What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-31 · 173 added, 141 removed, 166 unchanged (65% of the section changed)

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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.

Restatements of Previously Issued Consolidated Financial Statements

As described in Note 2—Restatement of Previously Issued Financial Statements, for the period ended December 31, 2024, management identified an error in the previously reported financial statements related to the under recognition of revenue during the year ended December 31, 2022.

The Company entered into a license agreement for which it should have recognized the entire proceeds receivable pursuant to the agreement as revenue during the year ended December 31, 2022.

The Company should also have recognized the financing component of the licensing agreement during the fiscal years ended December 31, 2023 and 2024.

As a result, the consolidated financial statements appearing elsewhere in this report reflect this restatement.

and its consolidated subsidiaries.

Business Operations

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Mercury Emissions

We provide mercury capture solutions driven by our patented two-part Sorbent Enhancement Additive (SEA®) process using a powerful combination of science and engineering.

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.

Our mercury removal technologies and systems will achieve mercury removal levels which meet or exceed the 2012 Coal- and Oil-Fired Electric Utility Steam Generating Units National Emission Standards for Hazardous Air Pollutants, as revised, known as 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.

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 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.

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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.

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, we announced the introduction of our new division to address the potable (drinking) water market with new sorbent technologies under development.

These new technologies involve less use of activated carbon and are a much more environmentally friendly approach to water treatment.

AC is a form of carbon that has been processed to have a large surface area and a high degree of porosity.

This gives it the ability to adsorb a wide range of substances, making it highly effective at removing particles, toxins and impurities.

GAC and similar agglomerated activated carbons (or shaped activated carbons) are a form of activated carbon that is specifically produced in a granular, coarse form, as opposed to powdered or pelletized forms.

This granularity allows for better flow through filtration systems, which makes it ideal for use in applications that require a continuous flow of air, water or liquids.

GAC is commonly used in water filtration systems, including municipal water treatment plants.

It is particularly effective at removing chlorine, organic compounds, pesticides, heavy metals, and other contaminants.

Reactivated GAC is spent GAC that has been restored for reuse, making it more sustainable and cost-effective.

Utilizing renewal raw materials allows us to develop and provide shaped activated carbon that can compete with other commercially available GAC options, and provide a superior activated carbon technology to remove contaminants (including PFAS) from potable water.

While pending PFAS regulations are projected to significantly increase overall GAC demand, our products are expected to be successfully applied regardless of PFAS regulations reflecting significant competitive advantages (i.e., renewable raw material sources, low arsenic content, and overall performance) to presently available GAC products for the water market.

In addition, our product(s) may provide inherent performance advantages such as lower pressure drop relative to existing carbon products in the marketplace today.

While the initial focus for our water treatment technologies will be on the potable water market, we expect that our technologies will also be valuable for industrial wastewater remediation.

Industrial wastewater is the liquid waste generated by industrial activities, including manufacturing, processing, and production facilities.

It often contains pollutants such as organic matter, heavy metals, chemicals, oils, and other contaminants that must be treated before being discharged into the environment or reused.

We believe our water treatment technologies will be well suited to treat such industrial wastewater in an optimal and cost-effective manner.

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 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.

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.

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 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.

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.

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 of common stock commenced trading on the TSX under the ticker symbol “BCHT”.

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.

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 Energy LLC (“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.

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.

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.

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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, various post-trial motions and applications were made by the parties.

We are awaiting rulings from the Court.

In April 2024, the EPA issued the first-ever national, enforceable drinking water standard to protect communities from exposure to harmful per-and polyfluoroalkyl substances (“PFAS”), also known as “forever chemicals”.

The Rule sets limits for five individual PFAS:

PFOA, PFOS, PFNA, PFHxS, and HFPO-DA (known as GenX Chemicals).

The Rule also sets a hazard index level for two or more of four PFAS as a mixture:

PFNA, PFHxS, HFPO-DA, and PFBS.

Under the Rule, public water systems must monitor these PFAS and will have three years to 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 May 2024, we announced the appointment of David Mazyck to head our new division to address the potable (drinking) water market with new sorbent technologies under development.

In addition, in May 2024, we announced the appointment of Dennis Baranik as Director of National Sales.

Baranik will oversee 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.

In July 2024, we commenced three patent infringement lawsuits against 14 defendants, including coal-fired power utilities, in three separate U.S.

District Courts in Arizona, Iowa and Missouri.

In January 2025, we commenced another patent infringement lawsuit against four defendants in the U.S.

District Court for the Western District of Missouri.

Such lawsuit claims infringement of the Company’s patent rights related to the Company’s mercury emissions reduction technologies.

The United States Judicial Panel on Multidistrict Litigation has ordered that such patent infringement lawsuits be consolidated and centralized in the Southern District of Iowa.

Effective as of October 8, 2024, we entered into agreement with one of the utilities and an affiliated entity named as defendants in the patent infringement lawsuit commenced by the Company in July 2024 in Arizona.

Such agreement provides such parties and their affiliates with a non-exclusive license to certain Company patents for use in connection with a certain designated coal-fired power plant operated by such utility.

The agreement includes a one-time license fee and 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.

Effective as of January 7, 2025, we entered into agreement with another one of the utilities named as a defendant in the Arizona action.

Such agreement provides such party and its affiliates with a non-exclusive license to certain Company patents for use in connection with a certain designated coal-fired power plant operated by such utility.

The 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.

In January 2025, we commenced another patent infringement lawsuit against four defendants in the U.S.

District Court for the Western District of Missouri.

Such lawsuit claims infringement of the Company’s patent rights related to the Company’s mercury emissions reduction technologies.

Named as defendants in the action are Evergy, Inc., Evergy Metro Inc., Evergy Missouri West, Inc.

and Evergy Kansas Central, Inc.

In the lawsuit, we request a trial by jury against the defendants and seek damages, costs, and legal expenses, along with a finding of willful infringement by the defendants, and an injunction prohibiting the defendants from further acts of infringement.

In February 2025, such lawsuit was consolidated with and transferred to the Southern District of Iowa.

Effective on October 17, 2024, as part of our rebranding, we changed our corporate name from Midwest Energy Emissions Corp.

to Birchtech, Inc.

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 Toronto Stock Exchange (“TSX”) and graduate from the TSX Venture Exchange (“TSXV”) to the TSX.

On November 12, 2024, our shares commenced trading on the TSX under the ticker symbol “BCHT”.

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.

On September 25, 2025, the Court issued a Memorandum Opinion and Order denying 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, and on November 20, 2025, the Court issued a Memorandum Opinion and Order denying the CERT defendants’ post-trial motion for a new trial on the issues of induced infringement, contributory infringement, willful infringement and damages.

Thereafter, on December 17, 2025, the Court issued a memorandum order granting the Company’s request for pre- and post-judgment interest, and denying the Company’s request for enhanced damages.

Following resolution of all post-trial motions, the Court issued the final judgment in favor of the Company on December 29, 2025 in the total amount of $78,397,157, which amount includes pre-judgment interest.

On January 28, 2026, the CERT defendants filed a notice of appeal of the judgment.

Under applicable rules, the CERT defendants may seek a stay of execution of the judgment pending appeal by posting a bond or other security in an amount and form approved by the Court.

As of the date of this report, the CERT defendants have not obtained a bonded stay.

Although the automatic stay of execution applicable following entry of judgment has expired, the appeal remains pending.

Interest continues to accrue on the judgment amount during the pendency of the appeal.

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 (“PTO”).

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 a result of the 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 April 2025, certain defendants in the consolidated Iowa actions filed IPR petitions seeking to invalidate various asserted claims of the Company’s patents.

In September and October 2025, the U.S.

Patent Trial and Appeal Board (“PTAB”) granted the institution of review of certain of the Company’s asserted patents.

The Company sought review of those institutional decisions by the PTO Director.

The Director has since issued decisions granting reconsideration in part and denying it in part, and certain matters remain subject to further motions and proceedings before the PTAB.

In connection with these proceedings, the Court in the consolidated Iowa actions has stayed the litigation pending completion of the IPR process.

Between June and July 2025, certain other defendants in the consolidated Iowa actions filed IPR petitions seeking to invalidate various asserted claims of the Company’s patents.

These petitions were denied institution by the PTO Director, and requests for reconsideration of those denials have also been denied.

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

Results of Operations

We generated revenues of approximately $17,406,000 and $17,625,000 (as restated) for the years ended December 31, 2024 and 2023, respectively.

We generated revenues of approximately $17,626,000 and $17,406,000 for the years ended December 31, 2025 and 2024, respectively.

Such revenues were primarily derived from sorbent product sales which were approximately $14,233,000 and $14,482,000 for the years ended December 31, 2025 and 2024, respectively.

Revenues can be dependent on natural gas prices, extreme weather, and the maintenance and downtime requirements of customer plants.

The decrease in revenues from the prior year was primarily due to the mix of plants running in 2024 resulting in decreased product revenues for 2024 compared to the prior year, offset by an increase in licensing revenues for 2024 compared to 2023.

Licensing revenues were approximately $2,808,000 and $388,000 (as restated) for the years ended 2024 and 2023, respectively.

Such increase was primarily due to a new licensing agreement which was entered into in 2024 with a utility.

Equipment sales and other revenues for the years ended December 31, 2024 and 2023 were approximately $116,000 and $145,000, respectively.

This decrease was primarily due to a decrease in demonstrations and consulting revenues offset by an increase in equipment sales revenues in 2024 compared to 2023.

The decrease in revenues for product sales from the prior year was primarily due to the mix of plants running, unexpected customer forced outages and products sold in 2025 resulting in decreased product revenues for 2025 compared to the prior year.

Licensing revenues were approximately $3,159,000 and $2,808,000 for the years ended 2025 and 2024, respectively.

Such increase was primarily due to new licensing agreements which was entered into in 2025 with primarily utility defendants.

Other revenues, consisting of demonstrations, consulting and equipment sales, were approximately $234,000 and $116,000 for the years ended December 31, 2025 and 2024, respectively.

Other revenues have not been material in relation to total revenues.

Cost of Sales

Cost of sales were approximately $10,225,000 and $10,305,000 for the years ended December 31, 2025 and 2024, respectively.

The decrease in cost of sales of approximately $1,867,000 was primarily attributable to decreased product sales in 2024 compared to the prior year, together with a decrease in the Company’s cost of carbon in 2024 compared to 2023.

Gross profit was approximately $7,101,000 and $5,453,000 (as restated) for the years ended December 31, 2024 and 2023, respectively.

This increase in gross profit of approximately $1,648,000 was primarily due to higher licensing revenues in 2024 compared to 2023, which typically carry higher margins than product sales, thus contributing to the overall improvement in gross profit.

The slight decrease in cost of sales of approximately $80,000 was primarily attributable to decreased product sales in 2025 compared to the prior year, together with a change in the mix of products sold in 2025 compared to 2024.

Gross profit was approximately $7,402,000 and $7,101,000 for the years ended December 31, 2025 and 2024, respectively.

The increase in gross profit of approximately $301,000 was primarily due to 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.

Operating Expenses

Operating expenses consisted of selling, general and administrative expenses (“SG&A”) and an impairment loss of $43,000 in 2024 and SG&A and an impairment loss of approximately $220,000 in 2023.

Operating expenses consisted of SG&A and research and development expenses (“R&D”) in 2025 and SG&A and in 2024.

Operating expenses decreased significantly in 2025 compared to 2024, despite incurring costs related to the development of the Company’s water treatment business.

SG&A expenses were approximately $8,577,000 and $14,216,000 for the years ended December 31, 2025 and 2024, respectively.

Although total SG&A expenses were largely unchanged in 2024 compared to the prior year, there were significant variances in individual categories.

Increases in salaries and wages, including bonus compensation and engagement of new senior personnel, increases in Board fees and increased stock-based compensation, were largely offset by reduced professional fees in 2024 compared to 2023.

The decrease in professional fees was mainly due to two settlement agreements reached in the fourth quarter of 2023 with various defendants in our patent litigation.

These agreements led to significant legal fees paid in 2023 to the patent litigation firm handling the cases, with no comparable expenses incurred in 2024.

Total SG&A expenses decreased in 2025 compared to the prior year, as a result of variances in individual categories.

This includes 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 2024 for which there were no comparable expenses in 2025, along with greater stock-based compensation in 2024 compared to 2025.

The decrease in professional fees was primarily due to lower legal fees in 2025 in connection with the Company’s patent litigation compared to the prior year which had greater legal fees due to trial preparation and the jury trial in the U.S.

District Court for the District of Delaware.

In addition, services provided by an independent contractor, which were previously included in SG&A for 2024, were classified as R&D expenses in 2025 to better align with the nature of the services performed.

Total R&D expenses were approximately $1,805,000 and $0 for the years ended December 31, 2025 and 2024, respectively.

R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies, and increased in 2025 compared to the prior year as the Company had not incurred any research related costs during 2024.

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 $7,158,000 and $8,973,000 (as restated) for the years ended December 31, 2024 and 2023, respectively.

Such decrease in operating loss was primarily due to our increased gross profit in 2024 compared to 2023 coupled with total operating expenses remaining relatively unchanged from year to year.

Our operating loss was approximately $3,030,000 and $7,158,000 for the years ended December 31, 2025 and 2024, 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 2025 as discussed above.

Other Income (Expense)

During the years ended December 31, 2024 and 2023, we had income from legal claims of $0 and approximately $27,608,000, respectively.

The income from legal claims in 2023 consisted of two settlement agreements reached in the fourth quarter of 2023 with various defendants in our patent litigation.

Interest expense related to the financing of capital was approximately $267,000 and $1,362,000 for the years ended December 31, 2024 and 2023, respectively.

During the years ended December 31, 2025 and 2024, we had total other income of $74,000 in 2025 compared to total other expense of $3,933,000 in 2024.

Interest expense was approximately $14,000 and $267,000 for the years ended December 31, 2025 and 2024, respectively.

The approximate breakdown of interest expense for the years ended December 31, 2025 and 2024 is as follows:

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Amortization of discount of notes payable

Loss on change in fair value of profit share liability were approximately $3,959,000 and $11,210,000 for the years ended December 31, 2024 and 2023, respectively.

The change is primarily attributed to the modification of the terms of the profit share liability (see Note 8 to the consolidated financial statements).

Net Income (Loss)

For the year ended December 31, 2024, we had a net loss of approximately $10,802,000 compared to net income of approximately $5,668,000 (as restated) for the year ended December 31, 2023.

Such change was primarily due to no income from legal claims in 2024 compared to $27,608,000 in 2023, offset by an increase in gross profit in 2024 compared to 2023, and a decrease in the loss on change in fair value of profit share recognized in 2024 compared to 2023.

Liquidity and Capital Resource

Gain or loss on change in fair value of profit share liability was a gain of approximately $6,000 and loss of approximately $3,959,000 for the years ended December 31, 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 consolidated financial statements for the year ended December 31, 2025).

For the year ended December 31, 2025, we had a net loss of approximately $3,026,000, an improvement from a net loss of $10,802,000 for the year ended December 31, 2024.

This improvement was primarily due to any increase in license fee revenue in 2025 compared to 2024, and a decrease in SG&A.

Liquidity and Capital Resources

We had approximately $2,245,000 in cash on our balance sheet at December 31, 2025 compared to approximately $3,456,000 at December 31, 2024.

Total current assets were approximately $5,004,000 and total current liabilities were approximately $10,740,000 at December 31, 2025, resulting in a working capital deficiency of approximately $5,737,000.

This compares to total current assets of approximately $24,995,000 (as restated) and total current liabilities of approximately $2,183,000 at December 31, 2023, resulting in working capital of approximately $21,812,000 (as restated).

Our accumulated deficit was approximately $72.8 million at December 31, 2024 compared to $62.0 million (as restated) at December 31, 2023.

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 working capital deficiency of approximately $2,707,000.

Our accumulated deficit was approximately $75,779,000 at December 31, 2025 compared to $72,753,000 at December 31, 2024.

Additionally, we had a net loss in the amount of approximately $3,026,000 and cash used in operating activities of approximately $700,000 for the year ended December 31, 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 year ended December 31, 2024, included elsewhere in this Annual Report, 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 were approximately $10,261,000 at December 31, 2024 versus approximately $28,311,000 (as restated) at December 31, 2023.

The change in total assets is primarily attributable to an approximate $17,484,000 decrease in cash and an approximate $1,253,000 decrease in accounts receivable, offset by an increase in property and equipment.

Subsequent to December 31, 2025, on February 27, 2026, we completed a public offering of 6,250,000 shares of our common stock, generating gross proceeds of $15.0 million.

On March 17, 2026, we sold to the underwriters in the offering pursuant to their partial exercise of their over-allotment option an additional 600,000 shares of our common stock resulting in additional gross proceeds of approximately $1.4 million.

After giving effect to the partial exercise of the over-allotment option, gross proceeds from the offering were approximately $16.4 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company.

Management believes that the proceeds from this offering, together with our existing cash, anticipated revenues and expected cash inflows from operations, will provide sufficient liquidity to fund our operations and meet our obligations for at least the next twelve months.

Total assets were approximately $9,238,000 at December 31, 2025 versus approximately $10,261,000 at December 31, 2024.

The change in total assets is primarily attributable to an approximate $1,211,000 decrease in cash, offset by deferred offering costs recognized in 2025 of $481,000, together with other changes in asset categories consisting of smaller increases and decreases that were not individually significant.

Total Liabilities

Total liabilities were approximately $10,953,000 at December 31, 2025 versus approximately $9,069,000 at December 31, 2024.

The decrease is primarily attributable to a decrease in outstanding debt as a result of the modification of the terms of the profit share liability, the repayment of the secured note and the repayment of the unsecured note.

The change in total liabilities is primarily attributable to an approximate $1,907,000 increase in accounts payable and accrued expenses.

Operating Activities

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

Net cash used in operating activities was approximately $4,105,000 for the year ended December 31, 2024 compared to net cash provided by operating activities of approximately $19,226,000 for the year ended December 31, 2023.

The increase in net cash provided by operating activities was primarily due to the following:

(i) a net loss of $10.5 million in 2024 compared to net income of $5.9 million in 2023;

(ii) loss on change in fair value of profit share of $4.0 million in 2024 compared to $11.2 million in 2023;

and (iii) 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.

Net cash used in operating activities was approximately $700,000 for the year ended December 31, 2025 compared to net cash used in operating activities of approximately $4,105,000 for the year ended December 31, 2024.

This decrease in net cash used in operating activities was primarily due to the following:

(i) a net loss of approximately $3.0 million in 2025 compared to a net loss of $10.8 million in 2024;

(ii) gain on change in fair value of profit share of approximately $6,000 in 2025 compared to a loss of $3,959,000 in 2024;

(iii) changes in accounts payable and accrued expenses of approximately $1,907,000 in 2025 compared to $145,000 in 2024;

and (iv) certain other changes in operating assets and liabilities including accounts receivable, income tax payable, deferred finance costs, and prepaid expenses and other assets.

Investing Activities

The Company had net cash used in investing activities of approximately $809,000 for the year ended December 31, 2024 for the purchase of a truck and lab equipment compared to no cash used in investing activities for the year ended December 31, 2023.

We had net cash used in investing activities of approximately $29,000 for the year ended December 31, 2025 for the purchase of lab equipment compared to net cash used in investing activities of approximately $809,000 for the year ended December 31, 2024 for the purchase of a truck and lab equipment.

Financing Activities

Net cash used in financing activities was approximately $12,569,000 for the year ended December 31, 2024 compared to approximately $210,000 provided by financing activities for the year ended December 31, 2023.

Net cash used in financing activities was $481,000 for the year ended December 31, 2025 compared to approximately $12,569,000 used in financing activities for the year ended December 31, 2024.

During the year ended December 31, 2025, we incurred approximately $481,000 of deferred offering costs related to our public offering.

During the year ended December 31, 2024, we repaid the remaining principal of approximately $272,000 on the AC Midwest secured note and approximately $12,315,000 of the principal remaining on the AC Midwest unsecured note.

During the years ended December 31, 2024 and 2023, we received approximately $17,500 and $210,000, respectively, from the exercise of stock options.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial conditions and results of operation are based upon the accompanying consolidated financial statements which have been prepared in accordance with the generally accepted accounting principles in the U.S.

The preparation of the consolidated financial statements requires that we make estimates and assumptions that affect the amounts reported in assets, liabilities, revenues, and expenses.

We use 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.

We base these estimates on various assumptions and experience that we believe to be reasonable.

The following critical accounting policies are those that are important to the presentation of our financial condition and results of operations.

These policies require management’s most difficult, complex, or subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

The following critical accounting policies affect our more significant estimates used in the preparation of our consolidated financial statements.

In particular, our most critical accounting policies relate to the recognition of revenue, and the valuation of our stock-based compensation.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.

Management evaluates its accounting policies, estimates, and judgments on an ongoing basis.

Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances.

Actual results may differ under different assumptions and conditions, and such differences could be material to the consolidated financial statements.

Management evaluated the development and selection of its critical accounting policies and estimates and believes that the following accounting policies are critical as they involve a higher degree of judgment or complexity and/or are the most significant to reporting our results of operations and financial position.

The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our consolidated financial statements.

While there are a number of accounting policies, methods and estimates affecting our consolidated financial statements as addressed in Note 3 to our financial statements, “Summary of Significant Accounting Policies,” areas that are particularly critical and significant include:

Property and Equipment

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Expenditures for repairs and maintenance which do not materially extend the useful lives of property and equipment are charged to operations.

Management reviews the carrying value of our property and equipment for impairment on an annual basis.

Intellectual Property

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Recoverability of Long-Lived and Intangible Assets

Long-lived assets and certain identifiable intangibles held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-lived assets and certain identifiable intangibles, including property and equipment and intellectual property, 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.

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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.

Since there is typically no active market for our long-lived tangible or intangible assets, we estimate fair values based on the expected future cash flows.

Our estimates are subject to uncertainty and may be affected by a number of factors outside our control, including general economic conditions and the competitive environment.

While we believe our estimates and judgments about future cash flows are reasonable, future impairment charges may be required if the expected cash flow estimates, as projected, do not occur or if events change requiring us to revise our estimates.

The Company has evaluated the recoverability of the carrying value of the Company’s property and equipment, right of use asset, and intellectual property.

After completing the assessment of property and equipment for impairment as of December 31, 2024 and 2023, the Company recorded an impairment expense related to property and equipment of $43,000 (2023 - $219,707) which is included in Impairment loss in the Company’s consolidated statements of operations.

After completing the assessment of property and equipment for impairment as of December 31, 2025 and 2024, the Company recorded an impairment expense related to property and equipment of $50,000 (2024 - $43,000) which is included in Impairment loss in the Company’s consolidated statements of operations and comprehensive loss.

The expense was primarily related to the impairment of construction in process costs where management determined that the undiscounted future cash flows were not sufficient to recover the carrying value of these assets over the estimated useful life.

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We account for stock-based compensation awards in accordance with the provisions of ASC 718, Compensation-Stock Compensation, which requires equity-based compensation, be reflected in the consolidated financial statements over the period of service which is typically the vesting period based on the estimated fair value of the awards.

These estimates require management to make assumptions with respect to the fair value of the Company’s equity award on the grant date, including the expected term of the award, the expected volatility of the Company’s stock calculated based on a period of time generally commensurate with the expected term of the award, risk-free interest rates and expected dividend yields of the Company’s stock.

Although we believe that our estimates and judgments are reasonable, actual results may differ from these estimates which could have a material adverse effect on our financial results.

Fair Value of Financial Instruments

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Our 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.

We have established and documented a process for determining fair value.

We maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

Whenever there is no readily available market data, management uses its best estimate and assumptions in determining fair value, but these estimates involve inherent uncertainties and the application of management’s judgment.

As a result, if other assumptions had been used, our recorded earnings or disclosures could have been materially different from those reflected in these financial statements.

Our estimates are subject to uncertainty and may be affected by a number of factors outside our control, including the timing of the receipt of proceeds from litigation.

For detailed information on our use of fair value measurements and our related valuation methodologies, see Note 3 to the Consolidated Financial Statements of this report.

Revenue Recognition

While we do not believe our revenue recognition involves significant judgment, it represents an important accounting policy.

We record revenue in accordance with ASC 606, Revenue from Contracts with Customers.

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Disaggregation of Revenue

We generated revenue for the years ended December 31, 2024 and 2023 by (i) delivering product to our commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites and (iii) performing demonstrations of our technology at customers with the intent of entering into long term supply agreements based on the performance of our products during the demonstrations and (iv) licensing our technology to customers.

We generated revenue for the years ended December 31, 2025 and 2024 by (i) delivering product to our commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites, (iii) performing demonstrations of our technology at customers with the intent of entering into long term supply agreements based on the performance of our products during the demonstrations and (iv) licensing our 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.

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Our management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about our effective tax rate reconciliation as well as information on income taxes paid.

The guidance will first be effective in our annual disclosures for the year ending December 31, 2025, and should be applied on a prospective basis with the option to apply retrospectively.

Early adoption is permitted.

The Company is in the process of assessing the impact of ASU 2023-09 on our disclosures.

Effective January 1, 2025, we adopted ASU 2023-09, Improvements to Income Tax Disclosures, which expanded income tax disclosure requirements, including disaggregation of pretax income (loss) and income tax expense (benefit) by jurisdiction and disclosure of income taxes paid (net of refunds received).

We adopted the standard on January 1, 2025 on a retrospective basis.

Accordingly, the tax rate reconciliation and income taxes paid disclosures for the year ended December 31, 2024 has been recast to conform to the current year’s presentation.

The adoption affected disclosures only and did not impact our financial position, results of operations, or cash flows.

In July 2025, the One Big Beautiful Bill Act (Public Law 119-21) was enacted.

The Company recognized the income tax effects of the legislation in the period of enactment in accordance with ASC 740.

The legislation did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2025.

The Company will continue to evaluate the impact of the legislation on future periods.

Recently Issued Accounting Standards

Recently issued, but not yet effective accounting pronouncements, that when adopted, may have a material effect on the accompanying consolidated financial statements are as follows:

Issued in June 2021, FASB Accounting Standards Update (ASU) No.

2016-13, Measurement of Credit Losses on Financial Instruments adds to U.S.

GAAP an impairment model known as the current expected credit loss (CECL) model, which is based on expected losses rather than incurred losses.

This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early application of the amendments is permitted.

Effective January 1, 2023, the Company adopted ASU No.

The adoption of ASU No.

2016-13 did not have a material effect on the accompanying consolidated financial statements.

In November 2023, the FASB issued ASU No.

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The Company adopted ASU 2023‑07 effective for its Annual Report on Form 10‑K for the year ended December 31, 2024 and subsequent interim periods.

Since ASU 2023-07 addresses only disclosures, the adoption of ASU 2023-07 did not have a significant impact on its consolidated financial statements.

Since ASU 2023‑07 addresses only disclosures, the adoption of ASU 2023‑07 did not have a significant impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023‑09, Income Taxes (Topic 740):

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The standard is effective for years beginning after December 15, 2024 and early adoption is permitted.

The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

The Company adopted ASU 2023-09 effective for its Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent interim periods.

Since ASU 2023-09 addresses only disclosures, the adoption of ASU 2023-09 did not have a significant impact on its consolidated financial statements.

In November 2024, the FASB issued ASU No.

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2024‑03 is permitted.

The Company does not expect the application of this standard will have a material impact on its financial statements and related disclosures.

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.

Non-GAAP Financial Measures

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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 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.

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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 years ended December 31, 2024 and 2023, respectively:

The following table shows our reconciliation of net loss to adjusted EBITDA for the years ended December 31, 2025 and 2024, respectively:

For the Year Ended

(as restated)

(In thousands)

Net income (loss)

Non-GAAP adjustments:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis