CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Report") includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words "believe," "expect," "will," "anticipate," "intend," "estimate," "project," "plan," "assume" or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words. All statements contained in this Report regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, the future of our industries and results that might be obtained by pursuing management's current or future plans and objectives are forward-looking statements.

Our forward-looking statements are based on the information currently available to us and speak only as of the date of the filing of this Report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these matters or how they may affect us. Over time, our actual results, performance, financial condition or achievements may differ from the anticipated results, performance, financial condition or achievements that are expressed or implied by our forward-looking statements, and such differences may be significant and materially adverse to our security holders. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.

MANAGEMENT'S DISCUSSION AND ANALYSIS





Overview

Millennium Sustainable Ventures Corp., formerly known as Millennium Investment & Acquisition Co. Inc., formerly known as Millennium India Acquisition Company, Inc. ("MILC", "we", "our", the "Company") is focused on the "Triple Bottom Line" and a commitment to Profit, Planet and People and is currently operations in two segments: sustainable cultivation of cannabis in greenhouses and sustainable production of activated carbon.

As of September 30, 2022, MILC has two areas of focus and conducts business in two operating segments as follows:





  1. Sustainable cultivation of cannabis in greenhouses
  2. Sustainable production of Activated Carbon

Greenhouse Cultivation of Cannabis

Millennium Cannabis LLC ("MillCann"), our wholly owned subsidiary, is focused on a sustainable approach to cannabis cultivation through Controlled Environmental Agriculture ("CEA") in the form of greenhouses. MillCann is currently focused securing cannabis licensing for a 550,000 square foot greenhouse facility in Michigan that is leased from a subsidiary of Power REIT (NYSE AMEX: PW and PW.PRA). David Lesser is Chairman and CEO of Power REIT and also Chairman and CEO of MILC. MILC's affiliation with Power REIT can provide efficient access to capital allowing MillCann to become a sustainable high-quality, low-cost producer of cannabis.

On September 9, 2021, a wholly owned subsidiary of MillCann, Marengo Cannabis LLC ("MC") entered into a 20-year lease (the "MarCann Lease) with a subsidiary of Power REIT for approximately 12 acres that includes a 556,416 square foot state-of-the-art greenhouse cultivation facility which is located in Marengo County, Michigan (the "MC Property"). As part of the MarCann Lease, the lessor has agreed to fund the rehabilitation and upgrading of the existing improvements.

We believe that once operational, this would be the largest cannabis cultivation facility in Michigan and one of the largest greenhouse cannabis cultivation facilities in the United States. We believe that given the scale of the project combined with the fact that it is a greenhouse will position MC, to compete very as a low-cost producer of high-quality cannabis. This is especially important as prices for cannabis in most markets have significantly compressed recently.





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As previously disclosed, cannabis licensing is delayed based on a lack of cooperation from Marengo Township where the property is located. As part of securing cannabis licenses from the Michigan Cannabis Regulatory Agency ("CRA"), a Certificate of Occupancy ("CO") must be submitted where applicable. Pursuant to the Marengo Township zoning map, the Property is zoned Agricultural and was given a Marijuana Overlay, which according to the Marengo Township Ordinance does not change the underlying zoning. As such, the Property does not require a CO and the CRA agreed in writing to accept a simple two sentence letter (the "CO Letter") as an alternative to providing a CO. PW Marengo pursued the agreed upon CO Letter from Marengo Township which was initially unwilling to cooperate which ultimately led to the initiation of two litigations against Marengo Township.

After commencement of the litigation process, we ultimately secured the CO Letter from the Marengo Township Supervisor confirming that the property does not need a CO. The CO Letter is in the form that the CRA previously agreed to accept. Based on the receipt of the CO Letter, the CRA licensing process moved forward and on August 9, 2022, CRA performed a pre-licensure inspection and identified that no deficiencies existed. In addition to the CRA approval we received, we are required to secure the approval of the Michigan Bureau of Fire Services ("BFS"). Unfortunately, after receiving the CRA pre-approval for the property, the attorney for the Township sent an email to the CRA indicating the facility was not in compliance with the Township requirements which resulted in a withdrawal of the application to CRA which can be re-submitted once the issues with Marengo Township are resolved. Despite having to withdraw the application to the CRA, we have been able to continue the process with the BFS. The process was fairly involved and required justifying the level of the hazards as reasonable for operation. On November 4, 2022, we received an approval of our plans from BFS which is subject to a final physical inspection which will take place once we are finalizing the license.

We continue to try to work with the Township to establish a path forward but will continue to pursue a parallel track in litigation including a court ordered mediation process.

In May 2021, MillCann made a loan to Walsenburg Cannabis, LLC ("WC") including a Framework Agreement whereby upon certain conditions, the loan would convert into a majority ownership position in WC under certain circumstances. During 2021 and 2022, WC harvested and sold crops but, unfortunately, the project was delayed and overbudget which caused financial strains. In addition, pricing in the Colorado cannabis market compressed dramatically in 2021 and has not recovered. Based on poor performance and in an effort to conserve resources, MillCann determined to stop funding additional operating losses at the Colorado cultivation facility in June, 2022 and the facility ceased operations. MILC is currently evaluating alternatives for capital recovery and also might consider resuming operations in the future based on the market environment. MILC has written off $1,505,898 as a bad debt expense based on uncertainty around recovery of its investment.

In June, 2021, MillCann committed to invest in a 9.35-acre property in Vinita, OK which has 40,000 square feet of greenhouse and related space and approximately 100,000 square foot outdoor growing area. During 2021, VC harvested and processed its first crops and sales began in the first quarter of 2022. MillCann invested in VC through a preferred equity interest that is structured to receive a full return of invested capital plus a 12.5% preferred return after which MillCann has an 82.0% ownership stake. The remaining subordinated ownership is held by former members of the management team of VC. The price for wholesale cannabis in the Oklahoma market has compressed dramatically from historical prices which has had a negative impact on project performance. At the end of September, 2022, MillCann determined to stop funding additional operating losses at the Vinita cultivation facility and the facility ceased operations. MILC has will take a write off of its investment as a bad debt expense based on uncertainty around recovery of its investment during Q3 2022.





Activated Carbon

Millennium HI Carbon, LLC ("MHC") is a wholly owned subsidiary that acquired an activated carbon plant in Hawaii (the "Hawaii Plant") that was intended to produce a very high-grade form of Activated Carbon for the production of ultracapacitors which are an advanced electrical storage device. During the first half of 2019, MHC concluded that the Hawaii Plant was not capable of producing consistent results and has made efforts to minimize overhead and cash drain while it seeks a strategic alternative for the Hawaii Plant. Effective December 31, 2021, MILC determined to write off $2,765,000, the remaining value of the HI asset for accounting purposes given that the plant is dormant and there is uncertainty around a business plan for this asset. We have entered into a Purchase Agreement that was scheduled to close by September 30, 2022 with a sales price of $3 million. The scheduled closing has been extended and the purchase price was increased to $3.2 million. There can be no assurance as to when or if this transaction will close.





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MillCarbon is a wholly owned subsidiary that has developed a novel method for the sustainable production of biochar and activated carbon and has constructed a proof-of-concept pilot-scale plant in Kentucky. This project has proven that it can produce either biochar and/or activated carbon from a waste stream generated by bourbon distilleries ("Stillage"). The bourbon industry in Kentucky generates in excess of 1 Billion gallons of Stillage annually which represents a significant disposal and environmental problem. We believe our technology represents a sustainable approach to relative to traditional methods which include mining coal for the production of Activated Carbon which has a very high carbon footprint. The plant has now completed over 230 batches that have produced Activated Carbon, Biochar, and Horticultural Vinegar. MillCarbon believes it has proven itself at the pilot scale level and is evaluating scaling up the plant to process approximately 10 million gallons per year by making incremental investments. The experience with the expanded plant would allow us to evaluate the construction of a large-scale plant based on the technology it has developed. We also believe this process can be replicated to address disposal issues from other carbon dense waste streams.

On October 1, 2021, MILC filed an application with FINRA for approval to change its name to Millennium Sustainable Ventures Corp and received approval for the name change as disclosed in a Form 8-K and Press Release issued on February 16, 2022. We believe the name change better reflects our focus on sustainable Controlled Environment Agriculture (CEA) cultivation in greenhouses and the sustainable production of activated carbon. MILC, with a focus on the "Triple Bottom Line" and a commitment to Profit, Planet and People is focused on sustainable business practices.

During 2020, MILC announced that it was seeking to de-register as an Investment Company that is regulated under Investment Company Act of 1940 (the "1940 Act"). As previously announced, MILC has completed the liquidation of its sole investment in securities - its investment in SMC and plans to invest the proceeds in operating businesses. On October 14, 2020, shareholders approved a proposal to change the nature of the Company's business from a registered investment company under the 1940 Act to a holding company that focuses primarily on owning and operating businesses (collectively, the "Deregistration Proposal"). On March 1, 2021, as amended on May 11, 2021, December 9, 2021, and January 21, 2022, the Company filed an application pursuant Section 8(f) of the Investment Company Act of 1940 for an Order Declaring that MILC has Ceased to be an Investment Company (the "Deregistration Order"). On February 2, 2022, the SEC issued a notice that it was commencing the 25-day public review period in response to MILC's application. On February 28, 2022, MILC received the Deregistration Order declaring that is has ceased to be an Investment Company. Consequently, the financial statements presented in this Report on Form 10-Q are presented in accordance with the reporting requirements under the Securities Exchange Act of 1934, as amended.





Critical Accounting Policies

The consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods.

The Company has identified its reportable segments and, for each period for which a statement of operations is presented, discloses certain information, separately by reportable segment, relative to the segment industries. As of September 30, 2022, MILC businesses are organized, managed and internally reported as two reportable segments. The reportable segments are determined based on the difference in the product produced. The cannabis cultivation segment, MillCann, is focused on a sustainable approach to cannabis cultivation through Controlled Environmental Agriculture ("CEA") in the form of greenhouses and is seeking to finalize licensing for a 550,000 square foot greenhouse located in Michigan. The carbon segment, MillCarbon, has developed a novel method for the sustainable production of activated carbon and has constructed a proof-of-concept pilot-scale plant in Kentucky to produce activated carbon from a waste stream generated by Bourbon distilleries.





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We regularly review underperforming assets to determine if a sale or disposal might be a better way to monetize the assets. When an asset group is considered for sale or disposal, we review the transaction to determine if or when the entity qualifies as a discontinued operation in accordance with the criteria of FASB ASC Topic 205-20 "Discontinued Operations." The FASB has issued authoritative guidance that raises the threshold for disposals to qualify as discontinued operations. Under this guidance, a discontinued operation is (1) a component of an entity or group of components that have been disposed of or are classified as held for sale and represent a strategic shift that has or will have a major effect on an entity's operations and financial results, or (2) an acquired business that is classified as held for sale on the acquisition date. As of September 30, 2022, VC and Millennium Produce discontinued operations and will be reported separately for the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, the Company's Property, Plant and Equipment consisted of Activated Carbon production machinery and equipment at the MillCarbon pilot plant in Kentucky, machinery and office equipment at MC. Property, plant and equipment is carried at historical cost, net of depreciation and adjustments for impairment. The Company assesses the carrying value of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Property, plant and equipment was never commercially operational and is now dormant for MHC and therefore has not incurred a depreciation expense on this asset and has since written off the asset. MILC recognized depreciation on its property, plant and equipment at its MC location on a straight-line basis over the useful life of five years.

Finished goods inventory is initially valued at cost and subsequently at the lower of cost and net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion, disposal and transportation for inventories in process. The Company periodically reviews its inventory and identifies that which is excess, slow moving or poor product quality by considering factors such as inventory levels and forecasted sales demand. Any identified excess, slow moving and poor-quality inventory is written down to its net realizable value through a charge to cost of goods sold. During Q2 2022, we wrote off all inventory at WC and during Q3 2022 we wrote off all inventory at VC and Millennium Produce.

Results of Operations - Continuing Operations

Three and Nine Months Ended September 30, 2022 and 2021:





Revenue

During the three months ended September 30, 2022 and 2021, the cultivation segment had $0 revenue with $0 cost of goods sold resulting from MILC ceasing cannabis operations in Oklahoma as well as its tomato cultivation operations in Nebraska and working towards securing licensing to commence operations in MI. There was no revenue or cost of goods sold for the carbon segment for the three-month periods ending 2022 and 2021.

During the nine months ended September 30, 2022, the cultivation segment's revenue increased by $128,000 and cost of goods sold increased by $904,726 resulting in a gross loss of $776,726 compared to no revenue an no cost of goods sold during the nine months ended September 30, 2021. This was a result of MILC shifting its focus to cannabis cultivation and the expenses incurred to continue operations in the first half of 2022. There was no revenue or cost of goods sold for the carbon segment for the nine-month periods ending 2022 and 2021. The gross loss in 2022 is attributable, in part, to the compressed prices for cannabis and supply chain issues resulting in construction delays which, ultimately caused problems with the initial harvests.





Operating Expenses

During the three months ended September 30, 2022, MILC's total operating expenses were $1,828,292 compared to $1,209,638 during the three months ended September 30, 2021. The increase of $618,654 was primarily related to an increase in lease expense of $740,465 for the cannabis cultivation segment, a decrease in general & administrative expense of $123,734 and an increase in professional fees of $1,923 related to the cannabis and activated carbon segments.

During the nine months ended September 30, 2022, MILC's total operating expenses were $7,125,173 compared to $2,451,541 during the nine months ended September 30, 2021. The increase of $4,673,632 was primarily related to an increase in lease expense of $3,517,273 for the cannabis cultivation segment, an increase of $1,505,898 resulting from the bad debt expense for the WC loan write off, and an increase in general & administrative expense of $260,734 and professional fees of $23,038 related to the cannabis and activated carbon segments. The increased expenses above are offset by a decrease of $633,311 for a provision of tax receivable that was incurred in 2021.





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Other Income/Expense and Net Loss

Other expense for the three months ended September 30, 2022 was $22,048 compared to other income of $78 during the three months ended September 30, 2021. The decrease of $22,126 was due to an increase in interest expense of $22,052 for the cannabis segment. As a result, consolidated net loss for MILC for the three months ended September 30, 2022 and 2021 was $1,850,340 compared to $1,209,638, respectively.

Other expense for the nine months ended September 30, 2022 was $24,777 compared to other income of $213,867 during the nine months ended September 30, 2021. The decrease of $238,644 was primarily due to a decrease in dividend income of $67,383 and an increase in interest expense of $33,104. For the activated carbon segment, there was a decrease in the PPP loan of $137,700 forgiveness, a decrease in other income of $183, and a decrease in interest income of $274. As a result, consolidated net loss for MILC for the nine months ended September 30, 2022 and 2021 was $7,926,676 compared to $2,237,674, respectively.

Liquidity and Capital Resources

Our cash totaled $24,801 as of September 30, 2022, compared to $1,623,291 as of December 31, 2021. The decrease of $1,598,490 is primarily from an increase in expenses in operating and investing activities due to the cannabis cultivation operations offset by loan proceeds related to the Company's credit facility with an affiliate (Note 6) and the Company's non-recourse loan (Note 8).

With the cash available as of September 30, 2022, the potential sales tax refunds, and the potential sale of its assets in Hawaii may be sufficient to fund our commitments, however, the Company may seek to raise funds through the sale of its securities or other capital sources as necessary.

Results of Operations - Discontinued Operations

VinCann, LLC

Net operating losses for the three and nine months ended September 30, 2022 are $917,527 and $2,197,054, respectively compared to $191,820 and $274,358 for the three and nine months ended September 30, 2021, respectively, with the increased expenses related to cost of goods sold in cultivating cannabis. A loss from discontinued operations was incurred on September 30, 2022 in the amount of $57,625 resulting in net operating loss from discontinued operations of $975,152 and $2,254,679 for the three and nine months ending on September 30, 2022, respectively.

Millennium Produce LLC

Net operating losses for the three and nine months ended September 30, 2022 are $3,331,967 and $3,689,472, respectively compared to $0 for the three and nine months ended September 30, 2021. A loss from discontinued operations was incurred on September 30, 2022 in the amount of $226,822 resulting in net operating loss from discontinued operations of $3,558,789 and $3,916,294 for the three and nine months ending on September 30, 2022, respectively.

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