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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-5657551
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(State or other jurisdiction of
incorporation of organization)
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(I.R.S. Employer
Identification Number)
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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Page
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Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015
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Condensed Consolidated Statements of Operations for the Three- and Six-Month Periods Ended June 30, 2016 and 2015
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Condensed Consolidated Statements of Comprehensive Income (loss) for the Three- and Six-Month Periods Ended June 30, 2016 and 2015
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Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2016 and 2015
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Notes to Condensed Consolidated Financial Statements
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June 30,
2016 |
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December 31,
2015 |
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||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
12,426
|
|
|
$
|
21,684
|
|
Restricted cash
|
|
7,020
|
|
|
—
|
|
||
Marketable securities
|
|
7
|
|
|
19
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $1,894 and $1,772, respectively
|
|
22,429
|
|
|
23,060
|
|
||
Inventories
|
|
1,498
|
|
|
1,653
|
|
||
Prepaid expenses and other current assets
|
|
2,390
|
|
|
3,889
|
|
||
Prepaid income taxes
|
|
659
|
|
|
1,857
|
|
||
Deferred income taxes
|
|
—
|
|
|
239
|
|
||
Total current assets
|
|
46,429
|
|
|
52,401
|
|
||
Property and equipment, net of accumulated depreciation of $24,268 and $23,414, respectively
|
|
11,247
|
|
|
12,001
|
|
||
Goodwill
|
|
2,116
|
|
|
2,116
|
|
||
Other intangible assets, net of accumulated amortization of $8,313 and $7,452, respectively
|
|
6,381
|
|
|
7,144
|
|
||
Deferred income taxes
|
|
1,205
|
|
|
992
|
|
||
Other assets
|
|
1,320
|
|
|
1,357
|
|
||
Total assets
|
|
$
|
68,698
|
|
|
$
|
76,011
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
7,267
|
|
|
8,942
|
|
||
Accrued liabilities:
|
|
|
|
|
||||
Employee compensation
|
|
1,556
|
|
|
1,645
|
|
||
Other accrued liabilities
|
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4,487
|
|
|
5,949
|
|
||
Total current liabilities
|
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13,310
|
|
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16,536
|
|
||
Other liabilities
|
|
503
|
|
|
501
|
|
||
Total liabilities
|
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13,813
|
|
|
17,037
|
|
||
Commitments and Contingencies
|
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
|
||||
Common stock, $.01 par value, 40,000,000 shares authorized, 23,800,924 and 23,419,008 shares issued, and 23,446,035, and 23,167,216 shares outstanding, respectively
|
|
238
|
|
|
234
|
|
||
Additional paid-in capital
|
|
136,429
|
|
|
135,394
|
|
||
Accumulated deficit
|
|
(79,398
|
)
|
|
(74,132
|
)
|
||
Accumulated other comprehensive loss
|
|
(1,246
|
)
|
|
(1,556
|
)
|
||
Nil coupon perpetual loan notes
|
|
76
|
|
|
76
|
|
||
Treasury stock, at cost
|
|
(1,214
|
)
|
|
(1,042
|
)
|
||
Total shareholders’ equity
|
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54,885
|
|
|
58,974
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
68,698
|
|
|
$
|
76,011
|
|
|
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues
|
|
$
|
15,175
|
|
|
$
|
18,683
|
|
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$
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32,997
|
|
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$
|
33,786
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
|
9,595
|
|
|
11,547
|
|
|
21,369
|
|
|
19,984
|
|
||||
Selling, general and administrative
|
|
6,760
|
|
|
8,400
|
|
|
14,239
|
|
|
16,603
|
|
||||
Research and development
|
|
1,122
|
|
|
982
|
|
|
2,280
|
|
|
1,854
|
|
||||
|
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17,477
|
|
|
20,929
|
|
|
37,888
|
|
|
38,441
|
|
||||
Operating (loss)
|
|
(2,302
|
)
|
|
(2,246
|
)
|
|
(4,891
|
)
|
|
(4,655
|
)
|
||||
Interest expense
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(30
|
)
|
||||
Interest income
|
|
6
|
|
|
7
|
|
|
16
|
|
|
14
|
|
||||
Other expense
|
|
(221
|
)
|
|
(65
|
)
|
|
(484
|
)
|
|
(161
|
)
|
||||
(Loss) before income taxes
|
|
(2,517
|
)
|
|
(2,307
|
)
|
|
(5,359
|
)
|
|
(4,832
|
)
|
||||
Income tax (expense) benefit
|
|
(111
|
)
|
|
936
|
|
|
94
|
|
|
1,807
|
|
||||
Net (loss)
|
|
$
|
(2,628
|
)
|
|
$
|
(1,371
|
)
|
|
$
|
(5,265
|
)
|
|
$
|
(3,025
|
)
|
Net (loss) per common share:
|
|
|
|
|
|
|
|
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||||||||
Basic
|
|
$
|
(0.11
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.13
|
)
|
Diluted
|
|
$
|
(0.11
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.13
|
)
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
23,381,000
|
|
|
23,140,000
|
|
|
23,283,000
|
|
|
23,034,000
|
|
||||
Diluted
|
|
23,381,000
|
|
|
23,140,000
|
|
|
23,283,000
|
|
|
23,034,000
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net (loss)
|
|
$
|
(2,628
|
)
|
|
$
|
(1,371
|
)
|
|
$
|
(5,265
|
)
|
|
$
|
(3,025
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
|
(111
|
)
|
|
97
|
|
|
318
|
|
|
(64
|
)
|
||||
Unrealized (losses) from marketable securities, net of tax
|
|
(5
|
)
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
||||
Total other comprehensive income (loss)
|
|
(116
|
)
|
|
97
|
|
|
310
|
|
|
(64
|
)
|
||||
Comprehensive (loss)
|
|
$
|
(2,744
|
)
|
|
$
|
(1,274
|
)
|
|
$
|
(4,955
|
)
|
|
$
|
(3,089
|
)
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2016
|
|
2015
|
||||
Operating Activities
|
|
|
|
|
||||
Net loss
|
|
$
|
(5,265
|
)
|
|
$
|
(3,025
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
||||
Depreciation
|
|
926
|
|
|
1,049
|
|
||
Amortization
|
|
861
|
|
|
1,075
|
|
||
Loss (Gain) on disposal of equipment
|
|
26
|
|
|
(26
|
)
|
||
Provision for doubtful accounts
|
|
151
|
|
|
—
|
|
||
Deferred income taxes
|
|
(10
|
)
|
|
(167
|
)
|
||
Stock-based compensation
|
|
1,041
|
|
|
833
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
173
|
|
|
2,378
|
|
||
Inventories
|
|
149
|
|
|
(279
|
)
|
||
Prepaid expenses, other current assets and other non-current assets
|
|
2,861
|
|
|
183
|
|
||
Accounts payable
|
|
(1,630
|
)
|
|
1,674
|
|
||
Accrued liabilities and other non-current liabilities
|
|
(1,482
|
)
|
|
(5,002
|
)
|
||
Net cash (used in) operating activities
|
|
(2,199
|
)
|
|
(1,307
|
)
|
||
Investing Activities
|
|
|
|
|
||||
Purchases of property, equipment and patents
|
|
(302
|
)
|
|
(383
|
)
|
||
Proceeds from the sale of equipment
|
|
1
|
|
|
26
|
|
||
Net cash (used in) investing activities
|
|
(301
|
)
|
|
(357
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Change in restricted cash
|
|
(7,020
|
)
|
|
—
|
|
||
Payments on short-term borrowings
|
|
—
|
|
|
(1,636
|
)
|
||
Treasury shares withheld
|
|
(172
|
)
|
|
(252
|
)
|
||
Net cash (used in) financing activities
|
|
(7,192
|
)
|
|
(1,888
|
)
|
||
Effect of exchange rate fluctuations on cash
|
|
434
|
|
|
(118
|
)
|
||
Net decrease in cash and cash equivalents
|
|
(9,258
|
)
|
|
(3,670
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
21,684
|
|
|
18,637
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
12,426
|
|
|
$
|
14,967
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||
|
|
2016
|
2015
|
|
2016
|
2015
|
||||||||
Foreign currency translation
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
|
$
|
(1,139
|
)
|
$
|
(632
|
)
|
|
$
|
(1,568
|
)
|
$
|
(471
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments (1)
|
|
(111
|
)
|
97
|
|
|
318
|
|
(64
|
)
|
||||
Balance at end of period
|
|
$
|
(1,250
|
)
|
$
|
(535
|
)
|
|
$
|
(1,250
|
)
|
$
|
(535
|
)
|
Available-for-sale marketable securities
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
|
$
|
9
|
|
$
|
23
|
|
|
$
|
12
|
|
$
|
23
|
|
Other comprehensive income:
|
|
|
|
|
|
|
||||||||
Net unrealized holding (loss) gain (2)
|
|
(5
|
)
|
—
|
|
|
(8
|
)
|
—
|
|
||||
Deferred income taxes (2)
|
|
—
|
|
—
|
|
|
|
|
—
|
|
||||
Total other comprehensive (loss) income
|
|
(5
|
)
|
—
|
|
|
(8
|
)
|
—
|
|
||||
Balance at end of period
|
|
$
|
4
|
|
$
|
23
|
|
|
$
|
4
|
|
$
|
23
|
|
Total accumulated other comprehensive loss
|
|
$
|
(1,246
|
)
|
$
|
(512
|
)
|
|
$
|
(1,246
|
)
|
$
|
(512
|
)
|
(1)
|
In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings.
|
(2)
|
In all periods presented, there were no realized holding gains or losses and therefore no amounts were reclassified to earnings.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Basic weighted-average shares
|
|
23,381,000
|
|
|
23,140,000
|
|
|
23,283,000
|
|
|
23,034,000
|
|
Conversion of unsecured loan notes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Unexercised options and unvested RSUs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Diluted weighted-average shares
|
|
23,381,000
|
|
|
23,140,000
|
|
|
23,283,000
|
|
|
23,034,000
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||
|
|
2016
|
2015
|
|
2016
|
2015
|
||||||||
Stock options and restricted stock units
|
|
$
|
580
|
|
$
|
561
|
|
|
$
|
1,041
|
|
$
|
833
|
|
Tax benefit of stock-based compensation expense
|
|
—
|
|
(217
|
)
|
|
—
|
|
(320
|
)
|
||||
After-tax effect of stock-based compensation
|
|
$
|
580
|
|
$
|
344
|
|
|
$
|
1,041
|
|
$
|
513
|
|
|
|
|
|
Number
of
Options
|
|
Weighted-
Average
Exercise Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding on January 1, 2016
|
|
1,191,125
|
|
|
$
|
10.48
|
|
|
|
|
|
||
Granted
|
|
81,000
|
|
|
1.58
|
|
|
|
|
|
|||
Exercised
|
|
—
|
|
|
—
|
|
|
|
|
|
|||
Expired or forfeited
|
|
(150,375
|
)
|
|
15.79
|
|
|
|
|
|
|||
Outstanding on June 30, 2016
|
|
1,121,750
|
|
|
$
|
9.12
|
|
|
4.74
|
|
$
|
—
|
|
Exercisable on June 30, 2016
|
|
1,121,750
|
|
|
$
|
9.12
|
|
|
4.74
|
|
$
|
—
|
|
•
|
The first type of award is based on individual performance during the respective calendar year as determined by the Committee based on performance criteria specified in the Agreement. These awards will vest over a
three
year period beginning on the Determination Date. We estimated the fair value of these performance-based RSU awards on the date of the Agreement using the trading price of the Company’s stock and our estimate of the probability that the specified performance criteria will be met. The fair value measurement and probability estimate will be re-measured each reporting date until the Determination Date, at which time the final award amount will be known. For these job performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award.
|
•
|
The second type of RSU award contains a targeted number of RSUs to be granted based on the Company’s revenue growth relative to a specified peer group during a period of
two
calendar years. These awards vest
67%
on the second anniversary of the Agreement date and
33%
on the third anniversary of the Agreement date. We estimated the fair value of these performance-based RSU awards on the Agreement date using the trading price of the Company’s stock on the date of determination and our estimate of the probability that the specified performance criteria will be met. For these revenue growth performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award.
|
•
|
The third type of RSU award contains a targeted number of RSUs to be granted based on the total shareholder return (TSR) of the Company’s common stock relative to a specified peer group during a period of
two
calendar years. These awards
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
|||
Unvested restricted stock units at January 1, 2016
|
|
1,204,883
|
|
|
$
|
4.21
|
|
Granted
|
|
845,862
|
|
|
1.88
|
|
|
Forfeited
|
|
(132,499
|
)
|
|
5.11
|
|
|
Vested
|
|
(381,916
|
)
|
|
4.36
|
|
|
Unvested restricted stock units at June 30, 2016
|
|
1,536,330
|
|
|
$
|
2.81
|
|
•
|
The Air Pollution Control technology segment includes technologies to reduce NO
x
emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion sources. These include Low and Ultra Low NO
x
Burners (LNB and ULNB), Over-Fire Air (OFA) systems, NO
x
OUT
®
and HERT™ Selective Non-Catalytic Reduction (SNCR) systems, and Advanced Selective Catalytic Reduction (ASCR
™
) systems. Our ASCR systems include ULNB, OFA, and SNCR components, along with a downsized SCR catalyst, Ammonia Injection Grid (AIG), and Graduated Straightening Grid GSG™ systems to provide high NO
x
reductions at significantly lower capital and operating costs than conventional SCR systems. The NO
x
OUT CASCADE
®
and NO
x
OUT-SCR
®
processes are more basic, 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.
|
•
|
The Fuel Conversion segment represents a new business initiative we commenced in 2014. We acquired intellectual property rights and know-how related to the CARBONITE® fuel conversion process and technology. This process can convert coals of various grades into value-added products that are high in energy content, carbon-rich and less pollutive. This technology has a number of potential applications including certain coal replacement, electric arc furnace (EAF) reductant, ferro-alloy feedstock, absorbent and Hg reduced carbon stock. During 2015 and 2016, we have been testing and developing the engineered carbon products for specific markets. We are in the process of evaluating the commercialization of these product offerings with prospective customers and considering alternatives. We have earned no significant revenue other than for test products from perspective customers for the
six
-month period ended
June 30, 2016
and
2015
.
|
Three months ended June 30, 2016
|
|
Air Pollution
Control Segment
|
|
FUEL CHEM
Segment
|
|
Fuel Conversion Segment
|
|
Other
|
|
Total
|
||||||||||
Revenues from external customers
|
|
$
|
10,031
|
|
|
$
|
5,144
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,175
|
|
Cost of sales
|
|
(7,152
|
)
|
|
(2,443
|
)
|
|
—
|
|
|
—
|
|
|
(9,595
|
)
|
|||||
Gross margin
|
|
2,879
|
|
|
2,701
|
|
|
—
|
|
|
—
|
|
|
5,580
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,760
|
)
|
|
(6,760
|
)
|
|||||
Research and development
|
|
—
|
|
|
—
|
|
|
(827
|
)
|
|
(295
|
)
|
|
(1,122
|
)
|
|||||
Operating income (loss)
|
|
$
|
2,879
|
|
|
$
|
2,701
|
|
|
$
|
(827
|
)
|
|
$
|
(7,055
|
)
|
|
$
|
(2,302
|
)
|
Three months ended June 30, 2015
|
|
Air Pollution
Control Segment
|
|
FUEL CHEM
Segment
|
|
Fuel Conversion Segment
|
|
Other
|
|
Total
|
||||||||||
Revenues from external customers
|
|
$
|
11,087
|
|
|
$
|
7,596
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,683
|
|
Cost of sales
|
|
(7,769
|
)
|
|
(3,778
|
)
|
|
—
|
|
|
—
|
|
|
(11,547
|
)
|
|||||
Gross margin
|
|
3,318
|
|
|
3,818
|
|
|
—
|
|
|
—
|
|
|
7,136
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,400
|
)
|
|
(8,400
|
)
|
|||||
Research and development
|
|
—
|
|
|
—
|
|
|
(629
|
)
|
|
(353
|
)
|
|
(982
|
)
|
|||||
Operating income (loss)
|
|
$
|
3,318
|
|
|
$
|
3,818
|
|
|
$
|
(629
|
)
|
|
$
|
(8,753
|
)
|
|
$
|
(2,246
|
)
|
Six months ended June 30, 2016
|
|
Air Pollution
Control Segment
|
|
FUEL CHEM
Segment
|
|
Fuel Conversion Segment
|
|
Other
|
|
Total
|
||||||||||
Revenues from external customers
|
|
$
|
23,021
|
|
|
$
|
9,976
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,997
|
|
Cost of sales
|
|
(16,471
|
)
|
|
(4,898
|
)
|
|
—
|
|
|
—
|
|
|
(21,369
|
)
|
|||||
Gross margin
|
|
6,550
|
|
|
5,078
|
|
|
—
|
|
|
—
|
|
|
11,628
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,239
|
)
|
|
(14,239
|
)
|
|||||
Research and development
|
|
—
|
|
|
—
|
|
|
(1,514
|
)
|
|
(766
|
)
|
|
(2,280
|
)
|
|||||
Operating income (loss)
|
|
$
|
6,550
|
|
|
$
|
5,078
|
|
|
$
|
(1,514
|
)
|
|
$
|
(15,005
|
)
|
|
$
|
(4,891
|
)
|
Six months ended June 30, 2015
|
|
Air Pollution
Control Segment
|
|
FUEL CHEM
Segment
|
|
Fuel Conversion Segment
|
|
Other
|
|
Total
|
||||||||||
Revenues from external customers
|
|
$
|
17,944
|
|
|
$
|
15,842
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,786
|
|
Cost of sales
|
|
(12,090
|
)
|
|
(7,894
|
)
|
|
—
|
|
|
—
|
|
|
(19,984
|
)
|
|||||
Gross margin
|
|
5,854
|
|
|
7,948
|
|
|
—
|
|
|
—
|
|
|
13,802
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,603
|
)
|
|
(16,603
|
)
|
|||||
Research and development
|
|
—
|
|
|
—
|
|
|
(1,101
|
)
|
|
(753
|
)
|
|
(1,854
|
)
|
|||||
Operating income (loss)
|
|
$
|
5,854
|
|
|
$
|
7,948
|
|
|
$
|
(1,101
|
)
|
|
$
|
(17,356
|
)
|
|
$
|
(4,655
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
12,255
|
|
|
$
|
11,901
|
|
|
$
|
26,685
|
|
|
$
|
24,476
|
|
Foreign
|
2,920
|
|
|
6,782
|
|
|
6,312
|
|
|
9,310
|
|
||||
|
$
|
15,175
|
|
|
$
|
18,683
|
|
|
$
|
32,997
|
|
|
$
|
33,786
|
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
Assets:
|
|
|
|
|
||||
United States
|
|
$
|
46,093
|
|
|
$
|
47,437
|
|
Foreign
|
|
22,605
|
|
|
28,574
|
|
||
|
|
$
|
68,698
|
|
|
$
|
76,011
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2016
|
|
2015
|
||||
Aggregate product warranty liability at beginning of period
|
|
$
|
268
|
|
|
$
|
268
|
|
Net aggregate expense (benefit) related to product warranties
|
|
(109
|
)
|
|
8
|
|
||
Aggregate reductions for payments
|
|
—
|
|
|
(8
|
)
|
||
Aggregate product warranty liability at end of period
|
|
$
|
159
|
|
|
$
|
268
|
|
•
|
Level 1 – Observable inputs to the valuation methodology such as quoted prices in active markets for identical assets or liabilities
|
•
|
Level 2 – Inputs to the valuation methodology including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets of liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means
|
•
|
Level 3 – Significant unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own estimates and assumptions or those expected to be used by market participants. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, option pricing models, and other commonly used valuation techniques
|
Date: August 9, 2016
|
By:
|
/s/ Vincent J. Arnone
|
|
|
Vincent J. Arnone
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Date: August 9, 2016
|
By:
|
/s/ David S. Collins
|
|
|
David S. Collins
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
1.
|
Pledgor hereby pledges, assigns, transfers, hypothecates, charges and sets over to Lender, and hereby grants to Lender a security interest in that certain demand deposit account number 878358139 (
the “Account”
) established and maintained with Lender, which Account has an opening balance of $7,020,000.00, all funds on deposit in the Account, and all proceeds thereof, (
the Account, the funds on deposit therein, all funds hereafter deposited to the Account or transferred to Lender for the purpose of being deposited to the Account
and the proceeds of any of the foregoing are hereinafter collectively called the “Collateral”
).
|
2.
|
The pledge of and security interest in the Collateral granted to Lender pursuant to this Agreement shall secure:
|
(a)
|
the prompt payment, when due, of all principal of and interest on that certain Second Amended Revolving Loan Note dated May 3, 2016 in the original principal amount of $7,000,000.00 made by Pledgor in favor of Lender, and all renewals, amendments, extensions or substitutions thereof; and
|
(b)
|
all “Obligations” as defined in the Credit Agreement and all sums due pursuant to the Loan Documents described therein; and
|
(c)
|
all other obligations and liabilities of the Borrower to the Lender, whether now existing or hereafter arising, direct or indirect, absolute or contingent, howsoever arising or created;
|
3.
|
Pledgor shall execute and deliver to Lender all documents which are, in the opinion of Lender, necessary to perfect and maintain a security interest in favor of Lender in and to all of the Collateral.
|
4.
|
Upon the occurrence and during the continuance of an Event of Default under this Agreement or the Credit Agreement (
and after all related cure periods, if any have expired
), Lender is authorized, at its option and
|
5.
|
Upon the occurrence and during the continuance of an Event of Default under the Credit Agreement (
and after all related cure periods, if any, have expired
), Lender shall be entitled to exercise all of the rights, powers and remedies (
whether vested in it by this Agreement or by law
) for the protection and enforcement of its rights in respect of the Collateral, and Lender shall be entitled, without limitation, to exercise the following rights, which Pledgor hereby agrees to be commercially reasonable:
|
(a)
|
to receive all amounts payable in respect of the Collateral; and/or
|
(b)
|
to apply the balance on deposit in the Account to the satisfaction of the Secured Obligations.
|
6.
|
All moneys collected by Lender upon any disposition of the Collateral shall be applied first to the payment of all costs and expenses incurred by Lender in connection with such disposition or the collection of any such moneys (
including, but not limited to, attorneys’ fees and expenses
), and the balance of such moneys shall be applied by the Lender to satisfy the Secured Obligations.
|
7.
|
Pledgor agrees that it has and will have no right to direct the disposition of the funds held in the Account, and shall have no control over the Account or the funds held therein until such time as the Secured Obligations have been paid in full.
|
8.
|
Lender agrees that it will release a portion of the Collateral upon written or email request by the Pledgor provided that (i) no Default or Event of Default then exists and is continuing; (ii) the Revolving Exposure is then less than the Revolving Commitment and (iii) only amounts in excess of the Cash Collateral Amount in effect at such time shall be susceptible to release.
|
9.
|
Pledgor represents and warrants that: (a) it is the legal, record and beneficial owner of, and has good title to, the Account and all funds on deposit or to be deposited therein subject to no lien, claim, charge or encumbrance whatsoever (
except the lien created by this Agreement or any other liens in favor of the Lender or its affiliates
); (b) it has full power, authority and right to pledge the Collateral, pursuant to this Agreement; (c) this Agreement creates, as security for the Secured Obligations, a valid, enforceable and perfected lien on all of the Collateral, in favor of Lender for the benefit of Lender, subject to no lien in favor of any other person other than the Lender or its affiliates; (d) no consent, filing, recording or registration is required to perfect the lien created by this Agreement.
|
10.
|
The obligations of Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, but not limited: (a) any exercise or non-exercise of any right, remedy, power or privilege under or in respect of this Agreement; (b) any furnishing of any additional security to Lender or any acceptance thereof of any sale, exchange, release, surrender or realization of or upon any security by Lender; or (c) any invalidity, irregularity or unenforceability of all or part of the Secured Obligations or of any security therefore.
|
11.
|
Time and exactitude of each of the terms, obligations, covenants and conditions are hereby declared to be the essence of this Agreement. The waiver by Lender of any breach of, or default under, any term, covenant or condition herein contained shall not be deemed a waiver of such term, covenant or condition or any subsequent breach of, or default under, the same, or any other term, covenant or condition herein contained. The failure to exercise any right hereunder by Lender shall not operate as a waiver of such right, and all rights and remedies herein provided are cumulative.
|
12.
|
This Agreement shall bind and inure to the benefit of the parties hereto and the respective successors and assigns.
|
13.
|
Any capitalized terms used herein without definition shall be accorded the meanings attributed to such terms in the Credit Agreement.
|
14.
|
Any notice required or permitted under this Agreement shall be delivered or sent in the manner and to the addresses specified in the Credit Agreement (
or such other address as may be specified in a notice given hereunder
).
|
15.
|
This Agreement has been executed and delivered in Illinois, and shall be construed in accordance with and governed by the laws of the State of Illinois. Lender may file any action, suit, or proceeding relating to this Agreement in any court sitting in Chicago, Illinois having subject matter jurisdiction. Pledgor hereby consents, acknowledges, and agrees that the Court shall have personal jurisdiction and venue in any action, suit, or proceeding which Lender may at any time wish to file in connection with this Agreement.
|
PLEDGOR:
|
FUEL TECH INC.,
|
a Delaware corporation
|
|
|
By:
|
Name:
|
Title:
|
|
|
|
LENDER:
|
JPMORGAN CHASE BANK N.A.,
|
a national banking association
|
|
|
By:
|
Name:
|
Title:
|
|
|
|
Date: August 9, 2016
|
By:
|
/s/ Vincent J. Arnone
|
|
|
Vincent J. Arnone
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Date: August 9, 2016
|
By:
|
/s/ David S. Collins
|
|
|
David S. Collins
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Date: August 9, 2016
|
By:
|
/s/ Vincent J. Arnone
|
|
|
Vincent J. Arnone
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Date: August 9, 2016
|
By:
|
/s/ David S. Collins
|
|
|
David S. Collins
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|