FUEL TECH, INC.

Previous wording

The Company experienced a return to profitable operations during the current quarter, brought on by strong margin contributions from both the FUEL CHEM and Air Pollution Control (APC) operating segments. Improved performance from the FUEL CHEM segment was bolstered by the commercialization of a demonstration program in the second half of 2024, and the APC segment margins were positively impacted by the increase in contributions from ancillary revenues. The Company continues to execute on existing project backlog and support our legacy accounts while actively pursuing additional market opportunities. We continue to invest in development of new technologies to expand our product offerings into the water and waste-water treatment market. Our capital resources are sufficient for our immediate and longer-term needs, and we continue to enjoy the services and support of a dedicated workforce. We expect that our cost control efforts will maintain our existing levels of operating expenditures and that new business opportunities will lead to an improved financial and market outlook.

Current wording

In the first quarter of 2026, the Company continued to execute on existing APC segment projects while actively pursuing new contract awards. FUEL CHEM segment revenue was negatively impacted due to seasonal maintenance outages and dispatch related decreases in operational demand. We continue to invest in development of new technologies to expand our product offerings into the water and waste-water treatment market. Our capital resources are sufficient for our immediate and longer-term needs, and we continue to enjoy the services and support of a dedicated workforce. We expect that our cost control efforts will maintain our existing levels of operating expenditures and that new business opportunities will lead to an improved financial and market outlook.

Previous wording

Our APC business experienced a decrease in revenue in the current quarter as compared to 2024, primarily due to timing of project execution and customer driven delays. We are encouraged by the depth of our business development activities, which reflects an increased focus on global emissions protocols across a variety of fuel sources. Our Consolidated APC backlog at September 30, 2025 was $9,472 and our global sales pipeline is in the $75 -100 million range.

Current wording

Our APC business experienced an increase in revenue and segment operating profit in the current quarter as compared to 2025, primarily due to timing of project execution as well as an increase in ancillary revenue. We are encouraged by the depth of our business development activities, which reflects an increased focus on global emissions protocols across a variety of fuel sources. Our Consolidated APC backlog at March 31, 2026 was $6,923 and our global sales pipeline is in the $75 -100 million range.

Previous wording

Revenues for the three-month periods ending September 30, 2025 and 2024 were$7,490 and$7,851, respectively, representing a decrease of$361, or 5%, versus the same period last year. Revenues for the nine-month periods ending September 30, 2025 and 2024 were $19,430 and $19,850, respectively, representing a decrease of $420, or 2%, versus the same period last year.

Current wording

Revenues for the three-month periods ending March 31, 2026 and 2025 were$6,080 and$6,382, respectively, representing a decrease of$302, or 5%, versus the same period last year.

Previous wording

The APC technology segment generated revenues of $2,707 for the three-month period ended September 30, 2025, representing a decrease of$517, or 16%, from the prior year amount of $3,224. The APC technology segment generated revenues of $6,515 for the nine-month period ended September 30, 2025, representing a decrease of $2,976, or 31%, from the prior year amount of $9,491. This decrease in APC revenue was primarily related to timing of project execution on existing contracts. Consolidated APC backlog at September 30, 2025 was $9,472 versus backlog at December 31, 2024 of $6,175. Our current backlog consists of U.S. domestic delivered projects totaling $3,989 and international delivered projects totaling $5,483.

Current wording

The APC technology segment generated revenues of $1,604 for the three-month period ended March 31, 2026, representing an increase of$301, or 23%, from the prior year amount of $1,303. This increase in APC revenue was primarily related to timing of project execution on existing contracts. Consolidated APC backlog at March 31, 2026 was $6,923 versus backlog at December 31, 2025 of $7,047. Our current backlog consists of U.S. domestic delivered projects totaling $3,657 and international delivered projects totaling $3,266.

Previous wording

The FUEL CHEM technology segment generated revenues of $4,783 and $4,627 for the three-month periods ended September 30, 2025 and 2024, respectively, representing an increase of $156, or 3%, versus the same period last year. The FUEL CHEM technology segment generated revenues of $12,915 and $10,359 for the nine-month periods ended September 30, 2025 and 2024, respectively, representing an increase of $2,556, or 25%. This increase in FUEL CHEM revenue for the three and nine months ended September 30, 2025 as compared to the same period in the prior year was primarily due tooutage completions and increased operation dispatch at legacy accounts, as well as sustained business from a new customer account added midyear in 2024.

Current wording

The FUEL CHEM technology segment generated revenues of $4,476 and $5,079 for the three-month periods ended March 31, 2026 and 2025, respectively, representing a decrease of $603, or 12%, versus the same period last year. This decrease in FUEL CHEM revenue for the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to seasonal maintenance outages and dispatch related decreases in operational demand.

Previous wording

Consolidated gross margin percentage for the three-month periods ended September 30, 2025 and 2024 was 49% and 43%, respectively. For the three-month periods ended September 30, 2025 and 2024 the FUEL CHEM operating segment gross margin was 50% and 49%, respectively. FUEL CHEM gross margin increased from the prior year primarily due to an increased volume of sales activity combined with relatively flat segment administrative expenses. APC segment gross margin increased to 47% from 35% primarily due to product and project mix.

Current wording

Consolidated gross margin percentage for the three-month periods ended March 31, 2026 and 2025 was 43% and 46%, respectively. For the three-month periods ended March 31, 2026 and 2025 the FUEL CHEM operating segment gross margin was 45% and 50%, respectively. FUEL CHEM gross margin decreased from the prior year primarily due to a decreased volume of sales activity combined with relatively flat operational expenses. APC segment gross margin increased to 38% from 33% primarily due to product and project mix.

Previous wording

Selling, general and administrative expenses (SG&A) were$3,207 and$3,225 for the three-month periods ended September 30, 2025 and 2024, respectively. For the three-month period ended September 30, 2025, the decrease of $18 is primarily the result of a decrease in administrative expenses. For the three-month periods ending September 30, 2025 and 2024, SG&A as a percentage of revenues increased to 43% from 41%. The increase versus the comparable period is primarily due to the decrease in revenues compared to prior quarter.

Current wording

Selling, general and administrative expenses (SG&A) were$3,716 and$3,341 for the three-month periods ended March 31, 2026 and 2025, respectively. For the three-month period ended March 31, 2026, the increase of $375 is primarily the result of an increase in employee-related expenses of $195, an increase in professional fees of $109, and an increase in administrative expenses for domestic and international locations of $74. For the three-month periods ending March 31, 2026 and 2025, SG&A as a percentage of revenues increased to 61% from 52%. The increase versus the comparable period is primarily due to the decrease in revenues and increase in SG&A compared to prior quarter.

Previous wording

Research and development expenses were$450 and$361 for the three-month periods ended September 30, 2025 and 2024, respectively. Research and development expenses were $1,510 and $1,159 for the nine-month periods ended September 30, 2025 and 2024, respectively. The expenditures in our research and development expenses are focused on new product development efforts in the pursuit of commercial applications for technologies outside of our traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities. This includes water treatment technologies and more specifically, our DGI® Dissolved Gas Infusion Systems, an innovative alternative to current aeration technology. This infusion process has a variety of applications in the water and wastewater industries, including remediation, treatment, biological activity, and wastewater odor management. DGI® technology benefits include reduced energy consumption, installation costs, and operating costs, while improving treatment performance.

Current wording

Research and development expenses were$524 and$570 for the three-month periods ended March 31, 2026 and 2025, respectively. The expenditures in our research and development expenses are focused on new product development efforts in the pursuit of commercial applications for technologies outside of our traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities. This includes water treatment technologies and more specifically, our DGI® Dissolved Gas Infusion Systems, an innovative alternative to current aeration technology. This infusion process has a variety of applications in the water and wastewater industries, including remediation, treatment, biological activity, and wastewater odor management. DGI® technology benefits include reduced energy consumption, installation costs, and operating costs, while improving treatment performance.

Previous wording

Interest income was$311 for the three-month period ended September 30, 2025 compared to$323 for the same period in 2024. Interest income was $1,127 for the nine-month period ended September 30, 2025 compared to $968 for the same period in 2024. Interest income primarily relates to interest received on the held-to-maturity debt securities and money market funds. Interest income for the nine-month period ended September 30, 2025 included $263 in interest income related to collection of our ERC benefit.

Current wording

Interest income was$240 for the three-month period ended March 31, 2026 compared to$279 for the same period in 2025. Interest income primarily relates to interest received on the held-to-maturity debt securities and money market funds.

Previous wording

Other expense, net was$5 for the three-month period ended September 30, 2025 compared to Other expense, net of$63 for the same period in 2024. Other income, net was $15 for the nine-month period ended September 30, 2025 compared to Other income, net of $1,576 for the same period in 2024. Other income and expense in 2025 and Other expense for the three-month period ended September 30, 2024 was mainly due to transactional foreign exchange gains and losses recognized from repayment of intercompany balances. Other income for the nine-month period ended September 30, 2024 primarily relates to the employee retention credit of $1,677 recorded in the first quarter of 2024.

Current wording

Other expense, net was$0 for the three-month period ended March 31, 2026 compared to Other expense, net of$66 for the same period in 2025. Other expense for the three-month period ended March 31, 2025 was mainly due to transactional foreign exchange gains and losses recognized from repayment of intercompany balances.

Previous wording

We have losses from operations during thenine-month period ended September 30, 2025 totaling$2,256. Our cash provided by operations for this same period totaled$4,583.

Current wording

We have losses from operations during thethree-month period ended March 31, 2026 totaling$1,596. Our cash used in operations for this same period totaled$847.

Previous wording

Our cash and cash equivalent balance as of September 30, 2025 totaled $13,677, which includes $2,221 of cash equivalents, and our working capital totaled $26,043. We have no outstanding debt other than our outstanding letters of credit, under our Investment Collateral Security agreement with BMO Harris Bank, N.A. (the Investment Collateral Security agreement), which does not have any financial covenants. We expect to continue operating under this arrangement for the foreseeable future.

Current wording

Our cash and cash equivalent balance as of March 31, 2026 totaled $9,109, which includes $1,320 of cash equivalents, and our working capital totaled $22,166. We have no outstanding debt other than our outstanding letters of credit, under our Investment Collateral Security agreement with BMO Harris Bank, N.A. (the Investment Collateral Security agreement), which does not have any financial covenants. We expect to continue operating under this arrangement for the foreseeable future.

Previous wording

Operating activities provided cash of$4,583 for thenine-month period ended September 30, 2025, primarily due to a decrease in accounts receivable of $3,082, collections of the ERC receivable of $1,677, an increase in accrued liabilities and other noncurrent liabilities of $516, a decrease in prepaid expenses, other current assets, and other non-current assets of $302, and removals of non-cash items from our net loss from continuing operations of depreciation and amortization of $517 and stock-based compensation, net of forfeitures of $269, offset by a decrease in accounts payable of $560.

Current wording

Operating activities provided cash of $1,508 for thethree-month period ended March 31, 2025, primarily due to a decrease in accounts receivable of $3,768 and removals of non-cash items from our net loss from continuing operations of depreciation and amortization of $173 and stock-based compensation, net of forfeitures of $110, offset by a decrease in accounts payable of $1,340, a decrease in accrued liabilities and other non-current liabilities of $249, an increase in inventory of $137, an increase in prepaid expenses, other current assets and other non-current assets of $28, and removals of non-cash items from our net loss from continuing operations of interest income on held-to-maturity securities of $50.

Previous wording

Investing activities provided cash of $765 and used cash of $3,388 for thenine-month periods ended September 30, 2025 and 2024, respectively. Investing activities for thenine-month periods ended September 30, 2025 and 2024 primarily consisted of purchases of debt securities as investments of $10,004 and $14,072, respectively. Investing activities for thenine-month periods ended September 30, 2025 and 2024 were funded by the maturities of debt securities of $11,000 in both periods.

Current wording

Investing activities used cash of $1,914 and provided cash of $1,692 for thethree-month periods ended March 31, 2026 and 2025, respectively. Investing activities for thethree-month periods ended March 31, 2026 and 2025 primarily consisted of purchases of debt securities as investments of $6,092 and $993, respectively. Investing activities for thethree-month periods ended March 31, 2026 and 2025 were funded by the maturities of debt securities of $4,500 and $2,750, respectively.

Previous wording

Financing activities used cash of $222 and $95, respectively, for the nine months ended September 30, 2025 and 2024 due to taxes paid on behalf of the equity award participants on the vesting of restricted stock units.

Current wording

Financing activities used cash of $34 and $24, respectively, for the three months ended March 31, 2026 and 2025 due to taxes paid on behalf of the equity award participants on the vesting of restricted stock units.

Previous wording

We expect additional capital expenditures during the fourth quarter of 2025 for the DGI business, maintenance of field equipment, computer and systems, and general office equipment. We expect to fund our capital expenditures with cash from operations or cash on hand.

Current wording

We expect additional capital expenditures in 2026 for the DGI business, maintenance of field equipment, computer and systems, and general office equipment. We expect to fund our capital expenditures with cash from operations or cash on hand.

Previous wording

The Company's Investment Collateral Security agreement is used for the sole purpose of issuing standby letters of credit and requires us to pledge our investments as collateral for 150% of the aggregate face amount of outstanding standby letters of credit. The Company pays 250 basis points on the face values of outstanding letters of credit. There are no financial covenants set forth in the Investment Collateral Security agreement. At September 30, 2025, the Company had outstanding standby letters of credit totaling approximately $3,141 under the Investment Collateral Security agreement. At September 30, 2025, the investments held as collateral totaled $4,711. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments.

Current wording

The Company's Investment Collateral Security agreement is used for the sole purpose of issuing standby letters of credit and requires us to pledge our investments as collateral for 150% of the aggregate face amount of outstanding standby letters of credit. The Company pays 250 basis points on the face values of outstanding letters of credit. There are no financial covenants set forth in the Investment Collateral Security agreement. At March 31, 2026, the Company had outstanding standby letters of credit totaling approximately $1,866 under the Investment Collateral Security agreement. At March 31, 2026, the investments held as collateral totaled $2,798. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments.

Previous wording

Fuel Tech issues a standard product warranty with the sale of its products to customers as discussed in Note 13. There was no change in the warranty liability balance during the nine months ended September 30, 2025.

Current wording

Fuel Tech issues a standard product warranty with the sale of its products to customers as discussed in Note 13. There was no change in the warranty liability balance during the three months ended March 31, 2026.