Birchtech Corp. (BCHT) Q1 2021 Earnings Report, Transcript and Summary

Good day and welcome to the ME2C Environmental First Quarter 2021 Earnings Call. This conference is being recorded today, May 17, 2021 and the earnings press release accompanying this conference call was issued before today’s call. On today’s call is ME2C’s President and CEO, Richard MacPherson. Before we get started, I will read the disclaimer about forward-looking statements. This conference call may contain in addition to historical information, forward-looking statements within the meanings of the federal securities laws regarding ME2C’s Environmental. Forward-looking statements include statements about plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are different than historical facts. Forward-looking statements are generally identified by using words such as anticipate, believe, plan, expect, intend, will and similar expressions, but these words are not exclusive means of identifying forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks, uncertainties that could cause actual results to differ materially from the statements made.

Thank you, operator and thank you to everybody for joining us on today’s call. Well, we are off to an incredibly strong start in 2021 as we make significant headway towards the full monetization of our patented environmental technologies. Our efforts during the first quarter built off the momentum that we had coming into this year as we seek to elevate our position as a leading clean-tech enterprise across the U.S. power sector. Those that have been following our company likely noticed that we re-branded to ME2C Environmental in February, we feel this new trade name suitability reflects our dedication to the important cause of combating climate change. Our emissions control technologies continue to be recognized by the power industry as premier solutions, improving plant efficiency and diminishing toxic emissions in extremely cost effective manner. Let me begin by providing an update on our multi-pronged litigation strategy, where much of our efforts are focused during the first quarter. To recap, our patented sorbent enhancing additive, or SEA technologies are most widely adopted emission capture system in play in North America. SEA was created in the early 2000s with the objective of creating the best approach to mercury emissions. This proprietary process was so well received by the industry that we believe today 44% of the coal-fired plants throughout the U.S. have adopted these, our technologies. While this has undoubtedly reduced emissions across North America and improved air quality for everyone, we as a firm that invented the technologies were pretty much. Left out of the commercial process of adoption to a large degree, left to compete against our own technologies with the various suppliers of the materials used in them, we made the decision to reset our business strategy, using our robust patent portfolio to initiate a litigation approach to ensure enterprise value for ME2C Environmental shareholders.

Thank you. Our first question is from Gerry Sweeney with ROTH Capital. Please proceed.

Good afternoon, Rick. Thanks for taking my questions.

Sure, Gerry.

I am going to see if I can answer this in a way that – but maybe to ask this question in a way that maybe you can answer it, but obviously, yes, I think you had these four agreements with U.S coal-fired producers, how much of that 44% that you mentioned in your prepared remarks to those four represent? And then I guess the harder part of the question maybe what follows after that and how many people are you talking to, to sort of round out the remaining percentage?

Sure. So, in terms of actual usage of the technology in the field from a megawatt point of view, they probably account for about 20% of the outstanding infringement. And so significant, but certainly not the majority of it, the rest of the fleet that are using it are still about 80% of the unclaimed usage. And with regards to the second part of your question, we have active negotiations and discussions ongoing right now, with 9 significant utility corporations and are engaged at different levels of engagement, I guess I could say at this point with each of them. And once we proceed through that group, then we would move on to the next group of folks that we feel need to either be licensed or be buying from us. And unfortunately, I can’t give any specific details on that, but we will be announcing settlements as we go forward.

Got it. And as those 9 is – are there discussions, I am assuming the infringement that’s basically water under the bridge and the discussions are a little bit more around licensing versus purchasing some of the sorbent supply side agreements, I guess that’s what I say?

Yes, that’s basically it. There is actually quite a – it’s quite a bit of back and forth that needs to take place before you can get down to the actual discussions with the plant operators on this stuff. You go through a whole process of putting the patents out there, explaining the patents, explaining how they are actually taking advantage of the patents. Sometimes they don’t even know they are. And then you get back through to the point of identifying how many plants they have got that are using the system, how bigger the plants, how much megawatts do they put out or the value statements trying to get a handle on the longer term use and value position? So there is quite a bit of work to go through to actually come to a point where you have got a working document that makes sense on both sides and we are at various stages of that process right now. With the nine, some very close to completion and some still in the weeds going through the details.

Got it. And another question, this is maybe a little bit on the technical side as well, different – every plan is different. So, even if it’s a smaller play in terms of megawatt capacity, it could use more sorbent than some other plant that maybe larger, is that correct? It’s just depending on how…

That is possible, not most probable. But that is true. And the other thing is some corporations may only have say three boilers in their whole fleet, but they all are large and they all use the process. Well, that could be of more economic interest to us than a large corporation that may have shuttered most of its coal fleet and only have a few of the units using our process. So, it’s a bit proceeding as to which of the folks we are dealing with have more value.

So, just to go back if there is – if it’s a predominantly coal-fired power utility, there is a little bit more economic incentive as opposed to…

Yes.

You got it. Okay, got it.

Yes.

I think, could you go over, I mean, we have discussed in the past of Refined Coal side. I mean, obviously you talked about the pending court case and it sounds like it’s coming to closure soon, but that’s a pretty significant market. I thought it maybe worth just touching upon what’s going on there for a minute?

Yes. And Gerry, I will just – I will be cautious with my words, but I will just give you a general overview. We have filed suit against 39 different defendants a 1.5 years ago based on what we felt was the usage of our patented technologies in a tax credit program…

That’s right.

Which is aimed at reducing emissions and it provides basically $1 billion a year as noted by the federal government to the providers of this tax credit program. We feel very much that this program is based on the integrity of our patented technologies. And the judge has been looking at both sides of our submissions for the past 1.5 year and is expected to make a decision any day now with regards to whether or not he would dismiss the case based on the merits of the defendants information that was put forward or allow it to proceed to discovery, which of course is what we are hoping for to have our day in court. And so we are just waiting to see how that shakes out. It’s a very lucrative program for those that were operating it. And we feel our shareholders have significant loss, significant value, if indeed, they are not compensated for the use of that patented technologies.

Got it. That makes sense. And then also on the future, right, you talked about methane capture water and soil remediation and then rare earth elements, I think I got that, right, I want to call it rare earth metals, but I think said elements, which of those three are probably the furthest along or probably the closest to maybe commercialization?

I would say, most likely the rare earth elements, we feel very good about where we are with that. As I mentioned in the call, we have been talking with, and are now just in the negotiation on the paper side – contract side with Penn State, which is extremely well known research group in the field. We felt that they were the best in the industry for us to work with. So, we have a great deal of technology that we are looking forward, after developing our level to take there for those folks to pick up the ball and work with us to go further. But we feel very good about where we are in that field. And I guess one of the key factors of what we bring to the space is not that we have found a different place to mine rare earth elements or any of that nature. But we feel that we have developed a process due to our expertise in our field that will allow any – pretty much any and all folks that are dealing in this mineral field to be able to take advantage of. So, our effort is not only to try to extract rare earth elements from residuals from coal mining, and from coal fired power plants, but also to introduce that technology to the industry as a whole. And I think through that approach, we will have a multifaceted success to the technologies that we are working on.

Got it, right. I appreciate it. Thanks for taking my questions.

Sure.

Our next question is from John Nobile with Taglich Brothers. Please proceed.

Hi, good afternoon Rich. And thanks again for this call, taking the questions. I wanted to just bring up the rare earth elements technologies that you are working on. When I looked at the press release, I believe you alluded to the fact that approximately 16,500 tons is produced and/or the demand is that much annually. So, I am just curious, how much of that market do you believe that you could penetrate, when everything is fully developed, and I was hoping you might be able to quantify or give a rough estimate as to what you believe that would equate to potential revenue?

John, thank you for the question. And I wish I had the answer for you. At this point in time, with this point of our development, what we are looking for is as I mentioned just earlier, there now is to try to create a technology that improves the extraction of the minerals to the point where it becomes economically viable to extract rare earth from the coal and coal fired byproducts from the coal mining and coal fired byproducts. And if we create that technology, which we are working on, it not only will help us extract rare earth elements from those areas, but also improve the efficiency of the overall extraction of those rare earth elements from all mining. With regards to trying to get a number as to what percentage we would be able to extract, it’s just way too early for me to give any kind of estimate or even guess at this point. But what we have got is we got our head down focused on what we do best, which is creating new chemical approaches to extraction of something that’s very valuable. In the past, it was taking the mercury out of flue gas. Now it’s being able to take rare earth elements out of solution, in order to be able to make them a much more viably – a much more economically viable approach from the traditional way that they are extracted. But also very important to be able to reduce the environmental footprint of that process, which today is very frightful in terms of what it takes to actually extract rare earth elements, whether it’s a mining operation, or whatever. So, we are taking a more holistic approach to it, John. I should have some real economic numbers at some point this year, but right now we are just focused on getting the technology, right. And then once we feed it into the system, we will have a much better sense of what its economic value is. Suffice it to say, if we can play an important role in this industry, it will not only benefit, the country, but it will be extremely valuable to the shareholders.

Okay. I mean, it sounds like it would be definitely well accepted. I mean, obviously, it’s too early to tell. But I mean, when this does come to fruition, I would think it should be a decent market share. But anyway, I just wanted to ask one more, if I could ask you to provide an update on how things are progressing with the development of your methane gas emissions control technology?

So, the most recent round of testing that we finished, John was about two weeks ago. We are just crunching the economics of it with regards to what the capture rate was, versus the cost to capture, and trying to do some models in terms of putting that into the field. We are probably another couple of weeks away from having some definitive answers. But we are very pleased with the actual fact that it works. We just need to crunch the economics on it now, to see where we are in terms of how economically viable it is. We are a company that not only tries to do something that actually works, but do – but only follow-up on things that have an economical – commercial viability. And that’s what we are focused on now. I would say that in the next earnings call, I should have a very good handle on where that sits. And we will have developed by that time, not only revenue models, but figured out how and who we should be working with to be able to move it to the next stage.

Okay. And if I could just ask you to repeat, you mentioned that earlier. The time to development, first to development, did you say it was rare earth elements or the methane gas emission technology?

I actually think the rare earth element will progress quicker, given what we have seen most recently and the work that we have planned with Penn State, I think will put us in stay that I would say late summer, early fall. We will have some very significant developments, if indeed it proves out to work as we are hoping it will.

Great. That’s all I have. Thank you for taking my questions.

Thank you, John.

We have reached the end of the question-and -answer session. I would like to turn the call back over to Mr. Rick MacPherson for his closing remarks.

Thank you, operator and folks. Thanks very much for listening in today. As you can see from the first quarter, we have started off as we expected, on a very positive note, with good earnings, good cash in hand, things are developing nicely with regards to the up-listing to a main exchange. I very much expect that we are going to continue to clean up the balance sheet. The increase in revenue is expected to continue on an increasing fashion quarter-over-quarter. So, I think we are going to have a very good year. And as I get a sense, in particular of these nine folks that we are dealing with now, on the infringement side, we will have a better sense of whether or not it’s going to be in the majority convert to licensing or supply side. And the big unknown for us at this point is where we go from here on the refined coal side of things. That’s also a very significant decision that we are waiting to come down. And we will be reporting back to everybody on that as soon as we find out. So with that, I will say thank you again and look forward to reporting back at the end of next quarter. Cheers.

Thank you. This concludes today’s call. Thank you for your participation.