UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended

~~September~~June 30, ~~2020~~2021

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

For the transition period from ______ to______.

Commission file number: 001-33059

FUEL TECH, INC.

(Exact name of registrant as specified in its charter)

Delaware

20-5657551

(State or other jurisdiction of

incorporation of organization)

(I.R.S. Employer

Identification Number)

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, IL 60555-1617

630-845-4500

www.ftek.com

(Address and telephone number of principal executive offices)

________________________________

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FTEK	NASDAQ

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

On ~~October~~July 31, ~~2020~~2021 there were outstanding ~~24,701,159~~30,263,791 shares of Common Stock, par value $0.01 per share, of the registrant.

Table of Contents

FUEL TECH, INC.

Form 10-Q for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2020~~2021

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020	1
	Condensed Consolidated Statements of Operations for the ~~Three-~~Three and ~~Nine-Month Periods~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	2
	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the ~~Three-~~Three and ~~Nine-Month Periods~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	23
	Condensed Consolidated Statements of Stockholders' Equity for the ~~Three-~~Three and ~~Nine-Month Periods~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	4
	Condensed Consolidated Statements of Cash Flows for the ~~Three-~~Six Months Ended June 30, 2021 and ~~Nine-Month Periods Ended September 30,~~ 2020 ~~and 2019~~	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	24
SIGNATURES		25

Table of Contents

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

FUEL TECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

							June 30,			December 31,
	September 30, 2020			December 31, 2019			2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	9,418		$	10,914		$	36,194		$	10,640
Restricted cash		2,025			2,080			98			1,595
Accounts receivable, net		5,989			6,473			3,403			6,548
Insurance Receivable		2,589			—
Inventories, net		337			264			194			97
Prepaid expenses and other current assets		1,678			1,879			1,555			2,193
Income taxes receivable		69			—
Total current assets		22,105			21,610			41,444			21,073
Property and equipment, net of accumulated depreciation of $26,692 and $26,174, respectively		5,347			5,662
Property and equipment, net of accumulated depreciation of $18,459 and $26,889, respectively								5,087			5,220
Goodwill		2,116			2,116			2,116			2,116
Other intangible assets, net of accumulated amortization of $6,810 and $6,671, respectively		794			906
Other intangible assets, net of accumulated amortization of $828 and $757, respectively								516			553
Restricted cash		367			507			270			371
Right-of-use operating lease assets		430			362			311			394
Other assets		366			443			317			361
Total assets	$	31,525		$	31,606		$	50,061		$	30,088
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,963		$	2,117		$	1,400		$	2,353
Current portion of long-term borrowings		945			—
Accrued liabilities:
Operating lease liabilities - current		175			182			132			149
Employee compensation		687			519			681			930
Income taxes payable		36			—
Other accrued liabilities		1,566			1,976			1,339			2,099
Total current liabilities		6,372			4,794			3,552			5,531
Operating lease liabilities - non-current		247			180			171			237
Long-term borrowings, net of current portion		611			—
Long-term borrowings								0			1,556
Deferred income taxes, net		172			171			134			134
Other liabilities		292			286			306			309
Total liabilities		7,694			5,431			4,163			7,767
COMMITMENTS AND CONTINGENCIES (Note 13)
Stockholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized, 25,509,298 and 25,053,480 shares issued, and 24,701,159 and 24,592,578 shares outstanding, respectively		255			254
Common stock, $.01 par value, 40,000,000 shares authorized, 31,227,300 and 25,639,702 shares issued, and 30,263,791 and 25,228,951 shares outstanding, respectively								312			262
Additional paid-in capital		139,767			139,560			164,157			140,138
Accumulated deficit		(113,060	)		(110,325	)		(114,983	)		(114,603	)
Accumulated other comprehensive loss		(1,589	)		(1,778	)		(1,430	)		(1,370	)
Nil coupon perpetual loan notes		76			76			76			76
Treasury stock, at cost		(1,618	)		(1,612	)		(2,234	)		(2,182	)
Total stockholders’ equity		23,831			26,175			45,898			22,321
Total liabilities and stockholders’ equity	$	31,525		$	31,606		$	50,061		$	30,088

See notes to condensed consolidated financial statements.

Table of Contents

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues
$ 8,155 $ 6,452 $ 16,334 $ 25,555
Costs and expenses:

Cost of sales
2,249 3,563 8,299 14,754
Selling, general and administrative
3,184 3,822 9,825 12,735
Restructuring charge
— — — 625
Research and development
285 352 880 823
Intangible assets abandonment
— 76 — 127
5,718 7,813 19,004 29,064
Operating income (loss) from continuing operations
2,437

(1,361
)
(2,670
)
(3,509
)
Interest expense
(9
)
(4
)
(15
)
(8
)
Interest income
3 19 16 30
Other income (expense), net
(55
)
71

83 (1
)
Income (loss) from continuing operations before income taxes
2,376

(1,275
)
(2,586
)
(3,488
)
Income tax expense
— (21
)
(149
)
(23
)
Net income (loss) from continuing operations
2,376

(1,296
)
(2,735
)
(3,511
)
Income (Loss) from discontinued operations
— 18

— (1
)
Net income (loss)
$ 2,376

$ (1,278
)
$ (2,735
)
$ (3,512
)
Net income (loss) per common share:

Basic

Continuing operations
$ 0.10

$ (0.05
)
$ (0.11
)
$ (0.15
)
Discontinued operations
$ — $ — $ — $ —
Basic net income (loss) per common share
$ 0.10

$ (0.05
)
$ (0.11
)
$ (0.15
)
Diluted

Continuing operations
$ 0.09

$ (0.05
)
$ (0.11
)
$ (0.15
)
Discontinued operations
$ — $ — $ — $ —
Diluted net income (loss) per common share
$ 0.09 $ (0.05 ) $ (0.11
)
$ (0.15
)
Weighted-average number of common shares outstanding:

Basic
24,701,000 24,187,000 24,656,000 24,183,000
Diluted
25,120,000 24,187,000 24,656,000 24,183,000

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Revenues	$	5,218		$	4,401		$	10,251		$	8,179
Costs and expenses:
Cost of sales		2,635			3,799			5,310			6,050
Selling, general and administrative		2,957			2,755			6,057			6,641
Research and development		315			271			730			595
		5,907			6,825			12,097			13,286
Operating loss		(689	)		(2,424	)		(1,846	)		(5,107	)
Interest expense		(5	)		(3	)		(9	)		(6	)
Interest income		2			2			3			13
Other (expense) income, net		(76	)		(88	)		1,482			138
Loss before income taxes		(768	)		(2,513	)		(370	)		(4,962	)
Income tax expense		(10	)		(31	)		(10	)		(149	)
Net loss	$	(778	)	$	(2,544	)	$	(380	)	$	(5,111	)
Net loss per common share:
Basic net loss per common share	$	(0.03	)	$	(0.10	)	$	(0.01	)	$	(0.21	)
Diluted net loss per common share	$	(0.03	)	$	(0.10	)	$	(0.01	)	$	(0.21	)
Weighted-average number of common shares outstanding:
Basic		30,264,000			24,668,000			28,895,000			24,633,000
Diluted		30,264,000			24,668,000			28,895,000			24,633,000

See notes to condensed consolidated financial statements.

Table of Contents

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited)

(in thousands)

	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended						Six Months Ended
	2020		2019			2020			2019			June 30,						June 30,
Net income (loss)	$	2,376	$	(1,278	)	$	(2,735	)	$	(3,512	)
												2021			2020			2021			2020
Net loss												$	(778	)	$	(2,544	)	$	(380	)	$	(5,111	)
Other comprehensive income (loss):
Foreign currency translation adjustments		268		(337	)		189			(276	)		133			152			(60	)		(79	)
Comprehensive income (loss)	$	2,644	$	(1,615	)	$	(2,546	)	$	(3,788	)
Comprehensive loss												$	(645	)	$	(2,392	)	$	(440	)	$	(5,190	)

See notes to condensed consolidated financial statements.

Table of Contents

Fuel Tech, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands of dollars or shares, as appropriate)

The following summarizes the changes in total stockholders' equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019:~~2020:

	Common Stock					Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Nil Coupon Perpetual		Treasury																Accumulated			Nil
	Shares			Amount		Capital		Deficit			Income (Loss)			Loan Notes		Stock			Total								Additional					Other			Coupon
Balance at December 31, 2018		24,170		$	248	$	138,992	$	(102,495	)	$	(1,285	)	$	76	$	(1,484	)	$	34,052
																						Common Stock					Paid-in		Accumulated			Comprehensive			Perpetual		Treasury
																						Shares			Amount		Capital		Deficit			Loss			Loan Notes		Stock			Total
Balance at December 31, 2019																							24,592		$	254	$	139,560	$	(110,325	)	$	(1,778	)	$	76	$	(1,612	)	$	26,175
Net loss		—			—		—		(1,289	)		—			—		—			(1,289	)		—			0		0		(2,567	)		0			0		0			(2,567	)
Foreign currency translation adjustments		—			—		—		—			104			—		—			104			—			0		0		0			(231	)		0		0			(231	)
Stock compensation expense		—			—		96		—			—			—		—			96			—			0		81		0			0			0		0			81
Common shares issued upon vesting of restricted stock units		18			—		—		—			—			—		—			—			55			0		0		0			0			0		0			0
Treasury shares withheld		(2	)		—		—		—			—			—		(2	)		(2	)		(11	)		0		0		0			0			0		(5	)		(5	)
Adoption of ASC 842		—			—		—		22			—			—		—			22
Balance at March 31, 2019		24,186		$	248	$	139,088	$	(103,762	)	$	(1,181	)	$	76	$	(1,486	)	$	32,983
Net Loss		—			—		—		(945	)		—			—		—			(945	)
Balance at March 31, 2020																							24,636		$	254	$	139,641	$	(112,892	)	$	(2,009	)	$	76	$	(1,617	)	$	23,453
Net loss																							—			0		0		(2,544	)		0			0		0			(2,544	)
Foreign currency translation adjustments		—			—		—		—			(43	)		—		—			(43	)		—			0		0		0			152			0		0			152
Stock compensation expense		—			—		123		—			—			—		—			123			—			0		69		0			0			0		0			69
Balance at June 30, 2019		24,186		$	248	$	139,211	$	(104,707	)	$	(1,224	)	$	76	$	(1,486	)	$	32,118
Net Loss		—			—		—		(1,278	)		—			—		—			(1,278	)
Foreign currency translation adjustments		—			—		—		—			(337	)		—		—			(337	)
Stock compensation expense		—			—		138		—			—			—		—			138
Balance at September 30, 2019		24,186		$	248	$	139,349	$	(105,985	)	$	(1,561	)	$	76	$	(1,486	)	$	30,641
Common shares issued upon vesting of restricted stock units																							66			1		0		0			0			0		(1	)		0
Treasury shares withheld																							(1	)		0		0		0			0			0		0			0
Balance at June 30, 2020																							24,701		$	255	$	139,710	$	(115,436	)	$	(1,857	)	$	76	$	(1,618	)	$	21,130

The following summarizes the changes in total stockholders' equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020:~~2021:

	Common Stock					Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Nil Coupon Perpetual		Treasury																Accumulated			Nil
	Shares			Amount		Capital		Deficit			Income (Loss)			Loan Notes		Stock			Total								Additional					Other			Coupon
Balance at December 31, 2019		24,592		$	254	$	139,560	$	(110,325	)	$	(1,778	)	$	76	$	(1,612	)	$	26,175
																						Common Stock					Paid-in		Accumulated			Comprehensive			Perpetual		Treasury
																						Shares			Amount		Capital		Deficit			Loss			Loan Notes		Stock			Total
Balance at December 31, 2020																							25,229		$	262	$	140,138	$	(114,603	)	$	(1,370	)	$	76	$	(2,182	)	$	22,321
Net income																							—			0		0		398			0			0		0			398
Foreign currency translation adjustments																							—			0		0		0			(193	)		0		0			(193	)
Stock compensation expense																							—			0		20		0			0			0		0			20
Common stock issued in connection with private placement, net																							5,000			50		23,979		0			0			0		0			24,029
Common shares issued upon vesting of restricted stock units																							50			0		0		0			0			0		0			0
Treasury shares withheld																							(15	)		0		0		0			0			0		(52	)		(52	)
Balance at March 31, 2021																							30,264		$	312	$	164,137	$	(114,205	)	$	(1,563	)	$	76	$	(2,234	)	$	46,523
Net loss		—			—		—		(2,567	)		—			—		—			(2,567	)		—			0		0		(778	)		0			0		0			(778	)
Foreign currency translation adjustments		—			—		—		—			(231	)		—		—			(231	)		—			0		0		0			133			0		0			133
Stock compensation expense		—			—		81		—			—			—		—			81			—			0		20		0			0			0		0			20
Common shares issued upon vesting of restricted stock units		55			—		—		—			—			—		—			—
Treasury shares withheld		(11	)		—		—		—			—			—		(5	)		(5	)
Balance at March 31, 2020		24,636		$	254	$	139,641	$	(112,892	)	$	(2,009	)	$	76	$	(1,617	)	$	23,453
Net Loss		—			—		—		(2,544	)		—			—		—			(2,544	)
Foreign currency translation adjustments		—			—		—		—			152			—		—			152
Stock compensation expense		—			—		69		—			—			—		—			69
Common shares issued upon vesting of restricted stock units		66			1		—		—			—			—		(1	)		—
Treasury shares withheld		(1	)		—		—		—			—			—		—			—
Balance at June 30, 2020		24,701		$	255	$	139,710	$	(115,436	)	$	(1,857	)	$	76	$	(1,618	)	$	21,130
Net Income		—			—		—		2,376			—			—		—			2,376
Foreign currency translation adjustments		—			—		—		—			268			—		—			268
Stock compensation expense		—			—		57		—			—			—		—			57
Balance at September 30, 2020		24,701		$	255	$	139,767	$	(113,060	)	$	(1,589	)	$	76	$	(1,618	)	$	23,831
Balance at June 30, 2021																							30,264		$	312	$	164,157	$	(114,983	)	$	(1,430	)	$	76	$	(2,234	)	$	45,898

See notes to condensed consolidated financial statements.

Table of Contents

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

							Six Months Ended
	Nine Months Ended September 30,						June 30,
	2020			2019			2021			2020
Operating Activities
Net loss	$	(2,735	)	$	(3,512	)	$	(380	)	$	(5,111	)
Loss from discontinued operations		—			1
Net loss from continuing operations		(2,735	)		(3,511	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		495			644			319			329
Amortization		139			118			71			85
(Gain) loss on disposal of equipment		(3	)		4
Loss on disposal of equipment								13			0
Provision for doubtful accounts, net of recoveries		(1,144	)		—			23			(1,082	)
Adjustment for Operating Lease (Note 2)		(11	)		—
Intangible assets abandonment		—			127
Stock-based compensation, net of forfeitures		208			357			40			150
Gain on forgiveness of Paycheck Protection Plan Loan								(1,556	)		0
Changes in operating assets and liabilities:
Accounts receivable		(863	)		8,601			3,079			1,863
Inventories		(71	)		654			(97	)		(78	)
Prepaid expenses, other current assets and other non-current assets		250			1,804			681			424
Accounts payable		820			(6,812	)		(943	)		(531	)
Accrued liabilities and other non-current liabilities		(376	)		(4,306	)		(1,021	)		537
Net cash used in operating activities - continuing operations		(3,291	)		(2,320	)
Net cash used in operating activities - discontinued operations		—			(21	)
Net cash used in operating activities		(3,291	)		(2,341	)
Net cash provided by (used in) operating activities								229			(3,414	)
Investing Activities
Purchases of equipment and patents		(206	)		(431	)		(237	)		(122	)
Net cash used in investing activities - continuing operations		(206	)		(431	)
Net cash provided by investing activities - discontinued operations		—			505
Net cash (used in) provided by investing activities		(206	)		74
Net cash used in investing activities								(237	)		(122	)
Financing Activities
Proceeds from borrowings		1,556			—			0			1,556
Proceeds from sale of common stock issued in connection with private placement								25,812			0
Costs related to sale of common stock issued in connection with private placement								(1,783	)		0
Taxes paid on behalf of equity award participants		(6	)		(2	)		(52	)		(6	)
Net cash provided by (used in) financing activities		1,550			(2	)
Net cash provided by financing activities								23,977			1,550
Effect of exchange rate fluctuations on cash		256			(458	)		(13	)		(258	)
Net decrease in cash, cash equivalents and restricted cash		(1,691	)		(2,727	)
Net increase (decrease) in cash, cash equivalents and restricted cash								23,956			(2,244	)
Cash, cash equivalents, and restricted cash at beginning of period (Note 2)		13,501			18,059			12,606			13,501
Cash, cash equivalents and restricted cash at end of period (Note 2)	$	11,810		$	15,332		$	36,562		$	11,257

See notes to condensed consolidated financial statements.

Table of Contents

FUEL TECH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~2020~~2021

(Unaudited)

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

1. General

Organization

Fuel Tech, Inc. and subsidiaries ("Fuel Tech", the "Company", "we", "us" or "our") develops and provides proprietary technologies for air pollution control, process optimization, water treatment, and advanced ~~engineered solutions for the optimization of combustion systems~~engineering services. These technologies enable customers to operate in ~~utility~~a cost-effective and ~~industrial applications. Our primary focus is on the worldwide marketing and sale of NOx reduction technologies as well as our FUEL CHEM program.~~ environmentally sustainable manner.

The Company’s NOx reduction technologies reduce nitrogen oxide emissions from boilers, furnaces and other stationary combustion sources.

~~Our~~ To reduce NOx emissions, our technologies utilize advanced combustion modification techniques and post-combustion NOx control approaches including non-catalytic, catalytic and combined systems. The Company also provides solutions for the mitigation of particulate matter, including particulate control with electrostatic precipitator products and services, and using flue gas conditioning systems which modify the ash properties of particulate for improved collection efficiency. The Company’s FUEL ~~CHEM program is based on proprietary TIFI~~^® ~~Targeted In-Furnace™ Injection~~CHEM® technology ~~in combination with advanced Computational Fluid Dynamics (CFD) and Chemical Kinetics Modeling (CKM) boiler modeling, in the unique application of specialty chemicals to improve~~improves the efficiency, reliability, fuel flexibility, boiler heat rate, and environmental status of combustion units by controlling slagging, fouling, corrosion, ~~opacity~~and opacity. Water treatment technologies include DGI™ Dissolved Gas Infusion Systems which utilize a patented nozzle to deliver supersaturated oxygen solutions and other ~~sulfur trioxide-related issues~~gas-water combinations to target process applications or environmental issues. This infusion process has a variety of applications in the ~~boiler.~~water and wastewater industries, including remediation, aeration, biological treatment, and wastewater odor management.

~~Our business is materially dependent~~Many of Fuel Tech’s products and services rely heavily on the continued existence and enforcement of air quality regulations, particularly in the United States. We have expended significant resources in the research and development of new technologies in building our proprietary portfolio of air pollution control, fuel and boiler treatment chemicals, computerCompany’s Computational Fluid Dynamics modeling ~~and advanced~~capabilities, which are enhanced by internally developed, high-end visualization ~~technologies.~~software.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form ~~10-Q~~10-Q and Article 10 of Regulation ~~S-X~~S-X of the Exchange Act. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the statements for the periods presented. All significant intercompany transactions and balances have been eliminated. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2020.~~2021. For further information, refer to the audited consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2019~~2020 as filed with the Securities and Exchange Commission.

~~COVID-19~~COVID-19 Pandemic

The ~~emergence~~effects of the coronavirus ~~(COVID-19) around the world presents~~(COVID-19) global pandemic has presented 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 three and nine months ended September 30, 2020, although~~Although the impact of the pandemic is difficult to quantify, ~~and may continue to do so indefinitely thereafter. The~~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 electric demand and unplanned outage activities and~~ due to the delay or abandonment of ongoing or anticipated projects due to our 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~~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~~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 might end.

Private Placement Offering

On February 11, 2021, Fuel Tech entered into a securities purchase agreement to issue and sell, in a private placement, 5,000,000 shares of Common Stock and 2,500,000 warrants exercisable for a total of 2,500,000 shares of Common Stock with an exercise price of $5.10 per Warrant Share, at a purchase price of $5.1625 per Share and associated warrant. The gross proceeds to the Company from the Private Placement were $25,812, before deducting placement agent fees and offering expenses of $1,783. Subject to certain ownership limitations, the Warrants are immediately exercisable upon issuance and expire on the five and one-half year anniversary of the effective date of the registration statement registering the Warrant Shares for resale. In addition, the Company issued to the placement agent Warrants to purchase up to 350,000 shares of Common Stock. The Placement Agent Warrants are exercisable at an exercise price of $6.45 per share of Common Stock and expire on the five and one-half year anniversary of the effective date of the registration statement registering the Shares and the Warrant Shares for resale.

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2. Summary of Significant Accounting Policies

Restricted cash

Restricted cash as of ~~September~~June 30, ~~2020~~2021 represents funds that are restricted to satisfy any amount borrowed against the Company's Cash Collateral Security agreement with BMO Harris Bank N.A. The balance of restricted cash totaling ~~$2,392~~$368 is comprised of ~~$2,025~~$98 in current assets relating to existing standby letters of credit with varying maturity dates and expire no later than ~~September~~ June 30, ~~2021~~2022 and ~~$367~~$270 in long-term assets will remain through the expiration dates of the underlying standby letter of credits (the latest maturity date is February 1, 2023) with BMO Harris Bank N.A. Refer to Note 910 Debt Financing for further information on the Cash Collateral Security agreement with BMO Harris Bank N.A.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:

					June 30,		June 30,
	September 30, 2020		September 30, 2019		2021		2020
Cash and cash equivalents	$	9,418	$	12,850	$	36,194	$	8,254
Restricted cash included in current assets		2,025		988		98		2,639
Restricted cash included in long-term assets		367		1,494		270		364
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	11,810	$	15,332
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows					$	36,562	$	11,257

Leases

The Company applies the provisions of Accounting Standards Codification ("ASC") 842, Leases. The Company determines if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. Right-of-use ("ROU") assets and lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. Operating ROU assets also include the impact of any lease incentives. Operating leases are included in right-of-use ("ROU") operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our Condensed Consolidated Balance Sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

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

During the quarter ending September 30, 2020, an error was detected in the calculation of the adoption of ASC 842. “Leases” made on January 1, 2019. The calculation included an incorrect lease amount associated with one of our leases. This error did not correctly present the Right of Use Operating Lease Asset and related Operating Lease Liability on the Company’s balance sheet.

We evaluated the revision in accordance with Accounting Standards Codification (ASC) 250, Accounting Changes and Error Corrections and evaluated the materiality of the revision on prior periods' financial statements in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 108, Quantifying Financial Statement Errors. We concluded that the revision was not material to any prior period and therefore, amendments of previously filed reports are not required. In accordance with ASC 250, we have corrected the error in all prior periods presented by revising the consolidated financial statements appearing herein. Periods not presented herein will be revised, as applicable, in future filings. The revision did not have an impact on net loss or earnings per share data for the year ended December 31, 2019.

As Previously Reported Year Ended
December 31, 2019

Revision

As Revised

Right of Use Operating Lease Asset
980 (618 ) 362
Operating Lease Liabilities - current
300 (118 ) 182
Operating Lease Liabilities - non current
680 (500 ) 180

3. Revenue

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 generally represent single performance obligations. 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.

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We generally expense sales commissions on a ratable basis when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.

Air Pollution Control Technology

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

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

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

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

Fuel Tech has installed over ~~1,100~~1,200 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.

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 above and for those project 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.

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Disaggregated Revenue by Product Technology

The following table presents our revenues disaggregated by product technology:

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Air Pollution Control
Technology solutions	$	2,326	$	1,191	$	4,524	$	9,727	$	223	$	1,469	$	596	$	2,198
Spare parts		254		299		667		832		236		214		416		413
Ancillary revenue		306		326		828		1,849		527		254		881		522
Total Air Pollution Control Technology revenues		2,886		1,816		6,019		12,408		986		1,937		1,893		3,133
FUEL CHEM
FUEL CHEM technology solutions		5,269		4,636		10,315		13,147		4,232		2,464		8,358		5,046
Total Revenues	$	8,155	$	6,452	$	16,334	$	25,555	$	5,218	$	4,401	$	10,251	$	8,179

Disaggregated Revenue by Geography

The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
United States	$	6,473	$	5,727	$	12,880	$	22,104	$	4,588	$	3,310	$	9,051	$	6,407
Foreign Revenues
Latin America		195		282		400		474		142		59		217		205
Europe		904		283		1,494		1,568		301		197		676		590
Asia		583		160		1,560		1,409		187		835		307		977
Total Foreign Revenues		1,682		725		3,454		3,451		630		1,091		1,200		1,772
Total Revenues	$	8,155	$	6,452	$	16,334	$	25,555	$	5,218	$	4,401	$	10,251	$	8,179

Timing of Revenue Recognition

The following table presents the timing of our revenue recognition:

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Products transferred at a point in time	$	5,108	$	5,261	$	11,089	$	15,828	$	4,995	$	2,932	$	9,655	$	5,981
Products and services transferred over time		3,047		1,191		5,245		9,727		223		1,469		596		2,198
Total Revenues	$	8,155	$	6,452	$	16,334	$	25,555	$	5,218	$	4,401	$	10,251	$	8,179

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Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheets. In our Air Pollution Control Technology segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. For the FUEL CHEM technology segment, deliveries made in the current period but billed in subsequent periods are also considered unbilled receivables (contract assets). These assets are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, contract assets for APC technology projects were approximately ~~$1,929~~$406 and ~~$1,857,~~$2,080, respectively, and $0 and $269, respectively, for the FUEL CHEM technology segment, and are included in accounts receivable on the condensed consolidated balance sheets.

However, the Company will periodically bill in advance of costs incurred before revenue is recognized, resulting in contract liabilities. These liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Contract liabilities were ~~$357~~$694 and ~~$712,~~$850, at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and are included in other accrued liabilities on the consolidated balance sheets.

Changes in the contract asset and liability balances during the ~~nine~~six month period ended ~~September~~June 30, ~~2020,~~2021, were not materially impacted by any other items other than amounts billed and revenue recognized as described previously. Revenue recognized that was included in the contract liability balance at the beginning of the period was ~~$97~~$49 and ~~$555~~$157 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively~~2021, and ~~$302~~$210 and ~~$1,059~~$458 for three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively,~~2020, which represented primarily revenue from progress towards completion of our Air Pollution Control technology contracts.

As of ~~September~~June 30, ~~2020,~~2021, we had ~~three~~1 construction ~~contracts~~contract in progress that ~~were~~was identified as a loss ~~contracts~~contract and a provision for losses of $3$11 was recorded in other accrued liabilities on the condensed consolidated balance sheet. Refer to Footnote 1314 for an accrual related to ~~certain non-conformance issues~~an equipment failure issue with a ~~U.S. customer associated with equipment~~Customer that requires remedy under the warranty provision of the customer contract. As of December 31, ~~2019,~~2020, we had ~~three~~1 construction ~~contracts~~contract in progress that ~~were~~was identified as a loss ~~contracts~~contract and a provision for losses in the amount of ~~$26~~$176 was recorded in other accrued liabilities on the consolidated balance sheet.

Remaining Performance Obligations

Remaining performance obligations represents the transaction price of Air Pollution Control technology booked orders for which work has not been performed. As of ~~September~~June 30, ~~2020,~~2021, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$6,417.~~$4,943. The Company expects to recognize revenue on approximately ~~$4,130~~$2,825 of the remaining performance obligations over the next 12 months with the remaining recognized thereafter.

Accounts Receivable

The components of accounts receivable are as follows:

	As of						As of
	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
Trade receivables	$	4,731		$	6,425		$	3,700		$	5,015
Unbilled receivables		1,929			1,857			406			2,348
Other short-term receivables		29			7			162			20
Allowance for doubtful accounts		(700	)		(1,816	)		(865	)		(835	)
Total accounts receivable	$	5,989		$	6,473		$	3,403		$	6,548

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4. Restructuring Activities

On January 18, 2019, the Company announced a planned suspension of its Air Pollution Control (“APC”) business operation in China. This action iswas part of Fuel Tech’s ongoing operational improvement initiatives designed to prioritize resource allocation, reduce costs, and drive profitability for the Company on a global basis. The transition associated with the suspension of the APC business which has taken place through ~~September~~June 30, ~~2020~~2021 includes staff rationalization and reduction, supplier and partner engagement, and the monetization of certain assets. The remaining transition activities include the execution of the ~~remaining~~ activities to satisfy the requirements for the remaining APC projects in China (with a backlog totaling approximately ~~$25)~~$12) in addition to collection efforts for the remaining accounts receivable.

The following table presents our revenues and net ~~loss~~income (loss) which includes the Restructuring charge line item within the Condensed Statements of Operations for ~~2020~~2021 and ~~2019~~2020 in China as follows:

													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Total revenues	$	6		$	—		$	11		$	311		$	4		$	3		$	15		$	5
Net loss	$	(73	)	$	(80	)	$	(31	)	$	(1,469	)
Net income (loss)														(63	)		(85	)		(38	)		42

Total assets primarily consist of cash, accounts receivable, contract assets, prepaid expenses and other current assets. Total liabilities consist of accounts payable and certain accrued liabilities.

The following table presents net assets in China as follows:

	As of				As of
	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Total assets	$	3,134	$	4,249	$	1,428	$	2,463
Total liabilities		380		399		292		396
Total net assets	$	2,754	$	3,850	$	1,136	$	2,067

The Company incurred $0 in the three and nine month periods ending September 30, 2020 and $0 and $625 during the three and nine month periods ending September 30, 2019 for severance and lease cancellation costs related to the suspension of the APC business in China.

There is no liability for restructuring activities for the three and nine months ending September 30, 2020. The following is a reconciliation of the accrual for the workforce reduction that is included within the "Accrued Liabilities - Employee Compensation" line of the consolidated balance sheets for the three and nine months ending September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Restructuring liability at beginning of period
$ — $ 155 $ — $ 65
Amounts expensed
— — — 625
Amounts paid
— (155
)
— (690
)
Restructuring liability at end of period
$ — $ — $ — $ —

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5. Accumulated Other Comprehensive Loss

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

													Three Months Ended						Six Months Ended
	Three months ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Foreign currency translation
Balance at beginning of period	$	(1,857	)	$	(1,224	)	$	(1,778	)	$	(1,285	)	$	(1,563	)	$	(2,009	)	$	(1,370	)	$	(1,778	)
Other comprehensive loss:
Other comprehensive income (loss):
Foreign currency translation adjustments (1)		268			(337	)		189			(276	)		133			152			(60	)		(79	)
Total accumulated other comprehensive loss	$	(1,589	)	$	(1,561	)	$	(1,589	)	$	(1,561	)	$	(1,430	)	$	(1,857	)	$	(1,430	)	$	(1,857	)

~~(1)~~(1)

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

6. Treasury Stock

Common stock held in treasury totaled ~~808,139~~963,509 and ~~796,090~~948,347 with a cost of ~~$1,618~~$2,234 and ~~$1,612~~$2,182 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that vested in the periods presented.

7. Earnings per Share

Basic earnings per share excludes the dilutive effects of stock options, restricted stock units (RSUs), and the nil coupon non-redeemable convertible unsecured loan notes. Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is anti-dilutive. Out-of-money stock options are excluded from diluted earnings per share because they are anti-dilutive. For the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019,~~June 30, 2020, basic earnings per share is equal to diluted earnings per share because all outstanding stock awards and convertible loan notes are considered anti-dilutive during periods of net loss.

The following table sets forth the weighted-average shares used in calculating the earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019.~~2020.

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Basic weighted-average shares		24,701,000		24,187,000		24,656,000		24,183,000		30,264,000		24,668,000		28,895,000		24,633,000
Conversion of unsecured loan notes		—		—		—		—		0		0		0		0
Unexercised options and unvested RSUs		419,000		—		—		—		0		0		0		0
Diluted weighted-average shares		25,120,000		24,187,000		24,656,000		24,183,000		30,264,000		24,668,000		28,895,000		24,633,000

~~For the three month period ended September 30, 2020, there were 110,000 outstanding~~Fuel Tech had 160,000 and 553,000 weighted average equity awards outstanding at June 30, 2021 and 2020, respectively that were ~~excluded from~~not dilutive for the ~~computation~~purposes of inclusion in the calculation of diluted ~~EPS as the inclusion of such would have been anti-dilutive.~~ earnings per share but could potentially become dilutive in future periods.

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8. Stock-Based Compensation

Under our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2014 Long-Term Incentive Plan (Incentive Plan), awards may be granted to participants in the form of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units (“RSUs”), Performance Awards, Bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plan may be our directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of our business. There are a maximum of 5,600,676 shares that may be issued or reserved for awards to participants under the Incentive Plan. As of ~~September~~June 30, ~~2020,~~2021, Fuel Tech had ~~2,359,333~~2,603,801 shares available for share-based awards under the 2014 Plan.

We did not record any excess tax benefits within income tax expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Given the Company has a full valuation allowance on its deferred tax assets, there were no excess tax benefits to record for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. In addition, we account for forfeitures of awards based on an estimate of the number of awards expected to be forfeited and adjusting the estimate when it is no longer probable that the employee will fulfill the service condition.

Stock-based compensation is included in selling, general, and administrative costs in our Condensed Consolidated Statements of Operations. The components of stock-based compensation for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019~~2020 were as follows:

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Stock options and restricted stock units, net of forfeited	$	57	$	138	$	207	$	357	$	20	$	69	$	40	$	150
Tax benefit of stock-based compensation expense		—		—		—		—
After-tax effect of stock-based compensation	$	57	$	138	$	207	$	357	$	20	$	69	$	40	$	150

Stock Options

Stock options granted to employees under the Incentive Plans have a 10-year life and they vest as follows: 50% after the second anniversary of the award date, 25% after the third anniversary, and the final 25% after the fourth anniversary of the award date. Fuel Tech calculates stock compensation expense for employee option awards based on the grant date fair value of the award, less expected annual forfeitures, and recognizes expense on a straight-line basis over the ~~four-year~~four-year service period of the award. Stock options granted to members of our board of directors vest immediately. Stock compensation for these awards is based on the grant date fair value of the award and is recognized in expense immediately.

Fuel Tech uses the Black-Scholes option pricing model to estimate the grant date fair value of employee stock options. The principal variable assumptions utilized in valuing options and the methodology for estimating such model inputs include: ~~(1)~~(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)~~(2) expected volatility – an estimate based on the historical volatility of Fuel Tech’s Common Stock for a period equal to the expected life of the option; and ~~(3)~~(3) expected life of the option – an estimate based on historical experience including the effect of employee terminations.

Stock option activity for Fuel Tech’s Incentive Plans for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was as follows:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value							Weighted- Average
Outstanding on January 1, 2020		747,500		$	3.33
										Number			Weighted-		Remaining		Aggregate
										of			Average		Contractual		Intrinsic
										Options			Exercise Price		Term		Value
Outstanding on January 1, 2021											484,500		$	3.57
Granted		—			—						0			0
Exercised		—			—						0			0
Expired or forfeited		(80,000	)		5.79						(50,000	)		8.16
Outstanding on September 30, 2020		667,500		$	3.04		4.48	$	—
Exercisable on September 30, 2020		667,500		$	3.04		4.48	$	—
Outstanding on June 30, 2021											434,500		$	3.05		3.59	$	142,670
Exercisable on June 30, 2021											434,500		$	3.05		3.59	$	142,670

As of ~~September~~June 30, ~~2020,~~2021, there was no0 unrecognized compensation cost related to non-vested stock options granted under the Incentive Plans.

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Restricted Stock Units

Restricted stock units (RSUs) granted to employees vest over time based on continued service (typically vesting over a period between two and four years). Such time-vested RSUs are valued at the date of grant using the intrinsic value method based on the closing price of the Common Shares on the grant date. Compensation cost, adjusted for estimated forfeitures, is amortized on a straight-line basis over the requisite service period.

In addition to the time vested RSUs, the Company entered into a ~~2020~~2021 Executive Performance RSU Award Agreement (the ~~“2020~~“2021 Agreement”) with certain officers, including its President and Chief Executive Officer pursuant to which each ~~2020~~2021 Participating Executive will have the opportunity to earn a specified amount of restricted stock units (RSUs). The amount of RSUs awarded, if any, will be based on the Company’s achievement of varying levels of operating income before the impact of incentive pay (but including adjustments to reflect the payment of sales commissions) in fiscal ~~2020~~2021 (“Operating Income”), as determined by the Company, in its sole discretion. Nevertheless, no Participating Executive will be entitled to any such RSUs unless the Company achieves a minimum of $1 million in Operating Income in ~~2020.~~2021. If awarded, such RSUs will vest in equal amounts (i.e., 1/3,1/3 and 1/3)3) over three years commencing one year after the grant date based on continued service. Such RSUs are valued at the date of grant using the intrinsic value method based on the closing price of the Company’s common stock on the grant date. Currently there is no expense reflected in the financial statements for these awards as the achievement is not considered probable.

At ~~September~~June 30, ~~2020,~~2021, there is ~~$151~~$59 of unrecognized compensation cost related to all non-vested share-based compensation arrangements granted under the Incentive Plan. That cost is expected to be recognized over the remaining requisite service period of ~~1.22~~0.72 years.

A summary of restricted stock unit activity for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 is as follows:

	Shares			Weighted Average Grant Date Fair Value					Weighted Average
Unvested restricted stock units at January 1, 2020		775,635		$	1.47
									Grant Date
						Shares			Fair Value
Unvested restricted stock units at January 1, 2021							100,005		$	4.08
Granted		—			—		0			0
Forfeited		(60,000	)		0.97		(5,000	)		0.97
Vested		(120,630	)		1.57		(50,002	)		1.50
Unvested restricted stock units at September 30, 2020		595,005		$	1.50
Unvested restricted stock units at June 30, 2021							45,003		$	7.29

The fair value of restricted stock that vested during the ~~nine~~six month period ending ~~September~~June 30, ~~2020~~2021 was ~~$190.~~$75.

Deferred Directors Fees

In addition to the Incentive Plans, Fuel Tech has a Deferred Compensation Plan for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech Common Stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards as opposed to liability awards. During the ~~nine~~six month periods ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019,~~2020, Fuel Tech recorded no0 stock-based compensation expense under the Deferred Plan.

9. ~~Debt Financing~~ Warrants

Fuel Tech uses the Black-Scholes option pricing model to estimate the grant date fair value of the warrants. The principal variable assumptions utilized in valuing warrants and the methodology for estimating such model inputs are: (1) risk-free interest rate of 0.59%, an estimate based on the yield of zero–coupon treasury securities with a maturity equal to the expected life of the warrant; (2) expected volatility of 94.66% – an estimate based on the historical volatility of Fuel Tech’s Common Stock for a period equal to the expected life of the warrant; and (3) expected life of the warrant of five and one-half years based on the term of the warrant.

The calculated fair value allocated to the warrants is $7,337. This amount has been recorded as Additional paid in capital - warrants and is shown net in the Additional paid in capital line of the condensed consolidated balance sheets.

The issuance of warrants to purchase shares of the Company's common stock are summarized as follows:

	Shares
Outstanding on December 31, 2020		0
Granted		2,850,000
Exercised		0
Outstanding as of June 30, 2021		2,850,000

The following table summarizes information about warrants outstanding and exercisable at June 30, 2021:

Range of Exercise Price	Number Outstanding/Exercisable		Weighted Average Remaining Life in Years	Weighted Average Exercise Price
$5.10		2,500,000	5.12	$	5.10
$6.45		350,000	5.12	$	6.45
		2,850,000

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10. Debt Financing

On April 17, 2020, the Company received $1,556 in loan proceeds from the Paycheck Protection Program (the “PPP”), established pursuant to the ~~recently enacted~~ Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The unsecured loan is evidenced by a promissory note of the Company dated April 15, 2020 ~~(the~~(the “Note”) in the principal amount of $1,556, issued to BMO Harris Bank N.A. (the “Bank”), the lender.

Under the terms of the Note, interest will accrue on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, On January 8, 2021, the Company ~~is obligated to make equal monthly payments of principal and interest, beginning seven months~~received full forgiveness from the date of the Note, until the maturity date. The Note contains covenants by the Company, including obtaining the written consent of the Bank prior to material changes in the management or ownership of the Company.

~~As of September 30, 2020 the Company has utilized~~SBA for the entire balance of loan proceeds used to fund its qualified payroll expenses. ~~As a result,~~The Company accounts for the PPP Loan as debt in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 470, Debt and accrues interest in accordance with the interest method under FASB ASC 835-30. When the loan was forgiven, the Company ~~believes it has met~~reduced the ~~eligibility criteria for forgiveness. To~~non-current liability by the ~~extent any~~ amount ~~is deemed unforgiveable, such amount will be payable over the terms of the note.~~

On June 19, 2019, the Company entered into a Cash 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. The BMO Harris agreement requires us to pledge as cash collateral 105% 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 forthforgiven and recorded other income in the ~~BMO Harris agreement. At September 30, 2020 and December 31, 2019, respectively, the Company had outstanding standby letters~~Condensed Consolidated Statement of credit totaling approximately $2,278 and $2,461 under the BMO Harris agreement. As of September 30, 2020 and December 31, 2019 respectively, the Company held $2,392 and $2,587 in a separate restricted use designated BMO Harris Bank N.A. deposit account. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments.

~~In connection with the transition to BMO Harris Bank N.A., the Company canceled its U.S. credit facility with JPMorgan Chase Bank, N.A. effective on September 25, 2019.~~Operations.

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~~10.~~11. Business Segment and Geographic Financial Data

Business Segment Financial Data

We segregate our financial results into ~~two~~2 reportable segments representing two broad technology segments as follows:

•

The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion sources. These include Low and Ultra Low NOx Burners (LNB and ULNB), Over-Fire Air (OFA) systems, NOxOUT^® and HERT™ Selective Non-Catalytic Reduction (SNCR) systems, and Advanced Selective Catalytic Reduction (ASCR^™) systems. Our ASCR systems include ULNB, 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. The NOxOUT CASCADE^® and ~~HERT™ Selective Non-Catalytic Reduction (SNCR) systems,~~NOxOUT-SCR^® processes are more basic, using just SNCR and ~~Advanced Selective Catalytic Reduction (ASCR~~^™~~) systems. Our ASCR systems include ULNB, 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. The NOxOUT CASCADE^® ~~and NOxOUT-SCR~~^® ~~processes are more basic, using just SNCR and SCR catalyst~~ components. ULTRA™ technology creates ammonia at a plant site using safe urea for use with any SCR application. Flue Gas Conditioning systems are chemical injection systems offered in markets outside the U.S. and Canada to enhance electrostatic precipitator and fabric filter performance in controlling particulate emissions.

•

The FUEL CHEM^® technology segment, which uses chemical processes in combination with advanced CFD and CKM boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in furnaces and boilers through the addition of chemicals into the furnace using TIFI^® Targeted In-Furnace Injection™ technology.

The “Other” classification includes those profit and loss items not allocated to either reportable segment. There are no inter-segment sales that require elimination.

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

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

Three months ended September 30, 2020	Air Pollution Control Segment		FUEL CHEM Segment			Other			Total
												Air Pollution			FUEL CHEM
Three months ended June 30, 2021												Control Segment			Segment			Other			Total
Revenues from external customers	$	2,886	$	5,269		$	—		$	8,155		$	986		$	4,232		$	0		$	5,218
Cost of sales		304		(2,553	)		—			(2,249	)		(507	)		(2,128	)		0			(2,635	)
Gross margin		3,190		2,716			—			5,906			479			2,104			0			2,583
Selling, general and administrative		—		—			(3,184	)		(3,184	)		0			0			(2,957	)		(2,957	)
Research and development		—		—			(285	)		(285	)		0			0			(315	)		(315	)
Operating income (loss) from continuing operations	$	3,190	$	2,716		$	(3,469	)	$	2,437
Operating income (loss) from operations												$	479		$	2,104		$	(3,272	)	$	(689	)

	Air Pollution			FUEL CHEM
Three months ended June 30, 2020	Control Segment			Segment			Other			Total
Revenues from external customers	$	1,937		$	2,464		$	0		$	4,401
Cost of sales		(2,320	)		(1,479	)		0			(3,799	)
Gross margin		(383	)		985			0			602
Selling, general and administrative		0			0			(2,755	)		(2,755	)
Research and development		0			0			(271	)		(271	)
Operating (loss) income from operations	$	(383	)	$	985		$	(3,026	)	$	(2,424	)

Three months ended September 30, 2019

Air Pollution
Control Segment

FUEL CHEM
Segment

Other

Total

Revenues from external customers
$ 1,816 $ 4,636 $ — $ 6,452
Cost of sales
(1,197
)
(2,366
)
— (3,563
)
Gross margin
619 2,270 — 2,889
Selling, general and administrative
— — (3,822
)
(3,822
)
Restructuring Charge
—

— — —

Research and development
— — (352
)
(352
)
Intangible assets abandonment
— — (76
)
(76
)
Operating income (loss) from continuing operations
$ 619 $ 2,270 $ (4,250
)
$ (1,361
)

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	Air Pollution			FUEL CHEM
Six months ended June 30, 2021	Control Segment			Segment			Other			Total
Revenues from external customers	$	1,893		$	8,358		$	0		$	10,251
Cost of sales		(1,038	)		(4,272	)		0			(5,310	)
Gross margin		855			4,086			0			4,941
Selling, general and administrative		0			0			(6,057	)		(6,057	)
Research and development		0			0			(730	)		(730	)
Operating income (loss) from operations	$	855		$	4,086		$	(6,787	)	$	(1,846	)

Nine months ended September 30, 2020

Air Pollution
Control Segment

FUEL CHEM
Segment

Other

Total

Revenues from external customers
$ 6,019 $ 10,315 $ — $ 16,334
Cost of sales
(2,782
)
(5,517
)
— (8,299
)
Gross margin
3,237 4,798 — 8,035
Selling, general and administrative
— — (9,825
)
(9,825
)
Research and development
— — (880
)
(880
)
Operating income (loss) from continuing operations
$ 3,237 $ 4,798 $ (10,705
)
$ (2,670
)

Nine months ended September 30, 2019	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
													Air Pollution			FUEL CHEM
Six months ended June 30, 2020													Control Segment			Segment			Other			Total
Revenues from external customers	$	12,408		$	13,147		$	—		$	25,555		$	3,133		$	5,046		$	0		$	8,179
Cost of sales		(8,061	)		(6,693	)		—			(14,754	)		(3,086	)		(2,964	)		0			(6,050	)
Gross margin		4,347			6,454			—			10,801			47			2,082			0			2,129
Selling, general and administrative		—			—			(12,735	)		(12,735	)		0			0			(6,641	)		(6,641	)
Restructuring Charge		—			—			(625	)		(625	)
Research and development		—			—			(823	)		(823	)		0			0			(595	)		(595	)
Intangible assets abandonment		—			—			(127	)		(127	)
Operating income (loss) from continuing operations	$	4,347		$	6,454		$	(14,310	)	$	(3,509	)
Operating income (loss) from operations													$	47		$	2,082		$	(7,236	)	$	(5,107	)

Geographic Segment Financial Data

Information concerning our operations by geographic area is provided below. Revenues are attributed to countries based on the location of the customer. Assets are those directly associated with operations of the geographic area.

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Revenues:
United States	$	6,473	$	5,727	$	12,880	$	22,104	$	4,588	$	3,310	$	9,051	$	6,407
Foreign		1,682		725		3,454		3,451		630		1,091		1,200		1,772
	$	8,155	$	6,452	$	16,334	$	25,555	$	5,218	$	4,401	$	10,251	$	8,179

					June 30,		December 31,
	September 30, 2020		December 31, 2019		2021		2020
Assets:
United States	$	25,008	$	23,460	$	46,186	$	24,524
Foreign		6,517		8,146		3,875		5,564
	$	31,525	$	31,606	$	50,061	$	30,088

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~~11.~~12. Leases

Leases

We have seven total operating leases which relate to both office space locations and certain office equipment. Our leases have remaining lease terms of 84 months to 54 years. Our leases do not contain any material residual value guarantees or material restricted covenants and we currently have no material sublease arrangements. We have no0 financing leases as defined under ASC 842.

Total operating lease expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019, adjusted for correction referenced in Note 2,~~2020, is as follows:

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Operating lease cost	$	47	$	136	$	157	$	419	$	45	$	47	$	89	$	103
Short-term lease cost		5		1		12		135		4		4		11		7
Total lease cost	$	52	$	137	$	169	$	554	$	49	$	51	$	100	$	110

The weighted average remaining lease term was ~~3.23~~2.67 years as of ~~September~~June 30, ~~2020.~~2021. The weighted average discount rate was ~~4.72%~~4.63% as of ~~September~~June 30, ~~2020.~~2021.

Remaining maturities of our existing lease liabilities as of ~~September~~June 30, ~~2020~~2021 were as follows:

Year Ending December 31,	Operating Leases			Operating Leases
2020 (excluding the nine months ended September 30, 2020)		44
2021		176
2021 (excluding the six months ended June 30, 2021)					87
2022		121			122
2023		115			115
2024		26			29
Thereafter		10
2025					7
Total lease payments	$	492		$	360
Less imputed interest		(70	)		(57	)
Total	$	422		$	303

The following is the balance sheet classification of our existing lease liabilities as of ~~September~~June 30, ~~2020:~~2021:

	As of				As of
	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Operating lease liabilities - current	$	175	$	182	$	132	$	149
Operating lease liabilities - non-current		247		180		171		237
Total operating lease liabilities	$	422	$	362	$	303	$	386

Supplemental cash flow information related to leases, ~~adjusted for correction referenced in Note 2,~~ was as follows:

									Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities	$	45	$	133	$	148	$	411	$	49	$	51	$	98	$	110
Leased assets obtained in exchange for operating lease liabilities		41		127		137		395		40		44		80		96

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~~12.~~13. Accrued Liabilities

The components of other accrued liabilities are as follows:

	As of				As of
	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Contract liabilities (Note 3)	$	357	$	712	$	694	$	850
Accrued remediation contingency (Note 13)		238		146
Accrued remediation contingency (Note 14)						11		176
Other accrued liabilities		971		1,118		634		1,073
Total other accrued liabilities	$	1,566	$	1,976	$	1,339	$	2,099

~~13.~~14. Commitments and Contingencies

Fuel Tech is subject to various claims and contingencies related to, among other things, workers compensation, general liability (including product liability), and lawsuits. The Company records liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.

From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows. We do not believe we have any pending loss contingencies that are probable or reasonably possible of having a material impact on our consolidated financial position, results of operations or cash flows.

During the ~~fourth~~third quarter of 2018, the Company was notified of certain non-conformance issues with a U.S. customer associated with equipment that requires remedy under the warranty provision of the contract. During the second quarter of 2020, a charge of $1,150 to remedy this non-conformance issue was incurred. Offsetting this amount was a reversal of $499 of expense to reduce the allowance of doubtful accounts that had been previously reserved. The Company has completed all work associated with this issue. As of September 30, 2020 and December 31, 2019, we have $0 and $146 of accrued liability associated with the completion of the non-conformance issues in the other accrued liabilities line of the Consolidated Balance Sheets. During the third quarter of 2020, the Company settled an outstanding claim with our insurance provider for these remediation efforts and recorded a receivable in the amount of $2,589. The settlement is recorded in the cost of sales line on the Consolidated Statement of Operations and in the Insurance Receivable line in the current asset section of the Consolidated Balance Sheets. Collection of the funds was completed in October 2020.

~~During the third quarter of 2020,~~ the Company was notified of an equipment component failure at a foreign customer location. The failure is ~~under investigation and will be~~being remedied under the warranty provision of the ~~contracts~~contract that ~~are~~is in place with the customer and supplier. As of ~~September~~June 30, 2021 and December 31, 2020,respectively, a charge of ~~$238~~$11 and $176 was recorded in the ~~accounts payable~~other accrued liabilities line of the ~~Consolidated Balance Sheets.~~condensed consolidated balance sheets.

Fuel Tech issues a standard product warranty with the sale of its products to customers. Our recognition of warranty liability is based primarily on analyses of warranty claims experienced in the preceding years as the nature of our historical product sales for which we offer a warranty are substantially unchanged. This approach provides an aggregate warranty accrual that is historically aligned with actual warranty claims experienced.

There was no0 change in the warranty liability balance included in the other accrued liabilities line of the Condensed Consolidated Balance Sheets during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019.~~2020. The warranty liability balance was $159 at ~~September~~June 30, ~~2020~~ 2021 and ~~2019.~~December 31, 2020.

~~14.~~15. Income Taxes

The Company’s effective tax rate is approximately ~~5.8%~~2.6% and ~~0.7%~~3% for the ~~nine-month period~~six-month periods ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019,~~2020, respectively. The Company's effective tax rate differs from the statutory federal tax rate of 21% for the ~~nine~~six month period ended ~~September~~June 30, ~~2020~~2021 primarily due to a full valuation allowance recorded on our United States, China and Italy deferred tax assets since we cannot anticipate when or if we will have sufficient taxable income to utilize the deferred tax assets in the future. Further, our effective tax rate differs from the statutory federal tax rate due to state taxes, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, non-deductible commissions, and non-deductible meals and entertainment expenses for the ~~nine~~six month periods ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019.~~2020. Income generated in the six months ended June 30, 2021 attributed to the gain on forgiveness of the Paycheck Protection Plan loan is tax exempt.

Fuel Tech had no0 unrecognized tax benefits as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (the “CARES Act”). Among the changes to the U.S. federal income tax rules, the Cares Act restored net operating loss carryback rules that were eliminated by 2017 Tax Cuts and Jobs Act, restored 100 percent bonus depreciation for qualified improvement property, modified the limit on the deduction for net interest expense and accelerated the timeframe for refunds of AMT credits. At this time we do not anticipate a material impact to the Company’s current or deferred income taxes as a result of the CARES Act. We will continue to evaluate the effects of the CARES Act as additional legislative guidance become available.

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~~15.~~16. Goodwill and Other Intangibles

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. Fuel Tech has ~~two~~2 reporting units for goodwill evaluation purposes: the FUEL CHEM^® technology segment and the APC technology segment. There is no0 goodwill associated with our APC segment. At both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our entire goodwill balance of $2,116 was allocated to the FUEL CHEM^® technology segment.

Goodwill is allocated to each of our reporting units after considering the nature of the net assets giving rise to the goodwill and how each reporting unit would enjoy the benefits and synergies of the net assets acquired. There were no0 indications of goodwill impairment in the ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019.~~2020.

Fuel Tech reviews other intangible assets, which include patent assets, for impairment on a recurring basis or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated.

There were no0 indications of intangible asset impairments for the ~~nine~~six month periods ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019.~~2020.

~~16.~~17. Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form ~~10-Q,~~10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.

~~17.~~18 Liquidity

We continue to monitor our liquidity needs and in response to our continued 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 experienced continued declines in revenues and recurring ~~losses.~~losses historically. 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. We continue to monitor our liquidity needs and have taken measures to reduce expenses and restructure operations which we feel are necessary to ensure we maintain sufficient working capital and liquidity to operate the business and invest in our future. 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. In the event we determine we need to raise additional working capital, we may consider various financing alternatives which may include debt financing, common stock offerings, or financing involving convertible debt or other equity-linked securities; however, such financing alternatives may not be available on acceptable terms or at all and any such additional financing could be dilutive to our shareholders.

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FUEL TECH, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Revenues for the three and ~~nine~~six month periods ending ~~September~~June 30, 2021 and 2020 were $5,218 and ~~2019 were $8,155~~$4,401, $10,251 and ~~$6,452, $16,334 and $25,555~~$8,179, respectively, representing an increase of ~~$1,703~~$817 or ~~26% for the quarter~~19% and ~~a decrease of $9,221~~$2,072 or ~~36%~~25% versus the same period last year.

The Air Pollution Control (APC) technology segment generated revenues of ~~$2,886~~$986 and ~~$6,019~~$1,893 for the three and ~~nine~~six month periods ending ~~September~~June 30, ~~2020,~~2021, representing ~~an increase on the quarter of $1,070 or 59% and~~ a decrease of ~~$6,389~~$951 or ~~52%~~49% and $1,240 or 40% from the prior year ~~amounts~~amount of ~~$1,816~~$1,937 and ~~$12,408.~~$3,133. The ~~variances~~decrease in APC revenue ~~were~~was principally related to timing of project execution ~~on existing projects~~ and the ~~decrease~~decline in backlog resulting from lower new APC orders announced during ~~2019~~2020 and continuing through the first ~~nine~~six months of ~~2020.~~2021.

Consolidated APC backlog at ~~September~~June 30, ~~2020~~2021 was ~~$6,417~~$4,943 versus backlog at December 31, ~~2019~~2020 of ~~$9,671.~~$5,268. Our current backlog consists of U.S. domestic projects totaling ~~$5,959~~$4,558 and international projects totaling ~~$458.~~$385.

The FUEL CHEM^® technology segment generated revenues of ~~$5,269~~$4,232 and ~~$10,315~~$8,358 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, representing an increase of ~~$633~~$1,768 or ~~14% for the quarter~~72% and ~~a decrease of $2,832~~$3,312 or ~~22%~~66% from the prior year amounts of ~~$4,636~~$2,464 and ~~$13,147.~~$5,046. The increase in FUEL CHEM revenue for the three months ended ~~September~~June 30, ~~2020~~2021 as compared to the same period of the prior year was due to ~~the sales~~revenue from new accounts, increased demand for power generation, and ~~installation of equipment on three new units. The decrease in revenues for the nine month period ending September 30, 2020 is due to a reduction in demand~~recovery from ~~power generation,~~ extended unscheduled outages and significantly reduced operations ~~which were largely~~ impacted by the COVID-19 ~~pandemic.~~ pandemic in 2020.

Consolidated gross margin percentage for the three and ~~nine~~six month periods ended ~~September~~June 30, 2021 and 2020 was 50% and ~~2019 was 72% and 49%~~48%, and ~~45%~~14% and ~~42%,~~26% respectively. Gross margin ~~for~~increased versus the comparable ~~periods have increased~~period due to the ~~settlement and recording~~concentration of ~~an insurance claim for remediation efforts on the APC~~ product ~~line.~~mix that is heavily FUEL CHEM weighted. FUEL CHEM margins increased to ~~52%~~50% from ~~49%~~40% in the current quarter due to the ~~product mix largely attributed to the aforementioned new unit installations.~~increase in revenue volume. Gross margins for the ~~nine~~three and six months ended ~~September~~June 30, 2021 and 2020 for the APC segment were 49% and ~~2019 remained flat at 49%.~~45%, and (20%) and 2% respectively. The increase in APC gross margin ~~to 110% and 54%~~ in the three and ~~nine~~six months ~~ending September~~ended June 30, ~~2020~~2021 from ~~34% and 35%~~the same period in ~~2019~~2020 is primarily due to the ~~$2,589 insurance settlement recorded for~~higher product mix of ancillary products and services and due to the non recurrence of $1,150 of charges incurred to remedy a non-conformance ~~issue~~issues with a U.S. customer under a warranty provision of the ~~contract.~~contract that was recorded in 2020.

Selling, general and administrative expenses (SG&A) were ~~$3,184~~$2,957 and ~~$9,825,~~$6,057, and ~~$3,822~~$2,755 and ~~$12,735~~$6,641, respectively for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. For the three and ~~nine~~six month ~~periods~~period ended ~~September~~June 30, ~~2020~~2021 the ~~decrease~~increase of ~~$638 and $2,910~~$202 is primarily the result of ~~a reduction~~an increase in ~~administrative costs relating to foreign subsidiaries of $52 and $1,000 (largely driven by the suspension of the APC business operation in China), a reduction in administrative costs~~employee related ~~to employees of $319 and $504, other administrative~~ costs of ~~$134~~$335 and ~~$487, space rental~~an increase in certain administrative overhead expenses of ~~$64 and $171 and professional and consulting services of $73 and $264. The~~$40 offset by a reversal of a ~~specific reserve of~~ $499 ~~for~~charge to the allowance offor doubtful accounts ~~related to the remedy of the aforementioned warranty nonconformity~~recorded in ~~the~~ second quarter of 2020. For the six month periods ending June 30, 2021 and 2020, ~~also contributed to this reduction.~~ SG&A as a percentage of revenues decreased to ~~39%~~59% from ~~59%~~81%. The decrease versus the comparable period is primarily due to the increase in overall revenues in the three month periods ending September 30, 2020 and 2019. For the nine month periods ending September 30, 2020 and 2019, SG&A as a percentage of revenues increased to 60% from 50%. The increase and decrease in the comparable periods are primarily due timing of project execution and an overall decrease in revenue year overcurrent year.

On January 18, 2019, the Company announced a planned suspension of its 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 Company recorded restructuring charges of $0 and $0, and $0 and $625 for the three and nine months ended September 30, 2020 and 2019, respectively. The charge in the nine months ended September 30, 2019 consisted primarily of one-time severance payments and the early termination penalty for our lease associated with the suspension of our APC business in China. For further information related to restructuring, refer to Note 4 - Restructuring Activities. The Company continues to engage in efforts to complete existing contracts.

Research and development expenses for the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020~~2021 were ~~$285~~$315 and ~~$880,~~$730, and for the same periods in ~~2019 were $352~~2020 was $271 and ~~$823~~$595 respectively. The expenditures in our research and development expenses were focused on new product development efforts in the pursuit of commercial applications for technologies outside of our traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities. This includes water treatment technologies and more specifically, our DGI™ Dissolved Gas Infusion Systems, an innovative alternative to current aeration technology. This ~~technology has not yet met the criteria to be a separate operating segment under ASC 280 Segment Reporting. This~~ infusion process has a variety of applications in the water and waste water industries, including remediation, treatment, biological activity and wastewater odor management. DGI technology benefits include reduced energy consumption, installation costs, and operating costs, while improving treatment performance.

Income tax expense for the three and ~~nine~~six month periods ended ~~September~~June 30, 2021 and 2020 was $10 and ~~2019 were $0~~$10, and ~~$21,~~$31 and $149 ~~and $23~~ respectively. The Company is projecting a consolidated effective tax rate of approximately ~~5.8%~~3% for ~~2020~~2021 which is lower than the federal income tax rate of 21%. The Company's effective tax rate differs from the statutory federal tax rate of 21% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily due to a full valuation allowance recorded on our United States, China and Italy deferred tax assets since we cannot anticipate when or if we will have sufficient taxable income to utilize the deferred tax assets in the future. Further, our effective tax rate differs from the statutory federal tax rate due to state taxes, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, non-deductible commissions, and non-deductible meals and entertainment expenses.

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Liquidity and Sources of Capital

We have sustained losses from ~~continuing~~ operations during the ~~nine~~six month period ended ~~September~~June 30, ~~2020~~2021 totaling ~~$2,736.~~$1,846. Our cash ~~used from continuing~~provided by operations for this same period totaled $3,291. We have taken measures to reduce our expense infrastructure and our ability to operate our base businesses prospectively is based on our ability to secure new orders in the APC business and our ability to successfully execute existing APC projects in line with our internal budgets.$229.

Our cash balance as of ~~September~~June 30, ~~2020~~2021 totaled ~~$11,810~~$36,562 (including restricted cash of ~~$2,392)~~$368), and our working capital totaled ~~$15,733.~~$37,892. We have no outstanding debt ~~obligations of $1,556 from a Paycheck Protection Program (the “PPP”) loan, and we have~~other than our outstanding letters of credit, under our current credit agreement which does not have any financial covenants as we are currently in a Cash Collateral Security agreement with our lender.

We have evaluated our ongoing business needs, and considered the cash requirements of our base business of Air Pollution Control and FUEL CHEM, as well as our efforts to wind-down our APC operations in China. 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, and c) the costs of winding down our APC operations in China as well as 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.

On June 19, 2019, the Company entered into a Cash 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. The BMO Harris agreement requires us to pledge as cash collateral 105% 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 Harris agreement. At ~~September~~June 30, ~~2020,~~2021, the Company had outstanding standby letters of credit totaling approximately ~~$2,278~~$351 under the BMO Harris agreement. As of ~~September~~June 30, ~~2020,~~2021, the Company held ~~$2,392~~$368 in a separate restricted use designated BMO Harris Bank N.A. deposit account. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments.

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

On April 15, 2020, the Company received $1,556 in loan proceeds from the Paycheck Protection Program (the “PPP”), established pursuant to the ~~recently enacted~~ Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). ~~The unsecured loan is evidenced by a promissory note of~~On January 8, 2021 the Company ~~dated April 15, 2020 (the “Note”) in the principal amount of $1,556, issued to BMO Harris Bank N.A. (the “Bank”), the lender.~~

Under the terms of the Note, interest will accrue on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest, beginning seven monthsreceived full forgiveness from the ~~date of~~SBA for the ~~Note, until the maturity date. The Note contains covenants by the Company, including obtaining the written consent of the Bank prior to material changes in the management or ownership of the Company.~~

The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amountentire balance of loan proceeds used to fund its qualified payroll expenses. When the loan was forgiven, the Company reduced the non-current liability by the ~~Company during~~amount forgiven and recorded other income in the ~~eight-week period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments, provided that at least 75%~~condensed consolidated statement of the loan amount is used for eligible payroll costs; maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the entire PPP Loan amount for qualifying expenses, though no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including, but not limited to, failing to make a payment when due under the Note, failure to take actions required by the Note, the Company defaulting under certain agreements in favor of any third party, making false statements, the Company’s insolvency, and the commencement of creditor or forfeiture proceedings against the Company. Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company.operations.

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Contingencies and Contractual Obligations

Fuel Tech issues a standard product warranty with the sale of its products to customers as discussed in Note ~~13.~~14. There was no change in the warranty liability balance during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect Fuel Tech’s current expectations regarding 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. Fuel Tech has tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “plan,” “expect,” “estimate,” “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 Fuel Tech and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 in Item 1A under the caption “Risk Factors,” which could cause Fuel Tech’s actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Fuel Tech undertakes no obligation to update such factors or to publicly announce the 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 Fuel Tech’s filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Fuel Tech’s 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 nor into foreign currency option contracts to manage this risk due to the immaterial nature of the transactions involved.

Fuel Tech is also exposed to changes in interest rates primarily due to its debt facility (refer to Note 910 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 upcoming year ended December 31, ~~2020.~~2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Fuel Tech maintains disclosure controls and procedures and internal controls designed to ensure (a) that information required to be disclosed in Fuel Tech’s filings under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) that such information is accumulated and communicated to management, including the principal executive and financial officer, as appropriate to allow timely decisions regarding required disclosure. Fuel Tech’s Chief Executive Officer and principal financial officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d -15(e) of the Exchange Act, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There has been no change in the Company's internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time involved in litigation incidental to our business. We are not currently involved in any litigation in which we believe an adverse outcome would have a material effect on our business, financial conditions, results of operations, or prospects.

Item 1A. Risk Factors

The risk factors included in our Annual Report on Form 10-K for fiscal year ended December 31, ~~2019~~2020 have not materially ~~changed, except for as follows.~~

The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, could adversely impact or cause disruption to our business, financial condition, results of operations and cash flows.

The continued global spread of the COVID-19 pandemic and the responses thereto are complex and rapidly evolving, and the extent to which the pandemic impacts our business, financial condition and results of operations, including the duration and magnitude of such impacts, will depend on numerous evolving factors that we may not be able to accurately predict or assess, including, but not limited to, the following:

	•	We have experienced, and may continue to experience, reductions in demand for certain of our products and the delay or abandonment of ongoing or anticipated projects due to our customers’, suppliers’ and other third parties’ financial distress or concern regarding the volatility of global markets. These impacts may continue or worsen if “stay-at-home”, “shelter-in-place”, social distancing, travel restrictions and other similar orders, measures or restrictions remain in place for an extended period of time or are re-imposed after being lifted or eased.
	•	Illness, travel restrictions or other workforce disruptions could adversely affect our supply chain, our ability to timely and satisfactorily complete our customers’ projects, our ability to provide services to our customers or our other business processes.
	•	In addition to existing travel restrictions implemented in response to the COVID-19 pandemic, jurisdictions may continue to close borders, impose prolonged quarantines and further restrict travel and business activity, which could materially impair our ability to support our operations and customers (both domestic and international), to source supplies through the global supply chain and to identify, pursue and capture new business opportunities. We also face the possibility of increased overhead or other expenses resulting from compliance with any future government orders or other measures enacted in response to the COVID-19 pandemic.

COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we identify in our 2019 Form 10-K, which in turn could materially adversely affect our business, financial condition and results of operations.changed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

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Item 6. Exhibits

a.	Exhibits (all filed herewith)
	31.1	Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	31.2	Certification of principal financial officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	32	Certification of CEO and principal financial officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
	101.1	Inline INSXBRL Instance Document - The Instance Document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document.
	101.2	Inline SCHXBRL Taxonomy Extension Schema Document
	101.3	Inline CALXBRL Taxonomy Extension Calculation Linkbase Document
	101.4	Inline DEFXBRL Taxonomy Extension Definition Linkbase Document
	101.5	Inline LABXBRL Taxonomy Extension Label Linkbase Document
	101.6	Inline PREXBRL Taxonomy Extension Prevention Linkbase Document
	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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FUEL TECH, INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~11/10/2020~~ August 10, 2021	By:	/s/ Vincent J. Arnone
		Vincent J. Arnone
		~~Vincent J. Arnone~~President and Chief Executive Officer
		~~President and Chief~~(Principal Executive ~~Officer~~Officer)

Date: August 10, 2021	By:	/s/ Ellen T. Albrecht
		~~(Principal Executive Officer)~~

~~Date: 11/10/2020~~	~~By:~~	~~/s/~~ Ellen T. Albrecht
		~~Ellen T. Albrecht~~
		Acting Treasurer and Controller
		(Principal Financial Officer)

	As Previously Reported Year Ended December 31, 2019		Revision			As Revised
Right of Use Operating Lease Asset		980		(618	)		362
Operating Lease Liabilities - current		300		(118	)		182
Operating Lease Liabilities - non current		680		(500	)		180

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020		2019
Restructuring liability at beginning of period	$	—	$	155		$	—	$	65
Amounts expensed		—		—			—		625
Amounts paid		—		(155	)		—		(690	)
Restructuring liability at end of period	$	—	$	—		$	—	$	—

Three months ended September 30, 2019	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	1,816		$	4,636		$	—		$	6,452
Cost of sales		(1,197	)		(2,366	)		—			(3,563	)
Gross margin		619			2,270			—			2,889
Selling, general and administrative		—			—			(3,822	)		(3,822	)
Restructuring Charge		—			—			—			—
Research and development		—			—			(352	)		(352	)
Intangible assets abandonment		—			—			(76	)		(76	)
Operating income (loss) from continuing operations	$	619		$	2,270		$	(4,250	)	$	(1,361	)

Nine months ended September 30, 2020	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	6,019		$	10,315		$	—		$	16,334
Cost of sales		(2,782	)		(5,517	)		—			(8,299	)
Gross margin		3,237			4,798			—			8,035
Selling, general and administrative		—			—			(9,825	)		(9,825	)
Research and development		—			—			(880	)		(880	)
Operating income (loss) from continuing operations	$	3,237		$	4,798		$	(10,705	)	$	(2,670	)