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What changed in FUELCELL ENERGY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FUELCELL ENERGY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+598 added−683 removedSource: 10-K (2023-12-19) vs 10-K (2022-12-20)

Top changes in FUELCELL ENERGY INC's 2023 10-K

598 paragraphs added · 683 removed · 450 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

195 edited+36 added−110 removed109 unchanged
Biggest changeWe are focused on using our proprietary technology to pursue the following four significant industry applications, each of which we believe is important to the global energy transition and to limiting global warming: • Distributed generation (commercially available); • Distributed hydrogen (commercially available); • Solid Oxide Electrolysis Cell (“SOEC”) based hydrogen production leveraging electrolysis, long-duration hydrogen energy storage and Reversible Solid Oxide Fuel Cells (“RSOFC”) for the low to zero carbon production of electricity utilizing pure hydrogen as the feedstock (under development and available for order); and • Carbon capture from external sources (under development) and carbon separation and utilization enabling carbon capture utilization and sequestration (“CCUS”) (commercially available). ​ See the section below entitled “Our Product Platforms and Applications” for more information. ​ 9 Table of Contents Our Market Opportunity ​ Climate initiatives are driving the global push to reduce greenhouse gases, including CO2, NOx and SOx.
Biggest changeFinally, all of these other technologies are currently significant contributors to landfill waste following their useful life. ​ ​ 13 Table of Contents Product Platforms and Applications We are focused on using our proprietary technology to pursue the following five significant applications, each of which we believe is important to the global energy transition and to limiting climate change, reducing NOx, SOx, and particulate pollution, limiting noise pollution associated with traditional power generation and fostering more efficient utilization of land compared to traditional power generation and intermittent renewable energy platforms: • Distributed generation from carbonate and solid oxide platforms (commercially available); • Distributed hydrogen production using carbonate-based Tri-gen to co-produce power, hydrogen, and water (commercially available); • Distributed and large-scale hydrogen production using high efficiency solid oxide electrolysis cell (“SOEC”) systems (commercially available); • Carbon capture from external sources (under development) and carbon recovery and utilization enabling carbon capture utilization and sequestration (“CCUS”) (commercially available); and • Long duration energy storage utilizing reversible solid oxide fuel cells (“RSOFC”) which alternate between electrolysis mode (to produce and store hydrogen using input power) and fuel cell mode, regenerating power from the stored hydrogen (under development). ​ The attributes of our products include: ​ ● Sustainable : With the commercialization of our solid oxide platform, we are able to offer two highly differentiated high temperature electrochemical platforms.
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 under Item 1A - Risk Factors of this report and the following factors: ● 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 and the listing rules of The Nasdaq Stock Market (“Nasdaq”), ● rapid technological change, ● competition, 4 Table of Contents ● 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 (“U.S.
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 under Item 1A - Risk Factors of this report and the following factors: ● 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 and the listing rules of The Nasdaq Stock Market (“Nasdaq”), ● rapid technological change, ● competition, ● the risk that our bid awards will not convert to contracts or that our contracts will not convert to revenue, 4 Table of Contents ● 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 (“U.S.
This capability enables utilities to add multi-megawatt power generation to enhance electric grid resiliency where needed, without the associated cost, inefficiencies of a transmission system, and other associated above-ground transmission risks.
This capability enables utilities to add multi-megawatt power generation to enhance electric grid resiliency where needed, without the associated cost and inefficiencies of a transmission system and without other associated above-ground transmission risks.
Under the typical provisions of both our LTSAs and PPAs, we provide services to monitor, operate and maintain power platforms to meet specified performance levels. Operations and maintenance are key drivers for power platforms to deliver their projected revenue and cash flows. The service aspects of our business model provide a recurring and predictable revenue stream for the Company.
Under the typical provisions of both our LTSAs and PPAs, we provide services to monitor, operate, service and maintain power platforms to meet specified performance levels. Operations and maintenance are key drivers for power platforms to deliver their projected revenue and cash flows. The service aspects of our business model provide a recurring and predictable revenue stream for the Company.
License Agreements License Agreement with EMTEC EMTEC and FuelCell Energy began working together in 2016 under an initial joint development agreement with a focus on better understanding the fundamental science behind carbonate fuel cells for use in advanced applications and specifically how to increase efficiency in separating and concentrating carbon dioxide from the exhaust of natural gas-fueled power generation.
License and Joint Development Agreements with EMTEC EMTEC and FuelCell Energy began working together in 2016 under an initial joint development agreement with a focus on better understanding the fundamental science behind carbonate fuel cells for use in advanced applications and specifically how to increase efficiency in separating and concentrating carbon dioxide from the exhaust of natural gas-fueled power generation.
Our proprietary technology also allows us to utilize on-site biogas, renewable natural gas or a hydrogen and natural gas blend, the application of which is rapidly expanding around the world, to fuel our platforms. ​ We market different configurations and applications of our SureSource platform to meet specific market needs, including: ​ • On-Site Power (also known as “Behind the Meter”): Customers benefit from improved power resilience, energy security from on-site power that reduces reliance on the electric grid in an environmentally responsible manner, and long-term electric and other value stream price certainty.
Our proprietary technology also allows us to utilize on-site biogas, renewable natural gas or a hydrogen and natural gas blend, the application of which is rapidly expanding around the world, to fuel our platforms. ​ We market different configurations and applications of our platform to meet specific market needs, including: ​ • On-Site Power (also known as “Behind the Meter”): Customers benefit from improved power resilience, energy security from on-site power that reduces reliance on the electric grid in an environmentally responsible manner, and long-term electric and other value stream price certainty.
Hydrogen is also capable of providing the fuel needed to produce high grade heat for industrial applications such as steel and glass production, in addition to its traditional uses for the refining process, in making ammonia, cement, and chemicals, in building heat, for combustion power generation, and even for residential heating . ​ Hydrogen is also an effective medium for the storage of energy, and we are in the process of commercializing a highly efficient and environmentally favorable hydrogen-based long-duration energy storage solution.
Hydrogen is also capable of providing the fuel needed to produce high grade heat for industrial applications such as steel and glass production, in addition to its traditional uses for the refining process, in making ammonia, cement, and chemicals, for in-building heating, for combustion power generation, and for residential heating . ​ Hydrogen is also an effective medium for the storage of energy, and we are in the process of commercializing a highly efficient and environmentally favorable hydrogen-based long-duration energy storage solution.
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 SureSource 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 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.
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 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.
Department of Energy (“DOE”), ExxonMobil Technology and Engineering Company, formerly known as ExxonMobil Research and Engineering Company (“EMTEC”), Canadian Natural Resources Limited (“CNRL”) and Drax Group provide funding for and encourage technology development. ​ ● Products characterized by sustainability over their full lifecycle compared to other “clean” technologies such as wind turbines, solar panels and mineral-based batteries for which recycling is neither economical nor practical.
Department of Energy (“DOE”), ExxonMobil Technology and Engineering Company, formerly known as ExxonMobil Research and Engineering Company (“EMTEC”), Canadian Natural Resources Limited (“CNRL”) and Drax Group (“Drax”) provide funding for and encourage technology development. ​ ● Products characterized by sustainability over their full lifecycle compared to other “clean” technologies such as wind turbines, solar panels and mineral-based batteries for which recycling is neither economical nor practical.
Our fuel cells can solidify the total utility power generation solution when combined with intermittent sources, such as solar or wind, or less efficient combustion-based equipment that provides peaking or load following power. ​ • Microgrid Applications: SureSource platforms can also be configured as a microgrid, either independently or with other forms of power generation, with the goal of providing continuous power and a seamless transition during times of grid outages.
Our fuel cells can solidify the total utility power generation solution when combined with intermittent sources, such as solar or wind, or less efficient combustion-based equipment that provides peaking or load following power. ​ • Microgrid Applications: Our platforms can also be configured as a microgrid, either independently or with other forms of power generation, with the goal of providing continuous power and a seamless transition during times of grid outages.
As a leading global manufacturer of proprietary fuel cell technology platforms, FuelCell Energy is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, and municipalities. ​ Our History FuelCell Energy was founded in 1969 by Bernard Baker and Martin Klein, who had a powerful vision for the future of energy.
As a leading global manufacturer of proprietary fuel cell technology platforms, FuelCell Energy is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, municipalities, and communities. ​ Our History FuelCell Energy was founded in 1969 by Bernard Baker and Martin Klein, who had a powerful vision for the future of energy.
We believe this feature will gain importance in the future as hydrogen becomes more widespread as a fuel, and in the more near term as we work to deploy our technology for hydrogen-based energy storage. ​ Both platforms can be used in electrolysis, which is the reverse of fuel cell operation – producing hydrogen from power.
We believe this feature will gain importance in the future as hydrogen becomes more widespread as a fuel, and in the more near term as we work to deploy our technology for hydrogen-based energy storage. ​ Both platforms can be used in electrolysis, which is the reverse of fuel cell operation – producing hydrogen from power and water.
We directly employ field technicians to service the power platforms and maintain service centers near our customers to support the high availability of our platforms. For all operating fuel cell platforms not under a PPA, customers purchase long-term service agreements (“LTSAs”), some of which have terms of up to 20 years.
We directly employ field technicians to service the power platforms and maintain distribution centers near our customers to support the high availability of our platforms. For all operating fuel cell platforms not under a PPA, customers purchase long-term service agreements (“LTSAs”), some of which have terms of up to 20 years.
Sustainability is promoted throughout our organization. We manufacture SureSource products and manage them through end-of-life using environmentally friendly business processes and practices, certified to ISO 14001:2015. We continually strive to improve how we plan and execute across the entire product life cycle.
Sustainability is promoted throughout our organization. We manufacture our products and manage them through end-of-life using environmentally friendly business processes and practices, certified to ISO 14001:2015. We continually strive to improve how we plan and execute across the entire product life cycle.
This multi-fuel capability enables the SureSource platform to leverage the established natural gas infrastructure that is readily available in our existing and target markets, compared to some types of fuel cells that can only operate on high purity hydrogen.
This multi-fuel capability enables our platform to leverage the established natural gas infrastructure that is readily available in our existing and target markets, compared to some types of fuel cells that can only operate on high purity hydrogen.
Carbon separated can also be sequestered depending upon the use case. ​ • Utility Grid Support : Our SureSource energy platforms are scalable, enabling multiple fuel cell platforms to be located together on a very small footprint per MW generated.
Carbon separated can also be sequestered depending upon the use case. ​ • Utility Grid Support : Our energy platforms are scalable, enabling multiple fuel cell platforms to be located together on a very small footprint per MW generated.
The Company, which is now based in Connecticut, was founded as a New York corporation to provide applied research and development services on a contract basis. The Company completed its initial public offering in 1992 and reincorporated in Delaware in 1999.
The Company, which is based in Connecticut, was founded as a New York corporation to provide applied research and development services on a contract basis. The Company completed its initial public offering in 1992 and reincorporated in Delaware in 1999.
Additionally, large energy-intensive industry sectors and the aviation sector in European Union countries above a certain size qualify for the ETS (Emissions Trading Scheme) and are subject to a cap-and-trade requirement for carbon emissions.
Additionally, large energy-intensive industry sectors and the aviation sector in European Union countries above a certain size qualify for the Emissions Trading Scheme and are subject to a cap-and-trade requirement for carbon emissions.
Our carbon separation technology allows carbon dioxide to be easily extracted and purified to the appropriate level for utilization or sequestration, significantly reducing the carbon footprint of the generated power from our fuel cell platforms.
Our carbon separation technology allows carbon dioxide to be extracted and purified to the appropriate level for utilization or sequestration, significantly reducing the carbon footprint of the generated power from our fuel cell platforms.
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, threats of, or the consequences of, pandemics, contagious diseases or health epidemics, including the 2019 novel coronavirus (“COVID-19”), and resulting supply chain disruptions, shifts in clean energy demand, impacts to our customers’ capital budgets and investment plans, impacts to our project schedules, impacts to our ability to service existing projects, and impacts on the demand for our products.
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, threats of, or the consequences of, pandemics, contagious diseases or health epidemics, including the novel coronavirus (“COVID-19”), and resulting supply chain disruptions, shifts in clean energy demand, impacts to our customers’ capital budgets and investment plans, and impacts on the demand for our products.
The Series B Preferred Stock ranks senior to our common stock with respect to payments upon liquidation, dividends, and distributions. ● Litigation could expose us to significant costs and adversely affect our business, financial condition, and results of operations. ● Weakness in the economy and other conditions affecting the financial stability of our customers could negatively impact future sales of our products and our results of operations. ● Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity. ● Our future success will depend on our ability to attract and retain qualified management, technical and other personnel. ​ 7 Table of Contents General Information Information contained in this report concerning the electric power supply industry and the distributed generation market, the distributed hydrogen market, the energy storage market and the carbon capture market, our general expectations concerning these industries and markets, and our position within these industries and markets are based on market research, industry publications, other publicly available information and assumptions made by us based on this information and our knowledge of these industries and markets, which we believe to be reasonable.
The Series B Preferred Stock ranks senior to our common stock with respect to payments upon liquidation, dividends, and distributions. ● Litigation could expose us to significant costs and adversely affect our business, financial condition, and results of operations. ● Weakness in the economy and other conditions affecting the financial stability of our customers could negatively impact future sales of our products and our results of operations. ● Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity. ● Our future success will depend on our ability to attract and retain qualified management, technical and other personnel. ● We are subject to risks inherent in international operations. ​ General Information Information contained in this report concerning the electric power supply industry and the distributed generation market, the distributed hydrogen market, the energy storage market and the carbon capture market, our general expectations concerning these industries and markets, and our position within these industries and markets are based on market research, industry publications, other publicly available information and assumptions made by us based on this information and our 7 Table of Contents knowledge of these industries and markets, which we believe to be reasonable.
Our SureSource power platforms are producing power for a variety of industrial, commercial, municipal and government customers, including manufacturing facilities, pharmaceutical processing facilities, universities, healthcare facilities and wastewater treatment facilities.
Our power platforms are producing power for a variety of industrial, commercial, municipal and government customers, including manufacturing facilities, pharmaceutical processing facilities, universities, healthcare facilities and wastewater treatment facilities.
Certain utility policies may also pose barriers to our installation or interconnection with the utility grid, such as backup, standby or departing load charges that make installation of our products less economically attractive for our customers. Regulatory and legislative support can take the form of policy, incentive programs, and defined sustainability initiatives such as Renewable Portfolio Standards (“RPS”).
Certain utility policies may also pose barriers to our installation or interconnection with the utility grid, such as backup, standby or departing load charges that make installation of our products less economically attractive for our customers. Regulatory and legislative impact can take the form of policy, incentive programs, and defined sustainability initiatives such as Renewable Portfolio Standards (“RPS”).
High levels of production concentration, compounded by complex supply chains, increase the risks that could arise from physical disruption, trade restrictions or other developments in major producing countries, jeopardizing energy security. ​ Long duration hydrogen-based energy storage is expected to be required at large scale in order to manage the forecasted high penetration of intermittent renewable resources globally, and we believe the water/hydrogen-based approach of our 18 Table of Contents solid oxide fuel cell/solid oxide electrolysis cell/reversible solid oxide fuel cell technology has the potential to be a key enabler of long duration hydrogen-based energy storage.
High levels of production concentration, compounded by complex supply chains, increase the risks that could arise from physical disruption, trade restrictions or other developments in major producing countries, jeopardizing energy security. ​ Long duration hydrogen-based energy storage is expected to be required at large scale in order to manage the forecasted high penetration of intermittent renewable resources globally, and we believe the water/hydrogen-based approach of our solid oxide fuel cell/solid oxide electrolysis cell/reversible solid oxide fuel cell technology has the potential to be a key enabler of long duration hydrogen-based energy storage.
One attractive application for this technology is the on-site production of carbon dioxide for use in beverage and food production, in addition to other uses such as pH balancing of water, the production of dry ice, as a binder in cement and concrete production, utilization in grow houses, the production of ethanol and synthetic fuels, and numerous other industrial applications and building materials.
One attractive application for this technology is the on-site production of carbon dioxide for use in beverage and food production, in addition to other uses such as pH balancing of water, the production of dry ice, as a binder in cement and concrete production, utilization in grow houses, the production of ethanol and synthetic fuels such as sustainable aviation fuels, and numerous other industrial applications and building materials.
Our plans are dependent on market acceptance of our products and we must complete development of our new products and develop additional commercially viable products in order to achieve our long-term revenue targets. ● Our products use inherently dangerous, flammable fuels, operate at high temperatures and use corrosive carbonate material, each of which could subject our business to product liability claims. 6 Table of Contents ● We are increasingly dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations and the operations of our power plant platforms.
Our plans are dependent on market acceptance of our products and we must complete development of our new products and develop additional commercially viable products in order to achieve our long-term revenue targets. ● Our products use inherently dangerous, flammable fuels, operate at high temperatures and use corrosive carbonate material, each of which could subject our business to product liability claims. ● We are increasingly dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations and the operations of our power plant platforms.
Under our robust environmental, health and safety (EH&S) program, we strongly encourage the reporting of near misses to identify opportunities for improvement and we are constantly evaluating our EH&S protocols in an effort to keep our facilities and workspaces environmentally friendly and safe for our team members, stakeholders, customers, and visitors. ​ We are committed to EH&S excellence.
Under our robust environmental, health and safety (“EH&S”) program, we strongly encourage the reporting of near misses to identify opportunities for improvement and we are constantly evaluating our EH&S protocols in an effort to keep our facilities and workspaces environmentally friendly and safe for our team members, stakeholders, customers, and visitors. ​ We are committed to EH&S excellence.
While we plan to aggressively pursue sales of our products in South Korea as a result of the Settlement Agreement with POSCO Energy and KFC, we 36 Table of Contents are also in the process of diversifying our sales mix from both a customer specific and geographic perspective as part of our overall strategic plan. ​ The international nature of our operations subjects us to a number of risks, including fluctuations in exchange rates, adverse changes in foreign laws or regulatory requirements and tariffs, taxes, and other trade restrictions.
While we plan to aggressively pursue sales of our products in South Korea as a result of the Settlement Agreement with POSCO Energy and KFC, we are also in the process of diversifying our sales mix from both a customer specific and geographic perspective as part of our overall strategic plan. ​ The international nature of our operations subjects us to a number of risks, including fluctuations in exchange rates, adverse changes in foreign laws or regulatory requirements and tariffs, taxes, and other trade restrictions.
We have been awarded a pilot program to provide a packaged 150 kg/day system for demonstration at Idaho National Laboratory.
We have also been awarded a pilot program to provide a packaged 150 kg/day system for demonstration at Idaho National Laboratory.
“Segment Information,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for information about our net sales by geographic region for the years ended October 31, 2022, 2021, and 2020.
“Segment Information,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for information about our net sales by geographic region for the years ended October 31, 2023, 2022 and 2021.
In addition, we are focused on advancing the commercialization of our platform technology to utilize pure hydrogen for baseload power generation and to perform electrolysis to convert water and electricity into hydrogen and to isolate and remove CO2 from external exhaust streams. ​ Hydrogen enables zero emissions transportation by utilizing a zero-carbon feedstock as the fuel to power cars, trucks, buses, ships, trains, and, in the future, aircraft and other aerospace applications.
In addition, we are focused on advancing the commercialization of our platform technology to utilize pure hydrogen for baseload power generation and to perform electrolysis to convert water and electricity into hydrogen and to isolate and remove CO 2 from external exhaust streams. ​ Hydrogen enables zero emissions transportation by utilizing a zero-carbon feedstock as the fuel to power cars, trucks, buses, ships, trains, and, in the future, aircraft and other aerospace applications.
Unlike solar, wind, and run of river hydro power, fuel cells are able to operate continuously regardless of weather, time of day, water levels, or geographic location. ​ ● Standardized : Our solutions use a standard cell design globally, enabling supply chain volume-based cost reduction, optimal resource utilization and long-life product enhancements. ​ ● Attractive Thermal Attributes : In addition to electricity, our standard fuel cell configuration produces high quality thermal energy (approximately 700° F), suitable for heating facilities or water, or steam for industrial processes or for absorption cooling.
Unlike solar, wind, and run of river hydro power, fuel cells are able to operate continuously regardless of weather, time of day, water levels, or geographic location. ​ ● Standardized : Our solutions use a standard cell design globally, enabling supply chain volume-based cost reduction, optimal resource utilization and long-life product enhancements. ​ ● Attractive Thermal Attributes : In addition to electricity, our standard fuel cell configuration produces high quality thermal energy (approximately 700° F), suitable for heating facilities or water, or steam for industrial processes or for absorption cooling ideal for data center applications.
Lisowski received his Bachelor’s Degree in Communications and Business Administration at Western New England University and a Master’s Degree in Management, Global Supply Chain Integrations from Rensselaer Polytechnic Institute. ​ ​ ​ ​ ​ Anthony Leo Executive Vice President, Chief Technology Officer ​ 65 ​ Mr.
Lisowski received his Bachelor’s Degree in Communications and Business Administration at Western New England University and a Master’s Degree in Management, Global Supply Chain Integrations from Rensselaer Polytechnic Institute. ​ ​ ​ ​ ​ Anthony Leo Executive Vice President, Chief Technology Officer ​ 66 ​ Mr.
Dolger received a Bachelor of Arts Degree from the State University of New York at Albany and Juris Doctor from Pace University School of Law. ​ ​ ​ ​ ​ Mark Feasel Executive Vice President, Chief Commercial Officer ​ 52 ​ Mr. Feasel was appointed Executive Vice President and Chief Commercial Officer in April 2022. Mr.
Dolger received a Bachelor of Arts Degree from the State University of New York at Albany and Juris Doctor from Pace University School of Law. ​ ​ ​ ​ ​ Mark Feasel Executive Vice President, Chief Commercial Officer ​ 53 ​ Mr. Feasel was appointed Executive Vice President and Chief Commercial Officer in April 2022. Mr.
Locating our platforms on-site also contributes directly to reducing our customers’ Scope 1 and Scope 2 emissions. ​ ● Scalable : Our platforms are scalable, providing a cost-effective solution to adding power incrementally as demand grows, such as multi-megawatt fuel cell parks supporting the electric grid and large scale commercial and industrial operations. ​ ● Forward Compatibility : Our fuel cells are multi-fuel capable, allowing a customer to deploy our platforms today utilizing natural gas and to migrate in the future to biofuels, renewable natural gas, and/or a hydrogen 15 Table of Contents and natural gas blend as those fuels become more abundant.
Locating our platforms on-site also contributes directly to reducing our customers’ Scope 1 and Scope 2 emissions. ​ ● Scalable : Our platforms are scalable, providing a cost-effective solution to adding power incrementally as demand grows, such as multi-megawatt fuel cell parks supporting the electric grid and large scale commercial and industrial operations. ​ ● Forward Compatibility : Our fuel cells are multi-fuel capable, allowing a customer to deploy our platforms today utilizing natural gas and to migrate in the future to biofuels, renewable natural gas, and/or a hydrogen and natural gas blend as those fuels become more abundant.
Pursuant to the EMTEC License Agreement, we granted EMTEC and its affiliates a non-exclusive, worldwide, fully-paid, perpetual, irrevocable, non-transferable license and right to use our patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from external industrial and power sources and for any other purpose attendant thereto or associated therewith, in exchange for a $10 million payment.
Pursuant to the EMTEC License Agreement, we granted EMTEC and its affiliates a non-exclusive, worldwide, fully-paid, perpetual, irrevocable, non-transferable license and right to use our patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from external industrial and power sources and for any other purpose attendant thereto or associated therewith, in 26 Table of Contents exchange for a $10 million payment.
We report the revenue earned under long-term maintenance and service agreements as Service agreements revenues in our Consolidated Statements of Operations and Comprehensive Loss. 24 Table of Contents Internationally, South Korea and Europe have historically been product sale markets for the Company; however, prior to fiscal year 2022, we had not recognized meaningful product sales revenues in these geographies since 2018.
We report the revenue earned under long-term maintenance and service agreements as Service agreements revenues in our Consolidated Statements of Operations and Comprehensive Loss. Internationally, South Korea and Europe have historically been product sale markets for the Company; however, prior to fiscal year 2022, we had not recognized meaningful product sales revenues in these geographies since 2018.
The primary emissions from our power plants, assuming no cogeneration application, are humid flue gas that is discharged at temperatures of 700-800° F, water that is discharged at temperatures of 10-20° F above ambient air temperatures, and CO2 in per-kW hour amounts that are, due to the high efficiency of fuel cells, significantly less than conventional fossil fuel central generation power plants.
The primary emissions from our power plants, assuming no cogeneration application, are humid flue gas that is discharged at temperatures of 700-800° F, water that is discharged at temperatures of 10-20° F above ambient air temperatures, and CO 2 in per-kW hour amounts that are, due to the high efficiency of fuel cells, significantly less than conventional fossil fuel central generation power plants.
The platforms are similar in many ways, but they also have unique capabilities. Both platforms can support power generation and combined heat and power applications using a variety of fuels, including natural gas, renewable biogas, and hydrogen.
The platforms are similar in many ways, but they also have unique capabilities. Both platforms support power generation and combined heat and power applications using a variety of fuels, including hydrogen, hydrogen and natural gas blends, biogas, renewable natural gas, and natural gas.
Our solutions produce electricity electrochemically − without combustion − and operate at a low decibel level, which enables siting of the power plants within dense, urban 14 Table of Contents areas while meeting clean air permitting regulations. We believe that our solutions represent an important local public health benefit and they often generate tax revenues for the local community.
Our solutions produce electricity electrochemically − without combustion − and operate at a low decibel level, which enables siting of the power plants within dense, urban areas while meeting clean air permitting regulations. We believe that our solutions represent an important local public health benefit, and they often generate tax revenues for the local community.
The IRA extends the existing Internal Revenue Code (“IRC”) Section 48 investment tax credit, which includes fuel cell technology, through 2024 and introduces new prevailing wage conditions required to be eligible for the full credit value.
The IRA extended the existing Internal Revenue Code (“IRC”) Section 48 investment tax credit, which includes fuel cell technology, through 2024 and introduces new prevailing wage conditions required to be eligible for the full credit value.
Our SureSource power platforms are unique in their ability to run on biogas. We market our products primarily in the United States, Europe and South Korea, and we are also pursuing expanding opportunities in other countries around the world.
Our patented power platforms are unique in their ability to run on biogas. We market our products primarily in the United States, Europe and South Korea, and we are also pursuing expanding opportunities in other countries around the world.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available free of charge through the “Investors” section of the Company’s website (http://www.fuelcellenergy.com) as soon as practicable after such material is electronically filed with, or furnished to, the 39 Table of Contents SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available free of charge through the “Investors” section of the Company’s website (http://www.fuelcellenergy.com) as soon as practicable after such material is electronically filed with, or furnished to, the SEC.
They require significantly less land than solar and wind projects. There is minimal noise produced by the mechanical BOP and our fuel cell platforms have a clean emissions profile, making our fuel cell energy platforms ideally suited for urban locations and in suburban applications at or near the point of energy consumption.
They require significantly less land than solar and wind projects for equivalent power production. There is minimal noise produced by the mechanical BOP and our fuel cell platforms have a clean emissions profile, making our fuel cell energy platforms ideally suited for urban locations and in suburban applications at or near the point of energy consumption.
Italy adopted a system to promote energy efficiency with Italian “White Certificates” (Energy Efficiency Certificates) that are tradable 34 Table of Contents certificates, for which fuel cells qualify, to promote energy savings expressed in tons of oil equivalent saved. Germany, the United Kingdom and the Netherlands provide tax incentives, grants and waivers of regulatory fees for clean energy installations.
Italy adopted a system to promote energy efficiency with Italian “White Certificates” (Energy Efficiency Certificates) that are tradable certificates, for which fuel cells qualify, to promote energy savings expressed in tons of oil equivalent saved. Germany, the United Kingdom and the Netherlands provide tax incentives, grants and waivers of regulatory fees for clean energy installations.
The utilities and independent power producer market has historically been our largest market with customers that include utilities on the East and West coasts of the United States, such as UIL Holdings Corporation, Inc. (owned by Avangrid, 21 Table of Contents Inc., a wholly owned subsidiary of Iberdrola), the Long Island Power Authority (“LIPA”) and Southern California Edison.
The utilities and independent power producer market has historically been our largest market with customers that include utilities on the East and West coasts of the United States, such as UIL Holdings Corporation, Inc. (owned by Avangrid, Inc., a wholly owned subsidiary of Iberdrola), the Long Island Power Authority (“LIPA”) and Southern California Edison.
We believe that we can accelerate and expand the adoption of our distributed power generation solutions through: ● further reductions in the total cost of ownership; ● increasing understanding of total avoided emissions and continued education regarding the multiple value streams that our solutions provide; ● continued improvements in product quality, power efficiency, and stack life; ● increasing brand recognition and understanding of our differentiated platform portfolio; ● expanding our sub megawatt platform to include solid oxide for both hydrogen power production and utilization of hydrogen rich fuels; 22 Table of Contents ● geographic and segment expansion; ● working to increase demand for on-site generation and microgrid expansion; and ● product expansion across carbon separation and utilization, carbon capture and distributed hydrogen.
We believe that we can accelerate and expand the adoption of our distributed solutions through: ● further reductions in the total cost of ownership; ● increasing understanding of total avoided emissions and continued education regarding the multiple value streams that our solutions provide; ● continued improvements in product quality, power efficiency, and stack life; ● increasing brand recognition and understanding of our differentiated platform portfolio; ● expanding our sub megawatt platform to include solid oxide for both hydrogen power production and utilization of hydrogen rich fuels; ● geographic and segment expansion; ● working to increase demand for on-site generation and microgrid expansion; and ● product expansion across carbon recovery and utilization, carbon capture and distributed hydrogen.
The high thermal value may allow customers to reduce or eliminate their burning of fuel in carbon intensive boilers, which should reduce emissions that contribute to their Scope 1 emissions. When configured for CHP, our system efficiencies can potentially reach up to 90%, depending on the application.
The high thermal value may allow 14 Table of Contents customers to reduce or eliminate their burning of fuel in carbon intensive boilers, which should reduce emissions that contribute to their Scope 1 emissions. When configured for CHP, our system efficiencies can potentially reach up to 90%, depending on the application.
Health and safety is both a bottom-up and top-down priority as the Company’s Board of Directors is actively engaged in ongoing review of our polices, protocols and performance. ​ Our EH&S core principles are: ● Zero injuries / incidents; ● Compliance with all legal obligations; ● Pollution prevention; ● Waste reduction; and ● Continual improvement. ​ We are also in the process of performing life cycle analyses on our products, as well as our production and office locations, and developing a roadmap to net zero carbon emissions. ​ 37 Table of Contents Our safety performance is excellent and is demonstrated by experience modification rates (EMR) below the industry average of 1.0 for the last 7 fiscal years: 2016: 0.81, 2017: 0.65, 2018: 0.62, 2019: 0.65, 2020: 0.59, 2021: 0.68 and 2022: 0.088.
Health and safety is both a bottom-up and top-down priority as the Company’s Board of Directors is actively engaged in ongoing review of our polices, protocols and performance. ​ Our EH&S core principles are: 31 Table of Contents ● Zero injuries / incidents; ● Compliance with all legal obligations; ● Pollution prevention; ● Waste reduction; and ● Continual improvement. ​ We are also in the process of performing life cycle analyses on our products, as well as our production and office locations, and developing a roadmap to net zero carbon emissions. ​ Our safety performance is excellent and is demonstrated by experience modification rates below the industry average of 1.0 for the last 7 fiscal years: 2017: 0.65, 2018: 0.62, 2019: 0.65, 2020: 0.59, 2021: 0.68, 2022: 0.088 and 2023: 0.89.
We will continue to monitor other global markets for expansion as those opportunities develop.
We will continue to monitor global markets for expansion as those opportunities develop.
Such statements relate to, among other things, the following: ● the development and commercialization by FuelCell Energy, Inc. and its subsidiaries (“FuelCell Energy,” “Company,” “we,” “us” and “our”) of fuel cell technology and products and the market for such products, ● the expected timing of completion of our ongoing projects, ● our business plans and strategies, ● the markets in which we expect to operate, ● the size and scope of our total addressable market opportunity, ● expected operating results such as revenue growth and earnings, ● our belief that we have sufficient liquidity to fund our business operations for the next 12 months, ● future funding under Advanced Technologies contracts, ● future financing for projects, including equity and debt investments by investors and commercial bank financing, as well as overall financial market conditions, ● the expected cost competitiveness of our technology, and ● our ability to achieve our sales plans, market access and market expansion goals, and cost reduction targets.
Such statements relate to, among other things, the following: ● the development and commercialization by FuelCell Energy, Inc. and its subsidiaries (“FuelCell Energy,” “Company,” “we,” “us” and “our”) of fuel cell technology and products and the market for such products, ● the expected timing of completion of our ongoing projects, ● our business plans and strategies, ● the markets in which we expect to operate, ● expected operating results such as revenue growth and earnings, ● our belief that we have sufficient liquidity to fund our business operations for the next 12 months, ● future funding under Advanced Technologies contracts, ● future financing for projects, including equity and debt investments by investors and commercial bank financing, as well as overall financial market conditions, ● the expected cost competitiveness of our technology, and ● our ability to achieve our sales plans, manufacturing capacity expansion plans, market access and market expansion goals, and cost reduction targets.
This added revenue attribute could make the SureSource Capture system more cost effective than other systems which are being considered, or are currently in use, for carbon capture. SureSource Capture systems can be implemented incrementally, managing capital outlay to match decarbonization objectives and regulatory requirements.
This added revenue attribute could make our carbon capture system more cost effective than other systems which are being considered, or are currently in use, for carbon capture. Our carbon capture systems can be implemented incrementally, managing capital outlay to match decarbonization objectives and regulatory requirements.
Our fuel cells, including the fuel cell components and completed fuel cell module, do not utilize any 3TG minerals (i.e., tin, tungsten, tantalum and gold) that are classified as conflict minerals. We utilize componentry in the BOP such as computer circuit boards that 27 Table of Contents utilize trace amounts of 3TG minerals.
Our fuel cells, including the fuel cell components and completed fuel cell module, do not utilize any 3TG minerals (i.e., tin, tungsten, tantalum and gold) that are classified as conflict minerals. We utilize componentry in the BOP such as computer circuit boards that utilize trace amounts of 3TG minerals.
Dolger held a variety of legal positions of increasing responsibility at the headquarters of Terex Corporation, a public company and a global manufacturer of aerial work platforms and materials processing 42 Table of Contents machinery, most recently as Assistant General Counsel from January 2016 to March 2021. Mr.
Dolger held a variety of legal positions of increasing responsibility at the headquarters of Terex Corporation, a public company and a global manufacturer of aerial work platforms and materials processing machinery, most recently as Assistant General Counsel from January 2016 to March 2021. Mr.
CES and RPS, and their 33 Table of Contents implementing regulations, vary significantly from state to state, particularly with respect to the percentage of renewable energy required to achieve the state’s mandate, the definition of eligible clean and renewable energy resources, and the extent to which renewable energy credits (certificates representing the generation of renewable energy) qualify for CES or RPS compliance.
CES and RPS, and their implementing regulations, vary significantly from state to state, particularly with respect to the percentage of renewable energy required to achieve the state’s mandate, the definition of eligible clean and renewable energy resources, and the extent to which renewable energy credits (certificates representing the generation of renewable energy) qualify for CES or RPS compliance.
We believe a large and increasing combined total addressable market (“TAM”) opportunity exists for solutions we currently have commercially available today and those solutions that we are actively developing for commercialization.
We believe a large and increasing combined total addressable market opportunity exists for solutions we currently have commercially available today and solutions that we are actively developing for commercialization.
The ability to provide clean power, heat, and useable carbon dioxide is a unique feature profile that we believe is only available with our SureSource platform.
The ability to provide clean power, heat, and useable carbon dioxide is a unique feature profile that we believe is only available with our carbon capture platform.
Our objective is to continue to improve our competitive position, including innovating in areas such as offering multiple platform solutions, and methods for producing clean hydrogen, solid oxide, and carbon separation and carbon capture in order to add value for customers looking for clean and renewable energy and to aid in their decarbonization goals. ​ ​ ​ Backlog Backlog represents definitive agreements executed by the Company and our customers.
Our objective is to continue to improve our competitive position, including innovating in areas such as offering multiple 25 Table of Contents platform solutions, and methods for producing clean hydrogen, solid oxide, and carbon separation and carbon capture in order to add value for customers looking for clean and renewable energy and to aid in their decarbonization goals. ​ ​ Backlog Backlog represents definitive agreements executed by the Company and our customers.
When configured for distributed hydrogen, our plants produce hydrogen in addition to power and water, with a potential effective efficiency (counting the fuel that would have been used to produce hydrogen conventionally) of up to 80% before considering waste heat utilization, which can raise the total efficiency even higher. ​ ● Use of Readily Available Catalyst Material : As our fuel cells are designed to operate at approximately 1,100° F, our platform solution has a key advantage afforded high temperature fuel cells, specifically that they do not require the use of geographically limited precious metal electrodes required by lower temperature fuel cells, such as proton exchange membrane (“PEM”), phosphoric acid (“PAFC”), and alkaline (“AFC”) fuel cells.
When configured for distributed hydrogen, our plants produce hydrogen in addition to power and water, with a potential effective efficiency (counting the fuel that would have been used to produce hydrogen conventionally) of up to 80% before considering waste heat utilization, which can further improve the total efficiency. ​ ● Use of Readily Available Catalyst Material : As our fuel cells are designed to operate at approximately 1,100° F, our platform solution has a key advantage afforded high temperature fuel cells, specifically that they do not require the use of geographically limited precious metal electrodes required by lower temperature fuel cells, such as proton exchange membrane (“PEM”) and phosphoric acid (“PAFC”) fuel cells.
Clean energy sources that 28 Table of Contents customers may consider beyond our solutions include products such as wind turbines, solar arrays, and hydro facilities, as well as a range of hydrogen and fuel cell solutions from both incumbent and developing competitors.
Clean energy sources that customers may consider beyond our solutions include products such as wind turbines, solar arrays, and hydro facilities, as well as a range of hydrogen and fuel cell solutions from both incumbent and developing competitors.
Our solid oxide platform is also capable of operating on hydrogen. For our carbonate platform, the unique chemistry of our fuel cells allows them to directly use low Btu on-site biogas utilizing our proprietary gas cleanup skid (SureSource Treatment TM ), with no reduction in output or efficiency compared to operation on natural gas.
Our solid oxide platform is also capable of operating on 100% hydrogen. For our carbonate platform, the unique chemistry of our fuel cells allows them to directly use low Btu on-site biogas utilizing our proprietary gas cleanup skid, with no reduction in output or efficiency compared to operation on natural gas.
The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC located at http://www.sec.gov. ​ 40 Table of Contents Information about our Executive Officers ​ NAME AGE PRINCIPAL OCCUPATION ​ ​ ​ ​ ​ Jason B. Few President, Chief Executive Officer ​ 56 ​ Mr.
The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC located at http://www.sec.gov. 32 Table of Contents Information about our Executive Officers ​ NAME AGE PRINCIPAL OCCUPATION ​ ​ ​ ​ ​ Jason B. Few President, Chief Executive Officer ​ 57 ​ Mr.
We report the revenue earned under these programs as Advanced Technologies contract revenues in our Consolidated Statements of Operations and Comprehensive Loss. ​ We have historically worked on technology development with various U.S. government departments and agencies, including the DOE, the Department of Defense (“DOD”), the Environmental Protection Agency (“EPA”), the Defense Advanced Research Projects Agency (“DARPA”), the Office of Naval Research (“ONR”), and the National Aeronautics and Space Administration (“NASA”).
We report the revenue earned under these programs as Advanced Technologies contract revenues in our Consolidated Statements of Operations and Comprehensive Loss. ​ We have historically worked on technology development with various U.S. government departments and agencies, including the DOE, the Department of Defense, the Environmental Protection Agency, the Defense Advanced Research Projects Agency, the Office of Naval Research, and the National Aeronautics and Space Administration.
The governments of South Africa, France, Germany, the United Kingdom and the U.S., along with the European Union, have announced an ambitious, long-term Just Energy Transition Partnership (the “Partnership”) to support South Africa’s decarbonization efforts.
The governments of South Africa, France, Germany, the United Kingdom and the U.S., along with the EU, have announced an ambitious, long-term Just Energy Transition Partnership (the “Partnership”) to support South Africa’s decarbonization efforts.
Dolger oversees all the Company’s legal and governmental affairs, as well as provides leadership in all aspects of the Company’s business, including commercial matters, compliance, corporate governance and board activities. Prior to joining the Company, Mr.
Dolger oversees all the Company’s legal and governmental affairs, as well as provides leadership in all aspects of the Company’s business, including commercial matters, compliance, corporate governance and board activities. Prior to joining the Company, 34 Table of Contents Mr.
In addition, increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services. ● We are required to maintain effective internal control over financial reporting. In a prior fiscal year, our management identified a material weakness in our internal control over financial reporting.
In addition, increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services. 6 Table of Contents ● We are required to maintain effective internal control over financial reporting. In a prior fiscal year, our management identified a material weakness in our internal control over financial reporting.
We target for expansion and development markets and geographic regions that: ● Benefit from and value clean distributed generation; ● Are located where there are high energy costs, poor grid reliability, and/or challenged transmission and distribution lines; ● Have a need for distributed hydrogen for transportation or industry; ● Can leverage the multiple value streams delivered by our SureSource platforms (electricity, hydrogen, thermal, water, and carbon separation); ● Are aligned with regulatory frameworks that harmonize energy, economic and environmental policies; and ● Are committed to reducing their Scope 1 and Scope 2 emissions.
We target for expansion and development markets and geographic regions that: ● Benefit from and value clean distributed generation; ● Are located where there are high energy costs, poor grid reliability, and/or challenged transmission and distribution lines; ● Have a need for distributed hydrogen for transportation or industry; ● Can leverage the multiple value streams delivered by our platforms (electricity, hydrogen, thermal, water, and carbon recovery); 19 Table of Contents ● Are aligned with regulatory frameworks that harmonize energy, economic and environmental policies; and ● Are committed to reducing their Scope 1 and Scope 2 emissions.
Beyond this change, we could benefit from changes to the production credit pursuant to IRC Section 45Q related to carbon capture and sequestration, the new investment tax credit pursuant to IRC Section 48E for zero emission energy property which will succeed the existing Section 48 ITC, and the IRC Section 45V production tax credit for hydrogen.
Beyond this change, we believe our Company could benefit from changes to the production tax credit pursuant to IRC Section 45Q related to carbon capture and sequestration, the new investment tax credit pursuant to IRC Section 48E for zero emission energy property, which will succeed the existing Section 48 investment tax credit, and the IRC Section 45V production tax credit for hydrogen.
The fuel cells utilized in these platforms react fuel electrochemically, without combusting the fuel, which avoids emissions produced by combustion such as nitrogen oxides (“NOx”), sulfur oxides (“SOx”) and particulates. In the electrochemical process, fuel and air are reacted in separate chambers in the fuel cell stack.
The fuel cells utilized in these platforms react fuel electrochemically, without combusting the fuel, 8 Table of Contents which avoids emissions produced by combustion such as nitrogen oxides (“NOx”), sulfur oxides (“SOx”) and particulates. In the electrochemical process, fuel and air are reacted in separate chambers in the fuel cell stack.
See Item 1A “Risk Factors” – “ We are subject to risks inherent in international operations .” See also Note 13.
See Item 1A “Risk Factors” – “ We are subject to risks inherent in international operations .” See also Note 14.
The reactions producing CO2 happen before the fuel is mixed with air, and the CO2 is concentrated and therefore easy to capture. Both our carbonate and solid oxide platforms are enabled to capture their own CO2 for use or sequestration before it is emitted into the air.
The reactions producing CO 2 happen before the fuel is mixed with air, and the CO 2 is concentrated and therefore easy to recover and capture. Both our carbonate and solid oxide platforms are enabled to recover and capture their own CO 2 for use or sequestration before it is emitted into the air.
Recurring revenue is delivered through recurring electricity, capacity, and renewable energy credit sales under power purchase agreements (“PPAs”) and tariffs for projects we retain in our generation operating portfolio, as well as service revenue, mainly through long-term service agreements.
Recurring revenue is delivered through recurring electricity, capacity, and renewable energy credit sales under power purchase agreements (“PPAs”) and tariffs for projects we retain in our generation operating portfolio, as well as service 20 Table of Contents revenue, mainly through long-term service agreements.
We source raw materials and BOP components from a diverse global supply chain. In fiscal year 2022, the foreign country with the greatest concentration risk was South Korea, accounting for 52% of our consolidated net revenues.
We source raw materials and BOP components from a diverse global supply chain. In fiscal year 2023, the foreign country with the greatest concentration risk was South Korea, accounting for 47% of our consolidated net revenues.
However, our carbonate platforms are unique in their ability to also capture CO2 from an external source, utilizing the flue stream of a power plant or an industrial boiler as a replacement for traditional air intake. ​ Our solid oxide platform can operate on pure hydrogen fuel.
However, our carbonate platforms are unique in their ability to also capture CO 2 from an external source, utilizing the flue stream of a power plant or an industrial boiler as a replacement for ambient air intake. ​ Our solid oxide platform can operate on pure hydrogen fuel.
The Torrington production and service facility and the Danbury corporate headquarters and research and development facility are ISO 9001:2015 and ISO 14001:2015 certified and our Field Service operation (which maintains the installed fleet of our platforms) is ISO 9001:2015 certified, reinforcing the tenets of our quality management system and our core values of safety, continuous improvement, and commitment to quality, environmental stewardship, and customer satisfaction.
The Torrington production and service facility and the Danbury corporate headquarters and research and development facility are ISO 9001:2015 and ISO 14001:2015 certified and our Field Service operation (which maintains the installed fleet of our platforms) is ISO 9001:2015 certified, reinforcing the tenets of our quality management system and a focus on safety, continuous improvement, and commitment to quality, environmental stewardship, and customer satisfaction.
This extension allowed for the continuation of research intended to enable incorporation of design improvements to our fuel cell design in order to support a decision to use the improvements in a future demonstration of the technology for capturing carbon at ExxonMobil’s Rotterdam refinery in the Netherlands and provided additional time to achieve the first milestone under the EMTEC Joint Development Agreement. ​ Effective as of April 30, 2022, we and EMTEC agreed, among other things, to further extend the term of the EMTEC Joint Development Agreement for an additional eight months, ending on December 31, 2022 and to increase the maximum amount of research costs to be reimbursed by EMTEC from $45.0 million to $50.0 million.
This extension allowed for the continuation of research intended to enable incorporation of design improvements to our fuel cell design in order to support a decision to use the improvements in a future demonstration of the technology for capturing carbon at an ExxonMobil refinery located in Rotterdam, Netherlands (such demonstration, the “Rotterdam Project”) and provided additional time to achieve the first milestone under the EMTEC Joint Development Agreement. ​ Effective as of April 30, 2022, we and EMTEC agreed to further extend the term of the EMTEC Joint Development Agreement for an additional eight months, ending on December 31, 2022 and to increase the maximum amount of research costs to be reimbursed by EMTEC from $45.0 million to $50.0 million.
Our platforms have a direct impact on reducing our customers’ Scope 1 and Scope 2 emissions thus lowering the global environmental footprint of baseload power generation. However, our platforms are designed to go beyond power generation, delivering hydrogen, carbon separation, water, and thermal energy in various applications.
Our platforms have a direct impact on reducing our customers’ Scope 1 and Scope 2 emissions, thus lowering the global environmental footprint of baseload, or primary, power generation. However, our platforms are designed to go beyond power generation, delivering hydrogen, carbon recovery, carbon capture, water, and thermal energy in various applications.
Pricing for LTSAs is based upon the value of service assurance and the markets in which we compete and includes all future maintenance and fuel cell module exchanges. Each model of our SureSource power platform has a target design life of 25-to-30 years.
Pricing for LTSAs is based upon the value of service assurance and the markets in 24 Table of Contents which we compete and includes all future maintenance and fuel cell module exchanges. Each carbonate model of our power platform has a target design life of 25-to-30 years.
Under this agreement, we have engaged in exclusive research and development efforts with 19 Table of Contents EMTEC to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources.
Under this agreement, we have engaged in exclusive research and development efforts with EMTEC to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources.
We have committed future production for scheduled fuel cell module exchanges under LTSAs and PPAs through the year which have expiration dates through 2042. The pricing structure of the LTSAs incorporates these scheduled fuel cell module exchanges and the committed nature of this production facilitates our production planning.
We have committed future production for scheduled fuel cell module exchanges under LTSAs and PPAs through the respective expiration dates of such LTSAs and PPAs, which range through 2042. The pricing structure of the LTSAs incorporates these scheduled fuel cell module exchanges and the committed nature of this production facilitates our production planning.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny such public health crisis could pose further risks to us and could also have a material adverse effect on our business, results of operations and financial position . ​ An increase in energy costs, including as a result of the ongoing conflict between Russia and Ukraine, may materially adversely affect our business, financial condition, and results of operations. ​ Our results of operations can be directly affected by volatility in the cost and availability of energy, which is subject to global supply and demand and other factors beyond our control.
Biggest changeAt this time, it is impossible to predict the future impact of COVID-19 or other public health crises that could emerge in the future, including other pandemics or epidemics, on our business, liquidity, capital resources, supply chain and financial results or its effect on clean energy demand, capital budgets of our customers, or demand for our products. ​ An increase in energy costs, including as a result of the ongoing conflict between Russia and Ukraine, may materially adversely affect our business, financial condition, and results of operations. ​ Our results of operations can be directly affected by volatility in the cost and availability of energy, which is subject to global supply and demand and other factors beyond our control.
As an exporter, we must comply with various laws and regulations relating to the export of products, services and technology from the U.S. and other countries having jurisdiction over our operations.
As an exporter, we must comply with various laws and regulations relating to the export of products, services and technology from the U.S. and with the laws and regulations of other countries having jurisdiction over our operations.
If we, or our intermediaries, fail to comply with the requirements of these laws and regulations, or similar laws of other countries, governmental authorities in the United States or elsewhere, as applicable, could seek to impose civil and/or criminal penalties, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations. ​ 54 Table of Contents The Paycheck Protection Program loan received by us in 2020 and subsequently repaid by us in 2021 has resulted in an informal SEC inquiry into our financial disclosures and may subject us to challenges regarding qualification for the loan, enforcement actions, fines and penalties. ​ On April 20, 2020, we entered into a Paycheck Protection Program Promissory Note, dated April 16, 2020 (the “PPP Note”), evidencing a loan to the Company from Liberty Bank under the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act”).
If we, or our intermediaries, fail to comply with the requirements of these laws and regulations, or similar laws of other countries, governmental authorities in the United States or elsewhere, as applicable, could seek to impose civil and/or criminal penalties, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations. 45 Table of Contents The Paycheck Protection Program loan received by us in 2020 and subsequently repaid by us in 2021 has resulted in an informal SEC inquiry into our financial disclosures and may subject us to challenges regarding qualification for the loan, enforcement actions, fines and penalties. ​ On April 20, 2020, we entered into a Paycheck Protection Program Promissory Note, dated April 16, 2020 (the “PPP Note”), evidencing a loan to the Company from Liberty Bank under the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act”).
Such developments may include new mutations of the virus, the continued efficacy of vaccines and the actions that may be taken by various governmental authorities in response to the outbreak, such as periodic quarantine or “shelter-in-place” orders and business closures imposed by various states within the United States, and the impact on the U.S. or global economy.
Such developments may include new mutations of the virus, the continued efficacy of vaccines and the actions that may be taken by various governmental authorities in response to a new outbreak, such as periodic quarantine or “shelter-in-place” orders and business closures imposed by various states within the United States, and the impact on the U.S. or global economy.
Provisions in our Certificate of Incorporation, as amended (“Certificate of Incorporation”), and Amended and Restated By-Laws (“By-laws”) and in Delaware and Connecticut corporate law may make it difficult and expensive for a third-party to pursue a tender offer, change in control or takeover attempt that is opposed by our management and board of directors.
Provisions in our Certificate of Incorporation, as amended (“Certificate of Incorporation”), and Second Amended and Restated By-Laws (“By-laws”) and in Delaware and Connecticut corporate law may make it difficult and expensive for a third-party to pursue a tender offer, change in control or takeover attempt that is opposed by our management and board of directors.
While we are not currently engaged in any intellectual property litigation, we could become subject to lawsuits in which it is alleged that we have infringed, misappropriated or otherwise violated the intellectual property rights of others or commence lawsuits against others who we believe are infringing, misappropriating or otherwise violating our rights or violating their agreements to protect our intellectual property.
While we are not currently engaged in any material intellectual property litigation, we could become subject to lawsuits in which it is alleged that we have infringed, misappropriated or otherwise violated the intellectual property rights of others or commence lawsuits against others who we believe are infringing, misappropriating or otherwise violating our rights or violating their agreements to protect our intellectual property.
A supplier’s failure to develop and supply components in a timely manner or to supply components that meet our quality, quantity or cost requirements or our technical specifications, or our inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, could each harm our ability to manufacture our SureSource products.
A supplier’s failure to develop and supply components in a timely manner or to supply components that meet our quality, quantity or cost requirements or our technical specifications, or our inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, could each harm our ability to manufacture our products.
Evolving stakeholder expectations and our efforts to manage these issues, report on them, and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price. ​ Such risks and uncertainties include: ​ • reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other stakeholders; • adverse impacts on our ability to sell and manufacture products; • the success of our collaborations with third parties; • increased risk of litigation, investigations, or regulatory enforcement action; • unfavorable ESG ratings or investor sentiment; • diversion of resources and increased costs to control, assess, and report on ESG metrics; • our ability to achieve our goals, commitments, and targets within the timeframes announced; • access to and increased cost of capital; and • adverse impacts on our stock price. ​ Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our ESG goals, commitments, and targets could have an adverse effect on our business, results of operations, financial condition, and stock price. ​ Risks Related to Sales of our Products We derive significant revenue from contracts awarded through competitive bidding processes involving substantial costs and risks.
Evolving stakeholder expectations and our efforts to manage these issues, report on them, and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price. ​ Such risks and uncertainties include: ​ • reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other stakeholders; • adverse impacts on our ability to sell and manufacture products; • the success of our collaborations with third parties; • increased risk of litigation, investigations, or regulatory enforcement action; • unfavorable ESG ratings or investor sentiment; • diversion of resources and increased costs to control, assess, and report on ESG metrics; • our ability to achieve our goals, commitments, and targets within the timeframes announced; • access to and increased cost of capital; and • adverse impacts on our stock price. ​ Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our ESG goals, commitments, and targets could have an adverse effect on our business, results of operations, financial condition, and stock price. 39 Table of Contents ​ Risks Related to Sales of our Products We derive significant revenue from contracts awarded through competitive bidding processes involving substantial costs and risks.
Our growing portfolio of project assets used to generate and sell power under PPAs and utility tariff programs exposes us to operational risks and uncertainties, including, among other things, lost revenues due to prolonged outages, replacement equipment costs, risks associated with facility start-up operations, failures in the availability or acquisition of fuel (including natural gas and renewable natural gas), the impact of severe adverse weather conditions, natural disasters, terrorist attacks, cybersecurity attacks, risks of property damage or injury from energized equipment, availability of adequate water resources and ability to intake and discharge water, use of new or unproven technology, fuel commodity price risk and fluctuating market prices, and lack of alternative available fuel sources.
Our growing portfolio of project assets used to generate and sell power under PPAs and utility tariff programs exposes us to operational risks and uncertainties, including, among other things, lost revenues due to prolonged outages, replacement equipment costs, risks 40 Table of Contents associated with facility start-up operations, failures in the availability or acquisition of fuel (including natural gas and renewable natural gas), the impact of severe adverse weather conditions, natural disasters, terrorist attacks, cybersecurity attacks, risks of property damage or injury from energized equipment, availability of adequate water resources and ability to intake and discharge water, use of new or unproven technology, fuel commodity price risk and fluctuating market prices, and lack of alternative available fuel sources.
If we experience delays in meeting our development goals for these products, these products exhibit technical defects, or we are unable to meet cost or performance goals with respect to these products, including goals for power output, hydrogen production, rates of carbon capture, useful life and reliability, then our ability to generate revenue and achieve profitability from sales of these new products will be delayed or may not occur at all.
If we experience delays in meeting our development goals (including manufacturing expansion) for these products, these products exhibit technical defects, or we are unable to meet cost or performance goals with respect to these products, including goals for power output, hydrogen production, rates of carbon capture, useful life and reliability, then our ability to generate revenue and achieve profitability from sales of these new products will be delayed or may not occur at all.
As a result of this repayment, the PPP Loan is not reported on our Consolidated Balance Sheets as of October 31, 2022 and 2021 . ​ Our receipt of the PPP Loan, our submission of a forgiveness application, and our withdrawal of our forgiveness application may result in adverse publicity and damage to our reputation, governmental investigations, inquiries, reviews and audits, such as the SEC inquiry described below, which could consume significant financial and management resources.
As a result of this repayment, the PPP Loan is not reported on our Consolidated Balance Sheets as of October 31, 2023 and 2022 . ​ Our receipt of the PPP Loan, our submission of a forgiveness application, and our withdrawal of our forgiveness application may result in adverse publicity and damage to our reputation, governmental investigations, inquiries, reviews and audits, such as the SEC inquiry described below, which could consume significant financial and management resources.
In addition, if additional funds are not secured in the future, we will have to modify, reduce, defer or eliminate parts of our present and anticipated future projects, or sell some or all of our assets. 55 Table of Contents Risks Related to our Intellectual Property and Technology Licenses We depend on our intellectual property, and our failure to protect that intellectual property could adversely affect our future growth and success.
In addition, if additional funds are not secured in the future, we will have to modify, reduce, defer or eliminate parts of our present and anticipated future projects, or sell some or all of our assets. 46 Table of Contents Risks Related to our Intellectual Property and Technology Licenses We depend on our intellectual property, and our failure to protect that intellectual property could adversely affect our future growth and success.
If any of our project assets are not considered commercially viable or costs are not deemed to be recoverable, we would be required to record a charge reflecting the impairment of such project assets. ​ Our Advanced Technologies contracts are subject to the risk of termination by the contracting party and we may not realize the full amounts allocated under some contracts due to the lack of Congressional appropriations or early termination. ​ A portion of our revenues has been derived from long-term cooperative agreements and other contracts with the DOE and other U.S. government agencies.
If any of our project assets are not considered commercially viable or costs are not deemed to be recoverable, we would be required to record a charge reflecting the impairment of such project assets. ​ Our Advanced Technologies contracts are subject to the risk of termination by the contracting party and we may not realize the full amounts allocated under some contracts due to the lack of Congressional appropriations or early termination. ​ 37 Table of Contents A portion of our revenues has been derived from long-term cooperative agreements and other contracts with the DOE and other U.S. government agencies.
The SEC did not communicate with us in fiscal year 2021 or fiscal year 2022 about its inquiry. ​ Risks Related to Our Need for Additional Capital We will need to raise additional capital, and such capital may not be available on acceptable terms, if at all. If we do raise additional capital utilizing equity, existing stockholders will suffer dilution.
The SEC did not communicate with us in fiscal year 2022 or fiscal year 2023 about its inquiry. ​ Risks Related to Our Need for Additional Capital We will need to raise additional capital, and such capital may not be available on acceptable terms, if at all. If we do raise additional capital utilizing equity, existing stockholders will suffer dilution.
Prolonged inflationary conditions, high and/or increased interest rates, and additional sanctions or retaliatory measures related to the Russia-Ukraine crisis, or other situations, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices and supply chain constraints.
Prolonged inflationary conditions, high and/or increased interest rates, and additional sanctions or retaliatory measures related to the Russia-Ukraine crisis, or other geo-political situations, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices and supply chain constraints.
If we are unable to enter into tax equity financing agreements with attractive pricing terms, or at all, we may not be able to obtain the capital needed to finance the build out of our generation assets which would impact our overall liquidity and our business, financial condition and results of operations. ​ Unanticipated increases or decreases in business growth may result in adverse financial consequences for us.
If we are unable to enter into tax equity financing agreements with attractive pricing terms, or at all, we may not be able to obtain the capital needed to finance the build out of our generation assets which would impact our overall liquidity and our business, financial condition and results of operations. ​ 36 Table of Contents Unanticipated increases or decreases in business growth may result in adverse financial consequences for us.
The Torrington facility is sized to accommodate the eventual annualized production capacity of up to 200 MW per year with additional capital investment in machinery, equipment, tooling and inventory. ​ 44 Table of Contents We have a manufacturing and service facility in Taufkirchen, Germany that has the capability to perform final module assembly for up to 20 MW per year of carbonate sub-megawatt fuel cell power platforms to service the European market.
The Torrington facility is sized to accommodate the eventual annualized production capacity of up to 200 MW per year with additional capital investment in machinery, equipment, tooling and inventory. ​ We have a manufacturing and service facility in Taufkirchen, Germany that has the capability to perform final module assembly for up to 20 MW per year of carbonate sub-megawatt fuel cell power platforms to service the European market.
Any outbreaks of contagious diseases, including COVID-19, and other adverse public health developments in countries where we and our suppliers operate, could have a material and adverse effect on our business, financial condition and results of operations.
Any outbreaks of contagious diseases, including new outbreaks of COVID-19 variants, and other adverse public health developments in countries where we and our suppliers operate, could have a material and adverse effect on our business, financial condition and results of operations.
We are investing in expanding this facility with the goal of increasing its production capacity to 10 MW per year of SOFC or 40 MW per year of SOEC, and we expect this expansion to be complete by the middle of fiscal year 2024.
We are investing in expanding this facility with the goal of increasing its production capacity to 10 MW per year of SOFC or 40 MW per year of SOEC, and we expect this expansion to be complete in fiscal year 2024.
If any development project or construction is not completed, is delayed or is subject to cost overruns, we could become obligated to make delay or termination payments or become obligated for other damages under contracts, experience diminished returns or be required 49 Table of Contents to write off all or a portion of our capitalized costs in the project.
If any development project or construction is not completed, is delayed or is subject to cost overruns, we could become obligated to make delay or termination payments or become obligated for other damages under contracts, experience diminished returns or be required to write off all or a portion of our capitalized costs in the project.
These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events.
These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks including the impact of emerging technologies, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events.
The significant volatility in the U.S. and international stock markets causes significant uncertainty and may result in an increase in the return required by investors in relation to the risk of such projects. ● If we, our customers or our suppliers cannot obtain financing under favorable terms, our business may be negatively impacted.
The significant volatility in the U.S. and international stock 50 Table of Contents markets causes significant uncertainty and may result in an increase in the return required by investors in relation to the risk of such projects. ● If we, our customers or our suppliers cannot obtain financing under favorable terms, our business may be negatively impacted.
The competitive bidding process involves substantial costs and a number of risks, including the significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us and our failure to accurately estimate the resources and costs 48 Table of Contents that will be required to fulfill any contract we win.
The competitive bidding process involves substantial costs and a number of risks, including the significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us and our failure to accurately estimate the resources and costs that will be required to fulfill any contract we win.
Financial market issues may delay, 59 Table of Contents cancel or restrict the construction budgets and funds available to us or our customers for the deployment of our products and services. ● Projects using our products are, in part, financed by equity investors interested in tax benefits, as well as by the commercial and governmental debt markets.
Financial market issues may delay, cancel or restrict the construction budgets and funds available to us or our customers for the deployment of our products and services. ● Projects using our products are, in part, financed by equity investors interested in tax benefits, as well as by the commercial and governmental debt markets.
Any of these events, which may result in disruptions to our supply chain or customer demand, could materially and adversely affect our business and our financial results. The extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.
Any of these events, which may result in disruptions to our supply chain or customer demand, could materially and adversely affect our business and our financial results. The extent to which new outbreaks of COVID-19 variants may impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.
Project assets and property, plant and equipment impairment charges totaled approximately $1.8 million, $5.0 million and $2.4 million for the fiscal years ended October 31, 2022, 2021 and 2020, respectively. ​ 45 Table of Contents As required by accounting rules, we review our goodwill for impairment at least annually as of July 31 or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill is less than its carrying value.
Project assets and property, plant and equipment impairment charges totaled approximately $2.4 million, $1.8 million and $5.0 million for the fiscal years ended October 31, 2023, 2022 and 2021, respectively. ​ As required by accounting rules, we review our goodwill for impairment at least annually as of July 31 or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill is less than its carrying value.
In such cases, the market price of our common stock could decline, and you may lose all or part of your investment. ​ Risks Related to Our Business, Industry and Supply Chain We have incurred losses and anticipate continued losses and negative cash flows.
In such cases, the market price of our common stock could decline, and you may lose all or part of your investment. ​ 35 Table of Contents Risks Related to Our Business, Industry and Supply Chain We have incurred losses and anticipate continued losses and negative cash flows.
In addition, to the extent the processes that our suppliers use to manufacture components are 46 Table of Contents proprietary, we may be unable to obtain comparable components from alternative suppliers, all of which could harm our business prospects, results of operations and financial condition.
In addition, to the extent the processes that our suppliers use to manufacture components are proprietary, we may be unable to obtain comparable components from alternative suppliers, all of which could harm our business prospects, results of operations and financial condition.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes against us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other 58 Table of Contents employees.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes against us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
Other than fuel cell developers, we must also compete with companies that manufacture combustion-based distributed power equipment, including various engines and turbines, and have well-established manufacturing, distribution, operating and cost features. Electrical efficiency of these products can be competitive with our SureSource power plants in certain applications.
Other than fuel cell developers, we must also compete with companies that manufacture combustion-based distributed power equipment, including various engines and turbines, and have well-established manufacturing, distribution, operating 41 Table of Contents and cost features. Electrical efficiency of these products can be competitive with our power plants in certain applications.
We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships.
We cannot assure you that 47 Table of Contents these agreements will not be breached, that we will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships.
These challenges include extended shipping lead times and pricing pressures on transportation and logistics that have adversely impacted, and may continue to adversely impact, our ability to meet our production schedules and project deadlines, may result in additional and increased costs, or may otherwise adversely impact our business, results of operations and financial condition.
These challenges may include extended shipping lead times and pricing pressures on transportation and logistics that could adversely impact our ability to meet our production schedules and project deadlines, may result in additional and increased costs, or may otherwise adversely impact our business, results of operations and financial condition.
We depend on POSCO Energy and EMTEC to also protect our intellectual property rights, but we cannot assure you that POSCO Energy or EMTEC will do so . ​ As of October 31, 2022, we (excluding our subsidiaries) had 129 U.S. patents and 251 patents in other jurisdictions covering our fuel cell technology (in certain cases covering the same technology in multiple jurisdictions) , with patents directed to various aspects of our SureSource technology, SOFC technology, PEM fuel cell technology and applications thereof.
We depend on POSCO Energy and EMTEC to also protect our intellectual property rights, but we cannot assure you that POSCO Energy or EMTEC will do so . ​ As of October 31, 2023, we (excluding our subsidiaries) had 139 U.S. patents and 282 patents in other jurisdictions covering our fuel cell technology (in certain cases covering the same technology in multiple jurisdictions) , with patents directed to various aspects of our SureSource technology, SOFC technology, PEM fuel cell technology and applications thereof.
Risks Related to Our Common and Preferred Stock Our stock price has been and could remain volatile. ​ The market price for our common stock has been and may continue to be volatile and subject to extreme price and volume fluctuations in response to market and other factors, including the following, some of which are beyond our control: ● failure to meet commercialization milestones; ● failure to win contracts through competitive bidding processes, or the loss of project awards previously announced or anticipated prior to entering into definitive contracts; ● the loss of a major customer or a contract; ● variations in our quarterly operating results from the expectations of securities analysts or investors; ● downward revisions in securities analysts’ estimates or changes in general market conditions; ● changes in the securities analysts that cover us or failure to regularly publish reports; ● announcements of technological innovations or new products or services by us or our competitors; 57 Table of Contents ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; ● additions or departures of key personnel; ● investor perception of our industry or our prospects; ● insider selling or buying; ● demand for our common stock; ● dilution from issuances of our common stock; ● general market trends or preferences for non-fueled resources; ● the COVID-19 pandemic, including any worsening of the pandemic; ● general technological or economic trends; and ● changes in United States or foreign political environment and the passage of laws, including, tax, environmental or other laws, affecting the product development business.
Risks Related to Our Common and Preferred Stock Our stock price has been and could remain volatile. ​ The market price for our common stock has been and may continue to be volatile and subject to extreme price and volume fluctuations in response to market and other factors, including the following, some of which are beyond our control: ● failure to meet commercialization milestones; ● failure to win contracts through competitive bidding processes, or the loss of project awards previously announced or anticipated prior to entering into definitive contracts; ● the loss of a major customer or a contract; ● variations in our quarterly operating results from the expectations of securities analysts or investors; ● downward revisions in securities analysts’ estimates or changes in general market conditions; ● changes in the securities analysts that cover us or failure to regularly publish reports; ● announcements of technological innovations or new products or services by us or our competitors; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; 48 Table of Contents ● additions or departures of key personnel; ● investor perception of our industry or our prospects; ● insider selling or buying; ● demand for our common stock; ● dilution from issuances of our common stock; ● general market trends or preferences for non-fueled resources; ● pandemics, or any public health or safety issues in the regions where we operate; ● general technological or economic trends; and ● changes in the United States or foreign political environment and the passage of laws, including, tax, environmental or other laws, affecting the product development business.
We believe that our businesses are operating in compliance in all material respects with applicable environmental laws; however, these laws and regulations have changed frequently 53 Table of Contents in the past and it is reasonable to expect additional and more stringent changes in the future.
We believe that our businesses are operating in compliance in all material respects with applicable environmental laws; however, these laws and regulations have changed frequently in the past and it is reasonable to expect additional and more stringent changes in the future.
The ongoing conflict between Russia and Ukraine has impacted global energy markets, particularly in Europe, leading to high volatility and increasing prices for crude oil, natural gas and other energy supplies.
The ongoing conflict between Russia and Ukraine has impacted global energy markets, particularly in Europe, leading to higher volatility in prices for crude oil, natural gas and other energy supplies.
On a quarterly basis, we perform a review process to help ensure that total estimated contract costs include estimates of costs to complete that are based on the most recent available information.
On an annual basis, we perform a review process to help ensure that total estimated contract costs include estimates of costs to complete that are based on the most recent available information.
These regulations could limit the growth in the use of carbonate fuel cell products, decrease the acceptance of fuel cells as a commercial product and increase our costs and, therefore, the price of our products.
These regulations could 44 Table of Contents limit the growth in the use of carbonate fuel cell products, decrease the acceptance of fuel cells as a commercial product and increase our costs and, therefore, the price of our products.
We 43 Table of Contents may never become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. For the reasons discussed in more detail below, there are uncertainties associated with our achieving and sustaining profitability.
We may never become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. For the reasons discussed in more detail below, there are uncertainties associated with our achieving and sustaining profitability.
Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity. ​ Economic and political events in 2022 have altered the landscape in which we and other U.S. companies operate in a variety of ways. In response to inflationary pressures, the U.S.
Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity. ​ Economic and political events in 2022 and 2023 have altered the landscape in which we and other U.S. companies operate in a variety of ways.
Although we have incorporated a robust design and redundant safety features in our power plants, have established comprehensive safety, maintenance, and training programs, follow third-party certification protocols, codes and standards, and do not store natural gas or hydrogen at our power plants, we cannot guarantee that there will not be accidents.
Although we incorporate a robust design and redundant safety features 42 Table of Contents in our power plants, have established comprehensive safety, maintenance, and training programs, follow third-party certification protocols, codes and standards, and do not store natural gas or hydrogen at our power plants, we cannot guarantee that there will not be accidents.
As of October 31, 2022, Versa also had 7 pending U.S. patent applications and 21 patent applications pending in other jurisdictions. In addition, as of October 31, 2022, our subsidiary, FuelCell Energy Solutions, GmbH, had license rights to 2 U.S. patents and 7 patents outside the U.S.
As of October 31, 2023, Versa also had 9 pending U.S. patent applications and 26 patent applications pending in other jurisdictions. In addition, as of October 31, 2023, our subsidiary, FuelCell Energy Solutions, GmbH, had license rights to 2 U.S. patents and 7 patents outside the U.S.
We also contract with private sector companies under certain Advanced Technologies contracts to develop strategically important and complementary offerings. ​ Generally, our privately funded Advanced Technologies contracts, including our EMTEC Joint Development Agreement, and our government research and development contracts are subject to the risk of termination at the convenience of the contracting party and may contain certain milestones and deliverables which we may not be able to meet if actual results differ materially from our original estimates.
We also contract with private sector companies under certain Advanced Technologies contracts to develop strategically important and complementary offerings. ​ Generally, our privately funded Advanced Technologies contracts, including our EMTEC Joint Development Agreement, contracted demonstration projects undertaken with EMTEC or other ExxonMobil affiliates, and our government research and development contracts are subject to the risk of termination at the convenience of the contracting party and may contain certain milestones and deliverables which we may not be able to meet if actual results or the timing of deliverables differ materially from our original estimates or contractually agreed timelines.
Our European service activities are also operated out of this location. ​ Our manufacturing and research and development facility in Calgary, Alberta, Canada is focused on the engineering and development of the Company’s solid oxide fuel cell (“SOFC”) and SOEC technologies.
Our European service activities are also operated out of this location. ​ Our manufacturing and research and development facility in Calgary, Alberta, Canada is focused on the engineering and development of the Company’s SOFC and SOEC technologies.
(See the section above entitled “Business – License Agreements—License Agreements and Settlement Agreement with POSCO Energy” for more information with respect to the limited license granted to POSCO Energy and KFC.) In addition, effective as of June 11, 2019, we entered into the EMTEC License Agreement, pursuant to which we agreed, subject to the terms of the EMTEC License Agreement, to grant EMTEC and its affiliates a non-exclusive, worldwide, fully paid, perpetual, irrevocable, non-transferrable license and right to use our patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop, and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from industrial and power sources and for any other purpose attendant thereto or associated therewith.
In addition, effective as of June 11, 2019, we entered into the EMTEC License Agreement, pursuant to which we agreed, subject to the terms of the EMTEC License Agreement, to grant EMTEC and its affiliates a non-exclusive, worldwide, fully paid, perpetual, irrevocable, non-transferrable license and right to use our patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop, and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from industrial and power sources and for any other purpose attendant thereto or associated therewith.
We have debt and finance obligations outstanding and may incur additional debt in the future, which may adversely affect our financial condition and future financial results. As of October 31, 2022, our total consolidated debt and finance obligations outstanding (“indebtedness”) was $83.5 million ($82.4 million, net of deferred finance costs).
We have debt and finance obligations outstanding and may incur additional debt in the future, which may adversely affect our financial condition and future financial results. As of October 31, 2023, our total consolidated debt and finance obligations outstanding (“indebtedness”) was $123.0 million ($119.5 million, net of deferred finance costs).
Violation or non-compliance with any of these laws or regulations, contractual requirements relating to data security and privacy, or our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material adverse effect on our brand, reputation, business, financial condition and results of operations, as well as subject us to significant fines, litigation losses, third-party damages and other liabilities. 52 Table of Contents Tax, Accounting, Compliance and Regulatory Risks We are required to maintain effective internal control over financial reporting.
Violation or non-compliance with any of these laws or regulations, contractual requirements relating to data security and privacy, or our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material adverse effect on our brand, reputation, 43 Table of Contents business, financial condition and results of operations, as well as subject us to significant fines, litigation losses, third-party damages and other liabilities.
Federal Reserve has raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy, including by exacerbating inflationary and other pressures linked to COVID-related supply chain disruptions.
In response to inflationary pressures, the U.S. Federal Reserve has raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy.
We face numerous challenges in our international expansion, including unexpected changes in regulatory requirements and other geopolitical risks, fluctuations in currency exchange rates, longer accounts receivable requirements and collections, greater bonding and security requirements, difficulties in managing international operations, potentially adverse tax consequences, restrictions on repatriation of earnings and the burdens of complying with a wide variety of international laws.
We face numerous challenges in our international expansion, including the strain any future growth may place on our management, service and operations teams and financial infrastructure, unexpected changes in regulatory requirements and other geopolitical risks, fluctuations in currency exchange rates, longer accounts receivable requirements and collections, greater bonding and security requirements, difficulties in managing international operations, potentially adverse tax consequences, restrictions on repatriation of any earnings and the burdens of complying 51 Table of Contents with a wide variety of international laws.
The closing price of our common stock on December 14, 2022 was $3.72. There can be no assurance that the current stock price will be maintained, and it is possible that our stock price could drop significantly.
The closing price of our common stock on December 14, 2023 was $1.56 per share. There can be no assurance that the current stock price will be maintained, and it is possible that our stock price could drop significantly.
As of October 31, 2022, we also had 40 patent applications pending in the U.S. and 107 patent applications pending in other jurisdictions. As of October 31, 2022, our subsidiary, Versa Power Systems, Ltd. (“Versa”), had 29 U.S. patents and 87 international patents covering SOFC technology (in certain cases covering the same technology in multiple jurisdictions) .
As of October 31, 2023, we also had 34 patent applications pending in the U.S. and 98 patent applications pending in other jurisdictions. As of October 31, 2023, our subsidiary, Versa Power Systems, Ltd. (“Versa”), had 24 U.S. patents and 86 international patents covering SOFC technology (in certain cases covering the same technology in multiple jurisdictions) .
If our goodwill and other indefinite-lived intangible assets and long-lived assets (including project assets) become impaired, we may be required to record a significant charge to operations. ​ We have recorded significant impairment charges, and may in the future be required to record significant impairment charges, to operations in our financial statements should we determine that our goodwill, other indefinite-lived intangible assets (i.e., in process research and development (“IPR&D”)) and other long-lived assets (i.e., project assets, property, plant and equipment and amortizing intangible assets) are impaired.
In that circumstance, our revenues may be inadequate to support our committed costs and our planned growth, and our gross margins and business strategy would be adversely affected. ​ If our goodwill and other indefinite-lived intangible assets and long-lived assets (including project assets) become impaired, we may be required to record a significant charge to operations. ​ We have recorded significant impairment charges, and may in the future be required to record significant impairment charges, to operations in our financial statements should we determine that our goodwill, other indefinite-lived intangible assets (i.e., in process research and development (“IPR&D”)) and other long-lived assets (i.e., project assets, property, plant and equipment and amortizing intangible assets) are impaired.
Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at the rate of $50 per share per year, payable either in cash or in shares of our common stock.
The terms of our Series B Preferred Stock also provide rights to their holders that could negatively impact us. Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at the rate of $50 per share per year, payable either in cash or in shares of our common stock.
Any accidents involving our products or other hydrogen-using products could materially impede widespread market acceptance and demand for our products. In addition, we might be held responsible for damages beyond the scope of our insurance coverage.
Any accidents involving our products or other hydrogen-using products could materially impede widespread market acceptance and demand for our products. In addition, we might be held responsible for damages beyond the scope of our insurance coverage. We also cannot predict whether we will be able to maintain adequate insurance coverage on acceptable terms.
Alternatively, if a court were to find the choice of forum provision contained in our By-laws to be inapplicable or unenforceable in such an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Alternatively, if a court were to find the choice of forum provision contained in our By-laws to be inapplicable or unenforceable in such an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. 49 Table of Contents The rights of our Series B Preferred Stock could negatively impact our cash flows and dilute the ownership interest of our stockholders.
In addition, our supply chain has been, and may continue to be, adversely affected by the COVID-19 pandemic, which has created global shipping and logistics challenges.
In addition, our supply chain has been, and in the future could be, adversely affected by the COVID-19 pandemic or other pandemics, which may create global shipping and logistics challenges.
We also cannot predict whether we will be able to maintain adequate insurance coverage on acceptable terms. 51 Table of Contents Risks Related to Privacy, Data Protection and Cybersecurity We are increasingly dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations and the operations of our power plant platforms.
Risks Related to Privacy, Data Protection and Cybersecurity We are increasingly dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations and the operations of our power plant platforms.
In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain foreign countries. 56 Table of Contents We also seek to protect our proprietary intellectual property, including intellectual property that may not be patented or able to be patented, in part by confidentiality agreements and, if applicable, inventors’ rights agreements with our subcontractors, vendors, suppliers, consultants, strategic business associates and employees.
We also seek to protect our proprietary intellectual property, including intellectual property that may not be patented or able to be patented, in part by confidentiality agreements and, if applicable, inventors’ rights agreements with our subcontractors, vendors, suppliers, consultants, strategic business associates and employees.
This facility also houses our SOFC and SOEC stack research and development effort and includes equipment for the manufacturing of solid oxide cells and stacks, including advanced manufacturing capabilities.
This facility also houses our SOFC and SOEC stack research and development effort and includes equipment for the manufacturing of solid oxide cells and stacks, including advanced manufacturing capabilities. As of October 31, 2023, this facility is capable of producing 1 MW per year of SOFC or approximately 4 MW per year of SOEC.
If we are unable to pass these costs on to our customers or timely complete projects, we may experience reduced revenue and other adverse impacts on our business, results of operations and financial condition.
If such events occur and we are unable to pass these costs on to our customers or timely complete projects, we may experience reduced revenue and other adverse impacts on our business, results of operations and financial condition. ​ 38 Table of Contents Our business and operations may be adversely affected by new outbreaks of COVID-19 variants or other outbreaks of contagious diseases.
Since the distributed generation, hydrogen, carbon capture and storage markets are still evolving, it is difficult to predict with certainty the size of these markets and their growth rates.
As is typical in a rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty and risk. Since the distributed generation, hydrogen, carbon capture and storage markets are still evolving, it is difficult to predict with certainty the size of these markets and their growth rates.
In a prior fiscal year, our management identified a material weakness in our internal control over financial reporting.
Tax, Accounting, Compliance and Regulatory Risks We are required to maintain effective internal control over financial reporting. In a prior fiscal year, our management identified a material weakness in our internal control over financial reporting.
We provide for a warranty of our products for a specific period of time against manufacturing or performance defects. We accrue for warranty costs based on historical warranty claim experience; however, actual future warranty expenses may be greater than we have assumed in our estimates.
We accrue for warranty costs based on historical warranty claim experience; however, actual future warranty expenses may be greater than we have assumed in our estimates. Issues have been and may continue to be found in existing or new products including, but not limited to, module decay rates which have exceeded and may continue to exceed design expectations.
We develop complex and evolving products and we continue to advance the capabilities of our fuel cell stacks. We now produce stacks in the United States with a net rated power output of 350 kilowatts when new and a 7-year cell design life.
We develop complex and evolving products and we continue to advance the capabilities of our fuel cell stacks. We produce carbonate fuel stacks with a 7-year cell design life. We are also in the process of manufacturing and selling SOEC and SOFC products. We provide product warranties for a specific period of time against manufacturing or performance defects.
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This facility includes equipment for the manufacturing of solid oxide cells and stacks, including an advanced automated stack manufacturing line which has been developed to ensure that the labor and overhead which are required to produce these technologies are optimized for efficiency and complement the low direct material cost of the stack.
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In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain foreign countries.
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As of October 31, 2022, this facility is capable of producing 1 MW per year of SOFC or approximately 4 MW per year of SOEC.
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In that circumstance, our revenues may be inadequate to support our committed costs and our planned growth, and our gross margins and business strategy would be adversely affected. ​ We are subject to risks in international operations, including risks relating to our ongoing relationship with POSCO Energy Co., Ltd. (“POSCO Energy”) and Korea Fuel Cell Co., Ltd. (“KFC”).
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With the settlement of our litigation with POSCO Energy and KFC, we expect to make significant product sales into South Korea and, with our renewed emphasis on marketing our products in European markets, we expect to make future product sales there as well.
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We face numerous challenges in our international expansion, including the strain any future growth may place on management, service and operations teams and financial infrastructure.
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We will face risk from complex and changing regulatory requirements, fluctuations in currency exchange rates, accounts receivable requirements and collections, difficulties in managing international operations, potentially adverse tax consequences, restrictions on repatriation of any earnings and the burdens of complying with a wide variety of international laws.
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In addition, with respect to South Korea, pursuant to the terms of the Settlement Agreement, we may have to rely on POSCO Energy and KFC for some period to provide certain services, such as operations and maintenance services to any new customers, and we will need their cooperation to transition long term service agreements from their existing customers to us in the future.
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Given the historical relationship among the parties with respect to certain actions and inactions by POSCO Energy and KFC and the prolonged litigation among the parties, there can be no guarantee that the parties will be able to successfully work together. Any of these factors could adversely affect our results of operations and financial condition.
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Given that our customers and suppliers are facing similar global supply chain challenges, we expect continued difficulty in forecasting demand and supply needs for the foreseeable future.
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While we have implemented several initiatives to mitigate the effects of the COVID-19 pandemic on our business, our business, results of operations and financial condition may still be adversely impacted. ​ Our business and operations may be adversely affected by the COVID-19 outbreak or other similar outbreaks.
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In addition, COVID-19 has resulted in a widespread health crisis that has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, resulting in economic downturns that could affect demand for our products or our ability to obtain financing for our business or projects.
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COVID-19 may impact the health of our team members, directors or customers, reduce the availability of our workforce or those of companies with which we do business, or otherwise cause human impacts that may negatively impact our business.
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For example, on March 18, 2020, in response to the escalating global COVID-19 outbreak, we temporarily suspended operations at our Torrington, Connecticut manufacturing facility, and also ordered those employees that could work from home to do so.
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We resumed operations in the manufacturing facility on June 22, 2020, and we established a phased-in return to work schedule commencing March 15, 2021 for those employees working from home that was completed April 19, 2021.
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However, we continue to evaluate our ability to operate in the event of resurgences of COVID-19 and the advisability of continuing operations, based on federal, state and local guidance, evolving data concerning the pandemic and the best interests of our employees, customers and stockholders.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The following is a summary of our offices and locations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Square Lease Expiration Location ​ Business Use ​ Footage ​ Dates Danbury, Connecticut Corporate Headquarters, Research and Development, Sales, Marketing, Service, Purchasing and Administration 72,000 Company owned Torrington, Connecticut Manufacturing and Administrative 167,000 December 2030 (1) Taufkirchen, Germany Manufacturing and Administrative 20,000 June 2023 Calgary, Alberta, Canada Manufacturing, Research and Development 32,220 January 2023 (2) (1) In November 2015, this lease was extended until December 2030, with the option to extend for three additional five-year periods thereafter.
Biggest changePROPERTIES The following is a summary of our offices and locations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Square Lease Expiration Location ​ Business Use ​ Footage ​ Dates Danbury, Connecticut Corporate Headquarters, Research and Development, Sales, Marketing, Service, Purchasing and Administration 72,000 Company owned Torrington, Connecticut Manufacturing and Administrative 167,000 December 2030 (1) Taufkirchen, Germany Manufacturing and Administrative 20,000 June 2024 Calgary, Alberta, Canada Manufacturing, Research and Development 48,308 September 2028 Calgary, Alberta, Canada Storage 18,627 July 2024 (1) In November 2015, this lease was extended until December 2030, with the option to extend for three additional five-year periods thereafter. ​
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(2) As of the date of this report, the Company is in negotiations with the lessor to extend this lease through May 2028.
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The Company is also negotiating a new lease at an adjacent property, which property would provide an additional 48,000 square feet of manufacturing space and which lease would also expire in May 2028. ​ 61 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the Company cannot assure the outcome of such Legal Proceedings, management presently believes that the result of such Legal Proceedings, either individually, or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements, and no material amounts have been accrued in the Company’s consolidated financial statements with respect to these matters. ​
Biggest changeLEGAL PROCEEDINGS From time to time, the Company is involved in legal proceedings, including, but not limited to, regulatory proceedings, claims, mediations, arbitrations and litigation, arising out of the ordinary course of its business (“Legal Proceedings”). 52 Table of Contents Although the Company cannot assure the outcome of such Legal Proceedings, management presently believes that the result of such Legal Proceedings, either individually, or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements, and no material amounts have been accrued in the Company’s consolidated financial statements with respect to these matters. ​
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Item 3. LEGAL PROCEEDINGS From time to time, the Company is involved in legal proceedings, including, but not limited to, regulatory proceedings, claims, mediations, arbitrations and litigation, arising out of the ordinary course of its business (“Legal Proceedings”).

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEquity Compensation Plan Information See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans. 64 Table of Contents Stock Repurchases The following table sets forth information with respect to purchases made by us or on our behalf of our common stock during the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs August 1, 2022 - August 31, 2022 ​ 378,933 ​ $ 4.21 ​ — ​ — September 1, 2022 - September 30, 2022 ​ 793 ​ ​ 3.97 ​ — ​ — October 1, 2022 - October 31, 2022 ​ — ​ ​ — ​ — ​ — Total ​ 379,726 ​ $ 4.21 ​ — ​ — (1) Includes only shares that were surrendered by employees to satisfy statutory tax withholding obligations in connection with the vesting of stock-based compensation awards. ​
Biggest changeEquity Compensation Plan Information See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans. 55 Table of Contents Stock Repurchases The following table sets forth information with respect to purchases made by us or on our behalf of our common stock during the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs August 1, 2023 - August 31, 2023 ​ — ​ $ — ​ — ​ — September 1, 2023 - September 30, 2023 ​ 356,581 ​ ​ 1.33 ​ — ​ — October 1, 2023 - October 31, 2023 ​ 242 ​ ​ 1.29 ​ — ​ — Total ​ 356,823 ​ $ 1.33 ​ — ​ — (1) Includes only shares that were surrendered by employees to satisfy statutory tax withholding obligations in connection with the vesting of stock-based compensation awards. ​
“Redeemable Preferred Stock” of the Notes to the Consolidated Financial Statements. ​ 63 Table of Contents Performance Graph The following graph compares the annual change in the Company’s cumulative total stockholder return on its common stock for the five fiscal years ended October 31, 2022 with the cumulative stockholder total return on the Russell 2000 Index, a peer group consisting of Standard Industry Classification Group Code 3690 companies listed on the Nasdaq Global Market and New York Stock Exchange and a customized 14 company peer group.
“Redeemable Preferred Stock” of the Notes to the Consolidated Financial Statements. ​ 54 Table of Contents Performance Graph The following graph compares the annual change in the Company’s cumulative total stockholder return on its common stock for the five fiscal years ended October 31, 2023 with the cumulative stockholder total return on the Russell 2000 Index, a peer group consisting of Standard Industry Classification Group Code 3690 companies listed on the Nasdaq Global Market and New York Stock Exchange and a customized 14 company peer group.
FuelCell Preferred Stock Information concerning the Company’s Series B Preferred Stock is incorporated herein by reference to Note 12.
FuelCell Preferred Stock Information concerning the Company’s Series B Preferred Stock is incorporated herein by reference to Note 13.
It assumes $100.00 invested on October 31, 2017 with dividends reinvested.
It assumes $100.00 invested on October 31, 2018 with dividends reinvested.
On December 14, 2022, the closing price of our common stock on the Nasdaq Global Market was $3.72 per share. As of December 14, 2022, there were 123 holders of record of our common stock. This does not include the number of persons whose stock is in nominee or “street” name accounts through brokers.
On December 14, 2023, the closing price of our common stock on the Nasdaq Global Market was $1.56 per share. As of December 14, 2023, there were 118 holders of record of our common stock. This does not include the number of persons whose stock is in nominee or “street” name accounts through brokers.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur generation operating portfolio provides us with the full benefit of future cash flows, net of any debt service requirements. ​ 76 Table of Contents The following table summarizes our generation operating portfolio as of October 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Project Name Location Power Off - Taker Rated Capacity (MW) (1) Actual Commercial Operation Date (FuelCell Energy Fiscal Quarter) PPA Term (Years) Central CT State University (“CCSU”) ​ New Britain, CT ​ CCSU (CT University) ​ 1.4 ​ Q2 ‘12 ​ 15 Riverside Regional Water Quality Control Plant ​ Riverside, CA ​ City of Riverside (CA Municipality) ​ 1.4 ​ Q4 '16 ​ 20 Pfizer, Inc. ​ Groton, CT ​ Pfizer, Inc. ​ 5.6 ​ Q4 '16 ​ 20 Santa Rita Jail ​ Dublin, CA ​ Alameda County, California ​ 1.4 ​ Q1 '17 ​ 20 Bridgeport Fuel Cell Project ​ Bridgeport, CT ​ Connecticut Light and Power Company (CT Utility) ​ 14.9 ​ Q1 '13 ​ 15 Tulare BioMAT ​ Tulare, CA ​ Southern California Edison (CA Utility) ​ 2.8 ​ Q1 '20 ​ 20 San Bernardino ​ San Bernardino, CA ​ City of San Bernardino Municipal Water Department ​ 1.4 ​ Q3'21 ​ 20 LIPA Yaphank Project ​ Long Island, NY ​ PSEG / LIPA, LI NY (Utility) ​ 7.4 ​ Q1'22 ​ 18 ​ ​ ​ ​ Total MW Operating: ​ 36.3 ​ ​ ​ ​ ​ (1) Rated capacity is the platform’s design rated output as of the date of initiation of commercial operations. ​ The following table summarizes projects in process, all of which are in backlog, as of October 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Project Name Location Power Off-Taker Rated Capacity (MW) (1) PPA Term (Years) Groton Sub Base ​ Groton, CT ​ CMEEC (CT Electric Co-op) ​ 7.4 ​ 20 Toyota ​ Los Angeles, CA ​ Southern California Edison; Toyota ​ 2.3 ​ 20 CT RFP-2 ​ Derby, CT ​ Eversource/United Illuminating (CT Utilities) ​ 14.0 ​ 20 SCEF - Derby ​ Derby, CT ​ Eversource/United Illuminating (CT Utilities) ​ 2.8 ​ 20 Trinity College ​ Hartford, CT ​ Trinity College ​ 0.3 ​ 15 ​ ​ ​ ​ Total MW in Process: ​ 26.8 ​ ​ ​ (1) Rated capacity is the platform’s design rated output as of the date of initiation of commercial operations, except with respect to the Groton Sub Base project.
Biggest changeOur generation operating portfolio provides us with the full benefit of future cash flows, net of any debt service requirements. 67 Table of Contents The following table summarizes our generation operating portfolio as of October 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Project Name Location Power Off - Taker Rated Capacity (MW) (1) Actual Commercial Operation Date (FuelCell Energy Fiscal Quarter) PPA Term (Years) Central CT State University (“CCSU”) ​ New Britain, CT ​ CCSU (CT University) ​ 1.4 ​ Q2 ‘12 ​ 15 Riverside Regional Water Quality Control Plant ​ Riverside, CA ​ City of Riverside (CA Municipality) ​ 1.4 ​ Q4 '16 ​ 20 Pfizer, Inc. ​ Groton, CT ​ Pfizer, Inc. ​ 5.6 ​ Q4 '16 ​ 20 Santa Rita Jail ​ Dublin, CA ​ Alameda County, California ​ 1.4 ​ Q1 '17 ​ 20 Bridgeport Fuel Cell Project ​ Bridgeport, CT ​ Connecticut Light and Power Company (CT Utility) ​ 14.9 ​ Q1 '13 ​ 15 Tulare BioMAT ​ Tulare, CA ​ Southern California Edison (CA Utility) ​ 2.8 ​ Q1 '20 ​ 20 San Bernardino ​ San Bernardino, CA ​ City of San Bernardino Municipal Water Department ​ 1.4 ​ Q3'21 ​ 20 LIPA Yaphank Project ​ Long Island, NY ​ PSEG / LIPA, LI NY (Utility) ​ 7.4 ​ Q1'22 ​ 18 Groton Project ​ Groton, CT ​ CMEEC (CT Electric Co-op) ​ 7.4 (2) ​ Q1'23 ​ 20 ​ ​ ​ ​ Total MW Operating: ​ 43.7 ​ ​ ​ ​ ​ (1) Rated capacity is the platform’s design rated output as of the date of initiation of commercial operations, except with respect to the Groton Project.
If these criteria are not met, the promised services are accounted for as a single performance obligation. The transaction price is determined based on the consideration that the Company will be entitled to in exchange for transferring goods or services to the customer.
If these criteria are not met, the promised goods or services are accounted for as a single performance obligation. The transaction price is determined based on the consideration that the Company will be entitled to in exchange for transferring goods or services to the customer.
Included in our inventory balance are used modules that are brought back into inventory upon installation of new modules. When a new module is installed, a determination is made as to whether the module has remaining useful life or should be scrapped and materials recycled.
Included in our inventory balance are used modules that are brought back into inventory upon installation of new modules. When a new module is installed, a determination is made as to whether the used module has remaining useful life or should be scrapped and materials recycled.
Estimates for future costs on service agreements are determined by a number of factors including the estimated remaining life of the module(s), used replacement modules available, and future operating plans for the power platform.
Estimates for future costs on service agreements are determined by a number of factors, including the estimated remaining life of the module(s), used replacement modules available, and future operating plans for the power platform.
As a leading global manufacturer of proprietary fuel cell technology platforms, FuelCell Energy is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, and municipalities. ​ 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.
As a leading global manufacturer of proprietary fuel cell technology platforms, FuelCell Energy is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, municipalities, and communities. ​ 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.
The Company allocates profits and losses to REI’s noncontrolling interest under the HLBV method. ​ See Note. 3 “Tax Equity Financing” for additional information regarding the tax equity financing transactions with East West Bank and REI. ​ Sale-Leaseback Accounting The Company, through certain wholly-owned subsidiaries, has entered into sale-leaseback transactions for commissioned project assets where we have entered into a PPA with a customer who is both the site host and end user of the power.
The Company allocates profits and losses to REI’s noncontrolling interest under the HLBV method. ​ See Note. 3 “Tax Equity Financing” for additional information regarding the tax equity financing transactions with Franklin Park, East West Bank and REI. ​ Sale-Leaseback Accounting The Company, through certain wholly-owned subsidiaries, has entered into sale-leaseback transactions for commissioned project assets where we have entered into a PPA with a customer who is both the site host and end user of the power.
Work in process inventory can generally be deployed rapidly while the balance of our inventory requires further manufacturing prior to deployment. To execute on our business plan, we must produce fuel cell modules and procure balance of plant (“BOP”) components in required volumes to support our planned construction 80 Table of Contents schedules and potential customer contractual requirements.
Work in process inventory can generally be deployed rapidly while the balance of our inventory requires further 70 Table of Contents manufacturing prior to deployment. To execute on our business plan, we must produce fuel cell modules and procure balance of plant (“BOP”) components in required volumes to support our planned construction schedules and potential customer contractual requirements.
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 . ​ Factors that may impact our liquidity Factors that may impact our liquidity in fiscal year 2023 and beyond include: ● The Company’s cash on hand and access to additional liquidity.
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 . ​ Factors that may impact our liquidity Factors that may impact our liquidity in fiscal year 2024 and beyond include: ● The Company’s cash on hand and access to additional liquidity.
To the extent a contract includes multiple promised goods or services, the Company must apply judgment to determine whether the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer (the goods or services are distinct) and if the promise to transfer the goods or services to the customer is separately identifiable from other promises in the contract (the goods or services are distinct in the context of the contract).
To the extent a contract includes multiple promised goods or services, the Company must apply judgment to determine whether the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer (the goods or services are capable of being distinct) and if the promise to transfer the goods or services to the customer is separately identifiable from other promises in the contract (the goods or services are distinct in the context of the contract).
Series B preferred stock dividends Dividends recorded on our 5% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) were $3.2 million for each of the years ended October 31, 2022 and 2021. ​ Net loss attributable to common stockholders and loss per common share Net loss attributable to common stockholders represents the net loss for the period less the preferred stock dividends on the Series B Preferred Stock.
Series B preferred stock dividends Dividends recorded on our 5% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) were $3.2 million for each of the years ended October 31, 2023 and 2022. ​ Net loss attributable to common stockholders and loss per common share Net loss attributable to common stockholders represents the net loss for the period less the preferred stock dividends on the Series B Preferred Stock.
Therefore, we have determined under the power and benefits criterion of ASC 810, Consolidations that we are the primary beneficiary of the Yaphank Partnership.
Therefore, we have determined under the power and benefits criterion of ASC 810 that we are the primary beneficiary of the Yaphank Partnership.
If events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable, we compare the carrying amount of an asset group to future undiscounted net cash flows, excluding debt service costs, expected to be generated by the asset group and their ultimate disposition.
If events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable, we compare the carrying amount of an asset group to future undiscounted net cash flows, excluding debt service costs, expected to be generated by the asset group and its ultimate disposition.
If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. During the years ended October 31, 2022 and 2021, the Company recorded certain project asset impairment charges.
If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. During the years ended October 31, 2023 and 2022, the Company recorded certain project asset impairment charges .
As it relates to our fuel cell modules, these improvements center around delivering more uniform temperature distribution within the stack modules with the intent of improving output over the life of the modules to achieve the product’s expected design life. ​ 69 Table of Contents Cost of service agreements revenues for both years includes planned maintenance activities, module exchanges and continued investment in the service fleet in order to improve performance.
As it relates to our fuel cell modules, these improvements center around delivering more uniform temperature distribution within the cell stack within the modules with the intent of improving output over the life of the modules to achieve the product’s expected design life. ​ Cost of service agreements revenues for both years includes planned maintenance activities, module exchanges and continued investment in the service fleet in order to improve performance.
Impairment of Long-Lived Assets (including Project Assets) Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group which pertain to specific projects may not be recoverable.
Impairment of Long-Lived Assets (including Project Assets) Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group which pertains to specific projects may not be recoverable.
Under this partnership flip structure, a partnership, in this case YTBFC Holdco, LLC (the “Yaphank Partnership”), was organized to acquire from FuelCell Energy Finance II, LLC, a wholly-owned subsidiary of the Company, all outstanding equity interests in Yaphank Fuel Cell Park, LLC which in turn owns the LIPA Yaphank Project and is the party to the power purchase agreement and all project agreements.
Under this partnership flip structure, a partnership, in this case YTBFC Holdco, LLC (the “Yaphank Partnership”), was organized to acquire from FuelCell Energy Finance II, LLC, a wholly-owned subsidiary of the Company, all outstanding equity interests in Yaphank Fuel Cell Park, LLC, which in turn owns the LIPA 80 Table of Contents Yaphank Project and is the party to the power purchase agreement and all project agreements.
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 75 Table of Contents 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. ​ Generation Operating Portfolio, Projects Assets and Backlog To grow our generation operating portfolio, the Company will invest in developing and building turn-key fuel cell projects, which will be owned by the Company and classified as project assets on the balance sheet.
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. ​ Generation Operating Portfolio, Project Assets and Backlog To grow our generation operating portfolio, the Company will invest in developing and building turn-key fuel cell projects, which will be owned by the Company and classified as project assets on the Consolidated Balance Sheets.
The consideration for each service agreement is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. The Company reviews its cost estimates on service agreements on a quarterly basis and records any changes in estimates on a cumulative catch-up basis.
The consideration for each service agreement is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. The Company reviews its cost estimates on service agreements on an annual basis and records any changes in estimates on a cumulative catch-up basis.
If the Company exercises this option, the exercise price to be paid by the Company will be the greater of (1) the fair market value of East West Bank’s equity interest at the time the option is exercised, (2) five percent of the $15 million tax equity commitment and (3) East West Bank’s claim in liquidation determined using the hypothetical liquidation at book value method. ​ The Groton Partnership is a Variable Interest Entity (“VIE”) under U.S.
If the Company exercises this option, the exercise price to be paid by the Company will be the greater of (1) the fair market value of East West Bank’s equity interest at the time the option is exercised, (2) five percent of the $15 million tax equity commitment and (3) East West Bank’s claim in liquidation determined using the hypothetical liquidation at book value method. ​ The Groton Partnership is a VIE under U.S.
Estimates are used in accounting for, among other things, revenue recognition, contract loss accruals, 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), lease liabilities and right-of-use (“ROU”) assets, and contingencies.
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.
In addition, the Company expensed costs related to the Toyota project which totaled $22.1 million for the year ended October 31, 2022 . ​ ● Certain of our PPAs for project assets in our generation operating portfolio and project assets under construction expose us to fluctuating fuel price risks as well as the risk of being unable to procure the required amounts of fuel and the lack of alternative available fuel sources.
In addition, the Company expensed costs related to the Toyota project which totaled $22.9 million for the year ended October 31, 2023 . ● Certain of our PPAs for project assets in our generation operating portfolio and project assets under construction expose us to fluctuating fuel price risks as well as the risk of being unable to procure the required amounts of fuel and the lack of alternative available fuel sources.
Includes the sale of completed project assets, sale and installation of fuel cell power platforms including site engineering and construction services, and the sale of modules, BOP components and spare parts to customers. Service. Includes performance under long-term service agreements for power platforms owned by third parties. License and royalty.
Includes the sale of completed project assets, sale and installation of fuel cell power platforms including site engineering and construction services, and the sale of modules, BOP components and spare parts to customers. Service. Includes performance under long-term service agreements for power platforms owned by third parties. Generation.
In fiscal years 2022 and 2021, we reviewed our cost estimates relating to our service contracts and identified higher estimated costs than those that were previously identified.
In fiscal years 2023 and 2022, we reviewed our cost estimates relating to our service contracts and identified higher estimated costs than those that were previously estimated.
See below for further discussion regarding revenue recognition for service agreements. Contractual payments related to the sale of the project asset and assignment of the PPA are generally received up-front. Payment terms for service agreements are generally ratable over the term of the agreement.
See below for further discussion regarding revenue recognition for service agreements. 78 Table of Contents Contractual payments related to the sale of the project asset and assignment of the PPA are generally received up-front. Payment terms for service agreements are generally ratable over the term of the agreement.
The Company’s future liquidity, for fiscal year 2023 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 Advanced Technologies platforms, including 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.
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. ​ We are continually assessing different means by which to accelerate the Company’s growth, enter new markets, commercialize new products, and enable capacity expansion.
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 projects to investors.
We expect generation revenue to continue to grow as additional projects 66 Table of Contents 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 projects to investors.
To achieve this core principle, the Company applies the following five-step approach: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as a performance obligation is satisfied.
To achieve this core principle, the Company applies the following five-step approach: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate 77 Table of Contents the transaction price to performance obligations in the contract; and (5) recognize revenue when or as a performance obligation is satisfied.
Department of Energy, is intended to demonstrate that the Company’s platform can operate at higher electrical efficiency than currently available electrolysis 81 Table of Contents technologies through the inclusion of an external heat source.
Department of Energy, is intended to demonstrate that the Company’s platform can operate at higher electrical efficiency than currently available electrolysis technologies through the inclusion of an external heat source.
The Company continues to advance its solid oxide platform research, including increasing production of solid oxide fuel cell modules and expanding manufacturing capacity. The Company continues to work with Idaho National Laboratories on a demonstration high-efficiency electrolysis platform. This project, done in conjunction with the U.S.
The Company continues to advance its solid oxide platform research, including increasing production of solid oxide fuel cell modules and expanding manufacturing capacity. The Company continues to work with INL on a demonstration high-efficiency electrolysis platform. This project, done in conjunction with the U.S.
The Company records any amounts that are billed to customers in excess of revenue recognized as deferred revenue and revenue recognized in excess of amounts billed to customers as unbilled receivables. 86 Table of Contents Revenue streams are classified as follows: Product.
The Company records any amounts that are billed to customers in excess of revenue recognized as deferred revenue and revenue recognized in excess of amounts billed to customers as unbilled receivables. Revenue streams are classified as follows: Product.
Navy Submarine Base in Groton, CT, which has been structured as a “partnership flip.” A partnership (the “Groton Partnership”) was organized with East West Bancorp, Inc. (“East West Bank”) to acquire from FuelCell Energy Finance II, LLC, a wholly owned subsidiary of the Company, all of the outstanding equity interests in Groton Station Fuel Cell, LLC (“Groton Project Company”).
Navy Submarine Base in Groton, CT (the “Groton Project”), which has been structured as a “partnership flip.” A partnership (the “Groton Partnership”) was organized with East West Bank to acquire from FuelCell Energy Finance II, LLC, a wholly-owned subsidiary of the Company, all of the outstanding equity interests in Groton Station Fuel Cell, LLC (the “Groton Project Company”).
Morgan Securities LLC and Loop Capital Markets LLC (the “Open Market Sale Agreement”) with respect to an at the market offering program under which the Company may, from time to time, offer and sell up to 95.0 million shares of the Company’s common stock.
Morgan Securities LLC and Loop Capital Markets LLC (the “Open Market Sale Agreement”) with respect to an at the market offering program under which the Company may, from time to time and subject to various conditions contained therein, offer and sell up to 95.0 million shares of the Company’s common stock.
On December 16, 2022, the Company entered into an amended and restated power purchase agreement (“ Amended and Restated PPA ”) which modified and replaced the existing power purchase agreement with Connecticut Municipal Electric Energy Cooperative (“CMEEC”) to allow the plant to operate at a reduced output of approximately 6 MW while a Technical Improvement Plan (“TIP”) is implemented over the next year with the goal of bringing the platform to its rated capacity of 7.4 MW by December 31, 2023.
On December 16, 2022, the Company entered into an Amended and Restated PPA which modified and replaced the existing power purchase agreement with Connecticut Municipal Electric Energy Cooperative (“CMEEC”) to allow the Groton Project to operate at a reduced output of approximately 6.0 MW while a Technical Improvement Plan (“TIP”) is implemented with the goal of bringing the platform to its rated capacity of 7.4 MW by December 31, 2023.
To build out this portfolio, as of October 31, 2022, we estimate the remaining investment in project assets to be made during fiscal year 2023 to be in the range of approximately $45.0 million to $65.0 million. To fund such expenditures, the Company expects to use unrestricted cash on hand and to seek sources of construction financing.
To build out this portfolio, as of October 31, 2023, we estimate the remaining investment in project assets to be made during fiscal year 2024 to be in the range of approximately $15.0 million to $25.0 million. To fund such expenditures, the Company expects to use unrestricted cash on hand and to seek sources of construction financing.
The Company considers the rights granted to East West Bank under the agreements to be more protective in nature than participatory. Therefore, the Company has determined under the power and benefits criterion of Accounting Standards Codification 810, Consolidations that it is the primary beneficiary of the Groton Partnership.
The Company considers the rights granted to East West Bank under the agreements to be more protective in nature than participatory. Therefore, the Company has determined under the power and benefits criterion of ASC 810 that it is the primary beneficiary of the Groton Partnership.
We seek to mitigate our fuel risk using strategies including: (i) fuel cost reimbursement mechanisms in our PPAs to allow for pass through of fuel costs (full or partial) where possible, which we have done with our 14.9 MW operating project in Bridgeport, CT; (ii) procuring fuel under fixed price physical contracts with investment grade counterparties, which we have done for twenty years for our Tulare BioMAT project and the initial seven years of the eighteen year PPA for our LIPA Yaphank, NY project; and (iii) potentially entering into future financial hedges with investment grade counterparties to offset potential negative market fluctuations.
We seek to mitigate our fuel risk using strategies including: (i) fuel cost reimbursement mechanisms in our PPAs to allow for pass through of fuel costs (full or partial) where possible, which we have done with our 14.9 MW operating project in Bridgeport, CT; (ii) procuring fuel under fixed price physical supply contracts with investment grade counterparties, which we have done for twenty years for our Tulare BioMAT project, the initial seven years of the eighteen year PPA for our LIPA Yaphank Project, six years of the twenty year PPA for our 14.0 MW Derby project, and the initial two years of the twenty year hydrogen power purchase agreement for our Toyota project; and (iii) potentially entering into future financial hedges with investment grade counterparties to offset potential negative market fluctuations.
These amounts include development costs, interconnection costs, costs associated with posting of letters of credit, bonding or other forms of security, and engineering, permitting, legal, and other expenses. ● The amount of accounts receivable and unbilled receivables as of October 31, 2022 and 2021 was $25.6 million ($9.7 million of which is classified as “Other assets”) and $35.2 million ($11.6 million of which is classified as “Other assets”), respectively.
These amounts include development costs, interconnection costs, costs associated with posting of letters of credit, bonding or other forms of security, and engineering, permitting, legal, and other expenses. ● The amount of accounts receivable and unbilled receivables as of October 31, 2023 and 2022 was $45.9 million ($25.8 million of which is classified as “Other assets”) and $25.6 million ($9.7 million of which is classified as “Other assets”), respectively.
Net cash provided by financing activities during fiscal year 2021 resulted from $525.9 million of proceeds from common stock sales, net of fees and expenses, $10.2 million of proceeds from the sale-leaseback transaction with Crestmark Equipment Finance, $3.0 million contribution received from a noncontrolling interest, and $0.9 million of proceeds received from warrant exercises, offset by debt repayments of $98.6 million primarily relating to the payoff of amounts owed under the Orion Credit Agreement and the PPP Note, a prepayment penalty of $4.0 million for the early payoff of the debt outstanding under the Orion Credit Agreement, payment of preferred dividends of $3.2 million under the terms of the Series B Preferred Stock, payment of $21.5 million to repay all remaining obligations under the terms of the Series 1 Preferred Shares and the payment of deferred financing costs of $0.4 million.
Net cash provided by financing activities during fiscal year 2021 resulted from $525.9 million of proceeds from common stock sales, net of fees and expenses, $10.2 million of proceeds from the sale-leaseback transaction with Crestmark Equipment Finance, a $3.0 million contribution received from a noncontrolling interest, and $0.9 million of proceeds received from warrant exercises, offset by debt repayments of $98.6 million primarily relating to the payoff of amounts owed under the Orion Credit Agreement and the PPP Note (in each case, as defined elsewhere herein), a prepayment penalty of $4.0 million for the early payoff of the debt outstanding under the Orion Credit Agreement, payment of preferred dividends of $3.2 million under the terms of the Series B Preferred Stock, payment of $21.5 million to repay all remaining obligations under the terms of the Series 1 Preferred Shares previously issued by one of the Company’s indirect subsidiaries and the payment of deferred financing costs of $0.4 million.
We may, at our option, convert these shares into the number of shares of our common stock that are issuable at the then prevailing conversion rate if the closing price of our common stock exceeds 150% of the then prevailing conversion price ($1,692 per share at October 31, 2022) for 20 trading days during any consecutive 30 trading day period. ​ Term and Construction Loans A discussion of the key terms and conditions of the loans outstanding as of October 31, 2022 is included in Note 10.
We may, at our option, convert these shares into the number of shares of our common stock that are issuable at the then 75 Table of Contents prevailing conversion rate if the closing price of our common stock exceeds 150% of the then prevailing conversion price ($1,692 per share as of October 31, 2023) for 20 trading days during any consecutive 30 trading day period. ​ Outstanding Loans as of October 31, 2023 A discussion of the key terms and conditions of the loans outstanding as of October 31, 2023 is included in Note 11.
Our accounts receivable balances may fluctuate as of any balance sheet date depending on the timing of individual contract milestones and progress on completion of our projects. ● The amount of total inventory as of October 31, 2022 and 2021 was $98.5 million ($7.5 million is classified as long-term inventory) and $71.7 million ($4.6 million is classified as long-term inventory), respectively, which includes work in process inventory totaling $67.8 million and $45.7 million, respectively.
Our accounts receivable balances may fluctuate as of any balance sheet date depending on the timing of individual contract milestones and progress on completion of our projects. ● The amount of total inventory as of October 31, 2023 and 2022 was $91.8 million ($7.3 million is classified as long-term inventory) and $98.5 million ($7.5 million is classified as long-term inventory), respectively, which includes work in process inventory totaling $55.6 million and $67.8 million, respectively.
As a result, we may manufacture modules or acquire BOP components in advance of receiving payment for such activities. This may result in fluctuations in inventory and in use of cash as of any given balance sheet date. ● The amount of total project assets as of October 31, 2022 and 2021 was $232.9 million and $223.3 million, respectively.
As a result, we may manufacture modules or acquire BOP components in advance of receiving payment for such activities. This may result in fluctuations in inventory and cash as of any given balance sheet date . ● The amount of total project assets as of October 31, 2023 and 2022 was $258.1 million and $232.9 million, respectively.
The Company completed its annual impairment analysis of goodwill and in-process research and development assets as of July 31, 2022. The Company performed a qualitative assessment for fiscal year 2022 and determined that it was more likely than not that there was no impairment of goodwill or the indefinite-lived intangible asset.
The Company completed its annual impairment analysis of goodwill and in-process research and development assets as of July 31, 2023. The Company performed a qualitative assessment for fiscal year 2023 and determined that it was more likely than not that there was no impairment of goodwill or the in-process research and development assets.
If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby project assets and further charges for the Toyota project asset. ​ The overall gross loss from generation revenues was $27.0 million for the year ended October 31, 2022, which represents an increase of $15.0 million from a gross loss of $12.0 million for the year ended October 31, 2021.
If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby project assets and further charges for the Toyota project asset. ​ The overall gross loss from generation revenues was $29.5 million for the year ended October 31, 2023, which represents an increase of $2.6 million from a gross loss of $27.0 million for the year ended October 31, 2022.
(2) Future minimum lease payments on finance and operating leases. (3) Represents payments due under sale-leaseback transactions and related financing agreements between certain of our wholly-owned subsidiaries and PNC Energy Capital, LLC (“PNC”) and/or Crestmark Equipment Finance (“Crestmark”) (as applicable). Lease payments for each lease under these financing agreements are generally payable in fixed quarterly installments over a 10-year period.
(2) Future minimum lease payments on finance and operating leases. (3) Represents payments due under sale-leaseback transactions and related financing agreements between certain of our wholly-owned subsidiaries and Crestmark Equipment Finance (“Crestmark”). Lease payments for each lease under these financing agreements are generally payable in fixed quarterly installments over a 10-year period.
In conjunction with entering into the Amended and Restated PPA, on December 16, 2022, the Company and CMEEC declared that the plant is commercially operational at 6 MW and CMEEC and the Company agreed that, for all purposes, the commercial operations date has been achieved. The Navy also provided its authorization to proceed with commercial operations at 6 MW.
In conjunction with entering into the Amended and Restated PPA, on December 16, 2022, the Company and CMEEC declared that the plants are commercially operational at 6.0 MW and CMEEC and the Company agreed that, for all purposes, the commercial operations date had been achieved. The Navy also provided its authorization to proceed with commercial operations at 6.0 MW.
Net cash used in investing activities during fiscal year 2022 included $25.6 million of project asset expenditures and $21.1 million of capital expenditures. Net cash used in investing activities during fiscal year 2021 included $66.9 million of project asset expenditures and $6.4 million of capital expenditures.
Net cash used in investing activities during fiscal year 2022 included $25.6 million of project asset expenditures and $21.1 million of capital expenditures.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with U.S. GAAP 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) 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.
The Company currently intends to use the net proceeds from this offering to accelerate the development and commercialization of its product platforms (including, but not limited to, its solid oxide and carbon capture platforms), for project development, market development, and internal research and development, to invest in capacity expansion for solid oxide and carbonate fuel cell manufacturing, and for project financing, working capital support, and general corporate purposes.
The Company currently intends to use the net proceeds from any additional sales under the Open Market Sale Agreement to accelerate the development and commercialization of its product platforms (including, but not limited to, its solid oxide and carbon capture platforms), for project development, market development, and internal research and development, to invest in capacity expansion for solid oxide and carbonate fuel cell manufacturing, and for project financing, working capital support, and general corporate purposes.
As of October 31, 2022, the Company had projects representing an additional 26.8 MW in various stages of development and construction, which projects are expected to generate operating cash flows in future periods, if completed.
As of October 31, 2023, the Company had projects representing an additional 19.4 MW in various stages of development and construction, which projects are expected to generate operating cash flows in future periods, if completed.
Due to the Company not meeting criteria to account for the transfer of the project assets as a sale, sale accounting is precluded. Accordingly, the Company uses the financing method to account for these transactions.
Due to the Company not meeting criteria to account for the transfer of the project assets as a sale since the leases include a repurchase right, sale accounting is precluded. Accordingly, the Company uses the financing method to account for these transactions.
The net increase of approximately $0.8 million to the loss accrual in fiscal year 2022 was a result of adjustments to future cost estimates related to future module exchanges, as further described above. ​ We work to continuously improve and mature our products and implement lessons learned into our product designs and manufacturing process subsequent to introduction.
The net increase of approximately $2.3 million to the loss accrual in fiscal year 2023 was a result of adjustments to future cost estimates related to future module exchanges, as further described above. 59 Table of Contents ​ We work to continuously improve and mature our products and implement lessons learned into our product designs and manufacturing process subsequent to introduction.
Off-Balance Sheet Arrangements We have no off-balance sheet debt or similar obligations which are not classified as debt. We do not guarantee any third-party debt. See Note 18. “Commitments and Contingencies” to our consolidated financial statements for the year ended October 31, 2022 included in this Annual Report on Form 10-K for further information.
Government-unfunded. 76 Table of Contents Off-Balance Sheet Arrangements We have no off-balance sheet debt or similar obligations which are not classified as debt. We do not guarantee any third-party debt. See Note 19. “Commitments and Contingencies” to our consolidated financial statements for the year ended October 31, 2023 included in this Annual Report on Form 10-K for further information.
REI’s tax equity commitment totaled $12.4 million. This transaction was structured as a “partnership flip,” which is a structure commonly used by tax equity investors in the financing of renewable energy projects.
This transaction was structured as a “partnership flip,” which is a structure commonly used by tax equity investors in the financing of renewable energy projects.
Our critical accounting policies are those that are both most important to our financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates . ​ Our critical accounting policies are those that are both most important to our financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
There was no comparable net loss for the year ended October 31, 2021 as the LIPA Yaphank tax equity transaction closed and the LIPA Yaphank Project began operating in the first quarter of fiscal year 2022.
There was no comparable net loss for the year ended October 31, 2022, as the Groton Project tax equity transaction closed and the Groton Project began operations in the first quarter of fiscal year 2023.
Accrued performance guarantees represent variable consideration for service contracts and accordingly are recorded as an offset to service agreements revenues. ​ Cost of service agreements revenues decreased $7.5 million to $17.2 million for the year ended October 31, 2022 from $24.7 million for the year ended October 31, 2021.
Accrued performance guarantees represent variable consideration for service contracts and accordingly are recorded as an offset to service agreements revenues. ​ Cost of service agreements revenues increased $27.7 million to $45.0 million for the year ended October 31, 2023 from $17.2 million for the year ended October 31, 2022.
Other income, net for the year ended October 31, 2022 primarily represents $3.5 million of interest earned on money market investments, a gain on derivative contract of $0.8 million, and $0.3 million of research and development tax credits, offset by foreign exchange losses of $0.9 million.
Other income, net for the year ended October 31, 2022 primarily represents a gain on derivative contract of $0.8 million, and $0.4 million of refundable research and development tax credits, offset by foreign exchange losses of $0.9 million.
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.
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.
Cost of service agreements revenues were lower for the year ended October 31, 2022 than for the year ended October 31, 2021 primarily due to the fact that there were fewer planned module exchanges in the service fleet that occurred during year ended October 31, 2022 than during the year ended October 31, 2021. ​ We record loss accruals for service agreements when the estimated cost of future module exchanges and maintenance and monitoring activities exceeds the remaining unrecognized consideration.
Cost of service agreements revenues were higher for the year ended October 31, 2023 than for the year ended October 31, 2022 due to the fact that 15 new module exchanges occurred during the year ended October 31, 2023, while there were fewer module exchanges during the year ended October 31, 2022. ​ We record loss accruals for service agreements when the estimated cost of future module exchanges and maintenance and monitoring activities exceeds the remaining unrecognized consideration.
“Project Assets” to the Consolidated Financial Statements for more information on the impairment charges for the fiscal year ended October 31, 2022. ​ We currently have three projects in development with fuel sourcing risk, which are the Toyota project, which requires procurement of RNG, and our Derby, CT 14.0 MW and 2.8 MW projects, which require natural gas.
“Project Assets” to the Consolidated Financial Statements for more information on the impairment charge for the fiscal year ended October 31, 2023. ​ We currently have three projects with fuel sourcing risk, which are the Toyota project, which requires procurement of RNG, and our Derby, CT 14.0 MW and 2.8 MW projects, both of which require natural gas for which there is no pass-through mechanism.
During fiscal year 2021, we achieved an annualized production rate of 32.4 MW as of October 31, 2021. During the fourth quarter of fiscal year 2022, we operated at an annualized production rate of approximately 41.5 MW, and for the full fiscal year ended October 31, 2022, we operated at an annualized production rate of 39.3 MW.
During fiscal year 2022, we achieved an annualized production rate of 39.3 MW as of October 31, 2022. During the fourth quarter of fiscal year 2023, we operated at an annualized production rate of approximately 35.2 MW, and for the full fiscal year ended October 31, 2023, we operated at an annualized production rate of 32.7 MW.
In addition, once the projects under development become operational, the Company will seek to obtain permanent financing (tax equity and debt) which would be expected to return cash to the business. For fiscal year 2022, capitalized project asset expenditures were $25.6 million.
In addition, once the projects under development become operational, the Company will seek to obtain permanent financing (tax equity and debt) which would be expected to return cash to the business. For the year ended October 31, 2023, capitalized project asset expenditures were $52.9 million.
For the year ended October 31, 2022, we operated at an annualized production rate of approximately 39.3 MW, which is an increase from the annualized production rate of 32.4 MW for the year ended October 31, 2021.
For the year ended October 31, 2023, we operated at an annualized production rate of approximately 32.7 MW, which is a decrease from the annualized production rate of 39.3 MW for the year ended October 31, 2022.
For the years ended October 31, 2022 and 2021, net loss attributable to common stockholders was $145.9 million and $104.3 million, respectively, and loss per common share was $0.38 and $0.31, respectively.
For the years ended October 31, 2023 and 2022, net loss attributable to common stockholders was $110.8 million and $145.9 million, respectively, and loss per common share was $0.26 and $0.38, respectively.
With respect to the Groton Sub Base project, the initial operating output is approximately 6.0 MW until the Technical Improvement Plan described below is fully implemented. Full implementation of the Technical Improvement Plan is expected to bring this platform to its design rated output of 7.4 MW.
The initial operating output of the Groton Project is and will be approximately 6.0 MW until the Technical Improvement Plan described below in footnote (2) is fully implemented. Full implementation of the Technical Improvement Plan is expected to bring this platform to its design rated output of 7.4 MW.
From the date of the Open Market Sale Agreement through October 31, 2022, the Company sold approximately 18.5 million shares under the Open Market Sale Agreement at an average sale price of $3.63 per share, resulting in gross proceeds of approximately $67.2 million before deducting sales commissions and fees, and net proceeds to the Company of approximately $65.4 million after deducting commissions and fees totaling approximately $1.8 million.
From the date of the Open Market Sale Agreement through October 31, 2023, the Company sold approximately 62.8 million shares under the Open Market Sale Agreement at an average sale price of $2.66 per share, resulting in gross proceeds of approximately $166.8 million before deducting sales commissions and fees, and net proceeds to the Company of approximately $162.7 million after deducting sales commissions and fees totaling approximately $4.1 million.
Loss accruals for service agreements are recognized to the extent that the estimated remaining costs to satisfy the performance obligation exceed the estimated remaining unrecognized consideration. Estimated losses are recognized in the period in which losses are identified.
Loss accruals for service agreements are recognized to the extent that the estimated remaining costs to satisfy the performance obligation exceed the estimated remaining unrecognized consideration. Estimated losses are recognized in the period in which losses are identified. Payment terms for service agreements are generally ratable over the term of the agreement.
Compared to the year ended October 31, 2021, Advanced Technologies contract revenues recognized under the Joint Development Agreement between the Company and ExxonMobil Technology and Engineering Company, f/k/a ExxonMobil Research and Engineering Company (“EMTEC”) (which was originally effective as of October 31, 2019) (as amended, the “EMTEC Joint Development Agreement”) were approximately $9.5 million lower during the year ended October 31, 2022 and Advanced Technologies contract revenues recognized under government contracts and other contracts were approximately $5.2 million higher for the year ended October 31, 2022.
Compared to the year ended October 31, 2022, Advanced Technologies contract revenues recognized under the Joint Development Agreement between the Company and ExxonMobil Technology and Engineering Company f/k/a ExxonMobil Research and Engineering Company (“EMTEC”) (which was originally effective as of October 31, 2019) (as amended, the “EMTEC Joint Development Agreement”) were approximately $0.3 million higher during the year ended October 31, 2023 and Advanced Technologies contract revenues recognized under government and other contracts were approximately $4.6 million lower for the year ended October 31, 2023 as a result of the allocation of engineering resources during the year based on the scope of the contracts in the year.
This gas contract is for the Company’s Yaphank project and the costs are expected to be offset by generation revenues on the project. (5) We pay $3.2 million in annual dividends on our Series B Preferred Stock, if and when declared.
The costs of the contracts are expected to be offset by generation revenues. (5) We pay $3.2 million in annual dividends on our Series B Preferred Stock, if and when declared.
Cost of service agreements includes maintenance and operating costs and module exchanges. ​ Overall gross loss from service agreements revenues was $4.4 million for the year ended October 31, 2022, which represents a decrease of $0.5 million from a gross loss of $4.9 million for the year ended October 31, 2021.
Cost of service agreements includes maintenance and operating costs and module exchanges. ​ Overall gross profit from service agreements revenues was $4.1 million for the year ended October 31, 2023 which increased from a gross loss of $4.4 million for the year ended October 31, 2022.
Project assets consist of capitalized costs for fuel cell projects that are operating and producing revenue or are under construction. Project assets as of October 31, 2022 consisted of $125.2 million of completed, operating installations and $107.7 million of projects in development.
Project assets consist of capitalized costs for fuel cell projects that are operating and producing revenue or are under construction. Project assets as of October 31, 2023 consisted of $167.5 million of completed, operating installations and $90.6 million of projects in development.
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 and storage and carbon capture, sequestration and utilization technologies.
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. ​ 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.
As of October 31, 2022, we had pledged approximately $23.0 million of our cash and cash equivalents as collateral for performance security and for letters of credit for certain banking requirements and contracts. This balance may increase with a growing backlog and installed fleet. ● On August 16, 2022, the U.S.
As of October 31, 2023, we had pledged approximately $49.6 million of our cash and cash equivalents as collateral for performance security and for letters of credit for certain banking requirements and contracts. This balance may increase with a growing backlog and installed fleet.
While government research and development contracts may extend for many years, funding is often provided incrementally on a year-by-year basis if contract terms are met and Congress authorizes the funds. As of October 31, 2022, Advanced Technologies contract backlog totaled $22.9 million, of which $8.1 million is non-U.S. Government-funded, $13.6 million is U.S. Government-funded and $1.2 million is U.S. Government-unfunded.
While government research and development contracts may extend for many years, funding is often provided incrementally on a year-by-year basis if contract terms are met and Congress authorizes the funds. As of October 31, 2023, Advanced Technologies contract backlog totaled $15.3 million, of which $10.7 million is non-U.S. Government-funded, $4.3 million is U.S. Government-funded and $0.3 million is U.S.
Includes license fees and royalty income from the licensure of intellectual property. Generation. Includes the sale of electricity under PPAs and utility tariffs from project assets retained by the Company. This also includes revenue received from the sale of other value streams from these assets including the sale of heat, steam, capacity and renewable energy credits. Advanced Technologies.
Includes the sale of electricity under PPAs and utility tariffs from project assets retained by the Company. This also includes revenue received from the sale of other value streams from these assets including the sale of heat, steam, capacity and renewable energy credits. Advanced Technologies. Includes revenue from customer-sponsored and government-sponsored Advanced Technologies projects.
Under Topic 606: Revenue from Contracts with Customers, the amount of revenue recognized for any goods or services reflects the consideration that the Company expects to be entitled to receive in exchange for those goods and services.
Revenue Recognition The Company recognizes revenue in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 606: Revenue from Contracts with Customers (“ASC 606”). Under ASC 606 , the amount of revenue recognized for any goods or services reflects the consideration that the Company expects to be entitled to receive in exchange for those goods and services.
Loss from operations Loss from operations for the year ended October 31, 2022 was $143.7 million compared to $64.9 million for the year ended October 31, 2021.
Loss from operations Loss from operations for the year ended October 31, 2023 was $136.1 million compared to $143.7 million for the year ended October 31, 2022.
Although the Company believes it will successfully implement the TIP within approximately one year and bring the plant up to its nominal output of 7.4 MW, no assurance can be provided that such work will be successful.
Although the Company believes it will successfully implement the TIP and bring the plant up to its design rated output of 7.4 MW by December 31, 2023, no assurance can be provided that such work will be successful.
In addition, under certain agreements, we are required to produce minimum amounts of power under our PPAs and we have the right to terminate PPAs by giving written notice to the customer, subject to certain exit costs. As of October 31, 2022, our generation operating portfolio was 36.3 MW.
In addition, under certain agreements, we are required to produce minimum amounts of power under our PPAs and we have the right to terminate PPAs by giving written notice to the customer, subject to certain exit costs.
Includes revenue from customer-sponsored and government-sponsored Advanced Technologies projects. See below for a discussion of revenue recognition under Topic 606 by disaggregated revenue stream. Completed project assets Contracts for the sale of completed project assets include the sale of the project asset, the assignment of the service agreement, and the assignment of the PPA.
See below for a discussion of revenue recognition under ASC 606 by disaggregated revenue stream. Completed project assets Contracts for the sale of completed project assets include the sale of the project asset, the assignment of the service agreement, and the assignment of the PPA.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe seek to mitigate our fuel risk using strategies including: (i) fuel cost reimbursement mechanisms in our PPAs to allow for pass through of fuel costs (full or partial) where possible, which we have done with our 14.9 MW operating project in Bridgeport, CT; (ii) procuring fuel under fixed price physical contracts with investment grade counterparties, which we have done for twenty years for our Tulare BioMAT project and the initial seven years of the 18 year PPA for our LIPA Yaphank, NY project; and (iii) potentially entering into future financial hedges with investment grade counterparties to offset potential negative market fluctuations. ​ We currently have three projects in development with fuel sourcing risk, namely, the Toyota project, which requires procurement of renewable natural gas (“RNG”), and our Derby, CT 14.0 MW and 2.8 MW projects, both of which require natural gas for which there is no pass though mechanism in the related PPAs.
Biggest changeWe seek to mitigate our fuel risk using strategies including: (i) fuel cost reimbursement mechanisms in our PPAs to allow for pass through of fuel costs (full or partial) where possible, which we have done with our 14.9 MW operating project in Bridgeport, CT; (ii) procuring fuel under fixed price physical supply contracts with investment grade counterparties, which we have done for twenty years for our Tulare BioMAT project, the initial seven years of the eighteen year PPA for our LIPA Yaphank Project, six of the twenty year PPA for our 14.0 MW Derby project, and the initial two years of the twenty year hydrogen power purchase agreement for our Toyota project; and (iii) potentially entering into future financial hedges with investment grade counterparties to offset potential negative market fluctuations.
On August 1, 2022, the Company entered into an amendment to its interest rate swap agreement that replaced LIBOR with Term Secured Overnight Financing Rate (“SOFR”) effective as of June 2023. The fair value adjustment for the years ended October 31, 2022 and October 31, 2021 resulted in a $0.9 million gain and a $0.5 million gain, respectively.
On August 1, 2022, the Company entered into an amendment to its interest rate swap agreement that replaced LIBOR with Term Secured Overnight Financing Rate (“SOFR”) effective as of June 2023. The fair value adjustment for the years ended October 31, 2023 and October 31, 2022 resulted in a $0.1 million loss and a $0.9 million gain, respectively.
Based on our overall interest rate exposure as of October 31, 2022, including all interest rate sensitive instruments, a change in interest rates of 1% would not have a material impact on our results of operations.
Based on our overall interest rate exposure as of October 31, 2023, including all interest rate sensitive instruments, a change in interest rates of 1% would not have a material impact on our results of operations.
We have also conducted a sensitivity analysis on the impact of RNG pricing and a $10/MMBTu increase in market pricing compared to our underlying project models would result in an impact of approximately $2.0 million to our Consolidated Statements of Operations and Comprehensive Loss on an annual basis . ​ 93 Table of Contents
We have also conducted a sensitivity analysis on the impact of RNG pricing and a $10/MMBTu increase in market pricing compared to our underlying project models would result in an impact of approximately $2.0 million to our Consolidated Statements of Operations and Comprehensive Loss on an annual basis.
The valuation methodology involves comparison of (i) the sum of the present value of all monthly variable rate payments based on a reset rate using the forward LIBOR curve and (ii) the sum of the present value of all monthly fixed rate payments on the notional amount, which is equivalent to the outstanding principal amount of the loan.
The valuation methodology involved comparison of (i) the sum of the present value of all monthly variable rate payments based on a reset rate using the forward LIBOR curve and (ii) the sum of the present value of all monthly fixed rate payments on the notional amount, which was equivalent to the outstanding principal amount of the loan.
A $1/Metric Million British Thermal Unit (“MMBTu”) increase in market pricing compared to our underlying project models 92 Table of Contents would result in a cost impact of approximately $1.4 million to our Consolidated Statements of Operations and Comprehensive Loss on an annual basis.
A $1/Metric Million British Thermal Unit (“MMBTu”) increase in market pricing compared to our underlying project models would result in a cost impact of approximately $26,000 to our Consolidated Statements of Operations and Comprehensive Loss on an annual basis.
Foreign Currency Exchange Risk As of October 31, 2022, approximately 0.3% of our total cash and cash equivalents were in currencies other than U.S. dollars (primarily the Euro, Canadian dollars and Korean Won) and we have no plans of repatriation. We make purchases from certain vendors in currencies other than U.S. dollars.
Foreign Currency Exchange Risk As of October 31, 2023, approximately 0.5% of our total cash and cash equivalents were in currencies other than U.S. dollars (primarily the Euro, Canadian dollars and Korean Won) and we have no plans of repatriation. We make purchases from certain vendors and receive payment from certain customers in currencies other than U.S. dollars.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Exposure Risk Cash is invested overnight with high credit quality financial institutions and therefore we are not exposed to market risk on our cash holdings from changing interest rates.
Cash is invested overnight with high credit quality financial institutions and therefore we are not exposed to market risk on our cash holdings from changing interest rates.
Project Fuel Price Exposure Risk Certain of our PPAs for project assets in our generation operating portfolio and project assets under construction expose us to fluctuating fuel price risks as well as the risk of being unable to procure the required amounts of fuel and the lack of alternative available fuel sources.
The fair value adjustments for the year ended October 31, 2023 resulted in a gain of $3.3 million. ​ Project Fuel Price Exposure Risk Certain of our PPAs for project assets in our generation operating portfolio and project assets under construction expose us to fluctuating fuel price risks as well as the risk of being unable to procure the required amounts of fuel and the lack of alternative available fuel sources.
The interest rate swap is adjusted to fair value on a quarterly basis. The estimated fair value is based on Level 2 inputs including primarily the forward LIBOR curve available to swap dealers.
The net interest rate across the BFC Credit Agreement and the swap transaction resulted in a fixed rate of 5.09%. The interest rate swap was adjusted to fair value on a quarterly basis. The estimated fair value was based on Level 2 inputs including primarily the forward LIBOR curve available to swap dealers.
Derivative Fair Value Exposure Risk Interest Rate Swap On May 16, 2019, an interest rate swap agreement was entered into with Fifth Third Bank in connection with the BFC Credit Agreement for the term of the loan. The net interest rate across the BFC Credit Agreement and the swap transaction results in a fixed rate of 5.09%.
Derivative Fair Value Exposure Risk Interest Rate Swap On May 16, 2019, an interest rate swap agreement was entered into with Fifth Third Bank in connection with the May 2019 Credit Agreement with Liberty Bank, as administrative agent and co-lead arranger, and Fifth Third Bank as co-lead arranger and interest rate swap hedger (the “BFC Credit Agreement”) for the term of the loan.
Fuel sourcing and risk mitigation strategies for all three projects are being assessed and will be implemented as project operational dates become firm. ​ Historically, this risk has not been material to our financial statements as our operating projects prior to October 31, 2022 either did not have fuel price risk exposure, had fuel cost reimbursement mechanisms in our related PPAs to allow for pass through of fuel costs (full or partial), or had established long term fixed price fuel physical contracts.
If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby project assets and further charges for the Toyota project asset. ​ Historically, this risk has not been material to our financial statements as our operating projects prior to October 31, 2023 either did not have fuel price risk exposure, had fuel cost reimbursement mechanisms in our related PPAs to allow for pass through of fuel costs (full or partial), or had established long term fixed price fuel physical contracts.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Exposure Risk We have invested in U.S. Treasury Securities with maturities of less than three months. We expect to hold these investments until maturity and accordingly, these investments are carried at amortized cost and not subject to mark-to-market accounting. At October 31, 2023, our U.S.
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Treasury Securities had a carrying value of $103.8 million, which approximated fair value. These investments have maturity dates ranging from November 2023 to January 2024 and a weighted average yield to maturity of 5.45%.
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This interest rate swap agreement was terminated during fiscal year 2023 in connection with the payoff of the senior and subordinated indebtedness of the Company to Liberty Bank, Fifth Third Bank and Connecticut Green Bank related to the Bridgeport Fuel Cell Project. ​ On May 19, 2023, in connection with the closing of the OpCo Financing Facility, the Company entered into an ISDA 2002 Master Agreement (the “Investec Master Agreement”) and an ISDA Schedule to the 2002 Master Agreement (the “Investec Schedule”) with Investec Bank plc as a hedge provider, and an ISDA 2002 Master Agreement (the “BMO Master Agreement”) and an ISDA Schedule to the 2002 Master Agreement (the “BMO Schedule”) with Bank of Montreal (Chicago Branch) as a hedge provider.
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On May 22, 2023, OpCo Borrower executed the related trade confirmations for these interest rate swap agreements with these hedge providers to protect against adverse price movements in the floating SOFR rate associated with 100% of the aggregate principal balance of the Term Loan outstanding.
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Pursuant to the terms of such agreements, OpCo Borrower will pay a fixed rate of interest of 3.716%. The net interest rate across the Financing Agreement and the swap transaction is 6.366% in the first four years and 6.866% thereafter.
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The obligations of OpCo Borrower to the hedge providers under the interest rate swap agreements are treated as obligations under the Financing Agreement and, accordingly, are secured, on a pari passu basis, by the same collateral securing the obligations of OpCo Borrower under the Financing Agreement.
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The Company has not elected hedge accounting treatment and, as a result, the 83 Table of Contents derivative will be remeasured to fair value quarterly with the resulting gains/losses recorded to other income/expense.
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The Company does not take a fundamental view on natural gas or other commodity pricing and seeks commercially available means to reduce commodity exposure. ​ There are currently three projects with fuel sourcing risk, which are the Toyota project, which requires procurement of RNG, and our Derby, CT 14.0 MW and 2.8 MW projects, both of which require natural gas for which there is no pass-through mechanism.
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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 projects in Derby, CT. The Company will look to extend the duration of these contracts should market and credit conditions allow.
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The Company recorded a derivative gain during the year ended October 31, 2023 of $4.1 million 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. ​ 84 Table of Contents

Other FCEL 10-K year-over-year comparisons