Item 7. Management’s Discussion and Analysis
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (amounts in thousands of dollars)
Management ’ s discussion and analysis ( “ MD&A ” ) should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.
Overview
In 2024, the Company continued to successfully execute on existing orders. We continue to invest in development of new technologies to expand our product offerings into the water and waste-water treatment market. Our capital resources are sufficient for our immediate and longer-term needs, and we continue to enjoy the services and support of a dedicated workforce. We expect that our cost control efforts will maintain our existing levels of operating expenditures and the diminishing effects of the pandemic should lead to an improved market outlook.
Key Operating Factors
Sales growth for our two reportable business segments is dependent upon the continued utilization of carbon-based fuels, such as natural gas and coal, for the generation of electric power. For our APC market segment, sales are driven primarily by our customers need to comply with federal, state and local regulatory mandates for the reduction or control of emissions of NOx. For our FUEL CHEM market segment, sales are dependent primarily upon our customers usage of our chemical technologies in order to mitigate slagging and fouling on coal or oil based combustion units in order to enjoy longer run times without the necessity of taking the combustion unit off line for cleaning.
We believe continued demand for our products will be led by the increased demand for electricity in emerging markets and new industries that are highly dependent upon electric power, such as the mega-computers required in order to power artificial intelligence and cryptocurrencies. While the market will continue to shift towards alternate forms of power generation continues, we anticipate natural gas and coal will remain significant sources of electricity generation in the future.
Our FUEL CHEM segment showed improved performance in 2024, experiencing an increase in segment revenues compared to 2023. Revenue growth was driven by the return of previously dormant customers as well as a new commercial program which was added following a successful site demonstration.
Our APC business experienced a decline in revenues and segment operating profits in 2024 compared to 2023 primarily due to customer-driven project delays and project timing. Despite this, we are encouraged by the pace and depth of our business development activities, which reflect an increased focus on global emissions protocols across a variety of fuel sources. Our Consolidated APC backlog at year end was $6,175.
Market Pressures
Our senior management team monitors and manages our ability to operate effectively as the result of market pressures. In particular, we are currently experiencing inflationary pressures for certain materials and labor, and long lead times for equipment components embodied in our products such as pumps, fans and catalysts. We continue to monitor the activities of our existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions; however, we cannot guarantee that we can continue to do so in the future. In this event, our business, results and financial condition could be adversely affected.
Background
We have two broad technology segments that provide advanced engineered solutions to meet the pollution control, efficiency improvement and operational optimization needs of energy-related facilities worldwide. They are as follows:
Air Pollution Control Technologies
The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas generated by the firing of natural gas, biomass or coal from boilers, incinerators, furnaces and other stationary combustion sources. These include SCR systems and NOxOUT and HERT™ SNCR systems. Our SCR systems can also include AIG, and GSG™ systems to provide high NOx reductions at significantly lower capital and operating costs than conventional SCR systems. ULTRA ® technology creates ammonia at a plant site using safe urea for use with any SCR application. ESP technologies make use of electrostatic precipitator products and services to reduce particulate matter. FGC systems are chemical injection systems offered in markets outside the U.S. and Canada to enhance electrostatic precipitator and fabric filter performance in controlling particulate emissions. We distribute our products through our direct sales force and third-party sales agents.
FUEL CHEM Technologies
The FUEL CHEM technology segment, which uses chemical processes in combination with advanced CFD and CKM boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in coal-fired furnaces and boilers through the addition of chemicals into the furnace using TIFI ® Targeted In-Furnace Injection™ technology. Fuel Tech sells its FUEL CHEM program through its direct sales force and agents to industrial and utility power-generation facilities. FUEL CHEM programs have been installed on combustion units in North America, Europe, and the Pacific Rim, treating a wide variety of solid and liquid fuels, including coal, heavy oil, biomass and municipal waste. The FUEL CHEM program improves the efficiency, reliability and environmental status of plants operating in the electric utility, industrial, pulp and paper, waste-to-energy, university and district heating markets and offers numerous operational, financial and environmental benefits to owners of boilers, furnaces and other combustion units.
The key market dynamic for both technology segments is the continued use of fossil fuels, especially coal, as the principal fuel source for global electricity production. In 2024, coal accounted for approximately 15% of all U.S. electricity generation and roughly 35% of global electricity generation. Major coal consumers include China, the U.S. and India.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (GAAP), which require us to make estimates and assumptions. We believe that certain accounting policies (see Note 1 to the consolidated financial statements) involve a higher degree of judgment, estimates and assumptions and are deemed critical. We routinely discuss our critical accounting policies with the Audit Committee of the Board of Directors.
Revenue Recognition: Air Pollution Control Technology
Fuel Tech’s APC contracts are typically six to eighteen months in length. A typical contract will have three or four critical operational measurements that, when achieved, serve as the basis for us to invoice the customer via progress billings. At a minimum, these measurements will include the generation of engineering drawings, the shipment of equipment and the completion of a system performance test.
As part of most of its contractual APC project agreements, Fuel Tech will agree to customer-specific acceptance criteria that relate to the operational performance of the system that is being sold. These criteria are determined based on modeling that is performed by Fuel Tech personnel, which is based on operational inputs that are provided by the customer. The customer will warrant that these operational inputs are accurate as they are specified in the binding contractual agreement. Further, the customer is solely responsible for the accuracy of the operating condition information; typically all performance guarantees and equipment warranties granted by us are voidable if the operating condition information is inaccurate or is not met.
Since control transfers over time, revenue is recognized based on the extent of progress towards completion of the single performance obligation. Fuel Tech uses the cost-to-cost input measure of progress for our contracts since it best depicts the transfer of assets to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost input measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs to fulfill include all internal and external engineering costs, equipment charges, inbound and outbound freight expenses, internal and site transfer costs, installation charges, purchasing and receiving costs, inspection costs, warehousing costs, project personnel travel expenses and other direct and indirect expenses specifically identified as project- or product-line related, as appropriate (e.g. test equipment depreciation and certain insurance expenses). Unexpected or unknown costs could affect the timing of revenue recognition and the cumulative profitability of the related projects.
Fuel Tech’s APC product line also includes ancillary revenue for post contractual goods and services. Revenue associated with these activities are recognized at a point in time when delivery of goods or completion of the service obligation is performed.
Fuel Tech has installed over 1,300 units with APC technology and normally provides performance guarantees to our customers based on the operating conditions for the project. As part of the project implementation process, we perform system start-up and optimization services that effectively serve as a test of actual project performance. We believe that this test, combined with the accuracy of the modeling that is performed, enables revenue to be recognized prior to the receipt of formal customer acceptance.
As of December 31, 2024 and 2023, we had no construction contracts in progress that were identified as a loss contract.
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheets. In our Air Pollution Control technology segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. These assets are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. At December 31, 2024 , 2023 , and 2022 contract assets for APC technology projects were approximately $2,075 , $2,285 , and $3,082, respectively, and are included in accounts receivable on the consolidated balance sheets.
However, the Company will periodically bill in advance of costs incurred before revenue is recognized, resulting in contract liabilities. These liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Contract liabilities were $721 , $1,279 , and $372 at December 31, 2024 , 2023 , and 2022 , respectively, and are included in other accrued liabilities on the consolidated balance sheets.
Assessment of Potential Impairment of Goodwill
Goodwill is not amortized but rather is reviewed annually as of the first day of the fourth quarter, or more frequently if indicators arise, for impairment. Such indicators include a decline in expected cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, a decrease in our market capitalization to an amount less than the carrying value of our assets, or slower growth rates, among others. We do not have any indefinite-lived intangible assets other than goodwill.
Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. We have two reporting units: the FUEL CHEM segment and the APC technology segment. Goodwill is only related to the FUEL CHEM segment.
Our evaluation of goodwill impairment involves first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may bypass this qualitative assessment, or determine that based on our qualitative assessment considering the totality of events and circumstances including macroeconomic factors, industry and market considerations, current and projected financial performance, a sustained decrease in our share price, or other factors, that additional impairment analysis is necessary. This additional analysis involves comparing the current fair value of a reporting unit to its carrying value. Fuel Tech uses a discounted cash flow (DCF) model to determine the current fair value of its FUEL CHEM reporting unit as this methodology was deemed to best quantify the present values of our expected future cash flows and yield a fair value that should be in line with the aggregate market value placed on the outstanding common stock as reflected by the current stock price multiplied by the outstanding shares of common stock. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce and working capital changes. Events outside our control, specifically market conditions that impact revenue growth assumptions, could significantly impact the fair value calculated. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, actual fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of goodwill.
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The application of our DCF model in estimating the fair value of each reporting segment is based on the ‘net asset’ approach to business valuation. In using this approach for each reportable segment, we forecast segment revenues and expenses out to perpetuity and then discount the resulting cash flows to their present value using an appropriate discount rate. The forecast considers, among other items, the current and expected business environment, expected changes in the fixed and variable cost structure as the business grows, and a revenue growth rate that we feel is both achievable and sustainable. The discount rate used is composed of a number of identifiable risk factors, including equity risk, company size, and certain company-specific risk factors such as our debt-to-equity ratio, among other factors, that when added together, results in a total return that a prudent investor would demand for an investment in our Company. In the event the estimated fair value of a reporting unit per the DCF model is less than the carrying value, we would record an impairment charge for the amount by which the carrying value exceeds the estimated fair value of the reporting unit.
The Company utilizes Accounting Standards Update (ASU) 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment for the annual goodwill impairment test.
Fuel Tech performed its annual goodwill impairment analysis for its FUEL CHEM reporting unit as of October 1, 2024 and determined that no impairment of goodwill existed within the FUEL CHEM technology segment.
Impairment of Long-Lived Assets
Under the guidance set forth in Accounting Standards Update (ASU) 2014-08, Property, Plant and Equipment (Topic 360), long-lived assets, including property and equipment and intangible assets, are reviewed for impairment when events and circumstances indicate that the carrying amount of the assets (or asset group) may not be recoverable. If impairment indicators exist, we perform a more detailed analysis and an impairment loss is recognized when either estimated future undiscounted cash flows expected to result from the use of the asset (or asset group) and its eventual disposition are less than the carrying amount or the determined fair value is less than the carrying amount. This process of analyzing impairment involves examining the operating condition of individual assets (or asset group) and estimating a fair value based upon current condition, relevant market factors and the remaining estimated operational life compared to the asset’s remaining depreciable life. Quoted market prices and other valuation techniques are used to determine expected fair value. We performed a detailed analysis of potential long-lived asset impairment during the fourth quarter of 2024 and determined no impairment exists. There was no impairment recorded during 2024.
A significant portion of our property and equipment is comprised of assets deployed at customer locations relating to our FUEL CHEM technology asset group, and due to the shorter-term duration over which this equipment is depreciated, the likelihood of impairment is mitigated. The discontinuation of a FUEL CHEM program at a customer site would most likely result in the re-deployment of all or most of the affected assets to another customer location rather than an impairment.
Valuation Allowance for Deferred Income Taxes
Deferred tax assets represent deductible temporary differences and net operating loss and tax credit carryforwards. A valuation allowance is recognized if it is more likely than not that some portion of the deferred tax asset will not be realized. At the end of each reporting period, management reviews the realizability of the deferred tax assets. As part of this review, we consider if there are taxable temporary differences that could generate taxable income in the future, if there is the ability to carry back the net operating losses or credits, if there is a projection of future taxable income, and if there are any tax planning strategies that can be readily implemented. As required by ASC 740 "Income Taxes", a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. This assessment resulted in a valuation allowance on our deferred tax assets of $13,697 and $15,699 at December 31, 2024 and 2023, respectively.
Stock-Based Compensation
We recognize compensation expense for employee equity awards ratably over the requisite service period of the award, adjusted for estimated forfeitures.
We utilize the Black-Scholes option-pricing model to estimate the fair value of stock option awards. Determining the fair value of stock options using the Black-Scholes model requires judgment, including estimates for (1) risk-free interest rate - an estimate based on the yield of zero-coupon treasury securities with a maturity equal to the expected life of the option; (2) expected volatility - an estimate based on the historical volatility of our common stock for a period equal to the expected life of the option; and (3) expected life of the option - an estimate based on historical experience including the effect of employee terminations.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides guidance for additional disclosures around the tax rate reconciliation and other tax disclosures. The standard will become effective for the annual reporting period beginning on January 1, 2025 for Fuel Tech. Application of the amendments should be applied prospectively but retrospective application is permitted. The Company is reviewing the impact of this new pronouncement and expects to incorporate the additional disclosures prospectively in the Tax note when the ASU is adopted.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to disclose in the notes to their financial statements disaggregated information about certain costs and expenses in both annual and interim filings. The standard will become effective for the annual reporting period beginning January 1, 2027 for Fuel Tech. The Company is reviewing the impact of this new pronouncement and expects to incorporate the additional disclosures in the relevant footnotes when the ASU is adopted.
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2024 versus 2023
Highlights for the year ended December 31, 2024, compared to 2023:
For the years ended December 31,
2024
2023
Change
Revenues
$
25,133
$
27,081
$
(1,948
)
Costs and expenses:
Cost of sales
14,510
15,425
(915
)
Selling, general and administrative
13,761
12,803
958
Research and development
1,564
1,511
53
Total costs and expenses
29,835
29,739
96
Operating loss
(4,702
)
(2,658
)
(2,044
)
Interest expense
—
(21
)
21
Interest income
1,251
1,300
(49
)
Other income (expense), net
1,585
(90
)
1,675
Loss before income taxes
(1,866
)
(1,469
)
(397
)
Income tax expense
(77
)
(69
)
(8
)
Net loss
$
(1,943
)
$
(1,538
)
$
(405
)
Revenues
Revenues for the years ended December 31, 2024 and 2023 were $25,133 and $27,081, respectively. The year-over-year decrease of $1,948 or 7%, was driven by the decrease in revenue in our APC technology segment in our U.S. operations, partially offset by an increase in our FUEL CHEM technology segment revenues. Our U.S. revenues decreased by $3,595, or 17%, from $21,397 in 2023 to $17,802 in 2024, and our international revenues increased by $1,647, or 29%, from $5,684 in 2023 to $7,331 in 2024.
Revenues for the APC technology segment were $11,242 for the year ended December 31, 2024, a decrease of $2,241, or 17%, versus fiscal 2023. The decrease in APC revenue for the twelve-month period ending December 31, 2024 in comparison to the prior year amount was principally related to the timing of project execution and customer driven delays. Consolidated APC backlog was $6,175 and $7,458 at December 31, 2024 and 2023, respectively. Our backlog at December 31, 2024 consists of U.S. domestic projects totaling $1,877 and international projects totaling $4,298.
Revenues for the FUEL CHEM technology segment for the year ended December 31, 2024 were $13,891, an increase of $293, or 2%, versus fiscal 2023. The increase in FUEL CHEM revenue was due primarily to renewed orders from previously dormant customers as well as the addition of a new customer following a successful site demonstration. We remain focused on attracting new customers in our FUEL CHEM business for both coal and non-coal applications. Our ability to attract new coal customers continues to be affected by the electric demand market, fuel switching as a result of low natural gas prices, and growth of renewable wind and solar power.
Cost of sales and gross margin
Consolidated cost of sales for the years ended December 31, 2024 and 2023 was $14,510 and $15,425, respectively. Consolidated gross margin percentages for the years ended December 31, 2024 and 2023 were 42% and 43%, respectively. The gross margins for the APC technology segment decreased to 37% in 2024 from 38% in 2023. The overall decrease in gross margin in the APC technology segment is primarily due to product and project mix. Gross margin percentage for the FUEL CHEM technology segment decreased to 46% from 48% for the years ended December 31, 2024 and 2023. This decrease is primarily due to demonstration costs and other administrative costs associated with new and previously dormant accounts.
Selling, general and administrative
Selling, general and administrative expenses for the years ended December 31, 2024 and 2023 were $13,761 and $12,803, respectively. The increase of $958, or 7%, is primarily attributed to the following:
•
An increase in employee related costs of $542
•
An increase in professional services and other expenses of $251
•
An increase in depreciation expense of $122
•
An increase in office and administrative costs relating to our foreign subsidiaries of $43
Depreciation and Amortization
Depreciation and amortization are calculated using the straight-line method and included in selling, general and administrative expense. For the years ended December 31, 2024 and 2023, the Company recorded depreciation of $403 and $281 and amortization of $57 and $61, respectively.
Research and development
Research and development expenses were $1,564 and $1,511 for the years ended December 31, 2024 and 2023, respectively. The expenditures in our research and development expenses were focused on new product development efforts in the pursuit of commercial applications for technologies outside of our traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities. Expenditures were mainly attributed to water treatment technologies and more specifically, our DGI ® Dissolved Gas Infusion Systems, an innovative alternative to current gas transfer and chemical replacement technologies. This infusion process has a variety of applications in the water and wastewater segments, including irrigation, treatment of natural waters, supply of oxygen for biological remediation, wastewater odor management, pH adjustment, re-carbonization, etc. DGI ® technology benefits include improved treatment performance and reduced treatment time, and the potential for reduced energy consumption, along with lower installation and operating costs. Third party validation testing of the efficiency of transferring oxygen to a treatment basin has been completed and results have been published.
Interest income
Interest income was $1,251 for the year ended December 31, 2024 compared to $1,300 for the same period in 2023. Interest income decreased due to a decrease in the balance held in money market funds.
Other income (expense), net
Other income, net was $1,585 for the year ended December 31, 2024 compared to Other expense, net of $90 for the same period in 2023. The increase of $1,675 is due primarily to the employee retention credit.
Income tax expense
For the year ended December 31, 2024, we recorded an income tax expense of $77 on pre-tax loss of $1,866. Our effective tax rates were (2.9)% and (4.8)% for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2023, we recorded an income tax expense of $69 on pre-tax income of $1,469. The effective tax rate for the year ended December 31, 2024 differed from the federal statutory rate of 21% as a result of establishing a deferred tax liability associated with a certain book-to-tax timing difference.
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Liquidity and Sources of Capital
At December 31, 2024 , we had cash and cash equivalents of $8,510 (which includes $ 631 of cash equivalents) and working capital of $23,764 versus cash and cash equivalents of $17,578 (which includes $ 5,083 of cash equivalents) and working capital of $32,633 at December 31, 2023 . We have no outstanding debt other than our outstanding letters of credit, under our Investment Collateral Security agreement with BMO Harris Bank, N.A. (the Investment Collateral Security agreement), which does not have any financial covenants. We expect to continue operating under this arrangement for the foreseeable future.
Operating activities used cash of $3,433 for the year ended December 31, 2024, primarily due to the employee retention credit receivable of $1,677, an increase in accounts receivable balances of $1,127, a decrease in accrued liabilities and other non-current liabilities of $312, and adjustments for non-cash items from our net loss from continuing operations for non-cash interest income on held-to-maturity securities of $132, partially offset by a decrease in prepaid expenses, other current assets, and other non-current assets of $292, an increase in accounts payable balances of $519, a decrease in inventory balances of $41, and adjustments for non-cash items from our net loss from continuing operations for depreciation and amortization of $460 and stock compensation expense of $446.
Operating activities provided cash of $696 for the year ended December 31, 2023 , primarily due to a decrease in accounts receivable balances of $1,039 and an increase in accrued expenses and other non-current liabilities of $1,239, partially offset by an increase in accounts payable balances of $295 and adjustments for non-cash items from our net loss from continuing operations for interest income on held-to-maturity securities of $433, depreciation and amortization of $342 and stock compensation expense of $389.
Investing activities used cash of $5,443 and $6,444 for the years ended December 31, 2024 and 2023, respectively. Investing activities for the years ended December 31, 2024 and 2023 primarily consisted of purchases of HTM debt securities as investments of $18,060 and $14,026, respectively, and the purchases of equipment and patent related costs of $378 and $418, respectively. Investing activities for the years ended December 31, 2024 and 2023 were partially funded by the maturities of debt securities of $12,995 and $8,000, respectively.
Financing activities used cash of $95 and provided cash of $42 for the years ended December 31, 2024 and 2023 . In 2024, the financing activity was related to taxes paid on behalf of equity award participants on the vesting of restricted stock units. In 2023, the finan cing activity was related to proceeds from the exercise of stock options.
We continue to monitor our liquidity needs and in response to our recent periods of net losses have taken measures to reduce expenses and restructure operations which we feel are necessary to ensure we maintain sufficient working capital and liquidity to operate the business and invest in our future. We have evaluated our ongoing business needs and considered the cash requirements of our base business of Air Pollution Control and FUEL CHEM. This evaluation included consideration of customer and revenue trends in our APC and FUEL CHEM business segments, current operating structure and expenditure levels, and other research and development initiatives. Based on this analysis, management believes that currently we have sufficient cash and working capital to operate our base APC and FUEL CHEM businesses. We believe our current cash position and net cash flows expected to be generated from operations are adequate to fund planned operations of the Company for the next 12 months.
We expect capital expenditures in 2025 for the DGI ® business, maintenance of field equipment, computer and systems, and general office equipment. We expect to fund our capital expenditures with cash from operations or cash on hand.
The Company's investment policy provides for $20,000 in funds at BMO Harris Bank (BMO Harris) to be invested in held-to-maturity debt securities of United States (US) Treasuries, including Notes, Bonds, and Bills, or US Government Agency securities. The funds are held in money market funds until they are invested in those securities. The investments are structured to create a maturity “ladder” where the proceeds from maturities are re-invested to maintain a balance of short- and long-term investments based on the expected business needs. Maturities are between three and thirty-six months.
The Company's Investment Collateral Security agreement with BMO Harris is used for the sole purpose of issuing standby letters of credit and requires us to pledge our investments as collateral for 150% of the aggregate face amount of outstanding standby letters of credit. The Company pays 250 basis points on the face values of outstanding letters of credit. There are no financial covenants set forth in the Investment Collateral Security agreement. At December 31, 2024, the Company had outstanding standby lett ers of credit totaling approximately $1,860 under the Investment Collateral Security agreement. At December 31, 2024 , the investments held as collateral totaled $2,790 . Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instru ments. The outstanding standby letters of credit mature as follows:
Total
2025
2026
Thereafter
Standby letters of credit and bank guarantees
$
1,860
$
1,166
$
694
$
—
Total
$
1,860
$
1,166
$
694
$
—