Task: You are provided with the Audited Financial Statements of Fuelcell Energy Inc (look for Attachment-1 in Moodle); a company based in Connecticut and having significant operations in Alberta, Canada; for year ended Oct 31, 2021. The Financial Statement contains three years of cash flow statement. (2019-2021) You, Aspiring Accountant, is tasked to review the statement of income, statement of financial positions, cash flow statement, and accompanying notes as a group and answer the following questions. Q1: For each adjustment mentioned in Operating Activities of Cash Flow Statement of 2021, explain, why the item was added or subtracted in the cash flow statement. In your explanation, relate each item to the Statement of Operations and Comprehensive Loss line item. For Example: Depreciation and amortization is related to Administrative and Selling Expenses. Q2: What is the main source of Cash for Fuelcell in 2021? Q3: What are the three top cash outflow items for Fuelcell in 2021?/nQ4: Create a waterfall chart for 2021 and 2020 for Fuelcell using the cash flow statement. (Reference: Dollarama Cash Flow 2021, Analytics in Action 22.1, textbook)/n Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to the Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at October 31, 2021 and 2020 Page 87 88 89 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended October 31, 2021, 2020 and 2019 90 Consolidated Statements of Changes in Equity for the Years Ended October 31, 2021, 2020 and 2019 91 Consolidated Statements of Cash Flows for the Years Ended October 31, 2021, 2020 and 2019 Notes to Consolidated Financial Statements 92 ྣ ང སྔགླ 93 86 86 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors FuelCell Energy, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of FuelCell Energy, Inc. and subsidiaries (the Company) as of October 31, 2021 and 2020, 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, 2021, and the related notes (collectively, the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of October 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended October 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2021 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Change in Accounting Principle As discussed in Note 13 to the consolidated financial statements, the Company has changed its method of accounting for leases as of November 1, 2019 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases. Basis for Opinions The Company'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 the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our 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 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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements 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. 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. Definition and Limitations of Internal Control Over Financial Reporting 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 87 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. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. Estimated costs at completion for certain service agreements As discussed in Note 1 to the consolidated financial statements, the Company's 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 platforms under the service agreement generate a minimum power output. The consideration for each service agreement is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. We identified the evaluation of total estimated costs at completion for certain service agreements as a critical audit matter. Specifically, evaluating the Company's total estimated costs at completion required complex auditor judgement to assess the estimated number of fuel cell modules to be replaced during the term of the agreements and their associated costs. These areas involved the application of significant estimation by management and contained significant measurement uncertainty. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company's process to develop total estimated costs at completion for service agreements. This included a control related to the estimated number of fuel cell modules to be replaced during the term of the agreement and their associated costs. For certain service agreements, we evaluated the estimated number of fuel cell modules to be replaced and their associated costs by: • . comparing the estimated number of fuel cell modules to be replaced to the replacement plan developed and maintained by the Company's service department comparing the total estimated costs to manufacture fuel cell modules to historical actual costs comparing current period total estimated costs at completion to previous total estimated costs at completion and assessing the cause of certain revisions assessing the number of fuel cell module replacements that will occur during the contract term using the useful life of fuel cell modules. /s/ KPMG LLP We have served as the Company's auditor since 1995. Hartford, Connecticut December 29, 2021 88 88 FUELCELL ENERGY, INC. Consolidated Balance Sheets October 31, 2021 and 2020 (Amounts in thousands, except share and per share amounts) ASSETS October 31, 2021 October 31, 2020 Current assets: Cash and cash equivalents, unrestricted Restricted cash and cash equivalents - short-term Accounts receivable, net Unbilled receivables Inventories Other current assets Total current assets Restricted cash and cash equivalents - long-term Inventories - long-term Project assets Property, plant and equipment, net Operating lease right-of-use assets, net Goodwill Intangible assets, net Other assets 432,213 149,867 11,268 9,233 14,730 9,563 8,924 8,041 67,074 50,971 9,177 6,306 543,386 233,981 16,731 32,952 4,586 8,986 223,277 161,809 39,416 36,331 8,109 10,098 4,075 4,075 18,670 19,967 16,998 15,339 Total assets (1) $ 875,248 $ 523,538 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt Current portion of operating lease liabilities Accounts payable 10,085 $ 21,366 1,032 939 19,267 9,576 Accrued liabilities Deferred revenue 16,099 15,681 6,287 10,399 Preferred stock obligation of subsidiary 938 Total current liabilities 52,770 58,899 Long-term deferred revenue 30,427 31,501 Long-term preferred stock obligation of subsidiary 18,265 Long-term operating lease liabilities 8,093 9,817 Long-term debt and other liabilities 78,633 150,651 Total liabilities 169,923 269,133 Redeemable Series B preferred stock (liquidation preference of $64,020 as of October 31, 2021 and October 31, 2020) 59,857 59,857 Redeemable noncontrolling interests 3,030 Total equity: Stockholders' equity: Common stock ($0.0001 par value); 500,000,000 and 337,500,000 shares authorized as of October 31, 2021 and October 31, 2020, respectively; 366,618,693 and 294,706,758 shares issued and outstanding as of October 31, 2021 and October 31, 2020, respectively 37 Additional paid-in capital 1,908,471 Accumulated deficit (1,265,251) 29 1,359,454 (1,164,196) Accumulated other comprehensive loss (819) (739) Treasury stock, Common, at cost (73,430 and 56,411 shares as of October 31, 2021 and October 31, 2020, respectively) (586) (432) Deferred compensation 586 432 Total equity 642,438 194,548 $ 875,248 $ 523,538 (1) Total liabilities, redeemable noncontrolling interests and stockholders' equity The consolidated assets as of October 31, 2021 and 2020 include $54,375 and $0, respectively, of assets of the variable interest entity ("VIE”) that can only be used to settle obligations of the VIE. These assets include cash of $1,364 and $0 as of October 31, 2021 and 2020, respectively, and project assets of $53,012 and $0 as of October 31, 2021 and 2020, respectively. See accompanying notes to consolidated financial statements. 89 88 FUELCELL ENERGY, INC. Consolidated Statements of Operations and Comprehensive Loss For the Years Ended October 31, 2021, 2020, and 2019 (Amounts in thousands, except share and per share amounts) 2021 2020 2019 Revenues: Product Service and license 481 19,791 25,133 26,618 Generation Advanced Technologies Total revenues Costs of revenues: Product Service and license Generation Advanced Technologies Total costs of revenues Gross loss Operating expenses: Administrative and selling expenses Research and development expenses Total costs and expenses Loss from operations 24,027 19,943 14,034 25,767 25,795 19,619 69,585 70,871 60,752 7,976 9,924 18,552 24,735 24,545 18,943 36,017 27,873 31,642 16,496 16,254 12,884 85,224 78,596 82,021 (15,639) (7,725) (21,269) 37,948 26,644 31,874 11,315 4,797 13,786 49,263 31,441 45,660 (64,902) (39,166) (66,929) Interest expense (7,363) (15,294) (10,623) Change in fair value of common stock warrant liability (15,974) (37,086) Extinguishment of Series 1 preferred share obligation (934) (Loss) gain on extinguishment of debt and financing obligation (11,156) 1,801 Other (expense) income, net (694) 684 93 Loss before provision for income taxes (101,023) (89,061) (77,459) Provision for income taxes (46) (109) Net loss (101,025) (89,107) (77,568) Net income attributable to redeemable noncontrolling interest 30 Net loss attributable to FuelCell Energy, Inc. (101,055) (89,107) (77,568) Series A warrant exchange (3,169) Series B preferred stock dividends (3,200) (3,331) (3,231) Series C Preferred stock deemed dividends and redemption value adjustment, net (6,522) Series D Preferred stock deemed dividends and redemption accretion (9,755) Net loss attributable to common stockholders $ (104,255) $ (92,438) (100,245) Loss per share basic and diluted: Net loss per share attributable to common stockholders Basic and diluted weighted average shares outstanding $ (0.31) $ 334,742,346 (0.42) $ (1.82) 221,960,288 55,081,266 2021 2020 2019 Net loss Other comprehensive loss: $ (101,025) $ (89,107) $ (77,568) Foreign currency translation adjustments (80) Total comprehensive loss $ (101,105) $ (92) (89,199) $ (77,812) (244) See accompanying notes to consolidated financial statements 06 90/n ACCT3201 Intermediate Accounting II Group Assignment Cash Flow Statement & other information Analysis Learning Outcome Evaluate the statement of cash flows and other financial statement note disclosures. a. Interpret a statement of cash flows. b. Analyze the statement of cash flows and communicate results to assist users with their decision making. c. Review basic and diluted earnings per share. Task: You are provided with the Audited Financial Statements of Fuelcell Energy Inc (look for Attachment-1 in Moodle); a company based in Connecticut and having significant operations in Alberta, Canada; for year ended Oct 31, 2021. The Financial Statement contains three years of cash flow statement. (2019-2021) You, Aspiring Accountant, is tasked to review the statement of income, statement of financial positions, cash flow statement, and accompanying notes as a group and answer the following questions. Q1: For each adjustment mentioned in Operating Activities of Cash Flow Statement of 2021, explain, why the item was added or subtracted in the cash flow statement. In your explanation, relate each item to the Statement of Operations and Comprehensive Loss line item. For Example: Depreciation and amortization is related to Administrative and Selling Expenses. Q2: What is the main source of Cash for Fuelcell in 2021? Q3: What are the three top cash outflow items for Fuelcell in 2021? Q4: Create a waterfall chart for 2021 and 2020 for Fuelcell using the cash flow statement. (Reference: Dollarama Cash Flow 2021, Analytics in Action 22.1, textbook) Q5: Review the Basic and Diluted Earnings per Share (Loss per Share) for Fuelcell for 2021 and 2020. Why are the basic and diluted numbers the same for 2020 and 2021? Q6: Why did Loss per Share reduce in 2021 from 2020, when net loss increased in 2021 from 2020? Q7: On Oct 31, 2021; Fuelcell has 366,618,693 shares outstanding but weighted average shares outstanding was 334,742,346. Explain how the weighted average shared outstanding is less than number of shares outstanding. Submission Guidance: Group Task should be submitted in MS Word in the Moodle Dropbox. Format: 14 pt. Calibri (Body), Single Line Spacing, Word Limit: 1,200. Marking Guide - Q1: There are 18 adjustments in operating activities. For each of the adjustments, use the following guide. A clear statement identifying as Cash Inflow Yes (1 marks) No (0 mark) or Cash Outflow Explanation of why an item is considered a cash inflow or outflow Related to Balance Yes (1 to 2 marks) No (0 mark) Unreasonable / Does Reasonable (1 Sheet/Income Statement not meet requirement mark) line item Total (0 – 4) 4 (0 mark) 0 - Marking Guide – Q2, Q3, Q5, Q6, Q7: Explanation using relevant concepts Yes (1-3 marks) No (0 mark) Using Financial Yes (1 to 2 Statement Number to No (0 mark) marks) support explanation A clear statement of Yes (1 mark) No (0 mark) conclusion Total (0 – 6) 6 0 Marking Guide - 4: Creation of Chart Yes (2 marks) No (0 mark)

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