Fuel Tech(FTEK) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis, market risk disclosures, and control procedures Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, with comparisons to 2020 Condensed Consolidated Balance Sheets The company's financial position significantly strengthened by June 30, 2021, driven by increased cash and equity following a private placement Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,194 | $10,640 | | Total Assets | $50,061 | $30,088 | | Total Liabilities | $4,163 | $7,767 | | Total Stockholders' Equity | $45,898 | $22,321 | Condensed Consolidated Statements of Operations Revenues grew 25% year-over-year for the six months ended June 30, 2021, with a dramatic improvement in net loss due to a PPP loan forgiveness Statement of Operations Summary (Six Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues | $10,251 | $8,179 | +25.3% | | Operating Loss | $(1,846) | $(5,107) | Improvement | | Net Loss | $(380) | $(5,111) | Improvement | | Diluted Net Loss per Share | $(0.01) | $(0.21) | Improvement | Statement of Operations Summary (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues | $5,218 | $4,401 | +18.6% | | Operating Loss | $(689) | $(2,424) | Improvement | | Net Loss | $(778) | $(2,544) | Improvement | | Diluted Net Loss per Share | $(0.03) | $(0.10) | Improvement | Condensed Consolidated Statements of Cash Flows Operating activities provided cash, and a private placement significantly boosted the company's cash balance to $36.6 million Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $229 | $(3,414) | | Net cash used in investing activities | $(237) | $(122) | | Net cash provided by financing activities | $23,977 | $1,550 | | Net increase (decrease) in cash | $23,956 | $(2,244) | - Financing activities were dominated by $25.8 million in proceeds from a private placement of common stock, net of $1.8 million in costs[17] - Operating cash flow benefited from a non-cash gain of $1.56 million on the forgiveness of a Paycheck Protection Plan (PPP) loan[17] Notes to Condensed Consolidated Financial Statements Key notes detail a February 2021 private placement, January 2021 PPP loan forgiveness, and segment revenue performance - On February 11, 2021, the company completed a private placement, selling 5,000,000 shares of common stock and 2,500,000 warrants, generating gross proceeds of $25.8 million[26] - The company received full forgiveness of its $1.56 million Paycheck Protection Program (PPP) loan on January 8, 2021, which was recognized as other income[81][82] Revenue by Segment (Six Months Ended June 30, in thousands) | Segment | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Air Pollution Control Technology | $1,893 | $3,133 | -39.6% | | FUEL CHEM | $8,358 | $5,046 | +65.6% | | Total Revenues | $10,251 | $8,179 | +25.3% | - Remaining performance obligations, representing booked orders for future work, totaled $4.9 million as of June 30, 2021, primarily from the APC segment[54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth driven by the FUEL CHEM segment, improved gross margin, and strengthened liquidity - The FUEL CHEM segment's revenue increased by 72% in Q2 and 66% in the first half of 2021, driven by new accounts, increased power demand, and recovery from COVID-19 impacts[114] - The Air Pollution Control (APC) segment's revenue decreased by 49% in Q2 and 40% in the first half of 2021, attributed to the timing of project execution and a decline in backlog[112] - Consolidated gross margin for the first six months of 2021 increased to 48% from 26% in 2020, primarily due to the higher proportion of revenue from the high-margin FUEL CHEM segment[115] - The company's cash balance was $36.6 million as of June 30, 2021, and management believes it has sufficient working capital to operate for the next 12 months[120][121] Quantitative and Qualitative Disclosures about Market Risk The company identifies immaterial foreign currency and interest rate risks, stating no hedging instruments are used - The company's earnings and cash flow are subject to fluctuations from foreign currency exchange rates, but the risk is considered immaterial[127] - Exposure to interest rate changes is primarily from its debt facility, but a hypothetical 100 basis point adverse move would not have a materially adverse effect on interest expense[128] Controls and Procedures Management concluded that disclosure controls were effective, with no material changes to internal controls over financial reporting during the quarter - The Chief Executive Officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[129] - There were no material changes in the company's internal control over financial reporting during the quarter[130] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered equity sales, and exhibits Legal Proceedings The company is not involved in any litigation expected to materially affect its business, financial condition, or operations - The company is not currently involved in any litigation where an adverse outcome is expected to have a material effect on its business[132] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - The risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, have not materially changed[133] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds for the period - The company reported 'None' for this item, indicating no unregistered sales of equity securities during the period[134] Exhibits This section lists the exhibits filed, including CEO and CFO certifications and Inline XBRL data files - Exhibits filed with the report include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL data files[137] Signatures The report was duly signed on August 10, 2021, by the President and Chief Executive Officer, and Acting Treasurer and Controller - The report was duly signed on August 10, 2021, by Vincent J. Arnone, President and Chief Executive Officer, and Ellen T. Albrecht, Acting Treasurer and Controller[140]