Birchtech Corp. — Interim / Quarterly Report 2026

May 14, 2026

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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, 2025, as well as our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission or Canadian securities regulators.

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

Overview

Business Operations

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

Mercury Emissions

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

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

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

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

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In April 2023, the EPA issued a proposal to strengthen and update MATS. Such proposal was finalized and published in May 2024 with an effective date of July 8, 2024 which, among other things, 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. On December 23, 2025, the EPA submitted a draft of the final action to the OMB for interagency review under Executive Order 12866. On February 19, 2026, following completion of the OMB interagency review process, the EPA finalized the repeal of the 2024 amendments to the MATS Rule which returned compliance to the 2012 MATS Rule requirements.

Water Treatment

In April 2024, the EPA 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 as enacted established legally enforceable MCLs (maximum contaminant levels) 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 as enacted, 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. 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 to 2031 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/GenX), and the Hazard Index mixture of these three PFAS plus PFBS to ensure the determinations and any resulting drinking water regulation follow the SDWA process.

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 counterparts. This combination allows us to evaluate reactivated GAC as a sustainable and cost-effective alternative to virgin carbon and address key water utility questions including how to optimize media changeout schedules, strategies to reduce operational costs, and provide lab-based validation of treatment performance for PFAS and other contaminants.

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

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

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

Other Recent Developments

Reverse Split

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

Patent Litigation

We previously commenced multiple patent infringement lawsuits to enforce our proprietary two-part SEA® process for mercury removal from coal-fired power plants. These actions, filed between 2019 and 2025, targeted various operators of coal-fired power plants and refined coal producers whom we allege have willfully infringed our patent rights.

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

Separately, the Company has entered into agreements with certain utilities resolving disputes and providing for licenses to certain of the Company's patents and withdrawal of related proceedings. As a result, those parties have been dismissed from the applicable actions. Two utilities remain in the consolidated Iowa actions.

In addition, certain defendants have filed inter partes review ("IPR") petitions challenging asserted claims of the Company's patents. The U.S. Patent Trial and Appeal Board ("PTAB") instituted review of certain petitions, and proceedings are ongoing. The U.S. District Court for the Southern District of Iowa has stayed the consolidated litigation pending resolution of the IPR proceedings. Other IPR petitions have been denied institution and requests for reconsideration have also been denied.

The Company cannot predict the ultimate outcome of the pending appeal or IPR proceedings.

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Registered Offering

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

NYSE American

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

Prior Developments

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

Results of Operations

Revenues

We generated revenues of approximately $4,240,000 and $3,221,000 for the three months ended March 31, 2026 and 2025, respectively. Such revenues were primarily derived from sorbent product sales which were approximately $4,188,000 and $2,677,000 for three months ended March 31, 2026 and 2025, respectively. Revenues in the mercury emissions market can be dependent on natural gas prices, extreme weather, and the maintenance and downtime requirements of customer plants. The increase in revenues for product sales from the prior year was primarily due to the mix of plants running and an increased demand for coal in connection with our mercury emissions business driven by more extreme weather conditions and higher natural gas prices in the current year compared to the prior year period. Additionally, sales were recognized for the water treatment market in 2026 compared to none in the comparable period of 2025.

Licensing revenues were $0 and $525,000 for the three months ended March 31, 2026 and 2025, respectively. Such decrease was primarily due to a new licensing agreement entered into in the first quarter of 2025 with a utility that provided for a one time up front license fee, for which there were no comparable transactions in the first quarter of 2026.

Other revenues, consisting of demonstrations, consulting and equipment sales, were approximately $52,000 and $19,000 for the three months ended March 31, 2026 and 2025, respectively. Other revenues have not been material in relation to total revenues.

Cost of Sales

Cost of sales were approximately $2,857,000 and $1,987,000 for the three months ended March 31, 2026 and 2025, respectively. The increase in cost of sales of approximately $870,000 was primarily attributable to increased product sales in the first three months of 2026 compared to the prior year period, together with a change in the mix of products sold in the first three months of 2026 compared to the prior year period.

Gross Profit

Gross profit was approximately $1,383,000 and $1,234,000 for the three months ended March 31, 2026 and 2025, respectively. The increase in gross profit of approximately $149,000 was primarily driven by greater product sales in the first three months of 2026. This increase was partially offset by a shift in revenue mix as licensing revenues, which typically carry higher margins, were higher in the three months ended March 31, 2025.

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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 2026 and 2025. Operating expenses decreased in the three months ended March 31, 2026 compared to the prior year period. SG&A expenses were approximately $1,981,000 and $2,171,000 for the three months ended March 31, 2026 and 2025, respectively. Total SG&A expenses decreased in the three months ended March 31, 2026 compared to the prior year period, as a result of variances in individual categories. This includes decreases in professional fees, along with greater stock-based compensation in the three months ended March 31, 2025 compared to the comparable period of the current year. The decrease in professional fees was primarily due to lower legal fees in 2026.

Total R&D expenses were approximately $551,000 and $407,000 for the three months ended March 31, 2026 and 2025, respectively. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies, and increased in the three months ended March 31, 2026 compared to the prior period as the Company did not have all of its R&D strategy implemented at the beginning of 2025. The Company began incurring research and development costs when the lab equipment at the Company's labs was placed into service.

Operating Loss

Our operating loss was approximately $1,149,000 and $1,343,000 for the three months ended March 31, 2026 and 2025, respectively. Such decrease in operating loss was primarily due to our increased revenues in the first three months of 2026 compared to prior year period coupled with a decrease in total operating expenses during the first three months of 2026 as discussed above.

Other Income (Expense)

During the three months ended March 31, 2026 and 2025, we had total other expenses of $196,000 in 2026 compared to total other expenses of $322,000 in 2025.

Interest income was approximately $50,000 and $31,000 for the three months ended March 31, 2026 and 2025.

Loss on change in fair value of profit share liability was approximately $246,000 and loss of approximately $353,000 for the three months ended March 31, 2026 and 2025, respectively.

Net Loss

For the three months ended March 31, 2026, we had a net loss of approximately $1,346,000, an improvement from a net loss of $1,679,000 for the three months ended March 31, 2025. This improvement was primarily due to any increase in revenues in 2026 compared to 2025, and a decrease in expenses.

Liquidity and Capital Resources

We had approximately $14,748,000 in cash at March 31, 2026, compared to approximately $2,245,000 at December 31, 2025. Total current assets were approximately $17,749,000 and total current liabilities were approximately $10,029,000 at March 31, 2026, resulting in working capital of approximately $7,720,000. This compares to total current assets of approximately $5,004,000 and total current liabilities of approximately $10,740,000 at December 31, 2025, resulting in a working capital deficiency of approximately $5,737,000. The increases in cash and working capital were primarily attributable to proceeds from the Company's public offering completed in the first quarter of 2026, as described below. Our accumulated deficit was approximately $77,125,000 at March 31, 2026 compared to $75,779,000 at December 31, 2025.

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

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

Total Assets

Total assets were approximately $21,395,000 at March 31, 2026 versus approximately $9,238,000 at December 31, 2025. The change in total assets is primarily attributable to an approximate $12,503,000 increase in cash primarily due to the proceeds from the Company's public offering completed in the first quarter of 2026, offset by deferred offering costs recognized in 2025 of $481,000 compared to no deferred offering costs in the first quarter of 2026, together with other changes in asset categories consisting of smaller increases and decreases that were not individually significant.

Total Liabilities

Total liabilities were approximately $10,227,000 at March 31, 2026 versus approximately $10,953,000 at December 31, 2025. The change in total liabilities is primarily attributable to an approximate $984,000 decrease in accounts payable and accrued expenses.

Operating Activities

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

Net cash used in operating activities was approximately $2,207,000 for the three months ended March 31, 2026 compared to approximately $254,000 for the three months ended March 31, 2025. The increase in net cash used in operating activities was primarily attributable to the following: (i) changes in accounts receivable, which used approximately $133,000 of cash in 2026 compared to providing approximately $558,000 in 2025; (iii) changes in accounts payable and accrued expenses, which used approximately $984,000 in cash in 2026 compared to providing approximately $304,000 of cash in 2025; and (iv) certain other changes in operating assets and liabilities, including accrued salaries, inventory, and prepaid expenses and other assets.

Investing Activities

We had net cash used in investing activities of $0 for the three months ended March 31, 2026 compared to cash used in investing activities of approximately $14,000 for the three months ended March 31, 2025 for the purchase of lab equipment.

Financing Activities

Net cash provided by financing activities was $14,710,000 for the three months ended March 31, 2026 compared to no cash provided or used in financing activities for the three months ended March 31, 2025. During the three months ended March 31, 2026, we completed a public offering of 6,850,000 shares of our common stock, generating net proceeds of approximately $14,229,000.

Critical Accounting Policies and Estimates

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

Non-GAAP Financial Measures

Adjusted EBITDA

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

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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 loss to adjusted EBITDA for the three months ended March 31, 2026 and 2025, respectively:

	For the Three Months Ended
	March 31, 2026	March 31, 2025
	(In thousands)
Net loss	$ (1,346)	$ (1,679)
Non-GAAP adjustments:
Depreciation and amortization	106	72
Change in fair value of profit share	246	353
Income Taxes	-	14
Stock based compensation	-	61
Adjusted EBITDA	$ (994)	$ (1,179)