##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 For the fiscal year ended: December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 For the transition period from  to
 Commission File No. 001-33059
 Fuel Tech, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-5657551(State or other jurisdiction of incorporation of organization)
    
    (I.R.S. Employer Identification Number)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Common Stock $0.01 par value per share
    
    The NASDAQ Stock Market, Inc(Title of Class)
    
    (Name of Exchange on Which Registered)
 Securities registered pursuant to Section 12(g) of the Act: None
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
 Yes o       No þ
 Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
 Yes o       No þ
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. o
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
 Yes þ       No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted to Rule
405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes o No þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, non-accelerated filer or a smaller reporting company (as defined in rule 12b-2 under
the Securities Exchange Act of 1934).
 Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes
o      
No þ
 The aggregate market value of the voting stock held by non-affiliates of the registrant based
on the average bid and asked prices of June 30, 2009 was $174,532,000. The aggregate market
value of the voting stock held by non-affiliates of the registrant based on the average bid
and asked prices of February 10, 2009 was $111,084,000.
 Indicate number of shares outstanding of each of the registered classes of Common Stock at
March 1, 2010: 24,211,967 shares of Common Stock, $0.01 par value.
 Documents incorporated by reference:
 Certain portions of the Proxy Statement for the annual meeting of stockholders to be held in
2010 are incorporated by reference in Parts II, III, and IV hereof.




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##### 



TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    7Item 1B. Unresolved Staff Comments
    
    
    8Item 2. Properties
    
    
    9Item 3. Legal Proceedings
    
    
    9Item 4. Submission of Matters to a Vote of Security Holders
    
    
    9PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchase
of Equity Securities
    
    
    9Item 6. Selected Financial Data
    
    
    11Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 8. Financial Statements and Supplementary Data
    
    
    21Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    48Item 9A. Controls and Procedures
    
    
    48Item 9B. Other Information
    
    
    48PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    49Item 11. Executive Compensation
    
    
    50Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    50Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    50Item 14. Principal Accountant Fees and Services
    
    
    50PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    51Signatures and Certifications
    
    
    55




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TABLE OF DEFINED TERMS
 Term
    
    DefinitionABC
    
    American Bailey CorporationAIG
    
    Ammonia Injection GridASCR
    
    A trademark used to describe Fuel Techs combination
of SNCR and SCRCAAA
    
    Clean Air Act Amendments of 1990CAIR
    
    Clean Air Interstate RuleCASCADE
    
    A trademark used to describe Fuel
Techs combination of SNCR and SCRCAVR
    
    Clean Air Visibility RuleCFD
    
    Computational Fluid DynamicsCommon Shares
    
    Shares of the Common Stock of Fuel TechCommon Stock
    
    Common Stock of Fuel TechEPA
    
    The U.S. Environmental Protection AgencyFGC
    
    Flue Gas ConditioningFUEL CHEM®
    
    A trademark used to describe Fuel Techs fuel and flue gas treatment
processes, including its TIFI® Targeted In-Furnace Injection technology to
control slagging, fouling, corrosion and a variety of sulfur trioxide-related
issuesGSG
    
    Graduated Straightening GridHERT
High Energy Reagent Technology
    
    A trademark used to describe a Fuel
Tech SNCR processLoan Notes
    
    Nil-coupon, non-redeemable convertible unsecured loan notes of Fuel TechNOx
    
    Oxides of nitrogenNOxOUT®
    
A trademark used to describe Fuel
Techs SNCR process for the reduction of NOx.NOxOUT-SCR®
    
    A trademark used to describe Fuel Techs direct injection of urea as a
catalyst reagent.SCR
    
    Selective Catalytic ReductionSIP Call
    
    State Implementation Plan RegulationSNCR
    
    Selective Non-Catalytic ReductionTCI® Targeted
Corrosion Inhibition
    
    A FUEL CHEM program designed for high-temperature slag and corrosion control,
principally in waste-to-energy boilersTIFI® Targeted In-Furnace Injection
    
    A proprietary technology that enables the precise injection of a chemical
reagent into a boiler or furnace as part of a FUEL CHEM programULTRA
    
    A trademark used to describe Fuel Techs process for generating ammonia for
use as SCR reagent




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Fuel Tech, Inc. and Subsidiaries




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##### Table of Contents



PART I
 Forward-Looking Statements
  
 ITEM 1
    
    - BUSINESS
  Fuel Tech
 www.ftek.com
 ® ® ® 2.5 ®
 American Bailey Corporation
  Air Pollution Control
 Regulations and Markets
  1




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2




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Fossil-Fired Power Plants NOx Emission Prevention and Control Policy
   Products
  
    
    Low NOx Burners and Ultra Low NOx Burners are available for coal-, oil-, and gas-fired
industrial and utility units. Each system application is specifically designed to maximize
NOx reduction. Computational Fluid Dynamics combustion modeling is used to validate the
design prior to fabrication of equipment. NOx reductions can range from 40%-60% depending
on the fuel type. Over-Fire Air systems stage combustion for enhanced NOx reduction.
Additional NOx reductions, beyond Low NOx Burners, of 35%-50%, are possible on different
boiler configurations on a range of fuel types. Combined overall reductions range from
50-70%, with overall capital costs range from $10  $20/kW and levelized total costs
ranging from $300  $1,500/ton of NOx removed, depending on the scope.
    
    Fuel Techs NOxOUT and HERT SNCR processes use non-hazardous urea as the reagent rather
than ammonia. Both the NOxOUT and HERT processes on their own are capable of reducing NOx
by up to 25%  50% for utilities and by potentially significantly greater amounts for
industrial units in many types of plants with capital costs ranging from $5  $20/kW for
utility boilers and with total annualized operating costs ranging from $1,000  $2,000/ton
of NOx removed.
    
    Fuel Techs Advanced Selective Catalytic Reduction
(ASCRTM) systems include
LNB, OFA, and SNCR components, along with a downsized SCR catalyst,
Ammonia Injection Grid
(AIG), and Graduated Straightening Grid (GSGTM) systems to provide up to 90% NOx
reduction at significantly lower capital and operating costs than conventional SCR systems
while providing greater operational flexibility to plant operators. The capital costs for
ASCR systems can range from $30  $150/kW depending on boiler size and configuration, which
is significantly less than that of conventional SCRs, which can cost $300/kW or more, while
operating costs are competitive with those experienced by SCR systems. The
CASCADETM and NOxOUT-SCR® processes are basic types of ASCR systems
which use just SNCR and SCR catalyst components. The CASCADE systems can achieve 60-70%
NOx reduction, with capital costs being a portion of the ASCR values defined above. Fuel
Techs NOxOUT-SCR process utilizes urea as the SCR catalyst reagent to achieve NOx
reductions of up to 85% from smaller stationary combustion sources with capital and
operating costs competitive with equivalently sized, standard SCR systems.
    
    Fuel Techs ULTRATM process is designed to convert urea to ammonia safely and
economically for use as a reagent in the SCR process for NOx reduction. Recent local
objections in the ammonia permitting process have raised concerns regarding the safety of
ammonia shipment and storage in quantities sufficient to supply SCR. In addition, the
Department of Homeland Security has characterized anhydrous ammonia as a Toxic Inhalation
Hazard (TIH) commodity. This is contributing to new restrictions by rail carriers on the
movement of anhydrous ammonia and to an escalation in associated rail transport and
insurance rates. Overseas, new coal-fired power plants incorporating SCR systems are
expected to be constructed at a rapid rate in China, and Fuel Techs ULTRA process is
believed to be a market leader for the safe conversion of urea to ammonia just prior to
injection into the flue gas duct, which is particularly important near densely populated
cities, major waterways, harbors or islands, or where the transport of anhydrous or aqueous
ammonia is a safety concern.
 3




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
    
    Under an exclusive licensing agreement with FGC Corporation, Fuel Tech sells flue gas
conditioning systems incorporating FGC Corporation technology for utility applications in
all geographies outside the United States and Canada. Flue gas conditioning systems
improve the efficiency of particulate collectors, including electrostatic precipitators
(ESPs) and fabric filters. These conditioning systems represent a far lower capital cost
approach to improving ash particulate capture versus the alternative of installing larger
ESPs or fabric filter technology to meet opacity levels.
    
    Fuel Tech now provides process design optimization, performance testing and improvement,
and catalyst selection services for SCR systems on coal-fired boilers. In addition, other
related services, including start-ups, maintenance support and general consulting services
for SCR systems, as well as ammonia injection grid design and tuning, to help optimize
catalyst performance and catalyst management services to help optimize catalyst life, are
now offered to customers around the world. Fuel Tech also specializes in both physical
experimental models, which involve construction of scale models through which fluids are
tested, and computational fluid dynamics models, which simulate fluid flow by generating a
virtual replication of real-world geometry and operating inputs. Fuel Tech designs flow
corrective devices, such as turning vanes, ash screens, static mixers and our patent
pending Graduated Straightening Grid GSGTM. Fuel Techs models help
clients optimize performance in flow critical equipment, such as selective catalytic
reactors in SCR systems, where the effectiveness and longevity of catalysts are of utmost
concern. The Companys modeling capabilities are also applied to other power plant systems
where proper flow distribution and mixing are important for performance, such as flue gas
desulphurization scrubbers, electrostatic precipitators, air heaters, exhaust stacks and
carbon injection systems for mercury removal.
  NOx Reduction Competition
        APC BACKLOG
  4




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FUEL CHEM
 Product and Markets
  3 2.5 2
  3
 3
 2
   Competition
 3
 5




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INTELLECTUAL PROPERTY
  EMPLOYEES
  ACQUISITION
  6




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##### Table of Contents



ITEM 1A
    
    - RISK FACTORS
    -
    
    The Air Pollution Control technology segment includes technologies to reduce NOx
emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion
sources. These include Low- and Ultra-Low NOx Burners (LNB and ULNB), Over-Fire Air
(OFA) systems, NOxOUT® and HERTTM Selective Non-Catalytic Reduction
(SNCR) systems, and Advanced Selective Catalytic Reduction (ASCRTM) systems.
The ASCR system includes ULNB, OFA, and SNCR components, along with a downsized SCR
catalyst, ammonia injection grid (AIG), and Graduated Straightening Grid GSGTM
systems to provide high NOx reductions at significantly lower capital and operating costs
than conventional SCR systems. The CASCADETM and NOxOUT-SCR®
processes are basic types of ASCR systems, using just SNCR and SCR catalyst components.
ULTRA technology creates ammonia at a plant site using safe urea for use with any SCR
application. Flue gas conditioning systems are chemical injection systems offered in
markets outside the U.S. and Canada to enhance electrostatic precipitator and fabric
filter performance in controlling particulate emissions.-
    
    The FUEL CHEM® technology segment, which uses chemical processes in
combination with advanced CFD and CKM boiler modeling, for the control of slagging,
fouling, corrosion, opacity and other sulfur trioxide-related issues in furnaces and
boilers through the addition of chemicals into the furnace using TIFI®Targeted
In-Furnace Injection technology.
   Products NOx Reduction Competition Air Pollution Control
 3
  Regulations and Markets Air Pollution Control
 (iv)
    
    Protection of Patents and Proprietary Rights
  7




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##### Table of Contents



ITEM 1B
    
    - UNRESOLVED STAFF COMMENTS
  8




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##### Table of Contents



ITEM 2
    
    - PROPERTIES
  -
    
    The Stamford, Connecticut building lease term, for approximately 6,000 square feet,
runs from February 1, 2010 to January 31, 2020. The facility houses certain
administrative functions such as Investor Relations and certain APC sales functions.
This lease replaces the prior facility lease for a separate location in Stamford which
expired on January 31, 2010, which Fuel Tech did not renew. .-
    
    The Beijing, China building lease term, for approximately 4,000 square feet, runs
from September 1, 2009 to August 31, 2010. This facility serves as the operating
headquarters for our Beijing Fuel Tech operation. Fuel Tech has the option to extend the
lease term at a market rate to be agreed upon between Fuel Tech and the lessor.-
    
    The Durham, North Carolina building lease term, for approximately 16,000 square
feet, runs from November 1, 2005 to April 30, 2014. This facility houses the former
Tackticks and FlowTack operations. Fuel Tech has no option to extend the lease.
  
 ITEM 3
    
    - LEGAL PROCEEDINGS
  
 ITEM 4
    
    - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5
    
    - MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF
EQUITY SECURITIES
 Market
  Prices
  2009
    
    High
    
    LowFourth Quarter
    
    $
    12.65
    
    
    $
    7.51Third Quarter
    
    
    12.55
    
    
    
    7.90Second Quarter
    
    
    14.15
    
    
    
    9.28First Quarter
    
    
    12.23
    
    
    
    7.01
 2008
    
    High
    
    LowFourth Quarter
    
    $
    18.95
    
    
    $
    6.05Third Quarter
    
    
    24.76
    
    
    
    14.52Second Quarter
    
    
    27.16
    
    
    
    17.55First Quarter
    
    
    22.94
    
    
    
    14.15
 9




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Dividends
  Share Repurchase Program
  Holders
  Transfer Agent
  Performance Graph
  
 10




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##### Table of Contents



ITEM 6
    
    - SELECTED FINANCIAL DATA
  CONSOLIDATED STATEMENT of
OPERATIONS DATA
 For the years ended December 312009
    
    2008
    
    2007
    
    2006
    
    2005(in thousands of dollars, except for share
and per- share data)Revenues
    
    $
    71,397
    
    
    $
    81,074
    
    
    $
    80,297
    
    
    $
    75,115
    
    
    $
    52,928Cost of sales
    
    
    42,444
    
    
    
    44,345
    
    
    
    42,471
    
    
    
    38,429
    
    
    
    27,118Selling, general and administrative and
other costs and expenses
    
    
    32,034
    
    
    
    30,502
    
    
    
    27,087
    
    
    
    25,953
    
    
    
    18,655Operating (loss) income
    
    
    (3,081
    )
    
    
    6,227
    
    
    
    10,739
    
    
    
    10,733
    
    
    
    7,155Net (loss) income
    
    
    (2,306
    )
    
    
    3,360
    
    
    
    7,243
    
    
    
    6,826
    
    
    
    7,588Basic (loss) income per Common Share
    
    $
    (0.10
    )
    
    $
    0.14
    
    
    $
    0.33
    
    
    $
    0.32
    
    
    $
    0.38Diluted (loss) income per Common Share
    
    $
    (0.10
    )
    
    $
    0.14
    
    
    $
    0.29
    
    
    $
    0.28
    
    
    $
    0.33Weighted-average basic shares outstanding
    
    
    24,148,000
    
    
    
    23,608,000
    
    
    
    22,280,000
    
    
    
    21,491,000
    
    
    
    20,043,000Weighted-average diluted shares outstanding
    
    
    24,148,000
    
    
    
    24,590,000
    
    
    
    24,720,000
    
    
    
    24,187,000
    
    
    
    23,066,000
 CONSOLIDATED BALANCE SHEET DATA
 December 312009
    
    2008
    
    2007
    
    2006
    
    2005(in thousands of dollars)Working capital
    
    $
    30,578
    
    
    $
    43,956
    
    
    $
    45,143
    
    
    $
    38,715
    
    
    $
    19,590Total assets
    
    
    92,262
    
    
    
    88,631
    
    
    
    87,214
    
    
    
    65,660
    
    
    
    44,075Long-term obligations
    
    
    2,196
    
    
    
    1,389
    
    
    
    1,255
    
    
    
    500
    
    
    
    448Total liabilities
    
    
    14,040
    
    
    
    15,056
    
    
    
    23,975
    
    
    
    18,005
    
    
    
    14,939Stockholders equity (1)
    
    
    78,222
    
    
    
    73,575
    
    
    
    63,239
    
    
    
    47,655
    
    
    
    29,136
 
 Notes:(1)
    
    Stockholders equity includes principal amount of nil coupon non-redeemable perpetual loan
notes. See Note 6 to the consolidated financial statements. 11




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ITEM 7
    
    - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Background
  Air Pollution Control Technologies
 ® TM TM TM TM ®
 FUEL CHEM Technologies
 ® ®
  Critical Accounting Policies and Estimates
  Revenue Recognition
   12




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Allowance for Doubtful Accounts
  Assessment of Potential Impairments of Goodwill and Intangible Assets
     13




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Impairment of Long-Lived Assets and Amortizable Intangible Assets
  Valuation Allowance for Deferred Income Taxes
  Stock-Based Compensation
  Recently Adopted Accounting Standards
   14




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2009 versus 2008
        15




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
    
    Personnel and other expenses related to the acquisitions of substantially all of the
assets of Tackticks LLC, FlowTack LLC, and ACT contributed additional incremental expenses
of $2,292 for fiscal 2009.
    
    The implementation of a new sales commission program for both the APC and FUEL CHEM
technology segments resulted in an increase of $793 in commission expense.
    
    The Company also incurred year-over-year increases in depreciation expense of $395
driven by the acceleration of leasehold improvement amortization expense related to the
termination of the current Stamford office lease, legal fees of $250 due to international
contracts and acquisition-related activities, and accounting and auditing fees of $109
primarily related to acquisition-related activities.
    
    Partially offsetting these amounts were a $781 one-time gain from the revaluation
of the contingent liability related to the ACT acquisition.
    2008 versus 2007
     16




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##### Table of Contents



-
    
    Fuel Tech recorded $5,815 in stock compensation expense in 2008 in accordance with ASC
718, as discussed in Note 7 to the consolidated financial statements. This amount
represented a $1,024 increase over 2007, attributable to stock option awards to Directors
and certain Fuel Tech employees in 2008 and the on-going expense recognition related to
stock options awarded in prior years.-
    
    Fuel Tech invested approximately $2,000 in personnel and other costs, including
expenses associated with the start-up of the Companys Beijing, China office, in the areas
of Engineering, Sales, Marketing and Administration to ensure the Companys financial and
operational infrastructure are able to accommodate anticipated future growth.-
    
    Partially offsetting this unfavorable variance was a reduction in annual incentive
expenses of $1,500 as the minimum income threshold for the year ended December 31, 2008 was
not met and, thus, no 2008 bonus payments were made under the Companys incentive plan.-
    
    The Company also incurred incremental year-over-year expense increases in the following
areas: consulting services increased $486 driven by expertise required in certain foreign
countries for initial market penetration and domestic financial advisory services;
acquisition-related expenses of $390, insurance expense increased $210 due to general
inflation, the addition of new policies, increased coverage on certain policies and an
increase in insurable assets; recruiting fees increased $316 due to the costs associated
with adding one new member to our Board of Directors and the hiring of a new Chief
Financial Officer; and non-income taxes increased $199 due primarily to a foreign
business tax increase and additional real estate taxes on the Companys new
headquarters facility.
    Liquidity and Sources of Capital
  17




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18




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Contractual Obligations and Commitments
   Payments due by period in thousands of dollarsContractual Cash
    
    
    
    
    
    Less than 1
    
    
    
    
    
    
    
    
    
    More than 5Obligations
    
    Total
    
    year
    
    1-3 years
    
    3-5 years
    
    yearsShort-Term Debt
Obligations
    
    $
    2,925
    
    
    $
    2,925
    
    
    $
    
    
    
    $
    
    
    
    $
    Estimated interest
payments on
long-term debt
obligations*
    
    
    170
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease
Obligations
    
    
    3,955
    
    
    
    623
    
    
    
    1,075
    
    
    
    807
    
    
    
    1,450Total
    
    $
    7,050
    
    
    $
    3,718
    
    
    $
    1,075
    
    
    $
    807
    
    
    $
    1,450
 
 *
    
    Long-term debt obligations consist solely of borrowings under the Companys Chinese revolving
credit facility which bears interest at a rate of 120% of the Peoples Bank of China (PBOC) Base
Rate, or 5.8%, at December 31, 2009.   -
    
    in support of the warranty period defined in the contract; or-
    
    in support of the system performance criteria that are defined in the contract.
  Commitment expiration by period in thousands of dollarsCommercial
    
    
    
    
    
    Less than 1Commitments
    
    Total
    
    year
    
    2-3 years
    
    4-5 years
    
    ThereafterStandby letters of
credit and bank
guarantees
    
    $
    5,622
    
    
    $
    4,819
    
    
    $
    165
    
    
    $
    638
    
    
    $
    
 19




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##### Table of Contents



Commitment expiration by period in thousands of dollarsCommercial
    
    
    
    
    
    Less than 1Commitments
    
    Total
    
    year
    
    2-3 years
    
    4-5 years
    
    ThereafterASC 740 Obligations
    
    $
    724
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    724
 Off-Balance-Sheet Transactions
  Subsequent Events
  
 ITEM 7A
    
    - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   20




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ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
 
 Internal
ControlIntegrated Framework
    Internal
Control  Integrated Framework
   
 21




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Report of Independent Registered Public Accounting Firm
 
     Internal Control  Integrated
Framework
  
 22




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2008As Adjusted, SeeDecember 31
    
    2009
    
    Note 2ASSETSCurrent assets:Restricted cash
    
    $
    200
    
    
    $
    Cash and cash equivalents
    
    
    20,965
    
    
    
    28,149Accounts receivable, net of allowance for doubtful
accounts of $70 and $80, respectively
    
    
    17,877
    
    
    
    23,365Inventories
    
    
    450
    
    
    
    1,014Deferred income taxes
    
    
    636
    
    
    
    767Prepaid expenses and other current assets
    
    
    2,294
    
    
    
    4,328Total current assets
    
    
    42,422
    
    
    
    57,623Property and equipment, net of accumulated depreciation of
$14,562 and $12,588, respectively
    
    
    15,549
    
    
    
    17,515Goodwill
    
    
    21,051
    
    
    
    5,158Other intangible assets, net of accumulated amortization of
$2,817 and $1,504, respectively
    
    
    6,749
    
    
    
    2,543Deferred income taxes
    
    
    4,183
    
    
    
    2,560Other assets
    
    
    2,308
    
    
    
    3,232Total assets
    
    $
    92,262
    
    
    $
    88,631LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    2,925
    
    
    $
    2,188Accounts payable
    
    
    5,824
    
    
    
    8,196Accrued liabilities:Employee compensation
    
    
    671
    
    
    
    510Other accrued liabilities
    
    
    2,424
    
    
    
    2,773Total current liabilities
    
    
    11,844
    
    
    
    13,667Other liabilities
    
    
    2,196
    
    
    
    1,389Total liabilities
    
    
    14,040
    
    
    
    15,056Stockholders equity:Common stock, $.01 par value, 40,000,000 shares authorized,
24,211,967 and 24,110,967 shares issued, respectively
    
    
    242
    
    
    
    241Additional paid-in capital
    
    
    125,458
    
    
    
    118,588Accumulated deficit
    
    
    (47,828
    )
    
    
    (45,522
    )Accumulated other comprehensive income
    
    
    269
    
    
    
    187Nil coupon perpetual loan notes
    
    
    81
    
    
    
    81Total stockholders equity
    
    
    78,222
    
    
    
    73,575Total liabilities and stockholders equity
    
    $
    92,262
    
    
    $
    88,631
  23




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##### Table of Contents



2008As Adjusted,For the years ended December 31
    
    2009
    
    See Note 2
    
    2007Revenues
    
    $
    71,397
    
    
    $
    81,074
    
    
    $
    80,297Costs and expenses:Cost of sales
    
    
    42,444
    
    
    
    44,345
    
    
    
    42,471Selling, general and administrative
    
    
    32,273
    
    
    
    28,402
    
    
    
    24,950Gain on revaluation of ACT liability
    
    
    (781
    )
    
    
    
    
    
    
    Research and development
    
    
    542
    
    
    
    2,100
    
    
    
    2,13774,478
    
    
    
    74,847
    
    
    
    69,558Operating (loss) income
    
    
    (3,081
    )
    
    
    6,227
    
    
    
    10,739Interest expense
    
    
    (120
    )
    
    
    (135
    )
    
    
    (24
    )Interest income
    
    
    32
    
    
    
    741
    
    
    
    1,634Other (expense) / income
    
    
    (241
    )
    
    
    (226
    )
    
    
    81(Loss) Income before taxes
    
    
    (3,410
    )
    
    
    6,607
    
    
    
    12,430Income tax benefit / (expense)
    
    
    1,104
    
    
    
    (3,247
    )
    
    
    (5,187
    )Net (loss) income
    
    $
    (2,306
    )
    
    $
    3,360
    
    
    $
    7,243Net (loss) income per Common Share:Basic
    
    $
    (0.10
    )
    
    $
    0.14
    
    
    $
    0.33Diluted
    
    $
    (0.10
    )
    
    $
    0.14
    
    
    $
    0.29Weighted-average number of Common Shares outstanding:Basic
    
    
    24,148,000
    
    
    
    23,608,000
    
    
    
    22,280,000Diluted
    
    
    24,148,000
    
    
    
    24,590,000
    
    
    
    24,720,000
  24




---



##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Nil CouponCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    

Treasury Stock
    
    
    PerpetualShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    Loan Notes
    
    
    TotalBalance at December 31, 2006
    
    
    22,087
    
    
    $
    221
    
    
    $
    103,122
    
    
    $
    (56,044
    )
    
    $
    79
    
    
    
    
    
    
    $
    
    
    
    $
    277
    
    
    $
    47,655Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,243
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,243Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,330Exercise of stock options and warrants
    
    
    322
    
    
    
    3
    
    
    
    909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    912Conversion of nil coupon perpetual loan notes into Common Shares
    
    
    1
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    Effect of ASC 740 adoption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81
    )Tax benefit from stock compensation expense
    
    
    
    
    
    
    
    
    
    
    1,482
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,482Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    4,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,791Issuance of deferred shares of stock
    
    
    
    
    
    
    
    
    
    
    1,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,150Balance at December 31, 2007
    
    
    22,410
    
    
    $
    224
    
    
    $
    111,459
    
    
    $
    (48,882
    )
    
    $
    166
    
    
    
    
    
    
    $
    
    
    
    $
    272
    
    
    $
    63,239Comprehensive income:Net income, as adjusted, See Note 2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,360
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,360Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,381Exercise of stock options and warrants
    
    
    1,657
    
    
    
    17
    
    
    
    602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    619Conversion of nil coupon perpetual loan notes into Common Shares
    
    
    44
    
    
    
    
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (191
    )
    
    
    Tax benefit from stock compensation expense
    
    
    
    
    
    
    
    
    
    
    548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    548Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    5,815
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,815Issuance of deferred shares of stock
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73Reclassification of liability award
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )Balance at December 31, 2008
    
    
    24,111
    
    
    $
    241
    
    
    $
    118,588
    
    
    $
    (45,522
    )
    
    $
    187
    
    
    
    
    
    
    $
    
    
    
    $
    81
    
    
    $
    73,575Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,306
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,306
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,224
    )Exercise of stock options and warrants
    
    
    101
    
    
    
    1
    
    
    
    605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    606Conversion of nil coupon perpetual loan notes into Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax benefit from stock compensation expense
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    6,011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,011Issuance of deferred shares of stock
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86Reclassification of liability award
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Balance at December 31, 2009
    
    
    24,212
    
    
    $
    242
    
    
    $
    125,458
    
    
    $

    (47,828
    )
    
    $
    269
    
    
    
    
    
    
    $
    
    
    
    $
    81
    
    
    $
    78,222
  25




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##### Table of Contents



2008As Adjusted,For the years ended December 31
    
    2009
    
    See Note 2
    
    2007OPERATING ACTIVITIESNet (loss) income
    
    $
    (2,306
    )
    
    $
    3,360
    
    
    $
    7,243Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    3,796
    
    
    
    2,810
    
    
    
    2,353Amortization
    
    
    1,312
    
    
    
    184
    
    
    
    115Effect of ASC 740 adoption
    
    
    
    
    
    
    
    
    
    
    (81
    )Loss on equipment disposals/impaired assets
    
    
    94
    
    
    
    35
    
    
    
    18Deferred income tax
    
    
    (1,492
    )
    
    
    814
    
    
    
    1,716Stock compensation expense
    
    
    6,011
    
    
    
    5,815
    
    
    
    4,791Changes in operating assets and liabilities:Accounts receivable
    
    
    5,488
    
    
    
    8,491
    
    
    
    (15,132
    )Inventories
    
    
    563
    
    
    
    (828
    )
    
    
    17Prepaid expenses, other current assets and other
noncurrent assets
    
    
    3,293
    
    
    
    (3,509
    )
    
    
    (906
    )Accounts payable
    
    
    (2,372
    )
    
    
    (5,436
    )
    
    
    6,000Accrued liabilities and other noncurrent liabilities
    
    
    (894
    )
    
    
    (3,720
    )
    
    
    (2,081
    )Other
    
    
    34
    
    
    
    31
    
    
    
    46Net cash provided by operating activities
    
    
    13,527
    
    
    
    8,047
    
    
    
    4,099INVESTING ACTIVITIESProceeds from sales of short-term investments
    
    
    
    
    
    
    1,998
    
    
    
    6,002Increase in restricted cash
    
    
    (200
    )
    
    
    
    
    
    
    Purchases of property, equipment and patents
    
    
    (2,004
    )
    
    
    (9,839
    )
    
    
    (9,715
    )Acquisition of businesses
    
    
    (20,185
    )
    
    
    (3,928
    )
    
    
    Net cash used in investing activities
    
    
    (22,389
    )
    
    
    (11,769
    )
    
    
    (3,713
    )FINANCING ACTIVITIESProceeds from short-term borrowings
    
    
    737
    
    
    
    137
    
    
    
    2,051Issuance of deferred shares
    
    
    86
    
    
    
    73
    
    
    
    1,150Proceeds from exercise of stock options and warrants
    
    
    605
    
    
    
    619
    
    
    
    912Reclassification of liability award
    
    
    90
    
    
    
    
    
    
    
    Excess tax benefit for stock-based compensation
    
    
    78
    
    
    
    548
    
    
    
    1,482Net cash provided by financing activities
    
    
    1,596
    
    
    
    1,377
    
    
    
    5,595Effect of exchange rate fluctuations on cash
    
    
    82
    
    
    
    21
    
    
    
    87Net increase (decrease) in cash and cash equivalents
    
    
    (7,184
    )
    
    
    (2,324
    )
    
    
    6,068Cash and cash equivalents at beginning of year
    
    
    28,149
    
    
    
    30,473
    
    
    
    24,405Cash and cash equivalents at end of year
    
    $
    20,965
    
    
    $
    28,149
    
    
    $
    30,473Supplemental Cash Flow Information:Increases in contingent consideration payable
    
    $
    1,526Cash paid for:Interest
    
    $
    120
    
    
    $
    135
    
    
    $
    24Income taxes paid
    
    $
    195
    
    
    $
    5,905
    
    
    $
    173
  26




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##### Table of Contents



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Organization
    Basis of Presentation
  Use of Estimates
  Fair Value of Financial Instruments
  Cash and Cash Equivalents
  Foreign Currency Risk Management
  Accounts Receivable
  27




---



##### Table of Contents



Allowance for Doubtful Accounts
  Balance at
    
    Charged to costs
    
    
    
    
    
    Balance atYear
    
    January 1
    
    and expenses
    
    (Deductions)/Other
    
    December 312007
    
    $
    150
    
    
    $
    
    
    
    $
    
    
    
    $
    1502008
    
    $
    150
    
    
    $
    
    
    
    $
    (70
    )
    
    $
    802009
    
    $
    80
    
    
    $
    41
    
    
    $
    50
    
    
    $
    70
 Translation of Foreign Currency
  Comprehensive Income
  Research and Development
  Product/System Warranty
  Goodwill and Other Intangibles
   28




---



##### Table of Contents



AmortizationDescription of Other Intangible
    
    Period
    
    
    2009
    
    
    2008Customer list
    
    3-15 years
    
    $
    4,918
    
    
    $
    1,548Patent asset
    
    10 years
    
    
    1,262
    
    
    
    1,170Covenant not to compete
    
    5-6 years
    
    
    476
    
    
    
    336Technologies
    
    3-8 years
    
    
    2,510
    
    
    
    603Miscellaneous
    
    3-7 years
    
    
    400
    
    
    
    390Total cost
    
    
    
    
    
    
    9,566
    
    
    
    4,047Less accumulated amortization
    
    
    
    
    
    
    (2,817
    )
    
    
    (1,504
    )Total net intangible asset value
    
    
    
    
    
    $
    6,749
    
    
    $
    2,543
  29




---



##### Table of Contents



Property and Equipment
  Description of Property and
    
    Depreciable
    
    
    2009
    
    
    2008Equipment
    
    Life
    
    
    Cost
    
    
    CostLand
    
    
    
    
    
    $
    1,440
    
    
    $
    1,440Building
    
    39 years
    
    
    4,535
    
    
    
    4,857Leasehold Improvements
    
    3-39 years
    
    
    4,632
    
    
    
    4,719Field equipment
    
    3-4 years
    
    
    14,448
    
    
    
    13,714Computer equipment and software
    
    2-3 years
    
    
    3,596
    
    
    
    3,527Furniture and fixtures
    
    3-10 years
    
    
    1,438
    
    
    
    1,823Vehicles
    
    3 years
    
    
    22
    
    
    
    22Total cost
    
    
    
    
    
    
    30,111
    
    
    
    30,102Less accumulated depreciation
    
    
    
    
    
    
    (14,562
    )
    
    
    (12,587
    )Total net book value
    
    
    
    
    
    $
    15,549
    
    
    $
    17,515
 Revenue Recognition
   Cost of Sales
  Selling, General and Administrative Expenses
  Distribution Costs
  30




---



##### Table of Contents



Income Taxes
   Balance at
    
    Charged to costs
    
    
    
    
    
    Balance atYear
    
    January 1
    
    and expenses
    
    (Deductions)/Other
    
    December 312007
    
    $
    782
    
    
    $
    
    
    
    $
    436
    
    
    $
    1,2182008
    
    
    1,218
    
    
    
    
    
    
    
    203
    
    
    
    1,4212009
    
    
    1,421
    
    
    
    
    
    
    
    (244
    )
    
    
    1,177
 Stock-Based Compensation
  Basic and Diluted Earnings per Common Share
  2009
    
    2008
    
    2007Basic weighted-average shares
    
    
    24,148,000
    
    
    
    23,608,000
    
    
    
    22,280,000Conversion of unsecured loan notes
    
    
    
    
    
    
    43,000
    
    
    
    45,000Unexercised options and warrants
    
    
    
    
    
    
    939,000
    
    
    
    2,395,000Diluted weighted-average shares
    
    
    24,148,000
    
    
    
    24,590,000
    
    
    
    24,720,000
 Recently Adopted Accounting Standards
   31




---



##### Table of Contents



2.
    
    CHANGE IN ACCOUNTING PRINCIPLE
   INCOME STATEMENT
 As Originally
    
    
    
    
    
    Effect ofFor the year ended December 31, 2008
    
    Reported
    
    As Adjusted
    
    ChangeRevenues
    
    $
    81,074
    
    
    $
    81,074
    
    
    
    Costs and expenses:Cost of sales
    
    
    44,345
    
    
    
    44,345
    
    
    
    Selling, general and administrative
    
    
    28,012
    
    
    
    28,402
    
    
    
    390Research and development
    
    
    2,100
    
    
    
    2,100
    
    
    
    74,457
    
    
    
    74,847
    
    
    
    390Operating income
    
    
    6,617
    
    
    
    6,227
    
    
    
    (390
    )Interest expense
    
    
    (135
    )
    
    
    (135
    )
    
    
    Interest income
    
    
    741
    
    
    
    741
    
    
    
    Other expense)
    
    
    (226
    )
    
    
    (226
    )
    
    
    Income before taxes
    
    
    6,997
    
    
    
    6,607
    
    
    
    (390
    )Income tax expense
    
    
    (3,395
    )
    
    
    (3,247
    )
    
    
    (148
    )Net income
    
    $
    3,602
    
    
    $
    3,360
    
    
    $
    (242
    )Net income per Common Share:Basic
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    (0.01
    )Diluted
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    (0.01
    )
 32




---



##### Table of Contents



BALANCE SHEET
 As Originally
    
    
    
    
    
    
    Effect ofAs of December 31, 2008
    
    Reported
    
    
    As Adjusted
    
    
    ChangeASSETSCurrent assets:Cash and cash equivalents
    
    $
    28,149
    
    
    $
    28,149
    
    
    
    Accounts receivable, net of allowance for doubtful
accounts of $70 and $80, respectively
    
    
    23,365
    
    
    
    23,365
    
    
    
    Inventories
    
    
    1,014
    
    
    
    1,014
    
    
    
    Deferred income taxes
    
    
    767
    
    
    
    767
    
    
    
    Prepaid expenses and other current assets
    
    
    4,718
    
    
    
    4,328
    
    
    
    (390
    )Total current assets
    
    
    58,013
    
    
    
    57,623
    
    
    
    (390
    )Property and equipment, net of accumulated depreciation of
$14,562 and $12,588, respectively
    
    
    17,515
    
    
    
    17,515
    
    
    
    Goodwill
    
    
    5,158
    
    
    
    5,158
    
    
    
    Other intangible assets, net of accumulated amortization of
$2,817 and $1,504, respectively
    
    
    2,543
    
    
    
    2,543
    
    
    
    Deferred income taxes
    
    
    2,412
    
    
    
    2,560
    
    
    
    148Other assets
    
    
    3,232
    
    
    
    3,232
    
    
    
    Total assets
    
    $
    88,873
    
    
    $
    88,631
    
    
    $
    (242
    )LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    2,188
    
    
    $
    2,188
    
    
    $
    Accounts payable
    
    
    8,196
    
    
    
    8,196
    
    
    
    Accrued liabilities:Employee compensation
    
    
    510
    
    
    
    510
    
    
    
    Other accrued liabilities
    
    
    2,773
    
    
    
    2,773
    
    
    
    Total current liabilities
    
    
    13,667
    
    
    
    13,667
    
    
    
    Other liabilities
    
    
    1,389
    
    
    
    1,389
    
    
    
    Total liabilities
    
    
    15,056
    
    
    
    15,056
    
    
    
    Stockholders equity:Common stock
    
    
    241
    
    
    
    241
    
    
    
    Additional paid-in capital
    
    
    118,588
    
    
    
    118,588
    
    
    
    Accumulated deficit
    
    
    (45,280
    )
    
    
    (45,522
    )
    
    
    (242
    )Accumulated other comprehensive income
    
    
    187
    
    
    
    187
    
    
    
    Nil coupon perpetual loan notes
    
    
    81
    
    
    
    81
    
    
    
    Total stockholders equity
    
    
    73,817
    
    
    
    73,575
    
    
    
    (242
    )Total liabilities and stockholders equity
    
    $
    88,873
    
    
    $
    88,631
    
    
    $
    (242
    )
 33




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STATEMENT OF CASH FLOWS
 As Originally
    
    
    
    
    
    Effect ofFor the year ended December 31, 2008
    
    Reported
    
    As Adjusted
    
    ChangeOPERATING ACTIVITIESNet income
    
    $
    3,602
    
    
    $
    3,360
    
    
    $
    (242
    )Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    2,810
    
    
    
    2,810
    
    
    
    Amortization
    
    
    184
    
    
    
    184
    
    
    
    Loss on equipment disposals/impaired assets
    
    
    35
    
    
    
    35
    
    
    
    Deferred income tax
    
    
    962
    
    
    
    814
    
    
    
    (148
    )Stock compensation expense
    
    
    5,815
    
    
    
    5,815
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    8,491
    
    
    
    8,491
    
    
    
    Inventories
    
    
    (828
    )
    
    
    (828
    )
    
    
    Prepaid expenses, other current assets and other
noncurrent assets
    
    
    (3,899
    )
    
    
    (3,509
    )
    
    
    390Accounts payable
    
    
    (5,436
    )
    
    
    (5,436
    )
    
    
    Accrued liabilities and other noncurrent liabilities
    
    
    (3,720
    )
    
    
    (3,720
    )
    
    
    Other
    
    
    31
    
    
    
    31
    
    
    
    Net cash provided by operating activities
    
    
    8,047
    
    
    
    8,047
    
    
    
    INVESTING ACTIVITIESProceeds from sales of short-term investments
    
    
    1,998
    
    
    
    1,998
    
    
    
    Increase in restricted cash
    
    
    
    
    
    
    
    
    
    
    Purchases of property, equipment and patents
    
    
    (9,839
    )
    
    
    (9,839
    )
    
    
    Acquisition of businesses
    
    
    (3,928
    )
    
    
    (3,928
    )
    
    
    Net cash used in investing activities
    
    
    (11,769
    )
    
    
    (11,769
    )
    
    
    FINANCING ACTIVITIESProceeds from short-term borrowings
    
    
    137
    
    
    
    137
    
    
    
    Issuance of deferred shares
    
    
    73
    
    
    
    73
    
    
    
    Proceeds from exercise of stock options and warrants
    
    
    619
    
    
    
    619
    
    
    
    Reclassification of liability award
    
    
    
    
    
    
    
    
    
    
    Excess tax benefit for stock-based compensation
    
    
    548
    
    
    
    548
    
    
    
    Net cash provided by financing activities
    
    
    1,377
    
    
    
    1,377
    
    
    
    Effect of exchange rate fluctuations on cash
    
    
    21
    
    
    
    21
    
    
    
    Net decrease in cash and cash equivalents
    
    
    (2,324
    )
    
    
    (2,324
    )
    
    
    Cash and cash equivalents at beginning of year
    
    
    30,473
    
    
    
    30,473
    
    
    
    Cash and cash equivalents at end of year
    
    $
    28,149
    
    
    $
    28,149
    
    
    $
    Supplemental Cash Flow Information:Cash paid for:Interest
    
    $
    135
    
    
    $
    135
    
    
    $
    Income taxes paid
    
    $
    5,905
    
    
    $
    5,905
    
    
    $
    
 34




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##### Table of Contents



3. CONSTRUCTION CONTRACTS IN PROGRESS
  2009
    
    
    2008Costs incurred on uncompleted contracts
    
    $
    12,608
    
    
    $
    18,220Estimated earnings
    
    
    8,556
    
    
    
    14,882Earned revenue
    
    
    21,164
    
    
    
    33,102Less billings to date
    
    
    (13,666
    )
    
    
    (28,773
    )Total
    
    $
    7,498
    
    
    $
    4,330Classified as follows:Costs and estimated earnings in excess of billings on uncompleted contracts
    
    $
    7,814
    
    
    $
    5,552Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (316
    )
    
    
    (1,223
    )Total
    
    $
    7,498
    
    
    $
    4,330
   4. TAXATION
  Origin of (loss) income before taxes
    
    2009
    
    2008
    
    2007United States
    
    $
    (3,378
    )
    
    $
    7,963
    
    
    $
    13,242Foreign
    
    
    (32
    )
    
    
    (1,356
    )
    
    
    (812
    )(Loss) Income before taxes
    
    $
    (3,410
    )
    
    $
    6,607
    
    
    $
    12,430
  2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    195
    
    
    $
    1,395
    
    
    $
    1,401State
    
    
    28
    
    
    
    411
    
    
    
    588Other
    
    
    
    
    
    
    (84
    )
    
    
    Total current
    
    
    223
    
    
    
    1,722
    
    
    
    1,989Deferred:Federal
    
    
    (1,219
    )
    
    
    1,464
    
    
    
    3,183State
    
    
    (108
    )
    
    
    61
    
    
    
    15Valuation allowance
    
    
    
    
    
    
    
    
    
    
    Total deferred
    
    
    (1,327
    )
    
    
    1,525
    
    
    
    3,198Income tax (benefit) expense
    
    $
    (1,104
    )
    
    $
    3,247
    
    
    $
    5,187
 35




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##### Table of Contents



2009
    
    2008
    
    2007Provision at the U.S. federal statutory rate
    
    $
    (1,194
    )
    
    $
    2,312
    
    
    $
    4,351State taxes, net of federal benefit
    
    
    (75
    )
    
    
    300
    
    
    
    405Foreign losses without tax benefit
    
    
    11
    
    
    
    391
    
    
    
    284Research credits
    
    
    (60
    )
    
    
    (77
    )
    
    
    (63
    )Other
    
    
    214
    
    
    
    321
    
    
    
    210Income tax (benefit) expense
    
    $
    (1,104
    )
    
    $
    3,247
    
    
    $
    5,187
  2009
    
    2008
    
    2007Provision at the U.S. federal statutory rate
    
    
    (35.0
    )%
    
    
    35.0
    %
    
    
    35.0
    %State taxes, net of federal benefit
    
    
    (2.2
    )%
    
    
    4.5
    %
    
    
    3.3
    %Foreign losses without tax benefit
    
    
    .3
    %
    
    
    5.9
    %
    
    
    2.3
    %Research credits
    
    
    (1.8
    )%
    
    
    (1.2
    )%
    
    
    (.5
    )%Other
    
    
    6.3
    %
    
    
    4.9
    %
    
    
    1.6
    %Income tax (benefit) expense effective rate
    
    
    (32.4
    )%
    
    
    49.1
    %
    
    
    41.7
    %
  2009
    
    2008Deferred tax assets:Stock compensation expense
    
    $
    6,302
    
    
    $
    4,238Research and development credit
    
    
    513
    
    
    
    492Equipment
    
    
    
    
    
    
    Alternative minimum tax credit
    
    
    275
    
    
    
    275Warranty reserve
    
    
    76
    
    
    
    101Accounts receivable
    
    
    27
    
    
    
    30Vacation accrual
    
    
    45
    
    
    
    45Deferred rent liability
    
    
    25
    
    
    
    49Effect of ASC 740
    
    
    30
    
    
    
    13Intangible assets
    
    
    283
    
    
    
    11Net operating loss carryforwards
    
    
    1,001
    
    
    
    1,245Total deferred tax assets
    
    
    8,577
    
    
    
    6,499Deferred tax liabilities:Equipment
    
    
    (1,200
    )
    
    
    (975
    )Prepaid expenses
    
    
    (123
    )
    
    
    (361
    )Patents
    
    
    (126
    )
    
    
    (94
    )Goodwill
    
    
    (1,132
    )
    
    
    (321
    )Total deferred tax liabilities
    
    
    (2,581
    )
    
    
    (1,751
    )Net deferred tax asset before valuation allowance
    
    
    5,996
    
    
    
    4,748Valuation allowances for deferred tax assets
    
    
    (1,177
    )
    
    
    (1,421
    )Net deferred tax asset
    
    $
    4,672
    
    
    $
    3,327
 36




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##### Table of Contents



Current assets
    
    $
    636
    
    
    $
    767Long-term assets
    
    
    4,183
    
    
    
    2,560Net deferred tax asset
    
    $
    4,819
    
    
    $
    3,327
      Description
    
    BalanceBalance at January 1, 2009
    
    $
    713Increases in positions taken in a prior period
    
    
    11Decreases in positions taken in a prior periodIncreases in positions taken in a current periodDecreases in positions taken in a current periodDecreases due to settlementsDecreases due to lapse of statute of limitationsBalance at December 31, 2009
    
    $
    724
      37




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##### Table of Contents



5. COMMON SHARES
  6. NIL COUPON NON-REDEEMABLE CONVERTIBLE UNSECURED LOAN NOTES
   7. STOCK-BASED COMPENSATION AND WARRANTS
       2009
    
    2008
    
    2007Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Risk-free interest rate
    
    
    2.46
    %
    
    
    2.85
    %
    
    
    4.39
    %Expected volatility
    
    
    68.0
    %
    
    
    59.3
    %
    
    
    57.4
    %Expected life of option
    
    5.1 years
    
    
    5.2 years
    
    
    5.2 years
 38




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Number
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-of
    
    
    Average
    
    
    of
    
    
    Average
    
    
    of
    
    
    AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    2,905,325
    
    
    $
    16.30
    
    
    
    2,464,325
    
    
    $
    15.03
    
    
    
    2,414,200
    
    
    $
    13.02Granted
    
    
    510,000
    
    
    
    9.96
    
    
    
    757,250
    
    
    
    18.05
    
    
    
    310,500
    
    
    
    25.80Exercised
    
    
    (101,000
    )
    
    
    5.84
    
    
    
    (171,125
    )
    
    
    3.61
    
    
    
    (188,875
    )
    
    
    4.83Expired or forfeited
    
    
    (263,200
    )
    
    
    18.82
    
    
    
    (145,125
    )
    
    
    18.69
    
    
    
    (71,500
    )
    
    
    20.82Outstanding at end of year
    
    
    3,051,125
    
    
    $
    15.28
    
    
    
    2,905,325
    
    
    $
    16.30
    
    
    
    2,464,325
    
    
    $
    15.03Exercisable at end of year
    
    
    1,784,000
    
    
    $
    14.28
    
    
    
    1,461,700
    
    
    $
    12.92
    
    
    
    955,825
    
    
    $
    7.11Weighted-average fair value of
options granted during the year
    
    
    
    
    
    $
    5.83
    
    
    
    
    
    
    $
    9.65
    
    
    
    
    
    
    $
    14.01
  Weighted-AverageNumber
    
    Weighted-
    
    Remainingof
    
    Average
    
    Contractual
    
    AggregateOptions
    
    Exercise Price
    
    Term
    
    Intrinsic ValueOutstanding on January 1, 2009
    
    
    2,905,325
    
    
    $
    16.30Granted
    
    
    510,000
    
    
    
    9.96Exercised
    
    
    (101,000
    )
    
    
    5.84
    
    
    
    
    
    
    $
    394Expired or forfeited
    
    
    (263,200
    )
    
    
    18.82Outstanding on December 31, 2009
    
    
    3,051,125
    
    
    $
    15.28
    
    
    7.01 years
    
    $
    1,863Exercisable on December 31, 2009
    
    
    
    
    
    
    
    
    
    6.04 years
    
    $
    1,863
  Options Outstanding
    
    Options ExercisableWeighted-Average
    
    Weighted-
    
    
    
    
    
    Weighted-Range of
    
    Number of
    
    Remaining
    
    Average
    
    Number of
    
    AverageExercise Prices
    
    Options
    
    Contractual Life
    
    Exercise Price
    
    Options
    
    Exercise Price$
    3.60 - $5.51
    
    
    
    415,000
    
    
    4.26 years
    
    $
    4.26
    
    
    
    415,000
    
    
    $
    4.26$
    5.52 - $11.03
    
    
    
    954,125
    
    
    7.53 years
    
    
    8.98
    
    
    
    510,375
    
    
    
    8.57$
    11.04 - $22.06
    
    
    
    667,000
    
    
    7.60 years
    
    
    16.08
    
    
    
    180,000
    
    
    
    13.29$
    22.07 -  $27.57
    
    
    
    1,015,000
    
    
    7.27 years
    
    
    25.19
    
    
    
    678,625
    
    
    
    25.39$
    3.60 -  $27.57
    
    
    
    3,051,125
    
    
    7.01 years
    
    $
    15.28
    
    
    
    1,784,000
    
    
    $
    14.44
 39




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##### Table of Contents



Weighted-AverageNon-Vested Stock
    
    Grant DateOutstanding
    
    Fair ValueOutstanding on January 1, 2009
    
    
    1,443,625
    
    
    $
    10.75Granted
    
    
    510,000
    
    
    
    5.83Released
    
    
    (475,500
    )
    
    
    9.90Expired or forfeited
    
    
    (211,000
    )
    
    
    10.07Outstanding on December 31, 2009
    
    
    1,267,125
    
    
    $
    8.37
    8. COMMITMENTS
 Operating Leases
  Year of Payment
    
    Amount2010
    
    $
    623,4542011
    
    
    538,8352012
    
    
    536,3202013
    
    
    480,320Thereafter
    
    $
    1,776,990
   Year of Payment
    
    Amount2010
    
    $
    120,6672011
    
    
    124,0002012
    
    
    124,0002013
    
    
    124,000Thereafter
    
    $
    789,000
 40




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##### Table of Contents




    
    The Stamford, Connecticut building lease term, for approximately 7,000 square feet,
runs from February 1, 2004 to January 31, 2010. The facility houses certain
administrative functions such as Investor Relations and certain APC sales functions.
Fuel Tech did not renew the expiring Stamford facility lease; rather, the Companys
Stamford-based employees relocated to a new facility and entered into a ten year lease,
for approximately 6,000 square feet, that began February 1, 2010.

    
    The Beijing, China building lease term, for approximately 4,000 square feet, runs
from September 1, 2009 to August 31, 2010. This facility serves as the operating
headquarters for our Beijing Fuel Tech operation. Fuel Tech has the option to extend the
lease term at a market rate to be agreed upon between Fuel Tech and the lessor.

    
    The Durham, North Carolina building lease term, for approximately 16,000 square
feet, runs from November 1, 2005 to April 30, 2014. This facility houses the former
Tackticks and FlowTack operations. Fuel Tech has no option to extend the lease.
  Performance Guarantees
  

    
    in support of the warranty period defined in the contract; or

    
    in support of the system performance criteria that are defined in the contract.
  Product Warranties
  2009
    
    2008
    
    2007Aggregate product warranty liability at beginning of year
    
    $
    265
    
    
    $
    464
    
    
    $
    472Net aggregate accruals related to product warranties
    
    
    60
    
    
    
    (45
    )
    
    
    88Aggregate reductions for payments
    
    
    126
    
    
    
    (154
    )
    
    
    (96
    )Aggregate product warranty liability at end of year
    
    $
    199
    
    
    $
    265
    
    
    $
    464
  9. DEBT FINANCING
  41




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42




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##### Table of Contents



10. RELATED PARTY TRANSACTIONS
  11. DEFINED CONTRIBUTION PLAN
  12. BUSINESS SEGMENT, GEOGRAPHIC AND QUARTERLY FINANCIAL DATA
 Business Segment Financial Data
  
    
    The Air Pollution Control technology segment includes technologies to reduce NOx
emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion
sources. These include Low- and Ultra-Low NOx Burners (LNB and ULNB), Over-Fire Air (OFA)
systems, NOxOUT® and HERTTM Selective Non-Catalytic Reduction (SNCR)
systems, and Advanced Selective Catalytic Reduction (ASCRTM) systems. The ASCR
system includes ULNB, OFA, and SNCR components, along with a downsized SCR catalyst, ammonia
injection grid (AIG), and Graduated Straightening Grid GSGTM systems to provide
high NOx reductions at significantly lower capital and operating costs than conventional SCR
systems. The CASCADETM and NOxOUT-SCR® processes are basic types of
ASCR systems, using just SNCR and SCR catalyst components. ULTRA technology creates ammonia
at a plant site using safe urea for use with any SCR application. Flue gas conditioning
systems are chemical injection systems offered in markets outside the U.S. and Canada to
enhance electrostatic precipitator and fabric filter performance in controlling particulate
emissions.
    
    The FUEL CHEM® technology segment, which uses chemical processes in combination
with advanced CFD and CKM boiler modeling, for the control of slagging, fouling, corrosion,
opacity and other sulfur trioxide-related issues in furnaces and boilers through the addition
of chemicals into the furnace using TIFI®Targeted In-Furnace Injection
technology.
   43




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##### Table of Contents



For the year ended
    
    Air Pollution Control
    
    FUEL CHEMDecember 31, 2009
    
    Segment
    
    Segment
    
    Other
    
    TotalRevenues from external customers
    
    $
    34,721
    
    
    $
    36,676
    
    
    $
    
    
    
    $
    71,397Cost of sales
    
    
    (21,518
    )
    
    
    (20,926
    )
    
    
    
    
    
    
    (42,444
    )Gross margin
    
    
    13,203
    
    
    
    15,750
    
    
    
    
    
    
    
    28,953Selling, general and administrative
    
    
    
    
    
    
    
    
    
    
    (32,273
    )
    
    
    (32,273
    )Gain from revaluation of ACT
liability
    
    
    
    
    
    
    
    
    
    
    781
    
    
    
    781Research and development
    
    
    
    
    
    
    
    
    
    
    (542
    )
    
    
    (542
    )Operating income (loss)
    
    $
    13,203
    
    
    $
    15,750
    
    
    $
    (32,034
    )
    
    $
    (3,081
    )
 For the year ended
    
    Air Pollution Control
    
    FUEL CHEMDecember 31, 2008
    
    Segment
    
    Segment
    
    Other
    
    TotalRevenues from external customers
    
    $
    44,393
    
    
    $
    36,681
    
    
    $
    
    
    
    $
    81,074Cost of sales
    
    
    (24,365
    )
    
    
    (19,979
    )
    
    
    (1
    )
    
    
    (44,345
    )Gross margin
    
    
    20,028
    
    
    
    16,702
    
    
    
    (1
    )
    
    
    36,729Selling, general and administrative
    
    
    
    
    
    
    
    
    
    
    28,402
    
    
    
    28,402Research and development
    
    
    
    
    
    
    
    
    
    
    2,100
    
    
    
    2,100Operating income (loss)
    
    $
    20,028
    
    
    $
    16,702
    
    
    $
    (30,503
    )
    
    $
    6,227
 For the year ended
    
    Air Pollution Control
    
    FUEL CHEMDecember 31, 2007
    
    Segment
    
    Segment
    
    Other
    
    TotalRevenues from external customers
    
    $
    47,750
    
    
    $
    32,547
    
    
    $
    
    
    
    $
    80,297Cost of sales
    
    
    (25,775
    )
    
    
    (16,619
    )
    
    
    (77
    )
    
    
    (42,471
    )Gross margin
    
    
    21,975
    
    
    
    15,928
    
    
    
    (77
    )
    
    
    37,826Selling, general and administrative
    
    
    
    
    
    
    
    
    
    
    24,950
    
    
    
    24,950Research and development
    
    
    
    
    
    
    
    
    
    
    2,137
    
    
    
    2,137Operating income (loss)
    
    $
    21,975
    
    
    $
    15,928
    
    
    $
    (27,164
    )
    
    $
    10,739
 Geographic Segment Financial Data
  For the years ended December 31
    
    2009
    
    2008
    
    2007Revenues:United States
    
    $
    55,395
    
    
    $
    68,433
    
    
    $
    67,534Foreign
    
    
    16,002
    
    
    
    12,641
    
    
    
    12,763$
    71,397
    
    
    $
    81,074
    
    
    $
    80,297
 As of December 31
    
    2009
    
    
    2008
    
    
    2007Assets:United States
    
    $
    82,261
    
    
    $
    80,999
    
    
    $
    79,132Foreign
    
    
    10,001
    
    
    
    7,632
    
    
    
    8,082$
    92,262
    
    
    $
    88,631
    
    
    $
    87,214
 44




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##### Table of Contents



Quarterly Financial Data
  For the quarters ended
    
    March 31
    
    June 30
    
    September 30
    
    December 312009 (a)Revenues
    
    $
    17,317
    
    
    $
    18,922
    
    
    $
    16,475
    
    
    $
    18,683Cost of sales
    
    
    11,374
    
    
    
    10,378
    
    
    
    10,034
    
    
    
    10,658Net income
    
    
    (1,562
    )
    
    
    (278
    )
    
    
    (698
    )
    
    
    232Net income per Common Share:Basic
    
    $
    (0.06
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
    
    $
    0.01Diluted
    
    $
    (0.06
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
    
    $
    0.012008 (b)Revenues
    
    $
    20,467
    
    
    $
    18,791
    
    
    $
    23,703
    
    
    $
    18,113Cost of sales
    
    
    10,669
    
    
    
    9,833
    
    
    
    13,019
    
    
    
    10,824Net income
    
    
    1,633
    
    
    
    447
    
    
    
    2,102
    
    
    
    (822
    )Net income (loss) per Common Share:Basic
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.09
    
    
    $
    (0.03
    )Diluted
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.09
    
    
    $
    (0.03
    )
   13. BUSINESS ACQUISITIONS
  Tackticks, LLC & FlowTack, LLC
  45




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##### Table of Contents



Advanced Combustion Technology, Inc.
    Three months ended December 312009
    
    2008Revenues
    
    $
    18,683
    
    
    $
    34,481Net income / (loss)
    
    
    232
    
    
    
    (3,833
    )Net income / (loss) per Common Share:Basic
    
    $
    0.01
    
    
    $
    (0.16
    )Diluted
    
    $
    0.01
    
    
    $
    (0.16
    )
 12  months ended December 312009
    
    2008Revenues
    
    $
    71,397
    
    
    $
    140,633Net (loss) / income
    
    
    (2,306
    )
    
    
    11,782Net (loss) / income per Common Share:Basic
    
    $
    (0.10
    )
    
    $
    0.50Diluted
    
    $
    (0.10
    )
    
    $
    0.48
 46




---



##### Table of Contents



Net working capital acquired
    
    $
    4,293Intangible assets subject to amortization:Customer relationships (11 year useful life)
    
    
    3,019Patents (8 year useful life)
    
    
    1,907APC order backlog (0.5 year useful life)
    
    
    400Tradenames (8 year useful life)
    
    
    351Covenants not-to-compete (5 year useful life)
    
    
    140Goodwill
    
    
    13,512Total acquisition costs
    
    
    23,622Contingent consideration
    
    
    1,526Total net assets recorded
    
    $
    25,148
 14. SUBSEQUENT EVENTS
  47




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##### Table of Contents



ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A   CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Change in Internal Controls
  
 Managements Report on Internal Control Over Financial Reporting
     
 ITEM 9B   OTHER INFORMATION
  48




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##### Table of Contents



PART III
 
 ITEM 10   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  www.ftek.com.
              49




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##### Table of Contents



ITEM 11   EXECUTIVE COMPENSATION
  
 ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  Number of securitiesremaining available forNumber of Securities to be
    
    
    Weighted-average
    
    
    future issuance under equityissued upon exercise of
    
    
    exercise price of
    
    
    compensation plansoutstanding options, warrants
    
    
    outstanding options,
    
    
    excluding securities listed inPlan Category
    
    and rights
    
    
    warrants and rights
    
    
    column (a)(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
(1)
    
    
    3,051,125
    
    
    $
    15.28
    
    
    
    356,762
 
 (1)
    
    Includes Common Shares of Fuel Tech authorized for awards under Fuel Techs Incentive
Plan, as amended through June 3, 2004.   
 ITEM 13   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14   PRINCIPAL ACCOUNTANT FEES AND SERVICES
  50




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##### Table of Contents



PART IV
 
 ITEM 15  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) (1) Financial Statements
  Managements Report on Internal Control Over Financial ReportingReport of Independent Registered Public Accounting Firm on Internal Control Over Financial
ReportingReport of Independent Registered Public Accounting FirmReport of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2009 and 2008Consolidated Statements of Operations for Years Ended December 31, 2009, 2008 and 2007Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2009, 2008
and 2007Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007Notes to Consolidated Financial Statements
 (2) Financial Statement Schedules
  51




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##### Table of Contents



(3) Exhibits
 Incorporated by referenceFiled
    
    
    
    PeriodExhibit
    
    Description
    
    herewith
    
    Form
    
    ending
    
    Exhibit
    
    Filing date3.1
    
    Certificate of Incorporation of Fuel Tech, Inc.
    
    
    
    8-K
    
    
    
    
    3.2
    
    
    10/05/063.2
    
    Certificate of Conversion of Fuel Tech, Inc.
    
    
    
    8-K
    
    
    
    
    3.1
    
    
    10/05/063.3
    
    By-Laws of Fuel Tech, Inc.
    
    
    
    8-K
    
    
    
    
    3.3
    
    
    10/05/064.1
    
    Instrument Constituting US $19,200,000 Nil Coupon Non-Redeemable
Convertible Unsecured Loan Notes of Fuel-Tech N.V., dated December
21, 1989
    
    
    
    10-Q
    
    09/30/09
    
    
    4.1
    
    
    11/04/094.2
    
    First Supplemental Instrument Constituting US $3,000 Nil Coupon
Non-Redeemable Convertible Unsecured Loan Notes of Fuel-Tech N.V.,
dated July 10, 1990
    
    
    
    10-Q
    
    09/30/09
    
    
    4.2
    
    
    11/04/094.3
    
    Instrument Constituting US $6,000 Nil Coupon Non-Redeemable
Convertible Unsecured Loan Notes of Fuel-Tech N.V., dated March 12,
1993
    
    
    
    10-Q
    
    09/30/09
    
    
    4.3
    
    
    11/04/094.4*
    
    Fuel Tech, Inc. Incentive Plan as amended through June 3, 2004
    
    
    
    S-8
    
    
    
    
    4.1
    
    
    10/02/064.5*
    
    Fuel Tech, Inc. Form of Non-Executive Director Stock Option Agreement
    
    
    
    10-K
    
    12/31/06
    
    
    4.6
    
    
    03/06/074.6*
    
    Fuel Tech, Inc. Form of Non-Qualified Stock Option Agreement
    
    
    
    10-K
    
    12/31/06
    
    
    4.7
    
    
    03/06/074.7*
    
    Fuel Tech, Inc. Form of Incentive Stock Option Agreement
    
    
    
    10-K
    
    12/31/06
    
    
    4.8
    
    
    03/06/07
 52




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##### Table of Contents



Incorporated by referenceFiled
    
    
    
    PeriodExhibit
    
    Description
    
    herewith
    
    Form
    
    ending
    
    Exhibit
    
    Filing date10.1**
    
    License Agreement dated November 18, 1998 between The
Gas Technology Institute and Fuel Tech, Inc. relating
to the FLGR Process.
    
    
    
    10-K
    
    12/31/99
    
    
    3.28
    
    
    03/30/0010.2**
    
    Amendment No. 1, dated February 28, 2000, to License
Agreement dated November 18, 1998 between The Gas
Technology Institute and Fuel Tech, Inc. relating to
the FLGR Process.
    
    
    
    10-K
    
    12/31/99
    
    
    3.29
    
    
    03/30/0010.3*
    
    Employment Agreement as of February 28, 2006 between
John (Johnny) F. Norris Jr. and Fuel Tech, Inc.
    
    
    
    10-K
    
    12/31/05
    
    
    3.18
    
    
    03/10/0610.4*
    
    Amendment to Employment Agreement as of February 28,
2007 between John (Johnny) F. Norris Jr. and Fuel Tech,
Inc.
    
    
    
    10-K
    
    12/31/07
    
    
    10.5
    
    
    03/05/0810.5
    
    Form of Indemnity Agreement between Fuel Tech, Inc. and
its Directors and Officers.
    
    
    
    8-K
    
    
    
    
    99.1
    
    
    02/07/0710.6**
    
    Restated Supply Agreement, dated March 4, 2009, between
Fuel Tech, Inc. and Martin Marietta Magnesia
Specialties, LLC.
    
    
    
    10-K
    
    12/31/08
    
    
    10.7
    
    
    03/05/0910.7
    
    Asset Purchase Agreement, dated December 5, 2008, among
Fuel Tech, Inc., Advanced Combustion Technology, Inc.,
Peter D. Marx, Robert W. Pickering and Charles E.
Trippel.
    
    
    
    10-K
    
    12/31/08
    
    
    10.8
    
    
    03/05/0910.8*
    
    Employment Agreement, dated April 30, 2008, between
John P. Graham and Fuel Tech, Inc.
    
    
    
    10-Q
    
    09/30/09
    
    
    10.1
    
    
    11/04/0910.9*
    
    Employment Agreement, dated February 1, 1998, between
Stephen P. Brady and Fuel Tech, Inc.
    
    
    
    10-Q
    
    09/30/09
    
    
    10.2
    
    
    11/04/0910.10*
    
    Employment Agreement, dated 10/31/1998, between William
E. Cummings, Jr. and Fuel Tech, Inc.
    
    X10.11
    
    Credit Agreement, dated as of June 30, 2009, between
JPMorgan Chase Bank, N.A. and Fuel Tech, Inc.
    
    
    
    10-Q
    
    09/30/09
    
    
    10.5
    
    
    11/04/0910.12
    
    First Amendment to Credit Agreement, dated as of
October 5, 2009, between JPMorgan Chase Bank, N.A. and
Fuel Tech, Inc.
    
    
    
    10-Q
    
    09/30/09
    
    
    10.6
    
    
    11/04/0910.13
    
    Second Amendment to Credit Agreement, dated as of
November 4, 2009, between JPMorgan Chase Bank, N.A. and
Fuel Tech, Inc.
    
    
    
    10-Q
    
    09/30/09
    
    
    10.7
    
    
    11/04/0910.14
    
    Sublease Agreement, dated December 9, 2009, between
Fuel Tech, Inc. and American Bailey Corporation
    
    X10.15*
    
    2010 Executive Officer Incentive Plan of Fuel Tech, Inc.
    
    X10.16*
    
    Fuel Tech, Inc. 2010 Senior Vice President Sales FUEL
CHEM® Incentive Plan
    
    X10.17*
    
    Fuel Tech, Inc. 2010 Senior Vice President Sales APC
Incentive Plan
    
    X10.18
    
    Corporate Incentive Plan of Fuel Tech, Inc.
    
    
    
    8-K
    
    
    
    
    99.1
    
    
    03/19/0923.1
    
    Consent of Independent Registered Public Accounting
Firm.
    
    X
 53




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##### Table of Contents



Incorporated by referenceFiled
    
    
    
    PeriodExhibit
    
    Description
    
    herewith
    
    Form
    
    ending
    
    Exhibit
    
    Filing date31.1
    
    Certifications of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
    
    X31.2
    
    Certifications of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
    
    X32
    
    Certification of Chief Executive
Officer, and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
    
    X
 
 *
    
    Indicates a management contract or compensatory plan or arrangement.**
    
    Portions of this document have been omitted pursuant to a
request for confidential treatment and the omitted information has been filed separately with the Securities and Exchange Commission. 54




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##### Table of Contents



SIGNATURES AND CERTIFICATIONS
  FUEL TECH, INC.Date:  March 4, 2010
    By:
    /s/ John F. Norris Jr.John F. Norris Jr.Chief Executive Officer
(Principal Executive Officer)Date:  March 4, 2010
    By:
    /s/ John P. GrahamJohn P. GrahamChief Financial Officer
(Principal Financial Officer) 55




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##### Table of Contents



Signature
    
    Title/s/ Douglas G. Bailey

     Douglas G. Bailey
    
    Chairman and Director/s/ Ralph E. Bailey

     Ralph E. Bailey
    
    Director and Chairman Emeritus/s/ Miguel Espinosa

     Miguel Espinosa
    
    Director/s/ Charles W. Grinnell

     Charles W. Grinnell
    
    Director/s/ Thomas L. Jones

     Thomas L. Jones
    
    Director/s/ John D. Morrow

     John D. Morrow
    
    Director/s/ John F. Norris Jr.
    
    Director, President and Chief Executive OfficerJohn F. Norris Jr.
    
    (Principal
Executive Officer)/s/ Thomas S. Shaw, Jr.

     Thomas S. Shaw, Jr.
    
    Director/s/ Delbert L. Williamson

     Delbert L. Williamson
    
    Director/s/ Ellen T. Albrecht
    
    Vice President and ControllerEllen T. Albrecht
    
    (Controller)/s/ John P. Graham
    
    Sr. Vice President, Chief Financial Officer and TreasurerJohn P. Graham
    
    (Principal
Financial Officer)
 56