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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission file number: 1-14204

Graphic

FUELCELL ENERGY, INC.

(Exact name of registrant as specified in its charter)

Delaware

06-0853042

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3 Great Pasture Road

Danbury, Connecticut

06810

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (203825-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

FCEL

The Nasdaq Stock Market LLC

(Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  

Number of shares of common stock, par value $0.0001 per share, outstanding as of September 2, 2022:  405,562,988

FUELCELL ENERGY, INC.

FORM 10-Q

Table of Contents

    

    

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

3

Consolidated Balance Sheets as of July 31, 2022 and October 31, 2021.

3

Consolidated Statements of Operations and Comprehensive Loss for the three months ended July 31, 2022 and 2021.

4

Consolidated Statements of Operations and Comprehensive Loss for the nine months ended July 31, 2022 and 2021.

5

Consolidated Statements of Changes in Equity for the three and nine months ended July 31, 2022.

6

Consolidated Statements of Changes in Equity for the three and nine months ended July 31, 2021.

7

Consolidated Statements of Cash Flows for the nine months ended July 31, 2022 and 2021.

8

Notes to Consolidated Financial Statements.

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

31

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

55

Item 4.

Controls and Procedures.

56

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

57

Item 1A.

Risk Factors.

61

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

61

Item 3.

Defaults Upon Senior Securities.

61

Item 4.

Mine Safety Disclosures.

61

Item 5.

Other Information.

61

Item 6.

Exhibits.

62

Signatures

64

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FUELCELL ENERGY, INC.

Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except share and per share amounts)

July 31,

October 31,

    

2022

    

2021

ASSETS

Current assets:

Cash and cash equivalents, unrestricted

$

456,479

$

432,213

Restricted cash and cash equivalents - short-term

5,627

11,268

Accounts receivable, net

12,101

14,730

Unbilled receivables

10,461

8,924

Inventories

80,606

67,074

Other current assets

14,259

9,177

Total current assets

579,533

543,386

Restricted cash and cash equivalents - long-term

17,532

16,731

Inventories - long-term

4,586

4,586

Project assets, net

246,018

223,277

Property, plant and equipment, net

52,868

39,416

Operating lease right-of-use assets, net

7,401

8,109

Goodwill

4,075

4,075

Intangible assets, net

17,697

18,670

Other assets

14,712

16,998

Total assets (1)

$

944,422

$

875,248

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

9,810

$

10,085

Current portion of operating lease liabilities

798

1,032

Accounts payable

26,978

19,267

Accrued liabilities

22,535

16,099

Deferred revenue

20,393

6,287

Total current liabilities

80,514

52,770

Long-term deferred revenue and customer deposits

14,342

30,427

Long-term operating lease liabilities

7,619

8,093

Long-term debt and other liabilities

82,280

78,633

Total liabilities (1)

184,755

169,923

Redeemable Series B preferred stock (liquidation preference of $64,020 as of
July 31, 2022 and October 31, 2021)

59,857

59,857

Redeemable noncontrolling interest

3,030

3,030

Total equity:

Stockholders’ equity:

Common stock ($0.0001 par value); 500,000,000 shares authorized as of July 31, 2022 and October 31, 2021; 394,430,969 and 366,618,693 shares issued and outstanding as of July 31, 2022 and October 31, 2021, respectively

39

37

Additional paid-in capital

2,056,626

1,908,471

Accumulated deficit

(1,365,506)

(1,265,251)

Accumulated other comprehensive loss

(1,145)

(819)

Treasury stock, Common, at cost (119,258 and 73,430 shares as of July 31, 2022
and October 31, 2021, respectively)

(786)

(586)

Deferred compensation

786

586

Total stockholder's equity

690,014

642,438

Noncontrolling interest

6,766

Total equity

696,780

642,438

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$

944,422

$

875,248

(1)The consolidated assets as of July 31, 2022 and October 31, 2021 include $105,641 and $54,375, respectively, of assets of the variable interest entity (“VIE”) that can only be used to settle obligations of the VIE.  These assets include cash of $2,842, unbilled accounts receivable of $1,067, operating lease right of use assets of $1,186 and project assets of $100,546 as of July 31, 2022, and cash of $1,364 and project assets of $53,012 as of October 31, 2021, respectively. The consolidated liabilities as of July 31, 2022 include short-term operating lease liabilities of $157, accrued liabilities of $500 and long-term operating lease liability of $1,478. The consolidated liabilities as of October 31, 2021 were $0.

See accompanying notes to consolidated financial statements.

3

FUELCELL ENERGY, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Three Months Ended July 31,

    

2022

    

2021

Revenues:

Product

$

18,000

$

Service

9,049

14,344

Generation

10,877

6,230

Advanced Technologies

5,178

6,246

Total revenues

43,104

26,820

Costs of revenues:

Product

17,919

1,903

Service

7,718

13,026

Generation

18,136

6,728

Advanced Technologies

3,511

4,063

Total costs of revenues

47,284

25,720

Gross (loss) profit

(4,180)

1,100

Operating expenses:

Administrative and selling expenses

14,158

8,662

Research and development expenses

9,659

3,023

Total costs and expenses

23,817

11,685

Loss from operations

(27,997)

(10,585)

Interest expense

(1,622)

(1,554)

Other income, net

1,136

149

Loss before provision for income taxes

(28,483)

(11,990)

Provision for income taxes

(494)

(7)

Net loss

(28,977)

(11,997)

Net income attributable to noncontrolling interest

437

Net loss attributable to FuelCell Energy, Inc.

(29,414)

(11,997)

Series B preferred stock dividends

(800)

(800)

Net loss attributable to common stockholders

$

(30,214)

$

(12,797)

Loss per share basic and diluted:

Net loss per share attributable to common stockholders

$

(0.08)

$

(0.04)

Basic and diluted weighted average shares outstanding

387,465,758

337,291,562

Three Months Ended July 31,

    

2022

    

2021

Net loss

$

(28,977)

$

(11,997)

Other comprehensive loss:

Foreign currency translation adjustments

(86)

(6)

Total comprehensive loss

$

(29,063)

$

(12,003)

Comprehensive income attributable to noncontrolling interest

437

Comprehensive loss attributable to FuelCell Energy, Inc.

$

(29,500)

$

(12,003)

See accompanying notes to consolidated financial statements.

4

FUELCELL ENERGY, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Nine Months Ended July 31,

    

2022

    

2021

Revenues:

Product

$

36,000

$

Service

13,855

19,917

Generation

27,423

17,306

Advanced Technologies

14,005

18,427

Total revenues

91,283

55,650

Costs of revenues:

Product

39,159

6,190

Service

13,123

20,992

Generation

42,978

23,265

Advanced Technologies

10,408

12,477

Total costs of revenues

105,668

62,924

Gross loss

(14,385)

(7,274)

Operating expenses:

Administrative and selling expenses

64,357

27,264

Research and development expenses

22,316

7,810

Total costs and expenses

86,673

35,074

Loss from operations

(101,058)

(42,348)

Interest expense

(4,757)

(5,662)

Loss on extinguishment of debt

(11,156)

Loss on extinguishment of Series 1 preferred share obligation

(934)

Change in fair value of common stock warrant liability

(15,974)

Other income (expense), net

1,086

(797)

Loss before provision for income taxes

(104,729)

(76,871)

Provision for income taxes

(494)

(3)

Net loss

(105,223)

(76,874)

Net loss attributable to noncontrolling interest

(4,968)

Net loss attributable to FuelCell Energy, Inc.

(100,255)

(76,874)

Series B preferred stock dividends

(2,400)

(2,400)

Net loss attributable to common stockholders

$

(102,655)

$

(79,274)

Loss per share basic and diluted:

Net loss per share attributable to common stockholders

$

(0.27)

$

(0.24)

Basic and diluted weighted average shares outstanding

375,638,293

323,983,465

Nine Months Ended July 31,

    

2022

    

2021

Net loss

$

(105,223)

$

(76,874)

Other comprehensive loss:

Foreign currency translation adjustments

(326)

(8)

Total comprehensive loss

$

(105,549)

$

(76,882)

Comprehensive loss attributable to noncontrolling interest

(4,968)

Comprehensive loss attributable to FuelCell Energy, Inc.

$

(100,581)

$

(76,882)

See accompanying notes to consolidated financial statements.

5

FUELCELL ENERGY, INC.

Consolidated Statements of Changes in Equity

(Unaudited)

(Amounts in thousands, except share amounts)

Common Stock

    

Shares

    

Amount

    

Additional
Paid-in
Capital

    

Accumulated
Deficit

    

Accumulated
Other
Comprehensive
Loss

    

Treasury
Stock

    

Deferred
Compensation

Total Stockholder's Equity

Noncontrolling Interests

    

Total
Equity

Balance, October 31, 2021

366,618,693

$

37

$

1,908,471

$

(1,265,251)

$

(819)

$

(586)

$

586

$

642,438

$

$

642,438

Common stock issued, non-employee compensation

20,673

100

100

100

Stock issued under benefit plans, net of taxes paid upon vesting of restricted stock awards

60,052

(260)

(260)

(260)

Share based compensation

1,470

1,470

1,470

Preferred dividends — Series B

(800)

(800)

(800)

Effect of foreign currency translation

(91)

(91)

(91)

Adjustment for deferred compensation

(13,232)

(64)

64

Net loss attributable to noncontrolling interest

5,496

5,496

(5,496)

Net Loss

(46,120)

(46,120)

(46,120)

Balance, January 31, 2022

366,686,186

$

37

$

1,908,981

$

(1,305,875)

$

(910)

$

(650)

$

650

$

602,233

$

(5,496)

$

596,737

Sale of common stock, net of fees

19,896,904

2

118,262

118,264

118,264

Common stock issued, non-employee compensation

13,002

68

68

68

Stock issued under benefit plans, net of taxes paid upon vesting of restricted stock awards

25,779

Share based compensation

1,695

1,695

1,695

Preferred dividends — Series B

(800)

(800)

(800)

Effect of foreign currency translation

(149)

(149)

(149)

Adjustment for deferred compensation

(13,002)

(68)

68

Reclassification of noncontrolling interest

12,419

12,419

Return of capital to noncontrolling interest

(496)

(496)

Distribution to noncontrolling interest

(95)

(95)

Net income attributable to noncontrolling interest

(91)

(91)

91

Net Loss

(30,126)

(30,126)

(30,126)

Balance, April 30, 2022

386,608,869

$

39

$

2,028,206

$

(1,336,092)

$

(1,059)

$

(718)

$

718

$

691,094

$

6,423

$

697,517

Sale of common stock, net of fees

7,814,115

27,173

27,173

27,173

Common stock issued, non-employee compensation

19,594

68

68

68

Stock issued under benefit plans, net of taxes paid upon vesting of restricted stock awards

7,985

18

18

18

Share based compensation

1,961

1,961

1,961

Preferred dividends — Series B

(800)

(800)

(800)

Effect of foreign currency translation

(86)

(86)

(86)

Adjustment for deferred compensation

(19,594)

(68)

68

Distribution to noncontrolling interest

(94)

(94)

Net income attributable to noncontrolling interest

(437)

(437)

437

Net Loss

(28,977)

(28,977)

(28,977)

Balance, July 31, 2022

394,430,969

$

39

$

2,056,626

$

(1,365,506)

$

(1,145)

$

(786)

$

786

$

690,014

$

6,766

$

696,780

See accompanying notes to consolidated financial statements.

6

FUELCELL ENERGY, INC.

Consolidated Statements of Changes in Equity

(Unaudited)

(Amounts in thousands, except share amounts)

Common Stock

    

Shares

    

Amount

    

Additional
Paid-in
Capital

    

Accumulated
Deficit

    

Accumulated
Other
Comprehensive
(Loss) Income

    

Treasury
Stock

    

Deferred
Compensation

Total Equity

Balance, October 31, 2020

294,706,758

$

29

$

1,359,454

$

(1,164,196)

$

(739)

$

(432)

$

432

$

194,548

Sale of common stock, net of fees

25,000,000

3

156,363

156,366

Orion warrant exercises

2,700,000

21,824

21,824

Common stock issued, non-employee compensation

2,734

45

45

Stock issued under benefit plans, net of taxes paid upon vesting of restricted stock awards

4,521

8

8

Share based compensation

1,417

1,417

Preferred dividends — Series B

(800)