BIRCHTECH - $BCHT - EP:082 - NANO CAP PODCAST - BIRCHTECH CORP

Welcome to the NanoCap Podcast. I'm your host, Will Chernlin, and I'm excited to have you join me on this journey through the world of NanoCap companies. For the past decade, I've talked to thousands of business owners across various industries. It's been an enlightening experience revealing the vast tapestries of entrepreneurship and innovation that thrives beneath the surface of mainstream media coverage. Each week, I will interview different leaders of nano-cap publicly traded companies to learn about their history, what they do now, and their future. As a reminder, none of this information is financial advice, and it is all for entertainment purposes only. Let's start this week's episode. Hi, everyone. This week, we have Rick McPherson, the president and CEO of BirchTech, stock kicker BCHT. Birchtech is a pollution control company that helps power plants and water utilities remove harmful contaminants from air and water. Rick, thanks so much for coming on the podcast. Oh, it's my pleasure. Thank you. So I was going back kind of before you started with Birch Tech, and you started a consulting business right as the dot-com bubble was kind of about to explode. So tell me about kind of just starting a business in this field, and if you were affected much by the dot com bubble or anything like that? Or what was it like kind of starting a business in such a chaotic period in 1999? You know, the opportunities were vast. There was so much coming at you at that point in time. It was difficult to separate, you know, all of the activities surrounding the business that you're trying to launch in order to stay in your own lane. That's one of the things I learned from the late 90s is to stay on your own line, really figure out what you do well and stick to it. And that's what we've been doing with Birch Tech. Yeah, so you're running cross-grain communications for about a decade there. You're hearing about different ways, different clean tech and such. How did you stumble upon University of North Dakota up in Grand Forks? What was the technology there that got you excited? Tell me a little bit more about that transition. Yeah, so I was looking for solutions to the upcoming mercury regulations that everybody knew were going to be eventually put in place, similar to the PFO, PFOS regulations that are scheduled for 2030, 31. And all of the research that I did pointed to the University of North Dakota's ERC Center as being the leading group in the field. So I started to do testing there and spent six to eight months testing as a customer at their facility and realized that they were way ahead of the field in trying to come up with solutions for mercury capture at coal-fired power plants. So after a period of six to eight months, I sat down with the director at the time and came up with a solution that would allow me and our company to take what they had developed to market and commercialize it rather than continuing to try to develop something new on our own. And so we licensed their technologies in an exclusive fashion, covering their patents and all of their knowledge and know-how, and then took that to market using their team of technicians in the field to dozens of different power plants across the U.S. and into Canada. And therein was the effort that we were able to use to commercialize the technologies and move them forward as a commercial entity. so just to kind of double click on that so did you enter the University of North Dakota as an academic just trying to learn more about this technology and help out and then you realize hey the best way I could help out is actually commercialize this and get it out into the world or tell me a little bit more about kind of that transition from academia where you couldn't just get stuck forever and you turning it into an actual like entrepreneurial endeavor Yeah, no, Will, the thing is, I went there as a customer using their facilities to develop a new technology, which after six to eight months, I realized they had already developed it. So rather than have them have their years of research and development and technology sit on a credenza, they had over 60 million invested in that development to date. When I got there, I sat down and arranged with the director of the facility to commercialize it. So it's one of the very few, if not the first and only, technology that they developed at that facility in a large scale that ever ended up being commercialized. And the commercialization helped them financially. It helped us to bring a new business to the market. and mostly it helped the industry itself to be able to use a technology that allowed them to get into compliance in a lot of cases where they couldn't, and then overall to be able to get into compliance with the new regulations in a much more economical fashion than what was traditionally being used up to that point. So here's the big question. So you're working on this research in North Dakota, and then there's kind of a blank spot in my research of how this eventually transitioned into BirchTech and where your patented SEA process comes into place. And so can you kind of bridge the gap from kind of from your time in North Dakota to commercializing it to where we are today? Sure, sure. So what we did basically is we actually went into the field using the EERC's technicians and field tested the technology for three years. So from 2008 to 2011, my son and I basically traveled the country carrying out test programs along with the EERC technicians at various power plants all across the country from coast to coast. And through that process, we were able to educate the industry and through our results prove that the technology was far superior to what was being used at the time. So we took it from a concept and a patented technology from a credenza to an actual usable technology that was practical and used in the field. And for example, one of our additives, our main additive was called SB. At the end of the day, SB26 was the product that we ended up commercializing. When we started at SB1 and we developed and massaged the approach to the point where we were 25 plus renditions down the road before we actually commercialized it. And back in the day, you know, folks really weren't used to putting directly in the boiler activated carbons mixed with halides. And so there was a great deal of trepidation as to whether that was going to upset the balance of the boiler or cause harm. So we had a big hurdle to get over there to prove to the industry that not only was this very viable in its capacity to capture mercury, but it was also harmless to the boiler. And so through that three-year process and the uptick in all of the patents and whatnot and processes and product development, we were able to come out at the end of the day with our first commercial client, which was in Washington state in 2011, that really proved to the industry that this is, you know, the go forward approach for sorbent type technologies to capture mercury. Yeah. So tell me about that because it's, as I was researching, it seems like you have found kind of a solution to help clean the air more, but tell me About Water and kind of what your solution is there? Yeah. So all of the know-how and all of the experience that we gained over these past 17 years in the air side has a very high transferability rate of that skill set into water purification. Because as we go forward, the majority of effort in capturing PFO and PFOS in particular on the water side, on the drinking water side in particular, is going to focus around activated carbons. And that's where our skill set has developed over these past 17 odd years. And so what we are able to do is acquire several very key individuals to work with our team in order to be able to come up with the best possible approach to beable to use activated carbins for the collection of, and eventually the destruction of PFO and PFOS toxins. And so the transferability of skill set was there. We've made that change nicely. We started from an analytical point of view, which is our strength as a tech company. You know, our main guy on the tech side, Dr. Nick Lentz, did his thesis in PFO, PFOS back 25 years ago. And we're very, very knowledgeable in the PFO PFOS world. We designed and put together probably the best lab in the country in North Dakota for analytical purposes of PFO-PFOS in water, in particular in drinking water. And then we built out a design center under the tutelage of Dr. David Mazik, who is another of the top leaders in activated carbons and in water purification in the county in Pennsylvania. So with those two facilities developed and up and running and staffed with multiple engineers and students from Penn State, we've been able to put together a package that offers engineering firms complete know-how from soup to nuts on the whole PFO, PFAS side of things. And so we've become pretty much the tip of the spear for engineering firms that need to understand this in a very specific way and bring the knowledge and information they need to their utility clients. And so we've entered the industry from an information technical know-how approach versus just trying to sell our way into it. Yeah, that was kind of, you touched kind of on one of my questions here is with the EPA's new PFAS kind of rule, it covers at least 50,000 U.S. water systems and every water utility is different. So how does your design centers account for that? And how do these tests turn into a paid customer? Because who is your customer at the end of the day? Sure. Good question. So what we've done, if we reached out to the engineering firms across the country, all of the major ones, and you got to understand, well, they're the ones who actually make the decisions for all of those utilities, those 50,000 utilities. The majority of them don't make all the hard technical decisions themselves, they hire an outside engineering firm to be able to tell them what to do so they don't go astray and people can drink pure drinking water. And so what we've done is we've backed up and taken a engineering relationship approach to this business by providing them with the very best analytical work that we could provide them, as well as a design center to help them come up with the strategic approach that they should take. To answer your second part of your question, by focusing on rejuvenating granular activated carbons, which we see as being the go-to technology going forward, we're not only able to be able to capture the PFO and PFAS at the highest rate possible, but we're able to do it at a very, very reduced cost. And the biggest problem right now in capturing PFO and PFOS in the water industry is the cost. It is possible to go out there and capture the PFO PFOS, but to do it at a reasonable price is very difficult. So we started back three years ago to design an approach and an SEA, a sorbent enhancing additive combination, that would allow us to be able to present a path forward for folks to be able to, especially in small communities and mid-size water utilities, be able To remove these PFOS contaminants without having to bankrupt the facility or cause them to drive the price of water through the roof. And that's our goal. That's our approach. And we feel that we're very well down the road in accomplishing that. We work very hard now with the Royal Water association, all of their constituents, as well as, as I mentioned, multiple engineering firms in bringing our new, what we call rejuvenation technology to the market, which will reduce the cost of removing PFOS, probably at least 50%. So I got a kind of a side question just because I'm curious. Is North America at the forefront of removing PFOs and having clean water? Or is there any other like country like singapore or switzerland or something that we kind of model our system after saying hey they're at the forefront we want more of what they got or who is at the foreground of cleaning out water and make sure there's no pifas in the drinking water and such well my understanding is the u.s is the leader in this good to hear so that that basically by default kind of makes you the leader so Great to hear. So you've had these regulatory kind of tailwinds behind you. You mentioned like 2031 with different regulations coming out and kind of knowing that some of what you're kind of planning for is going to become inevitable eventually. But at the same time, in the last few years, America has become more and more hungry for energy creation, for new power plants for data centers that need help cleaning their water and as they so kind of how have you decided to kind of stay on course as the ceo and just keep doing what you're doing and doing what your doing best and then how much your time is you spending time looking at the different tailwinds that are out there and different other opportunities that your product may be good for or just the market growing in general so great question lots packed into that i'll do my best to try to explain it. So no, no, that's fine. So the approach that we're taking is, A, we really know our stuff with regards to activated carbons. I have proven that. Dozens of different patents. Those patents were really well defended. We've collected over $40 million just in defending our patents. We've got this massive lawsuit judgment that's out there now that we were ready to collect on around $80 million. So we really don't want to stop. Yeah, from a tech point of view, we really know our stuff. So we started to look three years ago at what we could do to take that knowledge and build it into a business that was 10 times what we have today. And that's the water game. And we are very confident that we figured a way to do that. And it started by building those relationships with the engineering firms, finding out exactly what the challenges were, and then putting our know-how to work and coming up with solutions. So we've come up with sorbent-enhancing additives that are extremely effective. We've comeup with a new rejuvenation process that will take spent carbons and turn them into 100% or even more efficacy of the best you can buy in the market for half the price. And we've also then started to work with the utilities to be able to build out these facilities for them, either at their site or nearby, so they could take advantage of those long-term savings and meet their compliance for PFO-PFAS without having to mortgage the community to the hilt to get clean water. And that's our approach. That's what we did in the air side. We cut the cost of using sorbents to capture mercury in half, and we plan on cutting the cost to be able to take the PFO-PFOS out of your drinking water in half as well. We've proven it at the design stage. And with this next facility, which will be opening in January, we'll move that whole proof of concept into a commercial level. And we expect to have that up and running in January and can show to anybody and everybody in North America that if you're using activated carbon to purify your water and take out the PFO and PFAS that we can reactivate slash rejuvenate it and get rid of the PFO PFAS completely for about half the cost of what's going to cost you to actually just buy new carbon whenever your carbon is spent and then landfill the PHO PFAS. So we've really come up with a system that's being highly embraced at this point in time that will really revolutionize the way that utilities take PFO, PFOS out of the drinking water. And in a lot of cases, I think we'll be implementing these systems and getting up and running long before the 2030, 31 regs come into play. Because what we're finding now is once the utilities realize they've got a problem, they want to solve it. They don't want to just wait until 3031 to deal with it and have their constituents drinking it in the meantime. If there's an affordable way for them to get after it and get it done, then they're all ears. And that's what we're bringing to the market. Yeah, that's kind of the last point there is what I was thinking about kind of playing it out in my head of as more and more municipalities and utility companies start having this way cleaner water than maybe their neighbors because they're under a different utility it's going to be a grassroots movement demanding saying we want the p5s removed just like the people next door to us why do why do they have better water and then the uh the utility companies are going tobe on the hot seat and so they're probably just trying to avoid that altogether by saying hey we were proactive so no it's a it's an it's cool marketing technique for sure that who doesn't want clean water right you got it so you mentioned the judgment mindset my notes that's roughly 78 million dollar judgment what's the plan with that cash is it no more buybacks is it a big marketing plan is it more r&d kind of what when you have a big cash infusion like that what how are you planning ahead for it and how do you want to allocate it so first and foremost i'm not going to spend it until i got it yeah yeah sure in general in general terms you know with the interest that's accumulating as well over 80 million right now we would give 30 percent of that to the attorneys that handled the case for us. So we'd end up with, say, 50, 55 million cash. At this point in time, we've got about a 12 million balance on our balance sheet. We have zero debt. We don't owe any money. And as soon as we move into 27 and stop investing in the water side, because I feel at that point it will be past a break-even point of what we've got to invest versus running our air business, then we're going to be in a situation where you know, that cash will come in for use for whatever we deem fit. I have talked to the board about doing a one-time dividend of some sort. A lot of our shareholders have been with us from day one. I'd like to be able to make sure that we give that some recognition. Secondly, all of the build-outs that we plan for the facilities going forward will be debt financed without any equity involved in it. So we're very much looking forward to not using up the cash on that other than our part of it, which would be probably 20 to 30% of a plant cost we would take out of proceeds. The rest of it would be used for acquisitions that would bolster or improve our penetration with our rejuvenation units, whether it was change out companies that would be, for example, picking up the used or spent carbons at a facility, bringing them to our facility so we can rejuvenate, return them. Those kind of synergistic type acquisitions, nothing massive that would help us continue to grow. We see the opportunity to grow between now and 2031, probably to a $200 to $300 million top line company using the facilities that we have planned and the technologies that we've developed and pat. Yeah. And as you kind of keep selling to different plants it's got to be that much easier to sell to the next plant as you kind of prove out more and more it becomes that much more sustainable for sure so as we kind of wrap up here what is the milestones shareholders should be looking for just in say 2027 what what are the things that you hope to get done by the end of 2027 if everything goes to plan so what you should be Looking from us for is a closing on the acquisition that I mentioned sometime this fall. B, having that plant up and running commercially in January of 27. You should also look for a significant result from our last major lawsuit with the Ameren Corporation. There's some significant damage claims that we'll be making in that, but they also have a huge opportunity for us from a supply side, should they elect to go business versus litigation in solving that challenge. And also, as we get offtake agreements in hand for rejuvenation in various regions in the U.S., you'll see us announce new build-out propositions for our facilities and our new patented process as we go forward. We're looking to develop multiples of these units. And as we secure the paperwork necessary, along with the financing, again, debt financing only, then those will, I'll be able to project what the capacity factor and revenues for those will be. And like I say, by the time we get to 3031, we are looking to be in a position to have about somewhere between two and $300 million worth of processing capacity in hand and either up and running or coming close to completion to meet the regulations when they come in completely well rick with my kind of second to last question i usually have is what gets you out of bed in the morning what gets you excited about birch tech what makes you think that this is where you want to spend your time with all your different experience expertise consulting with all these different companies over the years it's just going to be exciting to be able to take all this stuff and put it in play this first one i can't wait to get it up and running full complete proof of concept of us as a commercial operator in the water business and nailing down these offtake agreements and planning these build outs over the next three years is super exciting. I'm meeting with a construction firm in Alabama next week that we've got pretty much pinned down as the guy that's going to build these out for us. We're providing all the technical know-how, all the blueprints and whatnot, how to build them out. So it's just an exciting time. And one of the most pleasurable things for me is to continue hiring the young engineers that we're adding now, almost at a rate of one a month, in terms of building the company from a real fresh new start. Average hire these days is late 20s, early 30s. So we're building a really fresh young company from the company that we have at this point as we enter the water business. Because that's really exciting to sit in a room and listen to all these young folks really getting on about, you know, what they hope to do and what the results are and the new designs and new products. So it's a very exciting time for us. Well, Rick, thank you so much for spending time with us today, for cleaning the air, for everything you do to advance civilization as a whole. If my listeners want to learn a little bit more about Birch Tech, where should I send them? Just send them to our website. We respond immediately. And if it's something that's technical, I'll shoot it off to one of the engineers. If it's general with regards to our impact on the environment and what we hope to accomplish overall, then our corporate gal, Stacey Hyde, is excellent. She's on top of all of that stuff. And if its corporate shareholder kind of stuff, it'll get routed to me, and I'll make sure we get it responded to. Thank you so much for your time today, Rick. and for those of you still listening please remember to subscribe and review thanks thanks will this podcast is for informational purposes only and does not provide financial legal or any other advice the information is not investment advice or any offer to buy or sell any securities or to make any investment the views expressed by the guests are their own and any reference to third-party products services or information does not constitute an endorsement by nanocap podcast or its affiliate. The NanoCap Podcast Express disclaims all liability for any individual's use of the information presented in this podcast.