Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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.

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 ☒

As of April ~~28, 2017,~~30, 2019, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was ~~$54,054,838~~$42,440,268 based on the closing sale price of ~~$1.15~~$3.12 as reported on the NASDAQ Global Market.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

This Annual Report on Form 10-K contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Form 10-K, including statements regarding the Company’s future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “believes,” “predicts,” “should,” “will,” “could,” “would,” “may,” “forecast,” and similar expressions and variations of such words are intended to identify forward-looking statements. Such statements relate to, among other things, the following:

The forward-looking statements contained in this report are subject to risks and uncertainties, known and unknown, that could cause actual results to differ materially from those forward-looking statements, including, without limitation, the risks contained under Item 1A - Risk Factors of this report and the following:

The forward-looking statements contained herein speak only as of the date of this ~~report.~~report and readers are cautioned not to place undue reliance on these forward-looking statements. Except for ongoing obligations to disclose material information under the federal securities laws, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.

Information contained in this report concerning the electric power supply industry and the distributed generation market, our general expectations concerning this industry and this market, and our position within this industry are based on market research, industry publications, other publicly available information and assumptions made by us based on this information and our knowledge of this industry and this market, which we believe to be reasonable. Although we believe that the market research, industry publications and other publicly available information, including the sources that we cite in this report, are reliable, they have not been independently verified by us and, accordingly, we cannot assure you that such information is accurate in all material respects. Our estimates, particularly as they relate to our general expectations concerning the electric power supply industry and the distributed generation market, involve risks and uncertainties and are subject to change based on various factors, including those discussed under Item 1A - Risk Factors of this report.

As used in this report, all degrees refer to Fahrenheit (“F”); kilowatt (“kW”) and megawatt (“MW”) numbers designate nominal or rated capacity of the referenced power plant; “efficiency” or “electrical efficiency” means the ratio of the electrical energy generated in the conversion of a fuel to the total energy contained in the fuel (lower heating value, the standard for power plant generation, assumes the water in the product is in vapor form; as opposed to higher heating value, which assumes the water in the product is in liquid form, net of parasitic load); kW means 1,000 watts; MW means 1,000,000 watts; “kilowatt hour” (“kWh”) is equal to 1kW of power supplied to or taken from an electric circuit steadily for one hour; and one British Thermal Unit (“Btu”) is equal to the amount of heat necessary to raise one pound of pure water from 59^oF to 60^oF at a specified constant pressure.

Advanced Technologies - Advanced Technologies projects involve the development of new products or applications based on existing carbonate ~~technology~~or solid oxide technologies or new electrochemical technologies. Examples are carbon capture, distributed hydrogen, solid oxide fuel cells and solid oxide electrolysis cell technologies. Advanced Technologies projects are typically externally funded by government or private sources and executed by our Advanced Technologies Group.

Availability - A measure of the amount of time a system is available to operate, as a fraction of total calendar time. For power generation equipment, an industry standard (IEEE (The Institute of Electrical and Electronics Engineers) 762, “Definitions for Use in Reporting Electric Generating Unit Reliability, Availability and Productivity”) is used to compute availability. “Availability percentage” is calculated as total period hours since Commercial Operations Date less hours not producing electricity due to planned and unplanned maintenance divided by total period hours. Grid disturbances, force majeure events and site specific issues such as a lack of available fuel supply or customer infrastructure repair do not penalize the calculation of availability according to this standard.

Carbonate Fuel Cell (“CFC”) - Carbonate fuel cells, such as the fuel cell power plants produced and sold by FuelCell Energy, are high-temperature fuel cells that use an electrolyte composed of a carbonate salt mixture suspended in a porous, chemically inert ceramic-based matrix. CFCs operate at high temperatures, enabling the use of a nickel-based catalyst, a lower cost alternative to precious metal catalysts used in some other fuel cell technologies.

Combined Heat & Power (“CHP”) - A power plant configuration or mode of operation featuring simultaneous on-site generation from the same unit of fuel of both electricity and heat with the heat used to produce steam, hot water or heated air for both heating and cooling applications.

Commercial Operations Date (“COD”) - The date that testing and commissioning of a fuel cell project is completed and the fuel cell power plant is operational with power being generated and sold to the end-user.

Distributed Generation - Electric power that is generated where it is needed (distributed throughout the power grid) rather than from a central location. Centrally generated power requires extensive transmission networks that require maintenance and experience efficiency losses during transmission while distributed generation does not. Distributed generation is typically classified as small to mid-size power plants, typically generating 75 MW or less. Central generation is typically classified as large power plants generating hundreds or even thousands of MW.

~~Micro-grids~~Microgrids - ~~Micro-grids~~Microgrids are localized electric grids that can disconnect from the traditional electric grid to operate autonomously and strengthen grid resiliency. ~~Micro-grids~~Microgrids can be composed only of SureSource power plants due to their continual power output or combine a variety of power generation types such as fuel cells and solar arrays.

Nitrogen Oxides (“NOx”) - Generic term for a group of highly reactive gases, all of which contain nitrogen and oxygen in varying amounts. Many of the NOx are colorless and odorless; however, they are a major precursor to smog production and acid rain. One common pollutant, Nitrogen Dioxide, along with particles in the air, can often be seen as a reddish-brown layer over ~~many~~an urban ~~areas.~~area. NOx form when fuel is burned at high temperatures, as in a combustion process. The primary manmade sources of NOx are motor vehicles, traditional ~~fossil-fuel~~fossil fuel fired electric utility generation, and other industrial, commercial and residential sources that burn fuels.

Particulate Matter(“PM”) - Solid or liquid particles emitted into the air that are generally caused by the combustion of materials or dust generating activities. Particulate matter caused by combustion can be harmful to humans as the fine particles of chemicals, acids and metals may get lodged in lung tissue.

Power Purchase Agreement (“PPA”) - A Power Purchase Agreement is a contract that enables a power user to purchase energy under a long-term contract where the user agrees to pay a predetermined rate for the kilowatt-hours delivered from a power generating asset while avoiding the need to own the equipment and pay the upfront capital cost. The PPA rate is typically fixed (with an escalation clause tied to a consumer price index or similar index), or pegged to a floating index that is on par with or below the current electricity rate being charged by the local utility ~~company~~company. A PPA is typically for a term of 10 to 20 years.

Renewable Biogas or Biogas - Renewable ~~biogas~~Biogas is fuel produced by biological breakdown of organic material. Biogas is commonly produced in biomass digesters employing bacteria in a heated and controlled oxygen environment. These digesters are typically used at wastewater treatment facilities or food processors to break down solid waste and the biogas produced is a byproduct of the waste digestion. Biogas can be used as a renewable fuel source for SureSource fuel cell plants located on site where the biogas is produced with gas cleanup, or it can be processed further to meet pipeline fuel standards and injected into a gas pipeline network, which is termed Directed Biogas. Directed Biogas requires additional processing to increase the Btu content of the gas, which increases cost and consumes power. Use of Biogas at the point of production (on-site) is more efficient and more economical.

Solid Oxide Electrolysis Cell (“SOEC”) - Solid Oxide Electrolysis Cells are electrochemical cells with the same cell and stack structure as Solid Oxide Fuel Cells, but are operated in reverse – instead of producing power from fuel and oxygen, SOEC cells produce hydrogen and oxygen from steam when supplied with power. ~~The Solid Oxide Fuel Cell platform can be operated in fuel cell mode (producing power from fuel) or electrolysis mode (producing hydrogen from power) and can alternate between the two.~~

Solid Oxide Fuel Cell (“SOFC”) - Solid Oxide Fuel Cells are electrochemical cells with a non-porous ceramic material as the electrolyte. SOFCs operate at high temperatures (slightly higher than ~~carbonate)~~carbonate fuel cells) eliminating the need for costly precious-metal catalysts, thereby reducing cost. Like carbonate fuel cells, the high operating temperature enables internal reforming of the hydrogen rich fuel source. The Solid Oxide Fuel Cell platform can be operated in fuel cell mode (producing power from fuel) or electrolysis mode (producing hydrogen from power) and can alternate between the two.

Sulfur Oxide (“SOx”) - Sulfur oxide refers to any one of the following: sulfur monoxide, sulfur dioxide (“SO₂”) and sulfur trioxide. SO₂ is a byproduct of various industrial processes. Coal and petroleum contain sulfur compounds, and generate SO₂ when burned. SOx compounds are particulate and acid rain precursors.

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

With more than 9.5 million megawatt hours of clean electricity produced, FuelCell Energy is now a global leader in delivering environmentally-responsible distributed baseload power solutions through our proprietary, molten-carbonate fuel cell technology. Today, we develop turn-key distributed power generation solutions and operate and provide comprehensive service for the life of the power plant. We are working to expand the proprietary technologies that we have developed over the past five decades into new products, markets and geographies.

restructuring our business to realize annualized operating savings of approximately $15 million, (d) making progress in constructing certain projects in our backlog, including the Connecticut Municipal Electric Energy Cooperative (“CMEEC”) project at the U.S. Navy base in Groton, Connecticut and the commissioning and startup of the 2.8 MW Tulare BioMAT project in California, (e) relaunching our sub-megawatt product in Europe, (f) executing a strategic relationship with E.On Business Solutions, an affiliate of one of the largest utilities in the world, to market and distribute our products beyond the two FuelCell operating plants E.On already owns, (g) extending the maturity of the Class A Cumulative Redeemable Exchangeable Preferred Shares issued by FCE FuelCell Energy Ltd. (the “Series 1 Preferred Shares”) by one year, and (h) concluding our engagement with Huron Consulting Services, LLC (“Huron Consulting”) after successful restructuring and payoff of our prior senior secured credit facility.

We will use this new focus coming out of our restructuring to advance our core goals of:

In order to achieve our core goals, we will focus in 2020 on implementing our new “Powerhouse” business strategy to strengthen our business, maximize operational efficiencies and position us for future growth. The “Powerhouse” business strategy is focused on three fundamental pillars – Transform, Strengthen, Grow – which are described in further detail below.

Our mission and purpose remains to utilize our proprietary, state-of-the-art fuel cell power plants to reduce the global environmental footprint of baseload power generation by providing environmentally responsible solutions for reliable electrical power, hot water, steam, chilling, hydrogen, microgrid applications, and carbon capture and, in so doing, drive demand for our products and services, thus realizing positive stockholder returns.

Our fuel cell solution is a clean, efficient alternative to traditional combustion-based power generation and is complementary to an energy mix consisting of intermittent sources of energy, such as solar and wind turbines. Our systems answer the ~~clean~~needs of diverse customers across several markets, including utility companies, municipalities, universities, hospitals, government entities and ~~affordable supply, recovery~~a variety of industrial and ~~storage of energy.~~ commercial enterprises. We ~~serve utilities and industry and municipal power users on three continents with megawatt-class scalable~~provide solutions ~~that include~~for various applications, including utility-scale ~~and~~distributed generation, on-site power generation and combined heat and power, with the differentiating ability to do so utilizing multiple sources of fuel including natural gas, Renewable Biogas (i.e., landfill gas, anaerobic digester gas), propane and various blends of such fuels. Our multi-fuel source capability is significantly enhanced by our proprietary gas-clean-up skid.

Our core fuel cell products offer clean, highly efficient and affordable power generation for customers, including the sub-megawatt SureSource 250^TM and SureSource 400^TM in Europe, and the 1.4 MW SureSource 1500^TM, the 2.8 MW SureSource 3000^TM, and the 3.7 MW SureSource 4000^TM globally. The plants are scalable for multi-megawatt utility applications, microgrid applications, distributed hydrogen, or on-site CHP generation for a broad range of applications.

The global SureSource product line is uniformly based on the same carbonate fuel cell technology. Using a standard design globally enables supply chain volume-based cost reduction, optimal resource utilization and long-life product enhancements. Our power plants utilize a variety of available fuels to produce electricity electrochemically, in a process that is highly efficient, quiet, and produces virtually none of the particulate pollutants associated with traditional combustion-based power generation solutions. 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. When configured for CHP, our system efficiencies can potentially reach up to 90%, depending on the application. When configured for distributed hydrogen our plants produce hydrogen in addition to power, with an 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.

Our proprietary carbonate fuel cell technology generates electricity directly from a fuel, such as natural gas or Renewable Biogas, by reforming the fuel inside the fuel cell to produce hydrogen. This internal, proprietary “one-step” reforming process results in a simpler, more efficient, and cost-effective energy conversion system compared with external reforming fuel cells. Additionally, natural gas has an established infrastructure and is readily available in our existing and target markets compared to some types of fuel cells that can only operate on high purity hydrogen, and Biogas is rapidly growing in production around the world. Our products are fuel flexible, and mainly utilize clean natural gas and Renewable Biogas generated by the customer on-site or directed Biogas generated at a distant location and transported via the existing common carrier gas pipeline networks. The unique chemistry of our Carbonate Fuel Cells allows them to directly use low Btu on-site Biogas with no reduction in output or efficiency compared to

operation on natural gas. We have developed proprietary Biogas cleanup and contaminant monitoring equipment which, combined with the inherent suitability of the Carbonate Fuel Cell chemistry, gives us an advantage in on-site Biogas applications. Our SureSource 1500 and SureSource 3000 power plants are the only systems certified to California Air Resource Board (“CARB”) emissions standards under the Distributed Generation Certification Program for operation with on-site Biogas. In addition, we have demonstrated operation of our carbonate fuel cell technology with other fuel sources including coal syngas and propane.

Our fuel cells operate at approximately 1,100° F. A key advantage of high temperature fuel cells is that they do not require the use of precious metal electrodes required by lower temperature fuel cells, such as proton-exchange membrane (“PEM”) fuel cells. As a result, we are able to use less expensive and readily available industrial metals, primarily nickel and stainless steel, as catalysts for our fuel cell components. Another key advantage of our fuel cell design is that they are easily sited with a relatively small footprint given the amount of power produced. There is minimal noise produced by the mechanical balance of plant (“BOP”) and a clean emissions profile, making our fuel cells ideally suited for urban and in building suburban applications at or near the point of energy consumption.

We market different configurations and applications of our SureSource plants to meet specific market needs, including:

Our Advanced Technologies programs, including our carbon capture, local hydrogen production and solid oxide fuel cells and electrolysis for energy storage represent future market, product and revenue opportunities for the Company beyond our current product line. We undertake both privately-funded and public research and development to develop these opportunities, reduce costs, and expand our technology portfolio.

Our multi-featured power plant platforms can be configured to provide a number of value streams, including clean electricity, high quality usable heat, and hydrogen suitable for vehicle fueling, industrial purposes or power generation, and to concentrate CO₂ from coal, biomass and natural gas fired power plants and industrial applications.

We have historically worked on technology development with various U.S. government departments and agencies, including the Department of Energy (“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”). Government funding, principally from the DOE, provided 6%, 8% and 9% of our revenue for the fiscal years ended October 31, 2019, 2018, and 2017, respectively.

Our Advanced Technologies programs are currently focused on commercializing solutions within three strategic areas:

Carbon Capture – Power generation and industrial applications are the source of two-thirds of the world’s carbon emissions. Coal and natural gas are abundant, low-cost resources that are widely used to generate electricity in developed and developing countries, but burning these fuels, as well as burning biomass, results in the emission of criteria pollutants and CO₂. Cost effective and efficient carbon capture from power generation and industrial applications globally represents a large market because it could enable clean use of all available fuels. The SureSource Capture^TM system separates and concentrates CO₂ from the flue gases of natural gas, biomass or coal-fired power plants or industrial facilities as a side reaction that extracts and purifies the CO₂ in the flue gas during the power generation process and destroys approximately 70% of NOx emissions. The production of additional power during the capture process, as opposed to consuming power, differentiates the SureSource Capture system from all other forms of carbon capture. This could make the SureSource Capture system more cost effective than other systems which are being considered for carbon capture. SureSource Capture systems can be implemented in increments, managing capital outlay to match decarbonization objectives and regulatory requirements. Since our solution generates a return on capital resulting from the fuel cell's production of electricity rather than an increase in operating expense required by other carbon capture technologies, it can extend the life of existing power plants. We have a joint development agreement with EMRE to develop and commercialize this application of our core technology. See additional discussion concerning our relationship with EMRE under the section below entitled “License Agreements and Royalty Income”. We are also working on a carbon capture project with Drax Power Station, the largest single-site renewable power generator in the United Kingdom.

Distributed Hydrogen Production, Compression, and Recovery - On-site or distributed hydrogen generation, produced cleanly, represents an attractive and expansive market. Our high temperature fuel cells generate electricity directly from a fuel by reforming the fuel inside the fuel cell to supply hydrogen for the electrical generation process. We have developed a process by which gas separation technology can be added to our core fuel cell to capture hydrogen that is not used by the electrical generation process, and we refer to this configuration as SureSource Hydrogen. The SureSource Hydrogen product has the potential to be a compelling solution for industrial users of hydrogen and in transportation fueling applications. The 2.3 MW SureSource Hydrogen plant has a hydrogen output of approximately 1,200 kg per day, in addition to the electricity, thermal energy and ~~industry,~~water generated by the fuel cell. Hydrogen is typically made from natural gas in large central steam methane reforming (“SMR”) plants. The conventional reforming process involves burning fossil fuel to produce steam and to heat a fuel/steam mixture to a high temperature, which is then passed over a catalyst that converts the methane/water mixture to carbon dioxide and hydrogen. The need to burn fossil fuel to provide thermal energy produces additional carbon dioxide criteria pollutant emissions, and SMRs are significant water consumers. A similar, but environmentally sustainable, process happens in SureSource internal reforming: methane (from natural gas or Biogas) reacts with water to produce hydrogen, but, in the internal reforming process, the water and the heat are byproducts of the fuel cell reaction. There is no need to burn fuel to supply heat, and there is no need to supply water. In fact, a SureSource Hydrogen plant is a net water producer, not a water consumer. When operated on Biogas, SureSource Hydrogen systems produce renewable hydrogen, but, even when fueled with natural gas, they produce hydrogen with a lower carbon impact than conventional SMR because of the use of internal heat instead of burning fuel.

SOFC/SOEC and Energy Storage – We are developing a solution for long duration energy storage using our proprietary solid oxide technology. Our solid oxide stacks are capable of alternating between electrolysis and power generation mode. Instead of producing power from fuel and air, a solid oxide fuel cell stack in electrolysis mode splits water into hydrogen and oxygen using supplied electricity. A storage system based on SOFC/SOEC technology will start with stored water, which will be converted to hydrogen during charging by electrolysis in the solid oxide stacks. The hydrogen is stored as compressed gas in cylinders or underground, creating the ability to produce a virtually limitless supply. When discharge power is needed, the stored hydrogen is sent back to the solid oxide stacks, which react it with air to produce power and to regenerate the water, which is stored for the next cycle.

The key aspect of this approach is that the reactant (water) is inexpensive and plentiful. Long duration storage can be achieved by adding water and hydrogen storage capacity, without the need to add excessive amounts of conventional battery reactants (e.g. Lithium, Cobalt, etc.), which have supply constraints for broad adoption and which present disposal challenges. Long duration energy storage is going to be required at large scale during time periods ranging from hourly to seasonal in order to manage high penetration of intermittent renewable resources, and this

water/hydrogen based approach of our SOFC/SOEC technology has the potential to be the key enabler of long duration storage.

SOFC power plant design and manufacturing is complementary to our carbonate-based megawatt-scale product line and affords us the opportunity to leverage our field operating history, our existing expertise in power plant design, fuel processing and high volume manufacturing capabilities, and our existing installation and service infrastructure. Additionally, the target market for storage applications is electric utilities, which is a market in which we are already active.

We perform SOFC/SOEC research and development at our Danbury, Connecticut headquarters, as well as at our dedicated SOFC/SOEC facility in Calgary, Alberta, Canada. We are working under a variety of awards from the DOE for development and commercialization of both SOFC and SOEC, and, during fiscal year 2019, we advanced our solid oxide power generation, electrolysis and energy ~~storage. With more than 7.0 million megawatt hours of ultra-clean~~storage applications by executing on our existing DOE contracts. Our solid oxide development activities are focused on three applications: power ~~produced, FuelCell Energy~~generation, electrolysis, and energy storage (which is a ~~global leader~~combination of the first two). During fiscal year 2019, we conducted our first prototype field test of a 250kW natural gas fueled SOFC power plant at the Clearway Energy Center in ~~designing, manufacturing, installing, operating~~downtown Pittsburgh, Pennsylvania. We are currently fabricating an advanced electrolysis system for testing in our Danbury, Connecticut headquarters, and ~~maintaining environmentally responsible~~we were recently awarded funding from the DOE to convert the electrolysis system to a reversible storage facility after the electrolysis testing is complete in late 2020. We believe that energy storage based on reversible solid oxide stacks can be a game changer for long duration energy storage.

We believe there are significant market opportunities for distributed hydrogen production, carbon capture, solid oxide fuel cell solutions and energy storage that represent potential future revenue opportunities for the Company. The projects described above allow us to leverage third-party resources and funding to accelerate the commercialization and realize the market potential of each of these solutions and virtually eliminate the need to rely on and use rare earth minerals.

Fuel cells are non-combustion devices that directly convert chemical energy (fuel) into electricity, heat and water. Because fuel cells generate power ~~solutions.~~

~~We provide comprehensive turn-key~~electrochemically rather than by combusting (burning) fuels, they are more efficient in extracting energy from fuels and produce less CO₂ and only trace levels of pollutants compared to combustion-type power generation ~~solutions~~or traditional power sources used to firm-up intermittent power sources, such as wind and solar. The following table illustrates the favorable emission profile of our ~~customers,~~SureSource power plants:

The high efficiency of our products results in significantly less CO₂ per unit of power production compared to the average U.S. fossil fuel power plant, and the carbon emissions are reduced even further when configured for CHP applications or biofuels. When our power plants are operating on Renewable Biogas, government agencies and regulatory bodies generally classify them as carbon neutral due to the renewable nature of the fuel source. The low CO₂ emissions and low criteria pollutants from SureSource power plants have a significant impact on sustainability and air quality because they avoid emissions 24 hours a day. The high capacity factor of baseload SureSource systems maximizes the impact of their environmental benefits. The following table shows how the low emissions combined with high capacity factor result in emissions avoidance comparable to or better than intermittent renewable power sources. While wind and solar renewable power sources may completely avoid these emissions while operating, given their low capacity factors, they avoid fewer emissions than fuel cells only because they operate for fewer hours per day. When wind and solar renewable power sources are not operating, higher emission resources are required to operate, thus diluting the benefits. Additionally, all renewable power sources have life cycle emissions associated with manufacture and disposal.

Our business model is based on multiple revenue streams, including power plant and component sales; recurring service revenue, mainly through long-term service agreements; recurring electricity, capacity and renewable attribute sales under PPAs and tariffs for projects we retain in our generation portfolio; and revenue from public and private industry research contracts under Advanced Technologies.

We are a complete solutions provider, controlling the design, manufacturing, sales, installation, operations and maintenance of our patented fuel cell technology under ~~multi-year~~long-term power purchase and service agreements. When principally utilizing long-term PPAs, the end-user of the power or utility hosts the installation and only pays for power as it is delivered, avoiding up-front capital investment. We also develop projects and ~~also~~ sell ~~direct~~equipment directly to customers, providing ~~either~~ a complete solution of ~~developing,~~engineering, installing and servicing the fuel cell power plant ~~or selling~~under an engineering, procurement and construction (“EPC”) agreement and a long-term maintenance and service agreement. In all cases, FuelCell Energy maintains the ~~power plant equipment only. For projects that we develop,~~long-term recurring service obligation and associated revenues running conterminous with the ~~end user~~life of the power typically enters into a PPA and we either identify a project investor to purchase the power plant and assume the PPA, or we retain the project and recognize electricity revenue ratably over the term of the PPA. project.

We target large-scale power users with our megawatt-class ~~installations.~~installations globally, and currently offer sub-megawatt solutions for smaller power consumers in Europe. To provide a frame of reference, one megawatt is adequate to continually power approximately 1,000 average sized U.S. homes. Our customer base includes utility companies, municipalities, universities, hospitals, government entities and a variety of industrial and commercial enterprises. Our leading geographic ~~markets are~~market is currently the United States, and ~~South Korea. We~~we are pursuing ~~expanding~~ opportunities in other ~~countries.~~countries around the world.

Our value proposition is to enable economic value with clean and affordable fuel cell power plants that supply power where consumed. Our products can also be configured for recovery and storage applications. Our solutions are easy-to-site in populated areas as they are clean, operate quietly and without vibrations, and have only modest space requirements. Fuel cells use an electrochemical process to convert a fuel source into electricity and heat in a highly efficient process that emits virtually no pollutants as the fuel is not burned, generating power that is almost wholly absent of criteria pollutants such as NOx that causes smog, SOx that contributes to acid rain, and particulate matter that can aggravate asthma. Locating power generation near the point of use reduces reliance on the transmission grid, leading to enhanced energy security and power reliability. Utilities can minimize or even avoid the cost of transmission or other infrastructure by adopting distributed generation, which saves their customers the cost of installing and maintaining transmission and also avoids the losses associated with transmitting electricity over great distances. Our power plants provide electricity priced competitively to grid-delivered electricity in certain ~~high cost~~ regions, and our strategy is to continue to reduce costs, which we believe will lead to wider adoption.

FuelCell Energy was founded as a Connecticut corporation in 1969 as an applied research organization, providing contract research and development. The Company went public in 1992 and reincorporated in Delaware in 1999. We began selling stationary fuel cell power plants commercially in 2003. Today, we develop turn-key distributed power generation solutions, operating and providing comprehensive service for the life of the asset.

Our business model ~~is to address power generation challenges with versatile, efficient~~involves full life-cycle management of our projects and ~~economical~~ fuel cell ~~solutions. We are leveraging our common core fuel cell technology~~solutions, from design through operation and ~~products to target global markets~~maintenance, including ~~on-site~~removal and ~~utility-scale projects for~~recycling. By weight, approximately 93% of the ~~supply, recovery and storage~~entire power plant can be re-used or recycled at the end of ~~energy. We selectively utilize strategic business alliances and collaboration agreements for market development, financing and cost reductions.~~ its useful life.

Our extensive intellectual property portfolio consists of patents, trade secrets and collective experience, which acts as a foundation for expanding and maximizing our solutions portfolio. Our business model is based on multiple revenue streams, including power plant and component sales; engineering, procurement and construction (“EPC”) revenue; royalty and license revenue; recurring service revenue, including long term service agreements; recurring electricity sales under PPAs and tariffs for projects we retain in our generation portfolio; and revenue from public and private industry research contracts under Advanced Technologies.

We target vertical markets and geographic regions ~~that value clean distributed generation, are located where there are high energy costs, and are aligned with regulatory frameworks that harmonize energy, economic and environmental policies.~~ that:

Our business model ~~addresses all three of~~focuses on providing these ~~policy areas~~vertical markets and geographic regions with highly efficient and affordable distributed generation that delivers de-centralized power in a low-carbon, virtually pollutant-free manner. Geographic markets that meet these criteria and where we are already well established include ~~South Korea,~~ the ~~Northeast U.S.~~Northeastern United States and California. We have also installed and are operating plants in ~~the United Kingdom, Germany, and Switzerland, have contracts and awards to install and operate plants in New York, and are pursuing further opportunities in Western~~ Europe and ~~certain other states~~Asia, mainly South Korea, in ~~the United States as well as certain countries in Asia. We selectively develop strategic business relationships with some of the leading energy and power generation companies in our target markets~~addition to ~~facilitate demand and deploy our projects.~~North America.

~~While the~~The Company has made significant progress with reducing costs and creating markets since the commercialization of our products in 2003, with more than 255 MW of our SureSource technology currently installed and operating. We believe that we ~~face two primary challenges in growing~~can accelerate and expand the adoption of our distributed power generation solutions ~~which are~~through (1) ~~the need to~~ further ~~reduce~~reductions in the total cost of ownership, ~~and~~ (2) ~~the~~ continued education ~~and acknowledgment of~~regarding the value that our solutions ~~provide. The business model~~provide, (3) geographic and segment expansion, (4) growing demand for ~~the~~onsite generation, (5) microgrid expansion, and ~~delivery of electricity for over a century has been central generation, which is large scale power generation in distant locations away from urban areas with transmission~~(6) product expansion across biofuels, carbon capture and ~~distribution to the end users. Distributed generation enhances existing utility models and it is being embraced in an increasing number of markets to improve grid operations.~~

We work with utilities and power generators to demonstrate how our solutions complement central generation by incrementally adding clean power generation when and where needed. One example of this is a 40 megawatt fuel-cell only program by Long Island Power Authority (“LIPA”) to address load pockets or power needs in specific areas of its service territory. LIPA operates in an area with high population density, scarce and expensive land, the need for resiliency to ensure power during storms, and vocal citizens that may not welcome new transmission lines in their neighborhoods. The structure of the program reflected the unique value drivers of fuel cells to cleanly, efficiently and economically supply power where it is needed, which for LIPA is near existing electrical substations. LIPA awarded the entire 40 MW program to FuelCell Energy through a competitive bidding process after a review of more than 375 MW of proposals from multiple developers.local hydrogen.

Fuel ~~cell power plant ownership structures~~Cell Power Plant Ownership Structures

InHistorically, in the United States, ~~historically,~~ customers ~~generally~~or developers typically purchased our fuel cell power plants outright. As the size of our fuel cell projects has grown and the availability of project capital has improved, project structures in the U.S. have transitioned to predominantly PPAs. Under a PPA, the utility or end-user of the power commits to purchase power as it is produced for an

extended period of time, typically ~~10 to 20~~10-to-20 years. ~~End-users may be~~Examples of customers that have previously entered into PPAs include universities, a ~~university,~~ pharmaceutical company, ~~hospital or utility.~~hospitals and utilities. A primary advantage for the ~~end-user~~customer is that it does not need to commit its own capital toor own a power generating asset, yet it enjoys the ~~multiple~~ benefits of fuel cell power generation.

Once the PPA is executed and project financing is committed, construction of the fuel cell project can begin. At or around the ~~COD,~~Commercial Operation Date, the project may be sold to a project investor or retained by the Company. If the project is sold, revenue from the product sale is ~~recognized.~~recognized, and the Company recognizes revenue separately for the long-term maintenance and service agreement over the term of that agreement. If the project is retained, electricity, ~~sales~~capacity and/or renewable energy credits are recognized monthly over the term of the PPA. We report the financial performance of retained projects as generation revenue and income.

Our business model is continuing to evolve to meet the needs and opportunities of the market and to best situate ourselves for success. In 2016, we began to retain ownership of certain projects through sale-leasebacks and retaining the related PPAs, thus keeping them on our balance sheet instead of selling them to an end-user customer, investor, or utility. Our decision to retain certain projects is based in part on the ~~strong~~recurring, predictable cash flows these projects can offer to us, the proliferation of ~~power purchase agreements~~PPAs in the industry and the potential access to capital. Retaining PPAs affords the Company ~~with~~ the full benefit of future cash flows under the PPAs, which isare higher than if we sell the ~~projects.~~projects, although it requires more upfront capital investment and financing. As of October 31, ~~2017,~~2019, our operating portfolio of retained projects totaled ~~11.2~~26.1 MW with an additional ~~19.5~~79.5 MW under development or construction. The Company plans to continue to grow this portfolio in a balanced manner, while also selling projects to investors when ~~that~~selling presents the best ~~opportunity.~~value and opportunity for the Company’s capital or meets the customer’s desired ownership structure.

Our fuel cell projects deliver power at a rate comparable to pricing from the grid in our targeted markets. Policy programs that help to support adoption of clean distributed power generation often lead to below-grid pricing. We measure power costs by calculating the Levelized Cost of Energy (“LCOE”) over the life of the project.

We innovate, design and own our proprietary fuel cell technology. We develop and execute comprehensive fuel cell turn-key projects or sell direct. We manufacture and install the fuel cell power plants and we then operate and maintain the plants for our customers under long term service agreements, or selectively retain projects in our generation portfolio. Given this level of integration, there are multiple areas and opportunities for cost reductions. There are several primary elements to LCOE for our fuel cell projects, ~~including (1) Capital Cost, (2)~~ including:

Given the level of integration in our business model of manufacturing, installing and ~~Maintenance, (3) Fuel,~~operating fuel cell power plants, there are multiple areas and ~~(4) Cost of Capital.~~opportunities for cost reductions. We are actively managing and reducing costs in all ~~four~~three LCOE areas as follows:

An ~~additional~~important and differentiating factor that benefits fuel cells when comparing LCOE to other forms of power generation is that our solutions provide delivered electricity that minimizes or even avoids the costs of ~~transmission.~~

~~Our~~high voltage and distributed ~~generation solutions minimize or entirely avoid~~transmission. Energy can be produced right at the ~~need for transmission.~~point of use. When comparing LCOE across different forms of power generation, transmission ~~needs to~~should be ~~considered in the evaluation.~~considered. Power generation far from where the power is used requires transmission, which is a cost to ratepayers, creates risk of system outages, increases cyber attack risk, and is inefficient due to line losses of power in the transmission process. Recent events, including hurricanes along the Gulf

coast and Puerto Rico, wildfires in California, and significant snow and ice storms in the Northeastern U.S., prove that transmission systems are more vulnerable to storm-related and other interruptions than locally-generated energy.

~~We believe that our~~Recently, California was affected by the utility policy of Public Safety Power Shutoffs (“PSPS”), a preemptive effort by the utility companies to prevent wildfires from being started by electrical equipment during strong ~~business model~~ and ~~strategy, demonstrated project~~dry wind conditions. Two plants manufactured and operated by FuelCell Energy remained operational as part of their respective microgrids in areas impacted by PSPS and provided steady, reliable power to the University of California, San Diego and the Santa Rita Jail during a time when over 3 million people were generally affected by PSPS.

Producing power near the point of use also facilitates the development ~~execution, plant operating performance, and strategic relationships will support accelerated adoption~~ of ~~our~~CHP applications, since it is easier to find a user for fuel cell ~~solutions.~~waste heat in distributed applications. Using waste heat to avoid burning fuel for thermal applications reduces LCOE (by avoiding fuel cost) and avoids additional carbon emissions and criteria pollutants.

Access to clean, affordable and reliable power ~~defines modern lifestyles.~~has transformed how most of the world lives today. The ability to provide power cleanly and efficiently is taking on greater importance and urgency in many regions of the world. FuelCell Energy’s products and services are specifically designed to deliver such clean, efficient power globally.

Central generation and its associated transmission requirements and distribution grid are difficult to site, costly, prone to interruption and generally take many years to permit and build. Some types of power generation that were widely adopted in the past, such as nuclear and coal power, are no longer welcome in certain ~~regions.~~regions of the world. The cost and impact to public health and the environment of pollutants and greenhouse gas emissions impact the siting of new power generation. The attributes of SureSource power plants address these challenges by providing virtually ~~particulate emission-free~~particulate-free baseload power and, ~~heat~~where desired, thermal energy at the point of use in a ~~highly efficient~~highly-efficient process that is affordable to consumers.

Our solutions are installed on both sides of the electric meter, meaning that we serve on-site markets supplying power directly to the end user, as well as utility-scale projects that supply the power to the electric grid. We target ~~seven~~ distinct markets, including:

The ~~Utilities~~utilities and ~~Independent Power Producers segment~~independent power producers market is our largest vertical market with customers that include utilities on the East and West ~~coast~~coasts of the United States, such as ~~Dominion (NYSE: D), one of the largest utilities in the United States:~~ Avangrid Holdings, ~~(NYSE: AGR),~~ Long Island Power & Light, Southern California Edison and NRG Energy (NYSE: NRG), one of the largest Independent Power Producers (“IPP”) in the United States. Our carbon capture demonstration installation will be located at a power plant owned by a subsidiary of Southern Company (NYSE: SO).Pacific Gas & Electric. In Europe, utility customers include E.ON Connecting Energies, ~~(DAX: EOAN),~~ one of the largest utilities in the world, and Switzerland-based ewz. ~~The greatest number of installed fuel cell plants is in~~In South Korea, ~~primarily supplying that nation's electric grid, with the fuel cells' heat typically used in district heating systems~~we are contracted to ~~heat~~operate and ~~cool nearby facilities. Our technology licensee in South~~maintain a 20 MW plant for Korea ~~is POSCO Energy Co., Ltd.~~Southern Power Company (“~~POSCO Energy”~~KOSPO”)~~, a subsidiary of South Korean-based POSCO (NYSE: PKX), one of the world's largest steel manufacturers.~~.

Our SureSource power plants 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. These institutions desire efficient, ~~ultra-clean~~clean and continuous power to reduce operating expenses, reduce greenhouse gas emissions and avoid pollutant emissions to meet their sustainability goals, while ~~achieving secure~~boosting resiliency and ~~reliable on-site power. Combined heat and power fuel cell~~limiting dependence on the distribution grid. CHP applications further support economic and sustainability initiatives by minimizing or avoiding the use of ~~combustion based~~combustion-based boilers for heat.

Our ~~products~~SureSource power plants are unique in their ability to run on biofuels. With the growing market for anaerobic digestion (the production of Biogas from the breakdown of biodegradable materials in the absence of oxygen) and increasingly stringent regulations regarding air quality, we see a growing market opportunity that is perfectly suited for our fuel ~~flexible, utilizing~~

cell design. SureSource power plants operating on Renewable Biogas are an especially compelling value proposition as they convert a waste product into clean ~~natural gas~~electricity and ~~renewable biogas~~heat, while eliminating flaring, which addresses certain economic and sustainability challenges faced by our customers. Biogas is generated by the ~~customer~~decay of organic material (i.e., biomass). This decaying organic material releases methane, or Biogas. As a harmful greenhouse gas, Biogas cannot be released directly into the atmosphere. Flaring creates pollutants and wastes this potential fuel source. Capturing and using Biogas as a fuel addresses these challenges and provides a carbon-neutral renewable fuel source. Our patented, proprietary clean-up skid, SureSource Treatment^TM, provides an economical and reliable system for treating Biogas for use on-site ~~or directed biogas generated~~ at ~~a distant location and transported via~~ the ~~existing gas network. In addition, we have demonstrated other fuel sources including coal syngas and propane.~~

As renewable technologies such as wind and solar power are deployed more widely, the need for a clean, continuous power generation that complements and balances these intermittent sources becomes greater to maintain grid stability and consistent power supply for on-site applications. Our installed base includes a number of locations where our customers use SureSource plants for meeting power needs that complements intermittent wind and/or solar power generation.

Our fuel cell solutions are well suited for micro-grid applications, either as the sole source of power, or integrated with other forms of power generation. We can model, install and operate the micro-grid, which is a differentiator in the power industry. We have fuel cells operating as micro-grids at universities and municipalities, including one university micro-grid owned by a wholly owned subsidiary of NRG Yield (NYSE: NYLD) and a town-based micro-grid owned by Avangrid. Under normal operation, the fuel cells supply power to the grid. If the grid is disrupted, the fuel cell plant will automatically disconnect from the grid and power a number of critical buildings.Biogas production facility.

Wastewater treatment facilities, food and beverage processors and agricultural operations produce ~~biogas~~Biogas as a byproduct of their operations. Disposing of this greenhouse gas can be harmful to the environment if released into the atmosphere or flared. Our SureSource power plants convert this ~~biogas~~Biogas into electricity and heat efficiently and economically. Wastewater facilities with anaerobic digesters are an attractive market for our SureSource solution including the power plant as well as treatment of the ~~biogas.~~Biogas. Many wastewater treatment plants currently flare Biogas produced in the anaerobic digestion process, emitting NOx, SOx and particulates into the atmosphere, which does not meet many air quality regulations. Since our fuel cells operate on the ~~renewable biogas~~Renewable Biogas produced by the wastewater treatment process and the heat is used to support daily operations at the wastewater treatment facility, the overall thermal efficiency of these installations is high, supporting economics and sustainability.

We estimate that the addressable distributed generation market and geographies in which we compete for the supply of energy, including distributed hydrogen production, is approximately a $22 billion opportunity, with approximately 40-45% consisting of power plant sales and the remainder representing associated service agreements. We estimate that the addressable market for the recovery of energy, including our fuel cell carbon capture solution and our gas pipeline application, is approximately $28 billion, assuming only a 1% penetration rate of addressable coal and gas-fired central generation power plant facilities within the geographies where we do business, and only 25% carbon capture at these coal or gas-fired plants. We believe there are additional market opportunities for capture from

industrial thermal sources, such as boilers, in industries like steel and cement production. The addressable energy storage market is still developing as different technologies are beginning to come to market with different approaches to storage and different storage durations. We estimate that the addressable market for long duration storage may be in the range of tens of billions of dollars.

We leverage our core capabilities by forging strategic alliances with carefully selected third parties that bring power generation experience, financial resources, and market access. Our strategic allies typically have extensive experience in developing and selling power generation products. We believe our strength in the development of fuel cell products, coupled with our strategic allies’ understanding of a broad range of markets and customers, products and services, enhances the sales and development of our products, as well as provides endorsement of our power generation solutions. Our global business alliances include:

~~NRG Energy:~~ NRG Energy (“NRG”) owns approximately 1.4 million shares of our common stock (or approximately 2% of our outstanding common stock), extends a $40.0 million revolving construction and term financing facility to FuelCell Energy Finance, LLC ("FuelCell Finance"), our wholly-owned subsidiary, and is represented on the FuelCell Energy Board of Directors by the CEO of NRG Yield (NYSE: NYLD). NRG is one of the largest IPPs in the U.S. with approximately 50,000 MW of generation capacity and almost three million retail and commercial customers.

~~POSCO Energy~~: We entered into manufacturing and technology transfer agreements in 2007, 2009 and 2012 with POSCO Energy, which provide POSCO Energy with the technology rights to manufacture SureSource power plants in South Korea and the right to sell power plants throughout Asia. POSCO Energy owns 2.6 million shares of our common stock (or approximately 4% of our outstanding shares of common stock). POSCO Energy is one of the largest IPPs in South Korea.

In March 2017, we entered into a memorandum of understanding (“2017 MOU”) with POSCO Energy to permit us to directly develop the Asian fuel cell business, including the right for us to sell SureSource solutions in South Korea and the broader Asian market. We and POSCO Energy also agreed to undertake to amend certain technology transfer and other agreements by a target date of September 30, 2017 to reflect our new relationship. Although these agreements have not yet been amended, we continue to engage in discussions with POSCO Energy regarding our relationship and the direction ofaddition, the fuel cell ~~business in~~does not emit the ~~South Korean~~harmful NOx, SOx and ~~Asian markets.~~

~~Pursuant~~particulates that come out of a flare. On-site Biogas projects are more efficient and more economical than Directed Biogas projects because less gas processing is required compared to the ~~2017 MOU, we~~processing needed to get the on-site gas to pipeline quality. The unique chemistry of carbonate fuel cells allows them to use low Btu on-site Biogas with no reduction in output or efficiency compared to operation on natural gas. We have ~~commenced marketing the entire suite of SureSource solutions in South Korea. In June 2017, an EPC contractor was awarded a 20~~ ~~megawatt~~ ~~project utilizing our SureSource technology by a Korean utility after a competitive bidding process. On August 29, 2017, we entered into a definitive agreement for this 20 MW project~~developed proprietary Biogas cleanup and contaminant monitoring equipment which, combined with the ~~EPC contractor, Hanyang Industrial Development Co., Ltd (“HYD”), pursuant to which we provided equipment to HYD for the fuel cell project with Korea Southern Power Co., Ltd.~~ ~~(“KOSPO”). The SureSource 3000~~^TM power plants will cleanly produce electricity and thermal energy to supply the electric grid and support a district heating system. Construction began in 2017 and the installation is expected to be operational in 2018. The valueinherent suitability of the ~~equipment sale contract to the Company is in excess of $60 million.~~

In accordance with the 2017 MOU, we are collaborating with POSCO Energy to pursue investor opportunities in the Korean fuel cell business to further develop and advance the Korean market for fuel cells.

~~E.ON Connecting Energies GmbH:~~ E.ON Connecting Energies (“E.ON”) specializes in integrated energy solutions for industrial, commercial and public sector customers. E.ON has purchased two SureSource fuel cell power plants to serve E.ON end user customers. The first sale announced was a CHP-configured megawatt-class fuel cell plant installation at a German manufacturing company and the second sale was a CHP-configured fuel cell power plant for a German hotel owned by an international hotel chain.

~~ExxonMobil:~~ We entered into a joint development agreement in 2016 with ExxonMobil for advancing fuel cell carbon capture with applications for gas-fired power stations. ExxonMobil is supporting a demonstration fuel cell carbon capture plant to be installed at the Plant Barry power station, owned by an affiliate of Southern Company.

~~Our core fuel cell products offer ultra-clean, highly efficient power generation for customers, including the 1.4 MW SureSource 1500~~^TM~~, the 2.8 MW SureSource 3000~~^TM~~, and the recently introduced 3.7 MW SureSource 4000~~^TM. The plants are scalable for multi-megawatt utility scale applications or on-site CHP generation for a broad range of applications. We provide a comprehensive and complete turn-key fuel cell project that includes project development, EPC services, O&M, and project finance.

~~Our proprietary~~ carbonate fuel cell technology generates electricity directly from a fuel, such as natural gas or renewable biogas, by reforming the fuel inside the fuel cell to produce hydrogen. This internal “one-step” reforming process resultschemistry, gives us an advantage in a simpler, more efficient, and cost-effective energy conversion system compared with external reforming fuel cells. Additionally, natural gas has an established infrastructure and is readily available in our existing and target markets compared to some types of fuel cells that require high purity hydrogen. The fuel cells operate at approximately 1,100° F. An advantage of high temperature fuel cells is that they do not require the use of precious metal electrodes required by lower temperature fuel cells, such as proton-exchange membrane (“PEM”) fuel cells. As a result, we are able to use less expensive and readily available industrial metals as catalysts for our fuel cell components.

~~The SureSource product line is a global platform based on carbonate fuel cell technology. Using a standard design globally enables volume-based cost reduction and optimal resource utilization.~~on-site Biogas applications. Our power plants utilize a variety of available fuels to produce electricity electrochemically, in a process that is highly efficient, quiet, and due to the avoidance of combustion, produces virtually no particulate pollutants. Thus, our plants generate more power and fewer emissions for a given unit of fuel than combustion-based power generation of a similar size, making them economical and environmentally responsible power generation solutions. In addition to electricity, our standard configuration produces high quality heat (approximately 700° F), suitable for heating facilities or water, or steam for industrial processes or absorption cooling. Our system’s efficiencies can reach up to 90%, depending on the application, when configured for CHP.

~~We market different configurations of the SureSource plants to meet specific market needs for the supply, recovery and storage of energy, including:~~

~~We are developing our long-duration SureSource Storage~~^TM solution, creating a system that utilizes both SOFC and SOEC technology and using hydrogen as the energy storage medium. Our solid oxide stacks are capable of alternating between electrolysis and power generation mode. Instead of producing powercritical municipal buildings. Heat from ~~fuel and air, a solid oxide~~this municipal-based fuel cell stack in electrolysis mode splits water into hydrogen and oxygen using supplied electricity. Hydrogen is an energy carrier that can be compressed and stored for long durations in storage tubes or underground.

This allows us to configure efficient and cost effective energy storage solutions where hydrogen is produced from electricity in electrolysis mode and stored until power is needed, at which point the stored hydrogenplant is used by the local high school. As mentioned above, our fuel cell-based microgrids have continued operating during PSPS events in the same stacks to produce electricity. Storage capacity is easily expanded by adding additional storage tanks, a low cost approach for storage applications requiring many hours or days of storage capacity. The need for long duration energy storage behind the meter and on the utility grid will increase as the penetration of intermittent renewable sources on the grid expands. This solution can be sited adjacent to an electric substation, avoiding the need for transmission.

Fuel cells are devices that directly convert chemical energy (fuel) into electricity, heat and water. Because fuel cells generate power electrochemically rather than by combusting (burning) fuels, they are more efficient in extracting energy from fuels, and produce less CO₂ ~~and only trace levels of pollutants compared to combustion-type power generation. The following table illustrates the favorable emission profile of our SureSource power plants:~~California.

~~For power plants operating on natural gas, higher electrical efficiency results in lower CO~~₂~~, and also results in less fuel needed per kWh of electricity generated and Btu of heat produced. The high efficiency of our products results in significantly less CO~~₂ per unit of power production compared to the average U.S. fossil fuel power plant, and the carbon emissions are reduced even further when configured for combined heat and power. When operating on renewable biogas, government agencies and regulatory bodies generally classify our power plants as carbon neutral due to the renewable nature of the fuel source.

High electrical efficiency reduces customers' exposure to volatile fuel costs, minimizes operating costs, and provides maximum electrical output from a finite fuel source. Our power plants achieve electrical efficiencies of 47% to 60% or higher depending on configuration, location, and application, and even higher total efficiency in a CHP configuration, depending on the application. This represents delivered efficiency as our distributed solutions generate power near the point of use, avoiding the line losses inherent in transmission. The electric grid in the United States is only approximately 35% electrically efficient and typically does not support CHP configurations.

We operate a 167,000 square-foot manufacturing facility in Torrington, Connecticut where we produce the individual cell packages and assemble the fuel cell modules. This facility also houses our global service center. Our completed modules are conditioned in Torrington and shipped directly to customer sites. Annual capacity (module manufacturing, final assembly, testing and conditioning) is 100 MW per year under the Torrington facility’s current configuration when being fully utilized. The Torrington facility is sized to accommodate eventual annual production capacity of 200 MW per year.

The expansion of the Torrington facility has enabled the consolidation of warehousing and service facilities, which has resulted in reduced leasing expenses. The additional space is also expected to lead to additional manufacturing efficiencies by providing the needed space to re-configure the manufacturing lines without interrupting production. As demand supports, a second phase will be undertaken to add manufacturing equipment to increase annual capacity to 200 MW.

We design and manufacture the core SureSource fuel cell components that are stacked on top of each other to build a fuel cell stack. For ~~MW-size~~megawatt-scale power plants, four fuel cell stacks are combined to build a fuel cell module. To complete the power plant, the fuel cell module or modules are combined with the BOP. The mechanical BOP processes the incoming fuel such as natural gas or ~~renewable biogas~~Renewable Biogas and includes various fuel handling and processing equipment such as pipes and blowers. The electrical BOP processes the power generated for use by the customer and includes electrical interface equipment such as an inverter. The BOP components are either purchased directly from suppliers or the manufacturing is outsourced based on our designs and specifications. This strategy allows us to

leverage our manufacturing capacity, focusing on the critical aspects of the power plant where we have specialized knowledge and expertise and possess extensive intellectual property. BOP components are shipped directly to a ~~customer's~~project site and are then assembled with the fuel cell module into a complete power plant.

~~North America:~~ We operate a 167,000 square-foot manufacturing facility in Torrington, Connecticut where we produce the individual cell packages and assemble the fuel cell modules. The completed modules are then conditioned at our facility in Danbury, Connecticut for the final step in the manufacturing process and shipped to customer sites. Annual capacity (module manufacturing, final assembly, testing and conditioning) is 100 MW per year, with full utilization under its current configuration. The building is sized to accommodate annual production capacity of 200 MW per year.

The expansion of the facility was recently completed, representing the first phase of a two phase capacity expansion. This expansion has enabled the consolidation of warehousing and service facilities, which will lead to reduced leasing expenses. The additional space is also expected to lead to additional manufacturing efficiencies by providing the needed space to re-configure the manufacturing lines without interrupting production. As demand

supports, the second phase will be undertaken to add manufacturing equipment to increase annual capacity to 200 MW. The State of Connecticut is extending two low interest long term loans to us (one for each of the two phases) and up to $10.0 million of tax credits. Each loan is $10.0 million, with an interest rate of 2.0% and a term of 15 years. Up to 50% of the principal is forgivable if certain job creation and retention targets are met.We previously received the proceeds of the first $10 million loan to support the first phase of the expansion and have received an extension from the State of Connecticut to meet the required job targets.

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 ~~Operations~~operation (which maintains the installed fleet ~~for~~of our plants) ~~are~~is ISO 9001:2015 certified, reinforcing the tenets of ~~the~~ FuelCell ~~Energy Quality Management System~~Energy’s quality management system and our core values of continual improvement and commitment to ~~quality.~~

~~South Korea:~~ ~~To meet Asian demand, POSCO Energy built a cell manufacturing facility~~quality, environmental stewardship, and customer satisfaction. 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 improve how we plan and execute across the entire product life cycle. We strive for “cradle-to-cradle” sustainable business practices, incorporating sustainability in ~~Pohang, Korea which became operational in late 2015. Annual production capability is 100 MW and the building is sized to accommodate up to 200 MW of annual production to support future growth~~our corporate culture. We utilize “Design for Environment” principles in the ~~Asian market.~~design, manufacture, installation and servicing of our power plants. “Design for Environment” principles aim to reduce the overall human health and environmental impact of a product, process or service, when such impacts are considered across the product’s lifecycle. We ~~collaborate with POSCO Energy to manage~~maintain a chain of custody and responsibility of our SureSource products throughout the ~~supply chain~~product life cycle. When our plants reach the end of their useful lives, we can refurbish and ~~production volumes between~~re-use certain parts and then recycle most of what we cannot re-use. By weight, approximately 93% of the ~~U.S. and South Korean facilities.~~entire power plant can be re-used or recycled at the end of its useful life.

~~Europe:~~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 sub-megawatt fuel cell power plants ~~for~~to service the fuel cell power plant demand in the European market. Our European service activities are also operated out of this location. Our operations in Europe are certified under both ISO 9001:2015 and ISO 14001:2015.

We have a research and development facility in Calgary, Alberta, Canada that is focused on the engineering and development of the Company’s SOFC and SOEC technology.

We use various commercially available raw materials and components to construct a fuel cell module, including nickel and stainless steel, which are key inputs toin our manufacturing process. Our fuel cell stack raw materials are sourced from multiple vendors and are not considered precious metals. We have a global integrated supply ~~chain that serves North American, European, and the POSCO Energy-owned Asian production facilities. In addition to manufacturing~~chain. While we manufacture the fuel cell module in our Torrington facility, the electrical and mechanical BOPs are assembled by and procured from several suppliers. All of our suppliers must undergo a stringent and rigorous qualification process. We continually evaluate and qualify new suppliers as we diversify our supplier base in our pursuit of lower costs and consistent quality. We purchase mechanical and electrical BOP ~~componentry~~components from third party vendors, based on our own proprietary designs.

We provide customers with complete turn-key solutions, including ~~the~~ development, engineering, procurement, construction, interconnection and operations for our fuel cell projects. From an EPC standpoint, we have an extensive history of safe and timely delivery of turn-key projects. We have developed relationships with many design firms and licensed general contractors and have a repeatable, safe, and efficient execution philosophy that has been successfully demonstrated in numerous jurisdictions, both domestically and abroad, all with an exemplary safety record. The ability to rapidly and safely execute installations minimizes ~~high cost~~high-cost construction period financing and can assist customers in certain situations when the ~~commercial operating date~~Commercial Operations Date is time sensitive.

We offer a comprehensive portfolio of services, including engineering, project management and installation, and long-term operating and maintenance programs, including trained technicians that remotely monitor and operate ~~the~~our plants around the world, 24 hours a day and 365 days a year. We directly employ field technicians to service the power plants and maintain service centers near our customers to ~~ensure~~support the high ~~availability~~Availability of our plants. ~~All of our~~

For all operating fuel cell plants not under a PPA, customers purchase long-term service agreements, some of which have terms of up to 20 years. Pricing for service contracts 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. ~~While the electrical and mechanical BOP in~~Each model of our SureSource power plants ~~is designed to last about 25 years, the current~~has a design life of 25-to-30 years. The fuel cell modules, ~~must be replaced approximately every five years.~~with legacy modules having a 5-year cell design life and current production modules having a 7-year cell design life, go through periodic replacement, while the BOP systems, which consist of conventional mechanical and electrical equipment, are maintained over the life of the plant.

Under the typical provisions of both our service agreements and PPAs, we provide services to monitor, operate and maintain ~~customer~~ power plants to meet specified performance levels. Operations and maintenance is a key driver for power plants 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. We have committed future production for scheduled fuel cell module exchanges under service agreements and PPAs through the year 2038. The pricing structure of the service agreements incorporates these scheduled fuel cell module exchanges and the committed nature of this production facilitates our production planning. Many of our PPAs and service agreements include guarantees for system performance, including electrical output and heat rate. Should the power plant not meet the minimum performance levels, we may be required to replace the fuel cell module with a new or used replacement module and/or pay performance penalties. The service aspects of our business model provide a recurring and predictable revenue stream for the Company. We have committed future production for scheduled fuel cell module exchanges under service agreements through the year 2038. The pricing structure of the service agreements incorporates these scheduled fuel cell module exchanges and the committed nature of this production facilitates our production planning. Our goal is to optimize ~~our customers’~~the power plants to meet expected operating parameters throughout their contracted ~~project~~service term.

In addition to our service agreements, we provide a warranty for our products against manufacturing or performance defects for a specific period of ~~time against manufacturing or performance defects.~~time. The warranty term in the U.S. is typically 15 months after shipment or 12 months after acceptance of our products. We accrue for estimated future warranty costs based on historical experience.

Retained projects in the generation portfolio do not have service agreements with the off-takers but we maintain the power plants through long-term service agreements with our project level subsidiaries. Under the PPAs for these retained projects, we are obligated to deliver a certain contractual level of power. We operate and maintain the plants in our generation portfolio in a manner intended to maximize power output, just as we do for our customers who own their plants.

EMRE 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.

In June 2019, we entered into a license agreement with EMRE, a wholly-owned subsidiary of ExxonMobil Corporation, to facilitate the further development of our SureSource Capture^TM product (the “EMRE License Agreement”). Pursuant to the EMRE License Agreement, the Company granted EMRE 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 industrial and power sources and for any other purpose attendant thereto or associated therewith, in exchange for a $10 million payment. Such right and license is sublicenseable to third parties performing work for or with EMRE or its affiliates, but shall not otherwise be sublicenseable.

The EMRE License Agreement facilitated the execution of a new joint development agreement with EMRE, effective October 31, 2019 and executed in fiscal year 2020, pursuant to which we will continue exclusive research and development efforts with EMRE to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources, in exchange for (a) payment of (i) an exclusivity and technology access fee of $5.0 million, (ii) up to $45.0 million for research and development efforts, and (iii) milestone-based payments of up to $10.0 million after certain technological milestones are met, and (b) certain licenses. As a result of the execution of the EMRE License Agreement in fiscal year 2020, the associated revenue and backlog will be accounted for in fiscal year 2020.

From approximately 2007 through 2015, we relied on POSCO Energy Co., Ltd. (“POSCO Energy”) to develop and grow the South Korean and Asian markets for our products and services.

We record license fees and are entitled to receive ~~license fees and~~ royalty income from POSCO Energy related to manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012. The Cell Technology Transfer Agreement ("CTTA"), executed in October 2012, provides POSCO Energy with the technology rights to manufacture, sell, distribute and service our SureSource ~~power plants~~300, SureSource 1500 and SureSource 3000 fuel cell technology in Asia. POSCO Energy built a cell manufacturing facility in Pohang, South Korea ~~and the right to sell power plants throughout Asia.~~ which became operational in late 2015.

In October 2016, the Company and POSCO Energy extended the terms of the 2007 and 2009 ~~license~~manufacturing and technology transfer agreements to be consistent with the term of the CTTA, which expires on October 31, 2027. The ~~term of these agreements may be extended beyond 2027 through future extensions by mutual agreement of the Company and~~CTTA requires POSCO ~~Energy. In conjunction with the CTTA, the Company is entitled~~Energy to ~~receive~~pay us a 3.0% royalty on POSCO Energy net product sales, as well as a royalty on ~~each~~ scheduled fuel cell module ~~replacement~~replacements under service agreements for modules that were built by POSCO Energy and installed at ~~any plant~~plants in Asia under the terms of long-term service agreements between POSCO Energy and its customers. While the ~~Master Service Agreement between~~aforementioned manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012 remain in effect, due to certain actions and inactions of POSCO Energy, the Company ~~and~~has not realized any material revenues, royalties or new projects developed by POSCO ~~Energy. The Company has contracted directly~~Energy since 2016.

In March 2017, we entered into a memorandum of understanding (“MOU”) with POSCO Energy ~~for equipment and services for its first direct order in~~to permit us to directly develop the ~~Korean market.~~

~~Advanced Technologies Programs (Third Party Funded Research and Development)~~

~~We undertake both privately-funded and public research and development to expand the markets for our power plants, reduce costs, and expand our technology portfolio in complementary high-temperature~~Asian fuel cell ~~systems. This research builds on our expertise~~business, including the right for us to sell SureSource solutions in South Korea and the ~~versatility of our fuel cell power plants and contributes~~broader Asian market. In June 2018, POSCO Energy advised us in writing that it was terminating the MOU effective July 15, 2018. Pursuant to the ~~development~~terms of ~~potentially new end markets for our commercial product solution portfolio. Our power plants can be configured~~the MOU, notwithstanding its termination, we will continue to ~~provide a number of value streams including clean electricity, high quality usable heat, hydrogen suitable for vehicle fueling or industrial purposes as well as configuration~~execute on sales commitments in Asia secured in writing prior to ~~concentrate CO~~₂ from coal and natural gas fired power plants. Our Advanced Technologies Programs are focused on commercializing solutions within three strategic areas: (1) carbon capture for emissions reduction and power generation; (2) distributed hydrogen production, compression, and recovery; and (3) SOFC/SOEC for stationary power generation and energy storage. The revenue and associated costs from government and third party sponsored research and development is classified as “Advanced Technologies contract revenues” and “Cost of Advanced Technologies contract revenues”, respectively, in our consolidated financial statements.

~~We have historically worked on technology development with various U.S. government departments and agencies,~~July 15, 2018, including the ~~Department~~20 MW power plant installed for KOSPO.

On or about November 2, 2018, POSCO Energy served FuelCell Energy with an arbitration demand, initiating a proceeding to resolve various outstanding amounts between the companies. The parties amicably resolved the arbitration proceeding in July 2019. Since that date, we have made numerous attempts to engage with POSCO Energy to address the need for deployment of ~~Energy (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). Government funding, principally from the DOE, provided 9%, 8% and 6% of our revenue for the fiscal years ended 2017, 2016, and 2015, respectively.

~~Significant commercialization programs on which we are currently working include:~~

~~Carbon Capture~~ - Coal and natural gas are abundant, low cost resources that are widely used to generate electricity in developed and developing countries, but burning these fuels results in the emission of criteria pollutants and CO₂~~. Cost effective and efficient carbon capture from coal-fired and gas-fired power plants potentially represents a large global market because it could enable clean use of these fuels. Our~~ carbonate fuel cell technology ~~separates~~in the Asian market in accordance with the requirements of the manufacturing and ~~concentrates CO~~₂ ~~as a side reaction during~~technology transfer agreements, our understanding of the ~~power generation process. Capturing CO~~₂~~as a side reaction while generating additional valuable power is an approach that could be more cost effective than other systems which are being considered for carbon capture.~~

~~We announced an agreement with ExxonMobil (NYSE: XOM) in 2016~~desire of the South Korean government to ~~pursue~~advance fuel cell ~~carbon capture for central generation gas-fired power plants. We are working on~~and hydrogen technology, and the ~~installation~~needs of ~~a megawatt-class fuel cell power plant at a mixed coal/gas-fired power station owned by Alabama Power, a subsidiary of Southern Company. This project is being supported by an award from~~ the ~~U.S. Department of~~Asian market, but have made little progress to date.

In November 2019, POSCO Energy to design and build the first MW-scale carbon capture system for coal fired power, and by ExxonMobil through a joint development agreement for evaluating carbon capture from gas-fired power generation. Successful demonstration may then lead to additional fuel cell power plant installations at this site and/or other central generation coal or gas-fired sites globally. In addition, in 2017, we conducted two engineering studies: one with Alberta Innovates, a consortium of Canadian oil sands producers, and one with Cenovus Energy, as lead partner of a joint industry project, to evaluate the feasibility of fuel cell carbon capture for gas-fired boilers used in oil sands processing. These oil and gas and power producers are interested in the fuel cell carbon capture value proposition, and these studies are evaluating the application of our carbon capture system at specific sites, which could be future MW-scale carbon capture project opportunities.

~~Distributed Hydrogen production, compression, and recovery -~~ On-site or distributed hydrogen generation, produced cleanly, represents an attractive market. Our high temperature fuel cells generate electricity directly from a fuel by reforming the fuel inside the fuel cell to supply hydrogen for the electrical generation process. Gas separation technology can be added to capture hydrogen that is not used by the electrical generation process, and we term this configuration SureSource Hydrogen. This value-added proposition may be compelling for industrial users of hydrogen and transportation applications, further summarized as follows:

~~Fueling Applications~~: We recently announced a renewable hydrogen generation project under a hydrogen power purchase agreement with Toyota. The multi-megawatt SureSource Hydrogen plant will be located at the Port of Long Beach, California and will use renewable directed biogas for fuel. Toyota will purchase the hydrogen output of approximately 1,200 kg per day to fuelspun-off its fuel cell ~~cars that arrive at the Port from overseas as well as fuel~~business into a ~~Class 8 fuel cell truck located at the Port. Toyota will also purchase a portion~~new entity, Korea Fuel Cell, Ltd. (“KFC”). As part of the ~~renewable electricity generated with~~spin-off, POSCO Energy transferred manufacturing and service rights under the ~~remainder~~aforementioned manufacturing and technology transfer agreements to KFC, but retained distribution rights, including trademarks, and severed its own liability under the aforementioned manufacturing and technology transfer agreements. We believe that these actions are all in material breach of the ~~electricity~~terms of the CTTA and other manufacturing and technology transfer agreements and are effectively a misappropriation of the Company’s intellectual property. We have formally objected to ~~be sold~~POSCO Energy’s spin-off, and POSCO Energy has posted a bond to secure any liabilities to FuelCell Energy arising out of the ~~local utility~~spin-off. In light of the situation with POSCO Energy, we are evaluating all of our options with respect to our relationship and agreements with POSCO Energy, including trade related matters, POSCO Energy’s material breach of its obligations under the ~~California BioMAT program.~~ CTTA and the manufacturing and technology transfer agreements, and the misappropriation of our intellectual property.

We previously demonstrated renewable hydrogen generation under a three year project at the Orange County Wastewater Treatment Facility in Irvine, California, utilizing renewable biogas to supply hydrogen for use in fuel cell vehicle fueling and produce clean renewable electricity. The demonstration was performed under a sub-contract to Air Products (NYSE: APD), with funding provided by the DOE, California Air Resources Board, South Coast Air Quality Management District, Orange County Sanitation District, and Southern California Gas Company.

~~SOFC/SOEC development and commercialization~~: We are working towards commercialization of solid oxide fuel cell technology to target long-duration storage applications utilizing hydrogen as an energy carrier and storage medium. SOFC power plant design and manufacturing is complementary to our carbonate technology-based MW scale product line and affords us the opportunity to leverage our field operating history, existing expertise in power plant design, fuel processing and high volume manufacturing capabilities, and our existing installation and service infrastructure. Additionally, the target market for storage application is electric utilities, which is a market in which we are already active.

We perform SOFC/SOEC research and development at our Danbury facility as well as at our dedicated SOFC/SOEC facility in Calgary, Canada. We are working under a variety of awards from the DOE for development and commercialization of both SOFC and SOEC. We are currently installing a demonstration SOFC power plant at the NRG Energy Center in Pittsburgh, Pennsylvania.

We believe there are significant market opportunities for distributed hydrogen production, carbon capture, solid oxide fuel cell solutions and energy storage. The demonstration projects described above are steps on the commercialization road map as we leverage third-party resources and funding to accelerate the commercialization and realize the market potential for each of these solutions.

In addition to research and development performed under research contracts, including as described in Advanced Technology Programs, we also fund our own research and development ~~projects including extending module~~activities to support the commercial fleet with product enhancements and improvements. During fiscal year 2018, we launched our seven-year life ~~increasing the power output of~~stacks, which extended our ~~modules and reducing the cost of our products. Current initiatives include increasing the net power output of the fuel cell stacks to 375 kW from 350 kW, and extending the~~ stack life from five years to seven ~~years from five-year life modules produced in fiscal 2017. The Company’s seven-year module design will enter production in fiscal 2018.~~years. Greater power output and improved longevity are expected to lead to improved gross margin profitability on a per-unit basis for each power plant sold and improved profitability of service contracts, which ~~will~~are expected to support expanding gross margins for the Company.

In addition to output and life enhancements, we designed and ~~are now introducing~~introduced the 3.7 ~~megawatt~~MW SureSource 4000 configuration with increased electrical efficiency, and we continually invest in cost reduction and improving the performance, quality and serviceability of our plants. These efforts ~~continually~~are intended to improve our value proposition.

Company-funded research and development is included in Research and development expenses (operating expenses) in our consolidated financial statements. The total research and development expenditures in the consolidated statement of operations, including third party and Company-funded expenditures, are as follows:

	Years Ended October 31,						Years Ended October 31,
	2017		2016		2015
(dollars in thousands)							2019		2018		2017
Cost of Advanced Technologies contract revenues	$	12,728	$	11,879	$	13,470	$	12,884	$	10,360	$	12,728
Research and development expenses		20,398		20,846		17,442		13,786		22,817		20,398
Total research and development	$	33,126	$	32,725	$	30,912	$	26,670	$	33,177	$	33,126

~~The~~Backlog represents definitive agreements executed by the Company ~~had a contract backlog totaling approximately $554.2 million as of October 31, 2017 compared to $432.3 million as of October 31, 2016. At October 31, 2017~~ and ~~2016, backlog included approximately $182.3 million and $204.8 million, respectively, of service agreements. Service~~our customers.

Contract backlog as of October 31, ~~2017~~2019 and 2018 consisted of the following (in thousands):

Service and generation backlog as of October 31, 2019 had ana weighted average term of approximately 1718 years, ~~weighted~~with weighting based on dollar backlog and utility service contracts of up to ~~twenty~~20 years in ~~duration. Generation backlog as~~duration at inception. Generally, our government research and development contracts are subject to the risk of ~~October 31, 2017 and 2016 was $296.3 million and $142.5 million, respectively. As~~termination at the convenience of October 31, 2017, product sales backlog totaled approximately $31.3 million compared to $24.9 million as of October 31, 2016. As of October 31, 2017, Advanced Technologies contracts backlog totaled $44.3 million, of which $24.5 million was funded compared to $60.1 million as of October 31, 2016, of which $39.6 million was funded.the contracting agency.

Our backlog amount outstanding is not indicative of amounts to be earned in the upcoming fiscal year. The specific elements of backlog may vary in terms of timing and revenue recognition from less than one year to up to ~~twenty~~20 years. ~~In addition, the~~

The Company may choose to sell or retain operating power plants on the balance sheet, ~~rather than selling them,~~ thus creating variability in timing of revenue recognition. Accordingly, the timing and the nature of our business makes it difficult to predict what portion of our backlog will be filled in the next fiscal year.

Backlog represents firm definitive agreements executed by the Company and our customers. As of October 31, 2017, we also had project awards totaling between $600.0 million and $1.0 billion, with the range based on whether the projects are sold or retained as part of our Generation portfolio. ~~Project awards referenced by the Company are~~

notifications that the Company has been selected, typically through a competitive bidding process, to enter into definitive agreements. These awards have been publicly disclosed. Negotiations are in process and if successfully completed, project awards will become backlog.

Fuel cell technologies are classified according to the electrolyte used by each fuel cell type. Our SureSource technology utilizes a carbonate electrolyte. Carbonate-based fuel cells are well-suited for megawatt-class applications, offering a number of advantages over other types of fuel cells in ~~the markets we are pursuing.~~ our target markets.

We are also actively developing SOFC technology, as discussed in the prior “Advanced Technologies Programs” section. Other fuel cell types that may be used for commercial applications include phosphoric acid and PEM.

The following table illustrates the four principal types of fuel cells, highlighting typical market applications, industry estimates of the electrical efficiency, expected capacity range, and versatility for applications in addition to power generation:

Our SureSource power plants compete in the marketplace for stationary distributed generation. In addition to different types of stationary fuel cells, some other technologies that compete in this marketplace include micro-turbines and reciprocating gas engines.

Several companies in the U.S. are engaged in fuel cell development, although we are the only domestic company engaged in manufacturing and deployment of stationary ~~carbonate fuel cells.~~Carbonate Fuel Cells. Other ~~emerging~~ fuel cell technologies (and the companies developing them) include small or portable PEM fuel cells (Ballard Power Systems, Plug Power, and increasing activity by numerous automotive companies including Toyota, Hyundai, Honda and GM), stationary phosphoric acid fuel cells (Doosan), stationary solid oxide fuel cells ~~(LG/Rolls Royce partnership and Bloom~~(Bloom Energy), and small residential solid oxide fuel cells (Ceres Power Holdings and Ceramic Fuel Cells Ltd.). Each of these competitors with stationary fuel cell applications has the potential to capture market share in our target markets.

Other than fuel cell developers, we may compete with companies such as Caterpillar, Cummins, ~~Wartsilla,~~Wartsila, MTU Friedrichshafen GmbH (MTU), and Detroit Diesel, which manufacture ~~more mature~~ combustion-based distributed power

generation equipment, including various engines and turbines, and have ~~well-established~~established manufacturing and distribution operations along with product operating and cost features. Competition on larger MW projects may also come from gas turbine companies like General Electric, Caterpillar Solar Turbines and Kawasaki.

We also compete against the electric grid, which is readily available to prospective customers. The electric grid is supplied by traditional centralized power plants, including coal, gas and nuclear, with transmission lines used to transport the electricity to the point of use.

Our stationary fuel cell power plants also compete against large scale solar and wind technologies, although we ~~can~~ complement the unreliable intermittent nature of solar and wind ~~intermittency~~ with the continuous, reliable power output of the fuel cells. Solar and wind require specific geographies and weather profiles, ~~and~~ require transmission for utility-scale applications, ~~as well as~~an energy storage solution to provide continuous power output, and a significant amount of land compared to our fuel cell power plants, making it difficult to site ~~MW-class~~megawatt-class solar and wind projects in urban areas, unlike our solutions.

~~We believe that only carbonate~~ Solar and wind applications are typically favored in markets which have a preference for zero-carbon resources. While fuel cells ~~are suitable for~~emit negligible amounts of NOx, SOx and particulates, fuel cells do emit a small amount of carbon dioxide. The carbon dioxide emissions of a fuel cell are only a fraction of the carbon ~~capture applications, so~~dioxide emissions of traditional combustion generators. We are working to educate policy makers in our ~~fuel cell~~target markets of the clean profile of our technology and the benefits of baseload power to complement zero carbon ~~capture solution does not compete against fuel cells from manufacturers utilizing other fuel cell technologies.~~intermittent resources.

Our distributed hydrogen solution competes against traditional centralized hydrogen generation as well as electrolyzers used for distributed applications. Hydrogen is typically generated at a central location in large quantities by combustion-based steam reforming and then distributed to end users by diesel truck. Besides utilizing tri-generation SureSource plants for distributed hydrogen, electrolyzers can be used that are in essence, reverse fuel cells. Electrolyzers take electricity and convert it to hydrogen. The hydrogen can be used as it is generated, compressed and stored, or injected into the natural gas pipeline. Companies using fuel cell-based electrolyzer technology for transportation applications include NEL and Hydrogenics Corporation.

Hydrogen is an energy carrier and energy storage utilizing hydrogen is a growing market opportunity that we are pursuing with our SOFC/SOEC technology. Companies using PEM-based fuel cell electrolyzer technology for storage include Hydrogenics Corporation and ITM Power PLC.

Distributed generation addresses certain power generation issues that central generation does not and legal, government and regulatory policy can impact deployment of distributed generation. The policies that affect our products are not always the same as those imposed on our competitors, and while some policies can make our products less competitive, others may provide an advantage. 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 not economically attractive for our customers. Regulatory and legislative support encompasses policy, incentive programs, and defined sustainability initiatives such as Renewable Portfolio Standards (“RPS”).

Various states and municipalities in the U.S. have adopted programs for which our products qualify, including programs supporting self-generation, clean air power generation, combined heat and power applications, carbon reduction, grid resiliency / ~~micro-grids~~microgrids and utility ownership of fuel cell projects.

The majority of states in the U.S. have enacted legislation adopting Clean Energy Standards (“CES”) or RPS mechanisms. Under these standards, regulated utilities and other load serving entities are required to procure a specified percentage of their total electricity sales to end-user customers from eligible resources. CES and RPS legislation and 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. Fuel cells using ~~biogas~~Biogas qualify as renewable power generation technology in all of the CES and RPS states in the U.S., and ~~eight~~some states ~~(Connecticut, Delaware, Indiana, New York, Ohio, Oklahoma, Pennsylvania and Maine)~~ specify that fuel cells operating on natural gas are also eligible for these initiatives in recognition of the high efficiency and low pollutants of fuel cells. ~~Massachusetts has recently promulgated regulations that will qualify certain~~Other states are moving away from generation utilizing fossil fuels in favor of zero carbon resources.

In February 2018, the U.S. Congress reinstated the 30% Investment Tax Credit (“ITC”) for fuel cells ~~under its Alternative Portfolio Standard.~~and also extended and significantly expanded the existing Carbon Oxide Sequestration Credit. The ITC phases down to 26% in 2020 and

22% by 2022 and is set to expire in 2023. The reinstatement of the ITC for fuel cells provided equal access to tax incentives for U.S. fuel cell manufacturers when compared with other clean energy solutions.

Internationally, South Korea has an RPS to promote clean energy, reduce carbon emissions, and develop local manufacturing of clean energy generation products to accelerate economic growth. The RPS is designed to increase new and renewable power generation to 10% of total power generation by ~~2023~~2024 from 2% when the RPS began in 2012. Eighteen of the largest power generators are obligated to achieve the RPS requirements in their generation or purchase offsetting renewable energy certificates. Financial penalties are levied by the government for non-compliance. European governments are supportive of hydrogen-based generation and efficient CHP applications, and some European governments such as Germany, the UK and the Netherlands, provide incentives in the form of tax incentives, grants and waivers of regulatory fees for such installations.

Our Company and its products are subject to various federal, provincial, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. Negligible emissions of SOx and NOx from our power plants are substantially lower than conventional combustion-based generating stations, and are far below existing and proposed regulatory limits. 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 much less than conventional fossil fuel central generation power plants due to the high efficiency of fuel cells. The discharge of water from our power plants requires permits that depend on whether the water is to be discharged into a storm drain or into the local wastewater system.

We are also subject to federal, state, provincial and/or local regulation with respect to, among other things, ~~emissions and~~ siting. In addition, utility companies and several states in the U.S. have created and adopted, or are in the process of creating and adopting, interconnection regulations covering both technical and financial requirements for interconnection of fuel cell power plants to utility grids. Our power plants are designed to meet all applicable laws, regulations and industry standards for use in ~~their~~ international ~~markets.~~markets in which we operate. Our SureSource solutions are CARB 2007 certified, and our SureSource 1500 and SureSource 3000, when operating on ~~biogas, is~~Biogas, are certified for the CARB 2013 biogas ~~standards.~~standard.

We are committed to providing a safe and healthy environment for our employees, and we are dedicated to seeing that safety and health hazards are adequately addressed through appropriate work practices, training and procedures. All of our employees must observe the proper safety rules and environmental practices in work situations, consistent with ~~these~~our work practices, training and procedures, and consistent with all applicable health, safety and environmental laws and regulations.

Our intellectual property consists of patents, trade secrets and institutional knowledge and know how that we believe is a competitive advantage and represents a significant barrier to entry for potential competitors. Our Company was founded in 1969 as an applied research company and began focusing on ~~carbonate fuel cells~~Carbonate Fuel Cells in the 1980s, with our first ~~fully commercialized~~fully-commercialized SureSource power plant sold in 2003. Over this time, we have gained extensive experience in designing, manufacturing, operating and maintaining fuel cell power plants. This experience cannot be easily or quickly replicated and, combined with our trade secrets, proprietary processes and patents, safeguards our intellectual property rights.

As of October 31, ~~2017,~~2019, our Company, excluding its subsidiaries, had 9295 patents in the U.S. and ~~106~~153 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. As of October 31, ~~2017,~~2019, we also had 3062 patent applications pending in the U.S. and 93112 pending in other jurisdictions. Our U.S. patents will expire between ~~2018~~2020 and ~~2035,~~2037, and the current average remaining life of our U.S. patents is approximately ~~9.2~~8.4 years.

Our subsidiary, Versa Power Systems, Ltd., as of October 31, ~~2017,~~2019, had 3533 U.S. patents and 7596 international patents covering the SOFC technology (in certain cases covering the same technology in multiple jurisdictions), with an average remaining U.S. patent life of approximately ~~6.8~~5.5 years. As of October 31, ~~2017,~~2019, Versa Power Systems, Ltd. also had ~~four~~1 pending U.S. patent ~~applications~~application and 1411 patent applications pending in other jurisdictions. In addition, as of

October 31, 2019, our subsidiary, FuelCell Energy Solutions, GmbH, ~~has~~had license rights to ~~use FuelCell Energy's carbonate fuel cell technology, and, as of October 31, 2017, had two~~2 U.S. patents and ~~nine~~7 patents outside the U.S. for carbonate fuel cell technology licensed from Fraunhofer IKTS.

Five patents ~~have~~ expired in 2019, but none of these expirations, individually or ~~will expire~~ in ~~2018 that would~~the aggregate, is expected to have any material impact on our current or anticipated operations. As has historically been the case, we are continually innovating and have a significant number of invention disclosures that we are reviewing that may result in additional patent applications.

Certain of our U.S. patents are the result of government-funded research and development programs, including our ~~Department of Energy (DOE)~~DOE programs. U.S. patents we own that resulted from government-funded research are subject to the government potentially exercising “march-in” rights. We believe that the likelihood of the U.S. government exercising these rights is remote and would only occur if we ceased our commercialization efforts and there was a compelling national need to use the patents.

We contract with a concentrated number of customers for the sale of our products and for research and ~~development contracts.~~development. For the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, our top customers, EMRE, Dominion Bridgeport Fuel Cell, LLC, Connecticut Power and Light, the DOE, Pfizer Inc., POSCO Energy, Hanyang Industrial Development Co., Ltd, ~~Dominion Bridgeport Fuel Cell, LLC, the Department of~~Clearway Energy ~~ExxonMobil, POSCO Energy (which owns approximately 4% of the outstanding shares of common stock of the Company)~~(formerly NRG Yield, Inc.), and ~~Avangrid Holdings (through its various subsidiaries),~~AEP Onsite Partners, LLC, accounted for an aggregate of ~~78%~~80%, ~~75%~~86% and ~~90%~~79%, respectively, of our total annual consolidated revenue. Revenue percentage by major customer for the last three fiscal years is as follows:

See Item 7 – “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 – “Consolidated Financial Statements and Supplementary Data” for further information regarding our revenue and revenue recognition policies.

We have marketing and manufacturing operations both within and outside the United States. We source raw materials and BOP components from a diverse global supply chain. In ~~2017,~~2019, the foreign country with the greatest concentration risk was South Korea, accounting for ~~46%~~4% of our consolidated net sales. The Company is entitled to receive royalties from POSCO Energy on the sale of power plants and module replacements related to service of fuel cell power plants in ~~Asia.~~Asia, and the Company received approximately $0.4 million in such royalties during the fiscal year ended October 31, 2019 as part of a net settlement of the arbitration brought by POSCO Energy. As part of our strategic plan, we are in the process of diversifying our sales mix from both a customer specific and geographic perspective. See Item 1A: Risk Factors - ~~“We~~“We are substantially dependent on a concentrated number of customers and the loss of any one of these customers could adversely affect our business, financial condition and results of operations,” ~~“We~~“We depend on strategic relationships with third parties, and the terms and enforceability of many of these relationships are not certain,” and ~~“As our relationship~~“The situation with POSCO Energy ~~changes, we may not be able~~has limited and continues to ~~succeed in~~limit our efforts to access the South Korean and Asian ~~markets.~~markets and could expose us to costs of arbitration or litigation proceedings.”

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. See Item

1A: Risk Factors – “We are subject to risks inherent in international operations.” See also Note 1416. “Segment Information,” to the consolidated financial statements in Part II, Item 8, “Consolidated Financial Statements ~~And~~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, ~~2017, 2016,~~2019, 2018, and ~~2015.~~2017. See also Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for other information about our operations and activities in various geographic regions.

FuelCell Energy’s ultra-clean, efficient and reliable fuel cell power plants help our customers achieve their sustainability goals. These highly efficient and environmentally friendly products support the “Triple Bottom Line” concept of sustainability, consisting of environmental, social and economic considerations. In October 2018, we were certified ISO 14001:2015 compliant, having demonstrated the establishment of and adherence to an environmental management system standard. FuelCell Energy is the only fuel cell manufacturer to have received this certification.

The electrical efficiency of our carbonate fuel cell solutions ranges from approximately 47% to 60% depending on the configuration. When configured for CHP, our system efficiencies can potentially reach up to 90%, depending on the application. This compares favorably to the average efficiency of the U.S. electrical grid of about ~~35%~~40%. Our solutions deliver this high electrical efficiency where the power is used, avoiding transmission. Transmission line losses average about ~~6% to 9%~~5% for the U.S. grid, which represents inefficiency and is a hidden cost to ratepayers. ~~In a combined heat and power configuration, total thermal efficiency of our fuel cell solutions can potentially be up to 90% depending on the application.~~

~~We utilize our fuel cells to provide a portion of the electricity used at our corporate office and at our North American manufacturing facility.~~

Other examples of energy management include routing excess heat from production processes throughout the manufacturing facility to reduce both heating costs and associated emissions, utilizing the power produced by fuel cells undergoing R&D at our corporate office for a portion of the power needs of the facility, and installation of high efficiency lighting at our North American manufacturing facility and corporate office.

We have expanded our manufacturing facility in Torrington and consolidated other locations, reducing transportation emissions and transportation costs, incorporating energy efficient building standards and reducing leasing costs. We are pursuing additional consolidation initiatives in 2018 as we plan to relocate fuel cell module conditioning to Torrington from our Danbury facility, which will further reduce transportation emissions and costs. We recognize that there is more to be done and we are utilizing cross-functional teams to identify and evaluate additional areas for improvement.

We continue to incorporate sustainability best practices into our corporate culture, ~~and~~as well as into the design, manufacture, installation and servicing of our fuel cell power plants. For example, atwhen our plants reach the ~~end-of-life~~end of ~~our power plants,~~their useful lives, we can refurbish and re-use certain parts ~~of the power plant~~ and ~~we are able to~~then recycle most of what we cannot re-use. Some of the parts in the fuel cell module can be re-furbished, such as end plates, while the individual fuel cell components are sent to a smelter for recycling. The BOP has an operating life of ~~twenty to twenty-five~~20-to-25 years, at which time metals such as steel and copper are reclaimed for scrap value. By weight, approximately 93% of the entire power plant ~~is either~~can be re-used or ~~recycled.~~recycled at the end of its useful life.

Our manufacturing process has a very low carbon footprint, utilizing an assembly oriented production strategy. While we continue to enhance and adopt sustainable business practices, we recognize this is an ongoing effort with more to be accomplished, such as further reducing the direct and indirect aspects of our carbon footprint.

We work to continually improve what we feel is a robust safety program. This is demonstrated by an improving safety trend over each of the past 45 years. We have never had a workplace fatality at any of our facilities or power plant installations.

Sustainability also incorporates social risks and human rights, and we will not knowingly support or do business with suppliers that treat workers improperly or unlawfully, including, without limitation, those that engage in child labor, human trafficking, slavery or other unlawful or morally reprehensible employment practices. We are continuing to implement comprehensive monitoring of our global supply chain to eliminate social risks and ensure respect for human rights. We contractually ensure that all qualified domestic suppliers in our supply chain comply with the Fair Labor Standards Act of 1938, as amended.

Assuring the absence of conflict minerals in our power plants is a continuing initiative. 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 do utilize componentry in the BOP such as computer circuit boards that utilize trace amounts of 3TG minerals. For perspective, total shipments in fiscal year ~~2016~~2018 weighed approximately ~~5.8~~2.8 million pounds, of which 38.0 pounds, or ~~0.000052%~~0.000291%, represented 3TG minerals, so the presence of these minerals is minimal. Our conflict mineral disclosure filed with the Securities and Exchange Commission (“SEC”) on Form SD contains specific information on the actions we are taking to avoid the use of conflict minerals.

As of October 31, ~~2017,~~2019, we had ~~458~~301 full-time associates, of whom ~~173~~119 were located at the Torrington manufacturing plant, ~~246~~145 were located at the Danbury, Connecticut facility or other field offices within the U.S., and 3937 were located abroad. We did not have any part-time associates. None of our U.S. associates are represented by a labor union or covered by a collective bargaining agreement. We believe our relations with our associates are good.

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 Investor Relations section of the Company’s ~~Internet~~ website (http://www.fuelcellenergy.com) as soon as practicable after such material is electronically filed with, or furnished to, the SEC. Material contained on our website is not incorporated by reference in this report. Our executive offices are located at 3 Great Pasture Road, Danbury, CT 06810. The public may also read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. 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.

Mr. Lisowski was appointed Executive Vice President and Chief Operating Officer in June 2019. Mr. Lisowski has served as the Company’s Vice President of Global Operations since 2018, and, from 2001 to 2018, held various other positions within the Company, including Vice President of Supply Chain from 2010 to 2018. Mr. Lisowski is a senior global operations leader with 26 years of progressive operations experience in technology-driven businesses. In his position as the Company’s Chief Operating Officer (and in his prior position as the Company’s Vice President of Global Operations), Mr. Lisowski is (and was) responsible for the Supply Chain, Manufacturing, Quality, Project Management, Environmental Health and Safety, and Plant Engineering functions of the Company. Additionally, Mr. Lisowski and his team are responsible for the development and qualification of strategic suppliers for critical direct materials, as well as procurement of capital equipment in support of operations.

Mr. Lisowski earned 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.

You should carefully consider the following risk factors before making an investment decision. If any of the following risks actually occur, our business, financial condition, or results of operations could be materially and adversely affected. In such cases, the trading price of our common stock could decline, and you may lose all or part of your investment.

If we do not meet the continued listing standards of The Nasdaq Global Market, our common stock could be delisted from trading, which could limit investors’ ability to make transactions in our common stock, subject us to additional trading restrictions, and trigger repurchase rights under the Amended Certificate of Designation for our 5% Series B Cumulative Convertible Perpetual Preferred Stock.

Our common stock is listed on The Nasdaq Global Market (FCEL), which imposes continued listing requirements with respect to listed securities. The Company has previously received notices from The Nasdaq Stock Market (“Nasdaq”), most recently on July 18, 2019, stating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1) because the closing bid price of our common stock was below the required minimum of $1.00 per share for the previous 30 consecutive business days. In accordance with Nasdaq Listing Rules, we had a period of 180 calendar days, or until January 14, 2020, to regain compliance with the minimum bid price requirement. On January 13, 2020, we received a notice from Nasdaq confirming that we had regained compliance with the minimum bid price requirement as the closing bid price of our common stock was above the required minimum of $1.00 per share for at least ten consecutive business days from December 26, 2019 to January 10, 2020. However, if we are not able to demonstrate compliance with the minimum bid price requirement in the future, if we fail to meet other continued listing requirements, or if we are otherwise not eligible for continued listing on Nasdaq, we may receive additional notices, and, if we are unable to regain compliance within the prescribed timeframe, our common stock will be subject to delisting. Such delisting could adversely affect the market price and liquidity of our common stock and reduce our ability to raise additional capital.

Additionally, if the Company’s common stock is delisted from trading on Nasdaq and is not approved for trading or quoted on any other U.S. securities exchange or other established over-the-counter trading market in the United States (a “Fundamental Change”), then, pursuant to the Amended Certificate of Designation for the 5% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) dated March 14, 2005, each holder of the Series B Preferred Stock has the right, at its option, to require us to purchase all or a portion of such holder’s shares of Series B Preferred Stock on the date that is 45 days after the date of the Company’s notice of such Fundamental Change for

an amount equal to the sum of 100% of the liquidation preference (which is $1,000 per share) of the shares of Series B Preferred Stock to be repurchased, plus any accrued and unpaid dividends to, but excluding the Fundamental Change purchase date. Under Delaware law, we may repurchase shares of the Series B Preferred Stock only if our total assets would be greater than the sum of our total liabilities plus, unless our Certificate of Incorporation, as amended, permits otherwise, the amount needed, if we were to be dissolved at the time of the repurchase, to satisfy the preferential rights, upon dissolution, of stockholders whose preferential rights on dissolution are superior to the holders of shares of the Series B Preferred Stock.

We have a limited number of shares of common stock available for issuance, which limits our ability to raise capital.

We have historically relied on the equity markets to raise capital to fund our business and operations. As of October 31, 2019, we had only 31,391,316 shares of common stock available for issuance, of which 30,274,072 shares were reserved for issuance under various convertible securities, options, and warrants, under our stock purchase and incentive plans, and under our at-the-market sales plan. As of January 14, 2020, we had 14,034,001 shares of common stock available for issuance, of which 10,290,934 shares were reserved for issuance under various convertible securities, options, and warrants, under our stock purchase and incentive plans, and under our at-the-market sales plan. At the April 4, 2019 annual meeting of stockholders, our stockholders did not approve our request to increase the number of shares of common stock that we are authorized to issue from 225,000,000 shares to 335,000,000 shares. The limited number of shares available for issuance limits our ability to raise capital in the equity markets and satisfy obligations with shares instead of cash, which could adversely impact our ability to fund our business and operations.

We have transitioned from a research and development company to a commercial products manufacturer, services provider and developer. We have not been profitable since our year ended October 31, 1997. We expect to continue to incur net losses and generate negative cash flows until we can produce sufficient revenues and margins to cover our costs. 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 ~~substantial~~ uncertainties associated with our achieving and sustaining profitability. We have, from time to time, sought financing in the public markets in order to fund operations and will continue to do so. Our future ability to obtain such financing could be impaired by a variety of factors, including, but not limited to, the price of our common stock, our lack of authorized, unreserved and unissued shares, and general market conditions.

Our cost reduction strategy may not succeed or may be significantly delayed, which may result in our inability to deliver improved margins.

Our cost reduction strategy is based on the assumption that increases in production will result in economies of scale. In addition, our cost reduction strategy relies on advancements in our manufacturing process, global competitive sourcing, engineering design, reducing the cost of capital and technology improvements (including stack life and projected power output). Failure to achieve our cost reduction targets could have a material adverse effect on our results of operations and financial condition.

Our workforce reduction may cause undesirable consequences and our results of operations may be harmed.

On April 12, 2019, we undertook a reorganization, which included a workforce reduction of 30%, or 135 employees. This workforce reduction may yield unintended consequences, such as attrition beyond our intended reduction in workforce and reduced employee morale, which may cause our employees who were not affected by the reduction in workforce to seek alternate employment. Additional attrition could impede our ability to meet our operational goals, which could have a material adverse effect on our financial performance. In addition, as a result of the reductions in our workforce, we may face an increased risk of employment litigation. Furthermore, employees whose positions were eliminated or those who determine to seek alternate employment may seek employment with our competitors. Although all our employees are required to sign a confidentiality agreement with us at the time of hire, we cannot assure you that the confidential nature of our proprietary information will be maintained in the course of such future employment. We cannot assure you that we will not undertake additional workforce reduction activities, that any of our efforts will be successful, or that we will be able to realize the cost savings and other anticipated benefits from our previous or any future workforce reduction plans. In addition, if we continue to reduce our workforce, it may adversely impact our ability to respond rapidly to any new product, growth or revenue opportunities and to execute on our backlog and business plans. Additionally, our recent reduction in workforce may make it more difficult to recruit and retain new hires as our business grows.

We have debt outstanding and may incur additional debt in the future, which may adversely affect our financial condition and future financial results.

Our total consolidated indebtedness was ~~$87.8~~$106.3 million as of October 31, ~~2017.~~2019. This includes approximately ~~$46.9~~$81.2 million of debt at our project finance subsidiaries and ~~$40.9~~$25.1 million of debt at the corporate level. The majority of our debt is long-term with ~~$28.3~~$21.9 million due within twelve months as of October 31, ~~2017. We also have approximately $40.0~~2019.

On October 31, 2019, we (and certain of our subsidiaries as guarantors) entered into a Credit Agreement (the “Orion Credit Agreement”) with Orion Energy Partners Investment Agent, LLC, as Administrative Agent and Collateral Agent (the “Agent”), and its affiliates, Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., and Orion Energy Credit Opportunities Fund II PV, L.P., as lenders, regarding a $200.0 million senior secured credit facility (the “Orion Facility”), structured as a delayed draw term loan, to be provided by the lenders. In conjunction with the closing of ~~borrowing capacity~~the Orion Facility, on October 31, 2019, we drew down $14.5 million (the “Initial Funding”) to fully repay debt outstanding to NRG Energy, Inc. (“NRG”) and Generate Lending, LLC (“Generate”) and to fund dividends paid to the holders of the Company’s 5% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) on or before November 15, 2019. The balance of the Initial Funding was used primarily to pay third party costs and expenses associated with closing on the Orion Facility.

As provided for in the Orion Credit Agreement, on November 22, 2019, we made a second draw (the “Second Funding”) of $65.5 million funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P. (collectively, the “Orion Lenders”), such that the total fundings under the Orion Facility as of November 22, 2019 were equal to $80.0 million. Proceeds from the Second Funding were used to repay outstanding third party debt with respect to certain Company projects, including the construction loan from Fifth Third Bank on the Groton Project and the loan from Webster Bank on the CCSU Project, as well as to fund remaining going forward construction costs and anticipated capital expenditures relating to certain projects, including the Groton Project, a ~~revolving construction~~7.4 MW project for the CMEEC located on the U.S. Navy submarine base in Groton, Connecticut, the Long Island Power Authority (“LIPA”) Yaphank Solid Waste Management Project (a 7.4 MW project), and ~~term~~the Tulare BioMAT project ~~financing facility.~~ (a 2.8 MW project).

Our ability to make scheduled payments of ~~the~~ principal and interest ~~or to refinance our indebtedness~~and other required repayments depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. In addition, the Agent and the lenders under the Orion Credit Agreement have broad approval rights over our ability to draw and allocate funds from the Orion Facility. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring operations, restructuring debt or obtaining additional equity capital on terms that may be onerous or dilutive.

It is also possible that we may incur additional indebtedness in the future in the ordinary course of business. If new debt is added to current debt levels, the risks described above could intensify.

Our debt agreements contain ~~customary~~ representations and warranties, affirmative and negative covenants, and events of default that entitle the lenders to cause our indebtedness under such debt agreements to become immediately due and payable. ~~In addition, our Loan and Security Agreement with Hercules Capital, Inc. (“Hercules”), as amended, contains a financial covenant whereby we~~

We are required to maintain ~~an unrestricted cash balance~~effective internal control over financial reporting. Our management previously identified a material weakness in ~~accounts subject~~our internal control over financial reporting. If we are unable to ~~an account~~remediate the material weakness or other control ~~agreement~~deficiencies are identified in ~~favor~~the future, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports in a timely manner, which may adversely affect investor confidence in our company and, as a result, the value of ~~Hercules of at least the greater of (x) (a) 75%~~our common stock.

We are required, pursuant to Section 404 of the ~~outstanding loan balance plus (b)~~Sarbanes-Oxley Act, to furnish a report by management on, among other things, the amount of accounts payable not paid within 90 days of the invoice date, and (y) (a) at all times prior to the Stockholder Approval Date, $20.0 million and (b) at all times on and after the Stockholder Approval Date, $10.0 million (the Stockholder Approval Date was December 14, 2017, which was the date on which stockholder approval of the issuance of certain shares upon the conversion and/or redemptioneffectiveness of our ~~Series C Convertible Preferred Stock~~internal control over financial reporting. Complying with Section 404 requires a rigorous compliance program as well as adequate time and resources. We may not be able to complete our internal control evaluation, testing and any required remediation in a timely fashion. Additionally, if we identify one or more material weaknesses in our internal control over financial reporting, we will not be able to assert that our internal controls are effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We previously disclosed in our Form 10-Qs for the quarters ended April 30, 2019 and July 31, 2019 that we did not have resources to sufficiently address asset impairments on a timely basis or the accounting considerations and disclosures related to our amended credit facilities. As a result, we concluded that there was ~~obtained).~~ ~~The Loan~~a material weakness in internal control over financial reporting, as we did not maintain effective controls over the accounting for and ~~Security Agreement, as amended, also contains an event of default~~disclosures in the ~~event of the delivery of a notice by the holders~~consolidated financial statements related to ~~redeem the Series C Preferred~~

~~Shares following a triggering event pursuant to the certificate of designations governing the Series C Preferred Shares.~~ Asasset impairments and credit facilities. This control deficiency has not been remediated as of October 31, ~~2017,~~2019 and we further identified that we did not have resources to sufficiently address certain other non-routine transactions and disclosures. This material weakness resulted in material misstatements that were corrected in the ~~outstanding loan balance~~consolidated financial statements prior to issuance.

Subsequent to the evaluation made in connection with filing our Form 10-Q for the quarter ended April 30, 2019, our management, with the oversight of the Audit and Finance Committee of our Board of Directors, began the process of remediating the material weakness. Progress to date includes engagement of a third party resource to help evaluate the accounting and disclosure for significant matters each quarter. Management also plans to add additional experienced accounting staff. In addition, under the ~~Loan~~oversight of the Audit and ~~Security Agreement, as amended, was $21.5 million, including accretion~~Finance Committee, management will continue to review and make necessary changes to the overall design of ~~an end-of-term payment.~~our internal control environment to improve the overall effectiveness of internal control over financial reporting.

We have made progress in accordance with our remediation plan and our goal is to remediate this material weakness in fiscal year 2020. However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures, however, there can be no assurance that this will occur within 2020.

We cannot be certain that these measures will successfully remediate the material weakness or that other material weaknesses and control deficiencies will not be discovered in the future. If our efforts are not successful or other material weaknesses are identified in the future, or if we are not able to comply with the requirements of Section 404 in a timely manner, our reported financial results could be materially misstated and we could be subject to investigations or sanctions by regulatory authorities, which would require additional financial and management resources, and the value of our common stock could decline.

To the extent we identify future weaknesses or deficiencies, there could be material misstatements in our consolidated financial statements and we could fail to meet our financial reporting obligations. As a result, our ability to obtain additional financing, or obtain additional financing on favorable terms, could be materially and adversely affected which, in turn, could materially and adversely affect our business, our financial condition and the value of our common stock. If we are unable to assert that our internal control over financial reporting is effective in the future, investor confidence in the accuracy and completeness of our financial reports could be further eroded, which would have a material adverse effect on the price of our common stock.

Our products compete with products using other energy sources, and if the prices of the alternative sources are lower than energy sources used by our products or attributes of other energy sources are favored over our products, sales of our products will be adversely affected. ~~Volatility of electricity and fuel prices may impact sales of our products and services in the markets in which we compete.~~

Our power plants can operate on a variety of fuels including natural gas, ~~renewable biogas,~~Renewable Biogas, directed ~~biogas~~Biogas and propane. If these fuels are not readily available or if their prices increase such that electricity produced by our products costs more than electricity provided by other generation sources, our products would be less economically attractive to potential customers. In addition, we have no control over the prices of several types of competitive energy sources such as solar, wind, oil, gas or coal or local utility electricity costs. Significant decreases (or short term increases) in the price of these technologies or fuels or prices for grid delivered ~~prices for~~ electricity could also have a material adverse effect on our business because other generation sources could be more economically attractive to consumers than our products. Additionally, in certain markets, consumers and regulators have expressed a preference for zero-carbon resources over fueled resources. Sales of our products could be adversely affected in these markets.

Financial markets worldwide have experienced heightened volatility and instability which may have a material adverse impact on our Company, our customers and our suppliers.

Financial market volatility can affect the debt, equity and project finance markets. This may impact the amount of financing available to all companies, including companies with substantially greater resources, better credit ratings and more successful operating histories than ours. It is impossible to predict future financial market volatility and instability and the impact on our Company, and it may have a materially adverse effect on us for a number of reasons, such as:

Our contracted projects may not convert to revenue, and our project pipeline may not convert to contracts, which may have a material adverse effect on our revenue and cash flow.

Some of the project awards we receive and orders we accept from customers require certain conditions or contingencies (such as permitting, interconnection or financing) to be satisfied, some of which are outside of our control. The time periods from receipt of an award to execution of a contract, or receipt of a contract to installation may vary widely and are determined by a number of factors, including the terms of the award, the terms of the customer contract and the customer’s site requirements. These same or similar conditions and contingencies may be required by financiers in order to draw on financing to complete a project. If these conditions or contingencies are not satisfied, or changes in laws affecting project awards occur, project awards may not convert to contracts, and installations may be delayed or canceled. This could have an adverse impact on our revenue and cash ~~flow.~~flow and our ability to complete construction of a project.

We have signed product sales contracts, engineering, procurement and construction contracts ~~(“EPC”)~~(EPC), power purchase agreements (PPAs) and long-term service agreements with customers subject to contractual, technology and operating risks as well as market conditions that may affect our operating results.

We apply the ~~percentage~~transfer of ~~completion~~control over time revenue recognition method under Accounting Standards Codification Topic 606: Revenue from Contracts with Customer to certain product sales contracts which are subject to estimates. On a quarterly basis, ~~the Company performs~~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. The ~~percentage~~amount of costs incurred on a cumulative to date basis as a function of estimated costs at completion ~~for the customer contracts based on this cost analysis~~ is ~~then~~ applied to ~~the total customer~~ contract ~~values~~consideration to determine the ~~total~~cumulative revenue tothat should be recognized to date.

In certain instances, we have executed ~~power purchase agreements (“PPA”)~~PPAs with the end-user of the power ~~and~~or site host of the fuel cell power plant. We may then sell the PPA to a project investor or retain the project and collect revenue from the sale of power over the term of the PPA, recognizing electricity revenue as power is generated and sold.

We have contracted under long-term service agreements with certain customers to provide service on our products over terms up to 20 years. Under the provisions of these contracts, we provide services to maintain, monitor, and repair customer power plants to meet minimum operating levels. Pricing for service contracts is based upon estimates of future costs including future ~~stack~~module replacements. While we have conducted tests to determine the overall life of our products, we have not run certain of our products over their projected useful life prior to ~~large-scale~~large scale commercialization. As a result, we cannot be sure that ~~our~~these products will last to their expected useful life, which could result in warranty claims, performance penalties, maintenance and ~~stack~~module replacement costs in excess of our estimates and losses on service contracts.

Our ability to proceed with projects under development and complete construction of projects on schedule and within budget may be adversely affected by escalating costs for materials, tariffs, labor and regulatory compliance, inability to obtain necessary permits, interconnections or other approvals on acceptable terms or on schedule and by other factors. 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 write off all or a portion of our ~~investment~~capitalized costs in the project. Each of these events could have an adverse effect on our business, financial condition, results of operations and prospects.

Our growing ~~generation~~ portfolio of ~~operating~~project assets exposes us to operational risks and commodity market volatility.

We have a growing portfolio of ~~generation~~project assets ~~selling~~used to generate and sell power under PPAs and utility tariff programs that 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, the impact of severe adverse weather conditions, ~~and~~ natural disasters, terrorist 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,~~sources.

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,~~experience; however, actual future warranty expenses may be greater than we have assumed in our estimates. As a result, operating results could be negatively impacted should there be product manufacturing or performance defects in excess of our estimates.

Our products are complex and could contain defects and may not operate at expected performance levels which could impact sales and market adoption of our products or result in claims against us.

We develop complex and evolving products and we continue to advance the capabilities of ~~the~~our fuel cell stacks and are now producing stacks in the United States with a net rated power output of 350 kWkilowatts and an expected ~~five year~~seven-year life.

We are still gaining field operating experience with respect to our products, and despite experience gained from our growing installed base and testing performed by us, our customers and our suppliers, issues may be found in existing or new products. This could result in a delay in recognition or loss of revenues, loss of market share or failure to achieve broad market acceptance. The occurrence of defects could also cause us to incur significant warranty, support and repair costs, could divert the attention of our engineering personnel from our product development efforts, and could harm our relationships with our customers. The occurrence of these problems could result in the

delay or loss of market acceptance of our products and would likely harm our business. Defects or performance problems with our products could result in financial or other damages to our customers. From time to time, we have been involved in disputes regarding product warranty issues. Although we seek to limit our liability, a product liability claim brought against us, even if unsuccessful, would likely be time consuming, ~~and~~ could be costly to ~~defend.~~defend, and may hurt our reputation in the marketplace. Our customers could also seek and obtain damages from us for their losses. We have accrued liabilities for potential damages related to performance ~~problems,~~problems; however, actual results may be different than the assumptions used in our accrual calculations.

We compete on the basis of our products’ reliability, efficiency, environmental considerations and cost. Technological advances in alternative energy products or improvements in the electric grid or other sources of power generation, or other fuel cell technologies may negatively affect the development or sale of some or all of our products or make our products non-competitive or obsolete prior to or after commercialization. Other companies, some of which have substantially greater resources than ours, are currently engaged in the development of products and technologies that are similar to, or may be competitive with, our products and technologies.

Several companies in the U.S. are engaged in fuel cell development, although we are the only domestic company engaged in manufacturing and deployment of stationary carbonate fuel cells. Other emerging fuel cell technologies (and the companies developing them) include small or portable ~~PEM~~proton-exchange membrane (“PEM”) fuel cells (Ballard Power Systems, Plug Power, and increasing activity by numerous automotive companies including Toyota, Hyundai, Honda and GM), stationary phosphoric acid fuel cells (Doosan), stationary solid oxide fuel cells ~~(LG/Rolls Royce partnership and Bloom~~(Bloom Energy), and small residential solid oxide fuel cells (Ceres Power Holdings and Ceramic Fuel Cells Ltd.). Each of these competitors has the potential to capture market share in our target markets. There are also other potential fuel cell competitors internationally that could capture market share.

Other than fuel cell developers, we must also compete with companies that manufacture ~~more mature~~ combustion-based distributed power equipment, including various engines and turbines, and have well-established manufacturing, distribution, ~~and~~ operating and cost features. Electrical efficiency of these products can be competitive with our SureSource power plants in certain applications. Significant competition may also come from gas turbine companies and large scale solar and wind technologies.

We derive significant revenue from contracts awarded through a competitive bidding ~~process~~processes involving substantial costs and risks. Due to this competitive pressure, we may be unable to grow revenue and achieve profitability.

We expect a significant portion of the business that we will seek in the foreseeable future will be awarded through competitive bidding ~~versus~~against other fuel cell technologies and other forms of power generation. 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. In addition, following a contract award, we may encounter significant expense, delay or contract modifications as a result of our competitors protesting or challenging contracts awarded to us in competitive bidding. In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. We may not be able to obtain task orders or recognize revenue under these multi-award contracts. Our failure to compete effectively in this procurement environment ~~would~~could adversely affect our revenue and/or profitability.

Unanticipated increases or decreases in business growth may result in adverse financial consequences for us.

If our business grows more quickly than we anticipate, our existing and planned manufacturing facilities may become inadequate and we may need to seek out new or additional space, at considerable cost to us. If our business does not grow as quickly as we expect, our existing and planned manufacturing facilities would, in part, represent excess capacity for which we may not recover the ~~cost~~cost. 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.

Our plans are dependent upon market acceptance of, as well as enhancements to, our products. Fuel cell systems represent an emerging market, and we cannot be sure that potential customers will accept fuel cells as a replacement for traditional power sources or non-fuel based power sources. 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 market is still evolving, it is difficult to predict with certainty the size of the market and its growth rate. The development of a market for our products may be affected by many factors that are out of our control, including:

If a sufficient market fails to develop or develops more slowly than we anticipate, we may be unable to recover the losses we will have incurred in the development of our products and may never achieve profitability.

As we continue to expand markets for our products, we intend to continue offering power production guarantees and other terms and conditions relating to our products that will be acceptable to the marketplace, and continue to develop a service organization that will aid in servicing our products and obtain self-regulatory certifications, if available, with respect to our products. Failure to achieve any of these objectives may also slow the development of a sufficient market for our products and, therefore, have a material adverse effect on our results of operations and financial condition.

We are substantially dependent on a concentrated number of customers and the loss of any one of these customers could adversely affect our business, financial condition and results of operations.

We contract with a concentrated number of customers for the sale of products and for research and development contracts. There can be no assurance that we will continue to achieve the current level of sales of our products to our largest customers. Even though our customer base is expected to increase and our revenue streams to diversify, a substantial portion of net revenues could continue to depend on sales to a limited number of customers. Our agreements with these customers may be canceled if we fail to meet certain product specifications or research and development milestones or materially breach the agreements, or if our customers materially breach the agreements, and our customers may seek to renegotiate the terms of current agreements or renewals. The loss of, or a reduction in sales to, one or more of our larger customers could have a material adverse effect on our business, financial condition and results of operations.

~~As our relationship with POSCO Energy changes, we may not be able to succeed in our efforts to access the South Korean and Asian markets.~~

We have historically relied on POSCO Energy to develop and grow the South Korean and Asian markets for our products and services. We entered into manufacturing and technology transfer agreements with POSCO Energy in 2007, 2009 and 2012, each of which expires on October 31, 2027. The Cell Technology Transfer Agreement (“CTTA”) provides POSCO Energy with the technology rights to manufacture SureSource power plants in South Korea and the right to sell power plants throughout Asia. The CTTA requires POSCO Energy to pay to the Company a 3.0% royalty on POSCO Energy net product sales, as well as a royalty on scheduled fuel cell module replacements under service agreements for modules that were built by POSCO Energy and installed at plants in Asia under the terms of our Master Service Agreement with POSCO Energy. In March 2017, we entered into a memorandum of understanding with POSCO Energy to permit us to directly develop the Asian fuel cell business, including the right for us to sell SureSource solutions in South Korea and the broader Asian market. We and POSCO Energy also agreed to undertake to amend the CTTA and other agreements by a target date of September 30, 2017, to reflect our

new relationship. Although the CTTA and other agreements have not yet been amended, we continue to engage in discussions with POSCO Energy regarding our relationship and the direction of the fuel cell business in the South Korean and Asian markets. We cannot predict the outcome of such discussions, the future status or scope of our relationship with POSCO Energy, or whether our relationship with POSCO Energy will continue in the future. If we enter into new or amended agreements with POSCO Energy, those agreements may be on terms that are less favorable to us than our existing agreements. If our relationship with POSCO Energy ends, or continues on terms that are less favorable to us, our efforts to access the South Korean and Asian markets, which are complex markets, may not be successful or may be hindered or delayed.

If our goodwill and other intangible assets, long-lived assets, inventory or project assets become impaired, we may be required to record a significant charge to earnings.

We may be required to record a significant charge to ~~earnings~~operations in our financial statements should we determine that our goodwill, other intangible assets (i.e., in process research and development (“IPR&D”)), other long-lived assets (i.e., property, plant and ~~equipment)~~equipment and definite-lived intangible assets), inventory, or project assets are impaired. Such a charge might have a significant impact on our reported financial ~~position~~condition and results of operations. We recorded a charge during the year ended October 31, 2019 for a specific construction in process asset related to automation equipment for use in manufacturing with a carrying value of $2.8 million, which was impaired due to uncertainty as to whether the asset will be completed as a result of our liquidity position and continued low level of production rates.

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. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill might not be recoverable include a significant decline in projections of future cash flows and lower future growth rates in our industry. We review IPR&D for impairment on an annual basis as of July 31 or more frequently if facts and circumstances indicate the fair value is less than the carrying value. If the technology has been determined to be abandoned or not recoverable, we would be required to impair the asset. We review inventory, long-lived assets and project assets for impairment whenever events or changes in circumstances indicate ~~that~~ the carrying amount may not be recoverable. We consider a project commercially viable and recoverable if it is anticipated to be sellable for a profit, or generates positive cash flows, once it is either fully developed or fully constructed. If our projects are not considered commercially viable, we would be required to impair the respective project assets.

The amount of total inventory as of October 31, ~~2017~~2019 and October 31, ~~2016~~2018 was ~~$74.5~~$56.7 million ($2.2 million of which was classified as long-term inventory) and ~~$73.8~~$54.5 million (none of which was classified as long-term inventory), respectively, which includes work in process inventory totaling ~~$54.4~~$31.2 million and ~~$48.5~~$29.1 million, respectively. We ~~have recently~~ reduced our production rate and ~~expect to operate~~have been operating at a lower level for a period of time in order to deploy inventory to new projects and mitigate future increases in ~~inventory. There is no guarantee, however, that we will be successful in deploying our existing~~ inventory. In addition, there are risks that our inventory could lose some or all of its value due to technological obsolescence, shifts in market demand or other unexpected changes in industry conditions and circumstances. If we are unable to deploy our current inventory or new inventory consistent with our business plan, we may be required to sell it at a loss, abandon it or recycle it ~~onto~~into different products. These actions would result in a significant charge to earnings. Such a charge might have a significant impact on our financial ~~position~~condition and results of operations.

Our ~~Advanced Technologies~~advanced technologies contracts are subject to the risk of termination by the contracting party and we may not realize the full amounts allocated under ~~the~~some contracts due to the lack of Congressional appropriations.

A portion of our fuel cell revenues ~~have~~has been derived from long-term cooperative agreements and other contracts with the U.S. Department of Energy and other U.S. government agencies. These agreements are important to the continued development of our technology and our products. We also contract ~~and partner~~ with private sector companies under certain ~~Advanced Technologies~~advanced technologies contracts to develop strategically important and complementary offerings.

Generally, our government research and development contracts are subject to the risk of termination at the convenience of the contracting agency. Furthermore, these contracts, irrespective of the amounts allocated by the contracting agency, are subject to annual Congressional appropriations and the results of government or agency sponsored reviews and audits of our cost reduction projections and efforts. We can only receive funds under these contracts ultimately made available to us annually by Congress as a result of the appropriations process.

Accordingly, we cannot be sure whether we will receive the full amounts awarded under our government research and development or other contracts. Failure to receive the full amounts under any of our government research and development contracts could materially and adversely affect our business prospects, results of operations and financial condition.

Our privately funded advanced technologies contracts are subject to termination at the convenience of the contracting party and contain certain milestones and deliverables. Accordingly, we cannot be sure whether we will receive the full amounts contracted for under privately funded advanced technologies contracts. Termination of these contracts or failure to receive the full amounts under any of these contracts could materially and adversely affect our business prospects, results of operations and financial condition.

A negative government audit could result in an adverse adjustment of our revenue and costs and could result in civil and criminal penalties.

Government agencies, such as the Defense Contract Audit Agency, routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations, and standards. If the agencies determine through these audits or reviews that we improperly allocated costs to specific contracts, they will not reimburse us for these costs. Therefore, an audit could result in adjustments to our revenue and costs.

Further, although we have internal controls in place to oversee our government contracts, no assurance can be given that these controls are sufficient to prevent isolated violations of applicable laws, regulations and standards. If the agencies determine that we or one of our subcontractors engaged in improper conduct, we may be subject to civil or criminal penalties and administrative sanctions, payments, fines, and suspension or prohibition from doing business with the government, any of which could materially affect our results of operations and financial condition.

The U.S. government has certain rights relating to our intellectual property, including the right to restrict or take title to certain patents.

Multiple U.S. patents that we own have resulted from government-funded research and are subject to the risk of exercise of “march-in” rights by the government. March-in rights refer to the right of the U.S. government or a government agency to exercise its non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government if the contractor fails to continue to develop the technology. These “march-in” rights permit the U.S. government to take title to these patents and license the patented technology to third parties if the contractor fails to utilize the patents.

We are, from time to time depending on our overall employee count, classified for government contracting as a “Large Business”, which could adversely affect our rights to own future patents under Department of Energy (“DOE”)-funded contracts.

We are, from time to time depending on our overall employee count, classified as a “large business” under DOE contracts. This allows us to own the patents that we develop under new DOE contracts if we obtain a waiver from the DOE. A “large business” under applicable government regulations generally consists of more than 500 employees averaged over a one year period. We will not own future patents we develop under new contracts, grants or cooperative agreements funded by the DOE, unless we obtain a patent waiver from the DOE. Should we not obtain a patent waiver and outright ownership, we would nevertheless retain exclusive rights to any such patents, so long as we continue to commercialize the technology covered by the patents.

We cannot assure you that we will enter into business relationships that are consistent with, or sufficient to support, our commercialization plans and our growth strategy or that these relationships will be on terms favorable to us. Even if we enter into these types of relationships, we cannot assure you that the business associates with ~~which~~whom we form relationships will focus adequate resources on selling our products or will be successful in selling them. Some of these arrangements have required or will require that we grant exclusive rights to certain companies in defined territories. These exclusive arrangements could result in our being unable to enter into other arrangements at a time when the business associate with ~~which~~whom we form a relationship is not successful in selling our products or has reduced its commitment to marketing our products. In addition, future arrangements may also include the issuance of equity ~~and~~and/or warrants to purchase our equity, which may have an adverse effect on our stock ~~price.~~price and would dilute our existing stockholders. To the extent we enter into partnerships or other business relationships, the failure of these partners or other business associates to assist us with the deployment of our products may adversely affect our results of operations and financial condition.

We depend on third party suppliers for the development and supply of key raw materials and components for our products.

We use various raw materials and components to construct a fuel cell module, including nickel and stainless steel which are critical to our manufacturing process. We also rely on third-party suppliers for the balance-of-plant components in our products. Suppliers must undergo a qualification process, which takes four to twelve months. We continually evaluate new suppliers, and we are currently qualifying several new suppliers. There are a limited number of suppliers for some of the key components of our 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 SureSource products. 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.

Due to our prior constrained liquidity, we previously delayed certain payments to third parties, including our suppliers, to conserve cash. Management entered into forbearance agreements and payment arrangements with certain suppliers. However, suppliers whose payments were delayed may take action against us, including, but not limited to, filing litigation, arbitration or other proceedings against us.

We do not know whether we will be able to maintain long-term supply relationships with our critical suppliers, or secure new long-term supply relationships, or whether such relationships will be on terms that will allow us to achieve our objectives. Our business prospects, results of operations and financial condition could be harmed if we fail to secure long-term relationships with entities that will supply the required components for our SureSource products.

We depend on our intellectual property, and our failure to protect that intellectual property could adversely affect our future growth and success.

Failure to protect our existing intellectual property rights may result in the loss of our exclusivity or the right to use our technologies. If we do not adequately ensure our freedom to use certain technology, we may have to pay others for rights to use their intellectual property, pay damages for infringement or misappropriation, or be enjoined from using such intellectual property. We rely on patent, trade secret, trademark and copyright law to protect our intellectual property. ~~In addition, we~~

We have licensed our carbonate fuel cell manufacturing intellectual property to POSCO Energy through a series of manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012, which agreements expire on October 31, 2027, and have provided POSCO Energy with the exclusive right to manufacture, sell, distribute and service our SureSource 300, SureSource 1500 and SureSource 3000 fuel cell technology in Asia. In addition, effective as of June 11, 2019, we entered into the EMRE License Agreement, pursuant to which we agreed, subject to the terms of the EMRE License Agreement, to grant EMRE 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. Such right and license is sublicensable to third parties performing work for or with EMRE or its affiliates, but shall not otherwise be sublicensable. We depend on POSCO Energy and EMRE to also protect our intellectual property rights as licensed.

As of October 31, ~~2017,~~2019, we, excluding our subsidiaries, had 9295 U.S. patents and ~~106~~153 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~~solid oxide fuel cell (“SOFC”) technology, PEM fuel cell technology and applications thereof. As of October 31, ~~2017,~~2019, we also had 3062 patent applications pending in the U.S. and 93112 patent applications pending in other jurisdictions. Our U.S. patents will expire between ~~2018~~2020 and ~~2035,~~2037, and the current average remaining life of our U.S. patents is approximately ~~9.2~~8.4 years. Our subsidiary, Versa Power Systems, Ltd., as of October 31, ~~2017,~~2019, had 3533 U.S. patents and 7596 international patents covering the SOFC technology (in certain cases covering the same technology in multiple jurisdictions), with an average remaining U.S. patent life of approximately ~~6.8~~5.5 years. As of October 31, ~~2017,~~2019, Versa Power Systems, Ltd. also had 41 pending U.S. patent ~~applications~~application and 1411 patent applications pending in other jurisdictions. In addition, as of October 31, 2019, our subsidiary, FuelCell Energy Solutions, GmbH, ~~has~~had license rights to ~~use FuelCell Energy’s carbonate fuel cell technology, and, as of October 31, 2017, had~~ 2 U.S. patents and 97 patents outside the U.S. for carbonate fuel cell technology licensed from Fraunhofer IKTS.

Some of our intellectual property is not covered by any patent or patent application and includes trade secrets and other know-how that is not able to be patented, particularly as it relates to our manufacturing processes and engineering design. In addition, some of our intellectual property includes technologies and processes that may be similar to the patented technologies and processes of third parties. If we are found to be infringing third-party patents, we do not know whether we will be able to obtain licenses to use such patents on acceptable terms, if at all. Our patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope, and enforceability of a particular patent.

We cannot assure you that any of the U.S. or international patents owned by us or other patents that third parties license to us will not be invalidated, circumvented, challenged, rendered unenforceable or licensed to others, or that any of our pending or future patent applications will be issued with the breadth of claim coverage sought by us, if issued at all. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain foreign countries.

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 ~~partners~~business associates and employees. 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. Certain of our intellectual property has been licensed to us on a non-exclusive basis from third parties that may also license such intellectual property to others, including our competitors. If our licensors are found to be infringing third-party patents, we do not know whether we will be able to obtain licenses to use the intellectual property licensed to us on acceptable terms, if at all.

If necessary or desirable, we may seek extensions of existing licenses or further licenses under the patents or other intellectual property rights of others. However, we can give no assurances that we will obtain such extensions or further licenses or that the terms of any offered licenses will be acceptable to us. The failure to obtain a license from a third party for intellectual property that we use at present could cause us to incur substantial liabilities, and to suspend the manufacture or shipment of products or our use of processes requiring the use of that intellectual property.

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 the intellectual property rights of others or commence lawsuits against others who we believe are infringing our rights or violating their agreements to protect our intellectual property. Our involvement in intellectual property litigation could result in significant expense to us, adversely affecting the development of sales of the challenged product or intellectual property and diverting the efforts of our technical and management personnel, whether or not that litigation is resolved in our favor.

Our future success will depend on our ability to attract and retain qualified management, technical, and other personnel.

Our future success is substantially dependent on the ~~continued~~ services and performance of our executive officers and other key management, engineering, scientific, manufacturing and operating ~~personnel, particularly Arthur Bottone, our Chief Executive Officer.~~personnel. The loss of the services of ~~any executive officer, including Mr. Bottone, or other~~ key management, engineering, scientific, manufacturing and operating personnel could materially adversely affect our business. Our ability to achieve our commercialization plans and to increase production at our manufacturing facility in the future will also depend on our ability to attract and retain additional qualified management, technical, manufacturing and operating personnel. Recruiting personnel for the fuel cell industry is competitive. We do not know whether we will be able to attract or retain additional qualified management, technical, manufacturing and operating personnel. Our inability to attract and retain additional qualified management, technical, manufacturing and operating personnel, or the departure of key employees, could materially and adversely affect our development, commercialization and manufacturing plans and, therefore, our business prospects, results of operations and financial condition. In addition, our inability to attract and retain sufficient management, technical, manufacturing and operating personnel to quickly increase production at our manufacturing facility when and if needed to meet increased demand may adversely impact our ability to respond rapidly to any new product, growth or revenue opportunities.

Our inability to attract and retain sufficient qualified management, ~~may be unable to manage rapid growth effectively.~~

~~We may rapidly expand our facilities~~technical, engineering, research, and manufacturing ~~capabilities, accelerate the commercialization~~personnel to staff our third party research contracts may result in our inability to complete such contracts or terminations of ~~our products~~such contracts, which may adversely impact financial conditions and enter a period of rapid growth, which will place a significant strain on our senior management team and our financial and other resources. Any expansion may expose us to increased competition, greater overhead, marketing and support costs and other risks associated with the commercialization of a new product. We would need to obtain sufficient backlog in order to maintain the use of the expanded capacity. Our ability to manage rapid growth effectively will require us to continue to secure adequate sources of capital and financing, improve our operations, improve our financial and management information systems and train, motivate and manage our employees. Difficulties in effectively managing issues presented by such a rapid expansion could harm our business prospects, results of ~~operations and financial condition.~~operations.

We are subject to various federal, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of carbon dioxide and pollutants into the atmosphere. In addition, it is possible that industry-specific laws and regulations will be adopted covering matters such as transmission scheduling, distribution, emissions, and the characteristics and quality of our products, including installation and servicing. 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. Accordingly, compliance with existing or future laws and regulations could have a material adverse effect on our business prospects, results of operations and financial condition.

Utility companies may resist the adoption of distributed generation and could impose customer fees or interconnection requirements on our customers that could make our products less desirable.

Investor-owned utilities may resist adoption of distributed generation fuel cell plants as such plants are disruptive to the utility business model that primarily utilizes large central generation power plants and associated transmission and distribution. On-site distributed generation that is on the customer-side of the electric meter competes with the utility. Distributed generation on the utility-side of the meter generally has power output that is significantly less than central generation power plants and may be perceived by the utility as too small to materially impact its business, limiting its interest. Additionally, perceived technology risk may limit utility interest in stationary fuel cell power plants.

Utility companies commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back up purposes. These fees could increase the cost to our customers of using our SureSource products and could make our products less desirable, thereby harming our business prospects, results of operations and financial condition.

Several U.S. states have created and adopted, or are in the process of creating, their own interconnection regulations covering both technical and financial requirements for interconnection to utility grids. Depending on the complexities of the requirements, installation of our systems may become burdened with additional costs that might have a negative impact on our ability to sell systems. The Institute of Electrical and Electronics Engineers has been working to create an interconnection standard addressing the technical requirements for distributed generation to interconnect to utility grids. Many parties are hopeful that this standard will be adopted nationally to help reduce the barriers to deployment of distributed generation such as fuel cells; however, this standard may not be adopted nationally thereby limiting the commercial prospects and profitability of our fuel cell systems.

We could be liable for environmental damages resulting from our research, development or manufacturing operations.

Our business exposes us to the risk of harmful substances escaping into the environment, resulting in personal injury or loss of life, damage to or destruction of property, and natural resource damage. Depending on the nature of the claim, our current insurance policies may not adequately reimburse us for costs incurred in settling environmental damage claims, and in some instances, we may not be reimbursed at all. Our business is subject to numerous federal, state, and local laws and regulations that govern environmental protection and human health and safety. We believe that our businesses are operating in compliance in all material respects with applicable environmental ~~laws,~~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.

Our operations may not comply with future laws and regulations and we may be required to make significant unanticipated capital and operating expenditures. If we fail to comply with applicable environmental laws and regulations, governmental authorities may seek to impose fines and penalties on us or to revoke or deny the issuance or renewal of operating permits and private parties may seek damages from us. Under those circumstances, we might be required to curtail or cease operations, conduct site remediation or other corrective action, or pay substantial damage claims.

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.

Our business exposes us to potential product liability claims that are inherent in products that use hydrogen. Our products utilize fuels such as natural gas and convert these fuels internally to hydrogen that is used by our products to generate electricity. The fuels we use are combustible and may be toxic. In addition, our SureSource products operate at high temperatures and use corrosive carbonate material, which could expose us to potential liability claims. 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. 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.

Since we market our products both inside and outside the U.S., our success depends in part on our ability to secure international customers and our ability to manufacture products that meet foreign regulatory and commercial requirements in target markets. Sales to customers located outside the U.S. accounts for a significant portion of our consolidated revenue. Sales to customers in South Korea represent the majority of our international sales. We have limited experience developing and manufacturing our products to comply with the commercial and legal requirements of international markets. In addition, we are subject to tariff regulations and requirements for export licenses, particularly with respect to the export of some of our technologies. 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. Any of these factors could adversely affect our results of operations and financial condition.

We source raw materials and parts for our products on a global basis, which subjects us to a number of potential risks, including the impact of export duties and quotas, trade protection measures imposed by the U.S. and other countries including tariffs, potential for labor unrest, changing global and regional economic conditions and current and changing regulatory environments. Changes to these factors may have an adverse effect on our ability to source raw materials and parts in line with our current cost structure.

Although our reporting currency is the U.S. dollar, we conduct our business and incur costs in the local currency of most countries in which we operate. As a result, we are subject to currency translation and transaction risk. Joint ventures or other business arrangements with strategic partners outside of the United States have involved and are expected in the future to involve investments denominated in the local currency. Changes in exchange rates between foreign currencies and the U.S. dollar could affect our net sales and cost of sales and could result in exchange gains or losses. We cannot accurately predict the impact of future exchange rate fluctuations on our results of operations.

We could also expand our business into new and emerging markets, many of which have an uncertain regulatory environment relating to currency policy. Conducting business in such markets could cause our exposure to changes in exchange rates to increase, due to the relatively high volatility associated with emerging market currencies and potentially longer payment terms for our proceeds. Our ability to hedge foreign currency exposure is dependent on our credit profile with financial institutions that are willing and able to do business with us. Deterioration in our credit position or a significant tightening of the credit market conditions could limit our ability to hedge our foreign currency exposure and, therefore, result in exchange gains or losses.

Exports of certain of our products are subject to various export control regulations and may require a license or permission from the U.S. Department of State, the U.S. Department of Energy or other agencies.

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. We are subject to export control laws and regulations, including the International Traffic in Arms Regulation, ~~(“ITAR”),~~ the Export Administration Regulation, ~~(“EAR”),~~ and the Specially Designated Nationals and Blocked Persons List, which generally prohibit U.S. companies and their intermediaries from exporting certain products, importing materials or supplies, or otherwise doing business with restricted countries, businesses or individuals, and require companies to maintain certain policies and procedures to ensure compliance. We are also subject to the Foreign Corrupt Practices Act which prohibits improper payments to foreign governments and their officials by U.S. and other business

entities. Under these laws and regulations, U.S. companies may be held liable for their actions and actions taken by their strategic or local partners or representatives. 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.

We are also subject to registration under the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). Due to the nature of certain of our products and technology, we must obtain licenses or authorizations from various U.S. government agencies such as DDTC or ~~DOE,~~the U.S. Department of Energy, before we are permitted to sell such products or license such technology outside of the U.S. We can give no assurance that we will continue to be successful in obtaining the necessary licenses or authorizations or that certain sales will not be prevented or delayed. Any significant impairment of our ability to sell products or license technology outside of the U.S. could negatively impact our results of operations, financial condition or liquidity.

We depend on strategic relationships with third parties, and the terms and enforceability of many of these relationships are not certain.

We have entered into strategic relationships with third parties for the design, product development, sale and service of our existing products and products under development, some of which may not have been documented by a definitive ~~agreement.~~agreement and others of which may require renewal. The terms and conditions of many of these relationships allow for termination by the third parties. Termination or expiration of any of these relationships could adversely affect our ability to design, develop and distribute these products to the marketplace. We cannot assure you that we will be able to successfully negotiate and execute definitive agreements or renewals with any of these third parties, and failure to do so may effectively terminate the relevant relationship.

~~If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our brand and operating results.~~

Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. We have devoted significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002. In addition, Section 404 under the Sarbanes-Oxley Act of 2002 requires that we assess, and that our auditors attest to, the design and operating effectiveness of our controls over financial reporting. Our compliance with the annual internal control report requirement for each fiscal year will depend on the effectiveness of our financial reporting and data systems and controls. Inferior internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock and our access to capital.

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~~.

~~Information~~operations. In addition, increased information technology ~~is critically important~~security threats and more sophisticated computer crime pose a risk to our ~~business operations.~~ systems, networks, products and services.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information and to manage a variety of business processes and activities, including communication with power plants owned by us or our customers and production, manufacturing, financial, logistics, sales, marketing and administrative functions. Additionally, we collect and store data that is sensitive to us and to third parties. Operating these information technology networks and systems and processing and maintaining this data, in a secure manner, are critical to our business operations and strategy. We depend on our information technology infrastructure to communicate internally and externally with employees, customers, suppliers and others. We also use information technology networks and systems to comply with regulatory, legal and tax requirements and to operate our fuel cell power plants. 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. If any of our significant information technology systems suffer severe damage, disruption or shutdown, and our disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial

results, or our fuel cell power plant operations may be disrupted, exposing us to performance penalties under our contracts with customers.

In addition, information technology security threats — from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and data — are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity attacks could also include attacks targeting customer data or the security, integrity and/or reliability of the hardware and software installed in our products. We have experienced, and may continue to experience in the future, cybersecurity attacks that have resulted in unauthorized parties gaining access to our information technology systems and networks and, in one instance, gaining control of the information technology system at one of our power plants. However, to date, no cybersecurity attack has resulted in any material loss of data, interrupted our day-to-day operations or had a material impact on our financial condition, results of operations or liquidity. While we actively manage information technology security risks within our control, there can be no assurance that such actions will be sufficient to mitigate all potential risks to our systems, networks and data. In addition to the direct potential financial risk as we continue to build, own and operate generation assets, other potential consequences of a material cybersecurity attack include reputational damage, litigation with third parties, disruption to systems, unauthorized release of confidential or otherwise protected information, corruption of data, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack.

Litigation could expose us to significant costs and adversely affect our business, financial condition, and results of operations.

We are, or may become, party to various lawsuits and claims arising in the ordinary course of business, which may include lawsuits or claims relating to commercial liability, product recalls, product liability, product claims, employment matters, environmental matters, breach of contract, or other aspects of our business. Litigation is inherently unpredictable, and although we may believe we have meaningful defenses in these matters, we may incur judgments or enter into settlements of claims that could have a material adverse effect on our business, financial condition, and results of operations. The costs of responding to or defending litigation may be significant and may divert the attention of management away from our strategic objectives. There may also be adverse publicity associated with litigation that may decrease customer confidence in our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may have a material adverse effect on our business, financial condition, and results of operations.

Our results of operations could vary as a result of changes to our accounting policies or the methods, estimates and judgments we use in applying our accounting policies.

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that could lead us to reevaluate our methods, estimates and judgments.

In future periods, management will continue to reevaluate its estimates for contract margins, service agreements, loss accruals, warranty, performance guarantees, liquidated damages and inventory valuation allowances. Changes in those estimates and judgments could significantly affect our results of operations and financial condition. We ~~may~~will also adopt changes required by the Financial Accounting Standards Board and the ~~Securities and Exchange Commission.~~SEC.

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:

In the past, following periods of volatility in the market price of their stock, many companies have been the subject of securities class action litigation. If we became involved in securities class action litigation in the future, it could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business prospects, results of operations and financial condition.

Provisions of Delaware and Connecticut law and of our ~~charter~~certificate of incorporation and by-laws and our outstanding securities may make a takeover more difficult.

Provisions in our ~~certificate~~Certificate of ~~incorporation~~Incorporation, as amended (“Certificate of Incorporation”), and ~~by-laws~~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. In addition, certain provisions of the Class A Cumulative Redeemable Exchangeable Preferred Shares issued by FCE FuelCell Energy Ltd. ~~Series~~(the “Series 1 Preferred ~~Shares, our Series B preferred stock~~Shares”) and our Series CB Preferred Shares could make it more difficult or more expensive for a third party to acquire us. Public stockholders who might desire to participate in such a transaction may not have an opportunity to do so. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or change in our management and board of directors.

Our ~~amended and restated by-laws~~By-Laws provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum deemed favorable by the stockholder for disputes with us or our directors, officers or employees.

Our ~~amended and restated by-laws~~By-Laws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our ~~certificate~~Certificate of ~~incorporation~~Incorporation or our ~~amended and restated by-laws,~~By-Laws, any action to interpret, apply, enforce, or determine the validity of our ~~certificate~~Certificate of ~~incorporation~~Incorporation or ~~amended and restated by-laws,~~By-Laws, or any action asserting a claim against us that is governed by the internal affairs doctrine. 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. Alternatively, if a court were to find the choice of forum provision contained in our ~~amended and restated by-laws~~By-Laws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

The implementation of our business plan and strategy will require additional capital.

The implementation of our business plan and strategy requires additional ~~capital.~~capital to fund operations as well as investment by us in project assets. If we are unable to raise additional capital in the amounts required, or at all, we will not be able to successfully implement our business plan and strategy. There can be no guarantee that we will be able to raise such additional capital at the times required or in the amounts required for the implementation of our business plan and strategy. In addition, the recent change to a more capital-intensive business model increases the risks of our being able to successfully implement our plans, if we do not raise additional capital in the amounts required. If we are unable to raise additional capital, our business, operations and prospects could be materially and adversely affected.

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. If we do not raise additional capital, our business could fail or be materially and adversely affected.

We will need to raise additional funds in debt and equity financings, and these funds may not be available to us when we need them or on acceptable terms, if at all. Such additional financings could be significant. If we raise additional funds through further issuances of our common stock, or securities convertible or exchangeable into shares of our common stock, into the public market, including shares of our common stock issued upon exercise of options or warrants, ~~you~~holders of our common stock could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of our then-existing capital stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we cannot raise additional funds when we need them, our business and prospects could fail or be materially and adversely affected. 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.

Future sales of substantial amounts of our common stock could affect the market price of our common stock.

Future sales of substantial amounts of our common stock, or securities convertible or exchangeable into shares of our common stock, into the public market, including shares of our common stock issued upon exercise of options or warrants, or perceptions that those sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital in the future.

We may be subject to actions for rescission or damages or other penalties in connection with certain sales of shares of our common stock in the open market.

Between August 2005 and April 2017, we sold shares of our common stock pursuant to a series of “at-the-market” sales plans. The shares sold pursuant to these sales plans represented a portion of the shares registered by us pursuant to shelf registration statements we filed with the SEC during this time period. While we reported the actual shares sold and proceeds, net of fees, of sales made during each fiscal quarter pursuant to the sales plans in our annual and quarterly reports on Forms 10-K and 10-Q, we did not file or deliver prospectus supplements at the time of or prior to making these sales. Accordingly, these sales may not have been in compliance with applicable federal and/or state securities laws, and the purchasers of such shares may have rescission rights or claims for damages. In addition, to the extent that these sales were not in compliance with applicable federal and/or state securities laws, we may be subject to penalties imposed by the SEC and/or state securities agencies. We have reported these sales to the SEC, and in response to our report, the SEC has opened an informal investigation of these sales. If purchasers successfully seek rescission and/or damages, and/or the SEC and/or state securities agencies impose financial penalties on us which are not covered by insurance, we may not have sufficient resources to make the necessary payments, and any such claims, damages or penalties could have a material adverse effect on our stock price, business prospects, results of operations, and financial condition. Although we believe we would have defenses to such claims or actions if brought, we are unable to predict ~~the likelihood of any claims or actions being brought against us, or~~ the amount of any damages or financial penalties which could be sought against us, or the extent to which any such financial exposure would be covered by insurance. However, we believe the likelihood of any claims or actions being brought against us is remote.

The situation with POSCO Energy has limited and continues to limit our efforts to access the South Korean and Asian markets and could expose us to costs of arbitration or litigation proceedings.

From approximately 2007 through 2015, we relied on POSCO Energy to develop and grow the South Korean and Asian markets for our products and services. We entered into manufacturing and technology transfer agreements with POSCO Energy in 2007, 2009 and 2012, each of which expires on October 31, 2027. The Cell Technology Transfer Agreement (“CTTA”) provides POSCO Energy with the technology rights to manufacture, sell, distribute and service our SureSource 300, SureSource 1500 and SureSource 3000 fuel cell technology in Asia. The CTTA requires POSCO Energy to pay to us a 3.0% royalty on POSCO Energy net product sales, as well as a royalty on scheduled fuel cell module replacements under service agreements for modules that were built by POSCO Energy and installed at plants in Asia under the terms of long-term service agreements between POSCO Energy and its customers. While the aforementioned manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012 remain in effect, due to certain action and inactions of POSCO Energy, we have not realized any material revenues, royalties or new projects developed by POSCO Energy since 2016.

In March 2017, we entered into a memorandum of understanding (“MOU”) with POSCO Energy to permit us to directly develop the Asian fuel cell business, including the right for us to sell SureSource solutions in South Korea and the broader Asian market. In June 2018, POSCO Energy advised us in writing that it was terminating the MOU effective July 15, 2018. Pursuant to the terms of the MOU, notwithstanding its termination, we will continue to execute on sales commitments in Asia secured in writing prior to July 15, 2018, including the 20 MW power plant installed for KOSPO.

On or about November 2, 2018, POSCO Energy served FuelCell Energy with an arbitration demand, initiating a proceeding to resolve various outstanding amounts between the companies. The parties amicably resolved the arbitration proceeding in July 2019. Since that date, we have made numerous attempts to engage with POSCO Energy to address the need for deployment of carbonate fuel cell technology in the Asian market in accordance with the requirements of the manufacturing and technology transfer agreements, our understanding of the desire of the South Korean government to advance fuel cell and hydrogen technology, and the needs of the Asian market, but have made little progress to date.

In November 2019, POSCO Energy spun-off its fuel cell business into a new entity, Korea Fuel Cell, Ltd. (“KFC”). As part of the spin-off, POSCO Energy transferred manufacturing and service rights under the aforementioned manufacturing and technology transfer agreements to KFC, but retained distribution rights, including trademarks, and severed its own liability under the aforementioned manufacturing and technology transfer agreements. We believe that these actions are all in material breach of the terms of the CTTA and other manufacturing and technology transfer agreements and are effectively a misappropriation of the Company’s intellectual property. We have formally objected to POSCO Energy’s spin-off, and POSCO Energy has posted a bond to secure any liabilities to FuelCell Energy arising out of the spin-off. In light of the situation with POSCO Energy, we are evaluating all of our options with respect to our relationship and agreements with POSCO Energy, including trade related matters, POSCO Energy’s material breach of its obligations under the CTTA and the manufacturing and technology transfer agreements, and the misappropriation of our intellectual property.

We cannot predict the outcome of any future discussions with, or actions or legal proceedings against, POSCO Energy or KFC, if they occur, the future status or scope of our relationship with POSCO Energy or KFC, whether our relationship with POSCO Energy or KFC will continue in the future, whether we will become involved in additional mediations, arbitrations, litigation or other proceedings with POSCO Energy or KFC, what the costs of any such proceedings will be or the effect of such proceedings on the market. Any such proceedings could result in significant expense to us and adversely affect our business and financial condition and reputation in the market, whether or not such proceedings are resolved in our favor. If our relationship with POSCO Energy or KFC ends, or continues on terms that are less favorable to us, or remains unresolved, our efforts to access the South Korean and Asian markets, which are complex markets, may not be successful or may be limited, hindered or delayed.

The rights of the Series 1 Preferred Shares and our Series B ~~preferred stock~~Preferred Stock could negatively impact our cash flows and the rights of our Series B Preferred Stock could dilute the ownership interest of our stockholders.

The terms of the Series 1 Preferred Shares issued by FCE FuelCell Energy Ltd. (“FCE Ltd.”)~~, our wholly-owned, indirect subsidiary,~~ provide rights to the holder, Enbridge Inc. (“Enbridge”), which could negatively impact us.

The provisions of the Series 1 Preferred Shares, as such will be amended pursuant to a letter agreement entered into by the Company, FCE Ltd. and Enbridge on January 20, 2020, require that FCE Ltd. make annual payments totaling Cdn. $1,250,000, including (i) annual dividend payments of Cdn. $500,000 and (ii) annual return of capital payments of Cdn. ~~$750,000. These~~$750,000, with such payments ~~will end~~to be made on a quarterly basis through December 31, ~~2020. Additional~~2021. Commencing on January 1, 2020, dividends accrue at an annual rate of 15% on ~~cumulative unpaid dividends at a 1.25% quarterly rate, compounded quarterly, until payment thereof. On December 31, 2020,~~ the ~~amount of all~~principal redemption price with respect to the Series 1 Preferred Shares and any accrued and unpaid dividends on the Series 1 Preferred Shares. The aggregate amount of all accrued and unpaid dividends to be paid on the Series 1 Preferred Shares ofon or before December 31, 2021 is expected to be Cdn. ~~$21.1~~$26.5 million and the balance of the principal redemption price ~~of Cdn. $4.4 million shall~~to be paid on or before December 31, 2021 with respect to ~~the holders~~all of the Series 1 Preferred ~~Shares.~~Shares is expected to be Cdn. $3.5 million. In connection with the letter agreement, the Company entered into the Second Amendment to the Orion Credit Agreement (the “Second Orion Amendment”), which adds a new affirmative covenant to the Orion Credit Agreement that obligates the Company to, and to cause FCE Ltd. ~~has~~to, on or prior to November 1, 2021, either (i) pay and satisfy in full all of their respective obligations in respect of, and fully redeem and cancel, all of the ~~option~~Series 1 Preferred Shares of ~~making dividend payments~~FCE Ltd., or (ii) deposit in a newly created account of FCE Ltd. or the ~~form~~Company cash in an amount sufficient to pay and satisfy in full all of ~~common stock~~their respective obligations in respect of, and to effect a redemption and cancellation in full of, all of the Series 1 Preferred Shares of FCE Ltd. The Second Orion Amendment also provides that the articles of FCE Ltd. setting forth the modified terms of the Series 1 Preferred Shares will be considered a “Material Agreement” under the Orion Credit Agreement. Under the Second Orion Amendment, a failure to satisfy this new affirmative covenant or ~~cash under~~to otherwise comply with the terms of the Series 1 Preferred ~~Shares.~~Shares will constitute an event of default under the Orion Credit Agreement, which could result in the acceleration of any amounts outstanding under the Orion Credit Agreement.

We are also required to issue common stock to the holder of the Series 1 Preferred Shares if and when the holder exercises its conversion rights. The number of shares of common stock that we may issue upon conversion could be significant and dilutive to our existing stockholders. For example, assuming the holder of the Series 1 Preferred Shares exercises its conversion rights after July 31, 2020 and assuming our common stock price is $2.19 (our common stock closing price on October 31, 2017) and an exchange rate of U.S. $1.00 to Cdn. $1.29 at the time of conversion, we would be required to issue approximately 1,657,928 shares of our common stock.

The terms of ~~the~~our Series B ~~preferred stock~~Preferred Stock also provide rights to their holders that could negatively impact us. Holders of the Series B ~~preferred stock~~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. To the extent the dividend is paid in shares, additional issuances could be dilutive to our existing stockholders and the sale of those shares could have a negative impact on the price of our common stock. A share of our Series B ~~preferred stock, after giving effect to the December 3, 2015 reverse stock split,~~Preferred Stock may be converted at any time, at the option of the holder, into ~~7.0922~~0.5910 shares of our common stock (which is equivalent to an initial conversion price of ~~$141~~$1,692 per

Furthermore, the conversion rate applicable to the Series B ~~preferred stock~~Preferred Stock is subject to additional adjustment upon the occurrence of certain events.

~~We may not be able to make cash payments to redeem the Series C Preferred Shares.~~

We have the obligation to make bimonthly redemption payments on the Series C Preferred Shares commencing on November 1, 2017. These mandatory redemption payments may be made, at our option, in cash or in shares of our common stock or in a combination of cash and shares of our common stock, except that our right to make payment in shares of common stock is dependent upon our satisfying certain equity conditions. Among other things, these equity conditions include our continued listing on the NASDAQ Global Market or another permitted exchange and our stock maintaining certain minimum average prices and trading volumes during the applicable measurement period. If we cannot satisfy the equity conditions, we will not be able to make our bimonthly mandatory redemption payments in stock, and we would be forced to make such bimonthly payments in cash. We may not have sufficient cash resources at the applicable time to make those cash payments, or to make such cash payments in full. In addition, certain such cash payments may not permitted under the terms of our existing or future indebtedness or may cause us to fail to satisfy financial maintenance covenants.

Further, any failure to pay any amounts due to the holders of the Series C Preferred Shares, as well as certain other “triggering events,” including, without limitation, our failure to timely deliver shares, our suspension of trading, our failure to keep reserved for issuance an adequate number of shares of common stock to cover conversion of the Series C Preferred Shares, and breaches of certain covenants that are not timely cured, where a cure period is permitted, would permit the holders of the Series C Preferred Shares to require us to redeem such Series C Preferred Shares in cash at a price equal to the greater of (i) 125% of the stated value of the Series C Preferred Shares being redeemed plus accrued dividends, if any, and (ii) the market value of the number of shares issuable on conversion of the Series C Preferred Shares, valued at the greatest closing sales price during the period from the date immediately before the triggering event through the date we make the redemption payment. However, if we are actually delisted from The NASDAQ Global Market, without obtaining a listing on another national securities exchange, it would constitute a “triggering event” under the Certificate of Designations for the Series C Preferred Shares and would also cause a failure of the equity conditions. Thus, if we fail to maintain trading or listing, as applicable, or if for any other reason we are required to repurchase the Series C Preferred Shares in cash prior to maturity, no assurance can be given that we would have the cash or financial resources available to us to make such a payment, and such an acceleration could have a material adverse effect on our business, results of operations and financial condition.

The Series CB Preferred ~~Shares rank~~Stock ranks senior to our common stock with respect to ~~dividends, distributions and~~ payments upon ~~liquidation.~~liquidation, dividends, and distributions.

The rights of the holders of ~~the~~our Series CB Preferred ~~Shares~~Stock rank senior to ~~the~~our obligations to our common ~~stockholders and our other preferred~~ stockholders. Upon our liquidation, the holders of Series CB Preferred ~~Shares~~Stock are entitled to receive ~~an amount per Series C Preferred Share equal to the greater of (A) the stated value thereof on the date of such payment, plus accrued dividends, if any and (B) the amount~~$1,000.00 per share ~~such holder would receive if such holder converted such Series C Preferred Shares into common stock immediately prior to the date of such payment. Further,~~plus all accumulated and unpaid dividends (the “Liquidation Preference”). Until the holders of Series CB Preferred ~~Shares have the right to participate~~Stock receive their Liquidation Preference in full, no payment will be made on any ~~payment~~junior shares, including shares of ~~dividends or other distributions made to the holders of~~our common ~~stock to the same extent as if they had converted such Series C Preferred Shares.~~stock. The existence of senior securities such ~~a senior security~~as the Series B Preferred Stock could have an adverse effect on the value of our common stock.

~~Holders of the Series C Preferred Shares have rights that may restrict our ability to operate our business.~~

Under the Certificate of Designations establishing the terms of the Series C Preferred Shares, we are subject to certain covenants that limit our ability to create new series of preferred stock, other than series junior to the Series C Preferred Shares with redemption occurring after the maturity date of the Series C Preferred Shares, and our ability to incur certain indebtedness. Such restrictions may have an adverse effect on our ability to operate our business while the Series C Preferred Shares are outstanding.

~~Our common stockholders may experience significant dilution upon the issuance of common stock upon conversion of or redemption payments under the Series C Preferred Shares.~~

The issuance of common stock as mandatory redemption payments or upon conversion of some or all of the Series C Preferred Shares will dilute the ownership interests of existing holders of shares of our common stock. If the initial aggregate stated value of the Series C Preferred Shares is converted into our common stock at its initial conversion price, we would issue 18,206,522 shares of common stock upon their conversion (without giving effect to any limitation on conversions). This excludes the effect of any common stock we may issue in lieu of paying bimonthly redemption amounts in cash, which may be made at a price lower than the initial conversion price. The initial conversion price of the Series C Preferred Shares is adjustable based on certain events, including in the event of a triggering event and in the event we effect a stock split, combination or similar transaction, to reflect the proportionate (adjusted) trading prices of our common stock before and after the effective date.

We are involved in legal proceedings, claims and litigation arising out of the ordinary conduct of our business. Although we cannot assure the outcome, management presently believes that the result of such legal proceedings, either individually, or in the aggregate, will not have a material adverse effect on our consolidated financial statements, and no material amounts have been accrued in our consolidated financial statements with respect to these matters.

Our common stock has been publicly traded since June 25, 1992. Our common stock trades under the symbol “FCEL” on the Nasdaq Global Market. ~~The following table sets forth the high and low sale prices for our common stock for the periods indicated as reported by the Nasdaq Global Market during the indicated quarters.~~

In December 2017, the number of authorized shares of the Company’s common stock was increased from approximately 125 million shares to 225 million shares by a vote of the holders of a majority of the outstanding shares of the Company’s common stock. In April 2017, the number of authorized shares of the Company’s common stock was increased from approximately 75 million to 125 million by vote of the holders of a majority of the outstanding shares of the Company’s common stock. In April 2016, the number of authorized shares of the Company's common stock was increased from approximately 39.6 million to 75 million by vote of the holders of a majority of the outstanding shares of the Company’s common stock.

On January ~~2, 2018,~~14, 2020, the closing price of our common stock on the Nasdaq Global Market was ~~$1.74~~$2.08 per share. As of January ~~2, 2018,~~14, 2020, there were ~~185~~110 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.

We have never paid a cash dividend on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. In addition, the terms of our Series B ~~preferred shares~~Preferred Stock prohibit the payment of dividends on our common stock unless all dividends on the Series B ~~preferred stock~~Preferred Stock have been paid in full.

In April 2017, the number of authorized shares of the Company’s common stock was increased from 75 million to 125 million by vote of the holders of a majority of the outstanding shares of the Company’s common stock.

In December 2017, the number of authorized shares of the Company’s common stock was increased from 125 million shares to 225 million shares by a vote of the holders of a majority of the outstanding shares of the Company’s common stock.

On May 8, 2019, the Company effected a 1-for-12 reverse stock split, reducing the number of our common shares outstanding on that date from 183,411,230 shares to 15,284,269 shares. The number of authorized shares of common stock remained (and remains) unchanged at 225,000,000 shares and the number of authorized shares of preferred stock remained (and remains) unchanged at 250,000 shares. Additionally, the conversion rate of our Series B Preferred Stock, the conversion price of our then outstanding Series C Convertible Preferred Stock and Series D Convertible Preferred Stock, the exchange price of our Series 1 Preferred Shares, the exercise price of all then outstanding options and warrants, and the number of shares reserved for future issuance pursuant to our equity compensation plans were all adjusted proportionately in connection with the reverse stock split. All share and per share amounts and conversion prices presented herein have been adjusted retroactively to reflect these changes.

Information concerning the Company’s Series B Preferred Stock and the Series 1 Preferred Shares issued by FCE Ltd. is incorporated herein by reference from Note 15. “Redeemable Preferred Stock” and Note 23. “Subsequent Events” of the Notes to the Consolidated Financial Statements.

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, ~~2017~~2019 with the cumulative stockholder total return on the Russell 2000 Index, a peer group consisting of Standard Industry Classification ~~("SIC)~~ Group Code 3690 companies listed on the Nasdaq Global Market and New York Stock Exchange and a customized 12 company peer group. It assumes $100.00 invested on October 31, ~~2012~~2014 with dividends reinvested.

Between August 2005 and April 2017, we sold shares of our common stock pursuant to a series of “at-the-market” sales plans approved by our Audit and Finance Committee and/or our Board of Directors. The intended use of proceeds from the sale of these shares was for general corporate purposes, to pay dividend and interest payments on shares of preferred stock of the Company and its subsidiaries, and to pay interest on our convertible notes outstanding at the time of the sales. The shares sold pursuant to the sales plans represented a portion of the shares registered by us pursuant to shelf registration statements we filed with the SEC during this time period. We previously reported the actual shares sold and proceeds, net of fees, of such sales during each fiscal quarter pursuant to the sales plans in our annual and quarterly reports on Forms 10-K and 10-Q filed with the SEC. Between August 2005 and April 2017, we issued and sold a total of 17.7 million shares of our common stock, for aggregate gross proceeds of $148.5 million and aggregate net proceeds (after aggregate selling commissions of $0.9 million) of $147.6 million pursuant to the “at-the-market” sales plans.

The following table shows the average sale price per share, the average commission per share, and the average per share proceeds to us (with such averages based on all sales made pursuant to the sales plans between August 2005 and April 2017):

The following table provides information regarding the date of, and the maximum number of shares authorized for sale under, each sales plan approved by our Board of Directors and/or our Audit and Finance Committee:

Fidelity Capital Markets or one of its affiliated entities (“Fidelity”) served as our agent for these sales and was authorized, from time to time, to sell up to a specified number of shares of our common stock within certain parameters provided by us to Fidelity from time to time. These parameters included: (i) limitations on the aggregate number of shares to be sold during a particular period; (ii) a target number of shares to be sold on a daily basis, including, in some instances, target ranges of shares to be sold within specified price ranges; (iii) minimum per share prices below which sales could not be made; (iv) trading limits based on a specified percentage of the average daily trading volume or the average trading volume over the duration of the particular sales plan; (v) restrictions requiring Fidelity to cease sales on a day on which the stock price dropped by (or more than) a specified percentage; (vi) authority/discretion to exceed certain parameters upon the occurrence of specified events (e.g., authority to sell more than the target number of shares, up to a specified number of shares, on a day on which the stock price went up by (or more than) a specified percentage); (vii) authority/discretion to cease or otherwise adjust sales based on market conditions; and (viii) the dates or events upon which a particular plan would terminate. Sales under the sales plans could be terminated at any time by us or by Fidelity.

Fidelity was not required to sell any specific number of shares of our common stock during any particular period and was not required to purchase any shares of our common stock. Shares sold by Fidelity under the sales plans were sold on the open market (on or through The Nasdaq Stock Market) at the then-prevailing market prices for our common stock. In connection with these sales, we paid Fidelity commissions ranging from $0.01 per share to $0.36 per share, which were deducted from the proceeds we received from the sale of the shares. The number of shares sold and the commission per share we paid to Fidelity have been adjusted to reflect our 1 for 12 reverse stock split effective on December 3, 2015.

~~There was no arrangement for funds to be received in an escrow, trust or similar arrangement.~~

While we did not enter into a typical “at-the-market” sales agreement with Fidelity, we do have a custody agreement with Fidelity pursuant to which we have agreed, subject to certain limitations on liability, to provide indemnification to Fidelity, its affiliates, and their respective directors, officers, employees, members and agents, against losses and liabilities arising out of or attributable to, among other things, our breach or violation of applicable laws, rules or

regulations, any actions taken or omitted to be taken by Fidelity based on instructions received from us or our agents, or misstatements or omissions in documents filed by us with governmental authorities. We have also agreed to reimburse Fidelity for other out-of-pocket expenses incurred under the custody agreement. In connection with these sales of common stock on our behalf, Fidelity could nonetheless be deemed to have been an “underwriter” within the meaning of the Securities Act of 1933, as amended, and the compensation paid to Fidelity could be deemed to have been underwriting commissions or discounts.

Fidelity has provided, and may in the future provide, various other custody, recordkeeping, and financial services for us and our affiliates, for which services Fidelity has received, and may in the future receive, customary fees.

The Company is authorized to issue up to 250,000 shares of preferred stock, par value $0.01 per share, issuable in one or more series of which shares to date have been issued and designated as Series C Convertible Preferred Stock and 5% Series B Cumulative Convertible Perpetual Preferred Stock.

~~We issued an aggregate of 33,500 shares of our Series C Convertible Preferred Stock ( “Series C Preferred Stock”~~ ~~and, such shares, the “Series C Preferred Shares”~~), $0.01 par value and $1,000 stated value per share for net proceeds of $27.9 million on September 5, 2017. Each share of Series C Preferred Stock was sold at a price of $895.52 for gross proceeds of approximately $30.0 million. As of October 31, 2017, there were 33,300 shares of Series C Preferred Stock issued and outstanding.

The Series C Preferred Shares are convertible into shares of common stock, subject to the beneficial ownership limitations provided in the Certificate of Designations for the Series C Preferred Stock (the “Certificate of Designations”), at a conversion price equal to $1.84 per share of common stock (“Conversion Price”), subject to adjustment as provided in the Certificate of Designations. In the event of a triggering event, as defined in the Certificate of Designations, the Series C Preferred Shares are convertible into shares of common stock at a conversion price the lower of $1.84 per share and 85% of the lowest volume weighted average price (“VWAP”) of the common stock of the five Trading Days (as such term is defined in the Certificate of Designations) immediately prior to delivery of the applicable conversion notice. The holders will be prohibited from converting Series C Preferred Shares into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would own more than 8.99% of the total number of shares of common stock then issued and outstanding. Each holder has the right to increase its maximum percentage up to 9.99% upon 60 days’ notice to the Company.

On November 1, 2017 and on the sixteenth day and first day of each calendar month thereafter until March 1, 2019, subject to extension in certain circumstances (the “Maturity Date”), inclusive, the Company will redeem the stated value of Series C Preferred Shares in thirty-three equal installments of $1.0 million (each bimonthly amount, an “Installment Amount” and the date of each such payment, an “Installment Date”). The holders will have the ability to defer Installment payments, but not beyond the Maturity Date. In addition, during each period commencing on the 11th trading day prior to an Installment Date and prior to the immediately subsequent Installment Date, the holders may elect to accelerate the conversion of Series C Preferred Shares at then applicable installment conversion price, provided that the holders may not elect to effect any such acceleration during such installment period if either (x) in the aggregate, all the accelerations in such installment period exceeds the sum of three other Installment Amounts, or (y) the number of Series C Preferred Shares subject to prior accelerations exceeds in the aggregate twelve Installment Amounts.

Subject to certain conditions as provided in the Certificate of Designations, the Company may elect to pay the Installment Amounts in cash or shares of common stock or in a combination of cash and shares of common stock.

Installment Amounts paid in shares will be that number of shares of common stock equal to (a) the applicable Installment Amount, to be paid in common stock divided by (b) the least of (i) the then existing conversion price, (ii) 87.5% of the VWAP of the common stock on the trading day immediately prior to the applicable Installment Date, and (iii) 87.5% of the arithmetic average of the two lowest VWAPs of the common stock during the ten consecutive

Trading Day period ending and including the Trading Day immediately prior to the applicable Installment Date as applicable, provided that the Company meets standard equity conditions. The Company shall make such election no later than the eleventh trading day immediately prior to the applicable Installment Date.

~~If the Company elects or is required to effect an Installment Amount in whole or in part in cash, the amount paid will be equal to 108%of the applicable Installment Amount.~~

Each holder of the Series C Preferred Shares shall be entitled to receive dividends (i) if no triggering event, as defined in the Certificate of Designations, has occurred and is continuing when and as declared by the Board of Directors, in its sole and absolute discretion or (ii) if a triggering event has occurred and until such triggering event has been cured, a dividend of 15% per annum based on the holder’s outstanding number of Series C Preferred Shares multiplied by the stated value. There were no triggering events or dividends declared in fiscal year 2017.

In the event of a triggering event, as defined in the Certificate of Designations, the holders of the Series C Preferred Shares can force redemption at a price equal to the greater of (i) the conversion amount to be redeemed multiplied by 125% and (ii) the product of (X) the Conversion Rate with respect to the Conversion Amount in effect at such time as such Holder delivers a Triggering Event Redemption Notice multiplied by (Y) the greatest Closing Sale Price of the common stock on any Trading Day during the period commencing on the date immediately preceding such Triggering Event and ending on the date the Company makes the entire payment required.

In the event of the Company’s liquidation, dissolution, or winding up, prior to distribution to holders of securities ranking junior to the Series C Preferred Shares, holders of Series C Preferred Shares will be entitled to receive the amount of cash, securities or other property equal to the greater of (A) the stated value thereof on the date of such payment plus accrued dividends, if any and (B) the amount per share such holder would receive if such holder converted such Series C Preferred Shares into common stock immediately prior to the date of such payment.

~~Shares of Series C Preferred Stock rank with respect to dividend rights and rights upon our liquidation, winding up or dissolution:~~

The holders of the Series C Preferred Shares have no voting rights, except as required by law. Any amendment to the Company’s certificate of incorporation, bylaws or certificate of designation that adversely affects the powers, preferences and rights of the Series C Preferred Shares requires the approval of the holders of a majority of the Series C Preferred Shares then outstanding.

There is no established public trading market for the Series C Preferred Shares, and the Company does not expect a market to develop for the Series C Preferred Shares. The Series C Preferred Shares will not be listed on Nasdaq or any other exchange or trading market. The Company does not plan on making an application to list the Series C Preferred Shares on Nasdaq, any other national securities exchange or any other nationally recognized trading system.

~~Class A Cumulative Redeemable Exchangeable Preferred Shares (the “Series 1 Preferred Shares”)~~

We have 1,000,000 Class A Cumulative Redeemable Exchangeable Preferred Shares (the “Series 1 Preferred Shares”) issued and outstanding. The Series 1 Preferred Shares were issued by FCE Ltd., one of our wholly-owned subsidiaries. We have guaranteed the obligations of FCE Ltd. under the Series 1 Preferred Shares.

On March 31, 2011 and April 1, 2011, the Company entered into agreements with Enbridge to modify the provisions of the Series 1 Preferred Shares of FCE Ltd. Enbridge is the sole holder of the Series 1 Preferred Shares. Consistent

with the previous Series 1 Preferred Share agreement, FuelCell Energy continues to guarantee the return of principal and dividend obligations of FCE Ltd. to the holders of Series 1 Preferred Shares under the modified agreement.

The terms of the Series 1 Preferred Shares require (i) annual dividend payments of Cdn. $500,000 and (ii) annual return of capital payments of Cdn. $750,000. These payments commenced on March 31, 2011 and will end on December 31, 2020. Dividends accrue at a 1.25% quarterly rate on the unpaid principal balance, and additional dividends will accrue on the cumulative unpaid dividends (inclusive of the Cdn. $12.5 million unpaid dividend balance as of the modification date) at a rate of 1.25% per quarter, compounded quarterly. On December 31, 2020, the amount of all accrued and unpaid dividends on the Series 1 Preferred Shares of Cdn. $21.1 million and the balance of the principal redemption price of Cdn. $4.4 million shall be paid to the holders of the Series 1 Preferred Shares. FCE Ltd. has the option of making dividend payments in the form of common stock or cash under the terms of the Series 1 Preferred Shares.

~~In addition to the above, the significant terms of the Series 1 Preferred Shares include the following:~~

For example, assuming the holder of the Series 1 Preferred Shares exercises its conversion rights after July 31, 2020 and assuming our common stock price is $2.19 (our common stock closing price on October 31, 2017) and an exchange rate of U.S. $1.00 to Cdn. $1.29 (exchange rate on October 31, 2017) at the time of conversion, we would be required to issue approximately 1,657,928 shares of our common stock.

We have 105,875 shares of our 5% Series B Cumulative Convertible Perpetual Preferred Stock (Liquidation Preference $1,000.00 per share) (“Series B Preferred Stock”) authorized for issuance. As of October 31, 2017 and 2016, there were 64,020 shares of Series B Preferred Stock issued and outstanding. The shares of our Series B Preferred Stock and the shares of our common stock issuable upon conversion of the shares of our Series B Preferred Stock are covered by a registration rights agreement. The following is a summary of certain provisions of our Series B Preferred Stock.

~~Shares of Series B Preferred Stock rank with respect to dividend rights and rights upon our liquidation, winding up or dissolution:~~

The Series B Preferred Stock pays cumulative annual dividends of $50.00 per share which are payable quarterly in arrears on February 15, May 15, August 15 and November 15. Unpaid accumulated dividends do not bear interest.

The dividend rate is subject to upward adjustment as set forth in the Certificate of Designation if we fail to pay, or to set apart funds to pay, any quarterly dividend. The dividend rate is also subject to upward adjustment as set forth in the Registration Rights Agreement entered into with the Initial Purchasers if we fail to satisfy our registration obligations with respect to the Series B Preferred Stock (or the underlying common shares) under the Registration Rights Agreement.

No dividends or other distributions may be paid or set apart for payment on our common shares (other than a dividend payable solely in shares of a like or junior ranking) unless all accumulated and unpaid Series B Preferred Stock dividends have been paid or funds or shares of common stock have been set aside for payment of accumulated and unpaid Series B Preferred Stock dividends.

The dividend on the Series B Preferred Stock may be paid in cash; or at the option of the Company, in shares of our common stock, which will be registered pursuant to a registration statement to allow for the immediate sale of these common shares in the public market. Dividends of $3.2 million were paid in each of the years ended October 31, 2017, 2016 and 2015. There were no cumulative unpaid dividends as of October 31, 2017 and 2016.

The Series B Preferred Stock stockholders are entitled to receive, in the event that we are liquidated, dissolved or wound up, whether voluntarily or involuntarily, $1,000.00 per share plus all accumulated and unpaid dividends to the date of that liquidation, dissolution, or winding up (“Liquidation Preference”). Until the holders of Series B Preferred Stock receive their Liquidation Preference in full, no payment will be made on any junior shares, including shares of our common stock. After the Liquidation Preference is paid in full, holders of the Series B Preferred Stock will not be entitled to receive any further distribution of our assets. As of October 31, 2017 and 2016, the Series B Preferred Stock had a Liquidation Preference of $64.0 million.

Each Series B Preferred Stock share may be converted at any time, at the option of the holder, into 7.0922 shares of our common stock, which is equivalent to an initial conversion price of $141.00 per share plus cash in lieu of fractional shares. The conversion rate is subject to adjustment upon the occurrence of certain events as described in the Certificate of Designation. The conversion rate is not adjusted for accumulated and unpaid dividends. If converted, holders of Series B Preferred Stock do not receive a cash payment for all accumulated and unpaid dividends; rather, all accumulated and unpaid dividends are canceled.

We may, at our option, cause shares of Series B Preferred Stock to be automatically converted into that number of shares of our common stock that are issuable at the then prevailing conversion rate. We may exercise our conversion right only if the closing price of our common stock exceeds 150% of the then prevailing conversion price ($141.00 per share as of October 31, 2017) for 20 trading days during any consecutive 30 trading day period, as described in the Certificate of Designation.

We do not have the option to redeem the shares of Series B Preferred Stock. However, holders of the Series B Preferred Stock can require us to redeem all or part of their shares at a redemption price equal to the Liquidation Preference of the shares to be redeemed in the case of a “fundamental change” (as described in the Certificate of Designation).

We may, at our option, elect to pay the redemption price in cash or, in shares of our common stock valued at a discount of 5% from the market price of shares of our common stock, or any combination thereof. Notwithstanding the foregoing, we may only pay such redemption price in shares of our common stock that are registered under the Securities Act of 1933 and eligible for immediate sale in the public market by non-affiliates of the Company.

Holders of Series B Preferred Stock currently have no voting rights; however, holders may receive certain voting rights, as described in the Certificate of Designation, if (1) dividends on any shares of Series B Preferred Stock, or any other class or series of stock ranking on a parity with the Series B Preferred Stock with respect to the payment of dividends, shall be in arrears for dividend periods, whether or not consecutive, for six calendar quarters or (2) we fail to pay the redemption price, plus accrued and unpaid dividends, if any, on the redemption date for shares of Series B Preferred Stock following a fundamental change.

So long as any shares of Series B Preferred Stock remain outstanding, we will not, without the consent of the holders of at least two-thirds of the shares of Series B Preferred Stock outstanding at the time (voting separately as a class with all other series of preferred stock, if any, on parity with our Series B Preferred Stock upon which like voting rights have been conferred and are exercisable) issue or increase the authorized amount of any class or series of shares ranking senior to the outstanding shares of the Series B Preferred Stock as to dividends or upon liquidation. In addition, we will not, subject to certain conditions, amend, alter or repeal provisions of our certificate of incorporation, including the Certificate of Designation relating to the Series B Preferred Stock, whether by merger, consolidation or otherwise, so as to adversely amend, alter or affect any power, preference or special right of the outstanding shares of Series B Preferred Stock or the holders thereof without the affirmative vote of not less than two-thirds of the issued and outstanding Series B Preferred Stock shares.

See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans.

There were no repurchases made by us or on our behalf of our common stock during the ~~periods indicated:~~fourth quarter of the fiscal year ended October 31, 2019.

The selected consolidated financial data presented below as of the end of each of the years in the five-year period ended October 31, ~~2017~~2019 have been derived from our audited consolidated financial statements together with the notes thereto. ~~We have no discontinued operations.~~ The data set forth below is qualified by reference to, and should be read in conjunction with our consolidated financial statements and their notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K.

	2017			2016			2015			2014			2013			2019			2018			2017			2016			2015
Revenues:
Revenues (1):
Product	$	43,047		$	62,563		$	128,595		$	136,842		$	145,071		$	481		$	52,490		$	43,047		$	62,563		$	128,595
Service and license		27,050			31,491			21,012			25,956			28,141			26,618			15,757			27,050			31,491			21,012
Generation		7,233			1,267			—			—			—			14,034			7,171			7,233			1,267			—
Advanced Technologies		18,336			12,931			13,470			17,495			14,446			19,619			14,019			18,336			12,931			13,470
Total revenues		95,666			108,252			163,077			180,293			187,658			60,752			89,437			95,666			108,252			163,077
Cost of revenues:
Product		49,843			63,474			118,530			126,866			136,989			18,552			54,504			49,843			63,474			118,530
Service and license		25,285			32,592			18,301			23,037			29,683			18,943			15,059			25,285			32,592			18,301
Generation		5,076			664			—			—			—			31,642			6,421			5,076			664			—
Advanced Technologies		12,728			11,879			13,470			16,664			13,864			12,884			10,360			12,728			11,879			13,470
Total cost of revenues		92,932			108,609			150,301			166,567			180,536			82,021			86,344			92,932			108,609			150,301
Gross profit (loss)		2,734			(357	)		12,776			13,726			7,122
Gross (loss) profit																	(21,269	)		3,093			2,734			(357	)		12,776
Operating expenses:
Administrative and selling expenses		25,916			25,150			24,226			22,797			21,218			31,874			24,908			25,916			25,150			24,226
Research and development costs		20,398			20,846			17,442			18,240			15,717			13,786			22,817			20,398			20,846			17,442
Restructuring expense		1,355			—			—			—			—			—			—			1,355			—			—
Total costs and expenses		47,669			45,996			41,668			41,037			36,935			45,660			47,725			47,669			45,996			41,668
Loss from operations		(44,935	)		(46,353	)		(28,892	)		(27,311	)		(29,813	)		(66,929	)		(44,632	)		(44,935	)		(46,353	)		(28,892	)
Interest expense		(9,171	)		(4,958	)		(2,960	)		(3,561	)		(3,973	)		(10,623	)		(9,055	)		(9,171	)		(4,958	)		(2,960	)
Income from equity investments		—			—			—			—			46
Other income (expense), net		247			622			2,442			(7,523	)		(1,208	)
Provision for income tax		(44	)		(519	)		(274	)		(488	)		(371	)
Other income, net																	93			3,338			247			622			2,442
(Provision) benefit for income tax																	(109	)		3,015			(44	)		(519	)		(274	)
Net loss		(53,903	)		(51,208	)		(29,684	)		(38,883	)		(35,319	)		(77,568	)		(47,334	)		(53,903	)		(51,208	)		(29,684	)
Net loss attributable to noncontrolling interest		-			251			325			758			961			—			—			—			251			325
Net loss attributable to FuelCell Energy, Inc.		(53,903	)		(50,957	)		(29,359	)		(38,125	)		(34,358	)		(77,568	)		(47,334	)		(53,903	)		(50,957	)		(29,359	)
Preferred stock dividends		(3,200	)		(3,200	)		(3,200	)		(3,200	)		(3,200	)
Net loss to common stockholders	$	(57,103	)	$	(54,157	)	$	(32,559	)	$	(41,325	)	$	(37,558	)
Net loss to common stockholders
Series A warrant exchange																	(3,169	)		—			—			—			—
Series B Preferred stock dividends																	(3,231	)		(3,200	)		(3,200	)		(3,200	)		(3,200	)
Series C Preferred stock deemed dividends and redemption value adjustment, net																	(6,522	)		(9,559	)		—			—			—
Series D Preferred deemed dividends and redemption accretion																	(9,755	)		(2,075	)		—			—			—
Net loss attributable to common stockholders																$	(100,245	)	$	(62,168	)	$	(57,103	)	$	(54,157	)	$	(32,559	)
Net loss attributable to common stockholders
Basic	$	(1.14	)	$	(1.82	)	$	(1.33	)	$	(2.02	)	$	(2.42	)	$	(1.82	)	$	(9.01	)	$	(13.73	)	$	(21.83	)	$	(15.94	)
Diluted	$	(1.14	)	$	(1.82	)	$	(1.33	)	$	(2.02	)	$	(2.42	)	$	(1.82	)	$	(9.01	)	$	(13.73	)	$	(21.83	)	$	(15.94	)
Weighted average shares outstanding
Basic		49,915			29,774			24,514			20,474			15,544			55,081			6,896			4,160			2,481			2,043
Diluted		49,915			29,774			24,514			20,474			15,544			55,081			6,896			4,160			2,481			2,043

	2017		2016		2015		2014		2013			2019		2018		2017		2016		2015
Cash and cash equivalents ~~(1)~~(2)	$	87,448	$	118,316	$	85,740	$	108,833	$	77,699		$	39,778	$	80,239	$	87,448	$	118,316	$	85,740
Working capital		105,432		150,206		129,010		141,970		83,066			23,087		70,182		105,432		150,206		129,010
Total current assets		203,510		202,204		203,898		217,031		189,329			84,319		130,303		203,510		202,204		203,898
Total assets		383,786		340,729		277,231		280,636		237,636			333,446		340,421		383,786		340,729		277,231
Total current liabilities		98,078		51,998		74,888		75,061		106,263			62,732		60,121		98,078		51,998		74,888
Total non-current liabilities		96,895		114,478		47,732		47,269		84,708			135,120		103,377		96,895		114,478		47,732
Redeemable preferred stock		87,557		59,857		59,857		59,857		59,857			59,857		94,729		87,557		59,857		59,857
Total equity (deficit)		101,256		114,396		94,754		98,449		(13,192	)
Total equity													75,737		82,194		101,256		114,396		94,754
Book value per share ~~(2)~~(3)	$	1.46	$	3.25	$	3.65	$	4.11	$	(0.81	)	$	0.39	$	10.31	$	17.48	$	39.03	$	43.79

The following discussion should be read in conjunction with information included in Item 8 of this report. Unless otherwise indicated, the terms “Company”, “FuelCell Energy”, “we”, “us”, and “our” refer to FuelCell Energy, Inc. and its subsidiaries. All tabular dollar amounts are in thousands.

In addition to historical information, this discussion and analysis contains forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please see “Forward-Looking Statement Disclaimer” for a discussion of the uncertainties, risks and assumptions associated with these statements, as well as other risks set forth in our filings with the SEC including those set forth under Item 1A — Risk Factors in this report.

FuelCell Energy delivers efficient, affordable and clean solutions for the supply, recovery and storage of energy. We design, manufacture, undertake project development of, install, operate and maintain megawatt-scale fuel cell systems, serving utilities and industrial and large municipal power users with solutions that include both utility-scale and on-site power generation, carbon capture, local hydrogen production for transportation and industrial users, and long duration energy storage. Our plants are operating inwas founded more than 50 ~~locations on three continents and have generated~~years ago in 1969. We began selling stationary fuel cell power plants commercially in 2003. With more than ~~7.0~~9.5 million megawatt hours ~~(MWh)~~ of ~~electricity.~~

~~We provide comprehensive~~clean electricity produced, FuelCell Energy is now a global leader in delivering environmentally-responsible distributed baseload power solutions through our proprietary, molten-carbonate fuel cell technology. Today, we develop turn-key distributed power generation solutions ~~to our customers, including installation~~and operate and provide comprehensive service for the life of the power plant. We are working to expand the proprietary technologies that we have developed over the past five decades into new products, markets and geographies.

Fiscal year 2019 was one of transformation for FuelCell Energy. We restructured our management team and our operations in ways that are intended to support our growth and achieve our profitability and sustainability goals. We raised capital under our at-the-market sales plan, which allowed us to pay down our accounts payable and stay current on our forbearance agreements. We repaid a substantial portion of our short-term debt, retired our Series C and Series D Convertible Preferred Stock obligations, and refocused on our core competencies in an effort to drive top-line revenue. We believe we have emerged from a difficult fiscal 2019 as a stronger company, better positioned to execute on our business plan. Our recent achievements, accomplished during one of the most stressful times in the Company’s history, include: (a) closing on a new $200 million credit facility with Orion Energy Partners, (b) executing a new Joint Development Agreement with EMRE, with anticipated revenues of up to $60 million, (c) restructuring our business to realize annualized operating savings of approximately $15 million, (d) making progress in constructing certain projects in our backlog, including the CMEEC project at the U.S. Navy base in Groton, Connecticut and the commissioning and startup of the 2.8 MW Tulare BioMAT project in California, (e) relaunching our sub-megawatt product in Europe, (f) executing a strategic relationship with E.On Business Solutions, an affiliate of one of the largest utilities in the world, to market and distribute our products beyond the two FuelCell operating plants E.On already owns, (g) extending the maturity of our Series 1 Preferred Shares issued by FCE FuelCell Energy Ltd. by one year, and (h) concluding our engagement with Huron Consulting after successful restructuring and payoff of our prior senior secured credit facility.

We will use this new focus coming out of our restructuring to advance our core goals of:

The events described in this “Recent Developments” section relate, in part, to matters discussed in more detail below in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section – particularly those matters discussed under “Liquidity and Capital Resources.” In certain instances, the capitalized terms used in this “Recent Developments” section are defined elsewhere in this Annual Report on Form 10-K.

On November 5, 2019, the Company signed a two-year Joint Development Agreement (“JDA”) with EMRE, pursuant to which the Company will continue exclusive research and development efforts with EMRE to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources, in exchange for (a) payment of (i) an exclusivity and technology access fee of $5.0 million, (ii) up to $45.0 million for research and development efforts, and (iii) milestone-based payments of up to $10.0 million after certain technological milestones are met, and (b) certain licenses to patents and patent applications, and copyrightable works resulting from the JDA.

As described below and in Note 13. “Debt”, on October 31, 2019, the Company and certain of its subsidiaries as guarantors entered into the Orion Credit Agreement with the Agent and certain of its affiliates as lenders for a $200.0 million senior secured credit facility, structured as a delayed draw term loan, to be provided by the lenders. On November 22, 2019, the Company made a second draw under the Orion Credit Agreement (the “Second Funding”) of $65.5 million, which was funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P. (the “Orion Lenders”), such that the total fundings to the Company under the Orion Facility were equal to $80.0 million. The funds drawn in the Second Funding were reduced by a Loan Discount (described further below and in Note 13. “Debt”) of $1.6 million, which was retained by the Orion Lenders. Proceeds from the Second Funding were used to repay outstanding third party debt of the Company with respect to certain other Company projects, including the construction loan from Fifth Third Bank on the Groton Project and the loan from Webster Bank on the CCSU Project, as well as ~~operating~~to fund remaining going forward construction costs relating to certain projects, including the Groton Project (a 7.4 MW project), the LIPA Yaphank Solid Waste Management Project (a 7.4 MW project), and ~~maintaining~~ the ~~plants under multi-year service agreements. We target large-scale power users~~Tulare BioMAT project (a 2.8 MW project).

In accordance with ~~our megawatt-class installations. As~~the Orion Credit Agreement in connection with the Second Funding, on November 22, 2019, the Company issued to the Orion Lenders warrants to purchase up to a ~~reference, one megawatt~~total of 14.0 million shares of the Company’s common stock (the “Second Funding Warrants”), with an initial exercise price with respect to 8.0 million of such shares of $0.242 per share and with an initial exercise price with respect to 6.0 million of such shares of $0.620 per share (such $0.620 per share exercise price being at a premium to the market price at the time of entry into the Orion Credit Agreement).

In conjunction with the Second Funding, the Company and the other loan parties entered into the First Amendment to the Orion Credit Agreement (the “First Orion Amendment”), which required the Company to establish a $5.0 million debt reserve, with such reserve to be released on the first date following the date of the Second Funding on which all of the following events shall have occurred: (a) each of (x) the commercial operation date for the Tulare BioMAT project shall have occurred and (y) a disposition, refinancing or tax equity investment in the Tulare BioMAT project of at least $5 million is ~~adequate~~consummated; (b) each of (x) the Groton Project shall have achieved its business plan in accordance with the Groton Construction Budget (as defined in the Orion Credit Agreement), (y) the commercial operation date for the Groton Project (as defined below) shall have occurred and (z) the Groton Project shall have met its annualized output and heat rate guarantees for three months; and (c) a disposition, refinancing or tax equity investment of at least $30 million shall have occurred with respect to ~~continually power approximately 1,000 average sized U.S. homes. Our customer base includes utility companies, municipalities, universities, government entities~~the Groton Project. The First Orion Amendment further requires the Company (i) to provide, no later than December 31, 2019 (or such later date as the Agent may, in its sole discretion, agree in writing), a biogas sale and ~~businesses~~purchase agreement through December 31, 2021 for the Tulare BioMAT project, which was obtained as of such date, (ii) to obtain by December 31, 2019 (or such later date as the Agent may, in its sole discretion, agree in writing) a ~~variety~~fully executed contract for certain renewable energy credits for the Groton Project, which was obtained as of ~~industrial~~such date, and ~~commercial enterprises. Our leading geographic markets are South Korea~~(iii) to provide by January 31, 2020 (or such later date as the Agent may, in its sole discretion, agree in writing) certain consents and estoppels from CMEEC related to the Groton Project and an executed, seventh modification to the lease between CMEEC and the United States Government, acting by and wethrough the Department of the Navy. The First Orion Amendment provides that, if the

requirements set forth in clauses (ii) and (ii) above are ~~pursuing expanding opportunities~~not timely satisfied, the Company will grant the Agent, on behalf of the Orion Lenders, a security interest and lien on all of the Company’s intellectual property, with such lien and security interest to be released at such time as the Company has satisfied such requirements.

In addition, in ~~Asia~~connection with the January 2020 Letter Agreement among the Company, FCE Ltd. and ~~Europe.~~Enbridge described below, on January 20, 2020, in order to obtain the Orion Lenders’ consent to the January 2020 Letter Agreement as required under the Orion Credit Agreement, the Company and the other loan parties entered into the Second Amendment to the Orion Credit Agreement (the “Second Orion Amendment”), which adds a new affirmative covenant to the Orion Credit Agreement that obligates the Company to, and to cause FCE Ltd. to, on or prior to November 1, 2021, either (i) pay and satisfy in full all of their respective obligations in respect of, and fully redeem and cancel, all of the Series 1 Preferred Shares of FCE Ltd., or (ii) deposit in a newly created account of FCE Ltd. or the Company cash in an amount sufficient to pay and satisfy in full all of their respective obligations in respect of, and to effect a redemption and cancellation in full of, all of the Series 1 Preferred Shares of FCE Ltd. The Second Orion Amendment also provides that the articles of FCE Ltd. setting forth the modified terms of the Series 1 Preferred Shares will be considered a “Material Agreement” under the Orion Credit Agreement. Under the Second Orion Amendment, a failure to satisfy this new affirmative covenant or to otherwise comply with the terms of the Series 1 Preferred Shares will constitute an event of default under the Orion Credit Agreement, which could result in the acceleration of any amounts outstanding under the Orion Credit Agreement.

On January 9, 2020, the Orion Lenders exercised, on a cashless basis, Orion Warrants (as defined below) (with cash exercise prices of $0.310 per share and ~~environmentally friendly power generation~~$ 0.242 per share) representing the right to purchase, in the aggregate, 12.0 million shares of the Company’s common stock. Because these warrants were exercised on a cashless basis pursuant to the formula set forth in the warrants, the Orion Lenders received, in the aggregate, a “net number” of 9,396,319 shares of the Company’s common stock upon the exercise of Initial Funding Warrants (as defined below) representing the right to purchase 6.0 million shares of the Company’s common stock and Second Funding Warrants representing the right to purchase 6.0 million shares of the Company’s common stock. The other 2,603,681 shares, which were not issued to the Orion Lenders due to the cashless nature of the exercise, are no longer required to be reserved for issuance upon exercise of the Orion Warrants.

Termination of Construction Loan Agreement with ~~easy-to-site stationary~~ Fifth Third Bank

As described below and in Note 13. “Debt”, on February 28, 2019, the Company, through its indirect wholly-owned subsidiary, Groton Station Fuel Cell, LLC (“Groton Borrower”), entered into a Construction Loan Agreement (as amended from time to time, the “Groton Agreement”) with Fifth Third Bank pursuant to which Fifth Third Bank agreed to make available to Groton Borrower a construction loan facility in an aggregate principal amount of up to $23.0 million (the “Groton Facility”) to fund the manufacture, construction, installation, commissioning and start-up of the 7.4 MW fuel cell power ~~plants. The power plants are located~~plant for the CMEEC at the United States Navy submarine base in ~~populated areas as they are virtually particulate pollutant free, operate quietly and without vibrations, and have only modest space requirements. Locating~~Groton, Connecticut (the “Groton Project”). Groton Borrower made an initial draw under the ~~power generation near~~Groton Facility on the ~~point~~date of ~~use provides many advantages, including less reliance on or even avoidance~~closing of the ~~transmission grid, leading to enhanced energy security~~facility of $9.7 million and ~~power reliability. Our power plants provide electricity priced competitively to grid-delivered electricity~~made an additional draw of $1.4 million in ~~certain high cost regions, and our strategy is to continue to reduce costs, which is expected to lead to wider adoption.~~

~~We are developing Advanced Technologies which leverage our commercial platform and expertise. Our SureSource power plants utilize carbonate fuel cell technology, which is a very versatile type~~April 2019. The total outstanding balance under the Groton Facility as of fuel cell technology. Utilizing our core SureSource plants, we have developed and are commercializing both a tri-generation distributed hydrogen configuration that generates electricity, heat and hydrogen for industrial or transportation uses, and a carbon capture application for coal or gas-fired power plants. We also are developing and working to commercialize solid oxide fuel cells for adjacent sub-megawatt applicationsNovember 22, 2019 (prior to the markets for our megawatt-class SureSource power plants as well as energy storage applications. These applications are complementary to our core products, leverage our existing customer base, project development, salespayment described below) was $11.1 million. Groton Borrower and ~~service expertise, and are large markets.~~

~~Korea Market Developments.~~ In June 2017, an EPC contractor, Hanyang Industrial Development Co., Ltd (“HYD”), was awarded a 20MW project by a utility in South Korea utilizing the Company’s SureSource technology. On August 29, 2017, weFifth Third Bank entered into a ~~contract with HYD~~payoff letter, dated November 22, 2019, pursuant to which, ~~we will provide equipment~~on November 22, 2019, the Agent, on behalf of Groton Borrower, paid off all of Groton Borrower’s indebtedness to ~~HYD~~Fifth Third Bank under the Groton Agreement and thereby terminated the Groton Facility.

On November 22, 2019, the Webster Bank debt was repaid in full and the borrowing arrangement was terminated.

As described below and in Note 13. “Debt”, the Company had a long-term loan agreement with the Connecticut Green Bank (as amended from time to time, the “Green Bank Loan Agreement”) for ~~this 20MW~~a loan totaling approximately $5.9 million in support of the 14.9 MW fuel cell ~~project~~park in Bridgeport, Connecticut (the “Bridgeport Fuel Cell Project”). ~~The SureSource 3000~~^TM ~~power plants will cleanly produce electricity~~On and ~~thermal energy~~effective as of December 19, 2019, the Company and Connecticut Green Bank entered into an amendment to ~~support a district heating system. Construction began in fall 2017 and~~ the ~~installation is expected to be operational in August 2018. The value~~Green Bank Loan Agreement (the “Green Bank Amendment”). Upon the execution of the ~~equipment sale contract~~Green Bank Amendment on December 19, 2019, Connecticut Green Bank made an additional loan to the Company in the aggregate principal amount of $3.0 million (the “December 2019 Loan”), which is ~~expected~~ to be used (i) first, to pay closing fees related to the acquisition of the Bridgeport Fuel Cell Project and the Subordinated Credit Agreement (as defined below), other fees, and accrued interest from May 9, 2019, totaling $404,000 (“Accrued Fees”), and (ii) thereafter, for general corporate purposes as determined by the Company, including, but not limited to, expenditures in ~~excess~~connection with the project being constructed by Groton Station Fuel Cell, LLC (“Groton Fuel Cell”). Pursuant to the terms of ~~$60 million, a portion~~the Green Bank Amendment, Connecticut Green Bank will have no further obligation to make loans under the Green Bank Loan Agreement and the Company will have no right to make additional draws under the Green Bank Loan Agreement.

The Green Bank Amendment provides that, until such time as the loan (which includes both the outstanding principal balance of ~~which~~the original loan under the Green Bank Loan Agreement and the outstanding principal amount of the December 2019 Loan) has been repaid in its entirety, interest on the outstanding balance of the loan shall accrue monthly in arrears from the date of the Green Bank Amendment at a rate of 5% per annum until May 8, 2019 and at a rate of 8% per annum thereafter, payable by the Company on a monthly basis in arrears. The Green Bank Amendment further provides that the payment by the Company of the Accrued Fees (as described above) includes any shortfall of interest due but unpaid by the Company through and including November 30, 2019. Interest payments made by the Company after the date of the Green Bank Amendment are to be applied first to interest that has accrued on the outstanding principal balance of the original loan under the Green Bank Loan Agreement and then to interest that has accrued on the December 2019 Loan.

The Green Bank Amendment also modifies the repayment and mandatory prepayment terms and extends the maturity date set forth in the original Green Bank Loan Agreement. Under the Green Bank Amendment, to the extent that excess cash flow reserve funds under the BFC Credit Agreement (as defined below) are eligible for disbursement to Bridgeport Fuel Cell, LLC pursuant to Section 6.23(c) of the BFC Credit Agreement, such funds are to be paid to Connecticut Green Bank, to be applied first to repay the outstanding principal balance of the original loan under the Green Bank Loan Agreement and thereafter to repay the outstanding principal amount of the December 2019 Loan, until repaid in full. The Green Bank Amendment further provides that the entire unpaid balance of the loan and all other obligations due under the Green Bank Loan Agreement will be due and payable on May 9, 2026 if not paid sooner in accordance with the Green Bank Loan Agreement. Finally, with respect to mandatory prepayments, the Green Bank Amendment provides that, when the Company has closed on the subordinated project term loan pursuant to the Commitment Letter, dated February 6, 2019, issued by Connecticut Green Bank to Groton Fuel Cell to provide a subordinated project term loan to Groton Fuel Cell in the amount of $5.0 million (the “Groton Commitment Letter”), the Company will be required prepay to Connecticut Green Bank the lesser of any then outstanding amount of the December 2019 Loan and the amount of the subordinated project term loan actually advanced by Connecticut Green Bank.

On October 30, 2019, the Company declared dividends on the Series B Preferred Stock, which included ~~backlog~~the accrued dividends payable under the Amended Certificate of Designation for the Series B Preferred Stock with respect to the May 15, 2019 and August 15, 2019 dividend payment dates and the dividends payable with respect to the November 15, 2019 dividend payment date, which were paid on or about November 15, 2019. The aggregate dividend payment was $2.4 million.

On November 26, 2019, the Company made the return of capital and dividend payments due as of March 31, 2019, June 30, 2019 and September 30, 2019, in an aggregate amount equal to Cdn. $0.9 million, on the Series 1 Preferred Stock.

As described in Note 15. “Redeemable Preferred Stock,” as of October 31, ~~2017.~~

~~U.S. Market Developments.~~ ~~During 2017,~~2019, FCE Ltd. or the Company, ~~received notices~~as the guarantor of ~~award on multiple projects in the U.S. and there have been favorable policy developments summarized as follows:~~

~~Production Rate Adjustment.~~ In June 2017, the Company reduced its production to approximately fifteen MW on an annualized basis. This adjustment was made to manage inventory levels, prepare to transition to new product introductions and complete certain building expansion activities. From June through September 2017, approximately 110 manufacturing employees worked shortened work weeks. The Company participated in the State of Connecticut’s “Shared Work Program” allowing affected employees to collect unemployment benefits for days they did not work. Employees returned to work full time in October 2017 and the production rate is currently 25 MW on an annualized basis. The Company is evaluating an increase in the production rate during 2018 due to increased backlog and project awards.

~~Convertible Preferred Offering.~~ On September 5, 2017, the Company priced an underwritten offering of 33,500 shares Series C Preferred Stock. The Series C Preferred Stock carries a 0.0% dividend and a $1.84 conversion price. Each share of Series C Preferred Stock was sold at a price of $895.52 for gross proceeds of approximately $30.0 million. FuelCell Energy intends to use the net proceeds from this offering for working capital, project financing, and general corporate purposes. The offering closed on September 8, 2017.

~~The Certificate of Designations~~FCE Ltd.’s payment obligations with respect to the Series C1 Preferred ~~Stock describes~~Shares, was obligated to pay, on or before December 31, 2020, all accrued and unpaid dividends on the Series 1 Preferred Shares and the balance of the principal redemption price with respect to all of the Series 1 Preferred Shares. As of October 31, 2019, the aggregate amount of all accrued and unpaid dividends to be paid on the Series 1 Preferred Shares on December 31, 2020 was expected to be Cdn. $21.1 million and the balance of the principal redemption price to be paid on December 31, 2020 with respect to all of the Series 1 Preferred Shares was expected to be Cdn. $4.4 million. Interest under the Series 1 Preferred Shares accrued at annual rate of 5%. In addition, the holder of the Series 1 Preferred Shares had the right to exchange such shares for fully paid and non-assessable shares of common stock of the Company at certain ~~triggering events~~specified prices, and FCE Ltd. had the ~~occurrence~~option of making dividend payments in the form of common stock of the Company or cash.

On January 20, 2020, the Company, FCE Ltd. and Enbridge entered into a letter agreement (the “January 2020 Letter Agreement”), pursuant to which ~~would give~~they agreed to amend the articles of FCE Ltd. relating to and setting forth the terms of the Series 1 Preferred Shares to: (i) remove the provisions of the articles permitting or requiring the issuance of shares of the Company’s common stock in exchange for the Series 1 Preferred Shares or as payment of amounts due to the holders of the Series C1 Preferred ~~Stock (i) the right to convert all or a portion of their shares of Series C Preferred Stock into shares of our common stock, and/or~~Shares, (ii) ~~the right to require the Company to redeem all or a portion of their shares of Series C Preferred Stock. One~~remove certain provisions of the ~~specified triggering events is the Company’s failure to receive certain payments under a sales contract on or prior~~articles relating to the earlier of (a) the Company’s public announcement of its fiscal 2017 fourth quarter earnings and (b) January 15, 2018. As of January 11, 2018 (the date of filing of this report and public announcement of fiscal 2017 fourth quarter earnings), the Company has received such payments and none of the triggering events described in the Certificate of Designations have occurred.

~~In connection with the offering~~redemption of the Series C1 Preferred ~~Stock, we~~Shares, (iii) increase the annual dividend rate, commencing on January 1, 2020, to 15%, (iv) extend the final payment date for all accrued and unpaid dividends and all return of capital payments (i.e., payments of the principal redemption price) from December 31, 2020 to December 31, 2021, (v) clarify when dividend and return of capital payments are to be made in the future and extend the quarterly dividend and return of capital payments through December 31, 2021 (which were previously to be paid each quarter through December 31, 2020), (vi) remove certain terms and provisions of the articles that are no longer applicable, and (vii) make other conforming changes to the articles. In addition, the parties agreed to amend the Company’s guarantee in favor of Enbridge as necessary or as the parties may mutually agree, in either case, in order to be consistent with such amended ~~our loan~~articles and ~~security agreement with Hercules Capital, Inc. (“Hercules”)~~ to ~~permit us to make certain cash payments that may be required pursuant~~maintain the Company’s guarantee of FCE Ltd.’s obligations under the Series 1 Preferred Shares.

After taking into account the amendments to the terms of the Series C1 Preferred Shares described in the January 2020 Letter Agreement, the aggregate amount of all accrued and unpaid dividends to be paid on the Series 1 Preferred Shares on December 31, 2021 is expected to be Cdn. $26.5 million and the balance of the principal redemption price to be paid on December 31, 2021 with respect to all of the Series 1 Preferred Shares is expected to be Cdn. $3.5 million.

During the period beginning on November 7, 2019 and ~~to adjust the cash covenant. Effective December 14, 2017, the~~ ~~minimum cash covenant requires~~ending on (and including) November 11, 2019, the Company issued and sold a total of approximately 7.9 million shares of its common stock under its At Market Issuance Sales Agreement, dated October 4, 2019 (the “Sales Agreement”), with B. Riley FBR, Inc. (the “Sales Agent”), at prevailing market prices, with an average sale price of $0.46 per share, and raised aggregate gross proceeds of approximately

$3.6 million, before deducting expenses and commissions. Commissions of $0.1 million were paid to ~~maintain an unrestricted cash balance~~the Sales Agent in ~~accounts subject~~connection with these sales, resulting in net proceeds to ~~an account control agreement in favor~~the Company of ~~Hercules of at least $10.0~~approximately $3.5 million.

The Company had sold an aggregate of approximately 17,998,846 shares of common stock under the Sales Agreement as of November 11, 2019.

Management evaluates ~~the~~our results of operations and cash flows using a variety of key performance indicators, including revenues compared to prior periods and internal forecasts, costs of our products and results of our cost reduction initiatives, and operating cash use. These are discussed throughout the “Results of Operations” and “Liquidity and Capital Resources” sections. Results of Operations are presented in accordance with accounting principles generally accepted in the United States (“GAAP”).

Our revenues and cost of revenues for the years ended October 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Years Ended October 31,						Change						Years Ended October 31,						Change
(dollars in thousands)	2017			2016			$			%			2019			2018			$			%
Total revenues	$	95,666		$	108,252		$	(12,586	)		(12	)%	$	60,752		$	89,437		$	(28,685	)		(32	)%
Total costs of revenues		92,932			108,609			(15,677	)		(14	)%		82,021			86,344			(4,323	)		(5	)%
Gross profit (loss)	$	2,734		$	(357	)	$	3,091			866	%
Gross margin		2.9	%		(0.3	)%
Gross (loss) profit													$	(21,269	)	$	3,093		$	(24,362	)		(788	)%
Gross (loss) profit margin														(35.0	)%		3.5	%

Total revenues for the year ended October 31, ~~2017~~2019 decreased ~~$12.6~~$28.7 million, or ~~12%~~32%, to ~~$95.7~~$60.8 million from ~~$108.3~~$89.4 million during the year ended October 31, ~~2016, due primarily to decreased product sales as discussed below.~~2018. Total cost of revenues for the year ended October 31, ~~2017~~2019 decreased by ~~$15.7~~$4.3 million, or ~~14%~~5%, to ~~$92.9~~$82.0 million from ~~$108.6~~$86.3 million during the year ended October 31, ~~2016.~~2018. The Company's gross loss margin was 35.0% in fiscal year 2019, as compared to a gross profit margin of 3.5% in fiscal year 2018. A discussion of the changes in product sales, service agreement and license revenues, Advanced Technologies contract revenues, and generation revenues follows. Refer to “Critical Accounting Policies and Estimates” for more information on revenue and cost of revenue classifications.

Our product sales, cost of product sales and gross loss from product sales for the years ended October 31, 2019 and 2018 were as follows:

Product sales for the year ended October 31, 2019 consisted of $0.5 million of power plant revenue compared to $52.5 million of product revenues for the year ended October 31, 2018, which included $49.4 million of power plant revenue and $3.1 million of revenue related to engineering and construction services.

The decline in product sales was primarily a result of our previous strategic decision to focus on utility scale PPA business opportunities to grow our generation portfolio, rather than selling our projects upon completion, and our continuing inability to access the Asian markets as a result of the situation with POSCO Energy.

Product sales for the year ended October 31, 2018 included revenues from the 20 MW order from Hanyang Industrial Development Co., Ltd (“HYD”), pursuant to which we provided equipment to HYD for a fuel cell project with KOSPO. Shipments began in the fourth quarter of fiscal 2017 and were completed in the first quarter of fiscal 2018. During the year ended October 31, 2018, we also recorded product revenues for the sale of a 2.8 MW natural gas fueled fuel cell power plant project located at the waste water treatment facility in Tulare, California to Clearway Energy.

Cost of product sales decreased $36.0 million for the year ended October 31, 2019 to $18.6 million, compared to $54.5 million in the prior year. Overall gross loss from product sales was $18.1 million for the year ended October 31, 2019 compared to a gross loss of $2.0 million in the year ended October 31, 2018. Both periods were impacted by the under-absorption of fixed overhead costs due to low production volumes. Manufacturing variances, primarily related to low production volumes and other charges, totaled approximately $14.5 million for the year ended October 31, 2019 compared to approximately $11.2 million for the year ended October 31, 2018. Cost of product sales for the year ended October 31, 2019 also includes an impairment charge for a specific construction in process asset related to automation equipment for use in manufacturing with a carrying value of $2.8 million, which was impaired due to uncertainty as to whether the asset will be completed as a result of the Company’s liquidity position and continued low level of production rates. For the year ended October 31, 2019, we operated at an annualized production rate of approximately 17 MW compared to a 25 MW annualized production rate in the year ended October 31, 2018. The annualized production rate as of October 31, 2019 was 10 MW.

As of October 31, 2018, product sales backlog totaled approximately $1,000. There was no product sales backlog as of October 31, 2019.

Our service and license revenues and associated cost of revenues for the years ended October 31, 2019 and 2018 were as follows:

Revenues for the year ended October 31, 2019 from service agreements and license fees increased $10.9 million to $26.6 million from $15.8 million for the year ended October 31, 2018. Service revenues increased from the year ended October 31, 2018 primarily due to revenues of $10.0 million recorded in connection with the EMRE License Agreement during the year ended October 31, 2019 and higher revenue from module replacements during the year ended October 31, 2019 (particularly during the first quarter of the year ended October 31, 2019) compared to the prior year. The prior year included revenue recorded in connection with the service agreement associated with the 14.9 MW fuel cell park in Bridgeport, Connecticut (“Bridgeport Fuel Cell Project”) of $2.3 million, compared to revenue recorded during the year ended October 31, 2019 of $8.0 million. As a result of the purchase of the Bridgeport Fuel Cell Project on May 9, 2019, revenue under the Bridgeport FuelCell Project service agreement is no longer being recognized.

The increases in revenue were partially offset by a decrease in revenue resulting from the adoption of Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) as of November 1, 2018, which impacted service and license revenues recognition. Service revenues are now recorded based on a cost-to-cost input method whereas previously service revenues for maintenance and monitoring were recorded ratably over the term of the service agreement and revenue from module exchanges was recognized upon the module replacement event. Performance guarantees, which were previously recorded as a cost of service and license revenues, are now accounted for as variable consideration with a reduction to service and license revenues. License revenues were previously recorded over the contract term on a straight-line basis; however, upon adoption of Topic 606, we assessed the performance obligations within an existing license contract and allocated consideration between performance obligations that are satisfied at a point in time and performance obligations that are recognized over time. Revenue from a license performance obligation that is satisfied over time was $1.6 million for the year ended October 31, 2019, compared to $2.2 million for the year ended October 31, 2018.

Cost of service and license revenues increased $3.9 million to $18.9 million for the year ended October 31, 2019 from $15.1 million for the year ended October 31, 2018. Cost of service agreements includes maintenance and operating costs, module exchanges, and, in the fiscal year ended October 31, 2018 (prior to the adoption of Topic 606), also included performance guarantees.

Overall gross profit from service and license revenues was $7.7 million for the year ended October 31, 2019, which represents an increase of $7.0 million from gross profit of $0.7 million for the year ended October 31, 2018. The adoption of Topic 606 resulted in a reduction of service and license margins of $2.6 million primarily due to a reduction in license revenue and a decrease in the amount of revenue that was recorded under Topic 606. Service and license revenue gross margins were further impacted by a change in our estimates for future module replacements, which resulted in a reduction of revenue of approximately $1.0 million and an increase in the service loss reserve of $1.7 million. The overall gross margin percentage of 28.8% for the year ended October 31, 2019 increased compared to 4.4% in the year ended October 31, 2018. This increase was primarily a result of the EMRE License Agreement revenues recorded for the year ended October 31, 2019, which had no corresponding cost of sales.

As of October 31, 2019, service backlog totaled $169.4 million compared to $251.7 million as of October 31, 2018. This backlog is for service agreements of up to 20 years at inception and is expected to generate positive margins and cash flows based on current estimates. The decrease in service backlog is primarily due to the acquisition of the Bridgeport Fuel Cell Project, as the service backlog previously associated with such project is now being included within generation backlog. This acquisition has resulted in additional revenue to be recorded under the PPA as compared to the service agreement. Service backlog also includes future license revenue.

Revenues for the year ended October 31, 2019 from generation increased $6.9 million to $14.0 million from $7.2 million for the year ended October 31, 2018. Generation revenues for the years ended October 31, 2019 and 2018 reflect revenue from electricity generated under the Company’s PPAs. Generation revenues increased for the year ended October 31, 2019 compared to the year ended October 31, 2018 due to additional revenue recorded for the Bridgeport Fuel Cell Project, which was acquired on May 9, 2019. Revenue recognized under the related PPA subsequent to the acquisition of the Bridgeport Fuel Cell Project is now included in Generation revenues in an amount equal to $7.0 million. Cost of generation revenues totaled $31.6 million in the year ended October 31, 2019, compared to $6.4 million for the year ended October 31, 2018.

The increase in Cost of generation revenues was primarily a result of: (i) our growing generation fleet, (ii) an impairment charge for the Triangle Street Project and (iii) an impairment charge for the Bolthouse Farms Project, which are further described as follows:

Cost of generation revenues included depreciation of approximately $6.8 million and $4.1 million for the years ended October 31, 2019 and 2018, respectively, and included amortization of $0.6 million for the Bridgeport Fuel Cell Project PPA for the year ended October 31, 2019. We had 26.1 MW of operating power plants in our portfolio as of October 31, 2019, compared to 11.2 MW as of October 31, 2018. This increase is a result of the acquisition of the Bridgeport Fuel Cell Project.

As of October 31, 2019, generation backlog totaled $1.1 billion compared to $839.5 million as of October 31, 2018.

Advanced Technologies contracts revenue and related costs for the years ended October 31, 2019 and 2018 were as follows:

Revenues for the year ended October 31, 2019 from Advanced Technologies contracts increased $5.6 million to $19.6 million from $14.0 million for the year ended October 31, 2018. The adoption of Topic 606 had no impact on Advanced Technologies revenue for the year ended October 31, 2019. The increase for the year ended October 31, 2019 was primarily due to the timing of project activity under existing contracts. Cost of Advanced Technologies contract revenues increased $2.5 million to $12.9 million for the year ended October 31, 2019, compared to $10.4 million for the year ended October 31, 2018. Advanced Technologies contracts for the year ended October 31, 2019 generated a gross profit of $6.7 million compared to a gross profit of $3.7 million for the year ended October 31, 2018. The increase in Advanced Technologies contract gross margin is related to the timing and mix of contracts being performed during the year ended October 31, 2019, particularly a higher proportion related to private industry contracts.

At October 31, 2019, Advanced Technologies contract backlog totaled $12.0 million compared to $32.4 million at October 31, 2018.

Administrative and selling expenses were $31.9 million and $24.9 million for the years ended October 31, 2019 and 2018, respectively. The increase from the prior year primarily relates to legal and consulting costs related to our restructuring, liquidity and refinancing initiatives. Total legal and professional fees incurred for the year ended October 31, 2019 were $11.5 million, compared to $4.1 million in the year ended October 31, 2018.

Research and development expenses decreased to $13.8 million for the year ended October 31, 2019 compared to $22.8 million during the year ended October 31, 2018. The decrease related to the reduction in spending resulting from the restructuring initiatives and resources being allocated to funded Advanced Technologies projects.

Loss from operations for the year ended October 31, 2019 was $66.9 million compared to $44.6 million for the year ended October 31, 2018. The increase in the loss from operations was primarily a result of the fact that there were no significant product sales, unfavorable margins mainly due to higher manufacturing variances (which were an additional $3.3 million for the year ended October 31, 2019 compared to the prior year), unfavorable generation margins resulting from the impairment charges of $20.4 million for the year ended October 31, 2019 and higher administrative and selling expenses of $7.0 million, partially offset by higher margins for service and license revenues, which were primarily due to the $10.0 million in revenue recorded for the EMRE License Agreement and lower research and development expenses of $9.0 million.

Interest expense for the years ended October 31, 2019 and 2018 was $10.6 million and $9.1 million, respectively. Interest expense for both periods presented includes interest on the loan and security agreement with Hercules Capital, Inc. (“Hercules”), interest expense related to financing obligations resulting from sale-leaseback transactions and interest for the amortization of the fair value discount of the Series 1 Preferred Stock. The increase in interest expense represents additional interest on the loans made by Fifth Third Bank and Liberty Bank in connection with the acquisition of the Bridgeport Fuel Cell Project and a modification fee of $0.8 million that was recorded in connection with the amendment of the loan agreement with NRG. The interest expense for the years ended October 31, 2019 and 2018 includes interest for the accretion of the fair value discount for the Series 1 Preferred Stock of $2.3 million and $2.2 million, respectively.

Other income, net was $0.1 million for the year ended October 31, 2019 compared to other income, net of $3.3 million for the year ended October 31, 2018. The income for each of the years ended October 31, 2019 and 2018 includes income of $0.6 million for refundable research and development tax credits. The income for fiscal year 2019 was offset by expense of $0.6 million for the fair value adjustments of an interest rate swap. Other income, net for the prior year also includes a foreign exchange gain related to the remeasurement of the Canadian Dollar denominated preferred stock obligation of our U.S. Dollar functional currency Canadian subsidiary and a foreign exchange gain that was realized on payments and unbilled receivable balances denominated in South Korean Won for the HYD contract.

We have not paid federal or state income taxes in several years due to our history of net operating losses, although we have paid foreign income and withholding taxes in South Korea. The Company recorded an income tax provision totaling $0.1 million for the year ended October 31, 2019 compared to a benefit of $3.0 million for the year ended October 31, 2018. The income tax benefit in 2018 was primarily related to the Tax Cuts and Jobs Act (the “Act”) that was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 34% to 21% effective January 1, 2018, which resulted in a deferred tax benefit of $1.0 million primarily related to a reduction of the Company’s deferred tax liability for in process research and development (“IPR&D”) for the year ended October 31, 2018. The Act also established an unlimited carryforward period for the net operating loss (“NOL”) the Company generated in fiscal year 2018. This provision of the Act resulted in a reduction of the valuation allowance attributable to deferred tax assets at the enactment date by $2.0 million based on the indefinite life of the resulting NOL as well as the deferred tax liability for IPR&D.

As of October 31, 2019, we had $850.0 million of federal NOL carryforwards that expire in the years 2020 through 2039 and $438.8 million of state NOL carryforwards that expire in the years 2020 through 2039. Additionally, we had $8.8 million of state tax credits available that expire from tax years 2020 to 2039.

For the year ended October 31, 2019, we recorded a charge to common stockholders for the difference between the fair value of the Series A Warrant (which was issued by the Company in July 2016) prior to our entry into the February 21, 2019 Exchange Agreement with the Series A Warrant holder (the “Exchange Agreement”) of $0.3 million and the fair value of the common shares issuable at the date of the Exchange Agreement of $3.5 million.

Dividends charges for the Series B Preferred Stock were $3.2 million in each of the years ended October 31, 2019 and 2018.

As discussed in more detail in Note 15. “Redeemable Preferred Stock” of the Notes to Consolidated Financial Statements, conversions during the years ended October 31, 2019 and 2018 resulted in a net deemed contribution of $1.6 million and a deemed dividend of $9.6 million, respectively. The deemed contributions (dividends) represent the difference between the fair value of the common shares issued to settle the conversion amounts and the carrying value of the shares of the Company’s Series C Convertible Preferred Stock (such shares are referred to herein as the “Series C Preferred Shares” and such stock is referred to herein as the “Series C Preferred Stock”). Additionally, during the year ended October 31, 2019, the net loss to common stockholders was impacted by a $0.5 million deemed contribution resulting from accounting for the Waiver Agreement, dated February 21, 2019, between the Company and the holder of the Series C Preferred Stock (the “Waiver Agreement”) and a $8.6 million redemption value adjustment recorded to adjust the carrying value of the Series C Preferred Shares to their redemption value during the quarter ended January 31, 2019 due to the occurrence of equity condition failures (as defined in the Certificate of Designations of the Series C Preferred Stock).

Conversions where the conversion price was below the initial conversion price (as adjusted for the reverse stock split) of $16.56 per share resulted in a variable number of shares being issued to settle the conversion amounts and are treated as a partial redemption of the shares of the Company’s Series D Convertible Preferred Stock (such shares are referred to herein as the “Series D Preferred Shares” and such stock is referred to herein as the “Series D Preferred Stock”). Conversions during the years ended October 31, 2019 and 2018 that were settled in a variable number of shares and treated as redemptions resulted in deemed dividends of $6.0 million and $2.1 million, respectively. The deemed dividends represent the difference between the fair value of the common shares issued to settle the conversion amounts and the carrying value of the Series D Preferred Shares.

The Series D Preferred Stock redemption accretion of $3.8 million recorded during the year ended October 31, 2019 reflects the accretion of the difference between the carrying value of the Series D Preferred Stock and the amount that would have been redeemed if stockholder approval had not been obtained for the issuance of common stock equal to 20% or more of our outstanding voting stock prior to the issuance of the Series D Preferred Stock. If we had been unable to obtain such stockholder approval and were therefore prohibited from issuing shares of common stock as a result of this limitation (the “Exchange Cap Shares”) to a holder of Series D Preferred Stock at any time after April 30, 2019, we would have been required to pay cash to such holder in exchange for the redemption of such number of Series D Preferred Shares held by such holder that would not have been convertible into such Exchange Cap Shares. Stockholder approval was obtained at the annual meeting of the Company’s stockholders on April 4, 2019 and no further accretion was required.

Net loss attributable to common stockholders represents the net loss for the period less the impact from the Series A Warrant exchange charge, Series B Preferred Stock dividends, Series C Preferred Stock deemed dividends and contributions, Series C redemption value adjustment, and Series D Preferred Stock dividends and redemption accretion. For the years ended October 31, 2019 and 2018, net loss attributable to common stockholders was $100.2 million and $62.2 million, respectively, and loss per common share was $1.82 and $9.01, respectively.

Our revenues and cost of revenues for the years ended October 31, 2018 and 2017 were as follows:

Total revenues for the year ended October 31, 2018 decreased $6.2 million, or 7%, to $89.4 million from $95.7 million during the year ended October 31, 2017. Total cost of revenues for the year ended October 31, 2018 decreased by $6.6 million, or 7%, to $86.3 million from $92.9 million during the year ended October 31, 2017. The Company's gross margin was ~~2.9%~~3.5% in fiscal year ~~2017,~~2018, as compared to the prior year gross margin ~~loss~~ of ~~0.3%~~2.9%. A discussion of the changes in product sales, service agreement and license revenues, Advanced Technologies contract revenues, and generation revenues follows. Refer to “Critical Accounting Policies and Estimates” for more information on revenue and cost of revenue classifications.

Our product sales, cost of product sales and gross profit for the years ended October 31, ~~2017~~2018 and ~~2016~~2017 were as follows:

	Years Ended October 31,						Change						Years Ended October 31,						Change
(dollars in thousands)	2017			2016			$			%			2018			2017			$		%
Product sales	$	43,047		$	62,563		$	(19,516	)		(31	)%	$	52,490		$	43,047		$	9,443		22	%
Cost of product sales		49,843			63,474			(13,631	)		(21	)%		54,504			49,843			4,661		9	%
Gross loss from product sales	$	(6,796	)	$	(911	)	$	(5,885	)		(646	)%	$	(2,014	)	$	(6,796	)	$	4,782		70	%
Product sales gross margin		(15.8	)%		(1.5	)%
Product sales gross loss margin														(3.8	)%		(15.8	)%

Product sales for the year ended October 31, 2018 included $49.4 million of power plant revenue and $3.1 million of revenue related to engineering and construction services. This is compared to product sales for the year ended October 31, 2017, which included $41.0 million of power plant revenue and $2.0 million of revenue ~~primarily~~ related to ~~power plant component sales and~~ engineering ~~procurement~~ and construction ~~services (“EPC services”). This is compared to~~services.

The increase in product sales for the year ended October 31, 2016 which included $11.7 million of power plant revenue, $41.8 million of fuel cell kits revenue and $9.1 million of revenue primarily from power plant component sales and EPC services. Product sales decreased $19.5 million, or 31%, for the year ended October 31, 20172018 when compared to ~~$43.0 million from $62.5 million for~~ the prior year ~~period.~~

~~The decline in revenue during the~~ period iswas primarily due primarily to lower revenue from POSCO Energy due to (i) the lack of kit sales for the year ended October 31, 2017 as the Company’s multi-year kit order with POSCO Energy concluded at the end of fiscal year 2016 and (ii) the transition to a royalty-only based model. The Company is entitled to receive a 3.0% royalty on POSCO Energy net product sales manufactured in South Korea as well as a royalty on each scheduled fuel cell module replacement under service agreements for modules that were built by POSCO Energy. Also contributing to the decline in revenue over the comparable period is the increase in instances in which the Company installs power plants for customers that have executed PPAs. The power plants are recognized as “Project assets” on the Consolidated Balance Sheets and generation revenue is recognized as earned over the life of the PPA or as a product sale in the event the Company sells the entire project (service agreement revenues would accompany a product sale). The decrease in kit revenue is partially offset by an increase in power plant revenue primarily relating to the 20 MW order from HYD, pursuant to which we provided equipment to HYD for a fuel cell project with KOSPO. Shipments began in the fourth quarter of fiscal 2017, which resulted in $38.5 million in revenue recorded in the prior year, and were completed in the first quarter of fiscal 2018, which resulted in $28.5 million in revenue recorded in fiscal year 2018. The Company completed commissioning the plant in the third quarter of fiscal 2018. The Company also completed the sale of certain project assets, including a ~~substantial portion~~2.8 MW natural gas fueled plant at the City of ~~revenue has been recorded for the delivered components.~~Tulare and a 1.4 MW plant at Trinity College.

Cost of product sales ~~decreased $13.7~~increased $4.7 million for the year ended October 31, ~~2017,~~2018 to $54.5 million, compared to $49.8 million ~~compared to $63.5 million~~in the same period in the prior year period. The decrease in cost of sales in fiscal year 2017 was driven by lower overall product volume which included no kit sales during the fiscal year and retention of project assets on balance sheet rather than sales to end customer or investors. Cost ofyear. Overall gross loss from product sales includes costs to design, engineer, manufacture and ship our power plants and power plant components to customers, site engineering and construction costs where we are responsible for power plant system installation, costs for assembly and conditioning equipment sold to POSCO Energy, warranty expense and inventory excess and obsolescence charges. The decrease in product sales gross margin is primarily due to lower manufacturing productionwas $2.0 million for the year ended October 31, ~~2017 resulting~~2018 compared to gross loss of $6.8 million in ~~a higher level~~the prior year comparable period. Gross loss decreased from the prior year period due primarily to the favorable margins realized for the HYD contract and the sale of ~~under-absorbed~~certain project assets. Both periods were impacted by the under-absorption of fixed ~~costs.~~overhead costs due to low production volumes of approximately 25 MW in each fiscal year.

As of October 31, ~~2017,~~2018, product sales backlog totaled approximately ~~$31.3 million~~$1,000 compared to ~~$24.9~~$31.3 million as of October 31, ~~2016.~~2017.

Our service agreements and license revenues and associated cost of revenues for the years ended October 31, ~~2017~~2018 and ~~2016~~2017 were as follows:

	Years Ended October 31,						Change						Years Ended October 31,						Change
(dollars in thousands)	2017			2016			$			%			2018			2017			$			%
Service and license revenues	$	27,050		$	31,491		$	(4,441	)		(14	)%	$	15,757		$	27,050		$	(11,293	)		(42	)%
Cost of service and license revenues		25,285			32,592			(7,307	)		(22	)%		15,059			25,285			(10,226	)		(40	)%
Gross profit (loss) from service and license revenues	$	1,765		$	(1,101	)	$	2,866			260	%
Gross profit from service and license revenues													$	698		$	1,765		$	(1,067	)		60	%
Service and license revenues gross margin		6.5	%		(3.5	)%								4.4	%		6.5	%

Revenues for the year ended October 31, ~~2017~~2018 from service agreements and license fee and royalty agreements ~~totaled~~decreased $11.3 million to $15.8 million from $27.1 million compared to $31.5 million for the prior year. The decrease relates primarily to fewer module exchanges under service agreements performed in 2017. Revenue for license fee and royalty agreements totaled $2.7 million and $6.2 million for the years ended October 31, 2017 and 2016, respectively, due to lower royalties recognized. The Company’s license and royalty agreements with POSCO Energy included a minimum royalty which expired in December 2016.

~~Service agreements and license cost of revenues decreased to $25.3 million for fiscal year 2017 from $32.6 million for the prior year. Gross margin~~ for the year ended October 31, 2017. Service agreement revenue decreased from the year ended October 31, 2017 ~~was 6.5% which improved~~primarily due to lower revenue from ~~a gross margin loss~~fewer module replacements in the year ended October 31, 2018 as compared to the same period in the prior year. Revenue from license, royalty and material management fees decreased to $2.2 million for the year ended October 31, 2018 from $2.7 million for the prior year period due to lower royalties recognized.

Cost of ~~3.5%.~~service and license revenues decreased $10.2 million to $15.1 million for the year ended October 31, 2018 from $25.3 million for the year ended October 31, 2017. Cost of service agreements includes maintenance and operating costs, module exchanges, and performance guarantees. The ~~improvement in gross margin~~decrease over the prior year period relates to lower expenses associated with module replacements and lower operating costs in the year ended October 31, 2018.

Overall gross profit from service and license revenues was ~~a result~~$0.7 million for the year ended October 31, 2018. The overall gross margin percentage of 4.4 percent for the ~~fact that~~year ended October 31, 2018 compared to 6.5 percent in the prior year ~~included~~period. Service margins were negatively impacted by, among other immaterial factors, costs associated with a terminated legacy service contract ~~loss accruals recorded in connection with~~during the extension of certain legacy contracts as well as due to changes in estimated costs for certain legacy contracts and charges which were incurred in connection with the termination of service agreements at certain sites. The fiscal year ~~2017 gross margin also included MW module replacements with favorable margins.~~ended October 31, 2018.

As of October 31, ~~2017,~~2018, service backlog totaled approximately ~~$182.3~~$251.7 million compared to ~~$204.8~~$182.3 million as of October 31, ~~2016.~~2017. Service backlog does not include future royalties or license ~~revenues.~~revenues for either 2018 or 2017. This backlog is for service agreements of up to ~~twenty years and is expected to generate positive margins and cash flows based on current estimates.~~20 years.

Generation revenue and related costs for the years ended October 31, 2018 and 2017 were as follows:

	Years Ended October 31,						Change					Years Ended October 31,						Change
(dollars in thousands)	2017			2016			$		%			2018			2017			$			%
Generation revenues	$	7,233		$	1,267		$	5,966		471	%	$	7,171		$	7,233		$	(62	)		(1	)%
Cost of generation revenues		5,076			664			4,412		664	%		6,421			5,076			1,345			26	%
Gross profit from generation revenues	$	2,157		$	603		$	1,554		258	%
Generation revenues gross profit												$	750		$	2,157		$	(1,407	)		(65	)%
Generation revenues gross margin		29.8	%		47.6	%							10.5	%		29.8	%

Revenues for the year ended October 31, ~~2017~~2018 from generation totaled $7.2 million, ~~compared to $1.3 million for the prior year period. Revenues~~which is generally consistent with revenues for the year ended October 31, 2017. Generation revenues for the years ended October 31, 2018 and 2017 reflects revenue from electricity generated ~~pursuant to~~from the Company’s PPAs. Cost of generation revenues totaled ~~$5.1~~$6.4 million ~~for~~in the year ended October 31, ~~2017,~~2018, compared to ~~$0.7~~$5.1 million for the comparable prior year period. ~~Gross~~The decrease in gross profit from generation revenues ~~increased to $2.2~~was primarily a result of the $0.5 million impairment of a 1.4 MW project in development that was terminated in fiscal year 2018 and higher maintenance activities at certain installations that occurred in the first half of 2018. Cost of generation revenues included depreciation of approximately $4.1 million for each of the ~~year~~years ended October 31, ~~2017, compared to $0.6 million for the prior year period.~~2018 and 2017. The increases represent the growth in the Company’s operating portfolio. The reduction in generation revenues gross margin percentage is the result of higher costs and lower revenues from electricity generation on certain plants during the initial startup operation period. As of October 31, 2017, the Company had 11.2 MW of operating power plants in its ~~portfolio.~~portfolio for both periods.

As of October 31, ~~2017,~~2018, generation backlog totaled approximately ~~$296.3~~$839.5 million compared to ~~$142.5~~$296.3 million as of October 31, ~~2016.~~2017.

Advanced Technologies contracts revenue and related costs for the years ended October 31, ~~2017~~2018 and ~~2016~~2017 were as follows:

	Years Ended October 31,						Change					Years Ended October 31,						Change
(dollars in thousands)	2017			2016			$		%			2018			2017			$			%
Advanced Technologies contracts	$	18,336		$	12,931		$	5,405		42	%	$	14,019		$	18,336		$	(4,317	)		(24	)%
Cost of Advanced Technologies contracts		12,728			11,879			849		7	%		10,360			12,728			(2,368	)		(19	)%
Gross profit	$	5,608		$	1,052		$	4,556		433	%
Advanced Technologies contracts gross profit												$	3,659		$	5,608		$	(1,949	)		(35	)%
Advanced Technologies contracts gross margin		30.6	%		8.1	%							26.1	%		30.6	%

Advanced Technologies ~~contracts~~contract revenue for the year ended October 31, ~~2017~~2018 was ~~$18.3~~$14.0 million, ~~representing an increase~~which reflects a decrease of ~~$5.4~~$4.3 million when compared to ~~$12.9~~$18.3 million of revenue for the year ended October 31, ~~2016.~~2017. Advanced Technologies contract revenue was lower for the year ended October 31, 2018 primarily due to the timing of project activity under existing contracts. Cost of Advanced Technologies ~~contracts increased~~contract revenues decreased $2.4 million to ~~$12.7~~$10.4 million for the year ended October 31, ~~2017,~~2018, compared to ~~$11.9~~$12.7 million for the same period in the prior year. ~~Gross profit from~~ Advanced Technologies contracts for the year ended October 31, ~~2017 was $5.6~~2018 generated a gross profit of $3.7 million compared to ~~$1.1~~a gross profit of $5.6 million for the year ended October 31, ~~2016, and gross margin was 30.6% for the year ended October 31, 2017 compared to 8.1% during the prior year period.~~2017. The ~~increase~~decrease in Advanced Technologies contract gross margin is related to the timing and mix of contracts ~~currently~~ being performed during the year ended October 31, 2018, particularly a ~~higher~~lower proportion related to private industry contracts.

At October 31, ~~2017,~~2018, Advanced Technologies contract backlog totaled approximately ~~$44.3~~$32.4 million compared to ~~$60.1~~$44.3 million at October 31, ~~2016.~~2017.

Administrative and selling expenses were $24.9 million and $25.9 million for the years ended October 31, 2018 and 2017, respectively. The decrease from the prior year period relates to lower compensation expense offset marginally by higher professional related expenditures and business development activities during the year ended October 31, 2017 compared to $25.2 million for the year ended October 31, 2016. The increase results primarily from higher business development costs incurred. Business development costs may vary from period to period depending on the nature and frequency of customer and state-level requests for proposals.2018.

Research and development expenses ~~decreased $0.4 million~~increased to ~~$20.4~~$22.8 million for the year ended October 31, ~~2017,~~2018 compared to ~~$20.8~~$20.4 million during the year ended October 31, ~~2016.~~2017. The increase from the prior year period is primarily due to timing of research and development activities related to new products including the SureSource 4000.

Restructuring expense of $1.4 million was recorded for the year ended October 31, 2017, relating to personnel separation costs from the business restructuring that was undertaken to reduce costs and align production levels with the level of production needs at the time. There were no restructuring activities for the year ended October 31, 2018.

Loss from operations for the year ended October 31, ~~2017~~2018 was ~~$44.9~~$44.6 million compared to ~~$46.4~~$44.9 million for the year ended October 31, ~~2016, primarily as a result of~~2017. The decrease was due to higher gross ~~margins in fiscal~~profit realized for the year ~~2017, which were partially~~ended October 31, 2018, lower administrative and selling expense and the lack of restructuring expense during the year ended October 31, 2018. This was offset by ~~higher operating expenses primarily for restructuring expense.~~increased research and development expenses.

Interest expense for the years ended October 31, 2018 and 2017 was $9.1 million and ~~2016 was~~ $9.2 million, respectively. Interest expense for both periods presented includes interest on the loan and ~~$5.0 million, respectively. The increase results from borrowings under the Company's Loan and Security Agreement~~security agreement with Hercules and interest expense related to sale-leaseback ~~transactions recorded under the finance method.~~transactions. The interest expense for the years ended October 31, ~~2017~~2018 and ~~2016~~2017 includes interest for the ~~amortization~~accretion of the redeemable preferred stock of a subsidiary fair value discount of ~~$2.0~~$2.2 million and ~~$1.8~~$2.0 million, respectively.

Other income, net, was $3.3 million for the year ended October 31, 2018 compared to other income, net of $0.2 million for the year ended October 31, ~~2017 compared to~~2017. The other income, net for both periods presented includes foreign exchange gains (losses) related to the remeasurement of ~~$0.6 million for~~the Canadian Dollar denominated preferred stock obligation of our U.S. Dollar functional currency Canadian subsidiary. For the year ended October 31, ~~2016. Unrealized~~2018, foreign exchange ~~(losses) gains aggregated to ($0.7) million~~gain was realized on payments and ~~$0.1 million~~unbilled receivable balances denominated in ~~fiscal year 2017 and 2016, respectively, which primarily related to~~South Korean Won for the ~~preferred stock obligation of our Canadian subsidiary, FCE Ltd. FCE Ltd.'s functional currency is U.S. dollars, while the preferred stock obligation is payable in Canadian dollars.~~HYD contract. Refundable research and development tax credits for the years ended October 31, 2018 and 2017 were $0.6 million and ~~2016 were~~ $0.9 million, ~~and $0.4 million,~~ respectively.

We have not paid federal or state income taxes in several years due to our history of net operating losses, ~~(“NOLs”),~~ although we have paid foreign income and withholding taxes in South Korea. ~~For~~The Company recorded an income tax benefit totaling $3.0 million for the year ended October 31, ~~2017, our provision for~~2018 compared to income ~~taxes was~~tax expense of $0.04 million ~~compared to $0.5 million in~~for the ~~prior year. We cannot estimate when production volumes will be sufficient to generate taxable domestic income. Accordingly, no~~year ended October 31, 2017. The income tax benefit ~~has been recognized~~ for ~~these NOLs or other~~the year ended October 31, 2018 primarily related to the Act that was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 34% to 21% effective January 1, 2018, which resulted in a deferred tax benefit of $1.0 million primarily related to a reduction of the Company’s deferred tax liability for IPR&D. The Act also established an unlimited carryforward period for the NOL the Company generated in fiscal year 2018. This provision of the Act resulted in a reduction of the valuation allowance attributable to deferred tax assets at the enactment date by $2.0 million based on the indefinite life of the resulting NOL as ~~significant uncertainty exists surrounding~~well as the ~~recoverability of these~~ deferred tax ~~assets.~~liability for IPR&D.

As of October 31, ~~2017,~~2018, we had ~~$752.7~~$799.9 million of federal NOL carryforwards that expire in the years 2019 through 2037 and ~~$414.7~~$410.2 million inof state NOL carryforwards that expire in the years ~~2018~~2019 through 2037. Additionally, we had ~~$11.6~~$8.3 million of state tax credits available ~~of which $0.6 million expires in 2018. The remaining credits do not expire.~~that expire from tax years 2018 to 2037.

The net loss attributed to the noncontrolling interest for the year ended October 31, 2016 was $0.3 million. During October 2016, the Company purchased the noncontrolling interest in FuelCell Energy Services, GmbH, from Fraunhofer IKTS, giving the Company sole ownership and eliminating future noncontrolling interest.Series B preferred stock dividends

Dividends recorded and paid on the Series B Preferred Stock were $3.2 million in each of the years ended October 31, 2018 and 2017.

Installment conversions occurring prior to August 27, 2018 in which the conversion price was below the initial conversion price of $1.84 per share and installment conversions occurring between August 27, 2018 and October 31, 2018 in which the conversion price was below the adjusted conversion price of $1.50 per share resulted in a variable number of shares being issued to settle the installment amount and were treated as a partial redemption of the Series C Preferred Shares. Installment conversions during the year ended October 31, 2018 that were settled in a variable number of shares and treated as redemptions resulted in deemed dividends of $9.6 million. There were no deemed dividends recorded for the year ended October 31, 2017 since the Series C Preferred Shares were not issued until September 2017 and ~~2016.~~installment conversions started in October 2017. The deemed dividend represents the difference between the fair value of the common shares issued to settle the installment amounts and the carrying value of the Series C Preferred Shares.

The Series D Preferred Stock redemption accretion of $2.1 million for the year ended October 31, 2018 reflects the accretion of the difference between the carrying value and the amount that would be redeemed if stockholder approval had not been obtained for common stock issuance equal to 20% or more of the Company’s outstanding voting stock as of the date of issuance of the Series D Preferred Stock. In the event that the Company had been unable to obtain such stockholder approval and was therefore prohibited from issuing shares of common stock as a result of this limitation (the “Exchange Cap Shares”) to a holder of Series D Preferred Stock at any time after April 30, 2019, the Company would have been obligated to pay cash to such holder in exchange for the redemption of such number of Series D Preferred Shares held by such holder that are not convertible into such Exchange Cap Shares at a price equal to the product of (i) such number of Exchange Cap Shares and (ii) the closing sale price on the trading day immediately preceding the date such holder delivers the applicable conversion notice with respect to such Exchange Cap Shares to the Company.

Net loss attributable to common stockholders represents the net loss for the period less the ~~net loss attributable to noncontrolling interest~~Series D Preferred Stock redemption accretion, preferred stock deemed dividends on the Series C Preferred Stock and ~~less~~ the preferred stock dividends on the Series B Preferred Stock. For the years ended October 31, ~~2017~~2018 and ~~2016,~~2017, net loss attributable to common stockholders was ~~$57.1~~$62.2 million and ~~$54.2~~$57.1 million, respectively, and ~~basic and diluted~~ loss per common share was ~~$1.14~~$9.01 and ~~$1.82,~~$13.73, respectively.

~~Our revenues and cost of revenues for the years ended October 31, 2016 and 2015 were as follows:~~

Total revenues for the year ended October 31, 2016 decreased $54.8 million, or 34%, to $108.3 million from $163.1 million during the year ended October 31, 2015, due primarily to decreased product sales as discussed below.

Total cost of revenues for the year ended October 31, 2016 decreased by $41.7 million, or 28%, to $108.6 million from $150.3 million for the year ended October 31, 2015. The Company's gross margin was a loss of 0.3% in fiscal year 2016, as compared to the prior year margin of 7.8%. A discussion of the changes in product sales, service agreement and license revenues, and Advanced Technologies contract revenues follows. Refer to “Critical Accounting Policies and Estimates” for more information on revenue and cost of revenue classifications.

~~Our product sales, cost of product sales and gross profit for the years ended October 31, 2016 and 2015 were as follows:~~

Product sales for the year ended October 31, 2016 included $11.7 million of power plant revenue, $41.8 million from sales of fuel cell kits and $9.1 million of revenue primarily related to power plant component sales and EPC services. This is compared to product sales for the year ended October 31, 2015 which included $19.6 million of power plant revenue, $84.5 million of fuel cell kits and module revenue and $24.5 million of revenue primarily from power plant component sales and EPC services. Product sales decreased $66.0 million, or 51%, for the year ended October 31, 2016 to $62.6 million from $128.6 million for the prior year period.

The decline in revenue during the period as compared to the prior year period is due primarily to lower revenue from POSCO Energy due to the transition of the kit and module sales to POSCO Energy to a royalty based model.

Also contributing to the decline in revenue over the comparable prior year period is certain power plants that are being recognized as Project assets on the balance sheet, as product and EPC revenue is not recognized with respect to these Project assets when sales are made. As the Company's development business expands, it is installing power plants for customers that have executed PPAs. These assets generally are the subject of sale-leaseback transactions with PNC Energy Capital, LLC (“PNC”), which are recorded under the financing method of accounting for a sale-leaseback. Under the finance method, the Company does not recognize the proceeds received from the lessor as a sale of such assets. The power plants are recognized as Project assets on the balance sheet and revenue will be recognized as electricity revenue is earned over the life of the PPA or when a definitive sales agreement is executed.

Cost of product sales decreased $55.1 million for the year ended October 31, 2016, to $63.5 million compared to $118.5 million in the prior year period. The decrease in cost of sales in fiscal year 2016 was driven by lower overall product volume during the fiscal year and retention of project assets on the balance sheet rather than sales to end customers or investors.

~~As of October 31, 2016, product sales backlog totaled approximately $24.9 million compared to $90.7 million as of October 31, 2015.~~

~~Our service agreements and license revenues and associated cost of revenues for the years ended October 31, 2016 and 2015 were as follows:~~

Revenues for the year ended October 31, 2016 from service agreements and license fee and royalty agreements totaled $31.5 million, compared to $21.0 million for the prior year. The increase relates primarily to more module exchanges performed in 2016, some of which resulted from service contract extensions for certain projects. Revenue for license fee and royalty agreements totaled $6.2 million and $4.7 million for the years ended October 31, 2016 and 2015, respectively.

Service agreements and license cost of revenues increased to $32.6 million for the year ended October 31, 2016 from $18.3 million for the prior year, resulting in a decrease in gross margin to a loss of 3.5% from a profit of 12.9% during the prior year period. The decrease in gross margin over the prior year relates to an increase in performance guarantee accruals due to plant performance at certain sites, contract loss accruals recorded in connection with the extension of certain legacy contracts as well as due to changes in estimated costs for certain legacy contracts, and charges incurred in connection with termination of service agreements at certain sites.

As of October 31, 2016, service backlog totaled approximately $204.8 million compared to $254.1 million as of October 31, 2015. Service backlog does not include future royalties or license revenues. This backlog is for service agreements of up to twenty years.

Revenues for the year ended October 31, 2016 from generation totaled $1.3 million. Revenues are from electricity generated pursuant to the Company’s PPAs. Cost of generation totaled $0.7 million for the year ended October 31, 2016. The increases represent the growth in the Company’s operating portfolio. The Company did not have any operating assets in its generation portfolio during fiscal 2015.

~~Advanced Technologies contracts revenue and related costs for the years ended October 31, 2016 and 2015 were as follows:~~

Advanced Technologies contracts revenue for the year ended October 31, 2016 was $12.9 million, representing a decrease of $0.5 million when compared to $13.5 million of revenue for the year ended October 31, 2015. Cost of Advanced Technologies contracts decreased $1.6 million to $11.9 million for the year ended October 31, 2016, compared to $13.5 million for the prior year. Gross profit from Advanced Technologies contracts for the year ended October 31, 2016 was $1.1 million compared to breakeven for the year ended October 31, 2015, and gross margin was 8.1% compared to breakeven during the prior year period. The increase in gross margin is related to the timing and mix of contracts currently being performed, particularly the transition to a larger mix of private industry contracts.

~~As of October 31, 2016, Advanced Technologies contract backlog totaled approximately $60.1 million compared to $36.5 million as of October 31, 2015.~~

Administrative and selling expenses were $25.2 million for the year ended October 31, 2016 compared to $24.2 million for the year ended October 31, 2015. The increase results primarily from higher business development costs incurred early in the year. Business development costs may vary from period to period depending on the nature of customer and state-level requests for proposals.

Research and development expenses increased $3.4 million to $20.8 million for the year ended October 31, 2016, compared to $17.4 million during the year ended October 31, 2015. The increase in research and development expenses reflects increased research and development activity related to near-term product introductions, including the high efficiency fuel cell. This configuration has an overall electrical efficiency of approximately 60% and is designed for utility scale applications and data centers. The first power plant is currently being installed and is expected to be fully operational in fiscal year 2018.

Loss from operations for the year ended October 31, 2016 was $46.4 million compared to a loss of $28.9 million for the year ended October 31, 2015, primarily as a result of lower gross margins in fiscal year 2016.

Interest expense for the years ended October 31, 2016 and 2015 was $5.0 million and $3.0 million, respectively. The increase results from borrowings under the Company's Loan and Security Agreement with Hercules, the $10.0 million low-cost loan granted by the State of Connecticut in early 2016, and interest expense related to sales-leaseback transactions recorded under the finance method. The interest expense for both periods includes interest for the amortization of the redeemable preferred stock of a subsidiary fair value discount of $1.8 million.

Other income, net, was $0.6 million for the year ended October 31, 2016 compared to other income, net of $2.4 million for the year ended October 31, 2015. Unrealized foreign exchange gains aggregated to $0.1 million and $1.7 million in fiscal year 2016 and 2015, respectively, which primarily related to the preferred stock obligation of our Canadian subsidiary, FCE Ltd. FCE Ltd.'s functional currency is U.S. dollars, while the preferred stock obligation is payable in Canadian dollars. Refundable research and development tax credits for the years ended October 31, 2016 and 2015 were $0.4 million and $0.6 million, respectively.

We have not paid federal or state income taxes in several years due to our history of NOLs, although we have paid income taxes in South Korea. For the year ended October 31, 2016, our provision for income taxes was $0.5 million, compared to $0.3 million in the prior year. We cannot estimate when production volumes will be sufficient to generate taxable domestic income. Accordingly, no tax benefit has been recognized for these NOLs or other deferred tax assets as significant uncertainty exists surrounding the recoverability of these deferred tax assets.

The net loss attributed to the noncontrolling interest for each of the years ended October 31, 2016 and 2015 was $0.3 million. During October 2016, the Company purchased the noncontrolling interest in FuelCell Energy Services, GmbH, from Fraunhofer IKTS, giving the Company sole ownership and eliminating future noncontrolling interest in earnings.

~~Dividends recorded and paid on the Series B Preferred Stock were $3.2 million in each of the years ended October 31, 2016 and 2015.~~

Net loss attributable to common stockholders represents the net loss for the period, less the net loss attributable to noncontrolling interest and less the preferred stock dividends on the Series B Preferred Stock. For the years ended October 31, 2016 and 2015, net loss attributable to common stockholders was $54.2 million and $32.6 million, respectively, and basic and diluted loss per common share was $1.82 and $1.33, respectively.

Cash, cash equivalents ~~on hand, cash flows from operating activities, availability under our loan facilities~~ and ~~access to the capital markets will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.~~

We intend to maintain appropriate cash and debt levels based upon our expected cash requirements for operations, capital expenditures, construction of project assets as well as principal, interest and dividend payments. In the future, we may also engage in additional debt or equity financings, including project specific debt financings. We believe that when necessary, we will have adequate access to the capital markets, although the timing and size of any financing will depend on multiple factors including market conditions, future order flow and the need to adjust production capacity. If we are unable to raise additional capital, our growth potential may be adversely affected and we may have to modify our plans.

~~Cash and cash equivalents including~~ restricted cash totaled ~~$87.5~~$39.8 million as of October 31, ~~2017~~2019 compared to ~~$118.3~~$80.2 million as of October 31, ~~2016. As of October 31, 2017:~~2018, consisting of:

The Company faced significant liquidity challenges in fiscal 2019, which were addressed through a series of actions late in the fiscal year and subsequent to fiscal year end. In the second and third quarters of fiscal 2019, management concluded that, as a result of the Company’s history of negative cash flows from operating and investing activities, negative working capital, aged accounts payable, forbearance agreements with suppliers, and significant short-term debt maturities, there was substantial doubt about the Company’s ability to continue as a going concern. To address these issues, we restructured our management team and our operations in ways that are intended to support our growth and achieve our profitability and sustainability goals. We raised capital under our at-the-market sales plan, which allowed us to pay down our accounts payable and stay current on our forbearance agreements. In addition, we repaid a substantial portion of our short-term debt, retired our Series C and Series D Preferred Stock obligations, entered into new or amended financing arrangements and entered into a license arrangement with EMRE, which resulted in $10.0 million of up-front proceeds. While some of the indicators of substantial doubt still exist, such as historical losses and negative cash flows, as a result of the previous actions taken by the Company in response to the liquidity challenges that arose in the second and third quarters of fiscal 2019, management has concluded that substantial doubt was alleviated and the Company expects to meet its obligations for at least one year from the date of issuance of these financial statements. Key definitive agreements which support the Company’s future liquidity position include:

The Company’s future liquidity will be dependent on ~~obtaining a combination~~its ability to (i) timely complete current projects in process within budget, including approved amounts that have been financed as financing does not cover overages, (ii) increase cash flows from its generation portfolio, including by meeting conditions required to timely commence operations of ~~increased~~new projects and operating its generation portfolio in compliance with minimum performance guarantees, (iii) obtain approval of and receive funding for project construction under the Orion Facility and meet conditions for release of funds, (iv) increase order and contract volumes, ~~increased cash flows from our generation~~which would lead to additional product sales and ~~service portfolios~~services agreements, (v) obtain funding for and receive payment for research and development under current and future Advanced Technology contracts, including achieving a $5 million technological performance milestone in the JDA during calendar year 2020, and (vi) implement the cost reductions necessary to achieve profitable operations. Our ~~expanding development~~business model requires substantial outside financing arrangements and satisfaction of ~~large-scale turn-key~~the conditions of such financing arrangements to deploy our projects and facilitate the growth of our business. If financing is not available to us on acceptable terms if and when needed, if we do not satisfy the conditions of our financing arrangements or if we spend more than the financing approved for projects, we may be required to reduce planned spending, sell assets, seek alternative financing and take other measures, which could have a material adverse effect on our operations.

As of January 14, 2020, we had 14,034,001 shares of common stock available for issuance, of which 10,290,934 shares were reserved for issuance under various convertible securities, options, and warrants, under our stock purchase and incentive plans, and under our at-the-market sales plan. The limited number of shares available for issuance limits our ability to raise capital in the ~~United States~~equity markets and satisfy obligations with shares instead of cash, which could adversely impact our ability to fund our business and operations. We must obtain stockholder approval to increase the number of shares of common stock we are authorized to issue under our Certificate of Incorporation. At the April 4, 2019 annual meeting of stockholders, our stockholders did not approve our request to increase the number of shares of common stock that we are authorized to issue from 225,000,000 shares to 335,000,000 shares. In the event that the Company’s Board of Directors determines to seek stockholder approval for an increase in authorized shares in the future, there can be no assurances of obtaining such stockholder approval.

While there can be no assurances, we anticipate raising additional required capital from new and existing investors and lenders. We expect to work with lenders and financial institutions to secure long-term debt, tax equity and sale-leasebacks for our project asset portfolio as we achieve the Commercial Operation Dates for these projects. This financing, if received, may allow the Company to recycle capital from these projects by reinvesting the capital in other projects and to pay down the Orion Facility over time. It should be noted that the lenders and the Agent under the Orion Credit Agreement (“Orion”) have broad approval rights over our ability to draw and allocate funds from the

Orion Facility. There can be no assurance that the Company can obtain such financing or that the Company can obtain such financing on terms acceptable to the Company. If the Company is unable to obtain such financing or raise additional capital, the Company may reduce its expenditures or slow its project spending. If the Company cannot obtain such financing or cannot obtain such financing on terms acceptable to the Company, it would negatively impact the Company’s business model, operations, and liquidity.

We believe that our cash flows from our existing backlog, including PPAs, service agreements and Advanced Technology contracts, combined with our current unrestricted cash and cash equivalents, cash which is expected to become unrestricted, and available borrowings under the Orion Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months.

To grow our generation 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. This strategy requires liquidity and ~~is expected~~the Company expects to continue to have increasing liquidity ~~requirements. A key element of our business model includes the development of turn-key~~requirements as project sizes increase and more projects ~~and we~~are added to backlog. We may commence ~~construction~~building project assets upon the award of a project or execution of a multi-year PPA with an end-user that has a strong credit profile. Project development and construction cycles, which span the time between securing a PPA and commercial ~~operations~~operation of the plant, vary substantially and can take years. As a result of these project cycles and strategic decisions to finance the construction of certain projects, we may need to make significant up-front investments of resources in advance of the receipt of any cash from the sale or long-term financing of such projects. These up-front investments may include using our working capital, availability under our construction financing ~~facility~~facilities or other ~~project~~ financing arrangements. We may choose to substantially complete the construction of a project before it is sold to a project investor. Alternatively, we may choose to retain ownership of one or more of these projects after they become operational if we determine it would be of economic and strategic benefit to do so. If, for example, we cannot sell a project at economics that are attractive to us, we may instead elect to own and operate such project, generally until such time that we can sell such project on economically attractive terms. In markets where there is a compelling value proposition, we may also build one or more power plants on an uncontracted “merchant” basis in advance of securing long-term contracts for the project attributes (including energy, renewable energy credits and capacity). Delays in construction progress and completing current projects in process within budget, or in completing financing or the sale of our projects ~~which we are self-financing~~ may impact our ~~liquidity.~~liquidity in a material way.

Our operating portfolio ~~(11.2~~(26.1 MW as of October 31, ~~2017)~~2019) contributes higher long-term cash flows to the Company than if these projects had been sold. These projects currently generate approximately $22.0 million per year in annual revenue depending on plant output, operations performance and site conditions. The Company plans to continue to grow this portfolio while also selling projects to investors. As of October 31, ~~2017,~~2019, the Company had projects representing an additional ~~19.5~~47.1 MW under development and construction, ~~some of~~ which ~~would be~~projects are expected to generate operating cash flows in ~~fiscal 2018.~~future periods. Retaining long-term cash flow positive projects, combined with our service fleet, ~~reduces~~is expected to result in reduced reliance on new project sales to achieve cash flow positive ~~operations.~~operations, however, operations and performance issues could impact results. The Company expects to finance the construction of the projects still under development and construction using proceeds from the Orion Facility, subject to lender approval, satisfaction of conditions for release of funding, including third party consents, and keeping project costs within approved budgets. We have ~~partnered~~worked with and are continuing to work with lenders and financial institutions to secure long-term debt, tax equity and sale-leasebacks for our project asset portfolio, ~~as well as NRG for construction period financing. Through~~but there can be no assurance that such financing can be attained, or that, if attained, it will be retained and sufficient. As of October 31, ~~2017,~~2019, we have financed four projects through sale-leaseback transactions. As of October 31, ~~2017,~~2019, total ~~finance~~financing obligations and debt outstanding related to project assets was ~~$48.3~~$85.1 million. Future required payments totaled $67.5 million as of October 31, 2019. The outstanding financing obligation under the sale-leaseback transactions includes an embedded gain, which will be recognized at the end of the lease term.

Our ~~generation~~operating portfolio provides the Company with the full benefit of future cash ~~flows.~~ flows, net of any debt service requirements.

The ~~Company had~~following table summarizes our operating portfolio as of October 31, 2019:

In May 2019, we closed on the acquisition of the 14.9 MW Bridgeport Fuel Cell Project in Bridgeport, Connecticut from Dominion Generation, Inc. We own and operate the Bridgeport Fuel Cell Project as part of our generation portfolio, which is included in the table above. The total cash consideration paid was $35.5 million. We funded the acquisition with a ~~contract~~combination of third party financing and $15.0 million of restricted cash on hand that was tied to the project and released at closing. Liberty Bank and Fifth Third Bank jointly provided the senior project-level debt facility of $25.0 million, while the Connecticut Green Bank provided additional subordinated capital. The PPA term runs through December 2028.

The following table summarizes projects in process in backlog ~~totaling approximately $554.2~~as of October 31, 2019:

Backlog represents ~~firm~~ definitive agreements executed by the Company and our customers. ~~This~~Projects for which we have a PPA are included in generation backlog, ~~excludes the following recent awards: LIPA for 39.8 MW projects, the Toyota hydrogen project and the Korean 20 MW twenty year service agreement. Backlog is expected~~which represents future revenue under long-term PPAs. Projects sold to ~~increase~~

~~by over $1.0 billion once these project awards are converted to definitive agreements.~~ ~~Project awards referenced~~customers (and not retained by the ~~Company~~Company) are ~~notifications that the Company has been selected, typically through a competitive bidding process, to enter into definitive agreements. These awards have been publicly disclosed. Negotiations are~~included in ~~process and if successfully completed, project awards will become backlog.~~

~~The Company also has a strong~~product sales and service ~~pipeline of potential projects in various stages of development in North America, Asia~~backlog and Europe. This pipeline includes projects for on-site ‘behind-the-meter’ applications and for grid support multi-megawatt fuel cell parks. Behind-the-meter applications provide end users with predictable long-term economics, on-site power including micro-grid capabilities and reduced carbon emissions. In addition, a number of multi-megawatt utility grid support projects are being developed for utilities and independent power producers to support the ~~grid where power~~related generation backlog is ~~needed. These projects help both utilities and governments meet their renewable portfolio standards.~~removed upon sale.

Factors that may impact our liquidity in fiscal year ~~2018~~2020 and beyond include:

Cash and cash equivalents and restricted cash and cash equivalents totaled ~~$87.4~~$39.8 million as of October 31, ~~2017~~2019 compared to ~~$118.3~~$80.2 million as of October 31, ~~2016.~~2018. As of October 31, ~~2017,~~2019, restricted cash and cash equivalents was ~~$38.2~~$30.3 million, of which ~~$4.6~~$3.5 million was classified as current and ~~$33.5~~$26.9 million was classified as non-current, compared to ~~$34.1~~$40.9 million total restricted cash and cash equivalents as of October 31, ~~2016,~~2018, of which ~~$9.4~~$5.8 million was classified as current and ~~$24.7~~$35.1 million was classified as non-current.

	2017			2016			2015
(dollars in thousands)										2019			2018			2017
Consolidated Cash Flow Data:
Net cash used in operating activities	$	(71,845	)	$	(46,595	)	$	(44,274	)
Net cash (used in) provided by operating activities										$	(30,572	)	$	16,322		$	(71,845	)
Net cash used in investing activities		(31,444	)		(41,452	)		(6,930	)		(69,300	)		(51,260	)		(31,444	)
Net cash provided by financing activities		72,292			120,658			28,219			59,655			27,717			72,292
Effects on cash from changes in foreign currency rates		129			(35	)		(108	)		(244	)		12			129
Net (decrease) increase in cash and cash equivalents	$	(30,868	)	$	32,576		$	(23,093	)
Net decrease in cash and cash equivalents										$	(40,461	)	$	(7,209	)	$	(30,868	)

Operating Activities – Net cash used in operating activities was ~~$71.8~~$30.6 million during fiscal year ~~2017~~2019 compared to ~~$46.6~~$16.3 million provided by operating activities during fiscal year 2018 and $71.8 million used in operating activities during fiscal year ~~2016.~~2017.

Net cash used in operating activities during fiscal year 2019 was primarily the result of the net loss of $77.6 million and increases in inventory of $6.4 million and unbilled receivables of $4.5 million. These amounts were offset by increases in deferred revenue of $6.0 million and accrued liabilities of $2.4 million, decreases in accounts receivable of $4.8 million and other assets of $2.1 million and net non-cash adjustments of $42.7 million.

Net cash provided by operating activities during fiscal year 2018 was primarily the result of decreases in accounts receivable of $48.7 million, inventories of $31.7 million, deferred revenue of $1.3 million and net non-cash activity of $15.4 million. Accounts receivable and inventory decreased primarily as a result of cash received and inventory delivered under the HYD contract. These amounts were offset by the net loss of $47.3 million for fiscal year 2018, decreases in accounts payable of $19.8 million and accrued liabilities of $11.3 million, and an increase in other assets of $2.3 million.

Net cash used in operating activities during fiscal year 2017 iswas primarily a result of the net loss of $53.9 million, increases in accounts receivable of $51.3 million and inventory of $8.0 million, and decreases in accrued liabilities of $2.3 million and deferred revenue of $0.9 million. The decreases were offset by non-cash ~~adjustments~~activity of $20.2 million and an increase in accounts payable of $25.0 million.

Net cash used in operating activities during fiscal year 2016 is primarily the result of a net loss of $51.2 million and a $26.6 million decrease in deferred revenue, partially offset by a $30.2 million decrease in accounts receivable. Cash used in operating activities also included a $3.0 million reduction in accounts payable, and an $8.1 million increase in inventories.

Investing Activities – Net cash used in investing activities was ~~$31.4~~$69.3 million during fiscal year ~~2017~~2019 compared to net cash used in investing activities of ~~$41.5~~$51.3 million during fiscal year ~~2016.~~2018 and net cash used in investing activities of $31.4 million during fiscal year 2017.

Net cash used in investing activities during fiscal year 2019 included the purchase by the Company of all of the outstanding membership interests in Bridgeport Fuel Cell, LLC (“BFC”), the owner of the 14.9 MW Bridgeport Fuel Cell Project, for $35.5 million, $31.7 million invested in project assets to expand our operating portfolio and $2.2 million for capital expenditures.

Net cash used in investing activities during fiscal year 2018 included a $41.2 million investment in project assets to expand our operating portfolio and $10.0 million for capital expenditures.

Net cash used in investing activities during fiscal year 2017 included a $19.7 million investment in project assets to expand our operating portfolio and $12.4 million for capital expenditures which was primarily for the substantial completion of the Torrington facility expansion. Net cash used for the year was offset by cash received in connection with an asset acquisition of $0.6 million.

Net cash used in investing activities during fiscal year 2016 consists of a $33.7 million investment in project assets as a result of expanding our portfolio to retain long-term positive cash flow projects (many under PPAs with contract durations of up to twenty years). Capital expenditures totaled $7.7 million and primarily related to the expansion of our Torrington facility.

Financing Activities - Net cash provided by financing activities was ~~$72.3~~$59.7 million during fiscal year ~~2017~~2019 compared to ~~$120.7~~$27.7 million in fiscal year ~~2016.~~2018 and $72.3 million in fiscal year 2017.

Net cash provided by financing activities during fiscal year 2019 resulted from the receipt of $69.6 million of debt proceeds, which included $26.7 million to acquire all of the membership interest in BFC, $14.5 million from the Orion Facility and the reminder related to project level financings offset by debt repayments of $48.4 million, the payment of deferred financing costs of $3.3 million and the payment of preferred dividends and return of capital of $1.8 million. The sale of common stock during fiscal year 2019 resulted in proceeds, net of fees, of $43.6 million.

Net cash provided by financing activities during fiscal year 2018 resulted from net proceeds of $25.3 million received in connection with the offering and issuance of the Series D Preferred Stock, the receipt of $13.1 million under the amended loan and security agreement with Hercules and net proceeds received of $10.5 million from warrant exercises and sales of our common stock under the At Market Issuance Sales Agreement entered into with B. Riley FBR, Inc. and Oppenheimer & Co. Inc. on June 13, 2018, offset by cash payments of $16.6 million primarily relating to repayments under the loan and security agreement with Hercules and the payment of preferred dividends and return of capital of $4.2 million.

Net cash provided by financing activities during fiscal year 2017 ~~includes~~included net proceeds received from the issuance of the Series C preferred shares of $27.9 million, cash received from a common stock offering of $14.2 million, cash received from warrant exercises of $12.7 million, and net proceeds from open market sales of common stock of $12.6 million. Net cash provided by financing activities also included $17.9 million of net proceeds from debt primarily relating to a sale-leaseback transaction with ~~PNC.~~PNC Energy Capital, LLC (“PNC”). Cash received was offset by the repayment of debt of $8.6 million, and the payment of preferred dividends and the return of capital of $4.2 million.

Net cash provided by financing activities during the year ended October 31, 2016 includes net proceeds from open market sales of common stock of $36.2 million and proceeds from a registered direct offering of common stock and warrants to a single institutional investor totaling $34.7 million. The Company also had net debt proceeds of $55.5 million consisting of long-term debt issued to (i) the State of Connecticut for our facility expansion, (ii) Hercules pursuant to the loan and security agreement to support working capital and (iii) NRG Energy and PNC to support

long-term project financing. Proceeds of financing activities were partially offset primarily by the payment of preferred dividends and return of capital payments of $4.2 million and the payment of deferred finance costs of $1.8 million.

A summary of our significant future commitments and contractual obligations as of October 31, ~~2017~~2019 and the related payments by fiscal year is summarized as follows:

											Payments Due by Period
(dollars in thousands)	Payments Due by Period												Less than		1 - 3		3 - 5		More Than
			Less than		1 - 3		3 - 5		More Than
Contractual Obligations	Total		1 year		years		years		5 years		Total		1 year		years		years		5 years
Purchase commitments ⁽¹⁾	$	29,107	$	25,909	$	3,043	$	155	$	—	$	34,553	$	32,053	$	2,478	$	22	$	—
Series 1 Preferred obligation ⁽²⁾		6,369		972		1,943		3,454		—		5,039		1,662		3,377		—		—
Term loans (principal and interest)		46,115		26,391		2,621		3,506		13,597
Term and Construction loans (principal and interest) ⁽³⁾												84,413		22,189		20,900		20,474		20,662
Capital and operating lease commitments ⁽³⁾⁽⁴⁾		7,261		1,534		1,577		773		3,377		13,973		1,024		2,500		1,742		8,707
Sale-leaseback financing obligation ⁽⁴⁾⁽⁵⁾		25,032		3,802		7,277		5,564		8,389		17,512		3,560		5,564		4,528		3,860
Option fee ⁽⁵⁾⁽⁶⁾		950		400		400		150		—		300		150		150		—		—
Series B Preferred dividends payable ⁽⁶⁾⁽⁷⁾		—		—		—		—		—		—		—		—		—		—
Total	$	114,834	$	59,008	$	16,861	$	13,602	$	25,363	$	155,790	$	60,638	$	34,969	$	26,766	$	33,229

In March 2017, the Connecticut Green Bank approved a $5.0 million credit facility for a 3.7 MW project under construction in Danbury, Connecticut. The credit facility will be funded after the power plant achieves commercial operations and is secured by the power plant and the underlying revenues from the sale of electricity, renewable energy credits (“RECs”), and capacity. The 20 year credit facility bears a fixed interest rate. Construction is currently in process and commercial operation is expected in early 2018. The credit facility is subject to execution of definitive documentation and customary closing conditions. This project will distribute power to the Connecticut

~~grid~~Term and ~~is expected to demonstrate electrical efficiency and the ability of utilities to affordably and cleanly solve power generation challenges in land-constrained areas.~~ Construction Loans

Webster Bank Loan. In November 2016, ~~the Company’s~~our wholly-owned subsidiary, FuelCell Energy Finance, LLC (“FuelCell Finance”), entered into a membership interest purchase agreement with GW Power LLC (“~~Seller”~~GWP”) whereby FuelCell Finance purchased all of the outstanding membership interests in New Britain Renewable Energy, LLC (“NBRE”) from ~~Seller. Seller~~GWP. GWP assigned the NBRE ~~interest~~interests to FuelCell Finance free and clear of all liens other than a pledge in favor of Webster Bank, National Association (“Webster Bank”). FuelCell Finance assumed the debt outstanding ~~with~~to Webster Bank in the amount of $2.3 ~~million.~~million (the “Webster Facilities”). The term loan interest israte was 5.0% per annum and ~~payment~~payments, which commenced in January 2017, were due on a quarterly ~~basis commenced in January 2017.~~basis. The balance outstanding as of October 31, ~~2017~~2019 was ~~$1.7~~$0.5 million. This balance was paid off subsequent to October 31, 2019 with proceeds from the Orion Facility, and the Webster Facilities were terminated.

State of Connecticut Loan. In ~~April 2016,~~October 2015, the Company entered into a definitive Assistance Agreement with the State of Connecticut and received a disbursement of $10.0 million, which was used for the first phase of the expansion of the Company’s Torrington, Connecticut manufacturing facility. In conjunction with this financing, the Company entered into a $10.0 million promissory note and related security agreements securing the loan with equipment liens and ~~security agreement (the “Hercules Agreement”) with Hercules~~a mortgage on its Danbury, Connecticut location. Interest accrues at a fixed interest rate of 2.0%, and the loan is repayable over 15 years from the date of the first advance, which occurred in October of 2015. Principal payments were deferred for ~~an aggregate principal amount of~~four years from disbursement and began on December 1, 2019. Under the Assistance Agreement, the Company was eligible for up to ~~$25.0~~$5.0 million ~~subject to certain terms~~in loan forgiveness if the Company created 165 full-time positions and ~~conditions.~~retained 538 full-time positions for two consecutive years (the “Employment Obligation”) as measured on October 28, 2017 (the “Target Date”). The ~~Hercules~~Assistance Agreement was subsequently amended in April 2017 to extend the ~~fourth fiscal quarter~~Target Date by two years to October 28, 2019.

In January 2019, the Company and the State of ~~2017.~~Connecticut entered into a Second Amendment to the Assistance Agreement (the “Second Amendment”). The ~~Company received an initial term loan advance on~~Second Amendment extends the ~~date of closing of $15.0 million and an additional $5.0 million in September 2016. As of~~Target Date to October 31, ~~2017, drawdowns~~2022 and ~~accrued amortization of~~amends the ~~end of term payment on the facility aggregated $21.5 million. The loan is a 30 month secured facility and the term loan interest was previously 9.5% and increased~~Employment Obligation to 9.75% resulting from the increase in the prime rate. Interest is paid on a monthly basis. Interest only payments were to be made for the first 18 months as a result of the Company achieving certain milestones. In addition to interest, principal payments commenced on November 1, 2017 in equal monthly installments. The loan balance and all accrued and unpaid interest is due and payable by October 1, 2018. Per the terms of the Hercules Agreement, there is an end of term payment of $1.7 million which is being accreted using the effective interest rate method.

As collateral for obligations under the Hercules Agreement, the Company granted Hercules a security interest in FuelCell Energy, Inc.’s existing and hereafter-acquired assets except for intellectual property and certain other excluded assets. Collateral does not include assets held by FuelCell Finance or any project subsidiary thereof. The Company may continue to collateralize and finance its project subsidiaries through other lenders and partners. Under the Hercules Agreement, as amended, there is a minimum cash covenant which requiresrequire the Company to continuously maintain a minimum of 538 full-time positions for 24 consecutive months. Based on the Company’s current headcount and plans for fiscal year 2020, it will be short of meeting this requirement. If the Company meets the Employment Obligation, as modified by the Second Amendment, and creates an ~~unrestricted cash balance~~additional 91 full-time positions, the Company may receive a credit in ~~accounts subject to an account control agreement in favor of Hercules of at least the greater of (x) (a) 75% of the outstanding loan balance plus (b)~~ the amount of ~~accounts payable (as defined~~$2.0 million to be applied against the outstanding balance of the loan. The Second Amendment deletes and cancels the provisions of the Assistance Agreement related to the second phase of the expansion project and the loans related thereto, but the Company had not drawn any funds or received any disbursements under ~~GAAP) not paid~~those provisions. A job audit will be performed within 90 days of the ~~invoice date and (y) (a) at all times prior to~~Target Date. If the ~~Stockholder Approval Date (as defined in~~Company does not meet the Certificate of Designations for the Series C Preferred Stock), $20.0 million and (b) at all times on and after the Stockholder Approval Date, $10.0 million (the Stockholder Approval Date was December 14, 2017, which was the date on which stockholder approval of the issuance of certain shares upon the conversion and/or redemption of the Company’s Series C Preferred Stock was obtained).

~~The second phase of our manufacturing expansion, for which we~~Employment Obligation, then an accelerated payment penalty will be ~~eligible to receive an additional $10.0 million in low-cost financing from~~assessed at a rate of $18,587.36 times the ~~State~~number of ~~Connecticut, will commence as demand supports. This includes adding manufacturing equipment to increase annual capacity from~~employees below the ~~current 100 MW to at least 200 MW. Plans for this phase also include the installation of a megawatt scale tri-generation fuel cell plant to power~~Employment Obligation. Such penalty is immediately payable and heat the facility as well as provide hydrogen for the manufacturing process of the fuel cell components, and the creation of an Advanced Technologies Center for technology testing and prototype manufacturing. In addition, the final stage of the fuel cell module manufacturing will be ~~relocated~~applied first to accelerate the ~~Torrington facility from its current location at~~payment of any outstanding fees or interest due and then to accelerate the ~~Danbury,~~ payment of outstanding principal.

Connecticut headquarters, which will reduce logistics costs. The total cost of both phases of the expansion could be up to $65.0 million over a five year period, including the proposed Advanced Technologies Center and tri-generation fuel cell power plant.

On July 30, 2014, the Company's subsidiary, FuelCell Finance, entered into a Loan Agreement with NRG. Pursuant to the Loan Agreement, NRG has extended a $40.0 million revolving construction and term financing facility to FuelCell Finance for the purpose of accelerating project development by the Company and its subsidiaries. FuelCell Finance and its subsidiaries may draw on the facility to finance the construction of projects through the commercial operating date of the power plants. FuelCell Finance has the option to continue the financing term for each project after the commercial operating date for a maximum term of five years per project. The interest rate is 8.5% per annum for construction-period financing and 8.0% thereafter. As of October 31, 2017, there was no outstanding balance on this facility.

Green Bank Loans. ~~In March 2013, we closed on~~We had a long-term loan agreement with the Connecticut Green Bank for a loan totaling approximately $5.9 million in support of the Bridgeport Fuel Cell ~~Park~~ Project. During the year ended October 31, 2019, this loan was partially repaid with a new project level loan from the Connecticut Green Bank (as discussed below) in connection with the Company’s acquisition of all of the membership interests in BFC. The balance under the long-term loan agreement as of October 31, 2019 was $1.8 million. Subsequent to October 31, 2019, the long-term loan agreement was amended and the Connecticut Green Bank provided the Company with an additional loan in the aggregate principal amount of $3.0 million. See Note 23. “Subsequent Events” of the Notes to Consolidated Financial Statements for additional information regarding the amendment to the loan agreement and the additional loan.

On May 9, 2019, in connection with the closing of the purchase of BFC, BFC entered into a subordinated credit agreement with the Connecticut Green Bank whereby Connecticut Green Bank provided financing in the amount of $6.0 million (the “Subordinated Credit Agreement”). As security for the Subordinated Credit Agreement, Connecticut Green Bank received a perfected lien, subordinated and second in priority to the liens securing the $25.0 million loaned under the BFC Credit Agreement (as defined below), in all of the same collateral securing the BFC Credit Agreement (as described below). The interest rate under the Subordinated Credit Agreement is 8% per annum. The debt service coverage ratio required to be maintained under the Subordinated Credit Agreement may not be less than 1.10 as of the end of each fiscal quarter, beginning with the quarter ended July 31, 2020. The term of the Subordinated Credit Agreement expires 7 years from the date of the advance of the loan. Principal and interest are due monthly in amounts sufficient to fully amortize the loan over an 84-month period ending in May 2026. The balance under the Subordinated Credit Agreement as of October 31, 2019 was $5.8 million.

Enhanced Capital Loan. On January 9, 2019, the Company, through its indirect wholly-owned subsidiary, TRS Fuel Cell, LLC, entered into a Loan and Security Agreement (the “Enhanced Capital Loan Agreement”) with Enhanced Capital Connecticut Fund V, LLC (“Enhanced”) for a loan in the amount of $1.5 million. The collateral for this loan included any project assets, accounts receivable and inventory owned by TRS Fuel Cell, LLC. Interest accrued at a rate of 6.0% per annum and was paid on the first business day of each month. The loan maturity date was three years from the date of the Enhanced Capital Loan Agreement, upon which the outstanding principal and any accrued interest would be due and payable. Under the terms of the Enhanced Capital Loan Agreement, the Company was required to close on tax equity financing by January 14, 2020. Given that the Company did not secure tax equity financing for this project, on January 13, 2020, TRS Fuel Cell, LLC and Enhanced entered into a payoff letter whereby the loan was paid off and extinguished on January 14, 2020.

Fifth Third Bank Groton Loan. On February 28, 2019, our indirect wholly-owned subsidiary, Groton Borrower entered into the Groton Agreement with Fifth Third Bank pursuant to which Fifth Third Bank agreed to make available to Groton Borrower a construction loan facility in an aggregate principal amount of up to $23.0 million (the “Groton Facility”) to fund the manufacture, construction, installation, commissioning and start-up of the 7.4 MW fuel cell power plant for the CMEEC at the United States Navy submarine base in Groton, Connecticut. Groton Borrower made an initial draw under the Groton Facility on the date of closing of the facility of $9.7 million and made an additional draw of $1.4 million in April 2019. The original maturity date of the Groton Facility was the earlier of (a) October 31, 2019, (b) the commercial operation date of the Groton Project, or (c) one business day after receipt of proceeds of debt financing (i.e., take out financing) in an amount sufficient to repay the outstanding indebtedness under the Groton Facility.

On August 13, 2019, Groton Borrower and Fifth Third Bank entered into Amendment No. 1 to the Groton Agreement, which reduced the aggregate principal amount available to Groton Borrower under the Groton Facility from $23.0 million to $18.0 million and pursuant to which Groton Borrower committed to, among other things, deliver to Fifth Third Bank, no later than September 28, 2019 (which deadline was automatically extended to October 21, 2019 upon the Company’s repayment of its corporate loan facility with Hercules on September 30, 2019), a binding loan agreement ~~carries~~for permanent financing and one or more binding letters of intent from tax equity investors.

On October 21, 2019, Groton Borrower and Fifth Third entered into Amendment No. 2 to the Groton Agreement (the “Second Groton Amendment”), pursuant to which Groton Borrower agreed to deliver to Fifth Third Bank, no later than December 16, 2019, a binding agreement, in form and substance reasonably acceptable to Fifth Third Bank: (i) executed by Groton Borrower and one or more Take-out Lenders (as defined in the Groton Agreement), pursuant to which the Take-out Lenders shall have, individually or collectively, agreed to provide a Take-out Financing (as defined in the Groton Agreement); or (ii) executed by Groton Borrower and one or more tax equity investors or other third parties, pursuant to which such tax equity investors or third parties, via a tax equity or other financing transaction, shall have, individually or collectively, agreed to provide funds to Groton Borrower in an amount no less than the then-outstanding Construction Loans (as defined in the Groton Agreement) under the Groton Agreement and accrued interest. The Second Groton Amendment further provided, however, that if (A) neither such binding agreement nor a commitment letter for either of such agreements (which commitment letter shall not include a due diligence or similar funding condition) was provided to Fifth Third Bank by November 21, 2019, then commencing on November 22, 2019 until delivery of such commitment letter, the interest rate ~~of 5.0% and principal repayments will commence~~ on the ~~eighth anniversary~~loans was to be the LIBOR rate plus 4% per annum and within three business days after such date, Groton Borrower was to pay to Fifth Third Bank a fee of $15,000 and (B) such binding agreement was not provided to Fifth Third by December 16, 2019, then commencing on December 17, 2019, the outstanding obligations under the Groton Agreement were to bear interest at a rate equal to the LIBOR rate plus 6% per annum. The total outstanding balance under the Groton Facility as of October 31, 2019 was $11.1 million. This balance was paid off subsequent to the end of the ~~project’s provisional acceptance~~fiscal year on November 22, 2019, and the Groton Facility was terminated.

BFC Loans. On May 9, 2019, in connection with the purchase of the membership interests of BFC, FuelCell Finance entered into a Credit Agreement with Liberty Bank, as administrative agent and co-lead arranger, and Fifth Third Bank, as co-lead arranger and swap hedger (the “BFC Credit Agreement”), whereby (i) Fifth Third Bank provided financing to BFC in the amount of $12.5 million towards the purchase price for the BFC acquisition; and (ii) Liberty Bank provided financing to BFC in the amount of $12.5 million towards the purchase price for the BFC acquisition. As security for the BFC Credit Agreement, Liberty Bank and Fifth Third Bank were granted a first priority lien in (i) all assets of BFC, including BFC’s cash accounts, fuel cells, and all other personal property, as well as third party contracts including the Energy Purchase Agreement between BFC and Connecticut Light and Power Company dated July 10, 2009, as amended; (ii) certain fuel cell modules that are intended to be used to replace the Bridgeport Fuel Cell Project’s fuel cell modules as part of routine operation and maintenance; and (iii) FuelCell Finance’s ownership interest in BFC.

The maturity date ~~which~~under the BFC Credit Agreement is May 9, 2025. Monthly principal and interest are to be paid in ~~December 2021. Outstanding amounts~~arrears in an amount sufficient to fully amortize the term loan over a 72 month period. BFC has the right to make additional principal payments or pay the balance due under the BFC Credit Agreement in full provided that it pays any associated breakage fees with regard to the interest rate swap agreements fixing the interest rate. The interest rate under the BFC Credit Agreement fluctuates monthly at the 30-day LIBOR rate plus 275 basis points on an initial total notional value of $25.0 million, reduced for principal payments. An interest rate swap agreement was required to be entered into with Fifth Third Bank in connection with the BFC Credit Agreement to protect against movements in the floating LIBOR index. Accordingly, on May 16, 2019, BFC entered into the 1992 ISDA Master Agreement, along with the Schedule to such Agreement, with Fifth Third Bank, and executed the related trade confirmations on May 17, 2019. The net interest rate across the BFC Credit Agreement and the swap transaction results in a fixed rate of 5.09%.

The obligations of BFC to Fifth Third Bank under the swap agreement are treated as obligations under the BFC Credit Agreement and, accordingly, are secured by ~~future~~the same collateral securing the obligations of BFC under the BFC Credit Agreement.

The BFC Credit Agreement also requires BFC to maintain a debt service reserve at each of Liberty Bank and Fifth Third Bank of $1.25 million, both of which were funded on May 10, 2019, to be held in deposit accounts at each respective bank, with funds to be disbursed with the consent of or at the request of the required lenders in their sole discretion. Each of Liberty Bank and Fifth Third Bank also has an operation and module replacement reserve (“O&M Reserve”) of $250,000, both of which were funded at closing of the BFC Credit Agreement, to be held in deposit accounts at each respective bank, and thereafter BFC is required to deposit $100,000 per month into each O&M Reserve for the first five years of the BFC Credit Agreement, with such funds to be released at the sole discretion of Liberty Bank and Fifth Third Bank, as applicable. BFC is also required to maintain excess cash flow reserve accounts at each of Liberty Bank and Fifth Third Bank and to evenly split and deposit the excess cash flows from the Bridgeport ~~contracts. The outstanding balance on~~Fuel Cell Project into these accounts. Excess cash flow consists of cash generated by BFC from the Bridgeport Fuel Cell Project after payment of all expenses (including after payment of intercompany service fees to the Company), debt service to Liberty Bank and Fifth Third Bank, the funding of all required reserves, and payments to Connecticut Green Bank ~~Note~~for the subordinated facility. BFC is also required to maintain a debt service coverage ratio of not less than 1.20, measured for the trailing year based on fiscal quarters beginning with the quarter ended July 31, 2020. The BFC Credit Agreement contains representations, warranties and other covenants. The Company also has certain quarterly and annual financial reporting requirements under the BFC Credit Agreement. The annual financial statements to be provided pursuant to such requirements are to be audited and accompanied by a report of an independent certified public accountant, which report shall not include a “going concern” matter of emphasis or any qualification or exception as to the scope of such audit.

Orion Senior Secured Credit Facility. On October 31, 2019, we (and certain of our subsidiaries as guarantors) entered into the Orion Credit Agreement with the Agent, and its affiliates, Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., and Orion Energy Credit Opportunities Fund II PV, L.P., as lenders, regarding a $200.0 million senior secured credit facility (the “Orion Facility”), structured as a delayed draw term loan, to be provided by the lenders, subject to certain lender approvals. In conjunction with the closing of the Orion Facility, on October 31, 2019, we drew down $14.5 million and received $14.1 million after a Loan Discount (described below) of $0.4 million in the Initial Funding to fully repay debt outstanding to NRG and Generate and to fund dividends paid to the holders of our Series B Preferred Stock on or before November 15, 2019. The balance of the Initial Funding was used primarily to pay third party costs and expenses associated with closing of the Orion Facility.

The Initial Funding is secured by corporate assets as described in the Pledge and Security Agreement among us, certain of our subsidiaries as guarantors, and the Agent (the “Pledge and Security Agreement”), including our intellectual property assets and our interest in certain fuel cell projects owned by us, but not including liens on certain of our assets and projects which are currently subject to other third party financing and for which none of the proceeds of the Initial Funding were applied (“Excluded Assets”). Those corporate subsidiaries whose assets are pledged to the Agent as part of the collateral are also corporate guarantors of the Orion Facility. As of the Initial Funding, the following projects had assets that were not pledged as collateral for the Orion Facility and were included in Excluded Assets: (a) the Bridgeport Project; (b) the Pfizer Project; (c) the Riverside Regional Water Quality Control Project; (d) the Santa Rita Jail Project; (e) the Triangle Street Project; (f) the UC Irvine Medical Center Project; (g) the CCSU Project and (h) the Groton Project (as described elsewhere herein). Additionally, our corporate headquarters at 3 Great Pasture Road, Danbury, Connecticut and certain scheduled equipment previously pledged to the State of Connecticut to secure the $10.0 million State of Connecticut loan used to complete the expansion of our Torrington manufacturing facility are Excluded Assets.

In connection with the Company’s providing collateral to the Agent for the Orion Facility, the Company granted security interests to the Agent in all of the Company’s bank accounts subject to deposit account security agreements, other than certain bank accounts referred to as “Excluded Accounts” and bank accounts maintained for Excluded Assets (as defined in the Orion Credit Agreement). Certain bank accounts have been established pursuant to the terms and conditions of the Orion Credit Agreement, for which security interests have been granted to the Agent, including general corporate accounts, accounts for each of the Covered Projects (as defined in the Orion Credit Agreement), a Project Proceeds Account (for the proceeds of Permitted Project Dispositions/Refinancings), a Borrower Waterfall Account (into which net operating cash flow of the Company after payment of operating expenses will be deposited for the payment of debt service to the Agent), a Debt Reserve Account (to fund a reserve for required debt service payments to the State of Connecticut and Connecticut Green Bank), a Preferred Reserve Account (to fund a reserve for required dividends on the Company’s Series B Preferred Stock and the Series 1 Preferred Shares (or, in lieu of such dividends, the amount required to redeem shares of Series 1 Preferred Stock in an amount equal to the amount of dividends that would otherwise have been paid in respect thereof)), a Module Replacement Reserve Account (to fund a reserve intended to be for the cost of module replacements for projects owned by the Company that would occur during the outstanding term of the Orion Facility) and certain other accounts. Excluded Accounts consist of bank accounts of the Company used to collateralize performance bonds and other sureties for projects and third party obligations and certain other certain operating accounts of the Company (i.e., payroll, benefits, sales and income tax withholding and related accounts).

Subsequent to October 31, 2019, a second draw (the “Second Funding”) of $65.5 million, funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P., was made on November 22, 2019 to fully repay our outstanding third party debt with respect to the outstanding construction loan to Fifth Third Bank on the Groton Project and the outstanding loan to Webster Bank on the CCSU Project as well as to fund remaining going forward construction costs and anticipated capital expenditures relating to the Groton Project (a 7.4 MW project), the LIPA Yaphank Solid Waste Management Project (a 7.4 MW project), and the Tulare BioMAT project (a 2.8 MW project). The funds drawn in the Second Funding were reduced by a Loan Discount (described below) of $1.6 million, which was retained by the lenders. Simultaneously with the Second Funding, the lien on our intellectual property assets that was granted to the Agent at the time of the Initial Funding was released and a lien was granted to the Agent to secure the Orion Facility on the assets of the Groton Project and CCSU Project as well as with respect to the equity interests in such project companies.

In conjunction with the Second Funding, the Company and the other loan parties entered into the First Amendment to the Orion Credit Agreement (the “First Orion Amendment”), which required the Company to establish a $5 million debt reserve, with such reserve to be released on the first date following the date of the Second Funding on which all of the following events shall have occurred: (a) each of (x) the commercial operation date for the Tulare BioMAT project shall have occurred and (y) a disposition, refinancing or tax equity investment in the Tulare BioMAT project of at least $5 million is consummated; (b) each of (x) the 7.4 MW project in Groton, Connecticut (the “Groton Project”) shall have achieved its business plan in accordance with the Groton Construction Budget (as defined in the Credit Agreement), (y) the commercial operation date for the Groton Project shall have occurred and (z) the Groton Project shall have met its annualized output and heat rate guarantees for three months; and (c) a disposition, refinancing or tax equity investment of at least $30 million shall have occurred with respect to the Groton Project. The First Orion Amendment further requires the Company to (i) provide, no later than December 31, 2019 (or such later date as the Agent may, in its sole discretion, agree in writing), a biogas sale and purchase agreement through December 31, 2021 for the Tulare BioMAT project, which was obtained as of such date; (ii) obtain by December 31, 2019 (or such later date as the Agent may, in its sole discretion, agree in writing) a fully executed contract for certain renewable energy credits for the Groton Project, which was obtained as of such date, and (iii) provide by January 31, 2020 (or such later date as the Agent may, in its sole discretion, agree in writing) certain consents and estoppels from CMEEC related to the Groton Project and an executed seventh modification to the lease between CMEEC and the United States Government, acting by and through the Department of the Navy. The First Orion Amendment provides that, if the requirements set forth in clauses (ii) and (iii) above are not timely satisfied, the Company will grant the Agent, on behalf of the lenders, a security interest and lien on all of the Company’s intellectual property, with such lien and security interest to be released at such time as the Company has satisfied such requirements.

On January 20, 2020, in conjunction with the January 2020 Letter Agreement, and in order to obtain the lenders’ consent to the January 2020 Letter Agreement as required under the Orion Credit Agreement, the Company and the

other loan parties entered into the Second Orion Amendment, which adds a new affirmative covenant to the Orion Credit Agreement that obligates the Company to, and to cause FCE Ltd. to, on or prior to November 1, 2021, either (i) pay and satisfy in full all of their respective obligations in respect of, and fully redeem and cancel, all of the Series 1 Preferred Shares of FCE Ltd., or (ii) deposit in a newly created account of FCE Ltd. or the Company cash in an amount sufficient to pay and satisfy in full all of their respective obligations in respect of, and to effect a redemption and cancellation in full of, all of the Series 1 Preferred Shares of FCE Ltd. The Second Orion Amendment also provides that the articles of FCE Ltd. setting forth the modified terms of the Series 1 Preferred Shares will be considered a “Material Agreement” under the Orion Credit Agreement. Under the Second Orion Amendment, a failure to satisfy this new affirmative covenant or to otherwise comply with the terms of the Series 1 Preferred Shares will constitute an event of default under the Orion Credit Agreement, which could result in the acceleration of any amounts outstanding under the Orion Credit Agreement.

We may draw the remainder of the Orion Facility, $120.0 million, over the first 18 months following the Initial Funding and subject to the Agent’s approval to fund: (i) construction costs, inventory and other capital expenditures of additional fuel cell projects with contracted cash flows (under PPAs with creditworthy counterparties) that meet or exceed a mutually agreed coverage ratio; and (ii) inventory, working capital, and other costs that may be required to be delivered by us on purchase orders, service agreements, or other binding customer agreements with creditworthy counterparties.

Under the Orion Credit Agreement, we also agreed to grant to the Agent a right of first offer (“ROFO”) with regard to construction financing indebtedness proposed to be incurred by us with respect to fuel cell projects intended to be owed by us. To the extent that the ROFO is not exercised by the Agent, we may obtain construction financing for these projects from third parties. The ROFO does not apply to, and there is no restriction on our right to consummate, take-out financings, including tax equity financings, of any projects upon completion of those projects and such projects’ being placed in service.

Under the Orion Credit Agreement, cash interest of 9.9% per annum will be paid quarterly in cash. In addition to the cash interest, “PIK” interest of 2.05% per annum will accrue which will be added to the outstanding principal balance of the Orion Facility but will be paid quarterly in cash to the extent of available cash after payment of our operating expenses and the funding of certain reserves for the payment of outstanding indebtedness to the State of Connecticut and Connecticut Green Bank. Each lender will fund its commitments on each funding date in an amount equal to the principal amount of the loans to be funded by such lender on such date, less 2.50% of the aggregate principal amount of the loans funded by such lender on such date (the “Loan Discount”), in accordance with the Loan Discount Letter entered into between us and the Agent as of October 31, ~~2017 was $6.1 million.~~2019 (the “Loan Discount Letter”). Such Loan Discount shall be in all respects fully earned on the Initial Funding Date and non-refundable and non-creditable thereafter.

Outstanding principal on the Orion Facility will be amortized on a straight-line basis over a seven-year term in quarterly payments beginning one year after the Initial Funding; provided that, if we do not have sufficient cash on hand to make any required quarterly amortization payments, such amounts shall be deferred and payable at such time as sufficient cash is available to make such payments subject to all outstanding principal being due and payable on the maturity date, which is the date that is eight years after the closing date or October 31, 2027.

The Orion Credit Agreement includes mandatory prepayment requirements and a prepayment premium of up to 30% of the amount being prepaid in the event that certain triggering events occur, including events of loss (destruction of or damage to any property of a loan party) where the proceeds received from such events of loss are not applied to the repair or restoration of the affected property, the sale, transfer or other disposition of project assets funded by the Orion Facility, if the proceeds from such disposition are not reinvested in substantially similar assets that are useful and necessary for the business (as defined in the Orion Credit Agreement) pursuant to a transaction permitted under the Orion Credit Agreement within a certain period of time, the incurrence of debt other than permitted indebtedness (as defined in the Orion Credit Agreement) and certain events of default (as defined in the Orion Credit Agreement), and also includes a post-default rate increase feature in the event certain events of default occur (in each case as defined in the Orion Credit Agreement).

In connection with the closing of the Orion Credit Agreement and the Initial Funding, on October 31, 2019, the Company issued warrants to the Initial Funding lenders under the Orion Credit Agreement to purchase up to a total of 6,000,000 shares of the Company’s common stock, at an exercise price of $0.310 per share (the “Initial Funding Warrants”). In addition, under the Orion Credit Agreement, on the date of the Second Funding (November 22, 2019),

the Company issued the warrants to the Second Funding lenders to purchase up to a total of 14,000,000 shares of the Company’s common stock, with an exercise price with respect to 8,000,000 of such shares of $0.242 per share and with an exercise price with respect to 6,000,000 of such shares of $0.620 per share (the “Second Funding Warrants”, and together with the Initial Funding Warrants, collectively the “Orion Warrants”).

The Orion Warrants have an 8-year term from the date of issuance, are exercisable immediately beginning on the date of issuance, and include provisions permitting cashless exercises. The Orion Warrants contain provisions regarding adjustment to their exercise prices and the type or class of security issuable upon exercise, including, without limitation, adjustments as a result of the Company undertaking or effectuating (a) a stock dividend or dividend of other securities or property, (b) a stock split, subdivision or combination, (c) a reclassification, (d) the distribution by the Company to substantially all of the holders of its common stock (or other securities issuable upon exercise of an Orion Warrant) of rights, options or warrants entitling such holders to subscribe for or purchase common stock (or other securities issuable upon exercise of an Orion Warrant) at a price per share that is less than the average of the closing sales price per share of the Company’s common stock for the ten consecutive trading days ending on and including the trading day before such distribution is publicly announced, and (e) a Fundamental Transaction (as defined in the Orion Warrants) or Change of Control (as defined in the Orion Credit Agreement).

In ~~April 2008,~~addition to the commitments listed in the table under the heading “Commitments and Significant Contractual Obligations,” we ~~entered into a 10-year loan agreement with~~have the ~~Connecticut Development Authority allowing for a maximum amount borrowed of $4.0 million.~~ following outstanding obligations.

As of October 31, ~~2017,~~2019 and 2018, we had an outstanding balance of $2.3 million on this loan. The interest rate is 5%. Interest only payments commenced in January 2014 and the loan is collateralized by the assets procured under this loan as well as $4.0 million of additional machinery and equipment. Repayment terms require interest and principal payments through May 2018.

We have pledged approximately ~~$38.2~~$30.3 million and $40.9 million, respectively, of our cash and cash equivalents as performance security and for letters of credit for certain banking requirements and contracts. As of October 31, ~~2017,~~2019 and 2018, outstanding letters of credit totaled ~~$2.9 million. These~~$5.7 million and $3.8 million, respectively. The letters of credit outstanding as of October 31, 2019 expire on various dates through ~~April 2019.~~August 2028. Under the terms of certain contracts, ~~the Company~~we will provide performance security for future contractual obligations. The restricted cash balance as of October 31, ~~2017 includes $15.0~~2019 also included $17.9 million which was placed in a Grantor’s Trust account to secure certain Company obligations under the 15-year service agreement for the Bridgeport Fuel Cell Park Project and is reflected as long-term restricted cash. The restrictions on the $15.0 million will be removed upon completion of the final module exchange at the Bridgeport Fuel Cell Park Project under the terms of the services agreement. The restricted cash balance as of October 31, 2017 also includes $17.0 millionprimarily to support obligations ofunder the power purchase and service agreements related to the PNC sale-leaseback ~~transactions.~~transactions and $6.7 million relating to future obligations associated with the Bridgeport Fuel Cell Project.

As of October 31, ~~2017,~~2019 and 2018, we ~~have~~had uncertain tax positions aggregating $15.7 million and have reduced our ~~NOLs~~NOL carryforwards by this amount. Because of the level of NOLs and valuation allowances, unrecognized tax benefits, even if not resolved in our favor, would not result in any cash payment or obligation and therefore have not been included in the contractual obligation table ~~above.~~under the heading “Commitments and Significant Contractual Obligations.”

~~In addition to the commitments listed in the table above, we have the following outstanding obligations:~~

Under the terms of our PPAs, customers agree to purchase power from our fuel cell power plants at negotiated rates. Electricity rates are generally a function of the customers’ current and estimated future electricity pricing available from the grid. We are responsible for all operating costs necessary to maintain, monitor and repair our fuel cell power plants. Under certain agreements, we are also responsible for procuring fuel, generally natural gas or Biogas, to run our fuel cell power plants. WeIn addition, under certain agreements, we are ~~typically not~~ required to produce minimum amounts of power under our PPAs and we ~~typically~~ have the right to terminate PPAs by giving written notice to the customer, subject to certain exit costs. As of October 31, ~~2017,~~2019, our operating portfolio ~~is 11.2~~was 26.1 MW.

We warranty our products for a specific period of time against manufacturing or performance defects. Our standard U.S. warranty period is generally ~~fifteen~~15 months after shipment or ~~twelve~~12 months after acceptance of the product. In addition to the standard product warranty, we have contracted with certain customers to provide services to ensure the power plants meet minimum operating levels for terms of up to ~~twenty~~20 years. Pricing for service contracts is based upon estimates of future costs, which could be materially different from actual expenses. ~~Also see~~Refer to “Critical Accounting Policies and Estimates” for additional details.

We have contracted with various government agencies and certain companies from private industry to conduct research and development as either a prime contractor or sub-contractor under multi-year, cost-reimbursement and/or cost-share type contracts or cooperative agreements. Cost-share terms require that participating contractors share the total cost of the project based on an agreed upon ratio. In many cases, we are reimbursed only a portion of the costs

~~the costs~~ incurred or to be incurred on the contract. 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, ~~2017,~~2019 and 2018, Advanced Technologies contracts backlog totaled ~~$44.3~~$12.0 million and $32.4 million, respectively, of which ~~$24.5~~$11.8 million and $15.9 million, respectively, is ~~funded.~~funded and $0.2 million and $16.5 million, respectively, is unfunded. Should funding be terminated or delayed or if business initiatives change, we may choose to devote resources to other activities, including internally funded research and development.

We have no off-balance sheet debt or similar obligations, other than operating leases, which are not classified as debt. We do not guarantee any third-party debt. See Note 1820. “Commitments and Contingencies” to our consolidated financial statements for the year ended October 31, ~~2017~~2019 included in this Annual Report on Form 10-K for further information.

The preparation of financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. 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) and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

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. Our accounting policies are set forth below.

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination and is reviewed for impairment at least annually. The intangible asset represents ~~indefinite lived~~indefinite-lived in-process research and development for cumulative research and development efforts associated with the development of solid oxide fuel cells (SOFC) stationary power generation and is also reviewed at least annually for impairment.

Accounting Standards Codification Topic 350, "Intangibles - Goodwill and ~~Other," (ASC 350)~~Other" (“ASC 350”) permits the assessment of qualitative factors to determine whether events and circumstances lead to the conclusion that it is necessary to perform the two-step goodwill impairment test required under ASC 350.

The Company completed its annual impairment analysis of goodwill and in-process research and development assets as of July 31, ~~2017. The Company had performed a quantitative assessment in the prior year~~2019 and determined that the estimated fair value of the reporting unit and in-process research and development intangible asset exceeded the respective carrying value and therefore no impairment was recognized as of July 31, 2016.2018. The Company performed a qualitative assessment for fiscal year ~~2017~~2019 and determined that it was more likely than not that there was no impairment of goodwill or the ~~indefinite lived~~indefinite-lived intangible asset.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. 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 interest costs, expected to be generated by the asset group and their

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. ~~Assets~~

During the year ended October 31, 2019, the Company recorded project asset impairment charges for (i) the Triangle Street Project and (ii) the Bolthouse Farms Project, which are further described as follows:

The Company recorded a $0.5 million impairment of a project asset during the year ended October 31, 2018 due to ~~be disposed of are reported at~~ the ~~lower~~termination of the ~~carrying amount or fair value, less costs to sell. No impairment charges were recorded during any of the years presented.~~project.

Under Accounting Standards Codification (“ASC”) Topic 606: Revenue from Contracts with Customer (“Topic 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. 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.

A contract is accounted for when there has been approval and commitment from ~~(i)~~both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Performance obligations under a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. In certain instances, the Company has concluded distinct goods or services should be accounted for as a single performance obligation that is a series of distinct goods or services that have the same pattern of transfer to the customer. 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). 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. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price, generally utilizing the expected value method. Determining the transaction price requires judgment. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. Standalone selling price is determined by the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Performance obligations are satisfied either over time or at a point in time as discussed in

further detail below. In addition, the Company’s contracts with customers generally do not include significant financing components or non-cash consideration.

Product. Includes the sale of completed project assets, sale and installation of fuel cell power plants including site engineering and construction services, (ii) equipment only sales (modules, BOPs, component part kits and spare parts to customers), (iii) performance under long-term service agreements, (iv) the sale of electricity and other value streams under PPAs and utility tariffs from project assets retained by the Company, (v) license fees and royalty income from manufacturing and technology transfer agreements, and (vi) government and customer-sponsored Advanced Technologies projects.

Given the growing revenue related to PPAs and project assets retained by the Company, beginning in the first quarter of 2017, the Company began classifying such revenues in a separate line item called Generation, and prior period amounts have been reclassified. As further clarification, revenue elements are classified as follows:

~~Product.~~ ~~Includes the sale and installation of fuel cell power plants and site engineering and construction services,~~ and the sale of ~~component part kits,~~ modules, ~~BOPs~~BOP components and spare parts to customers.

~~Service and license.~~Service. Includes performance under long-term service agreements for power plants owned by third ~~parties~~parties.

License and royalty. Includes license fees and royalty income from ~~manufacturing and technology transfer agreements.~~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 revenue from customer-sponsored and government-sponsored Advanced Technologies projects.

See below for discussion of revenue recognition under Topic 606 by disaggregated revenue stream, including a comparison to revenue recognition treatment under ASC 605, Revenue Recognition (“ASC 605”). Our revenue is generated from customers located throughout the U.S., Europe and Asia and from agencies of the U.S. government.

Contracts for the ~~Company is responsible for supply~~sale of equipment and site construction (full turn-key construction project) and has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total contract costs, revenue is recognized undercompleted project assets include the percentage of completion method of accounting. The use of percentage of completion accounting requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of time to complete the contract, the nature and complexitysale of the ~~work to be performed~~project asset, the assignment of the service agreement, and ~~total project costs. Our estimates are based upon~~ the ~~professional knowledge~~assignment of the PPA. The relative stand-alone selling price is estimated and ~~experience of our engineers, project managers and other personnel, who review each long-term contract on a quarterly~~is used as the basis to assess the contract’s schedule, performance, technical matters and estimated cost at completion. When changes in estimated contract costs are identified, such revisions may result in current period adjustments to operations applicable to performance in prior periods. Revenues are recognized based on the percentagefor allocation of the contract ~~value that incurred costs~~consideration. Revenue is recognized upon the satisfaction of the performance obligations, which includes the transfer of control of the project asset to ~~date bear~~the customer, which is when the contract is signed and the PPA is assigned to the customer. See below for further discussion regarding revenue recognition for service agreements. The revenue recognition for completed project assets under Topic 606 is consistent with treatment under ASC 605.

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.

Service agreements represent a single performance obligation whereby the Company performs all required maintenance and monitoring functions, including replacement of modules, to ensure the power plant(s) under the service agreement generate a minimum power output. To the extent the power plant(s) under service agreements do not achieve the minimum power output, certain service agreements include a performance guarantee penalty. Performance guarantee penalties represent variable consideration, which is estimated ~~total contract costs, after giving effect to estimates of costs to complete~~for each service agreement based on ~~most recent information. For customer contracts~~past experience, using the expected value method. The net consideration for ~~new or significantly customized products, where management does not believe it has the ability to reasonably estimate total contract costs, revenue~~each service agreement is recognized using ~~the completed contract method and therefore all~~costs incurred to date relative to total estimated costs at completion to measure progress. Under ASC 605, revenue ~~and costs~~ for the contract are deferred and not recognized until installation and acceptance of the power plant is complete. We recognize anticipated contract losses as soon as they become known and estimable. Actual results could vary from initial estimates and estimates will be updated as conditions change.

Revenue from equipment only sales where the Company does not have the obligations associated with overall construction of the project (modules, BOPs, fuel cell kits and spare parts sales) are recognized upon shipment or title transfer under the terms of the customer contract. Terms for certain contracts provide for a transfer of title and risk of loss to our customers at our factory locations and certain key suppliers upon completion of our contractual requirement to produce products and prepare the products for shipment. A shipment in place may occur in the event that the customer is not ready to take delivery of the products on the contractually specified delivery dates.

~~Revenue from~~ service agreements iswas generally recorded ratably over the term of the service agreement, as ~~our~~the performance of routine monitoring and maintenance under ~~these~~the service agreements ~~is generally~~was expected to be incurred on a straight-line basis. ~~For service agreements where we expect to have a~~If there was an estimated module exchange ~~at some point~~ during the term, ~~(generally service agreements in excess of five years),~~ the costs of performance ~~are~~were not expected to be incurred on a straight-line basis, and therefore a portion of the initial contract value ~~related~~relating to the module ~~exchange(s) is~~exchange was deferred and is recognized upon such module replacement ~~event(s).~~event. Prior to the implementation of Topic 606, an estimate for a performance guarantee was not recorded until a performance issue occurred at a particular power plant. At that point, the actual power plant’s output was compared against the minimum output guarantee and an accrual was recorded. Furthermore, under ASC 605, performance guarantee accruals were recorded based on actual performance and the related expense was recorded to service and license cost of revenues. The review of power plant performance was updated for each reporting period to incorporate the most recent performance of the power plant and minimum output guarantee payments made to customers, if applicable.

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.

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 net consideration. Estimated losses are recognized in the period in which losses are identified.

The Company ~~receives license fees and royalty income from POSCO Energy as a result~~records any amounts that are billed to customers in excess of manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012. The Cell Technology Transfer Agreement we entered into on October 31, 2012 provides POSCO Energy with a technology license to manufacture SureSource power plants in South Korea. On March 17, 2017, the Company entered into a Memorandum of Understanding (“2017 MOU”) with POSCO Energy to engage in discussions to further amend the above referenced agreements and other agreements between the parties, as well as to engage in discussions relating to entering into new agreements to further the parties’ mutual interests.

~~Pursuant to the 2017 MOU, the Company commenced marketing the entire suite of SureSource solutions in South Korea as well as the broader Asian markets for the supply, recovery and storage of energy.~~

~~Under PPAs and project assets retained by the Company,~~ revenue ~~from the sale of electricity and other value streams is~~ recognized as ~~electricity is provided~~deferred revenue and revenue recognized in excess of amounts billed to customers as unbilled receivables. Payment terms for service agreements are generally ratable over the ~~customer. These revenues are classified as a component~~term of ~~generation revenues.~~the agreement.

Advanced Technologies contracts include ~~both private industry~~the promise to perform research and ~~government entities.~~development services and as such this represents one performance obligation. Revenue from most government sponsored Advanced Technologies projects is recognized as direct costs are incurred plus allowable overhead less cost share requirements, if any. Revenue is only recognized to the extent the contracts are funded. Revenue from fixed price Advanced Technologies projects is recognized using ~~percentage~~the cost to cost input method. There was no impact of ~~completion accounting.~~adoption of Topic 606 on revenue recognition for Advanced Technologies ~~programs~~contracts.

The Company records any amounts that are ~~often multi-year~~billed to customers in excess of revenue recognized as deferred revenue and revenue recognized in excess of amounts billed to customers as unbilled receivables. Payments are based on costs incurred for government sponsored Advanced Technologies projects ~~or structured~~and upon completion of milestones for all other projects.

The Company entered into manufacturing and technology transfer agreements (the “license agreements”) with POSCO Energy in ~~phases~~2007, 2009 and 2012. Revenue from the license fees received from POSCO Energy was previously recognized over the term of the associated agreements. In connection with ~~subsequent phases dependent on reaching certain milestones prior~~the adoption of Topic 606, several performance obligations were identified including previously satisfied performance obligations for the transfer of licensed intellectual property, two performance obligations for specified upgrades of the previously licensed intellectual property, a performance obligation to additional funding being authorized. Government contracts are typically structured with cost-reimbursement and/or cost-shared type contracts or cooperative agreements. We are reimbursed for reasonable and allocable costs updeliver unspecified upgrades to the ~~reimbursement limits set~~previously licensed intellectual property on a when-and-if-available basis, and a performance obligation to provide technical support for previously delivered intellectual property. The performance obligations related to the specified upgrades will be satisfied and related consideration recognized as revenue upon the delivery of the specified upgrades. The performance obligations for unspecified upgrades and technical support are being recognized on a straight-line basis over the license term on the basis that this represents the method that best depicts the progress towards completion of the related performance obligations. All fixed consideration for the license agreements was previously collected.

Effective as of June 11, 2019, the Company entered into the EMRE License Agreement with EMRE, pursuant to which the Company agreed, subject to the terms of the EMRE License Agreement, to grant EMRE and its affiliates a non-exclusive, worldwide, fully paid, perpetual, irrevocable, non-transferrable license and right to use the Company’s 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. Such right and license is sublicensable to third parties performing work for or with EMRE or its affiliates, but shall not otherwise be sublicensable. Upon the payment by EMRE to the Company of $10.0 million, which was received by the Company on June 14, 2019, EMRE and its affiliates were fully vested in the rights and licenses granted in the EMRE License Agreement, and any further obligations under the license agreement are considered by the Company to be minimal. As a result, the total contract ~~or cooperative agreement,~~value of $10.0 million was recorded as revenue for the fiscal year ended October 31, 2019.

is recognized when electricity has been delivered based on the amount of electricity delivered at rates specified under the contracts, assuming all other revenue recognition criteria are met. For PPAs that are not accounted for as leases, revenue is recognized based on the output method as there is a directly observable output to the customer (electricity delivered to the customer and ~~on certain contracts we are reimbursed only a portion of~~immediately consumed). The Company is entitled to be compensated for performance completed to date (electricity delivered to the ~~costs incurred.~~customer).

The Company, through a wholly-owned subsidiary, ~~enters~~has entered into sale-leaseback transactions for commissioned ~~projects~~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~~Due to the Company's continuing involvement with the project and the projects being considered integral equipment, sale accounting is precluded by ASC 840-40, “Leases”. Accordingly, the Company uses the financing method to account for these transactions.

Under the financing method of accounting for a sale-leaseback, the Company does not recognize as income any of the sale proceeds received from the lessor that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are accounted for as financing obligations and leaseback payments made by the Company are allocated between interest expense and a reduction to the financing obligation. Interest on the financing obligation is calculated using the Company’s incremental borrowing rate at the inception of the arrangement on the outstanding financing obligation. ~~Judgment is required to determine the appropriate borrowing rate for the arrangement and in determining any gain or loss on the transaction that would be recorded at the end of the lease term.~~ While we ~~have received~~receive financing for the full value of the related power plant ~~assets,~~asset, we have not recognized revenue on the ~~sale leaseback~~sale-leaseback transaction. Instead, revenue is recognized through the sale of electricity and energy credits which are generated as energy is produced. The sale-leaseback arrangements with PNC allow the Company to repurchase the project assets at fair market value.

Inventories consist principally of raw materials and work-in-process. Inventories are reviewed to determine if valuation adjustments are required for obsolescence (excess, obsolete, and slow-moving inventory). This review includes analyzing inventory levels of individual parts considering the current design of our products and production requirements as well as the expected inventory needs for maintenance on installed power plants.

We warranty our products for a specific period of time against manufacturing or performance defects. Our U.S. warranty is generally limited to a term ~~generally~~of 15 months after shipment or 12 months after acceptance of our products. We accrue for estimated future warranty costs based on historical experience. We also provide for a specific accrual if there is a known issue requiring repair during the warranty period. Estimates used to record warranty accruals are updated as we gain further operating experience. As of October 31, ~~2017~~2019 and October 31, ~~2016,~~2018, the warranty accrual, which is classified in accrued liabilities on the ~~consolidated balance sheet,~~Consolidated Balance Sheets, totaled ~~$0.3 million and $0.5 million, respectively.~~$0.1 million.

In addition to the standard product warranty, we have entered into service agreements with certain customers to provide monitoring, maintenance and repair services for fuel cell power plants. Under the terms of these service agreements, the power plant must meet a minimum operating output during the term. If minimum output falls below the contract requirement, we may be subject to performance penalties or may be required to repair and/or replace the customer's fuel cell module. The Company has accrued for performance guarantees of ~~$2.2~~$0.8 million and ~~$3.3~~$1.1 million as of October 31, ~~2017~~2019 and ~~October 31, 2016,~~2018, respectively. Refer to Note 2. “Revenue Recognition” for the change in accounting effective as of November 1, 2019 relating to performance guarantees

The Company ~~provides for~~records loss accruals ~~on all~~for service agreements when the estimated cost of future module exchanges and maintenance and monitoring activities ~~exceed~~exceeds the remaining unrecognized contract value. Estimates for future costs on service agreements are determined by a number of factors including the estimated remaining life of the module, used replacement modules available, ~~our limit of liability on service agreements~~ and future operating plans for the power plant. Our estimates are performed on a contract by contract basis and include cost assumptions based on what we anticipate the service requirements will be to fulfill obligations for each contract. As of October 31, ~~2017~~2019 and October 31, ~~2016,~~2018, our loss accruals on service ~~agreement contracts~~agreements totaled ~~$1.1~~$3.3 million and ~~$2.7~~$0.9 million, respectively.

At the end of our service agreements, customers are expected to either renew the service agreement or, based on the Company's rights to title ~~for~~of the module, the module will be returned to the Company as the plant is no longer being ~~monitored or having routine service performed.~~maintained. As of October 31, ~~2017,~~2019, the Company had $1.0 million related to the residual value ~~asset was $1.0 million. As~~of replacement modules in power plants under service agreements compared to $1.2 million as of October 31, ~~2016, the Company did not have a residual value asset recorded.~~2018.

In ~~August~~May 2014, the Financial Accounting Standards Board (the “FASB”) issued ~~Accounting Standards Update (“ASU”) 2014-15, “Disclosure~~ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The adoption of ~~Uncertainties about an Entity’s Ability~~Topic 606 by the Company on November 1, 2018 using the modified retrospective transition method resulted in a cumulative effect adjustment that increased Accumulated deficit by $6.7 million.

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which provides for a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to ~~Continue as~~exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a ~~Going Concern,” which requires an entity to evaluate at each~~goodwill impairment loss is measured by comparing the implied fair value of a reporting ~~period whether there are conditions or events, in~~unit’s goodwill with the ~~aggregate,~~carrying amount of that raise substantial doubt about the entity’s ability to continue as a going concern within one year from the date the financial statements are issued and to provide related footnote disclosures in certain circumstances. goodwill. The Company early adopted ~~the provisions of~~ this ASU ~~for the annual reporting period ended October 31, 2017.~~effective November 1, 2018. The adoption of this ~~update~~ASU did not have ~~a significant~~an impact on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU simplifies the presentation of debt issuance costs by requiring that such costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt instrument, consistent with debt discounts. The Company has adopted ASU 2015-03 effective January 31, 2017 and retrospective application is required which resulted in a reclassification in our Consolidated Balance Sheet as of October 31, 2016 of $0.3 million of debt issuance costs from Current assets to be a direct deduction from “Current portion of long-term debt” and a reclassification of $1.1 million of debt issuance costs from “Other assets” to be a direct deduction from Long-term debt and other liabilities.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations.” ASU 2017-01 was issued to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company has elected to early

~~adopt ASU 2017-01 effective November 1, 2016 which did not have a significant impact on the Company’s consolidated financial statements.~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This topic provides for five principles which should be followed to determine the appropriate amount and timing of revenue recognition for the transfer of goods and services to customers. The principles in this ASU should be applied to all contracts with customers regardless of industry. The amendments in this ASU are effective for fiscal years, and interim periods within those years beginning after December 15, 2016, with two transition methods of adoption allowed. Early adoption for reporting periods prior to December 15, 2016 is not permitted. In March 2015, the FASB voted to defer the effective date by one year to fiscal years, and interim periods within those fiscal years beginning after December 15, 2017 (first quarter of fiscal year 2019 for the Company), but allow adoption as of the original adoption date. The Company has numerous different revenue sources including the sale and installation of fuel cell power plants, site engineering and construction services, sale of modules and spare parts, extended warranty service agreements, sale of electricity under power purchase agreements, license fees and royalty income from manufacturing and technology transfer agreements and customer-sponsored Advanced Technologies projects. This requires application of various revenue recognition methods under current accounting guidance. Although we anticipate that, upon adoption of this new ASU the timing of revenue recognition for certain of our revenue sources might change, we are still evaluating the financial statement impacts of the guidance in this ASU and determining which transition method we will utilize. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606).” This topic provides narrow-scope improvements and practical expedients regarding collectability, presentation of sales tax collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and other technical corrections. We have initiated a review of the contracts for our significant revenue streams to understand the impact of the adoption of this ASU.

In February 2016, the FASB issued ASU 2016-02, “Leases” ~~which,~~that amends the accounting and disclosure requirements for ~~operating leases,~~leases. The new guidance requires that a lessee toshall recognize a right-of-use (“ROU”) asset and a corresponding lease liability, initially measured at the present value of the lease payments, in its balance sheet. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Operations. The Company was required to adopt the new guidance on November 1, 2019. In July 2018, the FASB issued an amendment to the new leasing standard ~~also requires a lessee~~which provides an alternative transition method that allows companies to recognize a ~~single lease cost, calculated so that~~cumulative effect adjustment to the ~~cost of~~opening balance sheet upon adoption. The Company intends to elect this alternative transition method and forgo the lease is allocated over the lease term, on a generally straight-line basis. This ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (first quarter of fiscal year 2020 for the Company). Early adoption is permitted. adjustments to comparative-period financial information.

The Company has both operating and capital leases (refer to Note ~~18. Commitments~~20. “Commitments and ~~contingences)~~Contingencies”) as well as ~~sale-leasebacks~~sale-leaseback transactions that are accounted for under the finance ~~method~~method. The new standard provides entities with several practical expedient elections. Among them, the Company intends to elect the package of practical expedients that permits the Company to not reassess prior conclusions related to its leasing arrangements, lease classifications and ~~may have other arrangements that contain embedded~~initial direct costs. In addition, the Company plans to elect the practical expedients to not separate lease and non-lease components, to use hindsight in determining the lease terms and impairment of ROU assets, and to not apply the new standard’s recognition requirements to short-term leases ~~as characterized in this ASU. We expect that~~or use the portfolio approach to a group of leases with similar characteristics. Upon adoption of this ASU, the Company will ~~result~~record ROU assets and the present value of its lease liabilities which are currently not recognized on its consolidated balance sheet. The Company is in the ~~recognition~~process of ~~right-of-use~~implementing changes to its business processes, systems and controls to support the new lease standard and its disclosure requirements.

On adoption, the Company expects to recognize a lease liability of approximately $10.3 million and corresponding ROU assets ~~and lease liabilities not currently recorded in our consolidated financial statements under existing accounting guidance. However, we are still evaluating all~~of approximately $10.1 million. Any cumulative effect of the ~~Company’s contractual arrangements and~~adoption recorded to accumulated deficit is not expected to be significant. The Company also does not expect there to be a significant net effect on the ~~impact that adoption~~consolidated statements of ~~ASU 2016-02~~operations, however, what was previously presented as rent expense related to operating leases will ~~have~~be recognized as interest expense on the Company’s ~~consolidated financial statements.~~minimum lease obligation and depreciation of right-of-use asset.

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. Based on our overall interest rate exposure as of October 31, ~~2017,~~2019, including all interest rate sensitive instruments, a change in interest rates of 1% would not have a material impact on our results of operations.

As of October 31, ~~2017,~~2019 and 2018, approximately 6% and 4%, respectively, of our total cash, cash equivalents and investments were in currencies other than U.S. dollars (primarily the Euro, Canadian dollars and South Korean Won) and we have no plans of repatriation. We make purchases from certain vendors in currencies other than U.S. dollars. Although we have not experienced significant foreign exchange rate losses to date, we may in the future, especially to the extent that we do not engage in currency hedging activities. The economic impact of currency exchange rate movements on our operating results is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, may cause us to adjust our financing and operating strategies.

The conversion feature and the variable dividend obligation of ~~our~~FCE Ltd.’s Series 1 Preferred Shares are embedded derivatives that require bifurcation from the host contract. The aggregate fair value of these derivatives included within long-term debt and other liabilities as of October 31, ~~2017~~2019 and ~~2016~~2018 was ~~$0.8~~$0.6 million and ~~$0.7~~$0.8 million, respectively. The fair value was based on valuation models using various assumptions, including historical stock price volatility, risk-free interest rate and a credit spread based on the yield indexes of technology high yield bonds, foreign exchange volatility as the Series 1 Preferred Shares are denominated in Canadian dollars, and the closing price of our common stock. Changes in any of these assumptions would change the underlying fair value with a corresponding charge or credit to operations.

On May 16, 2019, an interest rate swap agreement (the “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%. The interest rate swap will be 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 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 fair value adjustments for the fiscal year ended October 31, 2019 resulted in $0.6 million of charges.

We have audited the accompanying consolidated balance sheets of FuelCell Energy, Inc. and subsidiaries (the Company) as of October 31, ~~2017~~2019 and ~~2016, and~~2018, the related consolidated statements of operations and comprehensive loss, changes in equity, and cash flows for each of the years in the three‑year period ended October 31, ~~2017. We also have audited FuelCell Energy, Inc.’s internal control over financial reporting as of October 31, 2017, based on criteria established in~~ ~~Internal Control - Integrated Framework (2013)~~ ~~issued by~~2019, and the Committee of Sponsoring Organizations of the Treadway Commission (COSO). FuelCell Energy, Inc.’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits ofrelated notes (collectively, the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

statements). In our opinion, the consolidated financial statements ~~referred to above~~ present fairly, in all material respects, the financial position of ~~FuelCell Energy, Inc. and subsidiaries~~the Company as of October 31, ~~2017~~2019 and ~~2016,~~2018, and the results of ~~their~~its operations and ~~their~~its cash flows for each of the years in the three‑year period ended October 31, ~~2017,~~2019, in conformity with U.S. generally accepted accounting principles. ~~Also~~

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of November 1, 2018 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our ~~opinion, FuelCell Energy, Inc. maintained,~~audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in ~~all~~accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material ~~respects, effective~~misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting asbut not for the purpose of ~~October 31, 2017, based~~expressing an opinion on ~~criteria established in~~ ~~Internal Control - Integrated Framework (2013)~~ ~~issued by~~ the ~~Committee of Sponsoring Organizations~~effectiveness of the ~~Treadway Commission (COSO).~~Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

	2017			2016			2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	49,294		$	84,187
Cash and cash equivalents, unrestricted							$	9,434		$	39,291
Restricted cash and cash equivalents - short-term		4,628			9,437			3,473			5,806
Accounts receivable, net of allowance for doubtful accounts of $79 and $193 as of October 31, 2017 and 2016, respectively		68,521			24,593
Accounts receivable, net of allowance for doubtful accounts of $0 and $160 as of October 31, 2019 and 2018, respectively								3,292			9,280
Unbilled receivables								7,684			13,759
Inventories		74,496			73,806			54,515			53,575
Other current assets		6,571			10,181			5,921			8,592
Total current assets		203,510			202,204			84,319			130,303
Restricted cash and cash equivalents - long-term		33,526			24,692			26,871			35,142
Project assets noncurrent		73,001			47,111
Inventories - long-term								2,179			—
Project assets								144,115			99,600
Property, plant and equipment, net		43,565			36,640			41,134			48,204
Goodwill		4,075			4,075			4,075			4,075
Intangible assets		9,592			9,592			21,264			9,592
Other assets, net		16,517			16,415
Other assets								9,489			13,505
Total assets	$	383,786		$	340,729		$	333,446		$	340,421
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	28,281		$	5,010		$	21,916		$	17,596
Accounts payable		42,616			18,475			16,943			22,594
Accrued liabilities		18,381			20,900			11,452			7,632
Deferred revenue		7,964			6,811			11,471			11,347
Preferred stock obligation of subsidiary		836			802			950			952
Total current liabilities		98,078			51,998			62,732			60,121
Long-term deferred revenue		18,915			20,974			28,705			16,793
Long-term preferred stock obligation of subsidiary		14,221			12,649			16,275			14,965
Long-term debt and other liabilities		63,759			80,855			90,140			71,619
Total liabilities		194,973			166,476			197,852			163,498
Redeemable preferred stock (liquidation preference of $64,020 as of October 31, 2017 and October 31, 2016)		59,857			59,857
Redeemable Series C preferred stock (liquidation preference of $33,300 as of October 31, 2017)		27,700			—
Redeemable Series B preferred stock (liquidation preference of $64,020 as of October 31, 2019 and 2018)								59,857			59,857
Redeemable Series C preferred stock (liquidation preference of $8,992 as of October 31, 2018)								—			7,480
Redeemable Series D preferred stock (liquidation preference of $30,680 as of October 31, 2018)								—			27,392
Total equity:
Stockholders’ equity
Common stock ($0.0001 par value; 125,000,000 and 75,000,000 shares authorized as of October 31, 2017 and 2016, respectively; 69,492,816 and 35,174,424 shares issued and outstanding as of October 31, 2017 and 2016, respectively)		7			4
Common stock ($0.0001 par value; 225,000,000 shares authorized as of October 31, 2019 and 2018; 193,608,684 and 7,972,686 shares issued and outstanding as of October 31, 2019 and 2018, respectively)								19			1
Additional paid-in capital		1,045,197			1,004,566			1,151,454			1,073,463
Accumulated deficit		(943,533	)		(889,630	)		(1,075,089	)		(990,867	)
Accumulated other comprehensive loss		(415	)		(544	)		(647	)		(403	)
Treasury stock, Common, at cost (88,861 and 21,527 shares as of October 31, 2017 and 2016, respectively)		(280	)		(179	)
Treasury stock, Common, at cost (42,496 and 13,042 shares as of October 31, 2019 and 2018, respectively)								(466	)		(363	)
Deferred compensation		280			179			466			363
Total stockholders’ equity		101,256			114,396			75,737			82,194
Total liabilities and stockholders’ equity	$	383,786		$	340,729		$	333,446		$	340,421

(Amounts in thousands, except share and per share and related party revenue amounts)

	2017			2016			2015			2019			2018			2017
Revenues:
Product sales (including $0.4 million, $43.6 million and $100.5 million of related party revenue)	$	43,047		$	62,563		$	128,595
Service agreements and license revenues (including $5.4 million, $8.5 million and $11.4 million of related party revenue)		27,050			31,491			21,012
Product sales										$	481		$	52,490		$	43,047
Service agreements and license revenues											26,618			15,757			27,050
Generation revenues		7,233			1,267			—			14,034			7,171			7,233
Advanced Technologies contract revenue (including $0, $0 and $0.6 million of related party revenue)		18,336			12,931			13,470
Advanced Technologies contract revenues											19,619			14,019			18,336
Total revenues		95,666			108,252			163,077			60,752			89,437			95,666
Costs of revenues:
Cost of product sales		49,843			63,474			118,530			18,552			54,504			49,843
Cost of service agreements and license revenues		25,285			32,592			18,301			18,943			15,059			25,285
Cost of generation revenues		5,076			664			—			31,642			6,421			5,076
Cost of Advanced Technologies contract revenues		12,728			11,879			13,470			12,884			10,360			12,728
Total cost of revenues		92,932			108,609			150,301			82,021			86,344			92,932
Gross profit (loss)		2,734			(357	)		12,776
Gross (loss) profit											(21,269	)		3,093			2,734
Operating expenses:
Administrative and selling expenses		25,916			25,150			24,226			31,874			24,908			25,916
Research and development expenses		20,398			20,846			17,442			13,786			22,817			20,398
Restructuring expense		1,355			—			—			—			—			1,355
Total operating expenses		47,669			45,996			41,668			45,660			47,725			47,669
Loss from operations		(44,935	)		(46,353	)		(28,892	)		(66,929	)		(44,632	)		(44,935	)
Interest expense		(9,171	)		(4,958	)		(2,960	)		(10,623	)		(9,055	)		(9,171	)
Other income, net		247			622			2,442			93			3,338			247
Loss before provision for income taxes		(53,859	)		(50,689	)		(29,410	)
Provision for income taxes		(44	)		(519	)		(274	)
Loss before (provision) benefit for income taxes											(77,459	)		(50,349	)		(53,859	)
(Provision) benefit for income taxes											(109	)		3,015			(44	)
Net loss		(53,903	)		(51,208	)		(29,684	)		(77,568	)		(47,334	)		(53,903	)
Net loss attributable to noncontrolling interest		—			251			325
Net loss attributable to FuelCell Energy, Inc.		(53,903	)		(50,957	)		(29,359	)
Preferred stock dividends		(3,200	)		(3,200	)		(3,200	)
Net loss to common stockholders	$	(57,103	)	$	(54,157	)	$	(32,559	)
Series A warrant exchange											(3,169	)		—			—
Series B Preferred stock dividends											(3,231	)		(3,200	)		(3,200	)
Series C Preferred stock deemed dividends and redemption value adjustment, net											(6,522	)		(9,559	)		—
Series D Preferred stock deemed dividends and redemption accretion											(9,755	)		(2,075	)		—
Net loss attributable to common stockholders										$	(100,245	)	$	(62,168	)	$	(57,103	)
Net loss to common stockholders per share
Basic	$	(1.14	)	$	(1.82	)	$	(1.33	)	$	(1.82	)	$	(9.01	)	$	(13.73	)
Diluted	$	(1.14	)	$	(1.82	)	$	(1.33	)	$	(1.82	)	$	(9.01	)	$	(13.73	)
Weighted average shares outstanding
Basic		49,914,904			29,773,700			24,513,731			55,081,266			6,896,189			4,159,575
Diluted		49,914,904			29,773,700			24,513,731			55,081,266			6,896,189			4,159,575

	2017			2016			2015			2019			2018			2017
Net loss		(53,903	)		(51,208	)	$	(29,684	)	$	(77,568	)	$	(47,334	)	$	(53,903	)
Other comprehensive loss:
Foreign currency translation adjustments		129			(35	)		(350	)		(244	)		12			129
Comprehensive loss	$	(53,774	)	$	(51,243	)	$	(30,034	)	$	(77,812	)	$	(47,322	)	$	(53,774	)

	Common Stock																										Common Stock
	Shares			Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Deferred Compensation			Noncontrolling Interest in Subsidiaries			Total Equity			Shares			Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Deferred Compensation		Total Equity
Balance, October 31, 2014		23,930,000		$	2	$	909,458		$	(809,314	)	$	(159	)	$	(95	)	$	95		$	(1,538	)	$	98,449
Sale of common stock		1,845,166			1		26,920			—			—			—			—			—			26,921
Share based compensation		—			—		3,157			—			—			—			—			—			3,157
Taxes paid upon vesting of restricted stock awards, net of stock issued under benefit plans		191,593			—		(539	)		—			—			—			—			—			(539	)
Reclassification of noncontrolling interest due to liquidation of subsidiary		—			—		(1,308	)		—			—			—			—			1,308			-
Noncontrolling interest in subsidiaries		—			—		—			—			—			—			—			(325	)		(325	)
Preferred dividends — Series B		—			—		(3,200	)		—			—			—			—			—			(3,200	)
Adjustment for deferred compensation		(2,049	)		—		—			—			—			17			(17	)		—			-
Effect of foreign currency translation		—			—		—			—			(350	)		—			—			—			(350	)
Net loss attributable to FuelCell Energy, Inc.		—			—		—			(29,359	)		—			—			—			—			(29,359	)
Balance, October 31, 2015		25,964,710		$	3	$	934,488		$	(838,673	)	$	(509	)	$	(78	)	$	78		$	(555	)	$	94,754
Sale of common stock, prepaid warrants and warrants, public offering		1,474,000			—		34,736			—			—			—			—			—			34,736
Exercise of prepaid warrants		1,100,000			—		—			—			—			—			—			—			-
Sale of common stock		6,023,372			1		36,055			—			—			—			—			—			36,056
Common stock issued, non-employee compensation		24,379			—		157			—			—			—			—			—			157
Share based compensation		—			—		3,425			—			—			—			—			—			3,425
Taxes paid upon vesting of restricted stock awards, net of stock issued under benefit plans		587,963			—		(286	)		—			—			—			—			—			(286	)
Noncontrolling interest in subsidiaries		—			—		—			—			—			—			—			(251	)		(251	)
Purchase of noncontrolling shares of subsidiary		—			—		(809	)		—			—			—			—			806			(3	)
Preferred dividends - Series B		—			—		(3,200	)		—			—			—			—			—			(3,200	)
Adjustment for deferred compensation		—			—		—			—			—			(101	)		101			—			-
Effect of foreign currency translation		—			—		—			—			(35	)		—			—			—			(35	)
Net loss attributable to FuelCell Energy, Inc.		—			—		—			(50,957	)		—			—			—			—			(50,957	)
Balance, October 31, 2016		35,174,424		$	4	$	1,004,566		$	(889,630	)	$	(544	)	$	(179	)	$	179		$	—		$	114,396			2,931,202		$	0	$	1,004,570		$	(889,630	)	$	(544	)	$	(179	)	$	179	$	114,396
Sale of common stock, warrants and public offering		12,000,000			1		13,883			—			—			—			—			—			13,884			1,000,000			—		13,884			—			—			—			—		13,884
Exercise of prepaid warrants and warrants		13,660,926			1		12,721			—			—			—			—			—			12,722			1,138,411			1		12,721			—			—			—			—		12,722
Sale of common stock		7,245,430			1		12,430			—			—			—			—			—			12,431			603,786			—		12,431			—			—			—			—		12,431
Common stock issued, non-employee compensation		86,001			—		129			—			—			—			—			—			129			7,167			—		129			—			—			—			—		129
Share based compensation		—			—		4,585			—			—			—			—			—			4,585			—			—		4,585			—			—			—			—		4,585
Taxes paid upon vesting of restricted stock awards, net of stock issued under benefit plans		1,284,673			—		(84	)		—			—			—			—			—			(84	)		107,056			—		(84	)		—			—			—			—		(84	)
Series C convertible preferred stock conversions		108,696					167																		167			9,058					167														167
Preferred dividends — Series B		—			—		(3,200	)		—			—			—			—			—			(3,200	)		—			—		(3,200	)		—			—			—			—		(3,200	)
Effect of foreign currency translation		—			—		—			—			129			—			—			—			129			—			—		—			—			129			—			—		129
Adjustment for deferred compensation		(67,334	)		—		—			—			—			(101	)		101			—			—			(5,611	)		—		—			—			—			(101	)		101		—
Net loss attributable to FuelCell Energy, Inc.		—			—		—			(53,903	)		—			—			—			—			(53,903	)
Net loss																												—			—		—			(53,903	)		—			—			—		(53,903	)
Balance, October 31, 2017		69,492,816		$	7	$	1,045,197		$	(943,533	)	$	(415	)	$	(280	)	$	280		$	—		$	101,256			5,791,068		$	1	$	1,045,203		$	(943,533	)	$	(415	)	$	(280	)	$	280	$	101,256
Sale of common stock, net of fees																												476,265			—		7,129			—			—			—			—		7,129
Exercise of warrants																												216,309			—		3,326			—			—			—			—		3,326
Common stock issued, non-employee compensation																												13,226			—		282			—			—			—			—		282
Share based compensation																												—			—		3,238			—			—			—			—		3,238
Taxes paid upon vesting of restricted stock awards, net of stock issued under benefit plans																												(14,913	)		—		(660	)		—			—			—			—		(660	)
Series C convertible preferred stock conversions																												1,496,368			—		20,220			—			—			—			—		20,220
Preferred dividends — Series B																												—			—		(3,200	)		—			—			—			—		(3,200	)
Series D Preferred stock redemption accretion																												—			—		(2,075	)		—			—			—			—		(2,075	)
Effect of foreign currency translation																												—			—		—			—			12			—			—		12
Adjustment for deferred compensation																												(5,637	)		—		—			—			—			(83	)		83		—
Net loss																												—			—		—			(47,334	)		—			—			—		(47,334	)
Balance, October 31, 2018																												7,972,686		$	1	$	1,073,463		$	(990,867	)	$	(403	)	$	(363	)	$	363	$	82,194
Sale of common stock, net of fees																												119,128,677			12		43,654			—			—			—			—		43,666
Common stock issued, non-employee compensation																												29,454			—		102			—			—			—			—		102
Share based compensation																												—			—		2,804			—			—			—			—		2,804
Taxes paid upon vesting of restricted stock awards, net of stock issued under benefit plans																												52,607			—		(200	)		—			—			—			—		(200	)
Series A Warrant Exchange																												500,000			—		—			—			—			—			—		-
Series C convertible preferred stock conversions																												3,914,218			—		15,489			—			—			—			—		15,489
Series C convertible preferred stock adjustment for beneficial conversion feature																												—			—		6,586			—			—			—			—		6,586
Series C convertible stock redemption value adjustments																												—			—		(14,597	)													(14,597	)
Preferred dividends — Series B																												—			—		(3,231	)		—			—			—			—		(3,231	)
Series D convertible preferred stock conversions																												62,040,496			6		31,177			—			—			—			—		31,183
Series D Preferred stock redemption accretion																												—			—		(3,793	)		—			—			—			—		(3,793	)
Impact of the adoption of Topic 606																												—			—		—			(6,654	)		—			—			—		(6,654	)
Effect of foreign currency translation																												—			—		—			—			(244	)		—			—		(244	)
Adjustment for deferred compensation																												(29,454	)		—		—			—			—			(103	)		103		-
Net loss																												—			—		—			(77,568	)		—			—			—		(77,568	)
Balance, October 31, 2019																												193,608,684		$	19	$	1,151,454		$	(1,075,089	)	$	(647	)	$	(466	)	$	466	$	75,737

	2017			2016			2015			2019			2018			2017
Cash flows from operating activities:
Net loss	$	(53,903	)	$	(51,208	)	$	(29,684	)	$	(77,568	)	$	(47,334	)	$	(53,903	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		4,585			3,425			3,157			2,804			3,238			4,585
Loss (gain) from change in fair value of embedded derivatives		91			(14	)		(23	)
(Gain) loss from change in fair value of embedded derivatives											(176	)		60			91
Depreciation		8,518			4,949			4,099			12,353			8,648			8,518
Amortization of non-cash interest expense		6,256			3,207			1,830
Foreign currency transaction losses (gains)		581			(324	)		(2,075	)
Non-cash interest expense on preferred stock and debt obligations											6,097			5,957			6,256
Deferred income taxes											—			(3,035	)		—
Impairment of property, plant and equipment and project assets											20,360			—			—
Unrealized loss on derivative contract											624			—			—
Unrealized foreign exchange (gains) losses											(29	)		(223	)		581
Other non-cash transactions		165			451			412			716			760			165
Decrease (increase) in operating assets:
Accounts receivable		(51,276	)		30,235			3,173			4,842			24,169			(35,388	)
Unbilled receivables											(4,488	)		24,562			(15,888	)
Inventories		(7,972	)		(8,052	)		(10,100	)		(6,427	)		31,714			(7,972	)
Project assets		—			—			(11,398	)
Other assets		(714	)		(837	)		1,022			2,120			(2,264	)		(714	)
(Decrease) increase in operating liabilities:
Increase (Decrease) in operating liabilities:
Accounts payable		25,020			(3,019	)		(7,224	)		(173	)		(19,846	)		25,020
Accrued liabilities		(2,290	)		1,240			6,435			2,377			(11,345	)		(2,290	)
Deferred revenue		(906	)		(26,648	)		(3,898	)		5,996			1,261			(906	)
Net cash used in operating activities		(71,845	)		(46,595	)		(44,274	)
Net cash (used in) provided by operating activities											(30,572	)		16,322			(71,845	)
Cash flows from investing activities:
Capital expenditures		(12,351	)		(7,726	)		(6,930	)		(2,151	)		(10,028	)		(12,351	)
Expenditures for long-term project assets		(19,726	)		(33,726	)		—
Cash acquired from acquisition		633			—			—
Project asset expenditures											(31,675	)		(41,232	)		(19,726	)
Asset acquisition											(35,474	)		—			633
Net cash used in investing activities		(31,444	)		(41,452	)		(6,930	)		(69,300	)		(51,260	)		(31,444	)
Cash flows from financing activities:
Repayment of debt		(8,571	)		(30,452	)		(1,535	)		(48,395	)		(16,616	)		(8,571	)
Proceeds from debt		17,877			85,935			6,763			69,596			13,091			17,877
Payments of deferred finance costs		(206	)		(1,758	)		—			(3,302	)		(352	)		(206	)
Purchase of non-controlling shares of subsidiary		—			(3	)		—
Net proceeds from issuance of Series C preferred shares		27,866			—			—			—			—			27,866
Proceeds from common stock issuance and warrant exercises, net of registration fees		39,396			70,929			27,060
Net proceeds from issuance of Series D preferred shares											—			25,317			—
Proceeds from sale of common stock and warrant exercises, net											43,573			10,455			39,396
Payment of preferred dividends and return of capital		(4,156	)		(4,170	)		(4,202	)		(1,840	)		(4,178	)		(4,156	)
Common stock issued for stock plans and related expenses		86			177			133			23			—			86
Net cash provided by financing activities		72,292			120,658			28,219			59,655			27,717			72,292
Effects on cash from changes in foreign currency rates		129			(35	)		(108	)		(244	)		12			129
Net (decrease) increase in cash, cash equivalents, and restricted cash		(30,868	)		32,576			(23,093	)
Net decrease increase in cash, cash equivalents, and restricted cash											(40,461	)		(7,209	)		(30,868	)
Cash, cash equivalents, and restricted cash-beginning of year		118,316			85,740			108,833			80,239			87,448			118,316
Cash, cash equivalents, and restricted cash-end of year	$	87,448		$	118,316		$	85,740		$	39,778		$	80,239		$	87,448

Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies

FuelCell Energy, Inc., together with its subsidiaries (the “Company”, “FuelCell Energy”, “we”, “us”, or “our”) is a leading integrated fuel cell company with a growing global ~~presence.~~presence in delivering environmentally-responsible distributed baseload power solutions through our proprietary, molten-carbonate fuel cell technology. We ~~design, manufacture, install,~~develop turn-key distributed power generation solutions and operate and provide comprehensive service ~~ultra-clean, efficient~~for the life of the power plant. We are working to expand the proprietary technologies that we have developed over the past five decades into new products, markets and ~~reliable stationary~~geographies. Our mission and purpose remains to utilize our proprietary, state-of-the-art fuel cell power ~~plants. Our SureSource~~plants to reduce the global environmental footprint of baseload power ~~plants generate electricity~~generation by providing environmentally responsible solutions for reliable electrical power, hot water, steam, chilling, hydrogen, micro-grid applications, and usable high quality heat for commercial, industrial, government and utility customers. We have commercialized our stationary carbonate fuel cells and are also pursuing the complementary development of planar solid oxide fuel cells and other fuel cell technologies. Our operations are funded primarily through sales of equity instruments to strategic investors or in public markets, corporate and project level debt financing and local or state government loans or grants. In order to produce positive cash flow from operations, we need to be successful at increasing annual order volume and production and in our cost reduction efforts.carbon capture.

The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. ~~In October 2016,~~

On May 8, 2019, the Company ~~purchased~~effected a 1-for-12 reverse stock split, reducing the ~~noncontrolling interest~~number of the Company’s common shares outstanding on that date from 183,411,230 shares to 15,284,269 shares. The number of authorized shares of common stock remained unchanged at 225,000,000 shares and the number of authorized shares of preferred stock remained unchanged at 250,000 shares. Additionally, the conversion rate of our Series B Preferred Stock (as defined elsewhere herein), the conversion price of our Series C Preferred Stock and Series D Preferred Stock (each as defined elsewhere herein), the exchange price of our Series 1 Preferred Shares (as defined elsewhere herein), the exercise price of all then outstanding options and warrants, and the number of shares reserved for future issuance pursuant to our equity compensation plans were all adjusted proportionately in ~~FuelCell Energy Services, GmbH.~~connection with the reverse stock split. All share and per share amounts and conversion prices presented herein have been adjusted retroactively to reflect these changes.

Certain reclassifications have been made to the prior year amounts to conform to the presentation for fiscal year ~~2017 presentation.~~2019. The Company ~~has~~ adopted Financial Accounting Standards ~~Update~~Board Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“~~ASU”~~Topic 606”) ~~2015-03, Interest – Imputation~~effective November 1, 2018 and applied the modified retrospective transition method. As a result of ~~Interest effective January~~the adoption of Topic 606, Unbilled receivables has been reclassified as a separate line item from Accounts receivable, net on the Consolidated Balance Sheets and Unbilled receivables has been classified as a separate item from Accounts receivable, net in the Consolidated Statement of Cash Flows for the fiscal year ended October 31, ~~2017,~~2018 and ~~retrospective application is required~~2017.

The Company faced significant liquidity challenges in fiscal 2019, which were addressed through a series of actions late in the fiscal year and subsequent to fiscal year end. In the second and third quarters of fiscal 2019, management concluded that, as a result of the Company’s history of negative cash flows from operating and investing activities, negative working capital, aged accounts payable, forbearance agreements with suppliers, and significant short-term debt maturities, there was substantial doubt about the Company’s ability to continue as a going concern. To address these issues, we restructured our management team and our operations in ways that are intended to support our growth and achieve our profitability and sustainability goals. We raised capital under our at-the-market sales plan, which allowed us to pay down our accounts payable and stay current on our forbearance agreements. In addition, we repaid a substantial portion of our short-term debt, retired our Series C and Series D Preferred Stock obligations, entered into new or amended financing arrangements and entered into a license arrangement with EMRE, which resulted in $10.0 million of up-front proceeds. While some of the indicators of substantial doubt still exist, such as historical losses and negative cash flows, as a ~~reclassification~~result of the previous actions taken by the Company in ~~our Consolidated Balance Sheet~~response to the liquidity challenges that arose in the second and third quarters of fiscal 2019, management has concluded that substantial doubt was alleviated and the Company expects to meet its obligations for at least one year from the date of issuance of these financial statements. Key definitive agreements which support the Company’s future liquidity position include:

The Company’s future liquidity will be dependent on its ability to (i) timely complete current projects in process within budget, including approved amounts that have been financed as financing does not cover overages, (ii) increase cash flows from its generation portfolio, including by meeting conditions required to timely commence operations of new projects and operating its generation portfolio in compliance with minimum performance guarantees, (iii) obtain approval of and receive funding for project construction under the Orion Facility and meet conditions for release of funds, (iv) increase order and contract volumes, which would lead to additional product sales and services agreements, (v) obtain funding for and receive payment for research and development under current and future Advanced Technology contracts, including achieving a ~~direct deduction~~$5 million technological performance milestone in the JDA during calendar year 2020, and (vi) implement the cost reductions necessary to achieve profitable operations. Our business model requires substantial outside financing arrangements and satisfaction of the conditions of such financing arrangements to deploy our projects and facilitate the growth of our business. If financing is not available to us on acceptable terms if and when needed, if we do not satisfy the conditions of our financing arrangements or if we spend more than the financing approved for projects, we may be required to reduce planned spending, sell assets, seek alternative financing and take other measures, which could have a material adverse effect on our operations.

As of January 14, 2020, we had 14,034,001 shares of common stock available for issuance, of which 10,290,934 shares were reserved for issuance under various convertible securities, options, and warrants, under our stock purchase and incentive plans, and under our at-the-market sales plan. The limited number of shares available for issuance limits our ability to raise capital in the equity markets and satisfy obligations with shares instead of cash, which could adversely impact our ability to fund our business and operations. We must obtain stockholder approval to increase the number of shares of common stock we are authorized to issue under our Certificate of Incorporation. At the April 4, 2019 annual meeting of stockholders, our stockholders did not approve our request to increase the number of shares of common stock that we are authorized to issue from ~~Current portion~~225,000,000 shares to 335,000,000 shares. In the event that the Company’s Board of Directors determines to seek stockholder approval for an increase in authorized shares in the future, there can be no assurances of obtaining such stockholder approval.

While there can be no assurances, we anticipate raising additional required capital from new and existing investors and lenders. We expect to work with lenders and financial institutions to secure long-term debt, tax equity and ~~a reclassification of $1.1 million of debt issuance costs~~sale-leasebacks for our project asset portfolio as we achieve the Commercial Operation Dates for these projects. This financing, if received, may allow the Company to recycle capital from ~~Other assets, net~~these projects by reinvesting the capital in other projects and to pay down the Orion Facility over time. It should be ~~a direct deduction from Long-term debt~~noted that the lenders and ~~other liabilities. The Company has also included an additional line item, “Generation,” in~~ the ~~“Revenues”~~Agent under the Orion Credit Agreement (“Orion”) have broad approval rights over our ability to draw and ~~“Cost of revenues” sections of the Statements of Operations to include revenues generated~~allocate funds from the ~~Company’s project assets (refer~~Orion Facility. There can be no assurance that the Company can obtain such financing or that the Company can obtain such financing on terms acceptable to the ~~Revenue Recognition section below for more information). The prior year amounts associated with power purchase agreements have been reclassified~~Company. If the Company is unable to obtain such financing or raise additional capital, the Company may reduce its expenditures or slow its project spending. If the Company cannot obtain such financing or cannot obtain such financing on terms acceptable to the ~~new “Generation” line item.~~Company, it would negatively impact the Company’s business model, operations, and liquidity.

All cash equivalents consist of investments in money market funds with original maturities of three months or less at date of acquisition. We place our temporary cash investments with high credit quality financial institutions. As of October 31, ~~2017, $38.2~~2019, $30.3 million of cash and cash equivalents was pledged as collateral for letters of credit and for certain banking requirements and contractual commitments, compared to ~~$34.1~~$40.9 million pledged as of October 31, ~~2016.~~2018. The restricted cash balance ~~includes $15.0 million~~ as of October 31, ~~2017 and 2016,~~2018 included $15.0 million, which ~~has been placed in a Grantor's Trust account to secure~~secured certain obligations of the Company under a 15-year service agreement for the Bridgeport Fuel Cell Park project and ~~has been~~was classified as ~~Restricted~~long-term. In connection with the acquisition of the Bridgeport Fuel Cell Project, $15.0 million of restricted cash was released on May 9, 2019. The restricted cash balance as of October 31, 2019 and ~~cash equivalents - long-term.~~2018 also includes $17.9 million and $17.7 million, respectively, to support obligations related to the PNC sale-leaseback transactions. As of October 31, ~~2017~~2019 and ~~2016,~~2018, we had outstanding letters of credit of ~~$2.9~~$5.7 million and ~~$7.9~~$3.8 million, respectively, which expire on various dates through April 2019. Cash and cash equivalents as of October 31, 2017 and 2016 also included $3.0 million and $5.3 million, respectively, of cash advanced by POSCO Energy for raw material purchases made on its behalf by FuelCell Energy. Under an inventory procurement agreement that ensures coordinated purchasing from the global supply chain, FuelCell Energy provides procurement services for POSCO Energy and receives compensation for services rendered. While POSCO Energy makes payments to us in advance of supplier requirements, quarterly receipts may not match disbursements.August 2025.

Inventories consist principally of raw materials and work-in-process. Cost is determined using the first-in, first-out cost method. In certain circumstances, we will make advance payments to vendors for future inventory deliveries. These advance payments are recorded as Other current assets on the ~~consolidated balance sheets.~~Consolidated Balance Sheets.

Inventories are reviewed to determine if valuation allowances are required for ~~obsolescence (excess and obsolete).~~excess quantities or obsolescence. This review includes analyzing inventory levels of individual parts considering the current design of our products

and production requirements as well as the expected inventory requirements for maintenance on installed power plants.

Project assets consist of capitalized costs for fuel cell projects in various stages of development, whereby we have entered into power purchase agreements (“PPAs”) prior to entering into a definitive sales or long-term financing agreement for the project, ~~or of~~ capitalized costs for fuel cell projects which are the subject of a sale-leaseback transaction with PNC orEnergy Capital, LLC (“PNC”), projects in development for which we expect to secure long-term ~~contracts. These~~contracts or projects are actively being marketed and intended to be sold, although we may choose to retain ownership of one or more of these projects after they become operational if we determine it would be of economic and strategic benefit. Additionally, Project assets include capitalized costs for fuel cell projects which areretained by the ~~subject of~~Company under a ~~sale-leaseback transaction (see "Sale-Leaseback Facility" below).~~merchant model. Project asset costs include costs for developing and constructing a complete turn-key fuel cell project. Development costs can include legal, consulting, permitting, interconnect, and other similar costs. ~~Once~~To the extent we enter into a definitive sales agreement, we expense project assets to cost of sales after the respective project asset is sold to a customer and all revenue recognition criteria have been met. We classify project assets as current if the expected commercial operation date is less than twelve months and long-term if it is greater than twelve months from the balance sheet date. There were no short-term project assets as of October 31, 2017. We review project assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Property, plant and equipment are stated at cost, less accumulated depreciation ~~provided~~which is recorded based on the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized on the straight-line method over the shorter of the estimated useful lives of the assets or the term of the lease. When property is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations for the period.

~~Intellectual property, including internally generated patents and know-how, is carried at no value.~~

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a ~~purchase~~ business combination and is reviewed for impairment at least annually.

Accounting Standards Codification Topic 350, "Intangibles - Goodwill and Other", (“ASC 350”) permits the assessment of qualitative factors to determine whether events and circumstances lead to the conclusion that it is necessary to perform the two-step goodwill impairment test required under ASC 350.

The Company completed its annual impairment analysis of goodwill and the in-process research & development assets ~~(IPR&D)~~(“IPR&D”) as of July 31, ~~2017.~~2019 and 2018. The goodwill and IPR&D asset are both held by the Company’s Versa Power Systems, Inc. (“Versa”) reporting unit. Goodwill and the IPR&D asset are also reviewed for possible impairment whenever changes in conditions indicate that the fair value of a reporting unit or IPR&D asset ~~are~~is more likely than not below its carrying value. No impairment charges were recorded during ~~any of~~ the fiscal years ~~presented.~~ended October 31, 2019, 2018 and 2017.

recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. ~~Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. No impairment charges were recorded during any of the years presented.~~

Refer to Note 2. “Revenue Recognition” for information on the Company’s revenue recognition accounting policy which is effective for the fiscal year ended October 31, 2019 upon adoption of ASU 2014-09, “Revenue from Contracts with Customers.”

The revenue recognition policy for fiscal years ended October 31, 2018 and 2017 was as follows:

The Company earned revenue from (i) the sale and installation of fuel cell power plants including site engineering and construction services, (ii) the sale of completed project assets, (iii) equipment only sales (modules, balance of plants (“BOP”), component part kits and spare parts to customers), ~~(iii)~~(iv) performance under long-term service agreements, ~~(iv)~~(v) the sale of electricity and other value streams under power purchase agreements (“PPAs”) and utility tariffs from project assets retained by the Company, ~~(v)~~(vi) license fees and royalty income from manufacturing and technology transfer agreements, and ~~(vi)~~(vii) government and customer-sponsored Advanced Technologies projects.

Product. Includes the sale of completed project assets, the sale and installation of fuel cell power plants ~~and~~including site engineering and construction services, and, the sale of component part kits, modules, BOPs and spare parts to customers.

Service and license. Includes performance under long-term service agreements for power plants owned by third parties and license fees and royalty income from manufacturing and technology transfer agreements.

Advanced Technologies. Includes revenue from customer-sponsored and government-sponsored Advanced Technologies projects.

~~Our~~The Company’s revenue is generated from customers located throughout the U.S., Europe and Asia and from agencies of the U.S. government.

For customer contracts where the Company is responsible for the supply of equipment and site construction (full turn-key construction project) and has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total contract costs, revenue is recognized under the percentage of completion method of accounting. The use of percentage of completion accounting requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of time to complete the contract, the nature and complexity of the work to be performed and total project costs. Our estimates are based upon the professional knowledge and experience of our engineers, project managers and other personnel, who review each long-term contract on a quarterly basis to assess the contract’s schedule, performance, technical matters and estimated cost at completion. When changes in estimated contract costs are identified, such revisions may result in current period adjustments to operations applicable to performance in prior periods. Revenues are recognized based on the percentage of the contract value that incurred costs to date ~~bear~~as compared to estimated total contract costs, after giving effect to estimates of costs to complete based on most recent information. For customer contracts for new or significantly customized products, where management does not believe it has the ability to reasonably estimate total contract costs, revenue is recognized using the completed contract method and therefore all revenue and costs for the contract are deferred and not recognized until installation and acceptance of the power plant is complete. We recognize anticipated contract losses as soon as they become known and estimable. Actual results could vary from initial estimates and estimates will be updated as conditions change.

Revenue from equipment only sales where the Company does not have the obligations associated with overall construction of the project (modules, BOPs, fuel cell kits and spare parts sales) iswas recognized upon shipment or title transfer under the terms of the customer contract. Terms for certain contracts provide for a transfer of title and risk of loss to our customers at our factory locations and certain key suppliers upon completion of our contractual requirement to produce products and prepare the products for shipment. A shipment in place may occur in the event that the customer is not ready to take delivery of the products on the contractually specified delivery dates.

In June 2017, an EPC contractor, Hanyang Industrial Development Co., Ltd (“HYD”), was awarded a 20 MW project by a utility in South Korea (Korea Southern Power Company) utilizing the Company’s SureSource technology. The Company was able to participate on this Korean project pursuant to a Memorandum of Understanding (“MOU”) with POSCO Energy that permitted the Company access to the Asian fuel cell market, including the sale of SureSource solutions in South Korea. Effective July 15, 2018, the MOU was terminated. On August 29, 2017, the Company entered into a contract with HYD pursuant to which the Company ~~will provide~~provided equipment to HYD for this 20 MW fuel cell project as well as ancillary services including plant commissioning. Construction began in the fall of 2017 and the installation ~~is expected to be~~became operational in the summer of 2018. The value of the contract to the Company ~~is in excess of $60~~was $70 million. The Company assessed the contract using the multi-element revenue recognition guidance and determined that each of the modules and BOPs as well as the ancillary services each ~~represent~~represented separate deliverables with stand-alone value. The full contract value was allocated to each element based on estimated selling prices using cost plus expected margins and revenue recognition ~~will occur~~occurred upon completion of shipping and customer acceptance of each piece of equipment and the proportional performance method ~~is being~~was used for the ancillary services as provided. Approximately $39 million of revenue was recognized in the fourth quarter of fiscal 2017 related to this ~~contract. The~~ contract ~~includes performance penalties~~ and partial termination rights if certain delivery dates are not met or if individual equipment deliverables do not pass final acceptance tests after three tries due to issues solely attributable to the Company.approximately $31 million was recognized during fiscal year 2018.

Revenue from service agreements iswas generally recorded ratably over the term of the service agreement, as ~~our~~the Company’s performance of routine monitoring and maintenance under these service agreements is generally expected to be incurred on a straight-line basis. For service agreements where ~~we expect~~the Company expects to have module exchanges at some point during the term (generally service agreements in excess of five years), the costs of performance are not expected to be incurred on a straight-line basis, and therefore, a portion of the initial contract value related to the module exchange(s) is deferred and is recognized upon such module replacement event(s).

~~We generally recognize~~The Company recognized license fees and other revenue over the term of the associated agreement. ~~License fees and royalty income have been included within revenues on the consolidated statement of operations.~~ The Company ~~receives~~records license fees and royalty income from POSCO Energy as a result of manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012. The ~~Cell Technology Transfer Agreement we~~manufacturing and technology transfer agreements the Company entered into ~~on October 31, 2012 provides~~with POSCO Energy collectively provide them with the ~~technology~~ rights to manufacture SureSource power plants in South Korea. On March 17, 2017, the Company entered into a Memorandum of Understanding (“2017 MOU”) with POSCO Energy to permit us to directly develop the Asian fuel cell business, including the right for usKorea and exclusive rights to sell ~~SureSource solutions~~ in South Korea and the broader Asian market. We and POSCO Energy also agreed to undertake to amend certain technology transfer and other agreements by a target date of September 30, 2017 to reflect our new relationship. Although these agreements have not yet been amended, we continue to engage in discussions with POSCO Energy regarding our relationship and the direction of the fuel cell business in the South Korean and Asian markets.

Under PPAs and project assets retained by the Company, revenue from the sale of electricity and other value streams isare recognized as electricity is provided to ~~the customer.~~customers. These revenues are classified as ~~a component of~~ generation revenues.

Advanced Technologies contracts ~~include~~are entered into with both private industry and government entities. Revenue from most government sponsored Advanced Technologies projects is recognized as direct costs are incurred plus allowable overhead less cost share requirements, if any. Revenue from fixed price Advanced Technologies projects is recognized using percentage of completion accounting. Advanced Technologies programs are often multi-year projects or structured in phases with subsequent phases dependent on reaching certain milestones prior to additional funding being authorized. Government contracts are typically structured with cost-reimbursement and/or cost-shared type contracts or cooperative agreements. We are reimbursed for reasonable and allocable costs up to the reimbursement limits set by the contract or cooperative agreement, and on certain contracts we are reimbursed only a portion of the costs incurred.

the ~~power (the "Customer").~~power. Due to the Company's continuing involvement with the project and ~~because~~ the projects ~~are~~being considered integral equipment, sale accounting is precluded by ASC ~~840-40.~~840-40, “Leases”. Accordingly, the Company uses the financing method to account for these transactions.

Under the financing method of accounting for a sale-leaseback, the Company does not recognize as income any of the sale proceeds received from the lessor that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are accounted for as financing obligations and leaseback payments made by the Company are allocated between interest expense and a reduction to the financing obligation. Interest on the financing obligation is calculated using the Company’s incremental borrowing rate at the inception of the arrangement on the outstanding financing obligation. ~~Judgment is required to determine the appropriate borrowing rate for the arrangement and in determining any gain or loss on the transaction that would be recorded at the end of the lease term.~~ While we receive financing for the full value of the related power plant asset, we have not recognized revenue on the ~~sale leaseback~~sale-leaseback transaction. Instead, revenue is recognized through the sale of electricity and energy credits which are generated as energy is produced. The sale-leaseback arrangements with PNC allow the Company to repurchase the project assets at fair market value.

We warranty our products for a specific period of time against manufacturing or performance defects. Our U.S. warranty is limited to a term generally 15 months after shipment or 12 months after acceptance of our products. We accrue for estimated future warranty costs based on historical experience. We also provide for a specific accrual if there is a known issue requiring repair during the warranty period. Estimates used to record warranty accruals are updated as we gain further operating experience. As of October 31, ~~2017~~2019 and ~~2016,~~2018, the warranty accrual, which is classified ~~in accrued liabilities~~as an Accrued liability on the ~~consolidated balance sheet,~~Consolidated Balance Sheets, totaled ~~$0.3 million and $0.5 million, respectively.~~$0.1 million.

In addition to the standard product warranty, we have entered into service agreements with certain customers to provide monitoring, maintenance and repair services for fuel cell power plants. Under the terms of these service agreements, the power plant must meet a minimum operating output during the term. If minimum output falls below the contract requirement, we may be subject to performance penalties or may be required to repair and/or replace the customer's fuel cell module. The Company has accrued for performance guarantees of ~~$2.2~~$0.8 million and ~~$3.3~~$1.1 million as of October 31, ~~2017~~2019 and ~~2016,~~2018, respectively. Refer to Note 2. “Revenue Recognition” for the change in accounting effective as of November 1, 2019 relating to performance guarantees.

The Company ~~provides for~~records loss accruals for ~~all~~ service agreements when the estimated cost of future module exchanges and maintenance and monitoring activities exceeds the remaining unrecognized contract value. Estimates for future costs on service agreements are determined by a number of factors including the estimated remaining life of the module, used replacement modules available ~~our limit of liability on service agreements~~ and future operating plans for the power plant. Our estimates are performed on a contract by contract basis and include cost assumptions based on what we anticipate the service requirements will be to fulfill obligations for each contract. As of October 31, ~~2017,~~2019, our loss accruals on service agreements totaled ~~$1.1~~$3.3 million compared to ~~$2.7~~$0.9 million as of October 31, ~~2016.~~2018.

At the end of our service agreements, customers are expected to either renew the service agreement or based on the Company's rights to title of the module, the module will be returned to the Company as the plant is no longer being ~~monitored or having routine service performed.~~maintained. As of October 31, ~~2016,~~2019, the Company ~~did not have an asset~~had $1.0 million related to the residual value of replacement modules in power plants under service agreements compared to ~~$1.0~~$1.2 million as of October 31, ~~2017.~~2018.

The Cell Technology Transfer and License Agreement dated October 31, 2012 by and between the Company and POSCO Energy, Co., (the "CTTA") provides POSCO Energy with the technology to manufacture SureSource power plants in South Korea and the exclusive market access to sell power plants throughout Asia. In connection with the CTTA, fees totaling $18.0 million were paid between fiscal year 2012 and 2015 and are being amortized over the term of the CTTA.

The Company also receives royalties from POSCO Energy under the 2007 Technology Transfer, Distribution and Licensing Agreement ("TTA") and the 2009 Stack Technology Transfer and License Agreement ("STTA") at the rate

of 3.0% of POSCO Energy net sales. Additionally, under the STTA certain license fee income aggregating $7.0 million is being recognized ratably over fifteen years beginning November 1, 2012. Under the terms of the TTA, POSCO Energy manufactures BOP in South Korea using its design, procurement and manufacturing expertise. The STTA allows POSCO Energy to produce fuel cell modules which will be combined with BOP manufactured in South Korea to complete electricity-producing fuel cell power plants for sale in South Korea.

The Company has a Master Service Agreement with POSCO Energy, whereby POSCO Energy has more responsibility for servicing installations in Asia that utilize power plants manufactured by POSCO Energy. The Company performs engineering and support services for each unit in the installed fleet and receives quarterly fees as well as a 3.0% royalty on each fuel cell module replacement under service agreements that were built by POSCO Energy and installed at any plant in Asia.

In April 2014, the Company entered into an Integrated Global Supply Chain Plan Agreement ("IGSCP") with POSCO Energy. FuelCell Energy provides procurement services for POSCO Energy and receives fixed compensation for services rendered.

~~The Company recorded revenue of $2.7 million, $6.2 million and $3.9 million for the years ended October 31, 2017, 2016 and 2015, respectively, relating to the above agreements.~~

We receive payments from customers upon the acceptance of a purchase order and when contractual milestones are reached. These payments may be deferred based on the nature of the payment and status of the specific project. Deferred revenue is recognized as revenue in accordance with our revenue recognition policies summarized above.

We perform both customer-sponsored research and development projects based on contractual agreement with customers and company-sponsored research and development projects.

Costs incurred for customer-sponsored projects include manufacturing and engineering labor, applicable overhead expenses, materials to build and test prototype units and other costs associated with customer-sponsored research and development contracts. ~~These costs~~Costs incurred for customer-sponsored projects are recorded as cost of Advanced Technologies contract revenues in the ~~consolidated statements~~Consolidated Statements of ~~operations.~~Operations.

Costs incurred for company-sponsored research and development projects consist primarily of labor, overhead, materials to build and test prototype units and consulting fees. These costs are recorded as research and development expenses in the consolidated statements of operations.

We contract with a concentrated number of customers for the sale of our products, for service agreement contracts and for Advanced Technologies contracts. For the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, our top customers accounted for ~~78%~~80%, ~~75%~~86% and ~~90%~~79%, respectively, of our total annual consolidated revenue.

The percent of consolidated revenues from each customer for the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, respectively, are presented below.

We do not use derivatives for speculative ~~purposes and through fiscal year end 2017, have not used derivatives for hedging~~ or trading purposes. Our derivative instruments ~~consist of~~include embedded derivatives in our Series 1 Preferred Shares. ~~We account for these derivatives using the fair-value method with changes~~Changes in fair value are recorded to ~~operations.~~Other income, net on the Consolidated Statements of Operations. Refer to Note 1315. “Redeemable Preferred Stock” for additional information.

The Company also has an interest rate swap that is adjusted to fair value on a quarterly basis. The fair value adjustment is based on Level 2 inputs including primarily the forward LIBOR curve available to swap dealers. The fair value 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. Refer to Note 13. “Debt” for further details.

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. 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. Estimates are used in accounting for, among other things, revenue recognition, excess and obsolete inventories, product warranty costs, accruals for service agreements, allowance for uncollectible receivables, depreciation and amortization, impairment of goodwill, indefinite-lived intangible assets and long-lived assets, valuation of derivatives, income taxes, and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates.

The translation of the financial statements of ~~FuelCell~~FCE Korea ~~Ltd’s,~~Ltd., FCES ~~GmbH's~~GmbH and Versa Power Systems ~~Ltd’s.~~Ltd. results in translation gains or losses, which are recorded in accumulated other comprehensive loss within stockholders’ equity.

Our Canadian subsidiary, FCE FuelCell Energy, Ltd., is financially and operationally integrated and the functional currency is the U.S. dollar. We are also subject to foreign currency transaction gains and losses as certain transactions are denominated in foreign currencies. We recognized net foreign currency transaction (losses) gains of ~~$(0.7)~~$(0.1) million, $0.3 million and ~~$1.7~~$(0.7) million for the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, respectively. These amounts have been ~~classified as other~~included in Other income, net in the ~~consolidated statements~~Consolidated Statements of ~~operations.~~Operations.

In ~~August~~May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which requires an entity to evaluate at each reporting period whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one yearASU 2014-09, “Revenue from the date the financial statements are issued and to provide related footnote disclosures in certain circumstances. The Company adopted the provisions of this ASU for the annual reporting period ended October 31, 2017.Contracts with Customers (Topic 606)”. The adoption of ~~this update did not have a significant impact~~Topic 606 by the Company on November 1, 2018 using the ~~Company’s consolidated financial statements.~~

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU simplifies the presentation of debt issuance costs by requiring that such costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt instrument, consistent with debt discounts. The Company has adopted ASU 2015-03 effective January 31, 2017 andmodified retrospective ~~application is required which~~transition method resulted in a reclassification in our Consolidated Balance Sheet as of October 31, 2016 of $0.3 million of debt issuance costs from Current assets to be a direct deduction from “Current portion of long-term debt” and a reclassification of $1.1 million of debt issuance costs from “Other assets” to be a direct deduction from Long-term debt and other liabilities.cumulative effect adjustment that increased Accumulated deficit by $6.7 million.

In January 2017, the FASB issued ASU ~~2017-01, “Business Combinations.” ASU 2017-01 was issued to clarify~~2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the ~~definition~~Test for Goodwill Impairment” which provides for a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a ~~business~~reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the ~~objective~~carrying amount of ~~adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.~~ that goodwill. The Company ~~has elected to~~ early ~~adopt~~adopted this ASU ~~2017-01~~ effective November 1, ~~2016 which~~2018. The adoption of this ASU did not have ~~a significant~~an impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This topic provides for five principles which should be followed to determine the appropriate amount and timing of revenue recognition for the transfer of goods and services to customers. The principles in this ASU should be applied to all contracts with customers regardless of industry. The amendments in this ASU are effective for fiscal years, and interim periods within those years beginning after December 15, 2016, with two transition methods of adoption allowed. Early adoption for reporting periods prior to December 15, 2016 is not permitted. In March 2015, the FASB voted to defer the effective date by one year to fiscal years, and interim periods within those fiscal years beginning after December 15, 2017 (first quarter of fiscal year 2019 for the Company), but allow adoption as of the original adoption date. The Company has numerous different revenue sources including the sale and installation of fuel cell power plants, site engineering and construction services, sale of modules, BOPs and spare parts, extended warranty service agreements, sale of electricity under power purchase agreements, license fees and royalty income from manufacturing and technology transfer agreements and customer-sponsored Advanced Technologies projects. This requires application of various revenue recognition methods under current accounting guidance. Although we anticipate that, upon adoption of this new ASU the timing of revenue recognition for certain of our revenue sources might change, we are still evaluating the financial statement impacts of the guidance in this ASU and determining which transition method we will utilize. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606).” This topic provides narrow-scope improvements and practical expedients regarding collectability, presentation of sales tax collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and other technical corrections. We have initiated a review of the contracts for our significant revenue streams to understand the impact of the adoption of this ASU.

The Company has both operating and capital leases (refer to Note ~~18. Commitments~~20. “Commitments and ~~contingences)~~Contingencies”) as well as ~~sale-leasebacks~~sale-leaseback transactions that are accounted for under the finance ~~method~~method. The new standard provides entities with several practical expedient elections. Among them, the Company intends to elect the package of practical expedients that permits the Company to not reassess prior conclusions related to its leasing arrangements, lease classifications and ~~may have other arrangements that contain embedded~~initial direct costs. In addition, the Company plans to elect the practical expedients to not separate lease and non-lease components, to use hindsight in determining the lease terms and impairment of ROU assets, and to not apply the new standard’s recognition requirements to short-term leases ~~as characterized in this ASU. We expect that~~or use the portfolio approach to a group of leases with similar characteristics. Upon adoption of this ASU, the Company will ~~result~~record ROU assets and the present value of its lease liabilities which are currently not recognized on its Consolidated Balance Sheet. The Company is in the ~~recognition~~process of implementing changes to its business processes, systems and controls to support the new lease standard and its disclosure requirements.

On adoption, the Company expects to recognize a lease liability of approximately $10.3 million and corresponding ROU assets of approximately $10.1 million. Any cumulative effect of the adoption recorded to accumulated deficit is not expected to be significant. The Company also does not expect there to be a significant net effect on the Consolidated Statements of Operations, however, what was previously presented as rent expense related to operating leases will be recognized as interest expense on the Company’s minimum lease obligation and depreciation of right-of-use ~~assets~~asset.

Under Accounting Standards Codification (“ASC”) Topic 606: Revenue from Contracts with Customer, 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 ~~lease liabilities not currently recorded~~services. To achieve this core principle, the Company applies the following five-step approach: (1) identify the contract with the customer; (2) identify the performance obligation in ~~our consolidated financial statements under existing accounting guidance. However we are still evaluating all~~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.

A contract is accounted for when there has been approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Performance obligations under a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. In certain instances, the Company has concluded distinct goods or services should be accounted for as a single performance obligation that is a series of distinct goods or services that have the same pattern of transfer to the customer. 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). 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. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price, generally utilizing the expected value method. Determining the transaction price requires judgment. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. Standalone selling price is determined by the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Performance obligations are satisfied either over time or at a point in time as discussed in further detail below. In addition, the Company’s ~~contractual arrangements~~contracts with customers generally do not include significant financing components or non-cash consideration.

Product. Includes the sale of completed project assets, sale and installation of fuel cell power plants including site engineering and construction services, and the sale of modules, balance of plant (“BOP”) components and spare parts to customers.

Service. Includes performance under long-term service agreements for power plants owned by third parties.

License and royalty. Includes license fees and royalty income from the licensure of intellectual property.

Advanced Technologies. Includes revenue from customer-sponsored and government-sponsored Advanced Technologies projects.

Contracts for the sale of completed project assets includes the sale of the project asset, the assignment of the service agreement, and the assignment of the PPA. The relative stand-alone selling price is estimated and is used as the basis for allocation of the contract consideration. Revenue is recognized upon the satisfaction of the performance obligations, which includes the transfer of control of the project asset to the customer, which is when the contract is signed and the PPA is assigned to the customer. See below for further discussion regarding revenue recognition for service agreements. The revenue recognition for completed project assets under Topic 606 is consistent with treatment under ASC 605.

Service agreements represent a single performance obligation whereby the Company performs all required maintenance and monitoring functions, including replacement of modules, to ensure the power plant(s) under the service agreement generate a minimum power output. To the extent the power plant(s) under service agreements do not achieve the minimum power output, certain service agreements include a performance guarantee penalty. Performance guarantee penalties represent variable consideration, which is estimated for each service agreement based on past experience, using the expected value method. The net consideration for each service agreement is recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Under ASC 605, revenue for service agreements was generally recorded ratably over the term of the service agreement, as the performance of routine monitoring and maintenance under the service agreements was expected to be incurred on a straight-line basis. If there was an estimated module exchange during the term, the costs of performance were not expected to be incurred on a straight-line basis, and therefore a portion of the initial contract value relating to the module exchange was deferred and recognized upon such module replacement event. Prior to the implementation of Topic 606, an estimate for a performance guarantee was not recorded until a performance issue occurred at a particular power plant. At that point, the actual power plant’s output was compared against the minimum output guarantee and an accrual was recorded. Furthermore, under ASC 605, performance guarantee accruals were recorded based on actual performance and the related expense was recorded to service and license cost of revenues. The review of power plant performance was updated for each reporting period to incorporate the most recent performance of the power plant and minimum output guarantee payments made to customers, if applicable.

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 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. Payment terms for service agreements are generally ratable over the term of the agreement.

Advanced Technologies contracts include the promise to perform research and development services and as such this represents one performance obligation. Revenue from most government sponsored Advanced Technologies projects is recognized as direct costs are incurred plus allowable overhead less cost share requirements, if any. Revenue is only recognized to the extent the contracts are funded. Revenue from fixed price Advanced Technologies projects is recognized using the cost to cost input method. There was no impact ~~that~~of adoption of ~~ASU 2016-02~~Topic 606 on revenue recognition for Advanced Technologies contracts.

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. Payments are based on costs incurred for government sponsored Advanced Technologies projects and upon completion of milestones for all other projects.

The Company entered into manufacturing and technology transfer agreements with POSCO Energy Co., Ltd. (“POSCO Energy”) in 2007, 2009 and 2012. Revenue from the license fees received from POSCO Energy was previously recognized over the term of the associated agreements. In connection with the adoption of Topic 606, several performance obligations were identified including previously satisfied performance obligations for the transfer of licensed intellectual property, two performance obligations for specified upgrades of the previously licensed intellectual property, a performance obligation to deliver unspecified upgrades to the previously licensed intellectual property on a when-and-if-available basis, and a performance obligation to provide technical support for previously delivered intellectual property. The performance obligations related to the specified upgrades will ~~have~~be satisfied and related consideration recognized as revenue upon the delivery of the specified upgrades. The performance obligations for unspecified upgrades and technical support are being recognized on a straight-line basis over the license term on the basis that this represents the method that best depicts the progress towards completion of the related performance obligations. All fixed consideration for the license agreements was previously collected.

Effective as of June 11, 2019, the Company entered into a License Agreement (the “EMRE License Agreement”) with ExxonMobil Research and Engineering Company (“EMRE”), pursuant to which the Company agreed, subject to the terms of the EMRE License Agreement, to grant EMRE and its affiliates a non-exclusive, worldwide, fully paid, perpetual, irrevocable, non-transferrable license and right to use the Company’s 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. Such right and license is sublicensable to third parties performing work for or with EMRE or its affiliates, but shall not otherwise be sublicensable. Upon the payment by EMRE to the Company of $10.0 million, which was received by the Company on June 14, 2019, EMRE and its affiliates were fully vested in the rights and licenses granted in the EMRE License Agreement, and any further obligations under the EMRE License Agreement are considered by the Company to be minimal. As a result, the total contract value of $10.0 million was recorded as revenue for the year ended October 31, 2019.

For project assets where customers purchase electricity from the Company under certain PPAs, the Company has determined that these agreements should be accounted for as operating leases pursuant to ASC 840, Leases. Revenue is recognized when electricity has been delivered based on the amount of electricity delivered at rates specified under the contracts, assuming all other revenue recognition criteria are met. For PPAs that are not accounted for as leases, revenue is recognized based on the output method as there is a directly observable output to the customer (electricity delivered to the customer and immediately consumed). The Company is entitled to be compensated for performance completed to date (electricity delivered to the customer).

The cumulative effect of the changes made to the Company’s Consolidated Balance Sheets as of November 1, 2018 as a result of the adoption of Topic 606 was as follows:

The increase in long-term deferred revenue primarily pertains to license arrangement considerations previously recognized as revenue under ASC 605 that will be recognized when the specific upgrade performance obligations are met.

The following tables summarize the impacts of Topic 606 on the Company’s consolidated financial ~~statements.~~statements as of and for the year ended October 31, 2019.

For the year ended October 31, 2019, the only adjustment to comprehensive loss when comparing the balances with Topic 606 and the balances without Topic 606 included the adjustment to net loss.

For the year ended October 31, 2019, the impact of adoption of Topic 606 on the Consolidated Statement of Cash Flows included an adjustment to net loss of $2.6 million and adjustments to changes in operating assets and liabilities consistent with the impact of adoption of Topic 606 on the October 31, 2019 Consolidated Balance Sheet as reflected above.

Contract assets as of October 31, 2019 and October 31, 2018 were $11.3 million and $23.1 million, respectively. The contract assets relate to the Company’s rights to consideration for work completed but not billed. These amounts are included on a separate line item as Unbilled receivables and balances expected to be billed later than one year from the balance sheet date are included within Other assets on the accompanying Consolidated Balance Sheets. The net change in contract assets represent amounts recorded as revenue offset by customer billings. For the year ended October 31, 2019, a total of $6.6 million was transferred to accounts receivable from contract assets recognized at the beginning of the period and an additional adjustment was made to reduce contract assets as a result of the acquisition of the Bridgeport Fuel Cell Project (refer to Note 3. “Acquisition” for additional information).

Contract liabilities as of October 31, 2019 and October 31, 2018 were $40.2 million and $28.1 million, respectively. The contract liabilities relate to the advance billings to customers for services that will be recognized over time and in some instances for deferred revenue relating to the license performance obligations that will be recognized at a future point in time. These amounts are included within Deferred revenue and Long-term deferred revenue on the accompanying Consolidated Balance Sheets. The net change in contract liabilities represents customer billing offset by revenue recorded.

Remaining performance obligations are the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of October 31, 2019, the Company’s total remaining performance obligations for service agreements, license agreements, and Advanced Technologies contracts were $204.3 million. License revenue recognized over time will be recognized over the remaining term of the applicable license agreement. License revenue recognized at a point in time will be recognized when the first specified upgrade that has been developed is delivered and when the second specified upgrade is developed and delivered. Service revenue in periods in which there are no module replacements is expected to be relatively consistent from period to period, whereas module replacements will result in an increase in revenue when replacements occur. Advanced technologies revenue will be recognized as cost are incurred.

The Company has elected practical expedients in the accounting guidance that allow for revenue to be recorded in the amount that the Company has a right to invoice, if that amount corresponds directly with the value to the customer of the Company's performance to date, and not to disclose related unsatisfied performance obligations. Generation sales, to the extent the related power purchase agreements are within the scope of Topic 606, fall into this category, as these sales are recognized as revenue in the period the Company provides the electricity and completes the performance obligation, which is the same as the monthly amount billed to customers.

On October 31, 2018, FuelCell Energy Finance, LLC (“FuelCell Finance”) entered into a membership interest purchase agreement (the “Purchase Agreement”) with Dominion Generation, Inc., amended on January 15, 2019 and May 9, 2019, pursuant to which FuelCell Finance purchased (on May 9, 2019) all of the outstanding membership interests in Dominion Bridgeport Fuel Cell, LLC (which is now known as Bridgeport Fuel Cell, LLC) (“BFC”). BFC owns a 14.9 MW fuel cell park in Bridgeport, Connecticut (the “Bridgeport Fuel Cell Project”), which the Company originally developed and constructed and has been operating for Dominion Generation, Inc. under a service agreement since December 2013.

On May 9, 2019, FuelCell Finance closed on the purchase of BFC for a total cash purchase price of $35.5 million, subject to a dollar-for-dollar post-closing adjustment to the extent that the closing working capital was greater or less than $1.0 million (the “BFC Purchase Price”). The Company recorded a working capital adjustment of $0.6 million, which has been included in the BFC Purchase Price. Certain balance sheet accounts as of the transaction date, May 9, 2019, relating to the Bridgeport Fuel Cell Project service agreement (accounts receivable of $2.7 million, unbilled receivables of $15.3 million and accrued performance guarantees of $1.3 million) were settled in connection with the acquisition and accordingly were included in the consideration for the acquisition.

The acquisition was funded by loans from Fifth Third Bank, Liberty Bank and Connecticut Green Bank (refer to Note 13. “Debt” for more information). The balance of the financing for the acquisition was funded by the $15 million of restricted cash on hand that was tied to the Bridgeport Fuel Cell Project and released at closing.

ASC Topic 805, “Business Combinations” states that a business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants. As the acquisition did not meet the definition of a business combination under ASC 805, the Company accounted for the transaction as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets. The Company determined the estimated fair values of net assets acquired using Level 3 inputs after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The acquisition of BFC also included a PPA with Connecticut Light and Power that has favorable terms relative to market, a land lease with the City of Bridgeport, and working capital. A pre-existing service agreement was determined to be priced similar to current market rates and no gain or loss was recorded. A total of $38.8 million of consideration was allocated to the fuel cell power plants installation which is recorded in Project Assets, a total of $12.3 million of consideration was allocated to the PPA which is recorded as an intangible asset, and the remaining consideration was allocated to the acquired working capital. The project asset and PPA intangible asset will be depreciated and amortized over their respective useful lives. Additionally, the land lease with the City of Bridgeport was not assigned any consideration due to its insignificant value.

The major depreciable assets of the Bridgeport Fuel Cell Project are the fuel cell modules, which will be depreciated over their estimated remaining useful lives of approximately one to seven years, and balance of plant assets, which will be depreciated over their estimated remaining useful lives of approximately 15 years. The intangible asset is being amortized over its remaining useful life of approximately 10 years.

On April 12, 2019, the Company undertook a reorganization, which included a reduction in force of 135 employees, which represented 30% of the Company’s global workforce. The workforce was reduced at the North American production facility in Torrington, Connecticut, as well as at corporate offices in Danbury, Connecticut and at remote locations. There was no restructuring expense recorded because no severance was provided in connection with the reduction in force.

In connection with the reorganization, the Company also reviewed certain construction in process projects and identified a construction in process asset related to automation equipment for use in manufacturing which has been determined to be impaired due to uncertainty as to whether the asset will be completed as a result of the Company’s liquidity position and continued low level of production rates. The Company recorded a charge of $2.8 million which is included in Cost of product sales on the Consolidated Statements of Operations for the year ended October 31, 2019.

There were no restructuring activities during the fiscal year ended October 31, 2018.

On November 30, 2016, a business restructuring was announced to reduce costs and align production levels with then current levels of demand in a manner that iswas consistent with the Company’s long-term strategic plan.

~~The Company reduced materials spend as well as implemented various cost control initiatives.~~ The workforce was reduced at both the North American production facility in Torrington, Connecticut, as well as at the corporate offices in Danbury, Connecticut and remote locations. A total of 96 positions, or approximately 17% of the Company’s global workforce, were eliminated. The production rate was reduced to ~~twenty-five~~25 MW annually, from the prior rate of ~~fifty~~50 MW annually, in order to position for delays in anticipated order flow. ~~This production level is anticipated to be temporary and will be reevaluated as order flow dictates.~~ Restructuring expense relating to eliminated positions of $1.4 million ~~has been~~was recorded and paid for in the year ended October 31, 2017, which has been presented onunder a separate caption in the Consolidated ~~Statement~~Statements of Operations.

Accounts receivable, net and unbilled receivables as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

	2017		2016
Advanced Technologies (including U.S. Government ⁽¹⁾):
Amount billed	$	1,934	$	2,463
Unbilled recoverable costs		7,352		3,068
		9,286		5,531	2019		2018
Commercial customers:
Amount billed		41,073		5,411	$	2,227	$	7,415
Unbilled recoverable costs		18,162		13,651
Unbilled receivables ⁽¹⁾						6,139		10,632
		59,235		19,062		8,366		18,047
	$	68,521	$	24,593
Advanced Technologies (including U.S. Government⁽²⁾):
Amount billed						1,065		1,865
Unbilled receivables						1,545		3,127
						2,610		4,992
Accounts receivable, net and unbilled receivables					$	10,976	$	23,039

We bill customers for power plant and power plant component sales based on certain contractual milestones being reached. We bill service agreements based on the contract price and billing terms of the contracts. Generally, our Advanced Technologies contracts are billed based on actual ~~recoverable costs incurred,~~revenues recorded, typically in the ~~month~~ subsequent ~~to incurring costs.~~month. Some Advanced Technologies contracts are billed based on contractual milestones or costs incurred. Unbilled ~~recoverable costs~~receivables relate to revenue recognized on customer contracts that ~~has~~have not been billed.

Accounts receivable are presented net of an allowance for doubtful accounts of ~~$0.1 million and~~ $0.2 million as of October 31, ~~2017 and 2016, respectively.~~2018. The Company had no allowance for doubtful accounts as of October 31, 2019. Uncollectible accounts ~~receivable~~receivables are charged against the allowance for doubtful accounts when all collection efforts have failed and it is deemed unlikely that the amount will be recovered.

Accounts receivable from commercial customers (including unbilled recoverable costs) include amounts due from POSCO Energy of $6.2 million and $5.0 million, and amounts due from NRG of $0.1 million as of each of October 31, 2017 and 2016. The Company also had amounts due to POSCO Energy of $32.7 million and $0 as of October 31, 2017 and 2016, respectively, for the purchase of inventory.

Inventories as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

	2017		2016		2019		2018
Raw materials	$	20,065	$	25,286	$	25,466	$	24,467
Work-in-process ⁽¹⁾		54,431		48,520		31,228		29,108
Inventories	$	74,496	$	73,806	$	56,694	$	53,575

Additional long-term inventory of $2.2 million as of October 31, 2019 includes a module that is contractually required to be segregated for use as a replacement at the Bridgeport Fuel Cell Project which is expected to be utilized beyond 12 months from October 31, 2019. There was no long-term inventory as of October 31, 2018.

Raw materials consist mainly of various nickel powders and steels, various other components used in producing cell stacks and purchased components for balance of plant. Work-in-process inventory is comprised of material, labor, and overhead costs incurred to build fuel cell stacks and modules, which are subcomponents of a power plant.

~~Raw materials~~The Company incurred excess plant capacity and ~~work in process are net~~manufacturing variances of ~~a valuation allowance of approximately $0.2~~$14.5 million and ~~$0.8~~$11.2 million ~~as of~~for the years ended October 31, ~~2017~~2019 and ~~2016, respectively.~~2018, respectively, which were included within product cost of revenues on the consolidated statements of operations.

Project assets as of October 31, ~~2017~~2019 and ~~2016~~2018 were ~~$73.0~~$144.1 million and ~~$47.1~~$99.6 million, respectively. As of October 31, 2019, the gross project asset values were $160.0 million and $107.7 million, respectively, and the project asset accumulated depreciation was $15.9 million and $8.1 million, respectively. The estimated useful lives of these project assets are 20 years for balance of plant and site construction, and 5 to 7 years for modules. The Bridgeport Fuel Cell Project is being depreciated based on similar useful lives adjusted for time elapsed prior to the acquisition. Project assets as of October 31, ~~2017 include $30.2 million which represents four~~2019 and 2018 included six and five, respectively, completed, commissioned installations ~~where we have~~generating power with respect to which the Company has a PPA with the end-user of power and site ~~host. Project assets~~host with an aggregate value of $59.2 million and $28.6 million as of October 31, ~~2016 include $6.2 million which represents one completed, commissioned installation where we have a PPA with the end-user~~2019 and 2018, respectively. Certain of ~~power and site host. These~~these assets are the subject of sale-leaseback arrangements with PNC, ~~Energy Capital, LLC (“PNC”),~~ which are ~~recorded under~~accounted for using the financing ~~method~~method. The increase in project assets is primarily a result of ~~accounting for a sale-leaseback. Under~~ the ~~finance method,~~acquisition of the ~~Company does not recognize the proceeds received from the lessor as a sale of such assets. The~~ Bridgeport Fuel Cell Project.

Project assets ~~balance~~ as of October 31, ~~2017~~2019 and 2018 also includes ~~assets aggregating $40.9~~installations with carrying values of $84.9 million and $71.0 million, respectively, which are being developed and constructed by the Company under existing PPAs and have not been placed in service.

During the year ended October 31, 2019, the Company recorded project asset impairment charges for (i) the Triangle Street Project and (ii) the Bolthouse Farms Project, which ~~have been executed or~~ are further described as follows:

The Company recorded a $0.5 million impairment of a project asset during the year ended October 31, 2018 due to ~~be executed~~the termination of a project. The impairments for both years were recorded as “Cost of generation revenues” in ~~fiscal year 2018.~~the Consolidation Statements of Operations.

Depreciation expense for project assets was $6.8 million, $4.1 million and ~~$0.7~~$4.1 million for the years ended October 31, 2019, 2018 and 2017, ~~and 2016,~~ respectively. ~~There was no depreciation expense recorded for the year ended October 31, 2015 since there were no project assets in service.~~

In November 2016, the Company’s wholly-owned subsidiary, FuelCell Energy Finance, LLC (“FuelCell Finance”) entered into a membership interest purchase agreement with GW Power LLC (“Seller”) whereby FuelCell Finance purchased all of the outstanding membership interests in New Britain Renewable Energy, LLC (“NBRE”) from Seller. Seller assigned the NBRE interest to FuelCell Finance free and clear of all liens other than a pledge in favor of Webster Bank, National Association. The Company adopted ASU 2017-01 which resulted in the transaction being accounted for as an asset acquisition of a power plant for a relative fair value of $2.3 million (carrying amount of $1.9 million as of October 31, 2017) which has been classified as a long-term project asset in support of an Energy Purchase Agreement.

Project construction costs incurred for ~~the~~ long-term project assets are reported as investing activities in the Consolidated Statements of Cash Flows. The proceeds received from the sale and subsequent leaseback of project assets are classified as “Cash flows from financing activities” within the Consolidated Statements of Cash Flows and are classified as a financing obligation within “Current portion of long-term debt” and “Long-term debt and other liabilities” on the Consolidated Balance Sheets (refer to Note 1113. “Debt” for more information).

Property, plant and equipment as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

	2017			2016			Estimated Useful Life		2019			2018			Estimated Useful Life
Land	$	524		$	524			—	$	524		$	524			—
Building and improvements		9,331			9,218		10-26 years			20,395			19,674		10-26 years
Machinery, equipment and software		91,680			87,350		3-8 years			106,726			93,356		3-8 years
Furniture and fixtures		3,576			3,509		10 years			4,255			3,958		10 years
Construction in progress		23,163			16,388			—		1,144			17,711			—
		128,274			116,989					133,044			135,223
Accumulated depreciation		(84,709	)		(80,349	)				(91,910	)		(87,019	)
Property, plant and equipment, net	$	43,565		$	36,640				$	41,134		$	48,204

The Company substantially completed the first phase of its project to expand the existing 65,000 square foot manufacturing facility in Torrington, Connecticut by approximately 102,000 square feet for a total size of 167,000 square feet during

During the year ended October 31, 2019, the Company recorded a $2.8 million impairment of construction in process assets related to automation equipment due to uncertainty of completion. There were no impairments of property, plant and equipment for the years ended October 31, 2018 and 2017.

Depreciation expense for property, plant and equipment was ~~$4.4~~$4.9 million, ~~$4.3~~$4.6 million and ~~$4.1~~$4.4 million for the years ended October 31, 2019, 2018 and 2017, ~~2016 and 2015,~~ respectively.

As of October 31, ~~2017~~2019 and ~~2016,~~2018, the Company had goodwill of $4.1 million and intangible assets of $21.3 million and $9.6 million, ~~associated~~respectively, that were recorded in connection with the 2012 Versa acquisition and the 2019

Bridgeport Fuel Cell Project acquisition. The Versa intangible asset represents ~~indefinite lived in-process research and development~~indefinite-lived IPR&D for cumulative research and development efforts associated with the development of solid oxide fuel cells stationary power generation. The Company recorded $12.3 million as an intangible asset during fiscal year 2019 which is for the consideration from the Bridgeport acquisition which was allocated to the PPA (refer to Note 3. “Acquisition” for additional information). The balance for the Bridgeport related intangible asset was $11.7 million as of October 31, 2019 and amortization recorded since the acquisition date of May 9, 2019 was $0.6 million.

The Company completed its annual impairment analysis of goodwill and ~~in-process research and development~~IPR&D assets as of July 31, 2017. The Company performed a quantitative assessment in the prior year and determined that the estimated fair value of the reporting unit and in-process research and development intangible asset exceeded the respective carrying value and therefore no impairment was recognized as of July 31, 2016.2019. The Company performed a qualitative ~~assessment~~analysis for fiscal ~~year~~years 2019, 2018 and 2017 and determined ~~that it was more likely than not~~ that there was no impairment of the goodwill or the ~~indefinite lived~~indefinite-lived intangible asset.

Other current assets as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

	2017		2016		2019		2018
Advance payments to vendors ⁽¹⁾	$	1,035	$	1,247	$	1,899	$	2,696
Deferred finance costs ⁽²⁾		129		152		-		97
Notes receivable⁽³⁾		—		1,007
Prepaid expenses and other ⁽⁴⁾		5,407		7,775
	$	6,571	$	10,181
Prepaid expenses and other ⁽³⁾						4,022		5,799
Other current assets					$	5,921	$	8,592

Other assets ~~net~~ as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

Accrued liabilities as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

Debt as of October 31, ~~2017~~2019 and ~~2016~~2018 consisted of the following (in thousands):

	2017			2016			2019			2018
Connecticut Development Authority Note							$	-		$	284
Orion Energy Partners Credit Facility								14,500			-
Connecticut Green Bank Loan								7,555			6,052
Liberty Bank Term Loan Agreement (BFC Loan)								11,632			-
Fifth Third Bank Term Loan Agreement (BFC Loan)								11,632			-
Finance obligations for sale-leaseback transactions								45,219			46,062
State of Connecticut Loan								10,000			10,000
Hercules Loan and Security Agreement	$	21,468		$	20,521			-			25,343
State of Connecticut Loan		10,000			10,000
Finance obligation for sale-leaseback transactions		46,937			41,603
NRG loan agreement		-			1,755
Connecticut Green Bank Note		6,052			6,050
Connecticut Development Authority Note		2,349			2,589
New Britain Renewable Energy Term Loan		1,697			—			497			1,107
Enhanced Capital Loan and Security Agreement								1,500			-
Fifth Third Bank Construction Loan Agreement								11,072			-
Capitalized lease obligations		632			660			141			341
Deferred finance costs		(1,344	)		(1,408	)		(3,180	)		(1,311	)
Unamortized debt discount								(4,251	)		-
Total debt	$	87,791		$	81,770		$	106,317		$	87,878
Current portion of long-term debt		(28,281	)		(5,010	)		(21,916	)		(17,596	)
Long-term debt	$	59,510		$	76,760		$	84,401		$	70,282

Aggregate annual principal payments under our loan agreements and capital lease obligations for the years subsequent to October 31, ~~2017~~2019 are as follows (in thousands):

Year 1	$	28,583	$	20,974
Year 2		4,518		10,586
Year 3		4,863		11,410
Year 4		4,057		10,417
Year 5		4,089		10,736
Thereafter(1)		43,025		21,917
	$	89,135	$	86,040

The Company had a loan agreement with the Connecticut Development Authority that was used to finance equipment purchases associated with our prior manufacturing capacity expansion. The interest rate was 5.0% per annum and the loan was collateralized by the assets procured under this loan as well as $4.0 million of additional machinery and equipment. The original repayment terms required monthly interest and principal payments through May 2018. However, the repayment terms for the loan agreement with the Connecticut Development Authority were modified in April ~~2016,~~2018, such that the remaining balance and interest was paid on a monthly basis through December 2018 and the loan was extinguished.

In conjunction with the closing of the Orion Facility, on October 31, 2019, the Company drew down ~~$20.0~~$14.5 million ~~during fiscal year 2016.~~(the “Initial Funding”) and received $14.1 million, after taking into account a discount of $0.4 million as described above, to fully repay debt outstanding to NRG Energy, Inc. (“NRG”) and Generate Lending, LLC (“Generate”) and to fund dividends paid to the holders of our Series B Preferred Stock (as defined elsewhere herein) on or before November 15, 2019. The ~~loan is a 30 month secured facility~~balance of the Initial Funding was used primarily to pay third party costs and expenses associated with closing of the Orion Facility. In connection with the closing of the Orion Facility and the ~~term~~Initial Funding, on October 31, 2019, the Company issued to the lenders warrants to purchase up to 6.0 million shares of the Company’s common stock (the “Initial Funding Warrants”) and made a commitment to issue warrants to purchase up to an additional 14.0 million shares of the Company’s common stock (the “Second Funding Warrants”) upon closing of the Second Funding under the Orion Facility, which occurred on November 22, 2019.

Subsequent to October 31, 2019, a second draw (the “Second Funding”) of $65.5 million, funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P., was made on November 22, 2019 to fully repay outstanding third party debt of the Company with respect to the outstanding construction loan ~~interest was previously 9.5 percent~~to Fifth Third Bank on the Groton Project and ~~increased~~the outstanding loan to ~~9.75 percent resulting from~~Webster Bank on the ~~increase~~CCSU Project as well as to fund remaining going forward construction costs and anticipated capital expenditures relating to the Groton Project (a 7.4 MW project), the LIPA Yaphank Solid Waste Management Project (a 7.4 MW project), and the Tulare BioMAT Project (a 2.8 MW project). The Company received $63.9 million after taking into account a loan discount of $1.6 million as described above. Also in conjunction with the ~~prime rate. Interest is paid on~~Second Funding, the Company issued to the Second Funding lenders warrants to purchase up to a ~~monthly basis. Interest only payments were~~total of 14.0 million shares of the Company’s common stock, with an initial exercise price with respect to ~~be made for~~8.0 million of such shares of $0.242 per share and with an initial exercise price with respect to 6.0 million of such shares of $0.620 per share (the “Second Funding Warrants”).

The Company may draw the remainder of the Orion Facility, $120.0 million, over the first 18 months asfollowing the Initial Funding and subject to the Agent’s approval to fund: (i) construction costs, inventory and other capital expenditures of additional fuel cell projects with contracted cash flows (under PPAs with creditworthy counterparties) that meet or exceed a ~~result of~~mutually agreed coverage ratio; and (ii) inventory, working capital, and other costs that may be required to be delivered by the Company ~~achieving certain milestones.~~on purchase orders, service agreements, or other binding customer agreements with creditworthy counterparties.

Under the Orion Credit Agreement, cash interest of 9.9% per annum will be paid quarterly. In addition to the cash interest, “PIK” interest of 2.05% per annum will accrue which will be added to the outstanding principal ~~payments commenced on November 1, 2017 in equal monthly installments. The loan~~ balance ~~and all accrued and unpaid interest is due and payable by October 1, 2018. Per the terms~~ of the ~~loan and security agreement, there is an end of term payment of $1.7 million which is being accreted over the 30 month term using the effective interest rate method.~~

~~As collateral for obligations under Hercules Agreement, the Company granted Hercules a security interest~~Orion Facility but will be paid quarterly in FuelCell Energy, Inc.’s existing and hereafter-acquired assets except for intellectual property and certain other excluded assets. Collateral does not include assets held by FuelCell Finance or any project subsidiary thereof. The Company may continue to collateralize and finance its project subsidiaries through other lenders and partners. Under the Hercules Agreement, as amended, there is a minimum cash covenant which requires the Company to maintain an unrestricted cash balance in accounts subject to an account control agreement in favor of Hercules of at least the greater of (x) (a) 75% of the outstanding loan balance plus (b) the amount of accounts payable (as defined under GAAP) not paid within 90 days of the invoice date and (y) (a) at all times prior to the ~~Stockholder Approval Date (as defined in the Certificate~~extent of ~~Designations for the Series C Preferred Stock), $20.0 million and (b) at all times on and~~available cash after the Stockholder Approval Date, $10.0 million (the Stockholder Approval Date was December 14, 2017, which was the date on which stockholder approval of the issuance of certain shares upon the conversion and/or redemptionpayment of the Company’s ~~Series C Preferred Stock was obtained).~~

~~In November 2015,~~operating expenses and the ~~Company closed on a definitive Assistance Agreement with~~funding of certain reserves for the payment of outstanding indebtedness to the State of Connecticut and Connecticut Green Bank. The Orion Credit Agreement contains representations, warranties and other covenants.

Outstanding principal on the Orion Facility will be amortized on a straight-line basis over a seven year term in quarterly payments beginning one year after the Initial Funding; provided that, if the Company does not have sufficient cash on hand to make any required quarterly amortization payments, such amounts shall be deferred and payable at such time as sufficient cash is available to make such payments subject to all outstanding principal being due and payable on the maturity date, which is the date that is eight years after the closing date or October 31, 2027.

The Orion Credit Agreement includes mandatory prepayment requirements and a prepayment premium of up to 30% of the amount being prepaid in the event that certain triggering events occur, including events of loss (destruction of or damage to any property of a loan party) where the proceeds received ~~a disbursement~~from such events of ~~$10.0 million~~loss are not applied to the repair or restoration of the affected property, the sale, transfer or other disposition of project assets funded by the Orion Facility, if the proceeds from such disposition are not reinvested in substantially similar assets that are useful and necessary for the ~~first phase~~business (as defined in the Orion Credit Agreement) pursuant to a transaction permitted under the Orion Credit Agreement within a certain period of time, the incurrence of debt other than permitted indebtedness (as defined in the Orion Credit Agreement) and certain events of default (as defined in the Orion Credit Agreement), and also includes a post-default rate increase feature in the event certain events of default occur (in each case as defined in the Orion Credit Agreement. The Company assessed these mandatory prepayment and post-default rate features and determined that while they represent embedded derivatives and are required to be bifurcated and separately valued, the probability of occurrence for events that would trigger these features was determined to be sufficiently low such that no value was assigned to these features as of October 31, 2019.

Issuance of the ~~expansion project~~Initial Funding Warrants and recognition of the Second Funding Warrants resulted in $3.9 million being recorded as a liability with the offset recorded as a debt discount. Refer to ~~expand~~Note 14. “Stockholders’ Equity and Warrant Liabilities” for additional information on the ~~existing 65,000~~Initial Funding Warrants and Second Funding Warrants including the accounting and terms.

~~square foot manufacturing facility in Torrington,~~ Connecticut ~~by approximately 102,000 square feet~~Green Bank Loans

As of October 31, 2018, the Company had a long-term loan agreement with the Connecticut Green Bank for a ~~total size~~loan totaling $5.9 million in support of ~~167,000 square feet. In conjunction~~the Bridgeport Fuel Cell Project. During the year ended October 31, 2019, this loan was partially repaid with ~~this financing,~~a new project level loan from Connecticut Green Bank (as discussed below) in connection with the Company’s acquisition of all of the membership interests in BFC. The balance under the long-term loan agreement as of October 31, 2019 was $1.8 million. Subsequent to October 31, 2019, the long-term loan agreement was amended and the Connecticut Green Bank provided the Company with an additional loan in the aggregate principal amount of $3.0 million. See Note 23. “Subsequent Events” for additional information regarding the amendment to the loan agreement and the additional loan.

On May 9, 2019, in connection with the closing of the purchase of BFC, BFC entered into a ~~$10.0~~subordinated credit agreement with the Connecticut Green Bank whereby Connecticut Green Bank provided financing in the amount of $6.0 million ~~Promissory Note~~(the “Subordinated Credit Agreement”). As security for the Subordinated Credit Agreement, Connecticut Green Bank received a perfected lien, subordinated and ~~related security agreement~~second in priority to the liens securing the $25.0 million loaned under the BFC Credit Agreement (as defined below), in all of the same collateral securing the BFC Credit Agreement. The interest rate under the Subordinated Credit Agreement is 8% per annum. The debt service coverage ratio required to be maintained under the Subordinated Credit Agreement may not be less than 1.10 as of the end of each fiscal quarter, beginning with the quarter ended July 31, 2020. The term of the Subordinated Credit Agreement expires 7 years from the date of the advance of the loan. Principal and interest are due monthly in amounts sufficient to fully amortize the loan over an 84 month period ending in May 2026. The Subordinated Credit Agreement contains representations, warranties and other covenants. The balance under the Subordinated Credit Agreement as of October 31, 2019 was $5.8 million.

On May 9, 2019, in connection with ~~equipment liens~~the purchase of the membership interests of BFC, FuelCell Finance (a subsidiary of the Company) entered into a Credit Agreement with Liberty Bank, as administrative agent and co-lead arranger, and Fifth Third Bank as co-lead arranger and swap hedger (the “BFC Credit Agreement”), whereby (i) Fifth Third Bank provided financing to BFC in the amount of $12.5 million towards the BFC Purchase Price; and (ii) Liberty Bank provided financing to BFC in the amount of $12.5 million towards the BFC Purchase Price. As security for the BFC Credit Agreement, Liberty Bank and Fifth Third Bank were granted a ~~mortgage on its Danbury,~~first priority lien in (i) all assets of BFC, including BFC’s cash accounts, fuel cells, and all other personal property, as well as third party contracts including the Energy Purchase Agreement between BFC and Connecticut ~~location. Pursuant~~Light and Power Company dated July 10, 2009, as amended; (ii) certain fuel cell modules that are intended to be used to replace the Bridgeport Fuel Cell Project’s fuel cell modules as part of routine operation and maintenance; and (iii) FuelCell Finance’s ownership interest in BFC. The maturity date under the BFC Credit Agreement is May 9, 2025. Monthly principal and interest are to be paid in arrears in an amount sufficient to fully amortize the term loan over a 72 month period. BFC has the right to make additional principal payments or pay the balance due under the BFC Credit Agreement in full provided that it pays any associated breakage fees with regard to the ~~terms~~interest rate swap agreements fixing the interest rate. The interest rate under the BFC Credit Agreement fluctuates monthly at the 30-day LIBOR rate plus 275 basis points on an initial total notional value of $25.0 million, reduced for principal payments.

An interest rate swap agreement was required to be entered into with Fifth Third Bank in connection with the BFC Credit Agreement to protect against movements in the floating LIBOR index. Accordingly, on May 16, 2019, an interest rate swap agreement (the “Swap Agreement”) was entered into with Fifth Third Bank in connection with the BFC Credit Agreement for the term of the ~~loan, payment of principal is deferred for~~loan. The net interest rate across the ~~first four years. Interest at~~BFC Credit Agreement and the swap transaction results in a fixed rate of ~~2.0 percent~~5.09%. The interest rate swap will be adjusted to fair value on a quarterly basis. The estimated fair value is ~~payable beginning in December 2015.~~based on Level 2 inputs including primarily the forward LIBOR curve available to swap dealers. The ~~financing is payable over 15 years, and is predicated on certain terms and conditions, including~~valuation methodology involves comparison of (i) the ~~forgiveness of up to half~~sum of the ~~loan principal if certain job retention~~present value of all monthly variable rate payments based on a reset rate using the forward LIBOR curve and ~~job creation targets are reached. On April 17, 2017,~~(ii) the ~~Company entered into an amendment~~sum of the present value of all monthly fixed rate payments on the notional amount which is equivalent to the ~~Assistance Agreement extending certain~~outstanding principal amount of the ~~job creation target dates~~loan. The fair value adjustments for the fiscal year ended October 31, 2019 resulted in $0.6 million of charges.

The BFC Credit Agreement requires BFC to maintain a debt service reserve at each of Liberty Bank and Fifth Third Bank of $1.25 million, which debt service reserves were funded on May 10, 2019, to be held in deposit accounts at each respective bank, with funds to be disbursed with the consent of or at the request of the required lenders in their sole discretion. Each of Liberty Bank and Fifth Third Bank also has an operation and module replacement reserve (“O&M Reserve”) of $250,000, both of which were funded at closing of the BFC Credit Agreement, to be held in deposit accounts at each respective bank, and thereafter BFC is required to deposit $100,000 per month into each O&M Reserve for the first five years of the BFC Credit Agreement, with such funds to be released at the sole discretion of Liberty Bank and Fifth Third Bank, as applicable. BFC is also required to maintain excess cash flow reserve accounts at each of Liberty Bank and Fifth Third Bank and to evenly split and deposit the excess cash flows from the Bridgeport Fuel Cell Project into these accounts. Excess cash flow consists of cash generated by ~~two years~~BFC from the Bridgeport Fuel Cell Project after payment of all expenses (including after payment of intercompany service fees to ~~October 28, 2019.~~the Company), debt service to Liberty Bank and Fifth Third Bank, the funding of all required reserves, and payments to Connecticut Green Bank for the subordinated facility. BFC is also required to maintain a debt service coverage ratio of not less than 1.20, measured for the trailing year based on fiscal quarters beginning with the quarter ended July 31, 2020. The BFC Credit Agreement contains representations, warranties and other covenants. The Company also has certain quarterly and annual financial reporting requirements under the BFC Credit Agreement. The annual financial statements to be provided pursuant to such requirements are to be audited and accompanied by a report of an independent certified public accountant, which report shall not include a “going concern” matter of emphasis or any qualification or exception as to the scope of such audit.

Several of the Company’s project finance subsidiaries ~~may enter~~previously entered into sale-leaseback agreements with PNC for commissioned projects where ~~we have~~the Company had entered into a PPA with the site host/end-user of produced power. Under the financing method of accounting for a sale-leaseback, the Company ~~does~~did not recognize as income any of the sale proceeds received from the lessor that contractually constitute ~~payment~~payments to acquire the assets subject to these arrangements. Instead, the sale proceeds received ~~are~~were accounted for as financing obligations. The outstanding ~~finance~~financing obligation balance as of October 31, ~~2017~~2019 was ~~$46.9~~$45.2 million and the ~~increase~~decrease from ~~the~~$46.1 million on October 31, ~~2016 balance~~2018 includes lease payments offset by the recognition of ~~$41.6 million includes~~interest expense. The outstanding financing obligations include an embedded gain which will be recognized at the end of each of the 10-year lease terms.

In October 2015, the Company closed on a ~~sale-leaseback transaction~~definitive Assistance Agreement with the State of ~~$5.4~~Connecticut and received a disbursement of $10.0 million which was ~~completed in December 2016~~used for the first phase of the expansion of the Company’s Torrington, Connecticut manufacturing facility. In conjunction with this financing, the Company entered into a $10.0 million promissory note and related security agreements securing the loan with equipment liens and a mortgage on its Danbury, Connecticut location. Interest accrues at a fixed interest rate of 2.0%, and the ~~recognition~~loan is repayable over 15 years from the date of ~~imputed~~the first advance, which occurred in October of 2015. Principal payments were deferred for four years from disbursement and began on December 1, 2019. Under the Assistance Agreement, the Company was eligible for up to $5.0 million in loan forgiveness if the Company created 165 full-time positions and retained 538 full-time positions for two consecutive years (the “Employment Obligation”) as measured on October 28, 2017 (the “Target Date”). The Assistance Agreement contains representations, warranties and other covenants. The Assistance Agreement was subsequently amended in April 2017 to extend the Target Date by two years to October 28, 2019.

In January 2019, the Company and the State of Connecticut entered into a Second Amendment to the Assistance Agreement (the “Second Amendment”). The Second Amendment extends the Target Date to October 31, 2022 and amends the Employment Obligation to require the Company to continuously maintain a minimum of 538 full-time positions for 24 consecutive months. Based on the Company’s current headcount and plans for fiscal year 2020, it will be short of meeting this requirement. If the Company meets the Employment Obligation, as modified by the Second Amendment, and creates an additional 91 full-time positions, the Company may receive a credit in the amount of $2.0 million to be applied against the outstanding balance of the loan. The Second Amendment deletes and cancels the provisions of the Assistance Agreement related to the second phase of the expansion project and the loans related thereto, but the Company had not drawn any funds or received any disbursements under those provisions. A job audit will be performed within 90 days of the Target Date. If the Company does not meet the Employment Obligation, then an accelerated payment penalty will be assessed at a rate of $18,587.36 times the number of employees below the Employment Obligation. Such penalty is immediately payable and will be applied first to accelerate the payment of any outstanding fees or interest ~~expense offset~~due and then to accelerate the payment of outstanding principal.

In April 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Hercules Agreement”) with Hercules Capital, Inc. (“Hercules”) for a loan in an aggregate principal amount of up to $25.0 million. The original loan was a 30 month secured facility, and the original loan balance and all accrued and unpaid interest was due and payable by ~~lease payments. New sale-leaseback transactions of $41.5 million~~October 1, 2018.

The Hercules Agreement was subsequently amended on September 5, 2017, October 27, 2017, March 28, 2018, August 29, 2018, December 19, 2018, February 28, 2019, March 29, 2019, May 8, 2019, June 11, 2019 and July 24, 2019. The amendments provided for lower minimum cash covenants and were entered into ~~during~~to avoid events of default and accelerations of amounts due under the Hercules Agreement. Principal payments under the Hercules Agreement began on April 1, 2019. The term loan interest rate for the entire term of the loan was the greater of (i) 9.90% plus the prime rate minus 4.50%, and (ii) 9.90%. The initial end of term charge of $1.7 million was paid on October 1, 2018. An additional end of term charge of $0.9 million was due on April 1, 2020 or upon repayment of the principal balance. The additional end of term charge was being accreted over a 30-month term.

On September 30, 2019, the Company and Hercules entered into a payoff letter (the “Payoff Letter”). Pursuant to the Payoff Letter, the Company paid to Hercules, on September 30, 2019, a final payment of $0.8 million, plus the end of term charge described above, which amounts represented the remaining outstanding principal balance, the remaining accrued interest outstanding, all remaining fees due under the Hercules Agreement, and the end of term charge, in full repayment of the Company’s outstanding obligations under the Hercules Agreement. Upon the payment of the $0.8 million and the end of term charge, all outstanding indebtedness and obligations of the Company owing to Hercules under the Hercules Agreement were paid in full and the loan was extinguished.

In November 2016, we assumed debt with Webster Bank in the amount of $2.3 million as a part of a project asset acquisition transaction. The term loan interest rate was 5.0% per annum and payments, which commenced in January 2017, were due on a quarterly basis. The balance outstanding as of October 31, 2019 and 2018 was $0.5 million and $1.1 million, respectively. The loan was paid off and extinguished subsequent to the fiscal year ended October 31, ~~2016.~~2019.

On January 9, 2019, the Company, through its indirect wholly-owned subsidiary, TRS Fuel Cell, LLC, entered into a Loan and Security Agreement (the “Enhanced Capital Loan Agreement”) with Enhanced Capital Connecticut Fund V, LLC (“Enhanced”) for a loan in the amount of $1.5 million. The ~~sale-leaseback transactions~~collateral for this loan included any project assets, accounts receivable and inventory owned by TRS Fuel Cell, LLC. Interest accrued at a rate of 6.0% per annum and was paid on the first business day of each month. The loan maturity date was three years from the date of the Enhanced Capital Loan Agreement, upon which the outstanding principal and any accrued interest would be due and payable. Under the terms of the Enhanced Capital Loan Agreement, the Company was required to close on tax equity financing by January 14, 2020. Given that the Company did not secure tax equity financing for this project, on January 13, 2020, TRS Fuel Cell, LLC and Enhanced entered into a payoff letter whereby the loan was paid off and extinguished on January 14, 2020.

On February 28, 2019, the Company, through its indirect wholly-owned subsidiary, Groton Station Fuel Cell, LLC (“Groton Borrower”), entered into a Construction Loan Agreement (as amended from time to time, the “Groton Agreement”) with Fifth Third Bank pursuant to which Fifth Third Bank agreed to make available to Groton Borrower a construction loan facility in an aggregate principal amount of up to $23.0 million (the “Groton Facility”) to fund the manufacture, construction, installation, commissioning and start-up of the 7.4 MW fuel cell power plant for the Connecticut Municipal Electric Energy Cooperative located on the U.S. Navy submarine base in Groton, Connecticut (the “Groton Project”). Groton Borrower made an initial draw under the Groton Facility on the date of closing of $9.7 million and made an additional draw of $1.4 million in April 2019. The original maturity date of the Groton Facility was the earlier of (a) October 31, 2019, (b) the commercial operation date of the Groton Project, or (c) one business day after receipt of proceeds of debt financing (i.e., take out financing) in an amount sufficient to repay the outstanding indebtedness under the Groton Facility.

On August 13, 2019, Groton Borrower and Fifth Third Bank entered into Amendment No. 1 to the Groton Agreement, which reduced the aggregate principal amount available to Groton Borrower under the Groton Facility from $23.0 million to $18.0 million and pursuant to which Groton Borrower committed to, among other things, deliver to Fifth Third Bank, no later than September 28, 2019 (which deadline was automatically extended to October 21, 2019 upon the Company’s repayment of its corporate loan facility with Hercules on September 30, 2019), a binding loan agreement for permanent financing and one or more binding letters of intent from tax equity investors.

On October 21, 2019, Groton Borrower and Fifth Third entered into Amendment No. 2 to the Groton Agreement (the “Second Groton Amendment”), pursuant to which Groton Borrower agreed to deliver to Fifth Third Bank, no later than December 16, 2019, a binding agreement, in form and substance reasonably acceptable to Fifth Third Bank: (i) executed by Groton Borrower and one or more Take-out Lenders (as defined in the Groton Agreement), pursuant to which the Take-out Lenders shall have, individually or collectively, agreed to provide a Take-out Financing (as defined in the Groton Agreement); or (ii) executed by Groton Borrower and one or more tax equity investors or other third parties, pursuant to which such tax equity investors or third parties, via a tax equity or other financing transaction, shall have, individually or collectively, agreed to provide funds to Groton Borrower in an amount no less than the then-outstanding Construction Loans (as defined in the Groton Agreement) under the Groton Agreement and accrued interest. The Second Groton Amendment further provided, however, that if (A) neither such binding agreement nor a commitment letter for either of such agreements (which commitment letter shall not include a ~~fair value purchase option~~due diligence or similar funding condition) was provided to Fifth Third Bank by November 21, 2019, then commencing on November 22, 2019 until delivery of such commitment letter, the interest rate on the loans was to be the LIBOR rate plus 4% per annum and within three business days after such date, Groton Borrower was to pay to Fifth Third Bank a fee of $15,000 and (B) such binding agreement was not provided to Fifth Third by December 16, 2019, then commencing on December 17, 2019, the outstanding obligations under the Groton Agreement were to bear interest at a rate equal to the ~~end~~LIBOR rate plus 6% per annum. The total outstanding balance under the Groton Facility as of October 31, 2019 was $11.1 million. This balance was paid off and the ~~lease term.~~loan was extinguished subsequent to the fiscal year ended October 31, 2019 on November 22, 2019, and the Groton Facility was terminated.

In July 2014, the Company, through its wholly-owned subsidiary, FuelCell Finance, entered into a Loan Agreement with ~~NRG.~~NRG (the “NRG Loan Agreement”). Pursuant to the NRG Loan Agreement, NRG ~~has~~ extended a $40.0 million revolving construction and term financing facility (the “NRG Loan Facility”) to FuelCell Finance for the purpose of accelerating project development by the Company and its subsidiaries. ~~We may~~Under the NRG Loan Agreement, FuelCell Finance and its subsidiaries were permitted to draw on the ~~facility~~NRG Loan Facility to finance the construction of projects through the commercial operating date of the power plants. Additionally, FuelCell Finance had the option to continue the financing term for each project after the commercial operation date for a minimum term of 5 years per project. The interest rate ~~is 8.5 percent~~was 8.5% per annum for construction-period financing and ~~8.0 percent~~8.0% per annum thereafter. ~~Fees that were paid by~~

On December 13, 2018, FuelCell Finance’s wholly owned subsidiary, Central CA Fuel Cell 2, LLC, drew a construction loan advance of $5.8 million under the NRG Loan Facility. This advance was used to support the completion of construction of the 2.8 MW Tulare BioMAT project in California. In conjunction with the December 13, 2018 draw, FuelCell Finance and NRG entered into an amendment to the NRG ~~for making~~Loan Agreement to revise the ~~loan facility available and related legal fees incurred were capitalized and are being amortized straight-line over the life~~definitions of the terms “Maturity Date” and “Project Draw Period” under the NRG Loan Agreement and to make other related ~~loan agreement, which is five years. The term~~revisions. Pursuant to this amendment, FuelCell Finance and its subsidiaries could only request draws through December 31, 2018, and the Maturity Date of each note was the ~~loans are up~~earlier of (a) March 31, 2019 and (b) the commercial operation date or substantial completion date, as applicable, with respect to ~~five years but may be repaid early should~~ the ~~projects be sold or refinanced at~~fuel cell project owned by the ~~option of the Company.~~borrower under such note.

The ~~Company has a long-term loan agreement with~~Maturity Date was subsequently extended through amendments to the Connecticut Green Bank totaling $5.9 million in support of the Bridgeport Fuel Cell Park project. The loan agreement carries an interest rate of 5.0 percent. Interest only payments commenced in January 2014NRG Loan Agreement on March 29, 2019 (the “Third Amendment”), June 13, 2019, July 11, 2019, August 8, 2019 and principal payments will commence on the eighth anniversary of the project’s provisional acceptance date, which is December 20, 2021, payable in forty-eight equal monthly installments. Outstanding amounts are secured by future cash flows from the Bridgeport Fuel Cell Park service agreement.

The Company has a loan agreement with the Connecticut Development Authority to finance equipment purchases associated with manufacturing capacity expansion allowing for a maximum amount borrowed of $4.0 million. The interest rate is 5.0 percent and the loan is collateralized by the assets procured under this loan as well as $4.0 million of additional machinery and equipment. Repayment terms require monthly interest and principal payments through May 2018.

September 30, 2019 (the “Seventh Amendment”). In ~~November 2016, in~~ connection with the ~~acquisition~~Third Amendment, the Company agreed to make an additional payment of ~~NBRE, debt with Webster Bank~~$750,000 at the Maturity Date, which is recorded in interest expense on the Consolidated Statement of Operations. In addition, the Seventh Amendment, extended the Maturity Date of each note to the earlier of (a) October 31, 2019, or (b) closing of a corporate refinancing or other form of liquidity; provided, however, that if NRG determined, in its sole discretion, that the Company was ~~assumed as a part~~not making sufficient progress toward the completion of the ~~transaction~~construction of the 2.8 MW Tulare BioMAT project in California, NRG had the right to accelerate the Maturity Date. The Company repaid and extinguished the loan on October 31, 2019.

On December 21, 2018, the Company, through its indirect wholly-owned subsidiary FuelCell Energy Finance II, LLC (“FCEF II”), entered into a Construction Loan Agreement (as amended from time to time, the “Generate Agreement”) with Generate pursuant to which Generate agreed (the “Commitment”) to make available to FCEF II a credit facility in an aggregate principal amount of up to $100.0 million (the “Generate Facility”) to fund the manufacture, construction, installation, commissioning and start-up of stationary fuel cell projects to be developed by the Company on behalf of FCEF II during the 36 months from the date of the Generate Agreement. The Commitment to provide Working Capital Loans (as defined in the Generate Agreement) was to remain in place for 36 months from the date of the Generate Agreement (the “Availability Period”). Interest at 9.5% per annum was to be paid on the first business day of each month. The initial draw amount ~~of $2.3~~under the Generate Facility, funded at closing, was $10.0 million. The ~~term~~initial draw reflected loan ~~interest rate is 5.0 percent~~advances for the first Approved Project (as defined in the Generate Agreement) under the Generate Facility, the Bolthouse Farms 5 MW project in California. The Company entered into amendments to the Generate Agreement on June 28, 2019, August 13, 2019 and ~~payments are due on a quarterly basis commencing in January 2017.~~September 30, 2019, which primarily extended the repayment date of the loan and provided additional collateral. The ~~balance outstanding~~loan was repaid and extinguished as of October 31, ~~2017 was $1.7 million.~~2019.

The Company leases computer equipment under master lease agreements. Lease payment terms are generally ~~thirty-six~~36 months from the date of acceptance for leased equipment.

Deferred finance costs relate primarily to (i) sale-leaseback transactions entered into with PNC which are being amortized over ~~the ten-year~~a 10-year term, ~~and direct deferred finance costs relating to~~(ii) payments under the Hercules Agreement, which were amortized over the term of the loan, ~~and security agreement entered into~~(iii) payments under the loans obtained to purchase the membership interests in ~~April 2016 is~~BFC which are being amortized over the ~~30 month life~~8-year term of the loans and (iv) payments to enter into the Orion Facility which will be amortized over the 8 year term of the loan.

In April 2017, the number of authorized shares of the Company's common stock was increased from 75,000,000 to 125,000,000, by vote of the holders of a majority of the outstanding shares of the Company's common stock.

On December 14, 2017, the number of authorized shares of the Company’s common stock was increased from 125,000,000 to 225,000,000, by a vote of the holders of a majority of the outstanding shares of the Company’s common stock.

On October 4, 2019, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley FBR, Inc. (the “Sales Agent”) to create an at-the-market equity program under which the Company may, from time to time, offer and sell up to 38.0 million shares of its common stock through the Sales Agent. However, to ensure that the Company had sufficient shares available for reservation and issuance upon exercise of all of the warrants to be issued to the lenders under the Orion Facility (as discussed in further detail below), the Company, effective as of October 31, 2019, reduced the number of shares reserved for future issuance and sale under the Sales Agreement from 27.9 million shares to 7.9 million shares (thus allowing for total aggregate issuances (past and future) of up to 18.0 million shares under the Sales Agreement) and reserved 20.0 million shares for issuance upon exercise of the warrants. Under the Sales Agreement, the Sales Agent is entitled to a commission in an amount equal to 3.0% of the gross proceeds from each sale of shares under the Sales Agreement.

During the year ended October 31, 2019, the Company sold 10.1 million shares of the Company’s common stock at prevailing market prices under the Sales Agreement and received aggregate gross proceeds of $3.0 million and paid $0.1 million of fees and commissions

On June 13, 2018, the Company entered into an At Market Issuance Sales Agreement (the “Previous Sales Agreement”) with B. Riley FBR, Inc. and Oppenheimer & Co. Inc. (together, the “Previous Agents”) to create an at-the-market equity program under which the Company could from time to time to offer and sell shares of its common stock having an aggregate offering price of up to $50.0 million through the Previous Agents. Under the Previous Sales Agreement, the Previous Agent making the sales was entitled to a commission in an amount equal to 3.0% of the gross proceeds from such sales.

During the year ended October 31, 2019, the Company sold 109.1 million shares of the Company’s common stock under the Previous Sales Agreement at prevailing market prices, at an average sale price of $0.39 per share and received aggregate gross proceeds of $42.0 million and paid $1.3 million of fees and commissions.

During the year ended October 31, 2018, the Company sold 0.5 million shares of the Company’s common stock under the Previous Sales Agreement, at prevailing market prices, at an average sale price of $16.72 per share and received aggregate gross proceeds of $8.0 million and paid $0.2 million of fees and commissions.

During the year ended October 31, 2017, the Company sold 0.6 million shares of the Company's common stock at an average sale price of $21.00 per share through periodic offerings/sales on the open market under the Previous Sales Agreement and raised approximately $12.6 million, net of aggregate selling commissions of $0.1 million.

On May 3, 2017, the Company completed an underwritten public offering of (i) ~~12,000,000~~1,000,000 shares of its common stock, (ii) Series C warrants to purchase ~~12,000,000~~1,000,000 shares of its common stock and (iii) Series D warrants to purchase ~~12,000,000~~1,000,000 shares of its common stock, for gross proceeds of approximately $15.4 million, at a public offering price of ~~$1.28~~$15.36 per share and accompanying warrants. Total net proceeds to the Company were approximately $13.9 million. The Series C warrants have an exercise price of ~~$1.60~~$19.20 per share and a term of five years. A total of ~~419,100~~962 shares of common stock were issued during ~~the fourth quarter of~~ fiscal year ~~2017~~2018 upon the exercise of Series C warrants and the Company received total proceeds of ~~$0.7~~$0.02 million. The Series D warrants ~~have~~had an exercise price of ~~$1.28~~$15.36 per share and a term of one year. A total of ~~9,415,826~~215,347 shares of common stock were issued during ~~the third and fourth quarters of~~ fiscal year ~~2017~~2018 upon the exercise of Series D warrants and the Company received total proceeds of ~~$12.1~~$3.3 million. The Series D warrants were all exercised prior to October 31, 2018. No Series C warrants were exercised during the fiscal year ended October 31, 2019.

On July 12, 2016, the Company closed on a registered public offering of securities to a single institutional investor pursuant to a placement agent agreement with J.P. Morgan Securities LLC. In conjunction with the offering, the Company issued ~~7,680,000~~640,000 Series A Warrants ~~all of which remained outstanding as of October 31, 2017,~~ at an exercise price of ~~$5.83~~$69.96 per share. They ~~are~~were initially exercisable beginning on the date that iswas six months and one day after the issue date and will expire on the fifth anniversary of the initial exercisability date. The Company also issued ~~4,926,000~~410,500 prefunded Series B Warrants which ~~are~~were immediately exercisable. They ~~have~~had an exercise price of ~~$0.0001~~$0.0012 per share and ~~will~~were to expire on the fifth anniversary of the issue date. There were ~~3,826,000~~318,834 prefunded Series B Warrants outstanding as of October 31, 2016, all of which were exercised during the year ended October 31, 2017.

On ~~July 30, 2014,~~February 21, 2019, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with the holder (the “Warrant Holder”) of the Series A Warrants. Pursuant to the Exchange Agreement, the Company agreed to issue to the Warrant Holder 500,000 shares of the Company’s common stock (subject to adjustment for stock dividends, stock splits, stock combinations, and other reclassifications) in exchange for the transfer of the Series A Warrants back to the Company, in reliance on an exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended. Following the transfer of the Series A Warrants back to the Company, the Series A Warrants were cancelled and no further shares were issuable pursuant to the Series A Warrants. During fiscal year 2019, the Company recorded a charge to common stockholders for the difference between the fair value of the Series

A Warrants prior to the modification of $0.3 million and the fair value of the common shares issuable at the date of the Exchange Agreement of $3.5 million.

In connection with the closing of the Orion Credit Agreement and the Initial Funding, on October 31, 2019, the Company issued ~~a warrant to NRG in conjunction with~~ the ~~entry into a Securities Purchase Agreement for the sale of common stock. Pursuant~~Initial Funding Warrants to the ~~warrant agreement, NRG had~~lenders under the ~~right~~Orion Credit Agreement to purchase up to ~~0.2 million~~a total of 6,000,000 shares of the Company’s common stock, at an exercise price of ~~$40.20~~$0.310 per share. In addition, under the Orion Credit Agreement, on the date of the Second Funding (November 22, 2019), the Company issued the Second Funding Warrants to the lenders under the Orion Credit Agreement to purchase up to a total of 14,000,000 shares of the Company’s common stock, with an exercise price with respect to 8,000,000 of such shares of $0.242 per share and with an exercise price with respect to 6,000,000 of such shares of $0.620 per share (the Initial Funding Warrants and the Second Funding Warrants are collectively referred to as the “Orion Warrants”).

The Orion Warrants have an 8-year term from the date of issuance, are exercisable immediately beginning on the date of issuance, and include provisions permitting cashless exercises. The Orion Warrants contain provisions regarding adjustment to their exercise prices and the type or class of security issuable upon exercise, including, without limitation, adjustments as a result of the Company undertaking or effectuating (a) a stock dividend or dividend of other securities or property, (b) a stock split, subdivision or combination, (c) a reclassification, (d) the distribution by the Company to substantially all of the holders of its common stock (or other securities issuable upon exercise of an Orion Warrant) of rights, options or warrants ~~expired~~entitling such holders to subscribe for or purchase common stock (or other securities issuable upon exercise of an Orion Warrant) at a price per share that is less than the average of the closing sales price per share of the Company’s common stock for the ten consecutive trading days ending on ~~July 30, 2017.~~and including the trading day before such distribution is publicly announced, and (e) a Fundamental Transaction (as defined in the Orion Warrants) or Change of Control (as defined in the Orion Credit Agreement).

Under the terms of the Orion Warrants, the Company may not effect the exercise of any portion of an Orion Warrant, and the holder of such warrant shall not have the right to exercise any portion of such warrant, to the extent that after giving effect to such exercise, such holder, collectively with its other attribution parties (as defined in the Orion Warrants), would beneficially own in excess of 4.99% of the shares of the Company’s common stock outstanding immediately after giving effect to such exercise; provided, however, that the holder may increase or decrease this limitation at any time, although any increase shall not be effective until the 61st day following the notice of increase.

The Company has accounted for the Initial Funding Warrants as a liability since there is a change of control provision in the Initial Funding Warrants regarding the composition of the board of directors and as such the Company could be required to repurchase the Initial Funding Warrants upon such change in control and therefore equity classification is precluded. The Company has accounted for the Second Funding Warrants as of October 31, 2019 under ASC 815, Derivatives and Hedging (“ASC 815”) since the Second Funding Warrants were considered contingent vesting warrants and therefore are considered to be an outstanding liability. Since the probability of vesting for the Second Funding Warrants was deemed to be 100%, there was no impact on the valuation. The Second Funding Warrants have been accounted for as a liability since the Company might be required to pay the holder under the same change of control provision as the Initial Funding Warrants and such event is outside the Company’s control and therefore equity classification is precluded.

The estimated fair value of the Orion Warrants was based on a Black-Scholes model using Level 2 inputs, including volatility of 96%, a risk free rate of 1.63%, the Company’s common stock price as of October 31, 2019 of $0.24 per share and the term of 8 years which resulted in a total value of $3.9 million. The Orion Warrants will be remeasured to fair value each reporting period.

The following table outlines the warrant activity during the fiscal year ended October 31, ~~2017:~~2019:

~~Other Common Stock Sales~~Refer to Note 23. “Subsequent Events” for information regarding the cashless exercise of certain of the Orion Warrants.

On December 14, 2017, in accordance with Nasdaq Marketplace Rule 5635(d), the Company’s common ~~stock on~~stockholders approved the ~~open market from time to time. The proceeds~~issuance of these sales may be used for general corporate purposes or to pay obligations related to the Company's outstanding Series 1 and Series B preferred shares. During the years ended October 31, 2017 and 2016, respectively, the Company sold 7.2 million shares and 6.0 million shares of the ~~Company's~~Company’s common stock ~~at prevailing market prices through periodic trades~~exceeding 19.9% of the number of shares outstanding on September 5, 2017, upon the ~~open market and raised approximately $12.6 million and $36.1 million, net~~conversion and/or redemption of ~~aggregate selling commissions~~the Series C Convertible Preferred Stock issued in an underwritten offering in September 2017.

On April 4, 2019, in accordance with Nasdaq Marketplace Rule 5635(d), the Company’s common stockholders approved the issuance of ~~$0.1 million and $0.1 million, respectively.~~shares of the Company’s common stock exceeding 19.9% of the number of shares outstanding on August 27, 2018, upon conversion of the Series D Convertible Preferred Stock issued in an underwritten offering in August 2018.

The Company is authorized to issue up to 250,000 shares of preferred stock, par value $0.01 per share, ~~issuable~~ in one or more series, of which (i) 30,680 shares were designated as Series D Convertible Preferred Stock (which is referred to ~~date have been issued~~herein as Series D Preferred Stock and the shares of which are referred to herein as Series D Preferred Shares) in August 2018, (ii) 33,500 shares were designated as Series C Convertible Preferred Stock (which is referred to herein as Series C Preferred Stock, and the shares of which are referred to herein as Series C Preferred Shares) in September 2017, and (iii) 105,875 shares were designated as 5% Series B Cumulative Convertible Perpetual Preferred Stock (referred to herein as Series B Preferred Stock) in March 2005. During the fiscal year ended October 31, 2019, all of the shares of Series D Preferred Stock and Series C Preferred Stock were converted into shares of common stock of the Company. Pursuant to our Certificate of Incorporation, as amended, our undesignated shares of preferred stock now include all of our shares of preferred stock that were previously designated as Series C Preferred Stock and Series D Preferred Stock, as all such shares have been retired and therefore have the status of authorized and unissued shares of preferred stock undesignated as to series.

In August 2018, the Company issued 30,680 shares of Series D Preferred Stock, which were initially convertible into 1,852,657 shares of the Company’s common stock at an initial conversion price of $16.56 per share (“Series D Conversion Price”), subject to certain adjustments.

The net proceeds to the Company from the sale of the Series D Preferred Stock, after deducting the underwriting discounts and commissions and the offering expenses payable by the Company, were $25.3 million.

As of October 31, 2018, there were 30,680 shares of Series D Preferred Stock issued and outstanding, with a carrying value of $27.4 million. Upon conversion of the last outstanding Series D Preferred Shares on October 1, 2019, there were no further Series D Preferred Shares outstanding.

Based on a review of pertinent accounting literature, including ASC 470 – Debt, ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivative and Hedging, the Series D Preferred Shares were classified outside of permanent equity on the Consolidated Balance Sheets and were recorded at fair value on the issuance date (proceeds from the issuance, net of direct issuance cost). An assessment of the probability of the exercise of the potential redemption features in the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock of the Company (the “Series D Certificate of Designation”) was performed at each reporting date to determine whether any changes in classification were required. As discussed below, as of October 31, 2018, the Company had not obtained stockholder approval to issue a number of shares of common stock equal to 20% or more of the Company’s outstanding voting stock prior to the date of issuance of the Series D Preferred Stock and therefore was accreting, as part of the stated value, the estimated value of the potential common stock shortfall if stockholder approval was not obtained. As of October 31, 2018, the Company determined that none of the other contingent redemption features were probable.

A description of certain terms and provisions of the Series D Preferred Shares that affected the accounting for the fiscal years ended October 31, 2019, 2018 and 2017 and that were in effect prior to the conversion of all of the Series D Preferred Shares during fiscal 2019 follows.

Conversion Right. The Series D Preferred Shares were convertible into shares of the Company’s common stock, subject to the requirements of Nasdaq Listing Rule 5635(d) and the beneficial ownership limitation provided in the Series D Certificate of Designation, at a conversion price equal to $16.56 per share of common stock, subject to adjustment as provided in the Series D Certificate of Designation, including adjustments if the Company sold shares of common stock or equity securities convertible into or exercisable for shares of common stock, at prices below $16.56 per share, in certain types of transactions. The holders were prohibited from converting Series D Preferred Shares into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would own more than 4.99% of the total number of shares of common stock then issued and outstanding. Each holder had the right to increase its maximum percentage up to 9.99% upon 60 days’ notice to the Company.

The Series D Conversion Price was subject to adjustment under certain circumstances in accordance with the Series D Certificate of Designation, including the following:

Conversion Upon a Triggering Event. Subject to the requirements of Nasdaq Listing Rule 5635(d) and the beneficial ownership limitations provided in the Series D Certificate of Designation, in the event of a triggering event (as defined in the Series D Certificate of Designation and summarized below), the holders of Series D Preferred Shares could elect to convert such shares into shares of common stock at a conversion price equal to the lower of the Series D Conversion Price in effect on the Trading Day (as such term is defined in the Series D Certificate of Designation) immediately preceding the delivery of the conversion notice and 85% of the lowest volume weighted average price (“VWAP”) of the common stock on any of the five consecutive Trading Days ending on the Trading Day immediately prior to delivery of the applicable conversion notice. This conversion right would commence on the date of the triggering event and end on the later of (i) the date the triggering event was cured and (ii) ten Trading Days after the Company delivered notice of the triggering event.

A triggering event (as defined in the Series D Certificate of Designation) included, without limitation:

Redemption. Commencing on December 1, 2018, and on the 16th day and 1st day of each calendar month thereafter until March 1, 2020, subject to extension in certain circumstances (the “Series D Maturity Date”), the Company was to redeem the stated value of Series D Preferred Stock in 31 equal installments of approximately $989,677 (each installment amount, a “Series D Installment Amount” and the date of each such payment, a “Series D Installment Date”). The holders had the ability to defer installment payments, but not beyond the Series D Maturity Date. In addition, during each period commencing on the 11th Trading Day prior to a Series D Installment Date and prior to the immediately subsequent Series D Installment Date, the holders could elect to accelerate the conversion of Series D Preferred Shares at the then applicable installment conversion price, provided that the holders could not elect to effect any such acceleration during such installment period if either (a) in the aggregate, all the accelerations in such installment period would exceed the sum of three other Series D Installment Amounts, or (b) the number of Series D Preferred Shares subject to prior accelerations would exceed in the aggregate 12 Series D Installment Amounts.

Subject to certain beneficial ownership limitations, the Company could elect to pay the Series D Installment Amounts in cash or in shares of common stock or in a combination of cash and shares of common stock, except that the Company’s right to make payment in shares of common stock, or an installment conversion, was dependent upon satisfying certain equity conditions set forth in the Series D Certificate of Designation. The failure to satisfy such equity conditions is referred to herein as an equity conditions failure. Among other things, these equity conditions included the Company’s continued listing on The Nasdaq Global Market or another permitted exchange, the Company reserving 150% of the number of shares of common stock necessary to effect the conversion of the Series D Preferred Shares that then remained outstanding (without regard to any limitations on conversions, such as beneficial ownership limitations) during the applicable measurement period, and the Company’s common stock maintaining certain minimum average prices and trading volumes during the applicable measurement period. Upon an equity conditions failure, a holder of Series D Preferred Shares could waive such failure (subject to certain exceptions) and receive the Series D Installment Amount in shares of our common stock based on the installment conversion price (calculated as described in the following paragraph). Alternatively, a holder of Series D Preferred Shares could elect to receive all or part of the Series D Installment Amount due in cash, which was to include an 8% premium to the Series D Installment Amount.

Series D Installment Amounts paid in shares were to be that number of shares of common stock equal to (a) the applicable Series D Installment Amount, to be paid in common stock divided by (b) the lesser of (i) the then existing conversion price, (ii) 87.5% of the VWAP of the common stock on the Trading Day immediately prior to the applicable Series D Installment Date, and (iii) 87.5% of the arithmetic average of the two lowest VWAPs of the common stock during the 10 consecutive Trading Day period ending on and including the Trading Day immediately prior to the applicable Series D Installment Date as applicable, provided that the Company met standard equity conditions. The Company was required to make such election no later than the 11th Trading Day immediately prior to the applicable Series D Installment Date.

If the Company elected or was required to pay a Series D Installment Amount in whole or in part in cash, the amount paid would have been equal to 108% of the applicable Series D Installment Amount.

Redemption Upon a Triggering Event. In the event of a triggering event (as defined in the Series D Certificate of Designation and summarized above), the holders of Series D Preferred Shares could require the Company to redeem such Series D Preferred Shares in cash at a price equal to the greater of (a) 125% of the stated value of the Series D Preferred Shares being redeemed plus accrued dividends, if any, and (b) the market value of the number of shares issuable on conversion of the Series D Preferred Shares, valued at the greatest closing sales price during the period from the date immediately before the triggering event through the date the Company made the redemption payment.

The Series D Preferred Stock redemption accretion of $3.8 million for the fiscal year ended October 31, 2019 reflects the accretion of the difference between the carrying value and the amount that would have been redeemed if stockholder approval had not been obtained for the issuance of common stock equal to 20.0% or more of the Company’s outstanding voting stock prior to the issuance of the Series D Preferred Stock.Additionally, prior to receiving stockholder approval of the issuance of 20.0% or more of the Company’s outstanding voting stock prior to the issuance of the Series D Preferred Stock, the holders were prohibited from converting Series D Preferred Shares into shares of common stock if such conversion would have caused the Company to issue pursuant to the terms of the Series D Preferred Stock a number of shares in excess of the maximum number of shares permitted to be issued thereunder without breaching the Company’s obligations under the rules or regulations of the Nasdaq Global Market. The Company received stockholder approval of such issuance at the annual meeting of the Company’s stockholders on April 4, 2019.

During the fiscal year ended October 31, 2019, holders of the Series D Preferred Stock converted all 30,680 Series D Preferred Shares into 62,040,496 shares of common stock, resulting in a reduction of $31.2 million to the carrying value being recorded to equity. Conversions in which the conversion price was below the fixed conversion price (the initial conversion price of the Series D Preferred Stock) resulted in a variable number of shares being issued to settle the conversion amounts and were treated as a partial redemption of the Series D Preferred Shares. Conversions during the year ended October 31, 2019 that were settled in a variable number of shares and treated as redemptions resulted in deemed dividends of $6.0 million. The deemed dividends represent the difference between the fair value of the shares of common stock issued to settle the conversion amounts and the carrying value of the Series D Preferred Shares.

As described above under the heading “Redemption Upon a Triggering Event,” a failure to pay any amounts due to the holders of the Series D Preferred Shares, as well as certain other triggering events, would have permitted the holders of the Series D Preferred Shares to require the Company to redeem such Series D Preferred Shares.

Alternatively, in the event of a triggering event, the holders of Series D Preferred Shares could elect to convert such shares into shares of common stock at a reduced conversion price, as described in additional detail above under the heading “Conversion Upon a Triggering Event.”

During the week of June 10, 2019, the holders of the Series D Preferred Stock asserted that certain triggering events had occurred under the Series D Certificate of Designation and indicated their intent to exercise their rights to convert certain of their shares at a reduced conversion price. While the Company did not agree with the basis for their assertions or their characterization of such events, there were provisions under the Series D Certificate of Designation which could be interpreted as giving the holders the right to demand such conversion at a reduced conversion price. Accordingly, during the period beginning on June 11, 2019 and ending on July 3, 2019, the Company effected conversions at reduced conversion prices ranging from $0.14 to $0.61.

During the fiscal year ended October 31, 2017, the Company issued ~~an aggregate of~~ 33,500 shares of ~~its Series C Convertible Preferred Stock (“~~Series C Preferred ~~Stock” and such shares, the “Series C Preferred Shares”), $0.01 par value and $1,000 stated value per share,~~Stock for net proceeds of $27.9 ~~million on September 5, 2017. Each share of Series C Preferred Stock was sold at a price of $895.52 for gross proceeds of approximately $30.0~~ million.

As of October 31, ~~2017,~~2018, there were ~~33,300~~8,992 shares of Series C Preferred Stock issued and outstanding, with a carrying value of ~~$27.7~~$7.5 million. Upon the conversion of the last outstanding Series C Preferred Shares on May 23, 2019, there were no further Series C Preferred Shares outstanding.

A summary of certain terms of the Series C Preferred Stock that were in effect prior to the conversion of all of the Series C Preferred Shares during fiscal 2019, including certain terms in effect prior to the date of the Waiver Agreement, dated February 21, 2019, between the Company and the holder of Series C Preferred Stock (the “Waiver Agreement”), and that affected the accounting for the fiscal years ended October 31, 2019, 2018 and 2017 follows.

Conversion Rights.The Series C Preferred Shares ~~are~~were convertible into shares of common stock, subject to the beneficial ownership limitations provided in the Certificate of Designations, ~~for~~Preferences and Rights of the Series C Preferred Stock of the Company (the ~~“Certificate~~“Series C Certificate of Designations”), at a conversion price equal to ~~$1.84~~$22.08 per ~~share of common stock (“Conversion Price”),~~share. The conversion price was subject to adjustment as provided in the Series C Certificate of Designations, including adjustments if the Company sold shares of common stock or equity securities convertible into or exercisable for shares of common stock, at ~~any time at~~variable prices below the ~~option of the holder.~~conversion price then in effect. In the event of a triggering event as(as defined in the Series C Certificate of ~~Designations,~~Designations), the Series C Preferred Shares ~~are~~would have been convertible into shares of common stock at a conversion price ofequal to the lower of ~~$1.84 per share~~the conversion price then in effect and 85% of the lowest ~~volume weighted average price (“VWAP”)~~VWAP of the common stock of the five ~~Trading Days (as such term is defined in the Certificate of Designations)~~trading days immediately prior to delivery of the applicable conversion notice. The holders ~~will be~~were prohibited from converting Series C Preferred Shares into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would own more than 8.99% of the total number of shares of common stock then issued and outstanding. Each holder ~~has~~had the right to increase its maximum percentage up to 9.99% upon 60 days’ notice to the Company.

As described below, under the Waiver Agreement, the holder waived any triggering event occurring after the date of the Waiver Agreement, as well as its right to demand, require or otherwise receive cash payments under the Series C Certificate of Designations, which waiver would have terminated upon the occurrence of certain key triggering events, the occurrence of a fundamental transaction, a breach of the Waiver Agreement, or the occurrence of a bankruptcy triggering event.

Installment Payments Prior to Execution of Waiver Agreement.On November 1, 2017 and on the ~~sixteenth~~16th day and ~~first~~1st day of each calendar month thereafter until March 1, 2019, subject to extension in certain circumstances (the ~~“Maturity~~“Series C Maturity Date”), inclusive, the Company ~~will~~was required to redeem the stated value of Series C Preferred Shares in ~~thirty-three~~33 equal installments of approximately $1.0 million (each bimonthly amount, ~~an “Installment~~a “Series C Installment Amount” and the date of each such payment, ~~an “Installment~~a “Series C Installment Date”). The holders ~~will have~~had the ability to defer ~~Installment~~installment payments, but not beyond the Series C Maturity Date. In addition, during each period commencing on the 11th trading day prior to ana Series C Installment Date and prior to the immediately subsequent Series C Installment Date, the holders ~~may~~could elect to accelerate the conversion of Series C Preferred Shares at the then applicable installment conversion price, provided that the holders ~~may~~could not elect to effect any such acceleration during such installment period if either ~~(x)~~(a) in the aggregate, all the accelerations in such installment period ~~exceeds~~would exceed the sum of three other Series C Installment Amounts, or ~~(y)~~(b) the number of Series C Preferred Shares subject to prior accelerations ~~exceeds~~would exceed in the aggregate ~~twelve~~12 Series C Installment Amounts.

Subject to certain conditions as provided in the Series C Certificate of Designations, the Company ~~may~~could elect to pay the Series C Installment Amounts in cash or shares of common stock or in a combination of cash and shares of common stock.

Series C Installment Amounts paid in shares ~~will~~were to be that number of shares of common stock equal to (a) the applicable Series C Installment Amount, to be paid in common stock divided by (b) the least of (i) the then existing conversion price, (ii) 87.5% of the VWAP of the common stock on the trading day immediately prior to the applicable Series C Installment Date, and (iii) 87.5% of the arithmetic average of the two lowest VWAPs of the common stock during the ~~ten~~10 consecutive ~~Trading Day~~trading day period ending on and including the ~~Trading Day~~trading day immediately prior to the applicable Series C Installment Date, as applicable, provided that the Company ~~meets~~met standard equity conditions. The Company ~~shall~~was required to make such election no later than the ~~eleventh~~11^th trading day immediately prior to the applicable Series C Installment Date.

If the Company ~~elects~~elected or iswas required to ~~effect an~~pay a Series C Installment Amount in whole or in part in cash, the amount paid ~~will be~~would have been equal to ~~the~~ 108% of the applicable Series C Installment Amount.

~~Each holder~~Under the Waiver Agreement, the Company was no longer obligated to make installment payments under Section 9 of the Series C ~~Preferred Shares shall be entitled to receive dividends (i) if no triggering event, as defined in the~~ Certificate of Designations, ~~has occurred~~ and ~~is continuing when and as declared by~~ the ~~Board of Directors,~~holder was permitted to convert at any time, in its ~~sole and absolute~~ discretion, ~~or (ii) if a triggering event has occurred and until such triggering event~~

has been cured, a dividend of 15% per annum based on the holder’s outstanding number of Series C Preferred Shares multiplied by the stated value. There were no triggering events or dividends declared in fiscal year 2017.subject to certain beneficial ownership limitations.

Redemption. In the event of a triggering event, as defined in the Series C Certificate of Designations, the holders of the Series C Preferred Shares ~~can~~could force redemption at a price equal to the greater of ~~(i)~~(a) the conversion amount to be redeemed multiplied by 125% and ~~(ii)~~(b) the product of ~~(X)~~(i) the ~~Conversion Rate~~conversion rate with respect to the ~~Conversion Amount~~conversion amount in effect at such time as such ~~Holder~~holder delivers a ~~Triggering Event Redemption Notice~~triggering event redemption notice multiplied by ~~(Y)~~(ii) the greatest ~~Closing Sale Price~~closing sale price of the common stock on any ~~Trading Day~~trading day during the period commencing on the date immediately preceding such ~~Triggering Event~~triggering event and ending on the date the Company makes the entire payment required.

InAs described below, under the ~~event~~Waiver Agreement, the holder waived, subject to certain conditions and limitations, all triggering events occurring after the date of the ~~Company’s liquidation, dissolution, or winding up, prior to distribution to holders~~Waiver Agreement.

On February 21, 2019, the Company entered into the Waiver Agreement with the holder of ~~securities ranking junior to~~ the Series C Preferred ~~Shares, holders~~Stock (such holder, the “Series C Holder”). Under the Waiver Agreement, the Series C Holder waived any equity conditions failures that may have occurred under the Series C Certificate of Designations. The Series C Holder further waived any triggering event occurring after the date of the Waiver Agreement, as well as its right to demand, require or otherwise receive cash payments under the Series C Certificate of Designations, which waiver would have terminated upon the occurrence of certain key triggering events (failure to provide freely tradable shares, suspension from trading on the Nasdaq Global Market or another eligible market, or failure to convert or deliver shares under certain circumstances), the occurrence of a fundamental transaction, a breach of the Waiver Agreement, or the occurrence of a bankruptcy triggering event. In addition, the Company agreed in the Waiver Agreement, pursuant to Section 8(d) of the Series C Certificate of Designations, to adjust the conversion price of the Series C Preferred ~~Shares will be entitled to receive~~Stock in connection with future conversions, such that, when the amount of cash, securities or other property equal to the greater of (A) the stated value thereof on the date of such payment plus accrued dividends, if any and (B) the amount per share such holder would receive if such holderSeries C Holder converted ~~such~~its Series C Preferred ~~Shares~~Stock into common stock, ~~immediately~~it would receive approximately 25% more shares than it would have received upon conversion prior to the execution of the Waiver Agreement. Under the Waiver Agreement, the conversion price of the Series C Preferred Stock was stated to be the lowest of (i) $4.45, (ii) 85% of the lowest closing bid price of the Company’s common stock during the period beginning on and including the fifth trading day prior to the date on which the applicable conversion notice was delivered to the Company and ending on and including the date on which the applicable conversion notice was delivered to the Company, and (iii) 85% of ~~such payment.~~

~~Shares~~the quotient of ~~Series C Preferred Stock rank with respect to dividend rights~~(A) the sum of the five lowest VWAPs of the Company’s

common stock during the 20 consecutive trading day period ending on and ~~rights upon our liquidation, winding up or dissolution:~~

~~The holders~~be issued upon conversion, 125% of the value of the Series C Preferred Shares ~~have no voting rights, except as~~being converted was divided by the applicable conversion price. The parties further agreed to waive the installment payment/conversion provisions in Section 9 of the Series C Certificate of Designations, which required ~~by law. Any amendment~~installment conversions or payments to be made on the 1^st and 16^th of each month (as described in additional detail above). Under the Waiver Agreement, conversions of Series C Preferred Stock were permitted to occur and did occur after the original March 1, 2019 maturity date, and the Company further agreed to reserve specific numbers of shares for issuance to the Series C Holder and the holders of the Series D Preferred Stock until the Company effected a reverse stock split, which occurred on May 8, 2019, or increased its authorized shares of common stock.

The Waiver Agreement was treated for accounting purposes to be an extinguishment of the Series C Preferred Stock instrument as of February 21, 2019. The Series C Preferred Stock remained classified in mezzanine equity, however, the carrying value was adjusted to reflect the estimated fair value of the post-modification Series C Preferred Shares which incorporated the new terms outlined in the Waiver Agreement. The valuation utilized a Binomial Lattice Model (“Lattice Model”) which is a commonly used methodology to value path-dependent options or stock units in order to capture their potential early conversion. The Lattice Model produces an estimated fair value based on changes in the underlying stock price over successive periods of time. The assumptions used in the model such as stock price, conversion price and conversion ratio were consistent with date of execution and terms in the Waiver Agreement. Other assumptions included the volatility of the Company’s ~~certificate~~stock which was assumed to be 75% and a discount rate of ~~incorporation, bylaws or certificate~~20% which was estimated based on various indices consistent with the Company’s profile, venture capital rates of ~~designation~~return and the Company’s borrowing rate. The Lattice Model resulted in an estimated fair value as of February 21, 2019 of $13.5 million whereby the Series C Preferred Stock carrying value was adjusted to this amount. As discussed below, a beneficial conversion feature was recorded during the three months ended January 31, 2019 due to reductions in the conversion price. Upon extinguishment during the three months ended April 30, 2019, the Company first allocated $6.6 million to the reacquisition of the embedded conversion option equal to the intrinsic value that ~~adversely affects~~was previously recognized during the ~~powers, preferences~~three months ended January 31, 2019 for the embedded conversion option. Because the remaining estimated fair value of the instrument on February 21, 2019 was less than the carrying amount of the Series C Preferred Stock, the amount of the shortfall resulted in a decrease in loss available to common stockholders for purposes of computing loss per share of $0.6 million.

In order to resolve different interpretations of the provisions of the Series C Certificate of Designations that governed adjustments to the conversion price in connection with sales of common stock under the Company’s at-the-market stock sales plan below the initial conversion price of $22.08 and ~~rights~~whether such sales constituted sales of variable priced securities under the Series C Certificate of Designations, the Company’s Board of Directors agreed to reduce the conversion price of the Series C Preferred Shares ~~requires~~from $22.08 to $18.00 effective August 27, 2018 in exchange for a waiver of certain anti-dilution and price adjustment rights under the ~~approval~~Series C Certificate of ~~the holders~~Designations for future at-the-market sales of ~~a majority~~common stock. The conversion price of the Series C Preferred Shares ~~then outstanding.~~was adjusted again on December 3, 2018 to $6.96, on December 17, 2018 to $6.00 and on January 2, 2019 to $5.16. During the period from February 1, 2019 to May 23, 2019, the conversion price was further adjusted to prices ranging from $4.45 to $1.27, the conversion price as of the last conversion, which occurred on May 23, 2019. Conversions occurring fiscal year ended October 31, 2019 resulted in a variable number of shares being issued to settle the conversion amounts and were treated as a partial redemption of the Series C Preferred Shares. Conversions during the year ended October 31, 2019 that were settled in a variable number of shares and treated as partial redemptions resulted in deemed contributions $1.5 million. The deemed contributions represent the difference between the fair value of the common shares issued to settle the conversion amounts and the carrying value of the Series C Preferred Shares. Additionally, as discussed in more detail above, the net loss attributable to common stockholders for the fiscal year ended October 31, 2019 was impacted by a $0.5 million decrease in the loss resulting from accounting for the Waiver Agreement in February 2019, which was recorded during the three months ended April 30, 2019. The net loss attributable to common stockholders for the year ended October 31, 2019 also includes the $8.6 million redemption value adjustment recorded during the three months ended January 31, 2019.

Based on review of pertinent accounting literature including ASC 470 – Debt, ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivative and Hedging, the Series C Preferred Shares ~~are~~were classified ~~as temporary~~outside of permanent equity on the ~~consolidated balance sheets~~Consolidated Balance Sheets and were recorded at fair value on the issuance date (proceeds from the issuance, net of direct issuance cost). ~~An assessment~~The decline in the Company’s stock price during the three months ended January 31, 2019 and between January 31, 2019 and the execution of the ~~probability~~Waiver Agreement in February 2019 resulted in equity conditions failures under the Series C Certificate of Designations, which were waived by the ~~potential redemption features~~Series C Holder in the Waiver Agreement, as described above. Prior to the execution of such Waiver Agreement, the

conversion price was adjusted in December 2018 and January 2019 as described above. This contingent beneficial conversion feature resulted in a $6.6 million reduction in the Series C Preferred ~~instrument is performed at each reporting date~~Shares carrying value. Because the equity conditions failures were continuing as of January 31, 2019 (prior to ~~determine whether any changes in classification are required. As of October 31, 2017,~~ the ~~Company determined that none~~execution of the ~~contingent redemption features were probable. As~~Waiver Agreement), the Series C Preferred Shares ~~are converted~~were adjusted to 108% of stated redemption value as of January 31, 2019 with a corresponding charge to common ~~shares, a proportional reduction in~~stockholders of $8.6 million.

During the ~~carrying value will be recorded to equity. For the~~fiscal year ended October 31, ~~2017, 200~~2019, holders of the Series C Preferred Stock converted 8,992 Series C Preferred Shares into 3,914,218 shares of common stock, resulting in a reduction in carrying value of $15.5 million. Upon the conversion of the last outstanding Series C Preferred Shares on May 23, 2019, there were no further Series C Preferred Shares outstanding.

During the fiscal year ended October 31, 2018, holders of the Series C Preferred Stock converted 24,308 Series C Preferred Shares into common shares through installment conversions resulting in a reduction of $20.2 million to the carrying value being recorded to equity. Installment conversions occurring prior to August 27, 2018 in which the conversion price was below the initial conversion price of $22.08 per share resulted in a variable number of shares being issued to settle the installment amount and were treated as a partial redemption of the Series C Preferred Shares. As discussed above, the Company’s Board of Directors agreed to reduce the conversion price of the Series C Preferred Shares ~~were converted~~from $22.08 to ~~common shares resulting~~$18.00 effective August 27, 2018 in exchange for a waiver of certain anti-dilution and price adjustment rights under the Series C Certificate of Designations for future at-the-market sales. Installment conversions occurring between August 27, 2018 and October 31, 2018 in which the installment conversion price was below the adjusted conversion price of $18.00 per share resulted in a ~~reduction~~variable number of ~~$0.2 million~~shares being issued to settle the ~~carrying value recorded~~installment amount and were treated as a partial redemption of the Series C Preferred Shares. Installment conversions during the year ended October 31, 2018 that were settled in ~~temporary equity.~~a variable number of shares and treated as partial redemptions resulted in deemed dividends of $9.6 million.

The Company has designated 105,875 shares of ~~our 5% Series B Cumulative Convertible Perpetual Preferred Stock (Liquidation Preference $1,000.00 per share) (“~~its authorized preferred stock as Series B Preferred ~~Stock”) authorized for issuance.~~Stock (liquidation preference $1,000.00 per share). As of October 31, ~~2017~~2019 and ~~2016,~~2018, there were 64,020 shares of Series B Preferred Stock issued and outstanding, with a carrying value of $59.9 million. The shares of Series B Preferred Stock and the shares of common stock issuable upon conversion of the shares of Series B Preferred Stock are covered by a registration rights agreement. The following is a summary of certain provisions of ~~our~~the Series B Preferred Stock.

The dividend rate is subject to upward adjustment as set forth in the Amended Certificate of Designation for the Series B Preferred Stock (the “Series B Certificate of Designation”)if ~~we fail~~the Company fails to pay, or to set apart funds to pay, any quarterly ~~dividend.~~dividend on the Series B Preferred Stock. The dividend rate is also subject to upward adjustment as set forth in the Registration Rights Agreement entered into with the ~~Initial Purchasers~~initial purchasers of the Series B Preferred Stock (the “Registration Rights Agreement”) if ~~we fail~~the Company fails to satisfy ~~our~~its registration obligations with respect to the Series B Preferred Stock (or the underlying common shares) under the Registration Rights Agreement.

No dividends or other distributions may be paid or set apart for payment on the Company’s common stock (other than a dividend payable solely in shares of a like or junior ranking), nor may any stock junior to or on parity with the Series B Preferred Stock be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for such stock) by the Company or on its behalf (except by conversion into or exchange for shares of a like or junior ranking), unless all accumulated and unpaid Series B Preferred Stock dividends

have been paid or funds or shares of common stock have been set aside for payment of accumulated and unpaid Series B Preferred Stock dividends.

The dividend on the Series B Preferred Stock may be paid in ~~cash;~~cash or, at the option of the ~~Company,~~holder, in shares of ~~our~~the Company’s common stock, which will be registered pursuant to a registration statement to allow for the immediate sale of these shares of common ~~shares~~stock in the public market. Dividends of $3.2 million were paid in cash in each of the fiscal years ended October 31, 2018 and 2017, ~~2016~~ and ~~2015.~~dividends of $1.6 million were paid in cash during the fiscal year ended October 31, 2019. There were no cumulative unpaid dividends as of October 31, ~~2017~~2018 and ~~2016.~~cumulative unpaid dividends as of October 31, 2019 were $1.6 million.

The Company may, at ~~our~~its option, cause shares of Series B Preferred Stock to be automatically converted into that number of shares of ~~our~~ common stock that are issuable at the then prevailing conversion rate. WeThe Company may exercise ~~our~~its conversion right only if the closing price of ~~our~~its common stock exceeds 150% of the then prevailing conversion price ($~~141.00~~1,692.00 per share as of October 31, ~~2017)~~2019) for 20 trading days during any consecutive 30 trading day period, as described in the Series B Certificate of Designation.

If holders of Series B Preferred Stock elect to convert their shares in connection with certain fundamental changes, as defined wein the Series B Certificate of Designation, the Company will in certain circumstances increase the conversion rate by a number of additional shares of common stock upon conversion or, in lieu thereof, wethe Company may in certain circumstances elect to adjust the conversion rate and related conversion obligation so that shares of ~~our~~ Series B Preferred Stock are converted into shares of the acquiring or surviving company, in each case as described in the Series B Certificate of Designation.

The adjustment of the conversion price is to prevent dilution of the interests of the holders of the Series B Preferred Stock from certain dilutive transactions with holders of common stock.

Redemption. ~~Redemption —~~ ~~We do~~The Company does not have the option to redeem the shares of Series B Preferred Stock. However, holders of the Series B Preferred Stock can require usthe Company to redeem all or part of their shares at a redemption price equal to the Liquidation Preference of the shares to be redeemed in the case of a “fundamental change” (as described in the Series B Certificate of Designation). A fundamental change ~~as defined.~~will be deemed to have occurred if any of the following occurs:

•

any “person” or “group” is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of all classes of the Company’s capital stock then outstanding and normally entitled to vote in the election of directors;

during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors (together with any new directors whose election by the Company’s board of directors or whose nomination for election by the stockholders was approved by a vote of two-thirds of the Company’s directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office;

the termination of trading of the Company’s common stock on The Nasdaq Stock Market and such shares are not approved for trading or quoted on any other U.S. securities exchange or established over-the-counter trading market in the U.S.; or

the Company consolidates with or merges with or into another person or another person merges with or into the Company or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the Company’s assets and certain of its subsidiaries, taken as a whole, to another person and, in the case of any such merger or consolidation, the Company’s securities that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Company’s voting stock are changed into or exchanged for cash, securities or property, unless pursuant to the transaction such securities are changed into securities of the surviving person that represent, immediately after such transaction, at least a majority of the aggregate voting power of the voting stock of the surviving person.

Notwithstanding the foregoing, holders of shares of Series B Preferred Stock will not have the right to require the Company to redeem their shares if:

the last reported sale price of shares of the Company’s common stock for any five trading days within the 10 consecutive trading days ending immediately before the later of the fundamental change or its announcement equaled or exceeded 105% of the conversion price of the shares of Series B Preferred Stock immediately before the fundamental change or announcement;

at least 90% of the consideration (excluding cash payments for fractional shares and in respect of dissenters’ appraisal rights) in the transaction or transactions constituting the fundamental change consists of shares of capital stock traded on a U.S. national securities exchange or quoted on the Nasdaq Stock Market, or which will be so traded or quoted when issued or exchanged in connection with a fundamental change, and as a result of the transaction or transactions, shares of Series B Preferred Stock become convertible into such publicly traded securities; or

in the case of a fundamental change event described in the fourth bullet above, the transaction is affected solely to change the Company’s jurisdiction of incorporation.

Moreover, the Company will not be required to redeem any Series B Preferred Stock upon the occurrence of a fundamental change if a third party makes an offer to purchase the Series B Preferred Stock in the manner, at the price, at the times and otherwise in compliance with the requirements set forth above and such third party purchases all Series B Preferred Stock validly tendered and not withdrawn.

The Company may, at ~~our~~its option, elect to pay the redemption price in cash, or in shares of ~~our~~the Company’s common stock valued at a discount of 5% from the market price of shares of ~~our~~the Company’s common stock, or in any combination thereof. Notwithstanding the foregoing, wethe Company may only pay such redemption price in shares of ~~our~~

the Company’s common stock that are registered under the Securities Act of 1933 and eligible for immediate sale in the public market by non-affiliates of the Company.

Voting ~~Rights -~~ Rights. Holders of Series B Preferred Stock currently have no voting ~~rights.~~rights; however, holders may receive certain voting rights, as described in the Series B Certificate of Designation, if (a) dividends on any shares of Series B Preferred Stock, or any other class or series of stock ranking on parity with the Series B Preferred Stock with respect to the payment of dividends, shall be in arrears for dividend periods, whether or not consecutive, containing in the

aggregate a number of days equivalent to six calendar quarters or (b) the Company fails to pay the redemption price, plus accrued and unpaid dividends, if any, on the redemption date for shares of Series B Preferred Stock following a fundamental change.

So long as any shares of Series B Preferred Stock remain outstanding, the Company will not, without the consent of the holders of at least two-thirds of the shares of Series B Preferred Stock outstanding at the time (voting separately as a class with all other series of preferred stock, if any, on parity with the Series B Preferred Stock upon which like voting rights have been conferred and are exercisable) issue or increase the authorized amount of any class or series of shares ranking senior to the outstanding shares of the Series B Preferred Stock as to dividends or upon liquidation. In addition, the Company will not, subject to certain conditions, amend, alter or repeal provisions of the Company’s certificate of incorporation, including the Series B Certificate of Designation, whether by merger, consolidation or otherwise, so as to adversely amend, alter or affect any power, preference or special right of the outstanding shares of Series B Preferred Stock or the holders thereof without the affirmative vote of not less than two-thirds of the issued and outstanding Series B Preferred Stock shares.

Class A Cumulative Redeemable Exchangeable Preferred Shares (the “Series 1 Preferred Shares”)

As of October 31, 2019, FCE FuelCell Energy Ltd. (“FCE ~~Ltd”~~Ltd.”), one of the Company's ~~wholly owned subsidiary, has~~indirect subsidiaries, had 1,000,000 Class A Cumulative Redeemable Exchangeable Preferred Shares (the “Series 1 Preferred Shares”) issued and outstanding, which were and are held solely by Enbridge, Inc. ("Enbridge"). The Company guarantees the return of principal and dividend obligations of FCE Ltd. to the holder of the Series 1 Preferred Shares.

On March 31, 2011 and April 1, 2011, the Company entered into agreements with Enbridge to modify the provisions of the Series 1 Preferred Shares of FCE Ltd. Consistent with the previous Series 1 Preferred Share agreement, FuelCell ~~guarantees~~Energy continues to guarantee the return of principal and dividend obligations of FCE Ltd. to the holders of Series 1 Preferred Shares under the modified agreement.

On January 20, 2020, the Company, FCE Ltd., and Enbridge entered into the January 2020 Letter Agreement pursuant to which they agreed to modify certain terms of the Series 1 Preferred Shares. Refer to Note 23. “Subsequent Events” for additional information regarding such letter agreement and such modified terms.

The following summary of the terms of the Series 1 Preferred Shares describes such terms as they existed on October 31, 2019 (prior to any modification covered by the January 2020 Letter Agreement).

The terms of the Series 1 Preferred Shares ~~includes payments of~~required (i) annual dividend payments of Cdn. $500,000 and (ii) annual return of capital payments of Cdn. $750,000. These payments, which were made on a quarterly basis, commenced on March 31, 2011 and ~~will~~were scheduled to end on December 31, 2020. ~~On December 31, 2020,~~Dividends accrued at a 1.25% quarterly rate on the unpaid principal balance, and additional dividends accrued on the cumulative unpaid dividends (inclusive of the Cdn. $12.5 million unpaid dividend balance as of the modification date) at a rate of 1.25% compounded quarterly. The amount of all accrued and unpaid dividends on the Series 1 Preferred Shares of Cdn. $21.1 million and the balance of the principal redemption price of Cdn. $4.4 million ~~shall~~as of October 31, 2019 were scheduled to be paid to the holders of the Series 1 Preferred ~~Shares.~~Shares on December 31, 2020. FCE Ltd. ~~has~~had the option, subject to the Company having sufficient authorized and unissued shares, of making dividend payments in the form of cash or shares of the Company’s common stock ~~or cash~~ under the terms of the Series 1 Preferred Shares.

~~Because the Series 1 Preferred Shares are classified as a mandatorily redeemable financial instrument, they are presented as a liability on the consolidated balance sheet.~~

The Company made its scheduled payments of Cdn. $1.3 million during each of fiscal year 2017, 2016 and 2015, under the terms of the agreement. The Company also recorded interest expense, which reflects the amortization of the fair value discount of approximately Cdn. $2.6 million, Cdn. $2.4 million and Cdn. $2.3 million, respectively. As of October 31, 2017 and 2016, the carrying value of the Series 1 Preferred shares was Cdn. $19.4 million ($15.1 million) and Cdn. $18.0 million ($13.5 million), respectively and is classified as preferred stock obligation of subsidiary on the consolidated balance sheets.

In addition to the above, the significant terms of the Series 1 Preferred Shares as they existed on October 31, 2019 (prior to any modification covered by the letter agreement referenced above) include the following:

Voting Rights —The holders of the Series 1 Preferred Shares are not entitled to any voting rights.

Dividends — Dividend payments ~~can~~could be made in cash or shares of common stock of the Company, at the option of FCE Ltd., and if common stock iswas issued, it ~~may~~could be unregistered. If FCE Ltd. ~~elects~~elected to make such payments by issuing shares of common stock of the Company, the number of shares of common ~~shares is~~stock was to be determined by dividing the cash dividend obligation by 95% of the volume weighted average price in U.S. dollars at which board lots of the common shares ~~have been~~were traded on ~~NASDAQ~~The Nasdaq Stock Market during the 20 consecutive trading days preceding the end of the calendar quarter for which such dividend in common shares iswas to be paid, converted into Canadian dollars using the Bank of Canada’s noon rate of exchange on the day of determination.

Redemption — The Series 1 Preferred Shares ~~are~~were redeemable by FCE Ltd. for Cdn. $25.00 per share less any amounts paid as a return of capital in respect of such share plus all unpaid dividends and accrued interest.

Liquidation or Dissolution — In the event of the liquidation or dissolution of FCE Ltd., the holders of Series 1 Preferred Shares will be entitled to receive Cdn. $25.00 per share less any amounts paid as a return of capital in respect of such share plus all unpaid dividends and accrued interest. The Company has guaranteed any liquidation obligations of FCE Ltd.

Exchange Rights — A holder of Series 1 Preferred Shares ~~has~~had the right, at its option, to exchange such shares for fully paid and non-assessable shares of common stock of the Company at the following exchange prices:

Cdn. ~~$1,664.52~~$19,974.24 per share of the Company’s common stock after July 31, 2015 until July 31, 2020; and

at any time after July 31, 2020, at a price equal to 95% of the then current market price (in Cdn. $) of shares of the Company’s common stock at the time of conversion.

The exchange rates set forth above ~~shall be adjusted~~were subject to adjustment if the Company: (i) ~~subdivides~~subdivided or ~~consolidates~~consolidated the common stock; (ii) ~~pays~~paid a stock dividend; (iii) ~~issues~~issued rights, options or other convertible securities to the Company's common stockholders enabling them to acquire common stock at a price less than 95% of the then-current price; or (iv) ~~fixes~~fixed a record date to distribute to the Company's common stockholders shares of any other class of securities, indebtedness or assets.

For example, if, under the terms as they existed on October 31, 2019, the holder of the Series 1 Preferred Shares was to exercise its conversion rights after July 31, 2020, then, assuming the common stock price was $0.24 (the common stock closing price on October 31, 2019) and the exchange rate was U.S. $1.00 to Cdn. $1.32 (the exchange rate on October 31, 2019) at the time of conversion, the Company would have been required to issue approximately 1,234,279 shares of its common stock.

Because the Series 1 Preferred Shares represent a mandatorily redeemable financial instrument, they are presented as a liability on the Consolidated Balance Sheet.

The Company made payments of Cdn. $0.3 million, Cdn. $1.3 million and Cdn. $1.3 million during fiscal years 2019, 2018 and 2017, respectively. The Company’s return of capital and dividend payments were not made for the calendar quarters ended on March 31, 2019, June 30, 2019 and September 30, 2019. Subsequent to the fiscal year ended October 31, 2019, the Company made the return of capital and dividend payments for the obligations due as of March 31, 2019, June 30, 2019 and September 30, 2019. The Company recorded interest expense, which reflects the amortization of the fair value discount of approximately Cdn. $3.0 million, Cdn. $2.8 million and Cdn. $2.6 million in the fiscal years ended October 31, 2019, 2018 and 2017, respectively. As of October 31, 2019 and 2018, the carrying value of the Series 1 Preferred Shares was Cdn. $22.7 million ($17.2 million) and Cdn. $20.9 million ($15.9 million), respectively. and was classified as preferred stock obligation of subsidiary on the Consolidated Balance Sheets.

Derivative liability related to Series 1 Preferred Shares

The conversion feature and variable dividend contained in the terms of the Series 1 Preferred Shares are not clearly and closely related to the characteristics of the Series 1 Preferred Shares. Accordingly, these features qualify as embedded derivative instruments and are required to be bifurcated and recorded as derivative financial instruments at fair value.

The conversion feature is valued using a lattice model. Based on the pay-off profiles of the Series 1 Preferred Shares as of October 31, 2019, it iswas assumed that we ~~will~~would exercise the call option to force conversion in 2020. Conversion after 2020 ~~delivers~~would have delivered a fixed pay-off to the investor and iswas modeled as a fixed payment in 2020. The cumulative dividend is modeled as a quarterly cash dividend component (to satisfy the minimum dividend payment requirement), and a one-time cumulative dividend payment in 2020.

The variable dividend is valued using a Monte Carlo simulation model.

The assumptions used in these valuation models include historical stock price volatility, risk-free interest rate and a credit spread based on the yield indexes of technology high yield bonds, foreign exchange volatility as the security is denominated in Canadian dollars, and the closing price of our common stock. The aggregate fair value of these derivatives included within long-term debt and other liabilities on the ~~consolidated balance sheets~~Consolidated Balance Sheets as of October 31, ~~2017~~2019 and ~~2016~~2018 was $0.6 million and $0.8 million, ~~and $0.7 million,~~ respectively.

Note ~~14.~~16. Segment Information

We are engaged in the development, design, production, construction and servicing of high temperature fuel cells for clean electric power generation. Critical to the success of our business is, among other things, our research and development efforts, both through customer-sponsored projects and Company-sponsored projects. The research and development activities are viewed as another product line that contributes to the development, design, production and sale of fuel cell products, however, it is not considered a separate operating segment. The chief operating decision maker does not review and assess financial information at a discrete enough level to be able to assess performance of research and development activities as if itthey operated as a standalone business segment, ~~we have~~therefore, the Company has identified one business segment: fuel cell power plant production and research.

Revenues, by geographic location (based on the customer’s ordering location) for the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015~~2017 were as follows (in thousands):

	2017		2016		2015		2019		2018		2017
United States	$	47,539	$	48,697	$	52,109	$	56,211	$	50,953	$	47,539
South Korea		44,217		52,007		109,953		2,686		36,279		44,217
England		368		277		142		1,496		387		368
Germany		2,740		7,147		764		359		1,795		2,740
Canada		729		124		—		—		23		729
Spain		73		—		109		—		—		73
Total	$	95,666	$	108,252	$	163,077	$	60,752	$	89,437	$	95,666

Service agreement revenue which is included within Service agreements and license revenues on the consolidated statement of operations was ~~$24.4~~$15.1 million, ~~$26.6~~$13.5 million and ~~$16.3~~$24.4 million, for the years ended October 31, 2019, 2018 and 2017, ~~2016 and 2015,~~ respectively.

Long-lived assets located outside of the United States as of October 31, ~~2017~~2019 and ~~2016~~2018 are not significant individually or in the aggregate.

Note ~~15.~~17. Benefit Plans

We have stockholder approved equity incentive plans, a stockholder approved ~~Section 423~~Employee Stock Purchase Plan (the “ESPP”) and an employee tax-deferred savings plan, which are described in more detail below.

2018 Omnibus Incentive Plan

The Company’s 2018 Omnibus Incentive Plan (the “2018 Incentive Plan”) was approved by the Company’s stockholders at the 2018 Annual Meeting of Stockholders, which was held on April 5, 2018. The 2018 Incentive Plan provides that a total of 0.3 million shares of the Company’s common stock may be issued thereunder. The 2018 Incentive Plan authorizes grants of stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance shares, performance units and incentive awards to key employees, directors, consultants and advisors. Stock options, RSAs and SARs have restrictions as to transferability. Stock option exercise prices are fixed by the Company’s board of directors but shall not be less than the fair market value of our common stock on the date of the grant. SARs may be granted in conjunction with stock options. Stock options generally vest ratably over 4 years and expire 10 years from the date of grant. As of October 31, 2019, there were 0.1 million shares available for grant under the 2018 Incentive Plan.

Other Equity Incentive Plans

The Company has a 2010 Equity Incentive Plan. In April 2017, the number of shares of common stock reserved for issuance under the 2010 Equity Incentive Plan was increased to 4.5 million shares. ~~The~~Under the 2010 Equity Incentive Plan, the Board iswas authorized to grant incentive stock options, nonstatutory stock options, ~~stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units ("RSUs"),~~SARs, RSAs, RSUs, performance units, performance shares, dividend equivalent rights and other stock based awards to our officers, key employees and non-employee directors. Stock options, RSAs and SARs have restrictions as to transferability. Stock option exercise prices are fixed by the Board but shall not be less than the fair market value of our common stock on the date of the grant. SARs may be granted in conjunction with stock options. Stock options generally vest ratably over 4 years and expire 10 years from the date of grant. The Company also has an international award program to provide RSUs for the benefit of certain employees outside the United States. ~~As of October 31, 2017, there were 0.2 million shares available for grant.~~ At October 31, ~~2017,~~2019, equity awards outstanding under the 2010 Equity Incentive Plan consisted of incentive stock options, nonstatutory stock options, RSAs and RSUs.

The Company's 1998, 2006 and ~~2006~~2010 Equity Incentive Plans remain in effect only to the extent of awards outstanding under the ~~plan~~plans as of October 31, ~~2017.~~2019.

Share-based compensation was reflected in the consolidated statements of operations as follows (in thousands):

	2017		2016		2015		2019		2018		2017
Cost of revenues	$	1,050	$	745	$	769	$	593	$	543	$	1,050
General and administrative expense		2,721		2,110		1,990		1,865		2,256		2,721
Research and development expense		679		504		360		272		355		679
	$	4,450	$	3,359	$	3,119	$	2,730	$	3,154	$	4,450

Stock Options

We account for stock options awarded to ~~employees and~~ non-employee directors under the fair value method. The fair value of stock options is estimated on the grant date using the Black-Scholes option valuation model and the following weighted-average ~~assumptions:~~assumptions (there were no options granted in fiscal year 2019):

	2017			2016			2015			2018			2017
Expected life (in years)		7.0			7.0			7.0			7.0			7.0
Risk free interest rate		2.2	%		1.5	%		1.7	%		2.8	%		2.2	%
Volatility		79.5	%		80.1	%		80.3	%		72.7	%		79.5	%
Dividend yield		—	%		—	%		—	%		—	%		—	%

The expected life is the period over which our ~~employees~~non-employee directors are expected to hold the options and is based on historical data for similar grants. The risk free interest rate is based on the expected U.S. Treasury rate over the expected life. Expected volatility is based on the historical volatility of our stock. Dividend yield is based on our expected dividend payments over the expected life.

The following table summarizes our stock option activity for the year ended October 31, ~~2017:~~2019:

The weighted average grant-date fair value per share for options granted during the years ended October 31, 2018 and 2017 ~~2016~~was $21.36 and ~~2015 was $1.50, $6.44 and $13.24,~~$18.00, respectively. There were no options exercised in fiscal ~~year 2017, 2016~~years 2019, 2018 or ~~2015.~~2017.

The following table summarizes information about stock options outstanding and exercisable as of October 31, ~~2017:~~2019:

~~The~~There was no intrinsic value for options outstanding and exercisable at October 31, ~~2017 was $0.07 million and $0.05 million, respectively.~~2019.

The following table summarizes our RSA and RSU activity for the year ended October 31, ~~2017:~~2019:

			Weighted- Average					Weighted- Average
Restricted Stock Awards and Units	Shares		Fair Value		Shares			Fair Value
Outstanding as of October 31, 2016		990,035		9.52
Outstanding as of October 31, 2018						364,215			24.36
Granted		2,510,216		1.48		71,885			4.40
Vested		392,458		12.39		(177,961	)		20.59
Forfeited		99,107		6.62		(67,024	)		22.40
Outstanding as of October 31, 2017		3,008,686		2.52
Outstanding as of October 31, 2019						191,115			16.11

RSA and RSU expense is based on the fair value of the award at the date of grant and is amortized over the vesting period, which is generally over 3 or 4 years. As of October 31, ~~2017,~~2019, the ~~3.0~~0.2 million outstanding RSAs and RSUs had an average remaining life of ~~2.5~~0.8 years and an aggregate intrinsic value of ~~$6.1 million.~~$45,500.

As of October 31, ~~2017,~~2019, total unrecognized compensation cost related to RSAs ~~including~~and RSUs was ~~$6.0~~$1.7 million which is expected to be recognized over the next ~~2.5 years~~year on a weighted-average basis.

During the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, we awarded ~~86,001, 24,379~~29,454, 13,226 and ~~2,399~~7,167 shares, respectively, of fully vested, unrestricted common stock to the independent members of our board of directors as a component of board of director compensation which resulted in recognizing $0.1 million, ~~$0.2~~$0.3 million and $0.1 million of expense, ~~for each of the respective years.~~respectively.

The 2018 Employee Stock Purchase Plan (the “ESPP”) was approved by the Company’s stockholders at the 2018 Annual Meeting of Stockholders. The adoption of the ESPP allows the Company to provide eligible employees of FuelCell Energy, Inc. and of certain designated subsidiaries with the opportunity to voluntarily participate in the ESPP, enabling such participants to purchase shares of the Company’s common stock at a discount to market price at the time of such purchase. The maximum number of the Company’s shares of common stock that may be issued under the ESPP is 41,667 shares. The previous Employee Stock Purchase Plan was suspended as of May 1, 2017 because we did not have sufficient shares of common stock available for issuance.

Under the ESPP, eligible employees have the right to purchase shares of common stock at the lesser of (i) 85% of the last reported sale price of our common stock on the first business day of the offering period, or (ii) 85% of the last reported sale price of the common stock on the last business day of the offering period, in either case rounded up to avoid impermissible trading fractions. Shares issued pursuant to the ESPP contain a legend restricting the transfer or sale of such common stock for a period of 0.5 years after the date of purchase.

The ESPP activity for the year ended October 31, ~~2017~~2019 was ~~as follows:~~de minimis.

~~The fair value of shares under the ESPP was determined at the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:~~

~~The weighted-average fair value of shares issued under the ESPP during fiscal year 2017 and 2016 was $1.76 and $6.86 per share, respectively.~~

~~The ESPP was suspended as of May 1, 2017 because we did not have sufficient shares of common stock available for issuance.~~

We offer a 401(k) plan (the “Plan”) to all full time employees that provides for tax-deferred salary deductions for eligible employees (beginning the first month following an employee’s hire date). Employees may choose to make voluntary contributions of their annual compensation to the Plan, limited to an annual maximum amount as set periodically by the Internal Revenue Service. Employee contributions are fully vested when made. Under the Plan, there is no option available to the employee to receive or purchase our common stock. Matching contributions of 2% under the Plan aggregated $0.5 million ~~$0.6 million and $0.4 million~~ for each of the years ended October 31, ~~2017, 2016,~~2019, 2018, and ~~2015, respectively.~~2017.

The components of loss before income taxes for the years ended October 31, ~~2017, 2016,~~2019, 2018, and ~~2015~~2017 were as follows (in thousands):

	2017			2016			2015			2019			2018			2017
U.S.	$	(49,723	)	$	(46,708	)	$	(26,459	)	$	(74,133	)	$	(47,314	)	$	(49,723	)
Foreign		(4,136	)		(3,981	)		(2,951	)		(3,326	)		(3,035	)		(4,136	)
Loss before income taxes	$	(53,859	)	$	(50,689	)	$	(29,410	)	$	(77,459	)	$	(50,349	)	$	(53,859	)

~~There was current~~The Company recorded an income tax provision totaling $0.1 million for the year ended October 31, 2019 compared to income tax benefit of $3.0 million and a tax provision of $0.04 million for the years ended October 31, 2018 and 2017, respectively. The income tax expense for the year ended October 31, 2019 primarily related to foreign taxes in South Korea and Canada. The income tax benefit for the year ended October 31, 2018 primarily related to the Tax Cuts and Jobs Act (the “Act”) that was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 34% to 21% effective January 1, 2018 which resulted in a deferred tax benefit of ~~$0.04~~$1.0 million ~~$0.5~~primarily related to a reduction of the Company’s deferred tax liability for in process research and development (“IPR&D”). The Act also established an unlimited carryforward period for the net operating loss (“NOL”) the Company generated after 2017. This provision of the Act resulted in a reduction of the valuation allowance attributable to deferred tax assets at the enactment date by $2.0 million ~~and $0.3 million~~based on the indefinite life of the resulting NOL as well as the deferred tax liability for IPR&D.

The income tax expense for the year ended October 31, 2017 related to foreign withholding taxes and income taxes in South Korea and there was no deferred federal income tax expense (benefit) for the ~~years~~year ended October 31, ~~2017, 2016 and 2015.~~2017. Franchise tax expense, which is included in administrative and selling expenses, was $0.2 million, $0.5 million ~~$0.4 million~~ and ~~$0.2~~$0.5 million for the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015,~~2017, respectively.

The reconciliation of the federal statutory income tax rate to our effective income tax rate for the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015~~2017 was as follows:

	2017			2016			2015			2019			2018			2017
Statutory federal income tax rate		(34.0	)%		(34.0	)%		(34.0	)%		(21.0	)%		(23.2	)%		(34.0	)%
Increase (decrease) in income taxes resulting from:
State taxes, net of Federal benefits		(1.3	)%		(0.2	)%		(0.1	)%		(2.9	)%		0.7	%		(1.3	)%
Foreign withholding tax		0.1	%		1.1	%		0.9	%		0.1	%		0.0	%		0.1	%
Net operating loss adjustment and true-ups		(4.6	)%		3.3	%		4.7	%
Net operating loss expiration and true-ups											(1.3	)%		4.6	%		(4.6	)%
Nondeductible expenditures		1.9	%		0.9	%		0.1	%		0.2	%		1.5	%		1.9	%
Change in state tax rate		(0.8	)%		(0.3	)%		1.6	%
Change in tax rates											(0.1	)%		201.6	%		(0.8	)%
Other, net		0.6	%		0.2	%		0.4	%		(0.3	)%		0.0	%		0.6	%
Valuation allowance		38.2	%		30.1	%		27.3	%		25.4	%		(191.2	)%		38.2	%
Effective income tax rate		0.1	%		1.1	%		0.9	%		0.1	%		(6.0	)%		0.1	%

Our deferred tax assets and liabilities consisted of the following at October 31, ~~2017~~2019 and ~~2016~~2018 (in thousands):

	2017			2016			2019			2018
Deferred tax assets:
Compensation and benefit accruals	$	11,158		$	9,625		$	7,446		$	7,767
Bad debt and other allowances		605			1,276			905			426
Capital loss and tax credit carry-forwards		13,398			12,772			12,645			12,295
Net operating losses (domestic and foreign)		282,022			265,799			217,430			202,643
Deferred license revenue		7,850			8,616			4,264			4,765
Inventory valuation allowances		111			278			312			238
Accumulated depreciation		5,095			4,653			9,200			4,374
Grant revenue		1,522			1,327			798			910
Gross deferred tax assets:		321,761			304,346			253,000			233,418
Valuation allowance		(321,761	)		(304,346	)		(250,985	)		(231,403	)
Deferred tax assets after valuation allowance		—			—			2,015			2,015
Deferred tax liability:
In process research and development		(3,377	)		(3,377	)		(2,321	)		(2,356	)
Net deferred tax liability	$	(3,377	)	$	(3,377	)	$	(306	)	$	(341	)

We continually evaluate our deferred tax assets as to whether it is “more likely than not” that the deferred tax assets will be realized. In assessing the realizability of our deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Based on the projections for future taxable income over the periods in which the deferred tax assets are realizable, management

believes that significant uncertainty exists surrounding the recoverability of the deferred tax assets. As a result, we recorded a ~~full~~ valuation allowance against our net deferred tax assets. None of the valuation allowance will reduce additional paid in capital upon subsequent recognition of any related tax benefits. In connection with our fiscal year 2013 acquisition of Versa we recorded a deferred tax liability for IPR&D, which has an indefinite life. Accordingly, we do not consider it to be a source of taxable income in evaluating the recoverability of our deferred tax assets.

As of October 31, ~~2017,~~2019, we had federal and state NOL carryforwards of ~~$752.7~~$850.0 million and ~~$414.7~~$438.8 million, respectively, a portion of which ($7.4 million and $6.3 million of federal and state NOL carryforwards, respectively) have not been recognized as they relate to windfall benefits arising from share-based compensation.respectively. The federal NOL carryforwards expire in varying amounts from ~~2019~~2020 through 2037 while state NOL carryforwards expire in varying amounts from fiscal year 2020 through 2039. Federal NOLs generated beginning in fiscal 2018 ~~through 2037.~~are not subject to expiration subsequent to the Act discussed above. Additionally, we had ~~$11.6~~$8.8 million of state tax credits available ~~of which $0.6 million expires in fiscal year 2018. The remaining credits do not expire.~~that will expire from tax years 2020 to 2039.

Certain transactions involving the Company’s beneficial ownership occurred in fiscal year 2014 and prior years, which could have resulted in a stock ownership change for purposes of Section 382 of the Internal Revenue Code of 1986, as amended.

We ~~completed~~complete a detailed Section 382 ~~study in fiscal year 2017~~ownership shift analysis on an annual basis to determine ifwhether any of our NOL and credit carryovers will be subject to limitation. Based on that study, we ~~have~~ determined that there was no ownership change as of the end of our fiscal year ~~2017 under~~2019 that impacts Section 382. The acquisition of Versa in fiscal year 2013 triggered a Section 382 ownership change at the level of Versa Power System which will limit the future usage of some of the federal and state ~~NOLs. The federal and state~~ NOLs that ~~are non 382-limited are included~~we acquired in that transaction. Accordingly, a valuation allowance has been recorded against the ~~NOL~~ deferred tax ~~assets as disclosed.~~asset associated with these attributes.

~~As discussed in Note 1, the~~The Company’s financial statements reflect expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return (including a decision whether to file or not file a return in a particular jurisdiction) presuming the taxing authorities’ full knowledge of the position and all relevant facts.

The liability for unrecognized tax benefits as of October 31, ~~2017~~2019 and ~~2016~~2018 was $15.7 million. This amount is directly associated with a tax position taken in a year in which federal and state NOL carryforwards were generated. Accordingly, the amount of unrecognized tax benefit has been presented as a reduction in the reported amounts of our federal and state NOL carryforwards. It is our policy to record interest and penalties on unrecognized tax benefits as income taxes; however, because of our significant NOLs, no provision for interest or penalties has been recorded.

We file income tax returns in the U.S. and certain states, primarily Connecticut and California, as well as income tax returns required internationally for South Korea and Germany. We are open to examination by the Internal Revenue Service and various states in which we file for fiscal year ~~2000~~2002 to the present. ~~Our~~During the fiscal year ended October 31, 2018, the Company underwent an IRS examination for its fiscal year 2016 ~~U.S. federal~~ tax ~~return is currently under examination by the Internal Revenue Service.~~year which was closed without material adjustment.

Basic earnings (loss) per common share (“EPS”) are generally calculated as income (loss) available to common stockholders divided by the weighted average number of common shares outstanding. Diluted EPS is generally calculated as income (loss) available to common stockholders divided by the weighted average number of common shares outstanding plus the dilutive effect of common share equivalents.

The calculation of basic and diluted EPS for the years ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015~~2017 was as follows (amounts in thousands, except share and per share amounts):

As of October 31, ~~2017~~2019 and ~~2016,~~2018, we had capital lease obligations of ~~$0.6~~$0.1 million and ~~$0.7~~$0.3 million, respectively. Lease payment terms are primarily thirty-six months from the date of lease.

We also lease certain computer and office equipment and manufacturing facilities in Torrington and Danbury, Connecticut under operating leases expiring on various dates through 2030. Rent expense was ~~$1.6~~$1.0 million, ~~$1.8~~$1.2 million and ~~$1.7~~$1.6 million for the years ended October 2019, 2018 and 2017, ~~2016 and 2015,~~ respectively.

Non-cancelable minimum payments applicable to operating and capital leases at October 31, ~~2017~~2019 were as follows (in thousands):

	Operating Leases		Capital Leases		Operating Leases		Capital Leases
2018	$	1,181	$	353
2019		910		211	$	922	$	102
2020		403		54		1,240		35
2021		381		10		1,221		4
2022		377		4		1,022		—
2023						720		—
Thereafter		3,289		—		8,707		—
Total	$	6,541	$	632	$	13,832	$	141

Under the provisions of ~~our~~its service agreements, ~~we provide~~the Company provides services to maintain, monitor, and repair customer power plants to meet minimum operating levels. Under the terms of ~~our~~such service agreements, the particular power plant must meet a minimum operating output during defined periods of the term. If minimum output falls below the contract requirement, wethe Company may be subject to performance penalties and/or may be required to repair or replace the customer’s fuel cell module(s). An estimate is not recorded for a potential performance guarantee liability until a performance issue has occurred at a particular power plant. At that point, the actual power plant’s output is compared against the minimum output guarantee and an accrual is recorded. The review of power plant performance is updated for each reporting period to incorporate the most recent performance of the power plant and minimum output guarantee payments made to customers, if any. The Company has provided for an accrual for performance guarantees, based on actual fleet performance, which totaled $2.2 million and $3.3 million as of October 31, 2017 and 2016, respectively, and is recorded in “Accrued liabilities.”

Our loss accrual on service agreements, excluding the accrual for performance guarantees, totaled $1.1 million and $2.7 million as of October 31, 2017 and 2016, respectively, and is recorded in “Accrued liabilities.” Our accrual estimates are performed on a contract by contract basis and include cost assumptions based on what we anticipate the service requirements will be to fulfill obligations under each contract. The decrease primarily relates to module exchanges performed during the year ended October 31, 2017.

Under the terms of ~~our~~the Company’s PPAs, customers agree to purchase power from ~~our~~the Company’s fuel cell power plants at negotiated rates. Electricity rates are generally a function of the customers’ current and estimated future electricity pricing available from the grid. As owner or lessee of the power plants, ~~we are~~the Company is responsible for all operating costs necessary to maintain, monitor and repair the power plants. Under certain agreements, ~~we are~~the Company is also responsible for procuring fuel, generally natural gas or biogas, to run the power plants.

~~Expansion~~ In addition, under the terms of ~~Torrington Facility and Related Low-Cost Financing~~

~~In December 2015,~~some of the PPA agreements, the Company ~~commenced the first phase of its project to expand the existing 65,000 square foot manufacturing facility in Torrington, Connecticut by approximately 102,000 square feet for a total size of 167,000~~

square feet. Initially, this additional space will be used to enhance and streamline logistics functions through consolidation of satellite warehouse locations and will provide the space needed to reconfigure the existing production process to improve manufacturing efficiencies. The company has substantially completed the first phase of the expansion during the fourth quarter of fiscal year 2017.

On November 9, 2015, the Company closed on a definitive Assistance Agreement with the State of Connecticut and received a disbursement of $10.0 million that was used for the first phase of the expansion project. In conjunction with this financing, the Company entered into a $10.0 million Promissory Note and related security agreements. The second phase of our manufacturing expansion, for which we will be eligible,is subject to ~~certain conditions to receive an additional $10.0 million in low-cost financing from the State of Connecticut, will commence as demand supports.~~a performance penalty.

At October 31, ~~2017,~~2019, the Company has unconditional purchase commitments aggregating ~~$29.1~~$34.6 million, for materials, supplies and services in the normal course of business.

The Company is contractually committed to provide compensation for any losses that our customers and finance partners may suffer in certain limited circumstances resulting from reductions in the U.S. Investment Tax Credit. Such obligations would arise as a result of reductions to the value of the underlying fuel cell projects as assessed by the U.S. Internal Revenue Service (the “IRS”). The Company does not believe that any payments under these contracts are probable based on the facts known at the reporting date. The maximum potential future payments that the Company could have to make under this obligation would depend on the difference between the fair values of the fuel cell projects sold or financed and the values the IRS would determine as the fair value for the systems for purposes of claiming the Investment Tax Credit. The value of the Investment Tax Credit in the Company’s agreements is based on guidelines provided by the statutory regulations from the IRS. The Company and its customers use fair values determined with the assistance of independent third-party appraisals.

~~We are~~ involved in legal proceedings, claims and litigation arising out of the ordinary conduct of ~~our~~its business. Although wethe Company cannot assure the outcome, management presently believes that the result of such legal proceedings, either individually, or in the aggregate, will not have a material adverse effect on ~~our~~the Company’s consolidated financial statements, and no material amounts have been accrued in ~~our~~the Company’s consolidated financial statements with respect to these matters.

The following represents supplemental cash flow information, including amounts effectively settled as described in Note 3. “Acquisitions” (dollars in thousands):

Selected unaudited financial data for each quarter of fiscal year ~~2017~~2019 and ~~2016~~2018 is presented below. We believe that the information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

(in thousands)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year			First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
Year ended October 31, 2017
Year ended October 31, 2019
Revenues																$	17,783		$	9,216		$	22,712		$	11,041		$	60,752
Gross (loss) profit																	(2,205	)		(3,640	)		7,965			(23,389	)		(21,269	)
Loss on operations																	(15,244	)		(17,623	)		(1,070	)		(32,992	)		(66,929	)
Net loss																	(17,548	)		(19,530	)		(5,311	)		(35,179	)		(77,568	)
Series A warrant exchange																	-			(3,169	)		-			-			(3,169	)
Series B Preferred stock dividends																	(800	)		(800	)		(810	)		(821	)		(3,231	)
Series C preferred stock deemed contributions (dividends)																	(9,005	)		1,599			884			-			(6,522	)
Series D preferred stock deemed dividends																	(5,685	)		(976	)		(3,091	)		(3	)		(9,755	)
Net loss to common stockholders																	(33,038	)		(22,876	)		(8,328	)		(36,003	)		(100,245	)
Net loss to common stockholders per basic and diluted common share ⁽¹⁾																$	(3.97	)	$	(2.06	)	$	(0.18	)	$	(0.23	)	$	(1.82	)
Year ended October 31, 2018
Revenues	$	17,002		$	20,417		$	10,358		$	47,889			95,666		$	38,613		$	20,830		$	12,110		$	17,884			89,437
Gross profit (loss)		1,813			383			(2,626	)		3,164			2,734			4,635			(629	)		(2,056	)		1,143			3,093
Loss on operations		(10,928	)		(11,496	)		(14,330	)		(8,181	)		(44,935	)		(5,553	)		(12,735	)		(14,474	)		(11,870	)		(44,632	)
Net loss		(13,685	)		(13,238	)		(17,001	)		(9,979	)		(53,903	)		(4,183	)		(13,174	)		(15,881	)		(14,096	)		(47,334	)
Preferred stock dividends		(800	)		(800	)		(800	)		(800	)		(3,200	)
Series B Preferred stock dividends																	(800	)		(800	)		(800	)		(800	)		(3,200	)
Series C Preferred stock deemed dividends																	(3,463	)		(4,199	)		(939	)		(958	)		(9,559	)
Series D Preferred stock redemption accretion																	—			—			—			(2,075	)		(2,075	)
Net loss to common stockholders		(14,485	)		(14,038	)		(17,801	)		(10,779	)		(57,103	)		(8,446	)		(18,173	)		(17,620	)		(17,929	)		(62,168	)
Net loss to common stockholders per basic and diluted common share ⁽¹⁾	$	(0.39	)	$	(0.33	)	$	(0.31	)	$	(0.17	)		(1.14	)	$	(1.41	)	$	(2.74	)	$	(2.45	)	$	(2.31	)		(9.01	)
Year ended October 31, 2016
Revenues	$	33,482		$	28,581		$	21,716		$	24,473		$	108,252
Gross (loss) profit		(166	)		(157	)		434			(468	)		(357	)
Loss on operations		(11,517	)		(12,708	)		(10,323	)		(11,805	)		(46,353	)
Net loss		(11,779	)		(15,414	)		(11,067	)		(12,948	)		(51,208	)
Preferred stock dividends		(800	)		(800	)		(800	)		(800	)		(3,200	)
Net loss to common stockholders		(12,512	)		(16,173	)		(11,810	)		(13,662	)		(54,157	)
Net loss to common stockholders per basic and diluted common share ⁽¹⁾	$	(0.48	)	$	(0.56	)	$	(0.38	)	$	(0.41	)		(1.82	)

On November 5, 2019, the Company signed a two-year JDA with EMRE, pursuant to which the Company will continue exclusive research and development efforts with EMRE to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources, in exchange for (a) payment of (i) an exclusivity and technology access fee of $5.0 million, (ii) up to $45.0 million for research and development efforts, and (iii) milestone-based payments of up to $10.0 million after certain technological milestones are met, and (b) certain licenses to patents and patent applications, and copyrightable works resulting from the JDA.

As disclosed in Note 13. “Debt”, on October 31, 2019, the Company and certain of its subsidiaries as guarantors entered into the Orion Credit Agreement with the Agent and certain of its affiliates as lenders for a $200.0 million senior secured credit facility, structured as a delayed draw term loan, to be provided by the lenders. On November 22, 2019, the Company made a second draw under the Orion Credit Agreement (the “Second Funding”) of $65.5 million, which was funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P. (the “Orion Lenders”), such that the total fundings to the Company under the Orion Facility were equal to

$80.0 million. The funds drawn in the Second Funding were reduced by a Loan Discount (described further in Note ~~21. Subsequent Events~~13. “Debt”) of $1.6 million, which was retained by the Orion Lenders. Proceeds from the Second Funding were used to repay outstanding third party debt of the Company with respect to certain other Company projects, including the construction loan from Fifth Third Bank on the Groton Project and the loan from Webster Bank on the CCSU Project, as well as to fund remaining going forward construction costs relating to certain projects, including the Groton Project (a 7.4 MW project), the LIPA Yaphank Solid Waste Management Project (a 7.4 MW project), and the Tulare BioMAT project (a 2.8 MW project).

~~On December 14, 2017,~~In accordance with the ~~number~~Orion Credit Agreement in connection with the Second Funding, on November 22, 2019, the Company issued to the Orion Lenders warrants to purchase up to a total of ~~authorized~~14.0 million shares of the Company’s common stock ~~was increased from 125,000,000~~(the “Second Funding Warrants”), with an initial exercise price with respect to ~~225,000,000, by~~8.0 million of such shares of $0.242 per share and with an initial exercise price with respect to 6.0 million of such shares of $0.620 per share (such $0.620 per share exercise price being at a ~~vote~~premium to the market price at the time of entry into the Orion Credit Agreement).

In conjunction with the Second Funding, the Company and the other loan parties entered into the First Amendment to the Orion Credit Agreement (the “First Orion Amendment”), which required the Company to establish a $5.0 million debt reserve, with such reserve to be released on the first date following the date of the ~~holders of a majority~~Second Funding on which all of the following events shall have occurred: (a) each of (x) the commercial operation date for the Tulare BioMAT project shall have occurred and (y) a disposition, refinancing or tax equity investment in the Tulare BioMAT project of at least $5 million is consummated; (b) each of (x) the Groton Project shall have achieved its business plan in accordance with the Groton Construction Budget (as defined in the Orion Credit Agreement), (y) the commercial operation date for the Groton Project shall have occurred and (z) the Groton Project shall have met its annualized output and heat rate guarantees for three months; and (c) a disposition, refinancing or tax equity investment of at least $30 million shall have occurred with respect to the Groton Project. The First Orion Amendment further requires the Company (i) to provide, no later than December 31, 2019 (or such later date as the Agent may, in its sole discretion, agree in writing), a biogas sale and purchase agreement through December 31, 2021 for the Tulare BioMAT project, which was obtained as of such date, (ii) to obtain by December 31, 2019 (or such later date as the Agent may, in its sole discretion, agree in writing) a fully executed contract for certain renewable energy credits for the Groton Project, which was obtained as of such date, and (iii) to provide by January 31, 2020 (or such later date as the Agent may, in its sole discretion, agree in writing) certain consents and estoppels from CMEEC related to the Groton Project and an executed, seventh modification to the lease between CMEEC and the United States Government, acting by and through the Department of the Navy. The First Orion Amendment provides that, if the requirements set forth in clauses (ii) and (ii) above are not timely satisfied, the Company will grant the Agent, on behalf of the Orion Lenders, a security interest and lien on all of the Company’s intellectual property, with such lien and security interest to be released at such time as the Company has satisfied such requirements.

In addition, in connection with the January 2020 Letter Agreement among the Company, FCE Ltd. and Enbridge described below, on January 20, 2020, in order to obtain the lenders’ consent to the January 2020 Letter Agreement as required under the Orion Credit Agreement, the Company and the other loan parties entered into the Second Amendment to the Orion Credit Agreement (the “Second Orion Amendment”), which adds a new affirmative covenant to the Orion Credit Agreement that obligates the Company to, and to cause FCE Ltd. to, on or prior to November 1, 2021, either (i) pay and satisfy in full all of their respective obligations in respect of, and fully redeem and cancel, all of the Series 1 Preferred Shares of FCE Ltd., or (ii) deposit in a newly created account of FCE Ltd. or the Company cash in an amount sufficient to pay and satisfy in full all of their respective obligations in respect of, and to effect a redemption and cancellation in full of, all of the Series 1 Preferred Shares of FCE Ltd. The Second Orion Amendment also provides that the articles of FCE Ltd. setting forth the modified terms of the Series 1 Preferred Shares will be considered a “Material Agreement” under the Orion Credit Agreement. Under the Second Orion Amendment, a failure to satisfy this new affirmative covenant or to otherwise comply with the terms of the Series 1 Preferred Shares will constitute an event of default under the Orion Credit Agreement, which could result in the acceleration of any amounts outstanding under the Orion Credit Agreement.

On January 9, 2020, the Orion Lenders exercised, on a cashless basis, Orion Warrants (with cash exercise prices of $0.310 per share and $ 0.242 per share) representing the right to purchase, in the aggregate, 12.0 million shares of the Company’s common stock. Because these warrants were exercised on a cashless basis pursuant to the formula set forth in the warrants, the Orion Lenders received, in the aggregate, a “net number” of 9,396,319 shares of the Company’s common stock upon the exercise of Initial Funding Warrants representing the right to purchase 6.0 million shares of the Company’s common stock and Second Funding Warrants representing the right to purchase 6.0 million shares of the Company’s common stock. The other 2,603,681 shares, which were not issued to the Orion Lenders due to the cashless nature of the exercise, are no longer required to be reserved for issuance upon exercise of the Orion Warrants.

As disclosed in Note 13. “Debt”, on February 28, 2019, the Company, through its indirect wholly-owned subsidiary, Groton Borrower, entered into the Groton Agreement with Fifth Third Bank pursuant to which Fifth Third Bank agreed to make available to Groton Borrower a construction loan facility in an aggregate principal amount of up to $23.0 million to fund the manufacture, construction, installation, commissioning and start-up of the 7.4 MW Groton Project. Groton Borrower made an initial draw under the Groton Facility on the date of closing of the facility of $9.7 million and made an additional draw of $1.4 million in April 2019. The total outstanding balance under the Groton Facility as of November 22, 2019 (prior to the payment described below) was $11.1 million. Groton Borrower and Fifth Third Bank entered into a payoff letter, dated November 22, 2019, pursuant to which, on November 22, 2019, the Agent, on behalf of Groton Borrower, paid off all of Groton Borrower’s indebtedness to Fifth Third Bank under the Groton Agreement and thereby terminated the Groton Facility.

On November 22, 2019, the Webster Bank debt was repaid in full and the borrowing arrangement was terminated.

As described in Note 13. “Debt”, the Company had a long-term loan agreement with the Connecticut Green Bank (“Green Bank”) for a loan totaling approximately $5.9 million in support of the Bridgeport Fuel Cell Project (as amended from time to time, the “Green Bank Loan Agreement”). On and effective as of December ~~14, 2017,~~19, 2019, the Company and Green Bank entered into an amendment to the Green Bank Loan Agreement (the “Green Bank Amendment”). Upon the execution of the Green Bank Amendment on December 19, 2019, Green Bank made an additional loan to the Company in the aggregate principal amount of $3.0 million (the “December 2019 Loan”), which is to be used (i) first, to pay closing fees related to the acquisition of the Bridgeport Fuel Cell Project and the Subordinated Credit Agreement, other fees, and accrued interest from May 9, 2019, totaling $404,000 (“Accrued Fees”), and (ii) thereafter, for general corporate purposes as determined by the Company, including, but not limited to, expenditures in connection with the project being constructed by Groton Station Fuel Cell, LLC (“Groton Fuel Cell”). Pursuant to the terms of the Green Bank Amendment, Green Bank will have no further obligation to make loans under the Green Bank Loan Agreement and the Company will have no right to make additional draws under the Green Bank Loan Agreement.

The Green Bank Amendment provides that, until such time as the loan (which includes both the outstanding principal balance of the original loan under the Green Bank Loan Agreement and the outstanding principal amount of the December 2019 Loan) has been repaid in its entirety, interest on the outstanding balance of the loan shall accrue monthly in arrears from the date of the Green Bank Amendment at a rate of 5% per annum until May 8, 2019 and at a rate of 8% per annum thereafter, payable by the Company on a monthly basis in arrears. The Green Bank Amendment further provides that the payment by the Company of the Accrued Fees (as described above) includes any shortfall of interest due but unpaid by the Company through and including November 30, 2019. Interest payments made by the Company after the date of the Green Bank Amendment are to be applied first to interest that has accrued on the outstanding principal balance of the original loan under the Green Bank Loan Agreement and then to interest that has accrued on the December 2019 Loan.

The Green Bank Amendment also modifies the repayment and mandatory prepayment terms and extends the maturity date set forth in the original Green Bank Loan Agreement. Under the Green Bank Amendment, to the extent that excess cash flow reserve funds under the BFC Credit Agreement are eligible for disbursement to Bridgeport Fuel Cell, LLC pursuant to Section 6.23(c) of the BFC Credit Agreement, such funds are to be paid to Green Bank, to be applied first to repay the outstanding principal balance of the original loan under the Green Bank Loan Agreement and thereafter to repay the outstanding principal amount of the December 2019 Loan, until repaid in full. The Green Bank Amendment further provides that the entire unpaid balance of the loan and all other obligations due under the Green Bank Loan Agreement will be due and payable on May 9, 2026 if not paid sooner in accordance with ~~NASDAQ Marketplace Rule 5635(d)~~the Green Bank Loan Agreement. Finally, with respect to mandatory prepayments, the Green Bank Amendment provides that, when the Company has closed on the subordinated project term loan pursuant to the Commitment Letter, dated February 6, 2019, issued by Green Bank to Groton Fuel Cell to provide a subordinated project term loan to Groton Fuel Cell in the amount of $5.0 million (the “Groton Commitment Letter”), the ~~Company’s~~Company will be required prepay to Green Bank the lesser of any then outstanding amount of the December 2019 Loan and the amount of the subordinated project term loan actually advanced by Green Bank.

On October 30, 2019, the Company declared dividends on the Series B Preferred Stock, which included the accrued dividends payable under the Series B Certificate of Designation with respect to the May 15, 2019 and August 15, 2019 dividend payment dates and the dividends payable with respect to the November 15, 2019 dividend payment date, which were paid on or about November 15, 2019. The aggregate dividend payment was $2.4 million.

As described in Note 15. “Redeemable Preferred Stock,” as of October 31, 2019, FCE Ltd. or the Company, as the guarantor of FCE Ltd.’s payment obligations with respect to the Series 1 Preferred Shares, was obligated to pay, on or before December 31, 2020, all accrued and unpaid dividends on the Series 1 Preferred Shares and the balance of the principal redemption price with respect to all of the Series 1 Preferred Shares. As of October 31, 2019, the aggregate amount of all accrued and unpaid dividends to be paid on the Series 1 Preferred Shares on December 31, 2020 was expected to be Cdn. $21.1 million and the balance of the principal redemption price to be paid on December 31, 2020 with respect to all of the Series 1 Preferred Shares was expected to be Cdn. $4.4 million. Interest under the Series 1 Preferred Shares accrued at annual rate of 5%. In addition, the holder of the Series 1 Preferred Shares had the right to exchange such shares for fully paid and non-assessable shares of common ~~stockholders approved~~stock of the Company at certain specified prices, and FCE Ltd. had the option of making dividend payments in the form of common stock of the Company or cash.

On January 20, 2020, the Company, FCE Ltd. and Enbridge entered into a letter agreement (the “January 2020 Letter Agreement”), pursuant to which they agreed to amend the articles of FCE Ltd. relating to and setting forth the terms of the Series 1 Preferred Shares to: (i) remove the provisions of the articles permitting or requiring the issuance of shares of the Company’s common stock ~~exceeding 19.9%~~in exchange for the Series 1 Preferred Shares or as payment of amounts due to the holders of the ~~number~~Series 1 Preferred Shares, (ii) remove certain provisions of ~~shares outstanding on September 5, 2017, upon~~ the ~~conversion and/or~~articles relating to the redemption of the Series ~~C Convertible~~1 Preferred ~~Stock issued in an underwritten offering in September 2017.~~

~~Tax Cuts~~Shares, (iii) increase the annual dividend rate, commencing on January 1, 2020, to 15%, (iv) extend the final payment date for all accrued and ~~Jobs Act~~

~~On December 22, 2017 the Tax Cuts~~unpaid dividends and Jobs Act (the “Act”) was signed into law. While enacted subsequent to this balance sheet date, the Act changes existing United States tax law and includes numerous provisions that will affect the Company. Specifically, the reductionall return of capital payments (i.e., payments of the ~~U.S. federal tax rate~~principal redemption price) from ~~34%~~December 31, 2020 to ~~21% effective January 1, 2018 will reduce~~December 31, 2021, (v) clarify when dividend and return of capital payments are to be made in the future and extend the quarterly dividend and return of capital payments through December 31, 2021(which were previously to be paid each quarter through December 31, 2020), (vi) remove certain terms and provisions of the articles that are no longer applicable, and (vii) make other conforming changes to the articles. In addition, the parties agreed to amend the Company’s ~~deferred tax liability IPR&D by approximately $1.0 million with~~guarantee in favor of Enbridge as necessary or as the ~~benefit~~parties may mutually agree, in either case, in order to be ~~reflected~~consistent with such amended articles and to maintain the Company’s guarantee of FCE Ltd.’s obligations under the Series 1 Preferred Shares.

After taking into account the amendments to the terms of the Series 1 Preferred Shares described in the ~~first quarter~~January 2020 Letter Agreement, the aggregate amount of ~~fiscal year 2018. The reduction in~~all accrued and unpaid dividends to be paid on the ~~federal tax rate will also reduce~~Series 1 Preferred Shares on December 31, 2021 is expected to be Cdn. $26.5 million and the ~~value~~balance of the ~~Company’s existing deferred tax assets, though~~principal redemption price to be paid on December 31, 2021 with respect to all of the Series 1 Preferred Shares is expected to be Cdn. $3.5 million.

During the period beginning on November 7, 2019 and ending on (and including) November 11, 2019, the Company issued and sold a total of approximately 7.9 million shares of its common stock under the Sales Agreement at prevailing market prices, with an ~~offsetting decrease~~average sale price of $0.46 per share, and raised aggregate gross proceeds of approximately $3.6 million, before deducting expenses and commissions. Commissions of $0.1 million were paid to ~~valuation allowance would be recorded.~~the Sales Agent in connection with these sales, resulting in net proceeds to the Company of approximately $3.5 million.

The Company had sold an aggregate of approximately 17,998,846 shares of common stock under the Sales Agreement as of November 11, 2019.

The Company maintains disclosure controls and procedures, which are designed to provide reasonable assurance that information required to be disclosed in the Company’s periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s principal executive officer and principal financial officer have concluded that, due to the material weakness described below, the Company’s disclosure controls and procedures were ~~effective to provide reasonable assurance~~ineffective as of the end of the period covered by this report.

Notwithstanding the material weakness described below, management has concluded that ~~information required to be disclosed~~our consolidated financial statements included in this Form 10-K for the fiscal year ended October 31, 2019 are fairly stated in all material respects in accordance with generally accepted accounting principles in the ~~Company’s periodic SEC reports is recorded, processed, summarized and reported within~~United States of America for each of the ~~time~~ periods ~~specified in the SEC’s rules and forms,~~presented and that ~~such information is accumulated and communicated to its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.~~they may be relied upon.

Management of FuelCell Energy, Inc., and its subsidiaries (the “Company”), are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that:

Under the supervision and with the participation of management, including our principal executive and principal financial officers, we ~~assessed~~evaluated the Company’s internal control over financial reporting as of October 31, ~~2017,~~2019, based on criteria for effective internal control over financial reporting established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on ~~this assessment, we have~~that evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of October 31, 2019 due to the material weakness in internal control over financial reporting described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We previously disclosed in our Form 10-Qs for the quarters ended April 30, 2019 and July 31, 2019 that the Company ~~maintained effective~~did not have resources to sufficiently address asset impairments on a timely basis or the accounting considerations and disclosures related to the Company’s amended credit facilities. As a result, we concluded that there was a material weakness in internal control over financial reporting, as we did not maintain effective controls over the accounting for and disclosures in the consolidated financial statements related to asset impairments and credit facilities. This control deficiency has not been remediated as of October 31, ~~2017 based on~~2019 and the ~~specified criteria. The Company's independent registered public~~Company further identified that it did not have resources to sufficiently address certain other non-routine transactions and disclosures.

This material weakness resulted in material misstatements that were corrected in the consolidated financial statements prior to issuance.

Subsequent to the evaluation made in connection with filing our Form 10-Q for the quarter ended April 30, 2019, our management, with the oversight of the Audit and Finance Committee of the Board of Directors, began the process of remediating the material weakness. Progress to date includes engagement of a third party resource to help evaluate the accounting ~~firm, KPMG LLP, has issued an audit report on~~and disclosure for significant matters each quarter. Management also plans to add additional experienced accounting staff. In addition, under the ~~Company's~~oversight of the Audit and Finance Committee, management will continue to review and make necessary changes to the overall design of our internal control environment to improve the overall effectiveness of internal control over financial reporting.

We have made progress in accordance with our remediation plan and our goal is to remediate this material weakness in fiscal year 2020. However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting ~~which appears in Part II, Item 8 of~~controls and procedures, however, there can be no assurance that this ~~Form 10-K.~~will occur within 2020.

Other than the ~~participation of our principal executive~~material weakness and ~~principal financial officers, whether any~~remediation process discussed above, there have been no other changes in our internal control over financial reporting that occurred during ~~our last~~the fourth quarter of fiscal ~~quarter (the registrant’s fourth fiscal quarter in the case of an annual report)~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~Based on the evaluation we conducted, our management has concluded that no such changes have occurred.~~

Letter Agreement with FCE FuelCell Energy Ltd. (“FCE Ltd.”) and Enbridge Inc. (“Enbridge”)

On January 20, 2020, the Company, FCE Ltd. (one of the Company’s indirect subsidiaries), and Enbridge entered into a letter agreement (the “January 2020 Letter Agreement”), pursuant to which they agreed to amend the articles of FCE Ltd. (the “Articles”) relating to and setting forth the terms of the Class A Cumulative Redeemable Exchangeable Preferred Shares (the “Series 1 Preferred Shares”) as described below. As of January 20, 2020, there were 1,000,000 Series 1 Preferred Shares of FCE Ltd. outstanding, all of which were held by Enbridge. The Series 1 Preferred Shares were originally acquired by the Company as a result of a business combination in 2003. The Company guarantees the return of principal and dividend obligations of FCE Ltd. to Enbridge, as the holder of the Series 1 Preferred Shares.

Prior to the amendment of the Articles and the terms of the Series 1 Preferred Shares as described below, the terms of the Series 1 Preferred Shares required (i) annual dividend payments of Cdn. $500,000 and (ii) annual return of capital payments of Cdn. $750,000, to be made on a quarterly basis until December 31, 2020. Dividends accrued at a 1.25% quarterly rate on the unpaid principal balance, and additional dividends accrued on the cumulative unpaid dividends (inclusive of the Cdn. $12.5 million unpaid dividend balance as of March 31, 2011) at a rate of 1.25% compounded quarterly. The aggregate amount of all accrued and unpaid dividends on the Series 1 Preferred Shares (Cdn. $21.1 million) and the balance of the principal redemption price with respect to all of the outstanding Series 1 Preferred Shares (Cdn. $4.4 million) was to be paid on or before December 31, 2020. In addition, the holder of the Series 1 Preferred Shares had the right to exchange such shares for fully paid and non-assessable shares of common stock of

the Company at certain specified prices, and FCE Ltd. had the option of making dividend payments in the form of common stock of the Company or cash.

In the January 2020 Letter Agreement, the Company, FCE Ltd., and Enbridge agreed to amend the Articles of FCE Ltd. and the terms of the Series 1 Preferred Shares to: (i) remove the provisions of the Articles permitting or requiring the issuance of shares of the Company’s common stock in exchange for the Series 1 Preferred Shares or as payment of amounts due to the holders of the Series 1 Preferred Shares, (ii) remove certain provisions of the Articles relating to the redemption of the Series 1 Preferred Shares, (iii) increase the annual dividend rate, commencing on January 1, 2020, to 15%, (iv) extend the final payment date for all accrued and unpaid dividends and all return of capital payments (i.e., payments of the principal redemption price) from December 31, 2020 to December 31, 2021, (v) clarify when dividend and return of capital payments are to be made in the future and extend the quarterly dividend and return of capital payments through December 31, 2021 (which were previously to be paid each quarter through December 31, 2020), (vi) remove certain terms and provisions of the Articles that are no longer applicable, and (vii) make other conforming changes to the Articles. In addition, the parties agreed to amend the Company’s guarantee in favor of Enbridge as necessary or as the parties may mutually agree, in either case, in order to be consistent with such amended Articles and to maintain the Company’s guarantee of FCE Ltd.’s obligations under the Series 1 Preferred Shares.

Accordingly, as amended, the terms of the Series 1 Preferred Shares require (i) annual dividend payments of Cdn. $500,000 and (ii) annual return of capital payments of Cdn. $750,000, to be made on a quarterly basis until December 31, 2021. Commencing on January 1, 2020, dividends accrue at an annual rate of 15% on the principal redemption price with respect to the Series 1 Preferred Shares and any accrued and unpaid dividends on the Series 1 Preferred Shares. The aggregate amount of all accrued and unpaid dividends on the Series 1 Preferred Shares (estimated at Cdn. $26.5 million) and the balance of the principal redemption price with respect to all of the outstanding Series 1 Preferred Shares (estimated at Cdn. $3.5 million) is to be paid on or before December 31, 2021. Further, the holder of the Series 1 Preferred Shares no longer has the right to exchange such shares for shares of common stock of the Company, and FCE Ltd. no longer has the option of making dividend payments in shares of common stock of the Company.

The foregoing summary of the terms of the January 2020 Letter Agreement and the amendments to the terms of the Series 1 Preferred Shares is qualified in its entirety by reference to (i) the January 2020 Letter Agreement, a copy of which is attached as Exhibit 4.13 to this Annual Report on Form 10-K and incorporated herein by reference, and (ii) Schedule A setting forth the amended rights, privileges, restrictions and conditions of the Series 1 Preferred Shares of FCE Ltd., a copy of which is attached as Exhibit 4.14 to this Annual Report on Form 10-K and incorporated herein by reference.

On October 31, 2019, the Company and certain of its subsidiaries as guarantors entered into a Credit Agreement (the “Orion Credit Agreement”) with Orion Energy Partners Investment Agent, LLC, as Administrative Agent and Collateral Agent (the “Agent”), and its affiliates, Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., and Orion Energy Credit Opportunities Fund II PV, L.P., as lenders, for a $200.0 million senior secured credit facility (the “Orion Facility”), structured as a delayed draw term loan, to be provided by the lenders, subject to certain lender approvals. In conjunction with the closing of the Orion Facility, on October 31, 2019, the Company drew down $14.5 million. On November 22, 2019, a second draw (the “Second Funding”) of $65.5 million, funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P., was made. In conjunction with the Second Funding, the Company, the Agent, and the other loan parties entered into the First Amendment to the Orion Credit Agreement, which required the Company to establish a $5.0 million debt reserve.

In connection with the January 2020 Letter Agreement among the Company, FCE Ltd. and Enbridge described above, on January 20, 2020, in order to obtain the lenders’ consent to the January 2020 Letter Agreement as required under the Orion Credit Agreement, the Company, the Agent, and the other loan parties entered into the Second Amendment to the Orion Credit Agreement (the “Second Orion Amendment”), which adds a new affirmative covenant to the Orion Credit Agreement that obligates the Company to, and to cause FCE Ltd. to, on or prior to November 1, 2021, either (i) pay and satisfy in full all of their respective obligations in respect of, and fully redeem and cancel, all of the Series 1 Preferred Shares of FCE Ltd., or (ii) deposit in a newly created account of FCE Ltd. or the Company cash in an

amount sufficient to pay and satisfy in full all of their respective obligations in respect of, and to effect a redemption and cancellation in full of, all of the Series 1 Preferred Shares of FCE Ltd. The Second Orion Amendment also provides that the Articles setting forth the modified terms of the Series 1 Preferred Shares will be considered a “Material Agreement” under the Orion Credit Agreement. Under the Second Orion Amendment, a failure to satisfy this new affirmative covenant or to otherwise comply with the terms of the Series 1 Preferred Shares will constitute an event of default under the Orion Credit Agreement, which could result in the acceleration of any amounts outstanding under the Orion Credit Agreement.

The foregoing summary of the terms of Second Orion Amendment is qualified in its entirety by reference to the Second Orion Amendment, a copy of which is attached as Exhibit 10.117 to this Annual Report on Form 10-K and incorporated herein by reference.

The information required by this Item 10, with respect to our executive officers, is included in Part I of the Annual Report on Form 10-K. The other information required by this Item 10 is incorporated by reference to the Company’s ~~2018~~2020 Proxy Statement to be filed with the SEC within 120 days ~~from~~after fiscal year end.

Our board of directors has adopted a Code of Ethics (the “Code”), which applies to the board of directors, named executive officers, and all employees. The Code provides a statement of certain fundamental principles and key policies and procedures that govern the conduct of our business. The Code covers all major areas of professional conduct, including employment policies, conflicts of interest, intellectual property and the protection of confidential information, as well as strict adherence to all laws and regulations applicable to the conduct of our business. As required by the Sarbanes-Oxley Act of 2002, our Audit and Finance Committee has procedures to receive, retain, investigate and resolve complaints received regarding our accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Code can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website at www.fuelcellenergy.com. We intend to disclose any changes in, or waivers from, the Code by posting such information on the same website or by filing a Current Report on Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or ~~NASDAQ.~~Nasdaq.

Information required under this Item is incorporated by reference to the Company’s ~~2018~~2020 Proxy Statement to be filed with the SEC within 120 days ~~from~~after fiscal year end.

~~Information required under this Item is incorporated by reference to the Company’s 2018 Proxy Statement to be filed with the SEC within 120 days from fiscal year end.~~

Information required under this Item is incorporated by reference to the Company’s ~~2018~~2020 Proxy Statement to be filed with the SEC within 120 days ~~from~~after fiscal year end.

The following table sets forth information with respect to the Company’s equity compensation plans as of the end of the fiscal year ended October 31, 2019.

Information required under this Item is incorporated by reference to the Company’s ~~2018~~2020 Proxy Statement to be filed with the SEC within 120 days ~~from~~after fiscal year end.

Information required under this Item is incorporated by reference to the Company’s 2020 Proxy Statement to be filed with the SEC within 120 days after fiscal year end.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Delaware		06-0853042
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3 Great Pasture Road
Danbury, Connecticut		06810
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol (s)		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		FCEL		The Nasdaq Stock Market LLC (Nasdaq Global Market)

Large accelerated filer ☐		Accelerated filer ☒☐		Non-accelerated filer ☐☒		Smaller reporting company ☐☒
				~~(Do not check if a smaller reporting company)~~		Emerging growth company ☐

Class		Outstanding at January ~~2, 2018~~14, 2020
Common Stock, $0.0001 par value per share		~~75,678,919~~ 210,965,999

Document		Parts Into Which Incorporated
Definitive Proxy Statement for the ~~Annual~~2020Annual Meeting of Stockholders ~~to be held April 5, 2018~~		Part III

		Page
Description		Number
Part I

Item 1 Business		3

Item 1A Risk Factors		2932

Item 1B Unresolved Staff Comments		4551

Item 2 Properties		4651

Item 3 Legal Proceedings		4651

Item 4 Mine Safety Disclosures		4651

Part II

Item 5 Market for ~~the~~ Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		4752

Item 6 Selected Financial Data		5554

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations		5756

Item 7A Quantitative and Qualitative Disclosures About Market Risk		8092

Item 8 Consolidated Financial Statements and Supplementary Data		8193

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~117~~152

Item 9A Controls and Procedures		~~117~~152

Item 9B Other Information		~~118~~153

Part III

Item 10 Directors, Executive Officers and Corporate Governance		~~118~~156

Item 11 Executive Compensation		~~118~~156

Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~118~~156

Item 13 Certain Relationships and Related Transactions, and Director Independence		~~118~~156

Item 14 Principal ~~Accountant~~Accounting Fees and Services		~~118~~157

Part IV

Item 15 Exhibits and Financial Statement Schedules		~~119~~157

Item 16 Form 10-K Summary		~~124~~168

Signatures		~~125~~169

Index to Item 1. BUSINESS		Page

Forward-Looking Statement Disclaimer		4

Background		5

Additional Technical Terms and Definitions		6

Overview		7

Products		9

Advanced Technology Programs		11

Business Strategy		814

Markets		10

~~Strategic Alliances~~		12

~~Products~~		1317

Manufacturing and Service Facilities		1618

Raw Materials and Supplier Relationships		19

Engineering, Procurement and Construction		19

Services and Warranty Agreements		1720

License Agreements and Royalty Income, Relationship with POSCO Energy		18

~~Advanced Technology Programs (Third Party Funded Research and Development)~~		1820

Company Funded Research and Development		2021

Backlog		2022

Fuel Cell Technologies		2123

Competition		2124

Regulatory and Legislative ~~Support~~Environment		2225

Government Regulation		2326

Proprietary Rights and Licensed Technology		2326

Significant Customers and Information about Geographic Areas		2427

Sustainability		2528

Associates		2629

Available Information		2629

	Emissions (Lbs. Per MWh)
	NO_X		SO₂		PM		CO₂		CO₂ with CHP
Average U.S. Fossil Fuel Plant ⁽¹⁾		0.48		2.6		0.08		1,533	NA
Microturbine (60kW) ⁽²⁾		0.44		0.008		0.09		1,596	520 - 680
Small Natural Gas Turbine ⁽³⁾		1.15		0.008		0.08		1,494	520 - 680
SureSource - natural gas ⁽⁴⁾		0.01		0.0001		0.00002		940	520 - 680
SureSource 4000 High Efficiency Plant		0.01		0.0001		0.00002		740	520 - 680
SureSource - utility scale carbon capture		0.01		0.0001		0.00002		80	n/a
SureSource - renewable biogas		0.01		0.0001		0.00002	< 0		< 0

	Capacity			Emissions, lb/MWh						Avoided Emissions, Tons/y per MW
	Factor, %			NO_X		PM10		CO₂		NO_X		PM10		CO₂
Average US Grid ⁽⁵⁾					1.10	0.05		1501			—		—		—
SureSource 3000 with CHP ⁽⁶⁾		90	%	0.01			0.00	738		4.3		0.19			3,008
SureSource 4000		90	%	0.01			0.00	778		4.3		0.19			2,848
SureSource Biogas fuel		90	%	0.01			0.00	0		4.3		0.19			5,917
Rooftop Solar ⁽⁷⁾		23	%		—		—		—	1.1		0.05			1,479
Utility Scale Solar PV ⁽⁷⁾		29	%		—		—		—	1.4		0.06			1,874
Wind ⁽⁷⁾		47	%		—		—		—	2.2			0.10		3,057

	2019		2018
Commercial:
Product	$	—	$	1
Service (a)		169,371		251,650
Generation		1,114,366		839,483
License (b)		22,931		—
Total Commercial	$	1,306,668	$	1,091,134

Advanced Technologies
Funded	$	11,758	$	15,934
Unfunded		220		16,449
Total Advanced Technologies	$	11,978	$	32,383

Total Contract Backlog	$	1,318,646	$	1,123,517


System Size Range	MW- Class	Sub-MW- Class			Micro CHP	Mobile
~~System Size Range~~	Carbonate (CFC)	Carbonate (CFC)	Solid Oxide (SOFC)	Phosphoric Acid (PAFC)	PEM / SOFC	Polymer Electrolyte Membrane (PEM)
Plant size	1.4 MW - 3.7 MW Plus	250 kW – 400 kW	up to ~~250~~300 kW	up to 440 kW	< 10 kW	5 - 100 kW
Typical Application	Utilities, Universities, Commercial & Industrial	Universities, Commercial & Industrial	Commercial Buildings & “Big-Box” Retail ~~Stores~~ Stores	Commercial Buildings & Grocery Stores	Residential and Small Commercial	Transportation
Fuel	Natural gas, On-site or Directed Biogas, Others	Natural gas, On-Site or Directed Biogas, Others	Natural Gas	Natural Gas	Natural Gas	Hydrogen
Advantages	High Efficiency, Scalable, Fuel Flexible & CHP	High Efficiency, Fuel Flexible & CHP	High Efficiency	CHP	Load Following & CHP	Load Following & Low Temperature
Electrical efficiency	43%~~-47~~-47% to 60%	~~50%~~43% - ~~60%~~47%	41% - 65%	40% - 42%	25% - 35%	25% - 35%
Combined Heat & Power (CHP)	Yes, Steam & Chilling	Yes, Hot Water	Depends on Technology Used	Limited: Hot Water, Chilling	Suitable for Facility Heating	noNo
Carbon Capture	Yes	noNo	noNo	No	noNo	noNo
Distributed Hydrogen	Yes	No	Yes	noNo	noNo	noNo
Reversible for Storage	noNo	No	Yes	noNo	noNo	noNo

		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⁽¹⁾		December 2030⁽²⁾⁽¹⁾
Taufkirchen, Germany	Manufacturing and Administrative		20,000	June ~~2018~~2023
Calgary, Alberta, Canada	Research and Development		32,220	January 2020⁽²⁾

	Common Stock Price
	High		Low
First quarter 2018 (through January 2, 2018)	$	2.31	$	1.50
Year Ended October 31, 2017
First Quarter	$	3.40	$	1.40
Second Quarter	$	1.98	$	1.00
Third Quarter	$	1.79	$	0.80
Fourth Quarter	$	2.49	$	1.33
Year Ended October 31, 2016
First Quarter	$	12.24	$	4.51
Second Quarter	$	8.08	$	4.56
Third Quarter	$	8.88	$	5.02
Fourth Quarter	$	5.67	$	3.35

	Per Share
Average sale price	$	8.38
Average commission	$	0.05
Average proceeds to us	$	8.33

~~Date of Board/Audit and Finance Committee Approval of Sales Plan~~	~~Maximum Number of Shares Authorized for Sale Pursuant to Sales Plan~~
~~6/17/2005~~		~~158,333~~
~~1/22/2007~~		~~500,000~~
~~1/11/2010~~		~~500,000~~
~~9/18/2013~~		~~583,333~~
~~3/26/2014~~		~~583,333~~
~~6/18/2014~~		~~833,333~~
~~9/23/2014~~		~~416,666~~
~~12/17/2014~~		~~416,666~~
~~4/1/2015~~		~~1,000,000~~
~~9/4/2015~~		~~1,000,000~~
~~12/16/2015~~		~~4,500,000~~
~~6/6/2016~~		~~8,700,000~~

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 – August 31		1,296	$	1.53		—		—
September 1 – September 30	370		$	1.60		—		—
October 1 – October 31		29,392	$	2.19		—		—
Total		31,058	$	1.77		—		—

Project Name	Location	Power Off-Taker	Rated Capacity (MW)	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	10
UCI Medical Center (“UCI”)	Orange, CA	UCI (CA University Hospital)	1.4	Q1 '16	19
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
		Total MW Operating:	26.1

Index to the Consolidated Financial Statements		Page

Report of Independent Registered Public Accounting Firm		8294

Consolidated Balance Sheets at October 31, ~~2017~~2019 and ~~2016~~2018		8395

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015~~2017		8496

Consolidated Statements of Changes in Equity ~~(Deficit)~~ for the Years Ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015~~2017		8597

Consolidated Statements of Cash Flows for the Years Ended October 31, ~~2017, 2016~~2019, 2018 and ~~2015~~2017		8698

Notes to Consolidated Financial Statements		8799

				Adjustment			Balance at
	October 31,			due to			November 1,
	2018			Topic 606			2018
ASSETS
Unbilled receivables	$	13,759		$	471		$	14,230
Other assets		13,505			(132	)		13,373

LIABILITIES
Accrued liabilities	$	7,632		$	995		$	8,627
Deferred revenue, current portion		11,347			(240	)		11,107
Long-term deferred revenue		16,793			6,238			23,031

EQUITY
Accumulated deficit	$	(990,867	)	$	(6,654	)	$	(997,521	)

	October 31, 2019
							Balances without
							adoption of
	As reported			Adjustments			Topic 606
ASSETS
Unbilled receivables	$	7,684		$	97		$	7,781
Other assets		9,489			(1,024	)		8,465

LIABILITIES
Accrued liabilities	$	11,452		$	(1,097	)	$	10,355
Deferred revenue		11,471			488			11,959
Long-term deferred revenue		28,705			(9,579	)		19,126

EQUITY
Accumulated deficit	$	(1,075,089	)	$	9,261		$	(1,065,828	)

	For the Year Ended October 31, 2019
						Balances without
						adoption of
	As reported			Adjustments		Topic 606
Total revenues	$	60,752		$	4,085	$	64,837
Total cost of revenues		82,021			1,478		83,499
Gross loss		(21,269	)		2,607		(18,662	)
Administrative and selling expenses		31,874			-		31,874
Research and development expenses		13,786			-		13,786
Loss from operations		(66,929	)		2,607		(64,322	)
Interest expense		(10,623	)		-		(10,623	)
Other income, net		93			-		93
Loss before provision for income taxes		(77,459	)		2,607		(74,852	)
Provision for income taxes		(109	)		-		(109	)
Net loss	$	(77,568	)	$	2,607	$	(74,961	)

	2017		2016
Long-term accounts receivable ⁽¹⁾	$	—	$	8,353
Long-term unbilled recoverable costs ⁽²⁾		12,806		5,714
Deferred finance costs ⁽³⁾		97		225
Long-term stack residual value ⁽⁴⁾		987		—
Other ⁽⁵⁾		2,627		2,123
Other assets, net	$	16,517	$	16,415

	2019		2018
Long-term stack residual value ⁽¹⁾	$	987	$	1,206
Long-term unbilled receivables ⁽²⁾		3,588		9,385
Other ⁽³⁾		4,914		2,914
Other assets	$	9,489	$	13,505

	2017		2016
Accrued payroll and employee benefits	$	5,315	$	4,183
Accrued contract loss		37		—
Accrued product warranty costs ⁽¹⁾		348		516
Accrued material purchases ⁽²⁾		2,396		6,908
Accrued service agreement costs ⁽³⁾		3,319		6,030
Accrued legal, taxes, professional and other ⁽⁴⁾		6,966		3,263
	$	18,381	$	20,900

	Series A Warrants		Series B Warrants			Series C Warrants			Series D Warrants			NRG Warrants
Balance as of October 31, 2016		7,680,000		3,826,000			—			—			166,000
Warrants issued on May 3, 2017							12,000,000			12,000,000			—
Warrants exercised		—		(3,826,000	)		(419,100	)		(9,415,826	)		—
Warrants expired		—		—			—			—			(166,000	)
Balance as of October 31, 2017		7,680,000		-			11,580,900			2,584,174			-

	Series A Warrants			Series C Warrants		Orion Warrants (a)
Balance as of October 31, 2018		640,000			964,114		-
Warrants exchanged		(640,000	)		—		—
Warrants issued		—			—		6,000,000
Balance as of October 31, 2019		-			964,114		6,000,000

				Weighted- Average Option
Options	Shares			Price
Outstanding as of October 31, 2016		246,923		$	44.88
Granted		103,819		$	1.50
Canceled		(40,792	)	$	94.63
Outstanding as of October 31, 2017		309,950		$	23.81

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
Range of	Number		Contractual		Exercise		Number		Exercise
Exercise Prices	outstanding		Life		Price		exercisable		Price
$0.00 — $3.23		103,819		9.4	$	1.50		77,865	$	1.50
$3.24 — $61.20		165,164		5.2	$	18.72		161,832	$	18.86
$61.21 — $119.04		40,833		0.3	$	100.78		40,833	$	100.78
$119.05 — $176.88		134		0.6	$	121.56		134	$	121.56
		309,950		6.0	$	23.81		280,664	$	26.00

	~~Number of~~
~~ESPP~~	~~Shares~~
~~Balance as of October 31, 2016~~		~~62,226~~
~~Issued at $2.85 per share~~		~~(25,988~~	)
~~Issued at $0.98 per share~~		~~(36,168~~	)
~~Available for issuance as of October 31, 2017~~		70

	October 31, 2017			October 31, 2016		October 31, 2015
May 2017 Offering – Series C Warrants		11,580,900	��		—		—
May 2017 Offering – Series D Warrants		2,584,174			—		—
July 2016 Offering - Series A Warrants		7,680,000			7,680,000		—
July 2016 Offering - Series B Warrants		—			3,826,000		—
July 2014 Offering - NRG Warrants		—			166,666		166,666
Outstanding options to purchase common stock		309,950			246,923		257,769
Unvested RSAs		1,898,692			915,831		450,783
Series C Preferred Shares to satisfy conversion requirements⁽¹⁾		18,097,826			—		—
5% Series B Cumulative Convertible Preferred Stock ⁽²⁾		454,043			454,043		454,043
Series 1 Preferred Shares to satisfy conversion requirements⁽²⁾		15,167			15,167		15,167
Total potentially dilutive securities		42,620,752			13,304,630		1,344,428

	October 31, 2019		October 31, 2018		October 31, 2017
Orion Warrants		6,000,000		—		—
May 2017 Offering – Series C Warrants		964,114		964,114		965,075
May 2017 Offering – Series D Warrants		—		—		215,348
July 2016 Offering – Series A Warrants		—		640,000		640,000
Outstanding options to purchase common stock		24,927		26,958		25,830
Unvested Restricted Stock Awards		24,574		93,286		158,224
Unvested Restricted Stock Units		166,541		270,929		92,500
Series C Preferred Shares to satisfy conversion requirements⁽¹⁾		—		499,556		1,508,152
Series D Preferred Shares to satisfy conversion requirements⁽²⁾		—		1,852,657		—
5% Series B Cumulative Convertible Preferred Stock ⁽³⁾		37,837		37,837		37,837
Series 1 Preferred Shares to satisfy conversion requirements⁽³⁾		1,264		1,264		1,264
Total potentially dilutive securities		7,219,257		4,386,601		3,644,230

	Year Ended October 31,
	2017		2016		2015
Cash interest paid	$	2,715	$	1,941	$	677
Income taxes paid	$	2	$	80	$	8
Noncash financing and investing activity:
Common stock issued for Employee Stock Purchase Plan in settlement of prior year accrued employee contributions	$	50	$	105	$	169
Noncash reclass from inventory to project assets	$	7,282	$	—	$	—
Assumption of debt in conjunction with asset acquisition	$	2,289	$	—	$	—
Acquisition of project assets	$	2,386	$	—	$	—
Accrued sale of common stock, cash received in a subsequent period	$	—	$	357	$	494
Accrued purchase of fixed assets, cash paid in subsequent period	$	2,490	$	3,952	$	—
Accrued purchase of project assets, cash paid in subsequent period	$	2,380	$	1,797	$	—

Plan Category	Number of Common Shares to be issued upon exercise of outstanding options and rights		Weighted-average exercise price of outstanding options and rights		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders:
Equity incentive plans⁽¹⁾		24,927	$	104.73		65,468
Employee stock purchase plan		—		—		34,539
Total		24,927	$	104.73		100,007

PRINCIPAL OCCUPATION

~~Arthur A. Bottone~~Jason B. Few
President, Chief Executive Officer and Chief ~~Executive~~Commercial Officer

Mr. ~~Bottone joined FuelCell Energy in February 2010 as Senior Vice President and Chief Commercial Officer and~~Few was ~~promoted to~~appointed President and Chief Executive Officer in ~~February 2011.~~August 2019 and Chief Commercial Officer in September 2019 and has served as a director since 2018. Mr. Bottone's focus is to accelerate and diversify global revenue growth to achieve profitability by capitalizing on heightened global demand for clean and renewable energy. Mr. Bottone has broad experience inFew chairs the ~~power generation field, including traditional central generation and alternative energy.~~Executive Committee of the Board of Directors (the “Board”). Prior to joining FuelCell Energy, Mr. ~~Bottone spent 25 years at Ingersoll Rand, a diversified global industrial company, including~~Few served as President of Sustayn Analytics LLC, a cloud-based software waste and recycling optimization company, since 2018, and as the Founder and Senior Managing Partner of BJF Partners LLC, a privately held strategic consulting firm, since 2016. Mr. Few has over 30 years of experience increasing enterprise value for Global Fortune 500 and privately-held technology, telecommunications, technology and energy firms. He has overseen transformational opportunities across the technology and industrial energy sectors, in roles including Founder and Senior Managing Partner of BJF Partners, LLC; President and Chief Executive Officer of Continuum Energy, ~~Systems business.~~an energy products and services company, from 2013-2016; various roles including Executive Vice President and Chief Customer Officer of NRG Energy, Inc., an integrated energy company, from 2011 to 2012; and from 2008 to 2009, Vice President, Smart Energy and from 2009 to 2012, President of Reliant Energy, a retail electricity provider. Mr. ~~Bottone's qualifications include extensive global business development, technology commercialization, power generation project development~~Few also has served as ~~well as acquisition and integration experience.~~a Senior Advisor to Verve Industrial Protection, an industrial cybersecurity software company, since 2016.
Mr. ~~Bottone~~Few was elected to the board of Marathon Oil (NYSE: MRO) effective April 1, 2019, and is a member of Marathon Oil’s Audit and Finance and Corporate Governance and Nominating Committees.
Mr. Few received ~~an undergraduate degree~~his Bachelor’s Degree in ~~Mechanical Engineering~~Computer Systems in Business from ~~Georgia Institute~~Ohio University, and a MBA from Northwestern University’s J.L. Kellogg Graduate School of ~~Technology in 1983, and received a Certificate of Professional Development from The Wharton School, University of Pennsylvania in 2004.~~Management.

Michael S. Bishop
~~Senior~~Executive Vice President, Chief Financial Officer and Treasurer

Mr. Bishop was appointed ~~Senior~~Executive Vice President in June 2019 and has served as the Company’s Chief Financial Officer and Treasurer insince June 2011. Mr. Bishop previously served as Senior Vice President of the Company from June 2011 to June 2019. He has more than 20 years of experience in financial operations and management with public high growth technology companies with a focus on capital raising, project finance, debt/treasury management, investor relations, strategic planning, internal controls, and organizational development. Since joining the Company in 2003, Mr. Bishop has held a succession of financial leadership roles, including Assistant Controller, Corporate Controller and Vice President and Controller. Prior to joining ~~FuelCell Energy,~~the Company, Mr. Bishop held finance and accounting positions at TranSwitch Corporation, Cyberian Outpost, Inc. and United Technologies, Inc. He is a certified public accountant and began his professional career at McGladrey and Pullen, ~~LLP.~~LLP (now RSM US LLP). Mr. Bishop also served four years in the United States Marine Corps.
Mr. Bishop received a Bachelor of Science in Accounting from Boston University ~~in 1993~~ and a MBA from the University of ~~Connecticut in 1999.~~Connecticut.