##### Table of Contents

---



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-K



(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2003



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission File No.: 001-15143



---



IMPCO TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 91-1039211                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)



16804 Gridley Place Cerritos,
California 90703

(Address of principal executive offices, including zip code)



(562) 860-6666

(Registrants telephone number, including area code)



---



Securities registered pursuant to Section 12(b) of the Act:



None





|                      |  |                                       
|--------------------- |  | --------------------------------------
|(Title of each class) |  | (Name of exchange on which registered)



Securities registered
pursuant to Section 12(g) of the Act:



Common Stock, $0.001 par
value per share



Indicate by check mark whether the Registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes  ̈ No x



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
 ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes x No  ̈



The aggregate market value of the Common Stock held by non-affiliates of the Registrant as of June 30, 2003, the end of the
registrants most recent second fiscal quarter, was approximately $101.0 million based upon the closing sale price of the Registrants Common Stock on such date, as reported on the Nasdaq National Market.



As of March 18, 2004, the Registrant had 18,591,021 shares of Common Stock, $0.001 par
value per share, outstanding.



---



---

##### Table of Contents

FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Statements about our plans,
intentions and expectations are not historical facts but rather are based on current expectations, estimates and projections about our industry, our beliefs and assumptions. We use words such as anticipate, expect,
intend, plan, believe, seek, estimate and variations of these words and similar expressions to help identify forward-looking statements. These statements are not guarantees of future
performance or courses of actions and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties include those described in Managements Discussion and Analysis of Financial Condition and Results of OperationsRisk Factors and elsewhere in this
Annual Report. You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this Annual Report.



PART I



Item 1.    Business.



Overview



We design, manufacture and supply advanced systems that store gaseous fuels and
monitor and control the pressure and flow of those fuels for use in internal combustion engines. Our components and systems enable internal combustion engines to operate on natural gas or propane. Our products improve efficiency, enhance power
output, and reduce emissions by electronically sensing and regulating the proper proportion of fuel and air required by the internal combustion engine. Additionally, we have extensive engineering, design and systems integration experience with our
customers requirements for product performance, durability and physical configuration. Based on over 45 years of technology development and expertise in producing cost-effective, safe and durable fuel technology systems, we believe we are
positioned to provide enabling products and technologies in the rapidly expanding alternative fuel industry.



Our customers use our components and systems on engines ranging from one to 4,000 horsepower. We provide gaseous fuel components and systems to the transportation
market and the industrial market, which includes the material handling and stationary and portable power generation markets.



A number of original equipment manufacturers, or OEMs, in the automotive, industrial and power generation industries, who are our customers, are developing
alternative clean power systems using clean burning gaseous fuels, which decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions of internal combustion engines. We offer the following products, kits and systems to these
customers:



| |  | systems integrationservices to integrate the gaseous fuel storage, fuel delivery and/or electronic control components and sub-systems to meet OEM and aftermarket requirements.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | fuel deliverypressure regulators, fuel injectors, flow control valves, and other components and systems designed to control the pressure, flow and/or metering of gaseous fuels;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | electronic controlssolid-state components and proprietary software that monitor and optimize fuel pressure and flow to meet manufacturers engine
requirements; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



1



---

##### Table of Contents

| |  | gaseous fueled internal combustion enginesengines manufactured by OEMs that are integrated with our fuel delivery and electronic control system.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



We have been producing and selling gaseous fuel systems and components for over 45
years. We sell these systems and components directly to end users, OEMs and the aftermarket through more than 400 distributors and dealers worldwide.



Our periodic and current reports are available, free of charge, as soon as reasonably practicable after such material is electronically filed with or furnished to
the SEC, on our website: www.impco.ws.Contents of our website are not incorporated into this report nor are they filed with or furnished to the SEC.



We were incorporated in Delaware in 1985 after having provided automotive and alternative fuel solutions in a variety of organizational structures since 1959.



Net consolidated revenues for the fiscal year ended December 31, 2003
were approximately $74.7 million with a net loss of $6.9 million. As discussed below in greater detail, on July 23, 2002 we spun off our Quantum division to our stockholders by distributing one share of Quantum Fuel Systems Technologies Worldwide,
Inc. (Quantum), common stock for every share of IMPCO common stock to holders of record as of July 5, 2002. Since July 23, 2002 we no longer own any interest in Quantum, and we are no longer involved in developing and marketing fuel cell
technologies, although we have entered into a three-year strategic alliance agreement with Quantum, under which we and Quantum may use jointly developed technologies in our respective markets.



Recent Developments



Capital Transactions.



On December 19, 2003 we concluded the issuance and sale of 1,500,000 shares of common stock to the selling stockholders for a price of $6.40 per share, yielding net
proceeds of approximately $9.0 million after discounts and commissions. The offering was conducted as a private placement under Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. The proceeds of this offering were used to retire
short-term debt and for working capital.



On July 22, 2003 we refinanced
our debt to retire our $11.3 million debt to Bank of America, to finance the $7.0 million deferred payment to complete the 50% acquisition of B.R.C. Societá Responsabilitá Limitata (BRC) and to provide working capital. The
debt restructuring consisted of two new loans. First, we entered into a senior subordinated secured promissory note and a related securities purchase agreement with Bison Capital Structured Equity Partners, LLC (Bison) for an aggregate
borrowing of $20.0 million, with net proceeds of $17.3 million, and we issued to an affiliate of Bison warrants to purchase up to 500,000 shares of our common stock. The Bison loan has a nominal interest rate of 11.25%, subject to certain
adjustments, and matures on July 22, 2007. Interest on the Bison loan is payable monthly in arrears. During periods in which an event of default exists under the Bison loan agreement, the interest rate increases at a rate of 0.50% per month up to a
maximum of 6 months or 3%, and in certain circumstances, interest payments during an event of default can be capitalized, or added to the principal amount outstanding. Additionally, we entered into a revolving loan and security agreement and a
related secured promissory note with LaSalle Business Credit, LLC (LaSalle). The LaSalle loan has a maximum borrowing limit of $12.0 million, with availability based upon a percentage of eligible inventory and eligible accounts
receivable, and has an adjustable interest rate of 1% above LaSalles prime rate as announced



2



---

##### Table of Contents

from time to time and matures on July 22, 2006. Interest on the LaSalle loan is payable monthly in arrears. During periods in which an event of default exists under
the LaSalle loan agreement, the interest rate increases to 2% above LaSalles prime rate. The Bison and LaSalle loans contain cross-default provisions such that an event of default existing under one loan generally constitutes an event of
default under the other.



Business Acquisition.



On October 3, 2002, we entered into an option agreement with the equity holders of
BRC. Under the option agreement, we obtained the right to purchase from those equity holders 50% of the outstanding equity interest of BRC for approximately $23.8 million, which included the issuance of approximately 2.3 million shares of Company
common stock (which the parties acknowledged and agreed were valued at $10.0 million). We announced on May 8, 2003 that we had exercised the option and that the purchase of 50% of BRC was completed pending a $7.0 million payment that represented a
deferred portion of the purchase price due on September 30, 2003. On July 22, 2003, in conjunction with the refinancing of our debt as discussed above, we paid the deferred payment of $7.0 million to the equity holders of BRC completing the
acquisition of the 50% equity interest in BRC. As of December 31, 2003, we incurred acquisition costs of approximately $24.6 million, which are shown on the consolidated balance sheets as part of investment in affiliates. The corresponding costs
incurred as of December 31, 2002 totaled $12.5 million. We use the equity method of accounting to recognize the investment in and the results of BRC in our consolidated financial results.



In accordance with the sale and purchase agreement executed in connection with the BRC investment, and subject to certain specified
conditions, we have the option to acquire from the BRC equity holders at least 90% ownership in BRC after the 2006 calendar year based upon a price determined by a multiple of Earnings Before Interest and Taxes adjusted by Depreciation and
Amortization (EBITDA) and other quantitative factors.



Change in fiscal
year.



Our fiscal year had traditionally ended on April 30, and our
fiscal quarters on July 31, October 31 and January 31. On November 14, 2002 we changed our fiscal year so that effective January 1, 2003 our fiscal year will be the calendar year. As a result, we filed a transition report on Form 10-K covering the
transition period from May 1, 2002 through December 31, 2002.



Alternative Fuel
Industry



Overview.



We focus on the alternative fuel industry. Three independent market
factorseconomics, energy independence and environmental concernsare driving the development of alternative fuel industry technology and markets. We believe the historic price differential between propane or natural gas and gasoline
drives the economics of the alternative fuel market. The price of clean fuels such as natural gas or propane are typically 40% to 60% that of traditional liquid fuels such as gasoline. By converting an internal combustion engine to run on propane or
natural gas customers can capitalize on the fuel price differential and reduce harmful vehicle emissions emitted from liquid fueled engines.



End users typically can recoup the cost of the conversion within six to eighteen months, depending on the fuel cost disparity prevailing at the time. Transportation
companies in various countries, including Australia, Mexico, India and China, are taking advantage of these economics.



3



---

##### Table of Contents

Among our most active customers are taxi companies, transit and shuttle bus companies, and companies with extensive
delivery fleets such as Coca Cola, Frito-Lay, Pepsi Cola and United Parcel Service. Small and large industrial engine users in the power generation market capitalize on the cost benefits of using alternative fuels and their low-pollutant
capabilities. For example, forklift users often operate equipment indoors where toxic emissions are a concern. In all these situations, it is relatively easy to establish centralized fueling stations. Because of the global price differential in
favor of gaseous fuels compared to gasoline, their availability in third-world markets and their lower pollutants, the alternative fuel industry market potential is growing rapidly. Approximately 57% of our revenues are derived from sales outside
the United States, of which Mexico accounted for 16% of sales and Europe accounted for 29% of sales for the fiscal year ended December 31, 2003.



In addition to economics, energy independence is a significant driver for the alternative fuel market. Many countries have significant natural gas reserves and seek
to use alternative fuels to reduce their dependence on imported oil and reduce their unfavorable balance of payments. Natural gas is generally consumed domestically since it is difficult to transport internationally in a gaseous state and liquefying
natural gas tends to be costly. Implementing OEM alternative fuel vehicles that operate on natural gas or propane can lessen the demand for gasoline. For example, the Egyptian and Chinese governments realized that rather than relying solely on
petroleum for its transportation needs, each could use natural gas in vehicles to free some of its oil production for export.



Governmental emission regulations, which support the use of clean burning alternative fuels, are also expanding the alternative fuel industry growth. The negative
environmental impact associated with liquid fossil fuels further increases the demand for systems that use clean burning fuels. Internal combustion engines are a major source of air pollution, which has led to increased government regulation and
oversight on vehicle and industrial engine emissions. The U.S. Department of Energy estimates that conventional motor vehicles fueled with natural gas emit 80% less carbon monoxide and nitrogen oxide than vehicles fueled by reformulated gasoline.
Most major international cities are experiencing significant pollution from gasoline and diesel emissions. These cities also have the largest concentrations of fleet operators, and many of these cities are taking steps to reduce emissions, typically
by implementing natural gas or propane-fueled vehicles. For example, in Mexico City, Milan and Rome, Italy the governments have taken steps such as prohibiting the use of certain vehicles on designated days of the week.



In the United States, legislative and administrative policies such as the Comprehensive
National Energy Strategy, the Clean Air Act Amendments of 1990; the Energy Policy Act of 1992; and the Organization for Economic Cooperation and Development (OECD) Environmental Committees Report on Environmentally Sustainable Transport
provide goals for energy efficiency and coupled with the Environmental Protection Agency and the California Air Resource Boards Large Spark Ignited Off-Highway Emission regulation for industrial equipment afford strict emission standards and
promote the development and implementation of alternative fuels and related technologies. All states, including California, Massachusetts, New York and Texas, have also adopted legislation targeted at reducing harmful emissions from motor vehicles,
industrial equipment, industry and consumer products. In addition, several countries, including Argentina, Canada, China, Colombia, Egypt, France, Germany, Greece, India, Italy, Mexico, Russia and the United Kingdom, have enacted air pollution
regulations or programs favoring the use of alternative fuels, including gaseous fuels such as low-carbon content propane and natural gas.





4



---

##### Table of Contents

Markets.



IMPCO is directly involved in three key-energy use market segments (transportation, industrial equipment and power generation equipment), which have seen growth in
the use of clean-burning gaseous fuels in association with other lower-emission fuel-components.



Transportation.    According to the most recent statistics from the World LP Gas Association, the International Association for Natural
Gas Vehicles (IANGV) and the European Natural Gas Association, there are over 5.7 million gaseous fuel vehicles in use worldwide: either for personal mobility, fleet conveyance or public transportation. As the worlds vehicle population
increases from 800 million to over 1.3 billion by 2020, most growth will occur in developing countries within Asia, North Africa, and areas of the Middle East. These regions currently have the lowest ratio of vehicles per one thousand people, and
are slated to grow rapidly over the next ten years as economic improvements stimulate personal vehicle ownership.



The Energy Information Administration of the U.S. Department of Energy, the World Bank, the Office of Economic and Community Development, the fifteen countries of
the European Union (EU15) and the Asian Development Bank suggests that interest in expanding the use of alternative fuel vehicles is mounting in many parts of the developed and developing world. Growth projections, reported by the Energy Information
Administration and the IANGV in comparison with current data available from the European Natural Gas Vehicle Association, indicate that over two million additional alternative fuel vehicles will be introduced worldwide by 2010. In Europe,
alternative fuel vehicles have rapidly penetrated the transportation market. The European Unions four largest natural gas-consuming members, the United Kingdom, Germany, France, and Italy, all have introduced incentives for gaseous-fueled
vehicles. The European Union has established a target to replace 20% of their liquid fueled vehicles with gaseous fuels by 2020. The Mexican Regulatory Commission of Energy estimates that Mexico will be able to increase the use of natural gas
vehicles from 2,000 in 2000 to 100,000 by 2008.



The Asia region is
emerging as a significant growth market for alternative fuel vehicles. China, already the worlds second-largest energy consumer, will continue to grow in importance on world energy markets as many forecasts suggest that strong economic growth
will drive up demand.



Industrial.    Equipment such as forklifts, aerial platforms, sweepers, turf equipment, light-duty construction equipment, mobile wood-processing equipment and other mobile industrial equipment have long been the
workhorses of developed countries, and are a significant portion of IMPCOs global activities. With developed countries such as the United States and the EU15 seeking a broader incorporation of emission sources in an attempt to further reduce
air pollution, many countries have and will legislate emission standards for this type of equipment. In the United States, the Environmental Protection Agency has enacted emission regulations for industrial off-highway equipment starting in 2004
that follows suit with Californias Large Spark Ignited mobile off-highway emission regulation initiated in 2001.



In North America alone there are more than 100,000 pieces of industrial off-highway equipment manufactured each year that use internal combustion engines. With new
emission regulations being imposed, these OEMs will require advanced technologies that permit the use of gaseous fuels in order to satisfy not only the regulation, but also the customers requirements for durability, performance and
reliability. IMPCO has developed and is currently supplying a series of advanced technology fuel systems to the industrial OEM market under the brand name Spectrum. IMPCO and its industrial brands focus on serving over 70% of the market with fuel
systems, services and emission certified engine packages.



5



---

##### Table of Contents

Power Generation.    The World Energy Outlook 2002 projects the global primary energy
demand will increase by 1.7% per year from 2000 to 2030, reaching 15.3 billion tons of oil equivalent. Even though the earths energy resources are adequate to meet this demand, the amount of investment that will be needed for these resources
to be exploited is significantly higher than has occurred in the past. For example, investment needs in the power sector are expected to be almost three times larger over the coming three decades than over the last three. Investment in the oil
industry will also have to rise sharply, as demand rises and the surplus capacity in crude oil production and refining that has characterized the industry since the 1970s is used up. Gaseous fuels such as propane and natural gas have significant
reserves available worldwide which are less costly to refine compared to crude oil and have historically been less expensive than liquid fuels. Countries like China, for example, are actively developing their infrastructure to utilize their natural
gas reserves rather than import liquid fuels.



Competitive Advantages



We believe we can extend our technological leadership position in the alternative
fuel industry based on our history of success in the designing, manufacturing and commercializing advanced fuel delivery systems and components, our relationships with leading companies in transportation and industrial markets, our financial
commitment to research and development and our proven ability to develop and commercialize new products. We believe our competitive strengths include:



Industry Leader.    We have derived a technology and product leadership position from the broad application and integration of our
technologies and enabling systems into the established and expanding alternative fuel industry. Over the past nine years we have invested approximately $130 million in research and development. This investment, coupled with our history and
experience in this industry, has provided us with a strong technology base for new product innovation for internal combustion engines, particularly in our industrial markets. Additionally, we believe our acquisition of 50% of BRC will expand our
technology and product leadership position. BRC has been developing, manufacturing and marketing alternative gaseous fuel products and systems for automobiles for more than twenty years.



Proven Manufacturing Methods.    We have more than four decades of experience in the manufacture,
development and integration of alternative fuel technologies and products. We currently maintain manufacturing and production facilities in the United States, Europe, Mexico and Australia, which produce a broad range of products and services,
including components, systems and specialty vehicle assembly. Our U.S., Australian and European facilities have achieved ISO-9000 or QS-9000 certification. QS-9000 is the common supplier quality standard for Chrysler Corporation, Ford Motor Company
and General Motors. QS-9000 applies to suppliers of production materials, production and service parts, heat-treating, painting and plating and other finishing services. ISO-9000 is a set of three individual, but related, international standards on
quality management and quality assurance. These standards were developed to document effectively the quality controls necessary to maintain efficient systems. Our 50% acquisition of BRC further expands our ability to manufacture and produce products
in Europe and South America. Additionally, BRC provides a broader manufacturing capability such as machining centers and electronic circuit board production to enable us to more readily realize cost reductions as opposed to purchasing from outside
vendors.



Strong OEM Customer
Relationships.    We currently sell products to more than 100 OEM customers in domestic and international alternative fuel markets. To date, we have sold over four million fuel systems or sub-systems globally to our
customers. We believe that the successful historic use of our products and our reputation as a leader in our industry provides a strong competitive position.



6



---

##### Table of Contents

Established Systems Integration Expertise.    As more OEMs seek to reduce costs by
outsourcing key tasks and reducing the number of suppliers, we have focused increasingly on capturing additional revenue opportunities by expanding our systems integration capabilities. In 1998, we established our Industrial Engine Systems business
in Sterling Heights, Michigan, which provides systems integration of our low-emission products for engines that are subsequently sold to industrial OEMs. We believe that our systems integration expertise, together with our proprietary and patented
technologies, give us a significant advantage in the alternative fuel markets.



Positioned for Global Growth.    With ten foreign facilities and over 400 distributors and dealers in more than 30 countries outside the United States, we believe that we are positioned to capitalize on global
growth opportunities. We believe that the alternative fuel markets will grow dramatically internationally, particularly in China, India, Japan, Mexico and Southeast Asia, because of the existing urban pollution problems and economics that favor
alternative fuels versus gasoline. Our acquisition of the BRC equity interest strengthens our global position by adding an additional 200 distributors and dealers in all 15 European nations, as well as ten Eastern European countries, and a number of
developing countries including Brazil, Argentina, Chile, Australia, India, China, Thailand and South Korea.



Business Strategy



We believe that the
successful execution of the following strategic objectives will enable us to maintain and expand our leadership position in the advanced fuel technologies industry.



Capitalize on our Strong Technology Leadership Position.    We are a leading developer and manufacturer of
fuel metering and electronic control systems for the alternative fuel industry. Management believes our position results from our current technology advantage and our investment in research and development. Our investment has permitted us to develop
and supply new technology and products to our target markets, which are transitioning to gaseous-fueled internal combustion engines, and management believes these trends will continue to grow as liquid fossil fuels become increasingly scarce and
expensive to develop. We also plan to develop new technologies and expand our product and system integration capabilities to an increasingly larger and more diversified customer base. Our 50% acquisition of BRC strengthens and broadens our
leadership position.



Focus on Advanced Fuel Technologies and
Products.    We intend to focus on advanced electronic and fuel metering technologies and products. We plan to continue our research and product development in fuel delivery and electronic control systems for alternative
fuels. We actively seek to establish joint development programs and strategic alliances with the major engine designers, manufacturers and industry leaders in these markets.



Develop and Expand Key Industry Relationships.    We plan to utilize the successful technical and business
relationships and reputation we have established worldwide with major industry leaders using alternative fuel products to enable us to establish and maintain strategic alliances, joint product development programs and joint ventures with these
companies in our target markets. We will concentrate our efforts on broadening our OEM relationships in an effort to establish strong top-tier supplier positions based on our belief that OEMs will drive industry growth in the alternative fuel
industry. The 50% purchase of BRC expands our OEM relations with countries, particularly in Latin America, Europe and Asia.



Expand and Broaden Systems Integration Expertise.    We expect to continue to broaden our capabilities to provide integration, testing,
validation and manufacturing of our products and systems into the transportation, material handling, stationary and portable power generation



7



---

##### Table of Contents

and general industrial markets. As more OEMs seek to reduce costs and shorten time to market by outsourcing key tasks and reducing numbers of suppliers, we are focused
increasingly on capturing additional revenue opportunities by expanding into value-added services, such as systems integration. For example, we have established an industrial systems unit in Michigan to integrate our products into engines that will
be sold to industrial OEMs, who in turn will install these engines into end products.



Increase Bases of Business Operations and Distributor Network in High-Growth Global Regions.    We plan to expand our operating network in high-growth regions, such as Asia, Europe and Latin America,
to take advantage of significant growth opportunities that we believe exist in those areas. We intend to capitalize on these growth opportunities through acquisitions and joint ventures, strengthening of our distributor network and developing key
local business and governmental support and recognition. In addition, our recent joint venture agreements with Minda Industries Limited India and with CNGC, a subsidiary of China National Petroleum Co., expand our presence in the Indian and Chinese
markets, respectively. Additionally, we are developing working relationships with several foreign governments. We believe that working with local governments and establishing joint ventures with local business leaders is essential to expanding into
international markets. For example, our discussions with government officials have led to our involvement in developing regulations in Mexico. Management expects that our acquisition of BRC equity interest will further expand our presence in the
global transportation market.



Expand our Global Manufacturing
Operations.    We plan to expand our current QS-9000 manufacturing operations in the United States and Mexico by establishing manufacturing sites in low-cost locations with a continued focus on quality, timely delivery and
operating efficiency. In addition, we anticipate that the manufacturing strengths of BRC, coupled with the additional product volume will result in productivity improvements.



Customers and Strategic Relationships



Our customers include some of the worlds largest OEMs and engine manufacturers, including Ashok Leyland, Boss Manufacturing, Caterpillar, Clark, Cummins,
Daewoo, Detroit Diesel, Ford Australia, GM Holden, Kohler, Komatsu, Mazda, Mitsubishi, Onan, Still and Toyota.



We are working with a number of these customers to address their future product and application requirements as they integrate more advanced, certified gaseous fuel
systems and engines into their business strategies. Additionally, we continually survey and evaluate the benefits of joint ventures, acquisitions and strategic alliances with our customers and other participants in the alternative fuel industry to
strengthen our global business position.



We have focused our strategic
alliances on our marketing strategy and/or on our development strategy. Our marketing strategy seeks to expand the distribution channels and OEM customer base for our gaseous fuel system technologies. Our development strategy is to advance the state
of technology and its application.



Quantum
Collaboration.    Our three-year agreement with Quantum provides that we will collaborate with Quantum to identify and conduct research and development programs of mutual interest. As part of those research and development
activities, we may develop technology and products separately or jointly with Quantum. The agreement also allows us to acquire and sell into our alternative fuel markets Quantums advanced technology products, including CNG storage tanks, fuel
injectors, in-tank regulators and other products, for use in automotive, bus and truck and industrial aftermarket applications and in the bus and truck and industrial OEM markets. For jointly developed products, we and Quantum will jointly own any



8



---

##### Table of Contents

patent or other intellectual property rights and will issue royalty-free cross licenses covering our respective markets. For separately developed products, each party
will grant the other a right to sell the affected products in their respective markets. The developing party will retain sole intellectual property ownership.



We believe that the ongoing Quantum alliance will expedite the commercialization and integration of advanced gaseous storage and handling systems and products
into our broader global alternative fuel markets, including automotive after-market, material handling, portable and stationary internal combustion engine-based power generation, and general industrial markets. In addition, we believe that the
spin-off will enable IMPCO to optimize its growth strategies as a separate, stand-alone entity, based on its capitalization and financing requirements, acquisition strategies, working capital requirements, projected cash flows from operations and
credit ratings.



Management plans to establish similar relationships with
leading manufacturers by using our systems integration capabilities and our leading technology position in gaseous fuel products and systems.



Products and Services



Our products include gaseous fuel regulators, fuel metering, fuel shut-off valves, fuel delivery systems, complete engine systems, and electronic controls for use
in internal combustion engines for the transportation, material handling, stationary and portable power generator and general industrial markets. In addition to these core products, which we manufacture, we also design, assemble and market ancillary
components required for complete systems operation on alternative fuels.



All of our products are designed, tested and validated in accordance with our own internal requirements, as well as tested and certified with major regulatory and safety agencies throughout the world, including Underwriters Laboratories
(UL) in North America and TÜV in Europe. The following table describes the features of our products:



|                |  |   |  |                                                                                                                                
|--------------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------
|Products        |  |   |  | Features                                                                                                                       
|Fuel Metering   |  |  |  | Designed to operate on propane, natural gas or digester gas fuels                                                              
|                |  |  
|                |  |  |  | Electronic control overlays allow integration with modern emissions monitoring systems for full emissions compliance capability
|                |  |  
|                |  |  |  | Designed for high resistance to poor fuel quality                                                                              
|                |  |  
|Fuel Regulation |  |  |  | Reduces pressure of gaseous and liquid fuels                                                                                   
|                |  |  
|                |  |  |  | Vaporizes liquid fuels                                                                                                         
|                |  |  
|                |  |  |  | Handles a wide range of inlet pressures                                                                                        
|                |  |  
|Fuel Shut-Off   |  |  |  | Mechanically or electronically shuts off fuel supply to the regulator and engine                                               
|                |  |  
|                |  |  |  | Available for low-pressure vapor natural gas and high-pressure liquid propane                                                  
|                |  |  
|                |  |  |  | Designs also incorporate standard fuel filtration to ensure system reliability                                                 



9



---

##### Table of Contents

|                       |  |   |  |                                                                                                                                                      
|---------------------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Products               |  |   |  | Features                                                                                                                                             
|                       |  |  
|Electronics & Controls |  |  |  | Provides closed loop fuel control, allowing integration with existing sensors to ensure low emissions                                                
|                       |  |  
|                       |  |  |  | Integrates gaseous fuel systems with existing engine management functions                                                                            
|                       |  |  
|Engine Systems         |  |  |  | Turnkey kits for a variety of engine sizes and applications                                                                                          
|                       |  |  
|                       |  |  |  | Customized applications interface per customer requirements                                                                                          
|                       |  |  
|Full Systems           |  |  |  | Complete vehicle and equipment systems for aftermarket conversion                                                                                    
|                       |  |  
|                       |  |  |  | Complete engine and vehicle management systems for heavy-duty engine on-highway truck and bus operation on natural gas                               
|                       |  |  
|                       |  |  |  | Complete engine and vehicle management systems for off-highway and industrial engines used for material handling, pumping and industrial applications



Services.    We provide a broad range of services to both our product customer base and the broader service marketplace. These services fall into the following key areas:



|                               |  |   |  |                                                                                                                                                                      
|------------------------------ |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Services                       |  |   |  | Capabilities                                                                                                                                                         
|Design and Systems Integration |  |  |  | Strong team of applications engineers for component, system and engine level exercises providing support to customers in the application of our gaseous fuel products
|                               |  |  
|                               |  |  |  | Applications engineering services for whole vehicle/machine integration outside of our products                                                                      
|                               |  |  
|                               |  |  |  | Full three dimensional design modeling and component rapid prototyping services                                                                                      
|                               |  |  
|Certification                  |  |  |  | Certification of component products and services in line with the requirements of California Air Resources Board for off-highway engines                             
|                               |  |  
|                               |  |  |  | Provide customers with the required tools to manage in-field traceability and other requirements beyond initial emission compliance                                  
|                               |  |  
|Testing and Validation         |  |  |  | Component endurance testing                                                                                                                                          
|                               |  |  
|                               |  |  |  | Component thermal and flow performance cycling                                                                                                                       
|                               |  |  
|                               |  |  |  | Engine and vehicle testing and evaluation for performance and emissions                                                                                              



10



---

##### Table of Contents

|                                   |  |   |  |                                                                                                                                                                   
|---------------------------------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Services                           |  |   |  | Capabilities                                                                                                                                                      
|                                   |  |  
|Sub-System Assembly                |  |  |  | Pre-assembled modules for direct delivery to customers production lines                                                                                          
|                                   |  |  
|                                   |  |  |  | Sourcing and integrating second and third tier supplier components                                                                                                
|                                   |  |  
|Training and Technical Service     |  |  |  | Complete technical service support, including technical literature, web-based information, direct telephone interface (in all major countries) and on-site support
|                                   |  |  
|                                   |  |  |  | Training services through sponsored programs at approved colleges, at our facilities worldwide and on-site at customer facilities                                 
|                                   |  |  
|Service Parts and Warranty Support |  |  |  | Access to service parts network, along with direct support in development of customers own internal service parts programs and procedures                        
|                                   |  |  
|                                   |  |  |  | Warranty and replacement services for our customers worldwide                                                                                                     



Sales and Distribution



We sell products through a worldwide network encompassing more than 400 distributors
and dealers in over 30 countries and through a sales force that develops sales with OEMs and large end-users. We focus on two markets: 1) the industrial market which includes material handling OEMs and aftermarket and stationary and portable power
generation OEMs and aftermarket, and 2) the transportation OEM and aftermarket. Of these markets, we believe that the greatest potential for immediate growth is in the Latin America and Asia Pacific regions in the transportation OEM and aftermarket
and in North America in the industrial OEM and aftermarket.



For the
fiscal year ended December 31, 2003, sales to distributors (including company-owned distributors) accounted for 45% of our net revenue and sales to OEM customers accounted for approximately 55% of our net revenue. During the transition period
beginning May 1, 2002 and ending December 31, 2002, sales to distributors accounted for 56% of our net revenue and sales to OEM customers accounted for 44% of net revenues. This change is due to increased revenues to OEM domestic customers.



Our company-owned distributors are included in our International
Operations segment and consist of our subsidiaries located in Europe, Australia, Mexico, Japan, India and China, which are responsible for sales, application and market development and technical service. Additionally, these subsidiaries provide
sales support, application development and technical support to aftermarket and OEM customers.



Manufacturing



We manufacture and assemble products at
our facilities in Cerritos, California, Sterling Heights, Michigan and at our international facilities. Current manufacturing operations consist primarily of mechanical assembly and light machining. We rely on outside suppliers for parts and
components and obtain components for products from a variety of domestic and foreign



11



---

##### Table of Contents

automotive and electronics suppliers, die casters, stamping operations, specialized diaphragm manufacturers and machine shops. For the fiscal year ended December 31,
2003, ten suppliers accounted for approximately 71% of our raw material purchases. During our fiscal years 2001 and 2002, the transition period ended December 31, 2002, and the fiscal year ended December 31, 2003, General Motors Corporation, and
affiliates of General Motors, accounted for approximately 29%, 9%, 12% and 33% respectively, of purchases. . During our fiscal years 2001 and 2002, the transition period ended December 31, 2002, and the fiscal year ended December 31, 2003, Rangers
Die Casting Company accounted for approximately 12%, 8%, 8% and 7%, respectively, of purchases.



Material costs and machined die cast aluminum parts represent the major components of cost of sales. Coordination with suppliers for quality control and timely
shipments is a high priority to maximize inventory management. We use a computerized material requirement planning system to schedule material flow and balance the competing demands of timely shipments, productivity and inventory management. All of
our U.S. manufacturing facilities are ISO-9001 or QS-9001 certified.



Research and
Development



Our research and development facility near Seattle,
Washington is dedicated to the research and development of systems and products that support the use of gaseous fuels in internal combustion engines. This facility has sophisticated, state-of-the-art research laboratories, emissions control
equipment, and testing equipment. Our research and development is focused on fuel delivery and electronic control systems and products for motor vehicles, engines, forklifts, stationary engines and small industrial engines.



We have the following technical capabilities:



| |  | Electronic Control Systems.Specialization in hardware design and selection, engine modeling, calibration and software design for engine and emission controls;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Mechanical Design and Development.    Specialization in pneumatic, kinematics, hydraulic components and systems and advanced materials, structural, flow and thermal
analysis;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Advanced Catalysts.    Catalyst and emission testing;
| | - | -----------------------------------------------------



| |  | Advanced Products.    Injectors, pressure sensors and bi-directional mass flow sensors, fuel management, mass flow sensors for natural gas measurement and
smart sensors using 8-bit micro-controllers; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Component, Subsystem and Engine System Test Facilities.    Extended vibrations, shock loads and accelerations, flow simulations and pneumatic leak checks.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



We believe this facility is a critical component in our
ability to maintain our technological leadership position in alternative fuel enabling systems.



We conduct alternative fuel application development at the following facilities:



| |  | Cerritos, California for the power generation market;
| | - | -----------------------------------------------------



| |  | Seattle, Washington for the transportation market and industrial markets;
| | - | -------------------------------------------------------------------------



| |  | Sterling Heights, Michigan for the industrial market.
| | - | -----------------------------------------------------



| |  | Rijswijk, Holland for the industrial and transportation market; and
| | - | -------------------------------------------------------------------



| |  | Cheltenham, Australia for the transportation market.
| | - | ----------------------------------------------------



These facilities encompass a total of approximately 100,000 square feet of laboratory space, and we have more than 50 employees at these facilities.



12



---

##### Table of Contents

Competition



We are a leading provider of alternative fuel systems. We provide products and integrated services for all gaseous fuels in our target markets for use in all end
user applications in the alternative fuel industry.



Our key competitors
in gaseous fuel delivery products, accessory components and engine conversions markets include Aisan, Koltec-Necam, Landi Renzo, Lovato, OMVL and Tartarini, which together with us account for a majority of the world market for alternative fuel
products and services. These competitors compete with us primarily in the transportation markets. In the future, we may face competition from traditional automotive component suppliers, such as Bosch, Delphi, Siemens and Visteon, and from motor
vehicle OEMs that develop fuel systems internally.



We believe that our
competitive advantage over current and future competitors is our technology leadership derived from many years of experience with alternative gaseous fuels. Our current competitors typically focus on fuel injection and individual components. We are
unique in being able to offer complete integrated fuel systems based on our own advanced technologies, including gaseous fuel storage, fuel metering, and electronic controls.



Product Certification



We must obtain emission compliance certification from the Environmental Protection Agency to sell certain of our products in the United States and from the
California Air Resources Board to sell certain products in California. Each car, truck or van sold in the U.S. market must be certified by the Environmental Protection Agency before it can be introduced into commerce and its products must meet
component, subsystem and system level durability, emission, refueling and various idle tests. In California, both on-road and off-road vehicles have emission compliance regulation. We have also obtained international emissions compliance
certification in Argentina, Australia, Brazil, Canada, Chile, Europe and Mexico.



We strive to meet stringent industry standards set by various regulatory bodies, including the Federal Motor Vehicle Safety Standards of the United States, the National Highway and Transportation Safety Administration, the National Fire
Protection Association, Underwriters Laboratories and American Gas. Approvals enhance the acceptability of our products in the domestic marketplace. Many foreign countries also accept these agency approvals as satisfying the approval for
sale requirements in their markets.



Backlog



As of March 8, 2004, our backlog for our products was $32.0 million as compared to
$13.5 million on February 28, 2003. We measure backlog for our product sales from the time orders become irrevocable, which generally occurs 90 days prior to the planned delivery date. Some of our backlog may not be shipped, and revenues from such
shipments may not be recognized in Fiscal 2004, or not at all.



Employees



As of December 31, 2003, we employed approximately 373 persons. Of
these employees, our U.S. Operations employed approximately 245 and 128 were employed by our International Operations. None of our employees are represented in a collective bargaining agreement. Management considers our relations with our employees
to be good.



Intellectual Property



We currently rely primarily on patent and trade secret laws to protect our
intellectual property. We currently have 11 U.S. patents and 15 foreign patents issued. Our U.S. patents began expiring in October 2002 and will expire on various dates until May 2020. We do not expect the expiration of our patents to have a
material affect on our revenues.



13



---

##### Table of Contents

We also rely on a combination of trademark, trade secret and other intellectual property laws and various contract
rights to protect our proprietary rights. However, we cannot be sure that these intellectual property rights provide sufficient protection from competition. We believe that copyright, trademark and trade secret protection are less significant than
our patents and that our growth and future success will be more dependent on factors such as the knowledge, ability and experience of our personnel, new product introductions and continued emphasis on research and development. We believe that
establishing and maintaining strong strategic relationships with valued customers and OEMs are the most significant factors protecting us from new competitors.



Item 2.    Properties.



Facilities



Our executive offices and our Gaseous Fuel Products division are located in Cerritos, California. We currently lease additional manufacturing, research and development and general office facilities in the following locations
set forth below:



|                           |  |                                                                   |  |               
|-------------------------- |  | ----------------------------------------------------------------- |  | --------------
|Location                   |  | Principal Uses                                                    |  | Square Footage
|                           |  |                                                                  
|Cerritos, California       |  | Corporate offices; manufacturing; design, development and testing |  | 105,000       
|                           |  |                                                                  
|Sterling Heights, Michigan |  | Sales, marketing application, development and assembly            |  | 78,000        
|                           |  |                                                                  
|Seattle, Washington        |  | Research and development                                          |  | 26,000        
|                           |  |                                                                  
|Rijswijk, Holland          |  | Sales, marketing application, development and assembly            |  | 16,000        
|                           |  |                                                                  
|Cheltenham, Australia      |  | Sales, marketing application, development and assembly            |  | 15,000        
|                           |  |                                                                  
|Sydney, Australia          |  | Sales, marketing and assembly                                     |  | 7,500         
|                           |  |                                                                  
|Mexico City, Mexico        |  | Sales, marketing application, development and assembly            |  | 12,000        
|                           |  |                                                                  
|Gurgaon, India             |  | Sales, marketing application, development and assembly            |  | 18,000        
|                           |  |                                                                  
|Fukuoka, Japan             |  | Sales, marketing and assembly                                     |  | 4,000         
|                           |  |                                                                  
|Cherasco, Italy*           |  | Sales, marketing application, development and assembly            |  | 250,000       



*The Cherasco, Italy facility is
operated by our unconsolidated subsidiary, BRC.



We also lease nominal
amounts of office space in France and the United Kingdom.



We believe our
facilities are presently adequate for our current core product manufacturing operations and OEM development programs and production.



Item 3.    Legal Proceedings.



We are not currently a party to any material legal proceeding. However, we may from time to time become involved in litigation relating to claims arising in the
ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources.



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



No Matters were submitted for the vote or approval of our security holders during the quarter ended December 31, 2003.



14



---

##### Table of Contents

PART II



Item 5.    Market for Companys Common Equity and Related Stockholder Matters.



Our common stock is traded on the Nasdaq National Market under the symbol IMCO. The following table sets forth, for the
periods indicated, the closing high and low sale prices of our common stock as reported on the Nasdaq National Market. Closing high and low sale prices for fiscal year 2002 and the eight-month transition period ended December 31, 2002 have been
adjusted for the Quantum spin-off on July 23, 2002.



|                                                          |  |      |       |     |   |      
|--------------------------------------------------------- |  | ---- | ----- | --- | - | -----
|                                                          |  | High |       | Low
|Fiscal Year Ended April 30, 2002                          |  |      |       |     |   |      
|First Quarter                                             |  | $    | 22.40 |     | $ | 13.33
|Second Quarter                                            |  | $    | 16.48 |     | $ | 6.14 
|Third Quarter                                             |  | $    | 9.84  |     | $ | 6.10 
|Fourth Quarter                                            |  | $    | 9.43  |     | $ | 5.59 
|Eight-month Transition Period Ended December 31, 2002 (1) |  |      |       |     |   |      
|May 1, 2002  June 30, 2002                               |  | $    | 7.95  |     | $ | 4.50 
|July 1, 2002  September 30, 2002                         |  | $    | 5.51  |     | $ | 2.48 
|October 1, 2002  December 31, 2002                       |  | $    | 4.95  |     | $ | 3.88 
|Fiscal Year Ended December 31, 2003                       |  |      |       |     |   |      
|First Quarter                                             |  | $    | 4.65  |     | $ | 2.01 
|Second Quarter                                            |  | $    | 6.15  |     | $ | 1.85 
|Third Quarter                                             |  | $    | 8.33  |     | $ | 5.20 
|Fourth Quarter                                            |  | $    | 8.82  |     | $ | 6.19 

---

|(1) | On November 14, 2002, we changed our fiscal year end to December 31.
|--- | --------------------------------------------------------------------



On March 17, 2004 the closing sale price of our common stock on The Nasdaq National Market was $5.08 per share. As of January 9, 2004, there were
approximately 517 holders of record of our common stock.



Dividend Policy



The Company has never paid dividends on its common stock. We
previously paid cumulative cash dividends to the holders of our 1993 Series 1 Preferred Stock. On March 31, 1999, each share of preferred stock was converted into shares of our common stock. As a result, after March 31, 1999, we have no shares of
preferred stock outstanding and have no obligation to pay any further dividends on those shares.



We currently intend to retain any earnings for use in developing and growing our business and do not anticipate paying any cash dividends on our common stock in the
foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on our results of operations, financial condition, contractual restrictions, restrictions imposed by
applicable law and other factors deemed relevant by the board of directors.



Item
6.    Selected Financial Data.



The following
table sets forth our selected consolidated financial data for the year ended December 31, 2003 and each of the four fiscal years ended April 30, 2002, 2001, 2000, 1999 and for the eight-month transition period ended December 31, 2002, as well as a
comparative eight-month period ended December 31, 2001. With the exception of the comparative eight month period ended December 31, 2001, which has been derived from our unaudited financial data, this data has been derived from our audited
consolidated financial



15



---

##### Table of Contents

statements and should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein. The financial
results of Quantum are shown below as a loss on discontinued operation, net of tax.



|                                                          |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------------- | - | ------ | ---------------------------- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                          |  | Fiscal Year Ended April 30, |        |   | Eight Months Ended December 31, |   |        | Fiscal YearEndedDecember 31, | 
|                                                          |  | 1999                        |        |   | 2000                            |   |        | 2001                         |  |   | 2002    |   |  | 2001 |         |   | 2002 |   |         | 2003 | 
|Statement of Operations:                                  |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Revenue                                                   |  | $                           | 62,358 |   |                                 | $ | 90,475 |                              |  | $ | 80,539  |   |  | $    | 67,676  |   |      | $ | 45,707  |      |  | $ | 46,421  |   |  | $ | 74,740  |  
|Cost and expenses:                                        |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Cost of sales                                             |  |                             | 36,832 |   |                                 |   | 54,718 |                              |  |   | 49,499  |   |  |      | 44,542  |   |      |   | 29,185  |      |  |   | 33,071  |   |  |   | 51,780  |  
|Research and development expense                          |  |                             | 2,710  |   |                                 |   | 2,620  |                              |  |   | 5,870   |   |  |      | 5,856   |   |      |   | 3,712   |      |  |   | 2,635   |   |  |   | 3,803   |  
|Selling, general and administrative                       |  |                             | 12,420 |   |                                 |   | 17,849 |                              |  |   | 18,562  |   |  |      | 19,676  |   |      |   | 13,075  |      |  |   | 11,922  |   |  |   | 19,638  |  
|Operating income (loss)                                   |  |                             | 10,396 |   |                                 |   | 15,289 |                              |  |   | 6,610   |   |  |      | (2,399  | ) |      |   | (266    | )    |  |   | (1,207  | ) |  |   | (481    | )
|Interest expense                                          |  |                             | 1,213  |   |                                 |   | 1,524  |                              |  |   | 1,088   |   |  |      | 1,164   |   |      |   | 933     |      |  |   | 995     |   |  |   | 4,039   |  
|Interest income                                           |  |                             | 43     |   |                                 |   | 82     |                              |  |   | 1,309   |   |  |      | 236     |   |      |   | 112     |      |  |   | 112     |   |  |   |        |  
|Gain on sale of subsidiary (1)                            |  |                             | 2,169  |   |                                 |   |       |                              |  |   |        |   |  |      |        |   |      |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations (net of tax) (4) |  |                             | 9,161  |   |                                 |   | 10,033 |                              |  |   | 3,674   |   |  |      | (2,220  | ) |      |   | (908    | )    |  |   | (25,279 | ) |  |   | (6,900  | )
|Loss on discontinued operation (net of tax)               |  |                             | (2,830 | ) |                                 |   | (6,968 | )                            |  |   | (16,777 | ) |  |      | (25,016 | ) |      |   | (17,908 | )    |  |   | (3,115  | ) |  |   |        |  
|Net income (loss)                                         |  |                             | 6,311  |   |                                 |   | 3,065  |                              |  |   | (13,103 | ) |  |      | (27,237 | ) |      |   | (18,816 | )    |  |   | (28,394 | ) |  |   | (6,900  | )
|Dividends on preferred stock                              |  |                             | 531    |   |                                 |   |       |                              |  |   |        |   |  |      |        |   |      |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss) applicable to common stock              |  | $                           | 5,800  |   |                                 | $ | 3,065  |                              |  | $ | (13,103 | ) |  | $    | (27,237 | ) |      | $ | (18,816 | )    |  | $ | (28,394 | ) |  | $ | (6,900  | )
|Net income (loss) per share (1)(2):                       |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Basic:                                                    |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations                  |  | $                           | 1.26   |   |                                 | $ | 1.18   |                              |  | $ | 0.37    |   |  | $    | (0.20   | ) |      | $ | (0.09   | )    |  | $ | (1.76   | ) |  | $ | (0.41   | )
|Loss from discontinued operation                          |  | $                           | (0.39  | ) |                                 | $ | (0.82  | )                            |  | $ | (1.69   | ) |  | $    | (2.25   | ) |      | $ | (1.71   | )    |  | $ | (0.22   | ) |  | $ |        |  
|Net income (loss)                                         |  | $                           | 0.80   |   |                                 | $ | 0.36   |                              |  | $ | (1.32   | ) |  | $    | (2.45   | ) |      | $ | (1.80   | )    |  | $ | (1.98   | ) |  | $ | (0.41   | )
|Diluted:                                                  |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations                  |  | $                           | 1.03   |   |                                 | $ | 1.09   |                              |  | $ | 0.33    |   |  | $    | (0.20   | ) |      | $ | (0.09   | )    |  | $ | (1.76   | ) |  | $ | (0.41   | )
|Loss from discontinued operations                         |  | $                           | (0.32  | ) |                                 | $ | (0.76  | )                            |  | $ | (1.52   | ) |  | $    | (2.25   | ) |      | $ | (1.71   | )    |  | $ | (0.22   | ) |  | $ |        |  
|Net income (loss)                                         |  | $                           | 0.71   |   |                                 | $ | 0.33   |                              |  | $ | (1.19   | ) |  | $    | (2.45   | ) |      | $ | (1.80   | )    |  | $ | (1.98   | ) |  | $ | (0.41   | )
|Number of shares used in per share computation (2)(3):    |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                     |  |                             | 7,293  |   |                                 |   | 8,489  |                              |  |   | 9,935   |   |  |      | 11,098  |   |      |   | 10,445  |      |  |   | 14,376  |   |  |   | 16,643  |  
|Diluted                                                   |  |                             | 8,976  |   |                                 |   | 9,232  |                              |  |   | 11,049  |   |  |      | 11,098  |   |      |   | 10,445  |      |  |   | 14,376  |   |  |   | 16,643  |  
|Balance Sheet Data:                                       |  |                             |        |   |                                 |   |        |                              |  |   |         |   |  |      |         |   |      |   |         |      |  |   |         |   |  |   |         |  
|Total current assets                                      |  | $                           | 52,120 |   |                                 | $ | 73,385 |                              |  | $ | 79,636  |   |  | $    | 61,825  |   |      | $ | 60,439  |      |  | $ | 35,243  |   |  | $ | 44,129  |  
|Total assets                                              |  |                             | 73,562 |   |                                 |   | 95,016 |                              |  |   | 120,763 |   |  |      | 123,449 |   |      |   | 117,270 |      |  |   | 75,978  |   |  |   | 101,136 |  
|Total current liabilities                                 |  |                             | 16,892 |   |                                 |   | 23,756 |                              |  |   | 28,089  |   |  |      | 33,110  |   |      |   | 20,332  |      |  |   | 24,038  |   |  |   | 21,990  |  
|Long-term obligations, less current portion               |  |                             | 13,894 |   |                                 |   | 23,344 |                              |  |   | 7,998   |   |  |      | 5,393   |   |      |   | 25,236  |      |  |   | 101     |   |  |   | 19,195  |  
|Stockholders equity                                      |  |                             | 41,449 |   |                                 |   | 45,379 |                              |  |   | 82,631  |   |  |      | 82,678  |   |      |   | 69,401  |      |  |   | 49,622  |   |  |   | 57,129  |  

---

|(1) | Represents gain on sale of 49% interest in IMPCO BV by BERU Aktiengesellschaft during fiscal 1999. We recorded a pre-tax gain of $2.2 million and an after-tax gain of $1.8 million or $0.20
per share.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | During fiscal year 1999, all of our preferred stock was converted to common stock and the diluted earnings per share was calculated as though the conversion occurred at the beginning of
fiscal year 1999.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | See note 1 of the notes to the consolidated financial statements included elsewhere in this Form 10-K for an explanation of the method used to determine the number of shares used to compute
the net income per share.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes in the eight months ended December 31, 2002 a $24.0 million valuation allowance to establish a reserve for the deferred tax assets that are unlikely to be realized in the next three
years (See Critical Accounting Policies beginning at p. 19 below)
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

Item 7.    Managements Discussion and Analysis of Financial
Condition and Results of Operations.



You should read this
discussion together with the financial statements and notes thereto and the other financial information included in this Annual Report on Form 10-K. Some of the information discussed in this section represents forward looking statements
within the meaning of federal securities laws. Please refer to the Note Regarding Forward Looking Statements at the top of page 1 when reviewing the following discussions.



Overview



We design, manufacture and supply components that store gaseous fuels and monitor and control the pressure and flow of those fuels for use in internal combustion
engines. Historically, most of our revenues have been derived from the sale of the products that enable traditional internal combustion engines to run on clean burning alternative fuels such as propane and natural gas instead of gasoline. Based on
over 45 years of technology development and expertise in producing cost-effective, safe, and durable fuel technology systems for engines, we believe that we are positioned to provide enabling products and technologies in the rapidly expanding
alternative fuel industry.



Our U.S. Operations division sells products,
including parts and conversion systems, for applications in the transportation and industrial markets, which include the material handling, stationary and portable power generator and general industrial markets. Our International Operations division
provides distribution for our products in Asia, Australia, Europe, India, Japan and Mexico, predominantly from our U.S. Operations division and some product assembly. We classify the results of the Quantum division, which was spun-off in July 2002,
as a discontinued operation on our consolidated financial statements.



Recent
Developments



Quantum Spin-off.



On July 23, 2002, we completed the distribution and spin-off of our Quantum division
by distributing one share of Quantum common stock for every share of IMPCO common stock held on the record date, which was July 5, 2002. Since we completed the Quantum spin-off in July 2002 we no longer are engaged in fuel cell technology research,
although we do have a continuing collaboration arrangement for certain research and development activities. We believe that the spin-off enables IMPCO to optimize its growth strategies as a separate, stand-alone entity, based on its prospective
capitalization and financing requirements, acquisition strategies, working capital requirements, projected cash flows from operations and desired credit ratings.



We have included a discussion on the Quantum reporting segment since the financial results of Quantum were included in the transition
period ended December 31, 2002 and our fiscal years ended April 30, 2001 and 2002 consolidated results of operations. As a result of the spin-off of Quantum, we have reported Quantum as a discontinued operation. Readers should note that financial
data that includes periods before the Quantum spin-off may not present a meaningful comparison with later periods because of the effect of the discontinued operation. Management expects the Quantum spin-off to have a favorable effect on our results
of operations and cash flows from operations.



17



---

##### Table of Contents

Capital Transactions.



On December 19, 2003 we concluded the issuance and sale of 1,500,000 shares of common stock to certain institutional investors at $6.40 per share, yielding net
proceeds of approximately $9.0 million after discounts and commissions. The offering was conducted as a private placement under Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. The proceeds of this offering were used to retire
short-term debt and for working capital.



On July 22, 2003 we refinanced
our debt to retire our $11.3 million debt to Bank of America, to finance the $7.0 million deferred payment to complete the 50% acquisition of B.R.C. Societá Responsabilitá Limitata (BRC), and to provide working capital. The
debt restructuring consisted of two new loans. First, we entered into a senior subordinated secured promissory note and a related securities purchase agreement with Bison Capital Structured Equity Partners, LLC (Bison) for an aggregate
borrowing of $20.0 million, with net proceeds of approximately $17.3 million, and we issued to an affiliate of Bison warrants to purchase up to 500,000 shares of our common stock. The Bison loan has a nominal interest rate of 11.25%, subject to
certain adjustments, and matures on July 22, 2007. Interest on the Bison loan is payable monthly in arrears. During periods in which an event of default exists under the Bison loan agreement, the interest rate increases at a rate of 0.50% per month
up to a maximum of 6 months or 3%, and in certain circumstances, interest payments during an event of default can be capitalized, or added to the principal amount outstanding. Additionally, we entered into a revolving loan and security agreement and
a related secured promissory note with LaSalle Business Credit, LLC (LaSalle). The LaSalle loan has a maximum borrowing limit of $12.0 million, with availability based upon a percentage of eligible inventory and eligible accounts
receivable, and has an adjustable interest rate of 1% above LaSalles prime rate as announced from time to time and matures on July 22, 2006. Interest on the LaSalle loan is payable monthly in arrears. During periods in which an event of
default exists under the LaSalle loan agreement, the interest rate increases to 2% above LaSalles prime rate. The Bison and LaSalle loans contain cross-default provisions such that an event of default existing under one loan generally
constitutes an event of default under the other. At December 31, 2003 the amount borrowed under the LaSalle facility was $5.2 million with $1.8 million of availability. See also Liquidity and Capital Resources.



On October 3, 2002, we entered into an option agreement with the equity holders of BRC.
Under the option agreement, we obtained the right to purchase from those equity holders 50% of the outstanding equity interest of BRC for approximately $23.8 million, which included the issuance of approximately 2.3 million shares of Company common
stock (which the parties acknowledged and agreed were valued at $10.0 million). We announced on May 8, 2003 that we had exercised the option and that the purchase of 50% of BRC was completed pending a $7.0 million payment that represented a deferred
portion of the purchase price due on September 30, 2003. On July 22, 2003, immediately after the refinancing of our debt as discussed above, we paid the deferred payment of $7.0 million to the equity holders of BRC completing the acquisition of the
50% equity interest in BRC. As of December 31, 2003, we had incurred acquisition costs of approximately $24.6 million, which are shown on the consolidated balance sheet as part of investment in affiliates. The corresponding costs incurred as of
December 31, 2002 totaled $12.5 million. We use the equity method of accounting to recognize the investment in and the results of BRC in our consolidated financial results.



In accordance with the sale and purchase agreement executed in connection with the BRC investment, and subject to certain specified
conditions, we have the option to acquire from the BRC equity holders at least 90% ownership in BRC after the 2006 calendar year based upon a price determined by a multiple of Earnings Before Interest and Taxes adjusted by Depreciation and
Amortization (EBITDA) and other quantitative factors. We believe the acquisition of 50%



18



---

##### Table of Contents

of BRC affords us a valuable strategic opportunity to expand in markets that are complementary to the traditional IMPCO markets for industrial applications. M.T.M.
S.r.l., a subsidiary of BRC, has been developing, manufacturing and marketing alternative gaseous fuel products and systems for automobiles for more than twenty years. We believe BRC is a leader in the transportation sector of the gaseous fuels
products market. BRC conducts business in all fifteen European Union nations, as well as ten Eastern European countries and a number of developing nations including Brazil, Argentina, Chile, Australia, India, China, Thailand and South Korea. We
believe this relationship with BRC will enable us to expand our position in end-user markets across a vast portion of the world. In addition, we anticipate that the manufacturing strengths of BRC, coupled with the additional product volume we hope
to derive from the relationship, should result in significant productivity improvements. Furthermore, we believe that this agreement places us in the position to exploit our combined technology and product strengths through a strong global
representation in the emerging alternative fuels industry.



Change of Fiscal Year



Our fiscal year had traditionally ended on April 30, and our fiscal
quarters on July 31, October 31 and January 31. On November 14, 2002 we changed our fiscal year so that effective January 1, 2003 our fiscal year will be the calendar year. Accordingly, we filed a transition report for the eight-month period ended
December 31, 2002 and this Annual Report for the fiscal year ended December 31, 2003 on Form 10-K, respectively.



Critical Accounting Policies and Estimates



The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, goodwill, taxes, inventories, warranty obligations, long-term service contracts, and
contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of
our consolidated financial statements:



We recognize revenue for product
sales when title is transferred, ordinarily when products are shipped, and when management is reasonably assured of collectibility. We provide for returns and allowances as circumstances and facts require.



We provide for the estimated cost of product warranties at the time revenue is
recognized. While we engage in product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service
delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.



We write down our inventory for estimated obsolescence and unmarketable inventory equal
to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less



19



---

##### Table of Contents

favorable than those projected by management, additional inventory write-downs may be required.



We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required.



We annually evaluate the carrying value of goodwill and other intangible assets using the impairment method. If the carrying value of
the net assets and liabilities underlying the goodwill recorded on the financial statements exceeds the fair value of the net assets and liabilities based on discounted cash flows, an impairment charge is recognized against goodwill following a
restatement of the tangible assets and liabilities at fair values.



We
operate wholly owned and majority owned subsidiaries. We recorded goodwill at the time of purchase for the amount of the purchase price over the fair value of the assets and liabilities acquired. Future adverse changes in market conditions or poor
operating results of underlying investments could result in losses or an inability to recover the carrying value of the goodwill, thereby possibly requiring an impairment charge in the future.



We record a deferred tax asset and assess the adequacy of a valuation allowance for the
purpose of carrying a net deferred tax asset at an amount that we believe will be recovered in the next three years. During the transition period ended December 31, 2002 and during the year ended December 31, 2003, we recorded $24.0 million and $2.5
million, respectively, for valuation allowances for that portion of deferred tax assets that we believe is less likely than not to be realized in the next three years. We consider our recent operating results, future taxable income and ongoing
prudent and feasible tax planning strategies in determining the amount of the valuation allowance required for the portion of the deferred tax asset that is not likely to be realized in the next three years, notwithstanding that a significant
portion of our deferred tax assets may have a longer life under applicable tax laws. On a quarterly basis, we continue to analyze the deferred tax asset and the reserve required for the portion of the asset that is unlikely to be realized in the
next three years. Future adverse changes in market conditions, poor operating results or a decline in our projections about future profitability may affect our assessment of the adequacy of the reserve. In the event that we determine that it is more
likely than not that we would be unable to realize an additional portion of our net deferred tax asset, an additional adjustment to the deferred tax asset valuation allowance would be charged to income in the period such determination was made.



20



---

##### Table of Contents

Results of Operations



Fiscal Year Ended December 31, 2003 and Twelve-Month Period ended December 31, 2002



In November 2002, we changed our fiscal year-end from April 30 to December 31. The basis of comparison for the discussion that follows
for the fiscal year ended December 31, 2003 consists of the eight months ended December 31, 2002, the three months ended April 30, 2002 and the month ended January 31, 2002. We have provided (in thousands of dollars) summary of the consolidated
statement of operations for 2002:



|                                            |  |                             |        |   |                                  |   |        |                                     |  |   |                             |   |  |   |         |  
|------------------------------------------- |  | --------------------------- | ------ | - | -------------------------------- | - | ------ | ----------------------------------- |  | - | --------------------------- | - |  | - | ------- | -
|                                            |  | Month Ended January 31,2002 |        |   | Three Months Ended April 30,2002 |   |        | Eight Months Ended December 31,2002 |  |   | Year Ended December 31,2002 |  
|Revenues                                    |  | $                           | 5,236  |   |                                  | $ | 16,733 |                                     |  | $ | 46,421                      |   |  | $ | 68,390  |  
|Costs and expenses:                         |  |                             |        |   |                                  |   |        |                                     |  |   |                             |   |  |   |         |  
|Cost of revenue                             |  |                             | 3,783  |   |                                  |   | 11,648 |                                     |  |   | 33,071                      |   |  |   | 48,502  |  
|Operating expenses                          |  |                             | 1,888  |   |                                  |   | 6,156  |                                     |  |   | 14,557                      |   |  |   | 22,601  |  
|                                            |  |                             |        |   |                                  |   |        |                                     |  |   |                             |   |  |   |         |  
|Total costs and expenses                    |  |                             | 5,671  |   |                                  |   | 17,804 |                                     |  |   | 47,628                      |   |  |   | 71,103  |  
|Operating loss                              |  |                             | (435   | ) |                                  |   | (1,071 | )                                   |  |   | (1,207                      | ) |  |   | (2,713  | )
|Interest expense, net                       |  |                             | 75     |   |                                  |   | 33     |                                     |  |   | 883                         |   |  |   | 991     |  
|Loss from continuing operations, net of tax |  |                             | (153   | ) |                                  |   | (899   | )                                   |  |   | (25,279                     | ) |  |   | (26,331 | )
|Loss on discontinued operation              |  |                             | (2,380 | ) |                                  |   | (4,757 | )                                   |  |   | (3,115                      | ) |  |   | (10,252 | )
|                                            |  |                             |        |   |                                  |   |        |                                     |  |   |                             |   |  |   |         |  
|Net income (loss)                           |  | $                           | (2,533 | ) |                                  | $ | (5,656 | )                                   |  | $ | (28,394                     | ) |  | $ | (36,583 | )
|                                            |  |                             |        |   |                                  |   |        |                                     |  |   |                             |   |  |   |         |  



Net revenue increased $6.3
million, or 9.3%, to $74.7 million in the fiscal year ended December 31, 2003 from $68.4 million for the twelve months ended December 31, 2002. Unless otherwise noted, comparisons for fiscal 2003 are to the unaudited 12 month period ended December
31, 2002. Revenue in the three months ended December 31, 2003 was $18.2 million or 21.3% higher than revenues of $15.0 million during the corresponding period of 2002. The annual revenue increase was due to a $7.6 million increase in net sales to
the industrial market partially offset by a $1.3 million decline in net sales to the transportation market. The increase in the industrial market was due primarily to the continued economic recovery affecting the industrial markets in the United
States and in Europe since the downturn that followed the events of September 11, 2001. The quarterly increase in revenues is attributable to the launch of our new Spectrum product line. During the fourth quarter of 2003, we began shipping the
Spectrum product line including certified engine packages and fuel systems in response to the new federal regulations, effective January 1, 2004, requiring that certain off-road vehicles and industrial applications meet more stringent
exhaust standards. Additionally, we expect that revenues will increase during the first part of 2004 as compared to the same period of 2003 in response to increased deliveries of Spectrum and improved economic conditions in the markets we serve.



21



---

##### Table of Contents

Net revenues and operating income for our reporting segments for the fiscal year 2003 as compared to 2002 are as
follows (in thousands of dollars):



|                         |  |                                 |         |   |                                 |   |         |      |  |   |        |   |  |   |        |  
|------------------------ |  | ------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                         |  | Revenues                        |         |   | Operating Income/(Loss)         |  
|                         |  | Twelve Months EndedDecember 31, |         |   | Twelve Months EndedDecember 31, |  
|                         |  | 2002                            |         |   | 2003                            |   |         | 2002 |  |   | 2003   |  
|U.S. Operations          |  | $                               | 49,339  |   |                                 | $ | 51,951  |      |  | $ | 2,210  |   |  | $ | 4,549  |  
|International Operations |  |                                 | 35,855  |   |                                 |   | 36,107  |      |  |   | 220    |   |  |   | 1,589  |  
|Corporate Expenses (1)   |  |                                 |        |   |                                 |   |        |      |  |   | (4,603 | ) |  |   | (6,992 | )
|Intersegment Elimination |  |                                 | (16,804 | ) |                                 |   | (13,318 | )    |  |   | (540   | ) |  |   | 373    |  
|                         |  |                                 |         |   |                                 |   |         |      |  |   |        |   |  |   |        |  
|Total                    |  | $                               | 68,390  |   |                                 | $ | 74,740  |      |  | $ | (2,713 | ) |  | $ | (481   | )
|                         |  |                                 |         |   |                                 |   |         |      |  |   |        |   |  |   |        |  

---

|(1) | Represents corporate expenses not allocated to any operating segments
|--- | ---------------------------------------------------------------------



The following table sets forth our product revenues by application across all reporting segments for 2003 and the corresponding period of 2002:



|               |  |                                 |        |      |   |       
|-------------- |  | ------------------------------- | ------ | ---- | - | ------
|               |  | Revenues                       
|               |  | Twelve Months EndedDecember 31,
|               |  | 2002                            |        | 2003
|Industrial     |  | $                               | 37,365 |      | $ | 45,217
|Transportation |  |                                 | 31,025 |      |   | 29,523
|               |  |                                 |        |      |   |       
|Total          |  | $                               | 68,390 |      | $ | 74,740
|               |  |                                 |        |      |   |       



During the twelve month periods
ended December 31, 2003 and 2002, our revenue was generated in the following geographic regions by percent proportions:



|                         |  |                                 |   |  |      |  
|------------------------ |  | ------------------------------- | - |  | ---- | -
|                         |  | Twelve Months EndedDecember 31, |  
|                         |  | 2002                            |   |  | 2003 |  
|United States and Canada |  | 43.3                            | % |  | 42.9 | %
|Asia & Pacific Rim       |  | 10.0                            | % |  | 12.3 | %
|Europe                   |  | 23.7                            | % |  | 29.1 | %
|Latin America            |  | 23.0                            | % |  | 15.7 | %



Operating loss improved by
$2.2 million, or 82%, from a loss of $2.7 million in 2002 to a loss of $0.5 million in 2003. This decrease in operating loss is the result of increased revenues of approximately $6.3 million, which contributed $1.8 million in additional
operating income; higher gross margin percentage of 2% (compared to 29% in 2002), which contributed $1.2 million; partially offset by increased operating expenses of approximately $0.8 million.



U.S. Operations.    Net revenues from U.S. Operations
increased $2.6 million, or 5.3%, to $52.0 million in the twelve months ended December 31, 2003 from net revenues of $49.3 million in the same period in 2002. The increase in sales during 2003 is due primarily to a $5.5 million increase in gross
revenue for the industrial market offset by a $2.9 million decline in revenues for the transportation market. We believe that U.S. Operations will benefit beginning in the fourth quarter of 2003 and 2004 from an anticipated increase in revenues
attributed to the new federal regulations affecting certain off-road vehicles and industrial applications requiring more stringent exhaust standards.



22



---

##### Table of Contents

Gross profit in this segment increased by $0.1 million in 2003 due to $0.6 million in higher margin contribution
from the $2.6 million in higher revenues offset by approximately $0.5 million due to reduced gross profit percentages resulting from unfavorable changes in product mix.



For 2003, operating income increased by $2.3 million, or 105.8%, as compared to the same period in 2002. The increase in operating
income was due to an increase in gross profit of $0.1 million and a decrease in operating expenses of $2.2 million. Significant cost reductions occurred in sales and marketing and the research functions since the third quarter of 2002
following the Quantum spin-off.



International
Operations.    For the fiscal year ended December 31, 2003, net revenue increased by approximately $0.2 million to $36.1 million, compared to $35.9 million reported for the same period in the prior calendar year. The growth
in revenue was due primarily to a 30% increase in revenues from our European and Asian subsidiaries offset by a reduction of 32% in revenues from our Mexican subsidiary. By market segment, the increase in sales during 2003 as compared to 2002 was
caused primarily by a $2.9 million increase in gross revenue from the industrial market offset by a $2.7 million decline in revenues from the transportation market. Foreign currency fluctuations had the effect of increasing revenue in U.S. dollars
by approximately $2.2 million.



Gross profit for 2003 increased by
approximately $2.6 million, or 32.8%, as compared to the same period in 2002. The increase in gross margin was attributed primarily to changes in product mix that contributed positively to gross margin.



During 2003, operating income from international operations increased by approximately
$1.4 million, or 622%, as compared to 2002. The increase in operating profit was due to the increase in gross profit of $2.6 million offset by increases in operating expenses of $1.2 million. The increase in operating expenses was associated
partly with amounts recognized as bad debt expense in our Mexican subsidiary for $0.5 million and higher expenses in our European subsidiaries related to the weakening of the dollar against the euro throughout 2003. During 2003, we recognized
$0.5 million in higher bad debt expense in Mexico primarily due to the write-off of another receivable of $0.4 million which we believe to be substantially uncollectible.



Corporate Expenses.    Corporate expenses consists of general and administrative expenses at the corporate
level to support our operating segments in areas such as executive management, finance, human resources, management information systems, legal services and investor relations. Corporate expenses for 2003 were approximately $2.4 million more than the
corresponding period of 2002 and are attributable to higher insurance premiums, higher depreciation expense for installation of new information systems, higher legal, investment banking and accounting expenses associated with LaSalle credit
facility and the Bison notes to refinance the Bank of America debt, higher consulting fees and outside services, and reduced recoveries of corporate overhead in 2003 to Quantum and the foreign affiliates.



Interest Expense.    Net interest expense for 2003 was
approximately $4.0 million compared to $1.0 million for 2002 due primarily to the carrying value of our debt increasing from $14.3 million at December 31, 2002 to $23.7 million at December 31, 2003. In July 2003, we entered into lending
agreements with Bison and LaSalle for $20.0 million and $12.0 million, respectively, for the primary purposes of repaying the Bank of America debt and financing the deferred portion of the BRC 50% acquisition of $7.0 million. The interest rates
for Bison and LaSalle were an effective interest rate of 15.9% and a variable interest rate equal to LaSalle Banks prime plus 1%, respectively. As of December 31, 2003, the amount borrowed under the LaSalle line was approximately $5.2 million
and the interest expense recognized in



23



---

##### Table of Contents

the statement of operations for the year ended December 31, 2003 was $0.2 million, which included $77,000 in amortization expense related to debt issuance costs of
approximately $0.3 million. Under the Bison loan agreement interest expense was approximately $1.8 million of which $0.8 million was attributed to the amortization of $2.2 million in deferred debt issuance costs, $2.6 million associated with
the fair value of 500,000 warrants issued in connection with the notes, and the $2.7 million loan discount associated with the difference between the $20.0 million loan amount and the actual net proceeds of $17.3 million. During 2003, we also
incurred interest expense in connection with several bridge loans totaling approximately $4.1 million that were repaid completely by December 2003. Interest expense for the bridge loans included cash payments of approximately $0.5 million and
amortization expense of $0.7 million associated with warrants issued to the holders of the bridge loans. Interest expense in the amount of approximately $0.7 million was recognized during 2003 for the Bank of American terms loans and lines of
credit, all of which were repaid in July 2003.



Provision For Income
Taxes.    During 2002, we established a $24.0 million valuation allowance for deferred tax assets on the basis that we believed that it is more likely than not that a portion of our deferred tax asset will not be realized and
established a valuation allowance for those assets that are not likely to be utilized in the next three years, notwithstanding that some of these may have longer lives under applicable tax laws. During 2003, we increased by approximately
$2.5 million the valuation allowance to $26.5 million on the basis that the increase in deferred tax asset and related net operating losses from the domestic pre-tax loss in 2003 of $6.1 million would more likely than not be unrecoverable
over the next three years. The effect of the increase in the valuation allowance was that no income tax benefit was recognized for domestic tax purposes during 2003. Federal net operating loss carryforwards of $72.0 million will begin to expire
in 2021. We have federal and state research and development credit carryforwards aggregating approximately $9.7 million. Federal research and development credits totaling $5.1 million will begin to expire in 2009. State research and development
credits of $4.6 million have no expiration. As of December 31, 2003, the deferred tax asset, net of the $26.5 million reserve, was $9.8 million. The income tax expense of $0.7 million during 2003 was attributed to our international
operations, which had a pre-tax income of approximately $1.6 million. We believe that, based on our history of prior operating earnings and our expectations for the future, our operating income will more likely than not be sufficient to
recognize fully the net deferred tax assets within the next three years. Future adverse changes in market conditions, poor operating results or a decline in our projections about future profitability may affect our assessment of the adequacy of the
reserve. In the event that we determine that it is more likely than not that we would be unable to realize an additional portion of our net deferred tax asset, an additional adjustment to the deferred tax asset valuation allowance would be charged
to income in the period such determination was made.



Equity Share of
Income (Loss) of Unconsolidated Affiliates.    We recognized a $1.1 million expense before tax corresponding to our share in the losses of unconsolidated affiliates primarily due to our 50% ownership in BRC of Italy for the
period of July 22, 2003 to December 31, 2003. Our share of the BRC loss was approximately $0.5 million. The BRC loss was attributed to reduced revenues of 2.6 million ($3.0 million) and reduced operating income of 2.1 million ($2.4 million) for the twelve months
ended December 31, 2003 compared to the corresponding period of 2002. Foreign exchange transaction loss totaled 0.3 million ($0.3
million) during the fourth quarter of 2003 due to the continued strengthening of the euro relative to other currencies in which BRC settled transactions. In accordance with the equity method of accounting for business combinations, we recognized
amortization expense of $0.3 million for the difference between the book value and the fair value of our share of the net assets acquired. This amortization expense will continue to be recognized until 2008 at an annual rate of approximately $0.7
million.



24



---

##### Table of Contents

Discontinued Operation.    We completed the spin-off of Quantum on July 23, 2002. We did
not recognize any activity during 2003 related to the discontinued operation. The loss from discontinued operation during the twelve months ended December 31, 2002 was $10.3 million.



Eight-Month Periods Ended December 31, 2002 and 2001



Net revenues and operating income for our reporting segments for the eight-month period ended December 31, 2002 (2002) or
transition period and the corresponding period of 2001 are as follows:



|                         |  |                                |         |   |                                |   |         |      |  |   |        |   |  |   |        |  
|------------------------ |  | ------------------------------ | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                         |  | Revenues                       |         |   | Operating Income/(Loss)        |  
|                         |  | Eight Months EndedDecember 31, |         |   | Eight Months EndedDecember 31, |  
|                         |  | 2001                           |         |   | 2002                           |   |         | 2001 |  |   | 2002   |  
|U.S. Operations          |  | $                              | 35,868  |   |                                | $ | 33,151  |      |  | $ | 2,962  |   |  | $ | 1,751  |  
|International Operations |  |                                | 22,222  |   |                                |   | 25,304  |      |  |   | 1,016  |   |  |   | 637    |  
|Corporate Expenses (1)   |  |                                |         |   |                                |   |         |      |  |   | (4,443 | ) |  |   | (3,460 | )
|Intersegment Elimination |  |                                | (12,383 | ) |                                |   | (12,034 | )    |  |   | 199    |   |  |   | (135   | )
|                         |  |                                |         |   |                                |   |         |      |  |   |        |   |  |   |        |  
|Total                    |  | $                              | 45,707  |   |                                | $ | 46,421  |      |  | $ | (266   | ) |  | $ | (1,207 | )
|                         |  |                                |         |   |                                |   |         |      |  |   |        |   |  |   |        |  

---

|(1) | Represents corporate expenses not allocated to any operating segments
|--- | ---------------------------------------------------------------------



The following table sets forth our product revenues by application across all reporting segments for the transition period and the corresponding period of 2001:



|               |  |                                |        |      |   |       
|-------------- |  | ------------------------------ | ------ | ---- | - | ------
|               |  | Revenues                      
|               |  | Eight Months EndedDecember 31,
|               |  | 2001                           |        | 2002
|Industrial     |  | $                              | 28,455 |      | $ | 23,468
|Transportation |  |                                | 17,252 |      |   | 22,953
|               |  |                                |        |      |   |       
|Total          |  | $                              | 45,707 |      | $ | 46,421
|               |  |                                |        |      |   |       



During the transition period and
the corresponding period of 2001, our revenue was generated in the following geographic regions by percent proportions:



|                         |  |                               |   |  |      |  
|------------------------ |  | ----------------------------- | - |  | ---- | -
|                         |  | Eight MonthsEndedDecember 31, |  
|                         |  | 2001                          |   |  | 2002 |  
|United States and Canada |  | 42.7                          | % |  | 40.5 | %
|Asia & Pacific Rim       |  | 10.9                          | % |  | 10.7 | %
|Europe                   |  | 30.3                          | % |  | 23.0 | %
|Latin America            |  | 16.1                          | % |  | 25.8 | %



Net revenue increased $0.7
million, or 1.6%, to $46.4 million in the transition period from $45.7 million in 2001. The revenue increase was primarily due to a $5.7 million increase in net sales of our products to the transportation market partially offset by a $5.0 million
decline in net sales of our products to the industrial market. The decline in the industrial market was due primarily to the continued economic slowdown affecting the industrial markets in the United States, particularly following the events of
September 11, 2001. We believe our sales into the transportation market have continued to grow, particularly in Mexico, due to a favorable price differential between conventional and alternative fuels.



25



---

##### Table of Contents

Our operating loss increased by approximately $0.9 million, or 352.5% from a $0.3 million loss in 2001 to a $1.2
million operating loss in 2002. The increase in operating loss in 2002 is due primarily to reduced gross profit on product shipments from both the U.S. and International operations partially offset by reduced expenses for research and development
and selling, general and administrative expenses.



U.S.
Operations.    Net revenues from U.S. Operations decreased $2.7 million, or 7.6%, to $33.2 million in the eight-month transition period ended December 31, 2002 from net revenues of $35.9 million in the same period in 2001.
The decrease in sales during the current period is due primarily to a $9.0 million decline in gross revenue for the industrial market offset by a $6.3 million increase in revenues for the transportation market.



Gross profit in this segment decreased $2.5 million, or 24.7%, to $7.6 million in the
transition period of 2002 from $10.0 million in 2001. Approximately $0.8 million of the decline in gross profit was due to a decline in revenue and approximately $1.7 million of the decline was due to comparably lower margins in the transportation
market than the industrial market.



For the transition period ended 2002,
operating income decreased by $1.2 million, or 41%, as compared to the same period in 2001. The reduction in operating profit was due to a reduction in gross profit of $2.5 million offset by a reduction in operating expenses of $1.3 million.
Approximately $1.0 million of the reduction in operating expenses was due to lower research and development expenses.



International Operations.    For the eight months ended December 31, 2002, net revenue increased by approximately $3.1 million to $25.3
million, compared to $22.2 million reported for the same period in the prior calendar year. The growth in revenue was due primarily to a 97% increase in revenues from our Mexican subsidiary offset by a reduction of 24% in revenues from our European
subsidiary. By market segment, the increase in sales during 2002 was caused primarily by a $5.0 million increase in gross revenue from the transportation market offset by a $1.9 million decline in revenues from the industrial market.



Gross profit for the transition period of 2002 decreased approximately $0.4 million, or
5.9%, as compared to the same period in 2001. Approximately $1.2 million of the decline in gross profit was due to changes in product mix offset by approximately $0.8 million attributable to the increase in revenue.



During the transition period of 2002, operating income decreased by approximately $0.4
million, or 37.3%, as compared to the same periods in the prior calendar year. The reduction in operating profit was due to a reduction in gross profit of $0.4 million.



Corporate Expenses.    Corporate expenses consists of general and administrative expenses at the corporate
level to support our operating segments in areas such as executive management, finance, human resources, management information systems, legal services and investor relations. As of May 1, 2002, the amortization of goodwill and other intangible
assets is no longer recorded as a corporate expense due to the implementation of Financial Accounting Standards Board Statement No. 142, Goodwill and Other Intangible Assets. During 2001, approximately $0.5 million of amortization of
goodwill and other intangibles was charged to corporate expense. Corporate expenses for 2002 were approximately $1.0 million less than the corresponding period of calendar year 2001 and are attributable to legal and consulting expenses totaling
approximately $1.2 million that were incurred during 2001 in connection with Quantum spin-off costs and an S-3 registration statement filing that was withdrawn on September 20, 2001 offset by higher one-time expenses for severance,



26



---

##### Table of Contents

accelerated accruals for audit fees and investor relations expenses due to the change in the fiscal year and not recognized in the eight months ended December 31,
2001, and other non-recurring expenses related to employee training expenses, insurance and administrative costs.



Interest Expense.    Net interest expense for 2002 was $0.7 million compared to $0.8 million for the corresponding period of 2001. As of
December 31, 2002 and April 30, 2002, total amounts due for bank lines of credit and term loans were $14.2 million and $19.4 million, respectively.



Provision For Income Taxes.    During 2002 we established a $24.0 million valuation allowance for deferred tax assets, which affected our
estimated effective annual tax rate of 1,111.7% for the transition period ended December 31, 2002. We believe it is more likely than not that a portion of our deferred tax asset will not be realized and established a reserve for those assets that
are not likely to be utilized in the next three years, notwithstanding that some of these may have longer lives under applicable tax laws. Federal net operating loss carryforwards of $66.5 million, as of December 31, 2002, begin to expire in 2021.
We have federal and state research and development credit carryforwards aggregating approximately $9.3 million. Federal research and development credits totaling $4.9 million as of December 31, 2002 begin to expire in 2009. State research and
development credits of $4.4 million have no expiration. As of December 31, 2002, the deferred tax asset, net of the $24.0 million reserve, was $9.4 million. We believe that, based on our history of prior operating earnings, our completed
spin-off of Quantum and our expectations for the future, our operating income will more likely than not be sufficient to recognize fully the net deferred tax assets within the next three years.



Discontinued Operation.We completed the spin-off of
Quantum on July 23, 2002. The loss from discontinued operation during the transition period ended December 31, 2002 was $5.2 million or $3.1 million, net of a $2.1 million tax benefit. For the same period ended December 31, 2001, the loss from
discontinued operation was approximately $28.7 million or $17.2 million, net of a $11.5 million tax benefit.



Years Ended April 30, 2002 and 2001



Net revenues and operating income for our reporting segments for the twelve-month period ended April 30, 2001 and 2002 are as follows (in thousands):



|                         |  |                            |         |   |                            |   |         |      |  |   |        |   |  |   |        |  
|------------------------ |  | -------------------------- | ------- | - | -------------------------- | - | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                         |  | Revenues                   |         |   | Operating Income/(Loss)    |  
|                         |  | Fiscal Year EndedApril 30, |         |   | Fiscal Year EndedApril 30, |  
|                         |  | 2001                       |         |   | 2002                       |   |         | 2001 |  |   | 2002   |  
|U.S. Operations          |  | $                          | 66,925  |   |                            | $ | 52,055  |      |  | $ | 11,138 |   |  | $ | 3,416  |  
|International Operations |  |                            | 31,132  |   |                            |   | 32,773  |      |  |   | 1,387  |   |  |   | 599    |  
|Corporate Expenses (1)   |  |                            |         |   |                            |   |         |      |  |   | (5,862 | ) |  |   | (6,807 | )
|Intersegment Elimination |  |                            | (17,518 | ) |                            |   | (17,152 | )    |  |   | (53    | ) |  |   | 393    |  
|                         |  |                            |         |   |                            |   |         |      |  |   |        |   |  |   |        |  
|Total                    |  | $                          | 80,539  |   |                            | $ | 67,676  |      |  | $ | 6,610  |   |  | $ | (2,399 | )
|                         |  |                            |         |   |                            |   |         |      |  |   |        |   |  |   |        |  

---

|(1) | Represents corporate expenses not allocated to any operating segments
|--- | ---------------------------------------------------------------------



Net revenue decreased $12.8 million, or 15.9%, to $67.7 million in the twelve-month period ended April 30, 2002 from $80.5 million in the twelve-month period ended
April 30, 2001. This decrease was primarily due to the decline in sales of conversion kits and components to the material handling market, which were attributable to unfavorable economic conditions.



27



---

##### Table of Contents

The following table sets forth our product revenues by application across all reporting segments:



|               |  |                            |        |      |   |       
|-------------- |  | -------------------------- | ------ | ---- | - | ------
|               |  | Revenues                  
|               |  | Fiscal Year EndedApril 30,
|               |  | 2001                       |        | 2002
|Industrial     |  | $                          | 54,114 |      | $ | 43,081
|Transportation |  |                            | 26,425 |      |   | 24,595
|               |  |                            |        |      |   |       
|Total          |  | $                          | 80,539 |      | $ | 67,676
|               |  |                            |        |      |   |       



During fiscal years 2001 and
2002, our revenue was generated in the following geographic regions in the following percent proportions:



|                         |  |      |   |  |      |  
|------------------------ |  | ---- | - |  | ---- | -
|                         |  | 2001 |   |  | 2002 |  
|United States and Canada |  | 55.0 | % |  | 44.1 | %
|Asia & Pacific Rim       |  | 13.0 | % |  | 9.9  | %
|Europe                   |  | 20.2 | % |  | 27.8 | %
|Latin America            |  | 11.8 | % |  | 18.2 | %



U.S.
Operations.    Net revenues in this segment decreased $14.9 million, or 22.2%, to $52.1 million in the twelve-month period ended April 30, 2002 from $66.9 million in the twelve-month period ended April 30, 2001. Revenues were
lower primarily due to the decline in sales of our products to the material handling market. We believe this decline in sales was caused by the current economic slowdown. The increase in our large stationary engine market was largely offset by the
decline in our small industrial engine market.



Gross profit in this
segment decreased $8.0 million, or 35.9%, to $14.3 million in the twelve-month period ended April 30, 2002 from $22.3 million in the twelve-month period ended April 30, 2001. The decline in revenues negatively impacted gross profit by $5.0 million.
The remaining $3.0 million decline in gross profit was due to product mix consisting of a higher percentage of lower margin complete engine systems sales and lower margin sales to our foreign subsidiaries.



Operating income in this segment decreased $7.7 million, or 69.4%, to $3.4 million in
the twelve-month period ended April 30, 2002 from $11.1 million in the twelve-month period ended April 30, 2001. This decrease was due to lower gross profits offset by a net $0.3 million reduction in operating expenses.



International Operations.    Net revenues in this segment
increased by $1.7 million, or 5.5%, to $32.8 million in the twelve-month period ended April 30, 2002 from $31.1 million in the twelve-month period ended April 30, 2001. In the twelve-month period ended April 30, 2002, net revenues increased $4.1
million at our Mexico subsidiary, $0.7 million in Asia, and $0.4 million at our European subsidiary. These increases were partially offset by decreases of $2.5 million at our Australian subsidiary and $1.0 million at our Japan subsidiary. In the
twelve-month period ended April 30, 2002, revenues for our International Operations segment would have increased an additional $0.4 million if not for the strengthening of the U.S. Dollar. A strong U.S. Dollar has a negative effect on the conversion
of foreign currency denominated sales.



Gross profit in this segment
decreased $0.6 million, or 6.2%, to $8.3 million in the twelve-month period ended April 30, 2002 from $8.9 million in the twelve-month period ended April 30,



28



---

##### Table of Contents

2001. Gross profit declined $1.1 million due to lower margins due to differences in product mix, which was partially offset by a $0.5 million increase in gross profit
due to higher revenues.



Operating income for this segment decreased $0.8
million, or 57.1%, to $0.6 million in the twelve-month period ended April 30, 2002 from $1.4 million in the twelve-month period ended April 30, 2001 as all foreign subsidiaries except Mexico experienced lower operating income. This was primarily a
result of lower gross margins due to the higher cost of U.S. goods purchased with their weakening local currencies. Additionally, we added marketing and technical personnel to support new and expanding markets in Asia, which resulted in increased
operating expenses in the twelve-month period ended April 30, 2002 as compared to the twelve-month period ended April 30, 2001.



Corporate Expenses.    Corporate expenses consists of general and administrative expenses at the corporate level to support our operating
segments in areas such as executive management, finance, human resources, management information systems, legal services and investor relations. Additionally, amortization of goodwill and other intangible assets was recorded as a corporate expense.
Corporate expenses increased $0.9 million, or 15.3%, to $6.8 million in the twelve-month period ended April 30, 2002 from $5.9 million in the twelve-month period ended April 30, 2001. During the twelve month period ended April 30, 2002, the increase
in corporate expenses were attributable to $1.2 million in legal fees and consulting services primarily related to Quantum spin-off costs and our From S-3 filing in connection with a follow-on equity offering, which was withdrawn on September 20,
2001.



Interest Expense (Net).    Net interest
expense increased by $0.8 million, to $0.9 million, in the twelve-month period ended April 30, 2002 from $0.1 million in the twelve-month period ended April 30, 2001. The increase was primarily due to a higher outstanding balance from our line of
credit with Bank of America, as compared to the interest income generated from the proceeds of the July 2000 equity offering in the first quarter of the prior fiscal year.



Provision for Income Taxes.    The estimated effective annual tax benefit rate of 40% for the twelve-month
period ended April 30, 2002 was less than the tax benefit rate of 41% in the twelve-month period ended April 30, 2001. The effective tax benefit rate represents the federal statutory income tax rate, state income taxes and foreign income taxes
increased by research and development credits. For the twelve-month period ended April 30, 2002, including the effects of the discontinued operation, we have incurred a $45.5 million loss before income taxes and minority interest. Also, we had
federal and state research and development credit carryforwards aggregating approximately $9.2 million. Federal research and development credits totaling $5.0 million begin to expire in 2009. State research and development credits of $4.2 million
have no expiration date. As of April 30, 2002, the net deferred tax asset was $31.9 million.



Discontinued Operation.Prior to the completed spin-off of Quantum on July 23, 2002, the loss from discontinued operation during the fiscal year ended April 31, 2002 was $41.7 million, or $25.0
million net of a $16.7 million tax benefit. For the same period ended April 30, 2001, the loss from discontinued operation was approximately $28.6 million, or $16.8 million net of a $11.8 million tax benefit.



Liquidity and Capital Resources



Our ongoing operations are funded by cash generated from operations, debt financings and sales of our equity securities. In addition,
these sources of cash provide for capital expenditures and research and development, as well as to invest in and operate our existing operations and prospective new lines of business.



29



---

##### Table of Contents

As of December 31, 2003, our cash and cash equivalents totaled $9.5 million, compared to cash and cash equivalents
of $2.0 million at December 31, 2002. On July 22, 2003 we refinanced our debt to retire our $11.3 million debt to Bank of America, to finance the $7.0 million deferred payment to complete the 50% acquisition of B.R.C. Societá
Responsabilitá Limitata (BRC), and to provide working capital. The debt restructuring consisted of two new loans. First, we entered into a senior subordinated secured promissory note and a related securities purchase agreement
with Bison Capital Structured Equity Partners, LLC (Bison) for an aggregate borrowing of $20.0 million, with net proceeds of $17.3 million, and we issued to an affiliate of Bison warrants to purchase up to 500,000 shares of our common
stock. The Bison loan has a nominal interest rate of 11.25%, subject to certain adjustments, and matures on July 22, 2007. Interest on the Bison loan is payable monthly in arrears. During periods in which an event of default exists under the Bison
loan agreement, the interest rate increases at a rate of 0.50% per month up to a maximum of 6 months or 3%, and in certain circumstances, interest payments during an event of default can be capitalized, or added to the principal amount outstanding.
At the same time, we entered into a revolving loan and security agreement and a related secured promissory note with LaSalle Business Credit, LLC (LaSalle). The LaSalle loan has a maximum borrowing limit of $12.0 million, with
availability based upon a percentage of eligible inventory and eligible accounts receivable, and has an adjustable interest rate of 1% above LaSalles prime rate as announced from time to time and matures on July 22, 2006. Interest on the
LaSalle loan is payable monthly in arrears. During periods in which an event of default exists under the LaSalle loan agreement, the interest rate increases to 2% above LaSalles prime rate. The Bison and LaSalle loans contain cross-default
provisions such that an event of default existing under one loan generally constitutes an event of default under the other. As of December 31, 2003, our borrowing under the line of credit was approximately $5.2 million with approximately $1.6
million unused and available under the line. On March 12, 2004, we received an amendment to the LaSalle loan agreement to expand the eligible accounts receivable, resulting in an additional $2.6 million of available additional borrowing under this
loan. On December 19, 2003 we sold 1,500,000 shares of common stock to certain institutional investors at $6.40 per share, yielding net proceeds of approximately $9.0 million after discounts and commissions. The offering was conducted as a private
placement under Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. The proceeds of this offering were used to retire short-term debt and for working capital.



Our subsidiary in Japan has a ¥64 million (US$0.6 million at December 31, 2003) short-term loan facility with the Hong Kong and
Shanghai Banking Corporation Ltd., Osaka Branch. At December 31, 2003, a balance of $0.6 million was outstanding. Our subsidiary in the Netherlands has a secured 2.3 million ($2.9 million) revocable credit facility with Fortis Bank. At December 31, 2003 there were no borrowings on this facility.



On October 3, 2002, we entered into an option agreement with the equity holders of BRC. Under the option agreement, we obtained the
right to purchase from those equity holders 50% of the outstanding equity interest of BRC for approximately $23.8 million, which included the issuance of approximately 2.3 million shares of Company common stock (which the parties acknowledged and
agreed were valued at $10.0 million). We announced on May 8, 2003 that we had exercised the option and that the purchase of 50% of BRC was completed pending a $7.0 million payment that represented a deferred portion of the purchase price due on
September 30, 2003. On July 22, 2003, immediately after the refinancing of our debt as discussed above, we paid the deferred payment of $7.0 million to the equity holders of BRC completing the acquisition of the 50% equity interest in BRC. As of
December 31, 2003, we had incurred acquisition costs of approximately $24.8 million, which are shown on the consolidated balance sheet as part of investment in affiliates. The corresponding costs incurred as of December 31, 2002 totaled $12.6
million. We use the equity method of accounting to recognize the investment in and the results of BRC in our consolidated financial results.



30



---

##### Table of Contents

As a result of the refinancing of the Bank of America debt and the acquisition of our 50% equity interest in BRC,
we have assumed additional long-term debt, which has increased our financial leverage. Interest costs and related charges since July 2003 have been higher than in prior years and will continue to be a significant use of funds. The LaSalle and Bison
notes have loan terms of three and four years, respectively. Under the Bison agreement, we are obligated to pay off the note in July 2007 in the amount of $20.0 million. Under the LaSalle agreement, which has a maturity date of July 2006, we are
obligated to repay the balance owed at that time under the revolving line of credit, not to exceed $12.0 million. At December 31, 2003 the Company was in default under terms of the LaSalle agreement in failure to maintain minimum consolidated EBITDA
of $4,000,000, to maintain a consolidated fixed charge coverage ratio of not less than 0.25:1.00, and to maintain a consolidated leverage ratio not to exceed 8.45:1.00. LaSalle has waived these financial covenant non-compliance conditions at
December 31, 2003. The Company was also in default under terms of the Bison agreement in failure to maintain minimum consolidated EBITDA of $3,500,000 and minimum consolidated leverage ratio not to exceed 8.50:1.00. Bison has waived these covenant
non-compliance conditions at December 31, 2003. The events of default under these loans will cause our applicable interest rates to increase as long as the circumstances continue unless we are successful in negotiating amendments to these covenants.
The LaSalle loan increases the interest rate to prime plus 2%, which will increase our interest expense and our cash outflows by approximately $25,000 per quarter. Under the Bison loan, the applicable interest rate increases by 0.5% per month up to
a maximum of 3% or six months. We expect that the increase in the Bison interest rate will increase our interest expense by approximately $150,000 during the first quarter of 2004, although in certain circumstances we are permitted to capitalize
those interest payments by adding them to the principal balance outstanding under the Bison loan. We also are seeking to revise our financial covenants in both loans to reflect more conservative estimates of future financial performance. However, we
cannot be assured that the lenders will agree to amend our financial covenants or grant further or continuing waivers in the future. If we cannot obtain the necessary waivers or amendments, or return to compliance with these and all other loan
covenants, our lenders may accelerate our debt, foreclose on our assets, or take other legal actions against us which, alone or in the aggregate, may have a material adverse effect on our business. During 2003, we received proceeds of approximately
$4.1 million in bridge loans and $8.0 million in loan commitments. As of December 31, 2003, we had repaid all of the bridge loans and the loan commitment expired without us exercising our option to borrow under its terms.



Our ratio of current assets to current liabilities was 2.0:1.0 at December 31, 2003 as
compared to 1.5:1.0 at December 31, 2002. During this same period our total working capital increased by $10.9 million from $11.2 million at December 31, 2002 to $22.1 million at December 31, 2003. Current assets increased by $8.9 million due
primarily to the stock offering in December 2003 yielding net proceeds of $9.0 million and current liabilities decreased by $2.0 million due primarily to payment of the Bank of America debt that was classified as a current liability at December 31,
2002.



Net cash provided by operating activities for fiscal 2003 was $0.8
million, compared to cash provided by operations for the eight months ended December 31, 2002 of $1.7 million. The decline in cash flow was attributed to the launch of the Spectrum product line during 2003, which required working capital
investments in accounts receivable and inventory in the amounts of $2.4 million and $0.6 million, respectively. Increases in accounts payable and accrued expenses during 2003 resulted in a $6.2 million source of cash, which provided the
necessary working capital to fund the Spectrum launch and to fund the loss from continuing operations of approximately $2.1 million after the effect of non-cash items totaling $4.8 million. In the eight months ended December 31, 2002, cash flow
from operating activities benefited



31



---

##### Table of Contents

from reductions in inventory and accounts receivables totaling $2.8 million attributed primarily to the 19% decline in revenues during the three months ended December
31, 2002.



Net cash used in investing activities for the fiscal year
ended December 31, 2003 was $15.4 million, an increase of $11.2 million from $4.2 million for the eight months ended December 31, 2002. This increase is due primarily to costs related to the 50% acquisition of BRC.



Net cash provided by financing activities for the fiscal year ended December 31, 2003
was $20.7 million or an increase of $9.2 million from $11.5 million for the eight months ended December 31, 2002. During December 2003, we raised approximately $9.0 million in net proceeds from the issuance of 1.5 million shares of common stock to
institutional investors.



For the fiscal year ended December 31, 2003,
cash provided by continuing operations totaled $6.1 million or a decrease of $2.9 million from the eight months ended December 31, 2002.



At December 31, 2003 the Company had received waivers from its two lenders, LaSalle and Bison, for covenant non-compliance conditions at December 31, 2003. In
addition: a) Bison granted the Company a modified EBITDA calculation for 2004 and a further waiver in maintaining its Term Loan status as a long term liability throughout 2004; b) LaSalle granted the Company a favorable amendment on March 12,
2004 which resulted in additional borrowing line capacity of $2.6 million; and c) we believe that LaSalle will work with the Company to amend its credit arrangement for the remainder of its term. Accordingly, we believe that the Company has
sufficient resources to meet its current financial obligations and finance its operations over the next twelve months.



Should we be unable to obtain waivers or amendments, the Company believes that its current cash balances, available cash drawn from its subsidiaries, other
financing alternatives, our history of being able to raise equity, and our ability to obtain bridge loans will result in adequate liquidity to continue operations through December 31, 2004.



Derivative Financial Instruments



We have used derivative financial instruments for the purpose of reducing our exposure to adverse fluctuations in interest and foreign
exchange rates. While these hedging instruments are subject to fluctuations in value, such fluctuations are generally offset by the value of the underlying exposures being hedged. We are not a party to leveraged derivatives and do not hold or issue
financial instruments for speculative purposes. As of December 31, 2003, we did not utilize any derivative financial instruments.



Foreign Currency Management.    The results and financial condition of our international operations are affected by changes in exchange
rates between certain foreign currencies and the U.S. Dollar. Our exposure to fluctuations in currency exchange rates has increased as a result of the growth of our international subsidiaries. The functional currency for all of our international
subsidiaries is the local currency of the subsidiary. An increase in the value of the U.S. Dollar increases the costs incurred by our subsidiaries because most of our international subsidiaries inventory purchases are U.S. Dollar denominated.
We monitor this risk and attempt to minimize the exposure through forward currency contracts and the management of cash disbursements in local currencies. At December 31, 2003, we have a single foreign exchange forward contract of approximately $0.5
million in which gains and losses are recognized in the statement of operations as the fair value of the contracts fluctuates. We seek to manage our foreign currency economic risk by minimizing our U.S. Dollar investment in foreign operations using
foreign currency term-loans to finance the operations of our foreign subsidiaries.



32



---

##### Table of Contents

Debt Obligations.    The following table summarizes our debt obligations at December 31,
2003. The interest rates represent weighted average rates, with the period end rate used for the variable rate debt obligations. The fair value of the debt obligations approximated the recorded value as of December 31, 2003 (in thousands of
dollars).



|                                         |  |      |   |  |      |   |  |       |   |  |        |   |  |            |   |  |        |  |                       |  
|---------------------------------------- |  | ---- | - |  | ---- | - |  | ----- | - |  | ------ | - |  | ---------- | - |  | ------ |  | --------------------- | -
|                                         |  | 2004 |   |  | 2005 |   |  | 2006  |   |  | 2007   |   |  | Thereafter |   |  | Total  |  | Fair valueat 12/31/03 |  
|Debt Denominated in U.S. Dollars:        |  |      |   |  |      |   |  |       |   |  |        |   |  |            |   |  |        |  |                       |  
|Line of credit                           |  |     |   |  |     |   |  | 5,238 |   |  |       |   |  |           |   |  | 5,238  |  | 5,238                 |  
|Interest rate                            |  |     | % |  |     | % |  | 5.0   | % |  |       | % |  |           | % |  |        |  | 5.0                   | %
|Term loans including current portion     |  |     |   |  |     |   |  |      |   |  | 20,000 |   |  |           |   |  | 20,000 |  | 17,483                |  
|Interest rate                            |  |     | % |  |     | % |  |      | % |  | 15.9   | % |  |           | % |  |        |  | 15.9                  | %
|Capital leases                           |  | 11   |   |  |     |   |  |      |   |  |       |   |  |           |   |  | 11     |  | 11                    |  
|Interest rate                            |  | 6.1  | % |  |     | % |  |      | % |  |       | % |  |           | % |  |        |  | 6.1                   | %
|Other finance loans                      |  | 72   |   |  |     |   |  |      |   |  |       |   |  |           |   |  | 72     |  | 72                    |  
|Interest rate                            |  | 5.8  | % |  |     | % |  |      | % |  |       | % |  |           | % |  |        |  | 5.8                   | %
|Weighted average interest rate (US)      |  |      |   |  |      |   |  |       |   |  |        |   |  |            |   |  |        |  | 13.4                  | %
|Debt Denominated in Foreign Currencies:  |  |      |   |  |      |   |  |       |   |  |        |   |  |            |   |  |        |  |                       |  
|Indian Rupees, term loan                 |  |     |   |  | 134  |   |  |      |   |  |       |   |  |           |   |  | 134    |  | 134                   |  
|Interest rate                            |  |     | % |  | 14.0 | % |  |      | % |  |       | % |  |           | % |  |        |  | 14.0                  | %
|Japanese Yen, term loan                  |  | 598  |   |  |     |   |  |      |   |  |       |   |  |           |   |  | 598    |  | 598                   |  
|Interest rate                            |  | 1.7  | % |  |     | % |  |      | % |  |       | % |  |           | % |  |        |  | 1.7                   | %
|Australian Dollar, capital leases        |  | 32   |   |  | 34   |   |  | 29    |   |  |       |   |  |           |   |  | 95     |  | 127                   |  
|Interest rate                            |  | 8.2  | % |  | 8.4  | % |  | 8.1   | % |  |       | % |  |           | % |  |        |  | 8.2                   | %
|Weighted average interest rate (foreign) |  |      |   |  |      |   |  |       |   |  |        |   |  |            |   |  |        |  | 4.6                   | %



Recent Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board
(FASB) issued Interpretation No. 46,Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51,(FIN 46). FIN 46 introduces a new consolidation model, the variable
interests model, which determines control (and consolidation) based on potential variability in gains and losses of the entity being evaluated for consolidation. The requirements for FIN 46, including its disclosures, apply immediately.



FIN 46 provides guidance for determining whether an entity qualifies as a variable
interest entity (VIE) by considering, among other considerations, whether the entity lacks sufficient equity or its equity holders lack adequate decision-making ability. If the entity does not qualify as a VIE, then the consolidation
criteria is based on previously established accounting standards. Qualifying VIEs are covered by FIN 46 and are individually evaluated for consolidation based on their variable interests. FIN 46 requires consideration and estimates of a significant
number of possible future outcomes of the VIE as well as the probability of each outcome occurring. Based on the allocation of possible outcomes, a calculation is performed to determine which party, if any, has a majority of potential negative
outcomes (expected losses) or a majority of the potential positive outcomes (expected residual returns), with an emphasis on negative outcomes. That party, if any, is the primary beneficiary and is required to consolidate the VIE. We have evaluated
the potential impact of FIN 46 as of December 31, 2003 and have concluded that there was no impact on our consolidated financial statements.



We adopted the new rules on accounting for goodwill and other intangible assets beginning with the transition period ended December 31, 2002. Application of the
nonamortization



33



---

##### Table of Contents

provisions of the Statement resulted in an increase in net income on an annual basis of approximately $0.4 million ($.03 per share). We performed the first of the
required impairment tests of goodwill and indefinite lived intangible assets effective May 1, 2002 and determined that there was no impact on the Companys financial position during the period ended July 31, 2002. We also conducted the goodwill
impairment tests as of December 31, 2002 and 2003 and similarly determined that there were no impacts on our financial position.



Contractual Obligations



The following table contains supplemental information regarding total contractual obligations as of December 31, 2003. The capital lease obligations are
undiscounted and represent total minimum lease payments. The Bison term loan is shown at its face value of $20.0 million, which differs from its carrying value of $17.5 million by the unamortized portion of the loan discount of $2.7 million.



|                            |  |                        |        |                    |   |           |  |           |       |                   |   |        |  |   |      
|--------------------------- |  | ---------------------- | ------ | ------------------ | - | --------- |  | --------- | ----- | ----------------- | - | ------ |  | - | -----
|                            |  | Payments Due by Period
|Contractual Obligations     |  | Total                  |        | Less than One Year |   | 2-3 Years |  | 4-5 Years |       | More Than 5 Years
|Revolving lines of credit   |  | $                      | 5,836  |                    | $ | 598       |  | $         | 5,238 |                   | $ |       |  | $ |     
|Term loans payable          |  |                        | 20,000 |                    |   |          |  |           |      |                   |   | 20,000 |  |   |     
|Notes payable               |  |                        | 134    |                    |   |          |  |           | 134   |                   |   |       |  |   |     
|Capital lease obligations   |  |                        | 153    |                    |   | 47        |  |           | 73    |                   |   | 33     |  |   |     
|Operating lease obligations |  |                        | 4,952  |                    |   | 1,384     |  |           | 1,068 |                   |   | 925    |  |   | 1,575
|Other and miscellaneous     |  |                        | 273    |                    |   | 273       |  |           |      |                   |   |       |  |   |     
|                            |  |                        |        |                    |   |           |  |           |       |                   |   |        |  |   |      
|Totals                      |  | $                      | 31,348 |                    | $ | 2,302     |  | $         | 6,513 |                   | $ | 20,958 |  | $ | 1,575
|                            |  |                        |        |                    |   |           |  |           |       |                   |   |        |  |   |      



34



---

##### Table of Contents

RISK FACTORS



The preceding discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. We face a number of risks and uncertainties in any forward-looking statement. Factors that could cause or contribute to such differences include, but are not limited to, the following:



We have substantial debt that we may be unable to service.



We are highly leveraged and have significant debt service obligations. As of December
31, 2003, we had aggregate outstanding indebtedness of $35.2 million and total stockholders equity of $57.1 million. In July 2003, we completed a financing that included the establishment of a new $12.0 million revolving credit facility and
the issuance of a senior subordinated secured note in the amount of $20.0 million.



Our substantial debt could have important consequences, including the following:



| |  | we will be required to use a substantial portion of our cash flow from operations to pay interest on our debt, thereby reducing our ability to fund working capital, capital expenditures,
strategic acquisitions, investments and alliances and other general corporate requirements;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our substantial leverage may increase our vulnerability to general economic downturns and adverse competitive and industry conditions and may place us at a competitive disadvantage compared
to those of our competitors that are less leveraged;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our debt service obligations may limit our flexibility to plan for, or react to, changes in our business and the industry in which we operate;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | our level of debt may make it difficult for us to raise additional financing on satisfactory terms; and
| | - | -------------------------------------------------------------------------------------------------------



| |  | if we were unable to comply with the financial and other restrictive covenants in our debt instruments, any such failure could, if not cured or waived, have a material adverse effect on our
ability to fulfill our obligations and on our business or prospects generally, including the possibility that our lenders might foreclose on our assets.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We currently are operating under waivers of financial covenants in both the Bison and LaSalle agreements relating to our EBITDA Covenant, Leverage Ratio Covenant and Fixed
Change Covenant. These waivers relate to non-compliance as of December 31, 2003 and, in Bisons case, continuing through December 31, 2004. The events of default under these loans will cause our applicable interest rates to increase
as long as the circumstances continue unless we are successful in negotiating amendments to these covenants. The LaSalle loan increases the interest rate to prime plus 2%, which will increase our interest expense and our cash outflows by $25,000 per
quarter. Under the Bison loan, the applicable interest rate increases by 0.5% per month up to a maximum of 3% or six months. We expect that the increase in the Bison interest rate will increase our interest expense by $150,000 during the first
quarter of 2004, although in certain circumstances we are permitted to capitalize those interest payments by adding them to the principal balance outstanding under the Bison loan. We also are seeking to revise our financial covenants in both loans
to reflect more current estimates of future financial performance. However, we cannot assure readers that the lenders will agree to amend our financial covenants or grant further or continuing waivers in the future. If we cannot obtain the necessary
waivers or amendments, or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



---

##### Table of Contents

| | return to compliance with these and all other loan covenants, our lenders may accelerate our debt, foreclose on our assets, or take other legal actions against us
which, alone or in the aggregate, may have a material adverse effect on our business.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The terms of our debt may severely limit our ability to plan for or respond to changes in our business.



Our debt agreements contain a number of restrictive covenants that impose significant
operating and financial restrictions on the company. Among other things, these restrictions limit our ability to:



| |  | incur liens or make negative pledges on our assets;
| | - | ---------------------------------------------------



| |  | merge, consolidate or sell our assets;
| | - | --------------------------------------



| |  | incur additional debt;
| | - | ----------------------



| |  | pay dividends or redeem capital stock and prepay other debt;
| | - | ------------------------------------------------------------



| |  | make investments and acquisitions;
| | - | ----------------------------------



| |  | make capital expenditures; or
| | - | -----------------------------



| |  | amend our debt instruments and certain other material agreements.
| | - | -----------------------------------------------------------------



Our debt also requires us to maintain specified financial ratios and meet specific financial tests. Our failure to comply with these covenants would result in
events of default that, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we were unable to make a required repayment or refinance these borrowings, our lenders could foreclose on our
assets. If we were unable to refinance these borrowings on favorable terms, our business could be adversely impacted.



The Nasdaq Stock Market may take the position that we should have obtained shareholder approval for certain issuances of our outstanding securities, and if
they were to take and prevail in that position, we could be subject to sanctions or delisting by The Nasdaq Stock Market.



Under applicable Nasdaq rules, a company with securities listed on the Nasdaq Stock Market must obtain shareholder approval before issuing securities if such
issuance is not a public offering and involves the sale of 20% or more of the issuers outstanding common stock at a price less than the greater of book or market value. Since January 2002, we have issued shares of our common stock or
securities convertible into or exercisable for our common stock in six separate transactions representing a total of 8,614,470 shares (excluding shares issued in connection with employee stock option plans, employee benefit plans and similar
arrangements). Some of these shares were issued or are issuable at a price that represents a discount to the market price of our common stock on the date of issuance. If the sale of common stock to the selling stockholders were aggregated or
integrated with one or more other transactions, or if two or more other transactions were to be integrated with one another, some of these combinations exceeded 20% of our outstanding common stock and thus would have required shareholder approval.
Although not free from doubt, we believe that the sale of common stock to the selling stockholders should not be aggregated or integrated with any other transaction, and we believe that no series of other transactions would be integrated in a manner
that would result in our being required to have obtained shareholder approval. We have not obtained any formal guidance from Nasdaq as to this matter. If Nasdaq were to determine that one or more of these transactions required shareholder approval,
Nasdaq could halt trading of our common stock and initiate delisting of our common stock from The Nasdaq National Market. A delisting from Nasdaq, if it were to occur, could materially impair the liquidity of our securities and could adversely
affect the trading price of our common stock.



36



---

##### Table of Contents

We recently have experienced, and in the near term we will continue to experience, significant cash outflows
that may limit our ability to grow and may materially and adversely impact our prospective revenues and liquidity.



We have experienced operating losses and net cash outflows. At December 31, 2003, our cash and cash equivalents totaled approximately $9.5 million and our working
capital was $22.1 million. We have experienced significant cash outflows in connection with our purchase of an equity interest in BRC, S.r.l. and, due to our higher levels of debt, will have higher interest expense in the future. Our current
cash position and upcoming cash obligations, especially if combined with stagnant or declining revenues, may force us to take steps such as personnel reductions or curtailment of growth as a means to manage our liquidity. Such measures could have an
adverse impact on research and development activities, our production capacity or other aspects of our business that might have a material adverse impact on results of operations. In some instances, these impacts may last beyond the term of the
immediate cash shortfall.



Prevailing economic conditions and
international dissension may disproportionately affect our business.



Because we depend heavily on sales to developing nations and because our business is based on fossil fuel markets, the effects of the Iraq conflict and continuing instability in the Middle East, as well as weaknesses in the U.S. and global
economies, may cause our customers to delay orders, may result in interruptions in shipments to some customers or from some suppliers, or may have other effects that may decrease our revenues or increase our costs. These situations, whether alone or
in combination with one or more risk factors discussed in this prospectus, may affect our business materially and adversely.



Our spin-off of our Quantum subsidiary is subject to tax risks for us and our stockholders, including restrictions on our or Quantums issuance of equity
securities in order to maintain the tax-free status of the spin-off.



At the time of our spin-off of Quantum on July 23, 2002, we received an opinion of Morrison & Foerster LLP to the effect that the spin-off was tax-free to our stockholders for federal income tax purposes. The opinion of Morrison &
Foerster LLP is not binding on the Internal Revenue Service and we can offer no assurance that the Internal Revenue Service or the courts will agree with their opinion. The opinion was also subject to specific assumptions and the accuracy and
completeness of specific factual representations and statements made by us and Quantum, and we are subject to certain limitations on changes in our capital structure following the Quantum transaction. If these assumptions, representations or
statements are incorrect or incomplete in any material respect, the conclusions set forth in the opinion may not be correct. Similarly, we can provide no assurances that our issuance of stock to BRCs stockholders or in various post-spin-off
equity issuances will not adversely impact the tax-free character of the Quantum spin-off.



Even if the spin-off is tax-free to our stockholders, it will be taxable to us if Section 355(e) of the Internal Revenue Code applies to the spin-off. Section 355(e) of the Internal Revenue Code will apply if 50% or more of our
stock or Quantum stock, by vote or value, is acquired by one or more persons, other than our historic stockholders who receive Quantum common stock in the spin-off, acting pursuant to a plan or a series of related transactions that includes the
spin-off. We cannot provide you any assurance that Section 355(e) of the Internal Revenue Code will not apply to the spin-off. Risk of the applicability of Section 355(e) of the Internal Revenue Code may also discourage, delay or prevent a merger,
change of control, or other strategic or capital raising transactions involving our outstanding equity or issuance of new equity.



37



---

##### Table of Contents

The growth of the alternative fuel market will have a significant impact on our business.



Our future success depends on the continued expansion of the alternative fuel
industry, which has not yet expanded broadly. In the United States and certain of our other target markets, alternative fuel such as natural gas currently cannot be readily obtained by consumers for motor vehicle use and only a small percentage of
motor vehicles manufactured in 2003 were equipped to use alternative fuels. We do not expect this trend to improve in the United States in the foreseeable future. We cannot assure you that the market for gaseous alternative fuel engines will expand
broadly or, if it does, that it will result in increased sales of our advanced fuel system products. In addition, we have designed many of our products for alternative fuel vehicles powered by internal combustion engines, but not for alternative
power sources, such as electricity or alternate forms of power. If the major growth in the alternative fuel market relates solely to those power sources, our revenues may not increase and may decline.



Users of gaseous fuel vehicles may not be able to obtain fuel conveniently and
affordably, which may adversely affect the demand for our products.



Vehicles and equipment powered by gaseous alternative fuels currently run primarily on natural gas or propane. The construction of a distribution system to deliver natural gas and propane will require significant investment by third
parties. An adequate fuel distribution infrastructure may not be built. We are relying on third parties, most of which are committed to the existing gasoline infrastructure, to build this infrastructure. If these parties build a fuel distribution
infrastructure, the fuel delivered through it, both due to the cost of the delivery system and the cost of the fuel itself, may have a higher price than users are willing to pay. If users cannot obtain fuel conveniently or affordably, a mass market
for vehicles and equipment powered by gaseous alternative fuels is unlikely to develop.



Our ability to attract customers and sell products successfully in the alternative fuel industry also depends significantly on the current price differential between liquid fuels, such as petroleum and gasoline, and gaseous
fuels, such as propane and natural gas. This price differential may not always exist. Should this differential narrow or disappear, it could adversely affect the demand of our products. The demand for our products could also be affected by the
imposition of an excise tax on the production, sale, or distribution of gaseous fuels, which would be expected to reduce the economic advantage of alternative fuels.



We currently face and will continue to face significant competition, which could result in a decrease in our revenue.



We currently compete with companies that manufacture products
to convert liquid-fueled internal combustion engines to gaseous fuels. Increases in the market for alternative fuel vehicles may cause automobile or engine manufacturers to develop and produce their own fuel conversion or fuel management equipment
rather than purchasing the equipment from suppliers such as us. In addition, greater acceptance of alternative fuel engines may result in new competitors. Should any of these events occur, the total potential demand for our products could be
adversely affected and cause us to lose existing business.



We face
risks associated with marketing, distributing and servicing our products internationally.



We currently operate in Australia, Central America, China, Europe, Egypt, India, Japan, Mexico and South America and market our products and technologies in other
international markets, including both industrialized and developing countries. Our international operations are subject to various risks common to international activities, such as the following:



| |  | exposure to currency fluctuations;
| | - | ----------------------------------



| |  | potential difficulties in enforcing contractual obligations and intellectual property rights;
| | - | ---------------------------------------------------------------------------------------------



38



---

##### Table of Contents

| |  | complying with a wide variety of laws and regulations, including product certification, environmental and import and export laws;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| |  | political instability; and
| | - | --------------------------



| |  | difficulties collecting international accounts receivable.
| | - | ----------------------------------------------------------



Our business may be subject to product liability claims, which could be expensive and could divert managements attention.



As a supplier, we face an inherent exposure to product liability claims if our
products (or the equipment into which our products are incorporated) malfunction in a way that results or is alleged to have resulted in personal injury or death. We may be named in product liability actions even if there is no evidence that our
systems or components caused a loss. Product liability claims could result in significant losses from defense costs or damages awards. The sale of systems and components for the transportation industry entails a high risk of these claims. In
addition, we may be required to participate in a recall involving these systems if any of our systems prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business
practices or the need to maintain good customer relationships. Each of these actions would likely harm our reputation and lead to substantial expense. We cannot assure you that our product liability insurance will be sufficient to cover all product
liability claims, that such claims will not exceed our insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, if at all. Any product liability claim brought against us could have a material
adverse effect on our reputation and business.



Our products may
become subject to future certification requirements or other regulations, which may impair our ability to market our products.



We must obtain product certification from governmental agencies, such as the Environmental Protection Agency and the California Air Resources Board, to sell certain
of our products in the United States. A significant portion of our future sales will depend upon sales of fuel management products that are certified to meet existing and future air quality and energy standards. We cannot assure you that our
products will continue to meet these standards. The failure to comply with these certification requirements could result in the recall of our products, civil penalties or criminal penalties.



Any new government regulation that affects our advanced fuel technologies, whether at
the foreign, federal, state or local level, including any regulations relating to installation and servicing of these systems, may increase our costs and the price of our systems. As a result, these regulations may have a negative impact on our
revenues and profitability and thereby harm our business, prospects, results of operations or financial condition.



New technologies could render our existing products obsolete.



New developments in technology may negatively affect the development or sale of some or all of our products or make our products
obsolete. Our inability to enhance existing products in a timely manner or to develop and introduce new products that incorporate new technologies, conform to increasingly stringent emission standards and performance requirements, and achieve market
acceptance in a timely manner could negatively impact our competitive position. New product development or modification is costly; involves significant research, development, time and expense; and may not necessarily result in the successful
commercialization of any new products.



39



---

##### Table of Contents

We depend on our intellectual property, and our failure to protect that intellectual property could adversely
affect our future growth and success.



We rely on patent,
trademark and copyright law, trade secret protection, and confidentiality and other agreements with our employees, customers, partners and others to protect our intellectual property. However, some of our intellectual property is not covered by any
patent or patent application and, despite our precautions, it may be possible for third parties to obtain and use our intellectual property without authorization.



We do not know whether any patents will be issued from our patent applications, whether the reissue examination will be in our favor,
or whether the scope of our issued patents is sufficiently broad to protect our technologies or processes. Moreover, patent applications and issued patents may be challenged or invalidated. We could incur substantial costs in prosecuting or
defending patent infringement suits. Furthermore, the laws of some foreign countries may not protect intellectual property rights to the same extent as do the laws of the United States. For instance, it may be difficult for us to enforce certain of
our intellectual property rights against third parties who may have inappropriately acquired interests in our intellectual property rights by filing unauthorized trademark applications in foreign countries to register the marks that we use because
of their familiarity with our worldwide operations.



As part of our
confidentiality procedures, we generally have entered into non-disclosure agreements with our employees, consultants and corporate partners and have attempted to control access to and distribution of our technologies, documentation and other
proprietary information. We plan to continue these procedures. Despite these procedures, third parties could copy or otherwise obtain and make unauthorized use of our technologies or independently develop similar technologies. The steps we have
taken and that we may take in the future may not prevent misappropriation of our solutions or technologies, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United
States.



We cannot assure you that we will be successful in protecting
our proprietary rights. Any infringement on any of our intellectual rights, could have an adverse effect on our ability to develop and sell successfully commercially competitive systems and components.



If third parties claim that our products infringe upon their intellectual
property rights, we may be forced to expend significant financial resources and management time and our operating results would suffer.



Third parties may claim that our products and systems infringe upon third-party patents and other intellectual property rights. Identifying third-party patent
rights can be particularly difficult, especially since patent applications are not published until 18 months after their filing dates. In the event a competitor were to challenge our patents, or assert that our products or processes infringe its
patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive product modifications, pay substantial damages, or even be forced to cease our operations. Third-party infringement claims,
regardless of their outcome, would not only drain our financial resources but also divert the time and effort of our management and could result in our customers or potential customers deferring or limiting their purchase or use of the affected
products or services until resolution of the litigation.



We depend
on third-party suppliers for the supply of key materials and components for our products.



We have established relationships with third-party suppliers that provide materials and components for our products. A suppliers failure to supply materials
or components in a timely



40



---

##### Table of Contents

manner or to supply materials and components that meet our quality, quantity or cost requirements, combined with a delay in our ability to obtain substitute sources
for these materials and components in a timely manner or on terms acceptable to us, would harm our ability to manufacture our products or would significantly increase our production costs, either of which would negatively impact our results of
operations and business. Adverse currency fluctuations may hinder our ability to economically procure key materials and services from overseas vendors and suppliers.



Potential fluctuations in our financial results could cause our stock price to decline.



Our revenue and operating results are subject to annual and quarterly fluctuations as
a result of a variety of factors, including the following:



| |  | budget cycles and funding arrangements of governmental agencies;
| | - | ----------------------------------------------------------------



| |  | purchasing cycles of fleet operators and other customers;
| | - | ---------------------------------------------------------



| |  | the uncertainty of timing of deliveries of vehicles and other equipment on which our products are installed;
| | - | ------------------------------------------------------------------------------------------------------------



| |  | the timing of implementation of government regulations promoting the use of our products; and
| | - | ---------------------------------------------------------------------------------------------



| |  | general economic factors.
| | - | -------------------------



It is possible that our operating results in one or more future quarters may fall below the expectations of securities analysts and investors. If this occurs, the
trading price of our common stock might be materially and adversely affected.



We could lose or fail to attract the personnel necessary to run our business.



Our success depends in large part on our ability to attract and retain key management, engineering, scientific, manufacturing and operating personnel. We lost some
of our executive management in the Quantum spin-off, and it will take time for us to hire or train replacement personnel. Recruiting personnel for the industries in which we operate is highly competitive, and the failure to attract or retain
qualified personnel could have a material adverse effect on our business.



Our business could be harmed if we fail to meet OEM specifications.



We offer integrated alternative fuel systems, which include tanks, brackets, electronics, software and other components required to allow these products to operate in alternative fuel applications. Customers for these systems
require that these products meet strict OEM standards. Our compliance with these requirements has resulted in increased development, manufacturing, warranty and administrative costs. A significant increase in these costs could adversely affect our
profitability. If we fail to meet OEM specifications on a timely basis, our relationships with OEMs may be harmed.



We may be subject to increased warranty claims.



In response to consumer demand, OEM, vehicle and industrial equipment manufacturers have been providing, and may continue to provide, increasingly longer warranty
periods for their products, thus requiring their suppliers, such as us, to provide correspondingly longer product warranties. Due to the longer warranty periods, we could incur substantially greater warranty claims in the future.



We may experience unionized labor disputes at OEM facilities.



As we become more dependent on vehicle conversion programs with OEMs, we will
become increasingly dependent on OEM production and the associated labor forces at OEM



41



---

##### Table of Contents

sites. Labor unions represent most of the labor forces at OEM facilities. In the past, labor disputes have occurred at OEM facilities, which adversely impacted our
direct OEM product sales. Such labor disputes are likely to occur in the future and, if so, will negatively impact our product sales and profitability.



Changes in environmental policies could hurt the market for our products.



The market for alternative fuel vehicles and equipment, and the demand for our products are driven, to a significant degree, by local,
state and federal regulations in the United States that relate to air quality and require the purchase of motor vehicles and equipment operating on alternative fuels. Similarly, foreign governmental regulations also affect our international
business. These laws and regulations may change, which could result in transportation or equipment manufacturers abandoning their interest in alternative fueled powered vehicles. In addition, a failure by authorities to enforce current domestic and
foreign laws or to adopt additional environmental laws could reduce the demand for our products.



Although many governments have identified as a significant priority the development of alternative energy sources, we cannot assure you that governments will not
change their priorities or that any change they make would not materially adversely affect our revenue or the development of our products.



We may be subject to litigation if our stock price is volatile.



Our common stock has experienced and may experience in the future, price and volume fluctuations. Many factors may cause the market
price for our common stock to decline, perhaps substantially, including the following:



| |  | the effect of events of default occurring under our credit arrangements, particularly when combined with the increase in our outstanding loan commitments;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | failure to meet our product development and commercialization milestones;
| | - | -------------------------------------------------------------------------



| |  | decreased demand for our common stock;
| | - | --------------------------------------



| |  | failure of our revenue and operating results to meet the expectations of securities analysts or investors in any quarter;
| | - | -------------------------------------------------------------------------------------------------------------------------



| |  | downward revisions in securities analysts estimates or changes in general market conditions;
| | - | ---------------------------------------------------------------------------------------------



| |  | technological innovations by competitors or in competing technologies;
| | - | ----------------------------------------------------------------------



| |  | investor perception of our industry or our prospects; or
| | - | --------------------------------------------------------



| |  | general technology or economic or regulatory trends.
| | - | ----------------------------------------------------



In the past, companies that have experienced declines in the market price of their stock have been the subject of securities class action litigation. We may become
involved in a securities class action litigation in the future. Litigation of this type often results in substantial costs and a diversion of managements attention and resources, which could harm our business, prospects, results of operations
or financial condition.



Provisions of Delaware law and of our
charter and bylaws may it more difficult to take over our company, a fact that may reduce our stock price.



Provisions in our certificate of incorporation and bylaws and in the Delaware corporation law may make it difficult and expensive for a third party to pursue a
tender offer, change in control or takeover attempt that our management and Board of Directors oppose. Public stockholders that might desire to participate in one of these transactions may not have an opportunity to do so. We also have a staggered
Board of Directors, which makes it difficult for



42



---

##### Table of Contents

stockholders to change the composition of the Board of Directors in any one year. These anti-takeover provisions could substantially impede the ability of public
stockholders to benefit from a change in control or to change our management and Board of Directors.



We have a stockholder protection rights agreement that provides for a dividend of one right for each outstanding share of our common stock. Upon the occurrence of
some events, including a person or entitys acquisition of 15% or more of our common stock, each right will entitle the holder to purchase, at an exercise price of $45 per right, common stock with a market value equal to twice the exercise
price, which could cause substantial dilution. The rights agreement may have the effect of deterring, delaying or preventing a change in control that might otherwise be in the best interests of our stockholders.



Future sales of our common stock could adversely affect our stock price.



Substantial sales of our common stock, including shares issued
upon exercise of our outstanding options and warrants, in the public market or the perception by the market that these sales could occur, could lower our stock price or make it difficult for us to raise additional equity. As of December 31, 2003, we
had 18,568,721 shares of common stock outstanding. Of these shares, 16,905,903 shares are currently freely tradable and 1,662,818 shares, which otherwise are freely tradable, are subject to a lockup agreement that restricts their resale until
certain dates beginning in 2004. The following table presents the relevant expiration dates and the number of shares as to which the lockup agreement expires:



|                 |  |                                    
|---------------- |  | -----------------------------------
|Date             |  | Number of Shares Available for Sale
|August 1, 2004   |  | 277,691                            
|February 1, 2005 |  | 460,601                            
|August 1, 2005   |  | 460,601                            
|February 1, 2006 |  | 463,925                            



As of December 31, 2003 up to
815,000 shares were issuable upon the exercise of warrants outstanding as of that date, all of which will be freely tradable upon exercise thereof. Furthermore, as of December 31, 2003, up to 2,750,833 shares are issuable upon the exercise of
options of which 746,514 are vested. Subject to applicable vesting and registration requirements, upon exercise of these options the underlying shares may be resold into the public market. In the case of outstanding options and warrants that have
exercise prices less than the market price of our common stock from time to time, investors would experience dilution. We cannot predict if future sales of our common stock, or the availability of our common stock for sale, will harm the market
price of our common stock or our ability to raise capital by offering equity securities.



Item 7A.    Quantitative and Qualitative Disclosures about Market Risk



Information relating to Quantitative and Qualitative Disclosures About Market Risk appear under the heading Derivative Financial Instruments which is
included in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operation.



Item 8.    Financial Statements and Supplementary Data.



See pages F-1 through F-51 of this Annual Report on Form 10-K.



Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.



None.



43



---

##### Table of Contents

PART III



The SEC allows us to incorporate by reference the information we file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is considered to be part of this Annual Report. We incorporate by reference in Items 11 to 13 below certain sections of our definitive proxy statement, to be filed pursuant
to Regulation 14A with the SEC within 120 days after December 31, 2003.



Item
10.    Directors and Executive Officers of the Registrant



The following table sets forth certain information regarding our directors and executive officers as of December 31, 2003:



|                       |  |     |  |                                                                          
|---------------------- |  | --- |  | -------------------------------------------------------------------------
|Name                   |  | Age |  | Position                                                                 
|Robert M. Stemmler (3) |  | 68  |  | Chairman of the Board of Directors, President and Chief Executive Officer
|Dale L. Rasmussen      |  | 54  |  | Senior Vice President and Secretary                                      
|Brad E. Garner         |  | 41  |  | Vice President and Chief Operating Officer, Americas, Asia/Pacific       
|Terry K. Clapp         |  | 60  |  | Vice President and Chief Operating Officer, Europe, Africa/Middle East   
|Nickolai A. Gerde      |  | 59  |  | Vice President Finance, Chief Financial Officer and Treasurer            
|Norman L. Bryan (1)    |  | 62  |  | Director                                                                 
|Paul Mlotok (1)(2)     |  | 59  |  | Director                                                                 
|J. David Power III (2) |  | 72  |  | Director                                                                 
|Don J. Simplot (2)(3)  |  | 68  |  | Director                                                                 
|Mariano Costamagna (3) |  | 52  |  | Director                                                                 

---

|(1) | Member of the Audit Committee
|--- | -----------------------------

|(2) | Member of the Compensation Committee
|--- | ------------------------------------

|(3) | Member of the Nominating Committee
|--- | ----------------------------------



Robert M. Stemmlerhas served as our President and Chief Executive Officer since May 1993. He has also been a director since May 1993, and the Chairman of
our Board of Directors since June 1998. From December 1992 until July 1993, Mr. Stemmler was a full time consultant to our company. He served as our General Manager from 1982 to 1985 and has held various management and executive positions throughout
his career at Celanese Corp. (now Hoechst-Celanese), an international chemical and fibers manufacturer; A.J. Industries, a holding company for aircraft, trucking and heating equipment companies; and Sargent Fletcher Company, a manufacturer of
military aircraft fuel tanks and in-flight refueling systems. He holds an M.B.A. degree from Seton Hall University and a B.S. degree in mechanical engineering from Washington University in St. Louis.



Dale L. Rasmussenhas served as our Senior Vice President and Secretary since
June 1989. He joined us in April 1984 as Vice President of Finance and Administration and Corporate Secretary. Prior to joining us, Mr. Rasmussen was a commercial banker for 12 years at banks that were acquired by Key Bank and U.S. Bank. He received
his B.A. degree in Business Administration and Economics from Western Washington University and is a graduate of the Pacific Coast Banking School. Mr. Rasmussen serves as the Chairman of the Board of Directors of Quantum Fuel Systems Technologies
Worldwide, Inc.



44



---

##### Table of Contents

Brad E. Garnerhas served as our Chief Operating Officer since July 2003 and has previously served as
General Manager & Director, Gaseous Fuel Products Division since April 2002. Mr. Garner joined IMPCO in July 1994 as Regional Sales Manager for the U.S. Midwest and Canada Regions. In February 1996, he was promoted to Manager of Applications
& Field Engineering. Mr. Garner also held the roles of Engineering Manager and General Manager for the Industrial Engines business unit of the Gaseous Fuel Products Division. Prior to joining IMPCO, Mr. Garner held a position with Superior
Propane as Senior Auto Propane Sales & Technical Manager. Prior to his employment at Superior, Mr. Garner was the owner and operator of Advanced Automotive Technology, one of the largest alternative fuels conversion centers in Canada. Mr. Garner
is a graduate of Fanshawe College of Technology in Canada with an equivalent to an Associates Degree in Mechanical Engineering.



Terry Clapphas served as our Vice President and Chief Operating Officer, European, Africa and Middle East Operations, since July 2003. Mr. Clapp joined
IMPCO in 2000 as Managing Director of Strategic Planning and Acquisitions and is based in Europe. Prior to joining IMPCO, Mr. Clapp was Managing Director, Acquisitions and International Business Development of the Mayflower Corporation, a UK
international automotive engineering group. Prior to joining Mayflower, Mr. Clapp had over 16 years experience as Managing Director of companies where he was responsible for company turn-arounds, restructuring and integration of new acquisitions.
Early in his career he worked for Shell and Xerox Corporation in the USA. Mr. Clapp holds a Masters Degree in English, Economics and Philosophy from Trinity College, Dublin, Ireland.



Nickolai A. Gerdewas appointed our Vice President Finance, Chief Financial Officer and Treasurer in January 2004. Mr. Gerde
was previously a Company director and co-Chair of the Audit Committee. Mr. Gerde is a former CPA, and has provided business and financial consulting services. He was previously the Vice President Finance and CFO for seven years of Pacific Aerospace
& Electronics, Inc. a publicly traded NASDAQ international aerospace supplier. He has held a number of senior financial management positions in both public and private businesses including telecommunications; economic development and business
recruitment; manufacturing; long term healthcare; and public accounting. Mr. Gerde earned a cum laude bachelors degree from the University of Washington Business School, a summa cum laude associates degree from Bellevue Community College and served
honorably in the U.S. Army in the U.S. and Europe. He has served on the boards of a number of civic organizations.



Norman L. Bryanhas served as a director since November 1993 and is Chair of the Audit Committee. He has been a consultant since January 1995. Mr. Bryan was
employed as the Senior Vice President of Sales and Marketing of EIT, Inc., an electric meter manufacturing company, from October 1998 to July 2002. Prior to retiring in 1994 from Pacific Gas and Electric Company, he was Vice President, Marketing
from February 1993 until December 1994, and was Vice President, Clean Air Vehicles from February 1991 to February 1993. Mr. Bryan holds an M.S. degree in business from Stanford University and a B.S.M.E. degree in mechanical engineering from
California State University in San Jose.



Paul Mlotokhas served
as a director since April 1997 and is Chair of the Compensation Committee. He is President of the Janaka Group which is involved in consulting on management training. From 1995 to 2001, he was a Senior Practitioner with the consulting firm Global
Business Network, doing scenario planning in the areas of energy, natural resources and finance. From 1989 to 1995, he was a Principal and oil industry analyst at Morgan Stanley & Co. He has a B.A. degree in economics from Cornell University and
a Ph.D. in economics from Brown University.



45



---

##### Table of Contents

J. David Power IIIhas served as a director since August 2000. He is the founder of J.D. Power and
Associates where he has served as Chairman since 1996. Mr. Power has previously worked with Ford Motor Company, General Motors Corporation, and J.I. Case Company. Mr. Power was a recipient of the Automotive Hall of Fames Distinguished Service
Citation. Mr. Power graduated from the College of Holy Cross, has an M.B.A. from The Wharton School of Finance at the University of Pennsylvania, and holds honorary doctorate degrees from College of the Holy Cross, California Lutheran University,
and California State University, Northridge.



Don J. Simplothas
served as a director since May 1978 and is Chair of the Nominating Committee. He is the President of Simplot Industries, Inc., which is engaged in agricultural enterprises, and a Director member of the office of the chair of J.R. Simplot Company,
which is also engaged in agricultural enterprises. Mr. Simplot is a director of Micron Technology, Inc., a designer and manufacturer of semiconductor memory components primarily used in various computer applications.



The Board of Directors is divided into three classes; each consisting of three
directors, with the three classes serving staggered three-year terms. Each director will hold office until the first meeting of stockholders immediately following expiration of his three year term of office and until his successor is qualified and
elected.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934 requires the Companys
Directors and executive officers, and persons who own more than 10% of the Companys Common Stock to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Executive officers, Directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. To the Companys
knowledge, based solely on review of the copies of such reports furnished to the Company or advice that no filings were required, during the fiscal year ended December 31, 2003 all executive officers, Directors and greater than 10% beneficial owners
complied with the Section 16(a) filing requirements, except that an initial beneficial ownership Report on Form 3 for Nickolai A. Gerde was filed late.



Item 11.    Executive Compensation



Information required by this Item 11 is incorporated by reference in this Annual Report from our definitive proxy statement to be filed pursuant to Regulation 14A
with the SEC within 120 days after December 31, 2003.



Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



Information required by this Item 12 is incorporated by reference in this Annual Report from our definitive proxy statement to be filed pursuant to Regulation 14A
with the SEC within 120 days after December 31, 2003.



Item
13.    Certain Relationships and Related Transactions



Information required by this Item 13 is incorporated by reference in this Annual Report from our definitive proxy statement to be filed pursuant to Regulation 14A with the SEC within 120 days after December 31, 2003.



46



---

##### Table of Contents

Item 14.    Controls and Procedures.



Within 90 days prior to the date of this report on Form 10-K, the Company carried out an evaluation under the supervision of
management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based upon the evaluation, the Chief Executive Officer and
the Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings. There were no significant changes to
the Companys internal controls or in other factors known to management that could significantly affect such internal controls subsequent to the date that the Company carried out its evaluation (for the quarter ended December 31, 2003).



In January of 2004, the Company hired a new Vice President Finance &
CFO who had been a member of the Companys Board of Directors and Co-Chair of the Audit Committee. The CFO has initiated new controls and procedures, more frequent analysis of accounts involving reserves, controls over revenue recognition at
foreign subsidiaries, and application of an internal certification process for quarterly reporting.



47



---

##### Table of Contents

PART IV



Item 15.    Exhibits, Financial
Statement Schedules, and Reports on Form 8-K.



(a)  Documents filed as
part of this report:



(1)  Consolidated Financial Statements:



|                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Report of independent auditors.                                                                                                                                                                 
|                                                                                                                                                                                                
|Consolidated balance sheets as of April 30, 2002, December 31, 2002 and December 31, 2003.                                                                                                      
|                                                                                                                                                                                                
|Consolidated statements of operations for fiscal years ended April 30, 2001 and 2002, the eight-month period ended December 31, 2002, and the fiscal year ended December 31, 2003.              
|                                                                                                                                                                                                
|Consolidated statements of stockholders equity for the fiscal years ended April 30, 2001, and 2002, the eight month period ended December 31, 2002 and the fiscal year ended December 31, 2003.
|                                                                                                                                                                                                
|Consolidated statements of cash flows for fiscal years ended April 30, 2001 and 2002, the eight month period ended December 31, 2002, and the fiscal year ended December 31, 2003.              
|                                                                                                                                                                                                
|Notes to consolidated financial statements.                                                                                                                                                     



(2)  Supplemental Financial
Statement Schedules:



|                                              |  | 
|--------------------------------------------- |  | 
|Schedule IIValuation and Qualifying Accounts |  | 



48



---

##### Table of Contents

SCHEDULE IIVALUATION ACCOUNTS

(In Thousands)



|                                                       |  |                              |        |                                       |   |                                 |  |   |                          |   |  |   |       
|------------------------------------------------------ |  | ---------------------------- | ------ | ------------------------------------- | - | ------------------------------- |  | - | ------------------------ | - |  | - | ------
|                                                       |  | Balance atbeginningof period |        | Additions chargedto costs andexpenses |   | Write-offs andother adjustments |  |   | Balance at end of period
|Allowance for doubtful accounts for the period ended:  |  |                              |        |                                       |   |                                 |  |   |                          |   |  |   |       
|December 31, 2003                                      |  | $                            | 1,295  |                                       | $ | 430                             |  | $ | (1,096                   | ) |  | $ | 629   
|December 31, 2002                                      |  |                              | 875    |                                       |   | 539                             |  |   | (119                     | ) |  |   | 1,295 
|April 30, 2002                                         |  |                              | 981    |                                       |   | 365                             |  |   | (471                     | ) |  |   | 875   
|April 30, 2001                                         |  |                              | 525    |                                       |   | 654                             |  |   | (199                     | ) |  |   | 981   
|                                                       |  |                              |        |                                      
|Inventory valuation reserve for the period ended:      |  |                              |        |                                       |   |                                 |  |   |                          |   |  |   |       
|December 31, 2003                                      |  | $                            | 1,666  |                                       | $ | 984                             |  | $ | (381                     | ) |  | $ | 2,269 
|December 31, 2002                                      |  |                              | 1,582  |                                       |   | 320                             |  |   | (236                     | ) |  |   | 1,666 
|April 30, 2002                                         |  |                              | 1,739  |                                       |   | 507                             |  |   | (665                     | ) |  |   | 1,582 
|April 30, 2001                                         |  |                              | 1,562  |                                       |   | 584                             |  |   | (407                     | ) |  |   | 1,739 
|                                                       |  |                              |        |                                      
|Warranty reserve for the period ended:                 |  |                              |        |                                       |   |                                 |  |   |                          |   |  |   |       
|December 31, 2003                                      |  | $                            | 452    |                                       | $ | 396                             |  | $ | (176                     | ) |  | $ | 674   
|December 31, 2002                                      |  |                              | 285    |                                       |   | 233                             |  |   | (66                      | ) |  |   | 452   
|April 30, 2002                                         |  |                              | 227    |                                       |   | 170                             |  |   | (112                     | ) |  |   | 285   
|April 30, 2001                                         |  |                              | 427    |                                       |   | 73                              |  |   | (273                     | ) |  |   | 227   
|                                                       |  |                              |        |                                      
|Product liability reserve for the period ended:        |  |                              |        |                                       |   |                                 |  |   |                          |   |  |   |       
|December 31, 2003                                      |  | $                            | 1      |                                       | $ |                                |  | $ |                         |   |  | $ | 1     
|December 31, 2002                                      |  |                              | 1      |                                       |   |                                |  |   |                         |   |  |   | 1     
|April 30, 2002                                         |  |                              | 1      |                                       |   |                                |  |   |                         |   |  |   | 1     
|April 30, 2001                                         |  |                              | 1      |                                       |   |                                |  |   |                         |   |  |   | 1     
|                                                       |  |                              |        |                                      
|Deferred tax valuation allowance for the period ended: |  |                              |        |                                       |   |                                 |  |   |                          |   |  |   |       
|December 31, 2003                                      |  | $                            | 24,000 |                                       | $ | 2,479                           |  | $ |                         |   |  | $ | 26,479
|December 31, 2002                                      |  |                              |       |                                       |   | 24,000                          |  |   |                         |   |  |   | 24,000



49



---

##### Table of Contents

Item 15.    Exhibit List



(3) Exhibits:



EXHIBIT INDEX



|            |  |                                                                                                                                                                                        |  |          |  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -
|Exhibit No. |  | Description                                                                                                                                                                            |  | Note No. |  
|            |  |                                                                                                                                                                                       
|2.1         |  | Deed of Sale of Business by and among IMPCO Technologies Pty. Limited, as buyer, and Ateco Automotive Pty Limited, as seller, dated as of July 1, 1996.                                |  | (7       | )
|            |  |                                                                                                                                                                                       
|2.2         |  | Deed of Release by and among IMPCO Technologies, Inc. and Ateco Automotive Pty Limited dated as of July 1, 1996.                                                                       |  | (7       | )
|            |  |                                                                                                                                                                                       
|2.3         |  | Shareholders Agreement for Gas Parts (NSW) Pty Limited by and among IMPCO Technologies Pty. Limited, Gas Parts Pty Limited and Gas Parts (NSW) Pty. Limited, dated as of July 4, 1996. |  | (7       | )
|            |  |                                                                                                                                                                                       
|2.4         |  | Option Agreement between IMPCO Technologies, Inc. and the controlling shareholders of B.R.C. Societa a Responsabilitá Limitata of Italy, dated as of October 3, 2002.                  |  | (31      | )
|            |  |                                                                                                                                                                                       
|3.1         |  | Certificate of Incorporation, as currently in effect.                                                                                                                                  |  | (28      | )
|            |  |                                                                                                                                                                                       
|3.2         |  | Bylaws adopted July 22, 1998.                                                                                                                                                          |  | (13      | )
|            |  |                                                                                                                                                                                       
|4.1         |  | Stockholders Protection Rights Agreement dated as of June 30, 1999 between IMPCO Technologies, Inc. and Chase Mellon Stockholder Services, L.L.C., as Rights Agent.                   |  | (12      | )
|            |  |                                                                                                                                                                                       
|10.1        |  | Lease between L-W Income Properties and IMPCO Technologies, Inc. dated May 10, 1989.                                                                                                   |  | (2       | )
|            |  |                                                                                                                                                                                       
|10.2+       |  | 1989 Incentive Stock Option Plan.                                                                                                                                                      |  | (3       | )
|            |  |                                                                                                                                                                                       
|10.3+       |  | 1991 Executive Stock Option Plan dated November 5, 1991, among AirSensors, Inc., as the Company, and Bertram R. Martin, James J. Mantras and Dale L. Rasmussen, as Optionees.          |  | (4       | )
|            |  |                                                                                                                                                                                       
|10.4        |  | First Amendment to Lease dated April 19, 1993, between L-W Income Properties and IMPCO Technologies, Inc.                                                                              |  | (5       | )
|            |  |                                                                                                                                                                                       
|10.5+       |  | 1993 Stock Option Plan for Non-employee Directors.                                                                                                                                     |  | (6       | )
|            |  |                                                                                                                                                                                       
|10.6+       |  | Amendment to 1989 Incentive Stock Option Plan.                                                                                                                                         |  | (6       | )
|            |  |                                                                                                                                                                                       
|10.7+       |  | 1996 Incentive Stock Option Plan.                                                                                                                                                      |  | (8       | )
|            |  |                                                                                                                                                                                       
|10.8+       |  | 1997 Incentive Stock Option Plan.                                                                                                                                                      |  | (9       | )
|            |  |                                                                                                                                                                                       
|10.9        |  | Lease between Klein Investments, Family Limited Partnership, as lessor, and IMPCO Technologies, Inc., as lessee, dated August 18, 1997.                                                |  | (10      | )
|            |  |                                                                                                                                                                                       
|10.10       |  | Amendment dated March 18, 1998 to Loan agreement dated October 7, 1998 between Bank of America National Trust and Savings, as lender, and IMPCO Technologies, Inc., as the borrower.   |  | (10      | )
|            |  |                                                                                                                                                                                       
|10.11       |  | Amendment dated April 29, 1998 to Loan agreement dated October 7, 1998 between Bank of America National Trust and Savings, as lender, and IMPCO Technologies, Inc., as the borrower.   |  | (10      | )



50



---

##### Table of Contents

|            |  |                                                                                                                                                                                                  |  |          |  
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- | -
|Exhibit No. |  | Description                                                                                                                                                                                      |  | Note No. |  
|            |  |                                                                                                                                                                                                 
|10.12       |  | Loan Agreement for IMPCO Technologies, B.V. as borrower, and Bank of America National Trust and Savings Association, acting through its Amsterdam branch, as lender, dated as of April 27,
1998. |  | (10      | )
|            |  |                                                                                                                                                                                                 
|10.13       |  | Loan Agreement dated September 11, 1998 between Bank of America National Trust and Savings Association, as lender, and IMPCO Technologies, Inc., as the borrower.                                |  | (11      | )
|            |  |                                                                                                                                                                                                 
|10.14       |  | Intentionally Omitted.                                                                                                                                                                           |  |          |  
|            |  |                                                                                                                                                                                                 
|10.15       |  | Loan Agreement between IMPCO Tech Japan KK, as borrower, and, Hongkong and Shanghai Banking Corporation Ltd., Osaka Branch., as lender, dated as of March 29, 1999.                              |  | (13      | )
|            |  |                                                                                                                                                                                                 
|10.16+      |  | Employment Agreement dated April 1, 1999, between IMPCO Technologies, Inc., as the Company, and Robert M. Stemmler, as the Employee.                                                             |  | (13      | )
|            |  |                                                                                                                                                                                                 
|10.17       |  | Amended Loan Agreement between IMPCO Technologies, Inc., as borrower and Bank of America N.A. as lender, dated September 13, 1999.                                                               |  | (14      | )
|            |  |                                                                                                                                                                                                 
|10.18       |  | Intentionally omitted.                                                                                                                                                                           |  |          |  
|            |  |                                                                                                                                                                                                 
|10.19       |  | Amendment No. 3 to Business Loan Agreement by and between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of June 13, 2000.                                                          |  | (15      | )
|            |  |                                                                                                                                                                                                 
|10.20       |  | Lease dated as of March 31, 2000, by and between Braden Court Associates and IMPCO Technologies, Inc.                                                                                            |  | (16      | )
|            |  |                                                                                                                                                                                                 
|10.21       |  | Amendment No. 4 to Business Loan Agreement by and between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of September 12, 2000.                                                     |  | (18      | )
|            |  |                                                                                                                                                                                                 
|10.22       |  | Amendment No. 5 to Business Loan Agreement between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of December 13, 2000.                                                             |  | (18      | )
|            |  |                                                                                                                                                                                                 
|10.23       |  | Amendment No. 6 to Business Loan Agreement between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of March 12, 2001.                                                                |  | (19      | )
|            |  |                                                                                                                                                                                                 
|10.24       |  | Promissory Note Issued by Robert Stemmler to Registrant dated March 15, 2001.                                                                                                                    |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.25       |  | Promissory Note Issued by Dale Rasmussen to Registrant dated March 15, 2001.                                                                                                                     |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.26       |  | Promissory Note Issued by Syed Hussain to Registrant dated March 15, 2001.                                                                                                                       |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.27       |  | Security Agreement and Agreement Not to Exercise Options entered into between Robert Stemmler and Registrant dated March 15, 2001.                                                               |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.28       |  | Security Agreement and Agreement Not to Exercise Options entered into between Dale Rasmussen and Registrant dated March 15, 2001.                                                                |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.29       |  | Security Agreement and Agreement Not to Exercise Options entered into between Syed Hussain and Registrant dated March 15, 2001.                                                                  |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.30       |  | Deed of Trust Executed by Dale Rasmussen regarding personal residence.                                                                                                                           |  | (17      | )
|            |  |                                                                                                                                                                                                 
|10.31+      |  | Corporate Alliance Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                                                    |  | (21      | )



51



---

##### Table of Contents

|            |  |                                                                                                                                                                                                   |  |          |  
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -
|Exhibit No. |  | Description                                                                                                                                                                                       |  | Note No. |  
|            |  |                                                                                                                                                                                                  
|10.32       |  | Master Technical Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                                                       |  | (21      | )
|            |  |                                                                                                                                                                                                  
|10.33       |  | Stock Transfer Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                                                         |  | (21      | )
|            |  |                                                                                                                                                                                                  
|10.34       |  | Registration Rights Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                                                    |  | (21      | )
|            |  |                                                                                                                                                                                                  
|10.35       |  | Amended and Restated Business Loan Agreement dated as of April 30, 2001 among the Registrant, Quantum Technologies, Inc. and Bank of America, N.A.                                                |  | (28      | )
|            |  |                                                                                                                                                                                                  
|10.36+      |  | 2000 Incentive Stock Option Plan.                                                                                                                                                                 |  | (20      | )
|            |  |                                                                                                                                                                                                  
|10.37       |  | IMPCO and GM Teaming Agreement dated July 30, 1997 by the Registrant and General Motors Corporation.                                                                                              |  | (22      | )
|            |  |                                                                                                                                                                                                  
|10.38       |  | Amendment No. 1 to Amended and Related Business Loan Agreement, dated as of September 5, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                         |  | (23      | )
|            |  |                                                                                                                                                                                                  
|10.39       |  | Amendment No. 2 to Amended and Restated Business Loan Agreement, dated as of October 8, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                          |  | (24      | )
|            |  |                                                                                                                                                                                                  
|10.40       |  | Amendment No. 3 to Amended and Restated Business Loan Agreement, dated as of November 9, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                         |  | (24      | )
|            |  |                                                                                                                                                                                                  
|10.41       |  | Amendment No. 4 to Amended and Restated Business Loan Agreement, dated as of December 12, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                        |  | (24      | )
|            |  |                                                                                                                                                                                                  
|10.42       |  | Common Stock and Warrants Purchase Agreement, dated January 11, 2002.                                                                                                                             |  | (25      | )
|            |  |                                                                                                                                                                                                  
|10.43       |  | Registration Rights Agreement, Dated January 11, 2002.                                                                                                                                            |  | (25      | )
|            |  |                                                                                                                                                                                                  
|10.44       |  | Form of Stock Purchase Warrant, Dated January 11, 2002.                                                                                                                                           |  | (25      | )
|            |  |                                                                                                                                                                                                  
|10.45       |  | Amendment No. 5 to Amended and Restated Business Loan Agreement, dated as of January, 2002, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                            |  | (26      | )
|            |  |                                                                                                                                                                                                  
|10.46       |  | Amendment No. 6 to Amended and Restated Business Loan Agreement, dated as of January 31, 2002, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                         |  | (26      | )
|            |  |                                                                                                                                                                                                  
|10.47       |  | Amendment No. 7 to Amended and Restated Business Loan Agreement, dated as of February 28, 2002, among Bank of America, N.A., the Registrant and Quantum Fuel Systems Technologies Worldwide,
Inc. |  | (26      | )
|            |  |                                                                                                                                                                                                  
|10.48       |  | Stock Purchase Agreement, dated May 3, 2002.                                                                                                                                                      |  | (27      | )
|            |  |                                                                                                                                                                                                  
|10.49       |  | Amendment No. 8 to Amended and Restated Business Loan Agreement, dated as of March 31, 2002, among Bank of America, N.A., the Registrant and Quantum Fuel Systems Technologies Worldwide,
Inc.    |  | (30      | )



52



---

##### Table of Contents

|            |  |                                                                                                                                                                                                |  |          |  
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -
|Exhibit No. |  | Description                                                                                                                                                                                    |  | Note No. |  
|            |  |                                                                                                                                                                                               
|10.50       |  | Amendment No. 9 to Amended and Restated Business Loan Agreement, dated as of April 30, 2002, among Bank of America, N.A., the Registrant and Quantum Fuel Systems Technologies Worldwide,
Inc. |  | (30      | )
|            |  |                                                                                                                                                                                               
|10.51       |  | Second Amended and Restated Business Loan Agreement, dated June 24, 2002, between Bank of America, N.A., and the Registrant.                                                                   |  | (30      | )
|            |  |                                                                                                                                                                                               
|10.52      |  | Employment Agreement dated April 1, 2002, between the Registrant and Robert M. Stemmler.                                                                                                       |  | (30      | )
|            |  |                                                                                                                                                                                               
|10.53      |  | Employment Agreement dated April 1, 2002, between the Registrant and W. Brian Olson.                                                                                                           |  | (30      | )
|            |  |                                                                                                                                                                                               
|10.54      |  | Employment Agreement dated April 1, 2002, between the Registrant and Dale L. Rasmussen.                                                                                                        |  | (30      | )
|            |  |                                                                                                                                                                                               
|10.55       |  | Contribution and Distribution Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide, Inc., dated July 23, 2002.                                                     |  | (29      | )
|            |  |                                                                                                                                                                                               
|10.56       |  | Tax Allocation and Indemnification Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide Inc., dated July 23, 2002.                                                 |  | (29      | )
|            |  |                                                                                                                                                                                               
|10.57       |  | Transition Services Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide, Inc., dated July 23, 2002.                                                               |  | (29      | )
|            |  |                                                                                                                                                                                               
|10.58      |  | Employee Benefit Matters Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide, Inc., dated July 23, 2002.                                                          |  | (29      | )
|            |  |                                                                                                                                                                                               
|10.59       |  | Lease dated July 18, 2001 by and between Property Reserve, Inc. and the Registrant.                                                                                                            |  | (30      | )
|            |  |                                                                                                                                                                                               
|10.60      |  | The 2002 Stock Option Plan for Employees                                                                                                                                                       |  | (32      | )
|            |  |                                                                                                                                                                                               
|10.61      |  | The 2002 Stock Option Plan for Non-employee Directors                                                                                                                                          |  | (32      | )
|            |  |                                                                                                                                                                                               
|10.62       |  | Amendment No. 1 to Second Amended and Restated Business Loan Agreement, dated as of December 10, 2002, among Bank of America, N.A., and the Registrant.                                        |  | (33      | )
|            |  |                                                                                                                                                                                               
|10.63       |  | Amendment No. 2 to Second Amended and Restated Business Loan Agreement, dated as of March 24, 2003, among Bank of America, N.A., and the Registrant.                                           |  | (33      | )
|            |  |                                                                                                                                                                                               
|10.64       |  | Equity Joint Venture Contract, dated as of December 16, 2002, among China Natural Gas Co. Ltd., and the Registrant.                                                                            |  | (33      | )
|            |  |                                                                                                                                                                                               
|10.65       |  | Joint Venture Agreement Minda IMPCO Technologies, Limited, dated May 18, 2001 among Minda Industries Limited and Mr. Nirmal K. Minda and the Registrant                                        |  | (33      | )
|            |  |                                                                                                                                                                                               
|10.66       |  | Joint Venture Agreement Minda IMPCO Limited, dated May 18, 2001 among Minda Industries and Mr. Nirmal K. Minda and the Registrant                                                              |  | (33      | )
|            |  |                                                                                                                                                                                               
|10.67       |  | Letter of commitment, dated March 26, 2003, among Don J. Simplot and the Registrant                                                                                                            |  | (33      | )
|            |  |                                                                                                                                                                                               
|10.68       |  | Securities Purchase Agreement dated December 17, 2003.                                                                                                                                         |  | (1       | )
|            |  |                                                                                                                                                                                               
|21.1        |  | Subsidiaries of the Company.                                                                                                                                                                   |  | (1       | )



53



---

##### Table of Contents

|            |  |                                                                       |  |          |  
|----------- |  | --------------------------------------------------------------------- |  | -------- | -
|Exhibit No. |  | Description                                                           |  | Note No. |  
|            |  |                                                                      
|23.1        |  | Consent of Ernst & Young LLP, Independent Auditors.                   |  | (1       | )
|            |  |                                                                      
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)   |  | (1       | )
|            |  |                                                                      
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)   |  | (1       | )
|            |  |                                                                      
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350. |  | (1       | )
|            |  |                                                                      
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350. |  | (1       | )

---

|(1) | Filed herewith.
|--- | ---------------

|(2) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1989.
|--- | -----------------------------------------------------------------------------

|(3) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1990.
|--- | -----------------------------------------------------------------------------

|(4) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1992.
|--- | -----------------------------------------------------------------------------

|(5) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1993.
|--- | -----------------------------------------------------------------------------

|(6) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1994.
|--- | -----------------------------------------------------------------------------

|(7) | Incorporated by reference to the Registrants Form 8-K/A dated July 1, 1996.
|--- | ----------------------------------------------------------------------------

|(8) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1997.
|--- | -----------------------------------------------------------------------------

|(9) | Incorporated by reference to the Registrants Proxy Statement for fiscal year 1997.
|--- | -----------------------------------------------------------------------------------

|(10) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1998.
|---- | -----------------------------------------------------------------------------

|(11) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 1998.
|---- | ----------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to the Registrants Form 8-K dated June 30, 1999.
|---- | ---------------------------------------------------------------------------

|(13) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1999.
|---- | -----------------------------------------------------------------------------

|(14) | Incorporated by reference to the Registrants Form 10-Q for the period ended December 7, 1999.
|---- | ----------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to the Registrants Form S-3/A (File No. 333-34366), filed with the Commission on June 14, 2000.
|---- | --------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to the Registrants Form 10-K for fiscal year 2000.
|---- | -----------------------------------------------------------------------------

|(17) | Incorporated by reference to the Registrants Form 8-K dated March 26, 2001.
|---- | ----------------------------------------------------------------------------

|(18) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 2000.
|---- | ----------------------------------------------------------------------------------------------

|(19) | Incorporated by reference to the Registrants Form 10-Q for the period ended January 31, 2001.
|---- | ----------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to the Registrants Proxy Statement for fiscal year 2000.
|---- | -----------------------------------------------------------------------------------

|(21) | Incorporated by reference to the Registrants Form S-3/A (File No. 333-63726), filed with the Commission on July 9, 2001.
|---- | -------------------------------------------------------------------------------------------------------------------------

|(22) | Incorporated by reference to the Registrants Form S-3 (File No. 333-34366), filed with the Commission on April 7, 2000.
|---- | ------------------------------------------------------------------------------------------------------------------------

|(23) | Incorporated by reference to the Registrants Form 10-Q for the period ended July 31, 2001.
|---- | -------------------------------------------------------------------------------------------

|(24) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 2001.
|---- | ----------------------------------------------------------------------------------------------

|(25) | Incorporated by reference to the Registrants Form 8-K filed on January 11, 2002.
|---- | ---------------------------------------------------------------------------------

|(26) | Incorporated by reference to the Registrants Form 10-Q for the period ended January 31, 2001.
|---- | ----------------------------------------------------------------------------------------------

|(27) | Incorporated by reference to the Registrants Form 8-K filed on May 10, 2002.
|---- | -----------------------------------------------------------------------------

|(28) | Incorporated by reference to the Registrants Form 10-K for fiscal year 2001.
|---- | -----------------------------------------------------------------------------

|(29) | Incorporated by reference to the Form 10-K filed by Quantum Fuel Systems Technologies, Inc., for fiscal year 2002.
|---- | ------------------------------------------------------------------------------------------------------------------

|(30) | Incorporated by reference to the Registrants Form 10-K for fiscal year 2002.
|---- | -----------------------------------------------------------------------------



54



---

##### Table of Contents

|(31) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 2002.
|---- | ----------------------------------------------------------------------------------------------

|(32) | Incorporated by reference to the Registrants Proxy Statement for fiscal year 2002.
|---- | -----------------------------------------------------------------------------------

|(33) | Incorporated by reference to the Registrants Transition Report on Form 10-K for the eight month transition period ended December 31, 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------

|+ | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------



|(b) | Reports on Form 8-K:
|--- | --------------------



Current Report on Form 8-K filed as of October 6, 2003 (Furnishing certain financial data relating to a subsidiary)



Amended Current Report on Form 8-K filed as of October 8, 2003 (Furnishing certain financial data relating to a subsidiary)



Current Report on Form 8-K filed as of December 23, 2003 (Reporting exempt sales of
equity securities)



Current Report on Form 8-K filed as of January 16,
2004 (Reporting replacement of executive officer)



55



---

##### Table of Contents

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized on March 22, 2004.



|                         |  |                           |  |                                                  
|------------------------ |  | ------------------------- |  | -------------------------------------------------
|IMPCO TECHNOLOGIES, INC.
|                         | 
|By:                      |  | /s/    ROBERT M.
STEMMLER
|                         |  | Name:                     |  | Robert M. Stemmler                               
|                         |  | Title:                    |  | Chief Executive Officer and Chairman of the Board



Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                            |  |                                                                                             |  |               
|------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------
|Signature                                   |  | Title                                                                                       |  | Date          
|                                            |  |                                                                                            
|/s/    ROBERT M.
STEMMLERRobert M. Stemmler |  | Chief Executive Officer and Chairman of the Board (Principal Executive Officer)             |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    NICKOLAI A.
GERDENickolai A. Gerde   |  | Vice President Finance, Chief Financial Officer and Treasurer (Principal Financial Officer) |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    RICHARD T.
FOGARTYRichard T. Fogarty |  | Corporate Controller (Principal Accounting Officer)                                         |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    NORMAN L.
BRYANNorman L. Bryan       |  | Director                                                                                    |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    PAUL
MLOTOKPaul Mlotok               |  | Director                                                                                    |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    J. DAVID POWER
IIIJ. David Power III |  | Director                                                                                    |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    DON J.
SIMPLOTDon J. Simplot         |  | Director                                                                                    |  | March 22, 2004
|                                            |  |                                                                                            
|/s/    MARIANO
COSTAMAGNAMariano
Costamagna |  | Director                                                                                    |  | March 22, 2004



56



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



INDEX TO FINANCIAL STATEMENTS



|                                                           |  |     
|---------------------------------------------------------- |  | ----
|                                                           |  | Page
|CONSOLIDATED FINANCIAL STATEMENTSIMPCO TECHNOLOGIES, INC. |  |     
|                                                           | 
|Report of Independent Auditors                             |  | F-2 
|                                                           | 
|Consolidated Balance Sheets                                |  | F-3 
|                                                           | 
|Consolidated Statements of Operations                      |  | F-5 
|                                                           | 
|Consolidated Statements of Stockholders Equity            |  | F-6 
|                                                           | 
|Consolidated Statements of Cash Flows                      |  | F-7 
|                                                           | 
|Notes to Consolidated Financial Statements                 |  | F-8 
|                                                           | 
|CONSOLIDATED FINANCIAL STATEMENTSBRC S.R.L.               |  |     
|                                                           | 
|Report of Independent Auditors                             |  | F-36
|                                                           | 
|Consolidated Balance Sheets                                |  | F-37
|                                                           | 
|Consolidated Statements of Operations                      |  | F-38
|                                                           | 
|Consolidated Statement of Changes in Quotaholders Equity  |  | F-39
|                                                           | 
|Consolidated Statements of Cash Flows                      |  | F-40
|                                                           | 
|Notes to Consolidated Financial Statements                 |  | F-41



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



The Board of Directors and
Stockholders

IMPCO Technologies, Inc.



We have audited the accompanying consolidated balance sheets of IMPCO Technologies, Inc. and subsidiaries as of April 30, 2002, December 31, 2002 and 2003 and the
related consolidated statements of operations, stockholders equity, and cash flows for each of the two years in the period ended April 30, 2002, the eight months ended December 31, 2002 and the year ended December 31, 2003. Our audits also
included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements
and schedule based on our audits.



We conducted our audits in accordance
with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IMPCO Technologies, Inc.
and subsidiaries at April 30, 2002, December 31, 2002 and 2003 and the consolidated results of their operations and their cash flows for each of the two years in the period ended April 30, 2002, the eight months ended December 31, 2002 and the year
ended December 31, 2003 in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth herein.



As more fully described in Note 16 to the consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets.



/s/    ERNST & YOUNG LLP



Los Angeles, California

March 10, 2004,

except for the 6th paragraph

of Note 1 and the 3rd and

5th paragraph of Note 3

as to which the date

is March 12, 2004



F-2



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



CONSOLIDATED
BALANCE SHEETS

(Thousands of Dollars Except Share Data)



|                                               |  |                |         |                   |   |                   |  |   |        
|---------------------------------------------- |  | -------------- | ------- | ----------------- | - | ----------------- |  | - | -------
|                                               |  | April 30, 2002 |         | December 31, 2002 |   | December 31, 2003
|ASSETS                                         |  |                |         |                   |   |                   |  |   |        
|Current assets:                                |  |                |         |                   |   |                   |  |   |        
|Cash and cash equivalents                      |  | $              | 10,413  |                   | $ | 1,996             |  | $ | 9,524  
|Restricted cash                                |  |                | 577     |                   |   | 1,604             |  |   | 724    
|Accounts receivable, net                       |  |                | 13,104  |                   |   | 11,641            |  |   | 14,051 
|Inventories:                                   |  |                |         |                   |   |                   |  |   |        
|Raw materials and parts                        |  |                | 7,724   |                   |   | 8,616             |  |   | 9,347  
|Work-in-process                                |  |                | 237     |                   |   |                  |  |   | 277    
|Finished goods                                 |  |                | 10,695  |                   |   | 8,705             |  |   | 8,275  
|                                               |  |                |         |                   |   |                   |  |   |        
|Total inventories                              |  |                | 18,656  |                   |   | 17,321            |  |   | 17,899 
|Deferred tax assets                            |  |                | 2,808   |                   |   | 1,032             |  |   | 283    
|Other current assets                           |  |                | 1,881   |                   |   | 1,649             |  |   | 1,648  
|Current assets from discontinued operation     |  |                | 14,386  |                   |   |                  |  |   |       
|                                               |  |                |         |                   |   |                   |  |   |        
|Total current assets                           |  |                | 61,825  |                   |   | 35,243            |  |   | 44,129 
|Equipment and leasehold improvements:          |  |                |         |                   |   |                   |  |   |        
|Dies, molds and patterns                       |  |                | 6,061   |                   |   | 6,343             |  |   | 6,572  
|Machinery and equipment                        |  |                | 6,126   |                   |   | 6,317             |  |   | 7,792  
|Office furnishings and equipment               |  |                | 8,737   |                   |   | 8,462             |  |   | 8,545  
|Automobiles and trucks                         |  |                | 416     |                   |   | 406               |  |   | 402    
|Leasehold improvements                         |  |                | 2,348   |                   |   | 3,401             |  |   | 3,597  
|                                               |  |                |         |                   |   |                   |  |   |        
|                                               |  |                | 23,688  |                   |   | 24,929            |  |   | 26,908 
|Less accumulated depreciation and amortization |  |                | 15,243  |                   |   | 16,359            |  |   | 18,589 
|                                               |  |                |         |                   |   |                   |  |   |        
|Net equipment and leasehold improvements       |  |                | 8,445   |                   |   | 8,570             |  |   | 8,319  
|Net goodwill and intangibles                   |  |                | 8,921   |                   |   | 8,921             |  |   | 10,106 
|Deferred tax assets, net                       |  |                | 29,129  |                   |   | 8,405             |  |   | 9,476  
|Investment in affiliates                       |  |                | 158     |                   |   | 12,777            |  |   | 25,500 
|Other assets                                   |  |                | 1,198   |                   |   | 2,062             |  |   | 3,606  
|Non-current assets from discontinued operation |  |                | 13,773  |                   |   |                  |  |   |       
|                                               |  |                |         |                   |   |                   |  |   |        
|Total Assets                                   |  | $              | 123,449 |                   | $ | 75,978            |  | $ | 101,136
|                                               |  |                |         |                   |   |                   |  |   |        





See accompanying notes to consolidated financial statements.



F-3



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



CONSOLIDATED BALANCE SHEETS

CONTINUED

(Thousands of Dollars Except Share Data)



|                                                                                                                                                                                                                                 |  |                |         |   |                   |   |         |                   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | ----------------- |  | - | ------- | -
|                                                                                                                                                                                                                                 |  | April 30, 2002 |         |   | December 31, 2002 |   |         | December 31, 2003 | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                             |  |                |         |   |                   |   |         |                   |  |   |         |  
|Current liabilities:                                                                                                                                                                                                             |  |                |         |   |                   |   |         |                   |  |   |         |  
|Accounts payable                                                                                                                                                                                                                 |  | $              | 5,240   |   |                   | $ | 5,166   |                   |  | $ | 9,082   |  
|Accrued payroll obligations                                                                                                                                                                                                      |  |                | 2,886   |   |                   |   | 2,387   |                   |  |   | 2,762   |  
|Other accrued expenses                                                                                                                                                                                                           |  |                | 1,749   |   |                   |   | 2,294   |                   |  |   | 4,195   |  
|Current revolving line of credit                                                                                                                                                                                                 |  |                | 8,625   |   |                   |   | 5,860   |                   |  |   | 5,238   |  
|Current maturities of long-term debt and capital leases                                                                                                                                                                          |  |                | 5,473   |   |                   |   | 8,331   |                   |  |   | 713     |  
|Current liabilities from discontinued operations                                                                                                                                                                                 |  |                | 9,137   |   |                   |   |        |                   |  |   |        |  
|                                                                                                                                                                                                                                 |  |                |         |   |                   |   |         |                   |  |   |         |  
|Total current liabilities                                                                                                                                                                                                        |  |                | 33,110  |   |                   |   | 24,038  |                   |  |   | 21,990  |  
|                                                                                                                                                                                                                                 |  |                |        
|Term loans, net of discount                                                                                                                                                                                                      |  |                | 4,890   |   |                   |   |        |                   |  |   | 17,617  |  
|Capital leases                                                                                                                                                                                                                   |  |                | 376     |   |                   |   | 101     |                   |  |   | 95      |  
|Non-current liabilities from discontinued operation                                                                                                                                                                              |  |                | 127     |   |                   |   |        |                   |  |   |        |  
|Other liabilities                                                                                                                                                                                                                |  |                |        |   |                   |   |        |                   |  |   | 1,483   |  
|Minority interest                                                                                                                                                                                                                |  |                | 2,268   |   |                   |   | 2,217   |                   |  |   | 2,822   |  
|Stockholders equity:                                                                                                                                                                                                            |  |                |         |   |                   |   |         |                   |  |   |         |  
|Preferred stock, $.001 par value, authorized 500,000 shares; none issued and outstanding at April 30, 2002, December 31, 2002, and December 31,
2003                                                                             |  |                |        |   |                   |   |        |                   |  |   |        |  
|Common stock, $.001 par value, authorized 100,000,000 shares 12,606,966 issued and outstanding at April 30, 2002; 16,433,282 issued and outstanding at
December 31, 2002; 18,568,721 issued and outstanding at December 31, 2003 |  |                | 13      |   |                   |   | 16      |                   |  |   | 19      |  
|Additional paid-in capital                                                                                                                                                                                                       |  |                | 126,316 |   |                   |   | 120,624 |                   |  |   | 132,190 |  
|Shares held in treasury                                                                                                                                                                                                          |  |                | (322    | ) |                   |   | (173    | )                 |  |   | (312    | )
|Accumulated deficit                                                                                                                                                                                                              |  |                | (39,671 | ) |                   |   | (68,065 | )                 |  |   | (74,993 | )
|Accumulated other comprehensive income (loss)                                                                                                                                                                                    |  |                | (3,658  | ) |                   |   | (2,780  | )                 |  |   | 225     |  
|                                                                                                                                                                                                                                 |  |                |         |   |                   |   |         |                   |  |   |         |  
|Total stockholders equity                                                                                                                                                                                                       |  |                | 82,678  |   |                   |   | 49,622  |                   |  |   | 57,129  |  
|                                                                                                                                                                                                                                 |  |                |         |   |                   |   |         |                   |  |   |         |  
|Total Liabilities and Stockholders Equity                                                                                                                                                                                       |  | $              | 123,449 |   |                   | $ | 75,978  |                   |  | $ | 101,136 |  
|                                                                                                                                                                                                                                 |  |                |         |   |                   |   |         |                   |  |   |         |  





See accompanying notes to consolidated financial statements.



F-4



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



CONSOLIDATED
STATEMENTS OF OPERATIONS

(Thousands of Dollars Except Per Share Data)



|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ------------------------------------ | - | ------- | ---------------------------------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                     |  | Fiscal Years Ended April 30, |         |   | Eight Months Ended December 31, 2002 |   |         | Fiscal YearEnded December 31, 2003 | 
|                                                                                                                     |  | 2001                         |         |   | 2002                                 |   |         |                                   
|Revenue                                                                                                              |  | $                            | 80,539  |   |                                      | $ | 67,676  |                                    |  | $ | 46,421  |   |  | $ | 74,740 |  
|Costs and expenses:                                                                                                  |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Cost of revenue                                                                                                      |  |                              | 49,499  |   |                                      |   | 44,542  |                                    |  |   | 33,071  |   |  |   | 51,780 |  
|Research and development expense                                                                                     |  |                              | 5,870   |   |                                      |   | 5,856   |                                    |  |   | 2,635   |   |  |   | 3,803  |  
|Selling, general and administrative expense                                                                          |  |                              | 18,561  |   |                                      |   | 19,676  |                                    |  |   | 11,922  |   |  |   | 19,638 |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Total costs and expenses                                                                                             |  |                              | 73,930  |   |                                      |   | 70,074  |                                    |  |   | 47,628  |   |  |   | 75,221 |  
|Operating income (loss)                                                                                              |  |                              | 6,609   |   |                                      |   | (2,398  | )                                  |  |   | (1,207  | ) |  |   | [481   | ]
|Interest (income) expense, net                                                                                       |  |                              | (221    | ) |                                      |   | 929     |                                    |  |   | 883     |   |  |   | 4,039  |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations before income taxes and equity share in losses of unconsolidated affiliates |  |                              | 6,830   |   |                                      |   | (3,327  | )                                  |  |   | (2,090  | ) |  |   | (4,520 | )
|Equity share in losses of unconsolidated affiliates                                                                  |  |                              |        |   |                                      |   |        |                                    |  |   |        |   |  |   | 1,107  |  
|Income tax expense (benefit)                                                                                         |  |                              | 2,903   |   |                                      |   | (1,331  | )                                  |  |   | 23,240  |   |  |   | 668    |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations before minority interests                                                   |  |                              | 3,927   |   |                                      |   | (1,996  | )                                  |  |   | (25,330 | ) |  |   | (6,295 | )
|Minority interest in income (loss) of consolidated subsidiaries                                                      |  |                              | 253     |   |                                      |   | 224     |                                    |  |   | (51     | ) |  |   | 605    |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                                                                             |  |                              | 3,674   |   |                                      |   | (2,220  | )                                  |  |   | (25,279 | ) |  |   | (6,900 | )
|Loss from discontinued operation                                                                                     |  |                              | (16,777 | ) |                                      |   | (25,016 | )                                  |  |   | (3,115  | ) |  |   |       |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Net loss                                                                                                             |  | $                            | (13,103 | ) |                                      | $ | (27,236 | )                                  |  | $ | (28,394 | ) |  | $ | (6,900 | )
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Net Income (loss) per share:                                                                                         |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Basic:                                                                                                               |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                                                                             |  | $                            | 0.37    |   |                                      | $ | (0.20   | )                                  |  | $ | (1.76   | ) |  | $ | (0.41  | )
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Loss from discontinued operation                                                                                     |  | $                            | (1.69   | ) |                                      | $ | (2.25   | )                                  |  | $ | (0.22   | ) |  | $ |       |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Net Income loss                                                                                                      |  | $                            | (1.32   | ) |                                      | $ | (2.45   | )                                  |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Diluted:                                                                                                             |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                                                                             |  | $                            | 0.33    |   |                                      | $ | (0.20   | )                                  |  | $ | (1.76   | ) |  | $ | (0.41  | )
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Loss from discontinued operation                                                                                     |  | $                            | (1.52   | ) |                                      | $ | (2.25   | )                                  |  | $ | (0.22   | ) |  | $ |       |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Net Income loss                                                                                                      |  | $                            | (1.19   | ) |                                      | $ | (2.45   | )                                  |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Number of shares used in per share calculation:                                                                      |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Basic                                                                                                                |  |                              | 9,935   |   |                                      |   | 11,098  |                                    |  |   | 14,376  |   |  |   | 16,643 |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  
|Diluted                                                                                                              |  |                              | 11,049  |   |                                      |   | 11,098  |                                    |  |   | 14,376  |   |  |   | 16,643 |  
|                                                                                                                     |  |                              |         |   |                                      |   |         |                                    |  |   |         |   |  |   |        |  



See accompanying notes to
consolidated financial statements.



F-5



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY



|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------------------------- | - | ------- | -------------------------------- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                               |  | Fiscal Years Ended April 30, |         |   | Eight Months EndedDecember 31,2002 |   |         | Fiscal YearEndedDecember 31,2003 | 
|(Thousands of Dollars Except Share Data)                                                                                                       |  | 2001                         |         |   | 2002                               |   |         |                                 
|Common Stock:                                                                                                                                  |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Beginning balance                                                                                                                              |  | $                            | 8       |   |                                    | $ | 10      |                                  |  | $ | 13      |   |  | $ | 16      |  
|Issuance of common stock (97,572, 328,459, 19,200, and 651,807 shares, respectively) resulting from the exercise of stock options and
warrants |  |                              |        |   |                                    |   | 1       |                                  |  |   |        |   |  |   | 1       |  
|Issuance of common stock (1,625,000, 2,000,000, 1,500,00 and 1,500,000 shares, respectively) resulting from equity offering                    |  |                              | 2       |   |                                    |   | 2       |                                  |  |   | 1       |   |  |   | 2       |  
|Issuance of common stock (0, 0, 2,309,470 and 0 shares, respectively) in connection with an option to acquire a business                       |  |                              |        |   |                                    |   |        |                                  |  |   | 2       |   |  |   |        |  
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Ending balance                                                                                                                                 |  | $                            | 10      |   |                                    | $ | 13      |                                  |  | $ | 16      |   |  | $ | 19      |  
|Additional paid-in capital relating to common stock:                                                                                           |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Beginning balance                                                                                                                              |  | $                            | 47,539  |   |                                    | $ | 102,832 |                                  |  | $ | 126,316 |   |  | $ | 120,624 |  
|Issuance of common stock resulting from the exercise of stock options and warrants                                                             |  |                              | 881     |   |                                    |   | 2,626   |                                  |  |   | 157     |   |  |   | 1,753   |  
|Issuance of common stock resulting from equity offering                                                                                        |  |                              | 52,345  |   |                                    |   | 20,738  |                                  |  |   | 17,299  |   |  |   | 8,818   |  
|Issuance of common stock in connection with option to acquire a business                                                                       |  |                              |        |   |                                    |   |        |                                  |  |   | 9,997   |   |  |   |        |  
|Fair value of stock warrants issued in connection with financing, net of unamortized deferred interest costs                                   |  |                              |        |   |                                    |   |        |                                  |  |   |        |   |  |   | 995     |  
|Reduction in current tax liability related to stock options                                                                                    |  |                              | 2,067   |   |                                    |   | 120     |                                  |  |   |        |   |  |   |        |  
|Spin-off of Quantum subsidiary                                                                                                                 |  |                              |        |   |                                    |   |        |                                  |  |   | (33,145 | ) |  |   |        |  
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Ending balance                                                                                                                                 |  | $                            | 102,832 |   |                                    | $ | 126,316 |                                  |  | $ | 120,624 |   |  | $ | 132,190 |  
|Shares held in trust for deferred compensation plan, at cost (4,137, 15,870, 18,224 and 34,592 shares, respectively)                           |  |                              | (143    | ) |                                    |   | (322    | )                                |  |   | (173    | ) |  |   | (312    | )
|Notes receivable from officers                                                                                                                 |  |                              | (3,914  | ) |                                    |   |        |                                  |  |   |        |   |  |   |        |  
|Retained earnings (accumulated deficit):                                                                                                       |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Beginning balance                                                                                                                              |  |                              | 668     |   |                                    |   | (12,435 | )                                |  |   | (39,671 | ) |  |   | (68,065 | )
|Sale of treasury shares below original cost                                                                                                    |  |                              |        |   |                                    |   |        |                                  |  |   |        |   |  |   | (28     | )
|Net loss income applicable to common stock                                                                                                     |  |                              | (13,103 | ) |                                    |   | (27,236 | )                                |  |   | (28,394 | ) |  |   | (6,900  | )
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Ending balance                                                                                                                                 |  |                              | (12,435 | ) |                                    |   | (39,671 | )                                |  |   | (68,065 | ) |  |   | (74,993 | )
|Accumulated other comprehensive income (loss):                                                                                                 |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Beginning balance                                                                                                                              |  | $                            | (2,726  | ) |                                    | $ | (3,719  | )                                |  | $ | (3,658  | ) |  | $ | (2,780  | )
|Foreign currency translation adjustment                                                                                                        |  |                              | (993    | ) |                                    |   | 178     |                                  |  |   | 865     |   |  |   | 2,901   |  
|Unrealized gain (loss) on derivative instrument                                                                                                |  |                              |        |   |                                    |   | (117    | )                                |  |   | 117     |   |  |   |        |  
|Unrealized gain (loss) on marketable securities available-for-sale                                                                             |  |                              |        |   |                                    |   |        |                                  |  |   | (104    | ) |  |   | 104     |  
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Ending balance                                                                                                                                 |  | $                            | (3,719  | ) |                                    | $ | (3,658  | )                                |  | $ | (2,780  | ) |  | $ | 225     |  
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Total stockholders equity                                                                                                                     |  | $                            | 82,631  |   |                                    | $ | 82,678  |                                  |  | $ | 49,622  |   |  | $ | 57,129  |  
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Comprehensive income (loss):                                                                                                                   |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Net loss                                                                                                                                       |  | $                            | (13,103 | ) |                                    | $ | (27,236 | )                                |  | $ | (28,394 | ) |  | $ | (6,900  | )
|Foreign currency translation adjustment                                                                                                        |  |                              | (994    | ) |                                    |   | 178     |                                  |  |   | 865     |   |  |   | 2,901   |  
|Unrealized gain (loss) on derivative instrument                                                                                                |  |                              |        |   |                                    |   | (117    | )                                |  |   | 117     |   |  |   |        |  
|Unrealized gain (loss) on marketable securities available-for-sale                                                                             |  |                              |        |   |                                    |   |        |                                  |  |   | (104    | ) |  |   | 104     |  
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  
|Comprehensive income (loss)                                                                                                                    |  | $                            | (14,097 | ) |                                    | $ | (27,175 | )                                |  | $ | (27,516 | ) |  | $ | (3,895  | )
|                                                                                                                                               |  |                              |         |   |                                    |   |         |                                  |  |   |         |   |  |   |         |  



See accompanying notes to
consolidated financial statements.



F-6



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



CONSOLIDATED
STATEMENTS OF CASH FLOWS

(Thousands of Dollars)



|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------------------------- | - | ------- | ---------------------------------- |  | - | ------- | - |  | - | ------- | -
|                                                                                         |  | Fiscal Year Ended |         |   | Eight MonthsEnded December 31, 2002 |   |         | Fiscal YearEnded December 31, 2003 | 
|                                                                                         |  | 2001              |         |   | 2002                                |   |         |                                   
|Cash flows from operating activities:                                                    |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Net income (loss) from continuing operations                                             |  | $                 | 3,675   |   |                                     | $ | (2,220  | )                                  |  | $ | (25,279 | ) |  | $ | (6,900  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Amortization of intangibles arising from acquisition                                     |  |                   | 738     |   |                                     |   | 747     |                                    |  |   |        |   |  |   |        |  
|Depreciation and other amortization                                                      |  |                   | 1,852   |   |                                     |   | 2,255   |                                    |  |   | 1,376   |   |  |   | 3,557   |  
|Valuation allowance for deferred taxes                                                   |  |                   |        |   |                                     |   |        |                                    |  |   | 24,000  |   |  |   | 2,376   |  
|Minority interests in income of consolidated affiliates                                  |  |                   | 253     |   |                                     |   | 224     |                                    |  |   | (51     | ) |  |   | 605     |  
|Equity share in loss of unconsolidated affiliates                                        |  |                   |        |   |                                     |   |        |                                    |  |   |        |   |  |   | 629     |  
|(Gain) loss on disposal of assets                                                        |  |                   | (3      | ) |                                     |   | 194     |                                    |  |   | 31      |   |  |   | 27      |  
|(Gain) loss from sale of available-for-sale securities                                   |  |                   | (17     | ) |                                     |   |         |                                    |  |   | 18      |   |  |   |        |  
|(Increase) decrease in deferred income taxes                                             |  |                   | 2,555   |   |                                     |   | (2,294  | )                                  |  |   | (630    | ) |  |   | (2,698  | )
|(Increase) decrease in accounts receivable                                               |  |                   | 4,170   |   |                                     |   | 2,123   |                                    |  |   | 1,463   |   |  |   | (2,410  | )
|(Increase) decrease in inventories                                                       |  |                   | 1,603   |   |                                     |   | 4,046   |                                    |  |   | 1,335   |   |  |   | (580    | )
|Increase (decrease) in accounts payable                                                  |  |                   | (4,668  | ) |                                     |   | (400    | )                                  |  |   | (75     | ) |  |   | 3,916   |  
|Increase in accrued expenses                                                             |  |                   | 255     |   |                                     |   | 461     |                                    |  |   | 45      |   |  |   | 2,277   |  
|Other, net                                                                               |  |                   | 7       |   |                                     |   | 168     |                                    |  |   | (549    | ) |  |   | 42      |  
|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Net cash provided by operating activities from continuing operations                     |  |                   | 10,420  |   |                                     |   | 5,304   |                                    |  |   | 1,684   |   |  |   | 841     |  
|Cash flows from investing activities:                                                    |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Purchase of equipment and leasehold improvements                                         |  |                   | (3,489  | ) |                                     |   | (3,086  | )                                  |  |   | (1,711  | ) |  |   | (1,744  | )
|Business acquisition cost                                                                |  |                   | (128    | ) |                                     |   | (211    | )                                  |  |   | (2,619  | ) |  |   | (13,622 | )
|Purchase of available-for-sale securities                                                |  |                   | (15,736 | ) |                                     |   |        |                                    |  |   |        |   |  |   |        |  
|Sale of available-for-sale securities                                                    |  |                   | 15,785  |   |                                     |   |        |                                    |  |   | 7       |   |  |   |        |  
|Proceeds from sale of equipment                                                          |  |                   | 9       |   |                                     |   | 3       |                                    |  |   | 131     |   |  |   | 3       |  
|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Net cash used in investing activities                                                    |  |                   | (3,559  | ) |                                     |   | (3,294  | )                                  |  |   | (4,192  | ) |  |   | (15,363 | )
|Cash flows from financing activities:                                                    |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Increase (decrease) in revolving line of credit                                          |  |                   | (13,513 | ) |                                     |   | 3,575   |                                    |  |   | (2,765  | ) |  |   | (623    | )
|Payments on term loans                                                                   |  |                   | (2,945  | ) |                                     |   | (1,380  | )                                  |  |   | (1,837  | ) |  |   | (6,855  | )
|Proceeds from term loans                                                                 |  |                   | 7,500   |   |                                     |   | 1,750   |                                    |  |   |        |   |  |   | 17,250  |  
|Payments of capital lease obligation                                                     |  |                   | (643    | ) |                                     |   | (288    | )                                  |  |   | (275    | ) |  |   | (402    | )
|Acquire common shares held in treasury                                                   |  |                   |        |   |                                     |   |        |                                    |  |   | (15     | ) |  |   | (167    | )
|Decrease (increase) in restricted cash                                                   |  |                   |        |   |                                     |   | (815    | )                                  |  |   | (1,028  | ) |  |   | 881     |  
|Increase (decrease) on notes receivable from officers                                    |  |                   | (3,914  | ) |                                     |   | 3,914   |                                    |  |   |        |   |  |   |        |  
|Proceeds from issuance of common stock                                                   |  |                   | 53,195  |   |                                     |   | 23,198  |                                    |  |   | 17,458  |   |  |   | 10,573  |  
|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Net cash provided by financing activities                                                |  |                   | 39,680  |   |                                     |   | 29,954  |                                    |  |   | 11,538  |   |  |   | 20,657  |  
|Net cash provided by continuing operations                                               |  |                   | 46,541  |   |                                     |   | 31,964  |                                    |  |   | 9,030   |   |  |   | 6,135   |  
|Net cash used in discontinued operation                                                  |  |                   | (33,244 | ) |                                     |   | (38,347 | )                                  |  |   | (18,312 | ) |  |   |        |  
|Translation adjustment                                                                   |  |                   | 280     |   |                                     |   | 209     |                                    |  |   | 865     |   |  |   | 1,393   |  
|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                     |  |                   | 13,577  |   |                                     |   | (6,174  | )                                  |  |   | (8,417  | ) |  |   | 7,528   |  
|Cash and cash equivalents at beginning of period                                         |  |                   | 3,010   |   |                                     |   | 16,587  |                                    |  |   | 10,413  |   |  |   | 1,996   |  
|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                               |  | $                 | 16,587  |   |                                     | $ | 10,413  |                                    |  | $ | 1,996   |   |  | $ | 9,524   |  
|                                                                                         |  |                   |         |   |                                     |   |         |                                    |  |   |         |   |  |   |         |  



See accompanying notes to
consolidated financial statements.



F-7



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



1.    Summary of
Significant Accounting Policies



(a) Basis of presentation and
description of the businessThe consolidated financial statements of IMPCO Technologies, Inc. (IMPCO or the Company) include the accounts of the Company and its majority owned subsidiaries IMPCO-BERU Technologies
B.V. (IMPCO BV); its wholly owned subsidiaries IMPCO Technologies, Pty. Limited (IMPCO Pty), IMPCO Tech Japan K.K. (IMPCO Japan) and Grupo I.M.P.C.O. Mexicano, S. de R.L. de C.V. (IMPCO Mexicano); and its
joint ventures Minda IMPCO Technologies Limited, IMPCO-Egypt, and CNGC-IMPCO Technologies, LLC (CNGC). The Company has a 40% interest in a joint venture, Minda IMPCO Limited, and uses the equity method for reporting the results of this
entity. The Company has purchased 50% of B.R.C. Societá a Responsabilitá Limitata (BRC). The Company uses the equity method to recognize the assets and liabilities of BRC in the Companys consolidated results. All
significant intercompany accounts and transactions have been eliminated in consolidation.



The Company is a designer, manufacturer and supplier of components and systems that store gaseous fuels and monitor and control the pressure and flow of those fuels for use in primarily internal combustion engines.



On July 23, 2002, the Company completed the distribution and spin-off of Quantum
Technologies Worldwide, Inc. (Quantum), a wholly owned subsidiary, by distributing one share of Quantum common stock for every share of IMPCO common stock held on the record date, July 5, 2002. The Company released Quantum from its
liability related to the $8.6 million line of credit with Bank of America and contributed cash of $15.0 million to supply liquidity and Quantums short-term operating needs. As a result of the spin-off, the Company no longer holds any
continuing interest in Quantum and has reported Quantum as a discontinued operation in the consolidated financial statements for all periods presented.



On November 14, 2002, the Company changed its fiscal calendar from April 30 to December 31. The consolidated financial statements and the accompanying notes include
the transition period for the eight months ended December 31, 2002.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Companys assets and the satisfaction of its liabilities in
the normal course of conducting business. The Company uses cash generated from operations, bank financings and sales of its equity securities to fund capital expenditures and research and development, as well as to invest in and operate existing
operations and new businesses. In July 2003, the Company concluded new loan agreements with Bison Capital Structured Equity Partners, LLC (Bison) for $20.0 million and with LaSalle Business Credit, LLC (LaSalle) for a maximum
amount of $12.0 million. From these proceeds, the Company repaid the Bank of America line of credit and term loans for a total of $11.3 million. In December 2003, the Company completed a private placement to institutional investors of 1.5 million
shares of its common stock in which it received approximately $9.0 million in net proceeds, after discounts, commissions and expenses.



At December 31, 2003 the Company was not in compliance under terms of the LaSalle and Bison agreements. See also Note 3. At December 31, 2003 the Company had
received waivers from LaSalle and Bison for covenant non-compliance conditions. Bison granted the Company a modified EBITDA calculation for 2004 and a further waiver in maintaining its Term



F-8



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Loan status as a long term liability throughout 2004. LaSalle granted the Company an amendment on March 12, 2004 which resulted in additional borrowing line capacity
of $2.6 million. Management believes that LaSalle will work with the Company to amend its credit arrangement for the remainder of its term. Accordingly, management believes that the Company has sufficient resources to meet its current financial
obligations and finance its operations through December 31, 2004.



It is
possible that the Company may require additional sources of financing in order to capitalize on opportunities that management believes currently exists in the alternative fuel market and to invest in long-term business opportunities. These
additional sources of financing may include bank borrowings or public or private offerings of equity or debt securities. No assurance can be given that such additional sources of financing will be available on acceptable terms, if at all.



(b) Cash and Cash EquivalentsThe Company considers all
highly liquid investments with maturity of three months or less when purchased to be cash equivalents.



(c) Restricted CashThe Company classifies cash and cash equivalents that are restricted from operating use for the next twelve months as restricted
cash. Amounts restricted for longer than twelve months are classified as other assets. When the restrictions are no longer in-place, the amounts are reclassified to cash and cash equivalents.



(d) InventoriesInventories are valued at the lower of cost or market. Cost
is determined by the first-in, first-out (FIFO) method while market is determined by replacement cost for raw materials and parts and net realizable value for work-in-process and finished goods.



(e) Equipment and leasehold improvementsEquipment and leasehold
improvements are stated on the basis of historical cost. Depreciation of equipment is provided using the straight-line method over the assets estimated useful lives, ranging from three to seven years. Amortization of leasehold improvements and
equipment under capital leases is provided using the straight-line method over the shorter of the assets estimated useful lives or the lease terms.



(f) Intangibles arising from acquisitionsIntangibles arising from acquisitions, primarily goodwill, are recorded based on the excess of the acquisition
cost over the fair value of amounts assigned to tangible assets and liabilities. Goodwill and other unidentifiable intangible assets that arise from acquisitions are subject to an annual evaluation in accordance with SFAS No. 142, Goodwill and
Other Intangible Assets,for the purpose of determining any impairment and would be recognized as goodwill expense.



In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under these rules, goodwill is no longer amortized but is subject to annual impairment tests in accordance with the Statement. Other
identifiable intangible assets continue to be amortized over their useful lives.



The Company has applied the rules on accounting for goodwill and other intangible assets beginning in the first quarter of the transition period ended December 31, 2002. Application of



F-9



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



the nonamortization provisions of the Statement has resulted in an increase in net income of approximately $0.5 million ($0.03 per share) for the transition period
ended December 31, 2002 and approximately $0.8 million ($0.05 per share) for the fiscal year ended December 31, 2003. The Company has completed the impairment tests as required upon adoption of SFAS No. 142 and the annual evaluation thereof for
impairment and has determined that there is no impairment to its recorded goodwill balance as of December 31, 2003.



(g) Warranty costsEstimated future warranty obligations related to certain products are provided by charges to operations in the period in which the
related revenue is recognized. Estimates are based, in part, on historical experience.



(h) Research and development costsResearch and development costs are charged to expense as incurred. Equipment used in research and development with alternative future uses is capitalized.



(i) Revenue recognitionRevenue is recognized when title is transferred,
ordinarily when products are shipped, and when management is reasonably assured of collectibility. Also, in accordance with Emerging Issues Task Force No. 00-10, the Company includes the costs of shipping and handling, when incurred, in cost of
goods sold.



(j) Minority interests in subsidiariesThe
balance sheet amounts in minority interest at December 31, 2003 represent 49% of the equity held by the single minority stockholder in IMPCO BV, 49% of the equity held by a single minority stockholder in IMPCO Fuel Systems, and a subsidiary of IMPCO
Pty, 40% of the equity held by a joint venture partner in Minda IMPCO. Minority interest represents the minority stockholders proportionate share of equity in those subsidiaries.



(k) Net income per shareBasic income per share is computed by dividing net income applicable to common stock by the
weighted average shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock outstanding, and if dilutive, all common stock equivalents. In addition to
net income (loss) per share, basic and diluted earnings per share are also presented for income (loss) from continuing operations and income (loss) from discontinued operation as appropriate.



(l) Stock based compensationIn October 1995, the Financial Accounting
Standards Board issued SFAS No. 123 Accounting For Stock Based Compensation, which established accounting and reporting standards for stock based employee compensation plans effective after fiscal year 1996. SFAS No. 123 encourages entities
to adopt the fair value based method of accounting; however, it also allows an entity to continue to measure compensation cost using the intrinsic value based method prescribed by Accounting Principles Board No. 25. Entities electing to remain on
the intrinsic value based method must make certain pro forma disclosures as if the new fair value method had been applied. At this time, the Company has not adopted the recognition provision of SFAS No. 123, but has provided pro forma
disclosures.



In December 2002, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 148, Accounting For Stock Based CompensationTransition and Disclosure.SFAS No. 148 amended SFAS No. 123 to provide new guidance



F-10



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



concerning the transition when a company changes from the intrinsic-value method to the fair-value method of accounting for employee stock-based compensation cost. As
amended by SFAS No. 148, SFAS No. 123 also requires additional disclosure regarding such cost in annual financial statements and in condensed interim financial statements. Certain disclosure provisions of SFAS No. 148 were adopted by the Company in
its financial statements prepared as of December 31, 2003.



SFAS No. 123,
as amended by SFAS No. 148, requires pro forma information regarding net income and net income per share to be disclosed for new options granted after fiscal year 1996. The fair value of these options was determined at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average assumptions:



|                                    |  |                              |   |  |                                      |   |  |                                     |   |  |      |  
|----------------------------------- |  | ---------------------------- | - |  | ------------------------------------ | - |  | ----------------------------------- | - |  | ---- | -
|                                    |  | Fiscal Years Ended April 30, |   |  | Eight Months Ended December 31, 2002 |   |  | Fiscal Year Ended December 31, 2003 |  
|                                    |  | 2001                         |   |  | 2002                                 |   |  |                                    
|Expected dividend yield             |  | 0.0                          | % |  | 0.0                                  | % |  | 0.0                                 | % |  | 0.0  | %
|Expected volatility                 |  | 69.5                         | % |  | 74.8                                 | % |  | 79.3                                | % |  | 83.3 | %
|Risk free interest rate             |  | 5.6                          | % |  | 5.0                                  | % |  | 4.4                                 | % |  | 4.0  | %
|Expected life of the option (years) |  | 6.0                          |   |  | 6.0                                  |   |  | 6.0                                 |   |  | 6.0  |  



The estimated fair value of the
options is amortized to expense over the options vesting period for pro forma disclosures. The per share pro forma for the effects of SFAS No. 123, as amended by SFAS 148, is not indicative of the effects on reported net
income/loss for future years. The Companys reported and pro forma information for the periods April 30, 2001 and 2002, and at December 31, 2002 and 2003 are as follows (in thousands of dollars except per share data):



|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | --------------------------------- | - | ------- | -------------------------------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                                          |  | Fiscal Years Ended April 30, |         |   | Eight MonthsEndedDecember 31,2002 |   |         | Fiscal YearEndedDecember 31,2003 | 
|                                                                                                                                          |  | 2001                         |         |   | 2002                              |   |         |                                 
|Loss as reported                                                                                                                          |  | $                            | (13,103 | ) |                                   | $ | (27,236 | )                                |  | $ | (28,394 | ) |  | $ | (6,900 | )
|Deduct: total stock-based employee compensation expense determined under the fair value based method for all awards, net of related
taxes |  |                              | (461    | ) |                                   |   | (691    | )                                |  |   | (545    | ) |  |   | (2,012 | )
|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Proforma net loss                                                                                                                         |  | $                            | (13,564 | ) |                                   | $ | (27,927 | )                                |  | $ | (28,939 | ) |  | $ | (8,912 | )
|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Basic loss per share:                                                                                                                     |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Net loss as reported                                                                                                                      |  | $                            | (1.32   | ) |                                   | $ | (2.45   | )                                |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Proforma loss                                                                                                                             |  | $                            | (1.37   | ) |                                   | $ | (2.52   | )                                |  | $ | (2.01   | ) |  | $ | (0.54  | )
|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Diluted loss per share:                                                                                                                   |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Net loss as reported                                                                                                                      |  | $                            | (1.19   | ) |                                   | $ | (2.45   | )                                |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  
|Proforma loss                                                                                                                             |  | $                            | (1.23   | ) |                                   | $ | (2.52   | )                                |  | $ | (2.01   | ) |  | $ | (0.54  | )
|                                                                                                                                          |  |                              |         |   |                                   |   |         |                                  |  |   |         |   |  |   |        |  



The Financial Accounting
Standards Board has also issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation. The Interpretation addresses implementation practice issues in accounting for compensation costs under existing
rules prescribed by Accounting Principles Board No. 25. The rules are applied prospectively to



F-11



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



all new awards, modifications to outstanding awards and changes in grantee status after July 1, 2000, with certain exceptions. The Company considers the impact of
these rules when adopting new stock option plans and when granting any options.



(m) Impairment of long-lived assets and long-lived assets to be disposed ofImpairment losses are recorded on long-lived assets used in operations when an indicator of impairment (significant decrease in market value of an
asset, significant change in extent or manner in which the asset is used or significant physical change to the asset) is present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying
amount. The Company has not experienced any significant changes in the business climate or in the use of assets that would require the Company to write down the value of the assets recorded in the balance sheet.



In August 2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations For a Disposal of a Segment
of a Business. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. We adopted SFAS No. 144 as of May 1, 2002, which did not have a significant impact on the Companys
financial position and results of operations, except that the Quantum operations is presented as a discontinued operation.



(n) Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of 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.



(o) ReclassificationsCertain prior year amounts have been reclassified to conform to current presentations.



(p) Foreign currency translationAssets and liabilities of the Companys foreign subsidiaries are generally translated at current exchange rates,
and related revenues and expenses are translated at average exchange rates in effect during the period. Resulting translation adjustments are recorded as a foreign currency component of other comprehensive income in stockholders equity. The
results and financial condition of the Companys international operations are affected by changes in exchange rates between certain foreign currencies and the U.S. Dollar. The functional currency for all of the Companys international
subsidiaries is the local currency of the subsidiary. An increase in the value of the U.S. Dollar increases costs incurred by the subsidiaries because most of its international subsidiaries inventory purchases are U.S. Dollar denominated. The
Company seeks to manage its foreign currency economic risk by minimizing its U.S. Dollar investment in foreign operations using foreign currency term loans and lines of credit to finance the operations of its foreign subsidiaries. At December 31,
2003, the Company had a single foreign exchange forward contract in which gains and losses are



F-12



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



ordinarily recognized in the consolidated statement of operations as the fair value of the contracts fluctuates.



Transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency, except those transactions that operate as a hedge of an identifiable foreign currency commitment, are included in the results of operations as incurred.



(q) Financial instrumentsAt December 31, 2003, the Companys
financial instruments recorded on the balance sheet include cash equivalents, capital lease obligations, short-term bank debt, and restricted cash. Because of the short maturity, short-term bank debt approximates fair value. At December 31, 2003,
the fair value of the Companys long-term debt and capital lease obligations approximated carrying value.



The Company periodically enters into foreign currency forward contracts and interest rate swap agreements. When the Company enters into foreign currency forward
contracts, it does so to hedge identifiable foreign currency commitments. Foreign currency contracts reduce the Companys exposure to unfavorable fluctuations in foreign currencies versus the U.S. dollar. Realized gains and losses on these
contracts are included in the measurement of the related foreign currency transaction. The Company, from time to time, uses interest rate swap agreements to manage interest rate risk on its floating rate debt portfolio. Each interest rate swap is
matched as a hedge against a specific debt instrument and has the same notional amount and tenor as the related debt instrument principle. As of December 31, 2003, the Company had a single foreign exchange forward contract of approximately $0.5
million for the purpose of hedging foreign exchange exposure.



[r] New
accounting pronouncementsIn January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No.
51, (FIN 46). FIN 46 introduces a new consolidation model, the variable interests model, which determines control (and consolidation) based on potential variability in gains and losses of the entity being evaluated for consolidation.
The requirements for FIN 46, including its disclosures, apply immediately.



FIN 46 provides guidance for determining whether an entity qualifies as a variable interest entity (VIE) by considering, among other considerations, whether the entity lacks sufficient equity or its equity holders lack adequate
decision-making ability. If the entity does not qualify as a VIE, then the consolidation criteria is based on previously established accounting standards. Qualifying VIEs are covered by FIN 46 and are individually evaluated for consolidation based
on their variable interests. FIN 46 requires consideration and estimates of a significant number of possible future outcomes of the VIE as well as the probability of each outcome occurring. Based on the allocation of possible outcomes, a calculation
is performed to determine which party, if any, has a majority of potential negative outcomes (expected losses) or a majority of the potential positive outcomes (expected residual returns), with an emphasis on negative outcomes. That party, if any,
is the primary beneficiary and is required to consolidate the VIE. The effective date for FIN 46 was deferred for public companies until the end of periods ending on or after December 15, 2003. Adoption of FIN 46 did not have an impact on the
Company.



F-13



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2.    Acquisitions



B.R.C. Societá a Responsabilitá Limitata.    On July 22, 2003, in conjunction with the
refinancing of the Company, the deferred payment of $7.0 million was paid to the equity holders of BRC consequently completing the 50% acquisition of BRC. As of December 31, 2003, the Company had incurred acquisition costs of approximately $24.6
million, which is shown on the consolidated balance sheet as part of investment in affiliates. The corresponding costs incurred as of December 31, 2002 totaled $12.5 million.



The Company uses the equity method of accounting to recognize the investment in and the results of BRC in the Companys financial
position at December 31, 2003 and for the fiscal year ended December 31, 2003. The condensed balance sheet for BRC as of December 31, 2002 and 2003 and the statements of operations for the years ended December 31, 2002 and 2003 follow (in thousands
of dollars):



|                                           |  |                            |        |   |                            |   |        |  
|------------------------------------------ |  | -------------------------- | ------ | - | -------------------------- | - | ------ | -
|                                           |  | December 31,2002           |        |   | December 31,2003           |  
|Current assets                             |  | $                          | 28,641 |   |                            | $ | 23,441 |  
|Long-term assets                           |  |                            | 5,997  |   |                            |   | 9,182  |  
|                                           |  |                            |        |   |                            |   |        |  
|Total Assets                               |  | $                          | 34,638 |   |                            | $ | 32,623 |  
|                                           |  |                            |        |   |                            |   |        |  
|Current liabilities                        |  | $                          | 11,609 |   |                            | $ | 6,163  |  
|Long-term liabilities                      |  |                            | 3,357  |   |                            |   | 4,155  |  
|Shareholders equity                       |  |                            | 19,672 |   |                            |   | 22,305 |  
|                                           |  |                            |        |   |                            |   |        |  
|Total liabilities and shareholders equity |  | $                          | 34,638 |   |                            | $ | 32,623 |  
|                                           |  |                            |        |   |                            |   |        |  
|                                           |  |                           
|                                           |  | Year EndedDecember 31,2002 |        |   | Year EndedDecember 31,2003 |  
|Revenue                                    |  | $                          | 32,809 |   |                            | $ | 36,280 |  
|Cost of revenues                           |  |                            | 16,328 |   |                            |   | 18,811 |  
|                                           |  |                            |        |   |                            |   |        |  
|Gross profit                               |  |                            | 16,481 |   |                            |   | 17,469 |  
|Operating expenses                         |  |                            | 14,610 |   |                            |   | 17,657 |  
|                                           |  |                            |        |   |                            |   |        |  
|Operating income (loss)                    |  |                            | 1,871  |   |                            |   | (188   | )
|Interest expense, net                      |  |                            | 622    |   |                            |   | 241    |  
|Other expenses                             |  |                            | 1,288  |   |                            |   | 497    |  
|                                           |  |                            |        |   |                            |   |        |  
|Pre-tax loss                               |  |                            | (39    | ) |                            |   | (926   | )
|Income taxes                               |  |                            | 980    |   |                            |   | 239    |  
|                                           |  |                            |        |   |                            |   |        |  
|Net loss                                   |  | $                          | (1,019 | ) |                            | $ | (1,165 | )
|                                           |  |                            |        |   |                            |   |        |  



In accordance with the BRC
option agreement, the Company has the option to acquire at least 90% ownership in BRC after the 2006 calendar year based upon a price determined by a multiple of earnings before interest and taxes adjusted for depreciation and amortization and other
quantitative factors.



F-14



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following supplemental condensed consolidated pro forma statements of operations for IMPCO for the year
ended December 31, 2002 and 2003 are prepared to give effect to the acquisition of 50% of BRC as if the transaction had occurred on January 1, 2002 instead of July 22, 2003 (in thousands of dollars, except for per share data):



|                                                |  |                            |         |   |                            |   |        |  
|----------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------ | -
|                                                |  | Year EndedDecember 31,2002 |         |   | Year EndedDecember 31,2003 |  
|Revenue                                         |  | $                          | 68,390  |   |                            | $ | 74,740 |  
|Net Loss                                        |  | $                          | (37,332 | ) |                            | $ | (6,895 | )
|                                                |  |                           
|Net loss per share:                             |  |                            |         |   |                            |   |        |  
|Basic:                                          |  |                            |         |   |                            |   |        |  
|Net loss                                        |  | $                          | (2.72   | ) |                            | $ | (0.41  | )
|                                                |  |                            |         |   |                            |   |        |  
|Diluted:                                        |  |                            |         |   |                            |   |        |  
|Net loss                                        |  | $                          | (2.72   | ) |                            | $ | (0.41  | )
|                                                |  |                            |         |   |                            |   |        |  
|Number of shares used in per share calculation: |  |                            |         |   |                            |   |        |  
|Basic                                           |  |                            | 13,744  |   |                            |   | 16,643 |  
|                                                |  |                            |         |   |                            |   |        |  
|Diluted                                         |  |                            | 13,744  |   |                            |   | 16,643 |  
|                                                |  |                            |         |   |                            |   |        |  



Related Party Transaction



In July 2003, the Company made the final deferred payment to the
BRC equity holders, which completed the $23.8 million acquisition of a 50% equity interest in BRC. Mr. Mariano Costamagna is the Chief Executive Officer of MTM s.r.l., an Italian corporation and a wholly owned subsidiary of BRC and, prior to the
transaction, directly or indirectly held a 50% equity interest in BRC. In connection with this purchase, the Company paid $6.9 million and issued 1,039,262 shares of common stock to Mr. Costamagna or his spouse, representing payment for one-half of
the 50% equity interest he held directly or indirectly in BRC. Mr. Costamagna was elected to a three-year term as a Company director beginning June 12, 2003. Mr. Costamagna presently owns 20% equity interest in BRC, and other members of his
immediate family own between 5% and 20% of the equity interest in BRC.



F-15



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3.    Debt Payable



The Companys debt payable is summarized as follows (in thousands of dollars):



|    |  |                                                                                           |  |                |        |                |   |                   |  |                   |        |  |   |       
|--- |  | ----------------------------------------------------------------------------------------- |  | -------------- | ------ | -------------- | - | ----------------- |  | ----------------- | ------ |  | - | ------
|    |  |                                                                                           |  | April 30, 2001 |        | April 30, 2002 |   | December 31, 2002 |  | December 31, 2003
|(a) |  | Bank of America NT&SA:                                                                    |  |                |        |                |   |                   |  |                   |        |  |   |       
|    |  | Revolving line of credit                                                                  |  | $              | 3,914  |                | $ | 8,625             |  | $                 | 5,860  |  | $ |      
|    |  | Mexican peso line of credit                                                               |  |                | 541    |                |   |                  |  |                   |       |  |   |      
|    |  | Term loan                                                                                 |  |                | 8,894  |                |   | 6,353             |  |                   | 4,447  |  |   |      
|    |  | Capital lease and capital expenditure lines of credit facilities                          |  |                | 1,436  |                |   | 1,516             |  |                   | 2,327  |  |   |      
|(b) |  | Senior subordinated secured promissory noteBison Capital Structured Equity Partners, LLC |  |                |       |                |   |                  |  |                   |       |  |   | 17,483
|(c) |  | Revolving promissory noteLaSalle Business Credit, LLC                                    |  |                |       |                |   |                  |  |                   |       |  |   | 5,238 
|(d) |  | Credit facilityFortis Bank (formerly Mees Pierson)                                       |  |                | 1,461  |                |   | 1,068             |  |                   | 715    |  |   |      
|(e) |  | Term loanThe Hong Kong and Shanghai Banking Corp. Ltd                                    |  |                | 776    |                |   | 500               |  |                   | 540    |  |   | 598   
|    |  | Line of credit                                                                            |  |                | 162    |                |   |                  |  |                   |       |  |   |      
|(f) |  | Notes payable                                                                             |  |                |       |                |   |                  |  |                   |       |  |   | 134   
|(g) |  | Other loans                                                                               |  |                |       |                |   |                  |  |                   |       |  |   | 72    
|    |  | Other capital leases                                                                      |  |                | 572    |                |   | 1,423             |  |                   | 222    |  |   | 138   
|    |  | Derivative instruments                                                                    |  |                |       |                |   | 195               |  |                   | 181    |  |   |      
|    |  |                                                                                           |  |                |        |                |   |                   |  |                   |        |  |   |       
|    |  |                                                                                           |  | $              | 17,756 |                | $ | 19,680            |  | $                 | 14,292 |  | $ | 23,663
|    |  | Less: current portion                                                                     |  |                | 9,758  |                |   | 14,287            |  |                   | 14,191 |  |   | 5,951 
|    |  |                                                                                           |  |                |        |                |   |                   |  |                   |        |  |   |       
|    |  | Non-current portion                                                                       |  | $              | 7,998  |                | $ | 5,393             |  | $                 | 101    |  | $ | 17,712
|    |  |                                                                                           |  |                |        |                |   |                   |  |                   |        |  |   |       



(a) Bank of America NT&SA



On July 21, 2003 the Company completed the refinancing of the Bank
of America debt and secured additional financing to complete the 50% acquisition of BRC and to provide for working capital. All of the amounts outstanding under the Bank of America agreements including accrued interest were settled in full.



(b) Senior Subordinated Secured Promissory NoteBison Capital
Structured Equity Partners, LLC



On July 18, 2003 the Company
entered into an agreement with Bison Capital Structured Equity Partners, LLC to sell to Bison a senior subordinated secured promissory note in the amount of $20.0 million bearing interest at a rate of 11.25%. Interest payments are due monthly over
the term of the note and the principal amount of the note is due in full on July 18, 2007. The proceeds of the note were approximately $17.3 million and resulted in a loan discount of approximately $2.7 million, which is amortized to interest
expense over the term of the note. At December 31, 2003 the carrying value of the note was approximately $17.5 million. Approximately $1.0 million was recognized as interest expense from inception of



F-16



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



the agreement to December 31, 2003. The Bison note is secured by the foreign assets of the Company. At December 31, 2003, the Company was in default for not meeting
certain financial measurement covenants at the end of the 4th quarter. The Company has obtained a waiver of its covenants at December 31, 2003, and certain covenant amendments for the remainder of 2004. The Company will be required to pay the
default rate of interest for the first quarter of 2004 (3% over the stated rate) in cash amounting to $150,000. The default rate of interest thereafter will be paid in kind and increase 150 basis points each quarter (up to a maximum of 18% per
annum) as long as the Company does not perform to the covenants established at the inception of the loan. (See Note 1)



In conjunction with the promissory note agreement the Company issued warrants to Bison to purchase 500,000 shares of the Companys common stock at a price of
$2.00. In September 2003, Bison exercised the warrants and acquired 500,000 shares of common stock.



(c) Revolving Promissory NoteLaSalle Business Credit, LLC



On July 18, 2003 the Company entered into a revolving promissory note with LaSalle Business Credit, LLC for a maximum amount of $12.0 million bearing interest at a
rate of prime plus 1%. The note is payable in full on July 18, 2006. The Companys availability under this facility is determined by a percentage of eligible accounts receivable and inventory balances as defined by the asset-based lending
agreement. As of December 31, 2003, $5.2 million was outstanding under the line of credit at an interest rate of 5.0% and approximately $1.6 million was unused and available under the line. As of December 31, 2003 the Company was in default for not
meeting certain financial measurement covenants at the end of the 4th quarter. The Company has obtained a waiver of its covenants at December 31, 2003. Based upon a request by the Company, the lender has granted the Company an amendment whereby two
large customers accounts will be granted up to 40% balance availability in the borrowing base (previously 15%), resulting in greater access to the credit facility. Based upon discussions with the bank, management believes that covenants may be
subject to a re-negotiation which could result in better matching with the Companys current performance capacities. (See Note 1)



(d) Credit facilityFortis Bank



IMPCO BV has secured a  2.3 million ($2.9
million) revocable credit facility with Fortis Bank in the Netherlands. The interest rate is determined on a weekly basis using a weighted average of several money market indices. IMPCO BVs borrowings under this facility may not exceed the
combined total of 70% of the book value of its eligible accounts receivable and 50% of the book value of its inventory (or the current market value when lower) with a maximum of  1.0 million. At December 31, 2003, the interest rate was 4.0% with no outstanding balance.



(e) The Hong Kong and Shanghai Banking Corporation Ltd.



Line of Credit.    In April 2002, IMPCO Japan secured a ¥64.0 million ($0.6 million) line of credit
facility with the Hong Kong and Shanghai Banking Corporation Ltd. (HSBC), Osaka Branch. This line of credit was renewed in March 2003 with a fixed interest rate of 1.685% for a period of 12 months and matures in April 2004. The line of
credit is cash secured from a restricted account with National Australian Bank Limited, which issued a stand-by letter of credit to HSBC as collateral for the line of credit. At December 31, 2003, the outstanding loan balance was ¥64.0 million
bearing interest at a rate of 1.685%.



F-17



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(f) Notes payable



During April and May of 2003, the Company entered into agreements with investors to provide approximately $3.1 million in bridge
loans, of which $1.4 million was from an entity related to one of the Companys directors. The bridge loans bore interest at a rate of 12% and matured in October 2003. In conjunction with the bridge loan agreements the Company issued warrants
to the investors to purchase 305,000 shares of the Companys common stock at $2.46, or 120% of market price. During July 2003, approximately $1.0 million of the loans was repaid, and the remaining loans and accrued interest in the amount of
$2.2 million and $0.1 million, respectively, were repaid in full in December 2003. In September 2003, the Company borrowed  0.5
million from an affiliate company and repaid the note plus accrued interest in December 2003.



In the fourth quarter of 2003, the Companys majority owned subsidiary, Minda IMPCO Ltd., of India entered into several loan agreements and obtained a total of INR6.0 million ($134,000) in loans with an average interest
rate of 14.0% and two year maturities.



(g) Other finance loans



In May and September of 2003, the Company financed certain
insurance policies through a third party lender. As of December 31, 2003 the balance of these loans was approximately $0.1 million, which mature in March 2004 and bear interest at 5.8%.



(h) Loans from a Director



On March 31, 2003, a Company director extended to the Company a loan commitment of $8.0 million expiring May 31, 2003, subsequently reduced to $1.5 million and
extended to January 31, 2004. In connection with the loan commitment, the Company granted to the director 200,000 warrants, fully vested, at a price of $2.51, which expire in four years.



On June 30, 2003, the 10% minority holder of IMPCO Mexicano exercised his put option for $0.5 million. The Company entered into an
agreement whereby the same Company director agreed to purchase the 10% interest for $0.5 million and would allow the Company to re-purchase the 10% interest at cost. In December 2003, the Company repaid the director $0.5 million, plus accrued
interest of $49,998, for his 10% interest and the Company owns 100% of IMPCO Mexicano.



At December 31, 2003, the Companys weighted average interest rate on debt payables was 13.1%.



4.    Marketable Securities



The Companys deferred compensation plan (plan) acquired 17,978 shares of Quantum common stock at an average price of $9.12 per share in accordance
with the Quantum spin-off, dated July 23, 2002. These shares were classified as marketable securities available-for-sale and are included as part of other assets on the consolidated balance sheet as of December 31, 2002. In accordance with SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities, unrealized gains and losses on marketable securities classified as available-for-sale are recognized as a component of other accumulated comprehensive income in the equity
section of the consolidated balance sheet. During the fourth quarter of 2003, the



F-18



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



plan was instructed to sell its shares of Quantum and use the proceeds to acquire shares in IMPCO. As of December 31, 2003, the unsold Quantum shares were classified
as trading securities in accordance with SFAS No. 115 and the unrealized loss in the amount of $39,000 carried in other accumulated comprehensive income was recognized as part of selling, general and administrative expense on the consolidated
statements of operations. In February 2004, 10,844 shares of Quantum were sold at an average price of $9.17 and 12,725 shares of IMPCO were acquired at an average price of $7.69. As of December 31, 2003, approximately $0.1 million was classified as
marketable securities held for trading as part of other assets on the balance sheet.



5.    Income Taxes



The provision
for (benefit from) income taxes consists of the following (in thousands of dollars):



|                                                                     |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------------------------- | - | ------- | --------------------------------- |  | - | ------ | - |  | - | ------ | -
|                                                                     |  | Fiscal Years Ended April 30, |         |   | Eight MonthsEndedDecember 31, 2002 |   |         | Fiscal YearEndedDecember 31, 2003 | 
|                                                                     |  | 2001                         |         |   | 2002                               |   |         |                                  
|Current:                                                             |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|Federal                                                              |  | $                            | (529    | ) |                                    | $ | (400    | )                                 |  | $ |       |   |  | $ |       |  
|State                                                                |  |                              | 103     |   |                                    |   | 1       |                                   |  |   | 1      |   |  |   |       |  
|Foreign                                                              |  |                              | 774     |   |                                    |   | 519     |                                   |  |   | 42     |   |  |   | 807    |  
|                                                                     |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|                                                                     |  |                              | 348     |   |                                    |   | 120     |                                   |  |   | 43     |   |  |   | 807    |  
|Deferred:                                                            |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|Federal and State                                                    |  |                              | 2,555   |   |                                    |   | (1,451  | )                                 |  |   | (803   | ) |  |   | (2,479 | )
|Foreign                                                              |  |                              |        |   |                                    |   |        |                                   |  |   |       |   |  |   | (139   | )
|Change in Valuation Allowance                                        |  |                              |        |   |                                    |   |        |                                   |  |   | 24,000 |   |  |   | 2,479  |  
|                                                                     |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|Total provision (benefit) for income taxes for continuing operations |  | $                            | 2,903   |   |                                    | $ | (1,331  | )                                 |  | $ | 23,240 |   |  | $ | 668    |  
|                                                                     |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|Provision (benefit) for income taxes for discontinued operation      |  | $                            | (11,832 | ) |                                    | $ | (16,675 | )                                 |  | $ | (2,076 | ) |  | $ |       |  
|                                                                     |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  



Income (loss) before income
taxes and minority interest of consolidated subsidiaries and dividends for U.S. and foreign-based operations is shown below (in thousands of dollars):



|                                                               |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------------------------- | - | ------- | --------------------------------- |  | - | ------ | - |  | - | ------ | -
|                                                               |  | Fiscal Years Ended April 30, |         |   | Eight MonthsEndedDecember 31, 2002 |   |         | Fiscal YearEndedDecember 31, 2003 | 
|                                                               |  | 2001                         |         |   | 2002                               |   |         |                                  
|Continuing operations                                          |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|U.S.                                                           |  | $                            | 5,568   |   |                                    | $ | (3,767  | )                                 |  | $ | (2,713 | ) |  | $ | (6,135 | )
|Foreign                                                        |  |                              | 1,262   |   |                                    |   | 440     |                                   |  |   | 623    |   |  |   | 1,615  |  
|                                                               |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|Total Continuing Operations                                    |  |                              | 6,830   |   |                                    |   | (3,327  | )                                 |  |   | (2,090 | ) |  |   | (4,520 | )
|Discontinued Operations                                        |  |                              | (28,610 | ) |                                    |   | (41,693 | )                                 |  |   | (5,191 | ) |  |   |       |  
|                                                               |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  
|Total income (loss) before income taxes and minority interests |  | $                            | (21,780 | ) |                                    | $ | (45,020 | )                                 |  | $ | (7,281 | ) |  | $ | (4,520 | )
|                                                               |  |                              |         |   |                                    |   |         |                                   |  |   |        |   |  |   |        |  



F-19



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A reconciliation of income taxes computed at the federal statutory income tax rate to income taxes reported in
the consolidated statements of operations is as follows:



|                                  |  |                              |   |  |                                      |   |  |                                     |   |  |       |  
|--------------------------------- |  | ---------------------------- | - |  | ------------------------------------ | - |  | ----------------------------------- | - |  | ----- | -
|                                  |  | Fiscal Years Ended April 30, |   |  | Eight Months Ended December 31, 2002 |   |  | Fiscal Year Ended December 31, 2003 |  
|                                  |  | 2001                         |   |  | 2002                                 |   |  |                                    
|Federal statutory income tax rate |  | -34.0                        | % |  | -34.0                                | % |  | -34.0                               | % |  | -34.0 | %
|Permanent differences             |  | 3.5                          |   |  | 0.9                                  |   |  | 32.7                                |   |  | 2.4   |  
|State tax, net                    |  | -1.6                         |   |  | -0.7                                 |   |  | -11.8                               |   |  |      |  
|Foreign tax, net                  |  | 1.6                          |   |  | 0.8                                  |   |  | -8.1                                |   |  | 2.6   |  
|Research and development credit   |  | -10.5                        |   |  | -7.0                                 |   |  | -15.2                               |   |  | -3.4  |  
|Valuation Allowance               |  |                             |   |  |                                     |   |  | 1148.1                              |   |  | 47.1  |  
|                                  |  |                              |   |  |                                      |   |  |                                     |   |  |       |  
|Effective tax rate                |  | -41.0                        | % |  | -40.0                                | % |  | 1111.7                              | % |  | 14.7  | %
|                                  |  |                              |   |  |                                      |   |  |                                     |   |  |       |  



The components of the
Companys deferred tax liabilities and assets is as follows (in thousands of dollars):



|                                        |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  
|--------------------------------------- |  | ---------------------------- | ------ | - | ---------------------------------- | - | ------ | --------------------------------- |  | - | ------- | - |  | - | ------- | -
|                                        |  | Fiscal Years Ended April 30, |        |   | Eight MonthsEndedDecember 31, 2002 |   |        | Fiscal YearEndedDecember 31, 2003 | 
|                                        |  | 2001                         |        |   | 2002                               |   |        |                                  
|Deferred tax liabilities:               |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  
|Tax over book depreciation              |  | $                            | (1,203 | ) |                                    | $ | (1,432 | )                                 |  | $ | (1,275  | ) |  |   | (863    | )
|Other                                   |  |                              | (1,791 | ) |                                    |   | (3,253 | )                                 |  |   | (2,857  | ) |  |   | (3,824  | )
|                                        |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  
|                                        |  |                              | (2,994 | ) |                                    |   | (4,685 | )                                 |  |   | (4,132  | ) |  |   | (4,687  | )
|Deferred tax assets:                    |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  
|Tax credit carryforwards                |  |                              | 7,944  |   |                                    |   | 10,739 |                                   |  |   | 10,878  |   |  |   | 12,533  |  
|Net operating loss carryforwards        |  |                              | 5,118  |   |                                    |   | 22,455 |                                   |  |   | 25,498  |   |  |   | 27,580  |  
|Inventory reserves                      |  |                              | 961    |   |                                    |   | 1,480  |                                   |  |   | 299     |   |  |   | 350     |  
|Other provisions for estimated expenses |  |                              | 1,741  |   |                                    |   | 1,948  |                                   |  |   | 894     |   |  |   | 462     |  
|                                        |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  
|                                        |  |                              | 15,764 |   |                                    |   | 36,622 |                                   |  |   | 37,569  |   |  |   | 40,925  |  
|                                        |  |                              |        |  
|Valuation Allowance                     |  |                              |       |   |                                    |   |       |                                   |  |   | (24,000 | ) |  |   | (26,479 | )
|                                        |  |                              |        |  
|Net deferred tax assets                 |  |                              | 12,770 |   |                                    |   | 31,937 |                                   |  |   | 9,437   |   |  |   | 9,759   |  
|Less: deferred tax assets-current       |  |                              | 2,169  |   |                                    |   | 2,808  |                                   |  |   | 1,032   |   |  |   | 283     |  
|                                        |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  
|Deferred tax assets non-current         |  | $                            | 10,601 |   |                                    | $ | 29,129 |                                   |  | $ | 8,405   |   |  | $ | 9,476   |  
|                                        |  |                              |        |   |                                    |   |        |                                   |  |   |         |   |  |   |         |  



The increase in valuation
allowance of approximately $2.5 million is attributable to the increase in deferred tax assets, primarily due to the increase of net operating loss carryforwards. The total valuation allowance of approximately $26.5 million as of December 31, 2003
was recognized based on the weight of available evidence that it is more likely than not that this portion of the deferred tax asset will not be realized within the next three years, notwithstanding that some of those assets may have longer lives
under applicable tax laws. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company
believes, based on its history of prior operating earnings, its spin-off of the Quantum division and its expectations of future earnings, that operating income of the Company will more likely than not be sufficient to realize the future benefits of
the



F-20



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



amount classified as net deferred tax asset. Future adverse changes in market conditions, poor operating results or a decline in our projections about future
profitability may affect the Company assessment of the adequacy of the valuation allowance and, consequently, the net carrying value of net deferred tax assets. In the event that the Company determines that it is more likely than not that it would
be unable to realize an additional portion of the net deferred tax asset, an additional adjustment to the deferred tax asset valuation allowance would be charged to income in the period such determination was made.



For the year ended December 31, 2003, the Company has a federal research and
development tax credit carryforward available for federal income tax purposes of approximately $5.1 million that, if not used, will begin to expire in 2009. Federal net operating loss carryforwards of $72.0 million will begin to expire in 2021.
Additionally, the Company has an alternative minimum tax credit carryforward available for federal income tax purposes of approximately $0.2 million that will carryforward indefinitely until utilized and a foreign tax credit of $0.7 million that
expires in 2004 if not utilized. The Company also has research and development credit carryforwards for state income tax purposes of approximately $4.6 million, which do not expire for tax reporting purposes. State net operating loss carryforwards
of approximately $33.0 million which will begin to expire in 2008.



6.    Discontinued Operation



On
July 23, 2002, the Company completed the distribution and spin-off of its Quantum subsidiary by distributing one share of Quantum common stock for every share of IMPCO common stock held on the record date, which was July 5, 2002. The Company assumed
approximately $8.6 million outstanding under the line of credit with Bank of America and also made a contribution in cash of $15.0 million to Quantum as part of the spin-off transaction and was presented in net cash used in discontinued operations
in the consolidated statements of cash flows for. As a result of the spin-off of Quantum, the Company no longer holds any continuing interest in Quantum.



The Company adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
effective as of May 1, 2002. Under the provisions of SFAS No. 144, the results of operations of Quantum are presented as discontinued operations in the Companys consolidated balance sheets.



F-21



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Operating results of discontinued operations for the period May 1, 2002 to the date of the Quantum spin-off,
July 23, 2002, and for the preceding fiscal years ended April 30, 2002 and 2001, are as follows (in thousands of dollars):



|                                            |  |                              |         |   |                             |   |         |   |  |   |        |  
|------------------------------------------- |  | ---------------------------- | ------- | - | --------------------------- | - | ------- | - |  | - | ------ | -
|                                            |  | Fiscal Years Ended April 30, |         |   | May 1, 2002to July 23, 2002 |  
|                                            |  | 2001                         |         |   | 2002                        |   |        
|Revenue                                     |  | $                            | 23,358  |   |                             | $ | 23,403  |   |  | $ | 4,446  |  
|Costs and expenses:                         |  |                              |         |   |                             |   |         |   |  |   |        |  
|Cost of product sales                       |  |                              | 19,452  |   |                             |   | 25,581  |   |  |   | 3,514  |  
|Research and development expense            |  |                              | 26,687  |   |                             |   | 32,657  |   |  |   | 4,730  |  
|Selling, general and administrative expense |  |                              | 5,499   |   |                             |   | 6,379   |   |  |   | 1,296  |  
|                                            |  |                              |         |   |                             |   |         |   |  |   |        |  
|Total costs and expenses                    |  |                              | 51,638  |   |                             |   | 64,617  |   |  |   | 9,540  |  
|                                            |  |                              |        
|Operating loss                              |  |                              | (28,280 | ) |                             |   | (41,214 | ) |  |   | (5,094 | )
|Interest expense                            |  |                              | 329     |   |                             |   | 479     |   |  |   | 97     |  
|                                            |  |                              |         |   |                             |   |         |   |  |   |        |  
|Loss before income taxes                    |  |                              | (28,609 | ) |                             |   | (41,693 | ) |  |   | (5,191 | )
|Income tax benefit                          |  |                              | (11,832 | ) |                             |   | (16,676 | ) |  |   | (2,076 | )
|                                            |  |                              |         |   |                             |   |         |   |  |   |        |  
|Loss from discontinued operation            |  | $                            | (16,777 | ) |                             | $ | (25,016 | ) |  | $ | (3,115 | )
|                                            |  |                              |         |   |                             |   |         |   |  |   |        |  



7.    Commitments and
Contingencies



(a) Leases



The Company has certain non-cancelable operating leases for facilities and equipment,
and non-cancelable capital leases for machinery, equipment and motor vehicles. Future minimum lease commitments under non-cancelable leases at December 31, 2003 are as follows (in thousands of dollars):



|                                               |  |                   |     |                  |   |      
|---------------------------------------------- |  | ----------------- | --- | ---------------- | - | -----
|                                               |  | Lease Obligations
|Fiscal Years Ended December 31,                |  | Capital Leases    |     | Operating Leases
|2004                                           |  | $                 | 47  |                  | $ | 1,384
|2005                                           |  |                   | 41  |                  |   | 592  
|2006                                           |  |                   | 32  |                  |   | 476  
|2007                                           |  |                   | 33  |                  |   | 465  
|2008                                           |  |                   |    |                  |   | 460  
|Thereafter                                     |  |                   |    |                  |   | 1,575
|                                               |  |                   |     |                  |   |      
|Total minimum lease payments                   |  | $                 | 153 |                  | $ | 4,952
|                                               |  |                   |     |                  |   |      
|Less: imputed interest                         |  |                   | 15  |                  |   |      
|                                               |  |                   |     |                  |   |      
|Present value of future minimum lease payments |  |                   | 138 |                  |   |      
|Less: current portion                          |  |                   | 43  |                  |   |      
|                                               |  |                   |     |                  |   |      
|Long-term capital lease obligation             |  | $                 | 95  |                  |   |      
|                                               |  |                   |     |                  |   |      



Total rental expense under the
operating leases for fiscal years ended April 30, 2001, and 2002, the transition period ended December 31, 2002, and the fiscal year ended December 31, 2003 were approximately $1.6 million, $1.7 million, $1.4 million, and $2.0 million respectively.
These leases are non-cancelable and certain leases have renewal options and escalation clauses.



F-22



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



At April 30, 2001, and 2002, the transition period ended December 31, 2002, and the fiscal year ended December
31, 2003 approximately $1.7 million, $1.1 million, $0.6 million, and $0.2 million were outstanding under the Companys capital lease facility, respectively. At December 31, 2003, the gross and net assets acquired under the capital lease
facility were approximately $3.4 million and $0.4 million, respectively. Amortization of these assets is included in depreciation expense.



(b) Contingencies



The Company is currently subject to certain legal proceedings and claims arising in the ordinary course of business. Based on advice from legal counsel, management
does not believe that the outcome of any of these matters will have a material adverse effect on the Companys consolidated financial statements.



(c) Investment and Tax Savings Plan



The Companys Investment and Tax Savings Plan (the Plan) is a defined contribution plan, which is qualified under Internal Revenue Service Code
Section 401(k). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. All employees who are at least age twenty-one or older are eligible to participate in the Plan on the first day of employment with the
Company. Employees of the Company who elect to participate in the Plan may contribute into the Plan not less than 1% nor more than 15% of compensation. The Companys matching contributions are discretionary and match elective salary deferrals
up to 3.0% of compensation. Approximately 69% of eligible employees were enrolled in the 401(k) plan at December 31, 2003. Employer contributions approximated $0.6 million, $0.6 million, $0.2 million, and $0.3 million for fiscal years ended 2001 and
2002, the transition period ended December 31, 2002, and the fiscal year ended December 31, 2003 respectively.



(d) Pension Expense



The Companys 51% owned subsidiary in The Netherlands has a defined benefit pension plan for employees over 25 years of age and mandatory retirement at age 65.
The post-retirement benefit is 70% of the highest annual compensation level earned during employment. The Company purchases and fully funds this benefit with a state-approved insurance carrier who takes full responsibility for paying post-retirement
benefits. For the years ended April 30, 2001 and 2002, the eight months ended December 31, 2002, and the year ended December 31, 2003, the Company paid approximately $0.1 million, $0.3 million, $0.2 million, and
$0.5 million, respectively.



8.    Stockholders Equity



(a) Stockholder Protection Rights Agreement



On June 30, 1999, the Companys Board of Directors adopted a Stockholder
Protection Rights Agreement and declared a dividend of one right on each outstanding share of IMPCO common stock. Each right entitles the holder, upon certain events, to purchase, at an exercise price of $45 per share, shares of common stock with a
value equal to twice the exercise price. The dividend was paid on July 26, 1999 to stockholders of record on July 12, 1999.



F-23



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(b) Stock options



The Company has eight stock option plans that provide for the issuance of options to key employees and directors of the Company at the
fair market value at the time of grant. Options under the plans generally vest in four or five years and are generally exercisable while the individual is an employee or a director, or ordinarily within one month following termination of employment.
In no event may options be exercised more than ten years after date of grant. On June 12, 2003, the stockholders of IMPCO approved the 2003 Stock Incentive Plan (Plan), which provides for the issuance of up to 800,000 shares of the
Companys common stock. Subject to the provisions of the Plan, the Companys board of directors or a committee appointed by the board will determine who will receive shares or options, the number of shares or options granted, the type of
options granted (incentive or non-qualified), the manner of exercise and the exercise price of the options.



In connection with the spin-off of Quantum, all stock options outstanding on the spin-off date were split into one option of IMPCO and one option of Quantum stock.
The exercise price of both the IMPCO and Quantum stock options was adjusted based on the relative market values of both companies on the first trading day following the spin-off. Options exercised prior to the spin-off of Quantum were made at the
exercise price prior to such adjustment. All vesting schedules remain the same and the option holders are not required to exercise their options concurrently.



|                                        |  |                 |   |  |                                |     
|--------------------------------------- |  | --------------- | - |  | ------------------------------ | ----
|                                        |  | Number ofShares |   |  | Weighted AverageExercise Price
|Outstanding at April 30, 2000           |  | 1,321,931       |   |  | $                              | 4.88
|Granted                                 |  | 416,453         |   |  |                                | 7.27
|Exercised                               |  | (97,572         | ) |  |                                | 5.06
|Forfeited                               |  | (46,047         | ) |  |                                | 8.78
|                                        |  |                 |   |  |                                |     
|Outstanding at April 30, 2001           |  | 1,594,765       |   |  | $                              | 5.39
|Granted                                 |  | 232,000         |   |  |                                | 6.17
|Exercised                               |  | (328,459        | ) |  |                                | 4.48
|Forfeited                               |  | (120,826        | ) |  |                                | 6.60
|                                        |  |                 |   |  |                                |     
|Outstanding at April 30, 2002           |  | 1,377,480       |   |  | $                              | 5.53
|Granted                                 |  | 819,000         |   |  |                                | 3.30
|Exercised                               |  | (19,200         | ) |  |                                | 4.28
|Forfeited                               |  | (98,787         | ) |  |                                | 6.72
|                                        |  |                 |   |  |                                |     
|Outstanding at December 31, 2002        |  | 2,078,493       |   |  | $                              | 4.61
|Granted                                 |  | 988,000         |   |  |                                | 5.04
|Exercised                               |  | (141,807        | ) |  |                                | 5.20
|Forfeited                               |  | (173,853        | ) |  |                                | 4.90
|                                        |  |                 |   |  |                                |     
|Outstanding at December 31, 2003        |  | 2,750,833       |   |  | $                              | 4.72
|                                        |  |                
|Shares exercisable at April 30, 2001    |  | 774,889         |   |  | $                              | 4.66
|Shares exercisable at April 30, 2002    |  | 666,623         |   |  | $                              | 4.79
|Shares exercisable at December 31, 2002 |  | 818,107         |   |  | $                              | 4.88
|Shares exercisable at December 31, 2003 |  | 746,514         |   |  | $                              | 5.08



F-24



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table sets forth summarized information with respect to stock options outstanding and exercisable
at December 31, 2003:



|                      |  |                                  |  |              |  |               |       |                  |         |               |   |      
|--------------------- |  | -------------------------------- |  | ------------ |  | ------------- | ----- | ---------------- | ------- | ------------- | - | -----
|                      |  | Outstanding at December 31, 2003 |  | Exercisable 
|Exercise Price Range: |  | Number of Shares                 |  | Average Life |  | Average Price |       | Number of Shares |         | Average Price
|$3.01 to $4.50        |  | 1,644,291                        |  | 7.8          |  | $             | 3.43  |                  | 383,791 |               | $ | 4.08 
|$4.51 to $6.00        |  | 107,033                          |  | 3.9          |  |               | 5.21  |                  | 100,533 |               |   | 5.17 
|$6.01 to $7.50        |  | 952,251                          |  | 8.1          |  |               | 6.71  |                  | 242,472 |               |   | 6.33 
|$7.51 to $9.00        |  | 43,858                           |  | 7.2          |  |               | 8.00  |                  | 17,678  |               |   | 8.00 
|$9.01 to $15.00       |  | 3,400                            |  | 6.6          |  |               | 12.50 |                  | 2,040   |               |   | 12.50
|                      |  |                                  |  |              |  |               |       |                  |         |               |   |      
|                      |  | 2,750,833                        |  | 7.7          |  | $             | 4.72  |                  | 746,514 |               | $ | 5.08 



At December 31, 2003, there were
approximately 102,000 shares available for grant.



The Company has
elected to account for its employee stock options under Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for employee stock options. No compensation
expense is recorded under APB 25 because the exercise price of the Companys employee common stock options equals the market price of the underlying common stock on the grant date.



(c) Warrants



On January 11, 2002, the Company completed a private placement of 2,000,000 shares of common stock at a price of $11.25 per share for $22.5 million. The Company
also issued to the investors warrants to purchase an aggregate of 200,000 shares of common stock at an exercise price of $13.25 per share. Each purchaser was issued a warrant to purchase one-tenth of a share of common stock for each share of common
stock purchased under the agreement. In addition, the Company issued warrants to purchase an aggregate of 100,000 shares of common stock to the placement agent in connection with the transaction. The total of 300,000 warrants were outstanding at
December 31, 2002 and the warrants are exercisable at any time until January 11, 2006.



In connection with a $8.0 million loan commitment obtained in March 2003 from a Company director that expired on July 31, 2003, the Company granted 200,000 warrants, vesting immediately, to the director to purchase IMPCO stock
at a price of $2.51. The warrants expire in four years. During 2003, the Company utilized the Black-Scholes model to determine the fair value of the options and recognized as expense approximately $0.3 million.



During April and May of 2003, the Company entered into agreements with investors to
provide approximately $3.1 million in bridge loans, of which $1.4 million was from an entity related to one of the Companys directors. In conjunction with the bridge loan agreements the Company issued warrants to the investors to purchase
305,000 shares of the Companys common stock at $2.46, or 120% of market price. As of December 31, 2003, 10,000 warrants had been exercised and the bridge loans were repaid. See Note 3(g). During 2003, the Company utilized the Black-Scholes
option pricing model and determined the fair value of the 305,000 warrants to be approximately $0.4 million. This amount was recognized on the statement of operations as part of interest expense.



F-25



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On July 21, 2003, the Company issued 500,000 warrants, fully vested, to Bison to acquire the Companys
stock in connection with the issuance of a $20.0 million senior secured subordinated promissory note at a price of $2.00. In September 2003, Bison exercised all of the warrants and the Company received $1.0 million in proceeds from the exercise of
the warrants. During 2003, the Company determined the fair value of the 500,000 Bison warrants to be approximately $2.6 million. The assumptions used in the Black-Scholes option pricing model were (i) expected term of the
options  4 years, (ii) annual volatility  91.3%, (iii) risk-free interest rate  2.6%, market price of the IMPCO common stock on the date of issuance  $6.02, and
(iv) dividends paid  none. During 2003, approximately $0.3 million was recognized as interest expense and the deferred portion of approximately $2.3 million is classified as part of additional paid in capital on the December 31,
2003 balance sheet and is amortized to interest expense ratably over the four year term of the loan.



(d) Notes receivable from officers



On March 2, 2001, the Board of Directors authorized loans to three officers of the Company for the exercise of options to purchase Company stock from former
stockholders. The loans accrued interest at 9% and were fully collateralized by a security interest in and lien upon shares of common stock of the Company and certain vested Company nonqualified stock options issued to the officers. Additionally,
the loans were secured by the personal residence of one of the officers and were cross-collateralized. Each of these loans was repaid in full in July 2001.



(e) Loans to Executive Officer



In December 2000, the Company loaned an officer of the Company $100,000. The loan initially bore interest at a rate of 5% per annum and, since June 30, 2001, bears
interest at a rate of 9% per annum. The loan became due and payable in full on July 31, 2002. As of December 31, 2003 approximately $3,000 was due and outstanding. The Company is negotiating to recover the amounts due under the loan.



In September 2001, the Company loaned this officer $175,000. The loan bore interest at
a rate of 9% per annum. The loan became due and payable in full on July 31, 2002. The amount outstanding as of December 31, 2003 was approximately $216,000. The Company is negotiating with this officer to recover the amounts due under the loan.



F-26



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



9.    Income (Loss) Per Share



The following table sets forth the computation of basic and diluted loss per share (in thousands of dollars except per share data):



|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|-------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------------- | - | ------- | ---------------------- |  | - | ------- | - |  | - | ------ | -
|                                                                           |  | Fiscal Years Ended April 30, |         |   | EndedDecember 31, 2002 |   |         | EndedDecember 31, 2003 | 
|                                                                           |  | 2001                         |         |   | 2002                   |   |         |                       
|Numerator:                                                                 |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                                   |  | $                            | 3,675   |   |                        | $ | (2,220  | )                      |  | $ | (25,279 | ) |  | $ | (6,900 | )
|Loss from discontinued operation                                           |  |                              | (16,777 | ) |                        |   | (25,016 | )                      |  |   | (3,115  | ) |  |   |       |  
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Net income (loss)                                                          |  | $                            | (13,102 | ) |                        | $ | (27,236 | )                      |  | $ | (28,394 | ) |  | $ | (6,900 | )
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Denominator:                                                               |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Denominator for basic earnings per shareweighted average number of shares |  |                              | 9,935   |   |                        |   | 11,098  |                        |  |   | 14,376  |   |  |   | 16,643 |  
|Effect of dilutive securities:                                             |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Employee stock options                                                     |  |                              | 1,114   |   |                        |   |        |                        |  |   |        |   |  |   |       |  
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Dilutive potential common shares                                           |  |                              | 11,049  |   |                        |   | 11,098  |                        |  |   | 14,376  |   |  |   | 16,643 |  
|Basic loss per share:                                                      |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                                   |  | $                            | 0.37    |   |                        | $ | (0.20   | )                      |  | $ | (1.76   | ) |  | $ | (0.41  | )
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Loss from discontinued operation                                           |  | $                            | (1.69   | ) |                        | $ | (2.25   | )                      |  | $ | (0.22   | ) |  | $ |       |  
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Net loss                                                                   |  | $                            | (1.32   | ) |                        | $ | (2.45   | )                      |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Diluted loss per share:                                                    |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Income (loss) from continuing operations                                   |  | $                            | 0.33    |   |                        | $ | (0.20   | )                      |  | $ | (1.76   | ) |  | $ | (0.41  | )
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Loss from discontinued operation                                           |  | $                            | (1.52   | ) |                        | $ | (2.25   | )                      |  | $ | (0.22   | ) |  | $ |       |  
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  
|Net loss                                                                   |  | $                            | (1.19   | ) |                        | $ | (2.45   | )                      |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                           |  |                              |         |   |                        |   |         |                        |  |   |         |   |  |   |        |  



For the period ended December
31, 2003, options to purchase approximately 2,751,000 shares of common stock and 815,000 stock warrants were excluded in the computation of diluted net income per share, as the effect would be anti-dilutive. For the fiscal years ended April 30, 2001
and 2002 and the transition period ended December 31, 2002, options to purchase approximately 480,000, 1,377,000, and 2,078,000 shares, respectively, of common stock were excluded in the computation of diluted net income per share, as the effect
would be anti-dilutive. For the fiscal years ended April 30, 2001 and 2002 and the transition period ended December 31, 2002, options to purchase 0, 300,000, and 300,000 shares, respectively, of warrants to acquire common stock were excluded in the
computation of diluted net income per share, as the effect would be anti-dilutive.



F-27



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10.    Revenues



During fiscal year 2001, IMPCO BV, IMPCO Pty, Grupo IMPCO Mexicano and IMPCO Japan subsidiaries accounted for approximately 18%, 8%,
9% and 4% of total consolidated revenues, respectively. During fiscal year 2002, IMPCO BV, IMPCO Pty, Grupo IMPCO Mexicano and IMPCO Japan subsidiaries accounted for approximately 22%, 6%, 16%, and 3% of total consolidated revenues, respectively.
During the eight months ended December 31, 2002, IMPCO BV, IMPCO Pty, Grupo IMPCO Mexicano and IMPCO Japan subsidiaries accounted for approximately 18%, 6%, 26%, and 3% of total consolidated revenues, respectively. During the fiscal year ended
December 31, 2003, IMPCO BV, IMPCO Pty, Grupo IMPCO Mexicano and IMPCO Japan subsidiaries accounted for approximately 22%, 6%, 16%, and 3% of total consolidated revenues, respectively.



The Company routinely sells products to a broad base of domestic and international customers, which includes distributors and original
equipment manufacturers. Based on the nature of these customers, credit is generally granted without collateral being required. The Company does not anticipate that a significant credit risk exists as a result of these customer relationships.



During the fiscal year ended December 31, 2003, the Company had one
customer with net revenues greater than ten percent of consolidated net revenues. Revenues for this customer as a percentage of total revenues were 10.3%, 14.4%, 7.9%, and 7.3% for the year ended December 31, 2003, the eight months ended December
31, 2002, and the years ended April 30, 2002 and 2001, respectively.



11.    Business Segment and Geographic Information



Business Segments.    The Company currently has two reporting segments organized along geographical boundaries: a domestic segment consisting of U.S. Operations and the rest of the world known as the
International segment. Prior to 2001, the U.S. Operations segment was called the Gaseous Fuel Products Division. The domestic segment sells products including parts and conversion systems to OEMs and the aftermarket. The Companys International
Operations in Australia, Europe, Japan, India, and Mexico provide distribution for the Companys products, predominantly from its domestic division and some product assembly.



Corporate expenses consist of general and administrative expenses at the corporate level and include the amortization of identifiable
intangibles. Intersegment eliminations are primarily the result of intercompany sales from our domestic division to our International Operations.



The Company evaluates performance based on profit or loss from operations before interest and income taxes. The accounting policies of the reportable segments are
the same as those described in the Summary of Significant Accounting Policies.



F-28



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Financial Information by Business Segment.    Financial information by business
segment for continuing operations follows (in thousands of dollars):



|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|------------------------ |  | ---------------------------- | ------- | - | ------------------------------------ | - | ------- | ----------------------------------- |  | - | ------- | - |  | - | ------- | -
|                         |  | Fiscal Years Ended April 30, |         |   | Eight Months Ended December 31, 2002 |   |         | Fiscal Year Ended December 31, 2003 | 
|Revenues:                |  | 2001                         |         |   | 2002                                 |   |         |                                    
|U.S. Operations          |  | $                            | 66,925  |   |                                      | $ | 52,055  |                                     |  | $ | 33,151  |   |  | $ | 51,951  |  
|International Operations |  |                              | 31,132  |   |                                      |   | 32,773  |                                     |  |   | 25,304  |   |  |   | 36,107  |  
|Intersegment Elimination |  |                              | (17,518 | ) |                                      |   | (17,152 | )                                   |  |   | (12,034 | ) |  |   | (13,318 | )
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|Total                    |  | $                            | 80,539  |   |                                      | $ | 67,676  |                                     |  | $ | 46,421  |   |  | $ | 74,740  |  
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|                         |  |                              |        
|                         |  | Fiscal Years Ended April 30, |         |   | Eight Months Ended December 31, 2002 |   |         | Fiscal Year Ended December 31, 2003 | 
|Operating Income (Loss)  |  | 2001                         |         |   | 2002                                 |   |         |                                    
|U.S. Operations          |  | $                            | 11,138  |   |                                      | $ | 3,416   |                                     |  | $ | 1,751   |   |  | $ | 4,549   |  
|International Operations |  |                              | 1,387   |   |                                      |   | 599     |                                     |  |   | 637     |   |  |   | 1,589   |  
|Corporate Expenses       |  |                              | (5,862  | ) |                                      |   | (6,807  | )                                   |  |   | (3,460  | ) |  |   | (6,992  | )
|Intersegment Elimination |  |                              | (53     | ) |                                      |   | 393     |                                     |  |   | (135    | ) |  |   | 373     |  
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|Total                    |  | $                            | 6,610   |   |                                      | $ | (2,399  | )                                   |  | $ | (1,207  | ) |  | $ | (481    | )
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|                         |  |                              |        
|                         |  | Fiscal Years Ended April 30, |         |   | Eight Months Ended December 31, 2002 |   |         | Fiscal Year Ended December 31, 2003 | 
|Identifiable Assets      |  | 2001                         |         |   | 2002                                 |   |         |                                    
|U.S. Operations          |  | $                            | 34,495  |   |                                      | $ | 26,346  |                                     |  | $ | 23,555  |   |  | $ | 25,704  |  
|International Operations |  |                              | 24,222  |   |                                      |   | 23,432  |                                     |  |   | 23,697  |   |  |   | 27,739  |  
|Corporate                |  |                              | 29,230  |   |                                      |   | 45,512  |                                     |  |   | 28,725  |   |  |   | 47,693  |  
|Discontinued Operation   |  |                              | 32,816  |   |                                      |   | 28,159  |                                     |  |   |        |   |  |   |        |  
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|Total                    |  | $                            | 120,763 |   |                                      | $ | 123,449 |                                     |  | $ | 75,977  |   |  | $ | 101,136 |  
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|                         |  |                              |        
|                         |  | Fiscal Years Ended April 30, |         |   | Eight Months Ended December 31, 2002 |   |         | Fiscal Year Ended December 31, 2003 | 
|Capital Expenditures     |  | 2001                         |         |   | 2002                                 |   |         |                                    
|U.S. Operations          |  | $                            | 977     |   |                                      | $ | 2,103   |                                     |  | $ | 1,087   |   |  | $ | 1,361   |  
|International Operations |  |                              | 312     |   |                                      |   | 134     |                                     |  |   | 376     |   |  |   | 98      |  
|Corporate                |  |                              | 2,003   |   |                                      |   | 763     |                                     |  |   | 248     |   |  |   | 285     |  
|Discontinued Operation   |  |                              | 9,343   |   |                                      |   | 3,471   |                                     |  |   |        |   |  |   |        |  
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  
|Total                    |  | $                            | 12,635  |   |                                      | $ | 6,471   |                                     |  | $ | 1,711   |   |  | $ | 1,744   |  
|                         |  |                              |         |   |                                      |   |         |                                     |  |   |         |   |  |   |         |  



F-29



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                              |  |                              |       |                                      |   |                                     |  |   |       |  |   |      
|----------------------------- |  | ---------------------------- | ----- | ------------------------------------ | - | ----------------------------------- |  | - | ----- |  | - | -----
|                              |  | Fiscal Years Ended April 30, |       | Eight Months Ended December 31, 2002 |   | Fiscal Year Ended December 31, 2003
|Depreciation and Amortization |  | 2001                         |       | 2002                                 |   |                                    
|U.S. Operations               |  | $                            | 1,291 |                                      | $ | 1,259                               |  | $ | 895   |  | $ | 1,294
|International Operations      |  |                              | 609   |                                      |   | 592                                 |  |   | 177   |  |   | 273  
|Corporate                     |  |                              | 691   |                                      |   | 916                                 |  |   | 304   |  |   | 1,990
|Discontinued Operation        |  |                              | 1,687 |                                      |   | 2,903                               |  |   | 862   |  |   |     
|                              |  |                              |       |                                      |   |                                     |  |   |       |  |   |      
|Total                         |  | $                            | 4,278 |                                      | $ | 5,670                               |  | $ | 2,238 |  | $ | 3,557
|                              |  |                              |       |                                      |   |                                     |  |   |       |  |   |      



Product Revenues by
Application.    The Companys product revenues by application across all business segments follows (in thousands):



|               |  |                              |        |                                      |   |                                     |  |   |        |  |   |       
|-------------- |  | ---------------------------- | ------ | ------------------------------------ | - | ----------------------------------- |  | - | ------ |  | - | ------
|               |  | Fiscal Years Ended April 30, |        | Eight Months Ended December 31, 2002 |   | Fiscal Year Ended December 31, 2003
|Revenues:      |  | 2001                         |        | 2002                                 |   |                                    
|Transportation |  | $                            | 26,425 |                                      | $ | 24,595                              |  | $ | 22,953 |  | $ | 29,523
|Industrial     |  |                              | 54,114 |                                      |   | 43,081                              |  |   | 23,468 |  |   | 45,217
|               |  |                              |        |                                      |   |                                     |  |   |        |  |   |       
|Total          |  | $                            | 80,539 |                                      | $ | 67,676                              |  | $ | 46,421 |  | $ | 74,740
|               |  |                              |        |                                      |   |                                     |  |   |        |  |   |       



Geographic
Information.    The Companys geographic information for revenues to unaffiliated customers and long-lived assets is shown below. The basis for determining revenues is the geographic location of the end-user.
Long-lived assets, excluding those classified under discontinued operation, represent long-term tangible assets that are physically located in the region as indicated (in thousands):



|                         |  |                              |        |                                      |   |                                     |  |   |        |  |   |       
|------------------------ |  | ---------------------------- | ------ | ------------------------------------ | - | ----------------------------------- |  | - | ------ |  | - | ------
|                         |  | Fiscal Years Ended April 30, |        | Eight Months Ended December 31, 2002 |   | Fiscal Year Ended December 31, 2003
|Revenues:                |  | 2001                         |        | 2002                                 |   |                                    
|United States and Canada |  | $                            | 44,229 |                                      | $ | 29,882                              |  | $ | 18,778 |  | $ | 32,053
|Europe                   |  |                              | 16,302 |                                      |   | 18,800                              |  |   | 10,691 |  |   | 21,724
|Asia & Pacific Rim       |  |                              | 10,486 |                                      |   | 6,701                               |  |   | 4,958  |  |   | 9,223 
|Latin America            |  |                              | 9,522  |                                      |   | 12,293                              |  |   | 11,994 |  |   | 11,740
|                         |  |                              |        |                                      |   |                                     |  |   |        |  |   |       
|Total                    |  | $                            | 80,539 |                                      | $ | 67,676                              |  | $ | 46,421 |  | $ | 74,740
|                         |  |                              |        |                                      |   |                                     |  |   |        |  |   |       
|                         |  |                              |       
|                         |  | Fiscal Years Ended April 30, |        | Eight Months Ended December 31, 2002 |   | Fiscal Year Ended December 31, 2003
|Long-Lived Assets:       |  | 2001                         |        | 2002                                 |   |                                    
|United States and Canada |  | $                            | 6,399  |                                      | $ | 7,472                               |  | $ | 7,455  |  | $ | 7,100 
|Europe                   |  |                              | 310    |                                      |   | 355                                 |  |   | 595    |  |   | 691   
|Asia & Pacific Rim       |  |                              | 224    |                                      |   | 211                                 |  |   | 203    |  |   | 228   
|Latin America            |  |                              | 419    |                                      |   | 407                                 |  |   | 317    |  |   | 300   
|                         |  |                              |        |                                      |   |                                     |  |   |        |  |   |       
|Total                    |  | $                            | 7,352  |                                      | $ | 8,445                               |  | $ | 8,570  |  | $ | 8,319 
|                         |  |                              |        |                                      |   |                                     |  |   |        |  |   |       



F-30



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



12.    Warranties



Estimated future warranty obligations related to certain products are provided by charges to operations in the period in which the
related revenue is recognized. Estimates are based, in part, on historical experience. Changes in the Companys product warranty liability during the fiscal years ended April 30, 2001, and 2002, the eight months ended December 31, 2002 and the
fiscal year ended December 31, 2003 are as follows:



|                                       |  |                              |      |   |                                      |   |      |                                    |  |   |     |   |  |   |      |  
|-------------------------------------- |  | ---------------------------- | ---- | - | ------------------------------------ | - | ---- | ---------------------------------- |  | - | --- | - |  | - | ---- | -
|                                       |  | Fiscal Years Ended April 30, |      |   | Eight Months Ended December 31, 2002 |   |      | FiscalYear Ended December 31, 2003 | 
|Warranty reserve for the period ended: |  | 2001                         |      |   | 2002                                 |   |      |                                   
|Balance at beginning of period         |  | $                            | 427  |   |                                      | $ | 227  |                                    |  | $ | 285 |   |  | $ | 452  |  
|New warranties issued                  |  |                              | 73   |   |                                      |   | 170  |                                    |  |   | 233 |   |  |   | 396  |  
|Warranties settled                     |  |                              | (273 | ) |                                      |   | (112 | )                                  |  |   | (66 | ) |  |   | (175 | )
|                                       |  |                              |      |   |                                      |   |      |                                    |  |   |     |   |  |   |      |  
|Balance at end of period               |  | $                            | 227  |   |                                      | $ | 285  |                                    |  | $ | 452 |   |  | $ | 674  |  
|                                       |  |                              |      |   |                                      |   |      |                                    |  |   |     |   |  |   |      |  



13.    Purchases



During fiscal years 2001 and 2002, the transition period ended
December 31, 2002 and the fiscal year ended December 31, 2003 purchases from two vendors constituted approximately 41%, 17%, 19%, and 33% of consolidated net inventory purchases, respectively. In fiscal year 2001 and 2002, the transition period
ended December 31, 2002, and the fiscal year ended December 31, 2003 10 suppliers accounted for approximately 67%, 28%, 34%, and 71% respectively, of consolidated net inventory purchases.



14.    Supplementary Cash Flow Information



For fiscal years 2001 and 2002, the transition period ended December 31, 2002, and the fiscal year ended December 31, 2003, the
Company incurred capital lease obligations of approximately $0.6 million, $0.4 million, $0, and $0.1 million, respectively.



Interest and income taxes paid for fiscal years 2001 and 2002, the transition period ended December 31, 2002, and the fiscal year ended December 31, 2003 are as
follows (in thousands of dollars):



|                                       |  |                              |       |                                      |   |                                     |  |   |     |  |   |      
|-------------------------------------- |  | ---------------------------- | ----- | ------------------------------------ | - | ----------------------------------- |  | - | --- |  | - | -----
|                                       |  | Fiscal Years Ended April 30, |       | Eight Months Ended December 31, 2002 |   | Fiscal Year Ended December 31, 2003
|                                       |  | 2001                         |       | 2002                                 |   |                                    
|Interest Paid                          |  | $                            | 1,363 |                                      | $ | 1,354                               |  | $ | 953 |  | $ | 2,387
|Taxes paid (including franchise taxes) |  | $                            | 982   |                                      | $ | 638                                 |  | $ | 42  |  | $ | 495  



Payments made by Quantum for
interest and taxes were not material for the periods indicated.



On
November 29, 2002, the Company issued 2,309,470 shares of the Companys common stock to the equity holders of BRC valued at $10.0 million as a down payment towards an option to acquire a 50% ownership in BRC.



F-31



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



15.    Fiscal Year Change



On November 14, 2002, the Company changed its fiscal year from April 30 to December 31. The table below summarizes selected data for
the unaudited eight months ended December 31, 2001 and the eight months ended December 31, 2002 (in thousands except for earnings per share).



|                                                      |  |                                 |         |   |      |   |         |  
|----------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                      |  | Eight Months Ended December 31, |        
|                                                      |  | 2001                            |         |   | 2002 |  
|                                                      |  | (unaudited)                     |         |   |      |  
|Statement of Operations:                              |  |                                 |         |   |      |   |         |  
|Revenue:                                              |  |                                 |         |   |      |   |         |  
|Net revenue                                           |  | $                               | 45,707  |   |      | $ | 46,421  |  
|Cost and expenses:                                    |  |                                 |         |   |      |   |         |  
|Cost of sales                                         |  |                                 | 29,185  |   |      |   | 33,071  |  
|Research and development expense                      |  |                                 | 3,712   |   |      |   | 2,635   |  
|Selling, general and administrative                   |  |                                 | 13,075  |   |      |   | 11,922  |  
|Operating income (loss)                               |  |                                 | (266    | ) |      |   | (1,207  | )
|Interest expense                                      |  |                                 | 933     |   |      |   | 995     |  
|Interest income                                       |  |                                 | 112     |   |      |   | 112     |  
|Income (loss) from continuing operations (net of tax) |  |                                 | (908    | ) |      |   | (25,279 | )
|Loss on discontinued operation (net of tax)           |  |                                 | (17,908 | ) |      |   | (3,115  | )
|                                                      |  |                                
|Net income (loss) applicable to common stock          |  | $                               | (18,816 | ) |      | $ | (28,394 | )
|                                                      |  |                                
|Net income (loss) per share:                          |  |                                 |         |   |      |   |         |  
|Basic:                                                |  |                                 |         |   |      |   |         |  
|Income (loss) from continuing operations              |  | $                               | (0.09   | ) |      | $ | (1.76   | )
|Loss from discontinued operation                      |  |                                 | (1.71   | ) |      |   | (0.22   | )
|Net income (loss)                                     |  | $                               | (1.80   | ) |      | $ | (1.98   | )
|Diluted:                                              |  |                                 |         |   |      |   |         |  
|Income (loss) from continuing operations              |  | $                               | (0.09   | ) |      | $ | (1.76   | )
|Loss from discontinued operations                     |  |                                 | (1.71   | ) |      |   | (0.22   | )
|Net income (loss)                                     |  | $                               | (1.80   | ) |      | $ | (1.98   | )
|Number of shares used in per share computation:       |  |                                 |         |   |      |   |         |  
|Basic                                                 |  |                                 | 10,445  |   |      |   | 14,376  |  
|Diluted                                               |  |                                 | 10,445  |   |      |   | 14,376  |  
|                                                      |  |                                
|Balance Sheet Data:                                   |  |                                 |         |   |      |   |         |  
|Total current assets                                  |  | $                               | 60,439  |   |      | $ | 35,243  |  
|Total assets                                          |  |                                 | 117,270 |   |      |   | 75,978  |  
|Total current liabilities                             |  |                                 | 20,332  |   |      |   | 24,038  |  
|Long-term obligations, less current portion           |  |                                 | 25,236  |   |      |   | 101     |  
|Stockholders equity                                  |  | $                               | 69,401  |   |      | $ | 49,622  |  



F-32



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



16.    Goodwill



In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, amortization of goodwill is no longer permitted. No such
amortization expense for goodwill was recognized for the eight-month period ended December 31, 2002 or the fiscal year ended December 31, 2003. The following data shows the effect on net loss and net loss per share of common stock if the provisions
of SFAS No. 142 had been in effect for the fiscal years ended April 30, 2001, and 2002 (in thousands of dollars except for per share data).



|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ----------------------------------- | - | ------- | ---------------------------------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                |  | Fiscal Year Ended April 30, |         |   | EightMonths Ended December 31, 2002 |   |         | FiscalYear Ended December 31, 2003 | 
|                                                                                                                |  | 2001                        |         |   | 2002                                |   |         |                                   
|Net loss as reported                                                                                            |  | $                           | (13,102 | ) |                                     | $ | (27,236 | )                                  |  | $ | (28,394 | ) |  | $ | (6,900 | )
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Add: Amortization of goodwill recorded during fiscal years prior to adoption of SFAS No. 142, net of tax effect |  |                             | 437     |   |                                     |   | 443     |                                    |  |   |        |   |  |   |       |  
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Proforma loss                                                                                                   |  | $                           | (12,665 | ) |                                     | $ | (26,793 | )                                  |  | $ | (28,394 | ) |  | $ | (6,900 | )
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Basic loss per share:                                                                                           |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Loss as reported                                                                                                |  | $                           | (1.32   | ) |                                     | $ | (2.45   | )                                  |  | $ | (1.98   | ) |  | $ | (0.41  | )
|Goodwill amortization                                                                                           |  |                             | 0.04    |   |                                     |   | 0.04    |                                    |  |   |        |   |  |   |       |  
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Proforma loss                                                                                                   |  | $                           | (1.28   | ) |                                     | $ | (2.41   | )                                  |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Diluted loss per share:                                                                                         |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Loss as reported                                                                                                |  | $                           | (1.19   | ) |                                     | $ | (2.45   | )                                  |  | $ | (1.98   | ) |  | $ | (0.41  | )
|Goodwill amortization                                                                                           |  |                             | 0.04    |   |                                     |   | 0.04    |                                    |  |   |        |   |  |   |       |  
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  
|Proforma loss                                                                                                   |  | $                           | (1.15   | ) |                                     | $ | (2.41   | )                                  |  | $ | (1.98   | ) |  | $ | (0.41  | )
|                                                                                                                |  |                             |         |   |                                     |   |         |                                    |  |   |         |   |  |   |        |  



17.    Quarterly Results
Of Operations



A summary of the unaudited quarterly results of
operations follows (in thousands, except per share amounts):



|                                  |  |           |        |   |            |   |        |           |  |   |            |   |  |   |        |  
|--------------------------------- |  | --------- | ------ | - | ---------- | - | ------ | --------- |  | - | ---------- | - |  | - | ------ | -
|                                  |  | FirstQtr. |        |   | SecondQtr. |   |        | ThirdQtr. |  |   | FourthQtr. |  
|Fiscal Year Ended April 30, 2001  |  |           |        |   |            |   |        |           |  |   |            |  
|Revenue                           |  | $         | 22,276 |   |            | $ | 20,485 |           |  | $ | 18,145     |   |  | $ | 19,633 |  
|Gross profit                      |  |           | 9,220  |   |            |   | 7,865  |           |  |   | 6,611      |   |  |   | 7,345  |  
|Operating income                  |  |           | 2,799  |   |            |   | 1,954  |           |  |   | 737        |   |  |   | 1,120  |  
|Interest (income) expense, net    |  |           | 541    |   |            |   | (294   | )         |  |   | (111       | ) |  |   | (32    | )
|Income from continuing operations |  |           | 1,249  |   |            |   | 1,389  |           |  |   | 821        |   |  |   | 216    |  
|Loss from discontinued operation  |  |           | (1,857 | ) |            |   | (2,771 | )         |  |   | (5,172     | ) |  |   | (6,977 | )
|Net loss                          |  | $         | (608   | ) |            | $ | (1,382 | )         |  | $ | (4,351     | ) |  | $ | (6,761 | )
|                                  |  |           |        |  
|Net income (loss) per share: (1)  |  |           |        |   |            |   |        |           |  |   |            |   |  |   |        |  
|Basic:                            |  |           |        |   |            |   |        |           |  |   |            |   |  |   |        |  
|Income from continuing operations |  | $         | 0.14   |   |            | $ | 0.13   |           |  | $ | 0.08       |   |  | $ | 0.02   |  
|Loss from discontinued operation  |  | $         | (0.21  | ) |            | $ | (0.26  | )         |  | $ | (0.50      | ) |  | $ | (0.68  | )
|Net loss                          |  | $         | (0.07  | ) |            | $ | (0.13  | )         |  | $ | (0.42      | ) |  | $ | (0.66  | )
|                                  |  |           |        |  
|Diluted:                          |  |           |        |   |            |   |        |           |  |   |            |   |  |   |        |  
|Income from continuing operations |  | $         | 0.13   |   |            | $ | 0.12   |           |  | $ | 0.07       |   |  | $ | 0.02   |  
|Loss from discontinued operation  |  | $         | (0.19  | ) |            | $ | (0.24  | )         |  | $ | (0.46      | ) |  | $ | (0.61  | )
|Net loss                          |  | $         | (0.06  | ) |            | $ | (0.12  | )         |  | $ | (0.39      | ) |  | $ | (0.59  | )



F-33



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                          |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|----------------------------------------- |  | ---------- | ------ | - | ----------- | - | ------ | ----------- |  | - | ------------------- | - |  | - | ------- | -
|                                          |  |            |        |  
|                                          |  | First Qtr. |        |   | Second Qtr. |   |        | Third Qtr.  |  |   | Fourth Qtr.         |  
|Fiscal Year Ended April 30, 2002          |  |            |        |   |             |   |        |             |  |   |                     |  
|Revenue                                   |  | $          | 18,920 |   |             | $ | 18,223 |             |  | $ | 13,799              |   |  | $ | 16,733  |  
|Gross profit                              |  |            | 7,836  |   |             |   | 6,056  |             |  |   | 4,143               |   |  |   | 5,099   |  
|Operating income (loss)                   |  |            | 1,891  |   |             |   | (696   | )           |  |   | (1,817              | ) |  |   | (1,776  | )
|Interest expense, net                     |  |            | 153    |   |             |   | 397    |             |  |   | 62                  |   |  |   | 316     |  
|Income (loss) from continuing operations  |  |            | 843    |   |             |   | (789   | )           |  |   | (1,069              | ) |  |   | (1,203  | )
|Loss from discontinued operation          |  |            | (6,439 | ) |             |   | (7,943 | )           |  |   | (5,951              | ) |  |   | (4,684  | )
|Net loss                                  |  | $          | (5,596 | ) |             | $ | (8,732 | )           |  | $ | (7,020              | ) |  | $ | (5,887  | )
|                                          |  |            |        |  
|Net income (loss) per share: (1)          |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Basic:                                    |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Income (loss) from continuing operations  |  | $          | 0.08   |   |             | $ | (0.07  | )           |  | $ | (0.10               | ) |  | $ | (0.10   | )
|Loss from discontinued operation          |  | $          | (0.62  | ) |             | $ | (0.76  | )           |  | $ | (0.54               | ) |  | $ | (0.37   | )
|Net loss                                  |  | $          | (0.54  | ) |             | $ | (0.83  | )           |  | $ | (0.64               | ) |  | $ | (0.47   | )
|                                          |  |            |        |  
|Diluted:                                  |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Income (loss) from continuing operations  |  | $          | 0.07   |   |             | $ | (0.07  | )           |  | $ | (0.10               | ) |  | $ | (0.10   | )
|Loss from discontinued operation          |  | $          | (0.56  | ) |             | $ | (0.76  | )           |  | $ | (0.54               | ) |  | $ | (0.37   | )
|Net loss                                  |  | $          | (0.49  | ) |             | $ | (0.83  | )           |  | $ | (0.64               | ) |  | $ | (0.47   | )
|                                          |  |            |        |  
|                                          |  |            |        |   | First Qtr.  |   |        | Second Qtr. |  |   | November & December |  
|Transition Period Ended December 31, 2002 |  |            |        |   |             |   |        |             |  |   |                     |  
|Revenue                                   |  |            |        |   |             | $ | 19,475 |             |  | $ | 18,771              |   |  | $ | 8,175   |  
|Gross profit                              |  |            |        |   |             |   | 5,826  |             |  |   | 5,191               |   |  |   | 2,332   |  
|Operating income (loss)                   |  |            |        |   |             |   | 385    |             |  |   | 97                  |   |  |   | (1,689  | )
|Interest expense, net                     |  |            |        |   |             |   | 215    |             |  |   | 290                 |   |  |   | 378     |  
|Income (loss) from continuing operations  |  |            |        |   |             |   | 115    |             |  |   | (163                | ) |  |   | (25,231 | )
|Loss from discontinued operation          |  |            |        |   |             |   | (2,884 | )           |  |   | (2                  | ) |  |   | (229    | )
|Net loss                                  |  |            |        |   |             | $ | (2,769 | )           |  | $ | (165                | ) |  | $ | (25,460 | )
|Net income (loss) per share: (1)          |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Basic:                                    |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Income (loss) from continuing operations  |  |            |        |   |             | $ | 0.01   |             |  | $ | (0.01               | ) |  | $ | (1.64   | )
|Loss from discontinued operation          |  |            |        |   |             | $ | (0.21  | )           |  | $ |                    |   |  | $ | (0.02   | )
|Net loss                                  |  |            |        |   |             | $ | (0.20  | )           |  | $ | (0.01               | ) |  | $ | (1.66   | )
|Diluted:                                  |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Income (loss) from continuing operations  |  |            |        |   |             | $ | 0.01   |             |  | $ | (0.01               | ) |  | $ | (1.64   | )
|Loss from discontinued operation          |  |            |        |   |             | $ | (0.20  | )           |  | $ |                    |   |  | $ | (0.02   | )
|Net loss                                  |  |            |        |   |             | $ | (0.19  | )           |  | $ | (0.01               | ) |  | $ | (1.66   | )
|                                          |  |            |        |  
|                                          |  | First Qtr. |        |   | Second Qtr. |   |        | Third Qtr.  |  |   | Fourth Qtr.         |  
|Fiscal Year Ended December 31, 2003       |  |            |        |   |             |   |        |             |  |   |                     |  
|Revenue                                   |  | $          | 19,572 |   |             | $ | 18,340 |             |  | $ | 18,669              |   |  | $ | 18,159  |  
|Gross profit                              |  |            | 6,559  |   |             |   | 5,970  |             |  |   | 5,805               |   |  |   | 4,626   |  
|Operating income (loss)                   |  |            | 1,141  |   |             |   | 1,052  |             |  |   | 412                 |   |  |   | (3,086  | )
|Interest expense, net                     |  |            | 231    |   |             |   | 1,026  |             |  |   | 1,552               |   |  |   | 1,230   |  
|Net income (loss)                         |  | $          | 451    |   |             | $ | (181   | )           |  | $ | (1,240              | ) |  | $ | (5,930  | )
|Net income (loss) per share: (1)          |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Basic:                                    |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Net income (loss)                         |  | $          | 0.03   |   |             | $ | (0.01  | )           |  | $ | (0.08               | ) |  | $ | (0.34   | )
|Diluted:                                  |  |            |        |   |             |   |        |             |  |   |                     |   |  |   |         |  
|Net income (loss)                         |  | $          | 0.03   |   |             | $ | (0.01  | )           |  | $ | (0.08               | ) |  | $ | (0.34   | )

---

|(1) | Per common share amounts for the quarters and full years have each been calculated separately. Accordingly, quarterly amounts may not add to the annual amounts because of differences in the
average common shares outstanding during each period and, with regard to diluted per common share amounts only, because of the effect of potentially dilutive securities only in the periods in which the effect would have been dilutive.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-34



---

##### Table of Contents

IMPCO TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company made certain adjustments in the 4th quarter of fiscal year 2003. These adjustments were to: 1)
Increase inventory obsolescence reserves by $0.3 million; 2) Increase the allowance for doubtful accounts by $0.2 million; 3) Write-off of bad debt expense by $0.4 million; and 4) Increase in the valuation allowance for deferred income taxes by
$2.5 million.



F-35



---

##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



To the Board of Directors and

Shareholders of BRC S.r.l.



We have audited the accompanying consolidated balance sheets of BRC S.r.l. and its subsidiaries as of December 31, 2002 and 2003, and the related consolidated
statements of operations, changes in quotaholders equity and cash flows for the three years ended December 31, 2001, 2002 and 2003. 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 the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BRC S.r.l. and its
subsidiaries as of December 31, 2002 and 2003 and the consolidated results of operations and cash flows for the three years ended December 31, 2001, 2002 and 2003, in conformity with accounting principles generally accepted in the United States.



/s/    RECONTA
ERNST & YOUNG S.P.A.



Milan, Italy

March 5, 2004



F-36



---

##### Table of Contents

BRC S.R.L.



CONSOLIDATED BALANCE SHEETS

As of December 31, 2002 and
2003

(In thousands of Euros)



|                                                                                          |  |      |        |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | -
|                                                                                          |  | 2002 |        |   | 2003 |  
|Assets                                                                                    |  |      |        |   |      |   |         |  
|Current Assets:                                                                           |  |      |        |   |      |   |         |  
|Cash and cash equivalents                                                                 |  |     | 5,883  |   |      |  | 1,752   |  
|Trade receivables, less allowance for doubtful accounts of 1,086, and 988, respectively |  |      | 6,706  |   |      |   | 4,743   |  
|Receivables from related parties                                                          |  |      | 2,975  |   |      |   | 2,372   |  
|Inventory, net (Note 3)                                                                   |  |      | 10,331 |   |      |   | 8,554   |  
|Prepaid expenses and other current assets                                                 |  |      | 861    |   |      |   | 510     |  
|Deferred income taxes (Note 7)                                                            |  |      | 565    |   |      |   | 737     |  
|                                                                                          |  |      |        |   |      |   |         |  
|Total Current Assets                                                                      |  |      | 27,321 |   |      |   | 18,668  |  
|Property, plant and equipment (Note 4)                                                    |  |      | 14,052 |   |      |   | 14,749  |  
|Less: Accumulated depreciation                                                            |  |      | (9,440 | ) |      |   | (10,524 | )
|                                                                                          |  |      |        |   |      |   |         |  
|Net property, plant and equipment                                                         |  |      | 4,612  |   |      |   | 4,225   |  
|Investments in affiliated companies                                                       |  |      | 443    |   |      |   | 537     |  
|Loans to affiliated companies                                                             |  |      |       |   |      |   | 1,920   |  
|Other non current assets                                                                  |  |      | 666    |   |      |   | 630     |  
|                                                                                          |  |      |        |   |      |   |         |  
|Total Assets                                                                              |  |     | 33,042 |   |      |  | 25,980  |  
|                                                                                          |  |      |        |   |      |   |         |  
|Liabilities and Quotaholders Equity                                                      |  |      |        |   |      |   |         |  
|Current Liabilities:                                                                      |  |      |        |   |      |   |         |  
|Short-term borrowings (Note 6)                                                            |  |     | 266    |   |      |  |        |  
|Current portion of long-term debt                                                         |  |      | 4,356  |   |      |   | 143     |  
|Accounts payable                                                                          |  |      | 4,344  |   |      |   | 2,810   |  
|Payables to related parties                                                               |  |      | 680    |   |      |   | 361     |  
|Income taxes payable (Note 7)                                                             |  |      |       |   |      |   | 24      |  
|Accrued expenses and other current liabilities (Note 8)                                   |  |      | 1,428  |   |      |   | 1,570   |  
|                                                                                          |  |      |        |   |      |   |         |  
|Total Current Liabilities                                                                 |  |      | 11,074 |   |      |   | 4,908   |  
|Long-term debt (Note 9)                                                                   |  |      | 950    |   |      |   | 976     |  
|Employees severance indemnities (Note 10)                                                 |  |      | 1,717  |   |      |   | 1,897   |  
|Other non current liabilities                                                             |  |      | 50     |   |      |   |        |  
|Deferred income taxes (Note 7)                                                            |  |      | 485    |   |      |   | 436     |  
|Commitments and Contingencies                                                             |  |      |       |   |      |   |        |  
|                                                                                          |  |      |        |   |      |   |         |  
|Total Non Current Liabilities                                                             |  |      | 3,202  |   |      |   | 3,309   |  
|Quotaholders Equity:                                                                     |  |      |        |   |      |   |         |  
|Ordinary quota, authorized 1,500,000 shares, issued and outstanding, par value 1.00 each |  |      | 1,500  |   |      |   | 1,500   |  
|Additional paid in capital                                                                |  |      | 221    |   |      |   | 221     |  
|Retained earnings                                                                         |  |      | 16,990 |   |      |   | 15,961  |  
|Other comprehensive income                                                                |  |      | 55     |   |      |   | 81      |  
|                                                                                          |  |      |        |   |      |   |         |  
|Total Quotaholders Equity                                                                |  |      | 18,766 |   |      |   | 17,763  |  
|                                                                                          |  |      |        |   |      |   |         |  
|Total Liabilities and Quotaholders Equity                                                |  |     | 33,042 |   |      |  | 25,980  |  
|                                                                                          |  |      |        |   |      |   |         |  



The accompanying notes are an
integral part of these financial statements.



F-37



---

##### Table of Contents

BRC S.R.L.



CONSOLIDATED STATEMENTS OF OPERATIONS

For the years
ended December 31, 2001, 2002 and 2003

(In thousands of Euros)



|                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|--------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                    |  | 2001 |        |   | 2002 |   |        | 2003 | 
|Net sales                                           |  |     | 33,540 |   |      |  | 33,729 |      |  |  | 31,709 |  
|Other revenues                                      |  |      | 781    |   |      |   | 956    |      |  |   | 338    |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Total revenues                                      |  |      | 34,321 |   |      |   | 34,685 |      |  |   | 32,047 |  
|Costs and Operating expenses:                       |  |      |        |   |      |   |        |      |  |   |        |  
|Cost of materials                                   |  |      | 15,357 |   |      |   | 17,262 |      |  |   | 16,616 |  
|Costs of external services                          |  |      | 6,365  |   |      |   | 6,185  |      |  |   | 6,082  |  
|Salaries, wages and employee benefits               |  |      | 8,186  |   |      |   | 7,809  |      |  |   | 7,814  |  
|Depreciation and amortization                       |  |      | 1,384  |   |      |   | 1,058  |      |  |   | 1,084  |  
|Other operating expenses                            |  |      | 834    |   |      |   | 394    |      |  |   | 617    |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Total costs and operating expenses                  |  |      | 32,126 |   |      |   | 32,708 |      |  |   | 32,213 |  
|Operating income                                    |  |      | 2,195  |   |      |   | 1,977  |      |  |   | (166   | )
|Interest expense                                    |  |      | (926   | ) |      |   | (694   | )    |  |   | (305   | )
|Interest income                                     |  |      | 40     |   |      |   | 37     |      |  |   | 92     |  
|Foreign exchange losses, net                        |  |      | 1,048  |   |      |   | 1,948  |      |  |   | 299    |  
|Equity share in losses of unconsolidated affiliates |  |      |       |   |      |   | 369    |      |  |   | 140    |  
|Other income                                        |  |      |       |   |      |   | 956    |      |  |   |       |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Income (loss) before taxes                          |  |      | 261    |   |      |   | (41    | )    |  |   | (818   | )
|Income taxes                                        |  |      | 783    |   |      |   | 1,037  |      |  |   | 211    |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Net loss                                            |  |     | (522   | ) |      |  | (1,078 | )    |  |  | (1,029 | )
|                                                    |  |      |        |   |      |   |        |      |  |   |        |  







The accompanying notes are an integral part of these financial statements.



F-38



---

##### Table of Contents

BRC S.R.L.



CONSOLIDATED STATEMENTS OF CHANGES IN QUOTAHOLDERS EQUITY

For the years ended December 31, 2001, 2002 and 2003

(In thousands of Euros)



|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|--------------------------------------- |  | -------------- | ----- | ------------------------- | - | ----------------- |  | - | --------------------------------- | - |  | -------------------------- | --- | - |  | - | ------ | -
|                                        |  | Ordinary Quota |       | AdditionalPaid in Capital |   | Retained Earnings |  |   | Other Comprehensive Income (Loss) |   |  | Total Quotaholders Equity |    
|As at December 31, 2000                 |  |               | 1,500 |                           |  |                  |  |  | 18,590                            |   |  |                           | (10 | ) |  |  | 20,080 |  
|Foreign exchange translation adjustment |  |                |       |                           |   |                   |  |   |                                   |   |  |                            | 129 |   |  |   | 129    |  
|Net loss                                |  |                |       |                           |   |                   |  |   | (522                              | ) |  |                            |     |   |  |   | (522   | )
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|Total comprehensive loss                |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   | (393   | )
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|As at December 31, 2001                 |  |                | 1,500 |                           |   |                  |  |   | 18,068                            |   |  |                            | 119 |   |  |   | 19,687 |  
|Additional paid in capital              |  |                |       |                           |   | 221               |  |   |                                   |   |  |                            |     |   |  |   | 221    |  
|Foreign exchange translation adjustment |  |                |       |                           |   |                   |  |   |                                   |   |  |                            | (64 | ) |  |   | (64    | )
|Net loss                                |  |                |       |                           |   |                   |  |   | (1,078                            | ) |  |                            |     |   |  |   | (1,078 | )
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|Total comprehensive loss                |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   | (1,142 | )
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|As at December 31, 2002                 |  |                | 1,500 |                           |   | 221               |  |   | 16,990                            |   |  |                            | 55  |   |  |   | 18,766 |  
|Foreign exchange translation adjustment |  |                |       |                           |   |                   |  |   |                                   |   |  |                            | 26  |   |  |   | 26     |  
|Net loss                                |  |                |       |                           |   |                   |  |   | (1,029                            | ) |  |                            |     |   |  |   | (1,029 | )
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|Total comprehensive loss                |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   | (1,003 | )
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  
|As at December 31, 2003                 |  |               | 1,500 |                           |  | 221               |  |  | 15,961                            |   |  |                           | 81  |   |  |  | 17,763 |  
|                                        |  |                |       |                           |   |                   |  |   |                                   |   |  |                            |     |   |  |   |        |  





The accompanying notes are an integral part of these financial statements.



F-39



---

##### Table of Contents

BRC S.R.L.



CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years
ended December 31, 2001, 2002 and 2003

(In thousands of Euros)



|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                          |  | 2001 |         |   | 2002 |   |        | 2003 | 
|Cash flows from operating activities:                                                     |  |      |         |   |      |   |        |      |  |   |        |  
|Net loss                                                                                  |  |     | (522    | ) |      |  | (1,078 | )    |  |  | (1,029 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |      |         |   |      |   |        |      |  |   |        |  
|Depreciation and amortization                                                             |  |      | 1,384   |   |      |   | 1,058  |      |  |   | 1,084  |  
|Employees severance indemnities                                                           |  |      | 210     |   |      |   | 223    |      |  |   | 180    |  
|Deferred taxes                                                                            |  |      | (131    | ) |      |   | 300    |      |  |   | (221   | )
|Losses in equity investees                                                                |  |      |        |   |      |   | 369    |      |  |   | 140    |  
|Gain on partial sale of Brazilian business                                                |  |      |        |   |      |   | (953   | )    |  |   |       |  
|Changes in operating assets and liabilities:                                              |  |      |         |   |      |   |        |      |  |   |        |  
|Accounts receivable                                                                       |  |      | 4,878   |   |      |   | (921   | )    |  |   | 2,566  |  
|Inventories                                                                               |  |      | 2,229   |   |      |   | 6,686  |      |  |   | 1,777  |  
|Prepaid expenses and other current assets                                                 |  |      | 604     |   |      |   | 577    |      |  |   | 351    |  
|Accounts payable                                                                          |  |      | (13,781 | ) |      |   | (76    | )    |  |   | (1,853 | )
|Accrued expenses and other current liabilities                                            |  |      | (675    | ) |      |   | 122    |      |  |   | 142    |  
|Income taxes                                                                              |  |      | (1,770  | ) |      |   | (106   | )    |  |   | 24     |  
|Other                                                                                     |  |      | (44     | ) |      |   | (169   | )    |  |   | (50    | )
|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|Net cash provided by (used in) operating activities                                       |  |      | (7,618  | ) |      |   | 6,032  |      |  |   | 3,111  |  
|                                                                                          |  |      |        
|Cash flows from investing activities:                                                     |  |      |         |   |      |   |        |      |  |   |        |  
|Purchases of property, plant and equipment                                                |  |      | (1,266  | ) |      |   | (526   | )    |  |   | (709   | )
|Disposals of property, plant and equipment                                                |  |      |        |   |      |   | 6,201  |      |  |   | 12     |  
|Proceeds on partial sale of Brazilian business                                            |  |      |        |   |      |   | 1,906  |      |  |   |       |  
|Investment in equity investees                                                            |  |      |        |   |      |   | (1,060 | )    |  |   | (234   | )
|Loans to affiliated companies                                                             |  |      |        |   |      |   |       |      |  |   | (1,920 | )
|Increase in non-current assets                                                            |  |      | (75     | ) |      |   | (217   | )    |  |   | 36     |  
|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|Net cash provided by (used in) investing activities                                       |  |      | (1,341  | ) |      |   | 6,304  |      |  |   | (2,815 | )
|                                                                                          |  |      |        
|Cash flows from financing activities                                                      |  |      |         |   |      |   |        |      |  |   |        |  
|Net change in short-term borrowings                                                       |  |      | 3,151   |   |      |   | (6,217 | )    |  |   | (266   | )
|Increase in long-term debt                                                                |  |      | 5,582   |   |      |   | 688    |      |  |   | 163    |  
|Repayment of long-term debt                                                               |  |      | (555    | ) |      |   | (2,136 | )    |  |   | (4,350 | )
|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|Net cash provided by (used in) financing activities                                       |  |      | 8,178   |   |      |   | (7,665 | )    |  |   | (4,453 | )
|                                                                                          |  |      |        
|Translation adjustment                                                                    |  |      | (40     | ) |      |   | 128    |      |  |   | 26     |  
|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|Net increase (decrease) in cash and cash equivalents                                      |  |      | (821    | ) |      |   | 4,799  |      |  |   | (4,131 | )
|Cash and cash equivalents at beginning of year                                            |  |      | 1,905   |   |      |   | 1,084  |      |  |   | 5,883  |  
|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|Cash and cash equivalents at end of year                                                  |  |     | 1,084   |   |      |  | 5,883  |      |  |  | 1,752  |  
|                                                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|                                                                                          |  |      |        
|                                                                                          |  | 2001 |         |   | 2002 |   |        | 2003 | 
|Supplemental disclosures:                                                                 |  |      |         |   |      |   |        |      |  |   |        |  
|Cash paid during the period for:                                                          |  |      |         |   |      |   |        |      |  |   |        |  
|Interest                                                                                  |  |     | 782     |   |      |  | 623    |      |  |  | 197    |  
|Taxes                                                                                     |  |     | 3,833   |   |      |  | 831    |      |  |  |       |  



F-40



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years
ended December 31, 2001, 2002 and 2003

(In thousands of Euros)



1.    Basis of Presentation and Description of Business



The consolidated financial statements of BRC S.r.l. (BRC or the Company) include the accounts of the Company,
of its wholly owned subsidiary MTM S.r.l. and of MTMs wholly owned subsidiary BRC Argentina S.A. and majority owned subsidiaries BRC Brasil S.A. and NG LOG Armazens Gerais Ltda. All significant intercompany accounts and transactions have been
eliminated. The Company has a 50% interest in the joint ventures WMTM and MTE and an 18.5% interest in Jehin and uses the equity method for reporting the results of these entities.



Prior to February 2001, MTM was owned directly by Mariano and Piero Costamagna. In February 2001, Mariano and Piero Costamagna
incorporated BRC S.r.l. and contributed their shareholdings in MTM to BRC S.r.l. This contribution has been accounted for as a reorganization under common control under which it is assumed that BRC S.r.l. has been the parent company from January 1,
2001 for all periods presented. Consequently, the carrying amounts of MTM and its subsidiaries were not adjusted at their transfer dates in accounting for the reorganization and the Companys quota capital has been reported in the consolidated
financial statements as if outstanding since January 1, 2001.



On July
22, 2003, the shareholders of BRC completed the sale of 50% of the Company to IMPCO Technologies Inc., a U.S. Company.



The Company is a designer, manufacturer and supplier of fuel technology systems for automobiles that enable traditional internal combustion engines to run on
alternative fuels such as propane and natural gas.



2.    Summary
of Significant Accounting Policies



This summary of significant
accounting policies is presented to assist the reader in understanding and evaluating the accompanying financial statements. These policies are in conformity with accounting principles generally accepted in the United States and have been
consistently applied.



Use of Estimates



The preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.



Cash and Cash Equivalents



Cash equivalents consist of time deposits and other short-term, highly liquid
instruments with maturities of three months or less when acquired and are stated at cost, which approximates fair value.



F-41



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Inventories



Inventories are stated at the lower of cost and market. Cost is determined using the weighted-average method. Elements of cost in inventories include raw materials,
direct labor and manufacturing overhead. Any write-downs of inventory are recorded as an adjustment to the cost basis.



Property, Plant and Equipment



Property, plant and equipment is stated at cost and depreciated using the straight-line method over the following estimated useful lives:



|                        |  |             
|----------------------- |  | ------------
|Buildings               |  | 33 years    
|Machinery and equipment |  | 10 years    
|Furniture and fittings  |  | 5 to 8 years



Impairment of Long-Lived
Assets



The Company assesses its long-lived assets (primarily
property, plant and equipment) for impairment whenever there is an indication that the carrying amount of the assets may not be recoverable. Recoverability is determined by comparing the estimated undiscounted cash flows expected from these assets
to their respective net carrying values. The amount of impairment loss, if any, is measured as the difference between the net book value of the assets and their estimated fair value.



Investments in affiliates



Investments in affiliates which are not majority owned or controlled but for which the Company exercises significant influence are accounted for using the equity
method.



Income Taxes



Income taxes provided by each entity are included in the consolidation in accordance
with the applicable local laws. Deferred income taxes are accounted for under the liability method, in accordance with SFAS No. 109 Accounting for Income Taxes,and reflect the tax effects of all significant temporary differences between the
tax basis of assets and liabilities and their reported amounts in the financial statements and net operating loss carry-forwards. Valuation allowances are provided against deferred tax assets when it is more likely than not that a tax benefit will
not be realized.



Investment tax credits are accounted for as a reduction
in current income taxes in the year in which the credit arises.



Foreign Currency Translation



The Companys
reporting currency and functional currency is the Euro. The financial statements of the Companys subsidiaries are measured using the local currency as the functional currency. With respect to the Brazilian and Argentine subsidiaries, revenues
and expenses have been translated into Euros using the average exchange rate for the period and assets and liabilities have been translated using the period-end exchange rate. With respect to the Argentine subsidiary, at December 31, 2001 through
January 10, 2002, there was no



F-42



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



exchangeability between the Argentine Peso and foreign currencies. On January 11, 2002 when the exchange market first opened, the exchange rate was ARP 1.5 to Euro 1. Under US
GAAP, when exchangeability between two currencies is temporarily lacking at the balance sheet date, the first subsequent rate at which exchange could be made shall be used as of the balance sheet date.



The resulting cumulative translation adjustments have been recorded as a separate
component of Quotaholders equity. Translation adjustments resulting from changes in exchange rates affecting balance sheet and income statement items amount to (losses)/gains of 129, (64) and 26, for the periods ended December 31, 2001, 2002 and 2003, respectively, and are presented in the Other Comprehensive Income.



Realized and unrealized foreign currency transaction gains and losses are included in
the determination of net income.



Revenue Recognition



Revenues are recognized on product sales when title transfers, which generally
corresponds to the date when products are shipped, and when collectibility is reasonably assured. Provisions for returns and other adjustments related to sales are provided in the same period the related sales are recorded on the basis of historical
rates of return.



Research and Development Expenses



Research and development expenses are charged to expense as incurred.



Government Grants



The Company receives grants from Italian governmental entities to subsidize certain investments in plant and equipment and research
and development expenditures. Grants are recognized when earned and there is no remaining risk of repayment. There is no remaining risk of repayment when the grant conditions are met or when there is no doubt that these conditions will be met in the
future. Grants relating to plant and equipment are recorded as a reduction of the cost of the related assets. Grants relating to research and development expenditure are recorded in other revenues.



During 2001, 2002 and 2003, the Company recognized government grants relating to plant
and equipment for nil, 133 and nil, respectively, and relating to research and development expenditure for 31, 507 and 137, respectively.



Statement of Cash Flows



Short-term borrowings arise primarily under the Companys short-term lines of credit with its banks. These short-term obligations are payable on demand. The
cash flows from these items are included under the caption Net change in short-term borrowings in the Consolidated Statements of Cash Flows.



Shipping and Handling Costs



Shipping and handling costs on product sales are classified in costs for external services and amount to 454, 373 and 362, for the years ended December 31, 2001, 2002 and 2003, respectively.



F-43



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3.    Inventory, Net



|                            |  |                   |        |   |                   |   |       |  
|--------------------------- |  | ----------------- | ------ | - | ----------------- | - | ----- | -
|                            |  | December, 31 2002 |        |   | December, 31 2003 |  
|Raw materials               |  |                  | 7,810  |   |                   |  | 6,189 |  
|Work in progress            |  |                   | 217    |   |                   |   | 203   |  
|Finished goods              |  |                   | 2,621  |   |                   |   | 2,501 |  
|                            |  |                   |        |   |                   |   |       |  
|Total inventory             |  |                   | 10,648 |   |                   |   | 8,893 |  
|Inventory valuation reserve |  |                   | (317   | ) |                   |   | (339  | )
|                            |  |                   |        |   |                   |   |       |  
|Inventory, net of reserve   |  |                  | 10,331 |   |                   |  | 8,554 |  
|                            |  |                   |        |   |                   |   |       |  



4.    Property, Plant and
Equipment



|                                   |  |                   |        |   |                   |   |         |  
|---------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------- | -
|                                   |  | December, 31 2002 |        |   | December, 31 2003 |  
|Machinery and equipment            |  |                  | 11,522 |   |                   |  | 11,813  |  
|Office furniture and equipment     |  |                   | 1,013  |   |                   |   | 1,106   |  
|Vehicles                           |  |                   | 563    |   |                   |   | 525     |  
|Other                              |  |                   | 954    |   |                   |   | 1,305   |  
|                                   |  |                   |        |   |                   |   |         |  
|Total property plant and equipment |  |                   | 14,052 |   |                   |   | 14,749  |  
|Accumulated depreciation           |  |                   | (9,440 | ) |                   |   | (10,524 | )
|                                   |  |                   |        |   |                   |   |         |  
|Net property plant and equipment   |  |                  | 4,612  |   |                   |  | 4,225   |  
|                                   |  |                   |        |   |                   |   |         |  



In July 2002, the Company sold
all its land and buildings to IMCOS2 S.r.l., a real estate investment company controlled by the shareholders of BRC, and to a leasing company, which then leased the land and buildings to IMCOS2 under capital lease arrangements. The portion of these
land and buildings that were previously used by BRC were then leased back to BRC under operating lease arrangements. The remaining portion of the land and buildings were previously leased by BRC to a related company and a third party. As the
sale-and-leaseback was undertaken between companies under common control, the transaction has been accounted for at historical cost and, consequently, the excess of the sale price over the carrying value of the land and buildings of 221 has been credited to additional paid-in capital.



The terms of the rental agreement between BRC and IMCOS2 S.r.l. require that the Company does not terminate the rental agreement until
eight years have expired.



5.    Investments in Affiliates



In February 2001, the Company acquired a 50% stake in MTE S.r.l.
for 25. MTE supplies the Company with electronic components for its fuel systems. The amount at which the investment is carried
equals the amount of underlying equity in net assets.



In March 2002, the
Company acquired a 18.5% stake in Jehin Engineering Company Ltd., a Korean manufacturer of fuel technology systems for 260. In
accordance with the share purchase agreement, BRC was able to appoint a member of the Board of Directors. In view of the influence that BRC gained through board membership, the investment has been accounted for using the equity method. The amount at
which the investment is carried equals the amount of underlying equity in net assets.



F-44



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In October 2001, BRC Brasil Ltda. (BRC Brasil) signed a joint venture agreement with White Martin Gases Industriais S.A. (WM), a Brazilian
company and subsidiary of Praxair, Inc., by which BRC and WM (the joint venture partners) agreed to establish a joint venture for the development, manufacture and supply of fuel technology systems in the Brazilian market. Pursuant to the
agreement, the joint venture partners agreed to invest jointly up to a maximum of US$4 million in the first three years of operations. In May 2002, the joint venture partners gave effect to the joint venture agreement and established WMTM
Equipamentos de Gases Ltda. (WMTM) owned 50% by each joint venture partner with an initial cash investment of 819. At
the same time the joint venture partners established another 50-50 owned company, BRC Gas Equipment Ltda. (BRCGE), with the objective of succeeding BRC Brasil in its activity of importation and sale of BRCs products on the
Brasilian market until such time as WMTM had become fully operational. BRC Brasil subscribed to the creation of BRCGE by contributing the inventories and certain other assets for a value of 717. MTM has also provided a bank guarantee to WMTM for an amount of 1,500, which was subsequently reduced to 819. In exchange for entering into the joint venture agreement, BRC
Brasil received from WM US$2.2 million. The agreement also required that BRC Brasil pay WM a certain amount in the event that BRCGE failed to achieve a stipulated level of earnings before interest, income taxes, depreciation and amortization, as
defined (EBITDA). Conversely, WM would pay BRC Brasil if the EBITDA exceeded the stipulated level of earnings before interest, income taxes, depreciation and amortization, as defined. In 2003, the parties agreed that the stipulated level
of EBITDA had not been achieved and, accordingly, BRC Brasil paid 98 and recorded this amount as a reduction of the US$2.2 million.
The Company has accounted for this transaction in accordance with EITF 01-2 Interpretations of APB Opinion No. 29and has recognized a partial gain in 2002 of 953, representing 50% of the excess of the fair value of the assets given up over the carrying value of such assets. The remaining 50% has been recorded as a reduction of the carrying value of the
Companys investment in the joint venture companies.



In August 2003
BRCGE ceased operations and in September 2003 was merged into WMTM. The carrying value of the investment in WMTM at December 31, 2003 in the amount of 605 has been classified as an equity investment.



For all the above investments, the amount at which the investment is carried equals the amount of the underlying equity in net assets.



In August 2003, BRC Brasil and WM each made loans to WMTM in the amount of 5,000,000 Real and each company subsequently made additional loans in the amount of
2,000,000 Real. The total of the loans made by BRC Brasil to WMTM of approximately 1,920 have been classified as loans to
affiliated companies. The loans are non-interest bearing and are due in January 2005.



6.    Short-Term Borrowings



At
December 31, 2003, the Company has an unsecured line of credit amounting to approximately 1,300 with no outstanding balance.
Additionally, the Company has up to a 4,500 line of credit secured by customer account receivable drafts, which has current
availability of 2,198 and has no outstanding balance. The weighted average interest rate on these short-term borrowings was
approximately 3.5% and nil per annum at December 31, 2002 and 2003. The lines of credit are callable on demand.



F-45



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



7.    Income Taxes



Italian and foreign income (losses) before income taxes are as follows:



|                                                              |  |                              |      |   |                              |   |        |                              |  |   |      |  
|------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---------------------------- | - | ------ | ---------------------------- |  | - | ---- | -
|                                                              |  | Year ended December 31, 2001 |      |   | Year ended December 31, 2002 |   |        | Year ended December 31, 2003 | 
|Italian                                                       |  |                             | 808  |   |                              |  | 1,051  |                              |  |  | (190 | )
|Foreign                                                       |  |                              | (547 | ) |                              |   | (1,092 | )                            |  |   | (628 | )
|                                                              |  |                              |      |   |                              |   |        |                              |  |   |      |  
|Total Italian and foreign income (losses) before income taxes |  |                             | 261  |   |                              |  | (41    | )                            |  |  | (818 | )
|                                                              |  |                              |      |   |                              |   |        |                              |  |   |      |  



Significant components of the
provision for income taxes are as follows:



|                                 |  |                              |      |   |                              |   |                              |  |   |      |  
|-------------------------------- |  | ---------------------------- | ---- | - | ---------------------------- | - | ---------------------------- |  | - | ---- | -
|                                 |  | Year ended December 31, 2001 |      |   | Year ended December 31, 2002 |   | Year ended December 31, 2003 | 
|Current                          |  |                             | 914  |   |                              |  | 737                          |  |  | 432  |  
|Deferred                         |  |                              | (131 | ) |                              |   | 300                          |  |   | (221 | )
|                                 |  |                              |      |   |                              |   |                              |  |   |      |  
|Total provision for income taxes |  |                             | 783  |   |                              |  | 1,037                        |  |  | 211  |  
|                                 |  |                              |      |   |                              |   |                              |  |   |      |  



A reconciliation between income
taxes computed at the Italian statutory tax rate and the effective income tax provision is as follows:



|                                                              |  |                              |      |   |                              |   |       |                              |  |   |      |  
|------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---------------------------- | - | ----- | ---------------------------- |  | - | ---- | -
|                                                              |  | Year ended December 31, 2001 |      |   | Year ended December 31, 2002 |   |       | Year ended December 31, 2003 | 
|Income tax provision at the Italian statutory tax rate of 34% |  |                             | 93   |   |                              |  | 14    |                              |  |  | (278 | )
|Effect of Italian IRAP                                        |  |                              | 439  |   |                              |   | 383   |                              |  |   | 356  |  
|Aggregated effect of different foreign tax rates              |  |                              | (38  | ) |                              |   | (15   | )                            |  |   |     |  
|Permanent Differences:                                        |  |                              |      |   |                              |   |       |                              |  |   |      |  
|Non deductible expenses                                       |  |                              | 46   |   |                              |   | 42    |                              |  |   | 17   |  
|Investment tax incentive                                      |  |                              | (375 | ) |                              |   |      |                              |  |   | (70  | )
|Other                                                         |  |                              |     |   |                              |   | 25    |                              |  |   | (4   | )
|Change in valuation allowance                                 |  |                              | 618  |   |                              |   | 588   |                              |  |   | 190  |  
|                                                              |  |                              |      |   |                              |   |       |                              |  |   |      |  
|Effective income tax provision                                |  |                             | 783  |   |                              |  | 1,037 |                              |  |  | 211  |  
|                                                              |  |                              |      |   |                              |   |       |                              |  |   |      |  



The Italian IRAP tax
is regional tax on productive activities, and has statutory rate of 4.25%. The IRAP tax is not deductible for corporate tax purposes. The IRAP tax base is similar to the corporate tax base, however does not permit a deduction for labor or interest.



The 2001 Italian investment tax incentive law was enacted in order to
encourage capital investments in Italy. Companies are able to reduce their taxable income by up to 50% of the excess of new qualifying capital and other expenditures made in the second half of 2001 and in the year 2002 in fixed assets (tangibles and
specified intangibles) over the average of the investments made in such assets during the five prior years. The incentive results in a current one time deduction and neither increases nor decreases the tax bases of the assets to



F-46



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



compute future tax deductions for depreciation and amortization relating to investment deductions granted. In 2001 and 2003 the Company recognized a benefit from the investment
deductions of 375 and 70, respectively.



The components of deferred
income tax assets and liabilities at December 31, 2002 and 2003 are:



|                                   |  |                   |        |   |                   |   |        |  
|---------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                   |  | December 31, 2002 |        |   | December 31, 2003 |  
|Deferred tax asset                 |  |                  | 1,771  |   |                   |  | 2,133  |  
|Less: valuation allowance          |  |                   | (1,206 | ) |                   |   | (1,396 | )
|                                   |  |                   |        |   |                   |   |        |  
|Deferred tax assets                |  |                   | 565    |   |                   |   | 737    |  
|Deferred tax liabilities           |  |                   | (485   | ) |                   |   | (436   | )
|                                   |  |                   |        |   |                   |   |        |  
|Net deferred tax asset (liability) |  |                  | 80     |   |                   |  | 301    |  
|                                   |  |                   |        |   |                   |   |        |  



Principal items comprising net
deferred income tax assets (liabilities) as of December 31, 2002 and 2003 are:



|                                        |  |                   |        |   |                   |   |        |  
|--------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                        |  | December 31, 2002 |        |   | December 31, 2003 |  
|Fixed assets                            |  |                  | (485   | ) |                   |  | (407   | )
|Warranty Provision                      |  |                   | 52     |   |                   |   | 74     |  
|Inventories                             |  |                   | 163    |   |                   |   | 327    |  
|Allowance for receivables               |  |                   | 302    |   |                   |   | 331    |  
|NOL carry-forwards                      |  |                   | 465    |   |                   |   | 585    |  
|Equity investments                      |  |                   | 418    |   |                   |   | 531    |  
|Foreign exchange losses                 |  |                   | 323    |   |                   |   | 285    |  
|Other                                   |  |                   | 48     |   |                   |   | (29    | )
|                                        |  |                   |        |   |                   |   |        |  
|Total deferred tax assets (liabilities) |  |                   | 1,286  |   |                   |   | 1,697  |  
|Valuation allowance                     |  |                   | (1,206 | ) |                   |   | (1,396 | )
|                                        |  |                   |        |   |                   |   |        |  
|Net deferred tax assets (liabilities)   |  |                  | 80     |   |                   |  | 301    |  
|                                        |  |                   |        |   |                   |   |        |  



At December 31, 2003, the
Company had NOLs, in Argentina amounting to approximately 1,290 which expire in 2011 and in Italy amounting to 98 which do not expire. Utilization of these NOLs is limited to future earnings of the related companies. The deferred tax asset
valuation allowance is principally related to tax assets located in the Argentine and Brazilian tax jurisdictions.



F-47



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8.    Accrued Expenses and Other Current Liabilities



|                                                     |  |                   |       |                   |   |      
|---------------------------------------------------- |  | ----------------- | ----- | ----------------- | - | -----
|                                                     |  | December 31, 2002 |       | December 31, 2003
|Social Security and other contributions              |  |                  | 289   |                   |  | 299  
|Withholding taxes on payroll and other sundry taxes  |  |                   | 274   |                   |   | 308  
|Accrued employee compensation                        |  |                   | 489   |                   |   | 547  
|Warranty provision                                   |  |                   | 137   |                   |   | 200  
|Accrued interest                                     |  |                   | 54    |                   |   | 2    
|Other                                                |  |                   | 185   |                   |   | 214  
|                                                     |  |                   |       |                   |   |      
|Total accrued expenses and other current liabilities |  |                  | 1,428 |                   |  | 1,570
|                                                     |  |                   |       |                   |   |      



9.    Debt Payable



Debt payable is as follows:



|                                                                                                                                                                                                             |  |                   |        |   |                   |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------ | - | ----------------- | - | ----- | -
|                                                                                                                                                                                                             |  | December 31, 2002 |        |   | December 31, 2003 |  
|Loan from Interbanca bearing interest at 6.3%, due in 2003, unsecured                                                                                                                                        |  |                  | 2,143  |   |                   |  |      |  
|Loan from Cassa di Risparmio di Bra, bearing interest at 5.5%, due in 2003, unsecured                                                                                                                        |  |                   | 1,886  |   |                   |   |      |  
|Loans from Ministry of Industry, pursuant to Law 46/82, for research and development and capital expenditures, repayable in annual installments through
2011, bearing interest at a subsidized rate of 3.25% |  |                   | 1,021  |   |                   |   | 1,077 |  
|Other loans                                                                                                                                                                                                  |  |                   | 257    |   |                   |   | 42    |  
|                                                                                                                                                                                                             |  |                   |        |   |                   |   |       |  
|Total Debt                                                                                                                                                                                                   |  |                   | 5,307  |   |                   |   | 1,119 |  
|Less: current portion                                                                                                                                                                                        |  |                   | (4,357 | ) |                   |   | (143  | )
|                                                                                                                                                                                                             |  |                   |        |   |                   |   |       |  
|Non-current Portion                                                                                                                                                                                          |  |                  | 950    |   |                   |  | 976   |  
|                                                                                                                                                                                                             |  |                   |        |   |                   |   |       |  



At December 31, 2003, long-term
debt is repayable as follows:



|                       |  |   |      
|---------------------- |  | - | -----
|Year ended December 31 |  |  
|2004                   |  |  | 143  
|2005                   |  |   | 231  
|2006                   |  |   | 107  
|2007                   |  |   | 107  
|2008 and thereafter    |  |   | 531  
|                       |  |   |      
|Total debt             |  |  | 1,119
|                       |  |   |      



10.    Employees
Severance Indemnities



The liability for severance indemnities
relates primarily to the Companys employees in Italy. The severance indemnity liability is calculated in accordance with local civil and labor laws based on each employees length of service, employment category and remuneration. There is
no



F-48



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



vesting period or funding requirement associated with the liability. The liability recorded in the balance sheet is the amount that the employee would be entitled to if the
employee terminates immediately. The charge to earnings was 383, 381 and 391 for the years ended December 31, 2001,
2002 and 2003, respectively.



11.    Related Party Transactions



A detail of balances with related parties as of December 31, 2002
and 2003 is as follows:



|                                 |  |                   |       |                   |   |      
|-------------------------------- |  | ----------------- | ----- | ----------------- | - | -----
|                                 |  | December, 31 2002 |       | December, 31 2003
|Receivables and advances:        |  |                   |       |                   |   |      
|WMTM Equipamentos de Gases Ltda. |  |                  | 2,812 |                   |  | 2,317
|BRC Gas Equipment Ltda.          |  |                   | 137   |                   |   |     
|MTE S.r.l.                       |  |                   | 8     |                   |   | 1    
|Jehin Engineering Company Ltd.   |  |                   | 18    |                   |   | 54   
|                                 |  |                   |       |                   |   |      
|Total receivables and advances   |  |                   | 2,975 |                   |   | 2,372
|                                 |  |                   |       |                   |   |      
|Payables:                        |  |                   |       |                   |   |      
|MTE S.r.l.                       |  |                   | 322   |                   |   | 185  
|Europlast S.r.l.                 |  |                   | 112   |                   |   | 68   
|TCN S.r.l.                       |  |                   | 246   |                   |   | 108  
|                                 |  |                   |       |                   |   |      
|Total payables                   |  |                  | 680   |                   |  | 361  
|                                 |  |                   |       |                   |   |      



In 2002 and 2003, the Company
sold fuel technology systems to BRCGE for an amount of 882 and 85, respectively.



In 2002 and 2003, the Company sold fuel technology systems to WMTM for an amount of 3,399 and 2,914, respectively.



In 2001, 2002 and 2003, the Company acquired from its affiliate, MTE S.r.l., electronic
components for its fuel technology systems for an amount of 746, 1,332 and 1,306, respectively. In 2002 and 2003,
the Company paid rent to MTE in the amount of 6 and sold products to MTE in the amount of 37 and 29, respectively.



In 2001, 2002 and 2003, the Company acquired plastic components from Europlast S.r.l.
for an amount of 310, 362 and 552, respectively, and iron-made elements from TCN S.r.l. for an amount of 577, 779 and 584, respectively. In 2003, the Company sold products to Europlast and TCN in the amount of 47 and 4, respectively. In 2003, the Company sold
products and purchased products from MTM Hydro S.r.l in the amount of 14, and 7, respectively. In 2003, the Company received rent from and sold product to BM2 in the amount of 6 and 40, respectively. Europlast, TCN, MTM Hydro
and BM2 are majority owned by the shareholders of the Company.



In 2001,
2002 and 2003, BRC rented an industrial building to TCN for 19, 11 and nil, respectively.



In 2002 and 2003, the Company leased buildings from IMCOS2 S.r.l., a related company, for an amount of 122 and 450, respectively.



F-49



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



12.    Commitments and Contingencies



Litigation



The Company is involved in legal proceedings arising in the normal course of business. Management believes that, based on advice of legal counsel, the outcome of
these proceedings will not have any material adverse effect on the Companys financial statements.



Lease Commitments



The following are the minimum payments that will have to be made in each of the years indicated based on operating leases in effect as of December 31, 2003:



|                             |  |   |      
|---------------------------- |  | - | -----
|Year ended December 31       |  |  
|2004                         |  |  | 450  
|2005                         |  |   | 450  
|2006                         |  |   | 450  
|2007                         |  |   | 450  
|2008                         |  |   | 450  
|Thereafter                   |  |   | 788  
|                             |  |   |      
|Total minimum lease payments |  |  | 3,038
|                             |  |   |      



Rental expense for all operating
leases amounted to nil, 122 and 450 in the years ended December 31, 2001, 2002 and 2003, respectively. The major portion of these leases contain renewal options.



13.    Financial Instruments



Off Balance Sheet Risk



The Company does not enter into forward exchange contracts or purchase foreign currency options to hedge firm sales/purchases commitments, anticipated but not yet
committed sales/purchases and investments in debt securities denominated in foreign currency.



Concentration of Credit Risks



Financial
instruments that potentially subject the Group to concentration of credit risks consist principally of cash investments and trade accounts receivable. The Group maintains cash and cash equivalents and short-term investments with financial
institutions located in the various countries in which it operates. The Company selects only financial institutions with high credit standards for use in its investment strategies.



Concentration of credit risks and the risk of accounting loss with respect to trade receivables is generally limited due to the large
number of the Companys end customers. The Company generally does not require collateral with respect to goods and services provided in Italy, but it normally makes sales to foreign customers against secured letters of credit.



The Companys two largest individual customers accounted for 10.5%, 18.9% and 22%,
of net sales for the years ended December 31, 2001, 2002 and 2003, respectively.



F-50



---

##### Table of Contents

BRC S.R.L.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Fair Value of Financial Instruments



The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments.



Cash and cash equivalentsThe carrying amount of cash and cash equivalents
reported by the Company approximates their fair value.



Accounts
receivable and payableThe carrying amount of accounts receivable and payable approximates their fair value.



Short and long-term debtThe fair value of long-term debt, as of December 31, 2002 and 2003, amounts to approximately 5,507and 934, respectively. The carrying amount of
the Companys other borrowings approximate their fair value. The fair values of the Companys long-term debt are estimated using cash flow analyses, based on the Companys incremental borrowing rates for similar types of borrowing
arrangements.



|14.Subsequent | Events
|------------- | ------



In January 2004, MTM exercised its put option for the disposal of a 10.5% portion of their shares held in Jehin at a price of 122, which approximates the purchase price net of the change in foreign exchange rate. The ownership of the shares is expected to be transferred in the second half of 2004. No significant gain or loss is anticipated as the put
price approximates carrying value.



F-51



---

##### Table of Contents

EXHIBIT INDEX



|           |  |                                                                                                                                                                                                  |  |          |  
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- | -
|ExhibitNo. |  | Description                                                                                                                                                                                      |  | Note No. |  
|           |  |                                                                                                                                                                                                 
|2.1        |  | Deed of Sale of Business by and among IMPCO Technologies Pty. Limited, as buyer, and Ateco Automotive Pty Limited, as seller, dated as of July 1, 1996.                                          |  | (7       | )
|           |  |                                                                                                                                                                                                 
|2.2        |  | Deed of Release by and among IMPCO Technologies, Inc. and Ateco Automotive Pty Limited dated as of July 1, 1996.                                                                                 |  | (7       | )
|           |  |                                                                                                                                                                                                 
|2.3        |  | Shareholders Agreement for Gas Parts (NSW) Pty Limited by and among IMPCO Technologies Pty. Limited, Gas Parts Pty Limited and Gas Parts (NSW) Pty. Limited, dated as of July 4, 1996.           |  | (7       | )
|           |  |                                                                                                                                                                                                 
|2.4        |  | Option Agreement between IMPCO Technologies, Inc. and the controlling shareholders of B.R.C. Societa a Responabilita Limitata of Italy, dated as of October 3, 2002.                             |  | (31      | )
|           |  |                                                                                                                                                                                                 
|3.1        |  | Certificate of Incorporation, as currently in effect.                                                                                                                                            |  | (28      | )
|           |  |                                                                                                                                                                                                 
|3.2        |  | Bylaws adopted July 22, 1998.                                                                                                                                                                    |  | (13      | )
|           |  |                                                                                                                                                                                                 
|4.1        |  | Stockholders Protection Rights Agreement dated as of June 30, 1999 between IMPCO Technologies, Inc. and ChaseMellon Stockholder Services, L.L.C., as Rights Agent.                              |  | (12      | )
|           |  |                                                                                                                                                                                                 
|10.1       |  | Lease between L-W Income Properties and IMPCO Technologies, Inc. dated May 10, 1989.                                                                                                             |  | (2       | )
|           |  |                                                                                                                                                                                                 
|10.2+      |  | 1989 Incentive Stock Option Plan.                                                                                                                                                                |  | (3       | )
|           |  |                                                                                                                                                                                                 
|10.3+      |  | 1991 Executive Stock Option Plan dated November 5, 1991, among AirSensors, Inc., as the Company, and Bertram R. Martin, James J. Mantras and Dale L. Rasmussen, as Optionees.                    |  | (4       | )
|           |  |                                                                                                                                                                                                 
|10.4       |  | First Amendment to Lease dated April 19, 1993, between L-W Income Properties and IMPCO Technologies, Inc.                                                                                        |  | (5       | )
|           |  |                                                                                                                                                                                                 
|10.5+      |  | 1993 Stock Option Plan for Non-employee Directors.                                                                                                                                               |  | (6       | )
|           |  |                                                                                                                                                                                                 
|10.6+      |  | Amendment to 1989 Incentive Stock Option Plan.                                                                                                                                                   |  | (6       | )
|           |  |                                                                                                                                                                                                 
|10.7+      |  | 1996 Incentive Stock Option Plan.                                                                                                                                                                |  | (8       | )
|           |  |                                                                                                                                                                                                 
|10.8+      |  | 1997 Incentive Stock Option Plan.                                                                                                                                                                |  | (9       | )
|           |  |                                                                                                                                                                                                 
|10.9       |  | Lease between Klein Investments, Family Limited Partnership, as lessor, and IMPCO Technologies, Inc., as lessee, dated August 18, 1997.                                                          |  | (10      | )
|           |  |                                                                                                                                                                                                 
|10.10      |  | Amendment dated March 18, 1998 to Loan agreement dated October 7, 1998 between Bank of America National Trust and Savings, as lender, and IMPCO Technologies, Inc., as the borrower.             |  | (10      | )
|           |  |                                                                                                                                                                                                 
|10.11      |  | Amendment dated April 29, 1998 to Loan agreement dated October 7, 1998 between Bank of America National Trust and Savings, as lender, and IMPCO Technologies, Inc., as the borrower.             |  | (10      | )
|           |  |                                                                                                                                                                                                 
|10.12      |  | Loan Agreement for IMPCO Technologies, B.V. as borrower, and Bank of America National Trust and Savings Association, acting through its Amsterdam branch, as lender, dated as of April 27,
1998. |  | (10      | )
|           |  |                                                                                                                                                                                                 
|10.13      |  | Loan Agreement dated September 11, 1998 between Bank of America National Trust and Savings Association, as lender, and IMPCO Technologies, Inc., as the borrower.                                |  | (11      | )
|           |  |                                                                                                                                                                                                 
|10.14      |  | Intentionally Omitted.                                                                                                                                                                           |  |          |  



---

##### Table of Contents

|           |  |                                                                                                                                                                     |  |          |  
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -
|ExhibitNo. |  | Description                                                                                                                                                         |  | Note No. |  
|           |  |                                                                                                                                                                    
|10.15      |  | Loan Agreement between IMPCO Tech Japan KK, as borrower, and, Hongkong and Shanghai Banking Corporation Ltd., Osaka Branch., as lender, dated as of March 29, 1999. |  | (13      | )
|           |  |                                                                                                                                                                    
|10.16+     |  | Employment Agreement dated April 1, 1999, between IMPCO Technologies, Inc., as the Company, and Robert M. Stemmler, as the Employee.                                |  | (13      | )
|           |  |                                                                                                                                                                    
|10.17      |  | Amended Loan Agreement between IMPCO Technologies, Inc., as borrower and Bank of America N.A. as lender, dated September 13, 1999.                                  |  | (14      | )
|           |  |                                                                                                                                                                    
|10.18      |  | Intentionally omitted.                                                                                                                                              |  |          |  
|           |  |                                                                                                                                                                    
|10.19      |  | Amendment No. 3 to Business Loan Agreement by and between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of June 13, 2000.                             |  | (15      | )
|           |  |                                                                                                                                                                    
|10.20      |  | Lease dated as of March 31, 2000, by and between Braden Court Associates and IMPCO Technologies, Inc.                                                               |  | (16      | )
|           |  |                                                                                                                                                                    
|10.21      |  | Amendment No. 4 to Business Loan Agreement by and between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of September 12, 2000.                        |  | (18      | )
|           |  |                                                                                                                                                                    
|10.22      |  | Amendment No. 5 to Business Loan Agreement between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of December 13, 2000.                                |  | (18      | )
|           |  |                                                                                                                                                                    
|10.23      |  | Amendment No. 6 to Business Loan Agreement between Bank of America, N.A. and IMPCO Technologies, Inc. dated as of March 12, 2001.                                   |  | (19      | )
|           |  |                                                                                                                                                                    
|10.24      |  | Promissory Note Issued by Robert Stemmler to Registrant dated March 15, 2001.                                                                                       |  | (17      | )
|           |  |                                                                                                                                                                    
|10.25      |  | Promissory Note Issued by Dale Rasmussen to Registrant dated March 15, 2001.                                                                                        |  | (17      | )
|           |  |                                                                                                                                                                    
|10.26      |  | Promissory Note Issued by Syed Hussain to Registrant dated March 15, 2001.                                                                                          |  | (17      | )
|           |  |                                                                                                                                                                    
|10.27      |  | Security Agreement and Agreement Not to Exercise Options entered into between Robert Stemmler and Registrant dated March 15, 2001.                                  |  | (17      | )
|           |  |                                                                                                                                                                    
|10.28      |  | Security Agreement and Agreement Not to Exercise Options entered into between Dale Rasmussen and Registrant dated March 15, 2001.                                   |  | (17      | )
|           |  |                                                                                                                                                                    
|10.29      |  | Security Agreement and Agreement Not to Exercise Options entered into between Syed Hussain and Registrant dated March 15, 2001.                                     |  | (17      | )
|           |  |                                                                                                                                                                    
|10.30      |  | Deed of Trust Executed by Dale Rasmussen regarding personal residence.                                                                                              |  | (17      | )
|           |  |                                                                                                                                                                    
|10.31      |  | Corporate Alliance Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                       |  | (21      | )
|           |  |                                                                                                                                                                    
|10.32      |  | Master Technical Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                         |  | (21      | )
|           |  |                                                                                                                                                                    
|10.33      |  | Stock Transfer Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                           |  | (21      | )



---

##### Table of Contents

|           |  |                                                                                                                                                                                                   |  |          |  
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -
|ExhibitNo. |  | Description                                                                                                                                                                                       |  | Note No. |  
|           |  |                                                                                                                                                                                                  
|10.34      |  | Registration Rights Agreement dated June 12, 2001 between Quantum Technologies Worldwide, Inc. and General Motors Corporation.                                                                    |  | (21      | )
|           |  |                                                                                                                                                                                                  
|10.35      |  | Amended and Restated Business Loan Agreement dated as of April 30, 2001 among the Registrant, Quantum Technologies, Inc. and Bank of America, N.A.                                                |  | (28      | )
|           |  |                                                                                                                                                                                                  
|10.36+     |  | 2000 Incentive Stock Option Plan.                                                                                                                                                                 |  | (20      | )
|           |  |                                                                                                                                                                                                  
|10.37      |  | IMPCO and GM Teaming Agreement dated July 30, 1997 by the Registrant and General Motors Corporation.                                                                                              |  | (22      | )
|           |  |                                                                                                                                                                                                  
|10.38      |  | Amendment No. 1 to Amended and Related Business Loan Agreement, dated as of September 5, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                         |  | (23      | )
|           |  |                                                                                                                                                                                                  
|10.39      |  | Amendment No. 2 to Amended and Restated Business Loan Agreement, dated as of October 8, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                          |  | (24      | )
|           |  |                                                                                                                                                                                                  
|10.40      |  | Amendment No. 3 to Amended and Restated Business Loan Agreement, dated as of November 9, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                         |  | (24      | )
|           |  |                                                                                                                                                                                                  
|10.41      |  | Amendment No. 4 to Amended and Restated Business Loan Agreement, dated as of December 12, 2001, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                        |  | (24      | )
|           |  |                                                                                                                                                                                                  
|10.42      |  | Common Stock and Warrants Purchase Agreement, dated January 11, 2002.                                                                                                                             |  | (25      | )
|           |  |                                                                                                                                                                                                  
|10.43      |  | Registration Rights Agreement, Dated January 11, 2002.                                                                                                                                            |  | (25      | )
|           |  |                                                                                                                                                                                                  
|10.44      |  | Form of Stock Purchase Warrant, Dated January 11, 2002.                                                                                                                                           |  | (25      | )
|           |  |                                                                                                                                                                                                  
|10.45      |  | Amendment No. 5 to Amended and Restated Business Loan Agreement, dated as of January, 2002, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                            |  | (26      | )
|           |  |                                                                                                                                                                                                  
|10.46      |  | Amendment No. 6 to Amended and Restated Business Loan Agreement, dated as of January 31, 2002, among Bank of America, N.A., the Registrant and Quantum Technologies, Inc.                         |  | (26      | )
|           |  |                                                                                                                                                                                                  
|10.47      |  | Amendment No. 7 to Amended and Restated Business Loan Agreement, dated as of February 28, 2002, among Bank of America, N.A., the Registrant and Quantum Fuel Systems Technologies Worldwide,
Inc. |  | (26      | )
|           |  |                                                                                                                                                                                                  
|10.48      |  | Stock Purchase Agreement, dated May 3, 2002.                                                                                                                                                      |  | (27      | )
|           |  |                                                                                                                                                                                                  
|10.49      |  | Amendment No. 8 to Amended and Restated Business Loan Agreement, dated as of March 31, 2002, among Bank of America, N.A., the Registrant and Quantum Fuel Systems Technologies Worldwide,
Inc.    |  | (30      | )
|           |  |                                                                                                                                                                                                  
|10.50      |  | Amendment No. 9 to Amended and Restated Business Loan Agreement, dated as of April 30, 2002, among Bank of America, N.A., the Registrant and Quantum Fuel Systems Technologies Worldwide,
Inc.    |  | (30      | )
|           |  |                                                                                                                                                                                                  
|10.51      |  | Second Amended and Restated Business Loan Agreement, dated June 24, 2002, between Bank of America, N.A., and the Registrant.                                                                      |  | (30      | )
|           |  |                                                                                                                                                                                                  
|10.52      |  | Employment Agreement dated April 1, 2002, between the Registrant and Robert M. Stemmler.                                                                                                          |  | (30      | )



---

##### Table of Contents

|           |  |                                                                                                                                                         |  |          |  
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -
|ExhibitNo. |  | Description                                                                                                                                             |  | Note No. |  
|           |  |                                                                                                                                                        
|10.53      |  | Employment Agreement dated April 1, 2002, between the Registrant and W. Brian Olson.                                                                    |  | (30      | )
|           |  |                                                                                                                                                        
|10.54      |  | Employment Agreement dated April 1, 2002, between the Registrant and Dale L. Rasmussen.                                                                 |  | (30      | )
|           |  |                                                                                                                                                        
|10.55      |  | Contribution and Distribution Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide, Inc., dated July 23, 2002.              |  | (29      | )
|           |  |                                                                                                                                                        
|10.56      |  | Tax Allocation and Indemnification Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide Inc., dated July 23, 2002.          |  | (29      | )
|           |  |                                                                                                                                                        
|10.57      |  | Transition Services Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide, Inc., dated July 23, 2002.                        |  | (29      | )
|           |  |                                                                                                                                                        
|10.58      |  | Employee Benefit Matters Agreement between the Registrant and Quantum Fuel Systems Technologies Worldwide, Inc., dated July 23, 2002.                   |  | (29      | )
|           |  |                                                                                                                                                        
|10.59      |  | Lease dated July 18, 2001 by and between Property Reserve, Inc. and the Registrant.                                                                     |  | (30      | )
|           |  |                                                                                                                                                        
|10.60      |  | The 2002 Stock Option Plan for Employees                                                                                                                |  | (32      | )
|           |  |                                                                                                                                                        
|10.61      |  | The 2002 Stock Option Plan for Non-employee Directors                                                                                                   |  | (32      | )
|           |  |                                                                                                                                                        
|10.62      |  | Amendment No. 1 to Second Amended and Restated Business Loan Agreement, dated as of December 10, 2002, among Bank of America, N.A., and the Registrant. |  | (31      | )
|           |  |                                                                                                                                                        
|10.63      |  | Amendment No. 2 to Second Amended and Restated Business Loan Agreement, dated as of March 24, 2003, among Bank of America, N.A., and the Registrant.    |  | (33      | )
|           |  |                                                                                                                                                        
|10.64      |  | Equity Joint Venture Contract, dated as of December 16, 2002, among China Natural Gas Co. Ltd., and the Registrant.                                     |  | (33      | )
|           |  |                                                                                                                                                        
|10.65      |  | Joint Venture Agreement Minda IMPCO Technologies, Limited, dated May 18, 2001 among Minda Industries Limited and Mr. Nirmal K. Minda and the Registrant |  | (33      | )
|           |  |                                                                                                                                                        
|10.66      |  | Joint Venture Agreement Minda IMPCO Limited, dated May 18, 2001 among Minda Industries and Mr. Nirmal K. Minda and the Registrant                       |  | (33      | )
|           |  |                                                                                                                                                        
|10.67      |  | Letter of commitment, dated March 26, 2003, among Don J. Simplott and the Registrant                                                                    |  | (33      | )
|           |  |                                                                                                                                                        
|10.68      |  | Limited Waiver and Amendment of Purchase Agreement and Note, dated March 12, 2004, Bison Structured Equity Partners, LLC                                |  | (1       | )
|           |  |                                                                                                                                                        
|10.69      |  | Amendment and Waiver Agreement, dated March 12, 2004, LaSalle Business Credit, LLC                                                                      |  | (1       | )
|           |  |                                                                                                                                                        
|21.1       |  | Subsidiaries of the Company.                                                                                                                            |  | (1       | )
|           |  |                                                                                                                                                        
|23.1       |  | Consent of Ernst & Young LLP, Independent Auditors.                                                                                                     |  | (1       | )
|           |  |                                                                                                                                                        
|99.1       |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350.                                                                                   |  | (1       | )
|           |  |                                                                                                                                                        
|99.2       |  | Certification of Acting Chief Financial Officer pursuant to 18 U.S.C. §1350.                                                                            |  | (1       | )

---

|(1) | Filed herewith.
|--- | ---------------

|(2) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1989.
|--- | -----------------------------------------------------------------------------

|(3) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1990.
|--- | -----------------------------------------------------------------------------

|(4) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1992.
|--- | -----------------------------------------------------------------------------

|(5) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1993.
|--- | -----------------------------------------------------------------------------

|(6) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1994.
|--- | -----------------------------------------------------------------------------

|(7) | Incorporated by reference to the Registrants Form 8-K/A dated July 1, 1996.
|--- | ----------------------------------------------------------------------------



---

##### Table of Contents

|(8) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1997.
|--- | -----------------------------------------------------------------------------

|(9) | Incorporated by reference to the Registrants Proxy Statement for fiscal year 1997.
|--- | -----------------------------------------------------------------------------------

|(10) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1998.
|---- | -----------------------------------------------------------------------------

|(11) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 1998.
|---- | ----------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to the Registrants Form 8-K dated June 30, 1999.
|---- | ---------------------------------------------------------------------------

|(13) | Incorporated by reference to the Registrants Form 10-K for fiscal year 1999.
|---- | -----------------------------------------------------------------------------

|(14) | Incorporated by reference to the Registrants Form 10-Q for the period ended December 7, 1999.
|---- | ----------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to the Registrants Form S-3/A (File No. 333-34366), filed with the Commission on June 14, 2000.
|---- | --------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to the Registrants Form 10-K for fiscal year 2000.
|---- | -----------------------------------------------------------------------------

|(17) | Incorporated by reference to the Registrants Form 8-K dated March 26, 2001.
|---- | ----------------------------------------------------------------------------

|(18) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 2000.
|---- | ----------------------------------------------------------------------------------------------

|(19) | Incorporated by reference to the Registrants Form 10-Q for the period ended January 31, 2001.
|---- | ----------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to the Registrants Proxy Statement for fiscal year 2000.
|---- | -----------------------------------------------------------------------------------

|(21) | Incorporated by reference to the Registrants Form S-3/A (File No. 333-63726), filed with the Commission on July 9, 2001.
|---- | -------------------------------------------------------------------------------------------------------------------------

|(22) | Incorporated by reference to the Registrants Form S-3 (File No. 333-34366), filed with the Commission on April 7, 2000.
|---- | ------------------------------------------------------------------------------------------------------------------------

|(23) | Incorporated by reference to the Registrants Form 10-Q for the period ended July 31, 2001.
|---- | -------------------------------------------------------------------------------------------

|(24) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 2001.
|---- | ----------------------------------------------------------------------------------------------

|(25) | Incorporated by reference to the Registrants Form 8-K filed on January 11, 2002.
|---- | ---------------------------------------------------------------------------------

|(26) | Incorporated by reference to the Registrants Form 10-Q for the period ended January 31, 2001.
|---- | ----------------------------------------------------------------------------------------------

|(27) | Incorporated by reference to the Registrants Form 8-K filed on May 10, 2002.
|---- | -----------------------------------------------------------------------------

|(28) | Incorporated by reference to the Registrants Form 10-K for fiscal year 2001.
|---- | -----------------------------------------------------------------------------

|(29) | Incorporated by reference to the Form 10-K filed by Quantum Fuel Systems Technologies, Inc., for fiscal year 2002.
|---- | ------------------------------------------------------------------------------------------------------------------

|(30) | Incorporated by reference to the Registrants Form 10-K for fiscal year 2002.
|---- | -----------------------------------------------------------------------------

|(31) | Incorporated by reference to the Registrants Form 10-Q for the period ended October 31, 2002.
|---- | ----------------------------------------------------------------------------------------------

|(32) | Incorporated by reference to the Registrants Proxy Statement for fiscal year 2002.
|---- | -----------------------------------------------------------------------------------

|+ | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------



5