TABLE OF DEFINED TERMS

PART I

Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “will,” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to

For us, and are subject to various risks,particular uncertainties and other factors, including, but not limited to, those discussed herein under the caption “Risk Factors” that could cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differbe materially fromdifferent than those expressed in our forward-looking statements include:

These or implied by, theseother uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. Except as expressly required by the federal securities laws, weWe do not undertake no obligation to update such factors or to publicly announce theour forward-looking statements. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in our filings with the Securities and Exchange Commission. See “Risk Factors” in Item 1A.could differ materially.

ITEM 1 - BUSINESS

As used in this Annual Report on Form 10-K, the terms “we,” “us,” or “our,” refer to Fuel Tech, Inc. and our wholly-ownedwholly owned subsidiaries.

GENERAL

We are a leading technology company engaged in the worldwide development, commercialization and application of state-of-the-art proprietary technologies for air pollution control, process optimization, water treatment and advanced engineering services. These technologies enable our customers to operate efficiently in a cost-effective and environmentally sustainable manner.

Many of our products and services rely heavily on our computational fluid dynamicsComputational Fluid Dynamics (CFD) and chemical kinetics modelingChemical Kinetics Modeling (CKM) capabilities, which are enhanced by internally developed, high-end visualization software.  These capabilities, coupled with our innovative technologies and multi-disciplined team approach, enable us to provide practical solutions to some of our customers' most challenging issues.

AIR POLLUTION CONTROL (APC)

Regulations and Markets: Domestic

The future growth of our APC technology segment is dependent upon the adoption and enforcement of environmental regulations in the U.S.United States (U.S.) and globally. In the U.S., federal and state laws regulating the emission of NOx are the primary driver in our APC technology segment. The principal regulatory drivers currently in effect are as follows:

Clean Air Act:Act (CAA): The Clean Air Act (CAA)CAA requires the U.S. Environmental Protection Agency (EPA) to establish national ambient air quality standards (NAAQS) at levels that are protective of public health with an adequate margin of safety. The six pollutants specified include: Ozone, (O3), Particulate Matter, (PM), Nitrogen Dioxide, (NO2), Sulfur Dioxide, (SO2), Lead, and Carbon Monoxide (CO).Monoxide. The NAAQS provisions require that states comply with ozone and particulate emissions standards. NOx emissions are a precursor to ozone formation and also contribute to fine particulate emissions (PM2.5).emissions. Since 1990, EPA rules and programs have been established at the regional and federal level to help states in their mission to define and meet their State Implementation Plans (SIPs) for attainment. The NAAQS ground-level ozone standards that were issued in 1997 were made more stringent in 2008 and again in 2015. The EPA has kept the 2020 NAAQS ozone standard at 70 parts per billion, the same limit as 2015.

In March 2023, EPA issued a Federal Implementation Plan (FIP) to address NOx emissions from upwind sources on downwind states.  The issuance of the FIP was proceeded by the EPA’s rejection of the proposed State Implementation Plans (SIPs) submitted by many of the upwind states pursuant to the CAA.  The issuance of the FIP, which was made pursuant to the Good Neighbor provision of the CAA, is likely to require a significant number of upwind sources to provide additional NOx controls to help downwind states meet the 2020 ozone NAAQS requirements starting in 2024 for utility power units and starting in 2026 for industrial sources.  Nevertheless, the ultimate timing of the effectiveness of the FIP is uncertain because several upwind affected states and sources have challenged the EPA’s rejection of the SIPs in court, and stays of the effectiveness of the FIP have been issued for many upwind states.  Fuel Tech will monitor the potential impact on these upcoming NOx emission requirements.

Clean Air Visibility Rule (CAVR): The Clean Air Visibility Rule (CAVR),CAVR, also known as the Regional Haze rule, is part of the Clean Air Act and was finalized in 2005. Under CAVR, certain States are required to submit implementation plans to the EPA to comply with the Regional Haze requirements, and updates are required every five years. A new CAVR was issued in January 2017 which requires states to implement new air pollution controls implementation plans in 2021.2021 and 2022. NOx emissions contribute to ground level ozone which can contribute to localized haze, and many State Implementation Plans (SIP) are addressing NOx reduction as part of CAVR compliance. Environmental organizations have filed lawsuits against EPA for failure to approve SIPs for the second round of CAVR compliance which is required prior to 2028.  The overall obligation of CAVR is to return the USU.S. scenic areas to “active” visibility by 2064.

New Unit Permits:  New gas fired units for both electricity generation and industrial use will require BACTBest Available Control Technology (BACT) as a permit requirement. SCR technology is very often BACT for NOx, and these permit requirements generate new market opportunities.

Consent Decrees: Consent decree activity through the USU.S. Department of Justice or EPA may require emission sources to meet individual requirements. Sources may also agree to specific air pollution requirements with states or environmental groups.

Regulations and Markets: International

We also sell air pollution control systems outside the United States,U.S., specifically in Europe, LatinSouth Africa, South America, India (under a license agreement) and in the Pacific Rim. The demand for our technologies comes from specific governmental regulations in NOx and PMparticulate matter emission limits which vary by country. We expect that there will be further opportunities to implement our technologies globally in established as well as new geographies in 2021.2024.

The European Union publishedUnion’s Best Available Reference Technology (BREF) emission guidelines continue to be implemented gradually starting from large utility boilers down to small industrial units. The last major update of the BREF (Best Available Reference Technology) emission guidelines in mid 2017 that further lowered emission targets over a span of the next four years. The compliance timeline is expected to be extended due to slow initial adoption. These measures are expected to lower the environmental impact of more than 3,000 large combustion plants throughout the European Union. Moreover, European countries that are not current EU members are expected to adopt these new standards as part of their approach to gain EU membership. Despite the significant expansion of renewable energy throughout Europe, the EU and neighboring states still rely heavily on coal generation to provide a stable base load to their power and heating demands. The BREF guidelines reducereduced NOx limit values by up to 25% which will requirein some cases required an upgrade of the first-generation NOx abatement systems, and that is expected to presentsystems. That has presented new opportunities for Fuel Tech. However, the pace of implementation will still be dependentTech, especially on each country's internal processes.biomass and waste incineration plants. New system opportunities are also being identified and followed in chemical production and petrochemical industries. European engineering companies are also supplying power generation and flue gas treatment systems to industrial and utility customers globally. Middle Eastern countries, especially Saudi Arabia have become a major focus for these companies due to the local initiatives for reducing pollution and improving tourism.  Fuel Tech’s NOx control technologies can be integrated into these systems.both new and existing combustion systems supplied into this market.

In South Africa, the state-owned utility Eskom and metallurgical companies are continuing with refurbishing aging ESPs and adding FGC technology to further improve ESP performance. Fuel Tech is well placed to compete for this business with our local partner Lesedi.

Brazil’s Sau Paulo state has announced stricter NOx emission requirements which will impact local cement, steel and glass production industries.  Fuel Tech has established local partnerships to bring our SNCR, SCR and FGC technologies to this market.

The Indian government has adopted a higherprioritized sulfur oxide treatment over NOx emission standard for legacyabatement in the refurbishment of thermal power plants than what was initially agreedunits.  However, new biomass fired boilers are expected to in 2015 as part of the Paris Agreement. As a result,be outfitted with SNCR systems will be limited to WTE / industrial units for the foreseeable future.technology.  Particulate Matter (PM)matter emission reductions continue to be an area of focus in the country and that presents an ongoing opportunity for Fuel Tech’s DFGC technology application which involves sulfur trioxide and ammonia injection.FGC technology. These technologies will be implemented through a collaboration with our local partner ISGEC.

Elsewhere inIn Southeast Asia, particulate emissions due tofrom poor performing ESPs have been gaining attention from local authorities.are being addressed. Power generators in several countries like Vietnam, Thailand, Malaysia and the Philippines are actively looking for corrective optionsoptions. In Taiwan, there is a push to convert coal fired units to burn biomass and thisprojects are being approved. This presents Fuel Tech with opportunities to bring our DFGC technologyASNCR, SCR, Ultra and FGC technologies to these markets.markets through local companies.

Products

Our NOx reduction and particulate control technologies are installed worldwide on over 1,2001,300 combustion units, including utility, industrial and municipal solid waste applications.  Our products include customized NOx control systems and our patented ULTRA^®technology, which converts urea-to-ammonia on site and provides safe reagent for use in Selective Catalytic Reduction (SCR)SCR systems.

A market factor for the APC product line is the continued use of coal and natural gas and the growth of biomass for global electricity production.  The growth of natural gas in the U.S. for industrial applications has increased the need for SCR technology since it often meets the definition of BACT and is required on new industrial units.

Sales of APC products were $8.6$13.5 million and $14.1$10.6 million for the years ended December 31, 20202023 and 2019,2022, respectively.

APC Competition

Competition with our NOx reduction suite of products may be expected from companies supplying SCR Systems, SNCR systems, ESP retrofits and FGC technologies. In addition, we experience competition in the urea-to-ammonia conversion market.

The SCR process is an effective and proven method of control for removal of NOx up to 90%. SCR systems have a high capital cost of $300+/kW on retrofit coal applications. Companies including GE, Babcock Power, Babcock & Wilcox (B&W) Company, CECO Environmental and Mitsubishi are active SCR system and reagent feed system providers.

The use of both urea and ammonia as the reagent for the SNCR process can reduce NOx by 30% - 70%, depending on a number of factors. Ammonia can be effective on incinerators and on Circulating Fluidized Bed combustion units, but has limited applicability for most utility boilers, where urea is dominant. The ammonia-based systems utilize either anhydrous or aqueous ammonia, both of which are hazardous substances. Competitors for ammonia based SNCR include CECO Environmental, B&W, and Yara, with HamonCECO Environmental and B&W for urea based SNCR systems.

ESP retrofit competitors include B&W and Southern Environmental and Hamon.  Flue Gas ConditioningEnvironmental. FGC competition includes Wahlco, Inc. and Chemithon, Inc.

Lastly, with respect to urea-to-ammonia conversion technologies, our controlled urea decomposition system competes with Hamon and Wahlco, which manufacture a system that hydrolyzes urea under high temperature and pressure.ammonia based processes. 

APC Backlog

Consolidated APC segment backlog at December 31, 20202023 was $5.3$7.5 million versus backlog at December 31, 20192022 of $9.7$8.2 million. The Company expects to recognize revenue on approximately $3.0$7.4 million of the backlog over the next 12 months with the remaining recognized thereafter.months.

FUEL CHEM

Product and Markets

The FUEL CHEM^® technology segment revolves around the unique application of specialty chemicals to improve the efficiency, reliability and environmental status of plants operating in the electric utility, industrial, pulp and paper, waste-to-energy, and university and district heating markets.  FUEL CHEM programs are currently in place on combustion units in North America, Mexico and Europe, treating a wide variety of solid and liquid fuels, including coal, heavy oil, black liquor, biomass and municipal waste.

Central to the FUEL CHEM approach is the introduction of chemical reagents, such as magnesium hydroxide, to combustion units via in-body fuel application (pre-combustion) or via direct injection (post-combustion) utilizing our proprietary TIFI^® technology.  By attacking performance-hindering problems, such as slagging, fouling and corrosion, as well as the formation of sulfur trioxide (SO3), and ammonium bisulfate, (ABS), our programs offer numerous operational, financial and environmental benefits to owners of boilers, furnaces and other combustion units.

A key market factor for this product line is the continued use of coal for global electricity production.  Coal currently accountsproduction. In 2023, coal accounted for approximately 21%14% of all U.S. electricity generation and roughly 33% 36% of global electricity generation. MajorMajor coal consumers include the United States,U.S., China and India. Additional market dynamics include a growing, worldwide utilization of biomass for both steam and electrical production, and the continued use of heavy fuel oil for power generation. The principal markets for this product line are electric power plants burning coals with slag-forming constituents such as sodium, iron and high levels of sulfur. Sodium is typically found in the Powder River Basin coals of Wyoming and Montana. Iron is typically found in coals produced in the Illinois Basin region. High sulfur content is typical of Illinois Basin coals and certain Appalachian coals. High sulfur content can give rise to unacceptable levels of SO3 formation especially in plants with SCR systems and flue gas desulphurization units (scrubbers).  As coal units strive to compete in electricity supply markets, lower cost, higher slagging fuels can create more operational challenges which TIFI^® Programs can help mitigate. The current Mexican government is favoringutilizing more indigenous fuel sources for power generation because the international market for high sulfur fuel oil (what Mexico produces) has been significantly reduced with the adoption of the new International Maritime Organization (IMO) restrictions. Fuel Tech’s TIFI^® systems can help with SO3 mitigation at these oil firedoil-fired power generation units.

The combination of slagging coals and SO3-related issues, such as “blue plume” formation, air pre-heater fouling and corrosion, SCR fouling and the proclivity to suppress certain mercury removal processes, represents an attractive market potential for Fuel Tech.

Sales of the FUEL CHEM products were $14.0$13.6 million and $16.4$16.3 million, for the years ended December 31, 20202023 and 2019,2022, respectively.

Competition

Competition for our FUEL CHEM product line includes chemicals sold by specialty chemical companies, such as Imerys, Environmental Energy Services, Inc., and SUEZ Water Technologies. No technologically comparable substantive competition currently exists for our TIFI^® technology, which is designed primarily for slag control and SO3 abatement, but there can be no assurance that such lack of substantive competition will continue.

INTELLECTUAL PROPERTY

The majority of our products are protected by U.S. and non-U.S. patents. We own 4738 granted patents worldwide including 13 US patents and 3 allowed utility model patents in China.25 non-US patents. We have 14six patent applications pending: including 5four in the United StatesU.S. and 9two in non-U.S. Jurisdictions.jurisdictions. These patents and applications cover some 2744 inventions, 1322 associated with our NOx reduction business, 1113 associated with the FUEL CHEM business, and threenine associated with water treatment. Our granted patents have expiration dates ranging from JanuaryMarch of 20212024 to NovemberFebruary of 2035.2041.

Management believes that the protection provided by the numerous claims in the above referenced patents or patent applications is substantial and affords us a significant competitive advantage in our business. Accordingly, any significant reduction in the protection afforded by these patents or any significant development in competing technologies could have a material adverse effect on our business.

EMPLOYEES

At December 31, 2020,2023, we had 73had 72 employees, 6668 in North America, twoand four in China and five in Europe. We enjoy good relations with our employees and are not a party to any labor management agreement.

HUMAN CAPITAL RESOURCES

We manage our Company according to a set of core principles.  Included among these are respect for the individual, aspiring to excellence, safety and security, and appropriate reward for outstanding effort.  We have put in place an employee compensation plan that recognizes hard work with above average salaries and equity incentive awards.  We have returned to face-to-face work in our day-to-day activities, but we have implemented training and provided guidance for our teams to operate safely even in a face-to-face environment.  As a technology company, we prize and reward educational achievement.  Amongbelieve our employees are foundour most valuable asset and we endeavor to provide a large cohort of doctorates as well as other advanced degreessafe, inclusive, high-performance culture where our people can thrive. As such, we continually work to recruit, develop, engage, train and professional certifications.  We expect that these approaches to managing and empoweringprotect our employees. The following are key human capital will continuemeasures and objectives on which we currently focus.

    Employee Total Compensation and Benefits Philosophy. We provide access to guidebenefits and offer programs that support work-life balance and overall well-being, including financial, physical and mental health resources, such as those listed below.

Commitment to Safe Working Environment. All employees are required to understand and obey local laws, to report any suspected violations, and to act in accordance with our progressCode of Conduct.

Compensation Equity. We concluded a comprehensive pay equity analysis in 2022 encompassing all staff members and job levels. We believe we have made compensation adjustments to rectify compensation disparities. We also implemented hiring and promotional practices to support our goal of ensuring offers to new employees or to employees being promoted internally are aligned with the future.market and equitable on an internal basis. We plan to conduct additional comprehensive pay equity analyses at appropriate intervals going forward.

Talent Acquisition and Retention. We strive to attract, develop and retain high-performing talent, and we support and reward employee performance. Programs to strengthen our talent include an employee referral program, tuition reimbursement, continued training and development and succession planning. We prioritize employee engagement and transparency by implementing programs and processes to ensure our employees have opportunities to ask questions, voice concerns, and share feedback. This is accomplished in part by conducting employee satisfaction surveys as part of the annual review process, and quarterly town hall meetings. In 2023, our employee turnover rate was approximately 10%.

RELATED PARTIES

There are no material Related Party transactions to disclose.  The Company's lease of certain office space to American Bailey Corp. reported in our Form 10-K for the year ended December 31, 2019 ended as of December 31, 2019.

AVAILABLE INFORMATION

We are a fully integrated company using a suite of advanced technologies to provide boiler optimization, efficiency improvement and air pollution reduction and control solutions to utility and industrial customers worldwide. Originally incorporated in 1987 under the laws of the Netherlands Antilles as Fuel-Tech N.V., we were domesticated in the United States on September 30, 2006, and continue as a Delaware corporation with our corporate headquarters at 27601 Bella Vista Parkway, Warrenville, Illinois, 60555-1617. Fuel Tech maintains an Internet website at www.ftek.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available through our website as soon as reasonably practical after we electronically file or furnish the reports to the Securities and Exchange Commission. Our website also contains our Corporate Governance Guidelines and Code of Ethics and Business Conduct, as well as the charters of the Audit, Compensation, and Nominating and Corporate Governance committees of the Board of Directors. All of these documents are available in print without charge to stockholders who request them. Information on our website is not incorporated into this report.

ITEM 1A - RISK FACTORS

InvestorsThe following is a discussion of the material risk factors; however, they may not be the only risks that we may face. The risks described below should not be considered a complete list of potential risks that we face, and additional risks and uncertainties not currently known to us or that we currently consider immaterial may also negatively impact our business. If any of these risks develop into actual or expected events, our business, financial condition, results of operations or cash flows could be materially and adversely affected, and, as a result, the trading price of our common stock could decline. You should carefully consider the risk factors described below, together with the other information included in this Annual Report on Form 10-K, before you decide to invest in our Common Shares should be mindful ofsecurities. Please read the following risk factors relative to our business.cautionary notice regarding forward-looking statements under the heading “Forward-Looking Statements.”

RISKS RELATED TO OUR PRODUCTS AND PRICING

Our Product Portfolio Lacks Diversification

We have two broad technology segments that provide advanced engineering solutions to meet the pollution control, efficiency improvement, and operational optimization needs of coal-firedcoal and natural gas-fired energy-related facilities worldwide. They are as follows:

An adverse development in our advanced engineering solutions business as a result of competition, technological change, government regulation, customers converting to use natural gas or other fuels, or any other factor could have a significantly greater impact than if we maintained more diverse operations.

We Face Substantial Competition

Competition in the Air Pollution Control market comes from competitors utilizing their own NOx reduction processes, including SCR systems, SNCR systems, Low NOx Burners, Over-Fire Air systems, ammonia and urea based delivery systems for SNCR and SCR, which do not infringe our patented or proprietary technologies.  Indirect competition will also arise from business practices such as the purchase rather than the generation of electricity, fuel switching, closure or de-rating of units, and sale or trade of pollution credits and emission allowances.  Utilization by customers of such processes or business practices or combinations thereof may adversely affect our pricing and participation in the NOx control market if customers elect to comply with regulations by methods other than the purchase of our Air Pollution Control products.  See Item 1 “Products” and “APC Competition” in the Air Pollution Control segment overview.

Competition for our FUEL CHEM markets include chemicals sold by specialty chemical companies, such as Imerys, Environmental Energy Services, Inc., and SUEZ Water Technologies.

Demand for Our APC and FUEL CHEM Products is Affected by External Market Factors

Reduced coal-fired electricity demand across the United States has led to coal-fired electricity production declines.  Contributing factors to this decline in coal-fired generation were: 1) lower natural gas prices which allowed utility operators to increase the amount of power generated from natural gas plants, 2) increased cost of environmental compliance with current environmental regulations, 3) constrained funding for capital projects, and 4) the uncertainty of regulation resulting in electricity generating unit operators delaying investment in NOx emission remediation plans until such time as the United States Environmental Protection Agency further clarifies the regulations.

Our Business Is Dependent on Continuing Air Pollution Control Regulations and Enforcement

Our business is significantly impacted by and dependent upon the regulatory environment surrounding the electricity generation market.  Our business will be adversely impacted to the extent that regulations are repealed or amended to significantly reduce the level of required NOx or particulate matter reduction, or to the extent that regulatory authorities delay or otherwise minimize enforcement of existing laws.  Additionally, long-term changes in environmental regulation that threaten or preclude the use of coal or other fossil fuels as a primary fuel source for electricity production which result in the reduction or closure of a significant number of fossil fuel-fired power plants may adversely affect our business, financial condition and results of operations.  See Item 1 above under the caption “Regulations and Markets” in the Air Pollution Control segment overview.

Our Dependence Upon Fixed-price Contracts Could Adversely Affect our Operating Results.Results

The majority of our air pollution control projects are currently performed on a fixed-price basis. Under a fixed-price contract, we agree on the price that we will receive for the entire project, based upon a defined scope, which includes specific assumptions and project criteria. If our estimates of the costs to complete the project are below the actual costs that we incur, our margins will decrease, or we may incur a loss. The revenue, cost and gross profit realized on a fixed-price contract will often vary from the estimated amounts because of unforeseen conditions or changes in job conditions and variations in labor and equipment productivity over the term of the contract. While our fixed-price contracts are typically not individually material to our operating results, if we are unsuccessful in mitigating these risks, we may realize gross profits that are different from those originally estimated and incur reduced profitability or losses on projects. Depending on the size of a project, these variations from estimated contract performance could have a significant effect on our operating results. In general, turnkey contracts to be performed on a fixed-price basis involve an increased risk of significant variations. Generally, our contracts and projects vary in length, depending on the size and complexity of the project, project owner demands and other factors. The foregoing risks are exacerbated for projects with longer-term durations and the inherent difficulties in estimating costs and of the interrelationship of the integrated services to be provided under these contracts whereby unanticipated costs or delays in performing part of the contract can have compounding effects by increasing costs of performing other parts of the contract.

Customers May Cancel or Delay Projects

Customers may cancel or delay projects for reasons beyond our control. Our orders normally contain cancellation provisions that permit us to recover our costs, and, for most contracts, a portion of our anticipated profit in the event a customer cancels an order. If a customer elects to cancel an order, we may not realize the full amount of revenues included in our backlog. If projects are delayed, the timing of our revenues could be adversely affected and projects may remain in our backlog for extended periods of time. Revenue recognition occurs over long periods of time and is subject to unanticipated delays. If we receive relatively large orders in any given quarter, fluctuations in the levels of our quarterly backlog can result because the backlog in that quarter may reach levels that may not be sustained in subsequent quarters.

Our Operating Results May Be Adversely Affected by Product Pricing

We typically experience significant competition for both of our technology segments which may require us to lower our product prices in order to remain competitive and have a corresponding adverse impact on our realized gross margins and operating profitability. See the risk factor entitled “We Face Substantial Competition” above.

Our Customer Base Is Highly Concentrated

A small number of customers have historically accounted for a significant portion of our revenues. During 2023, our five largest customers accounted for approximately 53% of our net revenues, with our largest customer accounting for approximately 20% of our net revenues. There can be no assurance that all significant customers will continue to purchase our products in the same quantities that they have in the past. The loss of any one of our significant customers or a material reduction in sales to a significant customer could have a material adverse effect on our sales and results of operations.

RISKS RELATED TO OUR BUSINESS

Our Financial Performance May Vary Significantly From Period to Period.Period

Our annual revenues and earnings have varied in the past and are likely to vary in the future. Our contracts generally stipulate customer specific delivery terms and may have contract cycles of a year or more, which subjects these contracts to many factors beyond our control. In addition, contracts that are significantly larger in size than our typical contracts tend to intensify their impact on our annual operating results. Furthermore, as a significant portion of our operating costs are fixed, an unanticipated decrease in our revenues, a delay or cancellation of orders in backlog, or a decrease in the demand for our products, may have a significant impact on our annual operating results. Therefore, our annual operating results may be subject to significant variations and our operating performance in one period may not be indicative of our future performance.

Customers May Cancel or Delay Projects.

Energy Transition

Customers may cancel or delay projects for reasons beyond our control. Our orders normally contain cancellation provisions that permit us to recover our costs,The strategic priorities and for most contracts, a portionfinancial performance of our anticipated profitbusinesses are subject to market and other dynamics related to decarbonization, which can pose risks in addition to opportunities for those businesses. Given the nature of our businesses and the industries we serve, we must anticipate and respond to market, technological, regulatory and other changes driven by broader trends related to decarbonization efforts in response to climate change. These changes present both risks and opportunities for our businesses, many of which provide products and services to customers in sectors like power generation that have historically been carbon intensive and will remain important to efforts globally to lower greenhouse gas emissions for decades to come. For example, the significant decreases in recent years in the event alevelized cost of energy for renewable sources of power generation (such as wind and solar), along with ongoing changes in government, investor, customer cancels an order. If a customer electsand consumer policies, commitments, preferences and considerations related to cancel an order, we may not realize the full amount of revenues includedclimate change, in our backlog. If projects are delayed, the timing of our revenues could besome cases have adversely affected, and projects may remainare expected to continue to affect, the demand for and the competitiveness of products and services related to carbonaceous fuel-based power generation, including sales of new air pollution control equipment and the utilization and servicing needs for existing power plants. Continued shifts toward greater penetration by renewables in both new capacity additions and the proportionate share of power generation, particularly depending on the pace and timeframe for such shifts across different markets globally, could have a material adverse effect on our backlog for extended periods of time. Revenue recognition occurs over long periods of timebusiness and is subject to unanticipated delays. If we receive relatively large orders in any given quarter, fluctuations in the levels of our quarterly backlog can result because the backlog in that quarter may reach levels that may not be sustained in subsequent quarters.consolidated results.

Our Manufacturing Operations Are Dependent on Third-party Suppliers.Suppliers

Although we are not dependent on any one supplier, we are dependent on the ability of our third-party suppliers to supply our raw materials, as well as certain specific component parts. The third-party suppliers upon which we depend may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud, loss of key personnel, or other reasons. We cannot assure that our third-party suppliers will dedicate sufficient resources to meet our scheduled delivery requirements or that our suppliers will have sufficient resources to satisfy our requirements during any period of sustained demand. Failure of suppliers to supply, or delays in supplying, our raw materials or certain components, or allocations in the supply of certain high demand raw components, for any reason, including, without limitation, disruptions in our suppliers’ business activities due to cybersecurity incidents, terrorist activity, public health crises (such as coronavirus), fires or other natural disasters could materially adversely affect our operations and ability to meet our own delivery schedules on a timely and competitive basis.  Additionally, our third-party suppliers may provide us with raw materials or component parts that fail to meet our expectations or the expectations of our customers, which could subject us to product liability claims, other claims and litigation.

Our Use of Subcontractors Could Potentially Harm our Profitability and Business Reputation.Reputation

Occasionally we act as a prime contractor in some of the engineered projects we undertake. In our capacity as lead provider and when acting as a prime contractor, we perform a portion of the work on our projects with our own resources and typically subcontract activities such as manufacturing and installation work. In our industry, the lead contractor is normally responsible for the performance of the entire contract, including subcontract work. Thus, when acting as a prime contractor, we are subject to risk associated with the failure of one or more subcontractors to perform as anticipated.

We employ subcontractors at various locations around the world to meet our customers’ needs in a timely manner, meet local content requirements and reduce costs. Subcontractors perform all of our manufacturing for customers. The use of subcontractors decreases our control over the performance of these functions and could result in project delays, escalated costs and substandard quality. These risks could adversely affect our profitability and business reputation. In addition, many of our competitors, who have greater financial resources and greater bargaining power than we have, use the same subcontractors that we use and could potentially influence our ability to hire these subcontractors. If we were to lose relationships with key subcontractors, our business could be adversely impacted.

Operational Execution

Operational challenges could have a material adverse effect on our business, reputation, financial position, results of operations and cash flows. The Company’s financial results depend on the successful execution of our businesses’ operating plans across all steps of the engineering and design, manufacture, installation and service lifecycle. We continue working to improve the operations and execution of our businesses and our ability to make the desired improvements will be a significant factor in our overall financial performance. Operational failures in any of our business segments that result in quality problems or potential product, environmental, health or safety risks, could have a material adverse effect on our business, reputation, financial position and results of operations. In addition, for some large-scale projects we may be required by our customer to take on the full scope of engineering, procurement, construction or other services. These types of projects often pose unique risks related to their location, scale, complexity, duration and pricing or payment structure. Performance issues or schedule delays can arise due to inadequate technical expertise, unanticipated project modifications, developments at project sites, environmental, health and safety issues, execution by or coordination with suppliers, subcontractors or consortium partners, financial difficulties of our customers or significant partners or compliance with government regulations, and these can lead to cost overruns, contractual penalties, liquidated damages and other adverse consequences. Operational, quality or other issues at large projects, or across our projects portfolio more broadly, can adversely affect our business, reputation or results of operations.

We Rely on Several Key Employees Whose Absence or Loss Could Disrupt our Operations or Be Adverse to our Business.Business

We are highly dependent on the experience of our management in the continuing development of our operations. The loss of the services of certain of these individuals would have a material adverse effect on our business. Although we have employment and non-competition agreements with certain of our key employees, as a practical matter, those agreements will not assure the retention of our employees, and we may not be able to enforce all of the provisions in any employment or non-competition agreement. Our future success will depend in part on our ability to attract and retain qualified personnel to manage our development and future growth. We cannot guarantee that we will be successful in attracting and retaining such personnel. Our failure to recruit additional key personnel could have a material adverse effect on our financial condition, results of operations and cash flows.

Increasing Costs for Manufactured Components May Adversely Affect our Profitability

Our products utilize a variety of manufactured components, including metallurgical catalysts, storage tanks, pumps and fans.  The current economic environment has resulted, and may continue to result, in price volatility and inflation of these costs. Further increases in the price of these items could further materially increase our operating costs and materially adversely affect our profit margins if we are unable to successfully pass such costs on to our customers.

Cybersecurity

Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime pose a risk to our systems, networks, products, solutions, services and data. Increased global cybersecurity vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks such as ransomware, as well as cybersecurity failures resulting from human error and technological errors, pose a risk to the security of Fuel Tech and its customers', partners', suppliers' and third-party service providers' infrastructure, products, systems and networks and the confidentiality, availability and integrity of Fuel Tech’s and its customers' data. As the perpetrators of such attacks become more capable, and as critical infrastructure is increasingly becoming digitized, the risks in this area continue to grow. There can be no assurance that our efforts to mitigate cybersecurity risks by employing a number of measures, including employee training, monitoring and testing, vulnerability testing and maintenance of protective systems and contingency plans, will be sufficient to prevent, detect and limit the impact of cyber-related attacks, and we remain vulnerable to known or unknown threats. A significant cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation, increased digital infrastructure or other costs that are not covered by insurance, litigation or regulatory action.

We May Not Be Able to Successfully Protect our Patents and Proprietary Rights

We hold licenses to or own a number of patents for our products and processes.  In addition, we also have numerous patent applications pending both in the U.S. and abroad.  There can be no assurance that any of our pending patent applications will be granted or that our outstanding patents will not be challenged, overturned or otherwise circumvented by competitors.  In foreign markets, the absence of harmonized patent laws makes it more difficult to ensure consistent respect for our patent rights in emerging markets.  In addition, certain critical technical information relating to our products which is not patented is held as trade secret, and protected by trade secret laws and restrictions on disclosure contained in our confidentiality and licensing agreements.  There can be no assurance that such protections will prove adequate or that we will have adequate remedies against contractual counterparties for disclosure of our trade secrets or other violations of our intellectual property rights.  See Item 1 above under the caption “Intellectual Property.”

Our Results May Be Affected By Foreign Operations

We currently have foreign operations predominantly in Europe with our offices located in Gallarate, Italy. The future business opportunities in this market are dependent on the continued implementation and enforcement of regulatory policies that will benefit our technologies, the acceptance of our engineering solutions in such markets, the ability of potential customers to utilize our technologies on a competitive, cost-effective basis, and our ability to protect and enforce our intellectual property rights.

On January 18, 2019, we announced the suspension

We May Not Be Able to Purchase Raw Materials on Commercially Advantageous Terms

Our FUEL CHEM technology segment is dependent, in part, upon a supply of magnesium hydroxide. Any adverse changes in the availability of this chemical will likely have an adverse impact on ongoing operation of our FUEL CHEM programs. On March 4, 2009, we entered into a Restated Product Supply Agreement (“PSA”)(PSA) with Martin Marietta Magnesia Specialties, LLC (MMMS) in order to assure the continuance of a stable supply from MMMS of magnesium hydroxide products for our requirements in the United StatesU.S. and Canada. The term of the PSA expires on December 31, 2021.2024. Pursuant to the PSA, MMMS supplies us with magnesium hydroxide products manufactured pursuant to our specifications and we have agreed to purchase from MMMS, and MMMS has agreed to supply, 100% of our requirements for such magnesium hydroxide products for our customers who purchase such products for delivery in the United StatesU.S. and Canada. There can be no assurance that we will be able to obtain a stable source of magnesium hydroxide in markets outside the United States.U.S.

Our Customer BaseBusiness Is Highly ConcentratedDependent on Continuing Air Pollution Control Regulations and Enforcement

A smallOur business is significantly impacted by and dependent upon the regulatory environment surrounding the electricity generation market.  Our business will be adversely impacted to the extent that regulations are repealed or amended to significantly reduce the level of required NOx or particulate matter reduction, or to the extent that regulatory authorities delay or otherwise minimize enforcement of existing laws.  Additionally, long-term changes in environmental regulation that threaten or preclude the use of coal or other fossil fuels as a primary fuel source for electricity production which result in the reduction or closure of a significant number of customers have historically accountedfossil fuel-fired power plants may adversely affect our business, financial condition and results of operations.  See Item 1 above under the caption “Regulations and Markets” in the Air Pollution Control segment overview.

GENERAL RISK FACTORS

Geopolitical and Unexpected Events May Impact New or Existing Projects and Prices and Availability of Raw Materials, Energy and Other Materials. 

These events may also impact energy and regulatory policy nationally or regionally for a significant portion of our revenues. There can be no assurance that our current customers will continue to place orders, that orders by existing customers will continue at the levels of previous periods, or that we will be able to obtain orders from new customers. The loss of one or more of our customersimpacted regions. Such disruptions could have a material adverse effect on our salesbusiness and operatingfinancial results.

There Is Still Significant Uncertainty Related to the COVID-19 Pandemic; Future Pandemics Could Pose Similar Challenges

The emergence of the coronavirus (COVID-19) around the world presents significant risks to the Company, not all of which the Company is able to fully evaluate or even foresee at the current time. The COVID-19 pandemic has affected the Company's operations in the year ended December 31, 2020, although the impact of the pandemic is difficult to quantify, and may continue to do so indefinitely hereafter. The Company has experienced, and may continue to experience, reductions in demand for certain of our products as several accounts remained offline due to soft electricity demand and unplanned outage activities and due to the delay or abandonment of ongoing or anticipated projects due to the customers', suppliers' and other third parties' financial distress or concern regarding the volatility of global markets. 

Management cannot predict the full impact of the COVID-19 pandemic on the Company's sales and marketing channels and supply chain, and, as a result, the ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments.  Such effects could exist for an extended period of time even after the pandemic ends and any future such pandemic could have similar or greater challenges.

ITEM 1B - UNRESOLVED STAFF COMMENTS

None

We are not aware of having experienced any material cybersecurity incidents.  We are not aware of any existent cybersecurity threats that would materially affect, or are reasonably likely to materially affect, our business strategy, results of operations or financial conditions.  For more information, please see “Cybersecurity” under Item 1A “Risk Factors” above.

Management Oversight

Day-to day management of cybersecurity threats is conducted by our Information Technology department which is charged with identifying and reporting threats to senior management. On a quarterly basis, cybersecurity is reviewed by our Information Technology Steering  Committee, which is comprised of our Chief Executive Officer, Chief Financial Officer, General Counsel and Head of Information Technology.

Board Oversight

The Audit Committee of our Board of Directors, which is composed of all non-employee directors, is responsible for oversight of management’s efforts to eliminate cybersecurity risks.

ITEM 2 - PROPERTIES

We own an office building in Warrenville, Illinois, which has served as our corporate headquarters since June 23, 2008. This facility, with approximately 40,000 square feet of office space, is sufficient to meet our requirements for the foreseeable future.

We also operate from leased office facilities and we do not segregate any of these leased facilities by operating business segment. The terms of the Company's three primary lease arrangements as of December 31, 20202023 are as follows:

ITEM 3 - LEGAL PROCEEDINGS

From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows.

See Note 9 "Commitments and Contingencies" in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

ITEM 4 – MINE SAFETY DISCLOSURES

Not Applicable

PART II

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

Market

Our Common Shares havecommon stock has been traded since September, 1993 on The NASDAQ Stock Market, Inc, where it trades under the symbol FTEK.

PricesHolders

The table below sets forthAs of February 28, 2024, there were 56 holders of record of our common stock, which does not include the high and low sales prices during each calendar quarter since January 2019.number of beneficial owners whose common stock was held in street name or through fiduciaries.

Dividends

We have never paid cash dividends on the Common Sharescommon stock and have no current plan to do so in the foreseeable future. The declaration and payment of dividends on the Common Shares arecommon stock is subject to the discretion of our Board of Directors. The decision of the Board of Directors to pay future dividends will depend on general business conditions, the effect of a dividend payment on our financial condition, and other factors the Board of Directors may consider relevant. The current policy of the Board of Directors is to reinvest earnings in operations to promote future growth.

Holders

As of March 3, 2021, there were 96 holders of record of our common stock, which does not include the number of beneficial owners whose common stock was held in street name or through fiduciaries.

NASDAQ Delisting Notice

On January 7, 2020, Fuel Tech, Inc. (the “Company”) received a letter from the Listing Qualifications Department of The NASDAQ Stock Market (“NASDAQ”) notifying the Company that, based upon the closing bid price of the Company’s common stock that trades under the symbol “FTEK” (“Common Stock”), for the last 30 consecutive business days the Common Stock did not meet the minimum bid price of $1.00 per share required for continued listing on NASDAQ pursuant to NASDAQ Listing Rule 5450(a)(1) (the “Minimum Bid Rule”), initiating an automatic 180 calendar-day grace period for the Company to regain compliance.  

In accordance with NASDAQ Listing Rule 5810(c)(3)(A), the Company had a period of 180 calendar days from the date of the notification, or until July 6, 2020 to achieve compliance with the Minimum Bid Rule. The Company received an extension to March 17, 2021 and regained compliance with the Minimum Bid Rule in December of 2020 when the Company’s Common Stock closed at or above $1.00 per share for a minimum of 10 consecutive business days.

Performance Graph

The following line graph compares our total return to stockholders per common share for the five years ended December 31, 2020 to that of the NASDAQ Composite Index and the S&P Global Clean Energy Index Fund for the period December 31, 2014 through December 31, 2020. The graph tracks the performance of a $100 investment in the Company's common stock and in each of the indexes (with the reinvestment of all dividends) on December 31, 2015.

ITEM 6 - SELECTED FINANCIAL DATARESERVED

Selected financial data are presented below as of the end of and for each of the fiscal years in the five-year period ended December 31, 2020. The selected financial data should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2020, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report and the schedules thereto.

Notes:

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (amounts in thousands of dollars)

Executive SummaryOverview

In 2020,2023, the Company continued to experience a challenging operational environmentsuccessfully execute on existing orders resulting fromin improved performance in the ongoing substitution of gas-fired and renewable energy plant for coal-fired installations.  Our cost control efforts reduced selling, general and administrative expenses from fiscal 2019 by 21% and the net loss by 46%.APC segment. We continue to invest in development of new technologies to expand our product offerings into the water pollution control and waste-water treatment market. Our capital resources are sufficient for our immediate and longer-term needs, and we continue to enjoy the services and support of a dedicated workforce. We expect that our cost control efforts will continue to yield reduced lossesmaintain our existing levels of operating expenditures and the diminishing effects of the pandemic should lead to an improved market outlook.

Key Operating Factors

Our FUEL CHEM segment faced difficult market circumstances in 2023, and experienced a decline in revenues and segment operating profits compared to 2022. The FUEL CHEM segment was negatively impacted due to the reduction in demand from other customers due to unfavorable climate conditions and to operating and maintenance scheduling. 

Our APC business experienced improvement in 2023, compared to 2022, due to the execution of projects awarded in the second half of 2022 and in 2023. Sales growth experienced headwinds in the United States due to regulatory unclarity resulting from legal challenges to the Cross State Air Pollution Control rule. We are encouraged by the pace and depth of our business development activities, which reflects an increased focus on global emissions protocols across a variety of fuel sources. Our Consolidated APC backlog at year end was $7,458 and our global sales pipeline has increased to $50 -75 million range.

Background

We have two broad technology segments that provide advanced engineered solutions to meet the pollution control, efficiency improvement and operational optimization needs of energy-related facilities worldwide. They are as follows:

Air Pollution Control Technologies

The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas generated by the firing of natural gas or coal from boilers, incinerators, furnaces and other stationary combustion sources. These include SCR systems, NOxOUT and HERTHERT™ SNCR systems. Our SCR systems Low NOx Burners (LNB),can also include AIG, and OFA systems, and I-NOx systems. The I-NOx system includes LNB, OFA, and SNCR components, along with a downsized SCR catalyst, Ammonia Injection Grid (AIG), 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. Our ESP technologies make use of electrostatic precipitator products and services include complete turnkey ESP retrofits and related services. Flue Gas Conditioningto reduce particulate matter. FGC systems are chemical injection systems offered in markets outside the U.S. and Canada to enhance electrostatic precipitator and fabric filter performance in controlling particulate emissions. We distribute our products through our direct sales force and third-party sales agents.

FUEL CHEM Technologies

The FUEL CHEM technology segment, which uses chemical processes in combination with advanced CFD and CKM boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in coal-fired furnaces and boilers through the addition of chemicals into the furnace using TIFI^® Targeted In-Furnace InjectionInjection™ technology. Fuel Tech sells its FUEL CHEM program through its direct sales force and agents to industrial and utility power-generation facilities. FUEL CHEM programs have been installed on combustion units in North America, Europe, China, and India, treating a wide variety of solid and liquid fuels, including coal, heavy oil, biomass and municipal waste. The FUEL CHEM program improves the efficiency, reliability and environmental status of plants operating in the electric utility, industrial, pulp and paper, waste-to-energy, university and district heating markets and offers numerous operational, financial and environmental benefits to owners of boilers, furnaces and other combustion units.

The key market dynamic for both technology segments is the continued use of fossil fuels, especially coal, as the principal fuel source for global electricity production. Coal currently accountsIn 2023, coal accounted for approximately 21%14% of all U.S. electricity generation and roughly 33%36% of global electricity generation.  Major coal consumers include China, the United StatesU.S. and India.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America,U.S. (GAAP), which require us to make estimates and assumptions. We believe that of our accounting policies (see Note 1 to the consolidated financial statements), the following involve a higher degree of judgment, estimates and complexityassumptions and are deemed critical. We routinely discuss our critical accounting policies with the Audit Committee of the Board of Directors.

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Fuel Tech’s sales of products to customers represent single performance obligations, which are not impacted upon the adoption of ASC 606. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

FUEL CHEM

Revenues from the sale of chemical products are recognized when control transfers to customer upon shipment or delivery of the product based on the applicable shipping terms. We generally recognize revenue for these arrangements at a point in time based on our evaluation of when the customer obtains control of the promised goods or services. 

On occasion, Fuel Tech will engineer and sell its chemical pumping equipment.  These projects are similar in nature to the APC projects described abovebelow and for those projects where control transfers over time, revenue is recognized based on the extent of progress towards completion of the single performance obligation. 

For projects containing multiple performance obligations, the Company allocates the transaction price based on the estimated standalone selling price. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation.

The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

Air Pollution Control Technology

Fuel Tech’s APC contracts are typically six to eighteen months in length. A typical contract will have three or four critical operational measurements that, when achieved, serve as the basis for us to invoice the customer via progress billings. At a minimum, these measurements will include the generation of engineering drawings, the shipment of equipment and the completion of a system performance test.

As part of most of its contractual APC project agreements, Fuel Tech will agree to customer-specific acceptance criteria that relate to the operational performance of the system that is being sold. These criteria are determined based on modeling that is performed by Fuel Tech personnel, which is based on operational inputs that are provided by the customer. The customer will warrant that these operational inputs are accurate as they are specified in the binding contractual agreement. Further, the customer is solely responsible for the accuracy of the operating condition information; typically all performance guarantees and equipment warranties granted by us are voidable if the operating condition information is inaccurate or is not met.

Since control transfers over time, revenue is recognized based on the extent of progress towards completion of the single performance obligation. Fuel Tech uses the cost-to-cost input measure of progress for our contracts since it best depicts the transfer of assets to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost input measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs to fulfill include all internal and external engineering costs, equipment charges, inbound and outbound freight expenses, internal and site transfer costs, installation charges, purchasing and receiving costs, inspection costs, warehousing costs, project personnel travel expenses and other direct and indirect expenses specifically identified as project- or product-line related, as appropriate (e.g. test equipment depreciation and certain insurance expenses). Unexpected or unknown costs could affect the timing of revenue recognition and the cumulative profitability of the related projects.

Fuel Tech’s APC product line also includes ancillary revenue for post contractual goods and services. Revenue associated with these activities are recognized at a point in time when delivery of goods or completion of the service obligation is performed.

Fuel Tech has installed over 1,2001,300 units with APC technology and normally provides performance guarantees to our customers based on the operating conditions for the project. As part of the project implementation process, we perform system start-up and optimization services that effectively serve as a test of actual project performance. We believe that this test, combined with the accuracy of the modeling that is performed, enables revenue to be recognized prior to the receipt of formal customer acceptance.

As of December 31, 20202023 and 2022, we had oneno construction contractcontracts in progress that were identified as a loss contract and a provision for losses of $176 was recorded in other accrued liabilities on the consolidated balance sheet. As of December 31, 2019, we had three construction contracts in progress that were identified as loss contracts and a provision for losses of $26 was recorded in other accrued liabilities on the consolidated balance sheet.contract. 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheets. In our Air Pollution Control Technologytechnology segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. These assets are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. At December 31, 20202023, 2022, and 2019,2021 contract assets for APC technology projects were approximately $1,127$2,285 and $1,857,$3,082, and $1,277, respectively, and are included in accounts receivable on the consolidated balance sheets. There were no contract assets for the FUEL CHEM technology segment as of December 31, 2023, 2022, and 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 consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Contract liabilities were $850$1,279, $372, and $712$390 at December 31, 20202023, 2022, and 20192021, respectively, and are included in other accrued liabilities on the consolidated balance sheets.

Allowance for Doubtful AccountsCredit 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). The Company adopted these ASUs on January 1, 2023 and began using our expected credit loss model to calculate the allowance. The allowance for doubtful accountscredit losses is management’s best estimate of the amount of credit losses in accounts receivable. The allowance for credit losses balance can be impacted by unforeseen collectability issues. In order to control and monitor the credit risk associated with our customer base, we review the credit worthiness of customers on a recurring basis. Factors influencing the level of scrutiny include the level of business the customer has with us, the customer’s payment history and the customer’s financial stability. Receivables are considered past due if payment is not received by the date agreed upon with the customer, which is normally 30 days.days after invoice. Representatives of our management team review all past due accounts on a weeklymonthly or as-needed basis to assess collectability. At the end of each reporting period, the allowance for doubtful accountscredit losses balance is reviewed relative to management’s collectability assessmentexpected credit loss model and is adjusted if deemed necessary through a corresponding charge or credit to bad debt expense, which is included in selling, general, and administrative expenses in the consolidated statements of operations. Bad debt write-offs are made when management believes it is probable a receivable will not be recovered.recovered.

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. Usage is recorded in cost of sales in the period that parts were issued to a project or used to service equipment. Inventories are carried at weighted average cost and periodically evaluated to identify obsolete or otherwise impaired parts that 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 the existing sales pipeline for which the inventory could be used.

Assessment of Potential Impairments of Goodwill and Intangible Assets

Goodwill is not amortized, but rather is reviewed annually (in the fourth quarter) or more frequently if indicators arise, for impairment. We do not have any indefinite-lived intangible assets other than goodwill. Such indicators include a decline in expected cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, a decrease in our market capitalization to an amount less than the carrying value of our assets, or slower growth rates, among others.

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. We have two reporting units: the FUEL CHEM segment and the APC technology segment. Goodwill is only related to the FUEL CHEM segment.

Our evaluation of goodwill impairment involves first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may bypass this qualitative assessment, or determine that based on our qualitative assessment considering the totality of events and circumstances including macroeconomic factors, industry and market considerations, current and projected financial performance, a sustained decrease in our share price, or other factors, that additional impairment analysis is necessary. This additional analysis involves comparing the current fair value of a reporting unit to its carrying value. Fuel Tech uses a discounted cash flow (DCF) model to determine the current fair value of its FUEL CHEM reporting unit as this methodology was deemed to best quantify the present values of our expected future cash flows and yield a fair value that should be in line with the aggregate market value placed on the outstanding number of Common Sharescommon stock as reflected by the current stock price multiplied by the outstanding shares of common shares.stock. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce and working capital changes. Events outside our control, specifically market conditions that impact revenue growth assumptions, could significantly impact the fair value calculated. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, actual fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of goodwill.

The application of our DCF model in estimating the fair value of each reporting segment is based on the ‘net asset’ approach to business valuation. In using this approach for each reportable segment, we forecast segment revenues and expenses out to perpetuity and then discount the resulting cash flows to their present value using an appropriate discount rate. The forecast considers, among other items, the current and expected business environment, expected changes in the fixed and variable cost structure as the business grows, and a revenue growth rate that we feel is both achievable and sustainable. The discount rate used is composed of a number of identifiable risk factors, including equity risk, company size, and certain company-specific risk factors such as our debt-to-equity ratio, among other factors, that when added together, results in a total return that a prudent investor would demand for an investment in our Company.

In the event the estimated fair value of a reporting unit per the DCF model is less than the carrying value, additional analysis would be required. The additional analysis would compare the carrying amount of the reporting unit’s goodwill with the implied fair value of that goodwill. The implied fair value of goodwill is the excess of the fair value of the reporting unit over the fair values assigned to all of the assets and liabilities of that unit as if the reporting unit was acquired in a business combination and the fair value of the reporting unit represented the purchase price.

The Company utilizes ASUAccounting Standards Update (ASU) 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment for the annual goodwill impairment test.

Fuel Tech performed its annual goodwill impairment analysis for each of its FUEL CHEM reporting unitsunit as of October 1, 20202023 and determined that no impairment of goodwill existed within the FUEL CHEM technology segment.

Impairment of Long-Lived Assets and Amortizable Intangible Assets

Long-lived assets, including property plant and equipment (PP&E) and intangible assets, are reviewed for impairment when events and circumstances indicate that the carrying amount of the assets (or asset group) may not be recoverable. If impairment indicators exist, we perform a more detailed analysis and an impairment loss is recognized when either estimated future undiscounted cash flows expected to result from the use of the asset (or asset group) and its eventual disposition are less than the carrying amount or the determined fair value is less than the carrying amount. This process of analyzing impairment involves examining the operating condition of individual assets (or asset group) and estimating a fair value based upon current condition, relevant market factors and the remaining estimated operational life compared to the asset’s remaining depreciable life. Quoted market prices and other valuation techniques are used to determine expected cash flows.fair value. Due to the existence of impairment indicators, as more fully described in Note 1 to our consolidated financial statements, we performed a more detailed analysis of potential long-lived and intangible asset impairment in the APC technology asset group during the fourth quarter of 20202023 and determined no impairment exists.

During the fourth quarter of 2020, the Company There was no impairment recorded an abandonment charge of $197 due to the Company's decision to no longer maintain and defend certain patents and trademarks which are no longer contributing to operations. The abandonment charge was calculated by determining the net book values of the abandoned patent assets by deducting the accumulated amortization from the acquisition cost. The abandonment charge is included in “Intangible assets abandonment and building impairment” line in the accompanying Consolidated Statements of Operations for the year then ended December 31, 2020.

In the second and third quarters of 2019, the Company recorded an abandonment charge of $127 associated with certain international patent assets which the Company elected to not maintain and abandon in certain international locations due to limited business opportunities in those regions. The abandonment charge was calculated by determining the net book values of the abandoned patent assets by deducting the accumulated amortization from the acquisition cost. The abandonment charge of $127 is included in “Intangible assets abandonment and building impairment” line in the accompanying Consolidated Statements of Operations for the year ended December 31, 2019.during 2023. 

A significant portion of our property and equipment is comprised of assets deployed at customer locations relating to our FUEL CHEM technology asset group, and due to the shorter-term duration over which this equipment is depreciated, the likelihood of impairment is mitigated. The discontinuation of a FUEL CHEM program at a customer site would most likely result in the re-deployment of all or most of the affected assets to another customer location rather than an impairment.

Valuation Allowance for Deferred Income Taxes

Deferred tax assets represent deductible temporary differences and net operating loss and tax credit carryforwards. A valuation allowance is recognized if it is more likely than not that some portion of the deferred tax asset will not be realized. At the end of each reporting period, management reviews the realizability of the deferred tax assets. As part of this review, we consider if there are taxable temporary differences that could generate taxable income in the future, if there is the ability to carry back the net operating losses or credits, if there is a projection of future taxable income, and if there are any tax planning strategies that can be readily implemented. As required by ASC 740 "Income Taxes", a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. This assessment resulted in a valuation allowance on our deferred tax assets of $15,971$15,699 and $15,394$15,627 at December 31, 20202023 and 2019,2022, respectively.

Stock-Based Compensation

We recognize compensation expense for employee equity awards ratably over the requisite service period of the award, adjusted for estimated forfeitures.

We utilize the Black-Scholes option-pricing model to estimate the fair value of stock option awards. Determining the fair value of stock options using the Black-Scholes model requires judgment, including estimates for (1) risk-free interest rate - an estimate based on the yield of zero-coupon treasury securities with a maturity equal to the expected life of the option; (2) expected volatility - an estimate based on the historical volatility of our Common Sharescommon stock for a period equal to the expected life of the option; and (3) expected life of the option - an estimate based on historical experience including the effect of employee terminations.

Recently AdoptedIssued Accounting Standards

LeasesPronouncements

OnIn November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which provides guidance for additional disclosures around segment reporting. The standard will become effective for annual periods beginning on January 1, 2019, we adopted ASC 842 using2024 for Fuel Tech and for interim periods thereafter. Application of the modified retrospective method outlinedamendments is retrospective. The Company is reviewing the impact of this new pronouncement and expects to incorporate the additional disclosures in the Segment note when the ASU 2018-11, “Leases (Topic 842) Targeted Improvements.” Refer to Note 10 for further details regarding the effect of adoption. We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use ("ROU") operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our Consolidated Balance Sheets.adopted. 

Operating lease ROU assetsIn 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 operating lease liabilities are recognized basedother tax disclosures. The standard will become effective for annual periods beginning on the present valueJanuary 1, 2025 for Fuel Tech. Application of the future minimum lease payments overamendments should be applied prospectively but retrospective application is permitted. The Company is reviewing the lease term at commencement date. As mostimpact of our leases do not provide an implicit rate, we use our incremental borrowing rate based onthis new pronouncement and expects to incorporate the information available at commencement dateadditional disclosures in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminateTax note when the lease when itASU is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.adopted. 

We have lease agreements with lease and non-lease components, and we elected the practical expedient to not separate lease and non-lease components for the majority of our leases. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. We also elected the practical expedient to keep leases with an initial term of 12 months or less off of the consolidated balance sheet.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The new rules reduce complexity by removing specific exceptions to general principles related to intra-period tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. The new rules also simplify accounting for franchise taxes that are partially based on income,  transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The new rules will be effective for the Company in the first quarter of 2021, with early adoption permitted. The ASU permits either a retrospective basis or a modified retrospective transition approach. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, we will be 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 standard will become effective for interim and annual periods beginning after December 15,2023 versus 2022 with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently in the process of evaluating the impact of adoption, but we do not believe the adoption of this standard will have a material impact on our financial statements.

2020 versus 2019

Highlights for the year ended December 31, 2020,2023, compared to 2019:2022:

Revenues

Revenues for the years ended December 31, 20202023 and 20192022 were $22,550$27,081 and $30,467,$26,941, respectively. The year-over-year decreaseincrease of $7,917$140 or 26%1%, was driven by decreasedthe increase in revenue in bothour APC andtechnology segment in our U.S. operations, partially offset by a decrease in our FUEL CHEM technology segments in our United States (U.S.) operations.segment. Our U.S. revenues decreasedincreased by $7,260$751, or 28%4%, from $25,882$20,311 in 2022 to $18,622,$21,062 in 2023, and our international revenues decreased by $657$611, or 14%9%, from $4,585$6,630 in 2022 to $3,928.$6,019 in 2023.

Revenues for the APC technology segment were $8,557$13,483 for the year ended December 31, 2020, a decrease2023, an increase of $5,525,$2,886, or 39%27%, versus fiscal 2019.2022. The decreaseincrease in APC revenue for the twelve monthtwelve-month period ending December 31, 20202023 in comparison to the prior year amount was principally related to the timing of project execution and the decline innew APC orders. Consolidated APC backlog which was $5.3 million$7,458 and $9.7 million, for the years ended $8,245 at December 31, 20202023 and 2019,2022, respectively. Our backlog at December 31, 2023 consists of U.S. domestic projects totaling $6,878 and international projects totaling $580.

Revenues for the FUEL CHEM technology segment for the year ended December 31, 20202023 were $13,993,$13,598, a decrease of $2,392,$2,746, or 15%17%, versus fiscal 2019.2022. The decrease in FUEL CHEM revenue was due to dispatch/demand and unforeseen plant outages. We remain focused on attracting new customers in our FUEL CHEM business, for both coal and non-coal applications, but ourapplications. Our ability to attract new coal customers continues to be affected by the soft electric demand market and fuel switching as a result of low natural gas prices.

Cost of sales and gross margin

Consolidated cost of sales for the years ended December 31, 20202023 and 20192022 were $11,912$15,425 and $19,637,$15,298, respectively. Consolidated gross margin percentages for the years ended December 31, 20202023 and 20192022 were 47%43% and 36%43%, respectively. The gross margins for the APC technology segment increased to 46%38% in 20202023 from 20%35% in 2019.2022. The overall increase in gross margin in the APC technology segment from 2019 to 2020is primarily due to the timing of a large insurance settlement of $2,589 which was used to fund the recovery plan for the project affectedproduct and project mix, timing of project execution and net of $1,427 of remediation costs incurred during 2020 to address non-conformance issues under the terms of a contract with a U.S. customer.mix. Gross margin percentage for the FUEL CHEM technology segment decreased to 48% from 49% for the years ended December 31, 20202023 and 2019.2022.

Selling, general and administrative

Selling, general and administrative (SG&A) expenses for the years ended December 31, 20202023 and 20192022 were $13,600$12,803 and $17,191,$12,275, respectively. The decreaseincrease of $3,591$528, or 21%4%, is primarily attributed to the following:

Depreciation and Amortization

Depreciation and amortization are calculated using the straight linestraight-line method and included in selling, general and administrative expense. For the years ended December 31, 20202023 and 2019,2022, the Company recorded depreciation of $663$281 and $810$352 and amortization of $185$61 and $186,$88, respectively.

Restructuring charge

Restructuring costs were $0 and $625 for the years ended December 31, 2020 and 2019. On January 18, 2019, the Company announced a planned suspension of the APC business operation in China. This action is part of Fuel Tech’s ongoing operational improvement initiatives designed to prioritize resource allocation, reduce costs, and drive profitability for the Company on a global basis. The transition associated with the suspension of the APC business includes staff rationalization, supplier and partner engagement, and the monetization of certain assets. See Note 16, Restructuring Activities, for further discussion.

Research and development

Research and development (“R&D”) expenses were $1,177$1,511 and $1,127$895 for the years ended December 31, 20202023 and 2019,2022, respectively.

Intangible assets abandonment

In The expenditures in our research and development expenses were focused on new product development efforts in the fourth quarterpursuit of 2020,commercial applications for technologies outside of our traditional markets, and in the Company recordeddevelopment and analysis of new technologies that could represent incremental market opportunities. This increase was mainly attributed to water treatment technologies and more specifically, our DGI® Dissolved Gas Infusion Systems, an abandonment chargeinnovative alternative to current gas transfer and chemical replacement technologies. This infusion process has a variety of $197 due toapplications in the Company's decision to no longer maintainwater and defend certain patentswastewater segments, including irrigation, treatment of natural waters, supply of oxygen for biological remediation, wastewater odor management, pH adjustment, re-carbonization, etc. DGI® technology benefits include improved treatment performance and trademarks which are no longer contributing to operations.  Inreduced treatment time, and the second quarter of 2019, Fuel Tech recorded an abandonment charge of $127 associatedpotential for reduced energy consumption, along with certain international patent assets which the Company elected to not maintainlower installation and abandon in certain international locations due to limited business opportunities in those regions. The abandonment charges were calculated by determining the net book valuesoperating costs. Third party validation testing of the abandoned patent assets by deducting the accumulated amortization from the acquisition cost. The abandonment charges are included in “Intangible assets abandonment” line in the accompanying Consolidated Statementsefficiency of Operations for the twelve months ended December 31, 2020transferring oxygen to a treatment basin has been completed and 2019, respectively.results have been published.

Interest (income) / expenseincome

Interest expenseincome was $1,300 for the year ended December 31, 2020 was $4 versus2023 compared to $202 for the same period in 2022. Interest income of $41 in 2019.increased due to the interest income on the held-to-maturity (HTM) debt securities and money market funds.

Foreign exchange gainOther Expense, net

Foreign exchange gainOther expense, net was $90 for the year ended December 31, 2020 was $0 after a gain2023 compared to Other expense, net of $370 in 2019 related to the Chile subsidiary.

Other income

Other income of $119 increased by $127$46 for the years ended December 31, 2020 comparedsame period in 2022. The change of $44 is due primarily to $(8)an increase in 2019 due to the interest collected on resolutionbank fees associated with our standby letters of legal judgment on a receivable payment from our China operations.credit.

Income tax benefit (expense)expense

For the year ended December 31, 2020,2023, we recorded an income tax expense of $57$69 on pre-tax loss of $4,221.$1,469. Our effective tax rates were (1.4)%(-4.7% and 0.2%(3.9)% for the years ended December 31, 20202023 and 2019,2022, respectively. For the year ended December 31, 2022, we recorded an income tax expense of $54 on pre-tax income of $1,388. The effective tax rate for the year-ended year ended December 31, 2020,2023 differed from the federal statutory rate of 21% as a result of establishing a deferred tax liability associated with a certain book-to-tax timing difference. For the year ended December 31, 2019, we recorded an income tax expense of $14 on pre-tax loss of $7,837. The effective tax rate for the year-ended December 31, 2020 and 2019 differed from the federal statutory rate of 34% as a result of net operating losses generated in the United States, China, and Italy, which were offset by establishment of full valuation allowances. 

Loss from discontinued operations

The activity of the Fuel Conversion discontinued operations consisted of other costs for the years ended December 31, 2020 and 2019 of $0 and $1, respectively. The activity of the Fuel Conversion discontinued operations consisted primarily of storage costs for holding the equipment at a third-party location totaling $21 for the year ended December 31, 2019 and the gain on sale of $20 from the sale of the remaining Fuel Conversion Assets Held for Sale recorded in discontinued operations.

Liquidity and Sources of Capital

At December 31, 20202023, we had cash and cash equivalents of $10,640 (excluding restricted$17,578 (which includes $5,083 of cash of $1,966)equivalents) and working capital of $15,542$32,633 versus cash and cash equivalents of $10,914 (excluding restricted$23,328 (which includes $10,768 of cash of $2,587)equivalents) and working capital of $16,816$31,059 at December 31, 20192022. We have no outstanding debt other than our outstanding letters of credit, under our Investment Collateral Security agreement with BMO Harris Bank, N.A. (the Investment Collateral Security agreement), which does not have any financial covenants. We expect to continue operating under this arrangement for the foreseeable future. 

Operating activities used $2,707provided cash of cash$696 for the year ended December 31, 2020,2023, primarily due to the add backa decrease in accounts receivable balances of $1,039, an increase in accrued liabilities and other non-current liabilities of $1,239, partially offset by an increase in accounts payable balances of $295 and adjustments for non-cash items from our net loss from continuing operations for interest income on held-to-maturity securities of $266 including$433, depreciation and amortization of $342 and stock compensation expense of $290, depreciation and amortization$389.

Operating activities used cash of $848, intangible assets abandonment charge of $197,$4,139 for the year ended December 31, 2022, primarily due to an increase in accounts receivable balances of $4,448, an increase in prepaid expenses and other assets of $314, and an adjustment for non-cash items from our net loss from continuing operations for the provision for credit losses of $106, partially offset by increases in accounts payable balances of $1,159 and accrued liabilities and other non-current liabilities of $2,$360, and an increase in our accounts payable balance of $198 offset by a decrease in prepaid expenses and other current and non-current assets of $161, a decrease in our inventory balance of $171 and a decrease in our accounts receivable balance of $1,095.

Operating activities used $3,387 of cashadjustments for the year ended December 31, 2019, primarily due to the add back of non-cash items from our net incomeloss from continuing operations for depreciation and amortization of $7,851 including$440 and stock compensation expense of $574, depreciation and amortization of $996, intangible assets abandonment charge of $127, a reduction of the excess and obsolete inventory reserve of $131, a decrease in our accounts receivable balance of $11,415, a decrease in our inventory balance of $818, a decrease in prepaid expenses and other current and non-current assets of $2,239, an decrease in our accrued liabilities and other non-current liabilities of $5,010, and a decrease in our accounts payable balance of $7,331. Cash used in operating activities also included cash used of $21 associated with the activity of the Fuel Conversion discontinued operations.$224.

Investing activities used cash of $247$6,444 and $45$9,483 for the years ended December 31, 20202023 and 2019,2022, respectively. Investing activities for the yearyears ended December 31, 20202023 and 2022 primarily consisted principally of purchases of HTM debt securities as investments of $14,026 and $9,777, respectively, and the purchases of equipment and patent related costs and of $247.$418 and $206, respectively. Investing activities for the yearyears ended December 31, 2019 consisted2023 and 2022 were partially funded by the maturities of purchasesdebt securities of equipment, patents,$8,000 and other intangibles of $550 and proceeds from sale of equipment of $505. $500, respectively.

Financing activities provided $1,282$42 and used $128$17 of cash for the years ended December 31, 20202023 and 20192022. In 2020,2023, the Company received a Paycheck Protection Plan loanfinancing activity was related to proceeds from the exercise of $1,556 but used a net $276 for stock compensationoptions. In 2022, financing activities were related transactions.  The cash used in 2019 was a resultto taxes paid on behalf of $128 used for the acquisition of common shares held in treasury that were withheld for taxes due by employees upon lapsingequity award participants on the vesting of restricted stock units during 2019.units. 

We continue to monitor our liquidity needs and in response to our recent periods of net losses have taken measures to reduce expenses and restructure operations which we feel are necessary to ensure we maintain sufficient working capital and liquidity to operate the business and invest in our future. We have evaluated our ongoing business needs, and considered the cash requirements of our base business of Air Pollution Control and FUEL CHEM. This evaluation included consideration of the following customer and revenue trends in our APC and FUEL CHEM business segments current operating structure and expenditure levels, and other research and development initiatives.  Based on this analysis, management believes that currently we have sufficient cash and working capital to operate our base APC and FUEL CHEM businesses. We believe our current cash position and net cash flows expected to be generated from operations are adequate to fund planned operations of the Company for the next 12 months.

We expect capital expenditures in 2024 for the DGI business, maintenance of field equipment, computer and systems, and general office equipment. We expect to fund our capital expenditures with cash from operations or cash on hand.

In June 2022, the Board of Directors approved an investment plan that would hold $10,000 in funds at BMO Harris Bank (BMO Harris) to be invested in held-to-maturity debt securities of United States (US) Treasuries, including Notes, Bonds, and Bills, or US Government Agency securities. In December 2022, the Board of Directors approved an additional investment of $10,000. The funds are held in money market funds until they are invested in those securities. The investments would be structured to create a maturity “ladder” where the proceeds from maturities are re-invested to maintain a balance of short- and long-term investments based on the expected business needs. Maturities will be between three and thirty-six months. This strategy allows the Company to provide returns on excess cash, while managing liquidity and minimizing exposure to interest rate fluctuations.

On June 19, 2019,30, 2022, the Company entered into a Cashthe Investment Collateral Security agreement with BMO Harris Bank, N.A. (the BMO Harris agreement) to use for the sole purpose of issuing standby letters of credit.credit, which replaces the Cash Collateral Security agreement with BMO Harris Bank, N.A. (the Former Collateral agreement). The BMO HarrisInvestment Collateral Security agreement requires us to pledge our investments as cash collateral 105%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 BMO HarrisInvestment Collateral Security agreement. At December 31, 2020,2023, the Company had outstanding standby lettersletters of credit totaling approximately $1,873$904 under the BMO HarrisInvestment Collateral Security agreement. As of At December 31, 20202023, the Companyinvestments held $1,966 in a separate restricted use designated BMO Harris Bank N.A. deposit account.as collateral totaled $1,356. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments.instruments. The excess in restricted cash collateral at year-end is related to timing of the release of severaloutstanding standby letters of credit which expired just after year-end.mature as follows:

In connection with the transition to BMO Harris Bank N.A., the Company canceled its U.S. Domestic credit facility (the Facility) with JPMorgan Chase Bank, N.A. (JPM Chase) effective on September 25, 2019.

Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), was previously obligated under a revolving credit facility (the China Facility) agreement, as most recently amended on October 19, 2018, with JPM Chase which provided for maximum revolving credit borrowings of RMB 2.625 million (approximately $382) and matured on June 30, 2019. The Facility was secured by $520 in cash held by the Company in a separate restricted use designated JPM Chase deposit account. The China Facility bears interest at a rate of 140% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by the Company. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As a result of the announcement of the suspension of the Air Pollution Control business in Beijing, the Company did not renew the China Facility upon its expiration on June 30, 2019.

For the year ended December 31, 2020 we have sustained a loss before discontinued operations totaling $4,278. Our cash used by continuing operations for this same period totaled $2,707. We have taken measures to reduce our expense infrastructure and have eliminated approximately $17.5 million in aggregate selling, general and administrative expenses primarily through headcount and other operating expense cutbacks since 2015.

We have experienced continued declines in revenues and recurring losses.  As a result, we have evaluated our ongoing business needs, and considered the cash requirements of our base business of Air Pollution Control (APC) and FUEL CHEM businesses. This evaluation included consideration of the following: a) customer and revenue trends in our APC and FUEL CHEM business segments, b) current operating structure and expenditure levels, c) current availability of working capital, and d) support for our research and development initiatives. 

Our cash balance as of December 31, 2020 totaled $12,606 (including our restricted cash balance), and our working capital totaled $15,542. We do not have any outstanding debt obligations other than for our letters of credit and our PPP loan which was forgiven on January 8, 2021. We currently have the BMO Harris agreement which we use to issue letters of credit to our customers, which is fully cash collateralized requiring us to deposit funds in a restricted cash account. We expect to continue operating under this arrangement for the foreseeable future. 

On February 17, 2021 we consummated the sale of 5,000,000 shares of Fuel Tech common stock sold to certain investors in a private placement transaction.  The Company received gross proceeds of $25.8 million.  The Company intends to use for the proceeds for general corporate purposes.  See Note 9B "Subsequent Events."  

Commercial Commitments

Commitment expiration by period in thousands of dollars

Off-Balance-Sheet Transactions

There were no other off-balance-sheet transactions other than the obligations and commitments listed above for the year ended December 31, 2020.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. We do not enter into foreign currency forward contracts or into foreign currency option contracts to manage this risk due to the nature of the transactions involved.

We are also exposed to changes in interest rates primarily due to our debt arrangement (refer to Note 1011 to the consolidated financial statements). A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not have a materially adverse effect on interest expense during the year ended December 31, 2020.2023.

Fuel Tech, Inc.

Consolidated Balance Sheets

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

See notes to consolidated financial statements.

Fuel Tech, Inc.

Consolidated Statements of Operations

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

See notes to consolidated financial statements.

Fuel Tech, Inc.

Consolidated Statements of Comprehensive Loss

(in thousands of dollars)

See notes to consolidated financial statements.

Fuel Tech, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands of dollars or shares, as appropriate)  

See notes to consolidated financial statements.

Fuel Tech, Inc.

Consolidated Statements of Cash Flows

(in thousands of dollars)