886128--1/14/2008--FUELCELL_ENERGY

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We have incurred losses and anticipate continued losses and negative cash flow. Our cost reduction strategy may not succeed or may be significantly delayed, which may result in our inability to offer our products at competitive prices and may adversely affect our sales. Our products will compete with products using other energy sources, and if the prices of the alternative sources are lower than energy sources used by our products, sales of our products will be adversely affected. Volatility of electricity prices may impact sales of our products in the markets in which we compete. Our products will compete with products using other energy sources, and if the prices of the alternative sources are lower than energy sources used by our products, sales of our products will be adversely affected. Volatility of electricity prices may impact sales of our products in the markets in which we compete. The reduction or elimination of government subsidies and economic incentives for alternative energy technologies, including our fuel cell power plants, could reduce demand for our products, lead to a reduction in our revenues and adversely impact our operating results. We have signed long-term power purchase and service agreements with customers which are subject to market conditions and operating risks that may affect our operating results. We extend product warranties which could We currently face and will continue to face significant competition. We have large and influential stockholders, which may make it difficult for a third party to acquire our common stock. CFC may develop competing technologies. We have limited experience manufacturing our Direct FuelCell products on a commercial basis, which may adversely affect our planned increases in production capacity and our ability to satisfy customer requirements. Unanticipated increases or decreases in business growth may result in adverse financial consequences for us. Our plans are dependent on market acceptance of our Direct FuelCell Our government research and development contracts are subject to the risk of termination by the contracting party and we may not realize the full amounts allocated under the contracts due to the lack of Congressional appropriations. A negative government audit could result in an adverse adjustment of our revenue and costs and could result in civil and criminal penalties The U.S. government has certain rights relating to our intellectual property, including restricting or taking title to certain patents. A failure to qualify as a small business could adversely affect our rights to own future patents under DOE-funded contracts. Our future success and growth is dependent on our distribution strategy. We depend on third party suppliers for the development and supply of key components for Direct FuelCell We depend on our intellectual property, and our failure to protect that intellectual property could adversely affect our future growth and success. Our future success will depend on our ability to attract and retain qualified management and technical personnel. Our management may be unable to manage rapid growth effectively. We may be affected by environmental and other governmental regulation. Utility companies could impose customer fees or interconnection requirements on our customers that could make our products less desirable. We could be liable for environmental damages resulting from our research, development or manufacturing operations. We may be required to conduct environmental remediation activities, which could be expensive. 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. We are subject to risks inherent in international operations. Our stock price has been and could remain volatile. Provisions of Delaware and Connecticut law and of our charter and by-laws may make a takeover more difficult. We depend on relationships with strategic partners, and the terms and enforceability of many of these relationships are not certain. Future sales of substantial amounts of our common stock could affect the market price of our common stock. The rights of the Series 1 preferred shares and Series B preferred stock could negatively impact FuelCell. 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. Our results of operations could vary as a result of methods, estimates and judgments we use in applying our accounting policies.

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886128--1/14/2008--FUELCELL_ENERGY_INC