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Note 1 - Organization and Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization Fuel Tech, Inc. and subsidiaries ("Fuel Tech", the "Company", "we", "us" or "our") develops and provides proprietary technologies for air pollution control, process optimization, water treatment, and advanced engineering services. Our primary focus is on the worldwide marketing and sale of Air Pollution Control (APC) technologies and our FUEL CHEM program. The Company’s nitrogen oxide (NOx) reduction technologies reduce nitrogen oxide emissions from boilers, furnaces and other stationary combustion sources. To reduce NOx emissions, our technologies utilize advanced combustion modification techniques and post-combustion NOx control approaches including non-catalytic, catalytic and combined systems. The Company also provides solutions for the mitigation of particulate matter, including particulate control with electrostatic precipitator products and services, and using Flue Gas Conditioning (FGC) systems which modify the ash properties of particulate for improved collection efficiency. Our FUEL CHEM program is based on proprietary TIFI® Targeted In-Furnace™ Injection 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 the efficiency, reliability, fuel flexibility, boiler heat rate, and environmental status of combustion units by controlling slagging, fouling, corrosion, and opacity. Water treatment technologies include DGI® Dissolved Gas Infusion Systems which utilize a patented gas-infusing saturator vessel and a patent-pending channel injector to deliver supersaturated oxygen-water solutions and potentially other gas-liquid combinations to target process applications or environmental issues within the municipal and industrial water sectors. The infusion process has a variety of potential applications in the water and wastewater treatment sector, including aquaculture, agriculture/horticulture, pulp & paper, tanneries, landfill leachate, irrigation, treatment of natural waters, wastewater odor management as well as supplying oxygen or other gases for biochemical reactions and pH adjustment. Our business is materially dependent on the continued existence and enforcement of air quality regulations, particularly in the U.S. 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, computer modeling and advanced visualization technologies. Many of Fuel Tech's products and services rely heavily on the Company's CFD modeling capabilities, which are enhanced by internally developed, high-end visualization software. International revenues were $7,331 and $5,684 for the years ended December 31, 2024 and 2023, respectively. These amounts represented 29% and 21% of Fuel Tech’s total revenues for the respective periods of time. Foreign currency changes did not have a material impact on the calculation of these percentages. We have a foreign office in Gallarate, Italy. Basis of Presentation The consolidated financial statements include the accounts of Fuel Tech and its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). The books and records of subsidiaries located in foreign countries are maintained according to generally accepted accounting principles in those countries. Upon consolidation, the Company evaluates the differences in accounting principles and determines whether adjustments are necessary to convert the foreign financial statements to the accounting principles upon which the consolidated financial statements are based. All intercompany transactions have been eliminated. Political, Geopolitical and Unexpected Events Management cannot predict the full impact of political, geopolitical and unexpected events which may impact new or existing projects and prices and availability of raw materials, energy and other materials. These events may also impact energy and regulatory policy nationally or regionally for the impacted regions. Such disruptions could have a material adverse effect on our business and financial results. The Company continues to monitor the potential impacts on the business. Liquidity We have experienced net losses in recent years. 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. As a result, we have evaluated our ongoing business needs, and considered the cash requirements of our 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 believe our current cash position and net cash flows expected to be generated from operations are adequate to fund planned operations of the Company. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for credit losses, income tax provisions, excess and obsolete inventory reserve, impairment of long-lived assets, and warranty expenses. Actual results could differ from those estimates. Fair Value Measurements The carrying values of cash and cash equivalents, accounts receivable, and accounts payable are reasonable estimates of their fair value due to their short-term nature. We apply authoritative accounting guidance for fair value measurements of financial and non-financial assets and liabilities. This guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis and clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| • | Level 1 – Observable inputs to the valuation methodology such as quoted prices in active markets for identical assets or liabilities
| • | Level 2 – Inputs to the valuation methodology including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means
| • | Level 3 – Significant unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own estimates and assumptions or those expected to be used by market participants. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, option pricing models, and other commonly used valuation techniques
Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. We had no assets or liabilities that were valued using level 2 or level 3 inputs and therefore there were no transfers between levels of the fair value hierarchy during the periods ended December 31, 2024 and 2023. Cash and cash equivalents We consider all highly liquid debt investments with original maturities from the date of purchase of three months or less as cash equivalents. Cash equivalents include investments in money market funds. At December 31, 2024, we had cash on hand of approximately $548 at our Beijing, China subsidiary that is subject to certain local regulations that may limit the immediate availability of these funds outside of China. Cash on hand at our Italy subsidiary totaled approximately $1,176 at December 31, 2024. Cash on hand at our Chilean subsidiary totaled approximately $159 at December 31, 2024. The following table provides a reconciliation of cash and cash equivalents reported within the Consolidated Balance Sheet that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:
|  | December 31, 2024 |  |  | December 31, 2023 |
Cash |  | $ | 7,879 |  |  | $ | 12,495 |
Cash equivalents |  |  | 631 |  |  |  | 5,083 |
Total cash and cash equivalents shown in the Consolidated Statements of Cash Flows |  | $ | 8,510 |  |  | $ | 17,578 |
Investments The Company's investment policy provides for $20,000 in funds at BMO Harris Bank (BMO Harris) to be invested in held-to-maturity debt securities. A portion of the funds invested are restricted as collateral under the Investment Collateral Security agreement (see Note 11). At December 31, 2024, the amount of funds collateralized under the Investment Collateral Security agreement is $2,790 relating to existing standby letters of credit that is comprised of $1,860 with varying maturity dates and expire no later than June 30, 2026. Our investments in debt securities consist of United States (US) Treasury securities, including Notes, Bonds, and Bills, and US Government Agency securities, which are designated as held-to-maturity (HTM) and stated at amortized cost. The Company has the positive intent and ability to hold these investments to maturity and does not expect to sell any debt securities before maturity to settle an obligation under the Investment Collateral Security agreement. The typical maturities of our HTM investments range from three to thirty-six months. HTM debt investments with original maturities of approximately three months or less from the date of purchase are classified within cash and cash equivalents. HTM debt investments with original maturities at the date of purchase greater than approximately three months and remaining maturities of less than one year are classified as short-term investments. HTM debt investments with remaining maturities beyond one year are classified as long-term investments. Interest income, including amortization of premium and accretion of discount, are included on the Consolidated Statements of Operations in Interest income under the effective yield method. Accrued interest is included in Prepaid expenses and other current assets on the Consolidated Balance Sheets. Due to the creditworthiness of the entities issuing these securities, there is no impairment recorded related to the unrealized losses. The following table provides the amortized cost, gross unrealized gains and losses, and fair value of our HTM debt securities:
|  | December 31, |
|  | 2024 |  |  | 2023 |
Held-to-maturity debt securities: |  |  |  |  |  |  |  |
Amortized cost |  | $ | 21,059 |  |  | $ | 15,800 |
Gross unrecognized gains |  |  | 50 |  |  |  | — |
Gross unrecognized losses |  |  | (33 | ) |  |  | (86 | )
Fair value |  | $ | 21,076 |  |  | $ | 15,714 |
The following table provides the amortized cost and fair value of debt securities by maturities at December 31, 2024:
|  | Amortized Cost |  |  | Fair Value |
Within one year |  | $ | 10,184 |  |  | $ | 10,200 |
After one year through two years |  |  | 10,875 |  |  |  | 10,876 |
Total |  | $ | 21,059 |  |  | $ | 21,076 |
Foreign Currency Risk Management Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. We do not enter into foreign currency forward contracts or into foreign currency option contracts to manage this risk due to the nature of the transactions involved. Accounts Receivable Accounts receivable consist of amounts due to us in the normal course of our business, are not collateralized, and normally do not bear interest. Accounts receivable includes contract assets, billings occurring subsequent to revenue recognition under Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers. At December 31, 2024 and 2023, unbilled receivables were approximately $2,075 and $2,285, respectively. Refer to Note 2 for further detail. Allowance for Credit Losses Fuel Tech measures expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts per the guidance set forth in Accounting Standards Update (ASU) 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). For trade receivables and other financial instruments, we use a forward-looking expected loss model for recognizing credit losses which reflects losses that are probable. For the general risk categories, the Company uses historical losses over a fixed period, excluding certain write-off activity that was not considered credit loss events, to determine the historical credit loss. Historical loss rates are then adjusted to consider current economic conditions, and past, current, and future events and circumstances when determining expected credit losses. Investments in financial assets issued by US Government and Government Agency are considered as having zero expected credit losses and are excluded from the allowance for credit loss calculation. The allowance for credit losses is our management's best estimate of the amount of credit losses in accounts receivable. At the end of each reporting period, the allowance for credit losses balance is reviewed relative to management’s assessment and is adjusted if deemed necessary. Bad debt write-offs are made when management believes it is probable a receivable will not be recovered. The table below sets forth the components of the Allowance for Credit Losses for the years ended December 31.
Year |  | Balance at January 1 |  |  | Provision charged to expense |  |  | Write-offs / Recoveries |  |  | Balance at December 31 |
2023 |  | $ | 110 |  |  | $ | 24 |  |  | $ | (23 | ) |  | $ | 111 |
2024 |  | $ | 111 |  |  | $ | — |  |  | $ | (5 | ) |  | $ | 106 |
Prepaid expenses and other current assets Prepaid expenses and other current assets are short-term commitments of typically three to six months for future payments and can be redeemed at a discount or applied to future vendor payments. Inventories Inventories consist primarily of equipment constructed for resale and spare parts and are stated at the lower of cost or net realizable value, using the weighted-average cost method. At December 31, 2024 and 2023, inventory included equipment constructed for resale of$176 and $207, respectively, and spare parts, net of reserves of $221 and $232, respectively. Usage is recorded in cost of sales in the period that parts were issued to a project, used to service equipment, or sold to customers. Equipment constructed for resale that is in process is recorded in Other assets. In process equipment for inventory recorded as other assets was $44 and $618 as of December 31, 2024 and 2023, respectively. Inventories are periodically evaluated to identify obsolete or otherwise impaired parts and are written off when management determines usage is not probable. The Company estimates the balance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipeline for which the inventory could be used. The excess and obsolete inventory reserve balance was $613 at December 31, 2024 and 2023. Foreign Currency Translation and Transactions Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at year end. Revenues and expenses are translated at average exchange rates prevailing during the year. Gains or losses on foreign currency transactions and the related tax effects are reflected in net loss. The resulting translation adjustments are included in stockholders’ equity as part of accumulated other comprehensive loss. Accumulated Other Comprehensive Loss
|  | December 31, |
|  | 2024 |  |  | 2023 |
Foreign currency translation |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | (1,748 | ) |  | $ | (1,728 | )
Other comprehensive loss: |  |  |  |  |  |  |  |
Foreign currency translation adjustments (1) |  |  | (167 | ) |  |  | (20 | )
Balance at end of period |  | $ | (1,915 | ) |  | $ | (1,748 | )
Total accumulated other comprehensive loss |  | $ | (1,915 | ) |  | $ | (1,748 | )
(1) | In all periods presented, there were no tax impacts related to functional currency translation adjustments.
Research and Development Research and development costs are expensed as incurred, except in the case of costs incurred related to capitalizable equipment. Research and development projects funded by customer contracts are reported as part of cost of goods sold. Internally funded research and development expenses are reported as operating expenses. Product/System Warranty We typically warrant our air pollution control products and systems against defects in design, materials and workmanship for one to two years. A provision for estimated future costs relating to warranty expense is recorded when the products/systems become commercially operational. Goodwill Goodwill is evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Goodwill of our reporting units is assigned upon acquisition 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. We have two reporting units for goodwill evaluation purposes: the FUEL CHEM technology reporting unit and the APC technology reporting unit. There is no goodwill associated with our APC technology reporting unit. The entire goodwill balance of $2,116 was allocated to the FUEL CHEM technology reporting unit as of December 31, 2024 and 2023. Goodwill is tested for impairment at least annually as of the first day of our fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Our evaluation of goodwill impairment involves first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may bypass this qualitative assessment, or determine that based on our qualitative assessment considering the totality of events and circumstances including macroeconomic factors, industry and market considerations, current and projected financial performance, a sustained decrease in our share price, or other factors, that additional impairment analysis is necessary. This additional analysis involves comparing the current fair value of our reporting units to their carrying values. We use a discounted cash flow (DCF) model to determine the current fair value of our FUEL CHEM reporting unit. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce and working capital changes. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, actual fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of goodwill. Fuel Tech performed its annual goodwill impairment analysis as of October 1, 2024 and determined that no impairment of goodwill existed. The Company did not recognize a charge for goodwill impairment for the periods ended December 31, 2024 and 2023. Other Intangible Assets Management reviews other finite-lived intangible assets, patent assets, trade names, and lease assets for impairment when events or changes in circumstances indicate the carrying amount of an asset or asset group 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 or asset group is less than the carrying amount of the asset or asset group, an impairment loss equal to the excess of the asset or asset group'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. During the years ended December 31, 2024 and 2023, Fuel Tech recorded no patent or trademark abandonment charges. Third-party costs related to the development of patents are included within other intangible assets on the consolidated balance sheets. The third-party costs capitalized as patent costs during the years ended December 31, 2024 and 2023 were $26 and $28, respectively. Third-party costs are comprised of legal fees that relate to the review and preparation of patent disclosures and filing fees incurred to present the patents to the required governing body. Our intellectual property portfolio has been a significant building block for the APC and FUEL CHEM technology segments. The patents are essential to the generation of revenue for our businesses and are essential to protect us from competition in the markets in which we serve. These costs are being amortized on the straight-line method over the period beginning with the patent issuance date and ending on the patent expiration date. Patent maintenance fees are charged to operations as incurred. Amortization expense from continuing operations for intangible assets was $57 and $61 for the years ended December 31, 2024 and 2023, respectively. The table below shows the amortization period and other intangible asset cost by intangible asset as of December 31, 2024 and 2023, and the accumulated amortization and net intangible asset value in total for all other intangible assets.
|  |  |  |  |  | 2024 |  |  | 2023 |
Description of Other Intangibles |  | Amortization Period (years) |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Carrying Amount |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Carrying Amount |
Patent assets |  |  | 1 - 20 |  |  |  | 852 |  |  |  | (525 | ) |  |  | 327 |  |  |  | 826 |  |  |  | (468 | ) |  |  | 358 |
Total |  |  |  |  |  | $ | 852 |  |  | $ | (525 | ) |  | $ | 327 |  |  | $ | 826 |  |  | $ | (468 | ) |  | $ | 358 |
The table below shows the estimated future amortization expense for intangible assets:
Year |  | Estimated Amortization Expense |
2025 |  | $ | 36 |
2026 |  |  | 35 |
2027 |  |  | 35 |
2028 |  |  | 35 |
2029 |  |  | 29 |
Thereafter |  |  | 157 |
Total |  | $ | 327 |
Property and Equipment Property and equipment is stated at historical cost and does not include capital in process expenditures yet to be capitalized. Provisions for depreciation are computed by the straight-line method, using estimated useful lives that range based on the nature of the asset. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense was $403 and $281 for the years ended December 31, 2024 and 2023, respectively. The table below shows the depreciable life and cost by asset class as of December 31, 2024 and 2023, and the accumulated depreciation and net book value in total for all classes of assets.
Description of Property and Equipment |  | Depreciable Life (years) |  |  | 2024 |  |  | 2023 |
Land |  |  |  |  |  | $ | 1,050 |  |  | $ | 1,050 |
Building |  |  | 39 |  |  |  | 3,950 |  |  |  | 3,950 |
Building and leasehold improvements |  |  | 3 - 39 |  |  |  | 2,677 |  |  |  | 2,655 |
Field equipment |  |  | 3 - 4 |  |  |  | 13,004 |  |  |  | 12,100 |
Computer equipment and software |  |  | 2 - 3 |  |  |  | 2,017 |  |  |  | 2,049 |
Furniture and fixtures |  |  | 3 - 10 |  |  |  | 1,305 |  |  |  | 1,307 |
Vehicles |  |  | 5 |  |  |  | 37 |  |  |  | 32 |
Construction in process |  |  |  |  |  |  | 2 |  |  |  | 99 |
Total cost |  |  |  |  |  |  | 24,042 |  |  |  | 23,242 |
Less accumulated depreciation |  |  |  |  |  |  | (18,958 | ) |  |  | (18,703 | )
Total net book value |  |  |  |  |  | $ | 5,084 |  |  | $ | 4,539 |
Property and equipment is reviewed for impairment when events and circumstances indicate that the carrying amount of the assets (or asset group) may not be recoverable. If impairment indicators exist, we perform a more detailed analysis and an impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset (or asset group) and its eventual disposition are less than the carrying amount. This process of analyzing impairment involves examining the operating condition of individual assets (or asset group) and estimating a fair value based upon current condition, relevant market factors and remaining estimated operational life compared to the asset’s remaining depreciable life. Quoted market prices and other valuation techniques are used to determine expected cash flows. We performed a detailed analysis of potential long-lived asset impairment during the fourth quarter of 2024 and determined no impairment exists. There was no impairment recorded during 2024 or 2023 Revenue Recognition The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. 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. 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 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. Cost of Sales Cost of sales includes all internal and external engineering costs, equipment and chemical 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). Certain depreciation and amortization expenses related to tangible and intangible assets, respectively, are allocated to cost of sales. We classify shipping and handling costs in cost of sales in the consolidated statements of operations. Selling, General and Administrative Expenses Selling, general and administrative expenses primarily include the following categories except where an allocation to the cost of sales line item is warranted due to the project- or product-line nature of a portion of the expense category: salaries and wages, employee benefits, non-project travel, insurance, legal, rent, accounting and auditing, recruiting, telephony, employee training, Board of Directors’ fees, auto rental, office supplies, dues and subscriptions, utilities, real estate taxes, commissions and bonuses, marketing materials, postage and business taxes. Departments comprising the selling, general and administrative line item primarily include the functions of executive management, finance and accounting, investor relations, regulatory affairs, marketing, business development, information technology, human resources, sales, legal and general administration. Income Taxes The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, the provision for income taxes represents income taxes paid or payable (or received or receivable) for the current year plus the change in deferred taxes during the year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid, and result from differences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates and tax laws when enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies, as well as all available positive and negative evidence. Positive evidence includes factors such as a history of profitable operations, projections of future profitability within the carryforward period, including from tax planning strategies, and our experience with similar operations. Negative evidence includes items such as cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a deferred tax asset based on existing projections of income. Deferred tax assets for which no valuation allowance is recorded may not be realized upon changes in facts and circumstances. Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitation has expired or the appropriate taxing authority has completed their examination even though the statute of limitations remains open. Interest and penalties related to uncertain tax positions are recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized. Leases The Company applies the provisions of 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 operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our 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 for leases with an initial term of 12 months or less. Stock-Based Compensation Our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2024 Long-Term Incentive Plan (2024 Plan), was adopted in June 2024 and replaced our prior incentive plan which was approved by our stockholders in 2014 (LTIP). No further grants will be made from the LTIP. Awards granted under the LTIP that were outstanding upon adoption of the 2024 Plan will be added to the shares available to be used for future awards to participants in the Incentive Plans if the awards are forfeited or otherwise canceled or upon expiration. The 2024 Plan and LTIP are referred to collectively as the Incentive Plans. The Incentive Plans allow for awards to be granted to participants in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plans 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 4,215,272 shares that may be issued or reserved for awards to participants under the Incentive Plans as of December 31, 2024. Based on the existing issued or reserved awards under the Incentive Plans, there are 2,957,150 shares available to be used for future awards to participants in the Incentive Plans as of December 31, 2024. Defined Contribution Plan We have a retirement savings plan available for all our U.S. employees who have met minimum length-of-service requirements. Our contributions are determined based upon amounts contributed by the employees with additional contributions made at the discretion of the Board of Directors. Costs related to this plan were $249 and $233 in 2024 and 2023, respectively. Basic and Diluted Earnings per Common Share Basic earnings per share excludes the antidilutive effects of stock options, restricted stock units (RSUs), warrants, and the nil coupon non-redeemable convertible unsecured loan notes (see Note 6). Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, warrants, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is antidilutive. Out-of-the-money stock options and warrants are excluded from diluted earnings per share because they are unlikely to be exercised and would be anti-dilutive if they were exercised. At December 31, 2024 and 2023, basic earnings per share is equal to diluted earnings per share because all outstanding stock awards, warrants, and convertible loan notes are considered anti-dilutive during periods of net loss. At December 31, 2024 and 2023, we had weighted-average outstanding equity awards of 168,900 and 390,900, respectively, and 2,850,000 warrants in both periods, which were antidilutive or represent out-of-the-money options for the purpose of calculation of the diluted earnings per share. As of December 31, 2024 and 2023, 274,900 and 246,500 incremental equity awards were antidilutive, respectively, because of the net loss in the year then ended. These equity awards could potentially dilute basic EPS in future years. The table below sets forth the weighted-average shares used at December 31, in calculating earnings (loss) per share:
|  | 2024 |  |  | 2023 |
Basic weighted-average shares |  |  | 30,572,000 |  |  |  | 30,348,000 |
Conversion of unsecured loan notes |  |  | — |  |  |  | — |
Unexercised options and unvested restricted stock units |  |  | — |  |  |  | — |
Diluted weighted-average shares |  |  | 30,572,000 |  |  |  | 30,348,000 |
Risk Concentrations Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. However, management believes the Company is not exposed to significant credit risk due to the financial position of its primary depository institution where a significant portion of its deposits are held. For the year ended December 31, 2024, we had two customers which individually represented greater than 10% of revenues. These two customers contributed revenues to the FUEL CHEM technology segment. In total these two customers represented 27% of consolidated revenues. We had no customer that accounted for greater than 10% of our current assets as of December 31, 2024. For the year ended December 31, 2023, we had two customers which individually represented greater than 10% of revenues. These two customers contributed revenues to the FUEL CHEM technology segment. In total these two customers represented 36% of consolidated revenues. We had no customer that accounted for greater than 10% of our current assets as of December 31, 2023. We control credit risk through requiring milestone payments on long-term contracts, performing ongoing credit evaluations of its customers, and in some cases obtaining security for payment through bank guarantees and letters of credit. Our FUEL CHEM technology segment is dependent, in part, upon a supply of magnesium hydroxide. Any adverse changes in the availability of this chemical will likely have an adverse impact on ongoing operation of our FUEL CHEM programs. Our supplier of magnesium hydroxide, Martin Marietta Magnesia Specialties, LLC (MMMS) assures the continuance of a stable supply from MMMS of magnesium hydroxide products for our requirements in the U.S. and Canada. MMMS supplies us with magnesium hydroxide products manufactured pursuant to our specifications and we have agreed to purchase from MMMS, and MMMS has agreed to supply, 100% of our requirements for such magnesium hydroxide products for our customers who purchase such products for delivery in the U.S. and Canada. There can be no assurance that we will be able to obtain a stable source of magnesium hydroxide in markets outside the U.S. Treasury Stock We use the cost method to account for common stock repurchases. During the year ended December 31, 2024, we withheld 83,050 shares of our common stock, valued at approximately $95, to settle personal tax withholding obligations that arose as a result of restricted stock units that vested. There were no shares withheld during the year ended December 31, 2023 to settle personal tax withholding obligations as a result of restricted stock unit vesting. Refer to Note 5, “Treasury Stock,” for further discussion. Recently Issued Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides guidance for additional disclosures around the tax rate reconciliation and other tax disclosures. The standard will become effective for the annual reporting period beginning on January 1, 2025 for Fuel Tech. Application of the amendments should be applied prospectively but retrospective application is permitted. The Company is reviewing the impact of this new pronouncement and expects to incorporate the additional disclosures in the Tax note when the ASU is adopted. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to disclose in the notes to their financial statements disaggregated information about certain costs and expenses in both annual and interim filings. The standard will become effective for the annual reporting period beginning January 1, 2027 for Fuel Tech. The Company is reviewing the impact of this new pronouncement and expects to incorporate the additional disclosures in the relevant footnotes when the ASU is adopted. CARES Act On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable tax credit against the employer share of Social Security tax for qualifying periods in 2020 and 2021. Under the provisions of the CARES Act, the Company is eligible for a refundable employee retention credit subject to certain criteria. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, we account for the ERC by analogy to International Accounting Standard ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it has reasonable assurance for receipt of the ERC and recorded the ERC benefit of $1,677 as other income on the Consolidated Statement of Operations for the year ended December 31, 2024 and as a component of Accounts Receivable on the Consolidated Balance Sheet as of December 31, 2024.

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