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Commission file number 1-14204

Indicate by check mark whether the registrant (1) has filed all documents and 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.     x Yes   o No

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of the Registrant's Common Stock, par value $.0001, as of September 11, 2002 was 39,228,828.

See notes to consolidated condensed financial statements

See notes to consolidated condensed financial statements

See notes to consolidated condensed financial statements

See notes to consolidated condensed financial statements

FuelCell Energy, Inc. is engaged in the development and commercialization of carbonate fuel cell technology for stationary power generation. We manufacture carbonate fuel cells and are currently in the process of developing standard products that incorporate our Direct FuelCell^® technology. We expect to incur losses as we expand our product development, increase our production volume and develop our distribution network.

NOTE 2:  BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial statements as of October 31, 2001 have been derived from our audited financial statements. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The interim consolidated condensed financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position as of July 31, 2002, the results of operations for the three and nine months ended July 31, 2002 and 2001, and cash flows for the nine months ended July 31, 2002 and 2001.

The results of operations for the three and nine months ended July 31, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year. The reader should supplement the information in this document with prior disclosures in our 2001 Annual Report on Form 10-K.

Certain reclassifications have been made to the July 2001 consolidated financial statements in order to conform to the 2002 presentation.

Basic and diluted loss per share is calculated based upon the provisions of SFAS No. 128.

We computed EPS without consideration to potentially dilutive instruments due to the fact that losses incurred would make them antidilutive. For the three and nine months ended July 31, 2002 and 2001, the weighted average shares of dilutive stock options, had their effect not been antidilutive, were 5,071,836 and 3,997,252, respectively. For the three and nine months ended July 31, 2002 and 2001, there were 5,133,333 and 4,500,000 warrants to purchase our common stock, respectively, all of which were out-of-the money. These warrants, if dilutive, would be excluded from the calculation of EPS since their vesting is contingent upon certain future performance requirements that are not yet probable. As of September 29, 2002, 1,733,333 warrants will expire.

NOTE 4:  DEPRECIATION

Depreciation is calculated using the straight-line method. Buildings and improvements are depreciated over periods from 10 to 30 years, machinery and equipment from 3 to 8 years and furniture and fixtures from 6 to 10 years. Depreciation expense for the three months ended July 31, 2002 and 2001 was $756,000 and $416,000, respectively. Depreciation expense for the nine months ended July 31, 2002 and 2001 was $2,074,000 and $1,170,000, respectively.

NOTE 5:  INVESTMENTS:  U.S. TREASURY SECURITIES

Investments, which are accounted for as held to maturity, consist of United States Treasuries.

Short-term investments:

These treasuries have maturity dates ranging from September 12, 2002 to July 31, 2003 and estimated yields ranging from 3.875% to 5.875%. As of July 31, 2002, and October 31, 2001, the aggregate fair value, gross holding gains and gross holding losses were as follows:

Long-term investments:

These notes have maturity dates ranging from August 15, 2003 to January 31, 2004, and estimated yields ranging from 3.000% to 5.250%. As of July 31, 2002, and October 31, 2001, the aggregate fair value, gross holding gains and gross holding losses were as follows:

The components of inventory at July 31, 2002 and October 31, 2001 consisted of the following:

NOTE 7:  OTHER CURRENT ASSETS, NET

The components of other current assets at July 31, 2002 and October 31, 2001 consisted of the following:

NOTE 8:  ACCRUED LIABILITIES

The components of accrued liabilities at July 31, 2002 and October 31, 2001 consisted of the following:

NOTE 9:  LONG-TERM DEBT

On June 29, 2000, we entered into a loan agreement, secured by machinery and equipment, and have borrowed $2,214,000. The loan is payable over seven years, with payments of interest only for the first six months and then repaid in monthly installments over the remaining six and one-half years with interest computed annually based on the ten-year U.S. Treasury note plus 2.5%. Our current interest rates at July 31, 2002 and October 31, 2001 were 7.6% and 7.9%, respectively. Our weighted-average interest rates at July 31, 2002 and October 31, 2001 were 7.8% and 7.9%, respectively.

The components of Long-Term debt at July 31, 2002 and October 31, 2001 were as follows:

The following discussion should be read in conjunction with the accompanying Unaudited Consolidated Condensed Financial Statements and Notes thereto included within this report, and our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2001. In addition to historical information, this Form 10-Q and the following discussion contain forward-looking statements, including statements regarding our plans and expectations regarding the development and commercialization of our fuel cell technology. Our actual results could differ materially from those projected. Factors that could cause such a difference include, but are not limited to, those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K filed for the fiscal year ended October 31, 2001.

We are a leading developer of carbonate fuel cell technology for stationary power generation. We have designed and are developing standard fuel cell power plants that offer significant advantages compared to existing power generation technology. These include higher fuel efficiency, significantly lower emissions, quieter operation, lower vibration, flexible siting and permitting requirements, scalability and potentially lower operating, maintenance and generation costs. The exhaust heat by-product can be used for combined cycle application utilizing an unfired gas turbine, and cogeneration applications such as high-pressure steam, district heating and air conditioning.

From our founding in 1969, we focused on developing fuel cells and specialized batteries. These efforts resulted in our obtaining various patents and expertise in these electrochemical technologies. For the last eighteen years, we have received funding from the United States Department of Energy ("DOE"), the United States Department of Defense ("DOD"), and other sources such as MTU-Friedrichshafen GmbH ("MTU"), a division of DaimlerChrysler, to whom we have licensed our fuel cell technology internationally. In April of 2000 and June of 2001, we raised net proceeds of approximately $299,000,000 from additional offerings of our common stock. Since September 2000, we have received an additional $25,000,000 from other equity investment partners.

Our carbonate fuel cell, known as the Direct FuelCell^®, is so named because of its ability to generate electricity directly from a hydrocarbon fuel, such as natural gas, by reforming the fuel inside the fuel cell to produce hydrogen. We believe that this "one-step" process results in a simpler, more efficient and cost-effective energy conversion system compared with external reforming fuel cells.

Our initial market entry commercial products are rated at 250 kW, 1 MW and 2 MW in capacity. Our products are targeted for utility, commercial and industrial customers in the growing distributed generation market for applications up to 10 MW. We are currently conducting field trials, and have conducted successful global field trials of combined heat and power DFC power plants ranging from 250 kW to 2 MW. We are also developing new products, based on our existing power plant design, for applications in the 10 to 50 MW range. Our current focus is to standardize our products, increase production volume and develop our distribution network in an effort to improve reliability and provide greater serviceability of our DFC power plants.

Our revenues and fees on long-term contracts are recognized on a method similar to the percentage-of-completion method. Revenues are recognized proportionally as research and development costs are incurred and compared to the estimated total research and development costs for each contract or field trial. Costs are considered research and development in nature as the benefit to be obtained may represent the design, development, manufacture, conditioning and testing of our fuel cell stacks. In many cases, we are reimbursed only a portion of the costs incurred or to be incurred on the contract.

As we commercialize our fuel cell technology, costs will relate entirely to the delivery of fuel cell products to customers. At the point that our fuel cells are commercialized, estimated costs to complete an individual contract in excess of revenue will be accrued immediately.

Warrants have been issued as sales incentives to certain of our business partners. As we recognize the associated revenue for orders placed in accordance with these sales agreements, a proportional amount of the fair value of the warrants will be recorded against the revenue.

We recognize research and development costs for contracts as incurred. When we build fuel cell stacks, which have not yet been dedicated to a particular contract, we include the manufacturing costs in work-in-process inventory to the extent we estimate them to be recoverable based on the anticipated cost reimbursement for these contracts.

Our cost of research and development contracts reflect costs incurred under specific customer sponsored research and development contracts. These costs consist of both manufacturing and engineering labor, including applicable overhead expenses, materials to build prototype units, materials for testing, and other costs associated with our customer sponsored research and development contracts.

Our research and development expenses reflect costs for research and development projects conducted without specific customer sponsored contracts. These costs consist primarily of labor, overhead, materials to build prototype units, materials for testing, consulting fees and other costs associated with our internal research and development expenses.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 revises the guidance for business combinations and eliminates the pooling method. SFAS No. 142 eliminates the amortization requirement for goodwill and certain other intangible assets and requires that such assets be reviewed periodically for impairment. We adopted SFAS No. 141 upon its adoption with no impact on our financial condition or results of operations. We are required to adopt SFAS No. 142 effective November 1, 2002 and it is anticipated to have no significant impact on our financial condition, results from operations or cash flows upon adoption.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, and development and (or) normal use of the asset. We are required to adopt the provisions of SFAS No. 143 effective November 1, 2002. To accomplish this, we must identify all legal obligations for asset retirements, if any, and determine the fair value of these obligations on the date of adoption. It is not anticipated to have a significant impact on our financial condition, results from operations or cash flows.

In October 2001, the FASB issued SFAS No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement also extends the reporting requirements to report separately, as discontinued operations, components of an entity that have either been disposed of or are classified as held-for-sale. We are required to adopt the provisions of SFAS No. 144 effective November 1, 2002. It is not anticipated to have a significant impact on our financial condition or results from operations or cash flows.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction," was issued. Under SFAS No. 145, gains and losses related to the extinguishment of debt should no longer be segregated on the income statement as extraordinary items. Instead, such gains and losses should be included as a component of income from continuing operations. The provisions of SFAS No. 145 are effective for fiscal years beginning after May 15, 2002 with early adoption encouraged. We do not believe that this statement will have a material impact on our financial position, results of operations or cash flows.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," was issued. This statement nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002 and thus will become effective for us as of January 1, 2003. It is not currently expected to have a material impact on our financial position, results of operations or cash flows upon adoption.

MTU -- The Company's European technology and distribution partner, MTU, placed orders for fuel cell components for six 250 kW DFC power plants at yet to be named sites for delivery next year. MTU began operating its 250 kW combined heat and power unit at an energy park at RWE, Germany's largest utility, and delivered another sub-megawatt unit to IZAR, a ship builder in Spain.

Coal Gas Demonstration 2 MW Unit. In July, the U.S. Department of Energy's National Energy Technology Laboratory (NETL) gave approval to advance the demonstration of a two megawatt DFC power plant operating on coal-derived gas by moving the fuel cell site to the IGCC plant at Wabash River Energy, Indiana, which is owned by Global Energy, Inc.

Revenues increased 57%, to $11,962,000 in the 2002 period from $7,622,000 in the 2001 period. This was due primarily to additional revenue from our research and development contracts involving the Clean Coal gasification project, the King County wastewater treatment facility, the U.S. Navy marine/diesel program, and the Department of Energy's coal mine methane project, as well as individual fuel cells shipped to MTU for use in power plants for their field trial program.

Cost of research and development contracts increased to $14,348,000 in the 2002 period from $5,232,000 in the 2001 period due to activity on contracts focused on the development of our megawatt-class products. We estimate that these contracts costs will continue to grow throughout the 2002 period.

Cost of product sales and revenues increased 99%, to $7,399,000 in the 2002 period from $3,724,000 in the 2001 period. This reflects our focus on developing standard DFC power plant products, increasing production volume, and first article design and testing of our sub-megawatt and megawatt products.

Administrative and selling expenses increased 27%, to $2,709,000 in the 2002 period from $2,134,000 in the 2001 period. Staffing, and the development of our distribution network were the main cost drivers.

Research and development expenses increased to $1,897,000 in the 2002 period from $852,000 in the 2001 period. This was primarily development costs associated with the design improvements and engineering of our sub-megawatt and megawatt products.

Loss from operations increased, to $14,391,000 in the 2002 period from $4,320,000 in the 2001 period. This reflects our focus on developing standard DFC power plant products and increasing production volume, including increased staffing, first article design and testing of our sub-megawatt and megawatt products, sales force development and training, and research and development contracts.

Interest and other income, net, decreased 23%, to $1,173,000 in the 2002 period from $1,514,000 in the 2001 period. This was due to a lower overall cash balance and declining interest rates.

Revenues increased 42%, to $27,528,000 in the 2002 period from $19,448,000 in the 2001 period. This was due primarily to additional revenue from our research and development contracts including Clean Coal, King County, Navy Phase II, and Coal Mine Methane, and individual fuel cells shipped to MTU for use in power plants for their field trial program.

Cost of research and development contracts increased to $29,452,000 in the 2002 period from $13,089,000 in the 2001 period. This can be attributed to activity on contracts that focused on the development of our megawatt-class products. We believe that there will be continued growth in these contract costs throughout the 2002 period.

Cost of product sales and revenues increased 51%, to $17,333,000 in the 2002 period from $11,471,000 in the 2001 period. This was due to our focus on developing standard DFC power plant products, increasing production volume, and first article design and testing of our sub-megawatt and megawatt products.

Administrative and selling expenses increased 21%, to $8,175,000 in the 2002 period from $6,737,000 in the 2001 period. The cost drivers included staffing, and the development of our distribution network.

Research and development expenses increased 98% to $4,634,000 in the 2002 period from $2,335,000 in the 2001 period. The primary drivers were development costs associated with design improvements and engineering of our sub-megawatt and megawatt products.

Loss from operations increased to $32,066,000 in the 2002 period from $14,184,000 in the 2001 period. This reflects our focus on developing standard DFC power plant products and increasing production volume, including increased staffing, first article design and testing of our sub-megawatt and megawatt products, sales force development and training, and research and development contracts.

Interest and other income, net, increased 13%, to $3,890,000 in the 2002 period from $3,439,000 in the 2001 period. This was due to the investment of additional cash from the net proceeds from the sales of our common stock in the second quarter of fiscal year 2001 and was partially offset by a decline in interest rates and an overall decrease in cash.

Our operations are funded primarily through sales of equity, cash generated from operations, and borrowings. Cash from operations includes revenue from government contracts and cooperative agreements, field trial projects, sale of fuel cell components primarily to MTU, license fees, and interest income.

At July 31, 2002, we had cash, cash equivalents and investments (U.S. Treasuries) of $240,516,000, compared to cash, cash equivalents and investments of $290,533,000 at October 31, 2001. The decrease in cash was attributable to $25,766,000 used to fund the cash portion of the net loss, a net inventory increase of $10,082,000, capital expenditures of $10,302,000, and a net reduction in working capital of $5,017,000. This was offset by net financing activities of $1,150,000.

The cash generated from sales of equity, operations and borrowings will be used to support the development of standard products that incorporate our Direct FuelCell^® technology, and to increase production volume and develop our distribution network, as well as for general corporate purposes including research and development, field trial support and working capital. Working capital requirements will consist primarily of increases in inventory as additional demonstrations and field trials of our Direct FuelCell^® products are conducted and material purchases increase.

Our research and development contracts are generally multi-year, cost reimbursement type contracts. The majority of these are U. S. Government contracts that are dependent upon the government's continued allocation of funds and may be terminated in whole or in part at the convenience of the government. We will continue to seek research and development contracts for all of our product lines. To obtain contracts, we must continue to prove the benefits of our technologies and be successful in our competitive bidding.

We anticipate that our existing capital resources, together with anticipated revenues, will be adequate to satisfy our planned financial requirements and agreements through at least the next twelve months.

Our exposure to market risk for changes in interest rates, relates primarily to our investment portfolio and long term debt obligations. Our investment portfolio includes both short-term United States Treasury instruments with maturities averaging three months or less, as well as U.S. Treasury notes with fixed interest rates with maturities of up to twenty months. Cash is invested overnight with high credit quality financial institutions. Based on our overall interest exposure at July 31, 2002, including all interest rate sensitive instruments, a near-term change in interest rate movements of 1% would affect our consolidated results of operations by approximately $2,400,000 annually.

Part II - Other Information

Item 4.  Submission of Matters to a Vote of Security Holders

     None

Item 5.  Exhibits and Reports on Form 8-K

     None

Exhibit Index

(a)  Exhibit Description

(b)  Reports on Form 8-K

     None

Pursuant to the requirements 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.

Dated:  September 12, 2002

CERTIFICATIONS

          I, Jerry D. Leitman, President, Chief Executive Officer and Chairman of the Board of FuelCell Energy, Inc., certify that:

          1.          I have reviewed this quarterly report on Form 10-Q of FuelCell Energy, Inc.;

          2.          Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

          3.          Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

Date:  September 12, 2002

CERTIFICATIONS

          I, Joseph G. Mahler, Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary of FuelCell Energy, Inc., certify that:

          1.          I have reviewed this quarterly report on Form 10-Q of FuelCell Energy, Inc.;

          2.          Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

          3.          Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

Date:  September 12, 2002