What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-03 compared with 2025-03-04 · 84 added, 97 removed, 961 unchanged (16% of the section changed)

20 unchanged sentences

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.

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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

13 unchanged sentences

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.

/s/ RSM US LLP

Chicago, Illinois

63 unchanged sentences

( 3,681 ) ( 4,702 )

Interest expense

Interest income

Other income (expense), net

Other (expense) income, net

Loss before income taxes

19 unchanged sentences

Foreign currency translation adjustments

( 167 ) ( 20 )

Total other comprehensive loss

( 167 ) ( 20 )

Total other comprehensive income (loss)

Comprehensive loss

13 unchanged sentences

— — 446 — — — — 446

Exercise of stock options

44 — 42 — — — — 42

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

18 unchanged sentences

$ ( 2,324 ) $ ( 1,943 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Loss on sale of equipment

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Loss on disposal of equipment

Non-cash interest income on held-to-maturity securities

7 unchanged sentences

Employee retention credit receivable

1,677 ( 1,677 )

Prepaid expenses, other current assets and other non-current assets

1 unchanged sentence

Accrued liabilities and other non-current liabilities

( 312 ) 1,239

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

3,016 ( 3,433 )

INVESTING ACTIVITIES

Purchases of equipment and patents

Purchases of equipment, patents, and other intangible assets

( 674 ) ( 378 )

2 unchanged sentences

Maturities of debt securities

Net cash used in investing activities

13,250 12,995

Net cash provided by (used in) investing activities

545 ( 5,443 )

FINANCING ACTIVITIES

Proceeds from exercise of stock options

Taxes paid on behalf of equity award participants

Net cash (used in) provided by financing activities

Effect of exchange rate fluctuations on cash

( 222 ) ( 95 )

Net decrease in cash and cash equivalents

Net cash used in financing activities

( 222 ) ( 95 )

Cash and cash equivalents at beginning of period

Effect of exchange rate fluctuations on cash

Net increase (decrease) in cash and cash equivalents

3,429 ( 9,068 )

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

42 unchanged sentences

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.

The Company uses estimates in accounting for, among other items, revenue recognition, impairment of goodwill and long-lived assets, and income tax provisions.

Actual results could differ from those estimates.

26 unchanged sentences

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.

At December 31, 2025 , the amount of funds collateralized under the Investment Collateral Security agreeme nt is $ 3,655 relating to existing standby letters of credit that is comprised of $ 2,437 with varying maturity dates and expire no later tha n October 8, 2028.

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.

14 unchanged sentences

$ 20,009 $ 21,076

$ 21,076 $ 15,714

The following table provides the amortized cost and fair value of debt securities by maturities at December 31, 2025 :

3 unchanged sentences

After one year through two years

10,875 10,876

After two years through three years

$ 19,933 $ 20,009

44 unchanged sentences

Foreign currency translation adjustments (1)

( 167 ) ( 20 )

Balance at end of period

21 unchanged sentences

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.

14 unchanged sentences

Patent maintenance fees are charged to operations as incurred.

On October 3, 2025 the Company finalized an Asset Purchase Agreement with Wahlco, Inc.

for the acquisition of certain assets for $ 350 .

Acquired assets include intellectual property, electronic files and records and engineering and designs in support of the intellectual property acquired.

This transaction was accounted for as an asset acquisition under ASC 805, Business Combinations and the purchase price was allocated to the assets acquired as required by the standard.

No goodwill was recorded related to the transaction.

Acquired assets are included in Other intangible assets, net on the consolidated balance sheet for the year ended December 31, 2025.

As part of the acquisition, $ 10 of the transaction price was allocated to a patent asset, which expires in 2034 and is included in Patent assets in the 'Description of Other Intangibles' below.

The remaining transaction price of $ 340 was allocated to the other intellectual property acquired and is included in Other intangible assets in the 'Description of Other Intangibles' below.

The carrying value of this intellectual property will be amortized on a straight-line basis over an estimated useful life of 10 years.

Amortization expense from continuing operations for intangible assets was $ 36 and $ 57 for the years ended December 31, 2025 and 2024 , respectively.

10 unchanged sentences

1 - 20 867 ( 561 ) 306 852 ( 525 ) 327

Other intangible assets

10 340 — 340 — — —

$ 1,207 $ ( 561 ) $ 646 $ 852 $ ( 525 ) $ 327

The table below shows the estimated future amortization expense for intangible assets:

36 unchanged sentences

Air Pollution Control Technology

Fuel Tech’s APC contracts are typically six to eighteen months in length.

Fuel Tech’s APC contracts are typically eight to twenty 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.

84 unchanged sentences

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.

For the year ended December 31, 2025 , we had three customers which individually represented greater than 10% of revenues.

These three customers contributed revenues to the FUEL CHEM technology segment.

In total these three customers represented 43 % of consolidated revenues.

We h ad no customer that accounted for greater than 10% of our current assets as of December 31, 2025 .

12 unchanged sentences

During the year ended December 31, 2025 , we withheld 147,685 shares of our common stock, valued at approximately $ 222 , 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.

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.

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 ):

9 unchanged sentences

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.

The full ERC receivable was collected in 2025 and is included in Net cash provided by operating activities on the Consolidated Statement of Cash Flows.

REVENUE RECOGNITION

7 unchanged sentences

Total Air Pollution Control technology

11,242 13,483

FUEL CHEM technology solutions

62 unchanged sentences

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.

Treasury in late December 2022, the Company was not subject to the AMT in the years 2023 through 2025.

Further, the Company believes that it is more likely than not it will not be subject to the AMT beginning 2026.

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.

For tax years beginning after December 31, 2024, 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 under the One Big Beautiful Bill Act (OBBBA).

For tax years beginning before December 31, 2024 and after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (TCJA) required taxpayers to capitalize R&E expenditures with R&E expenditures attributable to US-based research to be amortized over a period of five years and R&E expenditures attributable to research conducted outside of the US to be amortized over a period of 15 years.

Further, the statute provided 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 $ 1,920 related to research and experimental expenditures for the year ending December 31, 2025.

6 unchanged sentences

$ ( 2,268 ) $ ( 1,740 )

( 41 ) ( 126 )

Loss before income taxes

1 unchanged sentence

Significant components of income tax expense for the years ended December 31, are as follows:

( 51 ) ( 19 )

( 22 ) ( 55 )

Total current

( 73 ) ( 74 )

Total deferred

1 unchanged sentence

$ ( 15 ) $ ( 77 )

ASC 740 requires entities to annually disaggregate the income tax rate reconciliation between the following nine categories by both percentages and reporting currency amounts.

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:

federal statutory income tax rate and the consolidated income tax expense in the consolidated statements of operations for the year ended December 31, 2025 is as follows:

Provision at the U.S.

1 unchanged sentence

( 485 ) 21.0 %

State and local income taxes, net of federal income tax effect

IL state and local income tax

All other state and local income tax

Foreign tax effects, including foreign valuation allowance

Effect of changes in tax laws or rates enacted in the current period

Effect of cross-border tax laws

R&D tax credits

( 202 ) 8.8 %

Other tax credits

Changes in valuation allowances (federal only)

612 ( 26.4 )%

Nontaxable or nondeductible items

Stock compensation

Changes in unrecognized tax benefits

Other adjustments:

deferred revenue

Other adjustments

Income tax expense

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 year ended December 31, 2024 is as follows:

Provision at the U.S.

federal statutory rate

State taxes, net of federal benefit

Foreign tax rate differential

0.2 % ( 0.6 )%

Valuation allowance

105.6 % ( 4.9 )%

Chile outside basis differential

Italy IRES/IREP

Accrual to return

2.1 % ( 5.8 )%

Research and development credit

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

( 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:

35 unchanged sentences

$ 470 85 $ 555

Income taxes paid (net of refunds) by jurisdiction are as follows:

Income taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) in the following jurisdictions:

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.

37 unchanged sentences

The deferred income taxes associated with this investment are offset by a valuation allowance of ($ 159 ).

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 ).

At December 31, 2025 and 2024 , respectively, we had 32,281,179 and 31,767,329 shares of common stock issued and 31,074,438 and 30,708,273 shares 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, 2025 , we had 2,883,057 shares reserved for issuance upon the exercise or vesting of equity awards, of which 71,000 are stock options that are currently exercisable (see Note 8 ).

1 unchanged sentence

Common stock held in treasury totaled 1,206,741 and 1,059,056 with a cost of $ 2,568 and $ 2,346 at December 31, 2025 and 2024 , 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.

These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of vested restricted stock units.

NIL COUPON NON-REDEEMABLE CONVERTIBLE UNSECURED LOAN NOTES

34 unchanged sentences

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.

In addition, we account for forfeitures of awards based on an estimate of the number of awards expected to be forfeited and we adjust the estimate when it is no longer probable that the employee will fulfill the service condition.

Stock-based compensation is included in selling, general and administrative costs in our consolidated statements of operations.

9 unchanged sentences

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, 2025 and 2024 .

5 unchanged sentences

176,000 $ 1.94 270,500 $ 3.09

— — ( 44,000 ) 0.96

Expired or forfeited

16 unchanged sentences

71,000 1.3 $ 1.20

105,000 0.4 2.44

176,000 1.2 $ 1.94

As of and for the 12 months ended December 31, 2025 , 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 .

There were no options exercised during the years ended December 31, 2025 and 2024 .

It is our policy to issue new shares upon option exercises, loan conversions, and vesting of restricted stock units.

2 unchanged sentences

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.

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.

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 had the opportunity to earn a specified amount of RSUs based on Fuel Tech’s performance in 2023 and 2024.

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 and 70,850 RSU awards granted to Participating Executives in 2025 based on the Company's performance during the year ended December 31, 2024.

The Company entered into a new Executive Performance RSU Award Agreement (the "Agreement") in 2025 pursuant to which the Participating Executives under the 2023 Agreement again have the opportunity to earn a specified amount of RSUs based on Fuel Tech's performance in 2025 and 2026.

The target amount of RSUs for each of four possible RSU award components is set for each Participating Executive for 2025 and 2026.

4 unchanged sentences

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.

The amount, if any, of actual RSU awards to be issued for the years ended December 31, 2025 and 2026 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.

During the years ended December 31, 2025 and 2024 , there were 513,850 and 406,026 restricted stock units that vested with a grant date fair value of $ 654 and $ 536 , respectively.

32 unchanged sentences

As of December 31, 2025 , we had outstanding bank performance guarantees and letters of credit in the amount of $ 2,437 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 performance guarantees and letters of credit expire on dates ranging from January 2026 through October 2028.

The expiration dates may be extended if the project completion dates are extended.

46 unchanged sentences

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.

These include NOxOUT ® 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.

75 unchanged sentences

$ 1,026 $ 721

Deferred revenue

Warranty reserve (Note 9)

Deferred revenue

Accrued professional fees

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data