ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Fuel Tech, Inc. and subsidiaries ("Fuel Tech", the "Company", "we", "us" or "our") provides advanced engineered solutions for the optimization of combustion systems in utility and industrial applications. Our primary focus is on the worldwide marketing and sale of Air Pollution Control (APC) technologies as well as our FUEL CHEM program. The Company's NOx reduction technologies reduce nitrogen oxide emissions from boilers, furnaces and other stationary combustion sources.

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 and environmental status of combustion units by controlling slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in the boiler.

Our business is materially dependent on the continued existence and enforcement of air quality regulations, particularly in the United States. We have expended significant resources in the research and development of new technologies in building our proprietary portfolio of air pollution control, fuel and boiler treatment chemicals, computer modeling and advanced visualization technologies.

International revenues were

$3,928

and

$4,585

for the years ended

December 31, 2020

and

2019

, respectively. These amounts represented

17%

and

15%

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 foreign offices in Beijing, China and Gallarate, Italy.

Basis of Presentation

The consolidated financial statements include the accounts of Fuel Tech and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (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.

COVID-

Pandemic

The emergence of the coronavirus (COVID-

) around the world presents significant risks to the Company,

not

all of which the Company is able to fully evaluate or even foresee at the current time. The COVID-

pandemic has affected the Company's operations during the

twelve

months ended

December 31, 2020,

although the impact of the pandemic is difficult to quantify, and

may

continue to be so indefinitely thereafter. The Company has experienced, and

may

continue to experience, reductions in demand for certain of products as several accounts remained offline due to soft electric demand and unplanned outage activities and due to the delay or abandonment of ongoing or anticipated projects, due to our customers', suppliers' and other

third

parties' financial distress or concern regarding the volatility of global markets.

Management cannot predict the full impact of the COVID-

pandemic on the Company's sales and marketing channels and supply chains, and, as a result, the ultimate extent of the effects of the COVID-

pandemic on the Company is highly uncertain and will depend on future developments. Such effects could exist for an extended period of time even after the pandemic comes to an end.

Liquidity

We have experienced continued declines in revenues and recurring losses. As a result, we have evaluated our ongoing business needs, and considered the cash requirements of our Air Pollution Control (APC) and FUEL CHEM businesses. This evaluation included consideration of the following: a) customer and revenue trends in our APC and FUEL CHEM business segments, b) current operating structure and expenditure levels, c) current availability of working capital, and d) support for our research and development initiatives. We continue to monitor our liquidity needs and have taken measures to reduce expenses and restructure operations which we feel are necessary to ensure we maintain sufficient working capital and liquidity to operate the business and invest in our future.

February 11, 2021,

Fuel Tech entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors pursuant to which the Company agreed to issue and sell, in a private placement (the “Private Placement”), (i)

5,000,000

shares (the “Shares”) of Common Stock, (ii) and

2,500,000

warrants (the “Warrants”) exercisable for a total of

2,500,000

shares of Common Stock (the “Warrant Shares”) with an exercise price of

$5.10

per Warrant Share, at a purchase price of

$5.1625

per Share and associated warrant. The gross proceeds to the Company from the Private Placement were approximately

$25.8

million, before deducting placement agent fees and offering expenses. The receipt of these funds strengthen our current cash position and in conjunction with our net cash flows expected to be generated from operations are adequate to fund planned operations of the Company for the next

months.

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 doubtful accounts, 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 of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and long-term borrowings are reasonable estimates of their fair value due to their short-term nature.

Cash, cash equivalents and restricted cash

We include cash and investments having an original maturity of

three

months or less at the time of acquisition in cash and cash equivalents. We have never incurred realized or unrealized holdings gains or losses on securities classified as cash equivalents. Income resulting from short-term investments is recorded as interest income. At

December 31, 2020

, we had cash on hand of approximately

$858

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

$1,111

December 31, 2020

. Cash on hand at our Chilean subsidiary totaled approximately

$314

December 31, 2020

Restricted cash as of

December 31, 2020

represents funds that are restricted to satisfy any amount borrowed against the Company's Cash Collateral Security agreement with BMO Harris Bank N.A. The balance of restricted cash totaling

$1,966

is comprised of $

1,595

in current assets relating to existing standby letters of credit with varying maturity dates and expire

later than

December 31, 2020

and $

371

in long-term assets will remain through the expiration dates of the underlying standby letters of credit (the latest maturity date is

February 1, 2023)

with BMO Harris Bank N.A. Refer to Note

Debt Financing for further information on the Facility.

Restricted cash as of

December 31, 2019

represents funds that are restricted to satisfy any amount borrowed against the Company's then existing revolving credit facility (the Facility) with JPMorgan Chase Bank, N.A. In connection with the transition to BMO Harris Bank N.A., the Company canceled its U.S. Domestic credit facility with JPMorgan Chase Bank, N.A. effective on

September 25, 2019.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash 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, 2020		December 31, 2019
Cash and cash equivalents	$	10,640	$	10,914
Restricted cash included in current assets		1,595		2,080
Restricted cash included in long-term assets		371		507
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	12,606	$	13,501

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 ASC

606

Revenue from Contracts with Customers

. At

December 31, 2020

and

2019

, unbilled receivables were approximately $

2,348

and $

1,857

, respectively. Refer to Note

for further detail.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is our management's best estimate of the amount of credit losses in accounts receivable. In order to control and monitor the credit risk associated with our customer base, we review the credit worthiness of customers on a recurring basis. Factors influencing the level of scrutiny include the level of business the customer has with Fuel Tech, the customer's payment history, and the customer's financial stability. Receivables are considered past due if payment is

not

received by the date agreed upon with the customer, which is normally

days. Representatives of our management team review all past due accounts on a weekly basis to assess collectability. At the end of each reporting period, the allowance for doubtful accounts balance is reviewed relative to management's collectability assessment and is adjusted if deemed necessary through a corresponding charge or credit to bad debts expense, which is included in selling, general, and administrative expenses in the consolidated statements of operations. Bad debt write-offs are made when management believes it is probable a receivable will

not

be recovered. The table below sets forth the components of the Allowance for Doubtful Accounts for the years ended

December

31.

Year	Balance at January 1		Provision charged to expense			Write-offs / Recoveries			Balance at December 31
2019	$	1,411	$	573		$	(168	)	$	1,816
2020	$	1,816	$	(498	)	$	(483	)	$	835

Prepaid expenses and other current assets

Prepaid expenses and other current assets includes Chinese banker acceptances of

$549

and

$43

as of

December 31, 2020

and

2019

. These are short-term commitments of typically

three

six

months for future payments and can be redeemed at a discount or applied to future vendor payments.

Inventories

Inventories consist primarily of spare parts and are stated at the lower of cost or net realizable value, using the weighted-average cost method. Usage is recorded in cost of sales in the period that parts were issued to a project or used to service equipment. Inventories are 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 table below sets forth the components of the Excess and Obsolete Inventory Reserve for the years ended

December 31.

Year	Balance at January 1		Provision charged to expense		Write-offs / Recoveries			Balance at December 31
2019		1,131		—		(131	)		1,000
2020		1,000		—		(93	)		907

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 income. The resulting translation adjustments are included in stockholders' equity as part of accumulated other comprehensive loss.

During

2020

, the Company recorded a foreign currency adjustment of

$408

to accumulated other comprehensive loss

Accumulated Other Comprehensive Loss

	December 31,
	2020			2019
Foreign currency translation
Balance at beginning of period	$	(1,778	)	$	(1,285	)
Other comprehensive loss:
Foreign currency translation adjustments (1)		408			(493	)
Balance at end of period	$	(1,370	)	$	(1,778	)
Total accumulated other comprehensive loss	$	(1,370	)	$	(1,778	)

(

)

In all periods presented, there were

tax impacts related to rate changes and certain foreign currency translation adjustments were reclassified to earnings in

2019.

The adjustments reclassified to earnings in

2019

relate to the substantial completion of the liquidation of Fuel Tech S.p.A (Chile) during the

fourth

quarter of

2019.

Research and Development

Research and development costs are expensed as incurred. 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

two

years. A provision for estimated future costs relating to warranty expense is recorded when the products/systems become commercially operational.

Goodwill

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

two

reporting units. 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. For the APC business segment, the Company used working capital as a proxy of fair value for the business segment given the on-going losses in that segment. Fuel Tech performed its annual goodwill impairment analysis for each of its reporting units as of

October 1, 2020

and determined that

impairment of goodwill existed.

Goodwill is allocated to each of our reporting units, which is defined as an operating segment or

one

level below an operating segment, 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. Goodwill is also evaluated for impairment at the reporting unit level. We have

two

reporting units for goodwill evaluation purposes: the FUEL CHEM technology segment and the APC technology segment. There is

goodwill associated with our APC business technology segment.

The Company utilizes ASU

2017

04,

Intangibles-Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment for the annual goodwill impairment test completed during the

fourth

quarter.

The entire goodwill balance of

$2,116

was allocated to the FUEL CHEM technology segment as of

December 31, 2020

and

2019

. The Company did

not

recognize a charge for goodwill impairment for the periods ended

December 31, 2020

and

2019

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 year ended

December 31, 2020

, the Company recorded an abandonment charge of $

197

due to the Company's decision to

longer maintain and defend certain patents and trademarks which are

longer contributing to operations. The abandonment charge was calculated by determining the net book values of the abandoned patent assets by deducting the accumulated amortization from the acquisition cost. The abandonment charge is included in “Intangible assets abandonment and impairment” line in the accompanying Consolidated Statements of Operations for the year then ended

December 31, 2020

During the year ended

December 31, 2019

, Fuel Tech recorded an abandonment charge of $

127

associated with certain international patent assets which the Company elected to

not

maintain and abandon due to limited business opportunities in those regions. The abandonment charge was calculated by determining the net book values of the abandoned patent assets by deducting the accumulated amortization from the acquisition cost. The abandonment charge is included in “Intangible assets abandonment and impairment” line in the accompanying Consolidated Statements of Operations for the year ended

December 31, 2019

Third-party costs related to the development of patents are included within other intangible assets on the consolidated balance sheets. As of

December 31, 2020

and

2019

, the net patent asset balance was $

553

and $

906

, respectively. The

third

-party costs capitalized as patent costs during the years ended

December 31, 2020

and

2019

were

and

$56,

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 Air Pollution Control 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

$185

and

$186

for the years ended

December 31, 2020

and

2019

, respectively. The table below shows the amortization period and other intangible asset cost by intangible asset as of

December 31, 2020

and

2019

, and the accumulated amortization and net intangible asset value in total for all other intangible assets.

			2020							2019
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		1,310		(757	)		553		1,897		(991	)		906
Total			$	1,310	$	(757	)	$	553	$	1,897	$	(991	)	$	906

The table below shows the estimated future amortization expense for intangible assets:

Year	Estimated Amortization Expense
2021	$	145
2022		52
2023		51
2024		44
2025		43
Thereafter		218
Total	$	553

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 from continuing operations was

$663

and

$810

for the years ended

December 31, 2020

and

2019

, respectively. The table below shows the depreciable life and cost by asset class as of

December 31, 2020

and

2019

, and the accumulated depreciation and net book value in total for all classes of assets.

Description of Property and Equipment	Depreciable Life (years)		2020			2019
Land			$	1,050		$	1,050
Building		39		3,950			3,950
Building and leasehold improvements		3 - 39		2,886			2,886
Field equipment		3 - 4		19,748			19,507
Computer equipment and software		2 - 3		2,954			2,936
Furniture and fixtures		3 - 10		1,477			1,475
Vehicles		5		32			32
Construction in process				12			—
Total cost				32,109			31,836
Less accumulated depreciation				(26,889	)		(26,174	)
Total net book value			$	5,220		$	5,662

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

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Fuel Tech's sales of products to customers represent single performance obligations, which are

not

impacted upon the adoption of ASC

606.

The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is

not

separately identifiable from other promises in the contracts and, therefore,

not

distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Air Pollution Control Technology

Fuel Tech's APC contracts are typically

six

eighteen

months in length. A typical contract will have

three

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 has installed over

1,200

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

FUEL CHEM

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

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

For projects containing multiple performance obligations, the Company allocates the transaction price based on the estimated standalone selling price. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which

may

include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variable consideration is allocated specifically to

one

or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation.

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

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

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

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

January 1, 2019,

we adopted ASC

842

"Leases" using the modified retrospective method outlined in ASU

2018

11,

“Leases (Topic

842

) Targeted Improvements.” Refer to Note

for further details regarding the effect of adoption. We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use ("ROU") operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our Consolidated Balance Sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms

may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, and we elected the practical expedient to

not

separate lease and non-lease components for the majority of our leases. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. We also elected the practical expedient to keep leases with an initial term of

months or less off of the consolidated balance sheet.

During the quarter ended

September 30, 2020,

an error was detected in the calculation of the adoption of ASC

842,

"Leases" made on

January 1, 2019.

The calculation included an incorrect lease amount associated with

one

of our leases. This error did

not

correctly present the Right of Use asset and related Operating Lease Liability on the Company's balance sheet.

We evaluated the revision in accordance with Accounting Standards Codification (ASC)

250,

Accounting Changes and Error Corrections and evaluated the materiality of the revision on prior periods' financial statements in accordance with the Securities and Exchange Commission Staff Accounting Bulletin

No.

108,

Quantifying Financial Statement Errors. We concluded that the revision was

not

material to any prior period and, therefore, amendments of previously filed reports are

not

required. Periods

not

presented herein will be revised, as applicable, in future filings. The revision did

not

have an impact on the net loss or earnings per share for the year ended

December 31, 2019.

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

Stock-Based Compensation

Our stock-based employee compensation plan, referred to as the Fuel Tech, Inc.

2014

Long-Term Incentive Plan (Incentive Plan), was adopted in

May 2014

and allows 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 Plan

may

be our directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of our business. There are a maximum of

5,600,676

shares that

may

be issued or reserved for awards to participants under the Incentive Plan as of

December 31, 2020

. Based on the existing issued or reserved awards in Incentive Plan, there are

2,533,639

shares available to be used for future awards to participants in the Incentive Plan as of

December 31, 2020

Basic and Diluted Earnings per Common Share

Basic earnings per share excludes the antidilutive effects of stock options, restricted stock units (RSUs) and the

nil

coupon non-redeemable convertible unsecured loan notes (see Note

). Diluted earnings per share includes the dilutive effect of the

nil

coupon non-redeemable convertible unsecured loan notes, RSUs, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is antidilutive. Out-of-the-money stock options 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, 2020

and

2019

, we had outstanding equity awards of

584,505

and

913,000,

respectively, which were antidilutive for the purpose of calculation of the diluted earnings per share. As of

December 31, 2020

and

2019

, respectively, we had an additional

547,000

and

728,000

equity awards that were antidilutive 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

in calculating earnings (loss) per share:

	2020		2019
Basic weighted-average shares		24,691,000		24,202,000
Conversion of unsecured loan notes		—		—
Unexercised options and unvested restricted stock units		—		—
Diluted weighted-average shares		24,691,000		24,202,000

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, 2020

, we had

two

customers which individually represented greater than

10%

of revenues. Both customers contributed revenues to both product segments but were primarily concentrated in our FUEL CHEM technology segment and represented

28%

of consolidated revenues. We had

customers that accounted for greater than

10%

of our current assets as of

December 31, 2020

For the year ended

December 31, 2019

, we had

three

customers which individually represented greater than

10%

of revenues. One customer contributed primarily to our APC segment and represented

19%

of consolidated revenues. The other

two

customers contributed to the FUEL CHEM technology segment and each customer represented

11%

of consolidated revenues. We had

customers that accounted for greater than

10%

of our current assets as of

December 31, 2019

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.

Treasury Stock

We use the cost method to account for common stock repurchases. During the years ended

December 31, 2020

and

2019

, we withheld

152,257

and

140,784

shares of our Common Shares, valued at approximately

$570

and

$128,

respectively, to settle personal tax withholding obligations that arose as a result of restricted stock units that vested. Refer to Note

“Treasury Stock,” for further discussion.

Recently Issued Accounting Pronouncements

December 2019,

the FASB issued ASU

2019

12,

“Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes.” The new rules reduce complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. The new rules also simplify accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are

not

subject to tax, and enacted changes in tax laws in interim periods. The new rules will be effective for the Company in the

first

quarter of

2021,

with early adoption permitted. The ASU permits either a retrospective basis or a modified retrospective transition approach. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company's financial condition, results of operations, cash flows and disclosures.

June 2016,

the FASB issued ASU

2016

13,

Financial Instruments - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The standard will become effective for interim and annual periods beginning after

December 15, 2022,

with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently in the process of evaluating the impact of adoption, but we do

not

believe the adoption of this standard will have a material impact on our financial statements.