Birchtech Corp.: Form 10-Q for the period ended Jun 30, 2026

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere within this report. Certain statements we make under this Item 2 constitute “forward-looking statements” under the U.S. Private Securities Litigation Reform Act of 1995 or applicable Canadian securities laws. See “Forward-Looking Statements” in “Part I” preceding “Item 1 – Financial Statements.” You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission or Canadian securities regulators.

Unless indicated otherwise, references in this discussion and analysis to the “Company,” “we,” “us,” or “our” refer collectively to Birchtech Corp. and its consolidated subsidiaries.

Overview

Business Operations

We are a provider of specialty activated carbon technologies, delivering innovative solutions for air and water purification. We provide patented and proprietary technologies for mercury emissions capture to the coal-fired utility sector, and are developing disruptive water purification technologies with a specialization on forever chemicals such as PFAS and PFOS.

Mercury Emissions

We provide mercury capture solutions for coal-fired power plants driven by our patented two-part Sorbent Enhancement Additive (SEA®) process using a powerful combination of science and engineering. Our leading-edge services have been shown to achieve mercury emissions removal at a significantly lower cost and with less operational impact to coal-fired power plants than other used methods, while maintaining and/or increasing power plant output and preserving the marketability of byproducts for beneficial use. We design systems and materials tailored and formulated specifically to each customer’s coal-fired units. North America is currently the largest market for our emissions technologies. The market for mercury removal from power plant emissions in the United States has largely been driven by federal regulations. The MATS rule, proposed by the U.S. Environmental Protection Agency (“EPA”) in May 2011 and which became effective in April 2012, is intended to reduce air emissions of heavy metals, including Hg, from all major U.S. power plants burning coal or oil, which are the leading source of non-natural mercury emissions in the U.S. Our mercury removal technologies and systems achieve mercury removal levels which meet or exceed the MATS requirements with lower cost and plant systems impacts than typical PAC or BAC sorbent injection systems. Our products have been shown to be successful across a myriad of fuel and system types, tunable to any configuration, and environmentally friendly, allowing for the recycling of fly ash for beneficial use.

Our SEA® technology provides total mercury control with solutions that are based on a thorough scientific understanding of actual and probable interactions involved in mercury capture in coal-fired flue gas. A complete understanding of the complexity of mercury-sorbent-flue gas interactions and chemisorption mechanisms allows for optimal control strategy and product formulation, resulting in effective mercury capture. Combined with a thorough proprietary audit of the plant and its configuration and instrumentation, we believe our complete science and engineering approach for mercury-sorbent-flue gas interactions are well-understood, highly predictive, and critical to delivering total mercury control.

We believe that a significant percentage of coal-fired power plants in the United States have adopted and are infringing upon our two-part SEA® process for mercury removal from coal-fired power plants.

Beginning in 2019, we began to actively enforce our patent rights against unauthorized use of our patented technologies, and have since initiated patent litigation in various jurisdictions against multiple infringers, claiming infringement of our patents related to our two-part process for mercury removal from coal-fired power plants. We view such litigation as a last resort. Our goal and overall strategy is to convert infringers to our supply chain of sorbent products for mercury removal, or otherwise license our patents to them on a non-exclusive basis in connection with their respective coal-fired power plants.

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In April 2023, the EPA issued a proposal to strengthen and update MATS. Such proposal was finalized and published in May 2024 with an effective date of July 8, 2024 which, among other things, strengthened and updated MATS for coal-fired power plants and tightened the emission standard for mercury for existing lignite-fired power plants to a level that is aligned with the mercury standard that other coal-fired power plants have been achieving under MATS.

In June 2025, the EPA proposed to repeal certain amendments finalized in 2024 to the MATS Rule and return compliance obligations to the MATS standards which existed prior to the 2024 update. On December 23, 2025, the EPA submitted a draft of the final action to the OMB for interagency review under Executive Order 12866. On February 19, 2026, following completion of the OMB interagency review process, the EPA finalized the repeal of the 2024 amendments to the MATS Rule which returned compliance to the 2012 MATS Rule requirements.

Water Treatment

In April 2024, the EPA issued the first-ever national, enforceable drinking water standard to protect communities from exposure to harmful PFAS, also known as “forever chemicals”, under the Safe Water Drinking Act. The rule as enacted established legally enforceable maximum contaminant levels (“MCLs”) for six PFAS in drinking water: PFOA, PFOS, PFHxS, PFNA, and HFPO-DA as contaminants with individual MCLs, and PFAS mixtures containing at least two or more of PFHxS, PFNA, HFPO-DA, and PFBS using a Hazard Index MCL to account for the combined and co-occurring levels of these PFAS in drinking water. As originally adopted, the rule required public water systems to complete initial monitoring for these PFAS by 2027, provide the public with information regarding PFAS levels in drinking water beginning in 2027, and achieve compliance with the applicable MCLs by 2029.

On May 14, 2025, the EPA announced that it would retain the national drinking water standards for PFOA and PFOS but intends to extend the compliance deadline for those contaminants from 2029 to 2031 and establish a federal exemption framework. The EPA also announced its intent to rescind the existing regulations for PFHxS, PFNA, HFPO-DA, and the Hazard Index applicable to mixtures of PFHxS, PFNA, HFPO-DA, and PFBS, and to reconsider the underlying regulatory determinations for those substances through a new rulemaking process under the Safe Drinking Water Act. Until any such rulemaking is finalized, the April 2024 rule remains subject to ongoing administrative and legal developments.

In April 2024, we announced the introduction of our new water treatment business to address the growing potable (drinking) water market with next-generation sorbent technologies. These new solutions are being designed to use significantly less activated carbon, offering a more environmentally sustainable approach to water treatment while maintaining or improving contaminant removal performance. Our products target not only compliance with emerging PFAS regulations, but also broader opportunities in water quality improvement positioning us to serve a large and expanding market.

As part of this strategic pivot, we have invested in the commissioning of two state-of-the-art laboratory facilities, one in Pennsylvania and one in North Dakota, referred to as our “Design Centers.” The Design Centers are dedicated sites for water treatment innovation and development, including but not limited to the development of a carbon reactivation process, referrred to as Carbon RejuvenationTM, focused on the thermal reactivation of spent granular activated carbon (GAC). Together, we believe these facilities represent the only known facilities that have integrated capability in North America to thermally reactivate spent GAC under controlled conditions and subsequently conduct RSSCTs to directly compare reactivated GAC performance against virgin carbon counterparts. This combination allows us to evaluate reactivated GAC as a sustainable and cost-effective alternative to virgin carbon and address key water utility questions including how to optimize media changeout schedules, strategies to reduce operational costs, and provide lab-based validation of treatment performance for PFAS and other contaminants.

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These Design Centers will also function as a direct resource for the water treatment industry, offering thermal reactivation, contaminant analysis, and carbon performance evaluations. By enabling municipal and industrial utilities to lower compliance costs and improve operational efficiency, we expect to build strong technical credibility and customer engagement ahead of large-scale market adoption. Importantly, we believe our technology platform is not solely dependent on PFAS regulations as market demand for improved water treatment solutions is broad.

Our investment in our Design Centers also serves as the basis for our planned commercial thermal reactivation plants which we intend to open and operate in the future. Data generated from the Design Centers is being used to define permitting requirements, capital expenditure parameters, and projected operating costs accelerating the commercialization timeline while avoiding costly future reliance on third-party providers.

In light of evolving water regulations and funding dynamics, we believe the Company is well positioned to capture a meaningful share in the rapidly growing water treatment sector.

Other Recent Developments

Reverse Split

On December 23, 2025, we filed with the Secretary of State of the State of Delaware a certificate of amendment to our Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock at a ratio of 1-for-5, effective December 26, 2025. Following the reverse stock split, every five (5) shares of our issued and outstanding common stock were automatically converted into one (1) issued and outstanding share of common stock, without any change in par value per share. No fractional shares were issued in connection with the reverse stock split, and any shareholders who would have received fractional shares of common stock instead were rounded up to the nearest whole number of shares of common stock. The reverse stock split did not affect the number of shares of authorized common stock. The common stock began trading on a reverse stock split-adjusted basis on December 31, 2025.

Patent Litigation

We have commenced multiple patent infringement lawsuits to enforce our proprietary two-part SEA® process for mercury removal from coal-fired power plants. One action was filed in 2019, and additional actions were filed between 2024 to 2025 against various operators of coal-fired power plants and refined coal producers whom we allege have willfully infringed our patent rights. The actions filed between 2024 and 2025 have been consolidated in the U.S. District Court for the Southern District of Iowa.

Between January and July 2025, certain defendants in the consolidated Iowa actions filed inter partes review (“IPR”) petitions challenging asserted claims of our patents. The U.S. Patent Trial and Appeal Board instituted review of certain petitions, and in October 2025 the U.S. District Court for the Southern District of Iowa stayed the consolidated litigation pending resolution of the IPR proceedings.

With regard to the 2019 litigation, on December 29, 2025 and following resolution of post-trial motions, the U.S. District Court for the District of Delaware entered final judgment in favor of the Company in the amount of $78,397,157, inclusive of pre-judgment interest. On January 28, 2026, the defendants filed a notice of appeal of the judgment. No stay of execution of the judgment has been obtained, and interest continues to accrue during the pendency of the appeal.

Separately, in connection with the consolidated Iowa actions, the Company has entered into agreements with certain utilities and affiliated parties, the most recent of which became effective on May 28, 2026. These agreements resolved disputes with the applicable parties, granted licenses to certain of the Company’s patents and, where applicable, provided for the withdrawal of related IPR proceedings. As a result, those parties have been dismissed from the applicable actions, and all parties participating in the IPR proceedings have withdrawn from those proceedings which have concluded. One active case remains with one utility in the consolidated Iowa litigation. On July 23, 2026, the Court in Iowa issued its suggestion of remand that the remaining case be returned in its original court in Missouri for all further proceedings. The Company expects the stay previously issued to be lifted but cannot predict the ultimate outcome of the remaining litigation or the pending appeal of the Delaware judgment.

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Registered Offering

On February 27, 2026, we completed a public offering of 6,250,000 shares of our common stock, at a price of $2.40 per share, generating gross proceeds of $15,000,000. In connection with the offering, we granted Lake Street Capital Markets, LLC as representative of the several underwriters a 30-day option to purchase up to an additional 937,500 shares of common stock at the offering price of $2.40 per share (the “Over-Allotment Option”). On March 17, 2026, the Company sold to the underwriters pursuant to their partial exercise of their Over-Allotment Option an additional 600,000 shares of common stock resulting in additional gross proceeds of $1,440,000. After giving effect to the partial exercise of the Over-Allotment Option, gross proceeds from the offering were $16,440,000, before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. The net proceeds to us from the offering were $14,228,617, after deducting underwriting discounts and commissions of $1,150,800, and other offering expenses payable by us in the amount of $1,060,583. We intend to use the net proceeds of the offering, together with our existing cash, for, among other things, continuing operating expenses, working capital and other general corporate purposes.

NYSE American

On February 26, 2026, our shares of common stock commenced trading on the NYSE American under the symbol “BCHT” and ceased being traded on the OTCQB on that date.

Prior Developments

For a discussion of prior developments, see the Company’s Form 10-K for the year ended December 31, 2025.

Results of Operations

Revenues

We generated revenues of approximately $3,791,000 and $3,254,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $8,031,000 and $6,475,000 for the six months ended June 30, 2026 and 2025, respectively. Such revenues were primarily derived from sorbent product sales which were approximately $3,466,000 and $3,244,000 for the three months ended June 30, 2026 and 2025, respectively and approximately $7,654,000 and $5,921,000 for the six months ended June 30, 2026 and 2025, respectively. Revenues in the mercury emissions market can be dependent on natural gas prices, extreme weather, and the maintenance and downtime requirements of customer plants. The increase in revenues for product sales from the prior year was primarily due to the mix of plants running and an increased demand for coal in connection with our mercury emissions business driven by more extreme weather conditions and higher natural gas prices in the current year compared to the prior year period. Additionally, sales were recognized for the water treatment market in 2026 compared to none in the comparable period of 2025.

Licensing revenues were $0 and $0 for the three months ended June 30, 2026 and 2025, respectively and $0 and $525,000 for the six months ended June 30, 2026 and 2025, respectively. Such decrease was primarily due to a new licensing agreement entered into in the first quarter of 2025 with a utility that provided for a one time up front license fee, for which there were no comparable transactions in the first six months of 2026.

Other revenues, consisting of demonstrations, consulting and services revenue, and equipment sales, were approximately $324,000 and $9,000, respectively for the three months ended June 30, 2026 and 2025 and $376,000 and $28,000 for the six months ended June 30, 2026 and 2025, respectively. Other revenues have not been material in relation to total revenues.

Cost of Sales

Cost of sales were approximately $2,758,000 and $2,286,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $5,615,000 and $4,272,000 for the six months ended June 30, 2026 and 2025, respectively. The increase in cost of sales of approximately $1,343,000 was primarily attributable to increased product sales in the first six months of 2026 compared to the prior year period, together with a change in the mix of products sold in the first six months of 2026 compared to the prior year period.

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Gross Profit

Gross profit was approximately $1,033,000 and $968,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $2,415,000 and $2,202,000 for the six months ended June 30, 2026 and 2025. The increase in gross profit of approximately $213,000 was primarily driven by greater product sales in the first six months of 2026. This increase was partially offset by a shift in revenue mix as licensing revenues, which typically carry higher margins, were higher in the six months ended June 30, 2025 compared to none in the six months ended June 30, 2026.

Operating Expenses

We continue to incur significant expenses as we invest in the expansion of the water division. Operating expenses consisted of selling, general and administrative expenses (“SG&A”) and research and development expenses (“R&D”) in 2026 and 2025. Operating expenses increased in the six months ended June 30,2026 compared to the prior year period. SG&A expenses were approximately $2,068,000 and $1,698,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $4,049,000 and $3,869,000 for the six months ended June 30, 2026 and 2025, respectively. Total SG&A expenses increased in the six months ended June 30, 2026 compared to the prior year period, as a result of variances in individual categories. This includes increases in professional fees, along with greater investor relations costs in the six months ended June 30, 2026 compared to the comparable period of the previous year. The increase in professional fees was primarily due to increases legal fees in 2026 and the increase in investor relations fees was primarily due to increased costs associated with the Company’s NYSE American uplisting completed in the first quarter of 2026.

Total R&D expenses were approximately $587,000 and $455,000 for the three months ended June 30, 2026 and 2025, respectively, and $1,138,000 and $862,000 for the six months ended June 30, 2026 and 2025, respectively. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies, and increased in in the six months ended June 30, 2026 compared to the prior period as the Company did not have all of its R&D strategy implemented at the beginning of 2025. The Company began incurring research and development costs when the lab equipment at the Company’s labs was placed into service.

Operating Loss

Our operating loss was approximately $1,623,000 and $1,185,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $2,772,000 and $2,528,000 for the six months ended June 30, 2026 and 2025, respectively. This increase in operating loss was primarily attributable to higher SG&A expenses and increased R&D expenses during the 2026 periods, which more than offset the increased revenues and higher gross profit compared to the prior year periods.

Other Income (Expense)

Other income (expense) was approximately $(1,391,000) and $(356,000) for the three months ended June 30, 2026 and 2025, respectively, and $(1,587,000) and $(678,000) for the six months ended June 30, 2026 and 2025, respectively. The increase in net other expenses during the 2026 periods was primarily attributable to the recognition of $(1,250,000) of license and settlement fees during the second quarter of 2026, $750,000 of which is only due under certain circumstances if we receive net proceeds of at least $20.0 million from the Delaware litigation. Net other expense also reflected a loss on the change in fair value of the profit share liability, partially offset by increased interest income resulting from higher average cash balances following our February 2026 registered offering.

Interest income was approximately $116,000 and $20,000 for the three months ended June 30, 2026 and 2025, respectively, and $166,000 and $51,000 for the six months ended June 30, 2026 and 2025, respectively.

Loss on change in fair value of profit share liability was approximately $257,000 and $376,000 for the three months ended June 30, 2026 and 2025, respectively, and $503,000 and $729,000 for the six months ended June 30, 2026 and 2025, respectively.

License and settlement fees were approximately $(1,250,000) and $0 for the three months ended June 30, 2026 and 2025, respectively, and $(1,250,000) and $0 for the six months ended June 30, 2026 and 2025, respectively.

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Net Loss

For the three months ended June 30, 2026, we had a net loss of approximately $3,017,000 compared to approximately $1,542,000 for the three months ended June 30, 2025. For the six months ended June 30, 2026, we had a net loss of approximately $4,363,000 compared to approximately $3,221,000 for the six months ended June 30, 2025. The increase in net loss was primarily attributable to higher selling, general and administrative expenses, increased research and development expenses and higher net other expense, which more than offset the increases in revenues and gross profit during the 2026 periods.

Liquidity and Capital Resources

We had approximately $11,836,000 in cash at June 30, 2026, compared to approximately $2,245,000 at December 31, 2025. Total current assets were approximately $15,755,000 and total current liabilities were approximately $11,080,000 at June 30, 2026, resulting in working capital of approximately $4,675,000. This compares to total current assets of approximately $5,004,000 and total current liabilities of approximately $10,740,000 at December 31, 2025, resulting in a working capital deficiency of approximately $5,737,000. The increases in cash and working capital were primarily attributable to proceeds from the Company’s public offering completed in the first quarter of 2026, as described below. Our accumulated deficit was approximately $80,142,000 at June 30, 2026 compared to $75,779,000 at December 31, 2025.

As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, the Company had previously identified conditions that raised substantial doubt about its ability to continue as a going concern. Subsequent to year end, on February 27, 2026 and March 17, 2026 (following the partial exercise of the underwriters’ overallotment option), the Company completed an underwritten public offering of its common stock and received aggregate gross proceeds of $16.4 million, before deducting underwriting discounts and commissions and offering expenses.

Based on the net proceeds from the offering, together with the Company’s existing cash, anticipated revenues and additional cash inflows from its current operations, management believes that the Company has sufficient liquidity to fund its operations and meet its obligations for at least the next twelve months and that the conditions giving rise to the previously disclosed substantial doubt have been alleviated.

Total Assets

Total assets were approximately $19,415,000 at June 30, 2026 versus approximately $9,238,000 at December 31, 2025. The change in total assets is primarily attributable to an approximate $10,177,000 increase in cash primarily due to the proceeds from the Company’s public offering completed in the first quarter of 2026, offset by deferred offering costs recognized in 2025 of $481,000 compared to no deferred offering costs in the first quarter of 2026, together with other changes in asset categories consisting of smaller increases and decreases that were not individually significant.

Total Liabilities

Total liabilities were approximately $11,264,000 at June 30, 2026 versus approximately $10,953,000 at December 31, 2025. The change in total liabilities is primarily attributable to an approximate $503,000 increase in the profit share liability offset by an approximate $179,000 decrease in accounts payable and accrued expenses.

Operating Activities

Net cash (used in) provided by operating activities consists of net income (loss), adjusted by certain non-cash items, and changes in operating assets and liabilities.

Net cash used in operating activities was approximately $4,997,000 for the six months ended June 30, 2026 compared to approximately $1,986,000 for the six months ended June 30, 2025. The increase in net cash used in operating activities was primarily attributable to the following: (i) changes in accounts receivable, which used approximately $523,000 of cash in 2026 compared to using approximately $318,000 in 2025; (iii) changes in accounts payable and accrued expenses, which used approximately $179,000 in cash in 2026 compared to providing approximately $743,000 of cash in 2025; (iv) changes in prepaid expenses which used approximately $618,000 in cash in 2026 compared to providing approximately $72,000 of cash in 2025 and (v) certain other changes in operating assets and liabilities, including accrued salaries, inventory, and prepaid expenses and other assets.

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Investing Activities

We had net cash used in investing activities of $122,000 for the six months ended June 30, 2026 compared to cash used in investing activities of approximately $16,000 for the six months ended June 30, 2025 for the purchase of lab equipment.

Financing Activities

Net cash provided by financing activities was $14,710,000 for the six months ended June 30, 2026 compared to no cash provided or used in financing activities for the six months ended June 30, 2025. During the six months ended June 30, 2026, we completed a public offering of 6,850,000 shares of our common stock, generating net proceeds of approximately $14,229,000.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimated are discussed in our Annual Report on Form 10-K for the year ended December 31, 2025, and there have been no material changes to such policies or estimates during the six months ended June 30, 2026.

Non-GAAP Financial Measures

Adjusted EBITDA

To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we consider and are including herein Adjusted EBITDA, a Non-GAAP financial measure. We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net loss. We define Adjusted EBITDA as net income adjusted for interest and financing fees, income taxes, depreciation, amortization, stock-based compensation, and other non-cash income and expenses. We believe that Adjusted EBITDA provides us an important measure of operating performance because it allows management, investors, debtholders and others to evaluate and compare ongoing operating results from period to period by removing the impact of our asset base, any asset disposals or impairments, stock based compensation and other non-cash income and expense items associated with our reliance on issuing equity-linked debt securities to fund our working capital.

Our use of Adjusted EBITDA has limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition. Additionally, our measure of Adjusted EBITDA may differ from other companies’ measure of Adjusted EBITDA. When evaluating our performance, Adjusted EBITDA should be considered with other financial performance measures, including various cash flow metrics, net income and other GAAP results. In the future, we may disclose different non-GAAP financial measures in order to help our investors and others more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.

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The following table shows our reconciliation of net loss to adjusted EBITDA for the six months ended June 30, 2026 and 2025, respectively:

(In thousands)

(In thousands)

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective as a result of material weaknesses in our internal control over financial reporting. The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses in our internal control over financial reporting: (i) lack of a sufficient complement of personnel commensurate with the Company’s reporting requirements; and (ii) insufficient written documentation or training of our internal control policies and procedures which provide staff with guidance or framework for accounting and disclosing financial transactions.

Despite the existence of the material weaknesses above, we believe that the consolidated financial statements contained in this Form 10-Q fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.