Fuel Tech (FTEK) Risk Analysis

Competition in the Air Pollution Control market comes from competitors utilizing their own NOx reduction processes, including SCR systems, SNCR systems, ammonia and urea-based delivery systems for SNCR and SCR, which do not infringe our patented or proprietary technologies.  Indirect competition will also arise from business practices such as the purchase rather than the generation of electricity, fuel switching, closure or de-rating of units, and sale or trade of pollution credits and emission allowances.  Utilization by customers of such processes or business practices or combinations thereof may adversely affect our pricing and participation in the NOx control market if customers elect to comply with regulations by methods other than the purchase of our Air Pollution Control products.  See Item 1 "Products" and "APC Competition" in the Air Pollution Control segment overview. Competition for our FUEL CHEM markets include chemicals sold by specialty chemical companies, such as Imerys, Environmental Energy Services, Inc., and SUEZ Water Technologies.

We have two broad technology segments that provide advanced engineering solutions to meet the pollution control, efficiency improvement, and operational optimization needs of coal, biomass and natural gas-fired energy-related facilities worldwide. They are as follows: - The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas generated by the firing of natural gas, coal, or biomass from boilers, incinerators, furnaces and other stationary combustion sources. These include NOxOUT SNCR systems and SCR systems. Our SCR systems can also include AIG, and GSG™ systems to provide high NOx reductions at significantly lower capital and operating costs than conventional SCR systems. ULTRA technology creates ammonia at a plant site using safe urea for use with any SCR application. ESP technologies make use of electrostatic precipitator products and services to reduce particulate matter. FGC 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 coal-fired furnaces and boilers through the addition of chemicals into the furnace using TIFI Targeted In-Furnace Injection™ technology. An adverse development in our advanced engineering solutions business as a result of competition, technological change, government regulation, customers converting to use natural gas or other fuels, or any other factor could have a significantly greater impact than if we maintained more diverse operations.

Customers may cancel or delay projects for reasons beyond our control. Our orders normally contain cancellation provisions that permit us to recover our costs, and, for most contracts, a portion of our anticipated profit in the event a customer cancels an order. If a customer elects to cancel an order, we may not realize the full amount of revenues included in our backlog. Revenue recognition occurs over long periods of time and is subject to unanticipated delays. If projects are delayed, the timing of our revenues could be adversely affected and projects may remain in our backlog for extended periods of time. If we receive relatively large orders in any given quarter, fluctuations in the levels of our quarterly backlog can result because the backlog in that quarter may reach levels that may not be sustained in subsequent quarters. Customer-driven delays may also lead to increased material costs and other adverse financial impacts.

We hold licenses to or own a number of patents for our products and processes.  We also have patent applications pending both in the U.S. and abroad.  There can be no assurance that any of our pending patent applications will be granted or that our outstanding patents will not be challenged, overturned or otherwise circumvented by competitors.  In foreign markets, the absence of harmonized patent laws makes it more difficult to ensure consistent respect for our patent rights in emerging markets.  In addition, certain critical technical information relating to our products which is not patented is held as trade secret, and protected by trade secret laws and restrictions on disclosure contained in our confidentiality and licensing agreements.  There can be no assurance that such protections will prove adequate or that we will have adequate remedies against contractual counterparties for disclosure of our trade secrets or other violations of our intellectual property rights.  See Item 1 above under the caption "Intellectual Property."

Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime pose a risk to our systems, networks, products, solutions, services and data. Increased global cybersecurity vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks such as ransomware, as well as cybersecurity failures resulting from human error and technological errors, pose a risk to the security of Fuel Tech and its customers', partners', suppliers' and third-party service providers' infrastructure, products, systems and networks and the confidentiality, availability and integrity of Fuel Tech's and its customers' data. As the perpetrators of such attacks become more capable, and as critical infrastructure is increasingly becoming digitized, the risks in this area continue to grow. There can be no assurance that our efforts to mitigate cybersecurity risks by employing a number of measures, including employee training, monitoring and testing, vulnerability testing and maintenance of protective systems and contingency plans, will be sufficient to prevent, detect and limit the impact of cyber-related attacks, and we remain vulnerable to known or unknown threats. A significant cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation, increased digital infrastructure or other costs that are not covered by insurance, litigation or regulatory action.

Our business is significantly impacted by and dependent upon the regulatory environment surrounding the electricity generation market.  Our business will be adversely impacted to the extent that regulations are repealed or amended to significantly reduce the level of required NOx or particulate matter reduction, or to the extent that regulatory authorities delay or otherwise minimize enforcement of existing laws.  Additionally, long-term changes in environmental regulation that threaten or preclude the use of coal or other fossil fuels as a primary fuel source for electricity production which result in the reduction or closure of a significant number of fossil fuel-fired power plants may adversely affect our business, financial condition and results of operations.  See Item 1 above under the caption "Regulations and Markets" in the Air Pollution Control segment overview. Changes in environmental regulations and enforcement priorities, specifically regarding NOx emissions from small and medium-sized gas turbines, may materially and adversely affect  the demand for our Selective Catalytic Reduction (SCR) systems. Our business is significantly driven by federal and state air quality standards that mandate the use of post-combustion emission control technologies. On January 9, 2026, the EPA finalized amendments to the New Source Performance Standards (NSPS) for Stationary Combustion Turbines. Under these new rules, the EPA determined that combustion controls, rather than SCR technology, constitute the 'Best System of Emission Reduction' (BSER) for many new, modified, or reconstructed turbines, particularly those with a heat rating of less than 850 MMBtu/h (typically units of 100MW or less). The relaxation of these standards or the non-enforcement of more stringent state-level requirements could lead current and potential customers to bypass SCR installations in favor of less expensive combustion-only control methods. If our customers are not legally required to achieve the ultra-low NOx levels that our SCR systems provide, our order pipeline for 100MW and smaller units may decline significantly. Furthermore, any further delays in the implementation of stricter NOx standards, or a shift in regulatory focus away from stationary source emissions, could reduce our revenue, increase price competition, and negatively impact our overall financial condition.

Our annual revenues and earnings have varied in the past and are likely to vary in the future. Our contracts generally stipulate customer specific delivery terms and may have contract cycles of a year or more, which subjects these contracts to many factors beyond our control. In addition, contracts that are significantly larger in size than our typical contracts tend to intensify their impact on our annual operating results. Furthermore, as a significant portion of our operating costs are fixed, an unanticipated decrease in our revenues, a delay or cancellation of orders in backlog, or a decrease in the demand for our products, may have a significant impact on our annual operating results. Therefore, our annual operating results may be subject to significant variations and our operating performance in one period may not be indicative of our future performance.

Operational challenges could have a material adverse effect on our business, reputation, financial position, results of operations and cash flows. The Company's financial results depend on the successful execution of our businesses' operating plans across all steps of the engineering and design, manufacture, installation and service lifecycle. We continue working to improve the operations and execution of our businesses and our ability to make the desired improvements will be a significant factor in our overall financial performance. Operational failures in any of our business segments that result in quality problems or potential product, environmental, health or safety risks, could have a material adverse effect on our business, reputation, financial position and results of operations. In addition, for some large-scale projects we may be required by our customer to take on the full scope of engineering, procurement, construction or other services. These types of projects often pose unique risks related to their location, scale, complexity, duration and pricing or payment structure. Performance issues or schedule delays can arise due to inadequate technical expertise, unanticipated project modifications, developments at project sites, environmental, health and safety issues, execution by or coordination with suppliers, subcontractors or consortium partners, financial difficulties of our customers or significant partners or compliance with government regulations, and these can lead to cost overruns, contractual penalties, liquidated damages and other adverse consequences. Operational, quality or other issues at large projects, or across our projects portfolio more broadly, can adversely affect our business, reputation or results of operations.

We currently have foreign operations predominantly in Europe with our office located in Gallarate, Italy. The future business opportunities in this market are dependent on the continued implementation and enforcement of regulatory policies that will benefit our technologies, the acceptance of our engineering solutions in such markets, the ability of potential customers to utilize our technologies on a competitive, cost-effective basis, and our ability to protect and enforce our intellectual property rights.

These events may also impact energy and regulatory policy nationally or regionally for the impacted regions. Such disruptions could have a material adverse effect on our business and financial results.