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<SEC-DOCUMENT>0001125282-05-005701.txt : 20051107
<SEC-HEADER>0001125282-05-005701.hdr.sgml : 20051107
<ACCEPTANCE-DATETIME>20051104193931
ACCESSION NUMBER:		0001125282-05-005701
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20050930
FILED AS OF DATE:		20051107
DATE AS OF CHANGE:		20051104

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FUEL TECH N V
		CENTRAL INDEX KEY:			0000846913
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-21724
		FILM NUMBER:		051181804

	BUSINESS ADDRESS:	
		STREET 1:		CASTORWEG 22-24
		CITY:			CURACAO NETHERLANDS
		STATE:			P7

	MAIL ADDRESS:	
		STREET 1:		C/O FUEL TECH INC
		STREET 2:		300 ATLANTIC ST
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06901
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>b409639_10q.txt
<DESCRIPTION>QUARTERLY REPORT
<TEXT>
<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2005

                                       or

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from ______ to ______

         Commission file number:      000-21724
                                 --------------------

                                 FUEL-TECH N.V.
             (Exact name of registrant as specified in its charter)

         Netherlands Antilles                                    N.A.
         --------------------                           -----------------
          (State of Incorporation)                      (I.R.S. Employer
                                                        Identification No.)

         Fuel-Tech N.V.                                 Fuel Tech, Inc.
            (Registrant)                            (U.S. Operating Subsidiary)

         Castorweg 22-24                             695 East Main Street A-1
  Curacao, Netherlands Antilles                         Stamford, CT 06901
        (599) 9-461-3754                                  (203) 425-9830
          (Address and telephone number of principal executive offices)


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 and (2) has been subject to such filing requirements for
the past 90 days.

                                            Yes X             No
                                               ---              ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 under the Securities Exchange Act of 1934).

                                            Yes X             No
                                               ---               ---

As of October 20, 2005, there were outstanding 20,225,883 shares of Common
Stock, par value $0.01 per share, of the registrant.


===========================================================================

<PAGE>

                                 FUEL-TECH N.V.
          Form 10-Q for the nine-month period ended September 30, 2005

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----

<S>                                                                                                   <C>
PART I.  FINANCIAL INFORMATION

Item 1.           Financial Statements (Unaudited)

                  Condensed Consolidated Balance Sheets as of September 30, 2005                       1
                  and December 31, 2004

                  Condensed Consolidated Statements of Operations for the Three and Nine-              2
                  Month Periods Ended September 30, 2005 and 2004

                  Condensed Consolidated Statements of Cash Flows for the Nine-                        3
                  Month Periods Ended September 30, 2005 and 2004

                  Notes to the Condensed Consolidated Financial Statements                             4

Item 2.           Management's Discussion and Analysis of                                             10
                  Financial Condition and Results of Operations

Item 3.           Quantitative and Qualitative Disclosures about Market Risk                          12

Item 4.           Controls and Procedures                                                             12

PART II. OTHER INFORMATION

Item 1.           Legal Proceedings                                                                   13
Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds                         13
Item 3.           Defaults upon Senior Securities                                                     13
Item 4.           Submission of Matters to a Vote of Security Holders                                 13
Item 5.           Other Information                                                                   13
Item 6.           Exhibits and Reports on Form 8-K                                                    13


SIGNATURES                                                                                            14
</TABLE>

<PAGE>

PART I.      FINANCIAL INFORMATION
Item 1.      Financial Statements

                                 FUEL-TECH N.V.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (in thousands of U.S. dollars, except share data)

<TABLE>
<CAPTION>
                                                             September 30,        December 31,
                                                                  2005                2004
                                                            ---------------      ---------------
                                                              (Unaudited)
<S>                                                         <C>                  <C>
ASSETS
Current assets:
Cash and cash equivalents                                   $        11,761      $         6,531
Accounts receivable, net                                              9,717                7,358
Deferred income taxes                                                 1,110                  500
Prepaid expenses and other current assets                             1,160                1,271
                                                              -------------      ---------------
Total current assets                                                 23,748               15,660

Equipment, net of accumulated depreciation of
  $8,313 and $7,209, respectively                                     3,561                2,863
Goodwill                                                              2,119                2,119
Other intangible assets, net of accumulated amortization
  of $1,062 and $968, respectively                                    1,274                1,342
Deferred income taxes                                                   897                1,144
Other assets                                                            800                  700
                                                            ---------------      ---------------
Total assets                                                $        32,399      $        23,828
                                                            ===============      ===============


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                                            $         4,115      $         2,705
Accrued expenses                                                      3,353                1,663
                                                            ---------------      ---------------
Total current liabilities                                             7,468                4,368


Other liabilities                                                       474                  505
                                                            ---------------      ---------------
Total liabilities                                                     7,942                4,873

Shareholders' equity:
Common stock, par value $0.01 per share,
  authorized 40,000,000 shares, 20,182,944
  and 19,529,952 shares issued, respectively                            202                  195
Additional paid-in capital                                           89,484               88,600
Accumulated deficit                                                 (65,485)             (70,458)
Accumulated other comprehensive (loss) income                           (26)                  86
Nil coupon perpetual loan notes                                         282                  532
                                                            ---------------      ---------------
Total shareholders' equity                                           24,457               18,955
                                                            ---------------      ---------------
Total liabilities and shareholders' equity                  $        32,399      $        23,828
                                                            ===============      ===============
</TABLE>

See notes to condensed consolidated financial statements.

                                       1
<PAGE>

                                 FUEL-TECH N.V.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (in thousands of U.S. dollars, except share data)

<TABLE>
<CAPTION>
                                                        Three Months Ended                Nine Months Ended
                                                             September 30                      September 30
                                                          2005         2004                  2005         2004
                                                       ---------------------            -----------------------

<S>                                                  <C>          <C>                   <C>          <C>
Net sales                                            $  12,821    $   9,577             $  36,652    $   23,081

Costs and expenses:
Cost of sales                                            6,467        4,813                18,917        12,225
Selling, general and administrative                      4,121        3,435                11,930         9,763
Research and development                                   253          322                   913           895
                                                     ---------   ----------             ---------    ----------
                                                        10,841        8,570                31,760        22,883
                                                     ---------   ----------             ---------    ----------

Operating income                                         1,980        1,007                 4,892           198

Other expense                                              (18)          (6)                 (110)          (36)
                                                     ---------   ----------             ---------    ----------

Income before taxes                                      1,962        1,001                 4,782           162

Income tax (expense) benefit                              (914)           -                   191             -
                                                     ---------   ----------             ---------    ----------

Net income                                           $   1,048   $    1,001             $   4,973    $      162
                                                     =========   ==========             =========    ===========

Net income per Common Share:

     Basic                                           $     .05  $       .05             $     .25    $      .01
                                                     =========  ===========             =========    ==========
     Diluted                                         $     .05  $       .05             $     .22    $      .01
                                                     =========  ===========             =========    ==========

Average number of Common Shares outstanding:

     Basic                                          20,139,000   19,519,000            19,938,000    19,512,000
                                                    ==========   ==========            ==========    ==========
     Diluted                                        23,143,000   22,149,000            22,840,000    22,127,000
                                                    ==========   ==========            ==========    ==========
</TABLE>


See notes to condensed consolidated financial statements.

                                       2
<PAGE>

                                 FUEL-TECH N.V.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                         (in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                              September 30
                                                          2005             2004
                                                    -------------------------------
<S>                                                 <C>              <C>
OPERATING ACTIVITIES
Net cash provided by (used in)
   operating activities                             $       6,587    $        (611)
                                                    -------------    --------------

INVESTING ACTIVITIES
Proceeds from sale of equipment                                 -                6
Purchases of equipment and patents                         (1,884)          (1,926)
                                                    --------------   --------------
Net cash used in investing activities                      (1,884)          (1,920)
                                                    --------------   --------------

FINANCING ACTIVITIES
Exercise of stock options                                     639               21
                                                    -------------    -------------
Net cash provided by
   financing activities                                       639               21
                                                    -------------    -------------

Effect of exchange rate fluctuations on cash                 (112)             (21)
                                                    --------------   --------------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                         5,230           (2,531)

Cash and cash equivalents at beginning
   of period                                                6,531            7,812
                                                    -------------    -------------

CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                    $      11,761    $       5,281
                                                    =============    =============
</TABLE>

See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                                 FUEL-TECH N.V.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)


NOTE A:           BASIS OF PRESENTATION

The accompanying unaudited, condensed, consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the results of operations for the periods covered have been included. Operating
results for the nine-month period ended September 30, 2005 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2005.

The balance sheet at December 31, 2004 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial statements and
footnotes thereto included in Fuel-Tech N.V.'s Annual Report on Form 10-K for
the year ended December 31, 2004.

Fuel-Tech N.V., through its subsidiaries ("Fuel Tech"), is a technology company
active in the business of air pollution control and fuel treatment chemicals.
Fuel Tech, incorporated in 1987 under the laws of the Netherlands Antilles, is
registered at Castorweg 22--24 in Curacao under No. 1334/N.V.

                                       4
<PAGE>

NOTE B:           EARNINGS PER SHARE DATA

Basic earnings per share excludes the dilutive effects of stock options and
warrants and of the nil coupon non-redeemable convertible unsecured loan notes.
Diluted earnings per share includes the dilutive effect of stock options and
warrants and of the nil coupon non-redeemable convertible unsecured loan notes.
The following table sets forth the weighted-average shares (in thousands) used
in calculating the earnings per share for the three and nine-month periods ended
September 30, 2005 and 2004:

<TABLE>
<CAPTION>
                                                            Three months ended            Nine months ended
                                                               September 30                 September 30
                                                               2005         2004            2005        2004
                                                          ----------------------         -------------------
<S>                                                          <C>          <C>             <C>         <C>
 Basic weighted-average shares                               20,139       19,519          19,938      19,512
 Conversion of unsecured loan notes                              46           85              63          85
 Unexercised options and warrants                             2,958        2,545           2,839       2,530
                                                          ----------------------        --------------------
 Diluted weighted-average shares                             23,143       22,149          22,840      22,127
                                                          ======================        ====================
</TABLE>



NOTE C:           TOTAL COMPREHENSIVE INCOME

Total comprehensive income for Fuel Tech is comprised of net income and the
impact of foreign currency translation as follows:

<TABLE>
<CAPTION>
                                             For the three months ended                      For the nine months ended
                                                    September 30                                   September 30
                                     ------------------------------------------       --------------------------------------
(in thousands of U.S. dollars)             2005                    2004                     2005                2004
                                     ------------------     -------------------       -----------------  -------------------
<S>                                            <C>                    <C>                      <C>                <C>
Comprehensive income:
    Net income                                 $ 1,048                $ 1,001                  $ 4,973            $    162
    Foreign currency translation                     6                      8                     (112)                (21)
                                     ------------------     ------------------        -----------------  ------------------
                                               $ 1,054                $ 1,009                  $ 4,861            $    142
                                     ==================     ==================        =================  ==================
</TABLE>


NOTE D:           DERIVATIVE FINANCIAL INSTRUMENTS

 Foreign Currency Risk Management:

Fuel Tech's earnings and cash flow are subject to fluctuations due to changes in
foreign currency exchange rates. Fuel Tech does not enter into foreign currency
forward contracts or into foreign currency option contracts to manage this risk
due to the immaterial nature of the transactions involved.

                                       5
<PAGE>

NOTE E:           STOCK-BASED COMPENSATION

Fuel Tech accounts for stock option grants in accordance with Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." Under Fuel Tech's current plan, options may be granted at not less
than the fair market value on the date of grant, and therefore, no compensation
expense is recognized for the stock options granted.

If compensation expense for Fuel Tech's plans had been determined based on the
fair value at the grant dates for awards under its plans, consistent with the
method described in SFAS No. 123, "Accounting for Stock-Based Compensation,"
Fuel Tech's net income and income per share would have been adjusted as follows
for the three and nine-month periods ended September 30, 2005 and 2004:

<TABLE>
<CAPTION>
           (in thousands of U.S. dollars,           Three months ended                 Nine months ended
          except share data)                           September 30                       September 30
                                                    2005              2004             2005           2004
                                               ------------ ----------------        ----------- -------------
<S>                                                 <C>              <C>                <C>            <C>
          Net Income (loss):
               As reported                          $1,048           $1,001             $4,973        $  162
               As adjusted                             850              841              4,243          (428)

          Basic and diluted income
          (loss) per share:
               Basic - as reported                    $.05             $.05               $.25        $  .01
               Basic - as adjusted                    $.04             $.04               $.21        $ (.02)

               Diluted - as reported                  $.05             $.05               $.22        $  .01
               Diluted - as adjusted                  $.04             $.04               $.19        $ (.02)
</TABLE>

The application of the "As adjusted" disclosures presented above are not
representative of the effects SFAS No. 123 may have on such operating results in
future years due to the timing of stock option grants and considering that
options vest over a period of immediately to four years.

In December 2004, the Securities and Exchange Commission issued SFAS No. 123
(revised 2004), "Share-Based Payment," (SFAS No. 123R). SFAS No. 123R eliminates
the intrinsic value method under APB No. 25, and requires Fuel Tech to use a
fair-value based method of accounting for share-based payments. Under APB No.
25, no compensation cost related to stock options is recognized in the
Consolidated Statements of Operations. SFAS No. 123R requires that compensation
cost for employee services received in exchange for an award of equity
instruments be recognized in the Consolidated Statements of Operations based on
the grant-date fair value of that award. That cost recognized at the grant-date
will be amortized in the Consolidated Statements of Operations over the period
during which an employee is required to provide service in exchange for that
award (requisite service period). The provisions of SFAS No. 123R are effective
as of the first interim period that begins after June 15, 2005. On April 14,
2005, the Securities and Exchange Commission announced that it would permit
companies to delay implementation of SFAS No. 123R to the beginning of their
next fiscal year. The Company currently plans to implement the revised standard
on January 1, 2006. The Company is still evaluating the impact and has the
option to use the modified prospective or modified retrospective methods upon
adoption of SFAS No. 123R.

                                       6
<PAGE>

NOTE F:           DEBT

Fuel Tech, Inc. (FTI) has a $15.0 million revolving credit facility expiring
July 31, 2006, which is collateralized by all personal property owned by FTI.
FTI can use this facility for cash advances and standby letters of credit. Cash
advances under this facility bear interest based on the following:

     -    The Bank Prime Rate reduced by a range of zero to 50 basis points, or

     -    The Bank Interbank Offering Rate increased by a range of 200 to 250
          basis points

Fuel Tech can choose which rate to apply to borrowings. At September 30, 2005,
there were no borrowings outstanding on the facility.

NOTE G:           DISCONTINUATION OF ACUITIV(TM) BUSINESS

Effective March 1, 2005, Fuel Tech announced that it would discontinue
commercialization activities associated with its ACUITIV visualization software
business. The software will continue to be maintained and utilized internally on
a prospective basis because it is an essential tool in the design, marketing and
sale of Fuel Tech's Nitrogen Oxide (NOx) reduction and FUEL CHEM(R) product
applications.

As part of the cessation of activities, Fuel Tech terminated three individuals,
and a charge of $31,000 for severance obligations was recorded in the "Selling,
general and administrative" expense line item in the condensed consolidated
statement of operations for the nine-month period ended September 30, 2005.

In addition, effective December 31, 2004, patent assets related to the ACUITIV
visualization software business were deemed impaired. The impact of the
impairment loss for Fuel Tech was $88,000 and was recorded in the "Other
expense" line item in the consolidated statements of operations for the year
ended December 31, 2004.

NOTE H:           BUSINESS SEGMENT AND GEOGRAPHIC DISCLOSURES

Fuel Tech is organized into three reportable segments, two that provide advanced
engineering solutions for the optimization of combustion systems in utility and
industrial applications, and one that markets and sells visualization software.

The two segments that comprise the advanced engineering solutions product
offerings are as follows:

       - The NOx reduction technology segment, which includes the NOxOUT(R),
       NOxOUT CASCADE(R), NOxOUT ULTRA(R) and NOxOUT SCR(R) processes for the
       reduction of NOx emissions in flue gas from boilers, incinerators,
       furnaces and other stationary combustion sources, and

       - The fuel treatment chemical segment, which uses chemical processes for
       the control of slagging, fouling, and corrosion and for plume abatement
       in furnaces and boilers through the addition of chemicals into the fuel
       or by Targeted In-Furnace Injection (TIFI).

As described in Note G above, the segment that markets and sells visualization
software was discontinued in the quarter ending March 31, 2005. The
visualization software segment does not meet the materiality test for disclosure
and is aggregated in "Other" below. In addition, "Other" also includes those
profit and loss items not allocated by Fuel Tech to each reportable segment.
Lastly, there are no intersegment sales that require elimination.

Fuel Tech evaluates performance and allocates 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. Fuel Tech does not review assets by reportable segment, but rather, in
aggregate for Fuel Tech as a whole.

                                       7
<PAGE>

Information about reporting segment net sales and gross margin are provided
below in thousands of U.S. dollars:

<TABLE>
<CAPTION>
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
        Three months ended             Nitrogen Oxide      Fuel Treatment            Other               Total
        September 30, 2005               Reduction            Chemical
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
<S>                                             <C>                  <C>                 <C>                  <C>
Net sales from external customers               $ 6,683              $ 6,138             $      -             $12,821
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Cost of sales                                     3,304                3,113                   50               6,467
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Gross margin                                      3,379                3,025                 (50)               6,354
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Selling, general and administrative                   -                    -                4,121               4,121
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Research and development                              -                    -                  253                 253
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Operating income (loss)                         $ 3,379              $ 3,025             $(4,424)             $ 1,980
- ------------------------------------ =================== ==================== ==================== ===================
</TABLE>


<TABLE>
<CAPTION>
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
        Three months ended             Nitrogen Oxide      Fuel Treatment            Other               Total
        September 30, 2004               Reduction            Chemical
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
<S>                                             <C>                  <C>                 <C>                  <C>
Net sales from external customers               $ 4,395              $ 5,178             $      4             $ 9,577
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Cost of sales                                     2,485                2,238                   90               4,813
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Gross margin                                      1,910                2,940                  (86)              4,764
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Selling, general and administrative                   -                    -                3,435               3,435
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Research and development                              -                    -                  322                 322
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Operating income (loss)                         $ 1,910              $ 2,940             $ (3,843)            $ 1,007
- ------------------------------------ =================== ==================== ==================== ===================
</TABLE>


<TABLE>
<CAPTION>
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
         Nine months ended             Nitrogen Oxide      Fuel Treatment            Other               Total
        September 30, 2005               Reduction            Chemical
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
<S>                                            <C>                  <C>                 <C>                   <C>
Net sales from external customers              $ 23,003             $ 13,644            $       5             $36,652
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Cost of sales                                    11,620                7,069                  228              18,917
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Gross margin                                     11,383                6,575                 (223)             17,735
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Selling, general and administrative                   -                    -               11,930              11,930
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Research and development                              -                    -                  913                 913
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Operating income (loss)                        $ 11,383               $6,575            $ (13,066)            $ 4,892
- ------------------------------------ =================== ==================== ==================== ===================
</TABLE>


<TABLE>
<CAPTION>
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
         Nine months ended             Nitrogen Oxide      Fuel Treatment            Other               Total
        September 30, 2004               Reduction            Chemical
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
<S>                                            <C>                   <C>               <C>                    <C>
Net sales from external customers              $ 10,549              $12,522           $       10             $23,081
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Cost of sales                                     5,946                6,064                  215              12,225
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Gross margin                                      4,603                6,458                 (205)             10,856
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Selling, general and administrative                   -                    -                9,763               9,763
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Research and development                              -                    -                  895                 895
- ------------------------------------ ------------------- -------------------- -------------------- -------------------
Operating income (loss)                        $  4,603              $ 6,458           $  (10,863)            $   198
- ------------------------------------ =================== ==================== ==================== ===================
</TABLE>

                                       8
<PAGE>

Information concerning Fuel Tech's operations by geographic area is provided
below in thousands of U.S. dollars. Revenues are attributed to countries based
on the location of the customer. Assets are those directly associated with
operations of the geographic area.

<TABLE>
<CAPTION>
                                        Three months ended September 30              Nine months ended September 30
                                   ------------------------------------------    ----------------------------------------
                                         2005                    2004                  2005                  2004
                                   ------------------     -------------------    -----------------    -------------------

<S>                                         <C>                       <C>                <C>                    <C>
Revenues:
    United States                           $ 10,837                  $8,807             $ 30,552               $ 19,736
    Foreign                                    1,984                     770                6,100                  3,345
                                   ------------------     -------------------    -----------------    -------------------
                                            $ 12,821                  $9,577             $ 36,652               $ 23,081
                                   ==================     ===================    =================    ===================
</TABLE>


<TABLE>
<CAPTION>
                                     September 30,           December 31,
                                         2005                    2004
                                   ------------------     -------------------
<S>                                         <C>                     <C>
Assets:
    United States                           $ 28,955                $ 21,641
    Foreign                                    3,444                   2,187
                                   ------------------     -------------------
                                            $ 32,399                $ 23,828
                                   ==================     ===================
</TABLE>


NOTE I:           INCOME TAXES

For the three months ended September 30, 2005, Fuel Tech recorded tax expense of
$914,000. This amount is comprised of $793,000 in deferred tax expense and
$121,000 in current state income tax expense.

On a year-to-date basis, Fuel Tech recorded a tax benefit of $191,000. The tax
benefit is comprised of $1,837,000 in deferred tax expense, $172,000 in current
state income tax expense and a deferred tax benefit of $2,200,000 recorded at
June 30, 2005 resulting from a reduction in the deferred tax asset valuation
allowance. The reduction in the deferred tax asset valuation allowance
represented the anticipated utilization of net operating loss carryforwards in
subsequent periods. Based on a review of both historical and projected taxable
income at the end of June 30, 2005, Fuel Tech concluded that it was more likely
than not that some portion of the net operating losses would be utilized in
subsequent periods and that a reduction in the deferred tax valuation allowance
was required.

At December 31, 2004, Fuel Tech recorded a $1,500,000 reduction in the deferred
tax asset valuation allowance, which represented the anticipated utilization of
net operating loss carryforwards in subsequent periods. Based on a review of
both historical and projected taxable income, Fuel Tech had concluded that it
was more likely than not that some portion of the net operating losses would be
utilized in subsequent periods and that a reduction in the deferred tax
valuation allowance was required. No provision for federal or state income taxes
was recorded during the three or nine-month periods ended September 30, 2004 due
to the existence of net operating loss carryforwards.

                                       9
<PAGE>

                                 FUEL-TECH N.V.

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

RESULTS OF OPERATIONS

Net sales for the three months ended September 30, 2005 and 2004 were
$12,821,000 and $9,577,000, respectively, while net sales for the nine months
ended September 30, 2005 and 2004 were $36,652,000 and $23,081,000,
respectively. The year to date increase is due to a $12,454,000 increase in
revenues derived from the nitrogen oxide (NOx) reduction business. This business
segment, which began to show increased strength in the second half of 2004,
continues to experience a robust period of order activity. Utilities and
industrial facilities that are impacted by the Environmental Protection Agency's
(EPA) State Implementation Plan (SIP) Call regulation are continuing to prove
that Fuel Tech's technology is a viable tool in their ongoing regulatory
compliance planning. Fuel Tech continues to work towards developing alliance
agreements with critical customers looking to finalize their compliance plans.

The fuel treatment chemical business segment generated revenues of $13,644,000
for the nine months ended September 30, 2005 versus $12,522,000 in the
comparable period of 2004. Although this represents nine percent growth,
revenues were hampered by the following circumstances in the first nine months
of the year:

       - Demonstration programs- there were four demonstration programs during
         the first nine months of the year that have not yielded full commercial
         revenues. One was a no-cost demonstration at a critical coal-fired
         utility and one was a demonstration at a large coal-fired facility
         offered at fifty percent of commercial value. The other two
         demonstrations were structured on a cost-share basis, one on a
         coal-fired unit and one on an oil-fired unit. Under cost-share
         arrangements, during the demonstration period, Fuel Tech will invoice
         the customer at a specified percentage of the commercial price. At the
         end of the demonstration, if Fuel Tech meets the criteria for success
         that were established for the program, Fuel Tech will invoice the
         customer for the remaining percentage of the commercial price. These
         latter two demonstrations are expected to reach their evaluation date
         in the fourth quarter.

       - Coal supply chain issues- during the first nine months of the year one
         critical Western-coal fired utility unit significantly and unexpectedly
         reduced capacity for an extended period due to transportation related
         shortages of Western coal deliveries to the plant. Rail disruptions in
         the Powder River Basin have impacted several utilities, while
         maintenance and repair work on key rail lines is expected to impact
         coal shipments in several parts of the country for the remainder of the
         year.

       - Oil pricing- the high price of oil has resulted in reduced oil-fired
         electricity generation in the United States. Fuel Tech's oil-fired
         business was negatively impacted by this market dynamic, particularly
         during the first half of the year when cooler weather forced
         higher-cost electricity generating capacity to be curtailed.

Fuel Tech's TIFI technology alleviates the slagging and fouling issues
associated with burning coals that are high in low-melting-point ash
constituents, such as sodium. More than half of the coal burned today to
generate electricity is Western coal and it is Western coal that has higher
levels of low-melting-point ash constituents.

Due to its lower cost and lower pollutant content relative to Eastern coals, and
despite the rail issues noted above, it is anticipated that Western coals will
be burned in larger quantities and in an increasing number of facilities.
Consequently, the penetration of the Western coal-fired utility market remains
the top priority for this business segment.

Cost of sales as a percentage of net sales for the three-month periods ended
September 30, 2005 and 2004 was 50%. On a year-to-date basis the cost of sales
percentage is 52% and 53%, respectively, for 2005 and 2004. The improvement in
the cost of sales percentage on a year-to-date basis is primarily attributable
to the nitrogen oxide business, where the percentage decreased to 51% in 2005
from 56% in 2004. The decrease is attributable to the mix of project business.

                                       10
<PAGE>

Selling, general and administrative expenses for the three months ended
September 30, 2005 and 2004 were $4,121,000 and $3,435,000, respectively, while
these expenses for the nine months ended September 30, 2005 and 2004 were
$11,930,000 and $9,763,000, respectively. The increase is primarily attributable
to human resource-related expenses as staffing levels were increased in several
areas in anticipation of overall business growth. Revenue-related expenses
attributable to both business segments also contributed to the increase, as did
increases in audit and legal fees to a lesser degree.

Research and development expenses for the three months ended September 30, 2005
and 2004 were $253,000 and $322,000, respectively, while these expenses for the
nine months ended September 30, 2005 and 2004 were $913,000 and $895,000,
respectively. Fuel Tech continues to pursue commercial applications for its
technologies outside of its traditional markets, from both an industrial and
geographical perspective. In the first quarter of 2005, Fuel Tech funded a
successful demonstration of its TIFI technology in Mexico with a research
facility owned by the Mexican government.

The decline in other income and expense for the nine months ended September 30,
2005 versus the prior year is due principally to the impact of foreign currency
translation.

For the three months ended September 30, 2005, Fuel Tech recorded tax expense of
$914,000. This amount is comprised of $793,000 in deferred tax expense and
$121,000 in current state income tax expense.

On a year-to-date basis Fuel Tech recorded a tax benefit of $191,000. The tax
benefit is comprised of $1,837,000 in deferred tax expense, $172,000 in current
state income tax expense and a deferred tax benefit of $2,200,000 recorded at
June 30, 2005 resulting from a reduction in the deferred tax asset valuation
allowance. The reduction in the deferred tax asset valuation allowance
represented the anticipated utilization of net operating loss carryforwards in
subsequent periods. Based on a review of both historical and projected taxable
income at the end of June 30, 2005, Fuel Tech concluded that it was more likely
than not that some portion of the net operating losses would be utilized in
subsequent periods and that a reduction in the deferred tax valuation allowance
was required.

At December 31, 2004, Fuel Tech recorded a $1,500,000 reduction in the deferred
tax asset valuation allowance, which represented the anticipated utilization of
net operating loss carryforwards in subsequent periods. Based on a review of
both historical and projected taxable income, Fuel Tech had concluded that it
was more likely than not that some portion of the net operating losses would be
utilized in subsequent periods and that a reduction in the deferred tax
valuation allowance was required. No provision for federal or state income taxes
was recorded during the three or nine-month periods ended September 30, 2004 due
to the existence of net operating loss carryforwards.

LIQUIDITY AND SOURCES OF CAPITAL

On September 30, 2005, Fuel Tech had cash and cash equivalents of $11,761,000
and working capital of $16,280,000 versus $6,531,000 and $11,292,000 at the end
of 2004, respectively. Operating activities provided cash of $6,587,000 in the
first nine months of 2005, primarily due to the improvement in overall business
activity. Investing activities used cash of $1,884,000 during the first nine
months of 2005, largely for equipment purchases related to the fuel treatment
chemical business. During the first nine months of 2005, Fuel Tech generated
cash from the exercise of stock options in the amount of $639,000.

                                       11
<PAGE>

FORWARD-LOOKING STATEMENTS

Statements in this Form 10-Q that are not historical facts, so-called
"forward-looking statements," are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. 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. See "Risk Factors of the Business" in Item 1, "Business," and also
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in Fuel Tech's Form 10-K for the year ended December 31, 2004.

Item 3.           Quantitative and Qualitative Disclosures about Market Risk

 Foreign Currency Risk Management:

Fuel Tech's earnings and cash flow are subject to fluctuations due to changes in
foreign currency exchange rates. Fuel Tech does not enter into foreign currency
forward contracts or into foreign currency option contracts to manage this risk
due to the immaterial nature of the transactions involved.

Item 4.           Controls and Procedures

Fuel Tech maintains disclosure controls and procedures and internal controls
designed to ensure that information required to be disclosed in Fuel Tech's
filings under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. Fuel Tech's management, with the
participation of its principal executive and financial officers, has evaluated
the effectiveness of Fuel Tech's disclosure controls and procedures as of the
end of the period covered by this Quarterly Report on Form 10-Q. Fuel Tech's
principal executive and financial officers have concluded, based on such
evaluation, that such disclosure controls and procedures were effective for the
purpose for which they were designed as of the end of such period.

In performing the evaluation of internal controls as of December 31, 2004, one
instance was found where the procedures and controls were insufficient to ensure
that infrequent or unusual business transactions, such as lease agreements, are
analyzed, recorded, and monitored in the context of authoritative accounting
guidance such that these transactions are recognized in accordance with
generally accepted accounting principles. Rent expense during 2004 was
understated due to the accounting treatment for a "free rent" period that was
provided in its lease agreement for its corporate headquarters. Fuel Tech had
recorded rent expense in accordance with the required rental payment schedule in
the lease, rather than amortizing the total minimum lease payments over the full
term of the lease. The adjustment for additional rent expense of $123,000 was
recorded subsequent to the press release issued on Thursday, March 3, 2005. Fuel
Tech has only one other building lease agreement.

To remediate the material weakness that was recognized in Fuel Tech's internal
control over financial reporting, Fuel Tech implemented additional review
procedures over the factors affecting infrequent or unusual business
transactions, including lease agreements. These additional procedures include
inquiries of all management personnel that can legally bind Fuel Tech to
infrequent or unusual business transactions. If the inquiries reveal that Fuel
Tech has entered into infrequent or unusual business transactions, such
transactions are documented, analyzed, recorded, and monitored in the context of
authoritative accounting guidance.

Other than the addition of this procedure, there was no change in Fuel Tech's
internal control over financial reporting that was identified in connection with
such evaluation that occurred during the period covered by this Quarterly Report
on Form 10-Q that has materially affected, or is reasonably likely to materially
affect, Fuel Tech's internal control over financial reporting.

                                       12
<PAGE>

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings
             None

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds
             None

Item 3.      Defaults upon Senior Securities
             None

Item 4.      Submission of Matters to a Vote of Security Holders
             None

Item 5.      Other Information
             None

Item 6.      Exhibits
             a.   Exhibits
                  Exhibit 31.1 and 31.2 are filed herewith
                  Exhibit 32 is furnished herewith

             b.   Reports on Form 8-K

                  The Company filed form 8-K on August 3, 2005. This filing
                  included the Company's financial results for the quarter and
                  six-month period ending June 30, 2005.

                  The Company filed form 8-K on September 1, 2005. This filing
                  confirmed the revenue guidance of $45 million to $48 million
                  for the fiscal year 2005 earlier announced in the earnings
                  release for the quarter and six-month period ending June 30,
                  2005, on August 3, 2005.

                                       13
<PAGE>

FUEL-TECH N.V.
                                   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: November 4, 2005     By: /s/ Ralph E. Bailey
                               -------------------
                               Ralph E. Bailey
                               Chairman, Managing Director
                               and Chief Executive Officer

Date: November 4, 2005     By: /s/ Vincent J. Arnone
                               ---------------------
                               Vincent J. Arnone
                               Chief Financial Officer,
                               Vice President and
                               Treasurer

                                       14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>b409639_ex311.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

EXHIBIT 31.1

I, Ralph E. Bailey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Fuel-Tech N.V.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 (e) and 15d-15 (e) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

         a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

         c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:

         a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: as of November 4, 2005            By: /s/ Ralph E. Bailey
                                            -------------------
                                            Ralph E. Bailey
                                            Chairman, Managing Director
                                            and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>b409639_ex312.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

EXHIBIT 31.2

I, Vincent J. Arnone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Fuel-Tech N.V.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 (e) and 15d-15 (e) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

         a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

         c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:

         a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: as of November 4, 2005            By: /s/ Vincent J. Arnone
                                            ---------------------
                                            Vincent J. Arnone
                                            Chief Financial Officer,
                                            Vice President and
                                            Treasurer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>b409639_ex32.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

EXHIBIT 32

         The undersigned in their capacities as Chief Executive Officer and
Chief Financial Officer of the Registrant do hereby certify that:

         (i) this report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

         (ii) information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant as of, and for, the periods presented in the report.


Date: November 4, 2005     By: /s/ Ralph E. Bailey
                               -------------------
                               Ralph E. Bailey
                               Chairman, Managing Director
                               and Chief Executive Officer

Date: November 4, 2005     By: /s/ Vincent J. Arnone
                               ---------------------
                               Vincent J. Arnone
                               Vice President, Treasurer and
                               Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the "Act") this
certification accompanies the Report and shall not, except to the extent
required by the Act, be deemed filed by the Registrant for purposes of Section
18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Fuel-Tech N.V. and will be
retained by Fuel-Tech N.V. and furnished to the Securities and Exchange
Commission or its staff upon request.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
