Revenue

The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Fuel Tech's sales of products to customers generally represent single performance obligations. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is

not

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

not

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

We generally expense sales commissions on a ratable basis when incurred because the amortization period would have been

one

year or less. These costs are recorded within selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.

Air Pollution Control Technology

Fuel Tech's APC contracts are typically

six

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

Fuel Tech has installed over

1,200

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

FUEL CHEM

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

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

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

may

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

one

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

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

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

Disaggregated Revenue by Product Technology

The following table presents our revenues disaggregated by product technology:

	Three Months Ended
	March 31,
	2021		2020
Air Pollution Control
Technology solutions	$	373	$	729
Spare parts		180		199
Ancillary revenue		354		268
Total Air Pollution Control Technology revenues		907		1,196
FUEL CHEM
FUEL CHEM technology solutions		4,126		2,582
Total Revenues	$	5,033	$	3,778

Disaggregated Revenue by Geography

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

	Three Months Ended
	March 31,
	2021		2020
United States	$	4,463	$	3,097
Foreign Revenues
Latin America		75		146
Europe		375		393
Asia		120		142
Total Foreign Revenues		570		681
Total Revenues	$	5,033	$	3,778

Timing of Revenue Recognition

The following table presents the timing of our revenue recognition:

	Three Months Ended
	March 31,
	2021		2020
Products transferred at a point in time	$	4,660	$	3,049
Products and services transferred over time		373		729
Total Revenues	$	5,033	$	3,778

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheets. In our Air Pollution Control Technology segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. These assets are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. At

March 31, 2021

and

December 31, 2020

, contract assets were approximately

$355

and

$1,927,

respectively, and are included in accounts receivable on the consolidated balance sheets.

However, the Company will periodically bill in advance of costs incurred before revenue is recognized, resulting in contract liabilities. These liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Contract liabilities were

$787

and

$850,

March 31, 2021

and

December 31, 2020

, respectively, and are included in other accrued liabilities on the consolidated balance sheets.

Changes in the contract asset and liability balances during the

three

month period ended

March 31, 2021

, were

not

materially impacted by any other items other than amounts billed and revenue recognized as described previously. Revenue recognized that was included in the contract liability balance at the beginning of the period was

$108

for the

three

months ended

March 31, 2021

, and

$248

for

three

months ended

March 31, 2020

, which represented primarily revenue from progress towards completion of our Air Pollution Control technology contracts.

As of

March 31, 2021

, we had

one

construction contract in progress that was identified as a loss contract and a provision for losses of

$50

was recorded in other accrued liabilities on the consolidated balance sheet. Refer to Footnote

for an accrual related to an equipment failure issue with a Customer that requires remedy under the warranty provision of the customer contract. As of

December 31, 2020

, we had

one

construction contract in progress that was identified as a loss contract and a provision for losses in the amount of

$176

was recorded in other accrued liabilities on the consolidated balance sheet.

Remaining Performance Obligations

Remaining performance obligations, represents the transaction price of Air Pollution Control technology booked orders for which work has

not

been performed. As of

March 31, 2021

, the aggregate amount of the transaction price allocated to remaining performance obligations was

$5,151.

The Company expects to recognize revenue on approximately

$3,000

of the remaining performance obligations over the next

months with the remaining recognized thereafter.

Accounts Receivable

The components of accounts receivable are as follows:

	As of
	March 31, 2021			December 31, 2020
Trade receivables	$	4,231		$	5,015
Unbilled receivables		1,196			2,348
Other short-term receivables		51			20
Allowance for doubtful accounts		(877	)		(835	)
Total accounts receivable	$	4,601		$	6,548