Product sales and revenues for the third quarter were $29.4 million, compared to $16.2 million in the prior year. The company's product sales and service backlog totaled $231 million as of July 31, 2011, compared to $80 million as of July 31, 2010. For the third quarter of 2011, product order backlog totaled $153 million, and backlog for service agreements totaled $78 million. Backlog is the highest in the company's history as a result of the $129 million order for 70 megawatts of fuel cell kits and other equipment and services received from our South Korean partner, POSCO Power. We generated gross profit in the third quarter of 2011. This is a significant milestone and the first growth profit since the company began commercializing our FuelCell product.
Margins for product sales and revenues improved by $4.1 million compared to the third quarter of 2010, and the product cost-to-revenue ratio improved 0.99:1.00. Research and development contract revenue was $1.8 million for the third quarter of 2011, compared to $2.7 million in the prior-year quarter. The company's research and development backlog totaled $13.6 million as of July 31, 2011, compared to $7.4 million as of July 31, 2010. Net loss to common shareholders for the third quarter decreased by $8.6 million, or $0.07 per basic and diluted share, compared to $13.8 million or $0.15 per basic and diluted share for the third quarter of 2010. This is a 38% improvement over the prior year, as a result of improved product margins and lower operating costs.
My discussion to follow on year-to-date results will exclude the charges related to the repair and upgrade program, and the revaluation of the Series I preferred shares recorded during the second quarter of 2011. Please note that there is a non-GAAP reconciliation included at the end of the earnings release that illustrates financial results fiscal year-to-date, excluding these items.