10-Q 1 fcel-10q_20190731.htm 10-Q fcel-10q_20190731.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended July 31, 2019

OR

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

For the transition period from             to

Commission file number: 1-14204

 

FUELCELL ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

06-0853042

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

3 Great Pasture Road

Danbury, Connecticut

 

06810

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (203) 825-6000

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

FCEL

 

The Nasdaq Stock Market LLC

(Nasdaq Global Market)

 

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

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

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

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

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

Number of shares of common stock, par value $0.0001 per share, outstanding as of September 6, 2019:  125,914,240

 

 

 


FUELCELL ENERGY, INC.

FORM 10-Q

Table of Contents

 

 

 

 

 

Page

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Consolidated Financial Statements (unaudited).

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets as of July 31, 2019 and October 31, 2018.

 

3

 

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss for the three months ended July 31, 2019 and 2018.

 

4

 

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss for the nine months ended July 31, 2019 and 2018.

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity for the three and nine months ended July 31, 2019.

 

6

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity for the three and nine months ended July 31, 2018.

 

7

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended July 31, 2019 and 2018.

 

8

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements.

 

9

 

 

 

 

 

Item 2.

 

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

 

35

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk.

 

60

 

 

 

 

 

Item 4.

 

Controls and Procedures.

 

60

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings.

 

62

 

 

 

 

 

Item 1A.

 

Risk Factors.

 

62

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

77

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities.

 

77

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures.

 

77

 

 

 

 

 

Item 5.

 

Other Information.

 

77

 

 

 

 

 

Item 6.

 

Exhibits.

 

78

 

 

 

 

 

Signatures

 

 

 

82

 

 

2


FUELCELL ENERGY, INC.

Consolidated Balance Sheets

(Unaudited)

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

 

 

 

July 31,

 

 

October 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

16,018

 

 

$

39,291

 

Restricted cash and cash equivalents - short-term

 

 

1,381

 

 

 

5,806

 

Accounts receivable, net

 

 

3,705

 

 

 

9,280

 

Unbilled receivables

 

 

8,186

 

 

 

13,759

 

Inventories

 

 

59,830

 

 

 

53,575

 

Other current assets

 

 

7,254

 

 

 

8,592

 

Total current assets

 

 

96,374

 

 

 

130,303

 

Restricted cash and cash equivalents - long-term

 

 

28,400

 

 

 

35,142

 

Inventories - long-term

 

 

2,179

 

 

 

 

Project assets

 

 

156,393

 

 

 

99,600

 

Property, plant and equipment, net

 

 

42,406

 

 

 

48,204

 

Goodwill

 

 

4,075

 

 

 

4,075

 

Intangible assets

 

 

21,588

 

 

 

9,592

 

Other assets

 

 

10,019

 

 

 

13,505

 

Total assets

 

$

361,434

 

 

$

340,421

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

43,416

 

 

$

17,596

 

Accounts payable

 

 

30,250

 

 

 

22,594

 

Accrued liabilities

 

 

8,582

 

 

 

7,632

 

Deferred revenue

 

 

15,650

 

 

 

11,347

 

Preferred stock obligation of subsidiary

 

 

950

 

 

 

952

 

Total current liabilities

 

 

98,848

 

 

 

60,121

 

Long-term deferred revenue

 

 

22,190

 

 

 

16,793

 

Long-term preferred stock obligation of subsidiary

 

 

15,933

 

 

 

14,965

 

Long-term debt and other liabilities

 

 

79,696

 

 

 

71,619

 

Total liabilities

 

 

216,667

 

 

 

163,498

 

Redeemable Series B preferred stock (liquidation preference of $64,020 as of

   July 31, 2019 and October 31, 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 $25 and $30,680 as

   of July 31, 2019 and October 31, 2018, respectively)

 

 

27

 

 

 

27,392

 

Total equity:

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock ($0.0001 par value); 225,000,000 shares

   authorized as of July 31, 2019 and October 31, 2018;

   118,387,637 and 7,972,686 shares issued and outstanding as of July 31, 2019

   and October 31, 2018, respectively

 

 

12

 

 

 

1

 

Additional paid-in capital

 

 

1,125,212

 

 

 

1,073,463

 

Accumulated deficit

 

 

(1,039,910

)

 

 

(990,867

)

Accumulated other comprehensive loss

 

 

(431

)

 

 

(403

)

Treasury stock, Common, at cost (42,496 and 13,042 shares as of July 31, 2019

   and October 31, 2018, respectively)

 

 

(466

)

 

 

(363

)

Deferred compensation

 

 

466

 

 

 

363

 

Total stockholders’ equity

 

 

84,883

 

 

 

82,194

 

Total liabilities and stockholders' equity

 

$

361,434

 

 

$

340,421

 

 

See accompanying notes to consolidated financial statements.

3


FUELCELL ENERGY, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

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

 

 

 

Three Months Ended July 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

Product

 

$

 

 

$

1,328

 

Service and license

 

 

11,496

 

 

 

5,549

 

Generation

 

 

5,448

 

 

 

1,695

 

Advanced Technologies

 

 

5,768

 

 

 

3,538

 

Total revenues

 

 

22,712

 

 

 

12,110

 

Costs of revenues:

 

 

 

 

 

 

 

 

Product

 

 

4,547

 

 

 

4,099

 

Service and license

 

 

1,102

 

 

 

5,997

 

Generation

 

 

5,726

 

 

 

1,375

 

Advanced Technologies

 

 

3,372

 

 

 

2,695

 

Total costs of revenues

 

 

14,747

 

 

 

14,166

 

Gross profit (loss)

 

 

7,965

 

 

 

(2,056

)

Operating expenses:

 

 

 

 

 

 

 

 

Administrative and selling expenses

 

 

7,058

 

 

 

6,100

 

Research and development expenses

 

 

1,977

 

 

 

6,318

 

Total costs and expenses

 

 

9,035

 

 

 

12,418

 

Loss from operations

 

 

(1,070

)

 

 

(14,474

)

Interest expense

 

 

(3,536

)

 

 

(2,434

)

Other (expense) income, net

 

 

(685

)

 

 

1,042

 

Loss before provision for income taxes

 

 

(5,291

)

 

 

(15,866

)

Provision for income taxes

 

 

(20

)

 

 

(15

)

Net loss

 

 

(5,311

)

 

 

(15,881

)

Series B preferred stock dividends

 

 

(810

)

 

 

(800

)

Series C preferred stock deemed contributions (dividends)

 

 

884

 

 

 

(939

)

Series D preferred stock deemed dividends

 

 

(3,091

)

 

 

 

Net loss attributable to common stockholders

 

$

(8,328

)

 

$

(17,620

)

Loss per share basic and diluted:

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

$

(0.18

)

 

$

(2.45

)

Basic and diluted weighted average shares outstanding

 

 

45,069,911

 

 

 

7,191,457

 

 

 

 

Three Months Ended July 31,

 

 

 

2019

 

 

2018

 

Net loss

 

$

(5,311

)

 

$

(15,881

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

105

 

 

 

(128

)

Total comprehensive loss

 

$

(5,206

)

 

$

(16,009

)

 

See accompanying notes to consolidated financial statements.

4


FUELCELL ENERGY, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

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

 

 

 

Nine Months Ended July 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

Product

 

$

 

 

$

43,058

 

Service and license

 

 

25,866

 

 

 

12,859

 

Generation

 

 

8,560

 

 

 

5,329

 

Advanced Technologies

 

 

15,285

 

 

 

10,307

 

Total revenues

 

 

49,711

 

 

 

71,553

 

Costs of revenues:

 

 

 

 

 

 

 

 

Product

 

 

14,362

 

 

 

44,183

 

Service and license

 

 

15,166

 

 

 

11,934

 

Generation

 

 

9,047

 

 

 

5,020

 

Advanced Technologies

 

 

9,016

 

 

 

8,466

 

Total costs of revenues

 

 

47,591

 

 

 

69,603

 

Gross profit

 

 

2,120

 

 

 

1,950

 

Operating expenses:

 

 

 

 

 

 

 

 

Administrative and selling expenses

 

 

23,622

 

 

 

19,327

 

Research and development expenses

 

 

12,435

 

 

 

15,385

 

Total costs and expenses

 

 

36,057

 

 

 

34,712

 

Loss from operations

 

 

(33,937

)

 

 

(32,762

)

Interest expense

 

 

(7,807

)

 

 

(6,634

)

Other (expense) income, net

 

 

(556

)

 

 

3,138

 

Loss before (provision) benefit for income taxes

 

 

(42,300

)

 

 

(36,258

)

(Provision) benefit for income taxes

 

 

(89

)

 

 

3,020

 

Net loss

 

 

(42,389

)

 

 

(33,238

)

Series A warrant exchange

 

 

(3,169

)

 

 

 

Series B preferred stock dividends

 

 

(2,410

)

 

 

(2,400

)

Series C preferred stock deemed dividends and redemption value adjustment, net

 

 

(6,522

)

 

 

(8,601

)

Series D preferred stock deemed dividends and redemption accretion

 

 

(9,752

)

 

 

 

Net loss attributable to common stockholders

 

$

(64,242

)

 

$

(44,239

)

Loss per share basic and diluted:

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

$

(2.97

)

 

$

(6.70

)

Basic and diluted weighted average shares outstanding

 

 

21,608,427

 

 

 

6,607,687

 

 

 

 

Nine Months Ended July 31,

 

 

 

2019

 

 

2018

 

Net loss

 

$

(42,389

)

 

$

(33,238

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(28

)

 

 

(41

)

Total comprehensive loss

 

$

(42,417

)

 

$

(33,279

)

 

See accompanying notes to consolidated financial statements.

 

5


FUELCELL ENERGY, INC.

Consolidated Statements of Changes in Equity

(Unaudited)

(Amounts in thousands)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

 

 

Deferred

Compensation

 

 

Total

Equity

 

Balance, October 31, 2018

 

 

7,972,686

 

 

$

1

 

 

$

1,073,463

 

 

$

(990,867

)

 

$

(403

)

 

$

(363

)

 

$

363

 

 

$

82,194

 

Share based compensation

 

 

 

 

 

 

 

 

987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

987

 

Fee adjustment for common stock issuance

 

 

 

 

 

 

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90

 

Common stock issued under benefit plans, net

   of taxes paid upon vesting of restricted stock

   awards

 

 

1,946

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

Series C convertible preferred stock

   conversions

 

 

127,829

 

 

 

 

 

 

1,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,974

 

Series C convertible preferred stock

   adjustment for beneficial conversion feature

 

 

 

 

 

 

 

 

6,586

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,586

 

Series C convertible stock redemption value

   adjustments

 

 

 

 

 

 

 

 

(8,550

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,550

)

Series D convertible preferred stock

   conversions

 

 

932,144

 

 

 

 

 

 

4,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,334

 

Series D convertible preferred stock

   redemption accretion

 

 

 

 

 

 

 

 

(3,793

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,793

)

Preferred dividends — Series B

 

 

 

 

 

 

 

 

(800

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(800

)

Impact of the adoption of Topic 606

 

 

 

 

 

 

 

 

 

 

 

(6,654

)

 

 

 

 

 

 

 

 

 

 

 

(6,654

)

Effect of foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Net loss attributable to FuelCell Energy, Inc.

 

 

 

 

 

 

 

 

 

 

 

(17,548

)

 

 

 

 

 

 

 

 

 

 

 

(17,548

)

Balance, January 31, 2019

 

 

9,034,605

 

 

$

1

 

 

$

1,074,318

 

 

$

(1,015,069

)

 

$

(396

)

 

$

(363

)

 

$

363

 

 

$

58,854

 

Common stock issued, non-employee

   compensation

 

 

29,454

 

 

 

 

 

 

102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102

 

Share based compensation

 

 

 

 

 

 

 

 

955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

955

 

Taxes paid upon vesting of restricted stock

   awards, net of stock issued under benefit

   plans

 

 

52,784

 

 

 

 

 

 

(219

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(219

)

Series A warrant exchange

 

 

500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C convertible preferred stock

   conversions

 

 

2,127,528

 

 

 

 

 

 

10,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,355

 

Series C convertible preferred stock

   modification

 

 

 

 

 

 

 

 

(6,047

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,047

)

Series D convertible preferred stock

   conversions

 

 

1,994,413

 

 

 

 

 

 

6,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,305

 

Preferred dividends — Series B

 

 

 

 

 

 

 

 

(800

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(800

)

Effect of foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140

)

 

 

 

 

 

 

 

 

(140

)

Adjustment for deferred compensation

 

 

(29,454

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(103

)

 

 

103

 

 

 

 

Net loss attributable to FuelCell Energy, Inc.

 

 

 

 

 

 

 

 

 

 

 

(19,530

)

 

 

 

 

 

 

 

 

 

 

 

(19,530

)

Balance, April 30, 2019

 

 

13,709,330

 

 

$

1

 

 

$

1,084,969

 

 

$

(1,034,599

)

 

$

(536

)

 

$

(466

)

 

$

466

 

 

$

49,835

 

Sale of common stock, net of fees

 

 

43,997,807

 

 

 

3

 

 

 

16,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,199

 

Share based compensation

 

 

 

 

 

 

 

 

383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

383

 

Taxes paid upon vesting of restricted stock

   awards, net of stock issued under benefit

   plans

 

 

437

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

Series C convertible preferred stock

   conversions

 

 

1,658,861

 

 

 

2

 

 

 

3,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,162

 

Series D convertible preferred stock

   conversions

 

 

59,021,202

 

 

 

6

 

 

 

20,513

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,519

 

Effect of foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

 

105

 

Net loss attributable to FuelCell Energy, Inc.

 

 

 

 

 

 

 

 

 

 

 

(5,311

)

 

 

 

 

 

 

 

 

 

 

 

(5,311

)

Balance, July 31, 2019

 

 

118,387,637

 

 

$

12

 

 

$

1,125,212

 

 

$

(1,039,910

)

 

$

(431

)

 

$

(466

)

 

$

466

 

 

$

84,883

 

 

See accompanying notes to consolidated financial statements.

6


FUELCELL ENERGY, INC.

Consolidated Statements of Changes in Equity

(Unaudited)

(Amount in thousands)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

 

 

Deferred

Compensation

 

 

Total

Equity

 

Balance, October 31, 2017

 

 

5,791,068

 

 

$

1

 

 

$

1,045,203

 

 

$

(943,533

)

 

$

(415

)

 

$

(280

)

 

$

280

 

 

$

101,256

 

Exercise of warrants

 

 

172,200

 

 

 

 

 

 

2,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,647

 

Share based compensation

 

 

 

 

 

 

 

 

617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

617

 

Taxes paid upon vesting of restricted stock

   awards, net of stock issued under benefit

   plans

 

 

(8,912

)

 

 

 

 

 

(75

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(75

)

Series C convertible preferred stock

   conversions

 

 

512,487