Exhibit 99.3  HYDROGENICS
CORPORATION     Renewal
Annual Information Form  For the
Fiscal Year Ended December 31, 2004   March 24, 2005


TABLE OF
CONTENTS  1.
  FORWARD-LOOKING
  STATEMENTS2.
  CORPORATE STRUCTURE3.
  DESCRIPTION OF OUR
  BUSINESSOverviewHydrogenics Power and
  GenerationHydrogenics TestHistoryRecent EventsOur StrategyOur Products and ServicesOur Strategic
  RelationshipsSales and MarketingCustomersGovernment
  Sponsored Demonstration InitiativesResearch and DevelopmentIntellectual PropertyManufacturingFacilitiesHuman ResourcesLegal ProceedingsCompetitionSafetyHydrogen and
  Fuel Cell Industry Trends4.
  DESCRIPTION OF SHARE
  CAPITAL5.
  DIVIDENDS6.
  MARKET FOR SECURITIES7.
  DIRECTORS AND OFFICERS8.
  INTEREST
  OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS9.
  RISK
  FACTORS10.
  TRANSFER AGENTS AND
  REGISTRARS11.
  MATERIAL CONTRACTS12.
  INTERESTS OF EXPERTS13.
  ADDITIONAL INFORMATION  In this annual information form, the terms company, Hydrogenics,
we, us and our refers to Hydrogenics Corporation and, as applicable, its
subsidiaries.  All references to dollar
amounts are to U.S. dollars unless otherwise indicated.  Information contained on our website is not
part of this annual information form.


1.             FORWARD-LOOKING
STATEMENTS  This annual information form
contains forward-looking statements about our future results, levels of
activity, performance, goals or achievements or other future events.  These forward-looking statements are based on
certain assumptions and analyses made by us in light of our experience and our
perceptions of historical trends, current conditions and expected future
developments and other factors that we believe are appropriate in the
circumstances and these statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in our forward-looking statements.  In some cases, you can identify these
forward-looking statements by our use of words such as may, will, should,
could, expects, plans, intends, anticipates, believes, estimates,
predicts, seeks, strategy, potential or continue or the negative or
other variations of these words, or other comparable words or phrases.  Although we believe that the
expectations reflected in our forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance, goals or
achievements or other future events. 
These forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results or events to differ materially
from current expectations.  These risks
and uncertainties include, but are not limited to:  our
limited operating history and the difficulty of assessing our future growth
prospects;  the
failure of the hydrogen economy to grow at anticipated rates;


the
delay or failure of the mass commercialization of hydrogen fuel cell
technologies or other hydrogen technologies;  our
failure to develop, execute and implement strategies and business plans that
will create or meet market demand;  our
failure to develop products and services to meet our customers needs, attract
new customers or enable us to expand into new market segments or new geographic
markets;  actions
of our competitors;  changes
in technology;  the
failure of our significant investments in technology, capital expenditures and
infrastructure to increase our revenues or decrease our costs;  our
failure to secure and maintain strategic relationships;  our
failure to fully derive anticipated benefits from our acquisitions;  our
failure to recruit and retain qualified management and key employees;  our
failure to raise additional capital as needed;  changes
in the general economy;  changes
in laws and regulations, including codes and standards;  fluctuations
in certain currencies;  inadequate
protection of our intellectual property rights; and  impairment
of our identifiable intangible assets and goodwill.  These factors and other risk
factors described in this annual information form are not necessarily all of
the important factors that could cause actual results to differ materially from
those expressed in our forward-looking statements.  We are under no duty to update
any of our forward-looking statements after the date of this annual information
form, other than as required by law.  You
should not place undue reliance on forward-looking statements.  Readers are encouraged to read the section entitled
Risk Factors in this annual information form for a discussion of the factors
that could affect our future performance.  2


2.             CORPORATE
STRUCTURE  The legal name of our company is
Hydrogenics Corporation - Corporation Hydrogenique.  We were incorporated under the Canada Business Corporations Act on August 1, 1988 as
Traduction Militech Translation Inc.  By
articles of amendment dated August 20, 1990, we changed our name to Societe
Hydrogenique Incorporee - Hydrogenics Corporation Incorporated.  From 1990 to August 1995, Societe
Hydrogenique Incorporee - Hydrogenics Corporation Incorporated did not actively
carry on business.  In August 1995,
we commenced our fuel cell technology development business.  By articles of amendment dated January 24,
2000, we changed our name to Hydrogenics Corporation - Corporation
Hydrogenique.  Our registered and
principal executive offices are located at 5985 McLaughlin Road, Mississauga,
Ontario, L5R 1B8, Canada and our telephone number is (905) 361-3660.  As of March 24, 2005, we beneficially owned,
directly or indirectly, 100% of the voting and non-voting securities of the
subsidiaries listed below.  Indentation
indicates the voting securities are directly or indirectly owned by the
subsidiary listed above.  Subsidiaries
  
  Jurisdiction
  of IncorporationGreenlight Power
  Technologies, Inc. (Greenlight)
  
  CanadaEnKAT
  GmbH (EnKAT)
  
  GermanyHydrogenics Japan Inc.
  
  Ontario, CanadaHydrogenics USA, Inc.
  
  Delaware, U.S.A.Stuart Energy Systems
  Corporation (Stuart Energy)
  
  CanadaStuart
  Energy Europe N.V.
  
  Belgium  3


3.             DESCRIPTION
OF OUR BUSINESS  Overview  We are a leading global
developer of clean energy solutions, advancing the Hydrogen Economy by
commercializing hydrogen and fuel cell products.  Today, we have a diversified product
portfolio of fuel cell power products, hydrogen generation systems and fuel
cell test stations.  We are pursuing a balanced
business plan with commercial revenue today from sales of:  (i) our hydrogen generation systems to
the on-site industrial hydrogen market; (ii) our fuel cell test stations
to developers of fuel cells, fuel cell subcomponents and materials; and (iii) our
fuel cell power products and hydrogen refueling stations to the early-adopter
demonstration markets and emerging commercial markets for hydrogen power and
transportation applications.  We believe
that our product portfolio approach will:  provide margin-contributing
revenue today;  position us well
for significant growth opportunities in a variety of hydrogen energy
applications;  help insulate us
against exposure to any single technology, market or adoption rate;  enhance our
competitive position;  support more
consistent and predictable financial results over the long-term; and  provide a level
of mass and scale.  Following our acquisition of
Stuart Energy in January 2005, we divided our business into two
segments:  (i) fuel cell power products
and on-site hydrogen generation systems, or Hydrogenics Power and
Generation, and (ii) fuel cell test and diagnostic stations, or
Hydrogenics Test.  The description of our
business that follows reflects the acquisition of Stuart Energy and the companys
operations as of March 24,
2005.  Hydrogenics Power and Generation  We believe that our customers
will increasingly prefer strategic suppliers that are positioned to offer them
integrated or bundled hydrogen and fuel cell solutions to meet their needs and
create value for them.  We have
structured our Hydrogenics Power and Generation business to effectively respond
to customer inquiries for fuel cell power products, hydrogen generation systems
and turn-key, bundled solutions.  Our Hydrogenics Power and
Generation business unit currently employs approximately 240 people, including
approximately 180 people in our Mississauga, Ontario facility, and
approximately 60 people in our Oevel, Belgium facility, where we manufacture
and assemble our hydrogen generation systems based on alkaline water
electrolysis.  Power  We are developing a
comprehensive portfolio of proton exchange membrane, or PEM, fuel cell power
products.  We have developed and are
marketing scalable PEM fuel cell power modules that allow plug and play
integration into our own fuel cell products or those of original equipment
manufacturers (OEMs).  The low pressure
configuration of our power module architecture results in fewer moving parts,
greater system simplicity, higher efficiency, lower cost, enhanced reliability,
quieter operation and increased versatility when compared to the high pressure
systems offered by other fuel cell companies. 
Our goal is to apply our power module architecture across a wide range
of applications with early market appeal. 
We also plan to achieve commercialization through strategic partners
that have established market channels.  4


We are also developing PEM fuel
cell system products for specific end-use markets.  To date, our fuel cell systems cover a range
of portable, mobile and stationary power applications in the 5 kW to 65 kW
range.  The diversity of our technology
portfolio allows us to design and manufacture fuel cell systems with integrated
hydrogen refueling capabilities.  We believe that we are well
positioned to commercialize PEM fuel cell power products as a result of:  (i) the breadth of our product portfolio;
(ii) the costs, performance and attributes of our products relative to
competitive fuel cell products; (iii) our intellectual property portfolio;
(iv) our early market position in select early-adopter projects; (v) our
strategic partners; (vi) our skilled employee base; (vii) our global
market reach; and (viii) our financial strength.  Our power products business also
markets systems integration and engineering services.  System integration services entail working
with our clients to integrate their proprietary components into a fully
functional fuel cell system.  These
services include engineering, design, prototyping, testing, contract
manufacturing and project management.  Generation  With the acquisition of Stuart
Energy, we are now a leading global provider of on-site, packaged hydrogen
generation systems.  We believe that we
are the only hydrogen products company in the world with leading proprietary
technology in both alkaline water electrolysis and PEM water electrolysis,
together with access to reforming technologies through our strategic alliances
program.  Our product line of hydrogen
generation systems includes integrated solutions for on-site hydrogen
production, compression, storage, fuel dispensing and distributed power
generation.  Our hydrogen generation
product line is designed to meet a growing and diverse set of requirements for
the industrial, power generation and transportation fueling markets.  We integrate our proprietary,
industry-leading hydrogen generation systems with select components from our
strategic partners to provide integrated hydrogen solutions.  We have a strong competitive
position for on-site, electrolysis-based hydrogen generation systems in the
industrial market.  In this market, we
have 57 years of experience, strong brand recognition and a large global
installation base.  We have hundreds of
units operating in a variety of demanding operating conditions globally.  The industrial market for on-site hydrogen
generation offers us a growing source of margin-generating revenue that
provides a source of funding for our market development initiatives in the hydrogen
power and transportation markets.  In
addition, by packaging the same core hydrogen generation technology into our
targeted industrial market and hydrogen refueling station market, we can
minimize our technology and product development costs and achieve the benefits
of increased scale.  We believe that our
activities and market leadership position in our targeted industrial market
also provides a strong competitive position for us in the hydrogen refueling
station markets.  Hydrogenics
Test  We are a leading global provider
of PEM fuel cell test stations.   Our
test and diagnostic equipment is used to develop and optimize the performance
of PEM fuel cell technology by simulating, monitoring and controlling the
effect of power load, temperature, pressure, humidity and potential
contaminants on a fuel cell, and to measure the effect of changes in these
variables on fuel cell performance. 
Automotive companies, energy companies, fuel cell developers, component
suppliers and others are currently spending significant capital on the
development and improvement of their own fuel cell programs.  Test stands have become critical tools for
fuel cell technology developers, facilitating the effective integration and
operation of fuel cell stacks in a fully integrated power system.  Our test equipment and diagnostic products
currently range from basic component and stack research products to full system
and production grade test stations and diagnostic products.  We believe that our test stations and
diagnostic products will become an important element for many PEM fuel cell
development programs as broad commercial markets for fuel cells evolves.  We have significant experience gained in
designing, manufacturing and selling over 450 fuel cell test stations to
approximately 60 customers in North America, Asia and Europe.  Since our acquisition of Greenlight in January 2003,
we have marketed our PEM fuel cell test stations under our Greenlight brand.  5


Revenue
from ourtest equipment business has fluctuated historically and
is expected to continue to fluctuate significantly from period to period.  In 2004, product technology related issues, soft
market conditions for test equipment and weak execution of our integration
program negatively impacted our test equipment revenue.  To improve the performance of our test
equipment business, we implemented changes in management and staffing levels,
product design and business processes in 2004. 
Although a modest recovery in test equipment is anticipated in 2005, the
expectations for growth over the next three years for the test equipment
business have been substantially curtailed in our strategic plan.  This resulted in an impairment charge of $3.7
million in 2004 related to the intangible assets established at the time of the
acquisition of Greenlight.  Our test
business continues to be a global leader of PEM fuel cell test stands.  We are closely tracking industry trends and
our performance to ensure that our strategy objectives for this business are
met.  In addition to selling test
equipment to third parties, we have over 30 test stations installed in our
facilities that we use to provide testing services to customers.  These stations also support our own research
and development program for our PEM fuel cell power products.  Our fuel cell test and
diagnostic business unit is currently based in Burnaby, British Columbia, and
employs approximately 75 full-time people in Canada, Germany and Japan.  History  Since our inception and through the
end of 2000, our revenues were derived solely from the commercial sale of our
PEM fuel cell automated test stations and related diagnostic equipment.  In November 2000, we
completed our initial public offering of common shares that resulted in gross
proceeds of $84,000,000 and the listing of our common shares on the Toronto
Stock Exchange (TSX) and the Nasdaq National Market (NASDAQ).  Our expertise in the fuel cell
testing business provided the platform for the development and growth of our
fuel cell power products business.  This
business included the development and sale of fuel cell stacks, scalable fuel
cell power modules, stand-alone fuel cell systems and a variety of hydrogen
generation devices.  In 2001, we began to
generate revenues from the sale of fuel cell power products and system
integration services.  In January 2003, we
acquired Greenlight, our principal competitor in the fuel cell test equipment
business, in a transaction valued at approximately $19 million, exclusive of
expenses of approximately $1.1 million relating to the acquisition.  Under the terms of the acquisition,
Greenlight shareholders received cash consideration of approximately $2.3
million and approximately 4.2 million of our common shares, representing
approximately 8% of our then outstanding common shares.  As part of the integration, we combined the
respective fuel cell test businesses of Hydrogenics and Greenlight and have
operated this combined business under the Greenlight brand as the test
equipment and services division of Hydrogenics. 
The consolidation of our test businesses into an independent operating
division, based in Burnaby, British Columbia, allowed us to be better able to
focus on the expansion of our fuel cell power products business in our facility
in Mississauga, Ontario.  For the past three years, the
distribution of our revenues by segment was as follows:  2004
  
  2003
  
  2002(in
  millions)Test
  
  $
  11.1
  
  $
  20.7
  
  $
  5.6Power Products(1)
  
  5.6
  
  6.0
  
  10.2Total
  
  16.7
  
  26.7
  
  15.8
  
 Note: (1)Revenues from Power Products include engineering services primarily
provided to General Motors.  Engineering
services represented $1.8 million in revenue in 2004, $3.7 million in revenue
in 2003, and $5.8 million in revenue in 2002. 
Excluding revenues from these engineering services, our revenues from
Power Products were $3.8 million in 2004, $2.3 million in 2003 and $4.4 million
in 2002.  6


Recent
Events  Acquisition
and Integration of Stuart Energy Systems Corporation  On November 10, 2004, we
announced that we had entered into an agreement to acquire all of the issued
and outstanding shares of Stuart Energy at an exchange ratio of 0.74
Hydrogenics shares for each Stuart Energy share.  At the time of the announcement, the
transaction was valued at approximately $129 million.  On January 6, 2005, we announced that we
had successfully acquired approximately 86% of the issued and outstanding
shares of Stuart Energy.  On January 20,
2005, we announced that, after extending our offer, we had acquired
approximately 93% of the issued and outstanding Stuart Energy shares.  We then exercised our statutory rights under
the Canada Business Corporations Act
to compulsorily acquire the remaining Stuart Energy shares that had not been
deposited to the offer.  Following this
compulsory acquisition, we de-listed Stuart Energy common shares from the TSX,
effective February 18, 2005.  As of March 24, 2005, Stuart Energy
ceased to be a reporting issuer under applicable securities laws.  In connection with this acquisition, we
issued approximately 27 million of our common shares, representing
approximately42% of
our then outstanding common shares.  For
accounting purposes, the acquisition of Stuart Energy has been reflected as a
subsequent event in our December 31, 2004 financial statements.  The transaction will be accounted for as a
purchase transaction in the first quarter of 2005, and we will consolidate the
operations of Stuart Energy from January 6, 2005, the date of acquisition.  The acquisition of Stuart Energy
represents a key milestone in the execution of our strategic plan.  We continue to reduce our exposure to any
single product, single market or single adoption rate.  The combination has created a diversified
product portfolio of fuel cell power products, hydrogen generation stations and
fuel cell test stations.  We now have
greater scale with greater revenue diversity which should lead to morepredictable results for our
shareholders notwithstanding the cycles of any one of our businesses.  The
combined company has an expanded roster of blue-chip partners and customers,
including Air Liquide, Air Products, BOC, Cheung Kong Infrastructure,
ChevronTexaco, Ford, GM, John Deere, Linde, Shell Hydrogen and Toyota, as well
as a global network of sales agents and global customer service
capabilities.  We believe that our
ability to market a broader, more diversified product portfolio through
expanded global sales and distribution channels provides us with a competitive
advantage against competitors that do not enjoy such scale.  Our combined and complementary
product portfolio allows us to offer a turn-key hydrogen application and
hydrogen fueling solution to target customers. 
As an illustrative example, we can offer a bundled solutions for fuel
cell powered forklifts and hydrogen refueling infrastructure.  Our combined technology portfolio includes
expertise in PEM fuel cells, alkaline and PEM electrolysis, systems integration,
codes and standards and fuel cell test stands, as well as access to hydrogen
internal combustion engine technology.  A significant factor in
acquiring Stuart Energy was the opportunity to reduce our risk profile and
accelerate our pathway to commercial sustainability.  The acquisition and integration offers
significant cost synergies through rationalization of staff, facilities,
infrastructure and public company costs. 
We expect annualized cost savings as a result of the combination to be
approximately $8 million.  On January 21,
2005, we announced that we have implemented the initial phase of our
integration and synergies plan, including an immediate reduction of 15% of our
combined workforce and rationalization of our facilities.  The workforce reduction primarily affected
employees from both Mississauga, Ontario operations.  We have also added financial strength with
the acquisition of Stuart Energy.  As at January 31,
2005, we had approximately $114 million in cash and investments.  In addition, we have increased
our market capitalization and our market float. 
We expect this to lead to increased trading liquidity for our
shareholders and provide our investors with a diversified exposure to the
hydrogen economy.  Our business acquisition report
dated March 21,
2005 provides further details about the Stuart Energy acquisition and is
incorporated by reference into this annual information form.  7


Completion
of $62 million equity offering  On February 3, 2004, we
completed the issuance and sale of 11,000,000 common shares at $5.75 per share
for net proceeds of $59.6 million. 
Subsequent to this sale, the underwriters over-allotment option was
partially exercised resulting in the sale and issuance of an additional 373,608
common shares on February 13, 2004 for net proceeds of $2.0 million.  This equity offering, coupled
with our acquisition of Stuart Energy in January 2005, has significantly
strengthened our balance sheet.  As at January 31,
2005, we had approximately $114 million in cash and investments, compared with
approximately $47 million as at December 31, 2003.  Our
Strategy  We have implemented the
following strategies to further our goal of being a leader in the development
and commercialization of fuel cell power products, hydrogen generation systems
and fuel cell test equipment:  1.Develop a portfolio of complementary technologies and provide customers
with complete solutions.We
are developing a comprehensive portfolio of technologies to address the
mobility, stationary and portable power markets, as well as the hydrogen
generation infrastructure that is required to support these markets.  We believe the breadth of our portfolio of
fuel cell and hydrogen generation technologies enables us to provide customers
with complete energy solutions.  For
example, we are positioned to sell a hydrogen refueling station together with
one of our fuel cell power products.  By
selling products and services that combine features and value streams that
other fuel cell developers are not able to offer, we expect to realize improved
pricing, revenues and gross margins.   We
also expect this approach will allow us to strengthen our customer
relationships and provide a key competitive advantage in the form of proprietary
intellectual property.  We expect that
our portfolio of fuel cell and hydrogen technologies will, in the long term,
yield multiple value streams for our shareholders and, in the short term, serve
to insulate us from single point market failures and reduce technology risks.  We also believe that our strategy of
developing a comprehensive portfolio of technologies will position us favorably
to participate in a larger number of government-sponsored initiatives that
should stimulate early revenue opportunities.  2.Initially target near-term markets.  We believe that the best way to ensure our
participation in the mass commercial hydrogen and fuel cells markets of the
future is to initially focus on selling hydrogen and fuel cell products to the
markets that exist today.  We are
pursuing a balanced business plan with commercial revenue today from sales of:  (i) our hydrogen generation systems to
the on-site industrial hydrogen market; (ii) our fuel cell test stations
to developers of fuel cells, fuel cell subcomponents and materials; and (iii) our
fuel cell power products and hydrogen refueling stations to the early-adopter
demonstration markets for power and transportation applications.  We believe our focus on near-term market
opportunities that also align with market development for long-term market
opportunities, coupled with a continued focus on cost management, will lead to
increased sales revenue, improved gross sales margins and a decrease in our
current cash utilization rate.  Premium
power markets such as specialty off-road mobility, military, aerospace,
research and mission critical back-up power yield premium prices for effective solutions,
a key factor in meeting our overriding goal of commercial sustainability.  We believe that the premium pricing and lower
production costs associated with selling into these markets will provide us
with positive margins and additional technical expertise with a minimal level
of capital investment.  3.Deploy capital efficiently through horizontal business model.  We save money by leveraging the research and
development efforts of our component suppliers and the supply, distribution and
marketing initiatives of our OEM partners and customers.  We concentrate our research and development
initiatives on our core competencies and encourage our suppliers and channel
distribution partners to develop and invest in aspects of the supply and
distribution chain that are in their areas of expertise.  For example, in the production of our power
modules we rely on numerous suppliers to develop component parts such as MEAs,
bi-polar plates, wiring harnesses, blowers and power conditioning
components.  This allows us to avoid
costs associated with internally developing and/or investing in the
manufacturing capital equipment for these components.  We also focus on establishing and
strengthening key relationships with OEMs, like  8


GM and John Deere, that
have mature sales and distribution networks. 
Our goal is to utilize these existing sales and distribution networks
and minimize the costs associated with investing in our own marketing, sales
and distribution networks.  This strategy
allows us to efficiently deploy our capital.  4.Focus on product commercialization.  We will continue to develop, acquire or
partner to access technology and product solutions that satisfy market
requirements and advance our strategy for global growth.  We will continue to implement and improve our
structured process for product development, which includes an ongoing
cost-benefit analysis and milestone assessment to ensure market alignment.  We will also use our continuous quality
improvement program to improve product reliability and functionality, reduce
product footprint and the cost of designing, manufacturing and marketing our
products.  In addition to cost savings
expected through increased sales volume, we will seek to reduce costs through
the simplification of our product designs, product standardization,
identification and use of lower-cost materials and components and the
development of long-term relationships with third-party component suppliers.  5.Continue to develop and maintain key strategic
relationships.We will
continue to pursue strategic alliances, as well as acquisition or investment
opportunities, that improve our competitive position by expanding our product
and service offerings and our distribution capabilities, extending our market
reach and strengthening our balance sheet. 
We view these partners as critical to our long-term success.  6.Conserve cash through fiscal discipline.  We believe it is important at this early
stage of our industry to match our investment in the number of employees and
research and development to the adoption rate and developmental pace of
hydrogen and fuel cell technologies.  We
believe that this deliberate pacing will reduce the risk of over-investment in
production capacity prior to the emergence of a robust commercial market.  The alignment of our resources with current
market and development opportunities remains a fundamental discipline that we
believe is critical to growing at a sustainable pace.  Our product development efforts remain
focused on near-term commercial applications and are funded, in order, by: (i) positive
gross profits (revenues minus the cost of revenues); (ii) government
grants; (iii) joint development agreements; and, only to the extent
necessary, by (iv) existing cash reserves.  7.Extend global reach and make strategic acquisitions.  We will continue to direct sales, business
development and service capabilities in global markets where there are current
and future needs for hydrogen and fuel cell related technologies.  By doing so, we hope to develop customers and
suppliers in the key markets of North America, Europe, Japan, China and
India.  We also expect to continue to
complement our organic growth through strategic acquisitions of businesses and
technology.  For example, in 2002, our
acquisition of EnKAT in Germany established our foothold in the European
test station market.  In 2003, our
acquisition of Greenlight solidified our position as a leading global developer
and manufacturer of fuel cell test stations and diagnostic equipment.  In 2005, the acquisition of Stuart Energy, a
leading company in hydrogen production from water electrolysis, accelerated our
hydrogen generation business.  With our
acquisition of Stuart Energy, we now have a significant European presence and
global sales, agency and distribution channels. 
We have also acquired proprietary technology, including our license to
certain General Motors stack technology and certain patents used in connection
with our vehicle-to-grid, or V2G, initiatives. 
We will continue to expand our global operations and consider strategic
acquisitions as opportunities arise.  Our Products and Services  Fuel Cell
Power Products and Services  We design and manufacture fuel
cells, fuel cell power modules, fuel cell electric hybrid power solutions, and
integrated fuel cell systems.  We also provide
system integration services.  Our fuel
cell power products business is based in our Mississauga, Ontario facility.  Fuel Cell
Stacks.Our
fuel cell stack technology is suited to a wide range of power applications
ranging from sub-kilowatt remote power to multi-kilowatt mobile, stationary and
portable applications.  The power densities
of our  9


current series offer high
performance in a power range of 500 W to 40 kW. 
In addition to our own fuel cell stack program, we also have access to
certain of General Motors fuel cell technology for use in certain
applications.  We believe our access to
two proven fuel cell stack technologies provides us with significant product
and market flexibility.  Our fuel cell
stack products are typically used in our own fuel cell system products and product
development.  We also consider strategic
sales of our stack products to third parties.  Fuel Cell
Power Modules. 
In the development of our proprietary power modules, we have integrated
our fuel cell stacks with balance of plant subsystems and components to
manage all the operational system requirements, such as humidification
controls, heat management and gas flows.  Each power module runs on pure hydrogen and
produces DC power.  The versatility of
these compact, fully-integrated electrochemical generators makes them suitable
for deployment in a wide range of applications spanning the stationary, mobile
and portable power markets.  As our core
power product offering, these power modules, product branded as HyPM, can be
configured to meet a range of form factors and duty cycles.  We also offer engineering services to modulate
the HyPM design, often in a hybrid configuration with ultracapacitors or
batteries, to a customers particular application.  We market these plug and play power modules
to meet the range of requirements of OEMs and systems integrators in the early adopter
markets, such as off-road utility vehicles, forklift trucks, greensmowers and
backup power systems for servers and cell tower sites.  Our current offering of standard products
includes our 7 kW, 10 kW and 65 kW low pressure fuel cell power modules.  We have sold these units as stand-alone units
and also as packaged configurations where we have integrated two power modules
together to double the power output.  Our
HyPM power modules have been designed to accommodate either a Hydrogenics or a
General Motors fuel cell stack.  We have
provided and will continue to offer custom power modules for customers with
specific power requirements, such as the 20 kW power module we developed to
meet a specific customer demand.  In
addition, as an optional component of our HySTAT Energy Station, we currently
offer hydrogen internal combustion engine modules capable of generating power
in increments of 125 kW.  Fuel Cell
Electric Hybrid Power Solutions.  We have developed significant intellectual
property in fuel cell electric hybrid systems, which integrate a HyPM fuel
cell power module with electrical storage devices such as ultracapacitors or
advanced technology batteries into a high performance power generating package.
 These hybrid solutions are particularly
relevant in applications with duty cycles that exhibit pronounced load peaks.  The benefits of a hybrid combination include
improved power response, increased fuel efficiency, increased durability and
lower capital costs, and is applicable to stationary, mobile and portable power
applications.  We have developed
extensive modeling capabilities that enable us to take a customers specific
application requirements, model a tailored power solution, and deliver a fully
integrated fuel cell electric hybrid power solution to our customers.  These capabilities enable us to work closely
with our OEM customers in value-added activities, while providing feedback for
our fuel cell product development program.  Integrated
Fuel Cell Systems.We have
developed portable and stationary fuel cell power generation systems, on a per
order basis, as a complete power generation solution for the end user.  To date, we have designed integrated fuel
cell systems for use in a range of applications including portable and
auxiliary power units for military applications ranging from 500 W to 5 kW, a
25 kW cell tower backup power generator, and a 50 kW reformer-based energy station.  System
Integration and Engineering Services.We have
gained substantial expertise in fuel cell operating systems through our work on
the design and assembly of fuel cell test stations.  This expertise is in demand by fuel cell
developers that require a third party to integrate their technology into an
operational system and ultimately a power product.  To this end, we provide system integration
services to select customers.  These
services include engineering, design, prototyping, testing, contract manufacturing
and project management.  The ownership of
intellectual property that arises from these relationships is determined on a
case-by-case basis.  HyPM
  
  HyPM-XR
  
  HyPM-icePower
  Specification
  
  5 kW - 65 kW
  
  5 kW - 14 kW
  
  125 kWUses
  
  plug and play fuel cell power module suitable for
  
  rack-mountable HyPM configuration designed for
  
  backup and stationary power  10


integration into multiple stationary and mobility
  applications
  
  data centres and other critical backup power
  installations that require reliable extended run capabilitiesFeatures
  
  Compact low pressure design offers high reliability
  and high efficiency. Runs on pure hydrogen and delivers DC power
  
  Rack-mountable design allows up to 46 kW of back-up
  power in one standard server cabinet. Can be combined with ancillary
  electrolyser to produce hydrogen fuel on site, on demand.
  
  Capable of producing continuous clean power with
  sufficient supply of hydrogen  Hydrogen Generation Systems  With our Stuart Energy
acquisition, we now have a portfolio of hydrogen generation systems, including
systems based on alkaline water electrolysis, PEM water electrolysis and
hydrocarbon reformer technologies.  Our
line of alkaline electrolysers, formerly marketed by Stuart Energy as Stuart
Energy Stations (SES), is the most commercially developed of our hydrogen
generation product line.  Stuart Energy
has over 55 years of experience in industrial processing markets and almost 10
years in hydrogen refueling markets.  Our
modular alkaline hydrogen generation systems, now marketed as HySTAT-A
systems, can be configured and integrated with a selection of ancillary modules
to offer a stand-alone hydrogen generation plant, a refueling station or a
power-producing energy station.  The
range of hydrogen production capacities that the core HySTAT-A Generator can
deliver make it suitable for a wide range of industrial and refueling
applications.  Likewise, our
demonstration level PEM electrolyser systems, HySTAT-P, can be similarly
configured and integrated to serve a range of applications.  While we have developed our own proprietary
line of PEM electrolysers and acquired the Stuart Energy line of alkaline electrolysers,
we have chosen to purchase hydrocarbon reformers from third parties for
integration into certain of our hydrogen generation products.  Hydrogenics original HySTAT energy station
incorporated a reformer, or fuel processor, that is capable of supplying
hydrogen fuel to an integrated fuel cell system to deliver up to 50 kW of power
in a peak-shaving mode.  Under a joint
development agreement with Johnson Matthey, we have also developed a fully
integrated fuel processor system that incorporates Johnson Mattheys
proprietary fuel processing technology and our integrated system controls and
balance of plant subsystems.  We have
also designed and manufactured an integrated natural gas reformer for
ChevronTexaco.  HySTAT Generator
  
  HySTAT Refueling
  Station
  
  HySTAT Energy
  StationH2
  Generation Capacity
  
  1-300 Nm3/hr
  
  1-300 Nm3/hr
  
  1-300 Nm3/hr
  5250 kWUses
  
  Suitable for producing continuous or batch supplies
  of hydrogen typically for industrial processing applications
  
  Refueling of hydrogen-powered vehicles
  
  Stationary hydrogen-fueled power generation, with
  optional refueling equipmentFeatures
  
  Fully operational hydrogen delivery system designed
  around a selection of hydrogen generation technologies including electrolysis
  (alkaline and PEM) and reformer-based. Offers packaging choices and other
  system options.
  
  System comprised of HySTAT hydrogen generator with
  ancillary compression module, storage module and dispenser as requested
  
  Same as HySTAT refueler with the addition of a
  power module to produce clean continuous, or backup, power. Dispenser for
  hydrogen refueling is optional   11


Fuel Cell
Test and Diagnostic Equipment and Testing Services  We design and manufacture an
extensive portfolio of fuel cell test and diagnostic equipment, and offer
testing services to customers requiring third party testing programs.  Our test equipment business unit is operated
by our wholly-owned subsidiary, Greenlight, from its facility in Burnaby,
British Columbia.  Fuel Cell
Test Equipment.In order
to perform testing and diagnostic functions, our test stations provide the
necessary balance of plant components and subsystems to simulate, monitor and
control key parameters of a fuel cell such as power load, temperature,
pressure, humidity and potential contaminants. 
Our test stations measure the effect of these variables on fuel cell
performance and provide real-time data to our customers development programs.  Our current product line
includes test stations for fuel cell stacks, components, fuel reformers, electrolysers
and fuel cell systems.  Our commercially
available test stations are used in testing stationary, portable and mobile
fuel cell applications in the PEM, molten carbonate and solid oxide
chemistries.  The test stations are built
with proprietary software and advanced safety features, which permit unattended,
automated operation.  The software
controls, alters and monitors:  gas
flow rates  higher gas flow rates result in higher power output;  pressure
 increasing pressure achieves higher power output;  individual
cells  the testing and monitoring of individual cells within a stack to
validate each cell and quickly locate problems in stack performance;  temperature
 a temperature that is too high threatens to evaporate water in the fuel cell,
creating dry or sub-optimal operating conditions;  humidity
 fuel cells operate best when they are humidified or moist; however, over- or
under-humidification can impair performance; humidification testing helps to
identify the optimal operating humidity and therefore optimizes fuel cell
performance; and  load
profile  fuel cell load profile is controlled with user commands, either
manually or through scripted programs that control the software for unattended
dynamic operation.  We market our automated test
stations under the trade name FCATS. 
Our FCATS product line covers fuel cell stack testing from 50 kW to 160
kW, which we believe covers the power range for most PEM fuel cell stacks
currently in development.  We also
manufacture a smaller, more economical FCATS G-50 model, which is an industrial-grade
test station with a variety of features for testing single fuel cells or small
stacks.  In addition, we provide custom
design and manufacturing of test stations to meet specific customer needs.  FCATS test stations are designed to keep pace
with current manufacturing requirements as fuel cell commercialization
progresses from the research and development stage to prototype production and,
potentially, to mass production.  Diagnostic
Equipment.Our diagnostic modules measure the
electrical performance of fuel cells and fuel cell stacks using automated,
real-time, non-invasive techniques.  They
are divided into two functional categories: 
measurement and monitoring of a fuel cells internal resistance
(electrical efficiency) and measurement and monitoring of a fuel cells DC
voltage.  Our first diagnostics product
was marketed under the trade name IMPACT. 
This module can be sold as a stand-alone unit or integrated as an option
in our test stations.  The IMPACT module
utilizes an AC impedance measurement technique to determine the electrical
efficiency of a fuel cell stack, which allows developers to characterize the
internal components of fuel cells and to optimize a fuel cell stack for
rigorous practical applications.  We also
offer a diagnostics module marketed under the name FCVM.  This module  12


measures DC voltages in real
time to identify the performance of individual fuel cells within a fuel cell
stack.  The FCVM module can also be
integrated as an option in our test stations as well as our fuel cell power
modules.  Further diagnostic devices are
in product development stages.  Testing
Services.We offer a full range of testing
services as a cost-effective solution for customers who wish to initiate a test
program through an outside supplier. 
Through our testing services, we are able to offer our customers rapid
implementation, improved productivity, reduced financial risk and independent
test validation.  Our Strategic Relationships  We have formed strategic
relationships with industry leaders in specific markets.  We look to these relationships as a source of
complementary technologies, market development and distribution of our
products.  As part of our strategy, we
are continually evaluating markets for hydrogen and fuel cell products and
identifying potential strategic partners whose brands, distribution channels,
technical expertise and market knowledge can be accessed to facilitate the
successful commercialization of our products.  General
Motors  In October 2001, we formed
a strategic alliance with General Motors to accelerate the development of fuel
cell technology into global commercial markets. 
This alliance includes shared intellectual property rights and joint
efforts in fuel cell product development, engineering, prototyping, testing,
branding and marketing strategies. In connection with our strategic alliance,
we issued to General Motors approximately 11.4 million of our common shares, or
approximately 21% of our outstanding shares at October 2001 and
approximately 12.4% of our outstanding shares at March 24, 2005, and
warrants to purchase approximately 2.5 million additional shares.  Each warrant is exercisable at an exercise
price of $4.00 per share upon release from escrow.  The warrants expire on October 16, 2006.  Our partnership with General Motors positions
us in what we anticipate will eventually become the largest market for fuel
cell applications.  In February 2005, we
demonstrated a fuel cell-powered forklift and on-site hydrogen refueling
station at the Oshawa, Ontario car plant of General Motors of Canada (GM
Canada).  We expect to complete this
initial trial in the first half of 2005. 
This demonstration is part of a larger project to develop, demonstrate
and advance fuel cell-powered forklifts toward commercialization.  The project consortium is led by us and
involves John Deere, FedEx Canada, GM Canada and NACCO Materials Handling
Group.  The project is being financially
supported by a CDN$1.56 million contribution from Sustainable Development
Technology Canada, a CDN$0.39 million contribution from the Canadian
Transportation Fuel Cell Alliance and a CDN$1.69 million commitment from the
consortium.  Deere & Company  In August 2002, we launched
a new development effort with Deere & Company that culminated in the
delivery of an innovative power module used to power a John Deere commercial
work vehicle.  In June 2004, we
announced a five-year Collaboration Agreement with Deere &
Company.  We are currently working on
additional projects with Deere to extend our power modules to additional John
Deere applications.  ChevronTexaco  In May 2004, we announced
that we had signed a master services agreement with ChevronTexaco Technology
Ventures LLC.  In 2004, we secured two
work orders under the master services agreement.  In May 2004, we announced that we had
received the first work order for the provision of engineering and
product-related services to integrate a fully packaged hydrogen generator based
on ChevronTexaco Technology Ventures proprietary reformer technology.  In December 2004, we announced that we
had received the second work order for the provision of engineering and
product-related services to integrate a fully packaged hydrogen generator based
on proprietary natural gas reforming technology being developed by
ChevronTexaco.  Plans for the facility
include having the capacity to generate 150 kg/day of hydrogen to serve the
fueling needs of a fleet of fuel cell demonstration buses at  13


AC Transit in Oakland,
California.  The station is under
construction and scheduled for completion in the fall of 2005.  In July 2004, Stuart Energy
announced that it had received a purchase order from ChevronTexaco Technology
Ventures LLC to design, build and integrate hydrogen fueling station modules
that interface with the fully packaged hydrogen generator assembled by
Hydrogenics and incorporating ChevronTexaco Technology Ventures proprietary
hydrogen reformer technology.  In connection with our
acquisition of Stuart Energy, we now have the following additional alliances:  Cheung Kong Infrastructure
Holdings Limited  We are collaborating with Cheung
Kong Infrastructure Holdings Limited (CKI) to demonstrate a HySTAT with fuel
dispensing and backup power capabilities, together with a hydrogen-powered bus
that CKI plans to demonstrate, in Hong Kong later this year.  An important part of the process to
commercialize our HySTAT and hydrogen power products in the Hong Kong and Asia
Pacific markets relates to codes and standards acceptance.  We have been collaborating with CKI on
educating the applicable local regulators on the safety of our hydrogen products.  CKI is a large, publicly listed
company based in Hong Kong with holdings in utility and infrastructure-related
investments in Hong Kong, China, Australia and the Philippines.  To our knowledge, CKI indirectly holds
approximately 2%
of our issued and outstanding common shares.  Ford  In March 2002, Stuart
Energy entered into a cooperative efforts arrangement with Ford Power Products,
which was, at the time, a subsidiary of Ford Motor Company.  This arrangement supports the development of
the hydrogen internal combustion engines, or H2ICEs,
used in the regenerative power module in the hydrogen energy station
products.  Since March 2002, Ford
and Stuart Energy have informally cooperated on various initiatives and
projects involving Fords hydrogen internal combustion engines (H2ICEs) and Stuart Energys
hydrogen refueling infrastructure.  Leading Global Industrial Gas
Companies  Stuart Energy has preferred
supplier agreements with Air Liquide S.A., Air Products and Chemicals, Inc.,
BOC Gases and Linde A.G., four of the leading global industrial gas
companies.  Typically, these agreements
provide that Stuart Energy will be the preferred supplier of on-site,
electrolysis-based hydrogen generators for industrial applications to the
applicable industrial gas company.  We
believe that these relationships represent valuable sales channels, while
providing credible validation of our technology.  These relationships allow us to leverage our
industrial gas partners existing customer relationship and service
capabilities while providing them with access to our on-site hydrogen
generation product portfolio.  Shell
Hydrogen  In June 2003, Stuart
Energy entered into a development, marketing and sales agency agreement with
Shell Hydrogen, a global business of the Royal Dutch/Shell Group of
Companies.  This agreement provides Shell
Hydrogen access to Stuart Energys HomeFueler®, which is currently
under development.  The HomeFueler®
is expected to be an advanced, small-scale electrolyser developed specifically
for home hydrogen production.  The
HomeFueler® is expected to enable an individual to refuel a car
overnight.  Under this agreement, Shell
Hydrogen obtains certain rights to act as an agent for the HomeFueler®.  Shell Hydrogen also commits to conduct
certain market analysis of the potential of home hydrogen refueling.  Stuart Energy delivered a first prototype of
the HomeFueler® for field testing in 2004.  14


Statkraft and EHN  In October 2003, Stuart
Energy entered into a joint cooperation agreement with Statkraft SF and Corporación
Energía Hidroeléctrica de Navarra S.A.(EHN)to
assess, demonstrate and develop advanced renewable energy based hydrogen
production and distribution solutions. 
Both Statkraft and EHN have purchased initial equipment for evaluation
and demonstration of vehicle and power applications.  Sales
and Marketing  With the acquisition of Stuart
Energy, we now have greater global scale. 
We have a direct sales force of approximately 20 full-time sales professionals
in Canada, United States, Belgium, Germany, Japan, India, China and Russia,
along with a global network of sales
agents and distribution channels.  We
believe that our ability to market and sell a broader, more diversified product
portfolio through expanded global sales and distribution channels provides us
with a competitive advantage against competitors that do not enjoy such
scale.  Our sales force is
primarily organized by product line for our fuel cell power products and by
region for our hydrogen generation systems and our fuel cell test stations.  Customers  Each customer listed below has
accounted for at least $100,000 in revenues since 2000:  3M Company Adam Opel AG AeroVironment Inc. Asia Pacific Fuel Cell Technologies, Ltd. Ballard Power Systems Inc. ChevronTexaco Corporation Dalian Institute of Applied Technology Deere & Company Delphi Automotive Systems Inc. Department of National Defence (Canada) DuPont Canada Inc. E. I. du Pont de Nemours and
Company Engelhard Corporation European Community European Fuel Cell Group Ltd. Gas Technologies Institute General Hydrogen Corporation General Motors Corporation Government of Canada High Technology Development Corporation Hyundai Motor Company IMRA America, Inc. Industrial Technology Research Institute (Taiwan) UTC Fuel Cells Johnson Matthey plc Morganite Special Carbons Ltd. Plug Power Inc. PSA Peugeot Citroën QuestAir Technologies, Inc. Radian Inc. Sartorius AG United Technologies Corporation U.S. Army Tank-automotive and Armaments Command Toyota Tsusho Corporation Volvo Group Zentrum für Sonnenenergie-und
Wasserstoff-Forschung  As a result of the Stuart Energy
acquisition, we now have customer relationships with the following additional
companies:  Air Liquide S.A. Air Products and Chemicals, Inc. BOC Gases Cheung Kong Infrastructure
Holdings Limited Corporación Energia
Hidroeléctrica de Navarra S.A. (EHN) Ford Motor Company Linde A.G. Praxair Inc. Shell Hydrogen Statkraft SF Toyota Motor Sales U.S.A.  15


Government Sponsored Demonstration Initiatives  We are focused on opportunities and projects
that generate a return on investment.  When making project decisions, an important
consideration is our ability to realize gross margins as opposed to projects
created for the purpose of technology demonstrations or for proof-of-concept.  Accordingly, we will carefully screen
cost-share projects, looking at whether such projects are already part of our
product development and demonstration plan and whether there are significant
strategic implications.  We believe that certain
demonstration projects that are sponsored by government and industry
participants are important because they typically:  (i) provide opportunities to showcase the
capabilities of our fuel cell power products and hydrogen refueling stations; (ii) provide
important technical and/or market feedback; (iii) educate future
stakeholders; and (iv) result in the identification of potential customers
and/or strategic partners.  Currently, we
are participating in or plan to participate in a number of government-sponsored
demonstration projects.  As we are
typically required to contribute to the cost of these demonstration projects,
we are highly selective about the demonstration projects that we accept.  Research and Development  Subsequent to the acquisition of
Stuart Energy, we have focused and rationalized our consolidated research and
development program.  Our research and
development activities are currently conducted at our facility in Mississauga,
Ontario by a research and development staff consisting of approximately 30 full-time
employees.  Our current research and
development plan includes a roadmap for the development of our next generation
of technology and products, as well as continuous cost and performance
improvements of our existing products. 
Our near-term research and development program is focused on two streams
 to develop and demonstrate next generation technology for fuel cell power
modules and for hydrogen generation equipment. 
Our key initiatives for both streams of research and development include
cost reduction, increased durability, reduced footprint and improved operating
performance, as well as improved scalability of our product offering.  A portion of our consolidated
research and product development program has historically been funded by
various Canadian and United States government agencies, including Technology
Partnerships Canada, Natural Resources Canada, Canadian Department of National
Defense and the United States Department of Energy.  We currently have contribution agreements
from Natural Resources Canada and Industry Canada, including Technology
Partnerships Canada.  We will continue to
explore opportunities to sign additional research and product development
agreements that align with our research and development and product commercialization
programs.  Fuel Cell Power Products  The objective of our fuel cell
research and development program is to develop integrated fuel cell systems
rather than the individual components and materials, which we actively
encourage and assist our suppliers to develop. 
For example, in the production of our power modules, we rely on numerous
suppliers to develop component parts such as MEAs, bi-polar plates, wiring
harnesses, blowers and power conditioning components, thereby avoiding the
costs associated with internally developing these components.  We believe this strategy allows us to
efficiently deploy our capital by leveraging the research and development
efforts of our component suppliers.  As a result of this strategy,
one of our key research and development initiatives for our fuel cell productsis the development of a line of fuel cell
power modules across a power range of 5 kW to 65 kW which we believe will
provide a modular and scalable building block for future power products, as
well as for OEM customers.  Since 2001,
our power module development team has developed four distinct generations of
fully integrated plug and play HyPM power modules, ranging in size from 5 kW
to 65 kW.  HyPM power modules have been
designed to be adaptable to a wide variety of commercial applications without
major modifications.  The primary focus
of our research and development efforts on power modules is on cost reduction,
system simplification, durability, controls and manufacturability.  16


The development of fuel cell
diagnostics tools is also a key focus of our research and development
program.  These diagnostics tools have
direct applications to both our fuel cell test system business, as available
options for our test station customers, and to our power product development
program as imbedded windows into the performance of fuel cells that are
integrated into a functional system.  Our core stack technology
continues to be research and development intensive with emphasis on the testing
of new materials, design concepts, manufacturing techniques and on cost
reduction.  Hydrogen
Generation Products  The primary focus of our
near-term research and product development program for hydrogen generation
products is to develop and demonstrate next generation technology with improved
product costs, reduced footprint, enhanced performance, and expanded scalability.  We have strong proprietary intellectual
property for both the core electrolyser stack technology as well as the balance
of plant integration and design.  We work
with leading suppliers to source many of the balance of plant components found
in our hydrogen generation system product portfolio.  We have research and development
initiatives related to the reduction of our alkaline electrolyser cell stack costs,
improved efficiency in our alkaline electrolyser through improved electrode
performance, and the improved scalability of our alkaline electrolyser product
offering.  Our research and development
initiatives for hydrogen generation products also include improved stack
performance and durability for our PEM electrolysers.  We continue to develop and offer
turn-key hydrogen generation products which integrate hydrocarbon reformer
technologies from suppliers of reformers that we qualify, select and collaborate
with.  We engineer the integrated
solution around the reformer module supplied by our partners.  Intellectual
Property  We believe that aggressively
protecting our intellectual property is an important component of our becoming
a leader in the commercialization of fuel cell and hydrogen related products
and technologies.  We rely on a
combination of patent, copyright, trademark, trade secret and contract laws, as
well as international treaties, to protect our proprietary rights to our
intellectual property which includes technical know-how, designs, special
materials, manufacturing techniques, test equipment and procedures for fuel
cells, fuel cell components and fuel cell systems.  Most of our products have been delivered to
customers pursuant to confidentiality agreements, which restrict the recipient
from reverse engineering such products. 
We also seek to protect our proprietary intellectual property in part
through confidentiality agreements with our strategic partners and employees.  We typically retain sole
ownership of the intellectual property we develop on our own.  However, our strategic alliance with General
Motors and contractual relationships with some other companies provide for
shared intellectual property rights in certain situations.  As part of the agreement with General Motors,
we have a non-exclusive, royalty-free license to use certain of General Motors
proprietary fuel cell stack intellectual property in certain applications and
markets.  We have these rights in
perpetuity, including subsequent improvements to the licensed technology.  Our agreement with Dow Corning to jointly
commercialize our Seal-in-Place technology provides for certain shared
intellectual property rights.  Under the
agreement, we and Dow Corning jointly own a U.S. patent application, together
with all inventions falling within the description of such patent application
specific to Seal-in-Place sealing and sealing materials, for fuel cell and electrolyser
assemblies conceived or made under the agreement.  In addition, our joint development agreement
with Johnson Matthey provides for certain shared intellectual property
rights.  Under the agreement, we and
Johnson Matthey have granted each other a non-exclusive, irrevocable, global,
royalty-free license to the patents and technology owned by the inventing party
and also the right to sublicense such patents and technology in order to
further the parties work on the balance of plant system for Johnson Mattheys
fuel processor reactors.  Additionally,
all inventions conceived in the course of work performed under the agreement
and made jointly by both parties will be owned jointly by both parties.  When the agreement is terminated, the
licenses continue to the extent needed to allow the parties to use the jointly
owned patents and technology invented under the agreement.  17


Following our acquisition of
Stuart Energy, as of March 24,
2005, we have a portfolio of 87 granted patents and over 550patent applications pending worldwide
representing over 160separate
inventions.  Manufacturing  We are pursuing a manufacturing strategy based on the
principle of flexibility with our product delivery process, supply chains and
customer support functions.  This
flexibility should allow us to quickly and cost-effectively react to rapidly
changing customer demands, uncertain supply chain requirements and dynamic
markets.  We believe the greatest value in the supply chain for our
target markets can be captured by acting as a systems integrator.  As a result, our supply chain and
manufacturing strategy is to:  target
the value chain systems integrator position and perform final integration and
testing, strategically
outsource a significant portion of manufacturing requirements, retain
and control key technology components (i.e., cell stacks), develop
excellence in extended enterprise management capabilities (i.e., strategic
suppliers, partners and customers), use
flexible assembly systems, continue
to implement quality and reliability best practices, and continue
to develop core competencies in hydrogen safety, codes and standards and
approvals.  As product volumes increase, we will migrate from an
engineer-to-order unique configuration operation into an assemble-to-order standardized
configuration operation.  We believe that
an assemble-to-order approach will minimize infrastructure requirements and
provide for increased manufacturing flexibility, while maintaining the ability
to satisfy our customers specific needs.  We believe that two key factors to our success are:  (i) the ability to meet our long and
short term manufacturing requirements; and (ii) quality and reliability of
the components used in our products. 
Accordingly, we are continually improving the procurement process by
exploring new sourcing opportunities, targeting an optimal number of suppliers,
optimizing prices for high volume components, and, where appropriate, extending
joint purchasing by our global plants to all component classes.  In addition, we continue to implement a
diligent research, qualification and selection process to identify potential
third party suppliers of key components of our products.  By proactively managing our suppliers, we try
to minimize the risk of inventory shortages, quality issues and costs.  As our volume increases, we will be better
positioned to negotiate with our suppliers.  In connection with our acquisition and integration of Stuart Energy, we
are planning to extend the implementation of Stuart Energys enterprise
resource planning system to our other operations in 2005.  We assemble and test our fuel
cell power products at our headquarters in Mississauga, Ontario.  Most of our fuel cell power products are
currently in a pre-commercialization phase and are, therefore, manufactured in
very limited quantities.  On occasion, we
outsource certain requirements to local manufacturers who produce prototype
components to our specifications.  We
also outsource the production of components such as steel frames and enclosures
used in the production of certain of our power products to third party
manufacturers.  We believe that this
practice allows us to manage our capital costs and to focus on our core
business.  We currently assemble and test
our hydrogen generation products based on PEM water electrolysis and reformers
at our headquarters in Mississauga, Ontario. 
We currently assemble and test our hydrogen generation products based on
alkaline water electrolysis at our facility in Oevel, Belgium.  We currently assemble and test our fuel cell
test stations in our facility in Burnaby, British Columbia.  We are dependent upon third
party suppliers for certain key materials and components for our products.  We believe that we have sufficient sources
and supply of our key materials and key components, and to date, the pricing of
our key materials and components has been stable.  18


Facilities  Our executive offices are
located in Mississauga, Ontario, Canada. 
Our principal activities at this facility include the manufacture and
assembly of our fuel cell power products, the manufacture and assembly of our
hydrogen generation products based on PEM water electrolysis or reforming
technologies, the research and development of our fuel cell power products and
hydrogen generation products, and fuel cell testing services.  In connection with our EnKAT
acquisition in 2002, we acquired the lease on EnKATs 6,000 square foot sales
and assembly facility in Gelsenkirchen, Germany.  We currently use this facility for sales and
customer support for our fuel cell test equipment business and our fuel cell
power products business, along with certain limited assembly work for our fuel
cell test equipment business.  In connection with our
Greenlight acquisition in 2003, we acquired the lease on Greenlights 54,000
square foot executive office, test engineering and manufacturing facility in
Burnaby, British Columbia.  We currently
use this facility to develop, engineer and manufacture our test and diagnostic
products.  In connection with our Stuart
Energy acquisition in 2005, we acquired lease obligations relating to four
facilities leased by Stuart Energy, including: 
(i) a 135,000 square foot executive office and manufacturing
facility in Mississauga, Ontario, with an annual lease cost of approximately $737,000
expiring in July 2006; (ii) a 21,445 square foot executive office and
manufacturing facility in Oevel-Westerlo, Belgium, with an annual lease cost of
approximately $260,000 expiring in August 30, 2008; (iii) a
vacant 53,240 square foot facility in Shawinigan, Quebec, with an annual lease
cost of approximately $323,000 expiring in May 2011; and (iv) a vacant
facility in Grimma, Germany, with an annual lease cost of approximately $54,000expiring in June 30, 2012.  In connection with its acquisition of
Vandenborre Technologies NV in February 2003, Stuart Energy determined to
rationalize its consolidated facilities in 2003.  As a result, Stuart Energy has previously
taken a financial charge relating to the Shawinigan, Quebec and Grimma, Germany
facilities.  We are continuing to seek
sub-tenants for these rationalized facilities.  As part of our Stuart Energy
integration and synergies plan, we developed a plan to rationalize our combined
facilities.  In February 2005, we
transferred all of Stuart Energys remaining Mississauga-based employees to the
Hydrogenics Mississauga facility.  We
are currently in the process of attempting to sub-lease the Stuart Energy
Mississauga facility and selling certain assets that were used in that facility.  In July 2000, we opened a
sales office in Japan.  This office
coordinates our sales, service and marketing efforts in the Asia-Pacific
region.  We currently lease
manufacturing, research and development and general office facilities in the active
locations set forth below:  Location
  
  Principal Use
  
  Square
  Footage
  
  Lease Expiry DateMississauga, Ontario
  
  Corporate offices, manufacturing, research and
  development and testing services
  
  96,000
  
  August 31, 2010Burnaby, British Columbia
  
  Corporate offices, test station engineering and
  manufacturing
  
  54,000
  
  December 31, 2009Oevel-Westerlo, Belgium
  
  Corporate offices, manufacturing and assembling
  
  21,445
  
  August 30, 2008Gelsenkirchen, Germany
  
  Sales and marketing, assembly
  
  6,000
  
  November 30, 2005Tokyo, Japan
  
  Sales and marketing offices
  
  1,000
  
  May 27, 2005  19


We believe that our facilities
are presently adequate for our operations and we will be able to maintain
suitable space needed on commercially reasonable terms.  Human
Resources  Following our acquisition of
Stuart Energy and the subsequent rationalization of our workforce, as of March 24, 2005, we
haveapproximately 290
full-time employees.  Approximately 156 of our employees are
professional staff, including engineers, scientists, and other professionals,
including 15 Ph.D.s.  We believe that our ability to attract and
retain qualified personnel is critical to our success and the achievement of
our business plan.  We attempt to align
the interests of our employees with those of shareholders through the use of
incentive stock options, including performance-based stock options, and a
performance-based compensation structure. 
None of our employees are represented by a collective bargaining
agreement.  We believe that our relations
with our employees are good.  Legal
Proceedings  We are not currently party to
any material legal proceedings.  Competition  We are currently a global leader
in each of our target markets  the early-adopter markets for PEM fuel cell
power products, the industrial market for on-site hydrogen generation systems
based on water electrolysis, the early-adopter markets for hydrogen refueling
infrastructure, and the market for PEM fuel cell test and diagnostic
stations.  We compete directly and
indirectly with a number of companies in each of our target markets.  Each of these target markets is increasingly
competitive, and these competitive pressures may impact our market share,
revenue and margin performance.  Fuel Cell Power Products  We currently market PEM fuel cell power
products, including PEM fuel cell systems and subsystems, and the provision of
systems integration services into selected early-adopter, premium power
markets.  We expect to compete with
incumbent technologies as well as with companies that currently have fuel cell
and fuel cell system development programs. 
We expect to compete on the basis of product features, performance,
reliability, price, warranty and service. 
Companies that we currently compete with, directly or indirectly, in our
target markets for fuel cell power products, including companies that have fuel
cell development programs or provide integrated fuel cell power products,
include:  Anuvu, Ballard Power Systems
Inc., Cellex Power Products, Inc., Distributed Energy Systems Corporation,
General Hydrogen Corporation, Giner, Inc., Honda Motor Co. Ltd., Intelligent
Energy, Lynntech Incorporated, Nuvera, Plug Power Inc., Quantum Fuel Systems
Technologies Worldwide, Inc., ReliOn Inc., Teledyne, Toshiba Corporation,
Toyota Motor Corporation, and United Technologies Corporation.  Companies with programs for fuel cells other
than PEM fuel cells include Fuel Cell Energy Inc., Fuji Electric Co., Ltd.,
Hitachi, Ltd. and United Technologies Corporation.  Certain of our competitors have announced
corporate alliances with major vehicle manufacturers such as Daimler-Chrysler,
Ford and Honda.  Hydrogen Generation  In our target markets for industrial on-site
hydrogen generation and for hydrogen refueling stations, we compete on the
basis of safety, product features, performance, reliability, price, warranty
and service.  In these markets, we
compete, directly or indirectly, with the following companies:  Air Liquide S.A., Air Products and
Chemicals, Inc., BOC Gases, Distributed Energy
Systems Corporation, General Hydrogen Corporation, Giner, Inc., Harvest
Energy Technology, Inc., H2Gen Systems, HyRadix, Inc.,
Linde A.G., Norsk Hydro ASA, Plug Power Inc., Praxair, Inc.,Purification
Equipment Research Institute of CISC,Quantum Fuel Systems Technologies Worldwide, Inc. and Teledyne
Energy Systems, Inc.  There are three main sources of competition in the
industrial market:  a
small number of large merchant gas companies that dominate the market,  20


direct
competitors for on-site electrolytic hydrogen solutions, and on-site
reformers.  The large merchant gas
companies that dominate the industrial hydrogen market produce most of their
hydrogen from steam methane reforming and partial oxidation of fossil fuels at
centralized facilities, and transport the hydrogen to customers sites by truck
in gaseous or, more commonly, liquid form, or in certain circumstances by
pipeline.  This is referred to as delivered-to-site
hydrogen.  Many of these companies also
source on-site hydrogen generation solutions from us, so they are also
customers as well as competitors.  Many users of hydrogen
for industrial applications install hydrogen generation systems as part of
their manufacturing facility instead of, or in addition to, receiving
delivered-to-site hydrogen.  We primarily
compete in this on-site segment of the industrial market.  Our principal competitors in the industrial
market for on-site electrolytic hydrogen generation include Distributed Energy
Systems Corporation, Norsk Hydro ASA, Purification Equipment Research Institute
of CISC and Teledyne Energy Systems, Inc., with whom we compete in most of
the geographical markets in which we market our on-site electrolytic hydrogen
generation products.  On-site small steam
methane reformers and on-site small natural gas reformers are in the
development stage and, to our knowledge, have yet to emerge as commercially
competitive to either delivered gas or on-site electrolysis.  We will continue to monitor the development
of small reforming technologies and may become increasingly involved in this
area in the future as part of our portfolio of hydrogen products.  Companies that are offering on-site small
reformers include Caloric, Harvest Energy Technology, Inc., H2Gen, HyRadix
Inc. and Mahler.  Our hydrogen refueling
stations will compete with fossil fuel based hydrogen delivered by companies
such as Air Liquide S.A., Air Products and Chemicals, Inc., BOC Gases,
Linde AG and Praxair and with alternative equipment used to manufacture on-site
hydrogen from companies such as Distributed Energy Systems Corporation, General
Hydrogen Corporation, H2Gen Systems, HyRadix Inc., Norsk Hydro ASA, Plug Power
Inc. and Teledyne Energy Systems, Inc., some of which are or may be our
customers and/or partners.  We may also
compete with a number of other companies based in Canada, the U.S., Europe and
elsewhere who determine to serve as a system integrator for integrated hydrogen
infrastructure solutions, or as a supplier of targeted fueling services.  An example of this would be hydrogen storage
companies, such as Dynetek Corporation or Quantum Fuel Systems Technologies
Worldwide, Inc., providing a mobile refueling solution from
trailer-mounted storage similar to our trailer-mounted mobile hydrogen
generation systems.  Fuel Cell Test Stations  In 2004, the market for PEM fuel
cell automated test stations was very competitive.  In this market, we compete primarily on the
basis of product features, performance, reliability, price and service.  A number of companies currently manufacture
fuel cell automated test stations.  These
companies include Chino Corp., ElectroChem, Inc., Emprise Corporation,
Fideris Incorporated, FuelCon and Teledyne Energy Systems, Inc.  In addition to the companies which currently
manufacture test stations, most large fuel cell developers and OEMs have some
degree of internal test station development.  Safety  Like other fuels, the
handling and use of hydrogen deserves respect and adherence to proper
procedures.  The following summary points
outline some basic facts about hydrogen:  Hydrogen
disperses very rapidly.  Being the
lightest element (14.5 times lighter than air), hydrogen rises and spreads out
quickly in the atmosphere, and escapes containment; when a leak occurs, the
hydrogen gas dissipates so quickly it can be difficult to ignite.  Even when ignited, hydrogen burns upward, and
is quickly consumed.  External
studies comparing the combustibility of hydrogen and gasoline have concluded that
hydrogen is safer in a vehicle collision scenario.  21


In
the Preliminary Hydrogen Vehicle Safety Report, a study prepared for Ford by
Directed Technologies Inc. in July 1996, the issue of safety of hydrogen
as a fuel source for alternative vehicles was addressed.  The study determined that the safety of a
hydrogen fuel cell system was potentially better than the demonstrated safety
record of gasoline or propane powered vehicles, and equal to or better than
that of natural gas. The study indicated that the positive safety attributes of
hydrogen were more relevant in realistic operational and collision scenarios,
while the negative safety aspects of hydrogen were not considered as important
in likely vehicle accident scenarios.  Through ongoing research,
product design and development, and rigorous testing, we are committed to
continuing our long history of designing and manufacturing hydrogen generation
and supply systems with high safety integrity.  Hydrogen and Fuel Cell Industry Trends  The convergence of a number
of important drivers continues to lead to a general consensus among
governments and industry that hydrogen is the ultimate long-term sustainable
and emission-free alternative to petroleum. 
These drivers include:  the
escalating price of oil;  the
emergence of energy security as a top political and economic priority,
particularly in the United States;  the
heightened focus on air pollution and its associated health impacts, and the
increasing efforts to reduce smog in major urban centres around the world;  the
heightened focus on global warming and climate change and the wide-scale global
effort to reduce greenhouse gas (GHG) emissions such as carbon dioxide (CO2);  technology
developments, including developments with hydrogen fuel cells, hydrogen-powered
internal combustion engines (H2ICEs) and hybrid electric
technologies for both transportation and stationary power applications, as well
as technology developments in renewable power generation;  the
continuing deregulation of the electrical power industry, particularly in key
North American and European markets;  the
escalating price of natural gas in key industrialized markets; and  the
significant commitments by governments in various jurisdictions to fund
programs for research, development and demonstration of hydrogen technologies,
including hydrogen infrastructure.  Although hydrogen is not yet a
fuel that is readily available to consumers in the marketplace, it has been
used for industrial purposes for many decades, and currently the overall global
market for industrial hydrogen is approximately 50 million tons per
year.  More than 80% of hydrogen used
today for industrial applications is produced by reforming fossil fuels
(predominantly natural gas) into hydrogen, commonly referred to as steam
methane reforming.  Hydrogen produced
from water and electricity, commonly referred to as water electrolysis, is the
other primary method of producing hydrogen.  Due to increasing concerns
related to energy security, air pollution and global warming, there has been a
sustained, growing focus on transforming the worlds energy economy from being
carbon-based to hydrogen-based.  While
the use of fossil fuels to produce hydrogen does not result in zero emissions,
reformation coupled with fuel cell technology is able to exploit the existing
fuel infrastructure and still offer significant environmental improvements over
traditional internal combustion systems. 
In addition, when powered by renewable and sustainable sources of
non-carbon electricity, water electrolysis as a basis of hydrogen
infrastructure development is emerging as a promising low-to-zero emission pathway
for meeting the worlds growing energy needs for transportation fuel and
distributed power generation.  22


Our business is premised on the
belief that fuel cell technology, utilizing hydrogen as a fuel, offers a number
of benefits:  Improved Energy Efficiency.Fuel cells produce power more
efficiently than conventional power systems, such as the gasoline internal
combustion engine.  According to industry
sources, fuel cells are expected to have at least twice the energy conversion
efficiencies of a conventional internal combustion engine.  Abundant and Locally Accessible
Hydrogen Supply.Hydrogen
is the most abundant element on the earth and can be extracted from water or
fossil fuels.  Subject to perfecting
cost-efficient methods of hydrogen extraction, the potential supply is almost
limitless.  By contrast, the supply of
fossil fuels is considered finite. 
Additionally, hydrogen can be generated from water through electrolysis,
or from natural gas through reformation, making it a synthetic fuel
accessible to most geographic locations, unlike oil, which is found only in
certain geographic locations and must be transported from production regions to
end users.  Lower Emissions.PEM fuel cells discharge zero
or extremely low quantities of GHGs into the atmosphere.  Certain other technologies, such as fossil
fuel fed internal combustion engines or high temperature fuel cells, are
incapable of these low emissions levels.  Noise Reduction.  Fuel cell systems have few moving parts and
the electrochemical conversion process is soundless.  As a result, a fuel cell power generator or
appliance is significantly quieter than an internal combustion engine.  Minimal
vibration.  Also by virtue of having few moving parts,
fuel cell systems generate almost no vibration which is a consideration for
applications that do not tolerate such disturbance.  Distributed Generation.  Fuel cells can generate electricity and heat
locally, offering an advantage over centralized generation.  A multiplicity of decentralized generators
operating in parallel offer enhanced reliability and security compared to a
centralized generator, which is more vulnerable to single point failure.  Hydrogen industry participants
and a number of governments are currently focusing on a wide range of
applications for fuel cells and related new energy technologies that span the
transportation, stationary power and portable power markets.  As fuel cell technology evolves and related
costs decrease through economies of scale and material science advancements, we
believe that a significant market may develop for fuel cell powered products to
meet the expanding global need for energy.  The investment by
industry participants and governments is funding product development activities
and the initial demonstration and installation of hydrogen infrastructure and
fuel cell applications.  There are also
an increasing number of multilateral arrangements for collaborative
research and development related to hydrogen technologies.  In November 2003, the U.S. Energy
Secretary, Spencer Abraham, launched and hosted the first annual meeting of the
International Partnership for the Hydrogen Economy (IPHE).  At that meeting, Australia, Brazil, Canada,
China, the EU, France, Germany, Iceland, India, Italy, Japan, Korea, Norway,
Russia, the United Kingdom and the United States formalized their membership in
the IPHE by signing the terms of reference. 
The IPHE is intended to establish cooperative and collaborative efforts
in hydrogen production, storage, transport and end use technologies.  In September 2003, the
Chicago Climate Exchange (CCX) began trading GHG emissions, providing an
unprecedented opportunity for international voluntary participation in a global
Climate Change Program that will be supplemental and complementary to the Kyoto
Accord.  Companies and governments will
now be able to buy emissions credits from parties implementing energy
technology, such as fuel cells, with low GHG emissions, thus engaging market
forces in favor of sustainable energy sources. 
Similar trading initiatives have been announced in other parts of the
world, notably Japan and in Europe, signaling an important trend that could
fundamentally affect clean energy technologies and our sector.  23


In the automotive market, each
of DaimlerChrysler, Ford, General Motors, Honda, Nissan and Toyota has publicly
announced its intention to introduce hydrogen-powered vehicles, with mass
production of fuel cell vehicles anticipated by General Motors and Toyota by
2015.  Kyoto Accord  The Kyoto Accord is a United Nations
sanctioned protocol that went into effect February 16,
2005, with 141 countries signing on, including every major industrialized country
 except the United States, Australia and Monaco.  The Kyoto Protocol was adopted in late 1997
to address the problem of global warming by reducing the worlds GHG
emissions.  It is considered a first
step, one that can start the process but not realistically solve the worlds
climate change problems by the time its first commitment period ends in 2012.  It is broadly accepted that the kind of measures
that will be undertaken by countries around the world to achieve their Kyoto
targets will support the development of new sustainable energy technologies.
Although countries will look to shorter term renewable energy solutions for new
generating capacity  specifically wind and solar power which are already
commercialized to a degree  it is expected that the future prospects for
hydrogen and fuel cell technologies will be enhanced by the Kyoto Accord.  This is largely because hydrogen technologies
are very compatible with these other renewable power technologies, resulting in
a more reliable energy system than the intermittency of solar or wind power
technologies support on their own.  Also,
hydrogen and fuel cell technologies are positioned to open new transportation
markets for renewable energies, such as wind and solar, as these technologies
can be used to make hydrogen through electrolysis, which can then be used in
hydrogen-powered vehicles.  The result,
virtually zero-emission well to-wheels mobility, could be a central element
in the longer-term Kyoto platform of many countries.  United States  The United States has
recently been an outspoken advocate of hydrogen as a replacement for fossil
fuels on the grounds of energy security and protection of the environment.  President Bush has proposed a total of $1.7 billion
in funding over the next five years for the hydrogen fuel initiative and
FreedomCAR, a government-industry program for the advancement of high
efficiency vehicles.  As part of that
spending, the U.S. Department of Energy unveiled its Hydrogen Program plan
for the development and commercialization of hydrogen, a $720 million,
five-year program focused on hydrogen fueling infrastructure.  California Governor Arnold
Schwarzenegger has included hydrogen as a major part of his environmental
recovery plan, committing during his election campaign to build hydrogen
highways which will ensure the availability of hydrogen fueling stations on
Californias major interstate highways.  
On April 20, 2004, Governor Schwarzenegger signed an Executive
Order creating the California Hydrogen Highways Network, a public and private
partnership with the objective of building a California hydrogen highway by
2010 in order to speed the transition to a hydrogen economy in California.  The plan is ambitious and work is underway to
assess the number of hydrogen filling stations that will be commissioned as
part of this initiative.  Other U.S. states
have initiated or are contemplating their own hydrogen and/or fuel cell
development, commercialization or demonstration initiatives,
including Florida, New York, Illinois, Ohio, Connecticut, New Mexico,
North Dakota, Hawaii and Texas.  In July 2002, California
became the first state to regulate automotive GHG emissions with the signing of
a landmark law that mandates the California Air Resources Board to develop
regulations to limit CO2 and GHG emissions of vehicles in the
state.  The real significance of thisis that other states, for example New
York, New Jersey and Michigan, have indicated their intention to follow suit if
the California bill is successfully implemented. This critical mass of American
vehicle ownership could sway automotive companies to adopt a more aggressive
timeline for their low-to-zero vehicle emission targets.  In August 2003, an
estimated 50 million people in the north-eastern United States and Ontario went
without power for up to 4 days, due to a series of grid failures that
precipitated the largest power outage in North American history.  Subsequently, the President of the United
States and Prime Minister of Canada jointly commissioned the US-Canada Power
System Outage Task Force, which delivered its final report in April 2004.  The Task Forces report included a total of
46 recommendations covering systems reliability, generation capacities and grid
robustness  all  24


critical issues to ensure a
similar event does not happen again and that North America continues to enjoy
uninterrupted electricity supply.  In the
United States alone, approximately 400,000 megawatts of new electricity
generating capacity is forecast to be needed by 2020 to meet growing demand and
to replace retiring units from its current installed electricity-generating
base of approximately 900,000 megawatts. 
The existing electricity transmission and distribution grid is already overburdened
in a number of regions.  By locating the
power generation close to where the power is used, known as distributed
generation, it is possible to bypass the overloaded transmission and
distribution grid.  As hydrogen and fuel
cell technologies are well suited to a distributed generation model this
potentially provides an emerging opportunity for hydrogen fuel cells and H2ICE
powered generators to provide stationary generating capacity.  Canada  In October 2003, as part of
its CDN$1 billion Climate Change Action Plan, the Government of Canada
announced a CDN$215 million investment in hydrogen technologies, with
three strategic priorities: (i) early adoption of hydrogen technologies
through integrated demonstration projects undertaken by partnerships that will
showcase a working model of the hydrogen economy in real-world settings; (ii) improved
performance and reduced costs of hydrogen technologies, and extension of
Canadian leadership through research and development of innovative new
applications in strategic areas of the hydrogen value chain; and (iii) initiatives
to establish a hydrogen infrastructure.  To facilitate this investment,
the funding announcement was accompanied by the unveiling of a new program to
establish high-impact demonstration projects across the country.  The Hydrogen Early Adopters program is a
CDN$85 million fund dedicated to removing the barriers to the hydrogen
economy, including the development of hydrogen infrastructures.  Our understanding is that the Government of Canada
is mobilizing a revised Kyoto Plan that will be unveiled in the coming
months.  This new plan is expected to
result in significant program additions and adjustments, some of which may have
positive impacts on the hydrogen and fuel cell industry.  The Governments budget announcement on February 23,
2005 started to lay the fiscal groundwork for this plan which is expected to
draw on uncommitted Climate Change funds as well as a considerable portion of
the CDN$2.6 billion of the net proceeds from the Governments disposition of
its equity stake in Petro-Canada.  Of
interest in the hydrogen and fuel cell sector is aPartnership
Fund of CDN$250 million over five years that, among other things, will target
investment in large strategic projects like the east-west electricity
transmission grid to improve access for renewable and distributed energy
technologies.  Also announced isa Clean Fund
of CDN$1 billion over five years that will purchase domestic and international
carbon credits, as well as make direct investments in projects generating short
and long-term greenhouse gas reductions. 
The fiscal 2006 Budget notes that installation of green power sources,
such as fuel cells (and others) could apply to this Clean Fund.  In 2001, PricewaterhouseCoopers LLP was retained
by Fuel Cells Canada to undertake an independent study of the economic
rationale and direction for continued participation by Canadian governments in
the fuel cell industry.  The study sought
to stimulate discussion about the future of the Canadian fuel cell industry,
what it would take for Canadian companies to remain competitive and how
government and industry can work together. 
The resulting June 2002 report by Fuel Cells Canada and
PricewaterhouseCoopers entitled Fuel Cells  The Opportunity for Canada
projected that global demand for fuel cells could reach $46 billion in
2011.  In 2004, the Government of Canada,
PricewaterhouseCoopers and Fuel Cells Canada again collaborated to produce an
updated Canadian Hydrogen and Fuel Cell Sector Profile 2004.  This updated report concluded that the sector
showed strong growth in Canada in many key indicators for the 2002-2003 period,
including revenue, research and development expenditures, participation in
demonstration projects and patent holdings. 
It acknowledged that international competition is growing as industry
and governments in other jurisdictions become increasingly involved in focused
demonstration projects.  European
Union (EU)  Many EU countries have been
among the most active worldwide in developing the technologies and concepts
that would underlie any transition to a hydrogen economy.  The EUs goals are the reduction of negative
environmental  25


impacts of energy use and the improved
security of energy supply.  The long-term
EU vision is to have in place an energy supply system based on renewable
energies with hydrogen and electricity as prominent energy carriers.  In October 2002, the EU
established the High-Level Group on Hydrogen to advise the EU on determining
the prospects for, and economic impact of, moving towards a sustainable energy
economy based on hydrogen and electricity and introducing fuel cells as energy
converters.  The EU also established the
European Integrated Hydrogen Project, now in its second phase, to coordinate
the establishment of key hydrogen safety codes and standards in Europe.  In November 2003, the EU
set out a 2.8 billion program for hydrogen projects until 2015.  The two main programs in this project are: (i) the
1.3 billion Hypogen program, which aims to fund a large-scale test
facility for production of hydrogen and electricity; and (ii) the
1.5 billion Hycom program, which aims to establish a limited number of
hydrogen communities around the EU, using hydrogen as a source of energy for
heat and electricity and fuel for vehicles. 
The EU announced its intention to spend the 2.8 billion during
three phases, with phase one from 2005-2007 (500 million), phase two from
2007-2012 (1.5 billion) and the last phase from 2013-2015
(800 million).  The EU has adopted an action
plan to achieve by 2020 a 20% replacement of diesel and gasoline fuels with
fuels such as natural gas and hydrogen in the road transport sector in the
current EU member states.  Japan  Japans hydrogen effort is
focused on research and development for commercializing and popularizing fuel
cell vehicles and related hydrogen infrastructure, as well as stationary fuel
cell power systems for distributed generation. 
The Japanese research and development budget for fuel cells and hydrogen
has tripled since 1995, reaching $200 million in 2002 and
$280 million in 2003.  The Japanese
government has also announced some ambitious targets for the penetration of
hydrogen fuel cells, including a target of 50,000 hydrogen fuel cell vehicles
in 2010 and 5 million in 2020.  China  China is the worlds most
populous country, yet currently it consumes only a fraction of the per capita
energy of the U.S., Canada and Europe. 
Air pollution and GHG emissions are already a significant concern in
China, whose major cities are described as having some of the worst pollution
in the world due to vehicle traffic and coal power plants.  In October 2003, China banned coal power
plants in 23 provincial capitals, including Beijing and Shanghai, and
legislated that thermo-electric plants in other regional cities must meet
environmental standards.  China also has energy security
concerns, particularly considering the rapid growth of its personal automobile
population.  Although China only began
importing oil in 1993, by 1996 it was already importing 20% of its requirements.  In 2002, China imported approximately 35% of
its oil and this number is expected to reach approximately 70% by 2025.  In response to its energy security and air
quality concerns, China is pursuing a number of renewable, hydrogen and energy-efficiency
initiatives.  The Chinese government is
drafting fuel economy and emission standards that are in accordance with EU
standards and timelines that will see implementation in Beijing and Shanghai in
2005 and nationwide in 2010.  Reportedly,
the rules may not allow corporate averaging, meaning that all vehicles
must meet the higher minimum standards, further supporting wide adoption of new
and cleaner powertrains, such as hydrogen-powered vehicles.  We believe that the recent
funding announcements, governmental policies and legislation will continue to
act as drivers for the emerging hydrogen economy in general, and for fuel cells
in particular.  The ability of fuel cells
to penetrate commercial markets will also be driven by the following factors:
increased demand for reliable, high-quality, secure energy sources and power;
deregulation in the electricity market; international emissions trading; the
desire for decreased dependence on foreign oil resources; operational benefits
of fuel cells over more traditional sources of power; concerns regarding the
environmental impact of current energy sources; and the increasing costs of
extracting and transporting fossil fuels.  26


Nevertheless, significant
technical and logistical hurdles still impede the broad commercial application
of fuel cell technology.  For example:  current
fuel cell technology does not yet have the proven reliability and durability of
many existing alternative technologies in our target markets;  the
high raw material and manufacturing costs currently associated with fuel cell
production currently make it too expensive for many commercial applications in
our target markets;  the
integration of fuel cell systems into existing appliances and infrastructure
may be difficult;  hydrogen,
in a form that can be used by fuel cells, is not as readily accessible as fuels
such as gasoline and methanol due to the lack of a hydrogen fuel cell
infrastructure,; and  the
costs of hydrocarbon fuels which are used today to produce hydrogen for fuel
cells, such as natural gas and electricity, are rising, which may impede the
growth of hydrogen-powered fuel cells as a cost-efficient alternative means of
producing energy.  27


4.             DESCRIPTION OF SHARE CAPITAL  Hydrogenics authorized capital
consists of an unlimited number of common shares and an unlimited number of
preferred shares issuable in series, of which 91,671,213 common shares and no
preferred shares were issued and outstanding as of March 24, 2005.  Each common share carries one
vote on all matters to be voted on by our shareholders.  Holders of common shares are entitled to
receive dividends as and when declared by our board of directors and to share
ratably in our remaining assets available for distribution, after payment of
liabilities, upon Hydrogenics liquidation, dissolution or winding up.  Common shares do not carry pre-emptive rights
or rights of conversion into any other securities.  All outstanding common shares are fully paid
and non-assessable.  There are no
limitations on the rights of non-resident owners of common shares to hold or
vote their shares.  Our board of directors has the
authority, without further action by the shareholders, to issue an unlimited
number of preferred shares in one or more series and in the event that
preferred shares are issued, the board also has the authority to fix the
designations, powers, preferences, privileges and relative, participating,
optional or special rights of any preferred shares including any
qualifications, limitations or restrictions. 
Special rights that may be granted to a series of preferred shares may
include dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, any or all of which may be superior to the rights
of the common shares.  Preferred share
issuances could decrease the market price of common shares and may adversely
affect the voting and other rights of the holders of common shares.  The issuance of preferred shares could also
have the effect of delaying or preventing a change in control of Hydrogenics.  5.             DIVIDENDS  We have never declared or paid
any cash dividends on our common shares. 
We currently intend to retain any future earnings to fund the
development and growth of our business and we do not anticipate paying any cash
dividends in the foreseeable future.  28


6.             MARKET FOR SECURITIES  Our common shares are listed on
the TSX under the symbol HYG and on the NASDAQ under the symbol HYGS.  TSX
  
  NASDAQ2004
  
  High (C$)
  
  Low (C$)
  
  Volume
  
  High (US$)
  
  Low (US$)
  
  VolumeJanuary
  
  9.78
  
  7.52
  
  1,844,201
  
  7.60
  
  5.65
  
  12,270,750February
  
  8.65
  
  7.24
  
  1,494,086
  
  6.50
  
  5.42
  
  8,872,100March
  
  9.05
  
  6.75
  
  1,368,057
  
  6.78
  
  5.04
  
  5,924,260April
  
  8.45
  
  6.92
  
  1,342,922
  
  6.27
  
  5.25
  
  8,858,010May
  
  7.80
  
  6.00
  
  1,104,772
  
  5.69
  
  4.34
  
  9,441,610June
  
  6.99
  
  5.55
  
  948,322
  
  5.09
  
  4.07
  
  5,377,110July
  
  6.20
  
  5.01
  
  973,525
  
  4.89
  
  3.73
  
  4,827,260August
  
  5.50
  
  4.21
  
  941,040
  
  4.15
  
  3.19
  
  4,839,140September
  
  5.79
  
  4.82
  
  742,434
  
  4.64
  
  3.75
  
  3,848,860October
  
  6.25
  
  5.21
  
  531,491
  
  4.98
  
  4.26
  
  3,285,900November
  
  6.25
  
  4.94
  
  4,370,352
  
  5.19
  
  4.09
  
  8,294,160December
  
  6.14
  
  5.54
  
  1,487,519
  
  5.20
  
  4.52
  
  6,675,110  29


7.             DIRECTORS AND OFFICERS  The following table sets forth
information with respect to our directors and executive officers as of March 24,
2005:  Name
  
  Province or State
  and Country of
  Residence
  
  Title
  
  Director or
  Executive Officer
  Since
  
  Directors Term
  of Office Expires(1)Norman M. Seagram(2)(3)(4)
  
  Ontario, Canada
  
  Chairman of the Board of
  Directors
  
  2000
  
  2008Dr. Hugo Vandenborre
  
  Kasterlee,Belgium
  
  Vice Chairman of the Board
  of Directors
  
  2005
  
  2007Frank
  Colvin
  
  Michigan,
  United States
  
  Director
  
  2001
  
  2006Peter C. Johnson(4)
  
  Ontario, Canada
  
  Director
  
  2005
  
  2007Donald J. Lowry(2)(3)
  
  Alberta, Canada
  
  Director
  
  2000
  
  2005Pierre Rivard
  
  Ontario, Canada
  
  President, Chief Executive
  Officer and Director
  
  1995
  
  2006V.
  James Sardo(3)(4)
  
  Ontario, Canada
  
  Director
  
  2003
  
  2005Andrew T.B. Stuart(2)
  
  Ontario, Canada
  
  Director
  
  2005
  
  2005Wesley
  Twiss(2)(4)
  
  Alberta,
  Canada
  
  Director
  
  2003
  
  2006Joseph Cargnelli
  
  Ontario, Canada
  
  Chief Technology Officer
  
  1996
  
  N/ALawrence E. Davis(5)
  
  Ontario, Canada
  
  Chief Financial Officer
  
  2005
  
  N/AJonathan
  Lundy
  
  Ontario, Canada
  
  President,
  Hydrogenics Power and Generation
  
  2000
  
  N/AR.
  Randall MacEwen
  
  Ontario,
  Canada
  
  Vice
  President, Corporate Development and General Counsel and Corporate Secretary
  
  2005
  
  N/AMel
  Ogmen
  
  British Columbia,
  Canada
  
  President,
  Hydrogenics Test
  
  2004
  
  N/ARobert
  Campbell
  
  Ontario,
  Canada
  
  Vice
  President, Sales and Marketing
  
  2005
  
  N/ADr. Ravi B. Gopal
  
  Ontario, Canada
  
  Vice President,
  Applications Development
  
  1998
  
  N/ACharley Pappas
  
  Ontario, Canada
  
  Vice President,
  Infrastructure Applications
  
  2000
  
  N/ABart Van Ouytsel
  
  Geel, Belgium
  
  Vice President, European
  Operations
  
  2005
  
  N/A  
 Notes: (1)Over the past three years, we have adopted a staggered term approach for
our board of directors, typically electing approximately one third of our
directors each year, with directors being elected for terms of up to three
years.  As part of the boards ongoing
review of our corporate governance practices, the board has determined to
eliminate the staggered term approach and provide that the entire board of
directors stand for election at every annual meeting, beginning with the annual
and special meeting of our shareholders to be held on May 17, 2005.  While certain of our current directors have
existing terms that expire later than this meeting, each current director has
agreed to resign immediately prior to this meeting and stand for re-election at
this meeting. (2)Member of the Audit Committee. (3)Member of the Nomination and Corporate Governance Committee. (4)Member of the Human Resources and Compensation Committee. (5)On February 21, 2005, we announced the appointment of Mr. Davis
as our Chief Financial Officer effective April 1, 2005.  Mr. Davis replaces our outgoing Chief
Financial Officer, Gary G. Brandt.  Mr. Brandt
has agreed to continue until March 31, 2005 in order to facilitate an orderly
transition, including the completion of the audited consolidated financial
statements for 2004.  As of the date of this annual information form, our
directors and senior officers, as a group, beneficially own, or exercise
control or direction over, 13,864,246
of our common shares, being 15.1%
of our outstanding common shares.  Norman M.
Seagram, Chairman of the board of directors.Mr. Seagram was
elected Chairman of our board of directors in July 2000.  Mr. Seagram was President of Sportsco
International LP from February 2001 to March 2003.  30


From September 1996 to May 1997,
Mr. Seagram was President and Chief Executive Officer of Molson Inc., a
company that he had previously served for 24 years in a variety of senior
management positions.  From October 1992
to August 1996, Mr. Seagram was Chairman and Chief Executive Officer
of Air Liquide Canada, Inc., a producer of industrial gases.  Mr. Seagram is a trustee of Trinity
College School and serves on the International Advisory Council of INSEAD,
France, and on the advisory board of the Faculty of Applied Science and
Engineering, University of Toronto.  Dr. Hugo
Vandenborre, Vice Chairman of the board of directors. Dr. Vandenborre joined our board of directors as Vice
Chairman in January 2005 in connection with our acquisition of Stuart
Energy. Dr. Vandenborre was the Chairman of the board of directors of
Stuart Energy from September 2003 to January 2005.  Prior to February 2003, Dr. Vandenborre
served as the Chairman, President and Chief Executive Officer of Vandenborre
Technologies N.V., a private company he founded in 1991.  Dr. Vandenborre is a past President of
the European Electrochemical Engineering Society and the International Hydrogen
Energy Committee.  He is a founding
member of HYNET, the European Hydrogen Energy Thematic Network.  He has served on various advisory committees
of the Commission of the European Union and in 2002 was appointed as member of
the High Level Group to advise the European Commission President, the
European Commission Vice President, who is responsible for Energy and
Transport, and the European Commission Research Commissioner on hydrogen and
fuel cells.  Dr. Vandenborre sits on the Advisory
Council of the European Commission in connection with the development of a
deployment strategy for a sustainable hydrogen economy.  He also sits on the advisory panel of Conduit
Ventures Limited, a venture capital company focused on fuel cells and related
hydrogen technologies, backed by Danfoss A/S, Johnson Matthey plc,
Mitsubishi Corp. and Shell Hydrogen.  Frank Colvin,
Director.  Mr. Colvinjoined our board of directors in November 2001.  In February 2003, Mr. Colvin
retired as Vice President of Fuel Cell Activities, General Motors.  Prior to holding that position, Mr. Colvin
held numerous senior positions at General Motors, including, most recently,
Vice President of Engineering, General Motors Europe.  At the same time, he was also responsible for
General Motors Global Alternative Propulsion Centers (GAPC), managing General
Motors fuel cell research and development at three locations in Germany,
Michigan and New York State.  Mr. Colvin
is the nominee of General Motors in connection with our strategic alliance with
General Motors.  Peter C.
Johnson,
Director.  Mr. Johnson joined our
board of directors in January 2005 in connection with our acquisition of
Stuart Energy.  Mr. Johnson served as a director of
Stuart Energy from 1998 to January 2005.  Mr. Johnson is
the President of Muirfield Advisors Inc., a mergers and acquisitions advisory
firm that he founded in March 2003.  Prior to March 2003, Mr. Johnson
was a partner at the law firm McCarthy Tétrault LLP, where he practised
corporate and commercial law since 1990.  Mr. Johnson serves as a
director of London Hydro Inc. (a local utility) and KGK Synergize Inc. (a
nutraceutical company).  Donald J.
Lowry,Director. 
Mr. Lowryjoined our
board of directors in July 2000. 
Since February 1998, Mr. Lowry has been President and Chief
Executive Officer of EPCOR Utilities Inc., an essential services utility.  From May 1997 to January 1998, Mr. Lowry
served as Chairman of Alta Telecom Inc., a telecommunications company.  From March 1993 to May 1997, Mr. Lowry
served as President and Chief Operating Officer of Telus Communications Inc., a
telecommunications company.  Mr. Lowry
is a member of the Institute of Corporate Directors.  Pierre
Rivard,President,
Chief Executive Officer and Director.  Mr. Rivardis one of our founders and has served as our
President and as a director since the inception of our fuel cell related
business in August 1995.  Mr. Rivard
has served as our Chief Executive Officer since July 2000.  From June 1994 to July 1995, Mr. Rivard
served as a research engineer with the Department of Mechanical Engineering at
the University of Toronto.  Mr. Rivard
currently serves as Chairman of Fuel Cells Canada, a director of the Canadian
Hydrogen Association and Chair of the Core Committee of the Canadian Fuel Cell
Alliance.  Mr. Rivard earned a
Masters degree in Mechanical Engineering from the University of Toronto, a
Masters degree in Business Administration from the University of Western
Ontario, and a Bachelors degree in Mechanical Engineering from the Royal
Military College of Canada.  V. James
Sardo, Director. 
Mr. Sardojoined our
board of directors in May 2003.  He has
served as the Interim President and Chief Executive Officer of Royal Group
Technologies Limited since November 2004 and as a director of Royal Group
since November 2003.  Mr. Sardo
also serves as a director of UE Waterheater Operating Trust and  31


as a trustee of Custom Direct
Income Fund.  Mr. Sardo was
President, Canadian operations, of Moore Corporation Limited, from 1999 to 2001
and President and Chief Executive Officer of SMK Speedy International, from
1997 to 1999.  Prior to 1997, Mr. Sardo
held the Chief Executive Officer position at SNE, Inc. and Amre Inc. in
the United States and the position of Chairman and Chief Executive Officer of
Firestone Canada Inc.  Mr. Sardo is
a member of the Institute of Corporate Directors.  Andrew
T.B. Stuart,
Director.  Mr. Stuart joined
our board of directors in January 2005 in connection with our acquisition
of Stuart Energy.  Mr. Stuart served as a director of Stuart
Energy from December 1998 to January 2005, as its Vice-Chairman from June 2001
to January 2005 and as its President and Chief Executive Officer between
1999 and July 2001.  He also served
as President of Stuart Energy Systems Inc., one of Stuart Energys wholly owned
subsidiaries, from 1997 until July 2001. 
Mr. Stuart is currently the President and Chief Executive Officer
of Sustainability Shift Inc., a private advisory, business development and
investment firm that he founded in 2003. 
He is also the President and Chief Executive Officer of Alchemix Energy
Corporation, a joint company of Sustainability Shift Development Corporation
and Alchemix Corporation that develops large scale, carbon-based energy
conversion systems.   Mr. Stuart is
Chairman of Learning for a Sustainable Future, a pan-Canadian not-for-profit
organization supporting youth and educators in sustainable development
education.  He is a part of the Member
Council of Sustainable Development Technology Canada, a $350 million foundation
established by the Canadian Government to grant funds for clean technology
development.  He is an advisor to The
Quantum Leap Company, an energy and efficiency focused advisory and fund
management company.  He is also a member
of the board of directors of Dynetek Industries Ltd., a leading manufacturer of
high pressure vehicle storage cylinders for hydrogen and other gases.  Wesley Twiss,
Director.  Mr. Twissjoined our board of directors in February 2003.  Mr. Twiss has over 35 years of energy
industry experience, including 13 years as the senior financial officer of two
major Canadian companies.  Mr. Twiss
was the Executive Vice President and Chief Financial Officer for PanCanadian
Energy Corporation from October 2000 until April 2002 and was
Executive Vice President and Chief Financial Officer of Petro-Canada from 1998
through 2000.  Mr. Twiss is a
director of Canadian Oil Sands Limited, Keyera Energy Management Limited and
EPCOR, and is a trustee of Enbridge Commercial Trust.  Mr. Twiss is a member of the Institute
of Corporate Directors.  Joseph
Cargnelli,Chief Technology Officer.  Mr. Cargnelli is one of our
founders.  He served as our Treasurer
from January 1996 until July 2000 and as a director from January 1996
until January 2005, when he resigned in connection with the closing of the
Stuart Energy acquisition.  Mr. Cargnelli
was appointed as our Vice President, Technology in July 2000.  His title was changed to Chief Technology
Officer in April 2003.  Mr. Cargnelli
earned both a Masters of Applied Science degree in Mechanical Engineering and a
Bachelor of Applied Science degree in Mechanical Engineering from the
University of Toronto.  Mr. Cargnelli
is a member of the Professional Engineers of Ontario.  Lawrence E. Davis,
Chief Financial Officer.  Mr. Davis has
been hired as our Chief Financial Officer effective April 1, 2005.  Mr. Davis has over 20 years of financial
and operational experience.  He has been
a Chartered Accountant since 1987.  From
1999 to 2003, Mr. Davis was the Chief Financial Officer of GDI Global Data
Inc., a wireless data services company.  Mr. Davis
also acted as the President of Saturn Capital Corporation, a merchant bank that
advises, invests in and assumes senior management positions for high growth
businesses from 1997 until 1999.  From
1987 to 1997, Mr. Davis served as a Vice President for PricewaterhouseCoopers
LLP for 10 years and previously worked for two years with Ernst &
Young.  Jonathan
Lundy, President, Hydrogenics Power and Generation.  Mr. Lundyjoined
us in October 2000 as our Vice President, Corporate Affairs and Corporate
Secretary.  His title was changed to Vice
President, General Counsel and Corporate Secretary in April 2003 and,
following our acquisition of Stuart Energy, Mr. Lundy was promoted to President,
Hydrogenics Power and Generation.  From August 1998
to October 2000, Mr. Lundy was employed at Osler, Hoskin &
Harcourt LLP where he practiced corporate and securities law.  Mr. Lundy earned a Bachelor of Laws
degree and a Bachelor of Arts degree from the University of Western Ontario.  R. Randall
MacEwen, Vice
President, Corporate Development, General Counsel and Corporate
Secretary.  Mr. MacEwen has served as our Vice
President, Corporate Development, General Counsel and Corporate Secretary  32


since
the acquisition of Stuart Energy in January 2005.  Prior to the acquisition, Mr. MacEwen
acted as Stuart Energys Vice President, Corporate Development and General
Counsel since October 2001 and as its Corporate Secretary since September 2000.  Prior to joining Stuart Energy, Mr. MacEwen
practiced corporate and securities law as a corporate associate with Torys LLP,
a leading North American business law firm, where he specialized in mergers and
acquisitions and corporate finance.  Mr. MacEwen
is a former member of the board of directors of Fuel Cells Canada, of the Core
Team of the Canadian Transportation Fuel Cell Alliance, and of the board of
directors of the U.S. National Hydrogen Association.  Mr. MacEwen holds Bachelor of Arts (Hon.)
and Bachelor of Laws degrees from York University and the University of Western
Ontario, respectively.  Dr. Mel
Ogmen, President, Hydrogenics Test.  Mr. Ogmen joined us in the summer of 2004 as Vice President,
Operations of Greenlight.  In January 2005,
Mr. Ogmen was promoted to President, Hydrogenics Test. His former career,
spanning 17 years, was with Powerlasers, a developer and manufacturer of unique
laser welding technology for major automotive OEMs. Under his leadership,
Powerlasers grew from an entrepreneurial initiative to a full-fledged operation
with world-class accounts, which is today under Dofasco ownership. Mel received
his Bachelor of Science in Physics at Nottingham University in England, his Masters
of Science (Physics) from the University of Manitoba and his Ph.D. (Physics)
from York University in Toronto.  Robert W.
Campbell, P.Eng.,
Vice President, Sales and Marketing.  Mr. Campbell
has served as our Vice President, Sales and Marketing since the Stuart Energy
acquisition in January 2005.  Prior
to the acquisition, he held the same position at Stuart Energy since February 2003.  From November 2001 to February 2003,
Mr. Campbell served as Stuart Energys Vice President and General Manager,
Industrial.  Prior to joining Stuart
Energy, Mr. Campbell was Vice President, Marketing at Skyjack Inc. (a
manufacturer of aerial work platforms) from 2000-2001.  Mr. Campbell holds Bachelor of Science (Engineering)
and Masters of Business Administration degrees from Queens University and York
University, Schulich School of Business, respectively.  Dr. Ravi
B. Gopal, Vice President, Applications
Development.  Dr. Gopal joined us in
May 1998 and was appointed Vice President of Engineering, Electronics and
Controls in June 1999.  His title
was changed to Vice President Systems and Applications Engineering in November 2001.  Dr. Gopal was employed by the University
of Quebec, Trois-Rivieres as a Post-Doctoral Fellow from October 1991 to May 1994,
a Research Associate from June 1994 to May 1998 and as a member of
the teaching faculty from January to May 1998.  Dr. Gopal received his Ph.D. from the
Indian Institute of Science.  Charley
Pappas, P.Eng., Vice President, Infrastructure
Applications.  Mr. Pappasjoined us in April 2000 as our Director of Engineering
Operations and was appointed Vice President of Operations in September 2000.  His title was changed to Vice President,
Infrastructure Applications in April 2003. 
From October 1992 to April 2000, Mr. Pappas was employed
with Stuart Energy, where he served as Senior Design Engineer from 1992 to
1994, and Vice-President of Engineering from 1994 to 1999.  From 1991 to 1992, Mr. Pappas was
President and Project Manager with Phalanx Engineering Inc., an engineering
consultant to the industrial gas business. 
From 1981 to 1991, Mr. Pappas was employed by Union Carbide Canada
Limited in a number of positions.  Mr. Pappas
is a Member of the Professional Engineers of Ontario.  Bart
Van Ouytsel,
Vice President, European Operations.  Mr. Van Ouytsel has served as our Vice
President, European Operations since the Stuart Energy acquisition in January 2005.  Prior to the acquisition, he held was Vice
President & General Manager, European Operations at Stuart Energy
since February 2003.  From May 2000
to February 28, 2003, Mr. Van Ouytsel served as the Chief Operating
Officer for Vandenborre Hydrogen Systems N.V. 
From 1994 to May 2000, Mr. Van Ouytsel served as the European
President and Managing Director of Illinois-based Pentair Corporation.  Mr. Van Ouytsel holds a graduate degree
in electronic engineering and graduated from the Vlerick Leuven Ghent
Management University in Advanced Management.  As of the date of this annual
information form, each director is elected annually to serve for terms of up to
three years or until his successor is elected or appointed.  Officers are appointed by our board of
directors and hold office until their successors are appointed, subject to
resignation, retirement or removal by our board of directors.  33


8.             INTEREST OF MANAGEMENT AND
OTHERS IN MATERIAL TRANSACTIONS  Transactions with Viking
Engineering & Tool Co.  We subcontract some
manufacturing in the normal course of our operations to Viking Engineering &
Tool Co., a company owned by the father and uncle of Joseph Cargnelli, our
Chief Technology Officer and one or our principal shareholders.  For the fiscal year ended December 31,
2004, this company invoiced us approximately $1.8million. 
We believe that the rates this company has charged us for its services
are comparable to rates we could have obtained from an unrelated third party.  Transactions with General Motors
Corporation  In October 2001, we formed
a strategic alliance with General Motors to accelerate the development of fuel
cell technology into global commercial markets. 
In connection with this strategic alliance, we issued to General Motors
approximately 11.4 million of our common shares, or approximately 21% of our
outstanding shares at October 2001, and warrants to purchase approximately
2.5 million additional shares.  The
warrants were placed in escrow upon closing of the transaction and are released
at a rate of 61,761 warrants per month over 40 months.  Each warrant is exercisable at an exercise
price of $4.00 per share upon release from escrow.  The warrants expire on October 16,
2006.  The shares issued, and issuable
upon the exercise of the warrants, are subject to certain restrictions on
transfer.  In addition, we have granted
General Motors certain registration rights in connection with its shares and
the shares issuable upon the exercise of the warrants.  We have agreed that one director nominated by
General Motors shall be included in the slate of directors that is presented to
shareholders for approval at our general meeting.  In connection with the strategic
alliance, General Motors granted us a non-exclusive, royalty-free license to
use certain of General Motors proprietary fuel cell stack intellectual
property in certain applications and modules. 
The use or incorporation of General Motors fuel stack intellectual
property outside these defined areas requires the consent of General
Motors.  We granted to General Motors,
its affiliates and any third parties with whom General Motors has a technical
or business relationship related to fuel cells a perpetual, royalty-free,
non-exclusive license to use all of the intellectual property we develop that (i) uses
General Motors proprietary fuel cell stack intellectual property and/or (ii) is
funded by General Motors.  Intellectual
property that is not funded by General Motors, but which uses General Motors
fuel cell stack technology is licensed to General Motors non-exclusively.  Intellectual property that has been developed
through funding by General Motors, whether owned solely by us or jointly by us
and General Motors, is licensed to General Motors on an exclusive basis for
mobile applications and on a non- exclusive basis for all other applications.  In the event that we wish to liquidate or
discontinue activity in the fuel cell business, or otherwise wish to transfer
any of the intellectual property associated with General Motors proprietary
fuel cell stack intellectual property developed using funds from General Motors,
we are required to offer it first to General Motors.  We have also agreed to provide General Motors
with certain services, access to technology and testing resources in connection
with its fuel cell development program and we have agreed that all products,
material hardware and resources purchased from us by General Motors will be at
our most favorable commercial prices.  For so long as General Motors
holds at least 10% of our outstanding shares, in the event that any of our
founders, Pierre Rivard, Joseph Cargnelli or Boyd Taylor, wish to transfer (i) all
or substantially all of their shares to any person, or (ii) any of their
shares to a person actively competing with General Motors in the automotive or
fuel cell industry, he must first offer the shares to General Motors.  In addition, in the event that we issue
additional equity securities or securities convertible into equity securities
for cash consideration, we have granted General Motors the right to participate
in such offering on a pro rata basis based on the fully-diluted number of
common shares that it holds.  General
Motors pre-emptive right is subject to certain limited exceptions, including
the issuance of shares in connection with acquisitions.  Other than as described above, prior to October 16,
2005, General Motors is prohibited from acquiring any additional equity
securities.  34


9.             RISK FACTORS  An investment in
our common shares involves risk. 
Investors should carefully consider the risks described below and the
other information contained in, and incorporated into, this annual information
form, including managements discussion and analysis and our financial
statements for the year ended December 31, 2004.  The risks described below are not the only
ones we face.  Additional risks and
uncertainties, including those that we do not know about now or that we
currently deem immaterial, may also adversely affect our business.  Risk Factors Related To Our
Financial Condition  We have a limited operating
history, and because our mix of revenues in the recent past does not reflect
our current business strategy, it may be difficult to assess our business and
future prospects.  We commenced operations
of our fuel cell test business in 1996, and since that time, we have been
engaged principally in the manufacture and sale of fuel cell test and
diagnostic equipment, the provision of related engineering and testing
services, and research and development relating to fuel cell systems and
subsystems.  For the year ended December 31,
2004, we derived $11.1million,
or 66%, of our revenues from
sales of fuel cell test equipment and services; $5.6 million from sales of
power products including: $1.8 million,
or 11%, from the provision
of engineering services to General Motors; and $3.8million, or 23%,
from sales or lease of fuel cell power products.  For the year ended December 31, 2003, we
derived $20.7 million, or 77%, of our revenues from sales of fuel cell
test equipment and services; $6.0 million from sales of power products
including: $3.7 million, or 14%, from the provision of engineering
services to General Motors; and $2.3 million, or 9%, from sales or lease
of fuel cell power products.  For the
year ended December 31, 2002, we derived $5.6 million, or 35%, for
our revenues from sales of fuel cell test equipment and services; $10.3 million
from sales of power products including: $5.8 million, or 37%, from the
provision of engineering services to General Motors, and $4.5 million, or
28%, from sales or leases of fuel cell power products and related services.Our current business
strategy is to use the experience we have gained in the fuel cell test
equipment and service business to develop, manufacture and sell fuel cell power
products in larger quantities.  In
addition, following the acquisition of Stuart Energy, a significant part of our
business now relates to hydrogen generation products.  Because we have made limited sales of fuel
cell power products to date and have added a new revenue stream to our power
products segment, our historical operating data may be of limited value in
evaluating our future prospects.  Because we expect to
continue to incur net losses, we may not be able to implement our business
strategy, and the price of our common shares may decline.  We have not generated any positive net income since
the initial public offering of our shares in November 2000.  Our current business strategy is to develop a
portfolio of hydrogen and fuel cell products with market leadership positions
for each product.  In so doing, we will
continue to incur significant expenditures for general administrative
activities, including sales and marketing and research and development
activities.  As a result of these costs,
we will need to generate and sustain significantly higher revenues and positive
gross margins to achieve and sustain profitability.  We incurred a net loss of $33.5 million for the year
ended December 31, 2004 and a net loss of $22.1 million for the year
ended December 31, 2003.  Our
accumulated deficit as of December 31, 2004 was $81.0 million and as of December 31, 2003
was $47.4 million.  In January 2005,
we acquired Stuart Energy.  Stuart Energy
incurred a net loss of $16.6 million
for the nine months ended September 30, 2004 and a net loss of $26.9
million for the year twelve months December 31, 2003.  During that period, Stuart Energy never had a
profitable quarter.  We expect to incur significant operating expenses over
the next several years.  As a result, we
expect to incur further losses in 2005 and for the foreseeable future, and we
may never achieve profitability. 
Accordingly, we may not be able to implement our business strategy, and
the price of our common shares may decline.  Our quarterly operating
results are likely to fluctuate significantly and may fail to meet the
expectations of securities analysts and investors, and cause the price of our
common shares to decline.  35


Our quarterly revenues and operating results
have varied significantly in the past and are likely to vary in the
future.  These quarterly fluctuations in
our operating performance result from the length of time between our first
contact with a customer and the recognition of revenue from sales to that
customer.  Our products are
highly-engineered and expensive to produce and many are still in development
stages; therefore, the length of time between approaching a customer and
delivering our products to that customer can span quarterly periods.In many cases, a customers decision to buy
our products and services may require the customer to change its established
business practices and to conduct its business in new ways.  As a result, we must educate customers on the
use and benefits of our products and services, which can require us to commit
significant time and resources without necessarily resulting in revenues.  Many potential customers may wish to enter
into test arrangements with us in order to use our products and services on a
trial basis.  The success of these trials
may determine whether or not the potential customer purchases our products or
services on a commercial basis. 
Potential customers may also need to obtain approval at a number of
management levels and one or more regulatory approvals, which may delay a
decision to purchase our products.  The length and variability of the sales
cycles for our products make it difficult to forecast accurately the timing and
amount of specific sales and corresponding revenue recognition.  The delay or failure to complete one or more
large sales transactions could significantly reduce our revenues for a
particular quarter and we may expend substantial funds and management effort
during our sales cycle with no assurance that we will successfully sell our
products.  As a result, our quarterly
operating results are likely to fluctuate significantly and may fail to meet
expectations of securities analysts and investors, and the price of our common
shares may decline.  We may be unable to raise
additional capital to pursue our commercialization plans and may be forced to
discontinue product development, reduce our sales and marketing efforts or
forego attractive business opportunities.  Based on our current business plan, we
believe we have sufficient cash on hand to meet our working capital and capital
expenditure needs for the next 36 months. 
After that time, we may need to raise additional funds through
financing.  Alternatively, we may need to
raise additional funds sooner if our estimates of revenues, costs and capital
expenditures change or are inaccurate. 
We may also require additional capital to acquire or invest in
complementary businesses or products or obtain the right to use complementary
technologies.  If we are unable to raise
additional capital or are unable to do so on acceptable terms, we may
not be able to respond to competitive pressures upon us or we may be prevented
from conducting all or a portion of our planned operations.  In particular, the development and
commercialization of our products could be delayed or discontinued if we are
unable to fund our research and product development activities or the
development of our manufacturing capabilities. 
In addition, we may be forced to reduce our sales and marketing efforts
or forego attractive business opportunities.  If we issue additional equity securities in
order to raise funds, the ownership percentage in our company of each of our
existing shareholders will be reduced.  Our revenue and future
prospects depend to a certain extent on our relationship with General Motors
and General Motors commitment to the commercialization of fuel cell markets.  Our largest shareholder and historically our
largest customer by revenue is General Motors, which owns approximately 12.4% of our outstanding common
shares.  General Motors accounted for 31% of our revenues for the year
ended December 31, 2004, 33% for the year ended December 31, 2003 and
61% for the year ended December 31, 2002. 
Revenue from General Motors in 2004 declined, in part, due to the
culmination of our engineering services contract in the third quarter of
2004.  Our revenue and future prospects
would be materially hurt if General Motors were to change its relationship with
us.  There is no guarantee that our
interests will continue to be aligned with the interests of General Motors and
that our relationship with General Motors will continue in its current
form.  Furthermore, any change in General
Motors strategy with respect to fuel cells, whether as a result of market,
economic or competitive pressure, could also harm our business by reducing or
eliminating a substantial portion of our revenue.  Such a change in strategy could include, for
example, any decision by General Motors to:  36


alter its commitment to fuel cell technology
in favor of other competing technologies;  delay its introduction of fuel cell products
and vehicles; or  increase the internal development of fuel
cell products or purchase them from another supplier.  In addition, where intellectual property is
developed pursuant to our use of technology licensed from General Motors, we
have committed to provide certain exclusive or non-exclusive licenses in favor
of General Motors and in some cases, the intellectual property is jointly
owned.  As a result of such licenses, we
may be limited or precluded, as the case may be, in the exploitation of such
intellectual property rights.  We currently depend upon a
relatively limited number of customers for a majority of our revenues and a decrease
in revenue from these customers could materially adversely affect our business,
financial condition and results of operations.  To date, a relatively limited number of
customers have accounted for a majority of our revenues and we expect they will
continue to do so for the foreseeable future. 
Our four largest customers, including General Motors, accounted for 67% of our revenues for the year
ended December 31, 2004, 60% for the year ended December 31, 2003 and
80% for the year ended December 31, 2002. 
The identities of some of our largest customers have changed from year
to year.  Our arrangements with these
customers are generally non-exclusive, have no volume commitments and are often
done on a purchase-order basis and we cannot be certain that customers that
have accounted for significant revenue in past periods will continue to
purchase our products and generate revenues. 
Accordingly, our revenue and results of operations may vary from period
to period.  We are also subject to credit
risk associated with the concentration of our accounts receivable from these
significant customers.  If one or more of
our significant customers were to cease doing business with us, significantly
reduce or delay its purchases from us, or fail to pay on a timely basis, our
business, financial condition and results of operations could be materially
adversely affected.  Our operating results may be
subject to currency fluctuation.  Our monetary assets and
liabilities denominated in a currency other than the U.S. dollar will give rise
to a foreign currency gain or loss reflected in earnings.  To the extent that the Canadian dollar or the
euro weakens against the U.S. dollar, we may incur net foreign exchange losses
on our net monetary asset balance which is denominated in those
currencies.  Such losses would be
included in our financial results and, consequently, may have an adverse effect
on our share price.  As we currently have operations
based in Canada and Europe, a significant portion of our expenses are in
Canadian dollars and euros.  However, a
significant part of our revenues are currently generated in U.S. dollars
and euros, and we expect that a significant portion of our revenues for the
foreseeable future will be generated in U.S. dollars and euros.  In addition, we may be required to finance
our European operations by exchanging Canadian dollars or U.S. dollars into
euros.  The exchange rates between the
Canadian dollar, the U.S. dollar and the euro are subject to day-to-day
fluctuations in the currency markets and these fluctuations in market exchange
rates are expected to continue in the future. 
Such fluctuations affect both our consolidated revenues as well as our
consolidated costs.  If the value
of the U.S. dollar weakens against the Canadian dollar or the euro, the profit
margin on our products may be reduced.Also,
changes in foreign exchange rates may affect the relative costs of operations
and prices at which we and foreign competitors sell products in the same
market.We currently have limited currency hedging through financial
instruments.  We do carry a portion of
our short-term investments in Canadian dollars and euros.  Certain external factors may
affect the value of identifiable intangible assets and goodwill, which may
require us to recognize an impairment charge.  Identifiable
intangible assets and goodwill arising from our acquisition of Greenlight in
2003 and our acquisition of Stuart Energy in 2005 comprise a substantial
portion of our total assets.  Economic,
market, legal, regulatory, competitive, customer, contractual and other factors
may affect the value of identifiable intangible assets and goodwill.  If any of these factors impair the value of
these assets, accounting rules require us to reduce their carrying  37


value and
recognize an impairment charge, which would reduce our reported assets and
earnings in the year the impairment charge is recognized.  Our insurance may not be
sufficient.  We carry
insurance that we consider adequate having regard to the nature of the risks
and costs of coverage.  We may not,
however, be able to obtain insurance against certain risks or for certain
products or other resources located from time to time in certain areas of the
world.  We are not fully insured against
all possible risks, nor are all such risks insurable.  Thus, although we maintain insurance
coverage, such coverage may not be adequate.  Risk Factors Related To Our
Business and Industry  Significant markets for fuel
cell and other hydrogen energy products may never develop or may develop more
slowly than we anticipate, which would significantly harm our revenues and may
cause us to be unable to recover the losses we have incurred and expect to
incur in the development of our products.  Significant markets may never develop for
fuel cell and other hydrogen energy products or they may develop more slowly
than we anticipate. Any such delay or failure would significantly harm our
revenues and we may be unable to recover the losses we have incurred and expect
to continue to incur in the development of our products.  In such case, we may never achieve
profitability and our business could fail. 
Fuel cell and other hydrogen energy products represent an emerging
market, and whether or not end-users will want to use them may be affected by
many factors, some of which are out of our control, including:  the emergence of more competitive
technologies and products, including other environmentally clean technologies
and products that could render our products obsolete;  the future cost of hydrogen and other fuels
used by our fuel cell systems;  the future cost of MEAs used in our fuel cell
systems;  the future cost of platinum, a key metal used
in our fuel cell systems;  the regulatory requirements of agencies,
including the development of uniform codes and standards for fuel cell
products, hydrogen refueling infrastructure and other hydrogen energy products;  government support of fuel cell technology,
hydrogen storage technology and hydrogen refueling technology;  the manufacturing and supply costs for fuel
cell components and systems;  the perceptions of consumers regarding the
safety of our products;  the willingness of consumers to try new
technologies;  the continued development and improvement of
existing power technologies; and  the future cost of fuels used in existing
technologies.  Hydrogen may not be readily
available on a cost-effective basis, in which case we may be unable to compete
with existing power sources, and our revenues and results of operations would
be materially adversely affected.  If our customers of fuel cell power products
are not able to obtain hydrogen on a cost-effective basis, we may be unable to
compete with existing power sources, and our revenues and results of operations
would be materially  38


adversely affected.  Our fuel cell products require oxygen and
hydrogen to operate.  While ambient air
typically can supply the necessary oxygen, our fuel cells rely on hydrogen
being derived from water or from fuels such as natural gas, propane, methanol
and other petroleum products.  We
manufacture and develop hydrogen generation systems called electrolysers that
use electricity to separate water into its constituent parts of hydrogen and
oxygen.  In addition, third parties are
developing systems to extract, or reform, hydrogen from fossil fuels.  Significant growth in the use of
hydrogen-powered devices, particularly in the mobile market, may require the
development of an infrastructure to deliver the hydrogen.  There is no guarantee that such an
infrastructure will be developed on a timely basis or at all.  Even if hydrogen is available for our
products, if its price is such that electricity or power produced by our systems
would cost more than electricity provided through other means, we will be
unable to compete successfully.  Changes in government
policies and regulations could hurt the market for our products.  The fuel cell and hydrogen industry is in its
development phase and is not currently subject to industry-specific government
regulations in Canada or the United States relating to matters such as design,
storage, transportation and installation of fuel cell systems and hydrogen
infrastructure products.  However, given
that the production of electrical energy has typically been an area of
significant government regulation, we expect that we will encounter industry-
specific government regulations in the future in the jurisdictions and markets
in which we operate.  For example,
regulatory approvals or permits may be required for the design, installation
and operation of stationary fuel cell systems under federal, state and
provincial regulations governing electric utilities, and mobile fuel cell
systems under federal, state and provincial emissions regulations affecting
automobile manufacturers.  To the extent
that there are delays in gaining regulatory approval, our development and
growth may be constrained.  Furthermore,
the inability of our potential customers to obtain a permit, or the
inconvenience often associated with the permit process, could harm demand for
fuel cell and other hydrogen products and, therefore, harm our business.  Our business will suffer if environmental
policies change and no longer encourage the development and growth of clean
power technologies.  The interest by
automobile manufacturers in fuel cell technology has been driven in part by
environmental laws and regulations in California and, to a lesser extent, in
New York, Massachusetts and Maine.  There
can be no guarantee that these laws and regulations will not change.  Changes in these laws and regulations could
result in automobile manufacturers abandoning their interest in fuel cell
powered vehicles.  In addition, if
current laws and regulations in these states are not kept in force or if
further environmental laws and regulations are not adopted in these
jurisdictions as well as in other jurisdictions, demand for vehicular fuel
cells may be limited.  The market for stationary and portable
energy-related products is influenced by federal, state and provincial
governmental regulations and policies concerning the electric utility
industry.  Changes in regulatory
standards or public policy could deter further investment in the research and
development of alternative energy sources, including fuel cells and fuel cell
products, and could result in a significant reduction in the potential market
demand for our products.  We cannot
predict how changing government regulation and policies regarding the electric
utility industry will affect the market for stationary and portable fuel cell
systems.  Although the development of alternative
energy sources, and in particular fuel cells, has been identified as a
significant priority by many governments, we cannot be assured that governments
will not change their priorities or that any such change would not materially
affect our revenues and business.  If
governments change their laws and regulations such that the development of
alternative energy sources is no longer required or encouraged, the demand for
alternative energy sources such as our fuel cell products may be significantly
reduced or delayed and our sales would decline.  The development of uniform
codes and standards for hydrogen-powered vehicles and related hydrogen
refueling infrastructure may not develop in a timely fashion, if at all.  Uniform codes and standards do not currently
exist for fuel cell systems, fuel cell components, H2ICEs or for the
use of hydrogen as a vehicle fuel. 
Establishment of appropriate codes and standards is a critical element
to allow fuel cell system developers, fuel cell component developers, H2ICE
developers, hydrogen infrastructure companies and hydrogen storage and handling
companies to develop products that will be accepted in the marketplace.  39


The development
of hydrogen standards is being undertaken by numerous organizations.  Given the number of organizations pursuing
hydrogen codes and standards, it is not clear whether universally accepted
codes and standards will result in a timely fashion, if at all.  We currently face and will
continue to face significant competition from other developers and
manufacturers of fuel cell power products, hydrogen generation systems and test
and diagnostic equipment.  If we are
unable to compete successfully, we could experience a loss of market share and
reduced gross margins for our existing products and a failure to achieve
acceptance of our proposed products.  In the commercial production of fuel cell
power products, we compete with a number of companies that currently have fuel
cell and fuel cell system development programs. 
We expect that several of these competitors will be able to deliver
competing products to market before we do. 
While our strategy is the development of fuel cell and hydrogen
generation technologies for sale to systems integrators, governments,
OEMs and market channel partners, many of our competitors are developing
products specifically for use in particular markets.  These competitors may be more successful in
penetrating these specific markets than we are. 
In addition, an increase in the popularity of fuel cell power in particular
market channels may cause certain of our customers to develop and produce some
or all of the fuel cell technologies that we are developing.  In our markets for hydrogen generation
systems, we compete with a number of companies that develop and manufacture
hydrogen generation products based on-site water electrolysis and/or reforming
technologies.  We also compete with
suppliers of hydrogen gas that deliver hydrogen to the customers site in tube
trailers, bottles or by pipeline.  In
many cases, these suppliers have established delivery infrastructure and
customer relationships.  We compete with a number of companies that
manufacture fuel cell test and diagnostic equipment.  In addition, most large fuel cell developers
and OEMs have some degree of internal test station development.  Because fuel cell test and diagnostic equipment
essentially acts as the balance of plant component, which regulates the type
and level of power transferred from the fuel cell or the fuel cell stack, our
customers for fuel cell test and diagnostic equipment may develop their own
internal test stations.  We also sell
fuel cell test and diagnostic equipment to companies that compete with our
efforts to develop and manufacture fuel cell power products.  This competition may negatively impact the
sales of our fuel cell test and diagnostic equipment to such companies.  Competition in
the markets for fuel cell power modules, hydrogen generation equipment and fuel
cell test stations are significant and will likely persist and intensify over
time.  We compete directly and indirectly
with a number of companies that provide products and services that are
competitive with all, some or part of our products and related services.  Many of our existing and potential competitors have greater brand name
recognition than us and their products may enjoy greater initial market
acceptance among our potential customers. 
In addition, many of these competitors have significantly greater financial,
technical, sales, marketing, distribution, service and other resources than we
have and may also be better able
to adapt quickly to customers changing demands and to changes in technology.  If we are unable
to continuously improve our products and if we cannot generate effective
responses to our competitors brand power, product innovations, pricing
strategies, marketing campaigns, strategic partnerships, distribution channels,
service network and other initiatives,our ability to gain market share or market acceptance for our products could be limited,
our revenues and our profit
margins may suffer, and our
ability to expand our business could be impaired and we may never become profitable.  In
addition, we cannot predict that if acquired we will maintain the market share or
pricing levels that we need to become and remain profitable.  We face competition for fuel
cell power products from developers and manufacturers of traditional power
technologies and other alternative power technologies.  Each of our target markets is currently
served by existing manufacturers with existing customers and suppliers.  These manufacturers use proven and widely
accepted traditional technologies such as internal combustion engines and
turbines, as well as coal, oil and nuclear powered generators. Additionally,
there are competitors working on developing technologies including other types
of fuel cells and other alternative power technologies, advanced batteries and
hybrid battery/internal combustion engines, which may compete for our target
customers.  Given that  40


PEM fuel cells have the potential to replace
these existing power sources, competition in our target markets will also come
from these traditional power technologies, from improvements to traditional
power technologies and from new alternative power technologies, including other
types of fuel cells.  Demand for fuel
cell test and diagnostic equipment is dependent on continued efforts to
commercialize hydrogen-based fuel cell power technologies.  If we are unable
to continuously improve our products and if we cannot generate effective
responses to our competitors brand power, product innovations, pricing
strategies, marketing campaigns, strategic partnerships, distribution channels,
service network and other initiatives,our ability to gain market share or market acceptance for our products could be limited,
our revenues and our profit
margins may suffer, and our
ability to expand our business could be impaired and we may never become profitable.  In
addition, we cannot predict that if acquired we will maintain the market share or
pricing levels that we need to become and remain profitable.  Our strategy for the sale of
fuel cell power products depends upon developing strategic partnerships with
governments and systems integrators, OEMs, suppliers and other market channel
partners who will incorporate our products into theirs.  Other than with respect to a limited number
of specific markets, our strategy is to develop and manufacture products and
systems for sale to governments and systems integrators, OEMs, suppliers and
other market channel partners that have mature sales and distribution networks
for their products.Our success
may be heavily dependent upon our ability to establish and maintain
relationships with these strategic partners who will integrate our fuel cell products into their products and on
our ability to find partners who are willing to assume some of the
developmental and research costs and risk associated with our technologies and
products.  Our performance may as
a result depend on the success of other companies, and there are no assurances
of their success.  We can offer no guarantee that governments
and systems integrators, OEMs, suppliers and other market channel partners will
manufacture appropriate products or, if they do manufacture such products, that
they will choose to use our products as components.  The end products into which our fuel cell
technology will be incorporated will be complex appliances comprising many
components and any problems encountered by such third parties in designing,
manufacturing or marketing their products, whether or not related to the
incorporation of our fuel cell products, could delay sales of our products and
adversely affect our financial results. 
Our ability to sell our products to the OEM markets depends to a
significant extent upon our strategic partners worldwide sales and
distribution network and service capabilities. 
In addition, certain of our agreements with customers and strategic
partners require that we provide for shared intellectual property rights in certain
situations, and there can be no assurance that any future strategic
relationships that we enter into will not require us to share some of our
intellectual property.  Any change in the
fuel cell, hydrogen or alternative fuel strategies of one of our strategic
partners could have a material adverse effect on our business and future
prospects.  In addition, in some cases, our
strategic relationships are governed by a non-binding memorandum of
understanding or a letter of intent.  We
cannot assure you that we will be able to successfully negotiate and execute
definitive agreements with any of these partners, and failure to do so may
effectively terminate the relevant relationship.  We also have relationships with third-party
distributors who also indirectly compete with us.  For example, we have targeted industrial gas
suppliers as distributors of our hydrogen generators.  Because industrial gas suppliers currently
sell hydrogen in delivered form, adoption by their customers of our hydrogen
generation products could cause them to experience declining demand for
delivered hydrogen.  For this reason,
industrial gas suppliers may be reluctant to become distributors of our
hydrogen generators.  In addition, our
third-party distributors may require us to provide volume price discounts and
other allowances, or customize our products, either of which could reduce the
potential profitability of these relationships.  We are dependent upon third
party suppliers for key materials and components for our products.  If these suppliers become unable or unwilling
to provide us with sufficient materials and components on a timely and
cost-effective basis, we may be unable to manufacture our products
cost-effectively or at all, and our revenues and gross margins would suffer.  We rely upon third party suppliers to provide
key materials and components for our fuel cell power products, hydrogen
generation products and fuel cell test equipment.  A suppliers failure to provide materials or
components in a timely manner, or to provide materials and components that meet
our quality, quantity or cost requirements, or  41


our inability to obtain substitute sources
for these materials and components in a timely manner or on terms acceptable to
us, may harm our ability to manufacture our products cost-effectively or at
all, and our revenues and gross margins might suffer.  To the extent that we are unable to develop
and patent our own technology and manufacturing processes, and to the extent
that the processes which our suppliers use to manufacture the materials and
components are proprietary, we may be unable to obtain comparable materials or
components from alternative suppliers, and that could adversely affect our
ability to produce commercially viable products.  We will need to recruit,
train and retain key management and other qualified personnel to successfully
expand our business.  Our future success will depend in large part
upon our ability to recruit and retain experienced research and development,
engineering, manufacturing, operating, sales and marketing, customer service
and management personnel.  We compete in
a new market and there are a limited number of people with the appropriate
combination of skills needed to provide the services that our customers
require.  In the past, we have
experienced difficulty in recruiting qualified personnel and we expect to
experience continued difficulties in personnel recruiting.  If we do not attract such personnel, we may
not be able to expand our business.  In
addition, new employees generally require substantial training, which requires
significant resources and management attention. 
Our success also depends upon retaining our key management, research,
product development, engineering, marketing and manufacturing personnel.   Even if we invest significant resources to
recruit, train and retain qualified personnel, we may not be successful in our
efforts.  We may not be able to manage
successfully the expansion of our operations.  The pace of our expansion in facilities,
staff and operations has placed significant demands on our managerial,
technical, financial and other resources. 
We will be required to make significant investments in our engineering
and logistics systems and our financial and management information systems, as
well as retaining, motivating and effectively managing our employees.  Our management skills and systems currently
in place may not enable us to implement our strategy or to attract and retain
skilled management, engineering and production personnel.  Our failure to manage our growth effectively
or to implement our strategy in a timely manner may significantly harm our
ability to achieve profitability.  If we do not properly manage
foreign sales and operations, our business could suffer.  We expect that a
substantial portion of our future revenues will be derived from foreign
sales.  Our international activities may
be subject to inherent risks, including regulatory limitations restricting or
prohibiting the provision of our products and services, unexpected changes in
regulatory requirements, tariffs, customs, duties and other trade barriers,
difficulties in staffing and managing foreign operations, longer payment
cycles, problems in collecting accounts receivable, fluctuations in currency exchange
rates, foreign exchange controls that restrict or prohibit repatriation of
funds, technology export and import restrictions or prohibitions, delays from
customs brokers or government agencies, seasonal reductions in business
activity and potentially adverse tax consequences resulting from operating in
multiple jurisdictions.  As a result,if we do not properly manage foreign sales
and operations, our business could suffer.  We may acquire technologies
or companies in the future, and these acquisitions could disrupt our business
and dilute our shareholders interests in us.  In January 2005, we completed the
acquisition of Stuart Energy.  We cannot
assure you that we will be able to successfully complete the integration of
Stuart Energy into our operations or that the cost savings or synergies we
anticipate will be fully realized.  Our
failure to effectively integrate Stuart Energy into our operations or achieve
cost savings and synergies could have a material adverse effect on our business
and financial condition.  We may acquire additional technologies or
other companies in the future.  Entering
into an acquisition or investment entails many risks, any of which could
materially harm our business, including:  diversion of managements attention from other
business concerns;  42


failure to effectively assimilate the
acquired technology, employees or other assets of the company into our
business;  the loss of key employees from either our
current business or the acquired business; and  assumption of significant liabilities of the
acquired company.  If we complete additional acquisitions, we
may dilute your interest in us.  In
addition,achieving the
expected returns and synergies from our past and future acquisitions will
depend in part upon our ability to integrate the products and services,
technologies, research and development programs, operations, sales and
marketing functions, finance, accounting and administrative functions, and
other personnel of these businesses into our business in an efficient and
effective manner.  We cannot assure you
that we will be able to do so or that acquired businesses will perform at
anticipated levels.  If we are unable to
successfully integrate acquired businesses, our anticipated revenues may be
lower and our operational costs may be higher.  We have no experience
manufacturing our products on a large scale basis, and if we do not develop
adequate manufacturing processes and capabilities to do so in a timely manner, we
will be unable to achieve our growth and profitability objectives.  We have manufactured only a limited number of
products for prototypes and initial sales, and we have no experience
manufacturing products on a large scale. 
In order to produce certain of our products at affordable prices we will
have to manufacture a large volume of such products.  We do not know whether or when we will be
able to develop efficient, low-cost manufacturing capabilities and processes
that will enable us to meet the quality, price, engineering, design and
production standards or production volumes required to successfully mass market
such products.  Even if we are successful
in developing our manufacturing capabilities and processes, we do not know
whether we will do so in time to meet our product commercialization schedule or
to satisfy the requirements of our customers and the market.  Our failure to develop these manufacturing
processes and capabilities in a timely manner could prevent us from achieving
our growth and profitability objectives.  Risk Factors Related To Our
Products and Technology  We may never complete the
development of commercially viable fuel cell power products and/or commercially
viable hydrogen generation systems for new hydrogen energy applications, and if
we fail to do so, we will not be able to meet our business and growth
objectives.  We have made commercial sales of fuel cell
test and diagnostic equipment, generally on a purchase order basis, since our
inception, and have only been engaged in the development of fuel cells, fuel
cell power modules, integrated fuel cell systems and hydrogen refueling
stations for a short period of time. 
Because our business and industry are still in the developmental stage,
we do not know when or whether we will successfully complete research and
development of commercially viable fuel cell power products and commercially
viable hydrogen generation equipment for new hydrogen energy applications.  If we do not complete the development of such
commercially viable products, we will be unable to meet our business and growth
objectives.  We expect to face unforeseen
challenges, expenses and difficulties as a developing company seeking to
design, develop and manufacture new products in each of our targeted
markets.  Our future success also depends
upon our ability to effectively market fuel cell products and hydrogen
generation products once developed.  We must lower the cost of
our fuel cell products and hydrogen generation products and demonstrate their
reliability, or consumers will be unlikely to purchase our products and we will
therefore not generate sufficient revenues to achieve and sustain
profitability.  Fuel cells currently cost more than many
established competing technologies, such as internal combustion engines and
batteries.  The price of fuel cell
products and hydrogen generation products is dependent largely upon material
and manufacturing costs.  We cannot
guarantee that we will be able to lower these costs to the level where we will
be able to produce a competitive product or that any product we produce using
lower cost materials and manufacturing processes will not suffer from lower
performance, reliability and longevity. 
If we are unable to  43


produce fuel cell products and hydrogen
generation products that are competitive with other technologies in terms of
price, performance, reliability and longevity, consumers will be unlikely to
buy our fuel cell and hydrogen generation products.  Accordingly, we would not be able to generate
sufficient revenues with positive gross margins to achieve and sustain
profitability.  Any failures or
delays in our field tests of our products could negatively affect our
customer relationships and increase our manufacturing costs.  We regularly field test
our products and we plan to continue to conduct additional field tests in the
future.  Any failures or delays in our
field tests could harm our competitive position and impair our ability to sell
our products.  Our field tests may
encounter problems and delays for a number of reasons, including the failure of
our technology, the failure of the technology of others, the failure to combine
these technologies properly, operator error and the failure to maintain and
service the test prototypes properly. 
Many of these potential problems and delays are beyond our control.  In addition, field test programs, by their
nature, may involve delays in product roll-out and modifications to product
design, as well as third party involvement. 
Any problem or perceived problem with our field tests, whether
originating from our technology, from our design, or from third parties, could
hurt our reputation and the reputation of our products and limit our
sales.  Such failures with our field
tests may negatively affect our relationships with customers, require us to
extend field testing longer than anticipated before undertaking commercial
sales, and require us to develop further our technology to account for more
failures than anticipated prior to the field tests, thereby increasing our
manufacturing costs.  The components of our
products may contain defects or errors that could negatively affect our
customer relationships and increase our development, service and warranty
costs.  Our products are complex
and must meet the stringent technical requirements of our customers.  The software and other components used in our
fuel cell and hydrogen generation products may contain undetected defects or
errors, especially when first introduced, which could result in the failure of
our products to perform, damage to our reputation, delayed or lost revenue,
product returns, diverted development resources and increased development,
service and warranty costs.  Rapid technological advances or
the adoption of new codes and standards could impair our ability to deliver our
products in a timely manner, and as a result, our revenues would suffer.  Our success
depends in large part on our ability to keep our products current and
compatible with evolving technologies and codes and standards.  Unexpected changes in technology or in codes
and standards could disrupt the development of our products and prevent us from
meeting deadlines for the delivery of products. 
If we are unable to keep pace with technological advancements and adapt
our products to new codes and standards in a timely manner, our products may
become uncompetitive or obsolete and our revenues would suffer.  We depend upon intellectual
property and our failure to protect that intellectual property could adversely
affect our future growth and success.  Failure to protect our existing intellectual
property rights may reduce our ability to prevent others from using our
technology.  We rely on a combination of
patent, trade secret, trademark and copyright laws to protect our intellectual
property.  Some of our intellectual
property is currently not covered by any patent or patent application.  Our patent protection is subject to complex
factual and legal issues that may give rise to uncertainty as to the validity,
scope and enforceability of a particular patent.  Accordingly, we cannot be assured that:  any of the United States, Canadian or other
patents owned by us or third party patents that are licensed to us will not be
invalidated, circumvented, challenged, rendered unenforceable, or licensed to
others; or  any of our pending or future patent
applications will be issued with the breadth of protection sought by us, if
issued at all.  44


In addition, effective patent, trademark,
copyright and trade secret protection may be unavailable, limited, not applied
for or unenforceable in foreign countries. 
Furthermore, although we typically retain sole ownership of the
intellectual property we develop, our strategic alliance with General Motors
provides for shared intellectual property rights in certain situations.  Where intellectual property is developed
pursuant to our use of technology licensed from General Motors, we have committed
to provide certain exclusive or non-exclusive licenses in favor of General
Motors, and in some cases, the intellectual property is jointly owned.  As a result of such licenses, we may be
limited or precluded, as the case may be, in the exploitation of such
intellectual property rights.  We have also entered into agreements with
other customers and strategic partners that involve shared intellectual
property rights.  Any development made
under these agreements will be available for future commercial use by all
parties to the agreement.  We also seek to protect our proprietary
intellectual property through contracts, including, when possible,
confidentiality agreements and inventors rights agreements with our customers
and employees.  We cannot assure you that
the parties that enter into such agreements with us will not breach them, that
we will have adequate remedies for any breach or that such persons or
institutions will not assert rights to intellectual property arising out of
these relationships.  If necessary or
desirable, we may seek licenses under the patents or other intellectual
property rights of others.  However, we
cannot assure you that we will obtain such licenses or that the terms of any
offered licenses will be acceptable to us. 
Our failure to obtain a license from a third party for intellectual
property we use in the future could cause us to incur substantial liabilities
and to suspend the manufacture, shipment of products or our use of processes
which exploit such intellectual property.  Our involvement in
intellectual property litigation could negatively affect our business.  Our future success and competitive position
depend in part upon our ability to obtain or maintain the proprietary
intellectual property used in our principal products.  Our ability to establish and maintain such a
competitive position may be achieved in part by prosecuting claims against
others who we believe are infringing our rights and by defending claims brought
by others who believe that we are infringing their rights.  Our involvement in intellectual property
litigation could result in significant expense to us, adversely affect the
sales of any products involved or the use or licensing of related intellectual
property and divert the efforts of our technical and management personnel from
their principal responsibilities, whether or not such litigation is resolved in
our favor.  If we are found to infringe
the intellectual property rights of others, we may, among other things, be
required to:  pay substantial damages;  cease the development, manufacture, use, sale
or importation of products that infringe upon the intellectual property rights
of others;  discontinue processes incorporating
infringing technology;  expend significant resources to develop or
acquire non-infringing intellectual property; or  obtain licenses to the intellectual property
which we are found to be infringing.  We cannot offer any assurance that we will
prevail in any intellectual property litigation or, if we were not to prevail
in such litigation,  that licenses to the
intellectual property that we are found to be infringing would be available on
commercially reasonable terms, if at all. 
The costs of intellectual property litigation as well as the damages,
licensing fees or royalties that we might be required to pay could have a
material adverse effect on our business and financial results.  Our products use flammable
fuels that are inherently dangerous substances and could subject us to product
liabilities.  45


Our results of operations could be materially
harmed by accidents involving either our products or those of other fuel cell
manufacturers, either because we face claims for damages or because demand for
fuel cells and fuel cell products could suffer and our sales could
decline.  Our products use hydrogen which
is typically generated from gaseous and liquid fuels, such as propane, natural
gas or methanol in a process known as reforming.  While our fuel cell products do not use these
fuels in a combustion process, natural gas, propane and other hydrocarbons are
flammable fuels that could leak and then combust if ignited by another
source.  In addition, certain of our OEM
partners and customers may experience significant product liability
claims.  As a supplier of products and
systems to these OEMs, we face an inherent business risk of exposure to product
liability claims in the event that our products, or the equipment into which
our products are incorporated, malfunction and result in personal injury or
death.  We may be named in product
liability claims even if there is no evidence that our systems or components
caused the accidents.  Product liability
claims could result in significant losses as a result of expenses incurred in
defending claims or the award of damages. 
Since our products have not yet gained widespread market acceptance, any
accidents involving our systems, those of other fuel cell products or those
used to produce hydrogen could materially impede acceptance of our products.  In addition, although our management believes
that our liability coverage is currently adequate to cover these risks, we may
be held responsible for damages beyond the scope of our insurance coverage.  Risk Factors Related To Ownership
of Our Common Shares  If at any time we qualify as
a passive foreign investment company under United States tax laws, our
shareholders may be subject to adverse tax consequences.  We would be a passive foreign investment company if
75% or more of our gross income in any year is considered passive income for
United States tax purposes.  For this
purpose, passive income generally includes interest, dividends, some types of
rents and royalties, and gains from the sale of assets that produce these types
of income.  In addition, we would be
classified as a passive foreign investment company if the average percentage of
our assets during any year that produced passive income, or that were held to
produce passive income, is at least 50%.  Based upon our current
and projected income and the market value of the common shares, we do not
expect to be a passive foreign investment company for United States federal
income tax purposes for the taxable year ending December 31, 2004.  However, since the determination of whether
we are a passive foreign investment company is based upon the composition of
our income and assets from time to time, and since the market value of our
common shares is likely to fluctuate, there can be no assurance that we will
not be considered a passive foreign investment company for any fiscal year.  If we are classified as a passive foreign
investment company, this characterization could result in adverse United States
tax consequences to our shareholders resident in the United States, including
having gain recognized on the sale of our common shares be treated as ordinary
income, that is not eligible for the lower tax rate applicable to certain
dividends and having potential punitive interest charges apply to such sales
proceeds.  United States shareholders should consult
their own United States tax advisors with respect to the United States tax
consequences of holding our common shares and annually determine whether we are
a passive foreign investment company.  A limited number of
shareholders collectively own a significant portion of our common shares and
may act, or prevent corporate actions, to the detriment of other shareholders.  A limited number of shareholders, including
our founders and General Motors, currently own a significant portion of our
outstanding common shares.  General
Motors currently owns approximately 12.4%
of our outstanding common shares.  In
addition, General Motors currently owns warrants to acquire 2,470,436 of our
common shares.  Accordingly, these
shareholders may, if they act together, exercise significant influence over all
matters requiring shareholder approval, including the election of a majority of
our directors and the determination of significant corporate actions.  This concentration could also have the effect
of delaying or preventing a change in control that could be otherwise
beneficial to our shareholders.  46


Future sales of common
shares by our principal shareholders could cause our share price to fall and
reduce the value of a shareholders investment.  If our principal shareholders, including our
founders, sell substantial amounts of our common shares in the public market,
the market price of our common shares could fall and the value of your
investment could be reduced.  The
perception among investors that these sales may occur could also produce this
effect.  Share price declines may be
exaggerated if the low trading volume of our common shares that we have
experienced to date continues.  These
factors could also make it more difficult for us to raise additional funds
through future offerings of our common shares or other securities.  Our articles of
incorporation authorize us to issue an unlimited number of common and preferred
shares, and significant issuances of common or preferred shares could dilute the
share ownership of our shareholders, deter or delay a takeover of us that our
shareholders may consider beneficial or depress the trading price of our common
shares.  Our articles of incorporation permit us to
issue an unlimited number of common and preferred shares.  If we were to issue a significant number of
common shares, it would reduce the relative voting power of previously
outstanding shares.  Such future
issuances could be at prices less than our shareholders paid for their common
shares.  If we were to issue a
significant number of common or preferred shares, these issuances could also
deter or delay an attempted acquisition of us that a shareholder may consider
beneficial, particularly in the event that we issue preferred shares with
special voting or dividend rights.  While
the rules of NASDAQ and the TSX may require us to obtain shareholder
approval of significant issuances, we would not be subject to these
requirements if we ceased, voluntarily or otherwise, to be listed on NASDAQ and
the TSX.  Significant issuances of our
common or preferred shares, or the perception that such issuances may occur,
could cause the trading price of our common shares to drop.  U.S. investors may not be
able to enforce U.S. civil liability judgments against us or our
directors, controlling persons and officers.  We are organized under the laws of Canada.  A majority of our directors, controlling
persons and officers are residents of Canada and all or a substantial portion
of their assets and substantially all of our assets are located outside of the
United States.  As a result, it may be
difficult for U.S. holders of our common shares to effect service of process on
these persons within the United States or to realize in the United States upon
judgments rendered against them.  In
addition, a shareholder should not assume that the courts of Canada (i) would
enforce judgments of U.S. courts obtained in actions against us or such persons
predicated upon the civil liability provisions of the U.S. federal securities
laws or other laws of the United States, or (ii) would enforce, in
original actions, claims against us or such persons predicated upon the U.S.
federal securities laws.  However, a Canadian court would generally enforce, in
an original action, civil liability predicated on U.S. securities laws provided
that those laws that govern the shareholders claim according to applicable
Canadian law, are proven by expert evidence, are not contrary to public policy
as the term is applied by a Canadian court or are not foreign penal laws or
laws that deal with taxation or the taking of property by a foreign government
and provided that the action is in compliance with Canadian procedural laws and
applicable Canadian legislation regarding the limitation of actions.  Also, a judgment obtained in a U.S. court
would generally be recognized by a Canadian court except where, for example:  the U.S. court where the judgment was
rendered had no jurisdiction according to applicable Canadian law;  the judgment was subject to ordinary remedy
(appeal, judicial review and any other judicial proceeding which renders the
judgment not final, conclusive or enforceable under the laws of the applicable
state) or was not final, conclusive or enforceable under the laws of the
applicable state;  the judgment was obtained by fraud or in any
manner contrary to natural justice or rendered in contravention of fundamental
principles of procedure;  47


a dispute between the same parties, based on
the same subject matter has given rise to a judgment rendered in a Canadian
court or has been decided in a third country and the judgment meets the
necessary conditions for recognition in a Canadian court;  the enforcement of the judgment of the
U.S. court was inconsistent with public policy, as the term is applied by
the Canadian court;  the judgment enforces obligations arising
from foreign penal laws or laws that deal with taxation or the taking of
property by a foreign government; or  there has not been compliance with applicable
Canadian law dealing with the limitation of actions.  Our share price is volatile
and may continue to experience significant price and volume fluctuations.  Since our common shares were initially
offered to the public in November 2000, the stock markets, particularly in
the technology and alternative energy sectors, and our share price have
experienced significant price and volume fluctuations.  Our common shares may continue to experience
volatility for reasons unrelated to our own operating performance, including:  performance of other companies in the fuel
cell or alternative energy businesses;  news announcements, securities analysts
reports and recommendations and other developments with respect to our industry
or our competitors; and  changes in general economic conditions.  You would likely receive much
less than the amount you paid for your shares if we liquidate our assets and
distribute the proceeds.  The current market price of our common shares
significantly exceeds the net tangible book value per share of our common
shares.  As a result, you would likely
receive much less than the amount paid for your shares if we liquidate our
assets and distribute the proceeds.  As of the date of this annual information
form there were 5,933,292 options to purchase our common shares and warrants to
purchase up to2,470,436common
shares outstanding.  If these securities
are exercised, our shareholders will incur substantial dilution.  A significant element in our
plan to attract and retain qualified personnel is the issuance to such persons
of options to purchase our common shares. 
As of March 24,
2005, we have issued and outstanding5,933,292
options to purchase our common shares at an average price of CDN$5.54 per
common share.  In addition, in October 2001,
we issued General Motors warrants to acquire 2,470,436 of our common shares at
a price of $4.00 per common share. 
Accordingly, to the extent that we are required to issue significant
numbers of options to our employees, and such options are exercised or, to the
extent General Motors exercises its warrants, you could experience significant
dilution.  48


10.          TRANSFER AGENTS AND REGISTRARS  The registrar and transfer agent
for our common shares in Canada is CIBC Mellon Trust Company at its principal
offices in Toronto, Ontario and the co-transfer agent and co-registrar for our
common shares in the United States is Chase Mellon Shareholders Services LLC at
its offices in New York, New York.  11.          MATERIAL CONTRACTS  Support Agreement and Lock-Up
Agreement  On November 10, 2004, we entered into a
support agreement with Stuart Energy and a lock-up agreement with Stuart Energys
directors, officers and a number of its principal shareholders in connection
with our acquisition of Stuart Energy. 
Particulars of these agreements are described under the headings Support
Agreement and Lock-Up Agreement found on pages 25 to 32 of our takeover
bid circular dated November 30, 2004, which pages are incorporated by
reference into this annual information form.  Hydrogenics Underwriting
Agreement  On January 28, 2004, we entered into an
underwriting agreement with Citigroup Global Markets Inc., National Bank
Financial Inc. and TD Securities Inc., as underwriters, and Citigroup Global
Markets Canada Inc., as sub-underwriter, pursuant to which we issued and sold
11,373,608 common shares for total net proceeds of CDN$61.6 million.  The underwriters were paid a commission of
CDN$0.4388 per common share.  Pursuant to
the underwriting agreement, Hydrogenics agrees to indemnify and hold harmless
each of the underwriters and their directors, officers, employees and agents
for any losses, claims, damages or liabilities arising out of any untrue
statement or omission of a material fact in the registration statement, the
Canadian or U.S. preliminary prospectus or the Canadian or U.S. final
prospectus.  Stuart Energy Underwriting
Agreement  On February 4, 2004, Stuart Energy entered into
an underwriting agreement with National Bank Financial Inc., CIBC World Markets
Inc. and RBC Dominion Securities Inc., pursuant to which Stuart Energy issued
and sold 8,000,000 common shares for total gross proceeds of CDN$25 million,
out of which the underwriters were paid a fee of CDN$0.18 per common
share.   In the underwriting agreement,
Stuart Energy agrees to protect, hold harmless and indemnify each of the
underwriters and their affiliates, directors, officers, employees, shareholders
and agents for any losses, claims, damages, liabilities and reasonable costs
and expenses caused by or arising out of (i) any breach or default by
Stuart Energy, (ii) any misrepresentation, untrue statement or omission of
a material fact by Stuart Energy in any of the documents filed in connection
with the offering or any order made or investigation or proceeding threatened
or instituted as a result thereof, or (iii) Stuart Energy not complying
with any securities laws.  Copies of these agreements have been filed with the
Canadian Securities Administrators and may be found on the SEDAR web site at
www.sedar.com.  12.          INTERESTS OF EXPERTS  The auditors of the Company are
PricewaterhouseCoopers LLP, Royal Trust Tower, Suite 3000, Toronto
Dominion Centre, Toronto, Ontario, M5K 1G8. 
To our knowledge, the foregoing experts do not beneficially own,
directly or indirectly, any of our outstanding securities or other property of
the Company.  49


13.          ADDITIONAL INFORMATION  Additional financial information
with respect to Hydrogenics, including remuneration and indebtedness of
directors and officers, principal holders of our securities and options to
purchase securities is contained in our information circular in respect of our
most recent annual meeting of shareholders that involved the election of
directors.  Additional financial
information is contained in our audited comparative consolidated financial
statements and our management discussion and analysis for our most recently
completed fiscal year.  Additional
information relating to Hydrogenics may be found on the SEDAR website at
www.sedar.com.  50