Note 5. Nil Coupon Non-redeemable Convertible Unsecured Loan Notes

12 Months Ended

Dec. 31, 2011

Debt Instrument, Convertible, Type of Equity Security

5.   NIL COUPON NON-REDEEMABLE CONVERTIBLE UNSECURED LOAN NOTES

At December 31, 2011 and 2010, respectively, Fuel Tech had a principal amount of $76 of nil coupon non-redeemable convertible unsecured perpetual loan notes (the “Loan Notes”) outstanding.  The Loan Notes are convertible at any time into Common Shares at rates of $6.50 and $11.43 per share, depending on the note.  As of December 31, 2011, the nil coupon loan notes were convertible into 6,715 common shares.  Based on our closing stock price of $6.58 at December 31, 2011, the aggregate fair value of the common shares that the holders would receive if all loan notes were converted would be approximately $44, which is less than the principal amount of the loans outstanding as of that date. The Loan Notes bear no interest and have no maturity date.  They are repayable in the event of Fuel Tech’s dissolution and the holders do not have the option to cash-settle the notes.  Accordingly, they have been classified within stockholders’ equity in the accompanying balance sheet.  The notes do not hold distribution or voting rights unless and until converted into common shares.

In 2011, 2010, and 2009, Loan Notes in the principal amounts of $0, $5, and $0, respectively, were repurchased by the Company.