Edgar Filing: HYDROGENICS CORP

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 2004
REGISTRATION NO. 333-__________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM F-10
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
HYDROGENICS CORPORATION -
CORPORATION HYDROGENIQUE
(Exact name of Registrant as specified in its charter)

ONTARIO, CANADA 3629 NOT APPLICABLE
(Province or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)

5985 MCLAUGHLIN ROAD
MISSISSAUGA, ONTARIO L5R 1B8. CANADA
(905) 361-3660
(Address and telephone number of Registrant's principal executive offices)
----------------------
CT CORPORATION SYSTEM
111 EIGHTH AVENUE
NEW YORK, NEW YORK 10011
(212) 894-8400
(Name, address (including zip code) and telephone number (including area
code) of agent for service in the United States)

Copies of communications to:

MARK L. MANDEL, ESQ. MARK A. TRACHUK, ESQ. JEFFREY D. KARPF, ESQ. PATRICIA L. OLASKER, ESQ.
WHITE & CASE LLP OSLER, HOSKIN & HARCOURT CLEARY, GOTTLIEB, STEEN & DAVIES WARD PHILLIPS &
1155 AVENUE OF THE AMERICAS LLP HAMILTON VINEBERG LLP
NEW YORK, NEW YORK 10036 1 FIRST CANADIAN PLACE 1 LIBERTY PLAZA 44TH FLOOR, 1 FIRST CANADIAN
UNITED STATES TORONTO, ONTARIO M5X 1B8 NEW YORK, NEW YORK 10006 PLACE
(212) 819-8546 CANADA UNITED STATES TORONTO, ONTARIO M5X 1B1
(416) 362-2111 (212) 225-2000 CANADA
(416) 863-0900

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

PROVINCE OF ONTARIO, CANADA
(Principal jurisdiction regulating this offering)
------------------------------------------------
It is proposed that this filing shall become effective (check appropriate
box):

A. [ ] upon filing with the Commission, pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in the United
States and Canada).

B. [X] at some future date (check the appropriate box below):

1. [ ] pursuant to Rule 467(b) on (date) at (time) (designate a time
not sooner than 7 calendar days after filing).

2. [ ] pursuant to Rule 467(b) on (date) at (time) (designate a
time 7 calendar days or sooner after filing) because the
securities regulatory authority in the review jurisdiction
has issued a receipt or notification of clearance on (date).

3. [ ] pursuant to Rule 467(b) as soon as practicable after
notification of the Commission by the Registrant or the
Canadian securities regulatory authority of the review
jurisdiction that a receipt or notification of clearance has
been issued with respect hereto.

4. [X] after the filing of the next amendment to this Form (if
preliminary material is being filed).

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus
offering procedures, check the following box: [ ]

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CALCULATION OF REGISTRATION FEE

PROPOSED PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF REGISTRATION FEE(3)
BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) OFFERING PRICE(2)
------------------------------------- -------------- ----------------- ------------------ -----------------------------

Common shares 12,650,000 U.S.$6.33 U.S.$80,074,500 U.S.$6,479

(1) Includes Common Shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.

(2) Estimated solely for the purpose of determining the registration fee under
the Securities Act of 1933.

(3) Calculated pursuant to Rule 457(c) under the Securities Act of 1933.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES
ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(c)
OF THE ACT, MAY DETERMINE.

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PART I

INFORMATION REQUIRED TO BE DELIVERED TO
OFFEREES OR PURCHASERS

INFORMATION HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED , 2004

PROSPECTUS

(HYDROGENICS LOGO)

COMMON SHARES
$ PER COMMON SHARE
------------------

We are offering of our common shares under this prospectus. We
have granted the underwriters an option to purchase up to additional
common shares to cover over-allotments.

Our common shares are quoted on the Nasdaq National Market under the symbol
"HYGS" and listed on the Toronto Stock Exchange under the symbol "HYG." The last
reported sale price of our common shares on January 8, 2004 on the Nasdaq
National Market was $6.36 and on the Toronto Stock Exchange was Cdn. $8.18 per
common share. Unless otherwise stated, all dollar amounts herein are stated in
U.S. dollars.

------------------

INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 10.

WE ARE A FOREIGN ISSUER THAT IS PERMITTED, UNDER A MULTIJURISDICTIONAL
DISCLOSURE SYSTEM ADOPTED BY THE UNITED STATES, TO PREPARE THIS PROSPECTUS IN
ACCORDANCE WITH THE DISCLOSURE REQUIREMENTS OF OUR HOME COUNTRY, CANADA.
PROSPECTIVE INVESTORS SHOULD BE AWARE THAT SUCH REQUIREMENTS ARE DIFFERENT FROM
THOSE OF THE UNITED STATES. FINANCIAL STATEMENTS INCLUDED OR INCORPORATED HEREIN
HAVE BEEN PREPARED IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, AND MAY BE SUBJECT TO FOREIGN AUDITING AND AUDITOR INDEPENDENCE
STANDARDS, AND THUS MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED
STATES COMPANIES.

THE ENFORCEMENT BY INVESTORS OF CIVIL LIABILITIES UNDER THE FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BY THE FACT THAT WE ARE INCORPORATED
UNDER THE LAWS OF CANADA, THAT SOME OR ALL OF OUR OFFICERS AND DIRECTORS MAY BE
RESIDENTS OF A FOREIGN COUNTRY, THAT SOME OR ALL OF THE UNDERWRITERS OR EXPERTS
NAMED IN THE REGISTRATION STATEMENT MAY BE RESIDENTS OF A FOREIGN COUNTRY, AND
THAT ALL OR A SUBSTANTIAL PORTION OF OUR ASSETS AND SAID PERSONS MAY BE LOCATED
OUTSIDE OF THE UNITED STATES.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------

PER SHARE TOTAL
------------- --------------

Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Hydrogenics Corporation (before expenses) $ $

The underwriters expect to deliver the common shares to purchasers on or
about , 2004.

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CITIGROUP
------------------
NATIONAL BANK FINANCIAL TD SECURITIES (U.S.A.) INC.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. NEITHER WE NOR THE UNDERWRITERS HAVE AUTHORIZED
ANYONE TO PROVIDE YOU WITH ANY DIFFERENT INFORMATION. NEITHER WE NOR THE
UNDERWRITERS ARE MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE
SUCH AN OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION
PROVIDED BY THIS SHORT FORM PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE
DATE ON THE FRONT OF THIS SHORT FORM PROSPECTUS.

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TABLE OF CONTENTS

PAGE
----

Forward-Looking Statements.................................. ii
Exchange Rates.............................................. ii
Summary..................................................... 1
Documents Incorporated by Reference......................... 8
Recent Developments......................................... 9
Risk Factors................................................ 10
Presentation of Financial and Other Information............. 23
Use of Proceeds............................................. 23
Dividend Policy............................................. 23
Capitalization.............................................. 24
Dilution.................................................... 25
Selected Financial Data..................................... 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 28
Business.................................................... 38
Management.................................................. 54
Corporate Governance........................................ 56
Certain Transactions........................................ 58
Description of Capital Stock................................ 60
Shares Eligible for Future Sale............................. 61
Income Tax Consequences..................................... 63
Underwriting................................................ 69
Legal Matters............................................... 71
Experts..................................................... 72
Where You Can Find More Information......................... 73
Index to Financial Statements............................... F-1

Unless the context otherwise requires, all references to "Hydrogenics",
"the Company", "we", "us" and "our" refer to Hydrogenics Corporation --
Corporation Hydrogenique.

We have applied for registration of the trademarks "Hydrogenics", "FCATS",
"FCAVS", "HyTEF", "HyAL", "SCREENER", "POTENZ" and "MREF" in Canada. All other
trademarks or service marks appearing in this short form prospectus are the
trademarks or service marks of their respective owners.

FORWARD-LOOKING STATEMENTS

Statements under "Summary", "Risk Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and "Business" and
elsewhere in this short form prospectus and in the documents incorporated by
reference about our future results, levels of activity, performance, goals or
achievements or other future events constitute forward-looking statements. These
forward-looking statements are based on certain assumptions and analyses made by
us in light of our experience and our perceptions of historical trends, current
conditions and expected future developments and other factors that we believe
are appropriate in the circumstances and these statements involve known and
unknown risks, uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in our forward-looking
statements. These factors include, among others, those listed under "Risk
Factors" or described elsewhere in this short form prospectus.

In some cases, you can identify forward-looking statements by our use of
words such as "may", "will", "should", "could", "expects", "plans", "intends",
"anticipates", "believes", "estimates", "predicts", "seeks", "strategy",
"potential" or "continue" or the negative or other variations of these words, or
other comparable words or phrases.

Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements or other future events. We are under no
duty to update any of our forward-looking statements after the date of this
short form prospectus, other than as required by law. You should not place undue
reliance on forward-looking statements.

EXCHANGE RATES

On January 8, 2004, the noon buying rate in New York City for cable
transfers in Canadian dollars was Cdn. $1.00 equals U.S. $0.7820. The following
table sets forth, for each period presented, the high and low exchange rates,
the average of the exchange rates on the last day of each month during the
period indicated and the exchange rates at the end of the period indicated for
one Canadian dollar expressed in U.S. dollars, based on the inverse of the noon
buying rate for cable transfers payable in Canadian dollars as certified for
customs purposes by the Federal Reserve Bank of New York (the "noon-buying
rate").

YEAR ENDED DECEMBER 31,
----------------------------------------------- NINE MONTHS ENDED
1999 2000 2001 2002 2003 SEPTEMBER 30, 2003
------- ------- ------- ------- ------- ------------------

End of period..................... $0.6925 $0.6669 $0.6279 $0.6329 $0.7710 $0.7404
Average for period................ 0.6745 0.6725 0.6444 0.6368 0.7146 0.7012
High for period................... 0.6925 0.6969 0.6697 0.6612 0.7733 0.7492
Low for period.................... 0.6535 0.6410 0.6241 0.6209 0.6382 0.6329

Unless stated otherwise, all references to "$" or "U.S. $" in this short
form prospectus refer to United States dollars and all references to "Cdn. $"
refer to Canadian dollars.

SUMMARY

This summary highlights information contained elsewhere in or incorporated
in this short form prospectus. Before deciding to invest in our common shares,
you should carefully read this entire short form prospectus, including the
section entitled "Risk Factors".

HYDROGENICS CORPORATION

We are a leading developer and manufacturer of fuel cell and related new
energy technologies that produce clean electricity. Our principal business is
the development and commercialization of proton exchange membrane, or PEM, fuel
cell test and diagnostic stations, PEM fuel cell stacks and PEM fuel cell power
generation systems for portable, stationary and mobile applications. We are also
beginning to develop and manufacture hydrogen generation products to complement
our fuel cell product development initiatives, which include PEM electrolyzer
stacks, PEM electrolyzer refueling systems and the balance of plant components
for reformer-based hydrogen generation systems. Our business is divided into two
segments: fuel cell test and diagnostic equipment and fuel cell power products.

OUR BUSINESS AND PRODUCTS

FUEL CELL TEST AND DIAGNOSTIC EQUIPMENT

We are a leading developer and manufacturer of fuel cell testing equipment.
We have sold over 450 fuel cell test stations to approximately 55 customers in
North America, Asia and Europe. Our test and diagnostic equipment is used to
develop and optimize the performance of fuel cell technology by simulating,
monitoring and controlling the effect of power load, temperature, pressure,
humidity and potential contaminants on a fuel cell and to measure the effect of
changes in these variables on fuel cell performance. This equipment has become a
critical tool for fuel cell technology developers, allowing fuel cell stacks to
operate as part of a fully integrated power system.

FUEL CELL POWER PRODUCTS

Fuel Cell Power Modules. We have developed and recently begun selling
scalable fuel cell power modules that allow "plug and play" integration into our
own fuel cell products or those of original equipment manufacturers, or OEMs.
The low pressure configuration of our power module architecture results in fewer
moving parts, greater system simplicity, lower cost, enhanced reliability,
quieter operation and increased versatility when compared to the high pressure
systems offered by other companies. Our goal is to apply our power module
architecture across a wide range of applications with early market appeal and,
in addition, to achieve commercialization through strategic partners that have
established market channels.

Fuel Cell Systems. We are also developing fuel cell system products for
specific end-use markets. Our fuel cell systems cover a range of portable,
mobile and stationary power applications in the 500 watt to 50 kW range. The
diversity of our technology portfolio allows us to design and manufacture fuel
cell systems with integrated refueling capabilities, using either reformer or
electrolyzer technology. For instance, in conjunction with General Motors
Corporation, we have developed a 25 kW regenerative fuel cell backup power
generator that is targeted at the telecommunications market to provide reliable
power at cellular tower sites. We have also developed a 50 kW HySTAT energy
station that is capable of powering multi-dwelling complexes or small commercial
buildings as well as serving as a hydrogen refueling station for fuel cell
vehicles. In addition, we have a proprietary line of electrolyzers that we
incorporate into our

regenerative fuel cell systems. We are also developing stand-alone electrolyzer
refuelers that utilize our electrolyzer technology.

System Integration and Engineering. Our power products business unit also
provides systems integration and engineering services to key customers and
strategic partners.

OUR STRATEGY

We have implemented the following strategies to further our goal of being a
leader in the development and commercialization of fuel cell test and diagnostic
equipment and new energy technologies:

- INITIALLY TARGET PREMIUM POWER MARKETS. We believe that the best way to
ensure our participation in the mass commercial markets of the future is
to initially focus on selling fuel cell products to the smaller premium
power markets that exist today. Premium power markets such as specialty
off-road mobility, military, aerospace, research, mission critical
back-up power and funded demonstrations yield premium prices for workable
solutions, a key factor in meeting our overriding goal of commercial
sustainability. We hope that the premium pricing and smaller production
runs associated with selling into these markets will provide us with
positive margins and, more importantly, additional technical expertise
with a minimal level of capital investment.

- DEPLOY CAPITAL EFFICIENTLY THROUGH HORIZONTAL BUSINESS MODEL. We save
money by leveraging the research and development efforts of our component
suppliers and the supply, distribution and marketing initiatives of our
OEM partners and customers. We concentrate our research and development
initiatives on our core competencies and encourage our suppliers and
channel distribution partners to develop and invest in aspects of the
supply and distribution chain that are in their areas of expertise. We
also focus on establishing and strengthening key relationships with OEMs,
like General Motors and Deere & Company (John Deere), that have mature
sales and distribution networks. Our goal is to utilize these existing
sales and distribution networks and thereby minimize the costs associated
with investing in our own marketing, sales and distribution networks.

- CONTINUE TO PURSUE STRATEGIC RELATIONSHIPS. We look to strategic
partners as a source of funding and technology and as a potential means
of market distribution and view these partners as critical to our
long-term success. As part of our strategy we are continually evaluating
markets for fuel cell products and identifying potential strategic
partners whose brands, distribution channels, technical expertise and
customer knowledge can be accessed to bring fuel cell products to market.
In addition, we are exploring opportunities to work with governments to
provide them with innovative energy solutions. We work closely with our
strategic partners to understand their goals and specific requirements
and then rapidly develop prototypes and products to provide solutions to
our partners' needs. Our relationships with General Motors and John Deere
illustrate how we have successfully collaborated with industry leaders to
develop fuel cell applications for their respective markets.

- EXTEND GLOBAL REACH AND MAKE STRATEGIC ACQUISITIONS. We will continue to
direct sales, business development and service capabilities to global
markets where there are current and future needs for fuel cell related
technologies. We also expect to continue to complement our organic growth
through strategic acquisitions of businesses and technology. For example,
the acquisition of EnKAT GmbH in Germany established our foothold in the
European test station market. Likewise, the acquisition of our principal
competitor in the test market, Greenlight Power Technologies, Inc.,
solidified our position as a leading developer and manufacturer of fuel
cell test stations and diagnostic equipment. We have also acquired
proprietary technology, including our license to certain General Motors
stack technology and certain patents used in connection with our
vehicle-to-grid initiatives.

OUR COMPETITIVE ADVANTAGES

We believe that the following competitive advantages have enabled us to be
a leader in the design, development, manufacture and sale of fuel cell test and
diagnostic equipment and new energy technologies:

- STRATEGIC ALLIANCE WITH GENERAL MOTORS CORPORATION AND OTHER KEY
RELATIONSHIPS. Our alliance with General Motors includes shared
intellectual property rights and joint efforts in fuel cell product
development, engineering, prototyping, testing, branding and marketing
strategies. This alliance has given us the opportunity to participate in
the development of fuel cell systems for automotive applications, the
largest potential market for fuel cells, and has also helped us form key
customer relationships with other OEMs such as John Deere and
ChevronTexaco. We are currently providing power modules to John Deere for
use in a variety of its commercial work vehicles and we are working with
ChevronTexaco to develop a natural gas refueler, utilizing
ChevronTexaco's proprietary fuel processor. See "Certain
Transactions -- Alliance with General Motors Corporation".

- FUEL CELL SYSTEMS EXPERTISE. We have gained significant expertise from
our fuel cell test and diagnostic business in the operation of fuel cell
stacks and balance of plant and systems integration. We believe that our
expertise in optimizing the operation of a fuel cell system gives us the
platform to transform current fuel cell technology into workable and
cost-effective real-life applications. We believe that this expertise
will continue to provide us with an ability to respond rapidly to market
opportunities and technological changes in our industry. In addition, we
believe that we are among a small number of companies around the world
that have successfully demonstrated the ability to integrate a variety of
hydrogen generation systems together with a fuel cell to make complete,
self-contained fuel cell energy stations.

stationary power, portable military generators, vehicular auxiliary power units
and a number of other applications. By scalability, we mean that our power and
electrolyzer modules can be combined in series or in parallel to provide
complete solutions for our customers' power and hydrogen requirements.

- PROPRIETARY TECHNOLOGY. We believe we have proprietary technology across
our product offerings. We have increased our patent portfolio to ten
patents on our technology in the United States and Canada, and we
currently have approximately 230 patent applications pending in a number
of countries. We also believe that our access to two proven stack
technologies is unique among our competitors. The development of our own
fuel cell stack, combined with our access to certain of General Motors'
fuel cell stack technology, provides us with significant product and
market flexibility. Our HyPM power modules have been built to accommodate
either a Hydrogenics or a General Motors stack.

INDUSTRY OVERVIEW

The search for sustainable energy sources and alternative low or zero
emission energy technologies has grown in importance in recent years. Our
business is premised on the belief that fuel cell technology, utilizing hydrogen
as a fuel, offers a number of benefits:

- Improved energy efficiency

- Abundant and locally accessible hydrogen supply

- Lower emissions

- Noise reduction

- Distributed generation

A June 2002 study by Fuel Cells Canada and PricewaterhouseCoopers LLP
entitled "Fuel Cells -- The Opportunity for Canada" reviewed the economic
rationale and direction for continued participation in the fuel cell industry by
the Canadian government. This report projected that global demand for fuel cells
could reach $46 billion in 2011. The report further projected that if an annual
growth rate of 50% is maintained to 2021, the market could exceed $2.6 trillion
worldwide.

In his 2003 State of the Union speech, President Bush articulated a goal of
energy independence for the United States. To assist in advancing that goal, the
U.S. Department of Energy stated that the United States government committed to
spend more than $1.0 billion for the first five years of a long-term energy
technology and infrastructure development program, including hydrogen powered
automobiles. We believe governmental support of fuel cell and hydrogen fuel
initiatives is increasing in other countries as well. The Japanese government
provided over $175 million in support of fuel cell research and development and
commercialization in 2002 and has announced that it expects its annual
expenditure to exceed $240 million per year in future years, starting in 2003.
The European Commission has also announced a plan to spend $2.1 billion from
2003 to 2006 on renewable energy -- mostly on hydrogen fuel technologies and
fuel cells. Canada has increased funding for hydrogen fuel and fuel cell
initiatives, with recent announcements of expenditures totaling approximately
$135 million over five years.

ACQUISITION OF GREENLIGHT POWER TECHNOLOGIES, INC.

In January 2003, we acquired Greenlight, our principal competitor in the
fuel cell test business, in a transaction valued at approximately $19 million.
This acquisition enabled us to solidify our position in the fuel cell testing
business, while creating additional capacity and aligning dedicated resources to
our emerging fuel cell power products business. This acquisition combined the
number one and number two providers of fuel cell test equipment and testing
services to North America and Europe and almost doubled the size of our test
business.
------------------------

We are incorporated under the laws of Canada. Our registered office and
principal executive offices are located at 5985 McLaughlin Road, Mississauga,
Ontario, L5R 1B8, Canada, and our telephone number is (905) 361-3660.
------------------------

THE OFFERING

Common shares offered......... common shares ( common
shares if the underwriters exercise their
over-allotment option in full)

Common shares to be
outstanding after this
offering...................... common shares ( common
shares if the underwriters exercise their
over-allotment option in full)

Use of proceeds............... For general corporate purposes, capital
expenditures, investments in product
development and potential acquisitions and
investments. See "Use of Proceeds".

Nasdaq National Market
symbol........................ HYGS

Toronto Stock Exchange
symbol........................ HYG

The information set forth above is based on common shares outstanding as of
January 7, 2004 and excludes the following:

- outstanding options as of January 7, 2004 to purchase 3,306,407 common
shares under our stock option plan at a weighted average exercise price
of Cdn. $4.11 per share;

- 2,765,045 common shares available for future grants under our stock
option plan;

- outstanding warrants held by General Motors as of the date of this
prospectus to purchase 2,470,436 of our common shares at an exercise
price of $4.00 per share.

------------------------

Unless we state otherwise, the information in this short form prospectus
assumes no exercise of the underwriters' over-allotment option.

SUMMARY CONSOLIDATED FINANCIAL DATA

The data for each of the years ended December 31, 2000, 2001 and 2002 and
as at December 31, 2001 and 2002 are derived from our audited consolidated
financial statements as at December 31, 2001 and 2002 and for each of the years
in the three year period ended December 31, 2002, which are included and
incorporated by reference in this short form prospectus. The data for the
nine-months ended September 30, 2003 and 2002 are derived from our unaudited
consolidated interim financial statements for the nine months ended September
30, 2003 and 2002, which are incorporated by reference in this short form
prospectus. The data as at and for the nine months ended September 30, 2003
include the operating results of Greenlight from January 7, 2003. Our
consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles. Canadian GAAP differs in some
significant respects from U.S. GAAP. The principal differences between Canadian
GAAP and U.S. GAAP as they apply to us are disclosed in note 22 of our
consolidated financial statements for the years ended December 31, 2000, 2001
and 2002, and note 13 of our unaudited consolidated interim financial statements
for the nine month periods ended September 30, 2003 and 2002. You should read
the following summary consolidated financial data with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our financial
statements together with the notes thereto either included in or incorporated by
reference in this prospectus.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
2000 2001 2002 2002 2003
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Canadian GAAP:
Revenues.................... $ 8,883 $ 7,418 $ 15,840 $ 10,022 $ 20,778
Cost of revenues............ 6,485 4,941 10,703 6,888 13,849
----------- ----------- ----------- ----------- -----------
Gross profit................ 2,398 2,477 5,137 3,134 6,929
Loss from operations........ (545) (8,438) (21,783) (16,631) (19,064)
Net loss for the period..... $ (1,736) $ (2,816) $ (20,611) $ (15,480) $ (14,438)
=========== =========== =========== =========== ===========
Basic and diluted net loss
per share................. $ (0.08) $ (0.07) $ (0.43) $ (0.32) $ (0.27)
=========== =========== =========== =========== ===========
Shares used in calculating
basic and diluted net loss
per share................. 22,341,370 38,217,593 48,437,813 48,338,097 52,957,526

U.S. GAAP:
Net loss for the period..... $ (4,843) $ (4,284) $ (21,054) $ (15,763) $ (14,579)
=========== =========== =========== =========== ===========
Basic and diluted net loss
per share................. $ (0.22) $ (0.11) $ (0.43) $ (0.33) $ (0.28)
=========== =========== =========== =========== ===========

The impact on loss per share of the non-cash amortization of intangibles
was $0.18 per share for the nine months ended September 30, 2003 and $0.31 per
share for the year ended December 31, 2002.

Basic net loss per share excludes outstanding options to purchase 3,306,407
common shares under our stock option plan outstanding as of January 7, 2004 at a
weighted average exercise price of Cdn. $4.11 per share, 2,765,045 common shares
available for future grants under our stock option plan and outstanding warrants
held by General Motors to purchase 2,470,436 common shares at a price of $4.00
per share. The issued options and warrants are also excluded from the
computation of diluted net loss per share for each of the periods presented, as
the effects of their inclusion would be anti-dilutive.

AS AT DECEMBER 31
-------------------
2001 2002
-------- --------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Canadian and U.S. GAAP:
Cash and short-term investments............................. $ 65,809 $ 60,051
Working capital............................................. 72,397 66,387
Total assets................................................ 107,633 90,677
Total shareholders' equity.................................. 105,821 85,432

DOCUMENTS INCORPORATED BY REFERENCE

The following documents have been filed with the securities commission or
similar authority in each of the provinces of Canada where this short form
prospectus is being filed and are specifically incorporated by reference in, and
form an integral part of, this short form prospectus:

(a) our annual report on Form 20-F dated June 5, 2003 for the year
ended December 31, 2002;

(b) our audited consolidated financial statements for the year ended
December 31, 2002, together with the notes thereto and the auditors' report
thereon;

(c) management's discussion and analysis of financial condition and
results of operations as at December 31, 2002 and for the three years ended
December 31, 2002;

(d) our unaudited consolidated financial statements for the nine
months ended September 30, 2003 and September 30, 2002;

(e) management's interim discussion and analysis of financial
condition and results of operations for the third quarter ended September
30, 2003;

(f) our information circular dated April 30, 2003 relating to our
annual general meeting of shareholders held on May 30, 2003, except for the
information set out therein relating to the composition of the compensation
committee and its report on executive compensation, the statement of
corporate governance and any performance graph therein; and

(g) material change report dated January 15, 2003 pertaining to our
acquisition of Greenlight Power Technologies, Inc.

Any documents of the type referred to above and any material change report,
excluding confidential reports, filed by us with a securities commission or
similar regulatory authority in Canada after the date of this short form
prospectus and prior to the termination of any offering hereunder shall be
deemed to be incorporated by reference into this short form prospectus.

The information permitted to be omitted from this short form base PREP
prospectus will be contained in a supplemented PREP prospectus and will be
incorporated by reference herein as of the date of such supplemented PREP
prospectus.

ANY STATEMENT CONTAINED IN THIS SHORT FORM PROSPECTUS OR IN A DOCUMENT
INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO
BE MODIFIED OR SUPERSEDED, FOR PURPOSES OF THIS SHORT FORM PROSPECTUS, TO THE
EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED
DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN
MODIFIES OR SUPERSEDES SUCH PRIOR STATEMENT. THE MODIFYING OR SUPERSEDING
STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR
INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT MODIFIES OR
SUPERSEDES. THE MAKING OF A MODIFYING OR SUPERSEDING STATEMENT SHALL NOT BE
DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED STATEMENT,
WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL
FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR
THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE
CIRCUMSTANCES IN WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED
SHALL NOT CONSTITUTE A PART OF THIS SHORT FORM PROSPECTUS, EXCEPT AS SO MODIFIED
OR SUPERSEDED.

INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS SHORT FORM
PROSPECTUS FROM DOCUMENTS FILED WITH THE SECURITIES COMMISSIONS OR SIMILAR
AUTHORITIES IN CANADA. Copies of the documents incorporated herein by reference
may be obtained on request without charge from the Corporate Secretary at 5985
McLaughlin Road, Mississauga, Ontario, L5R 1B8, Canada or by telephone at (905)
361-3660. For the purpose of the Province of Quebec, this short form prospectus
contains information to be completed by consulting the permanent information
record, a copy of which permanent information record may also be obtained from
the Corporate Secretary at the address noted above. Copies of documents
incorporated by reference or forming part of the permanent information record
may also be obtained by accessing the website located at www.sedar.com.

RECENT DEVELOPMENTS

As part of our quarterly report on the nine months ended September 30,
2003, we disclosed that revenues for the year ended December 31, 2003 were
likely to be in the range of $28 million to $30 million. This guidance was down
from our original revenue guidance of $30 million to $32 million for the year
and was due primarily to timing of revenue recognition and tight delivery
deadlines around year-end. Due specifically to certain shipments and revenue
recognition being deferred to 2004, we now expect revenue to be in the range of
$26 million to $27 million for the year ended December 31, 2003, with a strong
backlog flowing into 2004.

We anticipate that our engineering services contract with General Motors
will end in the third quarter of 2004. Revenues from engineering services
provided to General Motors represented 14% of our total revenue for the first
nine months of 2003. We do not expect this to have an impact on our ongoing
relationship with General Motors or other sales to General Motors.

RISK FACTORS

This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information contained or
incorporated by reference in this short form prospectus before purchasing our
common shares. If any of the following risks occur, our business, operating
results and financial condition could be materially hurt, the trading price of
our common shares could decline and you may lose all or part of your investment.

RISK FACTORS RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY, AND BECAUSE OUR MIX OF REVENUES IN THE
RECENT PAST DOES NOT REFLECT OUR CURRENT BUSINESS STRATEGY, IT MAY BE DIFFICULT
TO ASSESS OUR BUSINESS AND FUTURE PROSPECTS.

We commenced operations of our fuel cell business in 1995, and since that
time, we have been engaged principally in the manufacture and sale of fuel cell
test and diagnostic equipment, the provision of related engineering and testing
services, and research and development relating to fuel cell systems and
subsystems. For the nine months ended September 30, 2003, we derived $15.9
million, or 76% of our revenues, from sales of fuel cell test and diagnostic
equipment; $2.9 million, or 14%, from the provision of engineering services to
General Motors Corporation; and $2.0 million, or 10%, from sales or lease of
fuel cell power products. For the year ended December 31, 2002, we derived $5.6
million, or 35%, from sales of fuel cell test and diagnostic equipment, $5.7
million, or 37% of our revenues, from the provision of engineering services to
General Motors, and $4.5 million, or 28%, from sales or leases of fuel cell
power products and related services. Our current business strategy is to use the
experience we have gained in the fuel cell test and diagnostic equipment
business to develop, manufacture and sell fuel cell power products in larger
quantities. Because we have made limited sales of fuel cell power products to
date, our historical operating data may be of limited value in evaluating our
future prospects.

BECAUSE WE EXPECT TO CONTINUE TO INCUR NET LOSSES, WE MAY NOT BE ABLE TO
IMPLEMENT OUR BUSINESS STRATEGY, AND THE PRICE OF OUR COMMON SHARES MAY DECLINE.

We have not generated any positive net income since the initial public
offering of our shares in November 2000. Our current business strategy is to use
the experience we have gained in the fuel cell test and diagnostic equipment
business to manufacture and sell fuel cell power products in larger quantities.
In so doing, we will continue to incur significant expenditures for general
administrative activities, including sales and marketing and research and
development activities. As a result of these increased costs, we will need to
generate significantly higher revenues and positive gross margins to achieve and
sustain profitability. We incurred a net loss of $14.4 million for the nine
months ended September 30, 2003 and a net loss of $20.6 million for the year
ended December 31, 2002. Our accumulated deficit as of September 30, 2003 was
$39.7 million and as of December 31, 2002 was $25.3 million. We will continue to
incur losses in the remainder of 2003 and beyond, and we may never achieve
profitability. Accordingly, our ability to operate our business and implement
our business strategy may be harmed and the value of our common shares may
decline.

WE MAY NEVER COMPLETE THE DEVELOPMENT OF COMMERCIALLY VIABLE FUEL CELL POWER
PRODUCTS, AND IF WE FAIL TO DO SO, WE WILL NOT BE ABLE TO MEET OUR BUSINESS AND
GROWTH OBJECTIVES.

We have made commercial sales of fuel cell test and diagnostic equipment,
generally on a purchase order basis, since our inception, and have only been
engaged in the development of fuel cells, fuel cell power modules, integrated
fuel cell systems and hydrogen generation devices for a short period of time.
Because our business and industry are still in the developmental stage, we do
not know when or whether we will successfully complete research and development
of commercially viable fuel cell power products. We will face unforeseen
challenges, expenses and difficulties as a developing company seeking to design,
develop and manufacture new products in each of our proposed markets. Our future
success depends upon our ability to develop and sell fuel cell products. We will
be unable to meet our business and growth objectives if we do not complete the
development of commercially viable fuel cell products.

WE MUST LOWER THE COST OF OUR FUEL CELL PRODUCTS AND DEMONSTRATE THEIR
RELIABILITY, OR CONSUMERS WILL BE UNLIKELY TO PURCHASE OUR PRODUCTS AND WE WILL
THEREFORE NOT GENERATE SUFFICIENT REVENUES TO ACHIEVE AND SUSTAIN PROFITABILITY.

Fuel cells currently cost more than many established competing
technologies, such as internal combustion engines and batteries. The price of
fuel cell products is dependent largely upon material and manufacturing costs.
We cannot guarantee that we will be able to lower these costs to the level where
we will be able to produce a competitive product or that any product we produce
using lower cost materials and manufacturing processes will not suffer from
lower performance, reliability and longevity. If we are unable to produce fuel
cell products that are competitive with other technologies in terms of price,
performance, reliability and longevity, consumers will be unlikely to buy our
fuel cell products. Accordingly, we would not be able to generate sufficient
revenues with positive gross margins to achieve and sustain profitability.

OUR REVENUE AND FUTURE PROSPECTS DEPEND TO A GREAT EXTENT ON OUR RELATIONSHIP
WITH GENERAL MOTORS CORPORATION AND GENERAL MOTORS CORPORATION'S COMMITMENT TO
THE COMMERCIALIZATION OF FUEL CELL MARKETS.

Our largest shareholder and historically our largest customer by revenue is
General Motors, which following this offering is expected to own approximately
18% of our outstanding common shares. General Motors accounted for 29% of our
revenues for the nine months ended September 30, 2003, 60% for the year ended
December 31, 2002 and 33% for the year ended December 31, 2001. Revenue from
General Motors in 2004 may decline due to the expected termination of our
engineering services contract in the third quarter of 2004. Our business and
results of operations would be materially hurt if General Motors were to change
or terminate its relationship with us. There is no guarantee that the interests
of Hydrogenics will continue to be aligned with the interests of General Motors
and that our relationship with General Motors will continue in its current form.
Furthermore, any change in General Motors' strategy with respect to fuel cells,
whether as a result of market, economic or competitive pressures, could also
harm our business by reducing or eliminating a substantial portion of our
revenue. Such a change in strategy could include, for example, any decision by
General Motors to:

- alter its commitment to fuel cell technology in favor of other competing
technologies;

- delay its introduction of fuel cell products and vehicles; or

- increase the internal development of fuel cell products or purchase them
from another supplier.

In addition, where intellectual property is developed pursuant to our use
of technology licensed from General Motors, we have committed to provide certain
exclusive or non-exclusive licenses in favor of General Motors and in some
cases, the intellectual property is jointly owned. As a result of such licenses,
we may be limited or precluded, as the case may be, in the exploitation of such
intellectual property rights.

WE CURRENTLY DEPEND UPON A LIMITED NUMBER OF CUSTOMERS FOR A MAJORITY OF OUR
REVENUES AND A DECREASE IN REVENUE FROM THESE CUSTOMERS COULD MATERIALLY REDUCE
OUR REVENUES AND EARNINGS.

To date, a small number of customers have accounted for a majority of our
revenues and we expect they will continue to do so for the foreseeable future.
Our three largest customers, including General Motors, as discussed above,
accounted for 55% of our revenues for the nine months ended September 30, 2003,
75% for the year ended December 31, 2002 and 70% for the year ended December 31,
2001. The identities of some of our three largest customers have changed from
year to year. If we lose any of these customers and do not attract additional
customers, we may not generate sufficient revenues to offset this loss of
revenues and our financial results will be materially adversely affected.
Furthermore, our arrangements with these customers are generally non-exclusive,
have no volume commitments and are often done on a purchase-order basis. We
cannot be certain that customers that have accounted for significant revenue in
past periods will continue to purchase our products and generate revenue.

Accordingly, our revenue and results of operations may vary from period to
period. We are also subject to credit risk associated with the concentration of
our accounts receivable from these significant customers. If one or more of our
significant customers were to cease doing business with us, significantly reduce
or delay its purchases from us, or fail to pay us on a timely basis, our
business, financial condition and results of operations could be materially
adversely affected.

OUR STRATEGY FOR THE SALE OF FUEL CELL POWER PRODUCTS DEPENDS UPON DEVELOPING
STRATEGIC PARTNERSHIPS WITH SYSTEMS INTEGRATORS, OEMS, GOVERNMENTS, SUPPLIERS
AND OTHER MARKET CHANNEL PARTNERS WHO WILL INCORPORATE OUR PRODUCTS INTO THEIRS.

Other than with respect to a limited number of specific markets, our
strategy is to develop and manufacture products and systems for sale to
governments and systems integrators, OEMs, suppliers and other market channel
partners that have mature sales and distribution networks for their products.
The success of our business depends on our ability to develop relationships with
other parties who will integrate our fuel cell products into their products and
on our ability to find partners who are willing to assume some of the
developmental and research costs and risk associated with fuel cell technology.
Our ability to sell our products to the OEM markets depends to a significant
extent upon our strategic partners' worldwide sales and distribution network and
service capabilities. In addition, our agreements with General Motors require
that we provide for shared intellectual property rights in certain situations,
and there can be no assurance that any future strategic relationships that we
enter into will not require us to share some of our intellectual property. Any
change in the fuel cell or alternative fuel strategies of one of our strategic
partners could have a material adverse effect on our business and future
prospects. We can offer no guarantee that systems integrators, OEMs,
governments, suppliers and other market channel partners will manufacture
appropriate products or, if they do manufacture such products, that they will
choose to use our products as components. The end products into which our fuel
cell technology will be incorporated will be complex appliances comprising many
components and any problems encountered by such third parties in designing,
manufacturing or marketing their products, whether or not related to the
incorporation of our fuel cell products, could delay sales of our products and
adversely affect our financial results.

WE CURRENTLY FACE AND WILL CONTINUE TO FACE SIGNIFICANT COMPETITION FROM OTHER
DEVELOPERS AND MANUFACTURERS OF FUEL CELL TEST AND DIAGNOSTIC EQUIPMENT AND
OTHER FUEL CELL POWER PRODUCTS. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, WE
COULD EXPERIENCE A LOSS OF MARKET SHARE AND REDUCED GROSS MARGINS FOR OUR
EXISTING PRODUCTS AND A FAILURE TO ACHIEVE ACCEPTANCE OF OUR PROPOSED PRODUCTS.

We compete with a number of companies that manufacture fuel cell test and
diagnostic equipment. In addition, most large fuel cell developers and OEMs have
some degree of internal test station development. We also sell fuel cell test
and diagnostic equipment to companies that compete with our efforts to develop
and manufacture fuel cell power products. Because fuel cell test and diagnostic
equipment essentially acts as the balance of plant component, which regulates
the type and level of power transferred from the fuel cell or the fuel cell
stack, our customers for fuel cell test and diagnostic equipment may develop
their own internal test stations.

In the commercial production of fuel cell systems and subsystems, we
compete with a number of companies that currently have fuel cell and fuel cell
system development programs. We expect that several of these competitors will be
able to deliver competing products to market before we do. To the extent that
any one of our competitors does so, it could limit our ability to gain market
share or market acceptance for our products, which could harm our revenues and
impair our ability to expand our business. While our strategy is the development
of fuel cell and hydrogen generation technologies for sale to systems
integrators, governments, OEMs and market channel partners, many of our
competitors are developing products specifically for use in particular markets.
These competitors may be more successful in penetrating these specific markets
than we are. In addition, an increase in the popularity of fuel cell power in
particular market channels may cause certain of our customers to develop and
produce some or all of the fuel cell and hydrogen generation technologies that
we are developing.

New developments in technology may negatively affect the development or
sale of some or all of our products or make our products or proposed products
uncompetitive or obsolete. Many of our competitors or potential competitors have
substantially greater resources than us and may be better able to market,
promote and advertise their products. To the extent that they already have name
recognition, their products may enjoy greater initial market acceptance among
our potential customers. These competitors may also be better able to adapt
quickly to customers' changing demands and to changes in technology.

WE FACE COMPETITION FOR FUEL CELL POWER PRODUCTS FROM DEVELOPERS AND
MANUFACTURERS OF TRADITIONAL POWER TECHNOLOGIES AND OTHER ALTERNATIVE POWER
TECHNOLOGIES.

Given that PEM fuel cells have the potential to replace existing power
sources, competition in our target markets will also come from current power
technologies, from improvements to current power technologies and from new
alternative power technologies, including other types of fuel cells. Each of our
target markets is currently served by existing manufacturers with existing
customers and suppliers. These manufacturers use proven and widely accepted
technologies such as internal combustion engines and turbines, as well as coal,
oil and nuclear powered generators. Additionally, there are competitors working
on developing technologies including other types of fuel cells and other
alternative power technologies, advanced batteries and hybrid battery/internal
combustion engines, which may compete for our target customers. Demand for fuel
cell test and diagnostic equipment is dependent on continued efforts to
commercialize hydrogen-based fuel cell power technologies. If we are unable to
compete successfully, we could experience a loss of market share and reduced
gross margins for our existing products and a failure to achieve acceptance of
our proposed products.

WE HAVE NO EXPERIENCE MANUFACTURING FUEL CELL PRODUCTS ON A LARGE SCALE BASIS,
AND IF WE DO NOT DEVELOP ADEQUATE MANUFACTURING PROCESSES AND CAPABILITIES, WE
WILL BE UNABLE TO ACHIEVE OUR GROWTH AND PROFITABILITY OBJECTIVES.

We have manufactured only a limited number of fuel cell power products for
prototypes and initial sales, and we have no experience manufacturing fuel cell
power products on a large scale. In order to produce fuel cell power products at
affordable prices we will have to manufacture a large volume of fuel cell
products. We do not know whether or when we will be able to develop efficient,
low-cost manufacturing capabilities and processes that will enable us to meet
the quality, price, engineering, design and production standards or production
volumes required to successfully mass market our fuel cell products. Even if we
are successful in developing our manufacturing capabilities and processes, we do
not know whether we will do so in time to meet our product commercialization
schedule or to satisfy the requirements of our customers and the market. Our
failure to develop these manufacturing processes and capabilities in a timely
manner could prevent us from achieving our growth and profitability objectives.

OUR PRODUCTS MAY NOT MEET PERFORMANCE EXPECTATIONS IN FIELD TESTS, WHICH COULD
NEGATIVELY AFFECT OUR CUSTOMER RELATIONSHIPS AND INCREASE OUR MANUFACTURING
COSTS.

We regularly field test our products, and we plan to continue to conduct
additional field tests in the future. Any failures or delays in our field tests
could harm our competitive position and impair our ability to sell our products.
Our field tests may encounter problems and delays for a number of reasons,
including the failure of our technology, the failure of the technology of
others, the failure to combine these technologies properly, operator error and
the failure to maintain and service the test prototypes properly. Many of these
potential problems and delays are beyond our control. In addition, field test
programs, by their nature, may involve delays in product roll-out and
modifications to product design, as well as third party involvement. Any problem
or perceived problem with our field tests, whether originating from our
technology, from our design, or from third parties, could hurt our reputation
and the reputation of our products and limit our sales. Such failures with our
field tests may negatively affect our relationships with customers, require us
to extend field testing longer than anticipated before undertaking commercial
sales, and require us to develop further our technology to account for more
failures than anticipated prior to the field tests.

WE ARE DEPENDENT UPON THIRD PARTY SUPPLIERS FOR KEY MATERIALS AND COMPONENTS FOR
OUR PRODUCTS. IF THESE SUPPLIERS BECOME UNABLE OR UNWILLING TO PROVIDE US WITH
SUFFICIENT MATERIALS AND COMPONENTS ON A TIMELY AND COST-EFFECTIVE BASIS, WE MAY
BE UNABLE TO MANUFACTURE OUR PRODUCTS COST-EFFECTIVELY OR AT ALL, AND OUR
REVENUES AND GROSS MARGINS WOULD SUFFER.

We rely upon third party suppliers to provide materials and components for
our fuel cell products. A supplier's failure to provide materials or components
in a timely manner, or to provide materials and components that meet our
quality, quantity or cost requirements, or our inability to obtain substitute
sources for these materials and components in a timely manner or on terms
acceptable to us, may harm our ability to manufacture our fuel cell products. To
the extent that we are unable to develop and patent our own technology and
manufacturing processes, and to the extent that the processes which our
suppliers use to manufacture the materials and components are proprietary, we
may be unable to obtain comparable materials or components from alternative
suppliers, and that could adversely affect our ability to produce commercially
viable fuel cell products.

THE COMPONENTS OF OUR FUEL CELL PRODUCTS MAY CONTAIN DEFECTS OR ERRORS THAT
COULD NEGATIVELY AFFECT OUR CUSTOMER RELATIONSHIPS AND INCREASE OUR
MANUFACTURING AND WARRANTY COSTS.

Our fuel cell products are complex and must meet the stringent technical
requirements of our customers. The software and other components used in our
fuel cell products may contain undetected errors or defects, especially when
first introduced, which could result in the failure of our fuel cell products to
perform, damage to our reputation, delayed or lost revenue, product returns,
diverted development resources and increased development, service and warranty
costs.

WE MAY NOT BE ABLE TO MANAGE SUCCESSFULLY THE EXPANSION OF OUR OPERATIONS.

The pace of our expansion in facilities, staff and operations has placed
significant demands on our managerial, technical, financial and other resources.
We will be required to make significant investments in our engineering and
logistics systems and our financial and management information systems, as well
as retaining, motivating and effectively managing our employees. Our management
skills and systems currently in place may not enable us to implement our
strategy or to attract and retain skilled management, engineering and production
personnel. Our failure to manage our growth effectively or to implement our
strategy in a timely manner may significantly harm our ability to achieve
profitability.

OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY
FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS, WHICH MAY
CAUSE OUR SHARE PRICE TO DECLINE.

Our quarterly revenues and operating results have varied significantly in
the past and are likely to vary in the future. These quarterly fluctuations in
our operating performance result from the length of time between our first
contact with a customer and the recognition of revenue from sales to that
customer. Our products are highly-engineered and expensive to produce and many
are still in development stages; therefore, the length of time between
approaching a customer and delivering our products to that customer can span
quarterly periods. The length and variability of the sales cycles for our
products make it difficult to forecast accurately the timing and amount of
specific sales and corresponding revenue recognition. The delay or failure to
complete one or more large sales transactions could significantly reduce our
revenues for a particular quarter and we may expend substantial funds and
management effort during our sales cycle with no assurance that we will
successfully sell our products. As a result, our operating results may continue
to fluctuate significantly from quarter to quarter and our share price may
decline and quarter to quarter comparisons of our revenues and operating results
may not be meaningful.

WE WILL NEED TO RECRUIT, TRAIN AND RETAIN KEY MANAGEMENT AND OTHER QUALIFIED
PERSONNEL TO SUCCESSFULLY EXPAND OUR BUSINESS.

Our future success will depend in large part upon our ability to recruit
and retain experienced research and development, engineering, manufacturing,
operating, sales and marketing, customer service

and management personnel. If we do not attract and retain such personnel, we may
not be able to expand our business. Competition for qualified personnel in our
industry is intense. In the past we have experienced difficulty in recruiting
qualified personnel and we expect to experience continued difficulties in
personnel recruiting. We compete in a new market and there are a limited number
of people with the appropriate combination of skills needed to provide the
services that our customers require. We expect competition for qualified
personnel to remain intense, and we may not succeed in attracting or retaining
appropriate personnel. In addition, new employees generally require substantial
training, which requires significant resources and management attention. Even if
we invest significant resources to recruit, train and retain qualified
personnel, we may not be successful in our efforts.

Our success also depends upon the continuing contribution of our key
management, research, product development, engineering, marketing and
manufacturing personnel, many of whom would be difficult to replace.

WE DEPEND UPON INTELLECTUAL PROPERTY AND OUR FAILURE TO PROTECT THAT
INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT OUR FUTURE GROWTH AND SUCCESS.

Failure to protect our existing intellectual property rights may reduce our
ability to prevent others from using our technology. We rely on a combination of
patent, trade secret, trademark and copyright laws to protect our intellectual
property. Some of our intellectual property is currently not covered by any
patent or patent application. Our patent protection is subject to complex
factual and legal issues that may give rise to uncertainty as to the validity,
scope and enforceability of a particular patent. Accordingly, we cannot be
assured that:

- any of the U.S., Canadian or other patents owned by us or third party
patents that are licensed to us will not be invalidated, circumvented,
challenged, rendered unenforceable, or licensed to others; or

- any of our pending or future patent applications will be issued with the
breadth of protection sought by us, if issued at all.

In addition, effective patent, trademark, copyright and trade secret
protection may be unavailable, limited, not applied for or unenforceable in
foreign countries. Furthermore, although we typically retain sole ownership of
the intellectual property we develop, our strategic alliance with General Motors
provides for shared intellectual property rights in certain situations. We have
also entered into agreements with both Dow Corning Corporation and Johnson
Matthey, Inc. that involve shared intellectual property rights. Any development
made under these agreements will be available for future commercial use by all
parties to the agreement.

We also seek to protect our proprietary intellectual property through
contracts, including, when possible, confidentiality agreements and inventors'
rights agreements with our customers and employees. We cannot be assured that
the parties that enter into such agreements with us will not breach them, that
we will have adequate remedies for any breach or that such persons or
institutions will not assert rights to intellectual property arising out of
these relationships. If necessary or desirable, we may seek licenses under the
patents or other intellectual property rights of others. However, we can give no
assurances that we will obtain such licenses or that the terms of any offered
licenses will be acceptable to us. The failure to obtain a license from a third
party for intellectual property we use in the future could cause us to incur
substantial liabilities and to suspend the manufacture, shipment of products or
our use of processes which exploit such intellectual property.

Where intellectual property is developed pursuant to our use of technology
licensed from General Motors, we have committed to provide certain exclusive or
non-exclusive licenses in favor of General Motors, and in some cases, the
intellectual property is jointly owned. As a result of such licenses, we may be
limited or precluded, as the case may be, in the exploitation of such
intellectual property rights.

OUR INVOLVEMENT IN INTELLECTUAL PROPERTY LITIGATION COULD NEGATIVELY AFFECT OUR
BUSINESS.

Our future success and competitive position depend in part upon our ability
to obtain or maintain the proprietary intellectual property used in our
principal products. Our ability to establish and maintain such a competitive
position may be achieved in part by prosecuting claims against others who we
believe are infringing our rights and by defending claims brought by others who
believe that we are infringing their rights. Our involvement in intellectual
property litigation could result in significant expense to us, adversely affect
the sales of any products involved or the use or licensing of related
intellectual property and divert the efforts of our technical and management
personnel from their principal responsibilities, whether or not such litigation
is resolved in our favor. If we are found to infringe the intellectual property
rights of others, we may, among other things, be required to:

- pay substantial damages;

- cease the development, manufacture, use, sale or importation of products
that infringe upon the intellectual property rights of others;

- discontinue processes incorporating infringing technology;

- expend significant resources to develop or acquire non-infringing
intellectual property; or

- obtain licenses to the intellectual property which we are found to be
infringing.

We cannot offer any assurance that we will prevail in any intellectual
property litigation or, if we were not to prevail in such litigation, that
licenses to the intellectual property that we are found to be infringing would
be available on commercially reasonable terms, if at all. The costs of
intellectual property litigation as well as the damages, licensing fees or
royalties that we might be required to pay could have a material adverse effect
on our business and financial results.

WE MAY ACQUIRE TECHNOLOGIES OR COMPANIES IN THE FUTURE, AND THESE ACQUISITIONS
COULD DISRUPT OUR BUSINESS AND DILUTE OUR SHAREHOLDERS' INTERESTS IN US.

In January 2003, we completed the acquisition of Greenlight Power
Technologies, Inc. We cannot assure you that we will be able to successfully
complete the integration of Greenlight into our operations or that the cost
savings or synergies we anticipate will be fully realized. Our failure to
effectively integrate Greenlight into our operations or achieve cost savings and
synergies could have a material adverse effect on our business and financial
condition.

We may acquire additional technologies or other companies in the future.
Entering into an acquisition entails many risks, any of which could materially
harm our business, including:

- diversion of management's attention from other business concerns;

- failure to effectively assimilate the acquired technology, employees or
other assets of the company into our business;

- the loss of key employees from either our current business or the
acquired business; and

- assumption of significant liabilities of the acquired company.

WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL TO PURSUE OUR COMMERCIALIZATION
PLANS AND MAY BE FORCED TO DISCONTINUE PRODUCT DEVELOPMENT, REDUCE OUR SALES AND
MARKETING EFFORTS OR FOREGO ATTRACTIVE BUSINESS OPPORTUNITIES.

We may not have sufficient capital to fund our operations, and we may not
be able to raise additional capital or may not be able to do so on acceptable
terms. Either of these outcomes could adversely affect our ability to respond to
competitive pressures upon us or prevent us from conducting all or a portion of
our planned operations. Based on our business plan for the next 36 months, we
expect that the estimated net proceeds from this offering together with cash on
hand will be sufficient to meet our working capital and capital expenditure
needs. After that time, we may need to raise additional funds through financing
16

which may not be available on acceptable terms, if at all. Alternatively, we may
need to raise additional funds sooner if our estimates of revenues, costs and
capital expenditures change or are inaccurate. We may also require additional
capital to acquire or invest in complementary businesses or products or obtain
the right to use complementary technologies.

The development and commercialization of our products could be delayed or
discontinued if we are unable to fund our research and product development
activities or the development of our manufacturing capabilities. In addition, we
may be forced to reduce our sales and marketing efforts or forego attractive
business opportunities. If we issue additional equity securities in order to
raise funds, the ownership percentage in our company of each of our existing
shareholders will be reduced.

RISK FACTORS RELATED TO THE FUEL CELL INDUSTRY

SIGNIFICANT MARKETS FOR FUEL CELL PRODUCTS MAY NEVER DEVELOP OR MAY TAKE LONGER
TO DEVELOP THAN WE ANTICIPATE, WHICH WOULD ADVERSELY AFFECT OUR REVENUE GROWTH.

Significant markets may never develop for fuel cell products or they may
develop more slowly than we anticipate. If significant markets fail to develop
or develop more slowly than we anticipate, we may be unable to recover the
losses we have incurred, and expect to continue to incur, in the development of
our products, and we may never achieve profitability. Any delay in, or failure
of, the development of significant markets for fuel cell products would
significantly harm our revenues and could cause our business to fail. Fuel cell
products represent an emerging market, and we do not know whether end-users will
want to use them. The development of a significant market for fuel cell products
may be affected by many factors, some of which are out of our control,
including:

- the emergence of newer, more competitive technologies and products,
including other environmentally clean technologies and products that
could render our products obsolete;

- the future cost of hydrogen and other fuels used by our fuel cell
systems;

- the future cost of membrane electrode assemblies, or MEA's, used in our
fuel cell systems;

- the future cost of platinum, a key metal used in our fuel cell systems;

- the regulatory requirements of agencies, including the development of
uniform codes and standards for fuel cell products;

- government support of fuel cell technology;

- the manufacturing and supply costs for fuel cell components and systems;

- the perceptions of consumers regarding the safety of our products;

- the willingness of consumers to try new technologies;

- the continued development and improvement of existing power technologies;
and

- the future cost of fuels used in existing technologies.

HYDROGEN MAY NOT BE READILY AVAILABLE ON A COST-EFFECTIVE BASIS.

If our customers are not able to obtain hydrogen on a cost-effective basis,
we may be unable to compete with existing power sources, and our revenues and
results of operations would be materially adversely affected. Our fuel cell
products require oxygen and hydrogen to operate. While ambient air typically can
supply the necessary oxygen, our fuel cells rely on hydrogen being derived from
water or from fuels such as natural gas, propane, methanol and other petroleum
products. We are currently developing devices called electrolyzers that use
electricity to separate water into its constituent parts of hydrogen and oxygen.
In addition, third parties are developing systems to extract, or reform,
hydrogen from fossil fuels. Significant growth in the use of hydrogen-powered
devices, particularly in the mobile market, may require the development of an
infrastructure to deliver the hydrogen. There is no guarantee that such an

infrastructure will be developed on a timely basis or at all. Even if hydrogen
is available for our products, if its price is such that electricity or power
produced by our systems would cost more than electricity provided through other
means, we will be unable to compete successfully.

OUR PRODUCTS USE FLAMMABLE FUELS THAT ARE INHERENTLY DANGEROUS SUBSTANCES AND
COULD SUBJECT US TO PRODUCT LIABILITIES.

Our results of operations could be materially harmed by accidents involving
either our products or those of other fuel cell manufacturers, either because we
face claims for damages or because demand for fuel cells and fuel cell products
could suffer and our sales could decline. Our products use hydrogen which is
typically generated from gaseous and liquid fuels, such as propane, natural gas
or methanol in a process known as reforming. While our fuel cell products do not
use these fuels in a combustion process, natural gas, propane and other
hydrocarbons are flammable fuels that could leak and then combust if ignited by
another source. In addition, certain of our OEM partners and customers may
experience significant product liability claims. As a supplier of products and
systems to these OEMs, we face an inherent business risk of exposure to product
liability claims in the event that our products, or the equipment into which our
products are incorporated, malfunction and result in personal injury or death.
We may be named in product liability claims even if there is no evidence that
our systems or components caused the accidents. Product liability claims could
result in significant losses as a result of expenses incurred in defending
claims or the award of damages. Since our products have not yet gained
widespread market acceptance, any accidents involving our systems, those of
other fuel cell products or those used to produce hydrogen could materially
impede acceptance of our products. In addition, although our management believes
that our liability coverage is currently adequate to cover these risks, we may
be held responsible for damages beyond the scope of our insurance coverage.

CHANGES IN GOVERNMENT POLICIES AND REGULATIONS COULD HURT THE MARKET FOR OUR
PRODUCTS.

The fuel cell industry is in its development phase and is not currently
subject to industry-specific government regulations in Canada or the United
States relating to matters such as design, storage, transportation and
installation of fuel cell systems. However, given that the production of
electrical energy has typically been an area of significant government
regulation, we expect that we will encounter industry-specific government
regulations in the future in the jurisdictions and markets in which we operate.
For example, regulatory approvals or permits may be required for the design,
installation and operation of stationary fuel cell systems under federal, state
and provincial regulations governing electric utilities, and mobile fuel cell
systems under federal, state and provincial emissions regulations affecting
automobile manufacturers. To the extent that there are delays in gaining
regulatory approval, our development and growth may be constrained. Furthermore,
the inability of our potential customers to obtain a permit, or the
inconvenience often associated with the permit process, could harm demand for
fuel cell products and, therefore, harm our business.

Our business will suffer if environmental policies change and no longer
encourage the development and growth of clean power technologies. The interest
by automobile manufacturers in fuel cell technology has been driven in part by
environmental laws and regulations in California and, to a lesser extent, in New
York, Massachusetts and Maine. There can be no guarantee that these laws and
regulations will not change. Changes in these laws and regulations could result
in automobile manufacturers abandoning their interest in fuel cell powered
vehicles. In addition, if current laws and regulations in these states are not
kept in force or if further environmental laws and regulations are not adopted
in these jurisdictions as well as in other jurisdictions, demand for vehicular
fuel cells may be limited.

The market for stationary and portable energy-related products is
influenced by federal, state and provincial governmental regulations and
policies concerning the electric utility industry. Changes in regulatory
standards or public policy could deter further investment in the research and
development of alternative energy sources, including fuel cells and fuel cell
products, and could result in a significant reduction in the potential market
demand for our products. We cannot predict how changing government

regulation and policies regarding the electric utility industry will affect the
market for stationary and portable fuel cell systems.

Although the development of alternative energy sources, and in particular
fuel cells, has been identified as a significant priority by many governments,
we cannot be assured that governments will not change their priorities or that
any such change would not materially affect our revenues and business. If
governments change their laws and regulations such that the development of
alternative energy sources is no longer required or encouraged, the demand for
alternative energy sources such as our fuel cell products may be significantly
reduced or delayed and our sales would decline.

RISK FACTORS RELATED TO THIS OFFERING

IF AT ANY TIME WE QUALIFY AS A PASSIVE FOREIGN INVESTMENT COMPANY UNDER UNITED
STATES TAX LAWS, OUR SHAREHOLDERS MAY BE SUBJECT TO ADVERSE TAX CONSEQUENCES.

We would be a passive foreign investment company if 75% or more of our
gross income in any year is considered "passive income" for United States tax
purposes. For this purpose, passive income generally includes interest,
dividends, some types of rents and royalties, and gains from the sale of assets
that produce these types of income. In addition, we would be classified as a
passive foreign investment company if the average percentage of our assets
during any year that produced passive income, or that were held to produce
passive income, is at least 50%.

Based upon our current and projected income and the market value of the
common shares, we do not expect to be a passive foreign investment company for
United States federal income tax purposes for the taxable year ending December
31, 2003. However, since the determination of whether we are a passive foreign
investment company is based upon the composition of our income and assets from
time to time, and since the market value of our common shares is likely to
fluctuate, there can be no assurance that we will not be considered a passive
foreign investment company for any fiscal year. If we are classified as a
passive foreign investment company, this characterization could result in
adverse U.S. tax consequences to our United States Holders (as defined below, in
"Income Tax Considerations -- United States Federal Income Tax Considerations"),
including having gain recognized on the sale of our common shares be treated as
ordinary income, that is not eligible for the lower tax rate applicable to
certain dividends and having potential punitive interest charges apply to such
sales proceeds.

United States shareholders should consult their own United States tax
advisors with respect to the United States tax consequences of holding our
common shares and annually determine whether we are a passive foreign investment
company.

A LIMITED NUMBER OF SHAREHOLDERS COLLECTIVELY OWN A MAJORITY OF OUR COMMON
SHARES AND MAY ACT, OR PREVENT CORPORATE ACTIONS, TO THE DETRIMENT OF OTHER
SHAREHOLDERS.

Prior to this offering, our principal shareholders, excluding General
Motors, currently own approximately 34% of our outstanding common shares. See
"Dilution". General Motors currently owns approximately 21% of our outstanding
common shares and is expected to own approximately 18% of our outstanding common
shares following the completion of this offering. In addition, General Motors
currently owns warrants to acquire 2,470,436 of our common shares. Should these
warrants be exercised prior to completion of this offering, General Motors would
own 25% of our outstanding common shares and would be expected to own
approximately 21% of our outstanding common shares following the completion of
this offering. Accordingly, these shareholders may, if they act together,
exercise significant influence over all matters requiring shareholder approval,
including the election of a majority of our directors and the determination of
significant corporate actions. This concentration could also have the effect of
delaying or preventing a change in control that could be otherwise beneficial to
our shareholders.

FUTURE SALES OF COMMON SHARES BY OUR EXISTING SHAREHOLDERS COULD CAUSE OUR SHARE
PRICE TO FALL AND REDUCE THE VALUE OF A SHAREHOLDER'S INVESTMENT.

If our shareholders sell substantial amounts of our common shares in the
public market, the market price of our common shares could fall. The perception
among investors that these sales will occur could also produce this effect.
Share price declines may be exaggerated if the low trading volume of our common
shares that we have experienced to date continues. Also, the contractual resale
restrictions and the approximately 4.2 million shares issued for the acquisition
of Greenlight to Greenlight majority shareholders will expire progressively from
January to July 2004. These factors could also make it more difficult for us to
raise additional funds through future offerings of our common shares or other
securities.

OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE AN UNLIMITED NUMBER OF
COMMON AND PREFERRED SHARES AND SIGNIFICANT ISSUANCES OF COMMON OR PREFERRED
SHARES COULD DILUTE THE SHARE OWNERSHIP OF OUR SHAREHOLDERS, DETER OR DELAY A
TAKEOVER OF US THAT OUR SHAREHOLDERS MAY CONSIDER BENEFICIAL OR DEPRESS THE
TRADING PRICE OF OUR COMMON SHARES.

Our articles of incorporation permit us to issue an unlimited number of
common and preferred shares. If we were to issue a significant number of common
shares, it would reduce the relative voting power of previously outstanding
shares. Such future issuances could be at prices less than our shareholders paid
for their common shares. If we were to issue a significant number of common or
preferred shares, these issuances could also deter or delay an attempted
acquisition of us that a shareholder may consider beneficial, particularly in
the event that we issue preferred shares with special voting or dividend rights.
While the rules of the Nasdaq National Market and the Toronto Stock Exchange may
require us to obtain shareholder approval of significant issuances, we would not
be subject to these requirements if we ceased, voluntarily or otherwise, to be
listed on the Nasdaq National Market and the Toronto Stock Exchange. Significant
issuances of our common or preferred shares, or the perception that such
issuances may occur, could cause the trading price of our common shares to drop.

U.S. INVESTORS MAY NOT BE ABLE TO ENFORCE U.S. CIVIL LIABILITY JUDGMENTS AGAINST
US OR OUR DIRECTORS, CONTROLLING PERSONS AND OFFICERS.

We are organized under the laws of Canada. A majority of our directors,
controlling persons and officers, as well as some of the experts named in this
short form prospectus, are residents of Canada and all or a substantial portion
of their assets and substantially all of our assets are located outside of the
United States. As a result, it may be difficult for U.S. holders of our common
shares to effect service of process on these persons within the United States or
to realize in the United States upon judgments rendered against them. In
addition, a shareholder should not assume that the courts of Canada (i) would
enforce judgments of U.S. courts obtained in actions against us or such persons
predicated upon the civil liability provisions of the U.S. federal securities
laws or other laws of the United States, or (ii) would enforce, in original
actions, claims against us or such persons predicated upon the U.S. federal
securities laws.

However, a Canadian court would generally enforce, in an original action,
civil liability predicated on U.S. securities laws provided that those laws that
govern the shareholder's claim according to applicable Canadian law, are proven
by expert evidence, are not contrary to public policy as the term is applied by
a Canadian court or are not foreign penal laws or laws that deal with taxation
or the taking of property by a foreign government and provided that the action
is in compliance with Canadian procedural laws and applicable Canadian
legislation regarding the limitation of actions.

Also, a judgment obtained in a U.S. court would generally be recognized by
a Canadian court except where, for example:

- the U.S. court where the judgment was rendered had no jurisdiction
according to applicable Canadian law;

- the judgment was subject to ordinary remedy (appeal, judicial review and
any other judicial proceeding which renders the judgment not final,
conclusive or enforceable under the laws of the applicable state) or was
not final, conclusive or enforceable under the laws of the applicable
state;

- the judgment was obtained by fraud or in any manner contrary to natural
justice or rendered in contravention of fundamental principles of
procedure;

- a dispute between the same parties, based on the same subject matter has
given rise to a judgment rendered in a Canadian court or has been decided
in a third country and the judgment meets the necessary conditions for
recognition in a Canadian court;

- the enforcement of the judgment of the U.S. court was inconsistent with
public policy, as the term is applied by the Canadian court;

- the judgment enforces obligations arising from foreign penal laws or laws
that deal with taxation or the taking of property by a foreign
government; or

- there has not been compliance with applicable Canadian law dealing with
the limitation of actions.

OUR SHARE PRICE HAS BEEN VOLATILE AND YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT
OR ABOVE THE OFFERING PRICE.

Since our common shares were initially offered to the public at a price of
$12 per share in November 2000, the last reported sale price of our common
shares on the Toronto Stock Exchange has varied from Cdn. $18.65 per share on
October 27, 2000 to Cdn. $2.65 per share on September 19, 2001 and the last
reported sale price of our common shares on the Nasdaq National Market has
varied from $12.25 per share on October 27, 2000 to $1.87 per share on September
19, 2001. In recent years, the stock markets have experienced significant price
and volume fluctuations, especially in the technology sector. Our common shares
may continue to experience volatility for reasons unrelated to our own operating
performance, including:

- performance of other companies in the fuel cell or alternative power
businesses;

- news announcements, securities analysts' reports and recommendations and
other developments with respect to our industry or our competitors; and

- changes in general economic conditions.

IF THE CANADIAN DOLLAR WEAKENS AGAINST THE U.S. DOLLAR, WE MAY EXPERIENCE
FOREIGN EXCHANGE LOSSES.

Our monetary assets and liabilities denominated in a currency other than
the U.S. dollar will give rise to a foreign currency gain or loss reflected in
earnings. To the extent that the Canadian dollar weakens against the U.S.
dollar, we may incur net foreign exchange losses. Such losses would be included
in our financial results and, consequently, may have an adverse effect on our
share price. In addition, sales to our customers have traditionally been
denominated primarily in U.S. dollars while certain of our expenses are
denominated primarily in Canadian dollars. If the value of the Canadian dollar
strengthens against the U.S. dollar, the profit margin on our products will be
reduced. We currently do not hedge our currency exposure through financial
instruments. However we do carry a portion of our short-term investments in
Canadian dollars. In addition, a portion of our revenue is denominated in euros,
and we are therefore subject to the risk of exchange rate fluctuations between
those currencies and the U.S. dollar.

YOU WOULD LIKELY RECEIVE MUCH LESS THEN THE AMOUNT YOU PAID FOR YOUR SHARES IF
WE LIQUIDATE OUR ASSETS AND DISTRIBUTE THE PROCEEDS.

The offering price of our common shares will significantly exceed the net
tangible book value per share of our common shares. Accordingly, if you purchase
common shares in this offering, you will incur immediate and substantial
dilution of your investment. As a result, you would likely receive much less
than the amount you paid for your shares if we liquidate our assets and
distribute the proceeds.

AS OF JANUARY 7, 2004, THERE WERE 3,306,407 OPTIONS TO PURCHASE OUR COMMON
SHARES AND WARRANTS TO PURCHASE UP TO 2,470,436 COMMON SHARES OUTSTANDING. IF
THESE SECURITIES ARE EXERCISED, YOU WILL INCUR SUBSTANTIAL DILUTION.

A significant element in our plan to attract and retain qualified personnel
is the issuance to such persons of options to purchase our common shares. As of
January 7, 2004, we have issued and outstanding 3,306,407 options to purchase
our common shares at an average price of Cdn. $4.11 per common share. In
addition, in October 2001, we issued General Motors warrants to acquire
2,470,436 of our common shares at a price of $4.00 per common share.
Accordingly, to the extent that we are required to issue significant numbers of
options to our employees, and such options are exercised or, to the extent
General Motors exercises its warrants, you could experience significant
dilution. As a result you would likely receive less than you paid for your
shares if we were to liquidate our assets and distribute the proceeds.

WE WILL HAVE BROAD DISCRETION REGARDING THE USE OF PROCEEDS FROM THIS OFFERING.
IF WE DO NOT USE THE PROCEEDS EFFECTIVELY TO DEVELOP AND EXPAND OUR BUSINESS,
THE VALUE OF YOUR INVESTMENT COULD BE REDUCED.

We have not identified specific uses for the proceeds from this offering.
As a result, our management will have broad discretion in how we use the net
proceeds from this offering. You will not have the opportunity to evaluate the
economic, financial or other information on which we base our decisions
regarding the use of the net proceeds from this offering and we may use these
proceeds in ways that do not increase our operating results or market value.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless we indicate otherwise, financial information in this short form
prospectus has been prepared in accordance with Canadian generally accepted
accounting principles, or GAAP. Canadian GAAP differs in some significant
respects from U.S. GAAP and thus our consolidated financial statements may not
be comparable to the financial statements of U.S. companies. The principal
differences as they apply to us are summarized in note 22 of our audited
consolidated financial statements for the year ended December 31, 2002 and note
13 of our unaudited consolidated interim financial statements for the nine month
periods ended September 30, 2003 and 2002, each of which are included in or
incorporated by reference into this short form prospectus.

Our reporting currency is the U.S. dollar. Effective January 1, 2002, our
functional currency is also the U.S. dollar. Prior to January 1, 2002, our
functional currency was the Canadian dollar.

USE OF PROCEEDS

We expect to receive approximately $ million in net proceeds from the
sale of common shares being offered by us in this offering, based on
the estimated offering price of $ per common share. We expect that we
will receive approximately $ from the sale of common shares
if the underwriters' over-allotment option is exercised in full.

As of the date of this short form prospectus, we have not made any specific
expenditure plans with respect to the net proceeds of this offering, except as
described below. We expect to use the net proceeds of this offering for general
corporate purposes, capital expenditures, investments in product development and
potential acquisitions and investments. We expect to make capital expenditures
in 2004 and 2005 to purchase equipment, make leasehold improvements, expand our
production capacity and fund research and development programs. We believe that
there will be significant opportunities to make acquisitions of, or investments
in, businesses, products or technologies that expand, complement or are
otherwise related to our current business and we may also use net proceeds from
this offering for these purposes. However, we currently have no specific
acquisitions planned. Pending these uses, we expect to invest the net proceeds
in short-term, interest bearing investment grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common shares. We
currently intend to retain any future earnings to fund the development and
growth of our business and we do not anticipate paying any cash dividends in the
foreseeable future.

CAPITALIZATION

The following table sets forth our capitalization as at September 30, 2003
on an actual basis and as adjusted to give effect to the offering, based on the
offering price of $ (Cdn. $ ) per common share, after
deducting underwriting discounts and commissions and estimated offering expenses
and assuming no exercise of the underwriters' over-allotment option.

AS AT SEPTEMBER 30, 2003
--------------------------
ACTUAL AS ADJUSTED(1)
-------- ---------------
(UNAUDITED)
(IN THOUSANDS)

Cash and short-term investments............................. $ 51,010
========
Long term debt.............................................. $ 608
--------

Shareholders' equity:
Share capital and other equity(2)......................... 131,658
Foreign currency translation adjustment................... (4,046)
Deficit................................................... (39,708)
--------
Total shareholders' equity........................ 87,904
--------
Total capitalization.............................. $ 88,512
========

---------------

(1) Reflects the receipt of the net proceeds from the sale of common
shares offered by the company at the offering price of $ (Cdn.
$ ) per common share, after deducting underwriting discounts and
commissions and estimated offering expenses, which pending application as
described in "Use of Proceeds" will be invested in short-term interest
bearing investment grade securities.

(2) Unlimited number of common shares authorized: 53,088,804 common shares
issued and outstanding (actual); common shares issued and
outstanding (as adjusted).

The preceding table excludes 3,306,407 common shares reserved for issuance
under our stock option plan with a weighted average exercise price of Cdn. $4.11
per share and warrants to purchase 2,470,436 common shares at an exercise price
of $4.00 per share held by General Motors.

DILUTION

Our consolidated net tangible book value as at September 30, 2003 was $63.3
million, or $1.19 per common share. Consolidated net tangible book value per
share is determined by dividing the amount of our total consolidated tangible
assets, less total consolidated liabilities, by the number of common shares
outstanding on September 30, 2003. Dilution in net tangible book value per
common share represents the difference between the assumed offering price and
the pro forma net tangible book value per common share immediately after the
completion of this offering.

After giving effect to the sale of the common shares offered at
the estimated offering price of $ per share and after deducting the
underwriting commissions and estimated offering expenses payable by us, our
consolidated net tangible book value as at September 30, 2003, would have been
$ million, or $ per common share. This represents an immediate
increase in consolidated net tangible book value of $ per share to existing
shareholders and an immediate dilution in consolidated net tangible book value
of $ per share to new investors in common shares who purchased such common
shares in this offering. This amount is equal to % of our estimated
offering price of $ per common share. The following table illustrates this
dilution on a per share basis:

(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)

Assumed offering price per common share..................... $
========
Consolidated net tangible book value per common share as
of September 30, 2003.................................. $1.19
Increase in net tangible book value per common share
attributable to new investors..........................
-----
Pro forma consolidated net tangible book value per common
share after this offering.................................
--------
Dilution in consolidated net tangible book value per common
share to new investors.................................... $
========

The following table sets forth, as at September 30, 2003, the difference
between the number of common shares purchased, the total consideration paid and
the average price per common share paid by the existing holders of our common
shares and by the new investors, before deducting underwriting commissions and
estimated offering expenses payable by us at the assumed offering price of
$ per share:

SHARES PURCHASED TOTAL CONSIDERATION
-------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- --------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNT)

Existing shareholders.................... 53,088,804 % $126,862 % $2.39
New investors............................
---------- ----- -------- ----- -----
Total.................................... 100.0% $ 100.0% $
========== ===== ======== ===== =====

The table above excludes the following:

- outstanding options as of January 7, 2004 to purchase 3,306,407 common
shares under our stock option plan at a weighted average exercise price
of Cdn. $4.11 per share;

- 2,765,045 common shares available for future grants under our stock
option plan; and

- outstanding warrants held by General Motors to purchase 2,470,436 of our
common shares at an exercise price of $4.00 per share.

To the extent that any common shares are issued upon the exercise of
options that were outstanding as of September 30, 2003 or granted after that
date, or reserved for future issuance under our stock option plan, there will be
further dilution to new investors. For a more detailed discussion of our stock
option plan and outstanding options to purchase common shares, see notes 9 and
10 to our audited consolidated financial statements as at and for the years
ended December 31, 2002 and 2001 which are included in this short form
prospectus.

SELECTED FINANCIAL DATA

The data as at December 31, 2001 and 2002 and for each of the years in the
three year period ended December 31, 2002 are derived from our audited
consolidated financial statements included in and incorporated by reference in
this prospectus. The selected consolidated financial data as at September 30,
2003 and for the nine month periods ended September 30, 2002 and 2003 are
derived from the unaudited consolidated interim financial statements, which, in
the opinion of management, include all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial information for
such periods and are included and incorporated by reference in this short form
prospectus. The data as at and for the nine months ended September 30, 2003
includes the operating results of Greenlight from January 7, 2003. Results for
any interim period are not necessarily indicative of the results that may be
expected for any other interim period or for a full year. Our consolidated
financial statements are prepared in accordance with Canadian generally accepted
accounting principles. Canadian GAAP differs in some significant respects from
U.S. GAAP. The principal differences between Canadian GAAP and U.S. GAAP as they
apply to us are disclosed in note 22 of our consolidated financial statements
for the years ended December 31, 2000, 2001 and 2002 and note 13 of our
unaudited consolidated interim financial statements for the nine month periods
ended September 30, 2003 and 2002. You should read the following selected
financial data with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements together
with the notes thereto appearing elsewhere or incorporated by reference in this
short form prospectus.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------------------
2000 2001 2002 2002 2003
--------- --------- ---------- ------------- ----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Canadian GAAP:
Revenues........................................... $ 8,883 $ 7,418 $ 15,840 $ 10,022 $ 20,778
Cost of revenues................................... 6,485 4,941 10,703 6,888 13,849
------- ------- -------- -------- --------
Gross profit....................................... 2,398 2,477 5,137 3,134 6,929
------- ------- -------- -------- --------
Operating expenses:
Selling, general and administrative.............. 2,069 4,403 6,658 4,424 8,837
Research and development......................... 790 3,518 4,235 3,358 6,641
Research and development grants.................. (140) (1,181) (474) (368) (2,124)
Depreciation of property, plant and equipment.... 224 716 1,278 971 1,690
Amortization of intangible assets................ -- 3,459 15,223 11,380 9,700
Integration costs................................ -- -- -- -- 1,249
------- ------- -------- -------- --------
2,943 10,915 26,920 19,765 25,993
------- ------- -------- -------- --------
Loss from operations............................... (545) (8,438) (21,783) (16,631) (19,064)
Other income (expenses)............................ (1,019) 5,778 1,426 1,263 4,746
------- ------- -------- -------- --------
Loss before income taxes........................... (1,564) (2,660) (20,357) (15,368) (14,318)
Current income tax expense......................... 172 156 254 112 120
------- ------- -------- -------- --------
Net loss for the period............................ $(1,736) $(2,816) $(20,611) $(15,480) $(14,438)
======= ======= ======== ======== ========
Basic and diluted net loss per share............... $ (0.08) $ (0.07) $ (0.43) $ (0.32) $ (0.27)
======= ======= ======== ======== ========

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
2000 2001 2002 2002 2003
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Shares used in computing basic and diluted net
loss per share............................... 22,341,370 38,217,593 48,437,813 48,338,097 52,957,526
========== ========== ========== ========== ==========
U.S. GAAP:
Net loss for the period........................ $ (4,843) $ (4,284) $ (21,054) $ (15,763) $ (14,579)
Basic and diluted net loss per share........... (0.22) (0.11) (0.43) (0.33) (0.28)

The impact on loss per share of the non-cash amortization of intangibles
was $0.18 per share for the nine months ended September 30, 2003 and $0.31 per
share for the year ended December 31, 2002.

AS AT DECEMBER 31, AS AT
------------------ SEPTEMBER 30,
2001 2002 2003
-------- ------- -------------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)

CONSOLIDATED BALANCE SHEET DATA:
Canadian and U.S. GAAP:
Cash and short-term investments(1).......................... $ 65,809 $60,051 $51,010
Working capital(2).......................................... 72,397 66,387 58,296
Total assets................................................ 107,633 90,677 98,791
Total shareholders' equity.................................. 105,821 85,432 87,904

---------------

(1) Total cash and short-term investments is comprised of the following:

AS AT AS AT AS AT
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
2001 2002 2003
------------ ------------ -------------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)

Cash............................................... $ 1,639 $ 994 $ 2,309
Short-term investments............................. 64,170 59,057 48,701
------- ------- -------
65,809 60,051 51,010
======= ======= =======

(2) Working capital is determined by subtracting the amount of our current
liabilities from our current assets.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the selected
consolidated historical financial data and our consolidated comparative
financial statements and the accompanying notes appearing elsewhere in this
short form prospectus or incorporated by reference. This discussion contains
forward-looking statements that involve risks and uncertainties. Please see
"Forward-Looking Statements".

OVERVIEW

We are a leading developer and manufacturer of fuel cell and related new
energy technologies that produce clean electricity. Our principal business is
the development and commercialization of proton exchange membrane, or PEM, fuel
cell test and diagnostic stations, PEM fuel cell stacks and PEM fuel cell power
generation systems for portable, stationary and mobile applications. We are also
beginning to develop and manufacture hydrogen generation products to complement
our fuel cell product development initiatives, which include PEM electrolyzer
stacks, PEM electrolyzer refuelling systems and balance of plant components for
reformer-based hydrogen generation systems.

Our business is divided into two segments:

FUEL CELL TEST AND DIAGNOSTIC EQUIPMENT. Our commercial series of fuel
cell testing and diagnostic equipment are used to develop and optimize the
performance of fuel cell technology by simulating, monitoring and controlling
the effect of power load, temperature, pressure, humidity and potential
contaminants on a fuel cell and to measure the effect of changes in these
variables on fuel cell performance. This equipment has become a critical tool
for fuel cell technology developers, allowing fuel cell stacks to operate as
part of a fully integrated power system.

FUEL CELL POWER PRODUCTS. We are developing a comprehensive portfolio of
fuel cell products which includes fuel cell stacks, scalable fuel cell power
modules and stand alone fuel cell systems. We are also beginning to develop
hydrogen generation devices. Our principal commercial product line is scalable
fuel cell power modules that have been developed to allow "plug and play"
integration into our own fuel cell products or those of OEMs. In addition, we
are developing certain complete fuel cell system products for specific end-use
markets. Our fuel cell systems cover a range of portable, mobile and stationary
power applications in the 500 watt to 50 kW range. Through this business unit we
also provide system integration and engineering services to key customers and
strategic partners.

REVENUES

We generate revenue through the sale of fuel cell test and diagnostic
equipment and fuel cell power products. We also generate revenue by providing
our customers system integration, engineering and testing services. Revenues
related to the sale of fuel cell test and diagnostic equipment and fuel cell
power products are recognized when there is persuasive evidence of an
arrangement, goods have been delivered, the fee is fixed or determinable, title
has passed to the customer and collection is reasonably assured. Where customer
acceptance clauses are considered to be substantive, revenue is recognized only
after customer acceptance is received. Revenues relating to system integration,
engineering and testing services are generally recognized as services are
rendered.

Where we have long-term contracts with a customer, revenues are recognized
under the percentage-of-completion method, whereby revenues and profits are
recognized on a pro rata basis in relation to contract costs incurred. An
example of such a contract would be in connection with a demonstration project
spanning multiple quarters.

On occasion, we enter into sales-type lease arrangements with our customers
in connection with the provision of our products. For these arrangements,
revenues are recognized when all the following criteria are met: persuasive
evidence of an agreement exists, goods have been delivered, the fee is fixed or
determinable and collection is reasonably assured.

We report our revenues in two segments: test and power products. Test
revenues include revenues related to the manufacturing and sale of test
equipment, upgrades to test equipment and in-house testing of customer supplied
components. Power products revenues include revenues related to systems
integration, fuel cell stacks, power modules, auxiliary power modules and
engineering services. Power products revenues from engineering services are
derived primarily from our long term contract with General Motors, pursuant to
which we provide technician and support services to General Motors in connection
with its fuel cell program. We expect that this contract will end in the third
quarter of 2004.

2003 Revenue. As part of our quarterly report on the nine months ended
September 30, 2003, we disclosed that revenues for the year ended December 31,
2003 were likely to be in the range of $28 million to $30 million. This guidance
was down from our original revenue guidance of $30 million to $32 million for
the year and was due primarily to timing of revenue recognition and tight
delivery deadlines around year-end. Due specifically to certain shipments and
revenue recognition being deferred to 2004, we now expect revenue to be in the
range of $26 million to $27 million for the year ended December 31, 2003, with a
strong backlog flowing into 2004.

COST OF REVENUES

Cost of revenues consists primarily of materials and direct labor relating
to engineering, design and build. The costs of providing engineering services,
although heavily oriented towards research and development activities, are
matched with corresponding revenues and are included in cost of revenues.

GROSS PROFIT

We calculate gross profit by deducting the cost of revenues from revenues.
Increased gross profit due to revenue growth and consistent gross margins are
important to the achievement of breakeven operating cash flow. Positive gross
profit combined with grants received for R&D projects are used as the primary
source of funding for our market and product development activities.

OPERATING EXPENSES

Selling, General and Administrative (SG&A). SG&A expenses consist
primarily of wages, salaries and benefits relating to our sales, marketing and
corporate staff, professional fees, travel, insurance and facilities costs.

Research and Development (R&D). R&D expenses consist of materials, labor
costs and benefits, legal fees for the protection of intellectual property and
overhead attributable to R&D activity.

R&D Grants. R&D grants are accounted for as a reduction of expense in our
consolidated statements of operations and are not included in revenues. R&D
grants include government funding and monies received under joint development
agreements. The Canadian government represents our primary source of R&D grants.
However, the value of grants received fluctuates significantly from year-to-year
as programs wind down and new programs commence at varying schedules.

Amortization of Intangible Assets. The majority of operating expenses
recorded as amortization of intangible assets is attributable to the
amortization of intangible assets that we purchased from General Motors in
October 2001. Pursuant to that transaction we purchased a perpetual royalty free
intellectual property license to use certain fuel cell stack technology, in
exchange for common shares and share purchase warrants in Hydrogenics.
Amortization expense also includes the amortization of intangible assets
acquired upon the January 7, 2003 acquisition of Greenlight.

Foreign Currency Translation. As a result of increased U.S. dollar
denominated transactions, effective January 1, 2002 the U.S. dollar became our
functional currency. Monetary assets and liabilities denominated in currencies
other than U.S. dollars are translated at the rate of exchange at the end of
each period. Non-monetary assets are translated at historical rates of exchange.
Revenues and expenses denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rate of exchange on the date of the
transaction, except for depreciation and amortization which are translated at
29

historical rates. Translation gains and losses primarily arise from the
translation of Canadian dollar denominated monetary assets and liabilities and
although unrealized are reflected in the results of operations.

Stock-Based Compensation. Effective January 1, 2002, we adopted the new
Canadian GAAP standard for reporting stock-based compensation. This standard
applies to all awards granted on or after January 1, 2002 and requires the fair
value based method of accounting for direct awards of stock to employees and
equity instruments granted to non-employees. For stock options granted to
employees, this standard, for periods prior to our 2004 fiscal year, allows
either the recognition of compensation expense based on the estimated fair value
at the date of grant or, alternatively, note disclosure of pro forma net
earnings and earnings per share data as if the stock-based compensation had been
recognized. We have opted for note disclosure of the pro forma net earnings and
earnings per share. The standard requires that such stock options granted to
employees must be expensed commencing January 1, 2004, with earlier adoption
encouraged.

ACQUISITIONS

EnKAT GmbH (EnKAT). On May 1, 2002, we acquired, through our German
subsidiary Hydrogenics GmbH, all the issued and outstanding shares of EnKAT
based in Gelsenkirchen, Germany. EnKAT designs and manufactures test systems for
fuel cells, reformers and electrochemical engines. Part of the purchase included
management services contracts for five years with each of the two principals of
the acquired company. The fair value of these contracts on the date of
acquisition was $0.6 million, which is being amortized on a declining basis at
an annual rate of 50%.

Greenlight Power Technologies Inc. (Greenlight). On January 7, 2003, we
acquired all the issued and outstanding shares of Greenlight based in Burnaby,
British Columbia, Canada. Greenlight designs and manufactures fuel cell test
systems. The purchase price was $19.0 million, exclusive of expenses of $1.1
million related to the acquisition. Consideration consisted of cash of $2.3
million and the issuance of 4,164,093 of our common shares with an aggregate
value of $16.7 million at the acquisition date. The allocation of the purchase
price to the assets acquired and liabilities assumed was as follows:

$ MILLIONS

Current assets.............................................. $ 3.0
Property, plant and equipment............................... 2.1
Future tax assets........................................... 5.4
Intangible assets --
Order backlog(1).......................................... 0.5
Customer relationships(2)................................. 5.0
Computer software(3)...................................... 1.9
Patentable technology(2).................................. 6.1 13.5
----
Goodwill.................................................... 5.3
Current liabilities......................................... (3.6)
Long-term debt.............................................. (0.2)
Future tax liabilities...................................... (5.4)
-----
$20.1
=====

---------------

(1) Being amortized over 1 year.

(2) Being amortized over 3 years.

(3) Being amortized over 2 years.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Revenues increased by $10.8 million, or 108%, to $20.8 million for the nine
months ended September 30, 2003, compared with $10.0 million for the nine months
ended September 30, 2002. The increase in revenues is primarily attributable to
a significant increase in test revenues. Test revenues were $15.9 million for
this period, or 76% of total revenues. Power products revenues were $4.9 million
for this period, or 24% of total revenues. Revenues from engineering services
provided to General Motors represented $2.9 million or 59% of power products
revenues. We anticipate that our engineering services contract with General
Motors will end sometime in 2004.

Overall revenues from General Motors for the first nine months of 2003 were
$6.0 million, or 29% of our total revenue for the period, compared with $6.0
million, or 60%, for the comparable period in 2002. Non General Motors-related
revenues increased by $10.8 million, or 270%, year-over-year. In 2003, we expect
power products revenues to be skewed heavily towards the second half of the
year. Due to the early development stage of the markets for our power products
we expect power products revenues to fluctuate significantly from period to
period.

Cost of revenues increased $6.9 million, or 100%, to $13.8 million for the
nine months ended September 30, 2003, compared with $6.9 million for the nine
months ended September 30, 2002. This increase results from the increase in
revenues for the same period.

Gross profit increased by $3.8 million, or 123%, to $6.9 million for the
nine months ended September 30, 2003, compared with $3.1 million for the nine
months ended September 30, 2002. Gross margins as a percentage of revenues were
slightly improved for the period at 33% compared with 31% for the same period in
the prior year. The increase in gross profit is primarily attributable to the
increase in revenues for the period. The gross margin as a percentage of
revenues fluctuates based on the mix of products or services sold, and the power
range of equipment. The increase in gross margin percentage for the period is
primarily attributable to the higher proportion of test revenues.

SG&A expenses increased $4.4 million, or 100%, to $8.8 million for the nine
months ended September 30, 2003, compared with $4.4 million for the nine months
ended September 30, 2002. The increase in SG&A expenses is primarily
attributable to the acquisition of Greenlight, increased salaries relating to
our sales, marketing and corporate staff, increased insurance costs, higher
legal costs and foreign exchange. Non recurring legal expenses of approximately
$1.5 million were incurred in 2002 and 2003 in defence of a patent infringement
lawsuit of which $1.0 million was incurred in the nine month period ended
September 30, 2003. Excluding the effects of these non-recurring legal costs
SG&A expenses would have been $7.8 million for the first nine months of 2003
compared with $3.9 million for the first nine months of 2002. Although $0.5
million was recovered from the plaintiff in the form of a promissory note
received during the third quarter of 2003, no corresponding reduction was taken
to SG&A expenses. The recovery is being accounted for as a contingent gain, to
be booked as a reduction to SG&A in the future when we receive the cash.

We expect SG&A to grow at a slower rate than the anticipated increase in
gross profits as a result of cost savings from the integration of Greenlight
with Hydrogenics and the corresponding economies of scale.

R&D expenses increased $3.2 million, or 94%, to $6.6 million for the nine
months ended September 30, 2003 compared with $3.4 million for the nine months
ended September 30, 2002. The increase in R&D expenses is primarily attributable
to our emerging power products business including development activity related
to our 10 kW power module, hydrogen generation initiatives and foreign exchange.
Specific R&D activities during the first nine months of 2003 include but are not
limited to: the NRCan bus project, the development of our 10 kW power module,
the HySTAT demonstration project for the City of Toronto, the development of our
electrolyzer, vehicle-to-grid research and development and re-fueling
initiatives.

R&D grants increased $1.7 million, or 425%, to $2.1 million for the nine
months ended September 30, 2003, compared with $0.4 million for the nine months
ended September 30, 2002. This increase reflects
31

the impact of new programs which received funding during the period including
the NRCan bus project and the HySTAT demonstration project for the City of
Toronto.

Depreciation of property, plant and equipment expense increased $0.7
million, or 70%, to $1.7 million for the nine months ended September 30, 2003,
compared with $1.0 million for the nine months ended September 30, 2002. The
majority of the increase is attributable to higher levels of property, plant and
equipment primarily associated with the acquisition of Greenlight.

Amortization of intangible assets decreased $1.7 million, or 15%, to $9.7
million for the nine months ended September 30, 2003, compared with $11.4
million for the nine months ended September 30, 2002. The decrease is primarily
the result of the reduction in amortization of the intangibles acquired from
General Motors which are being amortized on a 50% declining balance basis. The
corresponding impact on loss per share related to the non-cash amortization of
intangible assets for the nine months ending September 30, 2003 was $0.18 per
share.

Integration costs related to the Greenlight acquisition were $1.2 million
for the nine months ended September 30, 2003, without corresponding amounts for
the same periods in 2002. The integration costs reflect incurred but
non-recurring expenses relating to integrating Greenlight. These costs consist
primarily of relocation of our employees, involuntary terminations and direct
travel costs incurred, as resources are aligned and duplication of expenses
eliminated.

Interest income, net of bank charges and interest paid, declined $0.3
million, or 38%, to $0.5 million for the nine months ended September 30, 2003,
compared with $0.8 million for the nine months ended September 30, 2002. The
decrease, is primarily attributable to a reduction in short-term investments
compared to the prior period, as well as lower interest rates.

Foreign currency gains increased $3.9 million, or 780%, to $4.4 million for
the nine months ended September 30, 2003, compared with foreign currency gains
of $0.5 million for the nine months ended September 30, 2002. The foreign
currency gains result primarily from the holding of Canadian dollar denominated
short-term investments and the strengthening of the Canadian dollar against the
U.S. dollar during the period.

Net loss decreased $1.1 million, or 6%, to $14.3 million for the nine
months ended September 30, 2003 compared with a net loss of $15.4 million for
the nine months ended September 30, 2002. The year over year improvement for the
first nine months is primarily attributable to increased gross profits of $3.8
million, increased net foreign currency gains of $3.9 million and a net decrease
in combined depreciation and amortization of $1.0 million, which were partially
offset by increased SG&A expenses of $4.4 million, integration costs of $1.2
million, and increased net R&D costs of $1.5 million. The increases in SG&A
expenses and R&D were primarily caused by the impacts of the increase in the
Canadian dollar and the acquisition of Greenlight.

Basic and diluted loss per share decreased by $0.05, or 16%, to $0.27 for
the nine months ended September 30, 2003, compared with a basic loss per share
of $0.32 for the nine months ended September 30, 2002.

A reconciliation of reported net loss computed in accordance with Canadian
generally accepted accounting principles to EBITDA as defined by management is
as follows:

NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2003
------------------ ------------------
$ MILLIONS $ MILLIONS

Net loss for the period................................. $(15.5) $(14.4)
Interest, net........................................... (0.9) (0.5)
Current income tax expense.............................. 0.1 0.1
Provincial capital tax.................................. 0.1 0.1
Depreciation of property, plant and equipment........... 1.0 1.8
Amortization of intangible assets....................... 11.4 9.7
Foreign currency gains.................................. (0.5) (4.4)
Integration costs....................................... -- 1.2
------ ------
EBITDA.................................................. $ (4.3) $ (6.4)
====== ======

The Company's EBITDA loss for the period ending September 30, 2003 includes
the impact of approximately $2.3 million in increased expenses related to the
appreciation of the Canadian dollar, as well as $1.0 million of non-recurring
SG&A expenses related to our successful defense of a patent infringement
lawsuit. Excluding the effect of these unanticipated expenses, EBITDA loss
before integration costs would have been $3.1 million for the year-to-date. Our
decision to hold a significant portion of short-term investments in Canadian
dollars has contributed a foreign currency gain of $4.4 million, as noted above,
which more than offsets the approximate $2.3 million impact the rising Canadian
dollar has had on year-to-date expenses and EBITDA.

Management defines EBITDA as earnings (loss) before net interest income,
income taxes, provincial capital taxes, depreciation of property, plant and
equipment, amortization of intangible assets, foreign currency gains and losses
and integration costs. EBITDA is presented because it is a widely accepted
performance indicator of a company's ability to generate sufficient cash to meet
its liabilities as they come due although it should be noted that, under
Canadian GAAP, this indicator is not a measure of liquidity or of financial
performance. EBITDA, as presented above, is not a specifically defined term and
may not be comparable to similarly titled measures reported by other companies.
While providing useful information, EBITDA should not be considered in isolation
or as an alternative to net income or cash flows as determined under GAAP.

SHARES OUTSTANDING. The number of common shares outstanding at September
30, 2003 was 53,088,804. Options granted under our stock option plan and share
purchase warrants have not been included in the calculation of loss per share
for the nine months ended September 30, 2003 as the effect would be
anti-dilutive.

As at September 30, 2003, there were 3,369,438 stock options issued and
outstanding, of which 1,813,157 were exercisable. As at September 30, 2003 there
were 2,470,436 share purchase warrants outstanding, of which 1,420,503 have been
released from escrow.

COMPARISON OF YEARS ENDED DECEMBER 31, 2002 AND 2001

Revenues increased $8.4 million, or 114%, to $15.8 million in 2002 from
$7.4 million in 2001. The year-over-year annual increase was driven by all
revenue categories with test revenues up $1.5 million, or 37%, and power
products revenues up $6.9 million, or 209%. Revenues from engineering services
were up $5.3 million, or 1,325%, and represented 56% of power products revenue
for the period.

The increase in test revenues is due primarily to the emergence of in-house
testing services as a significant contributor to 2002 test revenues. Test
equipment orders improved considerably in 2002 following the launch of our new
FCATS product models, resulting in a record backlog of confirmed orders

for test equipment sales entering into 2003. The increase in power products
revenues derived from product sales was the result of increased unit sales of
fuel cell prototypes.

Power product revenue derived from engineering services to General Motors,
commenced in late 2001 and was not a significant part of revenues during 2001.
These services peaked in 2002, and engineering services revenues have declined
in 2003.

During 2002 North American revenues from all sources represented the
largest percentage of revenues at 82% or $12.9 million. Revenues from Europe
grew 36% during the period increasing from $1.4 million in 2001 to $1.9 million
in 2002. This growth was, in part, a result of the EnKAT acquisition in May
2002. Asian revenues declined during the period from $2.5 million in 2001 to
$1.0 million in 2002. This decline is timing related as production of confirmed
Asian orders was delayed until late 2002 and were shipped in the first quarter
of 2003.

The majority of our revenues in 2002 continued to be concentrated with
three customers. Our three largest customers contributed 75% and 70% of total
revenues for the years 2002 and 2001, respectively. Excluding our engineering
services contract with General Motors, our three largest customers contributed
60% of total revenues for 2002 and 69% for 2001. Consistent with prior years,
the composition of our three largest customers has changed in each of the years.
For 2002, two of our top three customers were new and the revenues from these
new customers were derived from power products.

Revenues from General Motors for 2002 were $9.6 million, or 61% of total
revenues, compared with $2.5 million, or 34% of total revenues, for 2001 with
the vast majority of increased revenues derived from engineering services.

Cost of revenues increased $5.8 million, or 118%, to $10.7 million in 2002
compared with $4.9 million in 2001. The year-over-year increase of $5.8 million,
or 118%, is directly related to the increases in revenues described above.
Certain cost of sales synergies have been realized as a result of the
integration of Greenlight with Hydrogenics.

Gross profits increased by $2.6 million, or 104%, to $5.1 million for 2002
compared with $2.5 million for 2001. Gross margins as a percentage of revenues
were essentially flat with margins of 32% in 2002 and 33% in 2001. Gross margins
from test and power products combined were 39% but overall gross margins were
reduced somewhat by lower margins from engineering services which typically have
comparatively low margins.

SG&A expenses increased by $2.3 million, or 52%, to $6.7 million in 2002,
compared with $4.4 million in 2001. The year-over-year increase in SG&A is
attributable primarily to three factors (i) increased wages and salaries
relating to our sales, marketing and corporate staff (average SG&A headcount
grew, year-over-year from 25 to 40 people, with Germany and Japan contributing
12 people or approximately 75% of the growth); (ii) increased insurance costs,
due to insurance rates that are up 30% year-over-year; and (iii) increased legal
fees associated with our successful defence of a patent infringement claim
against us.

R&D expenses increased by $0.7 million, or 20%, to $4.2 million in 2002,
from $3.5 million in 2001. The newest iteration of our fuel cell power module, a
low-pressure, low-profile design we refer to as the "LP2" power module, was a
substantial component of our increased R&D activity during 2002.

R&D grants decreased by $0.7 million, or 58%, to $0.5 million in 2002 from
$1.2 million in 2001. The value of our R&D grants fluctuates significantly from
period-to-period as programs wind down and new programs commence at varying
schedules. During 2002 a number of existing programs were completed or wound up
which resulted in the decrease.

Depreciation of property, plant and equipment expense increased by $0.6
million, or 86%, to $1.3 million for 2002, from $0.7 million in 2001. The
majority of the increase is a result of additional test equipment purchased and
manufactured during the year and the full year's depreciation of test equipment
acquired and manufactured in 2001 for in house testing. The acquisition of
Greenlight is expected to contribute up to $0.8 million of additional
depreciation expense in 2003.
34

Amortization of intangible assets increased by $11.7 million, or 334%, to
$15.2 million in 2002, compared with $3.5 million in 2001. The majority of the
increase is attributable to the amortization of intangible assets that we
purchased from General Motors in October 2001.

Assuming no additional intangible asset purchases or value impairment, and
factoring in the intangibles related to the Greenlight acquisition in January
2003, the projected amortization charge for the next five years will be:

YEAR $ MILLIONS
---- ----------

2003........................................................ $12.9
2004........................................................ 8.5
2005........................................................ 5.6
2006........................................................ 1.0
2007........................................................ 0.5

Interest income, net of bank charges and interest expense, decreased by
$1.8 million or 62%, to $1.1 million in 2002, from $2.9 million in 2001. The
decrease in interest income is a direct result of lower rates of investment
interest returns combined with lower cash balances.

Foreign currency gain of $0.5 million was reflected in results of
operations for 2002. This was a decline of $2.5 million or 83% from the net
foreign exchange gain of $3.0 million in 2001. The 2002 foreign exchange gain
was primarily attributable to holding Canadian denominated short-term
investments at a time when the Canadian dollar strengthened against the U.S.
dollar. During 2002 and 2001 we held over 50% of our short-term investments in
Canadian dollars. Over time, we anticipate that the majority of our cash and
short-term investments will be held in U.S. dollars, thereby minimizing our
exposure to foreign currency translation gains and losses yet still maintaining
sufficient Canadian dollar denominated short-term investments to provide an
effective hedge on the movement in the Canadian dollar.

Income tax expense increased by $0.1 million, or 50%, to $0.3 million in
2002 from $0.2 million in 2001. The expense is attributable to the federal large
corporations tax, which is based on our taxable capital. Similar to the
provincial capital tax, changes in this expense are partially dependent on the
eligibility of certain short-term investments being deducted from net assets to
arrive at our tax base.

Due to historical losses, as at December 31, 2002 we have provided a
valuation allowance against the full amount of the tax loss carry forwards of
$12.2 million.

Provincial capital tax expense increased by $0.1 million, or 100%, to $0.2
million in 2002 compared with $0.1 million in 2001. The increase was due to
holding a higher proportion of net assets at year end in a form which is subject
to tax.

Net loss for the year increased by $17.8 million, or 636%, to $20.6 million
in 2002, compared with $2.8 million in 2001. Excluding the non-cash amortization
of intangibles of $15.2 million in 2002 and $3.5 million in 2001, net loss would
have been $5.4 million in 2002, compared with net income of $0.7 million in
2001. The non-cash amortization of intangibles has been highlighted because of
its significant impact on operating results without a corresponding impact on
cash flow.

The year-over-year reduction in earnings of $17.8 million is primarily
attributable to:

Gross profit................................................ $ 2.6
Non-cash amortization intangible assets..................... (11.7)
Other income and expenses -- including foreign exchange and
interest.................................................. (4.4)
Other operating expenses.................................... (4.2)
Other....................................................... (0.1)
------
Total..................................................... ($17.8)
======

Loss per share was $0.43 for the year ended December 31, 2002, compared
with $0.07 for the year ended December 31, 2001. Excluding the non-cash
amortization of intangibles of $0.31 per share in 2002 and $0.09 per share in
2001, basic and diluted loss per share was $0.12 for the year ended December 31,
2002, compared with basic and diluted earnings per share of $0.02 for the year
ended December 31, 2001.

SHARES OUTSTANDING. For the year ended December 31, 2002, the weighted
average number of shares used in calculating the loss per share was 48,437,813
shares. The number of common shares outstanding at December 31, 2002 was
48,796,121 shares. For the year ended December 31, 2001, the weighted average
number of shares used in calculating the loss per share was 38,217,593 shares.
The number of common shares outstanding at December 31, 2001 was 47,918,446.

Options granted under our stock option plan and share purchase warrants
outstanding have not been included in the calculation of the loss per share as
the effect would be anti-dilutive.

Stock options outstanding were 2,624,820 as at December 31, 2002 of which
1,652,874 were exercisable. There were 2,470,436 share purchase warrants
outstanding, of which 864,654 were exercisable. Consistent with Canadian and
U.S. GAAP, information on stock options has been disclosed in notes 10 and 22 of
our comparative consolidated audited financial statements for the year ended
December 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2003, we held cash and short-term investments of $51.0
million compared with $60.1 million as of December 31, 2002. The following
contributed to the decrease of $9.1 million, or 15%, in cash and short-term
investments:

- business acquisition costs related to the Greenlight transaction of
approximately $5.5 million, including cash paid on acquisition,
transaction and integration costs, as well as the repayment of Greenlight
outstanding debt;

- $1.5 million was related to EBITDA loss of $6.4 million, which was
partially offset by unrealized foreign exchange gains of $4.6 million and
net interest income of $0.5 million; and

- $2.1 million related to capital expenditures, investment in working
capital and other.

At December 31, 2001, we held cash and short-term investments of $65.8
million. The decrease of $5.7 million in cash and short term investments from
December 31, 2001 was attributable to cash used to fund our operations. Our
investments are held exclusively in short-term high quality corporate or
government backed notes. To the extent that our cash flow from operations is
insufficient to fund ongoing operations and capital expenditures, we will draw
on our cash and short-term investment balances.

Cash used in operating activities during the nine months ended September
30, 2003 was $8.6 million compared with $3.6 million during the comparable
period in 2002. Cash used in operating activities in 2002 was $3.9 million,
compared with $5.7 million used 2001. Non-cash working capital decreased during
the year by $0.4 million despite the doubling of revenues.

Accounts receivable increased $1.3 million at December 31, 2002 to $5.7
million from $4.4 million at December 31, 2001 as a result of a 82% increase in
revenues during the fourth quarter of 2002 compared with the fourth quarter of
2001.

Inventories increased $1.8 million at December 31, 2002 to $4.8 million
from $3.0 million at December 31, 2001 primarily as a result of the significant
increase in confirmed orders at December 31, 2002. Raw material inventories,
many of which have long lead times, have increased to $2.2 million at December
31, 2002 from $2.0 million at December 31, 2001. Work-in-progress increased to
$2.2 million at December 31, 2002 from $0.5 million at December 31, 2001.
Finished goods inventory remained constant at $0.5 million;

Trade payables increased to $2.4 million at December 31, 2002, compared
with $1.1 million at December 31, 2001.
36

Capital expenditures increased $0.3 million, or 33%, to $1.2 million for
the nine months ended September 30, 2003, compared with $0.9 million for the
nine months ended September 30, 2002. Property, plant and equipment of $2.1
million were acquired through the acquisition of Greenlight. During this period,
expenditures for R&D test equipment represent the primary outlays for capital
expenditures. In 2002 property, plant and equipment purchases declined by $1.6
million, or 52%, to $1.5 million, from $3.1 million in 2001. In 2001, we
invested capital in the expansion of our testing facilities for internal and
customer directed research and development programs which accounts for the
higher capital expenditure in 2001. Capital expenditure plans for 2003 and
subsequent years will result in further increases in property, plant and
equipment as we continue our manufacturing and development initiatives.

During 2002, 877,675 shares were issued for $0.2 million under our stock
option plan compared with 994,440 shares issued for $0.1 million during 2001.
During the nine months ended September 30, 2003 4,292,683 shares were issued for
$16.9 million, principally in connection with the Greenlight acquisition.

We have an operating line of credit available of up to $0.6 million bearing
interest at prime plus 0.5%. We use this facility for overdraft protection and,
when necessary, letters of guarantee or letters of credit. The facility is
collateralized by a general security agreement over all assets of the Company.
There is currently nothing outstanding under this facility.

We will use our funds to meet net funding requirements for the development
and commercialization of our products including fuel cell test stations, PEM
fuel cell stacks and PEM fuel cell power generation systems for portable,
stationary and mobile applications. We will also use our funds to develop and
manufacture hydrogen generation products to complement our fuel cell product
development initiatives, which include PEM electrolyzer stacks, PEM electrolyzer
refuelling systems and reformer systems. Our actual funding requirements will
vary depending on a variety of factors, including our success in executing our
business plan, the progress of our research and development efforts, our
relationships with our strategic partners, our commercial sales, our ability to
control working capital and the results of our development and demonstration
programs. We believe that the net proceeds from this offering, together with our
existing cash balances and cash generated from our operations, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 36 months based on our current business plan
for the next 36 months. At this time, we have no plans for additional financing.
However, if cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity or arrange debt
financing, which could include establishing an additional line of credit.

BUSINESS

OVERVIEW

FUEL CELL TEST AND DIAGNOSTIC EQUIPMENT

Our test and diagnostic equipment is used to develop and optimize the
performance of fuel cell technology by simulating, monitoring and controlling
the effect of power load, temperature, pressure, humidity and potential
contaminants on a fuel cell and to measure the effect of changes in these
variables on fuel cell performance. This equipment has become a critical tool
for fuel cell technology developers, allowing fuel cell stacks to operate as
part of a fully integrated power system. In January 2003, we acquired Greenlight
Power Technologies, Inc., our principal competitor in the fuel cell test
equipment business. The acquisition of Greenlight facilitated the creation of
two dedicated business groups -- one, located in Burnaby, British Columbia,
focused solely on our test business and the other, located in Mississauga,
Ontario, focused primarily on developing our fuel cell power products business.

We have sold our test equipment to most significant fuel cell development
programs in the world. Building on the experience gained in designing,
manufacturing and selling over 450 fuel cell test stations to approximately 55
customers in North America, Asia and Europe, we have developed an extensive
portfolio of test equipment and diagnostic products. Our test equipment and
diagnostic products currently range from basic component and stack research
products to full system and production grade test stations and diagnostic
products. In addition to selling test equipment to third parties, we have over
40 test stations installed in our facilities that we use to provide testing
services to key customers and strategic partners and to support our own
significant research and development requirements. We believe that this
substantial collection of test stations represents one of North America's most
comprehensive fuel cell development and testing capabilities and, as such,
offers us an important source of revenue.

Automotive companies, energy companies, fuel cell developers, component
suppliers and others are currently spending significant capital on the
development and improvement of their own fuel cell programs. We believe that our
test stations and diagnostic products will become an important element to many
of these programs as broad commercial markets for fuel cells eventually develop.
Currently our fuel cell test and diagnostic business unit employs approximately
90 full-time people in Canada, Germany and Japan. We now market all of our test
equipment under the Greenlight brand.

FUEL CELL POWER PRODUCTS

Our expertise in the fuel cell testing business has provided a platform for
the development and growth of our power products business. We are developing a
comprehensive portfolio of fuel cell products. We are also beginning to develop
and manufacture hydrogen generation products. We believe that we are strongly
positioned to put fuel cells into commercial products by virtue of the breadth
of our power products portfolio, which includes fuel cell stacks, scalable fuel
cell power modules, stand-alone fuel cell systems and a variety of hydrogen
generation devices.

FUEL CELL POWER MODULES. We have developed and recently begun selling
scalable fuel cell power modules that allow "plug and play" integration into our
own fuel cell products or those of OEMs. The low pressure configuration of our
power module architecture results in fewer moving parts, greater system
simplicity, lower cost, enhanced reliability, quieter operation and increased
versatility when compared to

the high pressure systems offered by other companies. Our goal is to apply our
power module architecture across a wide range of applications with early market
appeal and, in addition, to achieve commercialization through strategic partners
that have established market channels.

FUEL CELL SYSTEMS. We are also developing fuel cell system products for
specific end-use markets. Our full fuel cell systems cover a range of portable,
mobile and stationary power applications in the 500 watt to 50 kW range. The
diversity of our technology portfolio allows us to design and manufacture fuel
cell systems with integrated refueling capabilities, using either reformer or
electrolyzer technology. For instance, in conjunction with General Motors, we
have developed a 25 kW regenerative fuel cell backup power generator that is
targeted at the telecommunications market to provide reliable power at cellular
tower sites. We have also developed a 50 kW HySTAT energy station that is
capable of powering multi-dwelling complexes or small commercial buildings as
well as serving as a hydrogen refueling station for fuel cell vehicles.

We have a proprietary line of electrolyzers that we incorporate into our
regenerative fuel cell systems. We are also developing stand-alone electrolyzer
refuelers that utilize our electrolyzer technology. In addition to these fuel
cell products, we have invested in a fuel cell vehicle-to-grid, or V2G, concept
and the development of related V2G technology. A fuel cell vehicle is
essentially a power generator on wheels that can provide clean power to
off-board users at any time when the fuel cell power module is not being used
for mobility purposes. Such off-board uses include the powering of electrical
devices such as power tools, or alternatively, interconnection to the electrical
grid to supply power to a building or even to supplement the grid's supply of
power from existing centralized power stations. This V2G concept is still in the
early phase of development.

SYSTEM INTEGRATION AND ENGINEERING. Our power products business unit also
provides systems integration and engineering services to key customers and
strategic partners. System integration services entail working with our clients
to integrate their proprietary components, typically a fuel cell stack or a
natural gas fuel processor, into a fully functional fuel cell system. These
services include engineering, design, prototyping, testing, contract
manufacturing and project management. Our power products business unit is
operated out of our Mississauga, Ontario facility and employs 120 people.

OUR STRATEGY

We have implemented the following strategies to further our goal of being a
leader in the development and commercialization of fuel cell test and diagnostic
equipment and new energy technologies:

- INITIALLY TARGET PREMIUM POWER MARKETS. We believe that the best way to
ensure our participation in the mass commercial markets of the future is
to initially focus on selling fuel cell products to the smaller premium
power markets that exist today. Premium power markets such as specialty
off-road mobility, military, aerospace, research, mission critical
back-up power and funded demonstrations yield premium prices for workable
solutions, a key factor in meeting our overriding goal of commercial
sustainability. We believe that the premium pricing and smaller
production runs associated with selling into these markets will provide
us with positive margins and, more importantly, additional technical
expertise with a minimal level of capital investment. In addition, by
targeting niche premium power markets, we expect to build enduring
customer relationships that will sustain our growth as fuel cells gain
more widespread commercial acceptance.

- DEPLOY CAPITAL EFFICIENTLY THROUGH HORIZONTAL BUSINESS MODEL. We save
money by leveraging the research and development efforts of our component
suppliers and the supply, distribution and marketing initiatives of our
OEM partners and customers. We concentrate our research and development
initiatives on our core competencies and encourage our suppliers and
channel distribution partners to develop and invest in aspects of the
supply and distribution chain that are in their areas of expertise. For
example, in the production of our power modules we rely on numerous
suppliers to develop component parts such as MEA's, bi-polar plates,
wiring harnesses, blowers and power conditioning components and thereby
avoid costs associated with internally developing these
39

components. We also focus on establishing and strengthening key
relationships with OEMs, like General Motors and Deere & Company (John
Deere), that have mature sales and distribution networks. Our goal is to
utilize these existing sales and distribution networks and thereby
minimize the costs associated with investing in our own marketing, sales
and distribution networks. This strategy allows us to efficiently deploy
our capital.

- DEVELOP A PORTFOLIO OF COMPLEMENTARY TECHNOLOGIES AND PROVIDE CUSTOMERS
WITH COMPLETE FUEL CELL SOLUTIONS. We are developing a comprehensive
portfolio of technologies to address the mobility, stationary and
portable power markets, as well as the hydrogen generation infrastructure
that is required to support these markets. We believe the breadth of our
portfolio of fuel cell and hydrogen generation technologies enables us to
provide customers with complete energy solutions. For example, we are
positioned to sell our fuel cell stack in conjunction with a test station
or, alternatively, to sell a hydrogen refueler together with one of our
fuel cell power products. By selling products and services that combine
features and value streams that other fuel cell developers are not able
to offer, we expect to realize improved pricing, revenues and gross
margins. We expect that our portfolio of fuel cell and hydrogen
technologies will, in the long term, yield multiple value streams for our
shareholders and, in the short term, serve to insulate us from single
point market failures and reduce technology risks. We also believe that
our strategy of developing a comprehensive portfolio of technologies will
position us favorably to participate in a larger number of
government-sponsored initiatives that should stimulate early revenue
opportunities.

- CONTINUE TO PURSUE STRATEGIC RELATIONSHIPS. We look to strategic
partners as a source of funding and technology and as a potential means
of market distribution capabilities and view these partners as critical
to our long-term success. As part of our strategy, we are continually
evaluating markets for fuel cell products and identifying potential
strategic partners whose brands, distribution channels, technical
expertise and customer knowledge can be accessed to bring fuel cell
products to market. In addition, we are exploring opportunities to work
with governments to provide them with innovative energy solutions. We
work closely with our strategic partners to understand their goals and
specific requirements and then rapidly develop prototypes and products to
provide solutions to our partners' needs. Our relationships with General
Motors and John Deere illustrate how we have successfully collaborated
with industry leaders to develop fuel cell applications for their
respective markets. We also strive to secure key government and industry
opportunities to demonstrate our technology in order to prove the
viability of fuel cell power and hydrogen generation products in high
visibility environments that provide significant feedback to our
development programs.

- CONSERVE CASH THROUGH FISCAL DISCIPLINE. We believe it is important at
this early stage of our industry to match our investment in headcount and
research and development to the adoption rate and developmental pace of
fuel cell technology. We believe that this deliberate pacing will reduce
the risk of over-investment in production capacity prior to the emergence
of a robust commercial market. The alignment of our resources with
current market and development opportunities remains a fundamental
discipline that we believe is critical to growing at a sustainable pace.
Our product development efforts remain focused on near term commercial
applications and are funded, in order, by (i) positive gross profits
(revenues minus the cost of revenues); (ii) government grants; (iii)
joint development agreements; and, only to the extent necessary, by (iv)
existing cash reserves.

- EXTEND GLOBAL REACH AND MAKE STRATEGIC ACQUISITIONS. We will continue to
direct sales, business development and service capabilities in global
markets where there are current and future needs for fuel cell related
technologies. By doing so, we hope to develop customers and suppliers in
the key markets of Japan, Europe and North America. We also expect to
continue to complement our organic growth through strategic acquisitions
of businesses and technology. For example, the acquisition of EnKAT GmbH
in Germany established our foothold in the European test station market.
Likewise, the acquisition of our principal competitor in the test market,
Greenlight, solidified our position as a leading developer and
manufacturer of fuel cell test stations and diagnostic equipment. We have
also acquired proprietary technology, including our license to certain
General Motors stack technology and certain patents used in connection
with our V2G initiatives.
40

We will continue to expand our global operations and consider strategic
acquisitions as opportunities arise.

OUR COMPETITIVE ADVANTAGES

- PREMIER CUSTOMER BASE. We sell fuel cell test and diagnostic equipment
to most significant fuel cell development programs in the world and to
many of the world's leading fuel cell component suppliers. Our customer
relationships have helped, and we believe, will continue to help, us
capitalize on the opportunities developing in the industry for fuel cell
and hydrogen generation products and services. For example, we currently
provide products and services to General Motors, John Deere, Johnson
Matthey and ChevronTexaco. In addition, we continue to seek strategic
relationships and significant customer relationships with market leaders
because we believe that they will have the potential to provide us with
access to some of the largest distribution channels for fuel cell
technology.

- STRATEGIC ALLIANCE WITH GENERAL MOTORS CORPORATION AND OTHER KEY
RELATIONSHIPS. We entered into an alliance with General Motors in
October 2001. Our alliance with General Motors includes shared
intellectual property rights and joint efforts in fuel cell product
development, engineering, prototyping, testing, branding and marketing
strategies. This alliance has given us the opportunity to participate in
the development of fuel cell systems for automotive applications, the
largest potential market for fuel cells, and has also helped us form key
customer relationships with other OEMs such as John Deere and
ChevronTexaco. We are currently providing power modules to John Deere for
use in a variety of their commercial work vehicles and we are working
with ChevronTexaco to develop a natural gas refueler, utilizing
ChevronTexaco's proprietary fuel processor. See "Certain
Transactions -- Alliance with General Motors Corporation".

- FUEL CELL SYSTEM EXPERTISE. Through the development and maturation of
our fuel cell test and diagnostic business, we have gained an in-depth
understanding of the intricacies of fuel cell technology. In particular,
we have gained significant expertise from our fuel cell test and
diagnostic business in the operation of fuel cell stacks and balance of
plant and systems integration. We believe that our expertise in
optimizing the operation of a fuel cell system gives us the platform to
transform current fuel cell technology into workable and cost-effective
real-life applications. We believe that this expertise will continue to
provide us with an ability to respond rapidly to market opportunities and
technological changes in our industry. In addition, we believe that we
are among a small number of companies around the world that have
successfully demonstrated the ability to integrate a variety of hydrogen
generation systems together with a fuel cell to make complete, self-
contained fuel cell energy stations. Many of these systems have been
integrated with "back-to-grid" capabilities, where the fuel cell supplies
power not only to the immediate application but also is capable of
transferring excess power back to the local electrical grid. We believe
that our fuel cell system expertise will continue to provide us with the
ability to respond rapidly to market opportunities and technological
changes in our industry.

- MODULAR ARCHITECTURE DEPLOYABLE IN MULTIPLE MARKETS. We believe the
versatility and scalability of our multi-application power and
electrolyzer module technology is unique among our competitors. By
versatility, we mean that our current power modules are particularly well
suited to address diverse markets including off-road mobility, buses,
materials handling, back-up and stationary power, portable military
generators, vehicular auxiliary power units and a number of other
applications. By scalability, we mean that our power and electrolyzer
modules can be combined in series or in parallel to provide complete
solutions for our customers' power and hydrogen requirements. By
deploying our module architecture across a variety of applications we are
able to be more cost-effective and efficient with our research and
development activities and investments.

- PROPRIETARY TECHNOLOGY. We believe we have proprietary technology across
our product offerings. We have increased our patent portfolio to ten
patents on our technology in the United States and Canada, and we have
approximately 230 patent applications pending in a number of countries.
We also believe that our access to two proven fuel cell stack
technologies is unique among our competitors. The development of our own
fuel cell stack, combined with our access to certain of General Motors'
fuel cell stack technology, provides us with significant product and
market flexibility. Our HyPM power modules have been built to accommodate
either a Hydrogenics or a General Motors stack.

- SUPERIOR TESTING CAPABILITIES. In addition to our expertise in the area
of fuel cell testing, we have one of the largest fuel cell development
and testing facilities in North America, which provides us with an
advantage over our competitors. We are able to quickly and efficiently
conduct comprehensive product testing and thereby quicken the development
of our technology and the evaluation of our suppliers' technologies. This
testing capability leads to rapid prototyping of our power and
electrolyzer stack and module technology. Furthermore, the use of our own
test equipment products provides valuable feedback to our test equipment
product development process.

INDUSTRY OVERVIEW

- IMPROVED ENERGY EFFICIENCY. Fuel cells produce power more efficiently
than conventional power systems, such as the internal combustion engine.
According to industry sources, fuel cells are expected to have at least
twice the energy conversion efficiencies of a conventional internal
combustion engine.

- ABUNDANT AND LOCALLY ACCESSIBLE HYDROGEN SUPPLY. Hydrogen is the most
abundant element on the earth and can be extracted from water or fossil
fuels. Subject to perfecting cost-efficient methods of hydrogen
extraction, the potential supply is almost limitless. By contrast, the
supply of fossil fuels is considered finite. Additionally, hydrogen can
be generated from water through electrolysis, or from natural gas through
reformation, making it a "synthetic fuel" accessible to most geographic
locations, unlike oil, which is found only in certain geographic
locations and must be transported from production regions to end users.

- LOWER EMISSIONS. PEM fuel cells discharge zero or extremely low
quantities of greenhouse gases into the atmosphere. Certain other
technologies, such as internal combustion engines or high temperature
fuel cells, are incapable of these low emissions levels.

- NOISE REDUCTION. Fuel cell systems have few moving parts and the
electrochemical conversion process is soundless. As a result, a fuel cell
power generator or appliance is significantly quieter than an internal
combustion engine.

- DISTRIBUTED GENERATION. Fuel cells can generate electricity and heat
locally, offering an advantage over centralized generation. A
multiplicity of decentralized generators operating in parallel offer
enhanced reliability and security compared to a centralized generator,
which is more vulnerable to single point failure.

Fuel cell industry participants and a number of governments are currently
focusing on a wide range of applications for fuel cells that span the
transportation, stationary power and portable power markets. As fuel cell
technology evolves and related costs decrease through economies of scale and
material science advancements, we believe that a significant market may develop
for fuel cell powered products to meet the expanding global need for energy.

In 2001, PricewaterhouseCoopers LLP was retained by Fuel Cells Canada to
undertake an independent study of the economic rationale and direction for
continued participation by Canadian
42

governments in the fuel cell industry. The study sought to stimulate discussion
about the future of the Canadian fuel cell industry, what it would take for
Canadian companies to remain competitive and how government and industry can
work together. The resulting June 2002 report by Fuel Cells Canada and
PricewaterhouseCoopers LLP entitled "Fuel Cells -- The Opportunity for Canada"
projected that global demand for fuel cells could reach $46 billion in 2011. The
report further projected that if an annual growth rate of 50% is maintained to
2021, the market could exceed $2.6 trillion worldwide. We believe this
information is useful in assessing our market opportunities. However,
PricewaterhouseCoopers LLP did not undertake an independent evaluation of the
fuel cell market. The fuel cell industry is rapidly evolving and information can
quickly become outdated, and we cannot guarantee future results, levels of
activity, performance or achievements or other future events.

We believe that recent events related to energy security have served to
illustrate the growing significance and the rising need for the commercial
advancement of the fuel cell industry. In his 2003 State of the Union speech,
President Bush articulated a goal of energy independence for the United States.
To assist in advancing that goal, the U.S. Department of Energy stated that the
United States government committed to spend more than $1 billion for the first
five years of a long-term energy technology and infrastructure development
program, including hydrogen powered automobiles. We believe governmental support
of fuel cell and hydrogen fuel initiatives is increasing in other countries as
well. The Japanese government provided over $175 million in support of fuel cell
research and development and commercialization in 2002 and has announced that it
expects its annual expenditure to exceed $240 million per year in future years,
starting in 2003. The European Commission has also announced a plan to spend
$2.1 billion from 2003 to 2006 on renewable energy -- mostly on hydrogen fuel
technologies and fuel cells. Canada has increased funding for hydrogen fuel and
fuel cell initiatives, with recent announcements of expenditures totalling
approximately $135 million over five years.

In addition to these stated commitments by individual countries, totalling
$7 billion over the next five years, U.S. Energy Secretary, Spencer Abraham, has
convened an international meeting of 15 energy ministers in Washington on
November 20, 2003 to establish the International Partnership for a Hydrogen
Economy, or IPHE. The IPHE is the first attempt at establishing a concerted
international approach to the revision of energy policies within the most
energy-dependent economies.

In parallel to the announcement of this meeting, in September 2003, the
Chicago Climate Exchange (CCX) began trading greenhouse gas emissions, providing
an unprecedented opportunity for international voluntary participation in a
global Climate Change Program that will be supplemental and complementary to the
Kyoto Accord. Companies and governments will now be able to "buy" emissions
credits from parties implementing energy technology, such as fuel cells, with
low greenhouse gas emissions, thus engaging market forces in favor of
sustainable energy sources. Similar trading initiatives have been announced in
other parts of the world, notably Japan and in Europe, signalling an important
trend that could fundamentally affect clean energy technologies and our sector.

We believe that the recent funding announcements, governmental policies and
legislation will continue to act as drivers for the emerging hydrogen economy in
general, and for fuel cells in particular. The ability of fuel cells to
penetrate commercial markets will also be driven by the following factors:
increased demand for reliable, high-quality, secure energy sources and power;
deregulation in the electricity market; international emissions trading; the
desire for decreased dependence on foreign oil resources; operational benefits
of fuel cells over more traditional sources of power; concerns regarding the
environmental impact of current energy sources; and the increasing costs of
extracting and transporting fossil fuels.

Nevertheless, significant technical and logistical hurdles still impede the
broad commercial application of fuel cell technology. For example:

- current fuel cell technology does not yet have the proven reliability and
durability of many existing alternative technologies in our target
markets;

- the high raw material and manufacturing costs currently associated with
fuel cell production currently make it too expensive for many commercial
applications in our target markets;

- the integration of fuel cell systems into existing appliances and
infrastructure may be difficult;

- hydrogen, in a form that can be used by fuel cells, due to the lack of a
hydrogen fuel cell infrastructure, is not as readily accessible as fuels
such as gasoline and methanol; and

- the costs of hydrocarbon fuels, such as natural gas, and electricity,
which are used today to produce hydrogen for fuel cells, are rising,
which may impede the growth of hydrogen-powered fuel cells as a
cost-efficient alternative means of producing energy.

Although hydrogen is not yet a fuel that is readily available to consumers
in the marketplace, it has been produced for many years in significant
quantities for industrial purposes using existing reliable technologies.
Hydrogen can be produced using electrolysis, which uses electricity to break
apart water into hydrogen and oxygen. Hydrogen can also be produced from
hydrocarbon fuels such as natural gas, methanol, ethanol, coal or gasoline
through a process known as reformation. While the use of fossil fuels to produce
hydrogen does not result in zero emissions, reformation coupled with fuel cell
technology is able to exploit the existing fuel infrastructure and still offers
significant environmental improvements over traditional internal combustion
engine systems.

ACQUISITION OF GREENLIGHT POWER TECHNOLOGIES, INC.

On January 7, 2003, we acquired Greenlight, our principal competitor in the
fuel cell test business, in a transaction valued at approximately $19 million,
exclusive of expenses of approximately $1.1 million relating to the acquisition.
This acquisition enabled us to solidify our position in the fuel cell testing
business, while creating additional capacity and aligning dedicated resources to
our emerging fuel cell power products business. This acquisition combined the
number one and number two providers of fuel cell test equipment and testing
services in North America and Europe and almost doubled the size of our test
business. Assets acquired through the acquisition of Greenlight include
Greenlight's manufacturing facility on leased premises in Burnaby, British
Columbia and all of its intellectual property. Under the terms of the
transaction, Greenlight shareholders received cash consideration of
approximately $2.3 million and approximately 4.2 million of our common shares,
representing approximately 8% of our then outstanding common shares. A portion
of these common shares are subject to contractual restrictions on resale in
Canada and are not yet freely tradeable in the United States. See "Shares
Eligible for Future Sale".

As part of the post-closing integration, we have combined the respective
fuel cell test businesses of Hydrogenics and Greenlight and now operate this
combined business under the Greenlight brand as the test equipment and services
division of Hydrogenics, based in Burnaby, British Columbia. The consolidation
of our test businesses into an independent operating division has allowed us to
be better able to focus on the expansion of our rapidly growing fuel cell power
products business in our facility in Mississauga, Ontario, Canada.

Audited financial statements of Greenlight for the year ended December 31,
2002 have been included in this prospectus. Our unaudited interim financial
statements for the nine months ended September 30, 2003, which are incorporated
by reference in this short form prospectus, include the operating results of
Greenlight from January 7, 2003.

PRODUCTS AND SERVICES

FUEL CELL POWER PRODUCTS AND SERVICES

We design and manufacture fuel cells, fuel cell power modules, hydrogen
generation devices and integrated fuel cell systems, and provide system
integration services. Our fuel cell power products unit is operated from our
Mississauga, Ontario facility.

FUEL CELL STACKS. Our fuel cell stack technology is suited to a wide range
of power applications ranging from sub-kilowatt remote power to multi-kilowatt
mobile, stationary and portable applications. The power densities of our current
series offer high performance in a power range of 500 W to 25 kW. In addition to
our own fuel cell stack program, we also have access to certain of General
Motors' fuel cell

technology for use in certain applications. We believe our access to two proven
fuel cell stack technologies provides us with significant product and market
flexibility.

FUEL CELL POWER MODULES. In the development of our proprietary power
modules, we have integrated our fuel cell stacks with "balance of plant"
subsystems and components to create fully integrated electrochemical generators
that are suitable for integration into a wide range of applications spanning the
stationary, mobile and portable power markets. Each power module runs on pure
hydrogen and produces DC power. We market our power modules to OEMs and systems
integrators under the trade name "HyPM" for incorporation into their products.
Our latest design is a low profile, low pressure 10 kW power module. We have
developed a 20 kW version and are also developing a 50 kW module. Our HyPM power
modules have been designed to accommodate either a Hydrogenics or a General
Motors fuel cell stack.

HYDROGEN GENERATION DEVICES. We have developed devices to generate
hydrogen as a fuel source. We have a proprietary line of electrolyzers which we
incorporate into our regenerative fuel cell power systems, which are marketed
under the trade names of HyUPS and HyPORT E. We have also developed our
electrolyzer technology as a stand-alone product for hydrogen generation. This
stand-alone electrolyzer product is marketed under the trade name of HyLYZER.
Our standalone electrolyzer device is capable of supplying hydrogen for up to 50
kW of fuel cell power. In addition, we have developed a hydrogen generation
device using our proprietary chemical hydride technology and have incorporated
this into an integrated system, which is marketed under the trade name of HyPORT
C.

While we have developed our own proprietary line of electrolyzers, we have
chosen to purchase reformers from third parties for integration into certain of
our stationary power products. Our HySTAT energy station, described below,
contains a reformer, or fuel processor, that is capable of supplying hydrogen
fuel for up to 50 kW of fuel cell power. Under a joint development agreement
with Johnson Matthey, we developed a fully integrated fuel processor system that
incorporates Johnson Matthey's proprietary fuel processing technology and our
integrated system controls and balance of plant subsystems. We also designed and
manufactured an integrated natural gas reformer for ChevronTexaco, which they
market under the brand name HALIAS.

INTEGRATED FUEL CELL SYSTEMS. We have developed portable and stationary
fuel cell power generation systems, on a per order basis, as a complete power
generation solution for the end user. To date we have designed integrated fuel
cell systems for use in a range of applications:

HYPORT C HYPORT E HYUPS HYSTAT
-------- -------- ----- ------

Power Specification... Up to 500 W Up to 5 kW 10-25 kW 50 kW

Uses.................. Portable device for Portable device Alternative to diesel Stationary power
use in remote particularly suited to generators and battery generator that can
locations (e.g. vehicles (e.g. can be banks to provide power provide peak shaving
military field used to power on board for critical backup power generation and
operations). and off-board applications (e.g. hydrogen refuelling
electrical loads). cellular towers). for vehicles. It is
capable of producing
enough electricity to
meet the needs of
10-15 average homes.

Features.............. Produces its own Produces its own Produces its own A refueler system
hydrogen to meet hydrogen through hydrogen fuel from produces the hydrogen
electrical load demand integration with an water using an fuel for the HySTAT
by mixing chemical electrolyzer which integrated fuel cells and it also
hydride with water. uses power from a electrolyzer module. supplies hydrogen to
vehicles alternator an adjacent hydrogen
while the vehicle is dispenser for vehicle
running to generate refuelling through an
hydrogen. The fuel integrated natural gas
cell can then be run reformer.
using the stored
hydrogen after the
vehicle's engine is
turned off.

SYSTEM INTEGRATION AND ENGINEERING SERVICES. We have gained substantial
expertise in fuel cell operating systems through our work on the design and
assembly of fuel cell test stations. This expertise is in demand by fuel cell
developers that require a third party to integrate their technology into an
operational system and ultimately a power product. To this end, we provide
system integration services to select customers. These services include
engineering, design, prototyping, testing, contract manufacturing and project
management. The ownership of intellectual property that arises from these
relationships is determined on a case-by-case basis.

In December 2001, we entered into a contract to supply General Motors with
engineering support and related services at a General Motors fuel cell research
facility in Honeyoye Falls, New York. A two year contract extension was signed
on March 31, 2003. Under the terms of this contract we supply ongoing
engineering, technical, testing, design and administrative support to General
Motors' fuel cell development efforts at its Honeyoye Falls development center.

FUEL CELL TEST AND DIAGNOSTIC EQUIPMENT AND TESTING SERVICES

FUEL CELL TEST EQUIPMENT. In order to perform testing and diagnostic
functions, our test stations provide the necessary balance of plant components
and subsystems to simulate, monitor and control key parameters of a fuel cell
such as power load, temperature, pressure, humidity and potential contaminants.
Our test stations measure the effect of these variables on fuel cell performance
and provide real-time data to our customers' development programs.

Our current product line includes test stations for fuel cell stacks,
components, fuel reformers, electrolyzers and fuel cell systems. Our
commercially available test stations are used in testing stationary, portable
and mobile fuel cell applications in the PEM, molten carbonate and solid oxide
chemistries. The test stations are built with proprietary software and advanced
safety features, which permit unattended automated operation. The software
controls, alters and monitors:

- gas flow rates -- higher gas flow rates result in higher power output;

- pressure -- increasing pressure achieves higher power output;

- individual cells -- the testing and monitoring of individual cells within
a stack to validate each cell and quickly locate problems in stack
performance;

- temperature -- a temperature that is too high threatens to evaporate
water in the fuel cell, creating "dry" or sub-optimal operating
conditions; and

- humidity -- fuel cells operate best when they are humidified or moist;
however, over- or under-humidification can impair performance;
humidification testing helps to identify the optimal operating humidity
and therefore optimizes the fuel cell's performance.

We market our automated test stations under the trade name FCATS. Our FCATS
product line covers fuel cell stack testing from 2 kW to 120 kW, which we
believe covers the power range for most PEM fuel cell stacks currently in
development. We also manufacture a smaller, more economical FCATS Screener
model, which is an industrial-grade test station with a variety of features for
testing single fuel cells. In addition, we provide custom design and
manufacturing of test stations to meet specific customer needs. FCATS test
stations are designed to keep pace with current manufacturing requirements as
fuel cell commercialization progresses from the research and development stage
to prototype production and potentially to mass production.

DIAGNOSTIC EQUIPMENT. Our diagnostic modules measure the electrical
performance of fuel cells and fuel cell stacks using automated, real-time
non-invasive techniques. They are divided into two functional categories:
measurement and monitoring of a fuel cell's internal resistance (electrical
efficiency) and measurement and monitoring of a fuel cell's DC voltage. Our
first diagnostics product was marketed under the trade name IMPACT. This module
can be sold as a stand-alone unit or integrated as an option in our test
stations. The IMPACT module utilizes an AC impedance measurement technique to
determine the electrical efficiency of a fuel cell stack, which allows
developers to characterize the internal components of
46

fuel cells and to optimize a fuel cell stack for rigorous practical
applications. We also offer a diagnostics module marketed under the trade name
FCVM. This module measures DC voltages in real time to identify the performance
of individual fuel cells within a fuel cell stack. The FCVM module can also be
integrated as an option in our test stations as well as our fuel cell power
modules. Further diagnostic devices are in product development stages.

TESTING SERVICES. We offer a full range of testing services as a
cost-effective solution for customers who wish to initiate a test program
through an outside supplier. Through our testing services, we are able to offer
our customers rapid implementation, improved productivity, lowered financial
risk and independent test validation.

HOW A FUEL CELL WORKS

A fuel cell is a device that converts chemical energy from hydrogen and
oxygen into electrical energy and produces an electrical current. It is similar
to a battery in that it has an anode and a cathode. However, a battery is only
capable of storing power, whereas the fuel cell can generate it, so long as
hydrogen, the fuel, is being supplied. As such, the fuel cell system also has
similarities to an internal combustion engine, except that it operates very
efficiently at low temperatures and with minimal moving parts. In the process of
electrochemical conversion to create electricity, the only by-products of the
fuel cell are water and heat.

To produce a usable amount of electricity, multiple fuel cells must be
combined into a fuel cell stack. The stack is essentially an assembly of fuel
cells, designed to produce a sufficient quantity of electricity to power an
appliance or engine. The electricity generated can be increased or decreased by
altering the number and size of cells in the stack.

Producing electrical power for a working application, such as an engine or
an appliance, requires much more than just the fuel cell stack. A fuel cell
system is comprised of three major sets of components: a hydrogen source; a fuel
cell or stack of fuel cells; and the necessary balance of plant subsystems to
regulate the flow of gas and pressure and the level of power transferred from
the fuel cell. In the case of a regenerative fuel cell system, discussed
elsewhere in greater detail, there is a fourth component, a hydrogen generation
device, typically an electrolyzer. Without this supportive operating system, the
fuel cell stack cannot produce usable power. The successful integration of an
entire fuel cell system is critical to achieving the desired power performance.
The collective components and subsystems of a fuel cell system, other than the
fuel cell stack, are known in our industry as the "balance of plant" of a fuel
cell system.

Fuel cells operate on hydrogen. Hydrogen can be produced using
electrolysis, a process that uses electricity to break apart water into its
constituent parts: hydrogen and oxygen. Hydrogen can also be produced by
reforming a hydrocarbon fuel such as natural gas, methanol, ethanol, coal or
gasoline.

SALES AND MARKETING

FUEL CELL POWER PRODUCTS AND SERVICES

Our sales and marketing efforts for our fuel cell power products are
currently focused on the premium power market, consisting primarily of customers
in the research, military, aerospace and backup power segments, that we view as
the likely early adopters of fuel cell power products. We believe that these
market segments are more likely to be early adopters based on the benefits that
fuel cell power technology offers notwithstanding the high cost of fuel cells
relative to conventional means of generating power. In addition, the customers
in this market generally possess a high degree of technical sophistication
allowing us to develop a close collaborative relationship to tailor our products
to their specific requirements and applications.

FUEL CELL TEST AND DIAGNOSTIC EQUIPMENT

We currently sell our test stations to automotive companies, fuel cell
developers, component suppliers and government agencies. Our marketing efforts
are global in scope and we have current plans to establish sales and service
offices in strategic locations around the world. In addition to distributorship
arrangements in Japan and Korea, we have established an Asia-Pacific regional
office in Tokyo with a manager and five service and after-sales personnel. We
have established our presence in Europe through our office in Germany that was
acquired in the EnKat acquisition. Our sales force is primarily organized by
region for our test station line of products, and by product line for our fuel
cell system products. Our direct sales force for fuel cell test and diagnostic
equipment currently consists of 16 employees based in Canada, Germany and Japan.
We plan to expand our sales staff to cover our growing markets.

MANUFACTURING

We assemble and test our fuel cell testing products at the facilities of
our wholly-owned subsidiary, Greenlight, in Burnaby, British Columbia. We
assemble and test our fuel cell power products at our headquarters in
Mississauga, Ontario. Most of our fuel cell power products are currently in a
pre-commercialization phase and are therefore manufactured in very limited
quantities. On occasion, we outsource some of the manufacturing that we require
to local manufacturers who produce prototype components to our specifications.
We also outsource the production of components such as steel frames and
enclosures used in the production of certain of our power products to third
party manufacturers. We believe that this practice allows us to manage our
capital costs and to focus on our core business. We are dependent upon third
party suppliers for certain key materials and components for our products. We
believe that we have sufficient sources and supply of our key materials and key
components, and to date, the pricing of our key materials and components has
been stable.

STRATEGIC RELATIONSHIPS AND DEVELOPMENT PROGRAMS

In October 2001, we formed a strategic alliance with General Motors to
accelerate the development of fuel cell technology into global commercial
markets. This alliance includes shared intellectual property rights and joint
efforts in fuel cell product development, engineering, prototyping, testing,
branding and marketing strategies. During the first nine months of 2003, revenue
from General Motors accounted for approximately 29% of our total revenue. In
2002, we celebrated the one-year anniversary of our relationship with General
Motors with the successful demonstration of our regenerative fuel cell auxiliary
power unit on a General Motors hybrid-diesel truck developed for the U.S.
military. Our partnership with General Motors positions us in what we anticipate
will eventually become the largest market for fuel cell applications. See
"Alliance with General Motors Corporation."

In April 2002, we entered into an agreement with Dow Corning to jointly
commercialize our "Seal-in-Place" technology, an innovative method of
cost-effectively sealing fuel cell stacks, electrolyzers and MEA's. We share
jointly in the intellectual property rights resulting from this agreement. Under
the agreement, the parties jointly own a U.S. patent application, together with
all inventions falling within the description of such patent application
specific to Seal-in-Place sealing and sealing materials for fuel cell and
electrolyzer assemblies conceived or made under the agreement.

In August 2002, we launched a new development effort with John Deere that
culminated in the delivery of an innovative power module that was used to power
a John Deere commercial work vehicle. We are currently working on additional
projects with John Deere to extend our power modules to additional John Deere
applications.

In April 2002, we entered into an agreement with Johnson Matthey to
collaborate on the development of a natural gas reformer based on Johnson
Matthey's fuel processor technology. We will continue to seek strategic
relationships that help us bring our products and technologies to market quickly
and cost-effectively.

CUSTOMERS

The following is a list of customers that each have accounted for at least
$100,000 in revenues since 2000:

3M Company Hyundai Motor Company
Adam Opel AG IMRA America, Inc.
AeroVironment Inc. Industrial Technology Research Institute
Asia Pacific Fuel Cell Technologies, Ltd. (Taiwan)
Ballard Power Systems Inc. UTC Fuel Cells
ChevronTexaco Corporation Johnson Matthey plc
Dalian Institute of Applied Technology Morganite Special Carbons Ltd.
Deere & Company Plug Power Inc.
Delphi Automotive Systems Inc. PSA Peugeot Citroen
Department of National Defence (Canada) QuestAir Technologies, Inc.
DuPont Canada Inc. Radian Inc.
E. I. du Pont de Nemours and Company Sartorius AG
Engelhard Corporation United Technologies Corporation
European Community U.S. Army Tank-automotive and Armaments
European Fuel Cell Group Ltd. Command
Gas Technologies Institute Toyota Tsusho Corporation
General Hydrogen Corporation Volvo Group
General Motors Corporation Zentrum fur Sonnenenergie-und
Government of Canada Wasserstoff-Forschung
High Technology Development Corporation

GOVERNMENT SPONSORED INITIATIVES

We believe that government and industry demonstration initiatives provide
premier opportunities to showcase the capabilities of our power product
portfolio. Technology demonstrations often result in the identification of
potential customers and strategic partners, give rise to important technical
learning and/or educate future stakeholders. Typically, when we enter into
agreements with either the Canadian or U.S. government, that government receives
the right to be paid royalties and also receives a non-exclusive license on any
intellectual property created during the term of the project or agreement which
allows it to use or to sublicense the resulting intellectual property rights.
Certain of these agreements allow the applicable government additional rights to
the resulting intellectual property if it believes that we are not exploiting
the technology in the manner agreed.

Currently we are participating in the following government grants and
development programs:

IdaTech. On October 22, 2003, we entered into to an agreement with
IdaTech LLC, the fuel cell subsidiary of IDACORP, Inc. to develop a 50 kW
fuel cell system that can serve as an independent energy source for large
facilities such as hotels, hospitals and office buildings. This project is
partially funded by the United States Department of Energy. The fully
integrated PEM fuel cell system will combine IdaTech's patented multi-fuel
fuel processing technology with a Hydrogenics fuel cell power module and
will deliver both electricity and thermal energy to building systems.
Additional applications include multi-family dwellings, prison systems,
hospital/medical care facilities and defense market applications.

SDTC. On October 21, 2003, we were approved by Sustainable
Development Technology Canada (SDTC) to lead a consortium of technology and
end-user partners to develop, demonstrate and pre-commercialize fuel
cell-powered forklifts. The project aims to demonstrate a number of value
propositions for this potentially early-adopting market. The consortium
members include Deere & Company, FedEx Canada, General Motors of Canada,
HERA Hydrogen Storage Systems, NACCO Materials Handling Group and the City
of Toronto. SDTC is an independent agency that administers

Canadian Government funding for climate change solutions. The contractual
terms of these arrangements are pending final negotiations.

HTDC. On July 24, 2003, we entered into a contract with the High
Technology Development Corporation (HTDC) in Hawaii to provide HyPM power
modules for a 30-foot fuel cell hybrid bus. This initiative is being funded
by the U.S. Air Force to evaluate advanced ground transportation
technologies. Under the terms of the contract, we will supply a fully
integrated 20 kW fuel cell power system.

City of Toronto. On April 15, 2003, the Toronto City Council approved
a three-year project in which the city's Energy Efficiency Office and Fleet
Services Division, in partnership with us and Exhibition Place, will
demonstrate, in three phases, the ability of fuel cell technology to
provide mobile and stationary power without harmful emissions. In phase
one, our 50 kW HySTAT energy station demonstrated "peak shaving" by
supplying power to the Exhibition grounds during periods of high
electricity consumption when power is more expensive to buy. During phase
one, we also operated a fuel cell-powered John Deere commercial work
vehicle to demonstrate how fuel cell technology can deliver quiet, zero
emissions power to vehicles. This vehicle was developed in conjunction with
John Deere's ePower Technology group using our HyPM power modules. During
phase one, the HySTAT unit was also used to refuel the John Deere
commercial work vehicle. In phase two, the HySTAT unit will continuously
generate the electricity required at the National Trade Center to
demonstrate its ability to supply continuous, or primary, power. In phase
three, we plan to integrate our electrolyzer technology with a renewable
energy source to make hydrogen for vehicle refuelling. The final phase will
also aim to demonstrate our V2G technology. The three phases of
demonstration will allow the public to learn about hydrogen and fuel cells
as the energy of the future in a hands-on setting.

Government of Canada. In the fourth quarter of 2002, we entered into
a contribution agreement with the Government of Canada, pursuant to which
the Government of Canada, through the Efficiency and Alternative Energy
Program and Natural Resources Canada, or NRCan, will support the
integration of our power module technology into a next-generation fuel
cell-powered transit bus. In the current phase of the project, the
Government of Canada will contribute Cdn. $2.0 million towards the project
which is scheduled for completion in March 2004. The balance of the
Cdn. $5.75 million project, comprised of material costs and labor and other
in-kind contributions, will be contributed by us and other project
partners. We expect a second phase of the project, with additional funding,
to commence immediately upon completion of phase one. We expect that the
project will be completed by March 2005.

NRCan. On January 10, 2001, we entered into a two-year contribution
agreement with NRCan and the Climate Change Action Fund relating to the
development of a stationary fuel cell system capable of generating power
for use in multi-dwelling clusters and small commercial buildings. The
agreement was subsequently amended on April 11, 2001. The agreement has
resulted in the development of our HySTAT system, a 50 kW stationary power
generator complete with an integrated natural gas reformer and hydrogen
storage. The total cost of the project has been approximately Cdn $6.0
million, of which the Government of Canada has contributed Cdn. $2.0
million: Cdn. $1.6 million from the Technology Early Action Measures, or
TEAM, a component of the Climate Change Action Fund, and Cdn. $400,000 from
NRCan. We have contributed the balance of the cost, which is comprised of
material costs, labor and other in-kind contributions. The HySTAT was
demonstrated in August 2003 at the Canadian National Exhibition as part of
our three-year initiative with the City of Toronto and Exhibition Place. We
expect to continue to make improvements to the HySTAT in our efforts to
develop a commercial product line based on this technology.

RESEARCH AND DEVELOPMENT

Our research and development activities are conducted internally at our
facilities in Mississagua, Ontario and Burnaby, British Columbia by a research
and development staff consisting of approximately 50 full time employees. We
direct our research and development initiatives towards development of
integrated fuel cell systems rather than to the individual components and
materials that comprise a fuel cell system. We actively encourage and assist our
suppliers to develop materials and individual components of a fuel cell system.
For example, in the production of our power modules, we rely on numerous
suppliers to develop component parts such as MEAs, bi-polar plates, wiring
harnesses, blowers and power conditioning components and thereby avoid the costs
associated with internally developing these components. We believe this strategy
allows us to efficiently deploy our capital by leveraging the research and
development efforts of our component suppliers.

As a result of this strategy, one of our key research and development
initiatives is the development of a line of fuel cell power modules across a
power range of 500 watts to 50 kW which we believe will provide a modular and
scalable building block for future power products, as well as for OEM customers.
Since 2001, our power module development team has developed four distinct
generations of fully integrated "plug and play" HyPM power modules, ranging in
size from 10 to 25 kW.

Our most recent development efforts resulted in our HyPM 10 which was
released in November 2003. Although now in production, we expect ongoing
development of our HyPM power module technology. HyPM power modules have been
designed to be adaptable to a wide variety of commercial applications without
major modifications. The primary focus of our research and development efforts
on power modules is on cost reduction, system simplification, durability,
controls and manufacturability.

Hydrogen generation is also a focus of our research and development
program. We have been developing our PEM electrolyzer technology for several
years. In 2003, we initiated the development of stand-alone PEM electrolyzer
modules that we market and sell under the name HyLYZER. We also incorporate our
electrolyzer technology in our proprietary regenerative systems. In addition, we
are integrating reformer technology into our products but our strategy is to
work with reformer suppliers rather than develop the technology ourselves.

We also dedicate research and development resources to the development of
standalone PEM fuel cell power generating systems, initially targeting premium
power applications for which fuel cell power provides a solution to specific
power requirements. Examples of these systems include our HyPORT-E regenerative
Auxiliary Power Unit (APU), which is comprised of a fuel cell power module, a
PEM electrolyzer module and a metal hydride hydrogen storage module. This
product was developed under contract with the U.S. military and was subsequently
unveiled in a General Motors hybrid-diesel truck in January 2003. Our
development team is currently working on a more compact second generation
HyPORT-E unit. In August 2003, we demonstrated a 50 kW HySTAT stationary power
generator complete with an integrated natural gas reformer and refueler. This
product was developed over the past three years with funding support from
Natural Resources Canada. We have not yet begun to manufacture commercial fuel
cell systems in significant quantities.

The development of fuel cell diagnostics tools is also a key focus of our
research and development program. These diagnostics tools have direct
applications to both our fuel cell test system business, as available options
for our test station customers, and to our power product development program as
imbedded "windows" into the performance of fuel cells that are integrated into a
functional system.

Our core stack technology continues to be research and development
intensive with emphasis on the testing of new materials, manufacturing
techniques and cost reduction.

INTELLECTUAL PROPERTY

We believe that an active policy of protecting intellectual property is an
important component of our strategy of becoming a leader in the
commercialization of fuel cell and hydrogen related products and

technologies. We rely on a combination of patent, copyright, trademark, trade
secret and contract laws, as well as international treaties, to protect our
proprietary rights to our intellectual property which includes technical
know-how, designs, special materials, manufacturing techniques, test equipment
and procedures for fuel cells, fuel cell components and fuel cell systems. Most
of our products have been delivered to customers pursuant to confidentiality
agreements, which restrict the recipient from reverse engineering such products.

We typically retain sole ownership of the intellectual property we develop
on our own. However, our strategic alliance with General Motors and contractual
relationships with some other companies provide for shared intellectual property
rights in certain situations. As part of the agreement with General Motors, we
have a non-exclusive, royalty-free license to use certain of General Motors
proprietary fuel cell stack intellectual property in certain applications and
markets. We have these rights in perpetuity, including subsequent improvements
to the licensed technology. Our agreement with Dow Corning to jointly
commercialize our "Seal-in-Place" technology provides for certain shared
intellectual property rights. Under the agreement, we and Dow Corning jointly
own a U.S. patent application, together with all inventions falling within the
description of such patent application specific to Seal-in-Place sealing and
sealing materials, for fuel cell and electrolyzer assemblies conceived or made
under the agreement. In addition, our joint development agreement with Johnson
Matthey provides for certain shared intellectual property rights. Under the
agreement, we and Johnson Matthey have granted each other a non-exclusive,
irrevocable, global, royalty-free license to the patents and technology owned by
the inventing party and also the right to sublicense such patents and technology
in order to further the parties' work on the balance of plant system for Johnson
Matthey's fuel processor reactors. Additionally, all inventions conceived in the
course of work performed under the agreement and made jointly by both parties
will be owned jointly by both parties. When the agreement is terminated, the
licenses continue to the extent needed to allow the parties to use the jointly
owned patents and technology invented under the agreement.

We have been granted ten patents on our technology in the United States and
Canada. We currently have approximately 230 patent applications pending
worldwide representing over 100 separate inventions.

COMPETITION

We expect to compete against current conventional technologies, other fuel
cell developers and other alternative power sources in all of our targeted
markets. In the fuel cell industry, we expect to compete in the fuel cell
products, hydrogen generation and fuel cell automated test station markets.

FUEL CELL TEST STATIONS

In the fuel cell automated test station market, we compete primarily on the
basis of product features, performance, reliability, price and access to
service. A number of companies currently manufacture fuel cell automated test
stations. These companies include Emprise Corporation, Chino Corp., ElectroChem,
Inc., Lynntech, Inc. and Teledyne Energy Systems, Inc. In addition to the
companies which currently manufacture test stations, most large fuel cell
developers and original equipment manufacturers have some degree of internal
test station development.

POWER PRODUCTS AND HYDROGEN GENERATION

In the commercial production of fuel cell systems and subsystems and the
provision of systems integration services, we expect to compete with companies
who currently have fuel cell and fuel cell system development programs. We
expect to compete on the basis of product flexibility, performance, product
reliability and price. Companies involved in fuel cell development programs
include Ballard Power Systems Inc., United Technologies Corporation, Analytic
Power Corporation, DeNora spa, Energy Partners, Inc., Honda Motor Co. Ltd., Plug
Power Inc., Toshiba Corporation, Toyota Motor Corporation, Giner, Inc., Quantum
Technologies Inc. and Distributed Energy Systems Inc. Companies with programs
for fuel cells other than PEM fuel cells include Fuel Cell Energy Inc., Fuji
Electric Co., Ltd., Global Thermoelectric Inc., Hitachi, Ltd. and United
Technologies Corporation. Certain of our competitors have announced corporate
alliances with major vehicle manufacturers such as Daimler-Chrysler, Honda and
Ford.

In addition, the following companies are involved in hydrogen generation:
Praxair, Inc., Air Liquide Group, Linde AG, BOC Group, Air Products and
Chemicals, Inc., Stuart Energy Systems Corporation, Distributed Energy Systems
Inc. and a number of large multinational oil and gas companies.

BACKLOG

As of November 6, 2003, the backlog of confirmed orders for our products
and services was approximately $17.5 million. We include only signed purchase
orders in our backlog.

EMPLOYEES

We have approximately 250 full-time employees. Approximately 100 of our
employees are professional staff, including engineers, scientists, and other
professionals. We believe that our ability to attract and retain qualified
personnel is critical to our success and the achievement of our business plan.
None of our employees are represented by a collective bargaining agreement. We
believe that our relations with our employees are good.

ORGANIZATIONAL STRUCTURE

We have five wholly-owned subsidiaries: Hydrogenics USA, Inc. (incorporated
under the laws of the State of Delaware), Hydrogenics Japan Inc. (incorporated
under the laws of the Province of Ontario), Hydrogenics GmbH and EnKat GmbH,
wholly owned by Hydrogenics GmbH, (each incorporated under the laws of Germany)
and Greenlight Power Technologies, Inc. (incorporated under the laws of Canada).

PROPERTY, PLANT AND EQUIPMENT

Our executive offices are located in Mississauga, Ontario, Canada. Our main
activities at this facility are the manufacture, research and development of our
fuel cell power products. On January 7, 2003, we acquired all of the issued and
outstanding common shares of Greenlight Power Technologies, Inc. and the lease
on Greenlight's 54,000 square foot headquarters and testing services facility in
Burnaby, British Columbia. We use this facility to develop and manufacture our
test and diagnostic products.

In July 2000, we opened a sales office in Japan. This office coordinates
our sales, service and marketing efforts in the Asia-Pacific region.

We currently lease manufacturing, research and development and general
office facilities in the locations set forth below:

SQUARE
LOCATION PRINCIPAL USE FOOTAGE LEASE EXPIRY DATE
-------- ------------- ------- -----------------

Mississauga, Ontario.............. Corporate offices, manufacturing, 96,000 August 31, 2005
research and development and
testing services
Burnaby, British Columbia......... Corporate offices and testing 54,000 December 31, 2004
services
Gelsenkirchen, Germany............ Sales and marketing, manufacturing 6,000 November 30, 2005
Tokyo, Japan...................... Sales and marketing offices 1,000 May 27, 2005

We believe that our facilities are presently adequate for our operations
and that we will be able to maintain suitable space needed on commercially
reasonable terms.

LEGAL PROCEEDINGS

We are not currently party to any material proceedings.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information with respect to our executive
officers and directors as of the date of this short form prospectus:

NAME AGE POSITION
---- --- --------

Pierre Rivard.......................... 47 President, Chief Executive Officer and Director
Norman M. Seagram(1)(2)(3)............. 69 Chairman of the Board of Directors
Boyd J. Taylor......................... 43 Vice President, Business Development, Sales and
Marketing and Director
Joseph Cargnelli....................... 33 Chief Technology Officer and Director
Gary Brandt............................ 45 Chief Financial Officer
Dr. Ravi B. Gopal...................... 42 Vice President Systems and Applications Engineering
Don J. Morrison(2)..................... 43 Director
Donald J. Lowry(2)(3).................. 51 Director
Wesley Twiss(1)(2)..................... 58 Director
Frank Colvin........................... 61 Director
Charley Pappas......................... 45 Vice President, Infrastructure Applications
James Sardo(1)(3)...................... 60 Director
Jonathan Lundy......................... 40 Vice President General Counsel and Corporate
Secretary

---------------

(1) Member of the Human Resources and Compensation Committee

(2) Member of the Audit Committee

(3) Member of the Nomination and Corporate Governance Committee

PIERRE RIVARD is one of our founders and has served as our President and a
director since the inception of our fuel cell related business in August 1995.
Mr. Rivard has served as our Chief Executive Officer since July 2000. From June
1994 to July 1995, Mr. Rivard served as a research engineer at the University of
Toronto with the Department of Mechanical Engineering. Mr. Rivard earned a
Master's degree in Mechanical Engineering from the University of Toronto, a
Master's degree in Business Administration from the University of Western
Ontario, and a Bachelor's degree in Mechanical Engineering from the Royal
Military College of Canada. Mr. Rivard resides in Toronto, Ontario.

NORMAN M. SEAGRAM was elected Chairman of our board of directors in July
2000. Mr. Seagram was President of Sportsco International LP from February 2001
to March 2003. From September 1996 to May 1997, Mr. Seagram was President and
Chief Executive Officer of Molson Inc., a brewery, sports and entertainment
company that he had previously served for 24 years in a variety of senior
management positions. From October 1992 to August 1996, Mr. Seagram was Chairman
and Chief Executive Officer of Air Liquide Canada, Inc., a producer of
industrial gases. Mr. Seagram is currently President of the Badminton & Racquet
Club of Toronto and sits as a director on the boards of the Toronto Symphony
Foundation, the Harbourfront Centre Foundation and the Canadian Foundation of
International Management. Mr. Seagram also is a trustee of Trinity College
School and serves on the International Advisory Council of INSEAD, France, and
on the advisory boards of Exclamation International Inc. and the Faculty of
Applied Science and Engineering, University of Toronto. Mr. Seagram resides in
Toronto, Ontario.

BOYD J. TAYLOR is one of our founders and has served as a director since
January 1996. Mr. Taylor served as our Secretary from January 1996 until July
1999 and was appointed as our Vice President, Sales and Marketing in July 2000.
His title was changed to Vice President, Business Development, Sales and
Marketing in April 2003. From January 1993 to September 1995, Mr. Taylor was
Manager of Sales and Marketing of Aquatic Telemetry Systems at Lotek Engineering
Inc., a manufacturer of terrestrial and

aquatic telemetry systems. Mr. Taylor earned a Bachelor's degree in Electrical
Engineering from Memorial University. Mr. Taylor resides in Oakville, Ontario.

JOSEPH CARGNELLI is one of our founders and has served as a director since
January 1996. Mr. Cargnelli served as our Treasurer from January 1996 until July
2000. Mr. Cargnelli was appointed as our Vice President Technology in July 2000.
His title was changed to Chief Technology Officer in April 2003. Mr. Cargnelli
earned both a Masters of Applied Science degree in Mechanical Engineering and a
Bachelor of Applied Science degree in Mechanical Engineering from the University
of Toronto. From April 1992 to April 1993, Mr. Cargnelli served as a Research
Engineer with the Laboratory of Advanced Concepts in Energy Conversion Inc., a
laboratory engaged in the research, development and demonstration of alkaline
fuel cells and hydrogen storage methods. Mr. Cargnelli resides in Toronto,
Ontario.

GARY BRANDT joined us in October 2001 as our Chief Financial Officer. From
2000 to 2001, Mr. Brandt was Chief Financial Officer with @Link Networks, Inc.
From 1996 to 2000, Mr. Brandt was Vice President, Investor Relations with
WorldCom Inc., and from 1994 to 1996 was Vice President, Investor Relations with
MFS Communications Company, Inc., which was acquired by WorldCom Inc. in 1996.
From 1985 to 1994, Mr. Brandt held various senior finance positions with
Northern Telecom. Mr. Brandt earned a Bachelors of Commerce degree from Queen's
University and a Master's degree in Business Administration from York
University. Mr. Brandt resides in Toronto, Ontario.

DR. RAVI B. GOPAL joined us in May 1998 and was appointed Vice President of
Engineering, Electronics and Controls in June 1999. His title was changed to
Vice President Systems and Applications Engineering in November 2001. Dr. Gopal
was employed by the University of Quebec, Trois-Rivieres as a Post-Doctoral
Fellow from October 1991 to May 1994, a Research Associate from June 1994 to May
1998 and as a member of the teaching faculty from January to May 1998. Dr. Gopal
received his Ph.D. from the Indian Institute of Science. Dr. Gopal resides in
Oakville, Ontario.

DON J. MORRISON joined our board of directors in September 2000. Don
Morrison is Senior Portfolio Manager at Ontario Municipal Employees Retirement
System (OMERS). Mr. Morrison has previously served as Senior Vice President,
Investments, at Working Ventures Canadian Fund Inc. and as Principal in the
Financial Advisory Services Group of PricewaterhouseCoopers LLP. Mr. Morrison is
a Chartered Accountant. Mr. Morrison was originally appointed to our board by
Working Ventures in accordance with the terms of our Amended and Restated
Unanimous Shareholders' Agreement, which expired upon completion of our initial
public offering. Mr. Morrison resides in Toronto, Ontario.

DONALD J. LOWRY joined our board of directors in July 2000. Since February
1998, Mr. Lowry has been President and Chief Executive Officer of EPCOR
Utilities Inc., an essential services utility. From May 1997 to January 1998,
Mr. Lowry served as Chairman of Alta Telecom Inc., a telecommunications company.
From March 1993 to May 1997, Mr. Lowry served as President and Chief Operating
Officer of Telus Communications Inc., a telecommunications company. Mr. Lowry
resides in Edmonton, Alberta.

JAMES SARDO joined our board of directors in May 2003. He currently is a
director of GDI Global Data Inc. and Royal Group Technologies. Mr. Sardo is also
a trustee of Custom Income Fund and UE Waterheater Income Fund. Mr. Sardo was
President, Canadian operations, of Moore Corporation Limited, from 1999 to 2001
and President and Chief Executive Officer of SMK Speedy International, from 1997
to 1999. Prior to 1997, Mr. Sardo held the Chief Executive Officer positions at
SNE, Inc. and Amre Inc. in the United States and the position of Chairman and
Chief Executive Officer of Firestone Canada Inc. Mr. Sardo is a member of the
Institute of Corporate Directors. Mr. Sardo resides in Mississauga, Ontario.

CHARLEY PAPPAS joined us in April 2000 as our Director of Engineering
Operations and was appointed Vice President of Operations in September 2000. His
title was changed to Vice President, Infrastructure Applications in April 2003.
From October 1992 to April 2000, Mr. Pappas was employed with The Electrolyzer
Corporation Limited, a manufacturer of hydrogen generators, where he served as
Senior Design Engineer from 1992 to 1994, and Vice-President of Engineering from
1994 to 1999. From 1991 to 1992, Mr. Pappas was President and Project Manager
with Phalanx Engineering Inc., an engineering

consultant to the industrial gas business. From 1981 to 1991, Mr. Pappas was
employed by Union Carbide Canada Limited in a number of positions. Mr. Pappas is
a Member of the Professional Engineers of Ontario and resides in Scarborough,
Ontario.

WESLEY TWISS joined our board of directors in February 2003. Mr. Twiss has
over 35 years of energy industry experience, including 13 years as the senior
financial officer of two major Canadian companies. Mr. Twiss was the Executive
Vice President and Chief Financial Officer for PanCanadian Energy Corporation
from October 2000 until April 2002 and was Executive Vice President and Chief
Financial Officer of Petro-Canada from 1998 through 2000. Mr. Twiss is a
director of Canadian Oil Sands Limited and a trustee of KeySpan Facilities
Commercial Trust and Enbridge Commercial Trust. Mr. Twiss resides in Calgary,
Alberta.

FRANK COLVIN joined our board of directors in November 2001. In February
2003, Mr. Colvin retired as Vice President of Fuel Cell Activities, General
Motors. Prior to holding that position, Mr. Colvin held numerous senior
positions at General Motors, including, most recently, Vice President of
Engineering, General Motors Europe. Mr. Colvin was selected to join our board of
directors by General Motors in connection with our strategic alliance with
General Motors. Mr. Colvin resides in Saint Clair Shores, Michigan.

JONATHAN LUNDY joined us in October 2000 as our Vice President Corporate
Affairs and Corporate Secretary. His title was changed to Vice President,
General Counsel and Corporate Secretary in April 2003. From August 1998 to
October 2000 Mr. Lundy was employed at Osler, Hoskin & Harcourt LLP where he
practised corporate and securities law. From May 1996 to August 1998 Mr. Lundy
was employed with Heenan Blaikie where he practised corporate law. Mr. Lundy
earned a Bachelor of Laws degree and a Bachelor of Arts degree from the
University of Western Ontario. Mr. Lundy is a member of the Law Society of Upper
Canada. Mr. Lundy resides in Oakville, Ontario.

CORPORATE GOVERNANCE

On June 20, 2003, we announced that our board of directors has approved and
adopted various new or revised corporate governance practices following a
comprehensive review of our corporate governance undertaken in 2002. Our board
understands that strong governance frameworks are critical not only to ensure
organizational compliance and effectiveness, but increasingly to meet capital
market expectations. These new and revised corporate governance practices were
developed and implemented in order to comply with the Proposed Toronto Stock
Exchange Disclosure and Continued Listing Requirements and Guidelines and other
Canadian securities legislation as well as the Nasdaq National Market Proposed
Corporate Governance Listing Standards, the Sarbanes-Oxley Act of 2002 and other
applicable U.S. securities legislation.

In accordance with the adopted practices, our board of directors currently
consists of nine members, five of whom qualify as unrelated and independent
directors, as determined by the board. No director will be deemed independent
unless the board affirmatively determines that the director has no material
relationship with us, directly or as an officer, shareholder or partner of an
organization that has material relationship with us. Our articles provide that
we may have between three and nine directors on our board. Each director is
elected for terms of up to three years, to hold office until the end of their
respective term or until their successor is duly elected or appointed, or until
the director's earlier death, resignation or removal.

There are currently three standing committees of our board of directors:
(i) Audit; (ii) Nominations and Corporate Governance; and, (iii) Human Resources
and Compensation. In accordance with the adopted revised governance practices,
each committee must be comprised solely of members who qualify as unrelated and
independent directors, as determined by the board.

AUDIT COMMITTEE. Our board of directors has adopted a revised mandate for
the Audit Committee. The Audit Committee is now comprised of four members, each
of whom is qualified as an unrelated and independent director, as determined by
the board. We believe that each of the members of the Audit
56

Committee are independent, as that term is defined under the Sarbanes-Oxley Act
of 2002 and the rules of the Nasdaq National Market. Each member of this
committee is financially literate and at least two members are "financial
experts," as that term is defined under the rules of the Nasdaq National Market
and the Sarbanes-Oxley Act of 2002. We believe that each of Wesley Twiss and Don
Morrison meets the requirements for a financial expert under the Sarbanes-Oxley
Act of 2002 and the rules of the Nasdaq National Market. The members of the
Audit Committee do not receive any compensation from us other than compensation
as directors and committee members. The Audit Committee assists our board of
directors in overseeing our financial controls and reporting. It also monitors
whether we are in compliance with our financial covenants and legal and
regulatory requirements governing financial disclosure matters and reviews on a
regular basis and monitors our risk assessment and management policies. This
committee approves the appointment and termination (both subject to shareholder
approval) of our external auditors and monitors their qualifications,
performance and independence. It also approves all audit and permitted non-audit
services to be provided by such external auditors. We intend to modify the
composition of our Audit Committee from time to time to ensure compliance with
the rules promulgated by the Securities and Exchange Commission, the Canadian
Securities Administrators, the Nasdaq National Market and the Toronto Stock
Exchange.

NOMINATION AND CORPORATE GOVERNANCE COMMITTEE. Following the adoption of
the new governance practices, the Nomination and Corporate Governance Committee
is now comprised of three non-management directors, each of whom is qualified as
an unrelated and independent director, as determined by the board. The primary
objective of this committee is to ensure that our business and affairs are
carried out in a transparent manner that will enhance shareholder value. This
committee is responsible for assisting our board in developing our approach to
corporate governance issues, proposing new board nominees and assessing the
effectiveness of our board, its committees, their respective chairs and
individual directors.

HUMAN RESOURCES AND COMPENSATION COMMITTEE. A revised mandate for the
Human Resources and Compensation Committee has also been adopted. The Human
Resources and Compensation Committee is now comprised of three members, each of
whom is qualified as an unrelated and independent director, as determined by the
board. This committee's responsibility is to assist the board of directors in
discharging its responsibilities relating to executive and other human resources
hiring, assessment, compensation and succession planning. These responsibilities
include senior management succession planning, the hiring and assessment of
senior management and fixing the compensation of our directors and senior
management. Our Human Resources and Compensation Committee also administers our
current stock option arrangements.

In response to the new corporate governance initiatives, we have also
improved other areas of our corporate governance practice. These changes include
the adoption of a Corporate Code of Ethics and a new Communications and
Disclosure Policy.

CERTAIN TRANSACTIONS

TRANSACTIONS WITH VIKING ENGINE & TOOL CO.

We subcontract some manufacturing in the normal course of our operations to
Viking Engine & Tool Co., a company owned by the father and uncle of Joseph
Cargnelli, one of our directors and a principal shareholder. For the fiscal year
ended December 31, 2002, we paid this company approximately $1.0 million. We
believe that the rates this company has charged us for its services are
comparable to rates we could have obtained from an unrelated third party.

ALLIANCE WITH GENERAL MOTORS CORPORATION

In October 2001, we formed a strategic alliance with General Motors to
accelerate the development of fuel cell technology into global commercial
markets. Our alliance with General Motors includes shared intellectual property
rights and joint efforts in fuel cell product development, engineering,
prototyping, testing, branding and marketing strategies. In connection with the
strategic alliance, we issued to General Motors approximately 11.4 million of
our common shares, or approximately 21% of our outstanding shares at October
2001, and warrants to purchase approximately 2.5 million additional shares. The
warrants were placed in escrow upon closing of the transaction and are released
at a rate of 61,761 warrants per month over 40 months. Each warrant is
exercisable at an exercise price of $4.00 per share upon release from escrow.
The warrants expire on October 16, 2006. The shares issued, and issuable upon
the exercise of the warrants, are subject to certain restrictions on transfer.
In addition, we have granted General Motors certain registration rights in
connection with its shares and the shares issuable upon the exercise of the
warrants. See "Shares Eligible for Future Sale -- U.S. Resale
Restrictions -- Registration Rights". We have agreed that one director nominated
by General Motors shall be included in the slate of directors that are presented
to shareholders for approval at our general meeting. In addition, General Motors
is entitled to appoint one observer to attend all meetings of our board of
directors.

In connection with the strategic alliance, General Motors granted us a
non-exclusive, royalty-free license to use certain of General Motors'
proprietary fuel cell stack intellectual property in certain applications and
modules. The use or incorporation of General Motors' fuel stack intellectual
property outside these defined areas requires the consent of General Motors. We
granted to General Motors, its affiliates and any third parties with whom
General Motors has a technical or business relationship related to fuel cells a
perpetual, royalty-free, non-exclusive license to use all of the intellectual
property we develop that (i) uses General Motors' proprietary fuel cell stack
intellectual property and/or (ii) is funded by General Motors. Intellectual
property that is not funded by General Motors, but which uses General Motors'
fuel cell stack technology is licensed to General Motors non-exclusively.
Intellectual property that has been developed through funding by General Motors,
whether owned solely by us or jointly by us and General Motors, is licensed to
General Motors on an exclusive basis for mobile applications and on a non-
exclusive basis for all other applications. In the event that we wish to
liquidate or discontinue activity in the fuel cell business, or otherwise wish
to transfer any of the intellectual property associated with General Motors'
proprietary fuel cell stack intellectual property developed using funds from
General Motors, we are required to offer it first to General Motors. We also
agreed to provide General Motors with certain services, access to technology and
testing resources in connection with its fuel cell development program and we
agreed that all products, material hardware and resources purchased from us by
General Motors will be at our most favorable commercial prices.

For so long as General Motors holds at least 10% of our outstanding shares,
in the event that any of our founders, Pierre Rivard, Boyd Taylor or Joseph
Cargnelli, wish to transfer (i) all or substantially all of their shares to any
person, or (ii) any of their shares to a person actively competing with General
Motors in the automotive or fuel cell industry, they must first offer the shares
to General Motors. In addition, in the event that we issue additional equity
securities or securities convertible into equity securities for cash
consideration, we have granted General Motors the right to participate in such
offering on a pro rata basis based on the fully-diluted number of common shares
that it holds. General Motors' pre-emptive right is

subject to certain limited exceptions, including the issuance of shares in
connection with acquisitions. We expect General Motors to waive its pre-emptive
right with respect to this offering. Other than as described above, prior to
October 16, 2005, General Motors is prohibited from acquiring any additional
equity securities.

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND ISSUED SHARE CAPITAL

Our authorized capital consists of an unlimited number of common shares and
an unlimited number of preferred shares issuable in series, of which 53,108,647
common shares and no preferred shares were issued and outstanding as of January
7, 2004.

Each common share carries one vote on all matters to be voted on by our
shareholders. Holders of common shares are entitled to receive dividends as and
when declared by our board of directors and to share ratably in our remaining
assets available for distribution, after payment of liabilities, upon our
liquidation, dissolution or winding up. Our common shares do not carry
pre-emptive rights or rights of conversion into any other securities. All
outstanding common shares are fully paid and non-assessable and the common
shares to be issued in this offering will also be fully paid and non-assessable.
There are no limitations on the rights of non-resident owners of our common
shares to hold or vote their shares.

Our board of directors has the authority, without further action by the
shareholders, to issue an unlimited number of preferred shares in one or more
series, and in the event that preferred shares are issued, the board also has
the authority to fix the designations, powers, preferences, privileges and
relative, participating, optional or special rights of any preferred shares
including any qualifications, limitations or restrictions. Special rights which
may be granted to a series of preferred shares may include dividend rights,
conversion rights, voting rights, terms of redemption and liquidation
preferences, any or all of which may be superior to the rights of the common
shares. Preferred share issuances could decrease the market price of the common
shares and may adversely affect the voting and other rights of the holders of
common shares. The issuance of preferred shares could also have the effect of
delaying or preventing a change in control of our company.

PRIOR SALES

During the nine months ended September 30, 2003, 4,292,683 common shares
were issued for $16.9 million, principally in connection with our acquisition of
Greenlight.

During 2002, we issued 877,675 (2001 -- 994,440; 2000 -- 49,000) common
shares for $193,000 (2001 -- $128,000; 2000 -- $23,000) in cash under the
exercise of options. During 2002, we issued 50,000 (2001 -- nil; 2000 -- nil)
stock options in exchange for consulting services from an outside supplier. Each
option is exercisable for one common share at a price of Cdn. $12.00 per share.
These options are for a term of ten years from the date of the grant and vest
quarterly over four years and are expensed at their fair value in accordance
with CICA Handbook Section 3870 "Stock Based Compensation and Other Stock Based
Payments." The fair value of stock options expensed during 2002 amounted to
$29,000 and was determined using a Black-Scholes pricing model with a risk-free
rate of 5.12%, an expected life of four years, a volatility factor of 77% and no
dividends.

On October 16, 2001, we issued 11,364,006 common shares and 2,470,436
common share purchase warrants to General Motors with an aggregate value of
approximately $34 million (net of issuance costs of $277,000) in exchange for
perpetual royalty-free intellectual property rights for certain fuel cell stack
technologies. Each common share purchase warrant is exercisable upon release
from escrow for one common share at a price of $4.00 per share. The fair value
of common share purchase warrants issued amounted to $4,722,000, net of issuance
costs, and was determined using a Black-Scholes pricing model with a risk-free
rate of 3.9%, a five year term and a volatility factor of 108%. The common share
purchase warrants were placed in escrow on October 16, 2001 and are to be
automatically released from escrow at a rate of 61,761 warrants per month over
40 months and expire on October 16, 2006.

On January 24, 2000, we issued 510,500 Series B preferred shares at $7.27
(Cdn. $10.50) per share for proceeds, net of issue costs, of $3,623,000 (Cdn.
$5,261,000). These shares were voting, convertible, redeemable and earned 5%
cumulative dividends.

During 2000, we completed a reverse share split reducing the number of
common shares from 3,000,000 to 2,812,500. Prior to our initial public offering
in November 2000, the shares were then split on a seven-to-one basis. The effect
of these splits has been recognized retroactively in all share and per share
data in the financial statements and notes.

On November 1, 2000, we completed an initial public offering and listed
common shares on the Nasdaq National Market and the Toronto Stock Exchange, and
issued 7,000,000 common shares raising proceeds of $76,167,000, net of issue
costs of $7,833,000.

On November 1, 2000, all outstanding Series A and B preferred shares were
converted to common shares in accordance with the terms of the shareholder
agreements. A total of 8,823,500 common shares were issued for a total stated
value of $4,529,000. At conversion, cumulative dividends of $229,000 were paid
to the preferred shareholders.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for our common shares in Canada is CIBC
Mellon Trust Company at its principal offices in Toronto, Ontario and the
co-transfer agent and co-registrar for our common shares in the United States is
Chase Mellon Shareholders Services L.L.C. at its offices in New York, New York.

SHARES ELIGIBLE FOR FUTURE SALE

The sale of substantial numbers of common shares in the public market, or
the possibility of this sale, could adversely affect prevailing market prices
for our common shares.

Upon completion of the offering based on the information as of January 7,
2004:

- a total of of our common shares will be outstanding;

- warrants to purchase 2,470,436 of our common shares at a price of $4.00
per share will be outstanding; and

- options to purchase a total of 3,306,407 of our common shares will be
outstanding.

All of the common shares sold in the offering in the United
States and Canada will be freely tradable without restriction under either the
U.S. Securities Act of 1933 or applicable Canadian securities laws, except by
"affiliates" as defined in Rule 144 under the U.S. Securities Act of 1933, or by
"control persons" as defined under applicable Canadian securities laws.

For the reasons given below, we believe that the following restricted
common shares will be eligible for resale in the public market at the following
times:

In connection with our acquisition of Greenlight, 4,103,161 Hydrogenics
common shares were issued to former Greenlight majority shareholders, subject to
the following contractual hold periods: shareholders may sell up to 50% of the
shares commencing January 8, 2004 and the remaining 50% after July 8, 2004, at
which point the shares will be freely tradable in Canada. Certain shareholders
may also sell up to 40,000 shares, or a greater amount with Hydrogenics' prior
consent, in any 30-day period, subject to certain restrictions, at a price
greater or equal to 100% of the closing price on Toronto Stock Exchange the
prior day. We believe that the following restricted common shares will be
eligible for resale in the Canadian public market at the following times:

SHARES ELIGIBLE FOR SALE
IN THE CANADIAN
PUBLIC MARKET
------------------------

January 8, 2004...................................... 1,416,789
July 8, 2004......................................... 2,051,580

Over the past year our three founders have elected to engage in some
personal financial diversification by selling a relatively small percentage of
their direct holdings in Hydrogenics. These sales are from personal direct
shareholdings and do not result from the exercise of stock options. Therefore,
as they sell, there is no corresponding dilution but rather, increased liquidity
in our public float. These selling programs are in full compliance with
applicable securities legislation and have been disclosed on a quarterly basis.
In selling these shares, the founders have entered into irrevocable contracts to
sell shares over an extended period of time and as such they have no opportunity
to "time the market".

OPTIONS

As of January 7, 2004, we had outstanding options to purchase 3,306,407
common shares, of which 1,905,641 options are exercisable. Common shares issued
upon exercise of a share option will, subject to any lock-up agreement, be
available for sale in Canada in the open market immediately upon exercise.

U.S. RESALE RESTRICTIONS

RULE 144

In general, under Rule 144 as currently in effect, a person who has
beneficially owned common shares for at least one year is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:

- 1.0% of the number of common shares then outstanding, which is expected
to equal approximately common shares immediately after this
offering; and

- the average weekly trading volume of the common shares on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 in connection with the sale.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. In addition, under Rule 144(k) as currently in effect, a person:

- who is not considered to have been one of our affiliates at any time
during the 90 days preceding a sale; and

- who has beneficially owned the shares proposed to be sold for at least
two years, including the holding period of any prior owner other than an
affiliate

is entitled to sell his shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless subject to a lock-up agreement or otherwise restricted, such "144(k)
shares" may be sold immediately upon the closing of this offering.

REGISTRATION RIGHTS

Assuming that we are eligible to use a "short form" registration statement
under the U.S. Securities Act of 1933 or if we have filed a Canadian prospectus,
General Motors is entitled to request up to three times that we register for
resale common shares and common shares issuable upon the exercise of warrants
that we issued to it in connection with our strategic alliance. Pursuant to such
a registration, General Motors is permitted sell up to approximately 11.4
million shares on or after October 16, 2007, up to approximately 7.6 million
additional shares on or after October 16, 2006 and up to approximately 3.8
million additional shares on or after October 16, 2005. General Motors is not
permitted to transfer our common shares, whether pursuant to a registration
statement or otherwise, other than to a subsidiary, prior to these dates. In
addition, subject to these limitations on the number of shares that General
Motors may sell, if we file a registration statement either for our own account
or for the account of any other person, General Motors is entitled to request
that we include its shares in that registration statement, subject to cutback
for marketing reasons. Registration under the U.S. Securities Act of 1933 of
shares held by General Motors would result in such shares becoming freely
tradable without restriction under the

U.S. Securities Act of 1933, except for shares purchased by affiliates,
immediately upon the effectiveness of such registration. Any sales of securities
by General Motors could have a material adverse effect on the trading price of
our common shares. General Motors' registration rights terminate on October 16,
2008.

INCOME TAX CONSEQUENCES

Because Canadian and United States tax consequences may differ from one
holder to the next, the discussion set out below does not purport to describe
all of the tax considerations that may be relevant to you and your particular
situation. Accordingly, you are advised to consult your own tax advisor as to
the United States and Canadian federal, provincial, state and other tax
consequences of investing in our common shares. The statements of United States
and Canadian tax law set out below are based on the laws and interpretations in
force as of the date of this short form prospectus, and are subject to changes
occurring after that date.

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS FOR UNITED STATES INVESTORS

In this summary, a "U.S. holder" means a person who, for the purposes of
the Canada-United States Income Tax Convention (1980), is a resident of the
United States and not of Canada and who, for the purposes of the Income Tax Act
(Canada):

- deals at arm's length and is not affiliated with us;

- is the beneficial owner of our common shares;

- holds our common shares as capital property;

- does not use or hold and is not deemed to use or hold our common shares
in the course of carrying on a business in Canada; and

- is not an insurer for whom our common shares constitute designated
insurance property or are effectively connected with an insurance
business carried on in Canada.

This summary does not apply to a U.S. holder that is a "financial
institution" for purposes of the mark-to-market rules contained in the Income
Tax Act (Canada). There are no Canadian federal estate taxes applicable to the
purchase or ownership of our common shares. Under the Income Tax Act (Canada),
on death, a U.S. holder would be deemed to dispose of all of his or her assets,
including our common shares.

This summary is based on the current provisions of the Income Tax
Act(Canada) and the regulations in force under the Income Tax Act (Canada) on
the date of this short form prospectus, the Convention, current published
administrative and assessing practices of the Canada Customs and Revenue Agency,
all specific proposals to amend the Income Tax Act (Canada) and the regulations
announced by the Minister of Finance (Canada) prior to the date of this short
form prospectus and all judicial decisions currently in effect.

This summary is not exhaustive and, except for the proposed amendments to
the Income Tax Act (Canada), does not take into account or anticipate
prospective or retrospective changes in the law or the administrative or
assessing practices of the Canada Customs and Revenue Agency, whether these
changes are effected by judicial, governmental or legislative action or
interpretation. This summary does not take into account tax legislation or
considerations of any province or territory of Canada. None of the tax
consequences described herein depend or rely on any of the proposed amendments
to the Income Tax Act (Canada) passing into law.

DIVIDENDS

Dividends paid, credited or deemed to have been paid or credited on our
common shares are subject to nonrefundable Canadian withholding tax under the
Income Tax Act (Canada) at the rate of 25%,

although this rate may be reduced by the provisions of an applicable income tax
treaty. Subject to the exceptions noted immediately below, under the Convention,
U.S. holders who beneficially own the dividends will be subject to a 15%
withholding tax on the gross amount of such dividends. In the case of a U.S.
holder that is a corporation which beneficially owns at least 10% of our voting
shares, the applicable rate of withholding tax on dividends will be reduced to
5%. In the case of dividends paid, credited or deemed to be paid or credited to
a U.S. holder that is a tax-exempt organization as described in Article XXI of
the Convention, no withholding tax will be payable.

DISPOSITIONS

Under the Income Tax Act (Canada), assuming you are a U.S. holder and
provided our common shares are listed on a prescribed stock exchange, which
includes the Toronto Stock Exchange and the Nasdaq National Market, you will be
exempt from Canadian tax on a capital gain realized on an actual or deemed
disposition of the common shares unless you, persons with whom you did not deal
at arm's length or you together with such persons owned 25% or more of our
issued shares of any class at any time during the five-year period before the
actual or deemed disposition.

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a description of the principal United States federal
income tax consequences that may be relevant with respect to the acquisition,
ownership and disposition of our common shares. This description addresses only
the United States federal income tax considerations of holders that are initial
purchasers of our common shares pursuant to the offering and that will hold such
common shares as capital assets. Except as set forth below, this description
does not address tax considerations applicable to holders that may be subject to
special tax rules, including:

- financial institutions or insurance companies;

- real estate investment trusts, regulated investment companies or grantor
trusts;

- dealers or traders in securities or currencies;

- tax-exempt entities;

- persons that received our shares as compensation for the performance of
services;

- persons that will hold our shares as part of a "hedging" or "conversion"
transaction or as a position in a "straddle" for United States federal
income tax purposes;

- persons that have a "functional currency" other than the United States
dollar; or

- holders that own or are deemed to own 10% or more, by voting power or
value, of our shares.

Moreover, this description does not address the United States federal
estate and gift or alternative minimum tax consequences of the acquisition,
ownership and disposition of our common shares.

This description is based on the Internal Revenue Code of 1986, as amended
(the "Code"), existing, proposed and temporary United States Treasury
Regulations and judicial and administrative interpretations thereof, in each
case as in effect and available on the date hereof.

The United States tax laws and the interpretation thereof are subject to
change, which change could apply retroactively and could affect the tax
consequences described below.

For purposes of this description, a "United States Holder" is a beneficial
owner of our common shares that, for United States federal income tax purposes,
is:

- a citizen or resident of the United States;

- a partnership or corporation created or organized in or under the laws of
the United States or any state thereof, including the District of
Columbia;

- an estate the income of which is subject to United States federal income
taxation regardless of its source; or

- a trust if such trust validly elects to be treated as a United States
person for United States federal income tax purposes or if (1) a court
within the United States is able to exercise primary supervision over its
administration and (2) one or more United States persons have the
authority to control all of the substantial decisions of such trust.

A "Non-United States Holder" is a beneficial owner of our common shares
that is not a United States Holder.

If a partnership (or any other entity treated as a partnership for United
States federal income tax purposes) holds our common shares, the tax treatment
of a partner in such partnership will generally depend on the status of the
partner and the activities of the partnership. Such a partner should consult its
tax advisor as to its tax consequences.

YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE UNITED STATES
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, OWNING OR
DISPOSING OF OUR COMMON SHARES.

DISTRIBUTIONS

Subject to the discussion below under "Passive Foreign Investment Company
Considerations", if you are a United States Holder, the gross amount of any
distribution made to you of cash or property, other than certain distributions,
if any, of our common shares distributed pro rata to all our shareholders with
respect to your common shares, before reduction for any Canadian taxes withheld
therefrom, will be includible in your income as dividend income to the extent
such distributions are paid out of our current or accumulated earnings and
profits as determined under United States federal income tax principles. Subject
to the discussion below under "Passive Foreign Investment Company
Considerations," dividends paid to non-corporate United States Holders in
taxable years beginning before December 31, 2008 may be eligible for the
preferential rates of U.S. federal income tax applicable in respect of certain
dividends. However, such dividends will not be eligible for the dividends
received deduction generally allowed to corporate United States Holders. Subject
to the discussion below under "Passive Foreign Investment Company
Considerations", to the extent, if any, that the amount of any distribution by
us exceeds our current and accumulated earnings and profits as determined under
United States federal income tax principles, it will be treated first as a
tax-free return of your adjusted tax basis in your common shares and thereafter
as capital gain. We do not maintain calculations of our earnings and profits
under United States federal income tax principles which may limit your ability
to characterize our distributions for United States Federal income tax purposes.

If you are a United States Holder, and we pay a dividend in Canadian
dollars, any such dividend will be included in your gross income in an amount
equal to the U.S. dollar value of Canadian dollars on the date of receipt. The
amount of any distribution of property other than cash will be the fair market
value of such property on the date of distribution.

If you are a United States Holder, dividends paid to you with respect to
your common shares will be treated as foreign source income, which may be
relevant in calculating your foreign tax credit limitation. Subject to certain
conditions and limitations, Canadian tax withheld on dividends may be deducted
from your taxable income or credited against your United States federal income
tax liability. The limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this

purpose, dividends that we distribute generally will constitute "passive
income", or, in the case of certain United States Holders, "financial services
income".

Subject to the discussion below under "Backup Withholding Tax and
Information Reporting Requirements," if you are a Non-United States Holder, you
generally will not be subject to United States federal income or withholding tax
on dividends received by you on your common shares, unless you conduct a trade
or business in the United States and such income is effectively connected with
that trade or business.

SALE OR EXCHANGE OF COMMON SHARES

Subject to the discussion below under "Passive Foreign Investment Company
Considerations", if you are a United States Holder, you generally will recognize
gain or loss on the sale or exchange of your common shares equal to the
difference between the amount realized on such sale or exchange and your
adjusted tax basis in your common shares. Such gain or loss will be capital gain
or loss. If you are a non-corporate United States Holder, the maximum marginal
United States federal income tax rate applicable to such gain will be lower than
the maximum marginal United States federal income tax rate applicable to
ordinary income (other than certain dividends) if your holding period for such
common shares exceeds one year. Gain or loss, if any, recognized by you
generally will be treated as United States source income or loss for United
States foreign tax credit purposes. The deductibility of capital losses is
subject to limitations.

If you are a United States Holder, the initial tax basis of your common
shares will be the U.S. dollar value of the Canadian dollar denominated purchase
price determined on the date of purchase. If the common shares are treated as
traded on an "established securities market" (which includes the Nasdaq National
Market and may include the Toronto Stock Exchange), a cash basis United States
Holder, or, if it elects, an accrual basis United States Holder, will determine
the dollar value of the cost of such common shares by translating the amount
paid at the spot rate of exchange on the settlement date of the purchase. If you
convert United States dollars to Canadian dollars and immediately use that
currency to purchase common shares, such conversion generally will not result in
taxable gain or loss to you.

With respect to the sale or exchange of common shares, the amount realized
generally will be the U.S. dollar value of the payment received determined on
(1) the date of receipt of payment in the case of a cash basis United States
Holder and (2) the date of disposition in the case of an accrual basis United
States Holder. If the common shares are treated as traded on an "established
securities market," a cash basis taxpayer, or, if it elects, an accrual basis
taxpayer, will determine the United States dollar value of the amount realized
by translating the amount received at the spot rate of exchange on the
settlement date of the sale.

Subject to the discussion below under "Backup Withholding Tax and
Information Reporting Requirements," if you are a Non-United States Holder, you
generally will not be subject to United States federal income or withholding tax
on any gain realized on the sale or exchange of such common shares unless:

- such gain is effectively connected with your conduct of a trade or
business in the United States; or

- you are an individual and have been present in the United States for 183
days or more in the taxable year of such sale or exchange and certain
other conditions are met.

PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS

A Non-U.S. corporation will be classified as a "passive foreign investment
company", or a PFIC, for United States federal income tax purposes in any
taxable year in which, after applying certain look-through rules, either

- at least 75% of its gross income is "passive income"; or

- at least 50% of the average value of its gross assets is attributable to
assets that produce "passive income" or are held for the production of
passive income.

Passive income for this purpose generally includes dividends, interest,
royalties, rents and gains from commodities and securities transactions.

Based on certain estimates of our gross income and gross assets and the
nature of our business, we believe that we will not be classified as a PFIC for
the taxable year ending December 31, 2003. Our status in future years will
depend on our assets (which for this purpose depends in part on the market value
of our common shares) in those years. We have no reason to believe that our
assets or activities will change in a manner that would cause us to be
classified as a PFIC, but there can be no assurance that we will not be
considered a PFIC for any taxable year. Generally, subject to the discussion
below, if we were a PFIC, and you are a United States Holder, you will be
subject to a special tax at ordinary income tax rates (without the possibility
to benefit from the lower rates applicable to certain dividends paid to non-
corporate holders) on "excess distributions", including certain distributions by
us, and gain that you recognize on the sale of your shares. The amount of income
tax on any excess distributions will be increased by an interest charge to
compensate for tax deferral, calculated as if the excess distributions were
earned ratably over the period you hold your shares. Classification as a PFIC
may also have other adverse tax consequences, including, in the case of
individuals, the denial of a step-up in the basis of your shares at death.

You can avoid certain of the unfavorable rules described in the preceding
paragraph by electing to mark your shares to market. If you make this
mark-to-market election, you will be required in any year in which we are a PFIC
to include as ordinary income the excess of the fair market value of your shares
at year-end over your basis in those shares. In addition, any gain you recognize
upon the sale of your shares will be taxed as ordinary income in the year of
sale. You should however consult your own tax advisor regarding the tax
consequences that would arise if we were treated as a PFIC.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS

United States backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate holders of stock.
Information reporting generally will apply to payments of dividends on, and to
proceeds from the sale or redemption of, common shares made within the United
States to a holder of common shares, other than an exempt recipient, including a
corporation, a payee that is not a United States person that provides an
appropriate certification and certain other persons. A payor will be required to
withhold backup withholding tax from any payments of dividends on, or the
proceeds from the sale or redemption of, common shares within the United States
to a holder, other than an exempt recipient, if such holder fails to furnish its
correct taxpayer identification number or otherwise fails to comply with, or
establish an exemption from, such backup withholding tax requirements. The
backup withholding tax rate is 28% for years 2003 through 2010.

In the case of such payments made within the United States to a foreign
simple trust, a foreign grantor trust or a foreign partnership, other than
payments to a foreign simple trust, a foreign grantor trust or a foreign
partnership that qualifies as a "withholding foreign trust" or a "withholding
foreign partnership" within the meaning of the applicable United States Treasury
Regulations and payments to a foreign simple trust, a foreign grantor trust or a
foreign partnership that are effectively connected with the conduct of a trade
or business in the United States, the beneficiaries of the foreign simple trust,
the persons treated as the owners of the foreign grantor trust or the partners
of the foreign partnership, as the case may be, will be required to provide the
certification discussed above in order to establish an
67

exemption from backup withholding tax and information reporting requirements.
Moreover, a payor may rely on a certification provided by a payee that is not a
United States person only if such payor does not have actual knowledge or a
reason to know that any information or certification stated in such certificate
is incorrect.

THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSEQUENCES RELATING TO ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR
COMMON SHARES. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE TAX
CONSEQUENCES OF YOUR PARTICULAR SITUATION.

UNDERWRITING

Citigroup Global Markets Inc. is acting as sole book-runner manager, and,
together with NBF Securities (USA) Corp. and TD Securities (U.S.A.) Inc., are
acting as the underwriters of the offering. Subject to the terms and conditions
stated in the underwriting agreement dated the date hereof, each underwriter
named below has agreed to purchase, and we have agreed to sell to that
underwriter, the number of common shares set forth opposite the underwriter's
name.

UNDERWRITER: NUMBER OF SHARES
------------ ----------------

Citigroup Global Markets Inc. ...........................
NBF Securities (USA) Corp. ..............................
TD Securities (U.S.A.) Inc. .............................
-------
Total....................................................
=======

The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The obligations of
the underwriters under the underwriting agreement are several and may be
terminated at their discretion on the basis of their assessment of the state of
the financial markets and upon the occurrence of other stated events. The
underwriters are obligated to purchase all of the common shares, other than
those covered by the over-allotment option described below, if they purchase any
of the common shares.

This short form prospectus has been filed under procedures in each of the
provinces of Canada that permit certain information about our common shares to
be determined after the prospectus has become final and that permit the omission
of that information from this short form prospectus. The procedures require the
delivery to purchasers of a supplemented PREP prospectus containing the omitted
information within a specified time after agreeing to purchase any of the common
shares. All disclosure contained in a supplemented PREP prospectus that is not
contained in the base PREP prospectus will be incorporated by reference into the
base PREP prospectus as of the date of the supplemented PREP prospectus.

This offering is being made concurrently in the United States and in all of
the provinces of Canada. Subject to applicable law, the underwriters may also
offer the common shares outside of the United States and Canada. Broker-dealer
affiliates of the underwriters named above may sell common shares in the United
States, Canada or elsewhere, as the case may be, in each case pursuant to
applicable law.

The underwriters propose to offer some of the common shares directly to the
public at the public offering price set forth on the cover page of this short
form prospectus and some of the common shares to dealers at the public offering
price less a concession not to exceed $ per common share. The underwriters
may allow, and dealers may re-allow, a concession not to exceed $ per common
share on sales to other dealers. If all of the common shares are not sold at the
initial offering price, the underwriters may change the public offering price
and other selling terms.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this short form prospectus, to purchase up to additional
common shares at the public offering price less the underwriting discount. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent the
option is exercised, each underwriter will be obligated, subject to some
conditions, to purchase a number of additional common shares approximately
proportionate to that underwriter's initial purchase commitment.

We and our officers and directors and certain shareholders have agreed
that, for a period of 90 days from the date of this prospectus, we and such
others will not, without the prior written consent of Citigroup Global Markets
Inc., dispose of or hedge any shares of our common shares or any securities
convertible into, or exercisable or exchangeable for, our common shares.
Citigroup Global Markets Inc., in its sole discretion, may release any of the
securities subject to these lock-up agreements at any time without notice.

Each underwriter has represented, warranted and agreed that:

- it has not offered or sold and prior to the expiry of a period of six
months from the closing date, will not offer or sell any shares included
in this offering to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;

- it has only communicated and caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of section 21 of the
Financial Services and Markets Act 2000 ("FSMA"), received by it in
connection with the issue or sale of any shares included in this offering
in circumstances in which section 21(1) of the FSMA does not apply to us;

- it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the shares
included in this offering in, from or otherwise involving the United
Kingdom; and

- the offer in The Netherlands of the shares included in this offering is
exclusively limited to persons who trade or invest in securities in the
conduct of a profession or business (which include banks, stockbrokers,
insurance companies, pension funds, other institutional investors and
finance companies and treasury departments of large enterprises).

The common shares are quoted on the Nasdaq National Market under the symbol
"HYGS" and are listed on the Toronto Stock Exchange under the symbol "HYG".

The following table shows the underwriting discounts and commissions that
we will pay to the underwriters in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional common shares.

PAID BY THE COMPANY
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------

Per Common Share............................................ $ $
----------- -----------
Total....................................................... $ $
=========== ===========

In connection with this offering, Citigroup Global Markets Inc., on behalf
of the underwriters, may purchase and sell our common shares in the open market.
These transactions may include short sales, syndicate covering transactions and
stabilizing transactions. Short sales involve syndicate sales of common shares
in excess of the number of shares to be purchased by the underwriters in the
offering, which creates a syndicate short position. "Covered" short sales are
sales of shares made in an amount up to the number of shares represented by the
underwriters' over-allotment option. In determining the source of shares to
close out the covered syndicate short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares through the
over-allotment option. Transactions to close out the covered syndicate short
involve either purchases of the common shares in the open market after the
distribution has been completed or the exercise of the over-allotment option.
The underwriters may also make "naked" short sales of shares in excess of the
over-allotment option. The underwriters must close out any naked short position
by purchasing common shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the shares in the open market after pricing
that could adversely affect investors who purchase in the offering. Stabilizing
transactions consist of bids for or purchases of shares in the open market while
the offering is in progress.

The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Citigroup Global Markets Inc. repurchases shares originally sold by that
syndicate member to cover syndicate short positions or make stabilizing
purchases.

Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common shares. They may also cause the price
of the common shares to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the Nasdaq National Market or in the
over-the-counter market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.

In addition, in connection with the offering, some of the underwriters (and
selling group members) may engage in passive market making transactions in the
common shares on the Nasdaq National Market, prior to the pricing and completion
of the offering. Passive market making consists of displaying bids on the Nasdaq
National Market no higher than the bid prices of independent market makers and
making purchases at prices no higher than those independent bids and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the common shares during a specified period and must be
discontinued when that limit is reached. Passive market making may cause the
price of the common shares to be higher than the price that otherwise would
exist in the open market in the absence of those transactions. If the
underwriters commence passive market making transactions, they may discontinue
them at any time.

In accordance with the applicable policies of several Canadian provinces,
the underwriters may not, throughout the period of distribution, bid for or
purchase common shares in Canada. Exceptions, however, exist where the bid or
purchase is not made to create the appearance of active trading in, or raising
prices of, the common shares. These exceptions include a bid or purchase
permitted under the by-laws and rules of the Toronto Stock Exchange relating to
market stabilization and passive market making activities and a bid or purchase
made for and on behalf of a customer where the order was not solicited during
the period of distribution. We have been advised that in connection with the
offering and pursuant to the first exception mentioned above, the underwriters
may over-allot or effect transactions which stabilize or maintain the market
price of the common shares at levels other than those which might otherwise
prevail on the open market.

The underwriters and their affiliates have performed investment banking and
advisory services for us, and provided other financial services to us, from time
to time for which they have received customary fees and expenses. The
underwriters and their affiliates may, from time to time, engage in transactions
with and perform services for us in the ordinary course of their business.

A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to underwriters that
may make Internet distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities dealers who
resell shares to online brokerage account holders.

We estimate that our total expenses for this offering will be $
million.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933 or under applicable
Canadian securities laws, or to contribute to payments the underwriters may be
required to make because of any of those liabilities.

LEGAL MATTERS

Osler, Hoskin & Harcourt LLP, Toronto, Ontario, is acting as our Canadian
legal counsel with respect to this offering and will pass upon the legality of
the common shares offered by this short form prospectus. Certain U.S. legal
matters will be passed upon for us by White & Case LLP, New York, New York.
Certain U.S. legal matters will be passed upon for the underwriters by Cleary,
Gottlieb, Steen & Hamilton, New York, New York, and certain Canadian legal
matters will be passed upon for the underwriters by Davies Ward Phillips &
Vineberg LLP, Toronto, Ontario.

As of the date hereof, partners and associates of each of Osler, Hoskin &
Harcourt LLP, White & Case LLP and Davies Ward Phillips & Vineberg LLP own
beneficially, directly and indirectly, less than 1% of the outstanding common
shares.

EXPERTS

Our financial statements as at December 31, 2002 and 2001, and for each of
the three years in the period ended December 31, 2002 included in this short
form prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors, given on the authority of said
firm as experts in auditing and accounting.

The financial statements of Greenlight Power Technologies, Inc. as of and
for the year ended December 31, 2002 included in this short form prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent auditors, given on the authority of said firm as experts in auditing
and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form F-10 covering the common shares being sold in this offering.
We have not included in this short form prospectus all of the information
contained in the registration statement, and you should refer to the
registration statement and its exhibits for further information. Any statement
regarding any of the contracts or other documents referred to in this short form
prospectus is not necessarily complete. If the contract or document is filed as
an exhibit to the registration statement, the contract or document is deemed to
modify the description contained in this short form prospectus. You must review
the exhibits themselves for a complete description of the contract or document.
You may review a copy of the registration statement, including exhibits and
schedules filed with it, at the Commission's public reference facilities in Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549. You may
also obtain copies of such materials from the Public Reference Section of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C., 20549, at prescribed rates or from the Commission's website at
http://www.sec.gov. You may call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. These Commission filings are also
available to the public from commercial document retrieval services.

We are subject to the informational requirements of the U.S. Securities
Exchange Act of 1934, as amended, or the Exchange Act, applicable to foreign
private issuers eligible for filings and submissions in accordance with the
Multijurisdictional Disclosure System and with the securities regulators in each
of the provinces of Canada under applicable provincial securities legislation,
and in accordance therewith file reports and other information with the
Securities and Exchange Commission. Under a multijurisdictional disclosure
system adopted by the United States, such reports and other information may be
prepared in accordance with the disclosure requirements of Canada, which
requirements are different from those of the United States. We are exempt from
the rules under the Exchange Act prescribing the furnishing and content of proxy
statements, and its officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. Under the Exchange Act, we are not required to
publish financial statements as frequently or as promptly as U.S. companies.
These materials can be inspected at the website of the Canadian System for
Electronic Document Analysis and Retrieval (SEDAR) at http://www.sedar.com.

The common shares are quoted on the Nasdaq National Market and reports and
other information concerning us may be inspected at the offices of the Nasdaq
National Market at 1735 K Street, N.W., Washington, D.C. 20006-1500.

INDEX TO FINANCIAL STATEMENTS

PAGE
----

CONSOLIDATED FINANCIAL STATEMENTS OF HYDROGENICS CORPORATION
AS AT DECEMBER 31, 2002 AND FOR THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 2002
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Deficit........... F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Consolidated Financial Statements.................. F-6
FINANCIAL STATEMENTS OF GREENLIGHT POWER TECHNOLOGIES, INC.
FOR THE YEAR ENDED
DECEMBER 31, 2002
Report of Independent Auditors.............................. F-26
Balance Sheet............................................... F-27
Statement of Operations and Deficit......................... F-28
Statement of Cash Flows..................................... F-29
Notes to Financial Statements............................... F-30
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS OF
HYDROGENICS CORPORATION
Unaudited Pro-Forma Combined Statement of Operations........ F-37
Notes to Unaudited Pro-Forma Combined Statement of
Operations................................................ F-38

F-1

REPORT OF INDEPENDENT AUDITORS

TO THE SHAREHOLDERS OF HYDROGENICS CORPORATION

We have audited the consolidated balance sheets of Hydrogenics Corporation
as at December 31, 2002 and 2001 and the consolidated statements of operations
and deficit and cash flows for each of the years in the three-year period ended
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in Canada and the United States of America. Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
2002 and 2001 and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2002 in accordance with
Canadian generally accepted accounting principles.

PricewaterhouseCoopers LLP (signed)
Chartered Accountants

February 5, 2003, except as to Note 20
which is as of April 28, 2003 and Note 11
which is as of August 6, 2003
Toronto, Canada

F-2

HYDROGENICS CORPORATION

CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2002 AND 2001
(THOUSANDS OF U.S. DOLLARS)

2002 2001
-------- --------

ASSETS
CURRENT ASSETS
Cash........................................................ $ 994 $ 1,639
Short-term investments...................................... 59,057 64,170
Accounts receivable (note 3 and 13)......................... 5,664 4,353
Grants receivable........................................... 396 741
Inventories (note 4)........................................ 4,780 2,969
Prepaid expenses............................................ 316 129
-------- --------
71,207 74,001
Deposits.................................................... 103 102
Property, plant and equipment (note 5)...................... 3,855 3,780
Intangible assets (note 6).................................. 15,512 29,750
-------- --------
$ 90,677 $107,633
======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (note 7 and 13).... $ 4,105 $ 1,542
Unearned revenue............................................ 571 51
Income taxes payable........................................ 144 11
-------- --------
4,820 1,604
LOANS PAYABLE (note 8)...................................... 425 208
-------- --------
5,245 1,812
-------- --------
SHAREHOLDERS' EQUITY
Share capital and other equity (note 9)..................... 114,748 114,526
Deficit..................................................... (25,270) (4,659)
Foreign currency translation adjustment..................... (4,046) (4,046)
-------- --------
85,432 105,821
-------- --------
$ 90,677 $107,633
======== ========

Commitments and contingencies (note 11)
Approved by the Board of Directors:

Norman Seagram, (signed) Pierre Rivard, (signed)
Chairman President, CEO

The accompanying notes form an integral part of these consolidated financial
statements.
F-3

HYDROGENICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED DECEMBER 31 2002, 2001 AND 2000
(THOUSANDS OF U.S. DOLLARS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

2002 2001 2000
----------- ----------- -----------

REVENUES.............................................. $ 15,840 $ 7,418 $ 8,883
COST OF REVENUES...................................... 10,703 4,941 6,485
----------- ----------- -----------
5,137 2,477 2,398
----------- ----------- -----------
OPERATING EXPENSES
Selling, general and administrative................... 6,658 4,403 2,069
Research and development.............................. 4,235 3,518 790
Research and development grants....................... (474) (1,181) (140)
Depreciation of property, plant and equipment......... 1,278 716 224
Amortization of intangible assets..................... 15,223 3,459 --
----------- ----------- -----------
26,920 10,915 2,943
----------- ----------- -----------
LOSS FROM OPERATIONS.................................. (21,783) (8,438) (545)
----------- ----------- -----------
OTHER INCOME (EXPENSES)
Accrued dividends and amortization of discount on
preferred shares.................................... -- -- (262)
Provincial capital tax................................ (190) (123) (260)
Interest.............................................. 1,121 2,927 832
Foreign currency gains (losses)....................... 495 2,974 (1,329)
----------- ----------- -----------
1,426 5,778 (1,019)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES.............................. (20,357) (2,660) (1,564)
CURRENT INCOME TAX EXPENSE (note 12).................. 254 156 172
----------- ----------- -----------
NET LOSS FOR THE YEAR................................. (20,611) (2,816) (1,736)
DEFICIT -- BEGINNING OF YEAR.......................... (4,659) (1,843) (107)
----------- ----------- -----------
DEFICIT -- END OF YEAR................................ $ (25,270) $ (4,659) $ (1,843)
=========== =========== ===========
NET LOSS PER SHARE (note 16)
Basic and diluted..................................... $ (0.43) $ (0.07) $ (0.08)
Shares used in calculating basic and diluted net loss
per share........................................... 48,437,813 38,217,593 22,341,370
----------- ----------- -----------

The accompanying notes form an integral part of these consolidated
financial statements.
F-4

HYDROGENICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(THOUSANDS OF U.S. DOLLARS)

2002 2001 2000
-------- ------- --------

CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year....................................... $(20,611) $(2,816) $ (1,736)
Items not affecting cash
Depreciation of property, plant and equipment............. 1,278 716 224
Amortization of acquired intangible assets................ 15,223 3,459 --
Amortization of discount on preferred shares.............. -- -- 85
Unrealized foreign exchange (gains) losses................ (271) (1,606) 1,329
Imputed interest on loan payable.......................... 47 19 7
Stock based consulting expense............................ 29 -- --
Net change in non-cash working capital...................... 378 (5,444) (1,189)
-------- ------- --------
(3,927) (5,672) (1,280)
-------- ------- --------
INVESTING ACTIVITIES
Decrease (increase) in short-term investments............... 5,414 8,782 (75,756)
Purchase of property, plant and equipment................... (1,541) (3,138) (1,492)
Acquisition of a business -- net of cash acquired........... (633) -- --
-------- ------- --------
3,240 5,644 (77,248)
-------- ------- --------
FINANCING ACTIVITIES
(Decrease) increase in loan payable......................... (150) 97 92
Common shares issued -- net of issuance costs............... 193 (149) 76,186
Preferred shares issued -- net of issuance costs............ -- -- 3,623
-------- ------- --------
43 (52) 79,901
-------- ------- --------
INCREASE (DECREASE) IN CASH DURING THE YEAR................. (644) (80) 1,373
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (1) (125) 18
Cash -- Beginning of year................................... 1,639 1,844 453
-------- ------- --------
Cash -- End of year......................................... $ 994 $ 1,639 $ 1,844
======== ======= ========
SUPPLEMENTAL DISCLOSURE
Interest paid............................................... $ 7 $ 9 $ 7
Income taxes paid........................................... 43 317 --

The accompanying notes form an integral part of these consolidated financial
statements.
F-5

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

1. DESCRIPTION OF BUSINESS

Hydrogenics Corporation (the Company) designs, develops, manufactures and
sells proton-exchange membrane, or PEM, fuel cell automated test stations, fuel
cell power products and provides engineering and other services. The Company is
based in Canada, and its principal customers include automotive companies, fuel
cell developers and component suppliers primarily located in the United States,
Europe and Asia.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles (Canadian GAAP), which,
in the case of the Company, conform in all material respects with accounting
principles generally accepted in the United States, except as outlined in Note
22.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany transactions and balances
have been eliminated on consolidation.

REVENUE RECOGNITION

Revenues from the sale of fuel cell test stations and fuel cell power
products and components are recognized when there is persuasive evidence of an
arrangement, goods have been delivered, title has passed to the customer, the
fee is fixed or determinable, and collection is reasonably assured.

Equipment leases that transfer substantially all of the benefits and risks
of ownership to customers are classified as sales-type leases as a result of
meeting the criteria established by Canadian Institute of Chartered Accountants
(CICA) Handbook Section 3065, "Leases". Revenue associated with sales-type
leases is recognized when all of the following criteria are met: persuasive
evidence of an agreement exists; delivery to the customer has taken place, the
price is fixed or determinable; and collection is reasonably assured.

Revenues relating to engineering and testing services are recorded as
services are rendered.

Revenues from long-term contracts are determined under the
percentage-of-completion method whereby revenues are recognized on a pro rata
basis in relation to contract costs incurred. Costs and estimated profit on
contracts in progress in excess of amounts billed are reflected as unbilled
revenue. Cash received in advance of revenue being recognized on contracts is
classified as unearned revenue.

PRODUCT WARRANTIES

The Company typically provides a warranty for parts and labor for up to one
year or for certain operating specifications such as hours of operation. Future
warranty costs provisions are based on management's best estimates of such
costs, taking into account the specific arrangements of each transaction and
past history.

GRANTS AND INVESTMENT TAX CREDITS

Grants to fund various research activities are received from government and
other institutions. These grants are recorded as either a liability, or a credit
to expenses in the statement of operations, when

F-6

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

earned, based on the terms and conditions of the agreements under which the
assistance is provided to the Company. A liability is recorded when repayment of
the obligation is considered probable. Research and development arrangements
that obligate the Company to repay the funds regardless of the outcome or
commercialization of the research and development are recognized as liabilities.

Investment tax credits related to qualifying research and development
expenditures are recorded as either a credit to expenses in the statement of
operations or a reduction of the cost of applicable property, plant and
equipment depending on the nature of the expenditures which gave rise to the
credits. Investment tax credits are recognized in the period in which the
credits are earned and realization is reasonably assured.

SHORT-TERM INVESTMENTS

Short-term investments consist of interest bearing securities with original
terms to maturity of less than one year, and are carried at the lower of
amortized cost and market. The Company has the intent and ability to hold these
securities to maturity.

INVENTORIES

Raw materials are valued at the lower of cost, determined on a first-in
first-out basis, and market. Market for raw materials is defined as replacement
cost. Finished goods and work-in-progress are recorded at the lower of cost and
net realizable value.

LONG-LIVED ASSETS

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated
depreciation. Property, plant and equipment are depreciated from the date of
acquisition or, in respect of internally constructed test equipment, from the
time an asset is substantially completed and ready for use. The cost of
internally constructed assets includes materials, labor and directly
attributable overhead costs.

Depreciation is computed using the declining balance method as follows:

Computer hardware and software.............................. 30% per annum
Office furniture and equipment.............................. 20% per annum
Test equipment.............................................. 30% per annum
Automobiles................................................. 30% per annum

Leasehold improvements are amortized on a straight line basis over the term
of the lease.

Intangible Assets

Intangible assets are carried at cost less accumulated amortization.
Amortization is calculated on a declining balance basis at a rate of 50 percent
per annum, which reflects the estimated useful life of the assets.

Effective January 1, 2002, the Company adopted the new CICA Handbook
Section 3062 "Goodwill and Intangible Assets". Under this new standard, goodwill
and other intangible assets with indefinite lives are no longer amortized but
are subject to annual fair value impairment tests. The Company's intangible
assets consist of acquired intellectual property and management services
contracts, which are considered to have finite useful lives and are amortized.
Accordingly, the adoption of this accounting standard had no impact on the
financial statements of the Company.

F-7

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. Recoverability of assets held and used is measured by
comparison of the carrying amount to future net undiscounted cash flows expected
to be generated by the asset. Any excess of the carrying value over the net
recoverable amount is charged to the statement of operations.

DEPOSITS

Amounts paid as security deposits, which are due for repayment more than
one year in the future, are recorded as deposits.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs incurred by the Company are expensed as
incurred. Costs incurred in applying for patents and licenses are expensed as
incurred. Product development costs are expensed as incurred until the product
or process is clearly defined and the associated costs can be identified,
technical feasibility is reached, there is intention to produce or market the
product, the future market is clearly defined, and adequate resources exist, or
are expected to be available to complete the project. To date no product
development costs have been capitalized.

FOREIGN CURRENCY TRANSLATION

The reporting currency of the Company is the U.S. dollar. Effective January
1, 2002 the functional currency of the Company is also the U.S. dollar. Monetary
assets and liabilities denominated in currencies other than the U.S. dollar are
translated at the rate of exchange in effect at the end of the year. Non-
monetary assets are translated at historic rates of exchange. Revenues and
expense items denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the average rate of exchange for the year,
except for depreciation and amortization which are translated at historic rates.
Resultant gains and losses are included in the results of operations.

The operations of the Company's German subsidiary are considered
integrated, and accordingly, its accounts are translated into U.S. dollars using
the temporal method. Under this method, monetary assets and liabilities are
translated using the year-end exchange rate, and non-monetary items are
translated using historic rates of exchange. Revenues and expenses of this
subsidiary are translated at the average exchange rate for the year, except for
depreciation and amortization, which are translated at historic rates of
exchange. Resultant translation gains and losses are included in the results of
operations.

Prior to January 1, 2002 the functional currency was the Canadian dollar
and amounts were translated into the U.S. reporting currency using the current
rate method. Using the current rate method, assets and liabilities were
translated at the year-end exchange rate, and revenues and expenses were
translated at the average exchange rate for the year. Gains or losses from
translation into the reporting currency were included in the cumulative
translation adjustment account in shareholders' equity.

STOCK-BASED COMPENSATION

Effective January 1, 2002, the Company adopted the new Canadian standard
for reporting stock based compensation, CICA Handbook section 3870 "Stock Based
Compensation and Other Stock Based Payments". Under this standard, stock-based
payments to non-employees and direct awards of stock to employees and
non-employees are accounted for using a fair value method of accounting. For
grants of stock options to employees, this standard allows either the
recognition of a compensation expense, based on the estimated fair value at the
date of grant or, alternatively, the disclosure of pro forma net earnings

F-8

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

and earnings per share data in the notes to the financial statements, as if fair
value of the stock based compensation had been recognized in earnings. The
Company has opted for the disclosure of the pro-forma net earnings and earnings
per share in the notes to the financial statements as if the fair value of the
stock based compensation had been recognized in earnings.

INCOME TAXES

Income taxes are recorded using the liability method. Future income tax
amounts arise due to temporary differences between the accounting and income tax
bases of the Company's assets and liabilities. Future income tax assets and
liabilities are measured using substantively enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled. The effect on future income tax assets and liabilities of a change in
tax rates is recognized in the period that includes the date of substantive
enactment. Future tax assets are recognized to the extent that realization of
such benefits is considered to be more likely than not.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made by the Company include allowances for potentially uncollectible
accounts receivable, warranty provisions, valuation allowances for future income
tax assets, useful lives of intangible assets, stock option volatility, expected
life of stock options, and provisions for costs to complete contracts in
progress.

CHANGE IN ACCOUNTING POLICY FOR CASH AND CASH EQUIVALENTS

Prior to fiscal December 31, 2001, investments with terms to maturity of
three months or less from the date of acquisition, were considered to be cash
equivalents. The Company's short-term deposits are generally held for investment
purposes rather than for operating requirements. Accordingly, in 2001, the
Company changed its definition of cash and cash equivalents to exclude all
investments from cash equivalents. This change in accounting policy which was
applied retroactively had the following impact:

Increase in cash provided by investing activities for
2001...................................................... $72,325
Increase in cash used in investing activities for 2000...... 75,756
Decrease in cash and cash equivalents as at December 31,
2001...................................................... 3,926
Decrease in cash and cash equivalents as at December 31,
2000...................................................... 75,592

The Company's consolidated statements of cash flows for 2000 were revised
to reflect the impact of this change, and to disclose the change in cash,
defined as cash on deposit, for each year. This change in accounting policy had
no effect on reported earnings and deficit for 2000.

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is calculated based on the weighted average
number of common shares outstanding for the year. Diluted earnings (loss) per
share is calculated using the daily weighted average number of common shares
that would have been outstanding during the year had all potential common shares
been issued at the beginning of the year, or when the underlying options or
warrants were granted, if later. The treasury stock method is used to determine
the incremental number of shares that

F-9

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

would have been outstanding had the Company used proceeds from the exercise of
options and warrants to acquire common shares.

COMPARATIVE BALANCES

Certain comparative balances for 2001 and 2000 have been reclassified to
conform to the presentation adopted by the Company in 2002.

3. ACCOUNTS RECEIVABLE

2002 2001
------ ------

Trade accounts receivable................................... $5,153 $3,817
Less: Allowance for doubtful accounts....................... (40) (122)
Goods and services tax...................................... 278 310
Refundable investment tax credits........................... 273 273
Other....................................................... -- 75
------ ------
$5,664 $4,353
====== ======

4. INVENTORIES

2002 2001
------ ------

Raw materials............................................... $2,163 $1,962
Work-in-progress............................................ 2,156 466
Finished goods.............................................. 461 541
------ ------
$4,780 $2,969
====== ======

F-10

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

5. PROPERTY, PLANT AND EQUIPMENT

2002 2001
------ ------

Cost
Test equipment............................................ $3,606 $3,096
Furniture and equipment................................... 1,074 746
Computer hardware and software............................ 993 583
Leasehold improvements.................................... 321 263
Automobiles............................................... 39 15
------ ------
$6,033 $4,703
====== ======
Accumulated depreciation
Test equipment............................................ $1,350 $ 557
Furniture and equipment................................... 309 140
Computer hardware and software............................ 339 157
Leasehold improvements.................................... 157 64
Automobiles............................................... 23 5
------ ------
$2,178 $ 923
====== ======
Net book value
Test equipment............................................ $2,256 $2,539
Furniture and equipment................................... 765 606
Computer hardware and software............................ 654 426
Leasehold improvements.................................... 164 199
Automobiles............................................... 16 10
------ ------
$3,855 $3,780
====== ======

Test equipment under construction, as at December 31, 2002, not yet subject
to depreciation amounted to $229 (2001 -- $147).

6. INTANGIBLE ASSETS

As a result of the acquisition of EnKAT GmbH on May 1, 2002, the Company
acquired management services contracts for five years from each of the two
principals of EnKAT. The details of the acquisition are described in Note 19.

During 2002 the Company acquired certain intellectual property valued at
$420 in exchange for an unsecured non-interest bearing term loan. The terms of
the loan are described in Note 8.

F-11

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

As at December 31 the carrying value of amortized intangible assets is as
follows:

2002 2001
-------- -------

Cost
Intellectual property..................................... $ 33,629 $33,209
Management services contracts............................. 565 --
-------- -------
$ 34,194 $33,209
======== =======
Accumulated amortization
Intellectual property..................................... $(18,492) $(3,459)
Management services contracts............................. (190) --
-------- -------
$(18,682) $(3,459)
======== =======
Net book value
Intellectual Property..................................... $ 15,138 $29,750
Management services contracts............................. 374 --
-------- -------
$ 15,512 $29,750
======== =======

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

2002 2001
------ ------

Trade accounts payable...................................... $1,723 $1,048
Supplier accruals........................................... 695 57
Current portion of loans payable............................ 101 --
Provincial capital tax...................................... 194 --
Accrued payroll costs....................................... 501 265
Warranty accrual............................................ 373 172
Accrued legal and audit costs............................... 299 --
Other....................................................... 219 --
------ ------
$4,105 $1,542
====== ======

Information regarding the changes in the Company's aggregate product
warranty liabilities was as follows for the year ended December 31, 2002:

Balance, December 31, 2001.................................. $ 172
Accruals for warranties issued during the year.............. 327
Settlements made during the year............................ (126)
-----
Balance, December 31, 2002.................................. $ 373
=====

8. LOANS PAYABLE

From time to time the Company receives repayable grant financing from
government agencies for research and development activities. At December 31,
2002 the outstanding amount of such repayable financing, net of imputed
interest, was $183 (2001 -- $164). This amount is unsecured and denominated in
Canadian dollars, and repayable over a four-year period commencing April 1,
2005. The amount

F-12

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

repayable in each quarter is 1.3 percent of the Company's gross revenues for the
proceeding quarter. Based on the maximum amount repayable being 150 percent of
the principal, the Company has charged to expense imputed interest of $20 in
2002 (2001 -- $19; 2000 -- $7) at an effective rate of 10 percent per annum.

During 2002 the Company acquired certain intellectual property in exchange
for an unsecured term, non-interest bearing loan of $420 denominated in U.S.
dollars. The loan is repayable over four years. At December 31, 2002 the
outstanding amount of the loan, net of imputed interest, was $297. The Company
has charged to expense imputed interest of $27 in 2002 at an effective rate of
10 percent per annum.

The present value of future loan repayments is as follows:

2003........................................................ $125
2004........................................................ 100
2005........................................................ 375
2006........................................................ 25
----
625
Less: imputed interest...................................... 99
----
526
Less: current portion....................................... 101
----
$425
====

F-13

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

9. SHARE CAPITAL AND OTHER EQUITY

Changes in shareholders' equity for 2000, 2001, and 2002 are as follows:

FOREIGN
COMMON SHARES EXPENSED CURRENCY TOTAL
--------------------- PREFERRED STOCK TRANSLATION SHAREHOLDERS'
NUMBER AMOUNT $ SHARES WARRANTS OPTIONS DEFICIT ADJUSTMENT EQUITY
---------- -------- --------- -------- -------- -------- ----------- -------------

BALANCE AT DECEMBER 31, 1999... 19,687,500 $ 21 $ 124 -- -- $ (107) -- $ 38
Issuance of Series B preferred
shares....................... -- -- 442 -- -- -- -- 442
Issuance of common shares...... 7,000,000 76,167 -- -- -- -- -- 76,167
Conversion of Series A
preferred shares............. 5,250,000 967 (124) -- -- -- -- 843
Conversion of Series B
preferred shares............. 3,573,500 3,562 (442) -- -- -- -- 3,120
Issuance of common shares on
exercise of options.......... 49,000 23 -- -- -- -- -- 23
Net loss....................... -- -- -- -- -- (1,736) -- (1,736)
Foreign currency translation
adjustment................... -- -- -- -- -- -- 1,363 1,363
BALANCE AT DECEMBER 31, 2000... 35,560,000 80,740 -- -- -- (1,843) 1,363 80,260
Issuance of common shares and
warrants for perpetual
royalty-free intellectual
property rights.............. 11,364,006 28,936 -- 4,722 -- -- -- 33,658
Issuance of common shares on
exercise of options.......... 994,440 128 -- -- -- -- -- 128
Net loss....................... -- -- -- -- -- (2,816) -- (2,816)
Foreign currency translation
adjustment................... -- -- -- -- -- -- (5,409) (5,409)
BALANCE AT DECEMBER 31, 2001... 47,918,446 109,804 -- 4,722 -- (4,659) (4,046) 105,821
Issuance of common shares on
exercise of options.......... 877,675 193 -- -- -- -- -- 193
Stock based consulting
expense...................... -- -- -- -- 29 -- -- 29
Net loss....................... -- -- -- -- -- (20,611) -- (20,611)
---------- -------- ----- ------ --- -------- ------- --------
BALANCE AT DECEMBER 31, 2002... 48,796,121 $109,997 -- $4,722 $29 $(25,270) $(4,046) $ 85,432
========== ======== ===== ====== === ======== ======= ========

The authorized capital stock of the Company consists of an unlimited number
of common shares and an unlimited number of preferred shares issuable in series.

During 2002, the Company issued 877,675 (2001 -- 994,440; 2000 -- 49,000)
common shares for $193 (2001 -- $128; 2000 -$23) in cash under the exercise of
options.

During 2002, the Company issued 50,000 (2001 -- nil; 2000 -- nil) stock
options in exchange for consulting services from an outside supplier. Each
option is exercisable for one common share of the Company at a price of
CAD$12.00 per share. These options are for a term of 10 years from the date of
grant and vest quarterly over four years and are expensed at the fair value in
accordance with CICA Handbook Section 3870 "Stock Based Compensation and Other
Stock Based Payments." The fair value of stock options expensed in the year
amounted to $29 and was determined using a Black-Scholes pricing model with a
risk-free rate of 5.12 percent, an expected life of 4 years, a volatility factor
of 77 percent and no dividends.

On October 16, 2001, the Company issued 11,364,006 common shares and
2,470,436 common share purchase warrants with an aggregate value of $33,658 (net
of issuance costs of $277) in exchange for perpetual royalty-free intellectual
property rights for certain fuel cell stack technology. Each common share
purchase warrant is exercisable upon release from escrow for one common share of
the Company at a price of $4.00 per share. The fair value of common share
purchase warrants issued amounted to $4,722, net of issuance costs, and was
determined using a Black-Scholes pricing model with a risk-free rate of

F-14

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

3.9 percent, a 5 year term and a volatility factor of 108 percent. The common
share purchase warrants were placed in escrow on October 16, 2001 and are to be
automatically released from escrow at a rate of 61,761 warrants per month over
40 months and expire on October 16, 2006.

During 2000, the Company completed a reverse share split reducing the
number of common shares from 3,000,000 to 2,812,500. Prior to the Company's
initial public offering in November 2000, the shares were split on a
seven-to-one basis. The effect of these splits has been recognized retroactively
in all share and per share data in the financial statements and notes.

On January 24, 2000, the Company issued 510,500 Series B preferred shares
at $7.27 (Cdn$10.50) per share for proceeds, net of issue costs, of $3,623
(Cdn$5,261). These shares were voting, convertible, redeemable and earned 5
percent cumulative dividends.

On November 1, 2000, the Company completed an initial public offering and
listed its common shares on the NASDAQ National Market and The Toronto Stock
Exchange, and issued 7,000,000 common shares raising proceeds of $76,167 net of
issue costs of $7,833.

On November 1, 2000, all outstanding Series A and B preferred shares were
converted to common shares in accordance with the terms of the share agreements.
A total of 8,823,500 common shares were issued for a total stated value of
$4,529. At conversion, cumulative dividends of $229 were paid to the preferred
shareholders.

10. EMPLOYEE STOCK BASED COMPENSATION

During 2000, the Company adopted a broad-based employee stock option plan.
The number of common shares that may be issued under the share option plan is
limited to 4,641,000. All options are for a term of 10 years from the date of
grant and vest over four years unless otherwise determined by the board of
directors. Under Canadian GAAP no compensation expense has been recorded with
respect to options granted to employees. A summary of the Company's employee
stock option plan activity is as follows:

OPTIONS FOR WEIGHTED
COMMON AVERAGE EXERCISE
SHARES PRICE CAD$
------------- ----------------

Balance -- December 31, 1999................................ 1,394,533 0.22
Options granted............................................. 2,547,117 1.21
Options exercised........................................... (49,000) 0.72
---------
Balance -- December 31, 2000................................ 3,892,650 0.86
Options granted............................................. 668,100 5.73
Options exercised........................................... (994,440) 0.20
Options forfeited on termination............................ (460,715) 0.70
---------
Balance December 31, 2001................................... 3,105,595 2.15
---------
Options granted............................................. 396,900 6.46
Options exercised........................................... (877,675) 0.35
---------
Balance December 31, 2002................................... 2,624,820 3.37
---------

F-15

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

WEIGHTED AVERAGE
OPTIONS FOR EXERCISE PRICE
COMMON SHARES CAD$
------------- ----------------

Exercisable at December 31, 2000............................ 1,981,439 0.25
Exercisable at December 31, 2001............................ 1,970,335 0.69
Exercisable at December 31, 2002............................ 1,652,874 1.87

The following table summarizes information about the Company's share
options outstanding as at December 31, 2002:

NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
EXERCISE PRICE DECEMBER 31, REMAINING SHARE PRICE DECEMBER 31, SHARE PRICE
CAD$ 2002 CONTRACTUAL LIFE CAD$ 2002 CAD$
-------------- -------------- ---------------- ----------- -------------- -----------

0.05 287,500 7.06 0.05 287,500 0.05
0.29 684,000 7.06 0.29 684,000 0.29
1.00 to 2.00 332,350 7.23 1.09 295,163 1.08
2.01 to 4.00 433,100 8.66 3.64 144,900 3.56
4.01 to 10.00 728,120 8.73 6.63 176,203 7.32
10.01 to 18.12 159,750 8.34 11.76 65,108 11.70
--------- ---------
2,624,820 1,652,874
========= =========

All options granted after November 1, 2000, the date of the Company's
initial public offering, have an exercise price equal to the closing share price
on The Toronto Stock Exchange the day before the grant.

For the year ended December 31, 2002, a total of 396,900 stock options were
granted to employees in accordance with the terms of the employee share option
plan. Had the Company determined compensation cost based on the fair value
method described in CICA Handbook Section 3870 "Stock Based Compensation and
Other Stock Based Payments," the fair value of the stock options granted during
the year would have been $1,543 (weighted average $3.89 per share) and the
related expense for the year ended December 31, 2002 would have been $295 ($0.01
per share on a basic and diluted basis). Pro-forma loss for the year ended
December 31, 2002 would have been $20,906 (($0.43) per share on a basic and
diluted basis). For the purpose of these disclosures stock options are valued
using the Black-Scholes option pricing model with the following assumptions:
risk-free interest rate of 4.50 percent to 4.86 percent, expected life of 4
years, expected volatility of 77 percent, and no dividends.

11. COMMITMENTS AND CONTINGENCIES

The Company incurred rental expenses of $886 under operating leases in 2002
(2001 -- $788, 2000 -- $390). The Company has future minimum lease payments
under operating leases relating to premises and office as follows:

2003........................................................ $ 859
2004........................................................ 693
2005........................................................ 449
2006........................................................ --
2007........................................................ --
2008 and thereafter......................................... --
------
$2,001
======

F-16

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

The Company has entered into repayable contribution and other research and
development arrangements with various Canadian governmental ministries and
public sector enterprises. Under these arrangements, the Company was eligible to
receive up to a cumulative amount of $3,194 (2001 -- $1,912; 2000 -- $657)
towards agreed upon research and development project costs. The utilized amount
of the advances at December 31, 2002 was $2,194 (2001 -- $1,726; 2000 -- $547).
In return, these funding parties have a right to receive as repayments, 1.3
percent to 4 percent of gross revenue received by the Company as a result of the
commercial exploitation of the associated technology. To date no revenues from
these technologies have been recognized and no repayable amounts have been
reflected in the accounts. These arrangements will expire in stages between
September 30, 2006 and March 31, 2016, or when total payments paid reach the
utilized amount of the advance, depending on the terms of the individual
contracts.

The Company has entered into indemnification agreements with its current
and former directors and officers to indemnify them, to the extent permitted by
law, against any and all charges, costs, expenses, amounts paid in settlement
and damages incurred by the directors and officers as a result of any lawsuit or
any other judicial, administrative or investigative proceeding in which the
directors and officers are sued as a result of their service. These
indemnification claims will be subject to any statutory or other legal
limitation period. The nature of the indemnification agreements prevents the
Company from making a reasonable estimate of the maximum potential amount it
could be required to pay to counter parties. The Company has purchased
directors' and officers' liability insurance. No amount has been recorded in the
financial statements with respect to these indemnification agreements.

In the normal course of operations, the Company may provide indemnification
agreements, other than those listed above, to counterparties that would require
the Company to compensate them for costs incurred as a result of changes in laws
and regulations or as a result of litigation claims or statutory sanctions that
may be suffered by the counterparty as a consequence of the transaction. The
terms of these indemnification agreements will vary based upon the contract. The
nature of the indemnification agreements prevents the Company from making a
reasonable estimate of the maximum potential amount it could be required to pay
to counter parties. No amount has been recorded in the financial statements with
respect to these indemnification agreements.

In January 2002, Lynntech Inc. commenced a legal action against the Company
in federal court (Southern District, Texas), alleging patent infringement. On
August 6, 2003, the Company successfully defended itself in this patent
infringement lawsuit. The Company was awarded a partial recovery of the $1.5
million incurred in legal fees, from the plaintiff. As settlement, the plaintiff
has issued a promissory note in the amount of $0.5 million. The note is payable
in full on March 1, 2008. Interest accrues at a compounded rate of 2% per annum
on the unpaid balance. Upon settlement in cash in a future period, the Company
will record a corresponding reduction in selling, general and administrative
expenses.

12. INCOME TAXES

As at December 31, 2002, the Company has available income tax loss
carry-forwards of $12,209 that may be used to reduce taxable income in future
years, expiring as follows:

2006........................................................ --
2007........................................................ $ 280
2008........................................................ 4,923
2009........................................................ 7,006
-------
Total....................................................... $12,209
=======

F-17

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

As at December 31, 2002, the Company has unclaimed Scientific Research &
Experimental Development expenditures of $1,412 that can be used to offset
future income over an indefinite period.

The Company also has earned non-refundable investment tax credits amounting
to approximately $398 that can be used to reduce future federal income taxes
payable, expiring in 2010 and 2011.

The Company has recorded a valuation allowance to reflect uncertainties
associated with the realization of the future income tax assets.

The Company's computation of income tax expense (recovery), which is all
arising in Canada, is as follows:

2002 2001 2000
-------- ------- -------

Loss before income taxes............................... $(20,357) $(2,660) $(1,564)
-------- ------- -------
Statutory income tax rate.............................. 33.12% 34.12% 34.95%
======== ======= =======
Income taxes (recovery) at statutory rate.............. $ (6,742) $ (908) $ (547)
Non-deductible expenses.............................. 1,034 306 91
Other permanent differences.......................... (160) 151 18
Large corporations tax............................... 254 156 172
Income tax rate changes.............................. 584 441 --
Change in valuation allowance........................ 5,284 10 438
-------- ------- -------
Income tax expense..................................... $ 254 $ 156 $ 172
======== ======= =======

Significant components of the Company's future income tax assets, which are
all arising in Canada, are:

2002 2001
------- -------

Non capital losses.......................................... $ 3,989 $ 2,017
SR&ED pool.................................................. 425 --
Investment tax credits...................................... 278 22
Warranty and other provisions............................... 165 60
Property, plant and equipment and intellectual property..... 3,313 231
Share issue costs........................................... 961 1,433
Unrealized foreign exchange (gains) loss.................... (559) (475)
Valuation allowance......................................... (8,572) (3,288)
------- -------
-- --
======= =======

13. RELATED PARTY TRANSACTIONS

In the normal course of operations, the Company sells certain products and
performs services to a company that owns a significant number of its common
shares. Revenues from this related company totalled $9,622 in 2002 (2001 --
$2,460; 2000 -$2,556). At December 31, 2002, the Company has an accounts
receivable due from this related company of $3,647 (2001 -$2,058; 2000 -- $519).

In the normal course of operations, the Company subcontracts certain
manufacturing functions to a company owned by a relative of one of the principal
shareholders of Hydrogenics Corporation. Billings by this related company for
manufacturing functions totalled $999 in 2002 (2001 -- $1,219; 2000 - $615). At

F-18

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

December 31, 2002, the Company has an accounts payable balance due to this
related company of $140 (2001 -- $119; 2000 -- $46).

All related party transactions have been recorded at the exchange amount,
which is the consideration paid or received as established and agreed to by the
related parties.

14. FINANCIAL INSTRUMENTS

At December 31, 2002, 2001 and 2000, the fair values of cash, and cash
equivalents, short-term investments, accounts receivable, grants receivable,
accounts payable and accrued liabilities approximate their respective carrying
values because of the short-term nature of these instruments.

The carrying value of loans payable approximates the fair value because
interest is imputed at a rate available to the Company for long-term borrowings
and is included in the loan balance.

U.S. dollar-denominated amounts included in cash and cash equivalents and
short-term investments at December 31, 2002 amount to $27,697 (2001 -- $26,546;
2000 -- $75,547). All cash and short-term investments amounts are deposited with
highly rated financial institutions within Canada.

A substantial portion of the Company's accounts receivable is owing from a
limited number of customers located globally (note 18). The Company performs
ongoing credit evaluations on its customers' financial condition and generally
requires no collateral from its customers. The Company maintains an allowance
for doubtful accounts receivable based on management's assessment of expected
collectibility and past history.

15. LINE OF CREDIT

The Company has an operating line of credit available up to $632
(CAD$1,000). As at December 31, 2002, 2001 and 2000, the Company had not drawn
on this line. The operating facility bears interest at Royal Bank of Canada
prime rate plus 0.5 percent, is due on demand and is collateralized by a general
security agreement over all assets.

16. LOSS PER SHARE

Loss per share is calculated using the weighted average number of common
shares outstanding for the year of 48,437,813 shares in 2002
(2001 -- 38,217,593; 2000 - 22,341,370). No effect has been given to the
potential exercise of stock options and warrants in the calculation of diluted
earnings (loss) per share as the effect would be anti-dilutive.

F-19

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

17. STATEMENTS OF CASH FLOWS

Components of the net change in non-cash working capital are as follows:

2002 2001 2000
------- ------- -------

Decrease (increase) in current assets
Accounts receivable....................................... $(1,383) $(1,920) $(1,626)
Grants receivable......................................... 343 (690) 63
Inventories............................................... (1,586) (1,879) (1,100)
Prepaid expenses.......................................... (147) (54) (114)
Deposits.................................................. -- -- (67)
Increase (decrease) in current liabilities
Accounts payable and accrued liabilities.................. 2,501 (749) 1,545
Unearned revenue.......................................... 520 -- --
Income taxes payable...................................... 131 (152) 160
Dividends payable......................................... -- -- (50)
------- ------- -------
$ 378 $ 5,444 $(1,189)
======= ======= =======

18. SEGMENTED FINANCIAL INFORMATION

The Company currently operates in a single reporting segment, being the
design, development, manufacturing and sale of proton-exchange membrane, or PEM,
fuel cell automated test stations, and fuel cell power systems and provides
engineering and other services. Substantially all the Company's long-lived
assets are located in Canada. Revenue is derived primarily from the sale of
goods and services to customers located as follows:

2002 2001 2000
------- ------ ------

United States............................................. $12,715 $3,080 $5,098
Japan..................................................... 703 2,081 --
United Kingdom............................................ 1,108 600 3,442
Rest of World............................................. 1,314 1,657 343
------- ------ ------
$15,840 $7,418 $8,883
======= ====== ======

2002 2001 2000
------- ------ ------

Revenues
Products.................................................. $ 7,794 $7,040 $8,883
Services.................................................. 8,046 378 --
------- ------ ------
$15,840 $7,418 $8,883
======= ====== ======

F-20

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

2002 2001 2000
------- ------ ------

Cost of sales
Products.................................................. $ 4,906 $4,657 $6,485
Services (excluding depreciation)......................... 5,797 284 --
------- ------ ------
$10,703 $4,941 $6,485
======= ====== ======

The Company's largest customers comprise the following percentages of total
revenue:

2002 2001 2000
---- ---- ----

First....................................................... 61% 33% 39%
Second...................................................... 7 28 29
Third....................................................... 7 9 10
Fourth...................................................... 6 6 7
Others...................................................... 19 24 15
--- --- ---
100% 100% 100%
=== === ===

19. BUSINESS ACQUISITION OF SUBSIDIARY

On May 1, 2002, the Company acquired all the issued and outstanding common
shares of EnKAT GmbH (EnKAT). EnKAT, based in Gelsenkirchen, Germany, designs
and manufactures test systems for fuel cells, reformers and electrochemical
engines.

The purchase price was $645, which includes cash paid of $277, repayment of
debt on acquisition of $281 and transaction costs of $87. The purchase price
allocated to the assets acquired and the liabilities assumed on the basis of
their respective estimated fair market values on the acquisition date was:

Assigned value of assets and liabilities acquired:

Current assets other than cash............................ $ 86
Property, plant and equipment............................. 30
Other intangible assets................................... 565
Current liabilities....................................... (36)
----
$645
====

As part of the acquisition, the Company obtained management services
contracts for five years for each of the two principals of EnKAT. The fair value
of these contracts has been included in other intangible assets and is being
amortized on a declining balance basis at an annual rate of 50 percent.

This acquisition was accounted for by the purchase method. The results of
operations of the Company include the results of EnKAT commencing May 1, 2002.

20. SUBSEQUENT EVENT

On January 7, 2003, the Company acquired all the issued and outstanding
common shares of Greenlight Power Technologies (Greenlight). Greenlight, based
in Burnaby, British Columbia, designs and manufactures test systems for fuel
cells, reformers and electrochemical engines. The purchase price was $29,472 CAD
(US $19,044) exclusive of expenses of $1,062 relating to the acquisition.
Consideration consisted of cash of $2,282 and the issuance of 4,164,093 common
shares of the Company with an

F-21

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

aggregate value of $16,762 at the acquisition date. The allocation of the
purchase price to the assets and liabilities acquired is as follows:

Current assets.............................................. $ 2,970
Property, plant and equipment............................... 2,120
Intangible assets........................................... 13,505
Goodwill.................................................... 5,262
Future tax asset............................................ 5,393
Current liabilities......................................... (3,549)
Long term debt.............................................. (202)
Future tax liabilities...................................... (5,393)
-------
$20,106
=======

This acquisition was accounted for by the purchase method. From the date of
the acquisition onwards the Company will consolidate the operations of
Greenlight in its financial statements.

Intangible assets acquired pursuant to the acquisition of Greenlight are
being amortized on a straight line basis over their estimated useful lives as
follows:

AMOUNT AT ESTIMATED
ACQUISITION DATE USEFUL LIFE
---------------- -----------

Order backlog............................................... $ 541 1 year
Customer relationships...................................... 5,045 3 years
Computer software........................................... 1,886 2 years
Patentable technology....................................... 6,033 3 years
-------
$13,505
=======

21. NEW ACCOUNTING STANDARDS

(I) CANADIAN STANDARDS

Guarantees

In December 2002, the CICA issued Accounting Guideline No. 14 (AcG 14)
relating to disclosure of guarantees. AcG 14 requires disclosure of key
information about certain types of guarantee contracts that require payments
contingent on specified types of future events. The guideline is effective for
periods beginning on or after January 1, 2003.

Asset Retirement Obligations

In December 2002, the CICA approved new Handbook section "Asset Retirement
Obligations" to replace the current guidance on future removal and site
restoration costs included in the CICA accounting standard 3061 "Property, Plant
and Equipment". The standard is effective for years beginning on or after
January 1, 2004. The standard requires recognition of a liability at its fair
value for the obligation associated with the retirement of a tangible long-lived
asset. A corresponding asset retirement cost would be added to the carrying
amount of the related asset and amortized to expense over the useful life of the
asset. The effect on net income of adopting this standard, on January 1, 2004,
is not expected to be material.

F-22

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

(II) U.S. STANDARDS

FIN 45 -- Guarantor's Accounting and Disclosure Requirements for Guarantees

In December 2002, the FASB issued Financial Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57 and 107" (FIN 45). FIN 45 requires that, effective for
years beginning after September 15, 2002, a guarantor recognizes, at the
inception of a guarantee, a liability for the fair value of the obligations it
has undertaken in issuing the guarantee. The Company has adopted the disclosure
of provisions of FIN 45 for the year ended December 31, 2002. The Company is
currently evaluating the impact of adopting the recognition provisions of FIN
45.

Asset Retirement Obligations

The FASB has issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. The effect on net income of adopting this standard on
January 1, 2003, is not expected to be material.

Extinguishment of Debt

The FASB has issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This
standard updates, defines and simplifies several existing accounting
pronouncements. For fiscal years beginning after May 15, 2002, gains and losses
from extinguishment of debt are no longer required to be treated as an
extraordinary item, net of income taxes. The effect on net income of adopting
this standard, on January 1, 2003, is considered not to be material.

Exit and Disposal Activities

The FASB has issued SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities". Under this standard, exit costs and restructuring
liabilities generally will be recognized only when incurred. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. The effect on net income of adopting this standard, on January 1, 2003, is
considered not to be material.

22. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES AND
PRACTICES

The financial statements have been prepared in accordance with Canadian
GAAP, which differ in certain respects from those principles that the Company
would have followed had its financial statements been prepared in accordance
with accounting principles generally accepted in the United States (U.S. GAAP).

F-23

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

The reconciliation of net loss for the year from Canadian GAAP to conform
with U.S. GAAP is as follows:

2002 2001 2000
----------- ----------- -----------

Loss for the year based on Canadian GAAP.............. $ (20,611) $ (2,816) $ (1,736)
Accrued dividends and amortization of discount on
preferred shares (i)................................ -- -- 262
Stock-based compensation (ii)......................... (443) (1,468) (3,369)
----------- ----------- -----------
Loss for the year based on U.S. GAAP.................. (21,054) (4,284) (4,843)
Other comprehensive income (loss) Foreign currency
translation (iii)................................... -- (5,409) 1,360
----------- ----------- -----------
Comprehensive loss based on U.S. GAAP................. $ (21,054) $ (9,693) $ (3,483)
=========== =========== ===========
Basic and fully diluted loss per share based on U.S.
GAAP................................................ $ (0.43) $ (0.11) $ (0.22)
Weighted average number of shares used in calculating
loss per share...................................... 48,437,813 38,217,593 22,341,370

2002 2001 2000
----------- ----------- -----------

Shareholders' equity based on Canadian GAAP........... $ 85,432 $ 105,821 $ 80,260
----------- ----------- -----------
Shareholders' equity based on U.S. GAAP............... $ 85,432 $ 105,821 $ 80,260
=========== =========== ===========

(I) PREFERRED SHARES

Under Canadian GAAP, convertible, redeemable, preferred shares are
presented as debt and equity components on the balance sheet. The Canadian GAAP
statement of operations includes a charge for interest on the debt component and
dividends. However, under U.S. GAAP, these preferred shares meet the definition
of mandatorily redeemable shares, which are considered a component of temporary
equity outside of shareholders' equity and dividends are charged directly to
equity.

(II) STOCK-BASED COMPENSATION

Under Canadian GAAP, no compensation expense has been recognized with
respect to employee stock options. For U.S. GAAP reporting, the Company uses the
intrinsic value method of APB Opinion No. 25 and options issued under the plan
are deemed to be compensatory to the extent that the fair value of the stock
exceeds the exercise price at the date of grant. The compensation cost is
recognized over the vesting period. For U.S. GAAP, the compensation cost not yet
recognized is presented as a deferred stock-based compensation charge, with a
corresponding amount included in stock options outstanding, both of which form
part of shareholders' equity. At December 31, 2002, equity balances for deferred
stock-based compensation and stock options outstanding are $175 and $3,206,
respectively.

Had the Company determined compensation cost based on the fair value method
as prescribed in Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation," the expense for the year ended
December 31, 2002 would have been $2,025 (2001 -- $3,018; 2000 -- $3,970) or
$0.04 per share (2001 - $0.08; 2000 -- $0.18). Pro-forma loss for the year ended
December 31, 2002 would have been $(22,636) (2001 -- $(5,834); 2000 -- $(5,444))
or $(0.47)(2001 -- $(0.15); 2000 -- $(0.25)) per share. For the purposes of
these disclosures stock options are valued using the Black-Scholes option
pricing model with the following weighted average assumptions: risk free
interest rate of

F-24

HYDROGENICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS

4.50 percent to 5.39 percent, expected life of four to ten years, expected
volatility of between 77 percent and 113 percent, and no dividends.

The condensed statements of operations and cash flows for the year ended
December 31, under U.S. GAAP, are as follows:

2002 2001 2000
-------- ------- -------

Revenues.................................................... $ 15,840 $ 7,418 $ 8,883
Cost of revenues............................................ 10,703 4,941 6,485
Operating expenses.......................................... 27,363 12,383 6,312
Loss from operations........................................ (22,226) (9,906) (3,914)
Loss for the year........................................... (21,054) (4,284) (4,843)

2002 2001 2000
------- ------- --------

Cash used in operation activities........................... $(3,927) $(7,025) $ (984)
Cash provided by (used in) investing activities............. 3,240 5,443 (77,869)
Cash provided by (used in) financing activities............. 43 (52) 79,672

(III) COMPREHENSIVE INCOME

U.S. GAAP requires disclosure of comprehensive income or loss which
comprises income (loss) and other comprehensive income. The only item of other
comprehensive income for the Company is the change in the foreign currency
translation adjustment included in shareholders' equity. Under Canadian GAAP,
there is no concept of comprehensive income.

(IV) LOSS PER SHARE

The numerator for purposes of calculating loss per share under U.S. GAAP
has been calculated as follows:

2002 2001 2000
-------- ------- -------

Net loss under U.S. GAAP.................................... $(21,054) $(4,284) $(4,843)
Less: Dividends on preferred shares......................... -- -- 179
-------- ------- -------
Loss available to common shareholders....................... $(21,054) $(4,284) $(5,022)
======== ======= =======

F-25

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS OF
GREENLIGHT POWER TECHNOLOGIES, INC.

We have audited the balance sheet of Greenlight Power Technologies, Inc. as
of December 31, 2002 and the statements of operations and deficit and cash flows
for the year then ended. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 2002 and the
results of its operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles, except that
they have not been prepared on a comparative basis.

PricewaterhouseCoopers LLP (signed)
Chartered Accountants

January 28, 2003
Vancouver, Canada

F-26

GREENLIGHT POWER TECHNOLOGIES, INC.

BALANCE SHEET
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS)

DECEMBER 31,
2002
------------

ASSETS
CURRENT ASSETS
Accounts receivable and unbilled revenues (note 3)........ $ 2,167
Refundable investment tax credits......................... 423
Inventories............................................... 2,142
Prepaid expenses.......................................... 85
-------
4,817
Property, plant and equipment (note 4)...................... 686
Identified intangible assets................................ 4
-------
$ 5,507
=======

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank indebtedness......................................... $ 1,442
Accounts payable and accrued liabilities (note 5)......... 2,101
Term loan (note 7)........................................ 60
Deferred revenue.......................................... 1,653
Allowance for warranty.................................... 130
Current portion of long-term obligations under capital
leases (note 6)........................................ 136
-------
5,522
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES (note 6)......... 116
-------
5,638
SHAREHOLDERS' DEFICIENCY
Share capital (note 9).................................... 3,754
Deficit................................................... (3,885)
-------
(131)
-------
$ 5,507
=======

Commitments (note 11)
Subsequent event (notes 9 and 13)

See accompanying notes to financial statements.
F-27

GREENLIGHT POWER TECHNOLOGIES, INC.

STATEMENT OF OPERATIONS AND DEFICIT
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS)

YEAR ENDED
DECEMBER 31,
2002
------------

REVENUE..................................................... $5,744
COST OF SALES............................................... 4,810
------
Gross profit................................................ 934
Operating Expenses:
Selling and marketing..................................... 738
General and administrative................................ 2,200
Research and development, net of grants and investment tax
credits (note 10)...................................... 456
Amortization.............................................. 194
------
3,588
------
LOSS FROM OPERATIONS........................................ 2,654
OTHER EXPENSES
Interest.................................................. 37
------
LOSS BEFORE INCOME TAXES.................................... 2,691
INCOME TAXES (note 12)...................................... (7)
------
NET LOSS.................................................... 2,684
DEFICIT, BEGINNING OF YEAR
As previously reported.................................... 1,159
Cumulative effect of change in accounting policy (note
2(h)).................................................. 42
------
As restated............................................... 1,201
------
DEFICIT, END OF YEAR........................................ $3,885
======

See accompanying notes to financial statements.
F-28

GREENLIGHT POWER TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS)

YEAR ENDED
DECEMBER 31,
2002
------------

CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss.................................................. $(2,684)
Items not affecting cash:
Amortization........................................... 194
Stock based compensation............................... 365
-------
(2,125)
Changes in non-cash working capital:...................... (123)
-------
(2,248)
INVESTING ACTIVITIES
Additions to property, plant and equipment................ (228)
FINANCING ACTIVITIES
Increase in bank indebtedness............................. 1,442
Increase in term loan..................................... 60
Repayment of principal portion of obligations under
capital lease.......................................... (110)
-------
1,392
-------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (1,084)
Cash and cash equivalents, beginning of year................ 1,084
-------
Cash and cash equivalents, end of year...................... $ --
=======
SUPPLEMENTARY INFORMATION
Interest paid............................................. $ 64
Income taxes received..................................... (7)
Capital assets acquired by means of capital lease......... 245

See accompanying notes to financial statements.
F-29

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 2002

1. OPERATIONS

Greenlight Power Technologies, Inc. (formerly Automation Systems Associates
Limited) was incorporated under the British Columbia Company Act on April 2,
1990. The Company was continued under the Canadian Business Corporation Act on
March 30, 2001. The Company designs, develops and manufactures fuel cell
automated test stations. The Company's principal customers include automotive
companies, fuel cell developers and component suppliers principally located in
Canada, the United States, Europe and Asia.

2. SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF PRESENTATION

The financial statements of the Company have been prepared in accordance
with Canadian generally accepted accounting principles ("Canadian GAAP"). In all
material respects, net loss of the Company for the year ended December 31, 2002
and shareholders' deficiency as at December 31, 2002 computed under Canadian
GAAP are equivalent to net loss and shareholders' deficiency computed under
accounting principles generally accepted in the United States ("U.S. GAAP").
These financial statements do not include all of the disclosures that would be
required under U.S. GAAP.

(B) USE OF ESTIMATES

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the amounts of assets and liabilities
and disclosure of contingent liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Allowances for doubtful accounts, allowance for warranty and
useful lives of assets estimates are significant areas requiring the use of
estimates. Actual results could differ from those estimates.

Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturities at the date of purchase
of three months or less. Interest earned and any market value losses are
recognized immediately in the statement of operations.

(D) INCOME TAXES

The Company follows the asset and liability method of accounting for income
taxes. Under this method, future income taxes are recognized for the future
income tax consequences attributable to differences between the financial
statement carrying values of existing assets and liabilities and their
respective income tax bases (temporary differences). The resulting changes in
the net future tax asset or liability are included in income. Future income tax
assets and liabilities are measured using enacted or substantively enacted tax
rates expected to apply to taxable income in the years in which temporary
differences are expected to be recovered or settled. The effect on future income
tax assets and liabilities of a change in tax rates is included in income in the
period that includes the substantive enactment date. Future income tax assets
are evaluated and if realization is not considered to be more likely than not, a
valuation allowance is provided.

F-30

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)

(E) INVENTORIES

Inventories consist of raw materials, work-in-progress and finished goods.
Raw materials are valued at the lower of cost, determined on a first-in
first-out basis, or market. Market is defined as replacement cost. Finished
goods and work-in-progress are recorded at the lower of cost and net realizable
value.

(F) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and amortized from the
date of acquisition or, in respect of internally constructed assets, from the
time an asset is completed and ready for use, using the straight-line method
over the estimated useful lives of the assets as follows:

Computer hardware........................................... 3 years
Computer software........................................... 2 years
Equipment................................................... 7 years
Office furniture and fixtures............................... 10 years
Leasehold improvements...................................... Term of the lease

(G) LONG-LIVED ASSETS

The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. Recoverability of assets held and used is measured by
comparison of the carrying amount of any assets to future net undiscounted cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount which the
carrying amount of the assets exceeds the net recoverable amount.

(H) REVENUE RECOGNITION

The Company previously recognized revenue from long-term contracts under
the percentage-of-completion method.

Effective January 1,2002 revenue is recognized when goods are delivered,
title passes to the customer and collection is reasonably assured provided that
in situations where customer acceptance is considered to be substantive to the
transaction, revenue is recognized only after such acceptance has been received
from the customer.

The Company has restated its previously reported deficit at January 1, 2002
to reflect this change, which resulted in an increase of $42 in the opening
January 1, 2002 deficit.

(I) PRODUCT WARRANTY

The Company provides for future warranty costs on products sold based on
management's best estimates of such costs taking into account past experience
and the nature of the contracts.

(J) GOVERNMENT ASSISTANCE AND INVESTMENT TAX CREDITS

Government assistance is recorded as either a reduction of the cost of the
applicable assets or credited in the statement of operations as determined by
the terms and conditions of the agreements under which the assistance is
provided to the Company. Investment tax credits are recorded as either a
reduction of the cost of applicable assets or credited in the statement of
operations depending on the nature of the expenditures that gave rise to the
credits.

F-31

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)

(K) RESEARCH AND PRODUCT DEVELOPMENT EXPENDITURES

Research costs are expensed as incurred. Development costs are deferred
when they meet specific criteria, otherwise they are expensed as incurred. At
December 31, 2002, no development costs have been deferred.

(L) FOREIGN CURRENCY TRANSLATION

Monetary items denominated in currencies other than the Canadian dollar,
the Company's functional currency, are translated at the rate of exchange in
effect at the balance sheet date. Non-monetary items and revenues and expenses
are translated at rates of exchange in effect at the date of the transaction.
Exchange gains or losses are reflected in earnings for the period.

(M) SHARE-BASED COMPENSATION PLANS

The Company issues shares and share options under its share-based
compensation plans as described in note 9. Effective January 1, 2002, the
Company adopted the intrinsic value method for recognizing compensation expense
for these plans when shares or share options are issued to employees. Any
consideration paid by employees on exercise of share options or purchase of
shares is credited to share capital.

3. ACCOUNTS RECEIVABLE AND UNBILLED REVENUES

Accounts receivable and unbilled revenues consist of the following amounts:

DECEMBER 31,
2002
------------

Trade accounts receivable................................... $1,489
Receivable from Hydrogenics Corporation..................... 208
Unbilled revenues........................................... 208
Grants receivable........................................... 262
------
$2,167
======

4. PROPERTY, PLANT AND EQUIPMENT

DECEMBER 31, 2002
--------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
------ ------------ --------

Computer hardware........................................ $ 272 $220 $ 52
Computer software........................................ 275 219 56
Equipment................................................ 281 104 177
Office furniture and fixtures............................ 138 66 72
Leasehold improvements................................... 89 79 10
Property acquired under capital leases:
Computer hardware...................................... 286 80 206
Equipment.............................................. 141 34 107
Office furniture and fixtures.......................... 13 7 6
------ ---- ----
$1,495 $809 $686
====== ==== ====

F-32

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following amounts:

DECEMBER 31,
2002
------------

Trade accounts payable...................................... $1,156
Other liabilities........................................... 583
Wages payable............................................... 362
------
$2,101
======

6. LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES

2003........................................................ $165
2004........................................................ 95
2005........................................................ 13
2006........................................................ 13
2007........................................................ 12
----
Total minimum lease payments................................ 298
Amount representing interest................................ 46
----
Present value of minimum capital lease payments............. 252
Current portion of obligations under capital leases......... 136
----
Long-term obligation under capital leases................... $116
====

Interest of $21 relating to capital lease obligations has been included in
interest expense in 2002.

7. TERM LOAN

The Term Loan bears interest at prime plus 1.25% and is repayable on
demand.

8. FINANCIAL INSTRUMENTS

(A) FAIR VALUES

The fair values of accounts receivable, refundable investment tax credits,
bank indebtedness, term loan, accounts payable, deferred revenue and allowance
for warranty approximate their carrying amounts because of the short-term nature
of these instruments.

(B) CREDIT RISK

The financial instruments that potentially expose the Company to
concentrations of credit risk are trade accounts receivable. Management
regularly monitors the credit worthiness of its customers and believes that it
has adequately provided for any exposure to potential credit losses.

9. SHARE CAPITAL

(A) AUTHORIZED

The authorized capital stock of the Company consists of an unlimited number
of common shares, voting, without par value.
F-33

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)

(B) ISSUED AND OUTSTANDING

NUMBER OF
SHARES AMOUNT
---------- ------

Balance, December 31, 2001.................................. 12,800,000 $3,389
Shares issued under compensation stock option plan.......... 364,433 365
---------- ------
Balance, December 31, 2002.................................. 13,164,433 $3,754
========== ======

Of the 1,300,000 shares issued to officers of the Company and initially
placed in escrow in April 2001, 500,000 common shares remain in escrow at
December 31, 2002. The 500,000 shares are subject to release upon the completion
of an initial public offering at a price not less than $3.00 per share resulting
in aggregate net proceeds of not less than $20,000 or an acquisition of all of
the outstanding shares of the Company at a price not less than $3.00 per share.

Of the 500,000 shares held in escrow, 383,334 were released subsequent to
December 31, 2002 upon the acquisition of the Company (see note 13) and 116,666
shares were cancelled. The release of 383,334 shares will result in a
stock-based compensation charge in 2003 under U.S. GAAP.

The Company has a stock option plan approved by the shareholders that
allows it to grant options to its employees, officers, directors and
non-employees to acquire up to 2,200,000 common shares, of which 1,822,558
options are outstanding at December 31, 2002. The exercise price of each option
is set by the Board at the time of the granting. Options have a maximum term of
seven years and terminate 30 days following the termination of the optionee's
employment, except in the case of death, in which case they terminate the
earlier of the option expiration date and one year from the date of death. One
sixteenth of the options vest and may be exercised in each quarter for four
years after granting.

A summary of the Company's share purchase option activity is as follows:

NUMBER WEIGHTED AVERAGE
OF OPTIONS EXERCISE PRICE
---------- ----------------

Balance, December 31, 2001.................................. 1,162,495 $1.00
Granted................................................... 728,560 1.00
Exercised................................................. -- --
Expired/cancelled......................................... (68,497) 1.00
--------- -----
Balance, December 31, 2002.................................. 1,822,558 $1.00
========= =====

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICE OF OPTIONS CONTRACTUAL LIFE PRICE OF OPTIONS PRICE
-------- ---------- ---------------- -------- ---------- --------
(YEARS)

$1.00 1,822,558 5.83 $1.00 509,164 $1.00

(D) COMPENSATION STOCK OPTIONS

The Company has a compensation stock option plan approved by the
shareholders that allows its employees, officers, directors and non-employees to
take a portion of their compensation due in stock of the Corporation rather than
cash. Options to acquire up to 542,000 common shares have been approved by

F-34

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)

the shareholders, of which 364,433 had been issued and exercised at December 31,
2002. The exercise price of each option is set at $0.001. Options expire 90 days
following the end of the fiscal quarter in which the options have been granted,
except in the case of death of the optionee, in which case the unexpired options
terminate one year from the date of death. Options granted under the
compensation stock option plan vest immediately upon granting. The compensation
stock option plan terminates 90 days after December 31, 2002. The Company
recognized a stock-based compensation expense in 2002 of $365.

A summary of the Company's compensation stock option activity is as
follows:

NUMBER WEIGHTED AVERAGE
OF OPTIONS EXERCISE PRICE
---------- ----------------

Balance, December 31, 2001................................. -- $ --
Granted.................................................. 364,433 0.001
Exercised................................................ 364,433 0.001
Expired/cancelled........................................ -- --
------- ------
Balance, December 31, 2002................................. -- $ --
======= ======

$0.001 -- -- -- -- --

(E) SHARE PURCHASE WARRANTS

On November 9, 2001, the Company issued 250,000 Series 1 Warrants and
250,000 Series 2 Warrants. On April 4, 2001, the Company issued 625,000 Series 1
Warrants and 625,000 Series 2 Warrants. Each Series 1 Warrant entitles the
holder to acquire one common share of the Company for a price of $2.00. Each
Series 2 Warrant entitles the holder to acquire one common share of the Company
for a price of $4.00. The warrants expire on April 4, 2005.

A summary of the Company's share purchase warrant activity is as follows:

OUTSTANDING ISSUED EXPIRED OUTSTANDING
EXERCISE DECEMBER 31, DURING DURING DECEMBER 31,
EXPIRY DATE PRICE 2001 YEAR YEAR 2002
----------- -------- ------------ ------ ------- ------------

April 4, 2005............................... $2.00 875,000 -- -- 875,000
April 4, 2005............................... 4.00 875,000 -- -- 875,000
--------- --- --- ---------
1,750,000 -- -- 1,750,000
========= === === =========

10. RESEARCH AND DEVELOPMENT

DECEMBER 31,
2002
------------

Research and development costs incurred..................... $918
Investment tax credits...................................... (462)
----
Research and development costs expensed..................... $456
====

F-35

GREENLIGHT POWER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)

11. COMMITMENTS

At December 31, 2002 the Company is committed to payments under operating
leases relating to premises as follows:

2003........................................................ $ 524
2004........................................................ 512
------
$1,036
======

At December 31, 2002 the Company has outstanding commitments aggregating to
a maximum of $46 relating to research and development programs.

12. INCOME TAXES

Significant components of the Company's future income tax asset are:

DECEMBER 31,
2002
------------

Non capital losses.......................................... $ 599
Scientific research expenditures............................ 455
Capital assets.............................................. 66
Share issuance costs........................................ 29
Warranty costs accrued...................................... 46
Valuation allowance......................................... (1,195)
--------
$ --
========

The losses from operations may be used to offset future income taxes and
expire as follows:

2008........................................................ $ 446
2009........................................................ 1,239
------
$1,685
======

13. SUBSEQUENT EVENT

On January 7, 2003, Hydrogenics Corporation acquired all of the outstanding
shares, options and warrants of the Company.

F-36

HYDROGENICS CORPORATION

PRO-FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED) (SEE COMPILATION REPORT)
FOR THE YEAR ENDED DECEMBER 31, 2002
(THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

HISTORICAL PRO-FORMA
------------------------ -------------------------
ADJUSTMENTS
HYDROGENICS GREENLIGHT (NOTE 2) COMBINED
----------- ---------- ------------ ----------

REVENUES....................................... $ 15,840 $ 3,669 -- $ 19,509
COST OF REVENUES............................... 10,703 3,072 -- 13,775
---------- ------- ------- ----------
5,137 597 -- 5,734
---------- ------- ------- ----------
OPERATING EXPENSES
Selling, general and administrative............ 6,658 1,877 -- 8,535
Research and development....................... 4,235 292 -- 4,527
Research and development grants................ (474) -- -- (474)
Depreciation of property, plant and
equipment.................................... 1,278 124 813 2,215
Amortization of intangible assets.............. 15,223 -- 5,177 20,400
---------- ------- ------- ----------
26,920 2,293 5,990 35,203
---------- ------- ------- ----------
LOSS FROM OPERATIONS........................... (21,783) (1,696) (5,990) (29,469)
---------- ------- ------- ----------
OTHER INCOME (EXPENSES)
Provincial capital tax......................... (190) -- -- (190)
Interest, net.................................. 1,121 (24) -- 1,097
Foreign currency gains......................... 495 -- -- 495
---------- ------- ------- ----------
1,426 (24) -- 1,402
---------- ------- ------- ----------
LOSS BEFORE INCOME TAXES....................... (20,357) (1,720) (5,990) (28,067)
CURRENT INCOME TAX EXPENSE (RECOVERY).......... 254 (5) -- 249
---------- ------- ------- ----------
NET LOSS FOR THE PERIOD........................ $ (20,611) $(1,715) $(5,990) $ (28,316)
========== ======= ======= ==========
NET LOSS PER SHARE
Basic and diluted.............................. $ (0.43) $ (0.54)
Shares used in calculating basic and diluted
net loss per share........................... 48,437,813 52,601,906

The accompanying notes form an integral part of this pro-forma financial
information
F-37

HYDROGENICS CORPORATION

NOTES TO PRO-FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2002
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

1. BASIS OF PRESENTATION

On January 7, 2003, Hydrogenics Corporation (the "Company") acquired all
the issued and outstanding common shares of Greenlight Power Technologies, Inc.
("Greenlight"). Greenlight, based in Burnaby, British Columbia, designs and
manufactures test systems for fuel cells, reformers and electrochemical engines.
The purchase price was $29,472 CAD (US $19,044) exclusive of expenses of $1,062
relating to the acquisition. Consideration consisted of cash of $2,282 and the
issuance of 4,164,093 common shares of the Company with an aggregate value of
$16,762 at the acquisition date.

The allocation of the purchase price to the assets acquired and liabilities
assumed was as follows:

$ MILLIONS
-----------------------

Current assets.............................................. $ 3.0
Property, plant and equipment............................... 2.1
Future tax assets........................................... 5.4
Intangible assets-
Order backlog(1).......................................... 0.5
Customer relationship(2).................................. 5.0
Computer software(3)...................................... 1.9
Patentable technology(2).................................. 6.1 13.5
----
Goodwill.................................................... 5.3
Accounts payable and accrued liabilities.................... (3.6)
Long-term debt.............................................. (0.2)
Future tax liabilities...................................... (5.4)
-----
$20.1
=====

---------------

(1) Being amortized over 1 year.

(2) Being amortized over 3 years.

(3) Being amortized over 2 years.

The unaudited pro-forma combined statement of operations gives effect to
the acquisition by the Company of Greenlight in a transaction that was accounted
for as a purchase. The unaudited pro-forma combined statement of operations is
based on the individual statements of operations of the Company and Greenlight
appearing elsewhere in this prospectus, and combines the results of operations
of the Company and of Greenlight (acquired by the Company on January 7, 2003)
for the year ended December 31, 2002 as if the acquisition occurred on January
1, 2002. The unaudited pro-forma combined statement of operations should be read
in conjunction with the historical financial statements and notes thereto of the
Company and Greenlight included elsewhere in this prospectus.

The pro-forma combined statement of operations has been prepared in
accordance with Canadian generally accepted accounting principles ("Canadian
GAAP"), which, in the case of the Company, conform in all material respects with
accounting principles generally accepted in the Unites States, except as
outlined in Note 3.

The pro-forma combined statement of operations is not necessarily
indicative of the results of operations that would have resulted had the
relevant transaction taken place at the date referred to above.

F-38

HYDROGENICS CORPORATION

NOTES TO PRO-FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2002
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

2. PRO-FORMA ASSUMPTIONS AND ADJUSTMENTS

The pro forma combined statement of operations has been prepared to reflect
the acquisition of Greenlight by the Company as if the acquisition occurred on
January 1, 2002. Pro-forma adjustments are made to reflect additional annual
depreciation and amortization resulting from the increased basis of property and
equipment and intangible assets acquired.

3. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES AND
PRACTICES

The pro-forma combined statement of operations has been prepared in
accordance with Canadian GAAP, which differ in certain respects from those
principles that the Company would have followed had its pro-forma combined
statement of operations been prepared in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP").

The reconciliation of pro-forma net loss for the year from Canadian GAAP to
U.S. GAAP is as follows:

Pro-forma net loss for the year based on Canadian GAAP...... $ (28,316)
Stock-based compensation (i)................................ (443)
-----------
Pro-forma net loss and comprehensive loss for the year based
on U.S. GAAP (ii)......................................... $ (28,759)
===========
Basic and diluted pro-forma net loss per share based on U.S.
GAAP...................................................... $ (0.54)
Weighted average number of shares used in calculating basic
and diluted net loss per share............................ 52,601,906

The condensed pro-forma combined statement of operations for the year ended
December 31, 2002 under U.S. GAAP, is as follows:

Revenues.................................................... $ 19,509
Cost of revenues............................................ 13,775
Operating expenses.......................................... 35,646
Loss from operations........................................ (29,912)
Net loss for the year....................................... (28,759)

(I) STOCK-BASED COMPENSATION

Had the Company determined compensation cost based on the fair value method
as prescribed in Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation," the combined pro-forma expense for
the year ended December 31, 2002 would have been $2,025 or $0.04 per share. The
combined pro-forma net loss for the year ended December 31, 2002 would have been

F-39

HYDROGENICS CORPORATION

NOTES TO PRO-FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2002
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

($30,341) or ($0.58) per share. For the purposes of these pro-forma disclosures
stock options are valued using the Black-Scholes option pricing model with the
following weighted average assumptions: risk free interest rate of 4.50 percent
to 5.39 percent, expected life of four to ten years, expected volatility of
between 77 percent and 113 percent, and no dividends.

(II) PRO-FORMA COMBINED COMPREHENSIVE LOSS

U.S. GAAP requires disclosure of comprehensive loss which comprises net
loss and other comprehensive income (loss). There were no items impacting the
pro-forma combined comprehensive loss during the year. Under Canadian GAAP,
there is no standard for reporting comprehensive loss.

(III) PRO-FORMA COMBINED NET LOSS PER SHARE

The numerator for purposes of calculating basic and diluted pro-forma
combined net loss per share under U.S. GAAP has been calculated as follows:

Pro-forma combined net loss under U.S. GAAP................. $(28,759)

F-40

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

(Hydrogenics Logo)

Common Shares

------------

PROSPECTUS

, 2004

------------

CITIGROUP
------------------------

NATIONAL BANK FINANCIAL

TD SECURITIES (U.S.A.) INC.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

PART II

INFORMATION NOT REQUIRED TO BE DELIVERED
TO OFFEREES OR PURCHASERS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 124 of the Canada Business Corporations Act, or the CBCA, provides:

(1) A corporation may indemnify a director or officer of the corporation, a
former director or officer of the corporation or another individual who
acts or acted at the corporation's request as a director or officer, or
an individual acting in a similar capacity, of another entity, against
all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by the individual in
respect of any civil, criminal, administrative, investigative or other
proceeding in which the individual is involved because of that
association with the corporation or other entity.

(2) A corporation may advance moneys to a director, officer or other
individual for the costs, charges and expenses of a proceeding referred
to in subsection (1). The individual shall repay the moneys if the
individual does not fulfil the conditions of subsection (3).

(3) A corporation may not indemnify an individual under subsection (1)
unless the individual: (a) acted honestly and in good faith with a view
to the best interests of the corporation, or, as the case may be, to
the best interests of the other entity for which the individual acted
as director or officer or in a similar capacity at the corporation's
request; and (b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, the individual had
reasonable grounds for believing that the individual's conduct was
lawful.

(4) A corporation may with the approval of a court, indemnify an individual
referred to in subsection (1), or advance moneys under subsection (2),
in respect of an action by or on behalf of the corporation or other
entity to procure a judgment in its favor, to which the individual is
made a party because of the individual's association with the
corporation or other entity as described in subsection (1) against all
costs, charges and expenses reasonably incurred by the individual in
connection with such action, if the individual fulfils the conditions
set out in subsection (3).

(5) Despite subsection (1), an individual referred to in that subsection is
entitled to indemnity from the corporation in respect of all costs,
charges and expenses reasonably incurred by the individual in
connection with the defence of any civil, criminal, administrative,
investigative or other proceeding to which the individual is subject
because of the individual's association with the corporation or other
entity as described in subsection (1), if the individual seeking
indemnity: (a) was not judged by the court or other competent authority
to have committed any fault or omitted to do anything that the
individual ought to have done; and (b) fulfils the conditions set out
in subsection (3).

(6) A corporation may purchase and maintain insurance for the benefit of an
individual referred to in subsection (1) against any liability incurred
by the individual: (a) in the individual's capacity as a director or
officer of the corporation; or (b) in the individual's capacity as a
director or officer, or similar capacity, of another entity, if the
individual acts or acted in that capacity at the corporation's request.

-2-

(7) A corporation, an individual or an entity referred to in subsection (1)
may apply to a court for an order approving an indemnity under this
section and the court may so order and make any further order that it
sees fit.

(8) An applicant under subsection (7) shall give the Director notice of the
application and the Director is entitled to appear and be heard in
person or by counsel.

(9) On an application under subsection (7) the court may order notice to be
given to any interested person and the person is entitled to appear and
be heard in person or by counsel.

In accordance with the CBCA, the Bylaws of the Company provide that:

Subject to the provisions of the CBCA, the Company shall indemnify a
director or officer, a former director or officer, or a person who acts
or acted at the Company's request as a director or officer of a body
corporate of which the Company is or was a shareholder or creditor (or
a person who undertakes or has undertaken any liability on behalf of
the Company or at the Company's request on behalf of any such body
corporate), and such director or officer's heirs and legal
representatives, against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative
action or proceeding to which such director or officer is made a party
by reason of being or having been a director or officer of the Company
or such body corporate (or by reason of having undertaken such
liability); and the Company shall with the approval of the court
indemnify a person in respect of an action by or on behalf of the
Company or body corporate to procure a judgment in its favour, to which
such person is made a party by reason of being or having been a
director or an officer of the Company or body corporate, against all
costs, charges and expenses reasonably incurred by such director or
officer in connection with such action if in case such director or
officer:

(a) acted honestly and in good faith with a view to the best
interests of the Company; and

(b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had
reasonable grounds for believing that his conduct was lawful.

Notwithstanding the foregoing, the Company shall, without requiring the
approval of a court, indemnify any person referred to above, in respect
of an action by or on behalf of the Company or body corporate to
procure a judgment in its favour who has been substantially successful
on the merits in the defence of any civil, criminal or administrative
action or proceeding to which such person is made a party by reason of
being or having been a director or officer of the Company or body
corporate, against all costs, charges and expenses reasonably incurred
by such person in respect of such action or proceeding, provided that
such person has satisfied the appropriate conditions in (a) and (b)
above.

-3-

The Company may also indemnify such person in such other circumstances
as the CBCA or law permits or requires. These provisions shall be in
addition to and not in substitution for any rights, immunities and
protections to which any director or officer is otherwise entitled.

A policy of directors' and officers' liability insurance is maintained by the
Company which insures directors and officers for certain losses as a result of
claims, other than those excluded by the insurance policy, against the directors
and officers of the Company in their capacity as directors and officers and also
reimburses the Company for payments made pursuant to the indemnity provisions
under the articles and the CBCA.

INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
REGISTRANT PURSUANT TO THE FOREGOING PROVISIONS, THE REGISTRANT HAS BEEN
INFORMED THAT IN THE OPINION OF THE U.S. SECURITIES AND EXCHANGE COMMISSION SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.

EXHIBITS

The following exhibits have been filed as part of this Registration
Statement on Form F-10:

EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1* Underwriting Agreement

4.1 Annual Report on Form 20-F for the year ended December 31, 2002,
incorporated by reference to the Registrant's Annual Report (Commission
File No. 000-31815) filed with the Securities and Exchange Commission
on June 5, 2003

4.2 Comparative audited consolidated financial statements for the year
ended December 31, 2002, together with the notes thereto and the
auditors' report thereon, incorporated by reference to the Registrant's
Annual Report (Commission File No. 000-31815) filed with the Securities
and Exchange Commission on June 5, 2003

4.3 Management's discussion and analysis of financial condition and results
of operations for the three years ended December 31, 2002, incorporated
by reference to the Registrant's Annual Report (Commission File No.
000-31815) filed with the Securities and Exchange Commission on June 5,
2003

4.4 Comparative unaudited consolidated financial statements for the nine
months ended September 30, 2003 and September 30, 2002, incorporated by
reference to the Registrant's Form 6-K (Commission File No. 000-31815)
filed with the Securities and Exchange Commission on November 25, 2003

4.5 Management's interim discussion and analysis of financial condition and
results of operations for the third quarter ended September 30, 2003,
incorporated by reference to the Registrant's report on Form 6-K
(Commission File No. 000-31815) filed with the Securities and Exchange
Commission on November 25, 2003

4.6 Information circular dated April 30, 2003 relating to the Registrant's
annual general meeting of shareholders held on May 30, 2003, except for
the information set out therein relating to the composition of the
compensation committee and its report on executive compensation, the
statement of corporate governance and any performance graph therein,
incorporated by reference to the Registrant's Form 6-K (Commission File
No. 000-31815) filed with the Securities and Exchange Commission on May
14, 2003; and

4.7 Material change report dated January 15, 2003 pertaining to the
Registrant's acquisition of Greenlight Power Technologies, Inc.,
incorporated by reference to the Registrant's report on Form 6-K
(Commission File No. 000-31815) filed with the Securities and Exchange
Commission on January 15, 2003

5.1 Consent of PricewaterhouseCoopers LLP, Toronto, Ontario

5.2 Consent of PricewaterhouseCoopers LLP, Vancouver, British Columbia

5.3* Consent of Osler, Hoskin & Harcourt LLP

5.4* Consent of Davies Ward Phillips & Vineberg LLP

5.5* Consent of White & Case LLP

5.6* Consent of Cleary, Gottlieb, Steen & Hamilton

6.1 Powers of attorney (included in the signature page to the Registration
Statement)

-----------------
* To be filed by amendment.

- 2 -

PART III

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

ITEM 1. UNDERTAKING

The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to this Form F-10 or to
transactions in such securities.

ITEM 2. CONSENT TO SERVICE OF PROCESS

Concurrently with the filing of this Registration Statement on Form
F-10, the Registrant is filing with the Commission a written irrevocable consent
and power of attorney on Form F-X.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form F-10 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toronto, Province of Ontario, Canada, on
January 9, 2004.

HYDROGENICS CORPORATION

By: /s/ Pierre Rivard
--------------------------------
Name: Pierre Rivard
Title: Chief Executive Officer and President

SIGNATURES AND POWERS OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Pierre Rivard and Jonathan Lundy, and
each of them severally, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all the said attorneys-in-fact and agents or either of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

Signature Title Date
---------- ----- ----

/s/ Pierre Rivard President, Chief Executive Officer
---------------------------------- and Director January 9, 2004
Pierre Rivard (Principal Executive Officer)

/s/ Norman M. Seagram
---------------------------------- Chairman of the Board of Directors January 9, 2004
Norman M. Seagram

/s/ Gary Brandt
---------------------------------- Chief Financial Officer January 9, 2004
Gary Brandt (Principal Financial and Accounting Officer)

/s/ Boyd J. Taylor
---------------------------------- Vice President Business Development, Sales January 9, 2004
Boyd J. Taylor and Marketing and Director

/s/ Joseph Cargnelli
---------------------------------- Chief Technology Officer and Director January 9, 2004
Joseph Cargnelli

/s/ Don J. Morrison
---------------------------------- Director January 9, 2004
Don J. Morrison

/s/ Donal J. Lowry
---------------------------------- Director January 9, 2004
Donald J. Lowry

Signature Title Date
---------- ----- ----

/s/ Wesley Twiss
---------------------------------- Director January 9, 2004
Wesley Twiss

/s/ Frank Colvin
---------------------------------- Director January 9, 2004
Frank Colvin

/s/ James Sardo
---------------------------------- Director January 9, 2004
James Sardo

Pursuant to the requirements of Section 6(a) of the Securities Act of
1933, the undersigned has signed this Registration Statement, solely in the
capacity of the duly authorized representative of Hydrogenics Corporation in the
United States, in the City of Newark, Delaware on January 9, 2004.

By: /s/ Donald J. Puglisi
-------------------------------------
Name: Donald J. Puglisi

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1* Underwriting Agreement

5.1 Consent of PricewaterhouseCoopers LLP, Toronto, Ontario

5.2 Consent of PricewaterhouseCoopers LLP, Vancouver, British Columbia

5.3* Consent of Osler, Hoskin & Harcourt LLP

5.4* Consent of Davies Ward Phillips & Vineberg LLP

5.5* Consent of White & Case LLP

5.6* Consent of Cleary, Gottlieb, Steen & Hamilton

6.1 Powers of attorney (included in the signature page to the Registration
Statement)

-----------------
* To be filed by amendment