Birchtech Corp.

Good afternoon, ladies and chairman. Thank you for standing by. Welcome to Birch Tech's second quarter 2025 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 for dial-in participants. This conference is being recorded today, August 14, 2025, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Birch Tech's president and CEO Richard MacPerson and CFO Fiona Fitzmaurice. 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 that are made pursuant to the Safe Harbor provisions of the U.S. Private Security's 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 any 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 Birch 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 supplement 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 comparison 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 does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this conference call. At this time, I'd like to turn the call over to President and CEO Richard MacPherson. Richard, the floor is yours.

Thank you, Operator, and thank you to everyone for joining us today. I'd like to welcome you to our second quarter 2025 Financial Results Conference call. Before diving into our financials for the quarter, it's important to reflect on Birch Tech's journey and mission. Established in 2008 as Midwest Energy Emissions Corp., our initial focus was on developing and commercializing the Sorbent Enhancement Additive, or SEA, technology. This innovative approach has been instrumental in assisting coal-fired power plants across North America to effectively reduce mercury emissions, ensuring compliance with environmental regulations for the country. Birch Tech's air business, built around our patented SEA Sorbent technologies that utilize activated carbon and various halides, was widely adopted across the coal-fired power industry due to its proven effectiveness in capturing mercury emissions. The success of this technology led to widespread adoption, but also infringement, as numerous industry players began using our patented process without proper licensing or business supply. So in response, since 2019, the company has aggressively defended its patents through legal action, securing significant settlements and a landmark $57 million, the unanimous jury award. We have continued to convert unlicensed users of our technology into long-term business partners, several of which have entered into license agreements or become direct supply customers. Inclusive of enhancements, interest and legal fees, our patent attorneys, Caldwell Cassidy Currie, have requested a final judgment of $160 million, which is currently pending a final decision by the Corp. Recognizing new and evolving environmental challenges, we expanded our activated carbon expertise into water purification, with the launch of our new patent-pending water treatment technologies, which are focused on contaminant removal from both potable and wastewater utilities. Spurred by the US EPA regulations, water treatment is a growing market and in critical need of more effective and certainly more affordable solutions. Birch Tech's new water business is dedicated to developing new technologies that remove harmful contaminants, such as PFAS or forever chemicals, from potable water and industrial applications. These strategic and highly complementary technologies leverage our industry-leading expertise in activated carbons and underscores our commitment to addressing critical environmental issues through affordable and sustainable innovation. Last year, to better reflect our diversified technology portfolio and our mission, we rebranded as Birch Tech Corp with the new ticker BCHT. This rebranding aligns with our dedication to providing substantial and effective solutions for both air and water purification and reinforces our role as a leader in environmental technologies. Now turning to the second quarter results, Birch Tech's air business grows healthy revenues of $3.3 million, with a strong .8% gross margin profile. We also believe that the US coal industry has stabilized, but based on recent directives from the new administration, could have the potential to increase due to the recent federal support for clean coal that ensures a longer operational runway for our core air quality business. On April 8, 2025, US EPA and President Donald J. Trump proclaimed their proclamation granted a two-year exemption to certain coal-fired power plants from compliance with the updated mercury air toxic standards introduced under the Biden administration's Clean Power Plan 2.0 in 2024. Now this action allows 47 major coal plant owners, operators, and more than 60 plants vital to maintaining grid stability to remain online through at least 2029 without being burdened by recent introduced regulatory add-ons. These plants have operated for approximately 10 years under the original MATS format, contributing to improved air quality nationwide. The numerous Birch Tech customers were included in those who received exemptions to the Biden administration's MATS Clean Power 2.0 and may be able to extend their operations to at least 2029. We fully support this effort by the current administration as empowering American clean coal and keeping these plants online. Our technologies continue to offer coal plants the best, most effective process to produce maximum power while maintaining a true clean coal approach to power generation with the elimination of mercury emissions. Now the strong validation of our patent rights from major industry leaders, which included significant settlements in late 2023 and the unanimous jury verdict in early 2024 with a final judgment expected in the very near term, has supported our steadfast protection of our innovative coal technologies. We have continued these efforts in support of our company's growth and to the benefit of our shareholders. During 2024 and early 2025, we filed a number of additional patent infringement lawsuits in various U.S. district courts against multiple power utilities and related entities. Since our litigation efforts commenced in 2019, our primary objective has been to enter into positive, mutually beneficial business relationships across the industry. And we have been successful with many of our previous defendants reaching license and or supply agreements for the continued use of our highly efficient technologies from mercury emissions capture. Now to that end, in January, we secured a non-exclusive agreement with a second coal-fired power utility named as a defendant in the company's lawsuit filed in Arizona, which was previously announced on July 30, 2024. Due to confidentiality agreements and ongoing litigations, the specific terms and cash infusion of this agreement cannot be publicly disclosed. We're happy to have reached a positive business outcome with this utility, which has and will continue to benefit from our patented technologies for years to come. Our outreach across the industry to secure similar business agreements continues. We have ongoing discussions with defendants named in our recent lawsuits. We expect significant upside potential from our successful post-trial outreach program, converting adopters of our core technologies to licensees and or supply customers. From 2020 until close of Q2, we've obtained 10 new license agreements with coal-fired power utilities, with several who converted to direct product supply customers as well. Now looking ahead, given these tailwinds and the current administration's support of coal-fired generation, we believe that we're well positioned to grow our air business revenue to at least $18 million in 2025 and an annual run rate potential of $40 million by the end of 2026. We launched our water business with the opening of two new testing laboratory, what we call design centers that are located in Grand Forks, North Dakota and State College, Pennsylvania. In these centers, led by nationally recognized experts, we are now offering a full-service solution for water utilities to deploy smarter, more affordable activated carbon technologies in support of US EPA's forthcoming PFAS regulations and to help utilities meet their ongoing purification needs today. In 2024, the EPA released an estimate of one billion annual costs over the next five years for US portable water utilities to meet the recent PFAS regulations. This is all further buoyed by recent news of the EPA to implement a series of actions aimed at preventing PFAS from entering drinking water systems, showcasing clear support from the Trump administration to this important issue. And even with our strong regulatory tailwinds aside, water utilities are currently facing high expense and remediation costs, underlined by a lack of supply alternatives and rising raw material costs, largely from increased demand for activated carbons. The launch of our two new design centers is a significant component in our -to-market strategy and in addressing the critical concern of affordability in contaminant removal faced by these water utilities. These centers and the industry-leading capabilities they will provide are the culmination of a significant investment on our part of expertise and resources that form the foundation of our water division's entrance in clean water technologies for contaminant removal. And we are focused on forever chemicals and harmful contaminants from the drinking water. In time, we're evaluating both M&A and greenfield opportunities to obtain a large-scale production facility for virgin and reactivated carbons, as well as entering the reactivation industry itself. Now, looking ahead for our air business, we expect an accelerated pace of revenue driven by new customers and license fees, strong positive momentum from our current customers under contract, and multiple opportunities to scale. Growth is further supported by the stable U.S. coal power market, with increased energy demands for coal power coming out of Washington and stringent state and federal regulations for emissions control. Supported by these tailwinds, as noted earlier, our air business alone has the potential to achieve an annualized run rate of at least $40 million by the end of 2026. And that would come by converting our present customer market share from approximately 15 to over 30% by bringing those utilities that are using our technologies independently under licenses or supply agreements to our legal activities. For our water business, alongside the sale of traditional virgin and eventually reactivated carbons, we are focused on developing a potentially superior technology offering as expected to be completed in the second half of this year and commercially available in 2026. Looking ahead to this year, given the timing shift as legal proceedings and prospective customer existing contract expiration timeframes continue to extend, an unfortunate fact of life when working with the court system, which I in no way believe changes our eventual outcome, we expect revenues at least $18 million in 2025, excluding any revenue from judgments in defense of our IPs. And we expect to see as well as potential revenues from our water business. So I'm incredibly proud of our team's accomplishments and believe there is significant value add potential to come for our shareholders as we expand into the water business. With that, I'd like to turn the call over to Fiona Fitzmorris, our chief financial officer, who walked through some key financial details from the second quarter of 2025. Fiona.

Thank you, Rick. I will constrain my section to a concise review of the financial results for the second quarter. For a full breakdown of our financial results, please view our regulatory filings. Revenues totaled $3.3 million in the second quarter as compared to $3.4 million in the same year ago quarter. The decrease in revenues from the prior year was primarily due to the mix of plants running unexpected customer forced outages and products sold. Growth profit decreased .7% to 1 million or .8% of total revenues in the second quarter of 2025 as compared to 1.1 million or .6% of total revenues in the same year ago quarter. The change in gross margin was primarily attributed to decrease revenues in the second quarter. Operating expenses consisted of selling general and administrative expenses and research and development expenses in 2025 and SG&A in 2024. SG&A expenses were approximately 1.7 million and 4.6 million for the three months ended June 30, 2025 and 2024 respectively. Total SG&A expenses decreased in the second quarter of 2025 compared to the prior year period as a result of variances in individual categories. Total R&D expenses were approximately 0.5 million and 0 for the three months ended June 30, 2025 and 2024 respectively. R&D expenses related to research conducted to develop water treatment products utilizing use-orbent technologies and increased in the second quarter of 2025 compared to the prior year period as the company had not incurred any research related costs during the year ago quarter. Net loss for the second quarter of 2025 improved to 1.5 million or negative two cents per basic and diluted share as compared to a net loss of 6.2 million or negative seven cents per basic and diluted share in the same year ago quarter. Adjusted EBITDA, a non-GAAP measure, totaled negative 1 million in the second quarter of 2025 as compared to negative 3.3 million in the same year ago quarter. Cash as of June 30, 2025 totaled 1.5 million with no debt as compared to 3.5 million with no debt as of December 31, 2024. I'd also like to briefly discuss the classification of our product share liability as of current liability on our balance sheet. This is a non-recourse liability that will not be repaid from cash on hand and is only to be paid from litigation proceeds including any potential future proceeds of our 57 million patent infringement verdict from which we requested 160 million from the court inclusive of enhancements, interest, legal fees and other items. Under GAAP accounting rules, the profit share liability is classified as a current liability as the company expects the proceeds from this verdict are likely to be received and the profit share from those proceeds repaid over the next 12 months. So ironically, the positive news of us believing receipt of these funds is likely over the next 12 months causes the profit share to be classified as a current liability while at the same time not allowing us to reflect in our current financial statements the expected revenue from the judgment. This completes my prepared comments. Now before we begin our questioning and mid-answer session, I'd like to turn the call back to Rick for some closing remarks. Rick?