Company: BCHT
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001477932-25-002237
Chunk: 410

Company: Birchtech Corp.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1B
Chunk 410
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 the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Profit Share Liability 

Description of the Matter 

As of December 31, 2024, the Company recorded a profit share liability of $6.85 million. As discussed in Note 8 to the financial statements, the Company entered into a profit participation preference (the “profit share liability”) with AC Midwest Energy LLC as part of its Unsecured Note Financing Agreement. The Company calculates the fair value of the profit share liability on a quarterly basis utilizing management estimates. The fair value of the profit share liability is calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability is determined on a Level 3 measurement.

Inherent in the valuation of Level 3 financial instruments are certain significant judgments and estimates related to forecasted cash flows. Changes in these assumptions can significantly impact the valuation of the profit share liability and the gain or loss on change in fair value that is recorded. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s forecasted cash flows.

How We Addressed the Critical Audit Matter in Our Audit 

To test the profit share liability calculation as of December 31, 2024, we performed the following procedures among others, by which we:

 ·Obtained and reviewed the Unsecured Note Agreement and evaluated management’s assessment of the terms of the agreement.    ·Evaluated the assumptions regarding the probabilities related to the timing and amount of cash flows by comparing historical information and current events.    ·Utilized our internal valuation specialist to assist in the assessment of the appropriateness of the valuation methodology and the reasonableness of the discount rate applied, including consideration of conditions affecting market rates.    ·Tested the clerical accuracy of the profit share liability calculation.

/s/ Rosenberg Rich Baker Berman, P.A.

We have served as the Company’s auditor since 2023. 

Somerset, New Jersey 

March 31, 2025

 F-2Table of Contents

BIRCHTECH CORP. AND SUBSIDIARIES

(formerly Midwest Energy Emissions Corp.) 

CONSOLIDATED BALANCE SHEETS 

  December 31, 2024  December 31,2023(as restated)        ASSETS      Current assets      Cash $3,456