First, you take dried mushrooms and grind them into a fine powder.
Then you will cook them multiple times with water or alcohol depending on the mushroom. Water to release water-soluble compounds. Alcohol to release non-water soluble compounds.
The cooking action breaks down the mushroom's cell walls, allowing for the extraction of beneficial compounds (beta-glucans, triterpenes, etc.). The mushroom cell walls are made up of chitin, which our bodies do not have the enzymes to break down properly, so if we just eat fresh mushrooms, the active compounds are not as bioavailable to us. Hence, the requirement for extraction.
The resulting liquid from cooking the mushrooms is drained off and concentrated to the desired consistency. If any alcohol is used in the extraction, it is precipitated out (removed).
The liquid is then sent to a spray dryer, which removes all the water, leaving you with the final powder.
So the final liquid is now a powder without any of the water and or alcohol.