FUEL TECH, INC. 10-K

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Fuel Tech, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Fuel Tech, Inc. and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 14 Impairment of Goodwill As described in Note 1 of the financial statements, goodwill is tested for impairment at least annually as of the first day of the Company’s fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s evaluation of goodwill impairment involves the comparison of the fair value of the Company’s reporting units to their carrying values. The Company uses a discounted cash flow analysis to determine the current fair value of the Company’s FUEL CHEM reporting unit. This requires management to make significant estimates and assumptions including estimates of future growth rates, operating margins and discount rates based on the estimated weighted average cost of capital for the business. Changes in these assumptions could have a significant impact on the fair value, which could have an impact on the conclusion of impairment, if any. The Company performed its impairment analysis as of October 1, 2024. As part of the impairment assessment, the Company’s management determined that the fair value of the FUEL CHEM reporting unit exceeded its carrying value. As a result, no impairment charge was recorded in the consolidated statement of operations for the year ended December 31, 2024. Key financial assumptions used to determine the discounted cash flows of the reporting unit were developed by management. We identified the evaluation of goodwill impairment as a critical audit matter because of the significant assumptions and judgments made by management within the discounted cash flow analysis used to determine the fair value of the Company’s FUEL CHEM reporting unit. Auditing the reasonableness of management’s key assumptions, including revenue growth rates, operating margins, and discount rates involved a high degree of auditor judgment and an increased effort, including the use of our fair value specialists. Our audit procedures related to revenue growth rates, operating margins, and the discount rate used to evaluate the Company’s FUEL CHEM reporting unit for impairment included the following, among others: ● With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate and tested the relevance and reliability of source information underlying the determination of the rate, tested the mathematical accuracy of the calculation, and developed a range of independent estimates and compared those to the rate selected by management. ● We evaluated reasonableness of management’s forecasted revenue growth rates and operating margins by comparing to historical results and industry forecasts. ● We evaluated management’s ability to accurately forecast revenue and operating margins by comparing management’s prior forecasts to actual results. ● We evaluated the impact of changes to significant assumptions on the determination of whether impairment exists. 15 Table of Contents Revenue Recognition As described in Note 1 of the financial statements, revenue for the Company’s Air Pollution Control technology contracts is recognized based on the extent of progress towards completion of the contract compared to the estimated effort to complete the contract. The Company uses a cost-to-cost input method of measuring progress on these 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 estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. We identified revenue recognition over time for the Company’s Air Pollution Control technology contracts as a critical audit matter because of certain significant assumptions management makes when measuring progress, including assumptions related to expected total costs to complete the contract. Auditing these assumptions involved a high degree of auditor judgment and an increase in audit effort due to the impact these assumptions have on the amount of revenue recognized. 16 Our audit procedures related to the evaluation of management’s estimation of revenue recognized include the following, among others: ● We evaluated management’s ability to accurately forecast project costs by comparing management’s prior forecasts of estimated costs to actual results. ● We evaluated management’s ability to accurately forecast project costs by comparing a sample of budgeted project costs to source information and obtaining an understanding of how the budget was prepared. ● We selected a sample of customer contracts and evaluated management’s calculation of revenue recognized over time by performing the following procedures: – Evaluating whether contract terms that may affect revenue recognition were identified and properly considered and performance obligations were appropriately identified. – Obtaining and reviewing contracts with customers, including change orders to evaluate whether the transaction price was appropriately identified. – Testing management’s revenue recognition calculation model for mathematical accuracy. – Assessing the validity of data used in the model for completeness and accuracy by agreeing, on a sample basis, key data inputs to source documents, including job costing reports and project budgets. /s/ RSM US LLP We have served as the Company's auditor since 2010. Chicago, Illinois March 4, 2025 17 Table of Contents Fuel Tech, Inc. Consolidated Balance Sheets ( in thousands of dollars, except share and per-share data ) December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 8,510 $ 17,578 Short-term investments 10,184 12,136 Accounts receivable, less current expected credit loss of $ 106 and $ 111 , respectively 9,368 6,729 Inventories, net 397 439 Prepaid expenses and other current assets 1,160 1,439 Total current assets 29,619 38,321 Property and equipment, net 5,084 4,539 Goodwill 2,116 2,116 Other intangible assets, net 327 358 Right-of-use operating lease assets 585 609 Long-term investments 10,875 3,664 Other assets 191 781 Total assets $ 48,797 $ 50,388 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,915 $ 2,421 Accrued liabilities: Operating lease liabilities - current 77 81 Employee compensation 1,248 1,252 Other accrued liabilities 1,615 1,934 Total current liabilities 5,855 5,688 Operating lease liabilities - non-current 548 533 Deferred income taxes 176 172 Other liabilities 263 281 Total liabilities 6,842 6,674 Commitments and contingencies (Note 9) Stockholders’ equity: Common stock, $ .01 par value, 40,000,000 shares authorized, 31,767,329 and 31,361,303 shares issued, and 30,708,273 and 30,385,297 shares outstanding in 2024 and 2023, respectively 317 313 Additional paid-in capital 165,295 164,853 Accumulated deficit ( 119,472 ) ( 117,529 ) Accumulated other comprehensive loss ( 1,915 ) ( 1,748 ) Nil coupon perpetual loan notes 76 76 Treasury stock, at cost (Note 5) ( 2,346 ) ( 2,251 ) Total stockholders’ equity 41,955 43,714 Total liabilities and stockholders’ equity $ 48,797 $ 50,388 See notes to consolidated financial statements. 18 Table of Contents Fuel Tech, Inc. Consolidated Statements of Operations ( in thousands of dollars, except share and per-share data ) For the years ended December 31, 2024 2023 Revenues $ 25,133 $ 27,081 Costs and expenses: Cost of sales 14,510 15,425 Selling, general and administrative 13,761 12,803 Research and development 1,564 1,511 Total costs and expenses 29,835 29,739 Operating loss ( 4,702 ) ( 2,658 ) Interest expense — ( 21 ) Interest income 1,251 1,300 Other income (expense), net 1,585 ( 90 ) Loss before income taxes ( 1,866 ) ( 1,469 ) Income tax expense ( 77 ) ( 69 ) Net loss $ ( 1,943 ) $ ( 1,538 ) Net loss per common share: Basic net loss per common share $ ( 0.06 ) $ ( 0.05 ) Diluted net loss per common share $ ( 0.06 ) $ ( 0.05 ) Weighted-average number of common shares outstanding: Basic 30,572,000 30,348,000 Diluted 30,572,000 30,348,000 See notes to consolidated financial statements. 19 Table of Contents Fuel Tech, Inc. Consolidated Statements of Comprehensive Loss ( in thousands of dollars ) For the years ended December 31, 2024 2023 Net loss $ ( 1,943 ) $ ( 1,538 ) Other comprehensive loss: Foreign currency translation adjustments ( 167 ) ( 20 ) Total other comprehensive loss ( 167 ) ( 20 ) Comprehensive loss $ ( 2,110 ) $ ( 1,558 ) See notes to consolidated financial statements. 20 Table of Contents Fuel Tech, Inc. Consolidated Statements of Stockholders’ Equity ( in thousands of dollars or shares, as appropriate ) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Nil Coupon Perpetual Loan Treasury Shares Amount Capital Deficit Loss Notes Stock Total Balance at December 31, 2022 30,296 313 164,422 ( 115,991 ) ( 1,728 ) 76 ( 2,251 ) $ 44,841 Net loss — — — ( 1,538 ) — — — ( 1,538 ) Foreign currency translation adjustments — — — — ( 20 ) — — ( 20 ) Stock compensation expense — — 389 — — — — 389 Exercise of stock options 44 — 42 — — — — 42 Common shares issued upon vesting of restricted stock units 45 — — — — — — — Balance at December 31, 2023 30,385 313 164,853 ( 117,529 ) ( 1,748 ) 76 ( 2,251 ) $ 43,714 Net loss — — — ( 1,943 ) — — — ( 1,943 ) Foreign currency translation adjustments — — — — ( 167 ) — — ( 167 ) Stock compensation expense — — 446 — — — — 446 Common shares issued upon vesting of restricted stock units 406 4 ( 4 ) — — — — — Taxes paid on behalf of equity award participants ( 83 ) — — — — — ( 95 ) ( 95 ) Balance at December 31, 2024 30,708 $ 317 $ 165,295 $ ( 119,472 ) $ ( 1,915 ) $ 76 $ ( 2,346 ) $ 41,955 See notes to consolidated financial statements. 21 Table of Contents Fuel Tech, Inc. Consolidated Statements of Cash Flows ( in thousands of dollars ) For the years ended December 31, 2024 2023 OPERATING ACTIVITIES Net loss $ ( 1,943 ) $ ( 1,538 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 403 281 Amortization 57 61 Loss on sale of equipment — 10 Non-cash interest income on held-to-maturity securities ( 132 ) ( 433 ) Provision for credit losses, net of recoveries ( 4 ) — Deferred income taxes 4 ( 5 ) Stock-based compensation, net of forfeitures 446 389 Changes in operating assets and liabilities: Accounts receivable ( 1,127 ) 1,039 Employee retention credit receivable ( 1,677 ) — Inventories 41 ( 46 ) Prepaid expenses, other current assets and other non-current assets 292 ( 6 ) Accounts payable 519 ( 295 ) Accrued liabilities and other non-current liabilities ( 312 ) 1,239 Net cash (used in) provided by operating activities ( 3,433 ) 696 INVESTING ACTIVITIES Purchases of equipment and patents ( 378 ) ( 418 ) Purchases of debt securities ( 18,060 ) ( 14,026 ) Maturities of debt securities 12,995 8,000 Net cash used in investing activities ( 5,443 ) ( 6,444 ) FINANCING ACTIVITIES Proceeds from exercise of stock options — 42 Taxes paid on behalf of equity award participants ( 95 ) — Net cash (used in) provided by financing activities ( 95 ) 42 Effect of exchange rate fluctuations on cash ( 97 ) ( 44 ) Net decrease in cash and cash equivalents ( 9,068 ) ( 5,750 ) Cash and cash equivalents at beginning of period 17,578 23,328 Cash and cash equivalents at end of period $ 8,510 $ 17,578 Supplemental Cash Flow Information: Cash income taxes paid, net $ 52 $ 12 Non-cash transfer from other non-current assets to property and equipment 597 — See notes to consolidated financial statements. 22 Table of Contents Notes to Consolidated Financial Statements ( in thousands of dollars, except share and per-share data ) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization Fuel Tech, Inc. and subsidiaries ("Fuel Tech", the "Company", "we", "us" or "our") develops and provides proprietary technologies for air pollution control, process optimization, water treatment, and advanced engineering services. Our primary focus is on the worldwide marketing and sale of Air Pollution Control (APC) technologies and our FUEL CHEM program. The Company’s nitrogen oxide (NOx) reduction technologies reduce nitrogen oxide emissions from boilers, furnaces and other stationary combustion sources. To reduce NOx emissions, our technologies utilize advanced combustion modification techniques and post-combustion NOx control approaches including non-catalytic, catalytic and combined systems. The Company also provides solutions for the mitigation of particulate matter, including particulate control with electrostatic precipitator products and services, and using Flue Gas Conditioning (FGC) systems which modify the ash properties of particulate for improved collection efficiency. Our FUEL CHEM program is based on proprietary TIFI ® Targeted In-Furnace™ Injection technology, in combination with advanced Computational Fluid Dynamics (CFD) and Chemical Kinetics Modeling (CKM) boiler modeling, in the unique application of specialty chemicals to improve the efficiency, reliability, fuel flexibility, boiler heat rate, and environmental status of combustion units by controlling slagging, fouling, corrosion, and opacity. Water treatment technologies include DGI ® Dissolved Gas Infusion Systems which utilize a patented gas-infusing saturator vessel and a patent-pending channel injector to deliver supersaturated oxygen-water solutions and potentially other gas-liquid combinations to target process applications or environmental issues within the municipal and industrial water sectors. The infusion process has a variety of potential applications in the water and wastewater treatment sector, including aquaculture, agriculture/horticulture, pulp & paper, tanneries, landfill leachate, irrigation, treatment of natural waters, wastewater odor management as well as supplying oxygen or other gases for biochemical reactions and pH adjustment. Our business is materially dependent on the continued existence and enforcement of air quality regulations, particularly in the U.S. We have expended significant resources in the research and development of new technologies in building our proprietary portfolio of air pollution control, fuel and boiler treatment chemicals, computer modeling and advanced visualization technologies. Many of Fuel Tech's products and services rely heavily on the Company's CFD modeling capabilities, which are enhanced by internally developed, high-end visualization software. International revenues were $ 7,331 and $ 5,684 for the years ended December 31, 2024 and 2023 , respectively. These amounts represented 29 % and 21 % of Fuel Tech’s total revenues for the respective periods of time. Foreign currency changes did not have a material impact on the calculation of these percentages. We have a foreign office in Gallarate, Italy. Basis of Presentation The consolidated financial statements include the accounts of Fuel Tech and its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). The books and records of subsidiaries located in foreign countries are maintained according to generally accepted accounting principles in those countries. Upon consolidation, the Company evaluates the differences in accounting principles and determines whether adjustments are necessary to convert the foreign financial statements to the accounting principles upon which the consolidated financial statements are based. All intercompany transactions have been eliminated. Political, Geopolitical and Unexpected Events Management cannot predict the full impact of political, geopolitical and unexpected events which may impact new or existing projects and prices and availability of raw materials, energy and other materials. These events may also impact energy and regulatory policy nationally or regionally for the impacted regions. Such disruptions could have a material adverse effect on our business and financial results. The Company continues to monitor the potential impacts on the business. Liquidity We have experienced net losses in recent years. We continue to monitor our liquidity needs and 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. As a result, we have evaluated our ongoing business needs, and considered the cash requirements of our APC and FUEL CHEM businesses. This evaluation included consideration of the following: a) customer and revenue trends in our APC and FUEL CHEM business segments, b) current operating structure and expenditure levels, c) current availability of working capital, and d) support for our research and development initiatives. 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. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for credit losses, income tax provisions, excess and obsolete inventory reserve, impairment of long-lived assets, and warranty expenses. Actual results could differ from those estimates. 23 Table of Contents Fair Value Measurements The carrying values of cash and cash equivalents, accounts receivable, and accounts payable are reasonable estimates of their fair value due to their short-term nature. We apply authoritative accounting guidance for fair value measurements of financial and non-financial assets and liabilities. This guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis and clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three -tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: • Level 1 – Observable inputs to the valuation methodology such as quoted prices in active markets for identical assets or liabilities • Level 2 – Inputs to the valuation methodology including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means • Level 3 – Significant unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own estimates and assumptions or those expected to be used by market participants. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, option pricing models, and other commonly used valuation techniques Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. We had no assets or liabilities that were valued using level 2 or level 3 inputs and therefore there were no transfers between levels of the fair value hierarchy during the periods ended December 31, 2024 and 2023 . Cash and cash equivalents We consider all highly liquid debt investments with original maturities from the date of purchase of three months or less as cash equivalents. Cash equivalents include investments in money market funds. At December 31, 2024 , we had cash on hand of approximately $ 548 at our Beijing, China subsidiary that is subject to certain local regulations that may limit the immediate availability of these funds outside of China. Cash on hand at our Italy subsidiary totaled approximately $ 1,176 at December 31, 2024 . Cash on hand at our Chilean subsidiary totaled approximately $ 159 at December 31, 2024 . The following table provides a reconciliation of cash and cash equivalents reported within the Consolidated Balance Sheet that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows: December 31, 2024 December 31, 2023 Cash $ 7,879 $ 12,495 Cash equivalents 631 5,083 Total cash and cash equivalents shown in the Consolidated Statements of Cash Flows $ 8,510 $ 17,578 Investments 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. A portion of the funds invested are restricted as collateral under the Investment Collateral Security agreement (see Note 11 ). At December 31, 2024 , the amount of funds collateralized under the Investment Collateral Security agreeme nt is $ 2,790 relating to existing standby letters of credit that is comprised of $ 1,860 with varying maturity dates and expire no later tha n June 30, 2026. Our investments in debt securities consist of United States (US) Treasury securities, including Notes, Bonds, and Bills, and US Government Agency securities, which are designated as held-to-maturity (HTM) and stated at amortized cost. The Company has the positive intent and ability to hold these investments to maturity and does not expect to sell any debt securities before maturity to settle an obligation under the Investment Collateral Security agreement. The typical maturities of our HTM investments range from three to thirty-six months. HTM debt investments with original maturities of approximately three months or less from the date of purchase are classified within cash and cash equivalents. HTM debt investments with original maturities at the date of purchase greater than approximately three months and remaining maturities of less than one year are classified as short-term investments. HTM debt investments with remaining maturities beyond one year are classified as long-term investments. Interest income, including amortization of premium and accretion of discount, are included on the Consolidated Statements of Operations in Interest income under the effective yield method. Accrued interest is included in Prepaid expenses and other current assets on the Consolidated Balance Sheets. Due to the creditworthiness of the entities issuing these securities, there is no impairment recorded related to the unrealized losses. The following table provides the amortized cost, gross unrealized gains and losses, and fair value of our HTM debt securities: December 31, 2024 2023 Held-to-maturity debt securities: Amortized cost $ 21,059 $ 15,800 Gross unrecognized gains 50 — Gross unrecognized losses ( 33 ) ( 86 ) Fair value $ 21,076 $ 15,714 The following table provides the amortized cost and fair value of debt securities by maturities at December 31, 2024 : Amortized Cost Fair Value Within one year $ 10,184 $ 10,200 After one year through two years 10,875 10,876 Total $ 21,059 $ 21,076 Foreign Currency Risk Management Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. We do not enter into foreign currency forward contracts or into foreign currency option contracts to manage this risk due to the nature of the transactions involved. Accounts Receivable Accounts receivable consist of amounts due to us in the normal course of our business, are not collateralized, and normally do not bear interest. Accounts receivable includes contract assets, billings occurring subsequent to revenue recognition under Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers . At December 31, 2024 and 2023 , unbilled receivables were approximately $ 2,075 and $ 2,285 , respectively. Refer to Note 2 for further detail. 24 Table of Contents Allowance for Credit Losses Fuel Tech measures expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts per the guidance set forth in Accounting Standards Update (ASU) 2019 - 10, Financial Instruments - Credit Losses (Topic 326 ), Derivatives and Hedging (Topic 815 ), and Leases (Topic 842 ). For trade receivables and other financial instruments, we use a forward-looking expected loss model for recognizing credit losses which reflects losses that are probable. For the general risk categories, the Company uses historical losses over a fixed period, excluding certain write-off activity that was not considered credit loss events, to determine the historical credit loss. Historical loss rates are then adjusted to consider current economic conditions, and past, current, and future events and circumstances when determining expected credit losses. Investments in financial assets issued by US Government and Government Agency are considered as having zero expected credit losses and are excluded from the allowance for credit loss calculation. The allowance for credit losses is our management's best estimate of the amount of credit losses in accounts receivable. At the end of each reporting period, the allowance for credit losses balance is reviewed relative to management’s assessment and is adjusted if deemed necessary. Bad debt write-offs are made when management believes it is probable a receivable will not be recovered. The table below sets forth the components of the Allowance for Credit Losses for the years ended December 31. Year Balance at January 1 Provision charged to expense Write-offs / Recoveries Balance at December 31 2023 $ 110 $ 24 $ ( 23 ) $ 111 2024 $ 111 $ — $ ( 5 ) $ 106 Prepaid expenses and other current assets Prepaid expenses and other current assets are short-term commitments of typically three to six months for future payments and can be redeemed at a discount or applied to future vendor payments. Inventories Inventories consist primarily of equipment constructed for resale and spare parts and are stated at the lower of cost or net realizable value, using the weighted-average cost method. At December 31, 2024 and 2023 , inventory included equipment constructed for resale of$ 176 and $ 207 , respectively, and spare parts, net of reserves of $ 221 and $ 232 , respectively. Usage is recorded in cost of sales in the period that parts were issued to a project, used to service equipment, or sold to customers. Equipment constructed for resale that is in process is recorded in Other assets. In process equipment for inventory recorded as other assets was $ 44 and $ 618 as of December 31, 2024 and 2023 , respectively. Inventories are periodically evaluated to identify obsolete or otherwise impaired parts and are written off when management determines usage is not probable. The Company estimates the balance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipeline for which the inventory could be used. The excess and obsolete inventory reserve balance was $ 613 at December 31, 2024 and 2023 . Foreign Currency Translation and Transactions Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at year end. Revenues and expenses are translated at average exchange rates prevailing during the year. Gains or losses on foreign currency transactions and the related tax effects are reflected in net loss. The resulting translation adjustments are included in stockholders’ equity as part of accumulated other comprehensive loss. Accumulated Other Comprehensive Loss December 31, 2024 2023 Foreign currency translation Balance at beginning of period $ ( 1,748 ) $ ( 1,728 ) Other comprehensive loss: Foreign currency translation adjustments (1) ( 167 ) ( 20 ) Balance at end of period $ ( 1,915 ) $ ( 1,748 ) Total accumulated other comprehensive loss $ ( 1,915 ) $ ( 1,748 ) ( 1 ) In all periods presented, there were no tax impacts related to functional currency translation adjustments. Research and Development Research and development costs are expensed as incurred, except in the case of costs incurred related to capitalizable equipment. Research and development projects funded by customer contracts are reported as part of cost of goods sold. Internally funded research and development expenses are reported as operating expenses. Product/System Warranty We typically warrant our air pollution control products and systems against defects in design, materials and workmanship for one to two years. A provision for estimated future costs relating to warranty expense is recorded when the products/systems become commercially operational. Goodwill Goodwill is evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Goodwill of our reporting units is assigned upon acquisition after considering the nature of the net assets giving rise to the goodwill and how each reporting unit would enjoy the benefits and synergies of the net assets acquired. We have two reporting units for goodwill evaluation purposes: the FUEL CHEM technology reporting unit and the APC technology reporting unit. There is no goodwill associated with our APC technology reporting unit. The entire goodwill balance of $ 2,116 was allocated to the FUEL CHEM technology reporting unit as of December 31, 2024 and 2023 . 25 Table of Contents Goodwill is tested for impairment at least annually as of the first day of our fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. 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 our reporting units to their carrying values. We use a discounted cash flow (DCF) model to determine the current fair value of our FUEL CHEM reporting unit. 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. 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. Fuel Tech performed its annual goodwill impairment analysis as of October 1, 2024 and determined that no impairment of goodwill existed. The Company did not recognize a charge for goodwill impairment for the periods ended December 31, 2024 and 2023 . Other Intangible Assets Management reviews other finite-lived intangible assets, patent assets, trade names, and lease assets for impairment when events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset or asset group is less than the carrying amount of the asset or asset group, an impairment loss equal to the excess of the asset or asset group's carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated. During the years ended December 31, 2024 and 2023 , Fuel Tech recorded no patent or trademark abandonment charges. Third-party costs related to the development of patents are included within other intangible assets on the consolidated balance sheets. The third -party costs capitalized as patent costs during the years ended December 31, 2024 and 2023 were $ 26 and $ 28 , respectively. Third-party costs are comprised of legal fees that relate to the review and preparation of patent disclosures and filing fees incurred to present the patents to the required governing body. Our intellectual property portfolio has been a significant building block for the APC and FUEL CHEM technology segments. The patents are essential to the generation of revenue for our businesses and are essential to protect us from competition in the markets in which we serve. These costs are being amortized on the straight-line method over the period beginning with the patent issuance date and ending on the patent expiration date. Patent maintenance fees are charged to operations as incurred. Amortization expense from continuing operations for intangible assets was $ 57 and $ 61 for the years ended December 31, 2024 and 2023 , respectively. The table below shows the amortization period and other intangible asset cost by intangible asset as of December 31, 2024 and 2023 , and the accumulated amortization and net intangible asset value in total for all other intangible assets. 2024 2023 Description of Other Intangibles Amortization Period (years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patent assets 1 - 20 852 ( 525 ) 327 826 ( 468 ) 358 Total $ 852 $ ( 525 ) $ 327 $ 826 $ ( 468 ) $ 358 The table below shows the estimated future amortization expense for intangible assets: Year Estimated Amortization Expense 2025 $ 36 2026 35 2027 35 2028 35 2029 29 Thereafter 157 Total $ 327 Property and Equipment Property and equipment is stated at historical cost and does not include capital in process expenditures yet to be capitalized. Provisions for depreciation are computed by the straight-line method, using estimated useful lives that range based on the nature of the asset. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense was $ 403 and $ 281 for the years ended December 31, 2024 and 2023 , respectively. The table below shows the depreciable life and cost by asset class as of December 31, 2024 and 2023 , and the accumulated depreciation and net book value in total for all classes of assets. Description of Property and Equipment Depreciable Life (years) 2024 2023 Land $ 1,050 $ 1,050 Building 39 3,950 3,950 Building and leasehold improvements 3 - 39 2,677 2,655 Field equipment 3 - 4 13,004 12,100 Computer equipment and software 2 - 3 2,017 2,049 Furniture and fixtures 3 - 10 1,305 1,307 Vehicles 5 37 32 Construction in process 2 99 Total cost 24,042 23,242 Less accumulated depreciation ( 18,958 ) ( 18,703 ) Total net book value $ 5,084 $ 4,539 Property and equipment is 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 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. 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 remaining estimated operational life compared to the asset’s remaining depreciable life. Quoted market prices and other valuation techniques are used to determine expected cash flows. 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 or 2023 26 Table of Contents Revenue Recognition The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. 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). Fuel Tech’s APC product line also includes ancillary revenue for post contractual goods and services. Revenue associated with these activities are recognized at point in time when delivery of goods or completion of the service obligation is performed. Fuel Tech 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. FUEL CHEM Revenues from the sale of chemical products are recognized when control transfers to customer upon shipment or delivery of the product based on the applicable shipping terms. We generally recognize revenue for these arrangements at a point in time based on our evaluation of when the customer obtains control of the promised goods or services. 27 Table of Contents Cost of Sales Cost of sales includes all internal and external engineering costs, equipment and chemical 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). Certain depreciation and amortization expenses related to tangible and intangible assets, respectively, are allocated to cost of sales. We classify shipping and handling costs in cost of sales in the consolidated statements of operations. Selling, General and Administrative Expenses Selling, general and administrative expenses primarily include the following categories except where an allocation to the cost of sales line item is warranted due to the project- or product-line nature of a portion of the expense category: salaries and wages, employee benefits, non-project travel, insurance, legal, rent, accounting and auditing, recruiting, telephony, employee training, Board of Directors’ fees, auto rental, office supplies, dues and subscriptions, utilities, real estate taxes, commissions and bonuses, marketing materials, postage and business taxes. Departments comprising the selling, general and administrative line item primarily include the functions of executive management, finance and accounting, investor relations, regulatory affairs, marketing, business development, information technology, human resources, sales, legal and general administration. Income Taxes The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, the provision for income taxes represents income taxes paid or payable (or received or receivable) for the current year plus the change in deferred taxes during the year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid, and result from differences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates and tax laws when enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies, as well as all available positive and negative evidence. Positive evidence includes factors such as a history of profitable operations, projections of future profitability within the carryforward period, including from tax planning strategies, and our experience with similar operations. Negative evidence includes items such as cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a deferred tax asset based on existing projections of income. Deferred tax assets for which no valuation allowance is recorded may not be realized upon changes in facts and circumstances. Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitation has expired or the appropriate taxing authority has completed their examination even though the statute of limitations remains open. Interest and penalties related to uncertain tax positions are recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized. Leases The Company applies the provisions of ASC 842, Leases. The Company determines if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. Right-of-use (ROU) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. Operating ROU assets also include the impact of any lease incentives. Operating leases are included in right-of-use operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, and we elected the practical expedient to not separate lease and non-lease components for the majority of our leases. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. We also elected the practical expedient for leases with an initial term of 12 months or less. 28 Table of Contents Stock-Based Compensation Our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2024 Long-Term Incentive Plan ( 2024 Plan), was adopted in June 2024 and replaced our prior incentive plan which was approved by our stockholders in 2014 (LTIP). No further grants will be made from the LTIP. Awards granted under the LTIP that were outstanding upon adoption of the 2024 Plan will be added to the shares available to be used for future awards to participants in the Incentive Plans if the awards are forfeited or otherwise canceled or upon expiration. The 2024 Plan and LTIP are referred to collectively as the Incentive Plans. The Incentive Plans allow for awards to be granted to participants in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plans may be our directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of our business. There are a maximum of 4,215,272 shares that may be issued or reserved for awards to participants under the Incentive Plans as of December 31, 2024 . Based on the existing issued or reserved awards under the Incentive Plans, there are 2,957,150 shares available to be used for future awards to participants in the Incentive Plans as of December 31, 2024 . Defined Contribution Plan We have a retirement savings plan available for all our U.S. employees who have met minimum length-of-service requirements. Our contributions are determined based upon amounts contributed by the employees with additional contributions made at the discretion of the Board of Directors. Costs related to this plan were $ 249 and $ 233 in 2024 and 2023 , respectively. Basic and Diluted Earnings per Common Share Basic earnings per share excludes the antidilutive effects of stock options, restricted stock units (RSUs), warrants, and the nil coupon non-redeemable convertible unsecured loan notes (see Note 6 ). Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, warrants, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is antidilutive. Out-of-the-money stock options and warrants are excluded from diluted earnings per share because they are unlikely to be exercised and would be anti-dilutive if they were exercised. At December 31, 2024 and 2023 , basic earnings per share is equal to diluted earnings per share because all outstanding stock awards, warrants, and convertible loan notes are considered anti-dilutive during periods of net loss. At December 31, 2024 and 2023 , we had weighted-average outstanding equity awards of 168,900 and 390,900 , respectively, and 2,850,000 warrants in both periods, which were antidilutive or represent out-of-the-money options for the purpose of calculation of the diluted earnings per share. As of December 31, 2024 and 2023 , 274,900 and 246,500 incremental equity awards were antidilutive, respectively, because of the net loss in the year then ended. These equity awards could potentially dilute basic EPS in future years. The table below sets forth the weighted-average shares used at December 31, in calculating earnings (loss) per share: 2024 2023 Basic weighted-average shares 30,572,000 30,348,000 Conversion of unsecured loan notes — — Unexercised options and unvested restricted stock units — — Diluted weighted-average shares 30,572,000 30,348,000 Risk Concentrations Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. However, management believes the Company is not exposed to significant credit risk due to the financial position of its primary depository institution where a significant portion of its deposits are held. For the year ended December 31, 2024 , we had two customers which individually represented greater than 10% of revenues. These two customers contributed revenues to the FUEL CHEM technology segment. In total these two customers represented 27 % of consolidated revenues. We h ad no customer that accounted for greater than 10% of our current assets as of December 31, 2024 . For the year ended December 31, 2023 , we had two customers which individually represented greater than 10% of revenues. These two customers contributed revenues to the FUEL CHEM technology segment. In total these two customers represented 36 % of consolidated revenues. We had no customer that accounted for greater than 10% of our current assets as of December 31, 2023 . We control credit risk through requiring milestone payments on long-term contracts, performing ongoing credit evaluations of its customers, and in some cases obtaining security for payment through bank guarantees and letters of credit. Our FUEL CHEM technology segment is dependent, in part, upon a supply of magnesium hydroxide. Any adverse changes in the availability of this chemical will likely have an adverse impact on ongoing operation of our FUEL CHEM programs. Our supplier of magnesium hydroxide, Martin Marietta Magnesia Specialties, LLC (MMMS) assures the continuance of a stable supply from MMMS of magnesium hydroxide products for our requirements in the U.S. and Canada. MMMS supplies us with magnesium hydroxide products manufactured pursuant to our specifications and we have agreed to purchase from MMMS, and MMMS has agreed to supply, 100% of our requirements for such magnesium hydroxide products for our customers who purchase such products for delivery in the U.S. and Canada. There can be no assurance that we will be able to obtain a stable source of magnesium hydroxide in markets outside the U.S. Treasury Stock We use the cost method to account for common stock repurchases. During the year ended December 31, 2024 , we withheld 83,050 shares of our common stock, valued at approximately $ 95 , to settle personal tax withholding obligations that arose as a result of restricted stock units that vested. There were no shares withheld during the year ended December 31, 2023 to settle personal tax withholding obligations as a result of restricted stock unit vesting. Refer to Note 5, “Treasury Stock,” for further discussion. 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 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. CARES Act On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") to provide certain relief as a result of the COVID- 19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable tax credit against the employer share of Social Security tax for qualifying periods in 2020 and 2021. Under the provisions of the CARES Act, the Company is eligible for a refundable employee retention credit subject to certain criteria. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, we account for the ERC by analogy to International Accounting Standard ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it has reasonable assurance for receipt of the ERC and recorded the ERC benefit of $1,677 as other income on the Consolidated Statement of Operations for the year ended December 31, 2024 and as a component of Accounts Receivable on the Consolidated Balance Sheet as of December 31, 2024. 29 Table of Contents 2. REVENUE RECOGNITION Disaggregated Revenue by Product Technology The following table presents our revenues disaggregated by product technology: Twelve Months Ended December 31, 2024 2023 Air Pollution Control Technology solutions $ 7,897 $ 9,497 Spare parts 1,616 2,239 Ancillary revenue 1,729 1,747 Total Air Pollution Control technology 11,242 13,483 FUEL CHEM FUEL CHEM technology solutions 13,891 13,598 Total Revenues $ 25,133 $ 27,081 Disaggregated Revenue by Geography The following table presents our revenues disaggregated by geography, based on the location of the end-user: Twelve Months Ended December 31, 2024 2023 United States $ 17,802 $ 21,397 Foreign Revenues Americas 924 577 Europe 2,146 2,558 South Africa 2,570 163 Pacific Rim and other 1,691 2,386 Total Foreign Revenues 7,331 5,684 Total Revenues $ 25,133 $ 27,081 Timing of Revenue Recognition The following table presents the timing of our revenue recognition: Twelve Months Ended December 31, 2024 2023 Products transferred at a point in time $ 17,236 $ 17,584 Products and services transferred over time 7,897 9,497 Total Revenues $ 25,133 $ 27,081 Contract Balances 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 APC 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. Changes in the contract asset and liability balances during the year ended December 31, 2024 , were not materially impacted by any other items other than amounts billed and revenue recognized as described previously. Revenue recognized that was included in the contract liability balance at the beginning of the period was $ 1,276 and $ 368 for the years ended December 31, 2024 and 2023 , respectively, which represented primarily revenue from progress toward completion of our APC technology contracts. As of December 31, 2024 and 2023 we had no construction contracts in progress that were identified as a loss contract. Remaining Performance Obligations Remaining performance obligations, represents the transaction price of APC technology booked orders for which work has not been performed. As of December 31, 2024 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 6,175 . The Company expects to recognize revenue on approximately $ 4,515 of the remaining performance obligations over the next 12 months with the remaining recognized thereafter. Practical Expedients and Exemptions We generally expense sales commissions on a ratable basis when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses within the Consolidated Statements of Operations. A practical expedient was elected to not recognize shipping and handling costs as a separate performance obligation under ASC 606. 30 Table of Contents Accounts Receivable The components of accounts receivable are as follows: As of December 31, 2024 December 31, 2023 Trade receivables $ 5,375 $ 4,300 Unbilled receivables 2,075 2,285 Receivable for employee retention credit 1,677 — Other short-term receivables 347 255 Allowance for credit losses ( 106 ) ( 111 ) Total accounts receivable $ 9,368 $ 6,729 3. INCOME TAXES Within the calculation of the Company’s annual effective tax rate, the Company has used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the FASB and/or various other taxing jurisdictions. For example, the Company anticipates that the state jurisdictions will continue to determine and announce their conformity to the U.S. Tax Act which could have an impact on the annual effective tax rate. On August 16, 2022, President Biden signed into law the Inflation Reduction Act (IRA) of 2022, which, among other things, imposes a new 15% corporate Alternative Minimum Tax (AMT) based on audited financial statement income ("AFSI") applicable to corporations with a three -year average AFSI over $1 billion. The AMT was effective starting with the 2023 tax year and, if applicable, corporations must pay the greater of the regular corporate income tax or the AMT. Although NOL carryforwards created through the regular corporate income tax system cannot be used to reduce the AMT, financial statement net operating losses can be used to reduce AFSI and the amount of AMT owed. The IRA of 2022 as enacted requires the U.S. Treasury to provide regulations and other guidance necessary to administer the AMT, including further defining allowable adjustments to determine AFSI, which directly impacts the amount of AMT to be paid. Based on interim guidance issued by the U.S. Treasury in late December 2022, the Company was not subject to the AMT in 2023 or 2024. Further, the Company believes that it is more likely than not it will not be subject to the AMT beginning 2025. The Company continues to evaluate the impacts of the Inflation Reduction Act of 2022 but does not expect this legislation to have a material impact on the Company's financial statements. For tax years beginning before January 1, 2022, taxpayers can make an election with respect to research and experimental (R&E) expenditures incurred in connection with a trade or business to either currently deduct or defer and amortize such expenditures over a period of not less than 60 months. However, the Tax Cuts and Jobs Act of 2017 (TCJA) requires taxpayers to capitalize R&E expenditures effective for taxable years beginning after December 31, 2021. R&E expenditures attributable to US-based research must be amortized over a period of 5 years and R&E expenditures attributable to research conducted outside of the US must be amortized over a period of 15 years. Further, the statute provides that the definition of R&E expenditures includes amounts paid or incurred in connection with the development of any software. The Company has recorded a deferred tax asset of $ 2,233 related to research and experimental expenditures for the year ending December 31, 2024. The U.S. Tax Cuts and Jobs Act of 2017, or the Tax Act, imposed a mandatory transition tax on accumulated foreign earnings as of December 31, 2017 and created a new territorial tax system in which we recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. For the years ended December 31, 2024 and 2023, we incurred income tax expense under the global intangible low-taxed income, or GILTI, provisions and have treated it as a component of income tax expense in the period incurred. The components of loss before taxes for the years ended December 31, are as follows: Origin of loss before taxes 2024 2023 United States $ ( 1,740 ) $ ( 1,772 ) Foreign ( 126 ) 303 Loss before income taxes $ ( 1,866 ) $ ( 1,469 ) 31 Table of Contents Significant components of income tax expense for the years ended December 31, are as follows: 2024 2023 Current: Federal $ — $ — State ( 51 ) ( 19 ) Foreign ( 22 ) ( 55 ) Total current ( 73 ) ( 74 ) Deferred: Federal ( 2 ) 2 State ( 2 ) 3 Total deferred ( 4 ) 5 Income tax expense $ ( 77 ) $ ( 69 ) A reconciliation between the provision for income taxes calculated at the U.S. federal statutory income tax rate and the consolidated income tax expense in the consolidated statements of operations for the years ended December 31, is as follows: 2024 2023 Provision at the U.S. federal statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 4.9 % 4.7 % Foreign tax rate differential 0.2 % ( 0.6 )% Valuation allowance 105.6 % ( 4.9 )% Chile outside basis differential ( 0.8 )% — % Italy IRES/IREP — % ( 3.8 )% Accrual to return 2.1 % ( 5.8 )% Research and development credit 11.2 % 5.4 % State rate change 0.9 % ( 1.4 )% Share based compensation ( 9.0 )% ( 6.7 )% Net Operating Loss expiration ( 144.3 )% — % Other Deferred true up 6.4 % ( 6.6 )% Global Intangible Low-Taxed Income (GILTI) inclusion — % ( 4.4 )% Other ( 1.1 )% ( 1.7 )% Income tax expense effective rate ( 2.9 )% ( 4.8 )% The deferred tax assets and liabilities at December 31 are as follows: 2024 2023 Deferred tax assets: Stock compensation expense $ 80 $ 250 Royalty accruals 10 10 Bad debt allowance 51 52 Net operating loss carryforwards 9,067 12,048 Credit carry-forwards 1,472 1,134 Inventory reserve 154 153 Depreciation 433 548 Research and Development Costs 2,233 1,053 Other 399 606 Total deferred tax assets 13,899 15,854 Deferred tax liabilities: Goodwill ( 296 ) ( 238 ) Intangible assets ( 82 ) ( 89 ) Total deferred tax liabilities ( 378 ) ( 327 ) Net deferred tax asset before valuation allowance 13,521 15,527 Valuation allowances for deferred tax assets ( 13,697 ) ( 15,699 ) Net deferred tax liability $ ( 176 ) $ ( 172 ) 32 Table of Contents The change in the valuation allowance for deferred tax assets for the years ended December 31 is as follows: Year Balance at January 1 Charged to costs and expenses (Deductions)/Other Balance at December 31 2023 $ 15,627 72 — $ 15,699 2024 $ 15,699 ( 2,002 ) — $ 13,697 For the years ended December 31, 2024 and 2023 , there were $ 0 and $ 42 exercises of stock options, respectively. As required by ASC 740, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than- not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The table below sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefit. Year Balance at January 1 Change in positions taken in a current period Balance at December 31 2023 $ 293 33 $ 326 2024 $ 326 144 $ 470 If upon examination interest and penalties related to unrecognized tax benefits were assessed, they would be included in income tax expense for all periods presented. There were no interest and penalties recognized in income tax expense during the years ended December 31, 2024 and 2023 . There were no unrecognized tax benefits as of December 31, 2024 and 2023 . There is unrecognized tax benefit of $ 470 and $ 326 for the years ended December 31, 2024 and 2023, respectively, that would impact the future effective tax rate, if recognized. We believe the unrecognized tax benefit will change in the next twelve months, either due to the generation or utilization of research and development credits. We are unable to estimate the amount of change. Tax years December 31, 2014 through December 31, 2024 remain open to assessment related to the unrecognized tax benefit. We are subject to taxation in the U.S., various states, and in non-U.S. jurisdictions. Our U.S. income tax returns are primarily subject to examination from 2021 through 2023; however, U.S. tax authorities also have the ability to review prior tax years to the extent loss carryforwards and tax credit carryforwards are utilized. The open years for the non-U.S. tax returns range from 2016 through 2023 based on local statutes. Management periodically estimates our probable tax obligations using historical experience in tax jurisdictions and informed judgments. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which we transact business. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretations of regulations. If such changes take place, there is a risk that the tax rate may increase or decrease in any period. Tax accruals for tax liabilities related to potential changes in judgments and estimates for both federal and state tax issues are included in current liabilities on the consolidated balance sheet. The investment in foreign subsidiaries other than Fuel Tech S.p.A (Chile) and Beijing Fuel Tech is considered to be indefinite in duration and therefore we have not provided a provision for deferred U.S. income taxes on the unremitted earnings from those subsidiaries. A provision has not been established because it is not practicable to determine the amount of unrecognized deferred tax liability for such unremitted foreign earnings and because it is our present intention to reinvest the undistributed earnings indefinitely. As required by ASC 740, 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. We have approximately $ 27,054 of U.S. net operating loss carryforwards available to offset future U.S. taxable income as of December 31, 2024. The net operating loss carry-forwards related to tax losses generated in years ending December 31, 2018 and before in the U.S. totaling $ 8,378 begin to expire in 2036. Further, we have tax loss carry-forwards of approximately $ 6,459 available to offset future foreign income in Italy as of December 31, 2024. We have recorded a full valuation allowance against the deferred tax asset because we cannot anticipate when or if this entity will have taxable income sufficient to utilize the net operating losses in the future. There is no expiration of the net operating loss carry-forwards related to tax losses generated in prior years in Italy. Finally, we have tax loss carry-forwards of approximately $ 1,098 available to offset future foreign income in China as of December 31, 2024. As of December 31, 2019, the investment in Fuel Tech S.p.A (Chile) was no longer considered to be indefinite and a provision for deferred U.S. income taxes was recorded. As of December 31, 2023, the provision for deferred U.S. income taxes related to the Fuel Tech S.p.A (Chile) investment was $ 149 . As of December 31, 2024, Fuel Tech S.p.A (Chile) was still included in continuing operations. As a result an additional ($ 13 ) was recorded, adjusting the total consideration to $ 136 . The deferred income taxes associated with this investment are offset by a valuation allowance of ($ 136 ). 33 Table of Contents 4. COMMON STOCK At December 31, 2024 and 2023 , respectively, we had 31,767,329 and 31,361,303 shares of common stock issued and 30,708,273 and 30,385,297 outstanding, with an additional 6,715 shares reserved for issuance upon conversion of the nil coupon non-redeemable convertible unsecured loan notes (see Note 6 ). As of December 31, 2024 , we had 4,215,272 shares reserved for issuance upon the exercise or vesting of equity awards, of which 176,000 are stock options that are currently exercisable (see Note 8 ). 5. TREASURY STOCK Common stock held in treasury totaled 1,059,056 and 976,006 with a cost of $ 2,346 and $ 2,251 at December 31, 2024 and 2023 , respectively. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that vested during the periods presented. 6. NIL COUPON NON-REDEEMABLE CONVERTIBLE UNSECURED LOAN NOTES At December 31, 2024 and 2023 , we had a principal amount of $ 76 of nil coupon non-redeemable convertible unsecured perpetual loan notes (Loan Notes) outstanding. The Loan Notes are convertible at any time into common stock at rates of $ 6.50 and $ 11.43 per share, depending on the note. As of December 31, 2024 , the nil coupon loan notes were convertible into 6,715 shares of common stock. Based on our closing stock price of $ 1.05 at December 31, 2024 , the aggregate fair value of the common stock that the holders would receive if all the loan notes were converted would be approximately $ 7 , which is less than the principal amount of the loans outstanding as of that date. The Loan Notes bear no interest and have no maturity date. They are repayable in the event of our dissolution and the holders do not have the option to cash-settle the notes. Accordingly, they have been classified within stockholders’ equity in the accompanying balance sheets. The notes do not hold distribution or voting rights unless and until converted into common stock. For the years ended December 31, 2024 and 2023 , there were no Loan Notes repurchased by the Company. 7. WARRANTS On February 11, 2021, Fuel Tech entered into a securities purchase agreement to issue and sell, in a private placement, 5,000,000 shares of common stock and 2,500,000 warrants exercisable for a total of 2,500,000 shares of common stock with an exercise price of $ 5.10 per Warrant Share, at a purchase price of $ 5.1625 per Share and associated warrant. The Warrants expire on the five and one -half year anniversary of the effective date of the registration statement registering the Warrant Shares for resale. In addition, the Company issued to the placement agent Warrants to purchase up to 350,000 shares of common stock. The Placement Agent Warrants are exercisable at an exercise price of $ 6.45 per share of common stock and expire on the five and one -half year anniversary of the effective date of the registration statement registering the Shares and the Warrant Shares for resale. The issuance of warrants to purchase shares of the Company's common stock are summarized as follows: Shares Outstanding as of December 31, 2023 2,850,000 Granted — Exercised — Outstanding as of December 31, 2024 2,850,000 The following table summarizes information about warrants outstanding and exercisable at December 31, 2024 : Number Weighted-Average Outstanding/ Remaining Life Weighted-Average Range of Exercise Price Exercisable in Years Exercise Price $ 5.10 2,500,000 1.62 $ 5.10 $ 6.45 350,000 1.62 $ 6.45 2,850,000 8. STOCK-BASED COMPENSATION Our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2024 Long-Term Incentive Plan ( 2024 Plan), was adopted in June 2024 and replaced our prior incentive plan which was approved by our stockholders in 2014 (LTIP). No further grants will be made from the LTIP. The 2024 Plan and LTIP are referred to collectively as the Incentive Plans. Under the Incentive Plans, awards may be granted to participants in the form of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, RSUs, Performance Awards, Bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plans may be our directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of our business. There are a maximum of 4,215,272 shares that may be issued or reserved for awards to participants under the Incentive Plans. At December 31, 2024 , we had 2,957,150 equity awards available for issuance under the Incentive Plans. We did not record any excess tax benefits within income tax expense for the years ended December 31, 2024 and 2023 . Given the Company has a full valuation allowance on its deferred tax assets, there were no excess tax benefits to record. In addition, we account for forfeitures of awards based on an estimate of the number of awards expected to be forfeited and adjusting the estimate when it is no longer probable that the employee will fulfill the service condition. 34 Table of Contents Stock-based compensation is included in selling, general and administrative costs in our consolidated statements of operations. The components of stock-based compensation from continuing operations for the years ended December 31, 2024 and 2023 were as follows: For the Year Ended December 31, 2024 2023 Stock options and restricted stock units, net of forfeitures $ 446 $ 389 After-tax effect of stock based compensation $ 446 $ 389 Stock Options The stock options granted to employees under the Incentive Plan have a 10 -year life and they vest as follows: 50 % after the second anniversary of the award date, 25 % after the third anniversary, and the final 25 % after the fourth anniversary of the award date. Fuel Tech calculates stock compensation expense for employee option awards based on the grant date fair value of the award, less expected annual forfeitures, and recognizes expense on a straight-line basis over the four -year service period of the award. Stock options granted to members of our Board of Directors vest immediately. Stock compensation for these awards is based on the grant date fair value of the award and is recognized in expense immediately. Fuel Tech uses the Black-Scholes option pricing model to estimate the grant date fair value of employee stock options. The principal variable assumptions utilized in valuing options and the methodology for estimating such model inputs include: ( 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 Fuel Tech’s 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. There were no stock options granted during the years ended December 31, 2024 and 2023 . The following table presents a summary of our stock option activity and related information for the years ended December 31: 2024 2023 Number of Options Weighted-Average Exercise Price Number of Options Weighted-Average Exercise Price Outstanding at beginning of year 270,500 $ 3.09 384,500 $ 2.98 Granted — — — — Exercised — — ( 44,000 ) 0.96 Expired or forfeited ( 94,500 ) 5.22 ( 70,000 ) 3.85 Outstanding at end of year 176,000 $ 1.94 270,500 $ 3.09 Exercisable at end of year 176,000 $ 1.94 270,500 $ 3.09 Weighted-Average Remaining Contractual Life (years) 1.18 1.56 Aggregate Intrinsic Value $ 4 $ 4 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on our closing stock price of $ 1.05 as of December 31, 2024 , which would have been received by the option holders had those options holders exercised their stock options as of that date. The following table summarizes information about stock options outstanding at December 31, 2024 : Options Outstanding and Exercisable Range of Exercise Prices Number of Options Weighted-Average Remaining Contractual Life (years) Weighted-Average Exercise Price $0.96 - $1.27 44,000 2.9 $ 0.97 $1.28 - $2.01 27,000 1.4 1.58 $2.02 - $2.44 105,000 0.4 2.44 176,000 1.2 $ 1.94 As of and for the 12 months ended December 31, 2024 , there was no non-vested stock option activity and no total unrecognized compensation cost related to non-vested stock options granted under the Incentive Plan. There were no options exercised during the year ended December 31, 2024 . Fuel Tech received proceeds of $ 42 from the exercise of stock options during the year ended December 31, 2023 . It is our policy to issue new shares upon option exercises, loan conversions, and vesting of restricted stock units. We have not used cash and do not anticipate any future use of cash to settle equity instruments granted under share-based payment arrangements. Shares received for exercise of stock options come from newly issued shares. Restricted Stock Units RSUs granted to employees vest over time based on continued service (typically vesting over a period between two to four years), and RSUs granted to directors vest after a one year vesting period based on continued service. Such time-vested RSUs are valued at the date of grant based on the closing price of the Common Shares on the grant date. Compensation cost, adjusted for estimated forfeitures, is amortized on a straight-line basis over the requisite service period. In addition to the time vested RSUs, in 2023 the Company entered into an Executive Performance RSU Award Agreement (the “Agreement”) with certain officers, including its President and Chief Executive Officer, Chief Financial Officer and Senior Vice President, Sales (each a “Participating Executive”) pursuant to which each Participating Executive will have the opportunity to earn a specified amount of RSUs based on Fuel Tech’s performance in 2023 and 2024. The target amount of RSUs for each of four possible RSU award components is set for each Participating Executive for 2023 and 2024. The Agreement provides for four possible RSU awards: “Look-Back RSUs,” “Total Revenue RSUs,” “New Business Growth RSUs,” and “Operating Income Growth” RSUs. If the Look-Back RSU’s are awarded, these RSUs will follow a vesting schedule that provides for vesting of one - third of the granted Look-Back RSUs after the first anniversary of the grant determination date, one - third after the second anniversary date and one - third after the third anniversary date. If the Total Revenue RSUs, New Business Growth RSUs, or Operating Income Growth RSUs targets are achieved, these RSU’s will follow a vesting schedule whereby 100 % of the granted RSUs will vest one year following the grant determination date. All RSUs are valued at the date of grant based on the closing price of the Company’s common stock on the grant date. There were 106,000 RSU awards granted to Participating Executives in 2024 based on the Company's performance during the year ended December 31, 2023 . The amount, if any, of actual RSU awards to be issued for the year ended December 31, 2024 is contingent on performance by the Participating Executive and the Company in the performance areas and for the measurement periods set forth in the Agreement as determined by the Company. 35 Table of Contents During the years ended December 31, 2024 and 2023 , there were 406,026 and 45,000 restricted stock units that vested with a grant date fair value of $ 536 and $ 62 , respectively. As of December 31, 2024 , there was $ 1,024 of total unrecognized compensation cost related to all non-vested share-based compensation arrangements granted under the Incentive Plan. That cost is expected to be recognized over the remaining requisite service period of 1.2 years. A summary of restricted stock unit activity for the years ended December 31, 2024 and 2023 is as follows: Shares Weighted Average Grant Date Fair Value Unvested restricted stock units at December 31, 2022 767,048 $ 1.32 Granted 1,040,200 1.26 Forfeited — — Vested ( 45,000 ) 1.37 Unvested restricted stock units at December 31, 2023 1,762,248 1.29 Granted 151,000 1.09 Forfeited ( 425,100 ) 1.26 Vested ( 406,026 ) 1.32 Unvested restricted stock units at December 31, 2024 1,082,122 $ 1.26 Deferred Directors Fees In addition to the Incentive Plan, Fuel Tech has a Deferred Compensation Plan for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech common stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards as opposed to liability awards. In 2024 and 2023 , there was no stock-based compensation expense under the Deferred Plan. 9. COMMITMENTS AND CONTINGENCIES Fuel Tech is subject to various claims and contingencies related to, among other things, workers compensation, general liability (including product liability), and lawsuits. The Company records liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows. We do not believe we have any pending loss contingencies that are probable or reasonably possible of having a material impact on our consolidated financial position, results of operations or cash flows. 36 Table of Contents Performance Guarantees The majority of Fuel Tech’s long-term equipment construction contracts contain language guaranteeing that the performance of the system that is being sold to the customer will meet specific criteria. On occasion, performance surety bonds and bank performance guarantees/letters of credit are issued to the customer in support of the construction contracts as follows: • in support of the warranty period defined in the contract; or • in support of the system performance criteria that are defined in the contract. As of December 31, 2024 , we had outstanding bank performance guarantees and letters of credit in the amount of $ 1,860 in support of equipment construction contracts that have not completed their final acceptance test or that are still operating under a warranty period. The performance guarantees and letters of credit expire on dates ranging from April 2025 through June 2026. The expiration dates may be extended if the project completion dates are extended. Our management believes it is probable that these projects will be successfully completed and that there will not be a material adverse impact on our operations from these bank performance guarantees and letters of credit. As a result, no liability has been recorded for these performance guarantees. Product Warranties Fuel Tech issues a standard product warranty with the sale of our products to customers. Our recognition of warranty liability is based primarily on analyses of warranty claims experience in the preceding years as the nature of our historical product sales for which we offer a warranty are substantially unchanged. This approach provides an aggregate warranty accrual that is historically aligned with actual warranty claims experienced. There was no change in the warranty liability included in the Other accrued liabilities line of the Consolidated Balance Sheet in 2024 and 2023 . The warranty liability balance was $ 159 at December 31, 2024 and 2023 . 10. LEASES The terms of the Company’s two primary office space lease arrangements are as follows: • The Gallarate, Italy building lease, for approximately 1,335 square feet, runs through April 30, 2031. This facility serves as the operating headquarters for our European operations. • The Aurora, IL warehouse lease, for approximately 11,000 square feet, runs through March 31, 2031. This facility serves as an outside warehouse facility. The Company also has two additional operating leases related to certain office equipment and one short-term lease. Our leases have remaining lease terms of 0.3 years to 6.3 years. Our leases do not contain any material residual value guarantees or material restricted covenants and we currently have no material sublease arrangements. We have no financing leases as defined under ASC 842. Total operating lease expense is as follows: 2024 2023 Operating lease cost $ 180 $ 188 Short-term lease cost 9 15 Total lease cost $ 189 $ 203 The weighted average remaining lease terms were 6.18 years and 6.58 years as of December 31, 2024 and 2023 , respectively. The weighted average discount rates were 8.25 % and 8.00 % as of December 31, 2024 and 2023 , respectively. Remaining maturities of our existing lease liabilities as of December 31, 2024 were as follows: Year Ending December 31, Operating Leases 2025 $ 125 2026 121 2027 125 2028 129 2029 131 Thereafter 171 Total lease payments $ 802 Less imputed interest ( 177 ) Total $ 625 The following is the balance sheet classification of our existing lease liabilities: 2024 2023 Operating lease liabilities - current $ 77 $ 81 Operating lease liabilities - non-current 548 533 Total operating lease liabilities $ 625 $ 614 37 Table of Contents Supplemental cash flow information related to leases was as follows: For the Twelve Months ended December 31, 2024 For the twelve months ended December 31, 2023 Cash paid for amounts included in the measurement of lease liabilities $ 132 $ 150 Leased assets obtained in exchange for operating lease liabilities 95 533 11. DEBT FINANCING 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 letters 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 instruments. 12. BUSINESS SEGMENT AND GEOGRAPHIC FINANCIAL DATA Business Segment Financial Data We segregate our financial results into two reportable segments representing two broad technology segments as follows: • The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas generated by the firing of natural gas or coal from boilers, incinerators, furnaces and other stationary combustion sources. These include NOxOUT ® and HERT™ Selective Non-Catalytic Reduction systems and Selective Catalytic Reduction (SCR) systems. Our SCR systems can also include Ammonia Injection Grid, and GSG™ Graduated Straightening Grid 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. • 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. The “Other” classification includes those profit and loss items not allocated to either reportable segment. There are no inter-segment sales that require elimination. Our Chief Executive Officer (CEO) serves as our Chief Operating Decision Maker (CODM) and is responsible for reviewing segment performance and making decisions regarding resource allocation. We evaluate performance and allocate resources based on revenue and gross margin by reportable segment. We do not allocate selling, general and administrative expenses, interest, other non-operating income or expense items, or taxes to segments. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. We do not review assets by reportable segment, but rather, in aggregate for the Company as a whole. Information about reporting segment net sales and gross margin from continuing operations are provided below: For the year ended December 31, 2024 Air Pollution Control Segment FUEL CHEM Segment Other Total Revenues from external customers $ 11,242 $ 13,891 $ — $ 25,133 Cost of sales ( 7,050 ) ( 7,460 ) — ( 14,510 ) Gross margin 4,192 6,431 — 10,623 Selling, general and administrative — — ( 13,761 ) ( 13,761 ) Research and development — — ( 1,564 ) ( 1,564 ) Operating income (loss) from continuing operations $ 4,192 $ 6,431 $ ( 15,325 ) $ ( 4,702 ) 38 Table of Contents For the year ended December 31, 2023 Air Pollution Control Segment FUEL CHEM Segment Other Total Revenues from external customers $ 13,483 $ 13,598 $ — $ 27,081 Cost of sales ( 8,410 ) ( 7,015 ) — ( 15,425 ) Gross margin 5,073 6,583 — 11,656 Selling, general and administrative — — ( 12,803 ) ( 12,803 ) Research and development — — ( 1,511 ) ( 1,511 ) Operating income (loss) from continuing operations $ 5,073 $ 6,583 $ ( 14,314 ) $ ( 2,658 ) Geographic Segment Financial Data Information concerning our operations by geographic area is provided below. Revenues are attributed to countries based on the location of the end-user. Assets are those directly associated with operations of the geographic area. We manage our assets on a total company basis, not by operating segment. Therefore, our CODM does not regularly review any asset information by operating segment and accordingly, we do not report asset information by operating segment. For the years ended December 31, 2024 2023 Revenues: United States $ 17,802 $ 21,397 Other Foreign 7,331 5,684 $ 25,133 $ 27,081 As of December 31, 2024 2023 Assets: United States $ 44,430 $ 46,487 Foreign 4,367 3,901 $ 48,797 $ 50,388 13. RESTRUCTURING ACTIVITIES On January 18, 2019, the Company announced a planned suspension of its APC business operation in China (Beijing Fuel Tech). This action was part of Fuel Tech’s ongoing operational improvement initiatives designed to prioritize resource allocation, reduce costs, and drive profitability for the Company on a global basis. The transition associated with the suspension of the APC business includes staff rationalization, supplier and partner engagement, and the monetization of certain assets. The remaining transition activities include the execution of the remaining activities to satisfy the requirements for the remaining APC projects in China (with a backlog totaling approximately $ 3 as of December 31, 2024 ) and those related to subsidiary closure. The following table presents our revenues and net loss in China for the years ended December 31, 2024 and 2023 : 2024 2023 Total revenues $ — $ 2 Net loss ( 53 ) ( 50 ) The following table presents net assets in China as of December 31, 2024 and 2023 : 2024 2023 Total assets $ 788 $ 846 Total liabilities 84 67 Total net assets $ 704 $ 779 Total assets primarily consist of cash and other receivables. Total liabilities consist of accounts payable and certain accrued liabilities. The Company recorded no restructuring charges for the years ended December 31, 2024 and 2023 . 39 Table of Contents 14. ACCRUED LIABILITIES The components of other accrued liabilities are as follows: As of December 31, 2024 December 31, 2023 Contract liabilities (Note 2) $ 721 $ 1,279 Deferred revenue 360 103 Warranty reserve (Note 9) 159 159 Accrued professional fees 86 101 Other accrued liabilities 289 292 Total other accrued liabilities $ 1,615 $ 1,934 40 Table of Contents ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None