Birchtech Corp. (BCHT) Earnings Call Transcript & Summary

Good day, everyone. I'm Martin Gagel, Birchtech, we'll be presenting today their business and their opportunities. We are taking questions from the audience. [Operator Instructions] So Rick, I'm going to now officially get sort of the proper presentation going. Are we good to go?

Yes, I believe we are, Stacey.

All right. Martin, by the way.

Yes, Martin.

All right. Okay. And then so 3, 2, 1. Birchtech is a leader in developing and deploying specialty activated carbon technologies to deliver patented, innovative solutions for air and water purification. We've got CEO, Richard MacPherson, here to tell us about Birchtech, its technologies, and opportunities and the expected catalysts for the coming year as well as the expected unlocking and realization of substantial value for shareholders. I'm Martin Gagel with Market Radius Research. It's Thursday, February 27. I do deep-dive interviews with some of the world's leading small-cap companies, looking to discover huge opportunities that have been overlooked by the broader markets. But please remember, this is neither a recommendation nor investment advice. We're here to learn about the company. Rick, thanks a lot for joining us. It's great to have you here.

Yes, Martin. It's my pleasure. Thanks for having me.

All right. You've been a public company now for coming up to 2 years. I follow the Canadian small-cap market pretty closely, and I didn't stumble upon you until a few weeks ago, earlier this year. Some significant milestones have happened, and you seem to be coming out and starting to make a bit of a splash now. What's been going on? And why are you making a bit of noise right now?

Well, Martin, we've been very active in our legacy core business these past 12 years. We've been working in the U.S., in the coal-fired power plant industry, providing technologies that were necessary to remove mercury emissions from coal-fired plants so they would meet compliance. Very successful. Early on, we worked under state regulations, built the company nicely until about 2015. And then when the federal regulations for mercury control came in, our company saw a big rise in business. We did $33 million in 2016 in revenue that year. We're planning to grow exponentially over the coming years. And although the technology itself that we brought to market was widely adopted, unfortunately, those that adopted it did not come through us even though it was a valid patented process. So we ended up struggling for a few years to get our feet back under us and then went ahead and filed suit in 2019 to reclaim our position in the industry. And that has worked out very well for us. In the past year or so, we've been very successful in the mercury control business, in adding back new clients and being successful in our litigation efforts, which we started in 2019. We've licensed about 10 large power plant corporations. And we've also secured license payments to the tune of about $35 million with regards to those folks coming to the table and doing business with us as a patent-holding operator. And so the core business, the mercury capture business has been coming back nicely. Our supply side for that business has also been increasing nicely. And so as we go into '25, we have a nice tailwind of growing business on that side of our company. And we have a very significant legal win that we're waiting for the final judgment on of $57 million, which we were awarded from a jury trial in federal court. The judge will make a decision on the final amount of that award in the coming weeks or months. And we very much look forward to pivoting from that into the new line of business, which we'll get to, that we've been developing these past couple of years. But overall, the company is coming back strong. We have a nice cash flow positive position to work from that's underwriting the developments that we've been making in a new field. And we feel very good about the future.

All right. So essentially, you developed this technology to clean air out of coal-fired plants. And then a bunch of these operators started using the technology without paying you for it. And then you had to -- that hurt you guys. You had to circle back, do -- take some legal action. And then as you started getting some wins there and sort of flexing your muscles, that's when you started then re-signing up commercial licensing agreements to capture that so the operators wouldn't be breaking on the patent side. Is that roughly -- and then so that licensing agreement is now kicking in?

Yes, Martin. That's the case. So not only do we get onetime license fees for these licenses, but the main part of that settlement type of approach is that we also get, in most cases, a ROFR, a right of first refusal, for the supply side of the business, which, overall, longer term, is worth much more value to the company and its shareholders by increasing the base of our business as we go forward. And as it sits right now, for example, we're closing in on $20 million a year in repeatable annual supply business. And the folks that we have -- that we're involved with now in a legal fight through our Caldwell Cassady & Curry legal group have the potential to add another $20 million or more in annual supply to our business base. So as a core business, the mercury emission control business is developing nicely for us now that we're finally able to monetize the asset value of our IP that we originally started out with way back in the early start of the company. And so as we go through 2025 and into 2026, we expect to realize a growing base of business that will provide significant profits for the company and allow us to transition into a broader-based environmental tech company that we will be focusing on water remediation and the purification of potable water.

Great. So initially, the business model was you sell a consumable product that goes to clean the air. They side-stepped that. You're doing a licensing agreement to capture money from them. But ultimately, the business model is you sell them this consumable where margin is built in that sort of captures your technology core. And so now you're with -- and I guess you have a lot better negotiating power with the people that are breaching your patents. Once you've got a big legal win under your belt, then you can say, hey, look, we've got precedent here, you need to negotiate and start operating straight up with us. Do I have that right?

Yes, Martin, you have that right. The revenue model that you mentioned is correct. And not only do we have the precedence of legal wins and others that have taken licenses, but there's always the situation where we could pursue long-term damages, which, in most cases, are in the tens of millions or more. So we have a lot of reasons why the infringing parties should just start doing business with us at comparable pricing rather than go down the litigation route. There's really no need for that if we have the opportunity to sit with them and explain how we would work with them. The cost-benefit equation is very favorable for these folks that are using the technology without a license.

Okay. So you're giving them a pretty clean path forward. You're not trying to punish them too much for what's happened. It's like, hey, let's just get this on track, move forward and just start paying your fees here.

That's the intention, Martin, yes.

All right. So is there a lot of growth still in that market? Or is that kind of saturated and you just need to sort of take back the share that sort of slipped through, given people's businesses practices?

Yes. So the adoption has already taken place. They're already using our process. They're already using the materials that we would be selling them. We basically just need to change the name on the truck that delivers the material to the back end of the power plant and get them to pay a license fee for the actual use of the technology. It's a simple process forward. Unfortunately, however, we have had to go the litigation route in order to be able to focus the attention necessary to make that happen.

All right. And just the legal win that you notched here, that is a significant win. And so the -- just for those of us who don't quite understand the legal process, you've won the win, but you're waiting for the final judgment and what the value is, or explain what's happened and what, I guess, the next or the final step would be?

Sure. So there's several things that have happened. And we've collected about $35 million so far in awards for the IP, not including license fees and things of that nature. One of the defendants in a previous case, 2 of them actually combined, settled away on the -- basically on the courthouse steps for $27.5 million. And then we went to trial with another group. And after a week of jury trial in a federal court, we were awarded $57 million by the jury. However, because it was induced infringement and infringement that was willfulness involved with it, that they willfully infringed, which is what the jury decided, then the court had the option to review that final award for other considerations due to the willfulness nature of the action. And so things such as legal fees, interest from the time of filing of the suit and a general willfulness amount can be applied to the final award amount on top of the amount that the jury provided. So the basic amount was $57 million award. We're cautiously waiting to see what the judge has to say about that and whether or not it will stay at the $57 million or what it might be increased by a certain number due to the willfulness nature of the action that took place against our patents.

So there's upside to this, potential upside to this amount?

Correct.

All right. And is there a time line when the judge has to respond by? Or is there any sense of when you expect to hear the final decision?

He's a very competent federal judge who has taken the time and effort to really look into the details and understand the case. And I expect he's following suit with the exact same process for doing the final judgment. And so it's up to him. Whenever he decides to bring down his final judgment, I expect a very detailed, organized, factual, common-sense response, and he will do that whenever he's ready to do it. I would hope that, given that the end of next month would be a year from the trial, that things might come together between now and then. But again, he's a federal judge. He'll do it on his own time and make sure that it's done right.

With the new federal administration in the U.S., I see sort of, regarding your business, sort of 2 aspects to it. A, Trump is a big fan of coal and some new opportunities of coal, but he maybe isn't so environmentally protective as other administrations have been. So there could be a whole lot of new coal plants out there needing cleaning technologies as well. Is there any risk of, let's say, weakening the EPA standards and -- that, that could take away the requirement for these coal plants to use your technology?

Long story short, no. I don't see our particular area of endeavor, mercury emissions, being affected at all. They are established, in place. They are law. They would have to be -- there have to be a lot of laws undone, not regulations, in order for this to go away. And in the last final go around of putting these regulations in place, it was the utilities themselves that asked that this level of regulation that they're now under be put in place so that it would level the playing field and they'd know where they were. So all of the plants are in compliance. They have all the equipment in place to stay in compliance. It's not a significant expense, comparatively, to their operations. And I don't see anything disrupting the mercury emission controls going forward regardless of the administration, not to say that this administration would want to do away with any regulations that were helpful to the citizenry. I'd just say that, although they are looking at regulatory matters, I don't see this as being an area that they would focus on at all.

Yes. Mercury is, I think, generally considered not good by everyone across the political spectrum and people seem to like their clean air and water. So hopefully, that does make a lot of sense. All right. Is that sort of -- have we covered everything on the air and the coal side? Is that the [indiscernible] or is there anything we're missing there?

Well, the only thing I'd like to leave, I guess, is that we're having great discussions right now with some of the folks that are using our processes outside of the license arrangement. And I expect those will come to fruition with very solid business solutions in the coming weeks and months. Two of the large corporations that we did file suit against opted early to settle away. And there are a number more at the table now, which we think will work their way through to an amicable solution in the coming weeks and months. So I think our core business will benefit nicely and grow strong through 2025. And I'm looking forward to bringing announcements to the market as these negotiations come to completion, as we go through. I really don't expect the majority of the outstanding cases we have now against, I think, about 12 different power plants will actually go through the trial. I expect most of these to settle this year and add nicely to the core business and also bring in significant license revenues that we will be using to grow out the water treatment side of the company, which we are building out.

Your licensing revenue is sort of remediation of sort of current and past [ sins ] and that. That is essentially 100% margin business. Is that right?

Yes. Outside of legal costs, it is.

Yes. And the actual -- when you're delivering, I guess, the activated carbon consumables to the plants, what kind of margins do that have? And like how much -- how many millions of dollars? I don't know what a typical coal-fired plant would use in a year. Can you give us some kind of metrics on revenues per plant and margins or some of the kind of unit economics associated with it?

Sure. So Martin, it is very variable given the size of the different operations and their what they call capacity factor, how much they run the machine. But in general, I would say that the average power plant would use $2 million to $3 million worth of product to capture its mercury and stay in compliance. And we sell that to them with a gross margin of somewhere in the 40% range. And so as we go forward and look to basically double the base business that we've got in that supply side, we would expect to see significant growth in our bottom line through '25 and into '26.

All right. Does it depend how much they use on the type of coal? I believe some coal has higher mercury content and some has lower mercury content. If you've got more mercury in your coal, you've got to use more of your consumables. Does that make sense?

Yes. The type of coal does make a difference, both in terms of how much mercury is in the coal and how many what they call halides are in that coal, which affects the combustion and the flue gas in the boiler that requires treatment in order to remove the mercury.

Right. Okay. I think we've covered the main things there. While you've been negotiating all this air clean challenges you've had, you've also been investing in water technologies. And I guess I'm not sure which one to address first. I guess you have a core knowledge or technology base and activated carbon, which can be used for the air side. And then it also -- is it that same sort of knowledge or technology that you have that now you're utilizing in the water space to get rid of PFAS, which has been getting a lot of deservedly negative news recently, that's accumulating in our water supply?

Yes, Martin. So along those lines, while the legal folks were doing their thing, we decided to take our skill set and our know-how in the engineering group and see what we could do as carbonaceous specialists to be able to take what we know and create a disruptive technology or technologies in another field that would have great economic value and enhance the operations in the country. So we focused on water remediation and drinking water, or potable water purification. And not only did we focus our own team, which is led by John Pavlish and Dr. Nick Lentz, and by the way, Dr. Lentz did his thesis on PFOA, PFAS over 20 years ago, but we took our core group with known pedigree and successful know-how of how to create technologies and introduce and commercialize them in the environmental world and added to that with several very key people from the water industry that had been doing the same sorts of things we were doing in air in water for the past 20 years. And so what we have today is a division combining them all led by Dr. David Mazyck, who's, in our books, the best of the best in the industry as far as carbonaceous materials go, in the use and effectiveness of them for water purification. And in the U.S., Martin, with the 50-plus thousand utilities that are operating, carbonaceous materials are used in about 80% of the cases to purify that water or remediate those wastewaters. So putting this team together with this knowledge base, and experience and know-how was crucial for us to be able to enter the water business. And we did it in a very interesting way. We backed up and instead of just taking activated carbons and trying to enter the business as another seller, we decided that we would take a research, development and what we call a data-first approach. And so what we've done is backed up, built out these 2 world-class laboratories, one in North Dakota and another in Pennsylvania, and started to develop, a couple of years ago, new technologies that would have higher efficacy and be priced better than the best of the best that was out there. And we feel that we've accomplished that. And so, of late, in the past quarter and leading in and through next quarter, we've been doing the final testing and development of these new technologies. Our effort is such that we will not only introduce these new technologies by the end of Q2 of this year, but we'll begin comparative testing with the utilities that are out there and their present materials that they use for purification. And we'll do comparative testing with our new materials at our new lab in North Dakota. It's an RSCCT setup, which allows us to do comparative testing simultaneously on a number of different samples brought in by utilities and to do it in a very much more condensed fashion. So this hasn't been done in a country before. We'll be able to take water samples from utilities across the country and put them against our technologies and, within days, have real-world data that we can comparatively show them how they can improve their water treatment facility by using these new materials that we've created. And simultaneously, what we've done is put the production and manufacture capacities of these new materials on stream so that, by late in 2025, we'll actually be able to manufacture and sell these products into market. We may get there sooner, but by third quarter for sure, we should be actively selling into the market. And we have identified tens of millions of dollars of potential for these new products by talking to the engineering firms and utilities that our water treatment specialists have built relationships with over the past couple of decades as they've worked as industry leaders in that industry.

Water cleaning and purification requires a lot of big equipment in that. You're selling a consumable like you do in the air area, correct? So every year, they have to buy a few tons or whatever it is per cubic meter of water that they purify in that. Is that essentially how the model works?

Yes, Martin, that's correct. You've got it right down.

Do you -- is it like a drop-in solution where, in one of the filters, you just add a new filter and it's the same? Or do your clients -- do they have to put in new piping or spend a few million dollars to retrofit to be able to take your consumable into their process?

No. It's a simple drop-in approach, Martin. The market that we're looking at is what they call a GAC market, granular activated carbon market. And our team have created new GAC versions with very high-performing aspects to them that should be able to replace the present GAC being used by multiples of these utilities and have better efficacy, longer-lasting and better pricing than what's available today. And not only that, these new variations of granular activated carbons have shown us in the lab to generate higher efficacy on PFOA, PFAS, or forever chemical absorption, as well as longer-lasting times with regards to how long they can be used in these large bed operations that you've mentioned.

Okay. So this is a relatively easy switch for the users to take on, just start buying from a new supplier, their GAC?

Yes. So not only that, Martin, these facilities, again, over 50,000, they regularly change out the GAC in their systems. Now, they may have to do it more often now if the forever chemical regulations go into place. But by doing it with us, changing out with our solution, will give them a better overall result than if they keep using the one that they're using now, in our experience. And so we will be involved not only in selling new GAC of a different variety to the market, but we'll also be involved in reactivating the spent carbons that are typically changed out on a rotating basis every year to 2 in most utilities. And what's different with our reactivation processes which we've developed is 100% of the spent carbon will be returned back to the utilities instead of approximately 75%, which is typically all that's able to be returned using the present technologies that are out there. That other 25% gets landfilled, and it's costly to landfill it as well. So overall, there are a number of different aspects to our new technologies based on the experience of the team that we have together that will make it a much better solution overall for the utilities across the country.

Did I get that right, you are taking their sort of used or contaminated carbon, taking it, cleaning it and then giving it back to them for reuse? Is that right?

That's correct. And we've developed a system that you can return 100% of it whereas, present-day and in the past and with the others going forward, as far as I'm aware now, you only get 75% back. 25% is landfilled at an expense, approximately $1 a pound, and then you have to buy new carbon from them to top it back up to get where you need to be. We are in a situation where we've developed a process to cancel all of that out. You send your spent carbon to our facilities once they're up and running. You'll get return 100% back and the efficacy of the returned product will actually be better than when you originally bought the product in the first place.

Is this business model dependent upon regulations at state or federal level saying that you need to remove or can have so many PFAS or have so much PFAS content in the water that you put out? Or you said there is an economic benefit to it as well. Is it just like it cleans better and you're able to do it less expensive because you're getting, what, 100% of your carbon back and there are other efficiencies involved? Is it just straight economically better for them to use this and they get the better cleaning out of it, too?

Good point, Martin. We're not worried about how long it takes for the forever chemical regulations to come into play or to what degree they come into play. We've designed technologies that will purify water under the standard systems that are in play today better than the best technologies that are out there. We are looking forward to introducing these technologies regardless of what happens with the PFOA/PFAS regulations. So if, when we get to full-scale operation in the field, we can provide the results that we think we can to the utility market, there should be a very solid piece of that market for us to obtain going forward. And it is a multibillion-dollar opportunity for us as we enter into the commercialization of our new products.

How hard will it be to displace the incumbents who are already selling in there? Do they have, let's say, long-term supply or service contracts, and you've got to wait a couple of years for -- until there's an opportunity for you to bid on it? Or is it kind of a month-to-month thing and you can get in the queue pretty quick?

Well, Martin, it varies quite a bit. However, typically, it would be a year-to-year kind of an RFP process, which we would be able to enter into. So as all of the utilities would have varying dates of renewal, there would always be an opportunity for us to enter the market. And so far, just in terms of soft commitments, verbal discussions with engineering firms and utilities, we've identified about $80 million of revenue available to us once we get to the point of full production of these new technologies. And maybe if I can, I'll speak quickly to our production capacities and what we've got underway. And at this point in time, we've secured feedstock supplies from significant manufacturing operations. We've also created joint venture relationships with other manufacturers. And we are also looking at an acquisition to be able to create and produce on our own. So collectively, we expect, by the latter half of 2025, to be in a position to generate very significant millions of dollars of revenue for this water business and also start a very significant plant build-out in the third quarter of this year, which would allow us to add another $60-plus million worth of supply-side revenue by the end of 2026.

The facility you're putting up in Texas right now, what revenue potential does that one -- that's expected to come on by -- before Q3, I believe. How much revenue could that one facility at that point generate?

That would use a previously-announced feedstock contract that we put together early in -- or late in 2024. And that would generate about $7 million or $8 million in revenue.

Okay. And what kind of gross margins would be you getting on that type of business?

The initial contract would have not near as much margin as the -- I'm sorry, that supply side would not have near as much margin as we eventually would get to. It would probably be in the low 20% range just because of the nature of it. And we would use it really to be able to enter the market, build the relationships and the actual -- work out the logistics of supplying the water industry as our entry in for 2025. Once we moved through the latter part of '25 and into '26, we would expect that we would be in a position to introduce much more product at much higher margins based on the efficacy of what we'll be bringing to market.

Got you. So you're going to be getting that through scale, just as you scale up and you can do things more efficiently, I guess, manufacture some of the -- instead of buying it, you can -- you'll be able to manufacture that yourself. And did I get that right? You said -- with new products, is there like a product runway or pipeline that you're looking at where you'll be launching new, higher-value products where you can get more money for? Did I get that right?

You know what? It's funny. We just kind of stumbled on that. One of the things that we're looking at now is an acquisition, which would not only provide us a runway into the water market, but position us to be able to alter and improve that plant so that we would indeed be offering higher-value, higher-dollar products from that, which would be sold into the water market. So a trending combination of those things should take effect post-acquisition in the last half of 2025.

All right. So it sounds like 2025 is going to start off modestly. It will grow and then grow from there. 2026 will be bigger. And then I guess, 2027, I guess, with clients coming on, new manufacturing and supply process, that really get a lot of acceleration and momentum 2027 and beyond.

That's correct, especially when the main plant is up and operating with the capacity to generate $60 million in material value initially. And then we would be able to start adding further lines to that as we go forward. So given the size of the market and the specialty of what we've developed, our challenge will just be to build plants out fast enough to be able to manage the opportunity that we are creating now.

And one question. Who are your customers? You gave a large number of how many customers out there. Are they municipal water systems? Or are they industrial water systems for cleaning as they go into, I don't know, a semiconductor plant or all the various plants that need water going in? And who are your clients?

So a combination of industrial and municipal water supply clients. We will be focusing initially in the -- this year, we'll be focusing on wastewater remediation from industrial sites as well as selling into the potable water business with utilities, mainly through their engineering firms. And so as the market develops, we will grow more into potable water, but the remediation business will stay as a base part of our business as well. So it's yet to be seen how it will develop, Martin, over time. But the big market is in the drinking water side, and we are extremely well positioned now, with our developing technologies, to enter that and do for the water what we did for air, be very disruptive and effective and decrease the cost of these utilities operations.

I'm going to connect the first part of the -- your presentation on air now with the water part of it. Your air side is going to be -- looks like generating a lot of excess cash in the near term. And what my question originally was going to be is, what are you going to do with the excess cash? How are you going to return it to shareholders, share buybacks, dividends or what? But on the water side of it, you have what seems to be very large expansion plans. You've got to build out facilities. I'm guessing that the cash generated from the air side is going to be redeployed into building out the water side. And I guess, will you -- will that be enough cash to grow the business? Or will it be more than you need and there can still be some return of capital to shareholders? Talk about your whole cash flow going from one side of the business to the other and what's required to grow the business.

That's a lot of questions, Martin, but I appreciate it. So let me just walk you through this because there are no hard-set decisions made at this point. We understand that these new technologies we developed are very valuable, and we'd like to get them to market. So we'll be looking at ways, either through licensing or supplying them ourselves, to get them to market and start to build market share. The actual return on investment for these plants that we hope to build out is very quick and expected to be rather immediate. If we, for example, build a plant, the main plant that we hope to get underway in September, and we've done all of the groundwork necessary to do that, you'll be looking at $12 million, $15 million to build the plant. In its first year of operation, 18 months later, it will generate about $60 million with at least half of that going to the bottom line. So they very quickly will be paying for themselves and then making very large incomes from that point onward. So it's imperative for us to take these new technologies and get them to market for the benefit of the market and for the benefit of the company. And so we most likely will be looking at a combination of using some of the proceeds that we have on hand as well as, I would say, debt financing to look after the acquisition and build-out of these plants. And it will not be difficult for us to underwrite these given the return on investment that they promise. The key to this is to make sure that the technologies we developed actually do what we say they will do. So the next 6 to 9 months is critical for us to put these materials in comparative testing and then produce enough so that they earn market share and come to be known as the best available technologies in the market. And that, in itself, will dictate how we build out the firm. So I can't give you all of the answers now, but there are several different scenarios, all of which are solid. And we've had a number of folks interested in underwriting these as we go forward. We've also been able to put the engineering firms together that could build out simultaneously multiples of these facilities. But it will all come down to the acceptance of these technologies over the next 6 to 9 months, and that will dictate the pace at which we build out the production.

Got you. Okay. So the next -- the rest of 2025 is an important year as you tweak the product, figure it out and lock it down and really understand its comparative value to what else is out there.

Correct. All the indications so far are that it will do great. But that's what we think versus what the market thinks after we go after it for the next 9 months. I'm 100% confident we'll be successful. I need to make sure we get there before I start pontificating about how many we're going to build and how many hundreds of millions we're going to sell.

But regardless, you've got a war chest there able to fund a lot of facilities and you're not going to be short on cash, it looks like, to drive the business forward.

We should be in good shape.

All right. We've got -- I think we've covered everything. I appreciate all that. We have a bunch of questions here from the audience. So let's run through these. I'm going to read them out sort of live and maybe we will have addressed that, so just add to what is necessary in addition to what we've covered so far. What is the risk that the judge's decision in Delaware, and is there a way that you could get funding for the $57 million before the decision is handed down? The idea behind the question, just how real is the cash from the jury award? I guess there's skepticism about Delaware courts. And I guess if you could factor that -- get a prepayment on it and, of that, someone else willing to take on that risk.

Sure. So the only answer I can give you to that, because I can't second-guess the judge, especially publicly, is that the judge carried out a very detailed, knowledgeable trial. He did years and years of work reviewing request for dismissal by all of the defendants. And all of the requests for dismissal based on all of the different technical merits that they brought forward were dismissed. They did not hold water. Any and all of the efforts that came up during trial were defeated. The jury voted on all 4 counts in our favor. There was nothing in the bench trial that our legal team saw that caused any concern for any changes in the view of the court. So we very much expect that the willfulness of the infringement is what's at stake here and not the judgment itself. And to discuss -- make any further comment, I think, would be unwise.

All right. Is the facility in Texas operational yet? Will this be providing sorbent materials for both air and water business?

So the facility that we have -- we have 2 of them in Texas, one in Corsicana and then a large facility that's shown online from time to time in Texarkana. The facility in Texarkana will be used in the formation and manufacturing of our new water materials to a certain extent. It will help manage that initial $7 million to $8 million worth of product for water. We do not anticipate using it for air service, but it can, as we develop, be used in that regard as well. And that particular piece of equipment is placed strategically next to a joint venture partner who will be working with us to produce these new materials.

All right. A 2-part question here, how many companies continue to infringe on your patents? And have you issued any cease-and-desist orders?

Good question. Right now, we have 12 of them under lawsuit for infringement and there is an outstanding cease-and-desist order which the court is deciding on for all of the defendants.

All right. As data centers -- I'm so glad someone was able to bring in a data center and AI question into this. As data centers and AI demand continue to grow rapidly and there's increased demand for liquid cooling at the data centers, there is a 2-phase liquid cooling that uses refrigerants that are categorized as PFAS. Can you please talk about how your -- is it possible for your technology to be used to help AI data centers be more data friendly? And have you investigated and do you have competition in this space?

Personally, I know nothing of that technology. I can say, however, that we have seen a number of plants, coal-fired plants, that were scheduled for shutdowns that have recently issued press releases that they're staying open because of the AI demand. So although the coal fleet is running at 16% to 17% of the total fleet at this point, it's expected that it actually may grow in the coming years depending on the AI demand. So our business right now, both with our present clients and with those under litigation through infringement, are all expected to remain in business in the coming years. And that's why we feel very good about our growth position and the longevity of our coal business.

Have you contemplated in coal or in just the mining industry in general that there could be an application for your cleaning technology to be of tailings -- dams and tailings water to be part of a solution to help clean those up?

Well, in so much as wastewater in a lot of places uses carbonaceous materials for purification, yes. No specific technology. Again, we're focusing on the materials that are being used rather -- in the processes rather than reinventing the structure of that.

All right. If you are successful with your litigation strategy, what would be the annual revenue opportunity we should model once all the RGUs are online? And what would be the expected duration of that revenue stream in contract terms?

So we have yet to give guidance. However, I can give some color in that, these are typically 5-year renewable contracts that we sign for supply. And I can restate the supply value of the present companies we are now in litigation with annually is somewhere in the $20 million to $30 million a year range. So depending on our success in working out business relationships, supply contracts with these folks, that's what will depend what our annual run rate on the supply side will be. The licensing revenues typically are a onetime annual fee. And so after that is all pushed through in '25 and into '26, we'll be left with a supply side business which should be very profitable if we're successful in our litigation efforts going forward as we have been in the past.

How long are your patents good for in terms of years? How long of a runway do you have your patents to protect this business?

There's a number of different patents with varying years of operation left in them. However, one of the overriding realities is anybody and everybody who's been using our patented technologies without a license, we state, at this point, are in a situation where they owe us very significant damages, in most cases tens of millions of dollars. So with that on the table as a reality, as we see it based on our experience to date with the litigation, we have a very strong negotiating point to be able to create long-term supply contracts in lieu of full damage claims. And that, more than patent years left is irrefutable and irreplaceable.

All right. What is the company's capacity to simultaneously do testing for multiple utilities and municipalities? Can you please provide a sense of the personnel and capacity required?

So our new facilities are the best in the country. We can simultaneously test and compare materials in dozens of different utility situations on a go-forward basis. So we'll be able to move through the utility business once we make our products known in a very rapid fashion. Our challenge is really not going to be doing the testing and comparing our new technologies to what's out there. Our challenge will be ramping up the production to meet the demand post 2025.

All right. What is the time frame for the new technology to be introduced? And does -- and I think you've addressed that, but -- and does it need any EPA or DOE or Agriculture Department approval to deem it the best technology? Can you get sort of government stamp saying, yes, you're the best?

We won't be looking for what you in the industry called BACT, Best Available Control Technology, designation. Really, what we'll be looking for is to be able to take the testing and the results on real-world data to the market and just show straight-up how better -- how much better these technologies are versus our competition. The certification and verification of the actual product to be used in market is more or less defined by the requirements of what they call the RFP, or the request for proposal ,that comes out. The materials need to meet certain standards and specifications. And all of the technologies we developed we know, meet these. So it really doesn't require any verifications as such, just the testing to prove it out and show DOE, EPA and utilities what the efficacy and results and long-term value of these technologies are.

All right. What do you need to do to secure supplies for your new product? Will it be capital intensive? And will those investments have to wait until you get a settlement in your mercury court case? I think you've addressed that already. Is there anything you want to add?

No, just that we don't need to wait. We've got opportunities and people that want to do business with us and people that would like to lend us the money necessary to build these out based on the economics of the return. As I mentioned earlier, Martin, and you recognize, the job at hand now is to take the next 6 to 9 months, prove straight-up to the market the efficacy of these new technologies and then start building out, this fall, the production side as we start to prove the value. I'll be bringing results to the market as we go forward. And as you see our successful results, you'll also be able to anticipate our build-out for supply. I mean, one big new plant will generate about $60 million. Combined with what we've got lined up for production capacity now, we could just get to what we've got soft commitments on just based on discussions. If, indeed, we're able to start proving it in heads-up comp paragraphs, then we'll be able to move that $80 million number a long way. And this is nothing new for us. When I started the company, my son and I went plant to plant to plant with the EERC technicians doing head-to-head testing against the very best, the Nords of the world and ADAs and everybody that was out there. We went and did head-to-head testing against their products in real-world situations, built the data, showed the industry how this would work, and it was widely adopted. Unfortunately, they didn't come back to us. But this time around, we're going to do the same thing, introduce a disruptive technology that we've proven for ourselves and we know how to prove to the world and take that out and start to build market share. The only difference is, this time, we know how to do it without getting into a 5-year legal battle.

All right. When they're testing it, is the testing going to happen on a bench or pilot scale? Or are they going to put it into the real facility and some of the pipes, or I don't know how it's segmented, and do sort of real-world tests? Or are you going to get one water company to be your sort of real-world pilot plant and then everyone else will see how it works there? What process do you go through to prove the superiority of your stuff?

So what we've done, as I mentioned earlier, we've built 2 large, world-class labs. One of them has the analytical technical capacity to simultaneously compare our technologies in real-world conditions against the utilities operating systems as they have it now. The other plant is set up to continue to develop and produce batch quantities of customized carbonaceous materials that will be used in this head-to-head testing. So collectively, they'll be able to bring in a utility's water and their materials they're using and do real-world head-to-head testing in this very specialized setup and have the results within days. Typically, this would be what they would call a slip stream effort at the utility itself, which would involve hundreds -- or thousands of pounds of material and weeks and weeks and weeks of testing to get to the same point along with the cost involved in that. So we've been able to compartmentalize all of this and put it together in a way that it will generate real-world results and allow these people to make decisions immediately.

All right. Rick, we've been at this for an hour now. We still have 8 questions or so from the audience. Do you have time for us to finish up the questions or...

No problem at all. Yes.

All right. How is your GAC different from the current incumbent providers? Is it a different design or different ingredients in it?

Totally different than anything that's out there today. Because the patents are pending at this point, I don't want to get into the details, much better efficacy on PFOA/PFAS, lower cost, lots of feedstock to provide the product going forward. And we've secured all of the different components necessary to both build out and supply our first plant, which we would expect to begin this fall once we go through what we expect to be an uplisting on the New York Stock Exchange.

All right. An add-on to that, how extensive is your intellectual property in the water area? And you mentioned you're waiting for your patents to come through. Have you begun your patent -- your process or know-how? What do you -- what steps are you doing to protect it?

So we, of course, are very experienced now in patent litigation and how to put one together and how to make sure it stands. And our team have put together very solid patent coverage. I believe it's 6 different patents at this time and growing based on the developments and inventions that they've made. And I'll just leave it at that, Martin, if you don't mind.

All right. That makes sense. I think you've addressed this, but anything to add? What is the gross margin profile of your GAC products? And what is the revenue potential for 2026?

So starting out, it's just over 20%, growing into the 40% to 50% once we get our plant up and running end of '26. And I'm sorry, there was a question there about '26. I missed it.

The revenue potential for 2026.

So the revenue potential I expect will be very high. Our ability to meet that, however, will be muted by our capacity to build things out quickly. So I would -- and it's only a guess at this point in time. I can see where we would get to a point where we could do possibly about $20 million in water revenue in 2026, but I haven't given guidance. That's not guidance. That's just an expectation, given where we are, that we should -- could produce about $20 million in material for the water market in 2026, which, of course, would come in on top of our growing air business.

Got you. Can you comment on the price difference on a per pound basis with current CAG (sic) [ GAC ] products?

So the GAC products now are being sold generally in the $2 a pound range. We feel that price will most likely increase given the increasing demand. Our product should be able to be sold for similar pricing, but with a significant increase in efficacy, somewhere in the 25% to 30% range, thereby generating, in general, a 25% to 30% improvement in economics for the end user.

Got you. Will it be able to be used longer as well, so they don't have to recycle it or clean it up as often?

It's possible, but we need to get to real-world long-term testing to confirm that. We don't think it will be any less, but we don't want to make any comments about it being better in longevity until we get it in the water for a couple of years and see how it's working.

All right. You mentioned a potential acquisition. Please talk more about this.

I wish I could, but I'm in due diligence right now, and I'm not able to discuss it other than it is an acquisition which will move us into the water market quickly and allow us to start selling product into that market through that vessel in the second half of 2025.

All right. What is the cost of building out a supply plant that would generate $50 million of annual revenues?

So the one that we have spec now, which our team designed and did all the CAT drawings, and we did all of the walk-down on several different sites underway with the whole permitting side of things and whatnot, it's actually a $15 million plant that would generate about $60 million a year in product based on today's pricing.

All right. And you've addressed this, but I'll just ask the question straight out. Why are you the only people that can do this technologies? Why can't other people build this and flood the market and suppress your margins?

They just don't -- there's nobody out there that has the team that we have. There's nobody out there that has the experience, know-how and pedigree of our team. What we did in the air side with carbonaceous materials was never done, has never been improved since we introduced it. What this team has done in creating these materials is not anything that we feel any team out there had the capacity to do nor the need to do it. All of the big guys in this space are producing a basic granular activated carbon. And it's a great product, many variations of it, and they've got the market locked down. There's not much economic initiative or driver there for them to create something that would reduce the amount of product they sold. That's for people like us to come in as a tech company, disrupt that reality and provide the industry with something that will reduce the costs and create a new market for new products. That's what we do.

All right. And final question here, I guess, maybe a market question for the end. Could you explain why your share price sells below the value of the legal judgment you've received?

No explanation from me, Martin, other than we have not brought a lot of news to market over this past year. We'll be moving forward with our new IR firm, the MZ Group, in a very newsworthy fashion going forward. And I think once the industry -- the investment industry understands really who we are and what we're pivoting to and the wins that we're having as they come down, there should be a different realization of what the enterprise value should be.

All right. That would make sense. So it sounds like you've been really heads-down trying to get everything working now. And now that the pieces are coming into line, you're making an effort to get out there and tell the story so that disconnect between value and market value -- real or perceived value and market value is better aligned.

That's correct. We'll be extremely active these next 4 to 6 months. Our objective is to move on to the New York Exchange in the third quarter. And I'm very much looking forward to being active and bringing a lot of news to the market leading up to that. So we'll just see how it plays out.

Going -- doing an uplifting, it's often concurrent with a financing, but it doesn't sound like you really would need a financing. Would there be one associated with that, maybe just to broaden your distribution? Or have you thought about that? Or any commentary you can make on that?

No real commentary, Martin, other than it is a discussion point, and we'll look at it as things develop through the summer and make some decisions on that in early fall.

Could you just talk about your capital structure right now? How many shares out? I've got -- I don't know actually, but I've got a sense that you probably own a fair share of the -- a lot of insider-held, shall we say. Can you give some rough numbers on what that all looks like?

Sure. So the insider position is about 25%, I believe. My percentage with regards to ownership and the rest of the company is about 15% when you include options. We very much are a closely held stock by a lot of people who have held the stock for some time. I very much think that the share value is undervalued at this time, but we'll see how that shakes out going forward. We have no debt. We've been able to remove all of our debt. We do have a profit share situation with our original bank where they will share a small percentage of the judgment award once those funds are received. Other than that, we have a cap value of the $50 million to $60 million range, varying on a weekly basis. But as you mentioned, the judgment, when it comes down, will be -- we're expecting it to be at least what our market cap is. So that should make a significant -- or could make a very significant impact on our share price. And I think as we move forward and bring results to the table, given the strategy and the heavy lifting that's been done over these past 18 months or so, I think the market will start to appreciate the value that we have as a company.

I think, if and when that judgment does come through, it will be hard to ignore it at that point. And something I've never thought of before, winning a judgment, is that -- like does that appear as income and as taxable? Or what is the tax implications of it? Or does it just fall straight on to your -- the asset side of your balance sheet?

I don't have the details on that, Martin. Actually, I've asked that question myself. I'm not concerned about the tax side. We've got a ton of losses over the last 8 years that we can apply against it. And it will be up to the attorneys to start in on the collection efforts as soon as the final judgment comes down. What's really encouraging for me is the work that we're now doing with the present defendants of the ongoing cases and how that will buoy the core business, increase the supply side and bring a steady amount of license revenue into the company throughout 2025 and into '26. So regardless of the onetime award, the company is very solid in terms of its cash flow and growth going through '26.

All right. Rick, that was excellent. We covered a lot of material here. I think we need to wrap it up. We've had you for over an hour and 15 minutes here. Any final comments before we put a wrap to this?

Nothing much, Martin. I want to thank you very much and folks that were listening. MZ Group, our new IR firm, will be bringing lots of information to the market in the coming weeks. We plan on giving guidance. We plan on giving a real good, solid understanding of where we are and where we're going. There is a lot of ongoing factors that change things with these lawsuits and stuff that change the numbers every week for us, every month, so we have to be cautious there. But overall, I think 2025 is the year we're going to realize, in real terms, the value that we've built for these past 2, 3 years and grow on from there. As we start to announce the water technology results in real terms with new clients, people should start to see what the value proposition really is. And for us, the water market is at least 10x the value of the air market, even when it finishes growing. So we're really looking forward to a nice move forward through '25 and '26.

Thank you very much. That was great. Fascinating story. I'm very glad you came on the show here. Thank you very much. I look forward to getting updates from you in the future. All the best, and I'll be definitely on my watch screen, and I'll be watching the news as it comes out and see how the different pieces fall into place here. Thank you.

Thank you, sir, a pleasure.