FUELCELL ENERGY INC

Previous wording

This Quarterly Report on Form 10-Q contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements other than statements of historical fact included in this Form 10-K, including statements regarding the Company’s future financial condition, results of operations, plans, objectives, expectations, future performance, business operations and business prospects, are forward-looking statements. Words such as “expects,” “anticipates,” “estimates,” “goals,” “projects,” “intends,” “plans,” “believes,” “predicts,” “should,” “seeks,” “will,” “could,” “would,” “may,” “forecast,” and similar expressions and variations of such words are intended to identify forward-looking statements and are included, along with this statement, for purposes of complying with the safe harbor provisions of the PSLRA. Forward-looking statements are neither historical facts, nor assurances of future performance. Instead, such statements are based only on our beliefs, expectations, and assumptions regarding the future. As such, the realization of matters expressed in forward-looking statements involves inherent risks and uncertainties. Such statements relate to, among other things, the following: (i) the development and commercialization by FuelCell Energy, Inc. and its subsidiaries of fuel cell technology and products and the market for such products; (ii)the expected timing of completion of our ongoing projects; (iii) our business plans and strategies; (iv) the markets in which we expect to operate; (v)expected operating results such as revenue growth and earnings; (vi) our belief that we have sufficient liquidity to fund our business operations for the next 12 months; (vii) future funding under Advanced Technologies contracts; (viii) future financing for projects, including equity and debt investments by investors and commercial bank financing, as well as overall financial market conditions; (ix) the expected cost competitiveness of our technology; and (x) our ability to achieve our sales plans, manufacturing capacity expansion plans, market access and market expansion goals, and cost reduction targets.

Current wording

This Quarterly Report on Form 10-Q contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements other than statements of historical fact included in this Form 10-K, including statements regarding the Company’s future financial condition, results of operations, plans, objectives, expectations, future performance, business operations and business prospects, are forward-looking statements. Words such as “expects,” “anticipates,” “estimates,” “goals,” “projects,” “intends,” “plans,” “believes,” “predicts,” “should,” “seeks,” “will,” “could,” “would,” “may,” “forecast,” and similar expressions and variations of such words are intended to identify forward-looking statements and are included, along with this statement, for purposes of complying with the safe harbor provisions of the PSLRA. Forward-looking statements are neither historical facts, nor assurances of future performance. Instead, such statements are based only on our beliefs, expectations, and assumptions regarding the future. As such, the realization of matters expressed in forward-looking statements involves inherent risks and uncertainties. Such statements relate to, among other things, the following: (i) the development and commercialization by FuelCell Energy, Inc. and its subsidiaries of fuel cell technology and products and the market for such products; (ii)the expected timing of completion of our ongoing projects; (iii) our business plans and strategies; (iv) the markets in which we expect to operate; (v)expected operating results such as revenue growth and earnings; (vi) our belief that we have sufficient liquidity to fund our business operations for the next 12 months; (vii) future funding under Advanced Technologies contracts; (viii) future financing for projects, including equity and debt investments by investors and commercial bank financing, as well as overall financial market conditions; (ix) the expected cost competitiveness of our technology; (x) our ability to successfully implement our restructuring plan during the expected timeframe and the expected effects and impacts of the Company’s restructuring plan; and (xi) our ability to achieve our sales plans, manufacturing capacity expansion plans, market access and market expansion goals, and cost reduction targets.

Previous wording

The forward-looking statements contained in this report are subject to risks and uncertainties, known and unknown, that could cause actual results and future events to differ materially from those set forth in or contemplated by the forward-looking statements, including, without limitation, the risks described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023 and in the section below entitled “Item 1A. Risk Factors,” and the following risks and uncertainties: general risks associated with product development and manufacturing; general economic conditions; changes in interest rates, which may impact project financing; supply chain disruptions; changes in the utility regulatory environment; changes in the utility industry and the markets for distributed generation, distributed hydrogen, and fuel cell power plants configured for carbon capture or carbon separation; potential volatility of commodity prices that may adversely affect our projects; availability of government subsidies and economic incentives for alternative energy technologies; our ability to remain in compliance with U.S. federal and state and foreign government laws and regulations; our ability to regain and maintain compliance with the listing rules of The Nasdaq Stock Market; our ability to implement a reverse stock split and the impacts of a reverse stock split, if implemented; rapid technological change; competition; the risk that our bid awards will not convert to contracts or that our contracts will not convert to revenue; market acceptance of our products; changes in accounting policies or practices adopted voluntarily or as required by accounting principles generally accepted in the United States (“GAAP”); factors affecting our liquidity position and financial condition; government appropriations; the ability of the government and third parties to terminate their development contracts at any time; the ability of the government to exercise “march-in” rights with respect to certain of our patents; our ability to successfully market and sell our products internationally; our ability to develop new products to achieve our long-term revenue targets; our ability to implement our strategy; our ability to reduce our levelized cost of energy and deliver on our cost reduction strategy generally; our ability to protect our intellectual property; litigation and other proceedings; the risk that commercialization of our new products will not occur when anticipated or, if it does, that we will not have adequate capacity to satisfy demand; our need for and the availability of additional financing; our ability to generate positive cash flow from operations; our ability to service our long-term debt; our ability to increase the output and longevity of our platforms and to meet the performance requirements of our contracts; our ability to expand our customer base and maintain relationships with our largest customers and strategic business allies; and concerns with, thr…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The forward-looking statements contained in this report are subject to risks and uncertainties, known and unknown, that could cause actual results and future events to differ materially from those set forth in or contemplated by the forward-looking statements, including, without limitation, the risks described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024 and in the section below entitled “Item 1A. Risk Factors,” and the following risks and uncertainties: general risks associated with product development and manufacturing; general economic conditions; changes in interest rates, which may impact project financing; supply chain disruptions; changes in the utility regulatory environment; changes in the utility industry and the markets for distributed generation, distributed hydrogen, and fuel cell power plants configured for carbon capture or carbon separation; potential volatility of commodity prices that may adversely affect our projects; availability of government subsidies and economic incentives for alternative energy technologies; risks that our restructuring plan will not result in the intended benefits or savings or will result in unanticipated costs, including but not limited to additional charges and/or higher than expected costs; our ability to remain in compliance with U.S. federal and state and foreign government laws and regulations; our ability to maintain compliance with the listing rules of The Nasdaq Stock Market; rapid technological change; competition; the risk that our bid awards will not convert to contracts or that our contracts will not convert to revenue; market acceptance of our products; changes in accounting policies or practices adopted voluntarily or as required by accounting principles generally accepted in the United States (“GAAP”); factors affecting our liquidity position and financial condition; government appropriations; the ability of the government and third parties to terminate their development contracts at any time; the ability of the government to exercise “march-in” rights with respect to certain of our patents; our ability to successfully market and sell our products internationally; our ability to develop additional commercially viable products; our ability to implement our strategy; our ability to reduce our levelized cost of energy and deliver on our cost reduction strategy generally; our ability to protect our intellectual property; litigation and other proceedings; the risk that commercialization of our new products will not occur when anticipated or, if it does, that we will not have adequate capacity to satisfy demand; our need for and the availability of additional financing; our ability to generate positive cash flow from operations; our ability to service our long-term debt; our ability to increase the output and longevity of our platforms and to meet the performance requirements of our contracts; and our ability to expand our customer base and maintain relationship…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We cannot assure you that: we will be able to meet any of our development or commercialization schedules; any of our new products or technologies, once developed, will be commercially successful; our power plants will be commercially successful; we will be able to obtain financing or raise capital to achieve our business plans; the government will

Current wording

We cannot assure you that: we will be able to meet any of our development or commercialization schedules; any of our new products or technologies, once developed, will be commercially successful; our power plants will be commercially successful; we will be able to obtain financing or raise capital to achieve our business plans; the government will appropriate the funds anticipated by us under our government contracts; the government will not exercise its right to

Previous wording

appropriate the funds anticipated by us under our government contracts; the government will not exercise its right to terminate any or all of our government contracts; or we will be able to achieve any other result anticipated in any other forward-looking statement contained herein.

Current wording

terminate any or all of our government contracts; or we will be able to achieve any other result anticipated in any other forward-looking statement contained herein.

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to the accompanying financial statements and footnotes to help provide an understanding of our financial condition, changes in our financial condition and results of operations. The preparation of financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities, as well as management’s assessment of the Company’s ability to meet its obligations as they come due over the next twelve months. Actual results could differ from those estimates. Estimates are used in accounting for, among other things, revenue recognition, lease right-of-use assets and liabilities, loss accruals on service agreements, excess, slow-moving and obsolete inventories, product warranty accruals, loss accruals on service agreements, share-based compensation expense, allowance for doubtful accounts, depreciation and amortization, impairment of goodwill and in-process research and development intangible assets, impairment of long-lived assets (including project assets), valuation of derivatives, and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates. The following discussion should be read in conjunction with information included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023 filed with the Securities and Exchange Commission (“SEC”). Unless otherwise indicated, the terms “Company”, “FuelCell Energy”, “we”, “us”, and “our” refer to FuelCell Energy, Inc. and its subsidiaries. All tabular dollar amounts are in thousands.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to the accompanying financial statements and footnotes to help provide an understanding of our financial condition, changes in our financial condition and results of operations. The preparation of financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities, as well as management’s assessment of the Company’s ability to meet its obligations as they come due over the next twelve months. Actual results could differ from those estimates. Estimates are used in accounting for, among other things, revenue recognition, lease right-of-use assets and liabilities, loss accruals on service agreements, excess, slow-moving and obsolete inventories, product warranty accruals, loss accruals on service agreements, share-based compensation expense, allowance for credit losses, depreciation and amortization, impairment of goodwill and in-process research and development intangible assets, impairment of long-lived assets (including project assets), valuation of derivatives, and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates. The following discussion should be read in conjunction with information included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024 filed with the Securities and Exchange Commission (“SEC”). Unless otherwise indicated, the terms “Company”, “FuelCell Energy”, “we”, “us”, and “our” refer to FuelCell Energy, Inc. and its subsidiaries. All tabular dollar amounts are in thousands.

Previous wording

Headquartered in Danbury, Connecticut, FuelCell Energy is a global leader in delivering environmentally responsible distributed baseload energy platform solutions through our proprietary fuel cell technology. Today, we offer commercial technology that produces clean electricity, heat, clean hydrogen, and water and is also capable of recovering and capturing carbon for utilization and/or sequestration, depending on product configuration and application. We also continue to invest in product development and commercializing technologies that are expected to add new capabilities to our platforms’ abilities to deliver hydrogen and long duration hydrogen-based energy storage through our solid oxide technologies, as well as further enhance our existing platforms’ carbon capture solutions.

Current wording

At FuelCell Energy, our purpose is to enable a world powered by clean energy. We are a global leader in delivering a variety of clean energy solutions to address some of the world’s most critical challenges around energy access, resilience, reliability, affordability, safety and security. Since our inception, FuelCell Energy has been innovating and developing commercial technologies that produce clean electricity, heat, clean hydrogen, and water. We are also proud to be at the forefront of what we believe to be one of the most critical technologies required to achieve the world’s overall emissions objectives: carbon capture. Today, we offer commercial technology that produces clean electricity, heat, clean hydrogen, and water and is also capable of recovering and capturing carbon for utilization and/or sequestration, depending on product configuration and application. We also continue to invest in product development and commercializing technologies that are expected to add new capabilities to our platforms’ abilities to deliver hydrogen and long duration hydrogen-based energy storage through our solid oxide technologies, as well as further enhance our existing platforms’ carbon capture solutions.

Previous wording

FuelCell Energy, based in Connecticut, was founded in 1969 as a New York corporation to provide applied research and development services on a contract basis. We completed our initial public offering in 1992 and reincorporated in Delaware in 1999. We began selling stationary fuel cell power plants commercially in 2003.

Current wording

FuelCell Energy, headquartered in Danbury, Connecticut, was founded in 1969 as a New York corporation to provide applied research and development services on a contract basis. We completed our initial public offering in 1992 and reincorporated in Delaware in 1999. We began selling stationary fuel cell power plants commercially in 2003.

Previous wording

Total revenues for the three months ended July 31, 2024 of $23.7 million reflects a decrease of $1.8 million from $25.5 million for the same period in the prior year. Cost of revenues for the three months ended July 31, 2024 of $29.9 million reflects a decrease of $3.8 million from $33.7 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

million reflects a decrease of $4.2 million from $28.4 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

Product revenues were $0.3 million during the three months ended July 31, 2024 and there were no product revenues in the comparable prior year period. The product revenues during the three months ended July 31, 2024 were recognized under the Company’s new sales contract with Ameresco, Inc., which was entered into during the second quarter of fiscal year 2024, pursuant to which the Company is to provide a 2.8 MW platform to the Sacramento Sewer District.

Current wording

Product revenues were $0.1 million during the three months ended January 31, 2025 and there were no product revenues in the comparable prior year period. The product revenues during the three months ended January 31, 2025 were recognized under the Company’s sales contract with Ameresco, Inc., which was entered into during the second quarter of fiscal year 2024, pursuant to which the Company is to provide a 2.8 MW platform to the Sacramento Sewer District.

Previous wording

Cost of product revenues increased $1.3 million for the three months ended July 31, 2024 to $4.2 million, compared to $2.9 million in the same period in the prior year. Manufacturing variances, primarily related to production volumes and unabsorbed overhead costs, totaled approximately $3.5 million for the three months ended July 31, 2024, compared to approximately $2.4 million for the three months ended July 31, 2023.

Current wording

Cost of product revenues increased $0.6 million for the three months ended January 31, 2025 to $3.0 million, compared to $2.4 million in the same period in the prior year. Manufacturing variances, primarily related to production volumes and unabsorbed overhead costs, totaled approximately $2.7 million for the three months ended January 31, 2025, compared to approximately $2.2 million for the three months ended January 31, 2024.

Previous wording

For the three months ended July 31, 2024, we operated at an annualized production rate of approximately 29.3 MW in our Torrington, CT manufacturing facility, compared to an annualized production rate of 28.9 MW for the three months ended July 31, 2023.

Current wording

For the three months ended January 31, 2025, we operated at an annualized production rate of approximately 31.2 MW in our Torrington, CT manufacturing facility, compared to an annualized production rate of 33.2 MW for the three months ended January 31, 2024.

Previous wording

Cost of service agreements revenues decreased $8.4 million to $1.1 million for the three months ended July 31, 2024 from $9.6 million for the three months ended July 31, 2023. Cost of service agreements revenues includes maintenance and operating costs and costs of module exchanges. The decrease in costs is primarily due to the fact that there were no module exchanges during the three months ended July 31, 2024, compared to three module exchanges during the three months ended July 31, 2023.

Current wording

Cost of service agreements revenues decreased $0.2 million to $1.7 million for the three months ended January 31, 2025 from $1.9 million for the three months ended January 31, 2024. Cost of service agreements revenues includes maintenance and operating costs and costs of module exchanges.

Previous wording

Overall gross profit from service agreements revenues was $0.3 million for the three months ended July 31, 2024, which remains unchanged from a gross profit of $0.3 million for the three months ended July 31, 2023. The overall gross margin was 18.8% for the three months ended July 31, 2024 compared to a gross margin of 2.7% in the comparable prior year period. Gross margin was higher during the three months ended July 31, 2024 primarily due to the fact that the comparable prior year quarter included a reserve established for obsolete inventory of approximately $0.8 million, while there was no comparable reserve established during the three months ended July 31, 2024.

Current wording

Overall gross profit from service agreements revenues was $0.2 million for the three months ended January 31, 2025, compared to a gross loss of $ (0.3) million for the three months ended January 31, 2024. The overall gross margin was 9.7% for the three months ended January 31, 2025 compared to a gross margin of (16.8)% in the comparable prior year period.

Previous wording

Revenues from generation for the three months ended July 31, 2024 totaled $13.4 million, which represents an increase of $2.4 million from the $11.0 million of revenue recognized for the three months ended July 31, 2023. The increase reflects revenue of $0.9 million generated by the Toyota Project, which became operational during the first quarter of fiscal year 2024, and revenue of $4.7 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, partially offset by lower revenue from other plants due to lower output resulting from routine maintenance activities. Generation revenues for the three months ended July 31, 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 July 31, 2024, the sale of hydrogen from the Toyota Project.

Current wording

Revenues from generation for the three months ended January 31, 2025 totaled $11.3 million, which represents an increase of $0.9 million from the $10.5 million of revenue recognized for the three months ended January 31, 2024. The increase reflects an increase in revenue of $1.7 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”) and both of which became operational in December 2023, partially 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, 2025 and 2024 reflect revenue from electricity generated under our power purchase agreements (“PPAs”), the sale of renewable energy credits, and additionally for the three months ended January 31, 2025, the sale of hydrogen from the Toyota Project.

Previous wording

Cost of generation revenues totaled $18.8 million in the three months ended July 31, 2024, compared to $17.5 million in the three months ended July 31, 2023. The overall increase in cost of generation revenues is primarily 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 costs related to the Toyota Project, which were $0.2 million in the three months ended July 31, 2024, compared to $6.2 million in the three months ended July 31, 2023 (which also included expensed gas costs). During the three months ended July 31, 2024, the Company incurred a

Current wording

Cost of generation revenues totaled $15.3 million in the three months ended January 31, 2025, compared to $20.9 million in the three months ended January 31, 2024. The overall decrease in cost of generation revenues is primarily related to a reduction in the expensed construction costs related to the Toyota Project, which were $0.3 million in the three months ended January 31, 2025, compared to $3.5 million in the three months ended January 31, 2024 (which also included expensed gas costs). During the three months ended January 31, 2025, the Company incurred a mark-to-market net gain of $1.8 million related to natural gas purchase contracts, compared to a mark-to-market net loss of $1.9 million during the three months ended January 31, 2024. Cost of generation revenues included depreciation and amortization of approximately $8.0 million and $6.8 million for the three months ended January 31, 2025 and 2024, respectively.

Previous wording

We had 62.8 MW of operating power plants in our generation operating portfolio as of July 31, 2024, which increased from 43.7 MW as of July 31, 2023 and which includes the Derby Projects and the Toyota Project, all of which became operational in December 2023.

Current wording

We had 62.8 MW of operating power plants in our generation operating portfolio as of January 31, 2025, which was unchanged from January 31, 2024.

Previous wording

Advanced Technologies contract revenues increased to $8.6 million from $4.7 million. Advanced Technologies contract revenues recognized under our Joint Development Agreement with ExxonMobil Technology and Engineering Company (“EMTEC”) were approximately $1.8 million, revenues arising from the purchase order received from Esso Nederland B.V. (“Esso”), an affiliate of EMTEC and Exxon Mobil Corporation, related to the Rotterdam project were approximately $3.5 million and revenue recognized under government contracts and other contracts were approximately $3.3 million for the three months ended July 31, 2024. This compares to Advanced Technologies contract revenues recognized under our Joint Development Agreement with EMTEC of approximately $2.8 million and revenue recognized under government contracts and other contracts of approximately $1.9 million for the three months ended July 31, 2023.

Current wording

Advanced Technologies contract revenues for the three months ended January 31, 2025 increased to $5.7 million from $4.6 million for the three months ended January 31, 2024. Advanced Technologies contract revenues recognized under our Joint Development Agreement with ExxonMobil Technology and Engineering Company (“EMTEC”) were approximately $1.2 million, revenues arising from the purchase order received from Esso Nederland B.V. (“Esso”), an

Previous wording

Advanced Technologies contract revenues increased to $20.1 million from $12.9 million. Advanced Technologies contract revenues recognized under our Joint Development Agreement with EMTEC were approximately $7.0 million, revenues arising from the purchase order received from Esso, an affiliate of EMTEC and Exxon Mobil Corporation, related to the Rotterdam project were approximately $7.2 million and revenue recognized under government contracts and other contracts were approximately $6.0 million for the nine months ended July 31, 2024. This compares to contract revenues recognized under our Joint Development Agreement with EMTEC of approximately $7.9 million, and revenue recognized under government contracts and other contracts of approximately $5.1 million for the nine months ended July 31, 2023.

Current wording

affiliate of EMTEC and Exxon Mobil Corporation, related to the Rotterdam project were approximately $3.5 million and revenue recognized under government contracts and other contracts were approximately $1.0 million for the three months ended January 31, 2025. This compares to Advanced Technologies contract revenues recognized under our Joint Development Agreement with EMTEC of approximately $2.5 million, revenue recognized under the Esso purchase order of approximately $1.0 million and revenue recognized under government contracts and other contracts of approximately $1.1 million for the three months ended January 31, 2024.

Previous wording

Cost of Advanced Technologies contract revenues increased to $5.8 million for the three months ended July 31, 2024, compared to $3.8 million for the same period in the prior year as a result of the higher activity discussed above.

Current wording

Cost of Advanced Technologies contract revenues increased to $4.2 million for the three months ended January 31, 2025, compared to $3.2 million for the same period in the prior year, primarily as a result of the additional costs incurred relating to the Esso purchase order.

Previous wording

Advanced Technologies contracts for the three months ended July 31, 2024 generated a gross profit of $2.8 million, compared to a gross profit of $0.9 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 July 31, 2024 compared to the three months ended July 31, 2023.

Current wording

Advanced Technologies contracts for the three months ended January 31, 2025 generated a gross profit of $1.5 million, compared to a gross profit of $1.3 million for the same period in the prior year. The increase was due primarily to the higher revenues recognized during the three months ended January 31, 2025 compared to the three months ended January 31, 2024.

Previous wording

Administrative and selling expenses were $14.6 million and $17.6 million for the three months ended July 31, 2024 and 2023, respectively. Administrative and selling expenses were lower during the three months ended July 31, 2024 than during the three months ended July 31, 2023 primarily due to lower legal, consulting and shareholder relations expenses and lower compensation expense.

Current wording

Administrative and selling expenses were $15.0 million and $16.4 million for the three months ended January 31, 2025 and 2024, respectively. Administrative and selling expenses were lower during the three months ended January 31, 2025 than during the three months ended January 31, 2024 primarily due to lower compensation expense as a result of the recent restructuring actions.

Previous wording

Research and development expenses decreased to $12.8 million for the three months ended July 31, 2024 compared to $15.6 million for the three months ended July 31, 2023. The decrease is primarily due to a decrease in spending 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, as well as a shift in engineering resource allocation toward supporting the increase in funded Advanced Technologies activities described above.

Current wording

Research and development expenses decreased to $11.1 million for the three months ended January 31, 2025 compared to $14.4 million for the three months ended January 31, 2024. The decrease is primarily due to a decrease in spending 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, as well as a shift in engineering resource allocation toward supporting an increase in funded Advanced Technologies activities.

Previous wording

Loss from operations for the three months ended July 31, 2024 was $33.6 million compared to $41.4 million for the three months ended July 31, 2023. This decrease was driven primarily by a $5.8 million decrease in operating expenses and a $2.0 million decrease in gross loss.

Current wording

Loss from operations for the three months ended January 31, 2025 was $32.9 million compared to $42.5 million for the three months ended January 31, 2024. This decrease was driven primarily by a $3.1 million decrease in operating expenses and a $6.5 million decrease in gross loss.

Previous wording

Interest expense for the three months ended July 31, 2024 and 2023 was $2.6 million and $1.9 million, respectively. Interest expense for the three months ended July 31, 2024 includes interest on: the Derby Senior Back Leverage Loan Facility and the Derby Subordinated Back Leverage Loan Facility (in each case as defined elsewhere herein), which were entered into in April 2024; the OpCo Financing Facility (as defined elsewhere herein), which was entered into in May 2023; 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 the Crestmark sale-leaseback transactions. Interest expense for the three months ended July 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 January 31, 2025 and 2024 was $2.6 million and $2.3 million, respectively. Interest expense for both periods includes interest on the OpCo Financing Facility (as defined elsewhere herein), which was entered into in May 2023, and 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. Interest expense increased for the three months ended January 31, 2025, as this period also includes interest on the Derby Senior Back Leverage Loan Facility and the Derby Subordinated Back Leverage Loan Facility (in each case, as defined elsewhere herein), which were entered into in April 2024, and on the facility with EXIM (as defined elsewhere herein), which was entered into in October 2024.

Previous wording

Interest income was $3.3 million and $4.0 million for the three months ended July 31, 2024 and 2023, respectively. The decrease in interest income during the three months ended July 31, 2024 was primarily driven by lower investible cash balances compared to the three months ended July 31, 2023. Interest income for the three months ended July 31, 2024 and 2023 represents interest earned on money market investments and investments in U.S. Treasury Securities.

Current wording

Interest income was $2.4 million and $4.1 million for the three months ended January 31, 2025 and 2024, respectively. The decrease in interest income during the three months ended January 31, 2025 was primarily driven by lower money market investments compared to the three months ended January 31, 2024. Interest income for the three months ended January 31, 2025 and 2024 represents interest earned on money market investments and investments in U.S. Treasury Securities.

Previous wording

Other (expense) income, net was ($2.2) million and $0.4 million for the three months ended July 31, 2024 and 2023, respectively. Other expense, net for the three months ended July 31, 2024 relates primarily to an unrealized loss of $2.4 million on the OpCo Financing Facility interest rate swap derivative. Other income, net for the three months ended July 31, 2023 relates primarily to foreign currency exchange gains.

Current wording

Other income (expense), net was $0.7 million and $(3.7) million for the three months ended January 31, 2025 and 2024, respectively. Other income, net for the three months ended January 31, 2025 relates primarily to an unrealized gain of $0.9 million on the OpCo Financing Facility interest rate swap derivative. Other expense, net for the three months ended January 31, 2024 relates primarily to a loss on the OpCo Financing Facility interest rate swap derivative of $3.5 million as a result of a decrease of approximately 100 basis points in the Secured Overnight Financing Rate (“SOFR”).

Previous wording

For the three months ended July 31, 2024 and 2023, net (loss) income attributable to noncontrolling interest totaled $(0.2) million and $0.1 million, respectively, for the Groton Project tax equity financing transaction with East West Bank.

Current wording

For the three months ended January 31, 2025 and 2024, net loss attributable to noncontrolling interest totaled $3.5 million and $3.6 million, respectively, for the Groton Project tax equity financing transaction with East West Bank.

Previous wording

For the three months ended July 31, 2024 and 2023, net (loss) income attributable to noncontrolling interest totaled $(0.4) million and $0.6 million, respectively, for the LIPA Yaphank Project tax equity financing transaction with REI.

Current wording

For the three months ended January 31, 2025 and 2024, net loss attributable to noncontrolling interest totaled $1.0 million and $0.3 million, respectively, for the LIPA Yaphank Project tax equity financing transaction with REI.

Previous wording

For the three months ended July 31, 2024, net loss attributable to noncontrolling interest totaled $(1.8) million for the Derby Projects tax equity financing transaction with Franklin Park. The loss was primarily a result of accelerated depreciation allocated to the noncontrolling interest under the HLBV method. There was no comparable net loss for the three months ended July 31, 2023, as the Derby Projects began operations in the first quarter of fiscal year 2024.

Current wording

For the three months ended January 31, 2025 and 2024, net income (loss) attributable to noncontrolling interest totaled $0.4 million and $(20.7) million, respectively, for the Derby Projects tax equity financing transaction with Franklin Park. The loss in the three months ended January 31, 2024 was primarily a result of accelerated depreciation allocated to the noncontrolling interest under the HLBV method.

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 July 31, 2024 and 2023, net loss attributable to common stockholders was $33.5 million and $25.1 million, respectively, and net loss per common share was $0.07 and $0.06, respectively. The increase is primarily due to the lack of gain on extinguishment of finance obligations and debt, net during the three months ended July 31, 2024 (compared to the gain that benefitted the comparable prior year period), partially offset by a decrease in loss from operations and the increased net loss attributable to noncontrolling interests for the three months ended July 31, 2024 compared to the three months ended July 31, 2023. The net loss per common share for the three months ended July 31, 2024 benefited from the higher number of weighted average shares outstanding due to share issuances since July 31, 2023.

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 January 31, 2025 and 2024, net loss attributable to common stockholders was $29.1 million and $20.6 million, respectively, and net loss per common share was $1.42 and $1.37, respectively. The increase in net loss per common share is primarily due to the decreased net loss attributable to noncontrolling interest during the three months ended January 31, 2025 (compared to the net loss attributable to noncontrolling interest that benefitted the comparable prior year period), partially offset by a decrease in loss from operations. The net loss per common share for the three months ended January 31, 2025 benefited from the higher number of weighted average shares outstanding due to share issuances since January 31, 2024.

Previous wording

As of July 31, 2024, unrestricted cash and cash equivalents totaled $159.3 million compared to $250.0 million as of October 31, 2023. During the year ended October 31, 2023 and the nine months ended July 31, 2024, the Company invested in United States (U.S.) Treasury Securities. The amortized cost of the U.S. Treasury Securities outstanding totaled $107.8 million as of July 31, 2024 compared to $103.8 million as of October 31, 2023 and is classified as Investments - short-term on the Consolidated Balance Sheets.

Current wording

As of January 31, 2025, unrestricted cash and cash equivalents totaled $98.1 million compared to $148.1 million as of October 31, 2024. During the year ended October 31, 2024 and the three months ended January 31, 2025, the Company invested in United States (U.S.) Treasury Securities. The amortized cost of the U.S. Treasury Securities outstanding totaled $110.3 million as of January 31, 2025 compared to $109.1 million as of October 31, 2024 and is classified as Investments - short-term on the Consolidated Balance Sheets.

Previous 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 nine months ended July 31, 2024 which is recorded as noncontrolling interest on the Consolidated Balance Sheets.

Current wording

During the first quarter of fiscal year 2025, the Company received the second annual funding from East West Bancorp, Inc. (“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 three months ended January 31, 2025 which is recorded as noncontrolling interest on the Consolidated Balance Sheets.

Previous wording

Sales Under Amended Open Market Sale Agreement

Current wording

On April 10, 2024, the Company entered into Amendment No. 1 to the Open Market Sale Agreement, dated July 12, 2022 (the “2022 Sales Agreement”), with Jefferies LLC, B. Riley Securities, Inc., Barclays Capital Inc., BMO Capital Markets Corp., BofA Securities, Inc., Canaccord Genuity LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Loop Capital Markets LLC (each, an “Agent” and together, the “Agents”) (the 2022 Sales Agreement as amended, the “Amended Sales Agreement”), with respect to an at the market offering program under which the Company may, from time to time, offer and sell shares of its common stock having an aggregate offering price of up to $300,000,000 (exclusive of any amounts previously sold under the 2022 Sales Agreement prior to its amendment). On December 27, 2024, the Company entered into Amendment No. 2 to the Amended Sales Agreement, which removed certain representations and warranties relating to the Company’s status as a well-known seasoned issuer. During the first quarter of fiscal year 2025, approximately 0.7 million shares of the Company’s common stock were sold under the Amended Sales Agreement at an average sale price of $9.19 per share, resulting in gross proceeds of approximately $6.3 million before deducting sales commissions and fees, and net proceeds to the Company of approximately $5.9 million after deducting sales commissions totaling approximately $0.1 million and fees totaling approximately $0.3 million. As of January 31, 2025, approximately $198.6 million of shares remained available for sale under the Amended Sales Agreement. See Note 12. “Stockholders’ Equity” for additional information regarding the 2022 Sales Agreement and the Amended Sales Agreement.

Previous wording

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 2025 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 and hydrogen platforms (which may involve partnerships with third parties) and its carbon capture platforms, (viii) implement capacity expansion and potentially attract partnerships 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

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 Company is also pursuing financing to support its commercial efforts which includes deployment of modules to the repowering opportunities in the Korean market including the GGE project (as defined elsewhere herein). 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 further reduce or slow planned spending, further 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.

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. The Company may also seek to undertake private placements of debt securities to finance its project asset portfolio. The Company is also pursuing financing to support its commercial efforts, which include deployment of modules to the repowering opportunities in the Korean market including the GGE project (as defined elsewhere herein). 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 also expect to seek 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 further reduce or slow planned spending, further 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 July 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 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 July 31, 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

Current wording

31, 2025. 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 January 31, 2025, the Company had three projects representing an additional 8.7 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 July 31, 2024, net debt outstanding related to project assets was $118.7 million. Future required payments, inclusive of principal and interest, totaled $144.2 million as of July 31, 2024. The outstanding finance obligations under our sale-leaseback transactions totaled $18.8 million as of July 31, 2024, of which $10.2 million represents the current carrying value of finance obligations less future required payments.

Current wording

As of January 31, 2025, net debt outstanding related to project assets was $114.3 million. Future required payments, inclusive of principal and interest, totaled $135.4 million as of January 31, 2025. The outstanding finance obligations under our sale-leaseback transactions totaled $18.8 million as of January 31, 2025, of which $10.9 million represents the current carrying value of finance obligations less future required payments.

Previous wording

In March 2024, we entered into a PPA with the University of Connecticut (“UConn”), in Storrs, Connecticut, for four 250 kW solid oxide fuel cell power generation systems totaling 1 MW. Power from these solid oxide fuel cells will be used by UConn’s new Innovation Partnership Building. Any unused power will be exported to the grid under the fuel cell net metering tariffs. This project is currently under development and the solid oxide fuel cell power generation system is expected to be installed in phases, with the first phase beginning in calendar year 2025 and construction concluding with installation of the last phase in calendar year 2026. Fuel cell stacks 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 is expected to be used at Trinity’s campus in Hartford, Connecticut to lower energy cost and enhance energy reliability and security. In March 2024, we entered into a PPA with the University of Connecticut (“UConn”), in Storrs, Connecticut, for four 250 kW solid oxide fuel cell power generation systems totaling 1 MW. Power from these solid oxide fuel cells is expected to be used by UConn’s new Innovation Partnership Building. Any unused power is expected to be exported to the grid under the fuel cell net metering tariffs. Fuel cell stacks for our solid oxide platform are manufactured at our manufacturing and research and development facility in Calgary, Alberta, Canada, and the Trinity and UConn projects will be fully assembled and integrated at our facilities in Connecticut.

Previous wording

Overall, backlog increased by approximately 12.6% to $1.20 billion as of July 31, 2024, compared to $1.06 billion as of July 31, 2023, primarily as a result of the LTSA with GGE with respect to the GGE Platform. The GGE Platform is comprised of 21 SureSource 3000 molten carbonate fuel cells (each a “Plant”). Each Plant is comprised of two 1.4-MW carbonate fuel cell modules. Pursuant to the LTSA, GGE and the Company have agreed that (i) GGE will purchase from the Company 42 1.4-MW carbonate fuel cell modules to replace existing fuel cell modules at the GGE Platform, (ii) the Company will provide certain balance of plant replacement components if and to the extent the parties reasonably determine existing components should be replaced, and (iii) the Company will provide long term operations and maintenance services for the GGE Platform. The total amount payable by GGE under the LTSA for the 42 replacement fuel cell modules, balance of plant replacement components, and service is $159.6 million USD, with payments to be made over time as such replacement fuel cell modules are commissioned and the service obligations under the LTSA for such Plants commence. This amount was recorded as backlog concurrent with the execution of the LTSA on May 28, 2024.

Current wording

As discussed above, backlog also increased due to the LTSA with GGE with respect to the GGE Platform. The GGE Platform is comprised of 21 SureSource 3000 molten carbonate fuel cells (each a “Plant”). Each Plant is comprised of two 1.4-MW carbonate fuel cell modules. Pursuant to the LTSA, GGE and the Company have agreed that (i) GGE will purchase from the Company 42 1.4-MW carbonate fuel cell modules to replace existing fuel cell modules at the GGE Platform, (ii) the Company will provide certain balance of plant replacement components if and to the extent the parties reasonably determine existing components should be replaced, and (iii) the Company will provide long term operations and maintenance services for the GGE Platform. The total amount payable by GGE under the LTSA for the 42 replacement fuel cell modules, balance of plant replacement components, and service was $159.6 million USD, with payments being made and to be made over time as such replacement fuel cell modules are commissioned and the service obligations under the LTSA for such Plants commence. This amount was recorded as backlog concurrent with the execution of the LTSA on May 28, 2024, and has since been reduced as revenue has been recognized under the LTSA which commenced in the fourth quarter of fiscal year 2024.

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 as of July 31, 2024, 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 16 years as of January 31, 2025, with weighting based on the dollar amount of backlog and utility service contracts of up to 20 years in duration at inception.