 2017 only 8% of plastics were recycled. I outlined some of this strategy in our last update. However, I wanted to mention again that the growing interest in environmentally sustainable fuels produced from non-recyclable waste commodities is becoming more attractive to governments and industries.

Another environmentally undesirable waste commodity gaining interest is polypropylene, polyester, and other types of discarded carpet. We are focused on discarded carpet as a feedstock because of its high mass – energy equivalence due to high concentrations of hydrocarbons. Our in-house marketing continues to work on go-to-market plans for our CFC™ systems targeting registered "Certified Collectors” of the Carpet America Recycling Effort (“C.A.R.E.”) trade coalition. CARE is a joint industry-government non-profit organization whose mission is to develop market-based solutions for recovering value from discarded carpet. We are also making proposals to carpet and flooring companies. For example, Shaw Industries, Inc. is a flooring company in Georgia that also recycles certain types of carpet. We will propose projects/joint ventures in 2020 targeted to these companies for the use of our Phase Two CFC™ systems to produce fuel from the strands of the collected discarded carpet. Check the Catalytec website periodically for future news posts on these developments.

CATALYTEC’S SUSTAINABLE FUELS

The types of sustainable fuel oil a Catalytec CFC™ 700 liters/hour system can produce are equivalent to several of the US Energy Information Agency’s classifications of fuel oils. I wanted to let you know what the categories of fuel oil equivalents Catalytec can produce with our systems. In contrast to fossil fuels, our sustainable fuels would be produced from environmentally undesirable non-recyclable waste. The categories we are targeting are:

No. 4 fuel oil which is a distillate fuel oil made by blending distillate fuel oil and residual fuel oil stocks. It conforms to ASTM Specification D 396 or Federal Specification VV-F-815C and is used extensively in industrial plants and in commercial burner installations that are not equipped with preheating facilities. It also includes No. 4 diesel fuel used for low- and medium-speed diesel engines and conforms to ASTM Specification D 975;

No. 5 residual fuel oil which is a residual fuel oil of medium viscosity, used in steam-powered vessels in government service and power plants, which is also known as “Navy Special” and is defined in Military Specification MIL-F-859E, including Amendment 2 (NATO Symbol F-770).

No. 6 Residual fuel oil which includes “Bunker” fuel oil used for the production of electric power, space heating, powering ships and vessels, and various industrial purposes..

ALCOA - ARCONIC

As you know we hoped to complete a Catalytec CFC™ 300 liter Phase Two system at Alcoa’s Warrick Operations to produce sustainable fuel from Alcoa’s waste watery-oils. You’ll also remember that Alcoa split into two separate companies. Alcoa remained the same, but a new company, named “Arconic” was created to focus on the aerospace and automotive industries. The creation of Arconic resulted in the loss of the Alcoa project collaboration for building of the first CFC™ 300 liters/hour system comprised of Phase One and Phase Two modular systems combined to produce fuel oil. You can read more about the Alcoa project in our 2019 update which is posted on our website.

The Arconic joint development agreement we negotiated in early 2019 called for our collaboration with Arconic to develop 3D printed aluminum lattice structures utilizing its new high temperature aluminum powders. The 3D printed structures would then be “coated” by Catalytec’s research and development partner in Germany – Catalytec GmbH. The goal of our collaboration with Arconic is to reduce or eliminate the use of platinum in the fabrication of automotive catalyst converters. You can read more about these developments in last year’s update if you like. If we are successful the reduction or elimination in the amount of platinum could dramatically reduce the fabrication cost of catalytic converter components currently being sold in the marketplace.

In order to prove and document the prototype’s performance we wanted to have an academic institution test the prototypes in order to demonstrate an unbiased performance benchmark. We entered into an NDA with the Erlangen Catalysis Resource Center at the Universität Erlangen-Nürnberg located in Erlangen, Germany precisely for that purpose. Unfortunately similar to Alcoa, the Resource Center split into two divisions - one being a technical division and the other a teaching division. In early October 2019 the technical division notified us that their research priorities would not include continuing with Catalytec. At that time we also discovered one of the main proponents of collaborating with Catalytec, Prof. Wilhelm Schwieger, had apparently retired.

With the setback we then began a search for another academic institution that could provide us with the necessary independent benchmark testing of our prototypes. We initially made inquiries at two universities in the State of Texas - the University of Texas and the University of Houston. These were chosen because of the considerable presence of the petroleum industry in the State of Texas. However, the COVID19 pandemic has closed both of these universities for the time being. We intend to renew our efforts with academic institutions in the United States and here in European Union as soon as academic institutions and universities reopen their campuses.

FUNDING

“Hope all is well. Just wanted to let you know, we are continuing our efforts in DC on your behalf. The last 4-5 years as you well know have been tough due to a series of federal government shutdowns. But 2020--due to the pandemic--may offer new funding opportunities. In the next few months, we may see several more pieces of federal legislation that may offer opportunity. A lot depends on the next 60 days. But 2020 may indeed offer opportunity in DC. Let us debrief in 30 days.”

As I mentioned earlier in this update we must generate operating revenues and become an operating company. As soon as we become an operating company, we hope our past relationships with the original private investment bankers/broker dealers that funded Catalytec’s initial funding round will manage a public offering of Catalytec’s shares, or in the alternative, list the shares on a public exchange. Both funding strategies, government grants and private equity, are designed to potentially realize our goal of becoming a public company. We would then have access to a broader universe of funding sources for our proprietary catalyst technologies that would not normally be available for a private company.

CATALYTEC VOC SYSTEMS

It is well known that present day industrial and manufacturing processes can cause harmful exhaust air emissions of VOCs that require air cleaning systems. In our last update I described how Catalytec obtained an exclusive marketing and distribution license from our research and development affiliate Catalytec GmbH for Catalytic Conversion (“CC”) VOC technology. Typical fossil fuels thermal combustion systems use natural gas burners to heat the exhaust gases to extremely high temperatures in the range of 700°C - 1000°C. While the high temperatures convert the hydrocarbons in the exhaust gases into water, these systems also emit large amounts of the greenhouse gas carbon dioxide (CO2). Fossil fuels thermal combustion systems have been the industry standard for the removal of VOC emissions for decades in the United States, but we have observed the preference for fossil fuels thermal combustion systems is gradually transitioning away from reliance on fossil fuels.

Catalytec’s systems utilize proprietary mixed oxide crystal catalysts to achieve efficient chemical reactions with 60% to 80% lower operating temperatures than fossil fuel burning systems. Our technology does not use fossil fuel burning technology to heat the exhaust gases. Instead, our CC systems use highly efficient recuperative heat recovery non-contact air-to-air electric heat exchangers. We also incorporate our unique honeycomb designed micro duct structures pre -coated with our mixed oxides crystals. The catalytic activity is caused by adsorption and desorption of harmful gases at the mixed oxides. Due to these mixed oxide crystals the harmful gases burn without a flame and chemically convert into carbon dioxide and water. The combination of these innovations results in much lower operating temperatures in the range of 280°C – 450°C using the caloric value of the emitted VOC for heating as well. The oxide crystalline structure gives the catalyst a high durability and temperature stability.

The minimum temperature for our catalysts is 300°C depending on the application, and an operating temperature of up to 500 °C is possible if there are other harmful compounds present in the exhaust gases.

In my last update I discussed several of the reasons why we are optimistic about the prospects for selling the CC systems in the United States and Canada. One reason is we use electric heat exchangers rather than fossil fuels which has been the industry standard in the European Union. We have installed CC systems at Bosch, Pirelli, and GE to name a few. Another reason is we discovered in 2019 increased interest in transitioning from fossil fuel burning systems to the more environmentally friendly electric powered systems. We’re finding this to be true despite the relatively inexpensive cost per kw/hr. of fossil fuels in the United States and Canada. You can read a more detailed description of our VOC systems on our website.

Catalytec’s CC technology was designed to eliminate the current necessity of high cost precious metal catalysts in commercial and small to medium scale industrial VOC removal applications. No Platinum or other expensive precious metals with their adverse impact on the environment are needed. Our VOC systems are able to reduce hydrocarbon loads to currently mandated environmental standards, while realizing substantial savings of fuel and energy costs in the process. Installing or retrofitting Catalytec’s CC systems into existing emission purification systems offers the most efficient, economical and sustainable solution for emission-free fabrication and commercial / industrial processing that we know of in today’s industrial/manufacturing sectors.

NEW TECHNOLOGY DEVELOPMENTS

As I mentioned previously, we entered into a joint development agreement with Arconic for coating new amorphous 3D printed prototype structures. The prototypes were designed for catalytic processes utilizing Arconic’s new high temperature aluminum powders. We have been exploring exciting new nanocoating technologies for molecular bonding of platinum to the prototypes. Nanocoating bonding technologies have the potential to dramatically reduce the thickness of the coating surface down to nanoscale. Nanoscale refers to measurements in “nanometers.” A nanometer is a unit of length in the metric system that is one billionth of a meter. As an illustration, a sheet of paper is about 100,000 nanometers thick. If we are successful, our catalyst coating of the prototypes at the nanoscale would dramatically reduce the amount of platinum we would need for the necessary chemical reactions to occur inside the prototype structures. While we are confident these nanoscale technologies show promise, some issues have to be solved. For example, we have to prevent ion exchanges between the aluminum and platinum molecules. We believe this can be accomplished with a titanium nanocoating buffer between the aluminum and platinum molecules inside the prototype structures. We will post updates at Catalytec’s website about nanoscale coating technologies as they develop.

PERSONAL MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

My wish is that each of you and your loved ones stay safe and in good health in 2020. We want our shareholders to remain confident that the Catalytec team continues to work hard to deliver value despite funding delays and the health threats associated with the COVID-19 pandemic While I cannot guarantee any of the above strategies will materialize, I can guarantee to all of you that I will continue to vigilantly pursue them as well as other new technologies as we develop them. As always, don’t hesitate to contact us with questions at catalytec.com.

Christian Koch, Chief Executive Officer

April 22, 2020

UPDATE MAY 1, 2019

In this update I will highlight some of the significant events that occurred in 2018. Since our last update there has been no change in what we’re trying to accomplish for our shareholders. Catalytec’s primary goal is the completion and operation of a full scale CFC™ ™ System. Of course, to accomplish this the company has to secure financing to build the system in Germany and thereafter commence operations in the United States of America.

ALCOA

As you are familiar, we had hoped to finally complete a Catalytec CFC™ 300 liter system at Alcoa’s Warrick Operations. You’ll also remember that Alcoa split into two companies. The “old” Alcoa did not have the resources to continue to supply their watery - oil feedstock, or budget for their necessary infrastructure changes. With the loss of the Alcoa project, and its projected revenues, our Investment bankers advised it would be very difficult to raise funds from institutional investment firms, or structure a merger transaction with an existing publicly traded corporation. As we advised in our past update, management decided not to immediately commence legal action against Alcoa because we had several connections with previous executive officers and engineers at Alcoa who were familiar with our technology and very much supportive of it. Management reasoned it made no sense to run the risk of alienating Alcoa’s corporate hierarchy if a potential future collaboration was being pursued with the executive officers and engineers. In addition, we still had time under the applicable statutes of limitations to defer any legal action against Alcoa. As will be described further on in this update, one of those engineers championed a joint development agreement we entered with the “new” Alcoa named “Arconic.”

CATALYTEC PHASE ONE SYSTEM

The Catalytec Phase One System that was installed at the Warwick operations is still in storage at Alcoa. Management has been diligent in assessing the prospects for producing revenues from the Phase One System. The Phase One System was designed specifically for Alcoa’s needs in separating watery - oil waste, aluminum and small particulate matter suspended in the watery – oil waste. Because of the specialized design of the system it was necessary to approach companies that had a similar watery – oil waste management problem. As you will recall from our previous updates, the Phase One System was designed to eventually be connected to a CFC™ System. Therefore, we focused on identifying potential sites where the Phase One System could be moved, and eventually connect it to a full CFC™ System to produce fuel oil.

Our initial strategic approach targeted to these companies was similar to our approach at Alcoa. The waste site would provide us with their waste watery – oil at no cost, and Catalytec would sell the separated used oil after processing it through the Phase One System. Throughout 2018 we were unable to secure any contract for this approach. Necessarily, we shifted to another strategy that would allow a potential waste site to keep the separated used oil produced by the Phase One System rather than waste site assigning the contract rights of re-sale of the separated used oil to Catalytec. In exchange for receiving the proceeds of the sale of the used oil, the company would pay a service fee to Catalytec based on the number of gallons processed by the Phase One System. We have been exploring this new economic strategy in Las Vegas, Carson City, Evansville and Nashville. As of that date of this writing we have not secured any letters of intent or contracts. We continue to pursue this strategy as it is in management’s opinion more likely to procure a site where we can reconnect the Phase One System. If we are able to enter into such an agreement with a waste site we will post an announcement to our web site.

FUNDING - POST ALCOA

In our last update we advised that the company had engaged in a separate funding strategy by hiring a lobbying firm in Washington, DC to secure a research and development grant to build one or more CFC™ Systems. Our first attempt at a research grant to the department of energy was met with a denial based on budgetary constraints. Our lobbyist advised this was primarily due to continuous failures by Congress to pass an annual budget. Further, our lobbyist indicated in several conference calls with Catalytec’s management that a full budget and appropriations bill was continuously being postponed throughout 2018. In response, and to not stand still while the lobbying efforts continued, management solicited various plastics waste management and plastics waste collection companies in hopes of securing a joint development project. We decided to focus on plastics as they are an excellent feedstock for a CFC™ System. Plastics have a high hydrocarbon efficiency ratio when used as a feedstock for catalytic deploymerization conversion into fuel oils. Equally attractive was plastic waste has become an escalating environmental problem with heightened public awareness. This heightened awareness of the problem of land and ocean plastic waste pollution has increased exposure to environmental funding sources focused on the removal of plastic waste from the environment.

The shift in strategy, to use plastics as a feedstock for a CFC™ System, changed our strategic direction from focusing on municipal solid waste or used watery – oil as feedstocks. We placed several preliminary proposals in front of three separate plastic waste collection sites in Nevada and Tennessee. The companies were keenly interested in supplying our system with their plastic waste and locating our CFC™ System at their site. However, the financial side of any joint venture requiring the site ownership to financially contribute to the project was not mutually satisfactory. Confidentiality and non-disclosure agreements prevent us from providing more details at this time.

FUNDING – DEPARTMENT OF ENERGY GRANT

As mentioned earlier in this update In an effort to raise capital critical for building a full Catalytec CFC™ System we engaged the services of the lobbying firm Burkman Associates, LLC with offices located in Washington D.C. We provided a copy of our Department of Energy proposal in our last update. Needless to say 2018 was very frustrating for us as well as for Burkman Associates, LLC. We continuously received reports that the budget had not been passed in Congress. Instead, continuing resolutions funded the government without passage of a full funding omnibus bill. However, with the passage of the omnibus budget, signed by president Trump after several government partial shutdowns in 2018, our lobbyist has again made efforts to secure a research and development grant with the Department of Energy.

The research grant proposal is focused on the removal of waste plastics from the environment by converting the plastic waste into fuel oils with Catalytec’s proprietary CFC™ deploymerization system. Our lobbyist informed us that the former governor of Texas, Rick Perry is now the new director of the Department of Energy. The attractiveness of converting plastic waste into fuel oil is what the lobbying effort will focus on to locate a CFC™ System in Perry’s home state of Texas. The amount of the grant will be negotiated directly by our lobbyist, but it has been made clear that at least one full CFC™ System is the minimum funding amount. We cannot say at this time if are lobbying efforts will be successful, but we continue to pursue this avenue of funding. Check our web site, which will be updated with further developments.

This is not to misconstrue our research grant proposal and lobbying efforts with Burkman & Associates as abandoning a potential “go public” transaction. However, we must first be successful in locating a waste site that needs a Phase One System for separation of waste watery – oils. This is a critical goal we must meet in order to generate operating revenues and become an “operating company.” Our investment banker advises Catalytec must become an operating company in order to attract a publicly traded “shell” corporation to structure a merger, or initiate a public offering of Catalytic stock. Both strategies are designed to result in Catalytec’s shares becoming publicy traded on a recognized stock market exchange in order to provide liquidity and attract institutional investment firms.

NEW DEVELOPMENTS – ARCONIC/CATALYTEC

As previously described, management continues to maintain communications with several officers and engineers at Alcoa. As a result of those discussions we successfully entered into a joint development agreement (“JDA”) with Arconic in 2018. The JDA requires the companies to collaborate for purposes of evaluating and developing a new design for automotive catalytic converter filters. The design will be produced through the newest powder bed additive manufacturing and computer 3D metal printing using Arconic developed high temperature aluminum powder. The newly designed “lattice” filter incorporates our catalyst reactive crystal technologies. The lattice design combined with Catalytec’s catalyst has the potential to convert harmful internal combustion engine exhaust gases without the use of, or with reduced quantities of, expensive platinum/rhodium currently in use for internal combustion engines.

The first Arconic/Catalytec 3D printed lattice prototypes were jointly designed and 3D printed by Arconic’s research and development division. These prototypes were shipped to Catalytec’s research and development partner Catalytic GMBH in Germany. The proprietary process of “coating” the prototypes actually involves growing reactive catalyst crystals in the microscopic pores naturally present in unpolished aluminum. This allows for the chemically bonding process to the microscopic pores in the lattice structure‘s “channels” to occur. Unpolished aluminum creates thousands of microscopic pores that would normally not be present if the aluminum was polished and finished for industrial use.

In addition, the unique 3D designed lattice internal structure allows for the necessary turbulence to occur sufficient for the catalyst to chemically convert the harmful carbon monoxide exhaust gas emissions. The joint development agreement with Arconic provides that all “background” technologies are the sole intellectual property of each company which protects our proprietary catalyst technologies. Only newly developed technologies that result from the collaboration between the companies are owned equally.

The next phase is for the “coated” prototypes to be comparison tested and benchmarked against platinum filters. This phase will be performed in cooperation the Universität Erlangen-Nürnberg located in Erlangen, Germany. The University is one of the largest universities in Germany, and is a leading research university with an international perspective. The university specializes in research and development of reactive chemical catalysts. A non-disclosure and non circumvention agreement was successfully negotiated and entered into in January of 2019. The university will coat platinum filters to establish benchmark exhaust gas performance results using platinum, and thereafter compare those results with the Arconic/Catalytec 3D printed lattice prototype filters coated with our reactive catalyst crystals. Further developments will be announced as they occur and posted on Catalytec’s website.

NEW DEVELOPMENTS – EXCLUSIVE DISTRIBUTION AGREEMENT

Also in 2018, Catalytec obtained an exclusive marketing and distribution license from our research and development affiliate Catalytec GmbH in Germany. The agreement calls for the introduction into the United States of GmbH’s existing catalyst technology for the cleaning of air – born volatile organic compounds (“VOCs”) produced by various industrial and manufacturing processes. Management decided to enter into this agreement in order to potentially create much needed revenue to support the company’s goal of being a revenue producing operating company and listing its shares on a publicly traded exchange.

Catalytec GmbH has produced these systems in Europe for many years. The reason why these catalytic systems have not been marketed in the United States is because of the relatively inexpensive cost per kw/hr. of fossil fuels in this country compared to the much higher costs in Europe. VOCs are simply burned off in fossil fuel oxygenation systems here in the United States while in Europe the high cost of the fossil fuels precludes these types of oxygenation burning systems. In Europe VOC systems utilize electricity not fossil fuels to generate the heat energy per kw/hr. to achieve VOC removal from the ambient air inside a particular manufacturing plant.

However, new developments in environmental legislation designed to curb the use of fossil fuels in the United States is seen by us as an opportunity to bring this technology to the market. As an example, California passed new legislation in late 2018 that requires the elimination of the use of fossil fuels to generate energy by the year 2045. The renewable energy measure would require California's utilities to generate 60 percent of their energy from wind, solar and other specific renewable sources by 2030. The goal would then be to use only carbon-free sources to generate electricity by 2045. In addition, California has created a "cap and trade" program to put a price on carbon emissions, creating incentives to discourage the use of fossil fuels. A further indication of this trend is that California's renewable energy goal is not as ambitious as is Hawaii’s. The state has adopted a 100 percent renewable energy mandate.

Management is of the opinion these recent developments will open United States markets for the use of non - fossil fuel burning catalyst VOC cleaning system technologies. Catalytic VOC cleaning systems have been operating successfully in Europe for decades. Catalytec and its research affiliate Catalytec GmbH entered into an exclusive distribution and marketing agreement in 2018 for that purpose. Catalytec will advertise and solicit proposals from companies that currently use fossil fuels to burn VOCs that want to switch to the more environmentally friendly catalyst system. Each catalytic VOC system will be designed in Europe depending on each customer’s specifications and requirements and then container shipped to the United States for installation. The companies plan on equally sharing net profits from each project. To date we are sending requests for proposal to other European companies that have the catalyst VOC cleaning systems. We are doing this in order to assess the price point at which our systems can be marketed in the United States with gross margins sufficient to maintain profitability. Of course, we will make further announcements as the situation warrants.

I hope this will give you some insight as to how we continue to work hard to achieve potential success for all our investors and shareholders. While I cannot guarantee any of the above strategies will materialize, I can guarantee to all of you that I will continue to vigilantly pursue them as well as other new technologies as we develop them.

Christian Koch, Chief Executive Officer