FUELCELL ENERGY INC

Previous wording

Total revenues for the three months ended January 31, 2024 of $16.7 million reflects a decrease of $20.4 million from $37.1 million for the same period in the prior year. Cost of revenues for the three months ended January 31, 2024 of $28.4 million reflects a decrease of $3.4 million from $31.8 million for the same period in the prior year. A discussion of the changes in product revenues, service agreements revenues, generation revenues and Advanced Technologies contract revenues follows.

Current wording

Total revenues for the three months ended April 30, 2024 of $22.4 million reflects a decrease of $15.9 million from $38.3 million for the same period in the prior year. Cost of revenues for the three months ended April 30, 2024 of $29.5 million reflects a decrease of $14.9 million from $44.4 million for the same period in the prior year. A discussion of the changes in product revenues, service agreements revenues, generation revenues and Advanced Technologies contract revenues follows.

Previous wording

Cost of product revenues increased $1.4 million for the three months ended January 31, 2024 to $2.4 million, compared to $1.0 million in the same period in the prior year. Manufacturing variances, primarily related to production volumes and unabsorbed overhead costs, totaled approximately $2.2 million for the three months ended January 31, 2024, compared to approximately $1.1 million for the three months ended January 31, 2023.

Current wording

Cost of product revenues decreased $0.5 million for the three months ended April 30, 2024 to $2.9 million, compared to $3.5 million in the same period in the prior year. Manufacturing variances, primarily related to production volumes and unabsorbed overhead costs, totaled approximately $2.8 million for the three months ended April 30, 2024, compared to approximately $3.3 million for the three months ended April 30, 2023.

Previous wording

For the three months ended January 31, 2024, we operated at an annualized production rate of approximately 33.2 megawatts (“MW”) in our Torrington, CT manufacturing facility, compared to an annualized production rate of 38.2 MW for the three months ended January 31, 2023.

Current wording

For the three months ended April 30, 2024, we operated at an annualized production rate of approximately 30.9 MW in our Torrington, CT manufacturing facility, compared to an annualized production rate of 28.7 MW for the three months ended April 30, 2023.

Previous wording

Overall gross loss from service agreements revenues was $0.3 million for the three months ended January 31, 2024, which decreased from a gross profit of $2.9 million for the three months ended January 31, 2023. The overall gross margin was (16.8)% for the three months ended January 31, 2024 compared to a gross margin of 21.2% in the comparable prior year period. Gross margin was lower during the three months ended January 31, 2024 primarily due to the lack of module exchanges during the quarter and the fact that the comparable prior year quarter included module exchanges that were performed pursuant to service agreements with higher margins.

Current wording

Overall gross profit from service agreements revenues was $0.1 million for the three months ended April 30, 2024, which decreased from a gross profit of $6.1 million for the three months ended April 30, 2023. The overall gross margin was 7.5% for the three months ended April 30, 2024 compared to a gross margin of 23.2% in the comparable prior year period. Gross margin was lower during the three months ended April 30, 2024 primarily due to the lack of module exchanges during the quarter and the fact that the comparable prior year quarter included module exchanges that were performed pursuant to service agreements with higher margins.

Previous wording

Revenues from generation for the three months ended January 31, 2024 totaled $10.5 million, which represents an increase of $0.9 million from revenue recognized of $9.6 million for the three months ended January 31, 2023. The increase reflects revenue of $0.5 million generated by the Toyota Project, which became operational during the three months ended January 31, 2024, and revenue of $2.1 million generated by the 14.0 MW Derby Fuel Cell Project and the 2.8 MW SCEF Fuel Cell Project, both located in Derby, Connecticut (collectively, the “Derby Projects”), both of which became operational in December 2023, offset by lower revenue from other plants due to lower output resulting from routine maintenance activities. Generation revenues for the three months ended January 31, 2024 and 2023 reflect revenue from electricity generated under our power purchase agreements (“PPAs”) and the sale of renewable energy credits.

Current wording

Revenues from generation for the three months ended April 30, 2024 totaled $14.1 million, which represents an increase of $5.7 million from revenue recognized of $8.4 million for the three months ended April 30, 2023. The increase reflects revenue of $0.8 million generated by the Toyota Project, which became operational during the first quarter of fiscal year 2024, and revenue of $4.6 million generated by the 14.0 MW Derby Fuel Cell Project and the 2.8 MW SCEF Fuel Cell Project, both located in Derby, Connecticut (collectively, the “Derby Projects”), both of which became operational in December 2023. Generation revenues for the three months ended April 30, 2024 and 2023 reflect revenue from electricity generated under our power purchase agreements (“PPAs”), the sale of renewable energy credits, and additionally for the three months ended April 30, 2024, the sale of hydrogen from the Toyota Project.

Previous wording

size of the installed fleet with the Toyota Project and Derby Projects achieving commercial operations in the three months ended January 31, 2024 as well as maintenance activities performed at the Tulare and Groton projects during the three months ended January 31, 2024. Both periods include expensed construction and gas costs related to the Toyota Project, which were $3.5 million in three months ended January 31, 2024, compared to $7.6 million in the three months ended January 31, 2023. During the three months ended January 31, 2024, the Company incurred a mark-to-market loss of $1.9 million related to a natural gas purchase contract. There was no comparable loss in the prior year as the Company changed its designation from normal purchase normal sale in the fourth quarter of fiscal year 2023 as a result of net settling certain natural gas purchases under a previous normal purchase normal sale contract designation, which resulted in a change to mark-to-market accounting. Cost of generation revenues included depreciation and amortization of approximately $6.8 million and $4.2 million for the three months ended January 31, 2024 and 2023, respectively.

Current wording

Cost of generation revenues totaled $21.4 million in the three months ended April 30, 2024, compared to $17.1 million in the three months ended April 30, 2023. The overall increase in cost of generation revenues is related to the increased size of the installed fleet with the Toyota Project and Derby Projects achieving commercial operations in the first quarter of fiscal year 2024. Both periods include expensed construction and gas costs related to the Toyota Project, which were $2.6 million in the three months ended April 30, 2024, compared to $4.5 million in the three months ended April 30, 2023. During the three months ended April 30, 2024, the Company incurred a mark-to-market net loss of $2.3 million related to natural gas purchase contracts. There was no comparable loss in the prior year as the Company changed its designation from normal purchase normal sale in the fourth quarter of fiscal year 2023 for one contract, and in the second quarter of fiscal year 2024 for other contracts, as a result of net settling certain natural gas purchases under previous normal purchase normal sale contract designations, which resulted in a change to mark-to-market accounting. Cost of generation revenues included depreciation and amortization of approximately $7.2 million and $5.3 million for the three months ended April 30, 2024 and 2023, respectively.

Previous wording

We currently have four projects with fuel sourcing risk, which are the Toyota Project, which requires procurement of renewable natural gas (“RNG”), and our 14.0 MW and 2.8 MW Derby Projects, and our 7.4 MW project in Yaphank Long Island (the “Yaphank Project”), which require natural gas for which there is no pass-through mechanism. A two-year (through May of 2025) fuel supply contract has been executed for the Toyota Project. Six-year (through October 2029) fuel supply contracts have been executed for the 14.0 MW and 2.8 MW Derby Projects. We are currently in the midst of a seven-year contract (through September 2028) for our 7.4 MW Yaphank Project. The Company will look to extend the duration of these contracts should market and credit conditions allow. If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby Project asset or the Yaphank Project asset and further charges for the Toyota Project asset.

Current wording

We currently have four projects with fuel sourcing risk, which are the Toyota Project, which requires procurement of renewable natural gas (“RNG”), and our 14.0 MW and 2.8 MW Derby Projects, and our 7.4 MW project in Yaphank Long Island (the “Yaphank Project”), which require natural gas for which there is no pass-through mechanism. A two-year (through May of 2025) fuel supply contract has been executed for the Toyota Project. Six-year (through October 2029) fuel supply contracts have been executed for the 14.0 MW and 2.8 MW Derby Projects. We are currently in the midst of a seven-year contract (through September 2028) for our 7.4 MW Yaphank Project. The Company will look to extend the duration of these contracts should market and credit conditions allow. If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby Project assets or the Yaphank Project asset and further charges for the Toyota Project asset.

Previous wording

Advanced Technologies contract revenues increased slightly to $4.6 million for the three months ended January 31, 2024 from $4.5 million for the three months ended January 31, 2023. Compared to the three months ended January 31, 2023, Advanced Technologies contract revenues recognized under our Joint Development Agreement with ExxonMobil Technology and Engineering Company (formerly known as ExxonMobil Research and Engineering Company) (“EMTEC”) were approximately $0.1 million higher during the three months ended January 31, 2024 and revenue recognized under government contracts and other contracts were approximately $0.1 million lower for the three months ended January 31, 2024. Advanced Technologies contract revenues for the first quarter of fiscal year 2024 also include revenues arising from the purchase order received from Esso Nederland B.V. (“Esso”), an affiliate of EMTEC and Exxon Mobil Corporation.

Current wording

Advanced Technologies contract revenues increased to $6.9 million for the three months ended April 30, 2024 from $3.7 million for the three months ended April 30, 2023. Compared to the three months ended April 30, 2023, Advanced Technologies contract revenues recognized under our Joint Development Agreement with ExxonMobil Technology and Engineering Company (formerly known as ExxonMobil Research and Engineering Company) (“EMTEC”) were approximately $0.1 million lower during the three months ended April 30, 2024 and revenue recognized under government contracts and other contracts were approximately $3.3 million higher for the three months ended April 30, 2024. Advanced Technologies contract revenues for the second quarter of fiscal year 2024 also include revenues arising from the purchase order previously received from Esso Nederland B.V. (“Esso”), an affiliate of EMTEC and Exxon Mobil Corporation, during the first quarter of fiscal year 2024.

Previous wording

Cost of Advanced Technologies contract revenues were $3.2 million for the three months ended January 31, 2024, compared to $3.3 million for the same period in the prior year.

Current wording

Cost of Advanced Technologies contract revenues were $3.9 million for the three months ended April 30, 2024, compared to $3.8 million for the same period in the prior year.

Previous wording

Advanced Technologies contracts for the three months ended January 31, 2024 and 2023 generated a gross profit of $1.3 million. The slight increase in gross profit was due primarily to the higher revenues and lower costs recognized under government and other contracts during the three months ended January 31, 2024 compared to the three months ended January 31, 2023.

Current wording

Advanced Technologies contracts for the three months ended April 30, 2024 generated a gross profit of $3.1 million, compared to a gross loss of $0.04 million for the same period in the prior year. The increase was due primarily to the higher revenues and lower costs recognized under government and other contracts during the three months ended April 30, 2024 compared to the three months ended April 30, 2023.

Previous wording

Administrative and selling expenses were $16.4 million and $15.0 million for the three months ended January 31, 2024 and 2023, respectively. Administrative and selling expenses were higher during the three months ended January 31, 2024 than during the three months ended January 31, 2023 primarily due to an increase in compensation expense resulting from an increase in headcount in support of sales, marketing and business expansion.

Current wording

Administrative and selling expenses were $17.7 million and $15.1 million for the three months ended April 30, 2024 and 2023, respectively. Administrative and selling expenses were higher during the three months ended April 30, 2024 than during the three months ended April 30, 2023 primarily due to an increase in compensation expense resulting from an increase in headcount in support of sales, marketing and business expansion.

Previous wording

Research and development expenses increased to $14.4 million for the three months ended January 31, 2024 compared to $12.7 million for the three months ended January 31, 2023. The increase is primarily due to an increase in spending, including spending for labor and materials, on the Company’s ongoing commercial development efforts related to our solid oxide power generation and electrolysis platforms and carbon separation and carbon recovery solutions compared to the comparable prior year period.

Current wording

Research and development expenses increased to $16.6 million for the three months ended April 30, 2024 compared to $14.7 million for the three months ended April 30, 2023. The increase is primarily due to an increase in spending, including spending for labor (including increased headcount) and materials, on the Company’s ongoing commercial development efforts related to our solid oxide power generation and electrolysis platforms and carbon separation and carbon recovery solutions compared to the comparable prior year period.

Previous wording

Interest expense for the three months ended January 31, 2024 and 2023 was $2.3 million and $1.5 million, respectively. Interest expense for the three months ended January 31, 2024 includes interest on the OpCo Financing Facility (as defined elsewhere herein), which was entered into in May 2023, interest on the Senior Back Leverage Loan Facility and the Subordinated Back Leverage Loan Facility (in each case as defined elsewhere herein), which were entered into in August 2023, and interest on the Crestmark sale-leaseback transactions. Interest expense for the three months ended January 31, 2023 includes interest associated with finance obligations for failed sale-leaseback transactions and interest on the loans associated with the Bridgeport Fuel Cell Project, which were terminated in May 2023.

Current wording

Interest expense for the three months ended April 30, 2024 and 2023 was $2.3 million and $1.5 million, respectively. Interest expense for the three months ended April 30, 2024 includes interest on the OpCo Financing Facility (as defined elsewhere herein), which was entered into in May 2023, interest on the Groton Senior Back Leverage Loan Facility and the Groton Subordinated Back Leverage Loan Facility (in each case as defined elsewhere herein), which were entered into in August 2023, and interest on the Crestmark sale-leaseback transactions. Interest expense for the three months ended April 30, 2023 includes interest associated with finance obligations for failed sale-leaseback transactions and interest on the loans associated with the Bridgeport Fuel Cell Project, which were terminated in May 2023.

Previous wording

Interest income was $4.1 million and $3.4 million for the three months ended January 31, 2024 and 2023, respectively. Interest income for the three months ended January 31, 2024 represents interest earned on money market investments and U.S. Treasury Securities.

Current wording

Interest income was $3.4 million and $3.7 million for the three months ended April 30, 2024 and 2023, respectively. Interest income for the three months ended April 30, 2024 represents interest earned on money market investments and investments in U.S. Treasury Securities.

Previous wording

We have not paid federal or state income taxes in several years due to our history of net operating losses, although we have paid foreign income and withholding taxes in Korea. Provision for income tax recorded for the three months ended January 31, 2024 and 2023 was $0 and $0.6 million, respectively.

Current wording

We have not paid federal or state income taxes in several years due to our history of net operating losses, although we have paid foreign income and withholding taxes in Korea. Provision for income tax recorded for each of the three months ended April 30, 2024 and 2023 was $0.0.

Previous wording

applying the equity method of accounting when there is a complex structure, such as the flip structure of our tax equity financings with East West Bancorp, Inc. (“East West Bank”), Renewable Energy Investors, LLC (“REI”), and Franklin Park 2023 FCE Tax Equity Fund, LLC (“Franklin Park”).

Current wording

Net (loss) income attributable to noncontrolling interests is the result of allocating profits and losses to noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method. HLBV is a balance sheet-oriented approach for applying the equity method of accounting when there is a complex structure, such as the flip structure of our tax equity financings with East West Bancorp, Inc. (“East West Bank”), Renewable Energy Investors, LLC (“REI”), and Franklin Park 2023 FCE Tax Equity Fund, LLC (“Franklin Park”).

Previous wording

For the three months ended January 31, 2024 and 2023, net (loss) income attributable to noncontrolling interest totaled ($0.3) million and $0.4 million, respectively, for the LIPA Yaphank Project tax equity financing transaction with REI.

Current wording

For the three months ended April 30, 2024 and 2023, net income attributable to noncontrolling interest totaled $0.2 million and $0.4 million, respectively, for the LIPA Yaphank Project tax equity financing transaction with REI.

Previous wording

Net loss attributable to common stockholders represents the net loss for the period less the preferred stock dividends on the Series B Preferred Stock. For the three-month periods ended January 31, 2024 and 2023, net loss attributable to common stockholders was $20.6 million and $19.4 million, respectively, and net loss per common share was $0.05 in both periods.

Current wording

Net loss attributable to common stockholders represents the net loss for the period less the preferred stock dividends on the Series B Preferred Stock. For the three month periods ended April 30, 2024 and 2023, net loss attributable to common stockholders was $32.9 million and $35.1 million, respectively, and net loss per common share was $0.07 and $0.09, respectively. The decrease is primarily due to the increased net loss attributable to noncontrolling interests. The net loss per common share for the three months ended April 30, 2024 also benefited from the higher number of weighted average shares outstanding due to share issuances since April 30, 2023.

Previous wording

There were no product revenues for the three months ended January 31, 2024 compared to $9.1 million for the three months ended January 31, 2023. Our December 2021 Settlement Agreement (the “Settlement Agreement”) with POSCO Energy Co., Ltd. and its subsidiary, Korea Fuel Cell Co., Ltd. (“KFC”), included an option to purchase an additional 14 modules (in addition to the 20 modules that were purchased by KFC during fiscal year 2022). This option included a material right related to an extended warranty obligation for the modules. The option was not exercised by KFC as of the expiration date of December 31, 2022 and, as a result, the Company recognized $9.1 million of product revenues for the three months ended January 31, 2023, which represents the consideration allocated to the material right if the option had been exercised.

Current wording

There were no product revenues for the six months ended April 30, 2024 compared to $9.1 million for the six months ended April 30, 2023. Our December 2021 Settlement Agreement with POSCO Energy Co., Ltd. and its subsidiary, Korea Fuel Cell Co., Ltd. (“KFC”), included an option to purchase an additional 14 modules (in addition to the 20 modules that were purchased by KFC during fiscal year 2022). This option included a material right related to an extended warranty obligation for the modules. The option was not exercised by KFC as of the expiration date of December 31, 2022 and, as a result, the Company recognized $9.1 million of product revenues for the six months ended April 30, 2023, which represents the consideration allocated to the material right if the option had been exercised.

Previous wording

Service agreements revenues for the three months ended January 31, 2024 decreased $12.3 million to $1.6 million from $13.9 million for the three months ended January 31, 2023. The decrease in service agreements revenues during the three months ended January 31, 2024 was primarily driven by the fact that there were no module exchanges during the quarter. During the three months ended January 31, 2023, there were module exchanges at the plant in Woodbridge, CT, which originally achieved commercial operations in fiscal year 2017, and at the plants owned by Korea Southern Power Company in Korea, which achieved commercial operations in fiscal year 2018.

Current wording

Service agreements revenues for the six months ended April 30, 2024 decreased $37.1 million to $3.0 million from $40.1 million for the six months ended April 30, 2023. The decrease in service agreements revenues during the six months ended April 30, 2024 was primarily driven by the fact that there were no module exchanges during the period. During the six months ended April 30, 2023, there were two new module exchanges at the plant in Woodbridge, CT, which originally achieved commercial operations in fiscal year 2017, and ten new module exchanges at the plants owned by Korea Southern Power Company in Korea, which achieved commercial operations in fiscal year 2018.

Previous wording

Cost of service agreements revenues decreased $9.1 million to $1.9 million for the three months ended January 31, 2024 from $10.9 million for the three months ended January 31, 2023. Cost of service agreements revenues includes maintenance and operating costs and costs of module exchanges. The decrease reflects lower costs as there were no module exchanges during the three months ended January 31, 2024.

Current wording

Cost of service agreements revenues decreased $27.9 million to $3.2 million for the six months ended April 30, 2024 from $31.1 million for the six months ended April 30, 2023. Cost of service agreements revenues includes maintenance and operating costs and costs of module exchanges. The decrease reflects lower costs as there were no module exchanges during the six months ended April 30, 2024.

Previous wording

Loss from operations for the three months ended January 31, 2024 was $42.5 million compared to $22.5 million for the three months ended January 31, 2023. This increase was driven primarily by a $17.0 million increase in gross loss and a $3.1 million increase in operating expenses for the three months ended January 31, 2024.

Current wording

Loss from operations for the six months ended April 30, 2024 was $83.8 million compared to $58.3 million for the six months ended April 30, 2023. This increase was driven primarily by a $17.9 million increase in gross loss and a $7.6 million increase in operating expenses for the six months ended April 30, 2024.

Previous wording

For the three months ended January 31, 2024 and 2023, net loss attributable to noncontrolling interest totaled $3.6 million and $2.9 million, respectively, for the Groton Project tax equity financing transaction with East West Bank.

Current wording

For the six months ended April 30, 2024 and 2023, net loss attributable to noncontrolling interest totaled $3.3 million and $2.9 million, respectively, for the Groton Project tax equity financing transaction with East West Bank.

Previous wording

For the three months ended January 31, 2024, net loss attributable to noncontrolling interest totaled $20.7 million for the Derby Projects tax equity financing transaction with Franklin Park. The loss is primarily driven by the Investment Tax Credit (“ITC”) attributable to the noncontrolling interest for the 2023 tax year. The ITC reduces the noncontrolling interest’s claim on hypothetical liquidation proceeds in the HLBV waterfall and is nonrecurring. This reduction in liquidation proceeds drove the loss in the three months ended January 31, 2024. There was no comparable net loss for the three months ended January 31, 2023, as the Derby Projects began operations in the first quarter of fiscal year 2024.

Current wording

For the six months ended April 30, 2024, net loss attributable to noncontrolling interest totaled $26.8 million for the Derby Projects tax equity financing transaction with Franklin Park. The loss is primarily driven by the Investment Tax Credit (“ITC”) attributable to the noncontrolling interest for the 2023 tax year. The ITC reduces the noncontrolling interest’s claim on hypothetical liquidation proceeds in the HLBV waterfall and is nonrecurring. The loss also is a result of accelerated depreciation allocated to the noncontrolling interest under the HLBV method. The above noted items resulted in a reduction in liquidation proceeds which drove the loss in the six months ended April 30, 2024. There was no comparable net loss for the six months ended April 30, 2023, as the Derby Projects began operations in the first quarter of fiscal year 2024.

Previous wording

As of January 31, 2024, unrestricted cash and cash equivalents totaled $297.5 million compared to $250.0 million as of October 31, 2023. During the year ended October 31, 2023 and the three months ended January 31, 2024, the Company invested in United States (U.S.) Treasury Securities, all of which had matured as of January 31, 2024. The amortized cost of the U.S. Treasury Securities outstanding totaled $0 as of January 31, 2024 compared to $103.8 as of October 31, 2023 and is classified as Investments - short-term on the Consolidated Balance Sheets.

Current wording

As of April 30, 2024, unrestricted cash and cash equivalents totaled $158.8 million compared to $250.0 million as of October 31, 2023. During the year ended October 31, 2023 and the six months ended April 30, 2024, the Company invested in United States (U.S.) Treasury Securities. The amortized cost of the U.S. Treasury Securities outstanding totaled $101.3 million as of April 30, 2024 compared to $103.8 million as of October 31, 2023 and is classified as Investments - short-term on the Consolidated Balance Sheets.

Previous wording

During the fourth quarter of fiscal year 2023, the Company closed on a tax equity financing transaction with Franklin Park 2023 FCE Tax Equity Fund, LLC (“Franklin Park”), a subsidiary of Franklin Park Infrastructure, LLC, for two fuel cell power plant installations -- the 14.0 MW Derby Fuel Cell Project and the 2.8 MW SCEF Fuel Cell Project, both located in Derby, Connecticut (collectively, the “Derby Projects”). Franklin Park’s tax equity commitment with respect to the Derby Projects totals $30.2 million. Of this amount, approximately $9.1 million was received on October 31, 2023 and the remaining approximately $21.1 million was received during the three months ended January 31, 2024. In connection with the initial closing of this tax equity financing transaction in fiscal year 2023, the Company paid closing costs of approximately $1.8 million, which included appraisal fees, title insurance expenses and legal and consulting fees.

Current wording

During the fourth quarter of fiscal year 2023, the Company closed on a tax equity financing transaction with Franklin Park 2023 FCE Tax Equity Fund, LLC (“Franklin Park”), a subsidiary of Franklin Park Infrastructure, LLC, for two fuel cell power plant installations -- the 14.0 MW Derby Fuel Cell Project and the 2.8 MW SCEF Fuel Cell Project, both located in Derby, Connecticut (collectively, the “Derby Projects”). Franklin Park’s tax equity commitment with respect to the Derby Projects totaled $30.2 million. Of this amount, approximately $9.1 million was received on October 31, 2023 and the remaining approximately $21.1 million was received during the six months ended April 30, 2024. In connection with the initial closing of this tax equity financing transaction in fiscal year 2023, the Company paid closing costs of approximately $1.8 million, which included appraisal fees, title insurance expenses and legal and consulting fees.

Previous wording

During the three months ended January 31, 2024, the Company completed the Technical Improvement Plan to bring the Groton Project (defined elsewhere herein) to its rated capacity and the Groton Project reached its design rated output of 7.4 MW. The Company achieved all conditions precedent required for the first annual funding from East West Bank and, as a result, the Company received a $4.0 million contribution during the three months ended January 31, 2024 which is recorded as noncontrolling interest on the Consolidated Balance Sheets.

Current wording

During the first quarter of fiscal year 2024, the Company completed the Technical Improvement Plan to bring the Groton Project (defined elsewhere herein) to its rated capacity and the Groton Project reached its design rated output of 7.4 MW. The Company achieved all conditions precedent required for the first annual funding from East West Bank under the tax equity financing transaction between the Company and East West Bank and, as a result, the Company received a $4.0 million contribution during the six months ended April 30, 2024 which is recorded as noncontrolling interest on the Consolidated Balance Sheets.

Previous wording

We believe that our unrestricted cash and cash equivalents, expected receipts from our contracted backlog and release of short-term restricted cash less expected disbursements over the next twelve months will be sufficient to allow the Company to meet its obligations for at least one year from the date of issuance of the financial statements included in this Quarterly Report on Form 10-Q.

Current wording

We believe that our unrestricted cash and cash equivalents, expected receipts from our contracted backlog, funds received upon the maturity of U.S. Treasury Securities, and release of short-term restricted cash less expected disbursements over the next twelve months will be sufficient to allow the Company to meet its obligations for at least one year from the date of issuance of the financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

To date, we have not achieved profitable operations or sustained positive cash flow from operations. The Company’s future liquidity, for fiscal year 2024 and in the long-term, will depend on its ability to (i) timely complete current projects in process within budget, (ii) increase cash flows from its generation operating portfolio, including by meeting conditions required to timely commence operation of new projects, operating its generation operating portfolio in compliance with minimum performance guarantees and operating its generation operating portfolio in accordance with revenue expectations, (iii) obtain financing for project construction and manufacturing expansion, (iv) obtain permanent financing for its projects once constructed, (v) increase order and contract volumes, which would lead to additional product sales, service agreements and generation revenues, (vi) obtain funding for and receive payment for research and development under current and future Advanced Technologies contracts, (vii) successfully commercialize its solid oxide, hydrogen and carbon capture platforms, (viii) implement capacity expansion for solid oxide product manufacturing, (ix) implement the product cost reductions necessary to achieve profitable operations, (x) manage working capital and the Company’s unrestricted cash balance and (xi) access the capital markets to raise funds through the sale of debt and equity securities, convertible notes, and other equity-linked instruments.

Current wording

To date, we have not achieved profitable operations or sustained positive cash flow from operations. The Company’s future liquidity, for the remainder of fiscal year 2024 and in the long-term, will depend on its ability to (i) timely complete current projects in process within budget, (ii) increase cash flows from its generation operating portfolio, including by meeting conditions required to timely commence operation of new projects, operating its generation operating portfolio in compliance with minimum performance guarantees and operating its generation operating portfolio in accordance with revenue expectations, (iii) obtain financing for project construction and manufacturing expansion, (iv) obtain permanent financing for its projects once constructed, (v) increase order and contract volumes, which would lead to additional product sales, service agreements and generation revenues, (vi) obtain funding for and receive payment for research and development under current and future Advanced Technologies contracts, (vii) successfully commercialize its solid oxide, hydrogen and carbon capture platforms, (viii) implement capacity expansion for solid oxide product manufacturing, (ix) implement the product cost reductions necessary to achieve profitable operations, (x) manage working capital and the Company’s unrestricted cash balance and (xi) access the capital markets to raise funds through the sale of debt and equity securities, convertible notes, and other equity-linked instruments.

Previous wording

We are continually assessing different means by which to accelerate the Company’s growth, enter new markets, commercialize new products, and enable capacity expansion. Therefore, from time to time, the Company may consider and enter into agreements for one or more of the following: negotiated financial transactions, minority investments, collaborative ventures, technology sharing, transfer or other technology license arrangements, joint ventures, partnerships, acquisitions or other business transactions for the purpose(s) of geographic or manufacturing expansion and/or new product or technology development and commercialization, including hydrogen production through our carbonate and solid oxide platforms and storage and carbon capture, sequestration and utilization technologies.

Current wording

We are continually assessing different means by which to accelerate the Company’s growth, enter new markets, commercialize new products, and enable capacity expansion. Therefore, from time to time, the Company may consider and enter into agreements for one or more of the following: negotiated financial transactions, minority investments, collaborative ventures, technology sharing, transfer or other technology license arrangements, joint ventures, partnerships,

Previous wording

Our business model requires substantial outside financing arrangements and satisfaction of the conditions of such arrangements to construct and deploy our projects to facilitate the growth of our business. The Company has invested capital raised from sales of its common stock to build out its project portfolio. The Company has also utilized and expects to continue to utilize a combination of long-term debt and tax equity financing (e.g., sale-leaseback transactions, partnership flip transactions and the monetization and/or transfer of eligible investment and production tax credits) to finance its project asset portfolio as these projects commence commercial operations, particularly in light of the passage of the Inflation Reduction Act in August 2022. The Company may also seek to undertake private placements of debt securities to finance its project asset portfolio. The proceeds of any such financing, if obtained, may allow the Company to reinvest capital back into the business and to fund other projects. We may also seek to obtain additional financing in both the debt and equity markets in the future. If financing is not available to us on acceptable terms if and when needed, or on terms acceptable to us or our lenders, if we do not satisfy the conditions of our financing arrangements, if we spend more than the financing approved for projects, if project costs exceed an amount that the Company can finance, or if we

Current wording

Our business model requires substantial outside financing arrangements and satisfaction of the conditions of such arrangements to construct and deploy our projects to facilitate the growth of our business. The Company has invested capital raised from sales of its common stock to build out its project portfolio. The Company has also utilized and expects to continue to utilize a combination of long-term debt and tax equity financing (e.g., sale-leaseback transactions, partnership flip transactions and the monetization and/or transfer of eligible investment and production tax credits) to finance its project asset portfolio as these projects commence commercial operations, particularly in light of the passage of the Inflation Reduction Act in August 2022. The Company may also seek to undertake private placements of debt securities to finance its project asset portfolio. The proceeds of any such financing, if obtained, may allow the Company to reinvest capital back into the business and to fund other projects. We may also seek to obtain additional financing in both the debt and equity markets in the future. If financing is not available to us on acceptable terms if and when needed, or on terms acceptable to us or our lenders, if we do not satisfy the conditions of our financing arrangements, if we spend more than the financing approved for projects, if project costs exceed an amount that the Company can finance, or if we do not generate sufficient revenues or obtain capital sufficient for our corporate needs, we may be required to reduce or slow planned spending, reduce staffing, sell assets, seek alternative financing and take other measures, any of which could have a material adverse effect on our financial condition and operations.

Previous wording

We believe our generation operating portfolio generally contributes to higher long-term cash flows to the Company than if these projects had been sold. Our generation operating portfolio totaled 62.8 MW as of January 31, 2024. We expect generation revenue to continue to grow as additional projects achieve commercial operation, but this revenue amount may also fluctuate from year to year depending on platform output, operational performance and management and site conditions. The Company plans to continue to grow this portfolio while also selling certain projects to investors. As of January 31, 2024, the Company had one project representing an additional 0.3 MW in development, which project is expected to generate operating cash flows in future periods, if completed. Retaining long-term cash flow positive projects, combined with our service fleet, is expected to result in reduced reliance on new project sales to achieve cash flow positive operations, however, operations and performance issues could impact results. We have worked with and are continuing to work with lenders and financial institutions to secure construction financing, long-term debt, tax equity and sale-leasebacks for our project asset portfolio, but there can be no assurance that such financing can be attained, or that, if attained, it will be retained and sufficient.

Current wording

We believe our generation operating portfolio generally contributes to higher long-term cash flows to the Company than if these projects had been sold. Our generation operating portfolio totaled 62.8 MW as of April 30, 2024. We expect generation revenue to continue to grow as additional projects achieve commercial operation, but this revenue amount may also fluctuate from year to year depending on platform output, operational performance and management and site conditions. The Company actively markets its products in order to grow this portfolio; however, the Company may also sell certain projects to investors from time to time. As of April 30, 2024, the Company had two projects representing an additional 1.3 MW in development, which projects are expected to generate operating cash flows in future periods, if completed. We have worked with and are continuing to work with lenders and financial institutions to secure construction financing, long-term debt, tax equity and sale-leasebacks for our project asset portfolio, but there can be no assurance that such financing can be attained, or that, if attained, it will be retained and sufficient.

Previous wording

As of January 31, 2024, net debt outstanding related to project assets was $110.7 million. Future required payments, inclusive of principal and interest, totaled $134.8 million as of January 31, 2024. The outstanding finance obligations under our sale-leaseback transactions, which totaled $18.8 million as of January 31, 2024, of which $9.4 million represents the current carrying value of finance obligations less future required payments.

Current wording

As of April 30, 2024, net debt outstanding related to project assets was $121.5 million. Future required payments, inclusive of principal and interest, totaled $149.2 million as of April 30, 2024. The outstanding finance obligations under our sale-leaseback transactions totaled $18.8 million as of April 30, 2024, of which $9.8 million represents the current carrying value of finance obligations less future required payments.

Previous wording

During fiscal year 2022, we entered into a power purchase agreement with Trinity College in Hartford, Connecticut, for our 250 kW solid oxide fuel cell power generation system. Power and heat produced from the platform will be used at Trinity’s campus in Hartford, Connecticut, to lower energy cost and enhance energy reliability and security. This project is currently under development and the solid oxide fuel cell power generation system is expected to be installed in the second half of fiscal year 2024. Modules for our solid oxide platform are manufactured at our manufacturing and research and development facility in Calgary, Alberta, Canada, and this project will be fully assembled and integrated at our facilities in Connecticut.

Current wording

During fiscal year 2022, we entered into a PPA with Trinity College in Hartford, Connecticut, for our 250 kW solid oxide fuel cell power generation system. Power and heat produced from the platform will be used at Trinity’s campus in Hartford, Connecticut to lower energy cost and enhance energy reliability and security. This project is currently under development and the solid oxide fuel cell power generation system is expected to be installed in fiscal year 2025. Modules for our solid oxide platform are manufactured at our manufacturing and research and development facility in Calgary, Alberta, Canada, and this project will be fully assembled and integrated at our facilities in Connecticut.

Previous wording

Overall, backlog decreased by approximately 3.4% to $1.03 billion as of January 31, 2024, compared to $1.06 billion as of January 31, 2023, primarily as a result of revenue recognition under generation, service and Advanced Technologies agreements since January 31, 2023. This decline in backlog was partially offset by new service agreements backlog as a result of the new service agreement with Noeul Green Energy entered into during the fiscal year ended October 31, 2023 and new Advanced Technologies contract backlog as a result of the purchase order received from Esso during the quarter ended January 31, 2024.

Current wording

Overall, backlog increased by approximately 3.8% to $1.06 billion as of April 30, 2024, compared to $1.02 billion as of April 30, 2023, primarily as a result of the service agreement with Noeul Green Energy entered into during the fiscal year ended October 31, 2023, Advanced Technologies contract backlog as a result of the purchase order received from Esso during the first quarter of fiscal year 2024 and additional Advanced Technologies contract backlog related to Amendment No. 5 to the Joint Development Agreement between the Company and EMTEC entered into in April 2024, partially offset by revenue recognition under generation, service and Advanced Technologies agreements since April 30, 2023.

Previous wording

Backlog represents definitive agreements executed by the Company and our customers. Projects for which we have an executed PPA are included in generation backlog, which represents future revenue under long-term PPAs. The Company’s ability to recognize revenue in the future under a PPA is subject to the Company’s completion of construction of the project covered by such PPA. Should the Company not complete the construction of the project covered by a PPA, it will forgo future revenues with respect to the project and may incur penalties and/or impairment charges related to the project. Projects sold to customers (and not retained by the Company) are included in product sales and service agreements backlog, and the related generation backlog is removed upon sale. Together, the service and generation portion of backlog had a weighted average term of approximately 17 years, with weighting based on the dollar amount of backlog and utility service contracts of up to 20 years in duration at inception.

Current wording

Backlog represents definitive agreements executed by the Company and our customers. Projects for which we have an executed PPA are included in generation backlog, which represents future revenue under long-term PPAs. The Company’s ability to recognize revenue in the future under a PPA is subject to the Company’s completion of construction of the project covered by such PPA. Should the Company not complete the construction of the project covered by a PPA, it will forgo future revenues with respect to the project and may incur penalties and/or impairment charges related to the project. Projects sold to customers (and not retained by the Company) are included in product sales and service agreements backlog, and the related generation backlog is removed upon sale. Together, the service and generation portion of backlog had a weighted average term of approximately 17 years as of April 30, 2024, with weighting based on the dollar amount of backlog and utility service contracts of up to 20 years in duration at inception.

Previous wording

Included in projected expenditures associated with the capacity expansion for molten carbonate is equipment to launch the carbon capture platform manufacturing required for the assembly of the technology we jointly developed with EMTEC. The solid oxide production capacity expansion is underway in our Calgary, Canada facility and is

Current wording

Included in projected expenditures associated with the capacity expansion for molten carbonate is equipment to launch the carbon capture platform manufacturing required for the assembly of the technology we jointly developed with EMTEC. The solid oxide production capacity expansion is underway in our Calgary, Canada facility and is expected to increase the capacity of the facility from 1 MW to 10 MW per year of solid oxide fuel cell production or from 4 MW to 40 MW per year of solid oxide electrolysis cell (“SOEC”) production by the end of calendar year 2025.

Previous wording

We have made progress in advancing our carbonate and solid oxide platform capacity expansion plans.

Current wording

Our current carbonate and solid oxide platform capacity expansion plans are as follows:

Previous wording

The Company continues to invest in capability with the goal of reducing production bottlenecks and driving productivity, including investments in automation, laser welding, and the construction of additional integrated conditioning capacity. The Company also constructed a SureSource 1500 in Torrington during fiscal year 2022, which operates as a testing facility for qualifying new supplier components and performance testing and validation of continued platform innovations. During fiscal year 2023, the Company made investments to add engineered carbon recovery capability to the onsite SureSource 1500. This addition is expected to be completed in fiscal year 2024. This product enhancement will allow potential customers to observe the operating plant and, given the targeted market of food and beverage companies, will allow for the sampling and testing of recovered CO 2 to verify quantity, quality or purity requirements.

Current wording

The Company continues to invest in capability with the goal of reducing production bottlenecks and driving productivity, including investments in automation, laser welding, and the construction of additional integrated conditioning capacity. The Company also constructed a SureSource 1500 in Torrington during fiscal year 2022, which operates as a testing facility for qualifying new supplier components and performance testing and validation of continued platform innovations. During fiscal year 2023, the Company made investments to add engineered carbon recovery capability to the onsite SureSource 1500. This addition is expected to be completed in fiscal year 2024. This product enhancement will allow potential customers to observe the operating plant and, given the targeted market of food and beverage companies, will allow for the sampling and testing of recovered

Previous wording

During the year ended October 31, 2023, Versa Power Systems Ltd. (“Versa Ltd.”), a subsidiary of FuelCell Energy, entered into a lease expansion, extension and amending agreement which expanded the space leased by Versa Ltd. in Calgary, Alberta, Canada to include an additional approximately 48,000 square feet, for a total of approximately 80,000 square feet of space. The Company took possession of part of the additional space on April 1, 2023 and took possession of the rest of the additional space on June 1, 2023 after certain leasehold improvements were made to support increased manufacturing. In addition, long-lead process equipment has been ordered to facilitate the expansion of manufacturing capacity for the solid oxide platforms in Calgary. Upon the completion of the Calgary capacity expansion, the Company expects that it will be able to increase annual production capacity and that it will be capable of delivering up to 40 MW of annualized SOEC production per year. During the engineering and permitting phase of this initial manufacturing expansion project, the Company has designed in flexibility that would allow us to further increase cell stack manufacturing capacity at our Calgary facility to facilitate the potential annualized production of up to an additional 40 MW of SOECs per year by leasing additional space and investing in various process optimizations intended to increase throughput and yield. This approach would allow for the potential to increase our total annualized SOEC manufacturing capacity to up to 80 MW per year. Additional investments in our Torrington, CT manufacturing facility could also be undertaken to provide solid oxide module assembly to further enhance overall SOEC manufacturing capacity. The Company has hired and trained additional staff for a 3-shift production operation to support the initial planned expansion to 40 MW and would need to add additional staff as required in the future to realize the potential 80 MW of annualized SOEC production.

Current wording

During the year ended October 31, 2023, Versa Power Systems Ltd. (“Versa Ltd.”), a subsidiary of FuelCell Energy, entered into a lease expansion, extension and amending agreement which expanded the space leased by Versa Ltd. in Calgary, Alberta, Canada to include an additional approximately 48,000 square feet, for a total of approximately 80,000 square feet of space. The Company took possession of part of the additional space on April 1, 2023 and took possession of the rest of the additional space on June 1, 2023. In addition, long-lead process equipment has been ordered to facilitate the expansion of manufacturing capacity for the solid oxide platforms in Calgary. Upon the completion of the Calgary capacity expansion, the Company expects that it will be able to increase annual production capacity and that it will be capable of delivering up to 40 MW of annualized SOEC production per year. During the engineering and permitting phase of this initial manufacturing expansion project, the Company has designed in flexibility that would allow us to further increase cell stack manufacturing capacity at our Calgary facility to facilitate the potential annualized production of up to an additional 40 MW of SOECs per year by leasing additional space and investing in various process optimizations intended to increase throughput and yield. This approach would allow for the potential to increase our total annualized SOEC manufacturing capacity to up to 80 MW per year. Additional investments in our Torrington, CT manufacturing facility could also be undertaken to provide solid oxide module assembly to further enhance overall SOEC manufacturing capacity. The Company has hired and trained additional staff for a 3-shift production operation to support the initial planned expansion to 40 MW and would need to add additional staff as required in the future to realize the potential 80 MW of annualized SOEC production.