10-Q 1 ftek20230930_10q.htm FORM 10-Q ftek20230930_10q.htm
0000846913 FUEL TECH, INC. false --12-31 Q3 2023 18,727 18,557 452 406 0.01 0.01 40,000,000 40,000,000 31,361,303 31,272,303 30,385,297 30,296,297 3 36 0 0 0 976,006 2,251 2,850,000 2,850,000 0 0 0 0 2 4 33.33 33.33 33.33 0 0 159 0 In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings. 00008469132023-01-012023-09-30 xbrli:shares 00008469132023-10-31 thunderdome:item iso4217:USD 00008469132023-09-30 00008469132022-12-31 iso4217:USDxbrli:shares 00008469132023-07-012023-09-30 00008469132022-07-012022-09-30 00008469132022-01-012022-09-30 0000846913ftek:CommonStockOutstandingMember2021-12-31 0000846913us-gaap:AdditionalPaidInCapitalMember2021-12-31 0000846913us-gaap:RetainedEarningsMember2021-12-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-31 0000846913ftek:NilCouponPerpetualLoanNotesMember2021-12-31 0000846913us-gaap:TreasuryStockCommonMember2021-12-31 00008469132021-12-31 0000846913ftek:CommonStockOutstandingMember2022-01-012022-03-31 0000846913us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-31 0000846913us-gaap:RetainedEarningsMember2022-01-012022-03-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-31 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-01-012022-03-31 0000846913us-gaap:TreasuryStockCommonMember2022-01-012022-03-31 00008469132022-01-012022-03-31 0000846913ftek:CommonStockOutstandingMember2022-03-31 0000846913us-gaap:AdditionalPaidInCapitalMember2022-03-31 0000846913us-gaap:RetainedEarningsMember2022-03-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-31 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-03-31 0000846913us-gaap:TreasuryStockCommonMember2022-03-31 00008469132022-03-31 0000846913ftek:CommonStockOutstandingMember2022-04-012022-06-30 0000846913us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-30 0000846913us-gaap:RetainedEarningsMember2022-04-012022-06-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-04-012022-06-30 0000846913us-gaap:TreasuryStockCommonMember2022-04-012022-06-30 00008469132022-04-012022-06-30 0000846913ftek:CommonStockOutstandingMember2022-06-30 0000846913us-gaap:AdditionalPaidInCapitalMember2022-06-30 0000846913us-gaap:RetainedEarningsMember2022-06-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-06-30 0000846913us-gaap:TreasuryStockCommonMember2022-06-30 00008469132022-06-30 0000846913ftek:CommonStockOutstandingMember2022-07-012022-09-30 0000846913us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-30 0000846913us-gaap:RetainedEarningsMember2022-07-012022-09-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-07-012022-09-30 0000846913us-gaap:TreasuryStockCommonMember2022-07-012022-09-30 0000846913ftek:CommonStockOutstandingMember2022-09-30 0000846913us-gaap:AdditionalPaidInCapitalMember2022-09-30 0000846913us-gaap:RetainedEarningsMember2022-09-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-09-30 0000846913us-gaap:TreasuryStockCommonMember2022-09-30 00008469132022-09-30 0000846913ftek:CommonStockOutstandingMember2022-12-31 0000846913us-gaap:AdditionalPaidInCapitalMember2022-12-31 0000846913us-gaap:RetainedEarningsMember2022-12-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-31 0000846913ftek:NilCouponPerpetualLoanNotesMember2022-12-31 0000846913us-gaap:TreasuryStockCommonMember2022-12-31 0000846913ftek:CommonStockOutstandingMember2023-01-012023-03-31 0000846913us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-31 0000846913us-gaap:RetainedEarningsMember2023-01-012023-03-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-31 0000846913ftek:NilCouponPerpetualLoanNotesMember2023-01-012023-03-31 0000846913us-gaap:TreasuryStockCommonMember2023-01-012023-03-31 00008469132023-01-012023-03-31 0000846913ftek:CommonStockOutstandingMember2023-03-31 0000846913us-gaap:AdditionalPaidInCapitalMember2023-03-31 0000846913us-gaap:RetainedEarningsMember2023-03-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-31 0000846913ftek:NilCouponPerpetualLoanNotesMember2023-03-31 0000846913us-gaap:TreasuryStockCommonMember2023-03-31 00008469132023-03-31 0000846913ftek:CommonStockOutstandingMember2023-04-012023-06-30 0000846913us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-30 0000846913us-gaap:RetainedEarningsMember2023-04-012023-06-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2023-04-012023-06-30 0000846913us-gaap:TreasuryStockCommonMember2023-04-012023-06-30 00008469132023-04-012023-06-30 0000846913ftek:CommonStockOutstandingMember2023-06-30 0000846913us-gaap:AdditionalPaidInCapitalMember2023-06-30 0000846913us-gaap:RetainedEarningsMember2023-06-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2023-06-30 0000846913us-gaap:TreasuryStockCommonMember2023-06-30 00008469132023-06-30 0000846913ftek:CommonStockOutstandingMember2023-07-012023-09-30 0000846913us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-30 0000846913us-gaap:RetainedEarningsMember2023-07-012023-09-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2023-07-012023-09-30 0000846913us-gaap:TreasuryStockCommonMember2023-07-012023-09-30 0000846913ftek:CommonStockOutstandingMember2023-09-30 0000846913us-gaap:AdditionalPaidInCapitalMember2023-09-30 0000846913us-gaap:RetainedEarningsMember2023-09-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-30 0000846913ftek:NilCouponPerpetualLoanNotesMember2023-09-30 0000846913us-gaap:TreasuryStockCommonMember2023-09-30 0000846913us-gaap:AssetPledgedAsCollateralMemberus-gaap:LetterOfCreditMember2023-09-30 0000846913us-gaap:AssetPledgedAsCollateralMemberus-gaap:LetterOfCreditMemberftek:VaryingMaturityDatesExpiringNoLaterThanSeptember302024Member2023-09-30 0000846913us-gaap:AssetPledgedAsCollateralMemberus-gaap:LetterOfCreditMemberftek:LatestMaturityDateNoLaterThanNovember302025Member2023-09-30 utr:M 0000846913srt:MinimumMember2023-01-012023-09-30 0000846913srt:MaximumMember2023-01-012023-09-30 0000846913ftek:EquipmentContstructedForResaleMember2023-09-30 0000846913ftek:EquipmentContstructedForResaleMember2022-12-31 0000846913ftek:SparePartsMember2023-09-30 0000846913ftek:SparePartsMember2022-12-31 0000846913ftek:InProcessEquipmentMember2023-09-30 0000846913ftek:InProcessEquipmentMember2022-12-31 00008469132022-01-012022-12-31 0000846913ftek:TechnologySolutionsMemberftek:AirPollutionControlMember2023-07-012023-09-30 0000846913ftek:TechnologySolutionsMemberftek:AirPollutionControlMember2022-07-012022-09-30 0000846913ftek:TechnologySolutionsMemberftek:AirPollutionControlMember2023-01-012023-09-30 0000846913ftek:TechnologySolutionsMemberftek:AirPollutionControlMember2022-01-012022-09-30 0000846913ftek:SparePartsMemberftek:AirPollutionControlMember2023-07-012023-09-30 0000846913ftek:SparePartsMemberftek:AirPollutionControlMember2022-07-012022-09-30 0000846913ftek:SparePartsMemberftek:AirPollutionControlMember2023-01-012023-09-30 0000846913ftek:SparePartsMemberftek:AirPollutionControlMember2022-01-012022-09-30 0000846913ftek:AncillaryRevenueMemberftek:AirPollutionControlMember2023-07-012023-09-30 0000846913ftek:AncillaryRevenueMemberftek:AirPollutionControlMember2022-07-012022-09-30 0000846913ftek:AncillaryRevenueMemberftek:AirPollutionControlMember2023-01-012023-09-30 0000846913ftek:AncillaryRevenueMemberftek:AirPollutionControlMember2022-01-012022-09-30 0000846913ftek:AirPollutionControlMember2023-07-012023-09-30 0000846913ftek:AirPollutionControlMember2022-07-012022-09-30 0000846913ftek:AirPollutionControlMember2023-01-012023-09-30 0000846913ftek:AirPollutionControlMember2022-01-012022-09-30 0000846913ftek:TechnologySolutionsMemberftek:FUELCHEMMember2023-07-012023-09-30 0000846913ftek:TechnologySolutionsMemberftek:FUELCHEMMember2022-07-012022-09-30 0000846913ftek:TechnologySolutionsMemberftek:FUELCHEMMember2023-01-012023-09-30 0000846913ftek:TechnologySolutionsMemberftek:FUELCHEMMember2022-01-012022-09-30 0000846913country:US2023-07-012023-09-30 0000846913country:US2022-07-012022-09-30 0000846913country:US2023-01-012023-09-30 0000846913country:US2022-01-012022-09-30 0000846913srt:LatinAmericaMember2023-07-012023-09-30 0000846913srt:LatinAmericaMember2022-07-012022-09-30 0000846913srt:LatinAmericaMember2023-01-012023-09-30 0000846913srt:LatinAmericaMember2022-01-012022-09-30 0000846913srt:EuropeMember2023-07-012023-09-30 0000846913srt:EuropeMember2022-07-012022-09-30 0000846913srt:EuropeMember2023-01-012023-09-30 0000846913srt:EuropeMember2022-01-012022-09-30 0000846913srt:AsiaMember2023-07-012023-09-30 0000846913srt:AsiaMember2022-07-012022-09-30 0000846913srt:AsiaMember2023-01-012023-09-30 0000846913srt:AsiaMember2022-01-012022-09-30 0000846913us-gaap:NonUsMember2023-07-012023-09-30 0000846913us-gaap:NonUsMember2022-07-012022-09-30 0000846913us-gaap:NonUsMember2023-01-012023-09-30 0000846913us-gaap:NonUsMember2022-01-012022-09-30 0000846913us-gaap:TransferredAtPointInTimeMember2023-07-012023-09-30 0000846913us-gaap:TransferredAtPointInTimeMember2022-07-012022-09-30 0000846913us-gaap:TransferredAtPointInTimeMember2023-01-012023-09-30 0000846913us-gaap:TransferredAtPointInTimeMember2022-01-012022-09-30 0000846913us-gaap:TransferredOverTimeMember2023-07-012023-09-30 0000846913us-gaap:TransferredOverTimeMember2022-07-012022-09-30 0000846913us-gaap:TransferredOverTimeMember2023-01-012023-09-30 0000846913us-gaap:TransferredOverTimeMember2022-01-012022-09-30 0000846913ftek:AirPollutionControlMember2023-09-30 0000846913ftek:AirPollutionControlMember2022-12-31 0000846913ftek:AirPollutionControlMember2021-12-31 0000846913ftek:FUELCHEMMember2023-09-30 0000846913ftek:FUELCHEMMember2022-12-31 0000846913ftek:FUELCHEMMember2021-12-31 xbrli:pure 00008469132023-10-012023-09-30 0000846913ftek:BacklogMembercountry:CN2023-09-30 0000846913country:CN2023-07-012023-09-30 0000846913country:CN2022-07-012022-09-30 0000846913country:CN2023-01-012023-09-30 0000846913country:CN2022-01-012022-09-30 0000846913country:CN2023-09-30 0000846913country:CN2022-12-31 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-30 0000846913us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-30 0000846913ftek:WeightedAverageEquityAwardsMember2023-07-012023-09-30 0000846913ftek:WeightedAverageEquityAwardsMember2023-01-012023-09-30 0000846913us-gaap:WarrantMember2023-07-012023-09-30 0000846913ftek:IncrementalEquityAwardsMember2023-01-012023-09-30 0000846913ftek:WeightedAverageEquityAwardsMember2022-07-012022-09-30 0000846913ftek:WeightedAverageEquityAwardsMember2022-01-012022-09-30 0000846913us-gaap:WarrantMember2022-07-012022-09-30 0000846913us-gaap:WarrantMember2023-01-012023-09-30 0000846913ftek:IncrementalEquityAwardsMember2022-01-012022-09-30 0000846913ftek:The2014LongTermIncentivePlanMember2023-09-30 0000846913ftek:The2014LongTermIncentivePlanMember2023-07-012023-09-30 0000846913ftek:The2014LongTermIncentivePlanMember2022-07-012022-09-30 0000846913ftek:The2014LongTermIncentivePlanMember2023-01-012023-09-30 0000846913ftek:The2014LongTermIncentivePlanMember2022-01-012022-09-30 0000846913us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-07-012023-09-30 0000846913us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-07-012022-09-30 0000846913us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-09-30 0000846913us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-09-30 utr:Y 0000846913us-gaap:EmployeeStockOptionMemberftek:The2014LongTermIncentivePlanMember2023-01-012023-09-30 0000846913us-gaap:EmployeeStockOptionMemberftek:The2014LongTermIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2023-01-012023-09-30 0000846913us-gaap:EmployeeStockOptionMemberftek:The2014LongTermIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2023-01-012023-09-30 0000846913us-gaap:EmployeeStockOptionMemberftek:The2014LongTermIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2023-01-012023-09-30 0000846913us-gaap:EmployeeStockOptionMemberftek:The2014LongTermIncentivePlanMember2023-01-012023-06-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMembersrt:MinimumMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMembersrt:MaximumMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMemberftek:TrancheOneIfLookbackRsusAwardedMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMemberftek:TrancheTwoIfLookbackRsusAwardedMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMemberftek:TrancheThreeIfLookbackRsusAwardedMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMemberftek:VestingIfTotalRevenueRsuNewBusinessGrowthRsuOrOperatingIncomeGrowthRsuAwardedMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockMemberftek:The2014LongTermIncentivePlanMember2023-09-30 0000846913us-gaap:RestrictedStockMemberftek:The2014LongTermIncentivePlanMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMember2022-12-31 0000846913us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMember2023-09-30 0000846913us-gaap:RestrictedStockUnitsRSUMemberftek:The2014LongTermIncentivePlanMember2023-01-012023-09-30 0000846913ftek:DeferredCompensationPlanForDirectorsMember2023-01-012023-09-30 0000846913ftek:DeferredCompensationPlanForDirectorsMember2022-01-012022-09-30 0000846913ftek:WarrantsIssuedInConnectionWithPrivatePlacementMember2023-09-30 0000846913ftek:WarrantsIssuedInConnectionWithPrivatePlacementMember2023-01-012023-09-30 0000846913ftek:ThePlacementAgentWarrantsMember2023-09-30 0000846913ftek:ThePlacementAgentWarrantsMember2023-01-012023-09-30 00008469132022-06-302022-06-30 0000846913us-gaap:AssetPledgedAsCollateralMember2023-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:AirPollutionControlMember2023-07-012023-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:FUELCHEMMember2023-07-012023-09-30 0000846913us-gaap:MaterialReconcilingItemsMember2023-07-012023-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:AirPollutionControlMember2022-07-012022-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:FUELCHEMMember2022-07-012022-09-30 0000846913us-gaap:MaterialReconcilingItemsMember2022-07-012022-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:AirPollutionControlMember2023-01-012023-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:FUELCHEMMember2023-01-012023-09-30 0000846913us-gaap:MaterialReconcilingItemsMember2023-01-012023-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:AirPollutionControlMember2022-01-012022-09-30 0000846913us-gaap:OperatingSegmentsMemberftek:FUELCHEMMember2022-01-012022-09-30 0000846913us-gaap:MaterialReconcilingItemsMember2022-01-012022-09-30 0000846913country:US2023-09-30 0000846913country:US2022-12-31 0000846913us-gaap:NonUsMember2023-09-30 0000846913us-gaap:NonUsMember2022-12-31 0000846913ftek:OtherAccruedLiabilitiesMember2023-09-30 0000846913ftek:OtherAccruedLiabilitiesMember2022-12-31
 
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

September 30, 2023

or 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to______.

Commission file number: 001-33059

 

FUEL TECH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

20-5657551

(State or other jurisdiction of

incorporation of organization)

(I.R.S. Employer

Identification Number)

 

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, IL 60555-1617

630-845-4500

www.ftek.com

(Address and telephone number of principal executive offices)

  ________________________________

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

 FTEK

NASDAQ

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

   

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

On October 31, 2023 there were outstanding 30,385,297 shares of Common Stock, par value $0.01 per share, of the registrant. 

 

 

 

 

 

 

FUEL TECH, INC.

Form 10-Q for the nine-month period ended September 30, 2023

 

INDEX

 

   

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1
 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

1

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022

3

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2023 and 2022

4

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

19

Item 4.

Controls and Procedures

19

PART II.

OTHER INFORMATION

20

Item 1.

Legal Proceedings

20

Item 1A.

Risk Factors

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

Item 6.

Exhibits

20

SIGNATURES

21

 

 

 
 

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)(in thousands, except share and per share data)

 

  

September 30,

  

December 31,

 
  

2023

  

2022

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $13,483  $23,328 

Short-term investments

  14,802   2,981 

Accounts receivable, net

  7,696   7,729 

Inventories, net

  325   392 

Prepaid expenses and other current assets

  1,041   1,395 

Total current assets

  37,347   35,825 

Property and equipment, net of accumulated depreciation of $18,727 and $18,557, respectively

  4,364   4,435 

Goodwill

  2,116   2,116 

Other intangible assets, net of accumulated amortization of $452 and $406, respectively

  376   397 

Right-of-use operating lease assets, net

  462   197 

Long-term investments

  4,883   6,360 

Other assets

  771   794 

Total assets

 $50,319  $50,124 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities:

        

Accounts payable

 $2,872  $2,710 

Accrued liabilities:

        

Operating lease liabilities - current

  103   125 

Employee compensation

  618   1,105 

Other accrued liabilities

  1,838   826 

Total current liabilities

  5,431   4,766 

Operating lease liabilities - non-current

  348   66 

Deferred income taxes, net

  177   177 

Other liabilities

  275   274 

Total liabilities

  6,231   5,283 

Stockholders’ equity:

        

Common stock, $.01 par value, 40,000,000 shares authorized, 31,361,303 and 31,272,303 shares issued, and 30,385,297 and 30,296,297 shares outstanding, respectively

  313   313 

Additional paid-in capital

  164,752   164,422 

Accumulated deficit

  (116,990)  (115,991)

Accumulated other comprehensive loss

  (1,812)  (1,728)

Nil coupon perpetual loan notes

  76   76 

Treasury stock, at cost

  (2,251)  (2,251)

Total stockholders’ equity

  44,088   44,841 

Total liabilities and stockholders’ equity

 $50,319  $50,124 

 

See notes to condensed consolidated financial statements.

 

 

 

                                        

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per-share data)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2023

   

2022

   

2023

   

2022

 

Revenues

  $ 7,988     $ 8,017     $ 20,736     $ 19,920  

Costs and expenses:

                               

Cost of sales

    4,376       4,345       12,323       11,280  

Selling, general and administrative

    2,966       3,273       9,126       9,201  

Research and development

    513       207       1,144       716  
      7,855       7,825       22,593       21,197  

Operating income (loss)

    133       192       (1,857 )     (1,277 )

Interest expense

    (5 )     (4 )     (15 )     (13 )

Interest income

    322       92       968       101  

Other income (expense), net

    9       34       (95 )     158  

Income (loss) before income taxes

    459       314       (999 )     (1,031 )

Income tax expense

                      (9 )

Net income (loss)

  $ 459     $ 314     $ (999 )   $ (1,040 )

Net income (loss) per common share:

                               

Basic net income (loss) per common share

  $ 0.02     $ 0.01     $ (0.03 )   $ (0.03 )

Diluted net income (loss) per common share

  $ 0.01     $ 0.01     $ (0.03 )   $ (0.03 )

Weighted-average number of common shares outstanding:

                               

Basic

    30,385,000       30,296,000       30,336,000       30,287,000  

Diluted

    30,627,000       30,371,000       30,336,000       30,287,000  

 

See notes to condensed consolidated financial statements.

 

 

 

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2023

   

2022

   

2023

   

2022

 

Net income (loss)

  $ 459     $ 314     $ (999 )   $ (1,040 )

Other comprehensive (loss) income:

                               

Foreign currency translation adjustments

    (122 )     (155 )     (84 )     (447 )

Comprehensive income (loss)

  $ 337     $ 159     $ (1,083 )   $ (1,487 )

 

See notes to condensed consolidated financial statements.

 

 

 

 

FUEL TECH, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)(in thousands of dollars or shares, as appropriate)

 

The following summarizes the changes in total stockholders' equity for the three and nine months ended September 30, 2022:

 

                                   

Accumulated

   

Nil

                 
                   

Additional

           

Other

   

Coupon

                 
   

Common Stock

   

Paid-in

   

Accumulated

   

Comprehensive

   

Perpetual

   

Treasury

         
   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Loan Notes

   

Stock

   

Total

 

Balance at December 31, 2021

    30,264     $ 312     $ 164,199     $ (114,549 )   $ (1,604 )   $ 76     $ (2,234 )   $ 46,200  

Net loss

                      (998 )                       (998 )

Foreign currency translation adjustments

                            (70 )                 (70 )

Stock compensation expense

                18                               18  

Common shares issued upon vesting of restricted stock units

    45       1       (1 )                              

Taxes paid on behalf of equity award participants

    (13 )                                   (17 )     (17 )

Balance at March 31, 2022

    30,296     $ 313     $ 164,216     $ (115,547 )   $ (1,674 )   $ 76     $ (2,251 )   $ 45,133  

Net loss

                      (356 )                       (356 )

Foreign currency translation adjustments

                            (222 )                 (222 )

Stock compensation expense

                28                               28  

Balance at June 30, 2022

    30,296     $ 313     $ 164,244     $ (115,903 )   $ (1,896 )   $ 76     $ (2,251 )   $ 44,583  

Net income

                      314                         314  

Foreign currency translation adjustments

                            (155 )                 (155 )

Stock compensation expense

                90                               90  

Balance at September 30, 2022

    30,296     $ 313     $ 164,334     $ (115,589 )   $ (2,051 )   $ 76     $ (2,251 )   $ 44,832  

 

 

The following summarizes the changes in total stockholders' equity for the three and nine months ended September 30, 2023:

 

                                   

Accumulated

   

Nil

                 
                   

Additional

           

Other

   

Coupon

                 
   

Common Stock

   

Paid-in

   

Accumulated

   

Comprehensive

   

Perpetual

   

Treasury

         
   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Loan Notes

   

Stock

   

Total

 

Balance at December 31, 2022

    30,296     $ 313     $ 164,422     $ (115,991 )   $ (1,728 )   $ 76     $ (2,251 )   $ 44,841  

Net loss

                      (414 )                       (414 )

Foreign currency translation adjustments

                            86                   86  

Stock compensation expense

                89                               89  

Balance at March 31, 2023

    30,296     $ 313     $ 164,511     $ (116,405 )   $ (1,642 )   $ 76     $ (2,251 )   $ 44,602  

Net loss

                      (1,044 )                       (1,044 )

Foreign currency translation adjustments

                            (48 )                 (48 )

Stock compensation expense

                98                               98  

Exercise of stock options

    44             42                               42  

Common shares issued upon vesting of restricted stock units

    45                                            

Balance at June 30, 2023

    30,385     $ 313     $ 164,651     $ (117,449 )   $ (1,690 )   $ 76     $ (2,251 )   $ 43,650  

Net income

                      459                         459  

Foreign currency translation adjustments

                            (122 )                 (122 )

Stock compensation expense

                101                               101  

Balance at September 30, 2023

    30,385     $ 313     $ 164,752     $ (116,990 )   $ (1,812 )   $ 76     $ (2,251 )   $ 44,088  

 

See notes to condensed consolidated financial statements.

 

 

 

 

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Nine Months Ended

 
   

September 30,

 
   

2023

   

2022

 

Operating Activities

               

Net loss

  $ (999 )   $ (1,040 )

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

               

Depreciation

    247       267  

Amortization

    46       70  

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

    (319 )      

Provision for credit losses, net of recoveries

          (45 )

Stock-based compensation, net of forfeitures

    288       136  

Changes in operating assets and liabilities:

               

Accounts receivable

    5       (3,449 )

Inventories

    68       (44 )

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

    363       370  

Accounts payable

    172       1,094  

Accrued liabilities and other non-current liabilities

    520       50  

Net cash provided by (used in) operating activities

    391       (2,591 )

Investing Activities

               

Purchases of equipment and patents

    (201 )     (186 )

Purchases of debt securities

    (14,026 )     (9,777 )

Maturities of debt securities

    4,000        

Net cash used in investing activities

    (10,227 )     (9,963 )

Financing Activities

               

Proceeds from exercise of stock options

    42        

Taxes paid on behalf of equity award participants

          (17 )

Net cash provided by (used in) financing activities

    42       (17 )

Effect of exchange rate fluctuations on cash

    (51 )     (401 )

Net decrease in cash and cash equivalents

    (9,845 )     (12,972 )

Cash and cash equivalents at beginning of period

    23,328       37,054  

Cash and cash equivalents at end of period

  $ 13,483     $ 24,082  

 

See notes to condensed consolidated financial statements.

 

 

FUEL TECH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

(in thousands, except share and per-share data)

 

 

1.     General

 

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. These technologies enable customers to operate in a cost-effective and environmentally sustainable manner.

 

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 systems which modify the ash properties of particulate for improved collection efficiency. The Company’s FUEL CHEM® technology improves 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.

 

Many of Fuel Tech’s products and services rely heavily on the Company’s computational fluid dynamics modeling capabilities, which are enhanced by internally developed, high-end visualization software.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for the fair statement of Fuel Tech's financial position, cash flows, and results of operations for the periods presented. All significant intercompany transactions and balances have been eliminated. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. For further information, refer to the audited consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form 10-K for the year ended  December 31, 2022 as filed with the Securities and Exchange Commission.

 

Global Health and Geopolitical Events

 

Management cannot predict the full impact of the COVID-19 pandemic and geopolitical events on the Company’s sales and marketing channels and supply chain, and as a result, the ultimate extent of the effects on the Company are highly uncertain and will depend on future developments. The Company continues to monitor the potential impacts on the business. 

 

 

2.     Summary of Significant Accounting Policies

 

Investments

 

In 2022, the Board of Directors approved a plan to invest up to $20,000 of excess capital in debt securities, or held in money market funds until such investments can be made, with BMO Harris Bank N.A (BMO Harris). A portion of the funds invested are restricted as collateral under the Investment Collateral Security agreement (see Note 10). At September 30, 2023, the amount of funds collateralized under the Investment Collateral Security agreement is $1,488 relating to existing standby letters of credit that is comprised of $1,197 with varying maturity dates and expire no later than September 30, 2024 and $291 with the latest maturity date no later than  November 30, 2025.

 

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. Carrying value of cash equivalents approximates fair value due to the maturities of three months or less.

 

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 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 Condensed 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 Condensed Consolidated Balance Sheets. 

 

6

 

Our investments in debt securities consist of United States (US) Treasury securities, including Notes, Bonds, and Bills, and US Government Agency securities. 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:

 

  

As of

 

Held-to-maturity debt securities:

 

September 30, 2023

  

December 31, 2022

 

Amortized cost

 $19,685  $9,341 

Gross unrecognized gains

      

Gross unrecognized losses

  (187)  (168)

Fair value

 $19,498  $9,173 

 

The following table provides the amortized cost and fair value of debt securities by maturities at September 30, 2023:

 

  

Amortized Cost

  

Fair Value

 

Within one year

 $14,802  $14,694 

After one year through two years

  4,883   4,804 

Total

 $19,685  $19,498 

 

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  September 30, 2023 and December 31, 2022, inventory included equipment constructed for resale of $207 and $207, respectively, and spare parts, net of reserves of $118 and $185, 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 $619 and $634 as of  September 30, 2023 and December 31, 2022, 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. 

 

Allowance for Credit Losses

 

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and in November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This guidance requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables and other financial instruments, we are required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The Company adopted these ASUs on January 1, 2023 using the prospective method. Application of the amendments did not require a cumulative-effect adjustment to retained earnings as of the effective date and did not have a material impact on our financial statements. Beginning on January 1, 2023, Fuel Tech will use the caption Allowance for Credit Losses and our expected credit loss model to calculate the allowance.

 

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 following table provides the roll forward of the allowance for credit loss:

 

At January 1, 2022

 $223 

Provision charged to expense

  (19)

(Write-offs) / Recoveries

  (94)

At December 31, 2022

 $110 

Provision charged to expense

   

(Write-offs) / Recoveries

   

At September 30, 2023

 $110 

 

 

3.     Revenue

 

Disaggregated Revenue by Product Technology

 

The following table presents our revenues disaggregated by product technology:

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Air Pollution Control

                

Technology solutions

 $1,910  $1,904  $7,449  $5,711 

Spare parts

  1,339   384   1,938   742 

Ancillary revenue

  462   440   1,305   1,217 

Total Air Pollution Control technology revenues

  3,711   2,728   10,692   7,670 

FUEL CHEM

                

FUEL CHEM technology solutions

  4,277   5,289   10,044   12,250 

Total Revenues

 $7,988  $8,017  $20,736  $19,920 

 

7

 

Disaggregated Revenue by Geography

 

The following table presents our revenues disaggregated by geography, based on the location of the end-user:

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

United States

 $5,640  $6,972  $15,937  $14,939 

Foreign Revenues

                

Latin America

  157   56   310   185 

Europe

  1,001   613   2,400   1,939 

Asia

  1,190   376   2,089   2,857 

Total Foreign Revenues

  2,348   1,045   4,799   4,981 

Total Revenues

 $7,988  $8,017  $20,736  $19,920 

 

Timing of Revenue Recognition

 

The following table presents the timing of our revenue recognition:

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Products transferred at a point in time

 $6,078  $5,969  $13,287  $14,065 

Products and services transferred over time

  1,910   2,048   7,449   5,855 

Total Revenues

 $7,988  $8,017  $20,736  $19,920 

 

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 Condensed Consolidated Balance Sheets. In our Air Pollution Control (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. For the FUEL CHEM technology segment, deliveries made in the current period but billed in subsequent periods are also considered unbilled receivables (contract assets). These assets are reported on the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. At September 30, 2023 December 31, 2022, and December 31, 2021, contract assets for APC technology projects were approximately $1,944, $3,082, and $1,277, respectively. There were no contract assets for the FUEL CHEM technology segment as of  September 30, 2023 December 31, 2022, and December 31, 2021.  

 

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 Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Contract liabilities were $1,365, $372, and $390 at September 30, 2023 December 31, 2022, and December 31, 2021, respectively, and are included in other accrued liabilities on the Condensed Consolidated Balance Sheets.

 

Changes in the contract asset and liability balances during the nine-month period ended September 30, 2023, 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 $0 and $368 for the three and nine months ended September 30, 2023, respectively, and $131 and $381 for three and nine months ended September 30, 2022, respectively, which represented primarily revenue from progress towards completion of our APC technology contracts.

 

As of September 30, 2023 and December 31, 2022, we had no construction contracts in progress that were identified as a loss contract. 

 

8

 

Remaining Performance Obligations

 

Remaining performance obligations represents the transaction price of APC technology booked orders for which work has not been performed. As of September 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $5,624. The Company expects to recognize revenue on approximately $4,874 of the remaining performance obligations over the next 12 months with the remaining recognized thereafter. 

 

Accounts Receivable

 

The components of accounts receivable are as follows:

 

  

As of

 
  

September 30, 2023

  

December 31, 2022

 

Trade receivables

 $5,717  $4,605 

Unbilled receivables

  1,944   3,082 

Other short-term receivables

  145   152 

Allowance for credit losses

  (110)  (110)

Total accounts receivable

 $7,696  $7,729 

 

 

4.     Restructuring Activities

 

On January 18, 2019, the Company announced a planned suspension of its APC business operation in China. 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 which has taken place through September 30, 2023 includes staff rationalization and reduction, supplier and partner engagement, and the monetization of certain assets. The remaining transition activities include the execution of the activities to satisfy the requirements for the remaining APC projects in China (with a backlog totaling approximately $3) and those related to subsidiary closure.

 

The following table presents our revenues and net loss for 2023 and 2022 in China as follows:

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Total revenues

 $  $1  $2  $2 

Net loss

  (17)  (142)  (36)  (193)

 

Total assets primarily consist of cash and other receivables. Total liabilities consist of accounts payable and certain accrued liabilities.

 

The following table presents net assets in China as follows:

 

  

As of

 
  

September 30, 2023

  

December 31, 2022

 

Total assets

 $842  $929 

Total liabilities

  73   79 

Total net assets

 $769  $850 

 

9

 
 

5.     Accumulated Other Comprehensive Loss

 

The changes in accumulated other comprehensive loss by component were as follows:

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2023

   

2022

   

2023

   

2022

 

Foreign currency translation

                               

Balance at beginning of period

  $ (1,690 )   $ (1,896 )   $ (1,728 )   $ (1,604 )

Other comprehensive (loss) income:

                               

Foreign currency translation adjustments (1)

    (122 )     (155 )     (84 )     (447 )

Total accumulated other comprehensive loss

  $ (1,812 )   $ (2,051 )   $ (1,812 )   $ (2,051 )

 

(1)

In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings.

 

 

6.     Treasury Stock

 

Common stock held in treasury totaled 976,006 with a cost of $2,251 at September 30, 2023 and December 31, 2022. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that vested in the periods presented.

 

 

7.     Earnings per Share

 

Basic earnings per share excludes the dilutive effects of stock options, restricted stock units (RSUs), warrants, and the nil coupon non-redeemable convertible unsecured loan notes. 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 anti-dilutive. Out-of-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. For the nine months ended September 30, 2023 and 2022, 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. 

 

The following table sets forth the weighted-average shares used in calculating the earnings per share for the three and nine months ended September 30, 2023 and 2022.

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Basic weighted-average shares

  30,385,000   30,296,000   30,336,000   30,287,000 

Conversion of unsecured loan notes

            

Unexercised options and unvested RSUs

  242,000   75,000       

Diluted weighted-average shares

  30,627,000   30,371,000   30,336,000   30,287,000 

 

For the three and nine months ended September 30, 2023, Fuel Tech had weighted-average outstanding equity awards of 246,500 and 382,200, respectively, and warrants of 2,850,000 in both periods, which were antidilutive or represent out-of-the-money options for the purpose of the calculation of diluted earnings per share. For the nine months ended September 30, 2023, Fuel Tech had 250,500 incremental equity awards that were excluded from the computation of diluted earnings per share as the inclusion of such would have been anti-dilutive due to a net loss in the period. For the three and nine months ended September 30, 2022, Fuel Tech had weighted-average outstanding equity awards of 296,500 and 674,000, respectively, and warrants of 2,850,000 in both periods, which were antidilutive for the purpose of the calculation of diluted earnings per share. For the nine months ended September 30, 2022, Fuel Tech had 33,000 incremental equity awards that were excluded from the computation of diluted earnings per share as the inclusion of such would have been anti-dilutive due to a net loss in the period. These equity awards could potentially dilute basic earnings per share in future years.

 

10

 
 

8.     Stock-Based Compensation

 

Under our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2014 Long-Term Incentive Plan (Incentive Plan), 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 Plan 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 5,600,676 shares that may be issued or reserved for awards to participants under the Incentive Plan. As of September 30, 2023, Fuel Tech had 745,650 shares available for share-based awards under the Incentive Plan.

 

We did not record any excess tax benefits within income tax expense for the three and nine months ended September 30, 2023 and 2022. Given the Company has a full valuation allowance on its deferred tax assets, there were no excess tax benefits to record for the three and nine months ended September 30, 2023 and 2022. 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.

    

Stock-based compensation is included in selling, general, and administrative costs in our Condensed Consolidated Statements of Operations. The components of stock-based compensation for the three and nine months ended September 30, 2023 and 2022 were as follows:

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Stock options and restricted stock units, net of forfeitures

 $101  $90  $288  $136 

After-tax effect of stock-based compensation

 $101  $90  $288  $136 

 

Stock Options

 

Stock options granted to employees under the Incentive Plans 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.

 

Stock option activity for Fuel Tech’s Incentive Plans for the nine months ended September 30, 2023 was as follows:

 

          

Weighted- Average

     
  

Number

  

Weighted-

  

Remaining

  

Aggregate

 
  

of

  

Average

  

Contractual

  

Intrinsic

 
  

Options

  

Exercise Price

  

Term

  

Value

 

Outstanding on January 1, 2023

  384,500  $2.98         

Granted

              

Exercised

  (44,000)  0.96         

Expired or forfeited

  (70,000)  3.85         

Outstanding on September 30, 2023

  270,500  $3.09   1.81  $9 

Exercisable on September 30, 2023

  270,500  $3.09   1.81  $9 

 

As of September 30, 2023, there was no unrecognized compensation cost related to non-vested stock options granted under the Incentive Plans.
 

11

 

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, the Company entered into a 2023 Executive Performance RSU Award Agreement (the “2023 Agreement”) with certain officers, including its President and Chief Executive Officer, Chief Financial Officer and Senior Vice President, Sales (each a “2023 Participating Executive”) pursuant to which each 2023 Participating Executive will have the opportunity to earn a specified amount of restricted stock units (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 amount, if any, of actual RSU awards to be issued 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 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.

 

At  September 30, 2023, there is $1,670 of 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 1.92 years.

 

A summary of restricted stock unit activity for the nine months ended September 30, 2023 is as follows:

 

      

Weighted Average

 
      

Grant Date

 
  

Shares

  

Fair Value

 

Unvested restricted stock units at January 1, 2023

  767,048  $1.32 

Granted

  965,200   1.26 

Vested

  (45,000)  1.37 

Unvested restricted stock units at September 30, 2023

  1,687,248  $1.29 

 

The fair value of restricted stock that vested during the nine-month period ended September 30, 2023 was $62.

 

Deferred Directors Fees

 

In addition to the Incentive Plans, 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 Accounting Standards Codification (ASC) 718, Fuel Tech accounts for these awards as equity awards as opposed to liability awards. During the nine-month periods ended September 30, 2023 and 2022, Fuel Tech recorded no stock-based compensation expense under the Deferred Plan.

 

 

9.      Warrants

 

The following table summarizes information about warrants outstanding and exercisable at September 30, 2023:

 

Range of Exercise Price  Number Outstanding/Exercisable  Weighted Average Remaining Life in Years  Weighted Average Exercise Price 
$5.10   2,500,000  2.87  $5.10 
$6.45   350,000  2.87  $6.45 
     2,850,000        

 

12

 
 

10.     Debt Financing

 

On June 30, 2022, the Company entered into an Investment Collateral Security agreement to use for the sole purpose of issuing standby letters of credit that replaces the former Cash Collateral agreement with BMO Harris. The Investment Collateral Security agreement 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 September 30, 2023, the Company had outstanding standby letters of credit totaling approximately $992 under the Investment Collateral Security agreement. At September 30, 2023, the investments held as collateral totaled $1,488. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments.

 

 

11.     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 Over-Fire Air systems, NOxOUT® and HERT™ Selective Non-Catalytic Reduction systems, and Selective Catalytic Reduction (SCR) systems. Our SCR systems can also include Ammonia Injection Grid, and Graduated Straightening Grid GSG™ systems to provide high NOx reductions at significantly lower capital and operating costs than conventional SCR systems. ULTRA® technology creates ammonia at a plant site using safe urea for use with any SCR application. Electrostatic Precipitator technologies make use of electrostatic precipitator products and services to reduce particulate matter. Flue Gas Conditioning 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 Computational Fluid Dynamics and Chemical Kinetics Modeling boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in 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.

 

We evaluate performance and allocate resources based on reviewing gross margin by reportable segment. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (Note 1 in our annual report on Form 10-K). We do not review assets by reportable segment, but rather, in aggregate for the Company as a whole.

 

13

 

Information about reporting segment net sales and gross margin from operations are provided below:

 

  

Air Pollution

  

FUEL CHEM

         

Three months ended September 30, 2023

 

Control Segment

  

Segment

  

Other

  

Total

 

Revenues from external customers

 $3,711  $4,277  $  $7,988 

Cost of sales

  (2,214)  (2,162)     (4,376)

Gross margin

  1,497   2,115      3,612 

Selling, general and administrative

        (2,966)  (2,966)

Research and development

        (513)  (513)

Operating income (loss) from operations

 $1,497  $2,115  $(3,479) $133 

 

  

Air Pollution

  

FUEL CHEM

         

Three months ended September 30, 2022

 

Control Segment

  

Segment

  

Other

  

Total

 

Revenues from external customers

 $2,728  $5,289  $  $8,017 

Cost of sales

  (1,801)  (2,544)     (4,345)

Gross margin

  927   2,745      3,672 

Selling, general and administrative

        (3,273)  (3,273)

Research and development

        (207)  (207)

Operating income (loss) from operations

 $927  $2,745  $(3,480) $192 

 

  

Air Pollution

  

FUEL CHEM

         

Nine months ended September 30, 2023

 

Control Segment

  

Segment

  

Other

  

Total

 

Revenues from external customers

 $10,692  $10,044  $  $20,736 

Cost of sales

  (7,155)  (5,168)     (12,323)

Gross margin

  3,537   4,876      8,413 

Selling, general and administrative

        (9,126)  (9,126)

Research and development

        (1,144)  (1,144)

Operating income (loss) from operations

 $3,537  $4,876  $(10,270) $(1,857)

 

  

Air Pollution

  

FUEL CHEM

         

Nine months ended September 30, 2022

 

Control Segment

  

Segment

  

Other

  

Total

 

Revenues from external customers

 $7,670  $12,250  $  $19,920 

Cost of sales

  (5,032)  (6,248)     (11,280)

Gross margin

  2,638   6,002      8,640 

Selling, general and administrative

        (9,201)  (9,201)

Research and development

        (716)  (716)

Operating income (loss) from operations

 $2,638  $6,002  $(9,917) $(1,277)

 

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.

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Revenues: