Birchtech Corp 10-Q for FY2025 Q3
Birchtech Corp. (BCHT)
About this 10-Q
Birchtech Corp filed this 10-Q on November 13, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.36M
- up 40.6% from $5.24M a year earlier
- Net income
- $788.01K
- compared with a net loss of $457.55K a year earlier
- Diluted EPS
- $0.01
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
Commission file number 000-33067
(Exact name of Registrant as Specified in its Charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal Executive offices) |
| (Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes
State the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date: Common, $.001 par value per share,
BIRCHTECH CORP.
TABLE OF CONTENTS
| 2 |
| Table of Contents |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” that are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 or applicable Canadian securities laws (collectively, “forward-looking statements”). Forward-looking statements reflect management’s current expectations regarding our future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. Forward-looking statements are generally identified by using words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “will,” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such risks include, without limitation, the following:
| · | changes in general economic and business conditions; |
| · | risks related to our industry, including regulatory changes and competitive pressures; |
| · | the loss of major customers; |
| · | dependence and availability and retention of key suppliers; |
| · | risks related to advancement in technologies; |
| · | lack of diversification in our business; |
| · | risks related to intellectual property, including the ability to protect intellectual property and the success of any patent litigation; |
| · | changes in demand for coal as a fuel source for electricity production; |
| · | development and growth of our new technologies, particularly in the water treatment market; |
| · | ability to retain key personnel; |
| · | the potential that dividends may never be declared; |
| · | varied, and, at times, limited trading activity for our common stock; |
| · | volatility in our stock price; and |
| · | other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed on March 31, 2025 with the U.S. Securities and Exchange Commission, and in other filings with the Securities and Exchange Commission or Canadian securities regulators. |
Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this report, and particularly our forward-looking statements, by these cautionary statements.
Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.
| 3 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
BIRCHTECH CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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| September 30, 2025 (Unaudited) |
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| December 31, 2024 |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other assets |
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Total current assets |
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Security deposits |
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Deferred offering costs |
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Property and equipment, net |
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Right of use asset - operating lease |
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Intellectual property, net |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
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Current liabilities |
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Accounts payable and accrued expenses (related party $ |
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Current portion of operating lease liability |
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Customer credits |
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Accrued salaries |
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Profit share liability – related party |
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Total current liabilities |
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Operating lease liability, net of current portion |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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Stockholders’ (deficit) equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ (deficit) equity |
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Total liabilities and stockholders’ (deficit) equity |
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See accompanying notes to these condensed consolidated financial statements.
| 4 |
| Table of Contents |
BIRCHTECH CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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| For the Three Months Ended September 30, 2025 |
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| For the Three Months Ended September 30, 2024 |
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| For the Nine Months Ended September 30, 2025 |
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| For the Nine Months Ended September 30, 2024 |
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Product revenue |
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License revenue |
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Other revenue |
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Revenues |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Research and development expenses |
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Selling, general and administrative expenses (related party of $112,500, $269,467, $337,500 and $635,864) |
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Total operating expenses |
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Operating income (loss) |
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Other income (expense) |
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Interest expense (related party of $Nil, $Nil, $Nil and $245,817) |
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Loss on change in fair value of profit share and unsecured note |
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Interest income |
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Total other income (expense) |
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Income (Loss) before provision for income taxes |
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(Provision for) benefit from income taxes |
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Net income (loss) |
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Net income (loss) per common share |
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Basic net income (loss) per share |
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Diluted net income (loss) per share |
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Weighted average common shares outstanding |
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Basic |
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Diluted |
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See accompanying notes to these condensed consolidated financial statements.
| 5 |
| Table of Contents |
BIRCHTECH CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
|
| Three and Nine Months Ended September 30, 2025 |
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| Common Stock |
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| Par Value |
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| Total |
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Balance - January 1, 2025 |
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Stock issued for delivery of RSUs |
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Share based payments |
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Net loss |
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Balance - March 31, 2025 |
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Stock issued for cashless exercise of options |
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Share based payments |
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Net loss |
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Balance – June 30, 2025 |
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Share based payments |
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Net income |
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Balance – September 30, 2025 |
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| Three and Nine Months Ended September 30, 2024 |
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| Additional |
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Balance - January 1, 2024 |
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Stock issued for cashless exercise of options |
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Gain on modification of related party debt |
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Share based payments |
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Net loss |
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Balance - March 31, 2024 |
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Stock issued for cashless exercise of options |
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Stock issued for cashless exercise of warrants |
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Share based payments |
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Net loss |
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Balance – June 30, 2024 |
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Stock issued for cashless exercise of options |
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Stock issued for exercise of warrants |
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Stock issued for cashless exercise of warrants |
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Share based payments |
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Net loss |
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| ( | ) | ||
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Balance – September 30, 2024 |
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|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||
See accompanying notes to these condensed consolidated financial statements.
| 6 |
| Table of Contents |
BIRCHTECH CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| For the Nine Months Ended September 30, 2025 |
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| For the Nine Months Ended September 30, 2024 |
| ||
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Cash flows from operating activities |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash (used in) operating activities: |
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Stock-based compensation |
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Amortization of discount of notes payable |
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Amortization of right to use assets |
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Amortization of patent rights |
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Depreciation expense |
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Non-cash interest income |
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| ( | ) |
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| ( | ) |
Loss on change in fair value of profit share |
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Changes in operating assets and liabilities |
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Accounts receivable |
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| ( | ) |
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| |
Deferred offering costs |
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| ( | ) |
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| |
Income tax receivable |
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| ( | ) | |
Inventory |
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| ( | ) | |
Prepaid expenses and other assets |
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| ( | ) | |
Accrued salaries |
|
| ( | ) |
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| |
Accounts payable and accrued liabilities |
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| ||
Income tax payable |
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| ( | ) | |
Operating lease liability |
|
| ( | ) |
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| ( | ) |
Net cash used in operating activities |
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| ( | ) |
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| ( | ) |
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Cash flows used in investing activities |
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Purchase of property and equipment |
|
| ( | ) |
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| ( | ) |
Net cash used in investing activities |
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| ( | ) |
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| ( | ) |
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Cash flows used in financing activities |
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Repayment of unsecured notes payable |
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| ( | ) |
Repayment of secured notes payable |
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| ( | ) | |
Proceeds from exercise of stock options |
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| ||
Net cash used in financing activities |
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| ( | ) | |
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Net decrease in cash and cash equivalents |
|
| ( | ) |
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| ( | ) |
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Cash and cash equivalents - beginning of period |
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| ||
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Cash and cash equivalents - end of period |
| $ |
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| $ |
| ||
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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|
Cash paid during the period for: |
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Interest |
| $ |
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| $ |
| ||
Income taxes |
| $ |
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| $ |
| ||
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SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS |
|
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Capital from related party debt extinguishments |
| $ |
|
| $ |
| ||
Recognition of ROU asset and operating lease liability |
| $ |
|
| $ |
| ||
See accompanying notes to these condensed consolidated financial statements.
| 7 |
| Table of Contents |
BIRCHTECH CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025 (Unaudited)
Note 1 - Organization
Birchtech Corp. and MES, Inc.
Birchtech Corp., formerly Midwest Energy Emissions Corp. (together with its consolidated subsidiaries, the “Company”), is organized under the laws of the State of Delaware. Effective on October 17, 2024, Midwest Energy Emissions Corp. changed its corporate name to Birchtech, Inc. pursuant to a certificate of amendment to its certificate of incorporation filed with the State of Delaware. MES, Inc. is incorporated in the State of North Dakota. MES, Inc. is a wholly owned subsidiary of Birchtech Corp. The Company is a provider of specialty activated carbon technologies and provides patented sorbent technologies for mercury emissions capture for the coal-fired utility sector and is developing water purification technologies with a specialization on forever chemicals such as PFAS and PFOS.
ME2C Sponsor LLC and ME2C Acquisition Corp.
ME2C Sponsor LLC is a limited liability company formed in the State of Delaware and is a wholly owned subsidiary of Birchtech Corp. and owns
Note 2 – Going Concern and Financial Condition
Under ASC 205-40, Presentation of Financial Statements—Going Concern, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirements of ASC 205-40.
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the unaudited condensed consolidated financial statements, the Company had a net loss of approximately $
In addition to maintaining its revenue stream from its legacy mercury emissions control business, the Company’s plans and expectations over the next twelve months to mitigate such financial condition include receiving additional cash inflows from the judgment expected in connection with the $
The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the financial statements are issued.
| 8 |
| Table of Contents |
Note 3 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of Rule 8-03 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed on March 31, 2025, from which the accompanying condensed consolidated balance sheet dated December 31, 2024 was derived.
In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the Company’s financial position as of September 30, 2025, and results of operations, changes in stockholders’ deficit and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Birchtech Corp. (formerly Midwest Energy Emissions Corp.) and its wholly-owned subsidiaries, MES, Inc. and ME2C Sponsor LLC, and ME2C Acquisition Corp. which is
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, valuation of equity issuances and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company uses estimates in accounting for, among other items, profit share liability, revenue recognition, allowance for credit losses, stock-based compensation, income tax provisions, excess and obsolete inventory reserve and impairment of intellectual property. Actual results could differ from those estimates.
Recoverability of Long-Lived and Intangible Assets
Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived and/or intangible assets would be adjusted, based on estimates of future undiscounted cash flows.
The Company has evaluated the recoverability of the carrying value of the Company’s property and equipment, right of use asset and intellectual property. No impairment charges were recognized for the three and nine months ended September 30, 2025 and 2024.
Fair Value of Financial Instruments
The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows:
| ☐ | Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date. |
|
|
|
| ☐ | Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. |
|
|
|
| ☐ | Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. |
| 9 |
| Table of Contents |
The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.
The profit share liability is the only item measured at fair value on a recurring basis by the Company at September 30, 2025 and December 31, 2024. The profit share liability is considered to be Level 3 measurements.
Financial instruments include cash, accounts receivable, accounts payable, and short-term debt. The carrying amounts of these financial instruments approximated fair value at September 30, 2025 and December 31, 2024 due to their short-term maturities.
At September 30, 2025, the fair value of the profit share liability is calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability at December 31, 2024 was also calculated using a discounted cash flow model based on estimated future cash payments. At September 30, 2025 and December 31, 2024, the fair value of the profit share liability was determined on a Level 3 measurement. These values are determined using pricing models for which the assumptions utilized management’s estimates. Significant unobservable inputs include a discount rate of approximately
The following tables present the Company’s liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.
|
|
|
| Fair Value Measurement as of |
| |||||||||||
|
|
|
| September 30, 2025 |
| |||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Liabilities: |
|
|
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|
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|
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|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Profit share liability – related party (1) |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Total Liabilities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
| Fair Value Measurement as of |
| ||||||||||
|
|
|
|
| December 31, 2024 |
| ||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Liabilities: |
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| ||||
|
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|
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|
| ||||
Profit share liability – related party (1) |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Total Liabilities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
(1) See Note 7 - Related Party
The following tables present the Company’s assets that are measured at fair value on a non-recurring basis and are categorized using the fair value hierarchy.
|
|
|
|
| Fair Value Measurement as of |
| ||||||||||
|
|
|
|
| December 31, 2024 |
| ||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets: |
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| ||||
|
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|
|
|
|
| ||||
Property and equipment (Construction in progress) |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Total Assets |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 10 |
| Table of Contents |
Revenue Recognition
The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales and other taxes are excluded from revenues. Invoiced shipping and handling costs are included in revenue.
Disaggregation of Revenue
The Company generated revenue for the three and nine months ended September 30, 2025 and 2024 by (i) delivering product to its commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites and (iii) performing demonstrations of its technology at customers with the intent of entering into long term supply agreements based on the performance of the Company’s products during the demonstrations and (iv) licensing its technology to customers.
Revenue for product sales is recognized at the point of time in which the customer obtains control of the product, at the time title passes to the customer upon shipment or delivery of the product based on the applicable shipping terms.
Licensing revenue includes the licensing of the Company’s intellectual property (“IP”). Revenue for IP rights is accounted for based on the nature of the promise to grant the license. In determining whether the Company’s promise is to provide a right to access its IP or a right to use its IP, the Company considers the nature of its IP to which the customer will have rights. IP is either functional IP which has significant standalone functionality or symbolic IP which does not have significant standalone functionality. Revenue from functional IP is recognized at the point in time when control of the distinct license is transferred to the customer. Revenue from symbolic IP is recognized over the access period to the Company’s IP.
The licenses provide the customer with the right to use the Company’s patented technologies as they exist at a point in time when the license is granted, for the duration of the contract term. The patented technology has stand-alone functionality, and the Company has no obligation to provide any future updates. During the three and nine months ended September 30, 2025, the Company recognized $
When a license arrangement contains payment terms beyond one year, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the license fees and is recognized as interest income over the payment period.
Variable consideration is recorded as revenue only to the extent that a significant reversal of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Significant judgment is required in estimating variable consideration for the performance obligation identified in the contract and this judgment involves assessing factors outside of our influence.
| 11 |
| Table of Contents |
Revenue for equipment sales is recognized upon commissioning and customer acceptance of the installed equipment per the terms of the purchase contract.
Revenue for demonstrations and consulting services is recognized when performance obligations contained in the contract have been completed, typically the completion of necessary field work and the delivery of any required analysis per the terms of the agreement.
The following table presents disaggregated sales based on the type of revenue for the three and nine months ended September 30, 2025 and 2024. All sales were in the United States.
|
| For the Three Months Ended September 30, 2025 |
|
| For the Three Months Ended September 30, 2024 |
| ||
Product revenue |
| $ |
|
| $ |
| ||
License revenue |
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| ||
Demonstrations & Consulting revenue |
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| ||
Equipment revenue |
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| $ |
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| $ |
| ||
|
| For the Nine Months Ended September 30, 2025 |
|
| For the Nine Months Ended September 30, 2024 |
| ||
Product revenue |
| $ |
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| $ |
| ||
License revenue |
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| ||
Demonstrations & Consulting revenue |
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Equipment revenue |
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| ||
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| $ |
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| $ |
| ||
Accounts receivable and allowance for credit losses
Accounts receivable are presented net of an allowance for credit losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.
Management believed that the accounts receivable were fully collectable and no allowance for credit losses was deemed to be required on its accounts receivable at September 30, 2025. The Company historically has not experienced significant uncollectible accounts receivable. As of September 30, 2025 and December 31, 2024, the Company’s allowance for credit losses was $
| 12 |
| Table of Contents |
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs consist of costs incurred to discover, research and develop products, and include personnel expenses, facility-related and depreciation expenses, and external costs of outside suppliers.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2025 and 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is no longer subject to tax examinations by tax authorities for the years prior to 2021.
The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes.
These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. Management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Basic and Diluted Income (Loss) Per Common Share
Income (loss) per share – basic is calculated by dividing net income (loss) by the weighted average number of shares of stock outstanding during the year, including shares issuable without additional consideration. Income per share – assuming dilution is calculated by dividing net income by the weighted average number of shares outstanding during the year adjusted for the effect of dilutive potential shares from options and warrants calculated using the treasury stock method and the if-converted method for preferred stock. There are 1,134,272 dilutive stock options for the three months ended September 30, 2025 as the Company reported net income for the period. There were no dilutive potential common shares for the nine months ended September 30, 2025 or the three or nine months ended September 30, 2024, because the Company incurred a net loss and basic and diluted losses per common share are the same.
We calculate basic earnings per share by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the effects of potentially dilutive securities. The summary of the basic and diluted earnings per share calculations for the three and nine months ended September 30, 2025 and 2024:
|
| For the Three Months Ended September 30, 2025 |
|
| For the Three Months Ended September 30, 2024 |
|
| For the Nine Months Ended September 30, 2025 |
|
| For the Nine Months Ended September 30, 2024 |
| ||||
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| ||||
Basic: |
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| ||||
Net Income (Loss) |
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| ( | ) |
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| ( | ) |
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| ( | ) | |
Weighted-average shares outstanding |
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| ||||
Basic |
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) | |
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Diluted: |
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Net Income (Loss) |
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| ( | ) |
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| ( | ) |
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| ( | ) | |
Weighted-average shares outstanding |
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| ||||
Effect of diluted securities – stock options |
|
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| - |
|
|
| - |
|
|
| - |
| |
Weighted-average shares used in the calculation of diluted earnings per share |
|
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| ||||
Diluted earnings (loss) per share |
|
|
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) | |
| 13 |
| Table of Contents |
Total common stock equivalents excluded from dilutive loss per share are as follows:
|
| September 30, |
|
| September 30, |
| ||
|
| 2025 |
|
| 2024 |
| ||
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| ||
Stock options |
|
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| ||
Warrants |
|
| - |
|
|
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| |
Restricted stock units |
|
| - |
|
|
|
| |
Total common stock equivalents excluded from dilutive loss per share |
|
|
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| ||
Concentration of Credit Risk
Financial instruments that subject the Company to credit risk consist of cash and equivalents on deposit with financial institutions and accounts receivable. The Company’s cash as of September 30, 2025 and December 31, 2024 is maintained at high-quality financial institutions and has not incurred any losses to date. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $
Customer and Supplier Concentration
For the nine months ended September 30, 2025, three customers represented
At September 30, 2025, two customers represented
For the nine months ended September 30, 2025,
Contingencies
Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
| 14 |
| Table of Contents |
Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed.
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. Since ASU 2023-09 addresses only disclosures, the adoption of ASU 2023-09 is not expected to have a significant impact on its unaudited condensed consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires entities to disaggregate expense items in the notes to the financial statements and requires disclosure of specified information related to purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Companies have the option to apply the guidance either on a retrospective or prospective basis, and early adoption is permitted. The Company is currently evaluating the impact of the ASU on its consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU No. 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted.
On July 30, 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient that assumes current conditions as of the balance sheet date remain unchanged when developing forecasts for estimating expected credit losses. Under ASU 2025-05, an entity is required to disclose that it has elected to use the practical expedient and the election should be applied prospectively. ASU 2025-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2025, with early adoption permitted. The Company does not expect the application of this standard will have a material impact on its financial statements and related disclosures.
Note 4 - Inventory
Inventory was comprised of the following at September 30, 2025 and December 31, 2024:
|
| September 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Raw Materials |
| $ |
|
| $ |
| ||
Finished Goods |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| 15 |
| Table of Contents |
Note 5 - Property and Equipment, Net
Property and equipment at September 30, 2025 and December 31, 2024 are as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Equipment & installation |
| $ |
|
| $ |
| ||
Leasehold improvements |
|
|
|
|
|
| ||
Trucking equipment |
|
|
|
|
|
| ||
Lab equipment |
|
|
|
|
|
| ||
Office equipment, computer equipment and software |
|
|
|
|
|
| ||
Total equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Construction in process |
|
|
|
|
|
| ||
Property and equipment, net |
| $ |
|
| $ |
| ||
The Company uses the straight-line method of depreciation over estimated useful lives of
Note 6 - Intellectual Property
License and patent costs capitalized as of September 30, 2025 and December 31, 2024 are as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Licenses and patents |
| $ |
|
| $ |
| ||
Less: Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intellectual property, net |
| $ |
|
| $ |
| ||
Amortization expense for the three months ended September 30, 2025 and 2024 was $
Annual amortization for the years ended: |
|
|
| |
December 31, 2025 (remaining) |
| $ |
| |
December 31, 2026 |
|
|
| |
December 31, 2027 |
|
|
| |
December 31, 2028 |
|
|
| |
December 31, 2029 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
Note 7 - Related Party
Secured Note Payable
On November 29, 2016, pursuant to a restated financing agreement entered with AC Midwest Energy, LLC (“AC Midwest”) on November 1, 2016, the Company closed on a secured note with AC Midwest (the “AC Midwest Secured Note”), which was to mature on
On October 28, 2022, the Company, along with MES, and AC Midwest, executed Amendment No. 4 to the Amended and Restated Financing Agreement pursuant to which the maturity date of the AC Midwest Secured Note was extended to August 25, 2025. In addition,
| 16 |
| Table of Contents |
On February 27, 2024,
As of September 30, 2025 and December 31, 2024, total principal of $
Amortized discount recorded as interest expense for the three months ended September 30, 2025 and 2024 was $
Unsecured Note Payable
On November 29, 2016, pursuant to a restated financing agreement entered with AC Midwest on November 1, 2016, the Company closed on an unsecured note with AC Midwest (the “AC Midwest Subordinated Note”), which was to mature on
The Company determined that the rate of interest on the AC Midwest Subordinated Note was a below market rate of interest and determined that a discount of $
On August 30, 2022, AC Midwest agreed to an extension of the maturity date of the AC Midwest Unsecured Note (and AC Midwest Secured Note) from August 25, 2022 to September 30, 2022. Such extension was expected to provide the Company sufficient time in which to conclude the process of negotiating certain changes and modifications to such financing arrangements. On September 28, 2022, AC Midwest agreed to an additional short-term extension of such maturity date from September 30, 2022 to October 31, 2022. The Company has accounted for the extension as debt extinguishment with a related party. As such the Company recorded a capital contribution of $
On October 28, 2022, the Company, along with MES, and AC Midwest, executed Amendment No. 1 to Unsecured Note Financing Agreement pursuant to which the maturity date of the AC Midwest Unsecured Note was extended to August 25, 2025. In addition, the parties agreed that the Profit Share (see “Profit Share” below) be increased by $
On February 27, 2024, the Company entered into an Unsecured Debt Restructuring Agreement (the “Debt Restructuring Agreement”) with AC Midwest which replaces and supersedes the Unsecured Note Financing Agreement. Pursuant to the Debt Restructuring Agreement, on February 27, 2024, the Company (i) paid AC Midwest $
| 17 |
| Table of Contents |
On August 26 and 27, 2024, the Company repaid AC Midwest the remaining principal of $
The Company has accounted for the February 27, 2024 modification as debt extinguishment with a related party. As such the Company recorded a capital charge of $
Amortized discount recorded as interest expense for the three months ended September 30, 2025 and 2024 was $
Profit Share
Pursuant to the Unsecured Note Financing Agreement, AC Midwest was also entitled to a “non-recourse” profit participation preference equal to 1.0 times the original principal amount of the AC Midwest Unsecured Note which on October 28, 2022 was increased to $
Pursuant to the Debt Restructuring Agreement, AC Midwest was granted a profit participation preference equal to $
In addition to facilitating the private sale to third parties as described above, AC Midwest granted the Company the exclusive right until December 31, 2024 to facilitate the sale of all or a portion of the remaining balance of the shares of common stock of the Company held by AC Midwest, which proceeds above a certain amount will be applied as a credit against the Restructured Profit Share dollar for dollar (the “Facilitation Credit”). As of December 31, 2024, the Company had not facilitated the sale of any portion of the remaining shares held by AC Midwest. As a result, no Facilitation Credit has been issued to the Company.
The Company has accounted for the February 27, 2024 modification as debt extinguishment with a related party. As such the Company recorded a capital contribution of $
| 18 |
| Table of Contents |
The Company is utilizing the methodology behind the ASC 815, Derivatives and Hedging and ASC 480, Distinguishing Liabilities from Equity to determine how to account for the profit-sharing portion of the note payable. Although the transaction is not indexed to MEEC’s common stock the profit sharing has the characteristics of a freestanding financial instrument because the profit sharing is not callable by the lender, it will be paid out past the maturity of the Unsecured Note Payable and, the fair value will fluctuate over time based on payment predictions. The Profit Share was determined to have a fair value of $
The following are the changes in the profit share liability (the only Level 3 financial instrument) during the nine months ended September 30, 2025 and the year ended December 31, 2024:
Profit Share as of January 1, 2024 |
| $ |
| |
Modification |
|
| ( | ) |
Loss on change in fair value of profit share |
|
|
| |
Profit Share as of December 31, 2024 |
| $ |
| |
|
|
|
|
|
Profit Share as of January 1, 2025 |
| $ |
| |
Loss on change in fair value of profit share |
|
|
| |
Profit Share as of September 30, 2025 |
| $ |
|
Related Party Transactions
Kaye Cooper Kay & Rosenberg, LLP provides certain legal services to the Company and the Company incurred $
On January 31, 2023, the Company entered into a License and Supply Agreement with Dakin Holdings Ltd., a company incorporated in Barbados (“Dakin”), effective as of January 1, 2023 (the “Dakin Agreement”), pursuant to which Dakin has granted to the Company (i) a limited license to manufacture and produce for Dakin products comprising certain intellectual property owned by Dakin (the “Dakin IP”), and (ii) an exclusive license to commercialize the Dakin IP in the United States. In addition, the Company shall pay Dakin a license fee of $
Note 8 - Operating Leases
On July 1, 2015, the Company entered into a five-year lease for warehouse space in Corsicana, Texas. The Company is also responsible for the pro rata share of the projected monthly expenses for the property taxes. The current pro rata share is $
| 19 |
| Table of Contents |
On August 1, 2024, the Company entered into a
On November 22, 2024, the Company entered into an approximate
For the nine months ended September 30, 2025 and the year ended December 31, 2024, the Company recorded an operating lease right of use asset and liabilities as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Right of use asset - operating lease |
| $ |
|
| $ |
| ||
Current portion of operating lease liability |
|
|
|
|
|
| ||
Operating lease liability |
|
|
|
|
|
| ||
Future remaining minimum lease payments under these non-cancelable leases are as follows:
For the twelve months ended September 30, |
|
|
| |
2026 |
| $ |
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
Thereafter |
|
|
| |
Total |
|
|
| |
Less discount |
|
| ( | ) |
Total lease liabilities |
|
|
| |
Less current portion |
|
| ( | ) |
Operating lease obligation, net of current portion |
| $ |
| |
The weighted average remaining lease term for operating leases is
For the nine months ended September 30, 2025 and 2024, the Company’s lease cost consists of the following components, each of which is included in costs and expenses within the Company’s unaudited condensed consolidated statements of operations:
|
| For the Nine Months Ended September 30, 2025 |
|
| For the Nine Months Ended September 30, 2024 |
| ||
Operating lease costs |
| $ |
|
| $ |
| ||
| 20 |
| Table of Contents |
Note 9 - Commitments and Contingencies
Fixed Price Contract
The Company’s multi-year contracts with its commercial customers contain fixed prices for product. These contracts expire between 2023 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period.
Legal proceedings
The Company has commenced multiple patent infringement lawsuits to enforce its proprietary two-part Sorbent Enhancement Additive (SEA®) process for mercury removal from coal-fired power plants. These actions, filed between 2019 and 2025, target various operators of coal-fired power plants and refined coal producers whom the Company alleges have willfully infringed its patent rights. The Company is seeking damages, injunctive relief, and other remedies in each of these proceedings.
Delaware District Court Action
In July 2019,
Between July 2020 and January 2021, the Company entered into agreements with each of the four major utility defendants which included certain monetary arrangements and pursuant to which the Company dismissed all claims brought against each of them and their affiliates.
In November 2023, the Company entered into a confidential binding term sheet with Arthur J. Gallagher & Co., and various of its affiliated entities, and DTE Energy Resources LLC and various of its affiliated entities, to resolve the patent litigation. Pursuant to the term sheet, all claims and counterclaims asserted by the parties in such patent litigation have been dismissed with prejudice, although such term sheet does not affect any other claim brought against the remaining CERT defendants. In November 2023, Alistar Enterprises, LLC, one of the remaining CERT defendants, entered into a settlement agreement with the Company.
In December 2023, and in connection with the term sheet described above, the Company, along with its wholly-owned subsidiary, MES, Inc., and (a) Chem-Mod LLC (“Chem-Mod”), (b) Arthur J. Gallagher & Co. and AJG Coal, LLC, and (c) DTE Energy Co. and DTE Energy Resources, LLC, entered into a paid license of U.S. Patent No. 8,168,147, U.S. Patent No. 10,343,114, U.S. Patent No. 10,589,225, U.S. Patent No. 10,596,517 and U.S. Patent No. 10,668,430 and their foreign equivalents and related patent applications and patents, which licenses the use of refined coal or the Chem-Mod Solution in conjunction with activated carbon. This license applies to Chem-Mod and certain of its licensees, sub-licensees, and their customers, for the remaining term of such patents. By its terms, the license does not cover the use of activated carbon with coal that is not either refined coal or coal made by or for use with the Chem-Mod Solution in a manner authorized by the license. The parties to the license have mutually released all claims that any past use of the Chem-Mod Solution in connection with the production or use of refined coal with activated carbon by entities other than the CERT defendants and their customers infringes the asserted patents and related intellectual property, and all claims that could have been brought challenging the validity of such patents. The remaining CERT defendants and their customers (for activities relating to the CERT defendants) were not included within the scope of the license.
| 21 |
| Table of Contents |
The case proceeded to trial in February 2024 against the remaining CERT defendants. On March 1, 2024, a federal jury returned a $
2024-2025 Patent Infringement Actions
In July 2024, the Company commenced three additional patent infringement lawsuits in U.S. District Courts in Arizona, Iowa and Missouri against multiple utilities and related entities. These actions allege willful infringement of the Company’s patents related to mercury emissions control. Named as defendants in the action filed in the U.S. District Court for the District of Arizona were Tucson Electric Power Co., San Carlos Resources, Inc., Salt River Project Agricultural Improvement and Power District, Tri-State Generation and Transmission Association, Inc., Springerville Unit 3 Holding LLC, and Springerville Unit 3 Partnership LP. Named as defendants in the action filed in the U.S. District Court for the Southern District of Iowa were Berkshire Hathaway Energy Company, MidAmerican Energy Company, PacifiCorp, Alliant Energy Corporation, Interstate Power and Light Company, and Wisconsin Power and Light Company, and named as defendants in the action filed in the U.S. District Court for the Eastern District of Missouri were Ameren Corp. and Union Electric Co.
In October 2024, the Company entered into an agreement with one of the utility defendants and an affiliated entity in the Arizona action, and in January 2025, the Company entered into an agreement with another utility named in the Arizona action. Such agreements provide such parties and their affiliates with a non-exclusive license to certain Company patents related to the Company’s two-part Sorbent Enhancement Additive (SEA®) process for use in connection with a certain designated coal-fired power plant operated by them. The agreements include one-time license fees which have been received by the Company. One agreement provides the Company with a right of first refusal for certain of such utility’s product supply for mercury emissions capture at such designated power plant and the other agreement provides the Company with the right to be included in such party’s bidding process for certain product supply for mercury emissions capture at such party’s designated power plant.
On December 17, 2024, the U.S. Judicial Panel on Multidistrict Litigation ordered the consolidation of the three lawsuits in the U.S. District Court for the Southern District of Iowa for coordinated pretrial proceedings. In January 2025, the Company initiated an additional infringement suit in the Western District of Missouri against several Evergy-affiliated entities. Named as defendants in the action were Evergy, Inc., Evergy Metro Inc., Evergy Missouri West, Inc. and Evergy Kansas Central, Inc. One of such defendants was dismissed from the Western District of Missouri action and named as a defendant in a separate case commenced in the U.S. District Court for the District of Kansas. Such cases were transferred to the Iowa court pursuant to the existing transfer order.
Between January and July 2025, certain defendants in the consolidated Iowa actions filed inter partes review (“IPR”) petitions with the U.S. Patent and Trademark Office seeking to invalidate various asserted claims.
Effective as of August 5, 2025, the Company entered into separate agreements with two utilities, which are affiliated with each other, and named as defendants in the Southern District of Iowa action. In addition, as of September 9, 2025, the Company entered into an agreement with a utility and its affiliated entities, named as defendants in the Western District of Missouri and District of Kansas actions. Such agreements provide such parties and their affiliates with a non-exclusive license to certain Company patents related to the Company’s two-part SEA® process for use in connection with certain designated coal-fired power plants operated by them. Each agreement includes a one-time license fee. The agreements effective as of August 5, 2025 entered into with the two utilities, provide the Company with the right to be included in each utility’s bidding process for certain product supply for mercury emissions capture at such party’s operated power plants. Such two utilities have also agreed to withdraw from the IPR petitions.
| 22 |
| Table of Contents |
Effective as of September 30, 2025, the Company entered into an agreement with another utility not named as a defendant in the Company’s patent litigations, but a party to the IPR petitions filed with the U.S. Patent and Trademark Office. Such agreement provides such utility and its affiliates with a with a non-exclusive license to certain Company patents related to the Company’s two-part SEA® process for use in connection with a certain designated coal-fired power plant operated by them. Such agreement includes a one-time license fee and provides the Company with the right to be included in such party’s bidding process for certain product supply for mercury emissions capture at such party’s designated power plant. Such party has agreed to withdraw from IPR petitions.
Effective as of October 15, 2025, the Company entered into an agreement with another utility named as a defendant in the Southern District of Iowa action. While the terms of the agreement are confidential, it includes a resolution of the disputes between the Company and that utility and its affiliates and provides for their withdrawal from related proceedings. As a result of this and the other agreements described above, the Company and several defendants have resolved their respective claims, and those defendants have been dismissed from the applicable actions. There remain two utilities in the consolidated Iowa actions.
As described above, between January and July 2025, certain defendants in the consolidated Iowa actions filed IPR petitions seeking to invalidate various asserted claims. In September and October 2025, the U.S. Patent Trial and Appeal Board (“PTAB”) granted the institution of the review of certain of the Company’s asserted patents. On October 13, 2025, the Court in the consolidated Iowa actions ruled to stay the litigation pending completion of the IPR process in the PTAB. No assurance can be given as to the ultimate outcome of these proceedings.
Except for the foregoing disclosures, the Company is not presently aware of any other material pending legal proceedings to which the Company is a party or of which any of its property is the subject.
Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that the Company will be successful in litigating and/or settling any of these claims. The Company expenses legal costs relating to patent litigation as incurred.
Note 10 - Stock Based Compensation
Stock Based Compensation
The Company accounts for stock-based compensation awards in accordance with the provisions of ASC 718, which addresses the accounting for employee stock options which requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the unaudited condensed consolidated financial statements over the vesting period based on the estimated fair value of the awards.
Stock based compensation consists of the amortization of common stock, stock options, restricted share units and warrants issued to employees, directors and consultants. For the three months ended September 30, 2025 and 2024, stock-based compensation expense amounted to $
On July 3, 2023, the Board of Directors of the Company approved and adopted the Company’s Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”) and the Company’s Amended and Restated 2017 Equity Incentive Plan (the “2017 Plan”) which amended the Company’s previously adopted 2014 Equity Incentive Plan and 2017 Equity Incentive Plans. Such amendments were made in accordance with the requirements of the TSX Venture Exchange. The 2014 Equity Incentive Plan was first approved by the Board on January 10, 2014. The 2017 Equity Incentive Plan replaced the 2014 Equity Incentive Plan, which was terminated by the Board on April 28, 2017. As a result of such termination, no additional awards may be granted under the 2014 Equity Incentive Plan but previously granted awards shall remain outstanding in accordance with their terms and conditions. The 2017 Plan was adopted by the Board on February 9, 2017. As amended by the Board on July 3, 2023, the maximum number of shares of common stock that may be issued under the 2017 Plan after July 3, 2023 is
| 23 |
| Table of Contents |
Common Stock
On November 8, 2022, the Company issued a total of
On March 19, 2025, the Company announced that its Board of Directors authorized a share repurchase program under which the Company may purchase up to $
Stock Options
On January 15, 2024, the Company granted nonqualified stock options to certain directors, executive officers and employees to acquire an aggregate of
On February 27, 2024, the Company issued
On June 24, 2024, the Company issued (i)
On June 28, 2024, the Company issued (i)
| 24 |
| Table of Contents |
On August 3, 2024, the Company issued
On January 2, 2025, and pursuant to an investor relations consulting agreement effective as of January 1, 2025 with a nonaffiliated third party, the Company granted a nonqualified stock option under the 2017 Plan to such third party to acquire
On January 9, 2025, the Company granted a nonqualified stock option under the 2017 Plan to a new director, who was elected to the Board on December 30, 2024, to acquire
Based on a Black-Scholes valuation model, these options were valued at $
On June 20, 2025, the Company issued (i)
A summary of stock option activity is presented below:
|
|
|
|
|
| Weighted |
|
|
| |||||||
|
|
|
| Weighted |
|
| Average |
|
|
| ||||||
|
| Number |
|
| Average |
|
| Remaining |
|
| Aggregate |
| ||||
|
| of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
|
| Shares |
|
| Price |
|
| Life (years) |
|
| Value |
| ||||
December 31, 2024 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Expirations |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| |
Exercised |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| |
September 30, 2025 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $
| 25 |
| Table of Contents |
Stock options exercised during the nine months ended September 30, 2025 include none that were exercised for cash and
Restricted Share Units
On January 15, 2024, the Company granted
On January 15, 2025, the Company issued
Note 11 - Warrants
The Company utilized a Black-Scholes options pricing model to value warrants at the issuance date. This model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected period until the warrants are exercised. When calculating the value of warrants issued, the Company uses a volatility factor, a risk-free interest rate and the life of the warrant for the exercise period.
There were no warrants outstanding as of December 31, 2024 and September 30, 2025, and no warrants were issued or exercised during the nine months ended September 30, 2025 and 2024.
Note 12 – Segment and Geographic Information
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer (the “CEO”). The Company is a provider of specialty activated carbon technologies and, at September 30, 2025, had one operating segment, which entails the provision of specialty activated carbon technologies for air and water purification in the United States.
There are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, management has determined that the Company has a single operating and reportable segment. The accounting policies related to operating and reportable segments are the same as those described in Note 3, “Basis of Presentation and Summary of Significant Accounting Policies”. The primary measure of segment profit or loss is consolidated net income as presented below and is used by the CEO for the purpose of evaluating segment performance and allocation of budget to support business expansion, new product development and operational efficiencies.
| 26 |
| Table of Contents |
|
| For the Three Months Ended September 30, 2025 |
|
| For the Three Months Ended September 30, 2024 |
|
| For the Nine Months Ended September 30, 2025 |
|
| For the Nine Months Ended September 30, 2024 |
| ||||
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| ||||
Material sales |
|
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| ||||
License fees |
|
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|
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|
|
| ||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material costs |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Blending and milling |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Shipping |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Other cost of goods sold |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Compensation and benefits |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Stock-based compensation |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Amortization and depreciation |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Consulting fees |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Professional fees |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
General and administrative |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Change in fair value of profit share |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Interest expense |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Income tax benefit (expense) |
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The segment assets are not reviewed by the CODM at a different asset level or category and is reviewed at the consolidated level.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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, 2024, 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. (formerly Midwest Energy Emissions 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 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 have largely been driven by federal regulations. The MATS rule, proposed by the 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 Sorbent Enhancement Additive (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, strengthens and updates MATS for coal-fired power plants and tightens 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.
On March 12, 2025, the newly appointed EPA administrator under the Trump Administration announced plans to roll back dozens of environmental regulations including the reconsideration of the MATS regulation. On April 8, 2025, President Trump signed a Proclamation exempting certain stationary sources, identified in Annex 1 of the Proclamation, from compliance with the 2024 updated MATS Rule. As set out in the Proclamation, the President’s exemption lasts for a period of two years beyond the updated Rule’s compliance date (i.e., for the period beginning July 8, 2027, and concluding July 8, 2029). During the two-year period these stationary sources identified in Annex 1 are subject to the compliance obligations that they are currently subject to under MATS as the MATS Rule existed prior to the 2024 update. Annex 1 identifies 47 plant owners and over 60 power plants provided such exemption, which list includes a number of our customers.
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. The EPA intends to finalize action on this proposal by December 2025.
Water Treatment
In April 2024, the EPA under the Biden Administration issued the first-ever national, enforceable drinking water standard to protect communities from exposure to harmful PFAS, also known as “forever chemicals”. The Rule established legally enforceable 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. Under the Rule, public water systems must monitor these PFAS and must complete initial monitoring by 2027, followed by ongoing compliance monitoring. Water systems must also provide the public with information on the levels of these PFAS in their drinking water beginning in 2027.
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. 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 counterpart. 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.
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.
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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.
On May 14, 2025, the EPA under the new Trump Administration announced the agency will keep the regulations for PFOA and PFOS. As part of this action, the EPA also announced its intent to extend the PFOA and PFOS MCL compliance deadlines and establish a federal exemption framework. Additionally, the EPA announced its intent to rescind the regulations and reconsider the regulatory determinations for PFHxS, PFNA, HFPO-DA (commonly known as GenX), and the Hazard Index mixture of these three PFAS plus PFBS to ensure the determinations and any resulting drinking water regulation follow the Safe Drinking Water Act process.
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.
Additional Information
In May 2024, we announced the appointment of David Mazyck to head our new business line to address the potable (drinking) water market with new sorbent technologies under development. In June 2025, he was appointed our Executive Director of Innovation and Commercialization. In addition, in May 2024, we announced the appointment of Dennis Baranik as Director of National Sales. Mr. Baranik oversees product sales and IP licensing in the Company’s core business for mercury emissions capture as well as support both product and business development for the water market. Also, in June 2025, we announced the appointment of Christopher Rinaldi as Director of Strategic Operations, with a focus on our water treatment business.
Effective on October 17, 2024, as part of our rebranding, we changed our corporate name from Midwest Energy Emissions Corp. to Birchtech Corp. pursuant to a certificate of amendment to our certificate of incorporation filed with the State of Delaware, and on October 17, 2024 our common stock commenced trading under the ticker symbol “BCHT”.
On October 9, 2024, we received conditional approval to list our shares of common stock on the TSX and graduate from the TSXV to the TSX. On November 12, 2024, our shares commenced trading on the TSX under the ticker symbol “BCHT”.
Other Recent Developments
On February 27, 2024, and pursuant to a Debt Restructuring Agreement entered into on such date with AC Midwest Energy LLC (“AC Midwest”), we made an approximate $9.0 million principal payment against an approximate $13.2 million unsecured note held by AC Midwest and repaid in full the remaining principal balance of approximately $272,000 due on a secured note held by AC Midwest. As part of the restructuring, we negotiated a reduction in the profit participation preference held by AC Midwest from approximately $17.7 million to $7.9 million (the “Restructured Profit Share”). Such Restructured Profit Share is “non-recourse” and shall only be paid from net litigation proceeds from claims relating to our intellectual property. In addition, pursuant to the Debt Restructuring Agreement, in March 2024, we were able to facilitate the private sale of certain shares of common stock held by AC Midwest and received a $960,000 credit toward the remaining balance due on the unsecured note. In August 2024, we repaid in full the remaining principal balance of approximately $3.2 million due on the unsecured note held by AC Midwest. As a result, the only remaining debt obligation to AC Midwest is the “non-recourse” Restructured Profit Share.
Following a five-day trial, on March 1, 2024, we were awarded a $57.1 million patent infringement verdict by a federal jury in the U.S. District Court for the District of Delaware against a remaining group of defendants in the lawsuit commenced by us in 2019. Such group of affiliated defendants included multiple limited liability companies with refined coal industry operations, including CERT Operations II LLC, CERT Operations IV LLC, CERT Operations V LLC, and CERT Operations RCB LLC. The jury determined that these defendants infringed our patented technologies for mercury emissions and were liable for willful infringement, along with inducing and contributory infringement. Following the trial, the Court entered non-final judgments on the verdict against the CERT defendants and the parties submitted post-trial motions relating to the jury trial. The CERT defendants also asserted that the Company’s claims were barred due to their defense that they had an implied license to the asserted patents. A bench trial was held on such issue. On June 10, 2025, the Court ruled that the CERT defendants failed to prove that they had such an implied license and denied their motion to alter or amend the non-final judgment. In addition, on September 25, 2025, the Court issued a Memorandum Opinion and Order that denied the CERT defendants’ post-trial motion that they should not be held liable as a matter of law for induced infringement, contributory infringement or willful infringement. We are awaiting the Court’s determination as to the final judgment.
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In July 2024, we commenced three additional patent infringement lawsuits in U.S. District Courts in Arizona, Iowa and Missouri against multiple utilities and related entities. These actions allege willful infringement of our patents related to mercury emissions control. In October 2024, we entered into an agreement with one of the utility defendants and an affiliated entity in the Arizona action, and in January 2025, we entered into an agreement with another utility named in the Arizona action. Such agreements provide such parties and their affiliates with a non-exclusive license to certain Company patents related to our two-part SEA® process for use in connection with a certain designated coal-fired power plant operated by them. The agreements include one-time license fees which have been received by us. One agreement provides us with a right of first refusal for certain of such utility’s product supply for mercury emissions capture at such designated power plant and the other agreement provides us with the right to be included in such party’s bidding process for certain product supply for mercury emissions capture at such party’s designated power plant.
On December 17, 2024, the U.S. Judicial Panel on Multidistrict Litigation ordered the consolidation of the three lawsuits in the U.S. District Court for the Southern District of Iowa for coordinated pretrial proceedings. In January 2025, we initiated an additional infringement suit in the Western District of Missouri against several Evergy-affiliated entities. One of such defendants was dismissed from the Western District of Missouri action and named as a defendant in a separate case commenced in the U.S. District Court for the District of Kansas. Such cases were transferred to the Iowa court pursuant to the existing transfer order.
Between January and July 2025, certain defendants in the consolidated Iowa actions filed IPR petitions with the U.S. Patent and Trademark Office seeking to invalidate various asserted claims.
On March 19, 2025, we announced that our Board of Directors authorized a share repurchase program under which the Company may purchase up to $5.0 million of its common stock. Purchases under the share repurchase program may be made from time to time, in such amounts as management deems appropriate, through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, purchases through 10b5-1 trading plans, or by any combination of such methods. The timing and amount of any repurchases pursuant to the share repurchase program will be determined based upon a variety of factors, including general market conditions, share price, corporate and regulatory requirements and limitations, corporate liquidity requirements and priorities, and other factors. The share repurchase program does not have an expiration date, does not require the Company to repurchase any specific number of shares of its common stock, if any, and may be modified, suspended or terminated at any time without notice. During the three and nine months ended September 30, 2025, there were no repurchases made under the program.
Effective as of August 5, 2025, we entered into separate agreements with two utilities, which are affiliated with each other, and named as defendants in the Southern District of Iowa action. In addition, as of September 9, 2025, we entered into an agreement with a utility and its affiliated entities, named as defendants in the Western District of Missouri and District of Kansas actions. Such agreements provide such parties and their affiliates with a non-exclusive license to certain Company patents related to our two-part Sorbent Enhancement Additive (SEA®) process for use in connection with certain designated coal-fired power plants operated by them. Each agreement includes a one-time license fee. The agreements effective as of August 5, 2025 entered into with the two utilities, provide us with the right to be included in each utility’s bidding process for certain product supply for mercury emissions capture at such party’s operated power plants. Such utilities have also agreed to withdraw from the IPR petitions.
Effective as of September 30, 2025, we entered into an agreement with another utility not named as a defendant in our patent litigations, but a party to the IPR petitions filed with the U.S. Patent and Trademark Office. Such agreement provides such utility and its affiliates with a with a non-exclusive license to certain Company patents related to the Company’s two-part SEA® process for use in connection with a certain designated coal-fired power plant operated by them. Such agreement includes a one-time license fee and provides the Company with the right to be included in such party’s bidding process for certain product supply for mercury emissions capture at such party’s designated power plant. Such party has agreed to withdraw from IPR petitions.
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Effective as of October 15, 2025, we entered into an agreement with another utility named as a defendant in the Southern District of Iowa action. While the terms of the agreement are confidential, it includes a resolution of the disputes between the Company and that utility and its affiliates and provides for their withdrawal from related proceedings. As a result of this and the other agreements described above, the Company and several defendants have resolved their respective claims, and those defendants have been dismissed from the applicable actions. There remain two utilities in the consolidated Iowa actions.
As described above, between January and July 2025, certain defendants in the consolidated Iowa actions filed IPR petitions seeking to invalidate various asserted claims. In September and October 2025, the U.S. Patent Trial and Appeal Board (“PTAB”) granted the institution of the review of certain of the Company’s asserted patents. On October 13, 2025, the Court in the consolidated Iowa actions ruled to stay the litigation pending completion of the IPR process in the PTAB. No assurance can be given as to the ultimate outcome of these proceedings.
Results of Operations
Revenues
We generated revenues of approximately $7,362,000 and $5,237,000 for the three months ended September 30, 2025 and 2024, respectively, and approximately $13,837,000 and $11,840,000 for the nine months ended September 30, 2025 and 2024, respectively. Such revenues were primarily derived from sorbent product sales which were approximately $4,716,000 and $5,092,000 for the three months ended September 30, 2025 and 2024, respectively and approximately $10,637,000 and $11,479,000 for the nine months ended September 30, 2025 and 2024, respectively. Revenues from product sales can be dependent on natural gas prices, extreme weather, and the maintenance and downtime requirements of customer plants. The decrease in product sales from the prior year was primarily due to the mix of plants running, unexpected customer forced outages and products sold in the first nine months of 2025 resulting in decreased product revenues for the nine months ended September 30, 2025 compared to the prior year period. This decrease was offset by an increase in licensing revenues for the nine months ended September 30, 2025 compared to September 30, 2024, resulting in an overall increase in the revenues for the nine months ended September 30, 2025 compared to the prior year period.
Licensing revenues were approximately $2,600,000 and $133,000 for the three months ended September 30, 2025 and 2024, respectively and approximately $3,125,000 and $274,000 for the nine months ended September 30, 2025 and 2024, respectively. Such increase was primarily due to new licensing agreements which were entered into during the nine months ended September 30, 2025 with primarily utility defendants.
Other revenues, consisting of demonstration, consulting and equipment sales, for the three months ended September 30, 2025 and 2024 were approximately $46,000 and $12,000, respectively and approximately $75,000 and $87,000 for the nine months ended September 30, 2025 and 2024, respectively. Other revenues have not been material in relation to total revenues.
Cost of Sales
Cost of sales were approximately $3,330,000 and $3,642,000 for the three months ended September 30, 2025 and 2024, respectively, and approximately $7,602,000 and $8,056,000 for the nine months ended September 30, 2025 and 2024, respectively. This decrease in cost of sales of approximately $454,000 for the nine months ended September 30, 2025 was primarily attributable to decreased product sales in the first nine months of 2025 compared to the prior year period, together with a change in the mix of products sold in the first nine months of 2025 compared to the first nine months of 2024.
Gross Profit
Gross profit was approximately $4,032,000 and $1,595,000 for the three months ended September 30, 2025 and 2024, respectively, and approximately $6,235,000 and $3,784,000 for the nine months ended September 30, 2025 and 2024. The increase in gross profit for the three and nine months ended September 30, 2025 was primarily due to significantly higher licensing revenues in 2025 compared to 2024, which typically carry higher margins than product sales, thus contributing to the overall improvement in gross profit.
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Operating Expenses
Operating expenses consisted of selling, general and administrative expenses (“SG&A”) and research and development expenses (“R&D”) in 2025 and SG&A and in 2024. Operating expenses decreased significantly in the nine months ended September 30, 2025 compared to the prior year period, despite incurring costs related to the development of the Company’s water treatment business. SG&A expenses were approximately $2,748,000 and $2,702,000 for the three months ended September 30, 2025 and 2024, respectively, and approximately $6,617,000 and $10,863,000 for the nine months ended September 30, 2025 and 2024, respectively. Total SG&A expenses decreased in the first nine months of 2025 compared to the prior year period, as a result of variances in individual categories. This included decreases in salaries and wages, professional fees and consulting fees. The decrease in salaries and wages was primarily due to the payment of bonus compensation in the first nine months of 2024 for which there were no comparable expenses in the first nine months of 2025, along with greater stock-based compensation in the first nine months of 2024 compared to the comparable period in 2025. The decrease in professional fees was primarily due to lower legal fees in the first nine months of 2025 in connection with the Company’s patent litigation compared to the prior year period which had greater legal fees due to trial preparation and the jury trial in the U.S. District Court for the District of Delaware.
Total R&D expenses were approximately $473,000 and $0 for the three months ended September 30, 2025 and 2024, respectively, and $1,335,000 and $0 for the nine months ended September 30, 2025 and 2024, respectively. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies, and increased in the first nine months of 2025 compared to the prior year period as the Company had not incurred any research related costs during the first nine months of 2024. The Company began incurring research and development costs when the lab equipment at the Company’s labs was placed into service.
Operating Income (Loss)
Our operating income was approximately $811,000 for the three months ended September 30, 2025 compared to a loss of $1,107,000 for the three months ended September 30, 2024. For the nine months ended September 30, 2025 and 2024, we had an operating loss of approximately $1,717,000 and $7,079,000, respectively. Such decrease in operating loss was primarily due to our increased license fee revenue in 2025 compared to 2024 coupled with a decrease in total operating expenses during the first nine months of 2025 as discussed above.
Other Income (Expense)
Interest expense related to the financing of capital was approximately $Nil and $7,000 for the three months ended September 30, 2025 and 2024, respectively, and $54 and $259,000 for the nine months ended September 30, 2025 and 2024, respectively. The approximate breakdown of interest expense for the three and nine months ended September 30, 2025 and 2024 is as follows:
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| 7 |
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| $ | 259 |
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Gain (Loss) on change in fair value of profit share liability and unsecured note was approximately $(38,000) and $282,000 for the three months ended September 30, 2025 and 2024, respectively, and $(767,000) and $(2,672,000) for the nine months ended September 30, 2025 and 2024, respectively. The change is primarily attributed to the modification of the terms of the profit share liability (see Note 7 to the unaudited condensed consolidated financial statements).
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Net Income (Loss)
For the three months ended September 30, 2025, we had a net income of approximately $788,000 compared to a net loss of approximately $458,000 for the three months ended September 30, 2024. For the nine months ended September 30, 2025, we had a net loss of approximately $2,433,000, an improvement from a net loss of approximately $9,459,000 for the nine months ended September 30, 2024. This improvement was primarily due an increase in license fee revenues in 2025 compared to 2024, and a decrease in SG&A.
Liquidity and Capital Resource
We had approximately $1,768,000 in cash on our balance sheet at September 30, 2025 compared to approximately $3,456,000 at December 31, 2024. Total current assets were approximately $6,027,000 and total current liabilities were approximately $11,054,000 at September 30, 2025, resulting in a working capital deficiency of approximately $5,027,000. This compares to total current assets of approximately $6,099,000 and total current liabilities of approximately $8,806,000 at December 31, 2024, resulting in a working capital deficiency of approximately $2,707,000. Our accumulated deficit was approximately $75,186,000 at September 30, 2025 compared to $72,753,000 at December 31, 2024. Additionally, we had a net loss in the amount of approximately $2,433,000 and cash used in operating activities of approximately $1,664,000 for the nine months ended September 30, 2025.
Based on the Company’s current cash levels and burn rate, discussed above, the Company believes its cash and financial resources may be insufficient to meet the Company’s anticipated needs for the twelve months following the date of issuance of the financial statements for the quarterly period ended September 30, 2025, included elsewhere in this Form 10-Q, which raises substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the financial statements.
In addition to maintaining the revenue stream from our legacy mercury emissions control business, our plans and expectations over the next twelve months to mitigate such financial condition include receiving additional cash inflows from the judgment expected in connection with the $57.1 million jury verdict awarded to us in March 2024, additional licensing revenues and product sales from the other patent litigation recently commenced, and revenues from our entry into the water treatment business. During 2024, we opened two new state of the art laboratories and have added personnel to support our entry into the water business which we believe will lead to a vibrant new revenue stream. In addition, management is exploring additional financing opportunities. While management believes these plans will alleviate substantial doubt, there is no assurance that they will be successfully realized or implemented.
Total Assets
Total assets were approximately $10,138,000 at September 30, 2025 versus approximately $10,261,000 at December 31, 2024. The change in total assets is primarily attributable to an approximate $1,688,000 decrease in cash, a $153,000 decrease in intellectual property, offset by an approximate $1,808,000 increase in accounts receivable.
Total Liabilities
Total liabilities were approximately $11,280,000 at September 30, 2025 versus approximately $9,069,000 at December 31, 2024. The increase is primarily attributable to an increase in accounts payable and accrued liabilities and an increase in the fair value of the non-recourse profit share liability.
Operating Activities
Net cash used in operating activities consists of net loss, adjusted by certain non-cash items, and changes in operating assets and liabilities.
Net cash used by operating activities was approximately $1,664,000 for the nine months ended September 30, 2025 compared to net cash used by operating activities of approximately $3,275,000 for the nine months ended September 30, 2024. The decrease in net cash provided by operating activities was primarily due to the following: (i) a net loss of $2.4 million for the nine months ended September 30, 2025 compared to net loss of $9.5 million for the nine months ended September 30, 2024; and (ii) certain other changes in operating assets and liabilities including accounts receivable, inventory, prepaid expenses and other assets, accrued salaries, and accounts payable and accrued liabilities.
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Investing Activities
The Company had net cash used in investing activities of approximately $23,000 for the nine months ended September 30, 2025 for the purchase of lab equipment compared to net cash used in investing activities of approximately $702,000 for the nine months ended September 30, 2024 for the purchase of a truck and lab equipment.
Financing Activities
Net cash used in financing activities was approximately $Nil for the nine months ended September 30, 2025 compared to approximately $12,569,000 used in financing activities for the nine months ended September 30, 2024. During the nine months ended September 30, 2024, we repaid the remaining principal of approximately $272,000 on the AC Midwest secured note and approximately $12,195,000 of the principal remaining on the AC Midwest unsecured note.
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, 2024, and there have been no material changes to such policies or estimates during the nine months ended September 30, 2025.
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 income (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.
The following table shows our reconciliation of net income (loss) to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024, respectively:
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| September 30, |
| ||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
|
| (In thousands) |
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| (In thousands) |
| ||||||||||
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| ||||
Net income (loss) |
| $ | 788 |
|
| $ | (470 | ) |
| $ | (2,433 | ) |
| $ | (9,189 | ) |
|
|
|
|
|
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|
|
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|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 107 |
|
|
| 65 |
|
|
| 282 |
|
|
| 185 |
|
Interest |
|
| - |
|
|
| 7 |
|
|
| - |
|
|
| 259 |
|
Change in fair value of profit share |
|
| 39 |
|
|
| (283 | ) |
|
| 767 |
|
|
| 2,672 |
|
Income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Stock based compensation |
|
| 21 |
|
|
| 134 |
|
|
| 100 |
|
|
| 1,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
| $ | 955 |
|
| $ | (547 | ) |
| $ | (1,284 | ) |
| $ | (5,032 | ) |
| 35 |
| Table of Contents |
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
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.
Item 4. Controls and Procedures.
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.
|
| 36 |
| Table of Contents |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 9 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this report for a summary of our legal proceedings, which is incorporated by reference herein.
Item 1A. Risk Factors.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Default Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| 37 |
| Table of Contents |
Item 6. Exhibits.
Exhibit Number |
| Description |
|
| |
| ||
| ||
| ||
| ||
101.INS* |
| Inline XBRL Instance Document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
_________________
* Filed herewith.
| 38 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BIRCHTECH CORP. | ||
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|
Dated: November 13, 2025 | By: | /s/ Richard MacPherson | |
|
| Richard MacPherson |
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|
| President and Chief Executive Officer |
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|
| (Principal Executive Officer) |
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|
Dated: November 13, 2025 | By: | /s/ Fiona Fitzmaurice |
|
|
| Fiona Fitzmaurice |
|
|
| Chief Financial Officer |
|
|
| (Principal Financial Officer) |
|
| 39 |
EXHIBIT 31.1
CERTIFICATION
I, Richard MacPherson, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Birchtech Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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|
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
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|
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
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|
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 13, 2025 | By: | /s/ Richard MacPherson | |
|
|
| Richard MacPherson, |
|
|
|
| President and Chief Executive Officer (Principal Executive Officer) |
|
EXHIBIT 31.2
CERTIFICATION
I, Fiona Fitzmaurice, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Birchtech Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
|
|
|
|
|
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 13, 2025 | By: | /s/ Fiona Fitzmaurice | |
|
|
| Fiona Fitzmaurice |
|
|
|
| Chief Financial Officer |
|
|
|
| (Principal Financial Officer) |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Birchtech Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigned’s knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 13, 2025 | By: | /s/ Richard MacPherson | |
|
|
| Richard MacPherson, |
|
|
|
| President and Chief Executive Officer (Principal Executive Officer) |
|
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Birchtech Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigned’s knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 13, 2025 | By: | /s/ Fiona Fitzmaurice | |
|
|
| Fiona Fitzmaurice |
|
|
|
| Chief Financial Officer |
|
|
|
| (Principal Financial Officer) |
|