Summary of MIDWEST ENERGY EMISSIONS CORP.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Background

We are a Development Stage Company that develops and employs patented and proprietary technologies to remove mercury from coal-fired power plants. The recently finalized U.S. EPA MATS requires that all coal and oil-fired power plants in the U.S., larger than 25MWs, must limit mercury in its emissions to below certain specified levels, according to the type of coal burned and the plant design. In general, MATS requires EGUs to remove about 90% of the mercury from their emissions. Our technology has been shown to be able to achieve mercury removal levels compliant with MATS and at a lower cost and plant impact than the most widely used approach of PAC or BAC injection. As is typical in this market, we are paid by the EGU based on how much of our material is injected to achieve the needed level of mercury removal. Our current client pays and we expect future clients will pay us periodically (monthly or as material is delivered) based on their actual use of our injected material. Clients will use our material whenever their EGUs operate, but they do not operate all the time. EGUs typically are not operated due to maintenance reasons or when the price of power in the market is less than their cost to produce that power. Thus, our revenues from EGU clients will not typically be a consistent, steady stream but will fluctuate, especially seasonally as the market demand for power fluctuates.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial conditions and results of operation are based upon the accompanying financial statements which have been prepared in accordance with the generally accepted accounting principles in the U.S. The preparation of the financial statements requires that we make estimates and assumptions that affect the amounts reported in assets, liabilities, revenues and expenses. Management evaluates on an on-going basis our estimates with respect to the valuation allowances for accounts receivable, income taxes, accrued expenses and equity instrument valuation, for example. We base these estimates on various assumptions and experience that we believe to be reasonable. The following critical accounting policies are those that are important to the presentation of our financial condition and results of operations and require management's most difficult, complex, or subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

The following critical accounting policies affect our more significant estimates used in the preparation of our financial statements and, in particular, our most critical accounting policy relates to recognition of revenue and the valuation of our stock based compensation.

Revenue Recognition

The Company records revenue from sales in accordance with ASC 605, Revenue Recognition ("ASC 605"). The criteria for recognition are as follows:

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred or services have been rendered;

3. The seller's price to the buyer is fixed or determinable; and

4. Collectability is reasonably assured.

Determination of criteria (3) and (4) will be based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will be provided for in the same period the related sales are recorded.

Goodwill

The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to (1) a significant adverse change in legal factors or in business climate; (2) unanticipated competition, or; (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. In conjunction with our reverse merger, the Company evaluated the carrying amount of the resulting goodwill and determined that the entire amount of goodwill of $3,555,000 was impaired.

Stock-Based Compensation

We have adopted the provisions of Share-Based Payment, which requires that share-based payments be reflected as an expense based upon the grant-date fair value of those grants. Accordingly, the fair value of each option grant, non-vested stock award and shares issued under our employee stock purchase plan, were estimated on the date of grant. We estimate the fair value of these grants using the Black-Scholes model which requires us to make certain estimates in the assumptions used in this model, including the expected term the award will be held, the volatility of the underlying common stock, the discount rate, dividends and the forfeiture rate. The expected term represents the period of time that grants and awards are expected to be outstanding. Expected volatilities were based on historical volatility of our stock. The risk-free interest rate approximates the U.S. treasury rate corresponding to the expected term of the option. Dividends were assumed to be zero. Forfeiture estimates are based on historical data. These inputs are based on our assumptions, which we believe to be reasonable but that include complex and subjective variables. Other reasonable assumptions could result in different fair values for our stock-based awards. Stock-based compensation expense, as determined using the Black-Scholes option-pricing model, is recognized on a straight-line basis over the service period, net of estimated forfeitures. To the extent that actual results or revised estimates differ from the estimates used, those amounts will be recorded as a cumulative adjustment in the period that estimates are revised.

Results of Operations

Pursuant to the terms of the Merger Agreement, the Company is in the process of dissolving the following entities that remained in existence after the Merger of Midwest and China Youth Media, Inc.:

· Youth Media (BVI) Ltd.

· Youth Media (Hong Kong) Limited

· Youth Media (Beijing) Limited

· Rebel Crew Films, Inc.

The operations and cash flows of these subsidiaries have been eliminated from the accounts of the Company's ongoing operations and major classes of assets and liabilities related thereto have been segregated. The losses from discontinued operations, including the impairment of certain assets of discontinued operations, have been reflected in the consolidated financial statements of this report. The Company does not expect to derive any revenues from the discontinued entity in the future and does not expect to incur any significant ongoing operating expenses.

Revenues

Sales - We generated revenues of $458,000 and $7,000 for the years ended December 31, 2011 and 2010, respectively. The Company generated revenue for the year ended December 31, 2011 by delivering product to our first commercial customer for use in the system commissioning process in preparation for the system launch in 2012. The Company generated all revenue for the year ended December 31, 2010 in connection with a 2009 sub-award project from the University of North Dakota Energy and Environmental Research Center ("EERC") for "Full Scale Testing of Sorbent Injection Technology on Mercury Control." We recognized revenue for services performed upon completion of the test work and approval of the invoices submitted to the EERC.

Cost and Expenses

Costs and expenses were $9,875,000 and $479,000 during the year ended December 31, 2011 and 2010, respectively. The increase in costs and expenses is attributable to (i) the impairment of goodwill of $3,555,000 discussed below,
(ii) Stock based compensation of $3,424,000 for the grants issued to officers upon the signing of their employment agreements and (iii) marketing and development expenses, professional fees and general and administrative expenses associated with our recent efforts to commercialize our mercury emissions control technologies for coal-fired boilers in the U.S. and Canada.

Cost of goods sold during the years ended December 31, 2011 and 2010 was $444,000 and zero, respectively. The cost in the periods ended December 31, 2011 was for product sold to our first commercial customer for use in the system commissioning process in preparation for the system launch in 2012.

Operating expenses during the years ended December 31, 2011 and 2010 was $255,000 and zero, respectively. The cost in the periods ended December 31, 2011 was for product sold to our first commercial customer for use in the system commissioning process in preparation for the system launch in 2012.

License Maintenance Fees were $150,000 and $100,000 for the year ended December 31, 2011 and 2010, respectively. The expenses relate to the amortization of the annual maintenance fee for the respective year.

Marketing and development expenses were $764,000 and $126,000 for the years ended December 31, 2011 and 2010, respectively. The increase in marketing and development expenses during 2011 is primarily attributed to our increase efforts to commercialize our mercury emissions control technologies and the increase in expenses associated with expanding our operations.

Selling, general and administrative expenses were $3,901,000 and $103,000 for the years ended December 31, 2011 and 2010, respectively. The increase in selling, general and administrative expenses during 2011 is primarily attributed to our increase in efforts to commercialize our mercury emissions control technologies and the increase in expenses associated with expanding our operations. A stock based compensation expense of $3,424,000 was recorded for the grants issued to officers upon the signing of their employment agreements.

Professional fee expenses were $806,000 and $150,000 for the years December 31, 2011 and 2010, respectively. The increase in professional fee expenses during 2011 is attributed to transaction costs incurred in connection with the Merger Agreement of $319,000 as well as our increased efforts to commercialize our mercury emissions control technologies and the increase associated with expanding our operations.

Goodwill impairment expenses were $3,555,000 and $0 for the years ended December 31, 2011 and 2010, respectively. The expense during 2011 was related to the determination of management that the goodwill created in the Merger was impaired.

Net Loss

For the years ended December 31, 2011 and 2010 we had a net loss from operations of approximately $9,497,000 and $472,000, respectively. The net loss is primarily attributed to (i) the impairment of goodwill of $3,555,000, (ii) Stock based compensation of $3,424,000 for the grants issued to officers upon the signing of their employment agreements and (iii) marketing and development expenses, professional fees and general and administrative expenses associated with our recent efforts to commercialize our mercury emissions control technologies for coal-fired boilers in the U.S. and Canada.

Interest Income and Other, Net

Given our financial constraints and our reliance on financing activities, interest expense related to the financing of capital was $54,000 and $0 during the years ended December 31, 2011 and 2010, respectively.

Taxes

As of December 31, 2011, our deferred tax asset primarily related to accrued compensation and net operating losses. A 100% valuation allowance has been established due to the uncertainty of the utilization of these assets in future periods. As a result, the deferred tax asset was reduced to zero and no income tax benefit was recorded. The net operating loss carryforward will begin to expire in 2025.

Section 382 of the Internal Code allows post-change corporations to use pre-change net operating losses, but limit the amount of losses that may be used annually to a percentage of the entity value of the corporation at the date of the ownership change. The applicable percentage is the federal long-term tax-exempt rate for the month during which the change in ownership occurs.

Liquidity and Capital Resources

Our principal sources of liquidity are cash generated from financing activities. As of December 31, 2011, our cash and cash equivalents were $100,000. We had a working capital deficit of approximately $2.4 million at December 31, 2011 and we continue to have recurring losses. Our anticipated cash needs for working capital and capital expenditures for at least the next twelve months is approximately $5.0 million. In the past we have primarily relied upon financing activities and loans from related parties to fund our operations. Success in our fund raising efforts is crucial. We are actively seeking sources of additional financing in order to maintain and expand our operations and to fund our debt repayment obligations. We are converting some of our short term liabilities to long-term convertible debt-to-equity and intend to raise near term financing to fund future operations through a convertible debt-to-equity offering. We also intend to raise additional equity financing to fund future operations. On February 23, 2012, we engaged Jacob Securities to arrange equity financing, private placement, or a merger or acquisition transaction for up to $10 million dollars. Even if we are able to obtain funding, there can be no assurance that a sufficient level of sales will be attained to fund such operations or that unbudgeted costs will not be incurred. Future events, including the problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to cost increases that could make the net proceeds of any new funding and cash flow from operations insufficient to fund our capital requirements. There can be no assurances that we will be able to obtain such additional funding from management or other investors on terms acceptable to us, if at all.

Total assets were $2.1 million at December 31, 2011 versus $97,000 at December 31, 2010. The change in total assets is almost exclusively attributable to recent purchases of heavy equipment related to the deployment of our mercury emissions control technologies for our two commercial coal-fired boilers in the U.S.

Operating activities used $1,460,000 of cash during the year ended December 31, 2011 compared to $430,000 during the year ended December 31, 2010. The change in cash used for operating activities resulted primarily from our recent efforts to commercialize our mercury emissions control technologies for coal-fired boilers in the U.S. and Canada and the associated increase in operating expenses.

Investing activities used $1,393,000 of cash during the year ended December 31, 2011 compared to $2,000 during the months ended December 31, 2010. This change resulted from the purchase of equipment during 2011.

Financing activities provided $2,946,000 during the year ended December 31, 2011 primarily due to proceeds from the issuance of stock of $2,247,000 and related party advances of $549,000, compared to net cash provided by financing activities of $439,000 during the year ended December 31, 2010 primarily due to related party advances of $435,000.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.