Birchtech Corp.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Birch Tech's second quarter 2026 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions for dial-in participants. This conference is being recorded today, Thursday, August 13, 2026, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Birch Tech President and CEO Richard McPherson and CFO Michael Mioska. Before we get started, I'll read a disclaimer about forward-looking statements. This conference call may contain, in addition to historical information, forward-looking statements that are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 or forward-looking information under applicable Canadian securities laws regarding Birch Tech. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions, or other statements relating to its future earnings, activities, events, or conditions. These statements are based on current expectations, estimates, and projections about the company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may and are likely to differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in Burt's Tech's periodic filings with the U.S. Securities and Exchange Commission or Canadian securities regulators. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control that may cause actual results to differ materially from those in the forward-looking statements. During today's call, the company will discuss adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is presented as a supplemental measure of the company's performance and exclusive of certain items that the company believes do not reflect the core operations of the company. Such non-GAAP measures should not be considered in isolation or as a substitute for GAAP financial information. Additionally, the company's definition of these measures may differ from those used by other companies, making comparisons across organizations difficult. And finally, this conference call contains time-sensitive information that reflects management's best analysis only as of the date and time of this conference call. The company did not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arrive after the date of this conference call. At this time, I'd like to turn the call over to President and CEO Richard McPherson. Richard, the floor is yours.

Thank you, Operator, and good afternoon, everyone. Welcome to our second quarter 2026 Financial Results Conference Call. I want to start with the milestone that defined the quarter on the legal front. In June, we announced the end of all remaining attempts to challenge our patents under Interparte's review. Every petition filed with the Patent Trial and Appeal Board against our patented SEA technologies have now been dismissed. removed prior to institution or resolved, and the parties previously involved are permanently barred from bringing further patent validity challenges. After seven years of disciplined enforcement, our patent estate stands well protected, an outcome that validates the business-first approach we've taken since 2019, through which approximately $37 million in license fees and settlements have been received to date. On collections, as a reminder, we remain in position to maintain a 78-plus million final judgment, which was entered by the U.S. District Court for the District of Delaware in December of 2025. The defendants have filed a notice of appeal but have not posted a bond, and post-judgment interest continues to accrue daily until the judgment is paid. Upon the conclusion of the appeals process, we will assess all enforcement options. Turning to operations, our business delivered second quarter revenues of approximately $3.8 million with an approximate 27% gross margin, driven by increases in both mercury emissions and water treatment product supply, RSSCT testing, and other water treatment sales. The increase in revenues from the prior period was primarily due to increased air business demand driven by the mix of plants that we have running combined in more extreme weather conditions and the higher natural gas prices in the current year compared to the second quarter of 2025. Additionally, sales were recognized for the water treatment market in 2026 compared to none in the comparable period of 2025. The U.S. coal market remained stable and continued federal support for coal plant operations reinforces demand for proven emissions control solutions like our patented SEA platform, creating a longer operational runway for our core air quality business and a solid foundation upon which our growing water treatment business will expand. Now allow me to provide added color on our air business, our SEA platform remains the legacy cornerstone of the company. With the IPR process now fully behind us, the distinctiveness of our technologies have never been clearer. As incumbent supply arrangements conclude for utilities already licensed under Birdstech, our focus remains on converting them into ongoing product supply customers as they adopt our formulations into the day-to-day operations and realize the benefits of our applied expertise. Second quarter air revenues totaled $3.4 million, mostly derived from product supply. Because coal fired production and the production supply demand that correlates with it fluctuates with weather, there is some seasonality in our business. And the second quarter of each year has historically been our lowest mercury emission revenue period. We aim to convert utility licensees that began as patent enforcement targets to direct purchases of our activated carbon sorbents. And we expect the pipeline of supply conversations to grow as power demand from AI increases in the coming years. That transition from legal resolution to commercial partnership has been our core objective in our business-first approach to patent enforcement that began over seven years ago. And as I mentioned, the June IPR resolution reaffirms the distinctiveness of our SEA process. We remain confident in the strength of our intellectual property. Now, for the remainder of 2026, the Air Division's roadmap remains centered on three objectives. Aimed transition of unlicensed users of our technology into licensees and long-term supply customers. expand reoccurring active carbon sales across our growing roster of newly licensed utilities, and redeploy the cash flow generated by this mature high-merging segment into the scale-up of our nascent, rapidly growing water business, where we see the highest prospect returns as we invest in the significant opportunity that lies ahead of us. Put simply, the air segment functions as a self-funding growth engine that producing both the capital and market credibility that enable us to invest aggressively in water while continuing to deliver value to shareholders. Now let me turn to water, where we continue to build on the commercial foundation established over a year ago, drive initial revenues, and are laying the groundwork for significant growth next year. During the quarter, we put our water platform in front of the industry at scale, exhibiting at leading water industry conferences across May and June, including the AWWA ACE26 Annual Conference and Exposition in Washington, D.C., the largest water national industry gathering, as well as various other regional and state water association events, and a National Technical Lab Instrument Conference in San Diego, where our Dr. Nicholas Lentz, was invited to speak about our innovative analytical instrumentation. Dr. Lentz also delivered a presentation on PFAS removal and our RSSCT analytical capabilities at a major industry event, underscoring the depth of our technical expertise that lies behind our platform. Our design centers remain the cornerstone of our data-first entry into the water market. Through our collaboration with national engineering firm Citil and environmental consultants, RSFCT testing performed at our analytical design center in Grand Forks, North Dakota, is available now to the hundreds of water utility clients they serve across the country. And we are working to replicate this approach with other leading environmental consultants and engineering firms. We are currently involved in supporting multiple national engineering firms with a combination of our RSFCT analytics and carbon reactivation in research projects with government entities and larger municipalities. As expected, our data-first approach has been well received by the industry, and we anticipate being a leading contributor to advanced contaminant treatment technologies. Our design centers will become significant profit centers, establishing our credibility and creating a strong market position for our products, services, and highly effective technologies. On the product side, our SEA-IX nuclear grade ion exchange rosin line, which we launched in March, continues to target an estimated 200 plus million addressable market spend of nuclear power, coal-fired utilities, and municipal water treatment. We have recently expanded upon this product portfolio by adding two additional lines focused on removing specific contaminants, boron, and heavy metals. Ion exchange rosins are used nearly as prevailingly as activated carbon, depending on the utility size, configuration, and water makeup. Alongside granular activated carbon, ion exchange rosins are also recognized as the best available technology by the US EPA for many contaminants including PFAS. These rosins are used in multiple industries to treat wastewater from coal and nuclear power to water municipalities and other industrial applications. Expanding this product line allows BridgeStack to address the growing needs of our customers with wastewater concerns. In addition to product sales and our SSCT design center, additional revenue comes from our water treatment solutions. which collaborates with engineering firms and utilities to integrate solutions that may include end-to-end media change-out services, vessel replacements, and shorter-term pilot testing. The market for these solutions is primarily wastewater, which affects water utilities as well as coal and nuclear power plants. Through our industry knowledge and strategic partnerships, we're now able to source media and solutions that more affordably and effectively address certain contaminants and unique water environments. Now, these areas that I've just described comprise our current revenue streams, which we expect will significantly increase through the next couple of years. We've added staff, increased our presence across the industry to support this growth. Our long-term and larger growth will come from our innovative technologies where we have made strong progress this year. Consistent with our SEA for clean air, We are focused on creating industry-disrupting technologies that are more sustainable, effective, and affordable. Our improved thermal reactive technologies, carbon rejuvenation, has demonstrated that our thermally rejuvenated granular activated carbon performs comparably to virgin carbon for PFAS removal. And it's a breakthrough that could dramatically lower the lifecycle cost for utilities. We continue to make meaningful progress establishing carbon rejuvenation capacity and look forward to providing further updates to that end in the very near future. The story from here remains conversion and scale, turning early engagements into reoccurring service and product revenue, advancing our carbon rejuvenation technologies, and continuing to broaden our water product line. With regulatory pressure for utilities to address harmful contaminants, including PFAS, and other tokens, many utilities have an affordable concern that Birch Tech is working to address. Many larger water providers have various water sources and high supply demands. Birch Tech is well positioned to meet these demands and challenges with our complete set of water purification technologies. Complementary to our established air business, our clean water technologies open a second substantial revenue stream that will continue to grow over the next few years. Now, before handing the call off, I want to congratulate Jim Tretl on his promotion to Chief Operating Officer. Jim has been with BridgeTech since 2014 and brings 36 years of experience in the dry bulk material handling industry to the role. His deep expertise, both on a technical side and hands-on engineering leadership and oversight of our design center operations have been instrumental in scaling both our air and clean water platforms, and this promotion reflects the critical role he'll play in our next phase of growth. As we continue to commercialize our carbon rejuvenation, Jim's expertise is a strong balance to our unique R&D background and capabilities. With that, I'd now like to turn the call over to our new CFO, Mike Bioska to walk through some key financial details from the second quarter of 2026.

Mike? Thank you, Rick, and good afternoon, everyone. I will keep my section to a concise review of the financial statements for the second quarter of 2026. For a full breakdown of our financial results, please view our regulatory filings. Revenues totaled $3.8 million for the second quarter of 2026, as compared to $3.3 million for the same year-ago quarter. The increase in revenues from the comparative period was primarily due to increased air business demand driven by the mix of plants running combined with more extreme weather conditions and higher natural gas prices in the current period as compared to the comparative period. Additionally, sales were recognized for the water treatment market in the second quarter of 2026 compared to none in the comparable period of 2025. Gross profit totaled $1 million as compared to $1 million in the same year-ago quarter. Gross profit was comparable to the prior period despite higher revenues in 2026, resulting from a shift in revenue mix away from the licensing revenues generated in the second quarter of 2025, which carried typically higher margins. We continue to incur significant expenses as we invest heavily in the expansion of the water division. To that end, SG&A expenses totaled $2.1 million in the second quarter of 2026, as compared to $1.7 million in the same year-ago quarter. The increase in expenses was primarily due to increased professional fees driven by increased legal fees in the second quarter of 2026. That combined with increased public company costs associated with the company's uplisting to the NYSE America. R&D expenses totaled $0.6 million for the second quarter of 2026 as compared to $0.5 million in the same year-ago quarter. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies. Other expenses totaled $1.4 million in the second quarter of 2026 as compared to $0.4 million in the same year-ago quarter. The increase in other expenses was mainly the result of license and settlement fees incurred in the second quarter of 2026. No such comparable fees were incurred during the second quarter of 2025. Net loss for the second quarter of 2026 totaled $3 million or $0.11 per basic and diluted share as compared to a net loss of $1.5 million or $0.08 per basic and diluted share in the same year-ago quarter. Adjusted EBITDA loss, a non-GAAP financial measure, totaled $1.9 million in the second quarter of 2026 compared to a loss of $1 million for the second quarter of 2025. Cash as of June 30, 2026, totaled $11.8 million with no debt as compared to $2.2 million as of December 31, 2025. Also, as our investors understand, but I still wanted to highlight, the liabilities we do have include a $7.3 million profit share liability that is only repayable when the company collects the $78 million plus final judgment discussed earlier by Rick. This completes my prepared comments. Now, before we begin our question and answer session, I'd like to turn the call back to Rick for some closing remarks. Rick.