<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 20-F


(Mark One)

[ ] Registration statement pursuant to Section 12(b) or (g) of the Securities
Exchange Act of 1934

                                       or

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the fiscal year ended December 31, 2001

                                       or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the transition period from ________ to ________

                      Commission file number _____________

               HYDROGENICS CORPORATION - CORPORATION HYDROGENIQUE
               --------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                                     CANADA
                                     ------
                 (Jurisdiction of incorporation or organization)

           5985 MCLAUGHLIN ROAD, MISSISSAUGA, ONTARIO L5R 1B8, CANADA
           ----------------------------------------------------------
                    (Address of principal executive offices)

 Securities registered or to be registered pursuant to Section 12(b) of the Act:
                                      None

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

                           Common Shares, no par value

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act:

                           Common Shares, no par value

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:

                     47,918,446 Common Shares, no par value


<PAGE>

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         Yes     X       No
              -------        -------

         Indicate by check mark which financial statement item the registrant
has elected to follow.

         Item 17           Item 18     X
                 -------            -------

<PAGE>




                           FORWARD-LOOKING STATEMENTS

         Statements in this annual report about our future results, levels of
activity, performance, goals or achievements or other future events constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in our forward-looking statements.
These factors include, among others, those listed under "Risk Factors" or
described elsewhere in this annual report.

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

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


                                 EXCHANGE RATES

         On June 21, 2002, the noon buying rate in New York City for cable
transfers in Canadian dollars was Cdn.$1.00 equals U.S.$0.6565. The following
table sets forth, for each period presented, the high and low exchange rates,
the average of the exchange rates on the last day of each month during the
period indicated, and the exchange rates at the end of the period indicated for
one Canadian dollar expressed in U.S. dollars, based on the inverse of the noon
buying rate for cable transfers payable in Canadian dollars as certified for
customs purposes by the Federal Reserve Bank of New York.

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                   ----------------------------------------------------------------------
                                     1997            1998           1999            2000           2001
                                   -------         -------         -------        -------         -------
<S>                              <C>             <C>             <C>            <C>             <C>
End of period...............       $0.6999         $0.6504         $0.6925        $0.6669         $0.6279
Average for period..........       $0.7198         $0.6714         $0.6744        $0.6732         $0.6462
High for period.............       $0.7467         $0.7105         $0.6925        $0.6969         $0.6701
Low for period..............       $0.6945         $0.6341         $0.6535        $0.6410         $0.6248

</TABLE>

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


                 PRESENTATION OF FINANCIAL AND OTHER INFORMATION

         Unless we indicate otherwise, financial information in this annual
report has been prepared in accordance with Canadian generally accepted
accounting principles, or GAAP. Canadian GAAP differs in some significant
respects from U.S. GAAP and thus our consolidated financial statements may not
be comparable to the financial statements of U.S. companies. The principal
differences as they apply to us are summarized in note 18 of our financial
statements for the year ended December 31, 2001 included elsewhere in this
annual report.

         As at and for all periods prior to December 31, 2001, our functional
currency was the Canadian dollar. Effective December 31, 1999, we adopted the
U.S. dollar as our reporting currency and the financial information included in
this annual report for 1999 and prior years has been presented in U.S. dollars
in accordance with a translation of convenience method using the exchange rate
at December 31, 1999, as set forth in note 2 of our financial statements for the
year ended December 31, 2001. For periods subsequent to December 31, 1999,

<PAGE>

Canadian dollar amounts have been translated into U.S. dollars using the current
rate method, as set forth in note 2 of our financial statements for the year
ended December 31, 2001.

<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

PART I                                                                                                       PAGE
------                                                                                                       ----

<S>    <C>          <C>                                                                                     <C>
         ITEM 1.      Identity of Directors, Senior Management and Advisors....................................1

         ITEM 2.      Offer Statistics and Expected Timetable..................................................1

         ITEM 3.      Key Information..........................................................................1

         ITEM 4.      Information on the Company..............................................................12

         ITEM 5.      Operating and Financial Review and Prospects............................................27

         ITEM 6.      Directors, Senior Management and Employees..............................................35

         ITEM 7.      Major Shareholders and Related Party Transactions.......................................44

         ITEM 8.      Financial Information...................................................................45

         ITEM 9.      The Offer and Listing...................................................................45

         ITEM 10.     Additional Information..................................................................47

         ITEM 11.     Quantitative and Qualitative Disclosure About Market Risk...............................56

         ITEM 12.     Description of Securities Other than Equity Securities..................................56

PART II

         ITEM 13.     Defaults, Dividend Arrearages and Delinquencies.........................................56

         ITEM 14.     Material Modifications to the Rights of Security Holders and Use of Proceeds............56

PART III

         ITEM 17.     Financial Statements....................................................................59

         ITEM 18.     Financial Statements....................................................................59

         ITEM 19.     Exhibits................................................................................59


</TABLE>


                                       i
<PAGE>



                                     PART I


ITEM 1.       IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

                  A.       DIRECTORS AND SENIOR MANAGEMENT.

                           Not applicable.

                  B.       ADVISERS.

                           Not applicable.

                  C.       AUDITORS.

                           PricewaterhouseCoopers LLP
                           Suite 3000, Box 82
                           Royal Trust Tower, TD Centre
                           Toronto, Ontario
                           Canada  M5K 1G8

ITEM 2.       OFFER STATISTICS AND EXPECTED TIMETABLE.

                  Not Applicable.

ITEM 3.       KEY INFORMATION.

                  A.       SELECTED FINANCIAL DATA.

         Our consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles. These principles conform in
all material respects with U.S. generally accepted accounting principles except
as disclosed in note 18 to our consolidated financial statements for the years
ended December 31, 2000 and 2001. The following selected financial data should
be read with "Operating and Financial Review and Prospects" and our consolidated
financial statements and notes appearing elsewhere in this annual report. The
statements of operations data for the years ended December 31, 1999, 2000 and
2001, and the balance sheet data as of December 31, 2000 and 2001 are derived
from our consolidated financial statements that have been audited by
PricewaterhouseCoopers LLP, our independent auditors, which are included
elsewhere in this annual report. The statement of operations data for the years
ended December 31, 1997 and 1998 and the balance sheet data as of December 31,
1997 and 1998 are derived from our financial statements that have been audited
by PricewaterhouseCoopers LLP that are not included in this annual report.


                                       1
<PAGE>


<TABLE>
<CAPTION>

                                                     YEAR ENDED DECEMBER 31,
                                -----------------------------------------------------------------
                                   1997          1998          1999         2000           2001
                                ----------     ---------     --------      ---------     --------
                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<S>                             <C>            <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS
  DATA:
Canadian GAAP:
Revenues....................    $       97     $     665     $  2,674      $   8,883     $   7,418
Cost of Revenues............            72           415        2,105          6,485         4,941
                                ----------     ---------     --------      ---------     ---------
Gross Profit................            25           250          569          2,398         2,477
                                ----------     ---------     --------      ---------     ---------
Operating expenses:
Selling, general and
  administrative............            28            89          534          2,069         4,403
Research and development....            (8)           45          136            650         2,337
Depreciation of property,
  plant and equipment.......             2             3           44            224           716
Amortization of acquired
  intellectual property.....            --            --           --             --         3,459
                                ----------     ----------    --------      ---------     ---------
Total operating expenses....            22           137          714          2,934        10,915
                                ----------     ---------     --------      ---------     ---------
Income (loss) from
  operations................             3           113         (145)          (545)       (8,438)

Other income (expenses).....            (1)           (2)         (64)        (1,019)        5,778
                                ----------     ----------    --------      ---------     ---------
Income (loss) before
  income taxes..............             2            111        (209)        (1,564)       (2,660)

Income tax expense (recovery)            3             12          (1)           172           156
                                ----------     ----------    --------      ---------     ---------
Net income (loss)...........            (1)            99        (208)        (1,736)       (1,816)
                                ----------     ----------    --------      ---------     ---------
Basic and fully diluted
  earnings (loss) per share.   $     (0.01)     $    0.01    $  (0.01)     $   (0.08)    $   (0.07)
                                ==========     ===========   ========      =========     =========

Shares used in computing
  basic and fully diluted
  earnings (loss) per share     19,687,500     19,687,500  19,687,500     22,341,370    38,217,593
                                ==========     ==========  ==========     ==========    ==========
Pro forma earnings (loss)
  per share.................                                $   (0.01)
                                                            =========
U.S. GAAP:
Revenues....................                   $      647       2,598          8,883         7,418
                                               ==========   =========      =========     =========
Net income (loss)...........                   $       96   $    (165)     $  (4,843)    $  (4,284)
                                               ==========   =========      =========     =========
Basic and fully diluted
  earnings (loss) per share.                   $     0.00   $   (0.01)     $   (0.22)    $   (0.11)
                                               ==========   =========      =========     =========

</TABLE>



<TABLE>
<CAPTION>
                                                             AS OF DECEMBER 31,
                                       -------------------------------------------------------------
                                       1997         1998          1999           2000         2001
                                       ----         ----          ----           ----         ----
                                                               (IN THOUSANDS)
<S>                                    <C>        <C>          <C>           <C>            <C>
BALANCE SHEET DATA:
Canadian GAAP
Cash........................           $ --       $  819       $   453       $   1,844         1,639
Working capital...............           15        1,123           700          78,796        72,397
Total assets..................           80        1,249         1,964          82,992       107,633
Total shareholders' equity....           23          247            38          80,260       105,821
U.S. GAAP:
Total assets..................                     1,176         1,964          82,992       107,633
Total shareholders' equity
  (deficiency)................                       115           (66)         80,260       105,821

</TABLE>

--------------------------
         Although the Canadian dollar is our functional currency, we have
adopted the U.S. dollar as our reporting currency. See note 2 of our financial
statements for the years ended December 31, 2000 and 2001.




                                       2
<PAGE>

                  B.       CAPITALIZATION AND INDEBTEDNESS.

                           Not applicable.

                  C.       REASONS FOR THE OFFER AND USE OF PROCEEDS.

                           Not applicable.

                  D.       RISK FACTORS.

         There is a high degree of risk associated with our company and
business. If any of the following risks occur, our business, operating results
and financial condition could be materially adversely affected and the trading
price of our common shares could decline.


                      RISK FACTORS RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY, SO IT MAY BE DIFFICULT TO ASSESS OUR
BUSINESS AND FUTURE PROSPECTS.

         We commenced operations of our fuel cell business in 1995 and since
that time have been engaged principally in research and development relating to
fuel cell systems and the manufacture and sale of fuel cell testing equipment.
Accordingly, there is only a limited basis upon which to evaluate our business,
performance to date and prospects. Part of our long-term strategy is to sell
fuel cell systems and subsystems primarily into the transportation, stationary
and portable power markets. We have not yet begun to manufacture commercial fuel
cell products for any of these markets in significant quantities. In light of
the foregoing, our historical results of operations should not be relied upon as
indications of future performance.

OUR FUEL CELL BUSINESS IS AT THE DEVELOPMENT STAGE AND OUR FUTURE SUCCESS
DEPENDS ON OUR ABILITY TO DESIGN, DEVELOP AND MANUFACTURE NEW PRODUCTS, WHICH IS
UNCERTAIN.

         We have only been engaged in our fuel cell business for a short period
of time and are still in the developmental stage. We will face challenges,
expenses and difficulties as a developing company seeking to design, develop and
manufacture new products in each of our proposed markets.

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.

         Our current business strategy is to expand significantly our
development and manufacture of PEM fuel cell products and to market these
products in the transportation, stationary and portable markets. In so doing, we
will incur significant expenditures for research and development, expansion of
our manufacturing capabilities, general administrative and sales and marketing
expenses. As a result of these increased costs, we will need to generate
significantly higher revenues to achieve and sustain profitability. We incurred
a net loss for the year 2001, we may continue to incur losses beyond 2001 and we
may never sustain profitability. Accordingly, our ability to operate our
business and implement our business strategy may be hampered and the value of
our common shares may decline.

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

         We do not know when or whether we will successfully complete research
and development of commercially viable fuel cell products for any of our target
markets. Our future success depends upon our ability to develop and sell fuel
cell products. We must develop or acquire access to substantial technological
advances to be incorporated into our products, particularly in the area of
hydrogen fuel processing and storage, before we will be able to produce
commercially viable products other than fuel cell testing stations. We will be
unable to meet our business and growth objectives if we do not produce or secure
access to these other products.



                                       3
<PAGE>

WE MUST LOWER THE COST OF OUR FUEL CELL PRODUCTS AND DEMONSTRATE THEIR
RELIABILITY OR WE WILL NOT GENERATE SUFFICIENT REVENUES TO ACHIEVE OR MAINTAIN
PROFITABILITY.

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

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

         To date, a small number of customers has accounted for a significant
majority of our revenues and will continue to do so for the foreseeable future.
For the year ended December 31, 2000, our three largest customers accounted for
approximately 78% of our revenues. For the year ended December 31, 2001, three
customers accounted for approximately 70% of our revenues. If we lose any of
these customers and do not attract additional customers, we may not generate
sufficient revenues to offset this loss of revenues and our financial results
will be materially adversely affected. In addition, if a significant customer
breaches its contractual obligation to pay amounts it owes us under
non-cancelable binding purchase orders because of its inability or refusal to
pay, or does not pay those amounts on time, our revenues and earnings could be
materially adversely affected.

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

         We may not have sufficient capital to fund our operations and we may
not be able to raise additional capital. Either of these outcomes could
adversely affect our ability to respond to competitive pressures or prevent us
from conducting all or a portion of our planned operations. We expect that cash
on hand will be sufficient to meet our working capital and capital expenditure
needs for the next 24 months. After that, we may need to raise additional funds
through financing which may not be available on acceptable terms, if at all. We
may also require additional capital to acquire or invest in complementary
businesses or products or obtain the right to use complementary technologies.

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

WE CURRENTLY FACE AND WILL CONTINUE TO FACE SIGNIFICANT COMPETITION, AND 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.

         Our products currently face and will continue to face significant
competition. New developments in technology may negatively affect the
development or sale of some or all of our products or make our products or
proposed products uncompetitive or obsolete. Other companies, many of which have
substantially greater resources than our company, are currently engaged in the
development of products and technologies that are similar to, or may be
competitive with, our products and technologies. They also may be better able to
market, promote and advertise their products. To the extent that they already
have name recognition, their products may enjoy greater initial market
acceptance among our potential customers. We also expect that several of these
competitors will be able to deliver competing products to the market before we
will. To the extent that any one of our competitors does so, it could limit our
ability to gain market share or market acceptance for our products,



                                       4
<PAGE>

which could harm our revenues and impair our ability to expand our business.
These competitors may also be better able than we to adapt quickly to customers'
changing demands and to changes in technology.

         A number of corporations, national laboratories and universities in the
United States, Canada, Europe, Japan and elsewhere possess fuel cell technology
and are actively engaged in the development and manufacture of fuel cells and
fuel cell products. Each of these competitors has the potential to capture
market share in various markets.

         As the fuel cell has the potential to replace existing power sources,
competition for our products will come from current power technologies, from
improvements to current power technologies and from new alternative power
technologies, including other types of fuel cells. Each of our target markets is
currently served by existing manufacturers with existing customers and
suppliers. These manufacturers use proven and widely accepted technologies such
as internal combustion engines and turbines, as well as coal, oil and nuclear
powered generators. Additionally, there are competitors working on developing
technologies including other types of fuel cells and other alternative power
technologies, advanced batteries and hybrid battery/internal combustion engines
which may compete for our target customers. We also face competition in the
market for our fuel cell test stations. In addition to a number of companies
that currently manufacture fuel cell test stations, most large fuel cell
developers and original equipment manufacturers have some degree of internal
test station development. Any of these companies may compete with us for
customers.

         If we are unable to compete successfully, we could experience a loss of
market share and reduced gross margins for our existing products and a failure
to achieve acceptance of our proposed products.

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

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

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

         We regularly field test our products and we plan to 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, will involve delays and modifications, 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 to develop further our technology to account
for more failures than anticipated prior to the field tests.

WE ARE DEPENDENT UPON THIRD PARTY SUPPLIERS FOR KEY MATERIALS AND COMPONENTS FOR
OUR PRODUCTS. IF THESE SUPPLIERS BECOME UNABLE OR UNWILLING TO PROVIDE US WITH
SUFFICIENT MATERIALS AND COMPONENTS ON A TIMELY



                                       5
<PAGE>

AND COST-EFFECTIVE BASIS, WE MAY BE UNABLE TO MANUFACTURE OUR PRODUCTS
COST-EFFECTIVELY OR AT ALL, AND OUR REVENUES AND GROSS MARGINS WOULD SUFFER.

         We rely upon third party suppliers to provide materials and components
for our fuel cell products. A supplier's failure to provide materials or
components in a timely manner, or to provide materials and components that meet
our quality, quantity or cost requirements, or our inability to obtain
substitute sources for these materials and components in a timely manner or on
terms acceptable to us, would harm our ability to manufacture our fuel cell
products. To the extent that we are unable to develop and patent our own
technology and manufacturing processes, and to the extent that the processes
which our suppliers use to manufacture the materials and components are
proprietary, we may be unable to obtain comparable materials or components from
alternative suppliers, and that could adversely affect our ability to produce
viable fuel cell products or could raise our cost of producing fuel cell
products to a level where it would no longer be profitable to produce such
products.

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

         The pace of our expansion in facilities, staff and operations places
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. There can be no
assurance that our management skills and systems currently in place will enable
us to implement our strategy or enable us 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.

WE COULD BE LIABLE FOR ENVIRONMENTAL COSTS AND DAMAGES RESULTING FROM OUR
RESEARCH, DEVELOPMENT AND FUTURE MANUFACTURING OPERATIONS, AND THESE COSTS AND
DAMAGES WOULD REDUCE OUR NET INCOME.

         Our business is subject to numerous U.S. and Canadian laws, regulations
and policies relating to the protection of the environment. These requirements,
and enforcement of these requirements, may become more stringent in the future.
We cannot be assured that we have been, or will be at all times, in compliance
with these requirements, and we may be required to make significant
unanticipated capital and operating expenditures in connection with these
requirements. Non-compliance could subject us to material liabilities, such as
government fines and penalties, revocation of operating permits, third party
lawsuits or the suspension of operations. Our business, which includes the use
and storage of hazardous substances, exposes us to the risk of harmful
substances escaping into the environment, which may result in personal injury or
loss of life, damage to or contamination of the environment, and natural
resource damages. In addition, our current insurance policies may not adequately
reimburse us for costs incurred in settling environmental liabilities, and in
some instances, we may not be reimbursed at all.

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

         We expect our revenues and operating results to vary significantly from
quarter to quarter. These quarterly fluctuations in our operating performance
result from the length of time between our first contact with a business
customer and the first receipt 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. As a
result, quarter to quarter comparisons of our revenues and operating results may
not be meaningful. In addition, due to our early stage of development, we cannot
predict our future revenues or results of operations accurately.

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

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




                                       6
<PAGE>

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

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

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

         o        assumption of significant liabilities of the acquired company.

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

         Our future success will depend in large part upon our ability to
recruit and retain experienced research and development, engineering,
manufacturing, operating, sales and marketing, customer service and management
personnel. If we do not attract and retain such personnel, we may not be able to
expand our business. Competition for qualified personnel is intense in our
industry. In the past we have experienced difficulty in recruiting qualified
personnel that meet our standards, and we expect to experience continued
difficulties in recruiting similar personnel. We are 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 demand. We expect competition for
qualified personnel to remain intense, and we may not succeed in attracting or
retaining sufficient personnel. In addition, new employees generally require
substantial training, which requires significant resources and management
attention. Even if we invest significant resources to recruit, train and retain
qualified personnel, we may not be successful in our efforts.

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

         In addition, 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. Accordingly, to the extent that we are required to issue
significant numbers of options to our employees, and such options are exercised,
our shareholders could experience substantial dilution.

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:

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

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

         In addition, effective patent, trademark, copyright and trade secret
protection may be unavailable, limited, not applied for or unenforceable in
foreign countries.

         We also seek to protect our proprietary intellectual property through
contracts, including, when possible, confidentiality agreements and inventors'
rights agreements with our customers and employees. We cannot be assured that
the parties that enter into such agreements with us will not breach them, that
we will have adequate remedies for any breach or that such persons or
institutions will not assert rights to intellectual property arising out of
these relationships. If necessary or desirable, we may seek licenses under the
patents or other intellectual



                                       7
<PAGE>

property rights of others. However, we can give no assurances that we will
obtain such licenses or that the terms of any offered licenses will be
acceptable to us. The failure to obtain a license from a third party for
intellectual property we use in the future could cause us to incur substantial
liabilities and to suspend the manufacture, shipment of products or our use of
processes which exploit such intellectual property.

OUR POTENTIAL 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 valuable 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 in such litigation, we may, among other
things, be required to:

         o        pay substantial damages;

         o        cease the development, manufacture, use, sale or importation
                  of products that infringe upon other patented intellectual
                  property;

         o        discontinue processes incorporating infringing technology;

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

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

         We cannot be assured that we would be successful in such development or
acquisition or that such licenses would be available upon reasonable terms. Any
such development, acquisition or license could require the expenditure of
substantial time and other resources and could have a material adverse effect on
our business and financial results.

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

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


                 RISK FACTORS RELATED TO THE FUEL CELL INDUSTRY

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

         Significant markets may never develop for fuel cell products, or may
develop more slowly than we anticipate. If significant markets fail to develop
or develop more slowly than we anticipate, we may be unable to recover the
losses we expect to incur in the development of our products and we may never
achieve profitability. Any delay in, or failure of, the development of
significant markets for fuel cell products would significantly harm our revenues
and could cause our business to fail. Fuel cell products represent an emerging
market, and we do not



                                       8
<PAGE>

know whether end-users will want to use them. The development of a significant
market for fuel cell products may be affected by many factors, some of which are
out of our control, including:

         o        the emergence of newer, more competitive technologies and
                  products;

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

         o        the future cost of membrane electrode assemblies used in our
                  fuel cell systems;

         o        the future cost of platinum, a key component of our fuel cell
                  systems;

         o        regulatory requirements;

         o        manufacturing and supply costs for fuel cell components and
                  systems;

         o        consumer perceptions of the safety of our products;

         o        consumer reluctance to try a new product; and

         o        the continued development and improvement of existing power
                  technologies.

THE FUELS ON WHICH OUR FUEL CELL PRODUCTS RELY MAY NOT BE READILY AVAILABLE ON A
COST-EFFECTIVE BASIS.

         If our customers are not able to obtain the fuels they will need to run
our products on a cost-effective basis, we may be unable to compete with
traditional power sources and our revenues and results of operations would be
materially adversely affected. Our fuel cell products require oxygen and
hydrogen to operate. While ambient air typically can supply the necessary
oxygen, our fuel cells derive hydrogen from fuels such as natural gas, propane,
methanol and other petroleum products. Even if these fuels are available to us,
if their prices are such that electricity produced by our systems would cost
more than electricity provided through other means, we will be unable to compete
successfully.

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

         Fuel cell products use dangerous substances. Our results of operations
could be materially harmed by any accidents involving either our products or
those of other fuel cell manufacturers, either because we could face claims for
damages or because demand for fuel cells and fuel cell products could suffer and
our sales could decline. Our fuel cell 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. Since our products have not yet gained widespread market
acceptance, any accidents involving our systems or those of other fuel cell
products could materially impede acceptance of our products. In addition,
although our management believes that our liability coverage is adequate to
cover these risks, we may be held responsible for damages beyond the scope of
our insurance coverage.

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

         The fuel cell industry is in its development phase and is not currently
subject to industry-specific government regulations in Canada or the United
States relating to matters such as design, storage, transportation and
installation of fuel cell systems. However, given that the production of
electrical energy has typically been an area of significant government
regulation, we expect that we will encounter industry-specific government
regulations in the future in the jurisdictions and markets in which we operate.
For example, regulatory approvals or permits may be required for the design,
installation and possibly 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



                                       9
<PAGE>

in gaining regulatory approval, our development and growth may be constrained.
Furthermore, the inability of our potential customers to obtain a permit, or the
inconvenience often associated with the permit process, could harm demand for
fuel cell products and, therefore, harm our business.

         Our principal target markets for our fuel cell products are the
transportation, stationary and portable markets, and our business will suffer if
environmental policies change and no longer encourage the development and growth
of these markets. The interest by automobile manufacturers in fuel cell
technology has been driven in large part by environmental laws and regulations
mainly 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. For example, California delayed implementation of its zero emission
vehicle mandate from 1998 to 2003 after a study determined that existing battery
technology provided inadequate performance to meet consumer needs. 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 and state 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 the deregulation and restructuring of the 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.

ZERO EMISSION VEHICLE REQUIREMENTS CAN BE MET WITHOUT USING FUEL CELLS.

         It is possible to meet the zero emission vehicle requirements imposed
by California, New York, Massachusetts and Maine by using technologies other
than fuel cells. For example, vehicles powered by batteries can receive full
credit and vehicles powered by low emission internal combustion engines and
hybrid internal combustion/battery engines can receive partial credit toward the
zero emission vehicle requirement. We can offer no assurance that automobile
manufacturers will use fuel cells in their vehicles to meet regulatory
requirements. Their failure to do so could have a material adverse effect on our
business and financial results and would significantly impair our ability to
expand our business.


                    RISK FACTORS RELATED TO OUR SHAREHOLDERS

THE TAX LIABILITY FOR OUR SHAREHOLDERS MAY INCREASE IF WE ARE TREATED AS A
PASSIVE FOREIGN INVESTMENT COMPANY, AND UNITED STATES HOLDERS OF OUR COMMON
SHARES WILL BE RESPONSIBLE FOR DETERMINING WHETHER WE ARE A PASSIVE FOREIGN
INVESTMENT COMPANY.

         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 could 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 could 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%. If we are classified as a passive foreign
investment company, this characterization could result in adverse U.S. tax
consequences to our shareholders, including having



                                       10
<PAGE>

gain recognized on the sale of our common shares be treated as ordinary income,
as opposed to capital gain income, and having potential punitive interest
charges apply to such sales proceeds. U.S. shareholders should consult their own
U.S. tax advisors with respect to the U.S. tax consequences of holding our
common shares.

         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. 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 a shareholder is a United States holder (as defined below) and
we are a passive foreign investment company at the time that such shareholder
owns common shares, such shareholder will be subject to special U.S. federal
income tax rules that may have negative consequences and will require annual
reporting. United States holders will be responsible for determining whether we
are a passive foreign investment company each year for purposes of applying the
passive foreign investment company act rules.

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

         Our principal shareholders own more than 39% of our outstanding common
shares. In addition, General Motors Corporation owns approximately 24% of our
outstanding 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 the 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.

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 common shares. If we were to issue a significant number of common or
preferred shares, these issuances could also deter or delay an attempted
acquisition of us that a shareholder may consider beneficial, particularly in
the event that we issue preferred shares with special voting or dividend rights.
While the rules of The Nasdaq Stock Market and The Toronto Stock Exchange may
require us to obtain shareholder approval of significant issuances, we would not
be subject to these requirements if we ceased, voluntarily or otherwise, to be
listed on The Nasdaq Stock Market and The Toronto Stock Exchange. Significant
issuances of our common or preferred shares, or the perception that such
issuances may occur, could cause the trading price of our common shares to drop.

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

         We are organized under the laws of Canada. A majority of our directors,
controlling persons and officers, as well as some of the experts named in this
annual report, 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, liabilities against us or such persons predicated upon the U.S. federal
securities laws or other laws of the United States.

         However, U.S. laws would generally be enforced by a Canadian court
provided that those laws are not contrary to Canadian public policy, are not
foreign penal laws or laws that deal with taxation or the taking of



                                       11
<PAGE>

property by a foreign government and provided that they are in compliance with
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, for example:

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

         o        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 not final, conclusive or
                  enforceable under the laws of the applicable state;

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

         o        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;

         o        the outcome of the judgment of the U.S. court was inconsistent
                  with Canadian public policy;

         o        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

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

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

         If our shareholders sell substantial amounts of our common shares in
the public market, the market price of our common shares could fall. The
perception among investors that these sales will occur could also produce this
effect.

OUR SHARE PRICE HAS DECLINED SINCE OUR INITIAL PUBLIC OFFERING AND IT MAY
CONTINUE TO DECLINE.

         In recent years, and especially in the last year, the stock markets
have experienced significant price and volume fluctuations, especially in the
technology sector. Our common shares may also experience that volatility for
reasons unrelated to our own operating performance, including:

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

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

         o        changes in general economic conditions.

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

         Effective January 1, 2002, we adopted the U.S. dollar as the functional
currency and 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. We currently hold approximately 60% of our short-term investments
in Canadian dollars. To the extent that the Canadian dollar is weakened against
the U.S. dollar, we may incur net foreign exchange losses. Such losses would
affect our financial results and, consequently, our share price.

ITEM 4.       INFORMATION ON THE COMPANY.


                                       12
<PAGE>

                  A.       HISTORY AND DEVELOPMENT OF THE COMPANY.

         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.

         The following are our significant transactions and events that have
occurred since January 1, 2001:

         o        On January 10, 2001, we entered into a $2 million contribution
                  agreement with Natural Resources Canada and the Climate Change
                  Action Fund relating to the development of a stationary fuel
                  cell system capable of generating power for use in
                  multi-dwelling clusters and small commercial buildings. This
                  agreement was subsequently amended on April 11, 2001. The
                  total project cost is $6,000,000 over two years. The
                  Government of Canada is contributing $2.0 million: $1,600,000
                  from the Technology Early Action Measures, or TEAM, component
                  of the Climate Change Action Fund, and $400,000 from NRCan. We
                  are contributing $4,000,000 to the project, which is comprised
                  of material costs, labor and other in-kind contributions.

         o        On April 18, 2001, we entered into a joint development
                  agreement with Johnson Matthey, Inc., to develop a fully
                  integrated fuel processor system. The fuel processor is
                  expected to incorporate Johnson Matthey's proprietary fuel
                  processing technology and our integrated system controls and
                  balance-of-plant subsystems.

         o        On July 23, 2001, we signed an exclusive agency agreement with
                  Hankook BEP Co. Ltd., a Korean distributor of automotive
                  testing systems, to market and sell our FCATS products in the
                  Korean market.

         o        On August 22, 2001, we signed an exclusive distribution
                  agreement with Toyota Tsusho Corporation to market and sell
                  our FCATS products in the Japanese market.

         o        On October 16, 2001, we formed a strategic alliance with
                  General Motors Corporation, or GM, to accelerate the
                  development of fuel cell technology into global commercial
                  markets. The alliance includes shared intellectual property
                  rights and joint efforts in fuel cell product development,
                  engineering, prototyping, testing, branding, and marketing
                  strategies. As part of the agreement, GM received 11.3 million
                  of our common shares, or approximately 24% of our outstanding
                  shares. We also issued GM warrants to acquire an additional
                  2.4 million common shares, bringing GM's stake to 28% of
                  outstanding equity. GM also appointed a representative and one
                  observer to our board of directors in conjunction with the
                  alliance, resulting in the expansion of our board from seven
                  directors to eight.

         o        On April 16, 2002, we acquired EnKat GmbH for a purchase price
                  of approximately $550,000, which was paid in cash on May 1,
                  2002. The principals of EnKat have been retained to lead
                  Hydrogenics' efforts in Europe. EnKat provides process
                  engineering services relating to the integration of testing
                  environments for fuel cells and their components. We intend to
                  rely on EnKat to establish operations in Europe and to bolster
                  our technological expertise in fuel processing.

         Our principal executive offices are located at 5985 McLaughlin Road,
Mississauga, Ontario, Canada L5R 1B8, and our telephone number is (905)
361-3660. Our agent for service of process in the United States is CT
Corporation System, located at 111 Eighth Avenue, New York, New York 10011.



                                       13
<PAGE>

         Capital expenditures for the year ended December 31, 2001 were $3.1
million, compared with $1.5 million and $0.3 million for the years ended
December 31, 2000 and 1999, respectively. This increase is attributable to
equipment and facility expenditures related to outfitting our facilities and our
expanded research and development efforts.

         We expect capital expenditure plans for 2002 and subsequent years to
result in further investment in capital assets as we continue our manufacturing
and development initiatives. Our current budget for 2002 includes a capital
budget of $5.6 million to purchase equipment and intellectual property,
primarily for our research and development programs in our Mississauga facility.
Our capital requirements will be affected by many factors, including the success
of our current product offerings, the ability to enhance our current products
and our ability to develop and introduce new products that keep pace with
technological developments in the marketplace. As at December 31, 2001 we had
cash of $1.6 million and short term investments of $64.2 million.

         There have been no public takeover offers by third parties in respect
of the Company's shares or by the Company in respect of other companies' shares.

                  B.       BUSINESS OVERVIEW.

OUR COMMERCIAL BUSINESS

         We develop and commercialize proton exchange membrane, or PEM, fuel
cell power generators, including related subsystem products and associated fuel
cell diagnostic equipment. Our mission is to accelerate the development and
commercialization of PEM fuel cell technologies in clean power generation. Our
business is currently built on three evolving branches: power products targeted
at commercial markets as they emerge, automated test and control systems for the
fuel cell research and development market, and systems integration with select
clients and partners. Currently, our key customers are primarily automotive
companies, fuel cell and fuel cell component developers, and government
agencies.

         Our power products are currently designed for premium power
applications. These power products comprise fully integrated fuel cell power
appliances and generators, as well as proprietary scalable fuel cell power
modules for integration into original equipment manufacturer, or OEM, equipment.
Our stand-alone power generators include portable and auxiliary power generators
in the 500 watt to 5kW range. The initial target market for these products is
the early adopting military market. In addition, we have developed a
regenerative fuel cell backup power generator, which currently can generate
25kW, initially targeting the telecommunications market to provide reliable
power at cell tower sites. Also under development is a 50kW stationary power
generator with natural gas reformer for powering multi-dwelling complexes or
commercial buildings.

         Our test stations are used to aid in the design, development and
manufacture of PEM fuel cell systems. A PEM fuel cell system is a power
generator that produces electricity through an electrochemical reaction of
hydrogen and oxygen with the principal by-products being heat and water. A PEM
fuel cell system is comprised of three major sets of components: a hydrogen fuel
processor and/or hydrogen storage device; a fuel cell or stack of fuel cells;
and power conditioning equipment, which regulates the type and level of power
transferred from the fuel cell. In the case of a regenerative fuel cell system
there is a fourth component, which is a hydrogen generation device, typically an
electrolyzer. The collective components and subsystems of a fuel cell system,
outside of the fuel cell stack, are known in our industry as the "balance of
plant" of a fuel cell system. In order to perform testing and diagnostic
functions, our test stations provide balance of plant components and subsystems
that simulate, monitor and control key parameters of a fuel cell such as power
load, temperature, pressure, humidification and potential contaminants. This
data enables our customers to measure the effect of these variables on fuel cell
performance. We are currently selling our test stations to automotive companies,
fuel cell developers, component suppliers and government agencies. Through the
development of our proprietary test stations, we have gained significant
expertise in the development and operation of PEM fuel cell stacks and the
balance of plant subsystems and components of a fuel cell system.

         We also provide systems integration and engineering services with
select clients and partners. System integration services entail working with
these clients to integrate their proprietary components, typically a fuel cell




                                       14
<PAGE>
stack, into a functional fuel cell system. These services include engineering
design, prototyping, testing, contract manufacturing, and project management.

OUR PRODUCTS

         In 2000, and since our inception, our revenues were derived solely from
the commercial sale of our PEM fuel cell automated test stations. We expect to
continue to market and sell our test stations for the foreseeable future.
However, in 2001 we began to generate revenues from our commercial power
products and system integration services.

         For the past three years, the distribution of our revenues determined
by the location of our customers was as follows:


<TABLE>
<CAPTION>
                                                                2001               2000              1999
                                                               ------             ------            ------
                                                                              (IN THOUSANDS)
      <S>                                                    <C>                <C>               <C>
      United States                                            $3,080             $5,098            $1,753
      Japan                                                     2,081                  -                 -
      Germany                                                     699                  -                 -
      United Kingdom                                              600              3,442               795
      Rest of World                                               958                343               126
                                                               ------             ------            ------
      Total                                                     7,418              8,883             2,674
                                                               ======             ======            ======
</TABLE>

         Our business is not subject to any seasonal fluctuations.

         We are dependent upon third party suppliers for certain key materials
and components for our products. A supplier's failure to provide materials or
components in a timely manner, or to provide materials and components that meet
our quality, quantity or cost requirements could harm our ability to manufacture
our fuel cell products. Currently we have ample sources and supply of our key
materials and key components. To date, the pricing of our key materials and
components has been stable.

OUR PRODUCTS IN DEVELOPMENT

         In addition to our fuel cell test stations, we are developing PEM fuel
cell power generating systems, initially targeting premium power applications
for which fuel cell power provides a solution to specific power requirements. We
have developed a fuel cell system that is intended to be used to power
instrumentation in the field, such as in a device that detects chemical and
biological agents in the air. A reconfiguration of this system is also under
development for the purpose of auxiliary power on board light armored army
vehicles. In 2001 we also developed for the military a portable 500 Watt fuel
cell system with a proprietary integrated chemical hydride hydrogen generator to
be used primarily for recharging batteries in remote locations. In addition, we
are developing regenerative fuel cell systems that can both generate electricity
and produce hydrogen fuel from water and store it for later use in powering the
fuel cell. Our first regenerative fuel cell system product, a 25kW backup power
generator initially targeting the reliable power needs of the telecommunications
market, was demonstrated in 2001. We have not begun to manufacture commercial
fuel cell systems in significant quantities.

MARKET OPPORTUNITIES FOR OUR FUEL CELL PRODUCTS

         We believe that a number of trends are focusing attention on the use of
PEM fuel cells as an attractive alternative method of power generation. As a
result, automotive companies, fuel cell developers, component suppliers and
others are currently spending significant amounts of capital developing their
own fuel cell programs. We believe that test stations, such as our FCATS and
FCAVS products, and our proprietary balance of plant components and subsystems,
will be important elements of many of these programs in both the development
stages and the manufacturing process as broad commercial markets for fuel cells
develop.



                                       15
<PAGE>

         Trends that will influence the penetration of PEM fuel cells into broad
commercial markets include:

         o        Increasing demand for continuous and reliable power;

         o        Increasing desire for energy security and less dependence on
                  foreign oil;

         o        Deregulation in the energy industry;

         o        Operational efficiencies and other advantages of fuel cells
                  over traditional power technologies;

         o        Environmental concerns regarding conventional power
                  technologies; and

         o        Rising and volatile energy costs causing consumers to seek
                  alternative means of producing energy.

         Although we are encouraged by these trends, there remain numerous
technical and logistical disadvantages that represent obstacles to the broad
commercial application of fuel cell technology. For example:

         o        current fuel cell technology does not have the proven
                  dependability that many of the existing alternative
                  technologies have in our target markets;

         o        the high manufacturing costs currently associated with fuel
                  cell production make many commercial applications in our
                  target markets prohibitively expensive;

         o        appropriate integration of current fuel cell systems into
                  existing conventional technology may be difficult;

         o        fuels such as hydrogen are not as readily available as fuels
                  such as gasoline and methanol used in some of the alternative
                  technologies in our target markets; and

         o        the costs of hydrocarbon fuels currently used to produce
                  hydrogen for fuel cells are rising, which may impede the
                  growth of hydrocarbon-powered fuel cells as a cost-efficient
                  alternative means of producing energy.

OUR COMMERCIAL PRODUCTS AND SERVICES

         Our products and services are described in more detail on the following
pages. References in the tables and elsewhere in this annual report to "amps"
and "watts" are to the applicable measurement units for electric current and
power, respectively, established under the International System of Units, which
is the modern metric system of measurement. One thousand watts of power is
referred to as a "kilo-watt" or "kW" as abbreviated. The references to these
units of measurement in the tables below are to the electrical limits that a
particular test station can test. For example, one of our 100kW FCATS would be
able to test a fuel cell stack that can generate up to 100kW of electric power
and our FCATS-LAA, which is designed to test a single fuel cell, can test single
fuel cells that generate no more than 2000 amps of electric current.

         In connection with our test stations, the testing requirements of our
customers are dictated by the power requirements of the applications for which
they are developing fuel cells and fuel cells stacks. Our customers typically
first test single fuel cells. Testing of a single fuel cell typically measures
the current, in amps, generated by the fuel cell. A customer may begin to
develop fuel cells with low currents of up to 300 amps and then move to the
development of fuel cells with higher currents of up to 2000 amps. Single fuel
cells are not capable of generating sufficient power to power an electrical
application, such as automobiles or houses, so they are combined with other fuel
cells to make up a fuel cell stack. Testing of a fuel cell stack typically
measures the power, or kW level, generated by the stack. Generally, fuel cell
stacks consisting of fuel cells with high electric current levels, such as 2000
amps, generate more electric power than stacks consisting of the same number of
fuel cells but with lower electric current levels, such as 300 amps. A greater
number of fuel cells in a fuel cell stack



                                       16
<PAGE>

typically produces a fuel cell stack that can generate a greater amount of
electric power. The amount of power produced by a fuel cell stack determines the
commercial markets for its use. For example, a 4kW fuel cell stack could produce
enough electricity to power a small house, whereas an 100kW fuel cell stack
could produce enough electricity to power an automobile.

POWER PRODUCTS

         The following table sets forth our power products and describes their
respective applications, target markets and development status:


<TABLE>
<CAPTION>

-------------------------- ------------------------------------- ---------------------- ------------------------------
         PRODUCT                       APPLICATION                   TARGET MARKET                 STATUS
-------------------------- ------------------------------------- ---------------------- ------------------------------
<S>                      <C>                                    <C>                   <C>
   HyUPS                   Delivers 25kW power output for             Stationary        Commercial production
                           backup power, with regenerative
                           capabilities
-------------------------- ------------------------------------- ---------------------- ------------------------------
   HyPM                    Power modules for integration into       Transportation,     Commercial production
                           a power appliance or propulsion       Stationary, Portable
                           system
-------------------------- ------------------------------------- ---------------------- ------------------------------
   HyPORT                  Delivers 2.5 to 5kW power output            Portable         Pre-commercial production
                           fueled by hydrogen stored in metal
                           hydride canisters
-------------------------- ------------------------------------- ---------------------- ------------------------------
   HyPORT C                Delivers 500W power output fueled           Portable         Pre-commercial production
                           by hydrogen generated by integrated
                           chemical hydride system
-------------------------- ------------------------------------- ---------------------- ------------------------------

</TABLE>

         Power Products

         In October 2001, we completed development of a stationary power
product, marketed under the name HyUPS and co-developed by us with GM, which
provides backup power for telecommunications and other critical backup power
markets. HyUPS is intended to provide a solution to problems associated with
diesel gensets and battery banks that are currently providing backup power for
telecommunications towers. The prototype unit is capable of delivering 25kW
power output and has regenerative capabilities. In the HyUPS, a PEM electrolyzer
recharges a hydrogen supply after grid power has been re-established, providing
a low-maintenance self-fueling system. In the current prototype system, hydrogen
is stored in an integrated high pressure cylinder. Longer power duration
capabilities are achievable by adding storage modules. Although the HyUPS
product is in commercial production, we continue to develop it further.

         Our HyPM power modules are a fundamental building block of our
commercial power products under development. Each HyPM power module includes a
fuel cell stack with a full balance of plant system. The HyPM is designed so
that it only requires a hydrogen fuel supply in order to deliver fully usable
conditioned power to a power application. We have designed these modules to be
modular and scalable to a large number of power applications and power ranges.
In 2001, we delivered 10 HyPM modules to customers. In the first quarter of
2002, we introduced our second generation HyPM power module, demonstrating
superior performance with corresponding reductions in parts count, material
costs and size. Although the HyPM product is in commercial production, we
continue to develop it further.

         HyPORT represents our fundamental portable power technology. HyPORT is
a fully integrated fuel cell system complete with hydrogen storage, designed to
be a portable system that is capable of being reconfigured for auxiliary power
applications. HyPORT is intended to provide a solution to problems associated
with diesel gensets and battery banks that are currently providing temporary
power for locations where grid access is not available. HyPORT has been
initially developed to meet the needs of the military market for tactically
quiet generators and onboard power generation for military vehicles.




                                       17
<PAGE>

         HyPORT C is a 500W portable fuel cell power product that is equipped
with a proprietary integrated chemical hydride hydrogen generator. It was
developed with financial assistance from the Canadian military for the primary
purpose of recharging batteries in the field. The chemical hydride subsystem
generates hydrogen by combining sodium borohydride with water in the presence of
a catalyst. This system is capable of load-following, which means that it
generates hydrogen on demand to meet the requirements of an electrical load so
that a hydrogen storage vessel or medium is not required.


FUEL CELL AUTOMATED TEST STATIONS AND MODULES

         The following table sets forth our fuel cell automated test stations
and describes their respective applications, target markets and development
status:

<TABLE>
<CAPTION>

-------------------------- ------------------------------------- ---------------------- ------------------------------
         PRODUCT                       APPLICATION                   TARGET MARKET                 STATUS
-------------------------- ------------------------------------- ---------------------- ------------------------------
<S>                      <C>                                      <C>                  <C>
   FCATS                   Automated control and monitoring of        Research &        4kW, 12kW, 24kW and 100kW
                           fuel cell stacks ranging from 2kW          development       systems in commercial
                           to 100kW                                                     production
-------------------------- ------------------------------------- ---------------------- ------------------------------
   FCATS-LAA               Automated control & monitoring of a        Research &        Commercial production
                           large active area single cell (up          development
                           to 1000cm squared) with current up to
                           2000 amps
-------------------------- ------------------------------------- ---------------------- ------------------------------
   FCATS Screener          Automated control and monitoring of                          Commercial production
                           single cell with total current             Research &
                           output of 300 amps                         development
-------------------------- ------------------------------------- ---------------------- ------------------------------
   FCAVS Residential       Automated performance verification          Fuel cell        Commercial production
                           and incubation for quality                manufacturers
                           assurance of manufactured fuel cell
                           stacks for residential fuel cell
                           systems of 12kW and under
-------------------------- ------------------------------------- ---------------------- ------------------------------
   FCAVS                   Automated performance verification       Transportation,     Commercial production
                           and incubation for quality                 Stationary
                           assurance of manufactured fuel cell
                           stack for 2kW to 100kW
-------------------------- ------------------------------------- ---------------------- ------------------------------
   IMPACT                  Standalone diagnostics module for          Research &        Commercial production
                           measurement of the electrical              development
                           efficiency of a fuel cell
-------------------------- ------------------------------------- ---------------------- ------------------------------

</TABLE>

Fuel Cell Automated Test Stations

         Our fuel cell automated test stations represent complete turnkey units
that evaluate fuel cell design and performance by simulating, monitoring and
controlling key parameters such as power load, temperature, pressure,
humidification and potential contaminants in the system. Our test stations are
built with advanced safety features which permit unattended automated operation,
and proprietary software. The software controls, alters and monitors:

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

         o        Pressure - increasing pressure achieves higher power output;

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



                                       18
<PAGE>

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

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

         FCATS. Our fuel cell automated test stations, marketed under the trade
name FCATS, are industrial-grade test stations capable of operating multi-cell,
large surface area stacks. Our FCATS product line consists of four models that
cover fuel cell stack testing from 2kW to 100kW, which we believe covers the
power range for most PEM fuel cell stacks currently in development. We believe
that few of our competitors have developed test equipment capable of measuring
PEM fuel cell stacks above 5kW. We also manufacture a smaller, more economical
FCATS Screener model, which is an industrial-grade test station with a variety
of features for testing single cells. In addition, we provide custom design and
fabrication 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 eventually to mass production.

         Our existing and potential customers for FCATS are primarily automotive
manufacturers and suppliers of fuel cell components. These customers use our
FCATS products to simulate, monitor, and control the effect of power load,
temperature, pressure, humidification and potential contaminants on a fuel cell
and to measure the effect of changes in these variables on fuel cell
performance. The data obtained through our test stations is used by our
customers to aid in the design, development, and manufacture of PEM fuel cell
systems.

         FCATS units are manufactured to order. We are continuing to improve the
FCATS product line based on customer feedback and on new requirements identified
in the market. In 2001, we plan to expand our line of FCATS products in response
to existing and new customer requirements. We believe that continuing to improve
product design, manufacturing processes and supplier relationships will enable
us to simplify the production process.

         FCAVS. We have developed a fuel cell automated verification station
based on our FCATS platform which we market under the trade name FCAVS. We
believe that FCAVS will meet the demand for a single-point testing station
required to verify fuel cell power generators for inspection as a part of the
manufacturing process. We launched our FCAVS series in the first quarter of
2000.

         IMPACT. The IMPACT subsystem is designed to measure the electrical
efficiency of a fuel cell non-intrusively, in real-time and under dynamic
conditions. We believe that this feature represents an improvement over previous
techniques and equipment.

SYSTEM INTEGRATION AND ENGINEERING SERVICES

         We have gained substantial expertise in fuel cell operating systems
from the design and assembly of fuel cell test stations. This expertise is in
demand by fuel cell developers who 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 clients and partners.
These services include engineering, design, prototyping, testing, contract
manufacturing, and project management. The ownership of intellectual property
that arises from these relationships is handled on a case by case basis.

         On December 3, 2001, we signed a contract to supply GM with engineering
support and related services at a GM fuel cell research facility in Honeoye
Falls, New York. To support this initiative, we hired 55 employees currently
working at this facility under three separate engineering contract firms through
GM as full-time employees. Under the terms of this contract we will supply
ongoing engineering, technical, testing, design and administrative support to
GM's fuel cell development efforts at its Honeyoye Falls research facility.



                                       19
<PAGE>

OUR PRODUCTS IN DEVELOPMENT

         The following tables set forth our products in development and
describes their respective applications, target markets and development status:

     BALANCE OF PLANT COMPONENTS AND SUBSYSTEMS


<TABLE>
<CAPTION>

-------------------- ------------------------------------------------ ----------------- ------------------------------
      PRODUCT                          APPLICATION                     TARGET MARKET               STATUS
-------------------- ------------------------------------------------ ----------------- ------------------------------
<S>                <C>                                              <C>                 <C>
Controls (hardware   Control and operation of PEM fuel cell systems   Transportation,        Commercial development
& software)          for use in modules and balance of plant            Stationary,
                     subsystems                                           Portable
-------------------- ------------------------------------------------ ----------------- ------------------------------
Cathode subsystem    Humidification of fuel cell system or power      Transportation,        Commercial development
                     module                                             Stationary,
                                                                          Portable
-------------------- ------------------------------------------------ ----------------- ------------------------------

</TABLE>


Balance of Plant Components and Subsystems

         The components and subsystems of our test stations evaluate fuel cell
design and optimize performance by simulating, monitoring and controlling key
parameters such as power load, temperature, pressure, humidification and
potential contaminants in the system. These components and subsystems also
provide balance of plant to a fuel cell system. We are currently applying our
balance of plant expertise and operational experience to develop fuel cell
systems. We believe that our balance of plant components and subsystems will
have broad market applications in all of our target markets, as they are
integrated into the control and operation of fuel cell systems.

         During 2001 we continued to evolve our proprietary cathode subsystem.
This is a balance-of-plant humidification system that we deploy in our FCATS
products and in the development of fuel cell power modules. This humidification
process is critical to the efficient operation of a fuel cell stack.

         During 2001 we entered into a collaborative agreement with Johnson
Matthey, Inc. to develop a fully integrated fuel processor system. Fuel
processing is a critical component in building a hydrogen infrastructure. The
fuel processor is expected to incorporate Johnson Matthey's proprietary fuel
processing technology and our integrated system controls and subsystems.


       FUEL CELL SYSTEMS FOR PREMIUM POWER APPLICATIONS


<TABLE>
<CAPTION>

-------------------- ------------------------------------------------ ----------------- ------------------------------
      PRODUCT                          APPLICATION                     TARGET MARKET               STATUS
-------------------- ------------------------------------------------ ----------------- ------------------------------
<S>                <C>                                                <C>              <C>
HyUPS                Delivers 25kW power output for backup power,        Stationary     Commercial production
                     with regenerative capabilities
-------------------- ------------------------------------------------ ----------------- ------------------------------
HyPORT               Portable power generator for premium multi-kW        Portable      Demonstrated unit in second
                     demands such as military instrumentation and                       half of 2000
                     remote power applications. Also reconfigured
                     for auxiliary power applications in                                Second generation 5kW system
                     utility/military vehicles.                                         near completion
-------------------- ------------------------------------------------ ----------------- ------------------------------
HyPORT C             500W portable power generator                        Portable      Prototype delivered in first
                                                                                        quarter of 2002
-------------------- ------------------------------------------------ ----------------- ------------------------------

</TABLE>


                                       20
<PAGE>


<TABLE>
<CAPTION>

-------------------- ------------------------------------------------ ----------------- ------------------------------
      PRODUCT                          APPLICATION                     TARGET MARKET               STATUS
-------------------- ------------------------------------------------ ----------------- ------------------------------
<S>                <C>                                                <C>              <C>
HyPM - extended      Scalable power module for integration into         Stationary,     10kW, 50kW in development
family of power      diverse applications                              transportation
outputs
-------------------- ------------------------------------------------ ----------------- ------------------------------

</TABLE>


Fuel Cell Systems For Premium Power Applications

         Our commercialization strategy for portable, stationary and
transportation markets is primarily focused on premium power applications.
Premium power refers to applications with critical power requirements that are
not adequately met by conventional technologies. For reasons generally related
to off-grid access, reliability, air contamination and noise levels, these
applications have an immediate need to find an alternative power delivery
system. We believe that the inherent features of fuel cells make this technology
a viable solution for such applications, and in the case of certain premium
markets, the current high $/kW cost of this solution is justifiable. For such
applications we have demonstrated the ability to develop operational fuel cell
systems to the exacting criteria that users demand. By using a premium power
market strategy, we believe that we are better able to manage risks by working
with technically sophisticated users, such as the military, in order to develop
products to well-defined specifications and to smaller controlled volumes and
capital expenditures.

         HyUPS. In October 2001 we completed development of our first premium
power stationary product, marketed under the tradename HyUPS. This critical
backup power product is initially targeted at telecommunications markets. The
prototype unit is capable of delivering 25kW power output and regenerates its
hydrogen fuel supply using an integrated electrolyzer after power is restored to
the grid. We expect field-testing of this product to commence in the second
quarter of 2002. Although the HyUPS product is in commercial production, as
discussed above, we continue to develop it further. We believe there is a
wide-ranging market for backup power systems in this power range.

         HyPORT. We have developed, with support from Natural Resources Canada
and the Canadian Department of National Defense, a 2kW portable fuel cell system
that powers a device for detecting chemical and biological agents. This product
is marketed under the name of HyPORT. We demonstrated our first prototype unit
in the second half of 2000. We believe that this system will have a broad range
of commercial and military applications, such as powering of remote sensors,
communication equipment, micro-cogeneration, micro-climate conditioning, robots,
automated vehicles, navigation, personal electronics, weapon subsystems, silent
watch and disseminated hydrogen production. Although the HyPORT product is in
commercial production, we continue to develop it further.

         On February 26, 2002, we successfully fulfilled our contract with
Canada's Department of National Defense, or DND, with on-time delivery and
demonstration of a prototype portable fuel cell power generator under the
trademark HyPORT C. In addition to demonstrating HyPORT C to the DND, the power
generator was concurrently demonstrated to the US Army Tank-automotive and
Armaments Command unit in response to the interest expressed by this operations
group. HyPORT C is capable of delivering 500W of power and is fueled by hydrogen
generated by our proprietary chemical hydride system. We plan to test the system
in the field for recharging batteries and directly powering electronic
instrumentation.

         HyPM. Our HyPM power modules are a fundamental building block of our
commercial power products under development. Each HyPM power module includes a
fuel cell stack with a full balance of plant system. The HyPM is designed so
that it only requires a hydrogen fuel supply in order to deliver fully usable
conditioned power to a power application. Although the HyPM product is in
commercial production, we continue to develop it further.

         FUEL CELL SYSTEMS FOR BROAD COMMERCIAL MARKETS



                                       21
<PAGE>


<TABLE>
<CAPTION>

-------------------- ------------------------------------------------ ----------------- ------------------------------
      PRODUCT                          APPLICATION                     TARGET MARKET               STATUS
-------------------- ------------------------------------------------ ----------------- ------------------------------
<S>                 <C>                                               <C>                <C>
HySTAT               50kW of electrical power for power in
                     multi-dwelling clusters and small commercial        Stationary          In development
                     buildings
-------------------- ------------------------------------------------ ----------------- ------------------------------
HyPM - extended      Scalable power module for integration into         Stationary,          10kW,25kW and 50kW in
family of power      diverse applications                              transportation        development
ranges
-------------------- ------------------------------------------------ ----------------- ------------------------------

</TABLE>

Fuel Cell Systems for Broad Commercial Markets

         We are developing integrated fuel cell systems for broad commercial
markets. We are currently expanding the kilowatt range of our proprietary
pre-commercial fuel cell systems such that they can be used in stationary
products, particularly to address power quality demands such as backup power in
telecommunications applications. We believe that we will be able to develop our
current systems to reach a 50kW power rating for these products.

         On January 11, 2001, we entered into a $2 million contribution
agreement with Natural Resources Canada and the Climate Change Action Fund
relating to the development of a stationary fuel cell system capable of
generating power for use in multi-dwelling clusters and small commercial
buildings. This system, known as the Fuel Cell Energy Tap, or FCET, is expected
to generate electricity by using PEM fuel cell technology, to be fueled by
natural gas. We expect that each generator will be capable of providing 50kW of
electrical power, as well as space and water heating.

         During 2001 we initiated bench testing of our alpha stage HyPM power
modules in order to prepare them for integration into fuel cell power products.
HyPM power modules have been designed to be adaptable to a wide variety of
commercial applications without major modifications. Each HyPM power module
incorporates a fuel cell stack, controller, and fuel and water management
systems. We anticipate that the markets for the HyPM product will include
cellular telephone tower back-up power and commercial back-up power. The alpha
units that we have developed are capable of generating 25kW of power. We
anticipate that the beta units of each power module will incorporate a PEM
electrolyzer to generate hydrogen and have a capacity of storing up to 100kWh of
energy. During 2001 we also made progress in the development or out 50kW
stationary power generator, referred to as HySTAT, which is designed to be
integrated with a natural gas reformer.

         On October 16, 2001, we formed a strategic alliance with GM to
accelerate the development of fuel cell technology into global commercial
markets. This alliance encompasses a number of activities, including shared
intellectual property rights and joint efforts in fuel cell product development,
engineering, prototyping, testing, co-branding and marketing strategies.

         SYSTEMS FOR HYDROGEN GENERATION


                                       22
<PAGE>



<TABLE>
<CAPTION>

------------------------------ -------------------------------------- ------------------ ----------------------------
           Product                          Application                 Target Market              Status
------------------------------ -------------------------------------- ------------------ ----------------------------
<S>                          <C>                                    <C>                <C>
PEM Electrolyzer               Hydrogen production from water for     Stationary,        Pre-commercial
                               regenerative and refueling             transportation,    development
                               applications, current systems up to    portable
                               37.5 m3/hr
------------------------------ -------------------------------------- ------------------ ----------------------------
Natural Gas Fuel               Hydrogen production from natural       Stationary,        Co-development project
Processors                     gas feed stock for refueling           transportation
                               applications, current systems range
                               from 5 to 45 m3/hr
------------------------------ -------------------------------------- ------------------ ----------------------------

</TABLE>

         Hydrogen Generation  Systems.

         Electrolyzer Systems. We are developing PEM electrolyzer technology
both for direct refueling applications as well as a component of an integrated
regenerative fuel cell system. A regenerative system can both generate
electricity and produce hydrogen fuel from water and store it for later use.
When electricity from an external power source is available, the regenerative
system applies electricity to water to produce both oxygen and hydrogen to be
stored until required. Subsequently, the stored hydrogen is consumed by the
regenerative fuel cell system to generate electricity.

         Our regenerative fuel cell systems, such as the HyUPS backup power
generator, are designed to enable our customers to invest in a single system
that can be applied to both refueling and electricity generation. We believe
that the single system characteristic has significant economic benefits in
markets where electricity costs can vary widely and where electricity can be
generated from renewable sources such as solar and wind energy. Where
electricity can be generated from renewable sources, a regenerative fuel cell
system creates a sustainable energy solution. We currently have in development
electrolyzer systems capable of supplying hydrogen for up to 50kW fuel cell
power. We believe that our regenerative systems have the potential to achieve
higher kilowatt hours per kilogram than advanced battery systems.

         Reformer Systems. We are involved in system integration of a fuel
processor, or reformer, system with a fuel cell system for stationary
applications. The current reformer system is capable of supplying hydrogen fuel
for up to 50kW of fuel cell power.

         On April 18, 2001, we entered into a collaborative agreement with
Johnson Matthey, Inc. to develop a fully integrated fuel processor system. The
fuel processor is expected to incorporate Johnson Matthey's proprietary fuel
processing technology and our integrated system controls and balance-of-plant
subsystems.

Other Products and Services

         In addition to our products described above, we design and manufacture
stand-alone PEM fuel cell stacks that can be integrated into other fuel cell
developers' systems. We also design and manufacture catalytic burners, a key
component of our extreme weather power products that can be used for clean,
cost-effective and efficient delivery of hydrogen and the co-generation of heat.

RESEARCH AND DEVELOPMENT

         We are targeting our research and development efforts to integrate fuel
cells into systems that present power solutions for early viable markets while
enhancing the performance and durability of fuel cell systems. We are developing
a line of fuel cell power modules, or electrochemical engines, across a
strategic power range to provide a modular and scalable building block for
future power products, as well as OEM partners. Developmental research in
specific methods of hydrogen generation and regenerative fuel cell systems is
also a focus of our



                                       23
<PAGE>

research and development program. We also undertake system integration projects
with selected customers for developing prototype and pre-commercial products.

SALES & MARKETING

         Our sales and marketing efforts are first focused on the needs of
premium power markets where the inherent features and benefits of the technology
allow a viable value proposition today in spite of the current high cost of fuel
cells. The customers in these markets are, in general, technically
sophisticated, therefore allowing for good working relationships to make the
technology work for their specific applications.

         Our first commercial product was our FCATS fuel cell test station.
FCATS are marketed and sold by our direct sales and marketing staff to advanced
fuel cell developers such as automotive companies, fuel cell component
developers and research institutions. Our marketing efforts are global in scope
and we have current plans to establish sales and service offices in strategic
locations around the world. In addition to distributorship arrangements in Japan
and Korea, we have established an Asia-Pacific regional office in Tokyo with a
manager and three service and after-sales personnel. The Company's sales force
is primarily organized by region for our test station line of products, and by
product line for our fuel cell system products. We currently plan to expand our
sales staff to cover our growing markets.

         Our sales and marketing strategies for our three principal markets are
as follows:

         Transportation Market. To date, our sales efforts have focused on
supplying automotive fuel cell test stations to automotive manufacturers and
automotive OEMs. Delivered fuel cell test stations range from 2kW to 100kW, and
include most aspects of the balance of plant required to control and operate a
full range of fuel cell stacks. We intend to develop fuel cell propulsion
systems for early-adopting power applications in this market, such as
underground mining vehicles and forklift trucks.

         On October 16, 2001, we formed a strategic alliance with GM to
accelerate the development of fuel cell technology into global commercial
markets. The alliance includes shared intellectual property rights and joint
efforts in fuel cell product development, engineering, prototyping, testing,
branding, and marketing strategies. We believe that this alliance will greatly
enhance our efforts in the transportation market.

         Over the longer term, we hope to build sales in the automotive fuel
cell market. We intend to seek opportunities to manufacture fuel cell systems
and subsystems for direct sale to or for distribution through OEMs, to license
designs to automotive manufacturers and to participate in the retooling of
machinery for the production of vehicles which use fuel cell technology.

         Stationary Market. We intend to focus our sales and marketing efforts
in the stationary power market on the sale of our industrial-grade test stations
and fuel cell systems that can be applied directly to the stationary power
market. We believe that as we improve the efficiencies of our systems and
production costs decrease, an increase in the demand for clean, high quality
uninterruptible electric power will lead to broader market opportunities for our
products.

         Our first targeted stationary market is the critical backup power
market, in particular the telecommunications market. We have developed our first
stationary power product, the HyUPS, for this premium market and expect to
conduct field tests in 2002 at a cell tower site in southern California.
Following successful completion of these tests we plan to align ourselves with
telecommunications network providers and OEMs in international as well as
domestic markets.

         We also intend to develop strategic partnerships in the distributed
power generation market to distribute our stationary power products. Targeted
strategic distribution partners include electric and gas utilities, energy
merchants, propane companies, independent heating, ventilation and
air-conditioning dealers and contractors, as well as energy service providers
and distributors of reciprocating engines and microturbines.



                                       24
<PAGE>

         Portable Market. We expect that our primary near-term customer for
portable fuel cell systems, in which we include auxiliary power units, will
continue to be the Canadian Department of National Defense. However, we believe
that there is an expanding market for portable power generation for applications
such as scientific and environmental monitoring, remote and extreme weather
power generation, control instrumentation at remote sites, and other specialty
applications. Portable power generators also can fulfill back-up power
requirements, especially as high power demands on the power grid cause an
increase in random electrical black-outs and brown-outs. We believe that fuel
cell systems can be marketed by highlighting the significant advantages such
systems enjoy over existing technologies for these applications. Our intention
is to establish non-exclusive supplier relationships with large volume major
retailers and with existing OEMs who wish to expand into a fuel cell line. In
either case, our current intentions are to supply fuel cell power modules to
these customers to be built into an end product. As we develop portable fuel
cell systems and as our manufacturing costs decline, our long-term objectives
are to form non-exclusive strategic relationships or joint ventures with leading
industry partners.

         In the long term, as manufacturing costs decline, we also hope to enter
the area of sub-kW electronic devices, such as cell phones and laptop computers.
Our marketing goal is to promote the longevity of the fuel cell system and its
ease of recharging, compared to the capabilities of battery technology. Our
objectives are to form non-exclusive relationships or joint ventures with
leading industry partners.

INTELLECTUAL PROPERTY

         We believe that an active policy of protecting intellectual property is
an important component of our strategy of becoming a technology leader in PEM
fuel cell test stations and systems and subsystems. We have recently initiated a
comprehensive program to review our inventions in order to protect our key
intellectual property through a variety of methods.

         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. We have recently
initiated a comprehensive invention disclosure program under which our employees
prepare and submit invention reports for review and evaluation. Most of our
products have been delivered to customers pursuant to confidentiality
agreements, which restrict the recipient from reverse engineering such products.

         Our strategy is to develop and secure intellectual property in areas of
underdeveloped technologies within our core business or areas not widely pursued
by our competitors, in which a cohesive block of patents can be secured as an
important competitive advantage. This strategy has led us to focus on the
development of fuel cell stacks functioning with unpressurized air, no or
limited humidification, no fuel conditioning and simple cooling techniques.

         We currently have been granted patents on our HyTEF technology in the
United States and Canada. Corresponding applications have been filed in Europe
covering seven of the European Union nations, and in Iceland, Japan, Norway,
Russia and Chile. More recently, 36 new patent applications have been filed in
Canada and the United States. Other patent applications are in preparation.
Subject to the payment of maintenance fees, our U.S. and Canadian patents
relating to our HyTEF technology will expire in 2016 and 2017, respectively.

TECHNOLOGY DEVELOPMENT FUNDING ARRANGEMENTS

         We typically retain sole ownership of the intellectual property we
develop. However, our strategic alliance with GM provides for shared
intellectual property rights. As part of this agreement, we have a global,
royalty-free license to certain GM fuel cell technology and related intellectual
property. We have these rights in perpetuity, including subsequent improvements
to the licensed technology.

         In addition, we have agreed to pay royalties to some of our funding
partners as follows:



                                       25
<PAGE>

         Natural Resources Canada and Canadian Department of National Defense.
Since 1996, we have entered into a number of agreements with Natural Resources
Canada, or NRCan, under which NRCan has provided us with varying levels of
funding to aid in the development of prototype power generators and PEM fuel
cell systems. Under each agreement, NRCan receives a royalty equal to 2% of all
revenue we receive for the licensing and sale of the intellectual property
related to the particular project. These royalty rights expire upon the earlier
of NRCan recouping the amount of the funding given to us or, in most cases, 15
years and in one case, 10 years. The aggregate funding amount to be recouped by
NRCan is approximately $641,000. We retain all intellectual property rights in
the projects, provided that we pursue the commercialization of the intellectual
property, subject to a non-exclusive royalty-free licenses granted to NRCan in
perpetuity to use or sublicense the intellectual property rights, should we
decide not to commercialize the technology. One of these agreements was amended
in early 2000 to add the Canadian Department of National Defense as a
contributor of funds.

         National Research Council Canada. In 1998, we entered into an agreement
with the National Research Council Canada, or the NRC, under which the NRC
agreed to contribute up to approximately $27,000 toward the development of an
advanced modular client/server fuel cell automated test station mainframe and
satellite. The NRC has no right to receive royalties under the agreement. In
1999, we entered into another agreement with the NRC pursuant to which the NRC
agreed to contribute up to approximately $329,000 toward the development of fuel
cell automated test stations for residential fuel cells. Under this agreement,
from April 1, 2005 to January 1, 2008, the NRC has the right to receive a
quarterly royalty of 1.3% of our gross revenue, up to a total of approximately
$493,500. If the NRC's contribution to the project is not recouped by 2008, we
will be obligated to pay royalties until the earlier of full repayment or April
1, 2015

         Universite du Quebec a Trois-Rivieres. In 1996, we entered into an
agreement with the Universite du Quebec a Trois-Rivieres, or UQTR, pursuant to
which we contributed approximately $21,000 to UQTR to aid in the development of
the HyTEF system. Under this agreement, UQTR has a right to receive a royalty of
4% of the total sales generated by the technology developed under that project
until September 2006. We retain rights to all intellectual property developed in
connection with the project. Amounts payable to UQTR are not capped under this
agreement.

         The Government of Canada. In the first quarter of 2001, we entered into
a contribution agreement with the Government of Canada, pursuant to which the
Government of Canada, through the Climate Change Action Fund and NRCan, agreed
to contribute up to Cdn.$2 million to be used in the development of a 50kW fuel
cell power generator fueled by natural gas. The total project cost is
Cdn.$6,000,000 over two years. The Technology Early Action Measures component of
the Climate Change Action Fund is contributing Cdn.$1.6 million to the project
and NRCan is contributing Cdn.$400,000. We are contributing Cdn.$4,000,000 to
the project, which is comprised of material costs, labor and other in-kind
contributions. Under this agreement, NRCan receives a royalty equal to 4% of all
revenue we receive for the licensing and sale of the intellectual property
related to this project. This royalty right expires upon the earlier of NRCan
recouping the amount of the funding given to us or 10 years. We retain all
intellectual property rights in this project, provided that we pursue the
commercialization of the intellectual property, subject to a non-exclusive
royalty-free license granted to Canada in perpetuity to use or sublicense the
intellectual property rights, should we decide not to commercialize the
technology.

COMPETITION

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

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

         Fuel Cell Systems & Systems Integration Services. In the commercial
production of fuel cell systems and



                                       26
<PAGE>

subsystems and the provision of systems integration services, we expect to
compete with companies who currently have fuel cell and fuel cell system
development programs. Companies involved in fuel cell development programs
include Ballard Power Systems Inc., United Technologies Corporation, Analytic
Power Corporation, DeNora spa, Energy Partners, Inc., Honda Motor Co. Ltd., H
Power Corp., International Fuel Cells Corporation, Idatech, LLC, Plug Power
Inc., Toshiba Corporation, the Toyota Motor Corporation, Giner, Inc. and Proton
Energy Systems Inc. Companies with programs for fuel cells other than PEM fuel
cells include Fuel Cell Energy Inc., Fuji Electric Co., Ltd., Global
Thermoelectric Inc., Hitachi, Ltd. and International Fuel Cells Corporation.

         A number of corporations, national laboratories and universities in the
United States, Canada, Europe, Japan and elsewhere also possess fuel cell
technology. Several of our competitors have financial, technological and
personnel resources far greater than ours and represent significant competition.

GOVERNMENT REGULATION

         Currently, the only regulations we encounter are the regulations that
are common to all businesses, such as employment legislation, implied warranty
laws, and environmental, health and safety standards. The principal
environmental legislation regulating our operations is the Ontario Environmental
Protection Act. We maintain a policy of operating our business in compliance
with all government regulations.

         It is likely that we will encounter industry-specific government
regulations in the future in many of the jurisdictions in which we operate. It
may become the case that regulatory approvals will be required for the design,
installation and possibly operation of stationary and mobile fuel cell systems.
To the extent that there are delays in gaining regulatory approval, our
development and growth may be constrained. We intend to comply with any
industry-specific regulations governments put in place.

LEGAL PROCEEDINGS

         We are not currently subject to any material legal proceedings;
however, we may from time to time become a party to various legal proceedings
arising in the ordinary course of business.

         C.       ORGANIZATIONAL STRUCTURE.

         We have two wholly-owned subsidiaries: Hydrogenics USA, Inc.,
incorporated under the laws of the State of Delaware, and Hydrogenics Japan
Inc., incorporated under the laws of the Province of Ontario.

         D.       PROPERTY, PLANTS AND EQUIPMENT.

         We manufacture our products at our registered and head office at 5985
McLaughlin Road, Mississauga, Ontario, Canada L5R 1B8. This facility is
approximately 96,000 square feet. We moved to this facility in October 2000, and
our lease for this facility expires in August 2005. Our main activities at this
facility involve the manufacture of our test station products and research and
development of our fuel cell products.

         On occasion, we outsource some of the manufacturing that we require to
local operators who produce prototype components to our specifications. We also
outsource to third party manufacturers the production of components, for
example, steel frames and enclosures used in FCATS production. We believe that
this practice allows us to manage our capital costs and to focus on our core
business.

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

         In December 2000, we leased a 9,600 square foot facility in Rush, New
York. The lease for this facility expires in December 2004.

ITEM 5.       OPERATING AND FINANCIAL REVIEW AND PROSPECTS.



                                       27
<PAGE>

         The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes to those statements included elsewhere in this annual report which have
been prepared in accordance with generally accepted accounting principles, or
GAAP, in Canada. Differences between Canadian GAAP and GAAP in the United States
are discussed in note 18 to our consolidated financial statements for the year
ended December 31, 2001. All financial information is reported in U.S. dollars
unless otherwise noted. This discussion contains forward-looking statements that
involve risks and uncertainties.


OVERVIEW

         During 2001, we continued to concentrate our efforts on the development
of fuel cell systems, components and subsystems targeted towards the broad
transportation, stationary and portable power markets. In 2001, we expanded our
expertise and knowledge of proton exchange membrane, or PEM, fuel cell systems
through the design, development and manufacture of our FCATS (Fuel Cell
Automated Test System) product line, and expanded our business through the
manufacture of commercial power products and the offering of systems integration
services.

         During fiscal 2001, we increased our capacity and capability to meet
the upcoming challenges of our industry by:

         o        adding 100 employees to finish the year at 171, a pace of
                  growth we expect to continue into 2002, as manufacturing and
                  research requirements continue to grow;

         o        expanding our sales and marketing efforts by broadening our
                  geographic reach into Europe and Asia; and

         o        preserving cash reserves and completing the year with a strong
                  balance sheet, including $1.6 million in cash and $64.2
                  million in short-term investments.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

REVENUES

         Revenues were $7.4 million for the year ended December 31, 2001,
compared with $8.9 million for 2000. The reduction in revenues is attributable
to a decline in units of test equipment sold. We believe that test equipment
sales were curtailed or deferred because of weak economic and capital markets in
2001. The reduction in revenue due to test equipment deferrals was somewhat
mitigated by sales of power products and other growing streams of revenue.

         In addition to test equipment sales, our revenue mix broadened during
2001 to include power modules, systems integration and fuel cell related
engineering services. This compares with nearly all revenues derived from test
equipment in 2000. We anticipate renewed activity in our research and
development test stations as the economy improves and government and competitive
pressures increase the demand for development of fuel cell applications. In
2002, we expect research and development engineering services to have
significant revenue growth and power applications and systems integration to
continue to contribute to revenues.

         Geographically, we have seen a significant expansion of our business in
Asia, particularly in Japan. As indicated in the following chart, Asia accounted
for 33%, compared with 3% in 2000; North America and Europe combined, accounted
for 67% in 2001, compared with 97% in 2000:

<TABLE>
<CAPTION>
                              2001                                 2000
                               $                % OF                 $               % OF
                         (IN THOUSANDS)       REVENUES        (IN THOUSANDS)        REVENUES
                          ------------        --------         ------------         --------
<S>                           <C>               <C>                <C>                <C>
         North America           3,559             48%                5,133              58%
         Asia                    2,459             33%                  308               3%



</TABLE>
                                       28
<PAGE>

<TABLE>
<CAPTION>
                              2001                                 2000
                               $                % OF                 $               % OF
                         (IN THOUSANDS)       REVENUES        (IN THOUSANDS)        REVENUES
                          ------------        --------         ------------         --------
<S>                           <C>               <C>                <C>                <C>
         Europe                  1,400             19%                3,442              39%
                          ------------        --------         ------------         --------
                                 7,418            100%                8,883             100%
</TABLE>



         Although our customer base has expanded, the majority of our revenues
are still concentrated with three top customers. For 2001, 2000 and 1999 our
three largest customers contributed 70%, 78%, and 80%, respectively, although
the specific customers within this group have changed from year-to-year.

GROSS MARGIN

         Cost of revenues were $4.9 million for the year ended December 31,
2001, compared with $6.5 million for the year ended December 31, 2000.
Correspondingly, gross margins were $2.5 million, or 33% of revenues, for the
year ended December 31, 2001, compared with $2.4 million or 27% for 2000.

         Changes in gross margin percentages are attributable to the product mix
and degree of customization on specific projects. Individual projects, due to
their relatively large size, can have a significant impact on the overall gross
margins. During the fourth quarter of 2000, we had a number of low margin
contracts that impacted the overall gross margins. The transition to a broader
portfolio of revenue, including engineering services, may initially cause a
reduction in gross margin percentages, but we expect these percentages to remain
within a target range of 25% to 30%.

         Cost of revenues is comprised of materials, direct labor costs and
benefits, and indirect labor costs and benefits relating to engineering and
design and overhead.

         The cost of providing research and development related engineering
services for GM are included in the cost of revenues and not research and
development.

SELLING, GENERAL AND ADMINISTRATION

         Selling, general and administrative, or SG&A, expenses were $4.4
million for the year ended December 31, 2001, compared with $2.1 million for
2000. SG&A expenses consist primarily of wages and salaries relating to our
sales, marketing and corporate staff, professional fees, selling and corporate
travel, insurance and facilities costs.

         The significant increase in SG&A expenses in 2001 is a result of:

         o        full year operation in the Mississauga, Ontario head office,
                  along with the associated costs;

         o        increased sales and marketing in Asia and support for our
                  marketing efforts in broader geographic areas;

         o        full year costs for administrative and support staff hired in
                  late 2000; and

         o        full year costs associated with being a public company
                  including insurance, investor relations and fulfilling strong
                  corporate governance requirements.

         We continue to align our sales and marketing efforts with emerging
market opportunities and we expect an increase in SG&A during 2002 in direct
support of viable commercial opportunities in the upcoming year.

RESEARCH AND DEVELOPMENT

         Research and development expenses were $3.5 million for the year ended
December 31, 2001, compared with $0.8 million for the year ended December 31,
2000. Research and development costs consist of materials, labor costs and
benefits, legal fees for the protection of intellectual property and overhead
attributable to research and development activity.



                                       29
<PAGE>

         Material costs related to specific development projects, combined with
an approximate tripling of research and development staff were the primary
contributors to the increase in research and development expenses in 2001.

         Research and development efforts are funded by internal cash reserves
as well as government research grants and joint development agreements. The
external funding arrangements are not included in revenues but recorded as a
reduction to our research and development expenses.

         We intend to continue to align our resources with emerging market
opportunities and increase investment in research and development as needed to
support the development of viable commercial applications.

         For financial statement presentation purposes, we reclassified
depreciation expense on research and development equipment to depreciation
expense. This has resulted in a reduction in the research and development
expense of $426,000 for 2001 and $125,000 for 2000.

DEPRECIATION OF PROPERTY PLANT AND EQUIPMENT

         Depreciation expense was $0.7 million for the year ended December 31,
2001, compared with $0.2 million for the year ended December 31, 2000. The
majority of the increase is a result of depreciation associated with test
equipment used in research and development programs.

         Depreciation is expected to increase in 2002 with full year charges on
equipment manufactured during 2001 and with the addition of equipment during
2002.

AMORTIZATION OF ACQUIRED INTELLECTUAL PROPERTY

         In October 2001 we purchased from GM, in exchange for common shares and
share purchase warrants, perpetual royalty free intellectual property rights for
certain fuel cell stack technology. The value of the acquired intellectual
property and the corresponding expected life of the asset were estimated by
management with verification from an independent valuator. The acquired
intellectual property is being amortized on a declining basis of 50% per year,
which reflects the rapid change in technology during the initial years. The
declining balance method of amortization is considered the best to reflect the
pattern in which the economic benefits of the acquired intellectual property
will be consumed by the company.

         Assuming no additional intellectual property purchases or value
impairment, the projected amortization charge for the next five years will be:

<TABLE>
<CAPTION>
                                           $
                                    (IN THOUSANDS)
                                    -------------
<S>                                  <C>
              2002                      14,875
              2003                       7,438
              2004                       3,718
              2005                       1,859
              2006                         929

</TABLE>

         We will continue to highlight the non-cash impact on earnings of the
amortization of this asset while it has a material impact on the financial
results.

ACCRUED DIVIDEND AND AMORTIZATION OF DISCOUNT ON PREFERRED SHARES

         Concurrent with our initial public offering in November 2000, all
issued and outstanding preferred shares were converted to common shares,
therefore, there are no expenses relating to preferred shares during 2001. Under
Canadian GAAP issued and outstanding preferred shares were treated, in part, as
debt.

PROVINCIAL CAPITAL TAX



                                       30
<PAGE>

         Provincial capital tax expense was $123,000 for the year ended December
31, 2001, compared with $260,000 for the year ended December 31, 2000. The
decrease is a result of investment allowances which, in part, are based on the
maturity terms of short-term investments. The provincial capital tax in 2000 is
directly attributable to our initial public offering on November 1, 2000. Due to
timing of our initial public offering, the above-mentioned investment allowances
were not available for the year ended December 31, 2000.

         Under Canadian GAAP this is not disclosed as income tax expense.

INTEREST AND BANK CHARGES

         Interest income, net of bank charges and interest expense, was $2.9
million for the year ending December 31, 2001, compared with $0.8 million for
2000 and $9,000 in 1999. The increase results from holding short-term
investments throughout 2001, compared with two months in 2000.

         Our investments are exclusively in short-term government backed notes.
Interest rates have declined during 2001 reducing our effective yield.

FOREIGN EXCHANGE

         Net foreign exchange gain was $3.0 million for the year ended December
31, 2001, compared with a net foreign exchange loss $1.3 million for the year
ended December 31, 2000. This foreign exchange gain was primarily attributable
to holding U.S. denominated short-term investments as the Canadian dollar
weakened against the U.S. dollar. The foreign exchange loss in 2000 was
attributable to a strengthening of the Canadian dollar during the last quarter
of the year. Effective January 1, 2002, we adopted the U.S. dollar as the
functional currency and 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. We currently hold approximately 60% of our
short-term investments in Canadian dollars.

INCOME TAXES

         Income tax expense was $156,000 for the year ended December 31, 2001,
compared with $172,000 for the year ended December 31, 2000 The expense arises
in the years 2000 and 2001 because of the Federal Large Corporations tax, which
is based on the taxable capital of the company. During 2001 certain short-term
investments were eligible to be deducted from net assets to arrive at an
adjusted net asset base. For Canadian GAAP this tax is considered an income tax
expense.

         There was no tax on income for the years ended December 31, 2001and
2000 because of tax losses of the company. Due to historical losses, we have
provided a revaluation allowance against the full amount of tax loss carry
forwards of $6.5 million.

NET LOSS FOR THE YEAR

         The net loss was $2.8 million for the year ending December 31, 2001,
compared with $1.7 million for the year ended December 31, 2000. Excluding the
non-cash amortization of $3.5 million for acquired intellectual property, net
income would have been $0.6 million for 2001. The non cash amortization of
acquired intellectual property has been highlighted because of its individually
significant impact on operating results without a corresponding impact on the
cash flow.

         Loss per share was $0.07 for the year ended December 31, 2001, compared
with $0.08 for the year ended December 31, 2000. Excluding the non-cash
amortization of $0.09 per share for amortization of acquired intellectual
property, basic and fully diluted earnings per share was $0.02.

         The weighted average number of shares used in calculating the loss per
share increased to 38.2 million shares as a result of the full year effect of
the public offering on November 1, 2000. We issued an additional 11.4 million
shares on October 16. 2001. The number of our common shares outstanding at
December 31, 2001 was 47.9 million shares.



                                       31
<PAGE>

         Options granted under our stock option plan and share purchase warrants
outstanding have not been included in the calculation of the loss per share as
the effect would be anti-dilutive. At year end there were 3.1 million stock
options outstanding, of which 2.0 million were exercisable. There were 2.5
million share purchase warrants outstanding, of which 124,000 were exercisable.
Consistent with Canadian and U.S. GAAP, information regarding stock options has
been disclosed in notes 9 and 18 of our financial statements.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

REVENUES

         Revenues were $8.9 million for the year ended December 31, 2000,
compared with $2.7 million for the year ended December 31, 1999. The increase in
revenues was primarily due to increased demand from our existing customers. We
also expanded our customer base during this period which resulted in additional
revenue.

         We continue to generate much of our revenue from a small number of our
customers. Revenues from our three largest customers accounted for 78% and 80%
of our total revenues for the years ended December 31, 2000 and 1999,
respectively.

         The majority of our revenues is recognized on a percentage of
completion basis due to the length of the build cycle of our FCATS product line.
As we standardize our manufacturing processes and reduce our build cycle, we
expect that a greater percentage of our revenue will be recognized when products
are delivered.

COST OF REVENUE

         As a result of a significant increase in revenues, cost of revenues
were $6.5 million for the year ended December 31, 2000, compared with $2.1
million for the year ended December 31, 1999. Cost of revenues consist of
materials, direct labor costs and benefits, indirect labor costs and benefits
relating to engineering and design and overhead costs. We realized a gross
margin of $2.4 million, or 27% of revenues, for the year ended December 31,
2000, compared with $0.6 million or 21% of revenues for the year ended December
31, 1999. A number of variables beyond our control can impact our gross margin,
such as the volume and the timing of orders, the degree of customization
required by our customers, and the product mix at any one time.

SELLING, GENERAL AND ADMINISTRATION

         Selling, general and administrative, or SG&A, expenses were $2.1
million for the year ended December 31, 2000, compared with $0.5 million for the
year ended December 31, 1999. SG&A expenses consist primarily of wages and
salaries relating to our sales, marketing and corporate staff, professional
fees, corporate travel, insurance and facilities costs.

         The increase in SG&A expenses in 2000 is attributable to a number of
items, including:

         o        insurance, professional fees and investor relations expenses
                  associated with our change of status from a private company to
                  a public company;

         o        rent and operating expenses resulting from the move to our new
                  96,000 square foot facility during the fourth quarter of 2000;

         o        sales and marketing expenses reflecting an expansion of our
                  sales and marketing staff and the opening of our Asia Pacific
                  office in Tokyo during the third quarter;

         o        hiring of additional employees during the year to facilitate
                  our manufacturing and development initiatives.

RESEARCH AND DEVELOPMENT



                                       32
<PAGE>

         Research and development expenses were $0.9 million for the year ended
December 31, 2000, compared with $0.4 million for the year ended December 31,
1999. Research and development costs consist of materials, labor costs and
benefits, legal fees for the protection of intellectual property and an
allocation of overhead attributable to research and development.

ACCRUED DIVIDEND AND AMORTIZATION OF DISCOUNT ON PREFERRED SHARES

         Expenses related to the accrued dividend and amortization of discount
on our preferred shares were $0.3 million for the year ended December 31, 2000,
compared with $0.1 million for the comparable period in 1999. This increase is
directly attributable to the issuance of preferred shares in January 2000. Under
Canadian GAAP our preferred shares were treated, in part, as debt and the
accrued dividends and discounts associated with such debt were amortized,
reflecting an expense on our financial statements. Upon the closing of our
public offering, all issued and outstanding preferred shares were automatically
converted into common shares. As a result, we will no longer incur expenses
associated with these preferred shares.

PROVINCIAL CAPITAL TAX

         As a result of the proceeds realized on the closing of our initial
public offering, our total assets have increased to a level that exceeds the
small business classification under Ontario tax legislation. As a result, we are
now subject to a provincial capital tax on our total assets. Under Canadian GAAP
this is not classified as income tax expense. For the year ended December 31,
2000, this amount was $0.3 million. In prior years we were not subject to this
tax.

INTEREST AND BANK CHARGES

         Interest income, net of bank charges and interest paid, was $0.8
million for the year ended December 31, 2000, compared with $9,000 for the year
ended December 31, 1999. This increase is primarily attributable to the interest
earned on the investment of the proceeds of our initial public offering. Our
investments are held exclusively in short term Canadian or U.S. government
securities.

FOREIGN EXCHANGE LOSS

         We incurred a foreign exchange loss of $1.3 million for the year ended
December 31, 2000, as a result of a strengthening of the Canadian dollar against
the U.S. dollar in the fourth quarter of 2000. The loss arises primarily because
the Canadian dollar is our functional currency and the majority of our cash or
cash equivalents are held in U.S. dollar short term investments. There were no
significant foreign exchange gains or losses in prior years.

INCOME TAXES

         Income tax expense was $0.2 million for the year ended December 31,
2000, compared with a recovery of income tax of $1,000 for the year ended
December 31, 1999. The increase is attributable to a Federal Large Corporations
Tax, which was triggered by the significant increase in our net assets. The
Federal Large Corporations Tax is imposed at a rate of 0.25 percent of an
adjusted net assets amount. This tax is considered an income tax for disclosure
purposes.

         We were not subject to any tax on income during the year ended December
31, 2000, due to our net loss for the year. Our effective tax rate changed
during fiscal 2000, reflecting our change of status from a Canadian controlled
private corporation to a public company. Canadian controlled private companies
are taxed at a lower rate than public companies. The change in our effective tax
rate will have an impact on future income tax payable.

NET LOSS FOR THE YEAR



                                       33
<PAGE>

         Net loss was $1.7 million for the year ended December 31, 2000,
compared with $0.2 million for the year ended December 31, 1999. The majority of
this increase is attributable to the foreign exchange loss of $1.3 million,
increased SG&A and research and development expenses.

         Loss per share was $0.08 for the year ended December 31, 2000, compared
with a loss of per share of $0.01 for the year ended December 31, 1999.

         The weighted average number of shares used in calculating the loss per
share increased to 22.3 million shares for fiscal 2000, reflecting our public
offering on November 1, 2000. The number of our common shares outstanding at
December 31, 2000 was 35.6 million. Options granted under our stock option plan
have not been included in the calculation of the fully diluted loss per share,
as the effect would be anti-dilutive. As at December 31, 2000, there were 3.9
million options issued and outstanding, of which 2.0 million were exercisable.

Liquidity AND CAPITAL RESOURCES

         At December 31, 2001, we held cash of $1.6 million and short-term
investments of $64.1 million, compared with $1.8 million in cash and $75.6
million in short-term investments at December 31, 2000.

         Cash used in operations for the year ended December 31, 2001 was $5.6
million, compared with $1.2 million used in the year ended December 31, 2000 and
$86,000 used in 1999. Included in cash used in operating activities for 2001 is
a net increase of $5.4 million in working capital, primarily from increases in
accounts receivable and inventories:

     o   Accounts receivable increased $1.9 million at December 31, 2001
         compared with 2000 as a result of a 73% increase in revenues during the
         fourth quarter of 2001 compared with the fourth quarter of 2000. The
         accounts receivables at December 31, 2000 compared with 1999 increased
         $639,000 due to an overall increase in revenues during 2000.

     o   Inventories increased $1.9 million at December 31, 2001 compared with
         2000 in anticipation of revenue growth in 2002. Raw materials, many of
         which have long lead times, have increased to $2.0 million in 2001 from
         $1.2 million in 2000. Work-in-progress and finished goods have
         increased to $1.0 million from $52,000 in 2000.


         We have an operating line of credit available up to $0.6 million
bearing interest at prime plus 0.5% and is available for overdraft protection
and when necessary, letters of guarantee or letters of credit. The facility is
collateralized by a general security agreement over all assets.

         We held short-term investments of $64.2 million at December 31, 2001,
compared with $75.6 million at December 31, 2000. This decrease in short-term
investments is partially attributable conversion to cash and subsequent use in
operating activities and purchase of property, plant and equipment. The decrease
is also a result of the declining Canadian dollar during 2001 and the resulting
balance sheet impact on translation to the U.S. reporting currency. This is
reflected within the foreign currency translation adjustment account in
shareholder's equity.

FINANCING ACTIVITIES

         During 2001, we issued 994,000 shares for $128,000 under our stock
option plan. We also received acquired intellectual property in exchange for the
issuance of shares and share purchase warrants to GM; no cash was involved in
this transaction.

         In 2000, as a result of a private placement of preferred shares which
closed on January 24, 2000, we received net proceeds of $3.6 million. On
November 1, 2000 we issued 7 million common shares at $12.00 per share, for net
proceeds of $76.2 million.



                                       34
<PAGE>

CAPITAL EXPENDITURES

         Property, plant and equipment purchases for the year ended December 31,
2001 were $3.1 million, compared with $1.5 million for the year ended December
31, 2000 and $0.3 million for the year ended December 31, 1999. This increased
expenditure in 2001 is attributable to increasing our testing facilities for
research and development programs. For 2000 the increase includes additions to
the test equipment and leasehold improvements and outfitting our current
manufacturing, office, and research facility.

         Capital expenditure plans for 2002 and subsequent years are expected to
result in further increases in property plant and equipment as we continue our
manufacturing and development initiatives.

DISCLOSURE ABOUT MARKET RISK

         Effective January 1, 2002, the U.S. dollar was adopted as our
functional currency. As a result, our income will include gains and losses on
the translation into U.S. dollars of items denominated in Canadian dollars and
other foreign currencies.

         As at and for all periods prior to December 31, 2001, our functional
currency was the Canadian dollar. Effective December 31, 1999, we adopted the
U.S. dollar as our reporting currency and the financial information included in
this annual report for 1999 and prior years has been presented in U.S. dollars
in accordance with a translation of convenience method using the exchange rate
at December 31, 1999, as set forth in note 2 of our financial statements for the
year ended December 31, 2001. For periods subsequent to December 31, 1999,
Canadian dollar amounts have been translated into U.S. dollars using the current
rate method, as set forth in note 2 of our financial statements for the year
ended December 31, 2001

         Exchange rate fluctuations may cause fluctuations in our quarterly
results. We transact business internationally in multiple currencies. In
particular, a significant portion of our cost of revenues consists of materials
purchased in Canadian dollars, which is only partially offset by revenues
generated in Canadian dollars. We do not currently engage in any hedging
transactions related to our exchange rate risk. Accordingly, gains and losses on
the conversion of transactions denominated in currencies other than U.S. dollars
may contribute to fluctuations in our results of operations and fluctuating
exchange rates could cause reduced revenue and gross margins from our
international sales.

         Our short-term investments, all of which have maturities of less than
one year, may expose us to market risk. Our investments are held exclusively in
short-term Canadian or U.S. government backed securities. The fair value of
these securities approximates their cost.

ITEM 6.       DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

                  A.       DIRECTORS AND SENIOR MANAGEMENT.

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


                                       35
<PAGE>


<TABLE>
<CAPTION>

                      Name                           Age                      Position
                      ----                           ---                      --------
<S>                                                 <C>    <C>
Pierre Rivard..................................       46     President, Chief Executive Officer and Director
Norman M. Seagram..............................       67     Chairman of the Board of Directors
Boyd J. Taylor.................................       42     Vice President Sales and Marketing and Director
Joseph Cargnelli...............................       32     Vice President Technology and Director
Gary Brandt....................................       43     Chief Financial Officer
Dr. Ravi B. Gopal..............................       41     Vice President Systems and Applications Engineering
Don J. Morrison................................       41     Director
Donald J. Lowry................................       49     Director
Dr. Robert Lee.................................       77     Director
Mr. Frank Colvin...............................       59     Director
Charley Pappas.................................       44     Vice President Engineering-Operations
Jim Collins....................................       39     Vice President Finance and Administration
Jonathan Lundy.................................       38     Vice President Strategic Development and Corporate
                                                             Secretary

</TABLE>

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

         NORMAN M. SEAGRAM was elected Chairman of our board of directors in
July 2000. Mr. Seagram is President of Sportsco International LP. Prior to
joining Sportsco in February 2001, Mr. Seagram was President and Chief Executive
Officer of Molson Inc., a brewery and entertainment company from September 1996
to May 1997. From October 1992 to August 1996, Mr. Seagram was Chairman and
Chief Executive Officer of Air Liquide Canada, Inc., a producer of industrial
gases. Mr. Seagram is currently Vice-Chairman of Tennis Canada and serves as a
director on the boards of VitalAire Company, the AR Plus Group, the Toronto
Symphony Orchestra, Trinity College School and the Canadian Foundation of
International Management. Mr. Seagram also serves on the International Advisory
Council of INSEAD, France, and on the advisory boards of Exclamation
International Inc., the Business Fund for Canadian Studies in the United States,
and the Faculty of Applied Science and Engineering, University of Toronto. Mr.
Seagram resides in Toronto, Ontario.

         BOYD J. TAYLOR is one of our founders and has served as a director
since January 1996. Mr. Taylor served as our Secretary from January 1996 until
July 1999 and was appointed as our Vice President Sales and Marketing in July
2000. From January 1993 to September 1995, Mr. Taylor was Manager of Sales and
Marketing of Aquatic Telemetry Systems at Lotek Engineering Inc., a manufacturer
of terrestrial and aquatic telemetry systems. Mr. Taylor earned a Bachelor's
degree in Electrical Engineering from Memorial University. Mr. Taylor resides in
Aurora, Ontario.

         JOSEPH CARGNELLI is one of our founders and has served as a director
since January 1996. Mr. Cargnelli served as our Treasurer from January 1996
until July 2000. Mr. Cargnelli was appointed as our Vice President Technology in
July 2000. Mr. Cargnelli earned both a Master of Applied Science degree in
Mechanical Engineering and a Bachelor of Applied Science degree in Mechanical
Engineering from the University of Toronto. From April 1992 to April 1993, Mr.
Cargnelli served as a Research Engineer with the Laboratory of Advanced



                                       36
<PAGE>

Concepts in Energy Conversion Inc., a laboratory engaged in the research,
development and demonstration of alkaline fuel cells and hydrogen storage
methods. Mr. Cargnelli resides in Toronto, Ontario.

         GARY BRANDT joined us in October 2001 as our Chief Financial Officer.
From 2000 to 2001, Mr. Brandt was Chief Financial Officer with @Link Networks.
From 1996 to 2000, Mr. Brandt was Vice President, Investor Relations with
WorldCom, and from 1994 to 1996 was Vice President, Investor Relations with MFS
Communications, which was acquired by World Com in 1996. From 1985 to 1994, Mr.
Brandt held various senior finance positions with Northern Telecom. Mr. Brandt
resides in Toronto, Ontario.

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

         DON J. MORRISON joined our board of directors in September 2000. Mr.
Morrison is Senior Vice President of Investments with Working Ventures Canadian
Fund Inc., a Canadian venture capital fund. Prior to joining Working Ventures in
July 1995, Mr. Morrison was a principal in the Financial Advisory Services Group
of PricewaterhouseCoopers LLP. Mr. Morrison represents Working Ventures on our
Board of Directors and on a number of private and public companies with a focus
on manufacturing, transportation and technology sectors. Mr. Morrison is a
chartered accountant. Mr. Morrison resides in Toronto, Ontario. Mr. Morrison was
originally appointed to our board by Working Ventures Canadian Fund Inc. in
accordance with the terms of our Amended and Restated Unanimous Shareholders'
Agreement, which expired upon completion of our initial public offering.

         DONALD J. LOWRY joined our board of directors in July 2000. Since
February 1998, Mr. Lowry has been President and Chief Executive Officer of EPCOR
Utilities Inc., an essential services utility. From May 1997 to January 1998,
Mr. Lowry served as Chairman of Alta Telecom Inc., a telecommunications company.
From March 1993 to May 1997, Mr. Lowry served as President and Chief Operating
Officer of Telus Communications Inc., a telecommunications company. Mr. Lowry
currently serves as a director on the board of the Canadian Electrical
Association, Sasktel International, Imperial Rubber Co. Ltd., Total Telecom Inc.
and Encore Energy. Mr. Lowry earned both a Master's degree in Business
Administration and a Bachelor of Commerce degree from the University of
Manitoba. Mr. Lowry resides in Edmonton, Alberta.

         DR. ROBERT LEE joined our board of directors in January 1999 and served
as Chairman until July 2000. Prior to January 1999, Dr. Lee was a member of our
Advisory Board. Dr. Lee has worked for Air Liquide Canada since 1947. Since
1990, Dr. Lee has been an independent technical advisor to Air Liquide Canada
and several of its subsidiaries, as well as to various other institutions,
including the University of British Columbia-Center for Metallurgical Processing
and the American Iron and Steel Institute/Department of Energy. Since 1985, Dr.
Lee has served as a director and the Vice President of Technology of Q.S. Oxygen
Process Inc. Dr. Lee has been involved in the development of more than 25
inventions, securing over 200 patents. In 1998, Dr. Lee received an honorary
Doctorate of Science from McGill University for innovative contributions to the
metallurgical industry. Dr. Lee resides in Calgary, Alberta.

         CHARLEY PAPPAS joined us in April 2000 as our Director of Engineering
Operations and was appointed Vice President of Operations in September 2000. His
title was changed to Vice President Engineering-Operations in November 2001.
From October 1992 to April 2000, Mr. Pappas was employed with The Electrolyser
Corporation Limited, a manufacturer of hydrogen generators, where he served as
Senior Design Engineer from 1992 to 1994, and Vice-President of Engineering from
1994 to 1999. From 1991 to 1992, Mr. Pappas was President and Project Manager
with Phalanx Engineering Inc., an engineering consultant to the industrial gas
business. From 1981 to 1991, Mr. Pappas was employed by Union Carbide Canada
Limited in a number of positions. Mr. Pappas resides in Scarborough, Ontario,
and is a Member of the Professional Engineers of Ontario.

         FRANK COLVIN joined our board of directors in November 2001. Mr. Colvin
is Vice President of Fuel Cell Activities, General Motors Corporation. Mr.
Colvin resides in Detroit, Michigan. Mr. Colvin was selected to join our board
of directors by GM in connection with our strategic alliance with GM. In
connection with this alliance,



                                       37
<PAGE>

GM also appointed Dave Wetter, who is Staff Engineer, GM Fuel Cell Development
Center, as a non-voting observer to our board of directors.

         JIM COLLINS joined us in May 2000 as Controller. He was appointed
Director of Finance and Administration in January 2001 and then as Vice
President Finance and Administration in June 2001. From 1992 to 2000 Mr. Collins
was the controller of privately held growth companies where he built and
maintained information and reporting systems and gained operational experience.
Prior to 1992 he was employed by Price Waterhouse in Australia and Canada. Mr.
Collins earned his Bachelor of Commerce at the University of British Columbia,
received his Chartered Accountant designation in 1989 and is a member of the
Institute of Chartered Accountants in British Columbia and Ontario. Mr. Collins
resides in Oakville, Ontario.

         JONATHAN LUNDY joined us in October 2000 as our Vice President
Corporate Affairs and Corporate Secretary. His title was changed to Vice
President Strategic Development and Corporate Secretary in November 2001. From
August 1998 to October 2000 Mr. Lundy was employed at Osler, Hoskin & Harcourt
LLP where he practiced corporate and securities law. From May 1996 to September
1998 Mr. Lundy was employed with Heenan Blaikie where he practiced corporate
law. Mr. Lundy earned a Bachelor of Laws degree and a Bachelor of Arts degree
from the University of Western Ontario. Mr. Lundy is a member of the Upper
Canada Law Society. Mr. Lundy resides in Oakville, Ontario.

                  B.       COMPENSATION.

COMPENSATION OF OFFICERS

         For the year ended December 31, 2001, our aggregate cash compensation
payments to our executive officers and directors for services rendered in these
capacities was approximately $630,569.

         The following table provides a summary of compensation earned by our
executive officers in 2001:

<TABLE>
<CAPTION>

------------------------------------- -------- ---------------------------------------- ----------------- ----------------
                                                                                           Long-Term
                                                                                          Compensation
                                                    Annual Compensation                    Awards(1)
------------------------------------- -------- ---------------------------------------- ----------------- ----------------
                                                                       Other
                                                                       Annual              Securities        All other
Name and Principal Position             Year      Salary      Bonus    Compensation(2)   Under Options     Compensation
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
                                                (U.S.$)     (U.S.$)        (U.S.$)            (#)             (U.S.$)
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
<S>                                  <C>      <C>          <C>              <C>              <C>               <C>
Pierre Rivard,                         2001     106,473      9,501            0                0                 0
President and Chief Executive
Officer
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
Boyd Taylor,                           2001      87,171      9,501            0                0                 0
Vice President Sales and Marketing
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
Joseph Cargnelli,                      2001      87,171      9,501            0                0                 0
Vice President Technology
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
Gary Brandt(3),                        2001      22,367        0              0                0                 0
Chief Financial Officer
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
Dr. Ravi Gopal,                        2001      87,171      9,501            0                0                 0
Vice President Systems and
Applications Engineering
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
Charley Pappas,                        2001      71,392      6,334            0             20,000              0
Vice President Engineering -
Operations
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------
Jim Collins(3),                        2001      68,171      6,334            0              8,100               0
Vice President Finance and
Administration
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------

</TABLE>


                                       38
<PAGE>



<TABLE>
<CAPTION>

------------------------------------- -------- ---------------------------------------- ----------------- ----------------
                                                                                           Long-Term
                                                                                          Compensation
                                                    Annual Compensation                    Awards(1)
------------------------------------- -------- ---------------------------------------- ----------------- ----------------
<S>                                  <C>      <C>          <C>              <C>           <C>                  <C>
Jonathan Lundy,                        2001     100,653      9,501            0             140,000              0
Vice President Strategic
Development and Corporate Secretary
------------------------------------- -------- ----------- ----------- ---------------- ----------------- ----------------

</TABLE>

(1)      The Company has not granted any Restricted Shares or Restricted Share
         Units, Stock Appreciation Rights or Long-Term Incentive Plan Payouts.

(2)      Benefits do not exceed the lesser of $50,000 and 10% of the total
         annual salary and bonuses for any of the named executive officers.

(3)      Mr. Brandt joined us in October 2001. Mr. Collins was our Controller
         until January 2001, when he was appointed Director of Finance and
         Administration, in which position he served until June 200 , when he
         was appointed Vice President Finance and Administration.

EMPLOYMENT AGREEMENTS

         We have employment agreements with the following executive officers:
Pierre Rivard, Boyd Taylor, Joseph Cargnelli and Dr. Ravi Gopal. In respect of
these agreements, we agreed to provide these officers with annual salaries in
2001 ranging from Cdn.$135,000 to Cdn.$160,000 per annum. In addition, each
agreement provides for an initial term of two years ending April 20, 2003, with
automatic one year extensions thereafter unless otherwise terminated pursuant to
the terms of such agreement. These agreements also provide for payments of
varying amounts not exceeding 24 month's salary in lieu of notice if the
executive officer is terminated without cause from his position at any time
during the term of the agreement. Upon termination resulting from a change of
our control, each executive officer will be entitled to receive an amount equal
to 24 month's salary. In addition, upon termination resulting from a change of
our control, all unvested options shall become immediately exercisable for a
period of ninety days from the date of termination.

COMPENSATION OF DIRECTORS

         Each of our non-employee directors is paid an annual fee of Cdn.$10,000
for his services as a director. Non-employee directors who serve as Committee
Chairs are paid an additional annual fee of Cdn.$1,000. The chairman of the
board of directors is paid an annual fee of Cdn.$12,000 for his services, and an
attendance fee of Cdn.$900 for each board meeting attended. In addition,
non-employee directors receive an attendance fee of Cdn.$700 for each board and
committee meeting attended. Each committee chair receives an additional
attendance fee of Cdn.$200 for each committee meeting attended. Attendance fees
are paid to a maximum per diem of Cdn.$1,350 for the Chairman and Cdn.$1,050 for
non-employee directors.

         Our non-employee directors are also reimbursed for their reasonable
out-of-pocket disbursements incurred on the business of the Company and are also
eligible to receive stock options in accordance with the recommendations of the
Management Development and Compensation Committee.

         C.       BOARD PRACTICES.

COMPOSITION OF THE BOARD OF DIRECTORS

         Our board of directors currently consists of eight members, five of
whom are non-management directors. Our articles provide that we may have between
three and nine directors on our board. Each of our directors holds office until
the next annual meeting of shareholders and until the director's successor is
elected and qualified, or until the director's earlier death, resignation or
removal.



                                       39
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

         Our board of directors has a Management Development and Compensation
Committee, an Audit Committee and a Nomination and Corporate Governance
Committee.

         Management Development and Compensation Committee. The Management
Development and Compensation Committee reviews and makes recommendations to our
board concerning the terms of the compensation packages provided to our
employees, including our executive officers, the terms of any bonus or other
awards provided to our employees, including our executive officers, and makes
recommendations to our board regarding new executive officer appointees. Our
Management Development and Compensation Committee also administers our current
stock option arrangements. The members of our Management Development and
Compensation Committee are Norman Seagram, Donald Lowry and Pierre Rivard.

         Audit Committee. The Audit Committee oversees the retention,
performance and compensation of our independent auditors, and oversees and
establishes procedures concerning our systems of internal accounting and
auditing control. The members of our Audit Committee are Norman Seagram, Donald
Lowry, Robert Lee, and Boyd Taylor. We intend to modify the composition of our
Audit Committee from time to time to ensure compliance with the rules
promulgated by the Securities and Exchange Commission, The Nasdaq Stock Market,
Inc. and The Toronto Stock Exchange.

         Nomination and Corporate Governance Committee. The Nomination and
Corporate Governance Committee evaluates and assesses the effectiveness of our
board, our individual directors and our board committees, establishes procedures
for identifying new nominees to the board, recruits and recommends new nominees
to the board and develops and monitors our approach to corporate governance
issues. The members of our Nomination and Corporate Governance Committee are
Norman Seagram, Donald Lowry and Pierre Rivard.

                  D.       EMPLOYEES.

         At December 31, 2001, we employed 171 persons, up from 74 as at
December 31, 2000, all of whom are full-time employees. Approximately 81 of our
employees are professional staff, including engineers, scientists, and other
professionals. Our employees are not represented by a labor union. We believe
that our relationship with our employees is good.

         The following is a geographic breakdown of our employees as of December
31, 2001:

                         Canada                        112
                         U.S.A.                         56
                         Japan                           3
                         -------------------------- -------
                         Total                         171

                  E.       SHARE OWNERSHIP.

         The following table sets forth certain information concerning the share
ownership of our directors and executive officers as of May 10, 2002:




                                       40
<PAGE>


<TABLE>
<CAPTION>

                                         NUMBER OF COMMON                                            PERCENTAGE OF
                           NUMBER OF     SHARES WHICH MAY    RANGE OF EXERCISE       RANGE OF        COMMON SHARES
                             COMMON     BE ACQUIRED UNDER    PRICE OF OPTIONS    EXPIRATION DATES    BENEFICIALLY
NAME                      SHARES OWNED   OUR OPTION PLAN          ($CDN.)           OF OPTIONS           OWNED
----                      ------------   ---------------     -----------------   -----------------   -------------
<S>                      <C>                  <C>           <C>              <C>                       <C>
Pierre Rivard              6,442,500               0                   N/A                   N/A         13.32%
Norman M. Seagram             16,200          24,900           $5.00-$8.70           August 2010          0.05%
                                                                                       -May 2011
Boyd J. Taylor             6,452,500               0                   N/A                   N/A         13.34%
Joseph Cargnelli           6,442,500               0                   N/A                   N/A         13.34%
Gary Brandt                        0         300,000                 $3.85          October 2011          0.10%
Ravi B. Gopal                 15,000         707,500           $0.05-$0.29          January 2010          1.47%
Don J. Morrison                  500          16,000                 $8.70          January 2011-         0.01%
                                                                                        May 2011
Donald J. Lowry                1,000          20,200           $5.00-$8.70           August 2010-         0.02%
                                                                                        May 2011
Robert Lee                         0         124,500           $0.29-$8.70          January 2010-         0.23%
                                                                                        May 2011
Frank Colvin                       0               0                   N/A                   N/A             0%
Charley Pappas                   979          37,640          $4.64 - $8.70      April 2010- May          0.02%
                                                                                            2011
Jim Collins                      500          40,100          $5.00 - $8.70       Jun 2010 - May          0.04%
                                                                                            2011
Jonathan Lundy                                                                      October 2010-
                                   0         200,000         $3.40 - $11.43       September 2011          0.08%

</TABLE>


OPTION GRANTS DURING FISCAL 2001

         We granted options under our stock option plan to our senior executive
officers during the year ended December 31, 2001 as follows:


<TABLE>
<CAPTION>

--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
                                                                                    Fair Value
                                             % of Total                           Of Securities
                         Securities       Options Granted                           Underlying
                        Under Options       to Employees        Exercise or       Options On the
                           Granted          In Financial        Base price        Date Of Grant          Expiration
   Name                      (#)                Year         (Cdn.$/Security)    (Cdn.$/Security)           Date
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
<S>                 <C>                <C>                  <C>                <C>                <C>
Pierre Rivard                 0                  0%                 N/A                N/A                  N/A
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Gary Brandt                300,000             44.90%              $3.85              $3.85           October 15, 2011
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Boyd Taylor                   0                  0%                 N/A                N/A                  N/A
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Joseph Cargnelli              0                  0%                 N/A                N/A                  N/A
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Dr. Ravi Gopal                0                  0%                 N/A                N/A                  N/A
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Charley Pappas             20,000              2.99%               $8.70              $8.70             May 15, 2011
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Jonathan Lundy             40,000              20.95%              $8.70              $8.70             May 15, 2011
                          100,000                                  $3.40              $3.40          September 18, 2011
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------
Jim Collins                 8,100              1.21%               $8.70              $8.70             May 15, 2001
--------------------- ------------------ ------------------- ------------------ ------------------- ---------------------

</TABLE>

OPTIONS EXERCISED IN FISCAL YEAR 2001

         The following table details information with respect to all options of
the Company exercised by our executive officers during the fiscal year ended
December 31, 2001, and all options held by our executive officers and
outstanding on December 31, 2001:




                                       41
<PAGE>

<TABLE>
<CAPTION>

--------------------- ------------------ ------------------- ------------------ ------------------------
                                                                                       Value of
                                                                                      Unexercised
                                                                Unexercised          In-the-money
                                                                  Options               Options
                         Securities          Aggregate           At FY-End             At FY-End
                         Acquired on           Value                (#)                 (Cdn.$)
                          Exercise            Realized         Exercisable/          Exercisable/
        Name                 (#)              (Cdn.$)          Unexercisable         Unexercisable
--------------------- ------------------ ------------------- ------------------ ------------------------
<S>                      <C>                <C>             <C>               <C>
Pierre Rivard                N/A                N/A                 N/A                   N/A
--------------------- ------------------ ------------------- ------------------ ------------------------
Boyd Taylor                  N/A                N/A                 N/A                   N/A
--------------------- ------------------ ------------------- ------------------ ------------------------
Joseph Cargnelli             N/A                N/A                 N/A                   N/A
--------------------- ------------------ ------------------- ------------------ ------------------------
Gary Brandt                   0                  0              0 / 300,000          0 / 2,370,000
--------------------- ------------------ ------------------- ------------------ ------------------------
Dr. Ravi Gopal                0                  0              857,500 / 0          9,935,625 / 0
--------------------- ------------------ ------------------- ------------------ ------------------------
Charley Pappas                0                  0            15,155 / 39,845      107,709 / 202,041
--------------------- ------------------ ------------------- ------------------ ------------------------
Jonathan Lundy                0                  0           17,500 / 192,500       5,600 / 973,800
--------------------- ------------------ ------------------- ------------------ ------------------------
Jim Collins                   0                  0            8,450 / 36,650       56,613 / 216,143
--------------------- ------------------ ------------------- ------------------ ------------------------

</TABLE>

DIRECTOR, EMPLOYEE AND CONSULTANT STOCK OPTIONS

         As of May 10, 2002, our executive officers, directors, employees and
consultants held options to purchase an aggregate of 2,722,900 of our common
shares. Our executive officers held options to acquire 1,285,240 of these common
shares, exercisable at prices ranging from Cdn.$0.05 to Cdn.$11.43, expiring
January 24, 2010 through October 15, 2011. Our directors who are not executive
officers held options to acquire 185,600 common shares, exercisable at prices
ranging from Cdn.$0.29 to Cdn.$8.70, expiring between January 24, 2010 through
May 16, 2011. Our employees, excluding our executive officers, held options to
acquire 1,252,060 common shares, exercisable at prices ranging from Cdn.$0.05 to
Cdn.$18.12 expiring at dates ranging from January 24, 2010 to March 16, 2011.

         In 2001, the options granted to officers, directors and various
employees have been at the exercise prices indicated below:

         o        on January 19, 2001 we granted our Chairman, Norman Seagram,
                  12,000 options with an exercise price of Cdn$8.70 per share.
                  We also granted Donald Lowry, Dr. Robert Lee and Donald
                  Morrison, all non-executive directors, 10,000 options each at
                  an exercise price of Cdn$8.70.

         o        on February 4, 2001 we granted 5,000 options at an exercise
                  price of Cdn$10.75 to employees (other than officer and
                  directors).

         o        on March 4, 2001 we granted 5,000 options at an exercise price
                  of Cdn$8.75 to employees (other than officer and directors).

         o        on May 15, 2001 we granted (i) Norman Seagram, Chairman of our
                  board of directors, 8,000 options with an exercise price of
                  Cdn$8.70 per share, (ii) Donald Lowry, Dr. Robert Lee and
                  Donald Morrison, all non-executive directors, 6,000 options
                  each at an exercise price of Cdn$8.70, (iii) Jonathan Lundy,
                  Vice President Strategic Development and Corporate Secretary,
                  40,000 options at an exercise price of Cdn$8.70, (iv) Charley
                  Pappas, Vice President Engineering - Operations, 20,000
                  options at and exercise price of Cdn$8.70, (v) Jim Collins,
                  Vice President Finance and Administration, 8,100 options at an
                  exercise price of Cdn$8.70, and (vi) various other employees
                  an aggregate of 109,500 options at an exercise price of
                  Cdn$8.70.



                                       42
<PAGE>

         o        on September 19, 2001 we granted Jonathan Lundy, Vice
                  President Strategic Development, 100,000 options at an
                  exercise price of Cdn$3.40.

         o        on October 15, 2001, we granted Gary Brandt, Chief Financial
                  Officer, 300,000 options at an exercise price of Cdn$3.85.

         o        on October 23, 2001, we granted 12,500 options at an exercise
                  price of Cdn$7.80 to employees (other than officer and
                  directors)

STOCK OPTIONS

         Since 1999, we have granted options to purchase our common shares to
various employees, officers, directors and consultants. We formalized these
grants in January 2000 by entering into stock option agreements with these
individuals. These agreements generally provide that the options have a maximum
term of ten years and vest over four years. In the event that an optionee's
employment is terminated, the vested portion of any grant will remain
exercisable for a period of 60 days after the date of termination. In the event
of the death or incapacity of the optionee, the vested portion of any grant will
remain exercisable for a period of 120 days following the date of death or
incapacity. Unvested options expire upon the termination, death or incapacity of
the optionee. If a change of control of our company occurs, the company through
our board of directors has the power to amend the terms of each option to allow
for the exercise of the unvested portion of each option prior to the completion
of the change of control.

STOCK OPTION PLAN

         Our board approved a stock option plan, which was implemented on
November 1, 2000 by our Management Development and Compensation Committee. This
plan grants to our board of directors or a committee of our board the discretion
to grant options to purchase common shares to our employees, directors and
consultants. The plan provides that options will have a maximum term of ten
years, unless a shorter term is specified by our board, and will have an
exercise price per share of not less than the fair market value of our common
shares on the day immediately prior to the date of grant. Unless otherwise
specified in the particular optionee's option agreement, options granted under
the plan will vest over a period of three years with one third of the particular
option grant vesting each year. Options granted under the plan may not be
transferred or assigned by the optionee and upon any such transfer or assignment
or attempted transfer or assignment, such options will terminate and be of no
further force and effect. The total number of options approved for issuance
under the new plan and all other established or proposed share compensation
arrangements is 4,641,000.

         If an optionee's employment or term as a director or consultant with us
is terminated without cause or the optionee voluntarily resigns, any vested
options then held by the optionee may be exercised by the optionee for a period
of 90 days from the applicable date of termination or resignation provided that
the option does not expire prior to the end of the 90 day period. If an
optionee's employment or term as a director or consultant with us is terminated
for cause, all options then held by the optionee, whether vested or unvested,
immediately expire and are cancelled on the applicable termination date. If an
optionee that is an employee, director or consultant dies or becomes disabled or
an optionee that is an employee or director retires, any vested options then
held by the optionee may be exercised for a period of 180 days from the
applicable date of death, disablement or retirement, provided that the option
does not expire prior to the end of the 180 day period.

         If there is an amalgamation, combination, merger or other
reorganization involving our company, the plan will allow the board to replace
or modify any issued option in order to preserve proportionately the rights and
obligations of all optionees. The board may also permit the vesting and exercise
of any outstanding unvested option not otherwise exercisable upon the occurrence
of events, for example, a change of control involving our company.

         In addition, no one person will be permitted to receive more than 5% of
the common shares reserved for issuance pursuant to options granted under the
plan.



                                       43
<PAGE>

ITEM 7.       MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

                  A.       MAJOR SHAREHOLDERS.

         The following table provides information regarding the beneficial
ownership of our common shares as of May 10, 2002, as to each person or entity
who beneficially owns more than 5% of our outstanding common shares. None of
these shareholders has different voting rights than any of the Company's other
shareholders.

         Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Except as otherwise indicated, the persons named in
the table have sole voting and investment power with respect to all common
shares held by them. The number of common shares outstanding used in calculating
the percentage for each listed person includes the common shares underlying
options or warrants held by such person that are exercisable within 60 days of
May 10, 2002, but excludes common shares underlying options or warrants held by
any other person. Common shares placed in a trust with an irrevocable order to
sell, in accordance with a plan pursuant to Rule 10b5-1 under the Securities
Exchange Act of 1934, are also excluded from the calculations of beneficial
ownership. Percentage ownership is calculated by reference to the 48,358,641
common shares deemed outstanding as of May 10, 2002. All of our shareholders
hold common shares.


<TABLE>
<CAPTION>

BENEFICIAL OWNER                                              NUMBER OF COMMON SHARES BENEFICIALLY OWNED
----------------                                              ------------------------------------------
                                                                   NUMBER                 PERCENT
                                                              ---------------             -------

<S>                                                           <C>                       <C>
General Motors Corporation (1)                                    11,858,094(2)            24.27%
Pierre Rivard (3)                                                  6,442,500               13.32%
Boyd Taylor  (3)                                                   6,452,500               13.34%
Joseph Cargnelli (3)                                               6,442,500               13.32%

</TABLE>

-----------------
         (1)      Frank Colvin, one of our directors, and Dave Wetter, a
                  non-voting observer to our board of directors, were appointed
                  to our board as nominees of General Motors Corporation, in
                  accordance with the terms of the Corporate Alliance Agreement
                  that we entered into with General Motors Corporation on
                  October 16, 2001. General Motors Corporation is the world's
                  largest vehicle manufacturer. The address of General Motors
                  Corporation is 300 Renaissance Center, Detroit, Michigan
                  48265.

         (2)      General Motors Corporation acquired all of its shares of the
                  Company pursuant to the Corporate Alliance Agreement and the
                  Share Subscription Agreement, each dated October 16, 2001. The
                  issuance of these shares to General Motors decreased the
                  beneficially ownership of all of our other shareholders.

         (3)      The address of all of the senior executive officers listed in
                  this table is Hydrogenics Corporation, 5985 McLaughlin Road,
                  Mississauga, Ontario, Canada L5R 1B8.

                  B.      RELATED PARTY TRANSACTIONS

         We subcontract some manufacturing in the normal course of our
operations to a company owned by the father and uncle of Joseph Cargnelli, one
of our directors and a principal shareholder. For the fiscal year ended December
31, 2001, this company billed us approximately $1.2 million. We believe that the
rates this company has charged us for its services are comparable to rates we
could have obtained from an unrelated third party.

         On October 16, 2001, we formed a strategic alliance with General Motors
to accelerate the development of fuel cell technology into global commercial
markets. The alliance includes shared intellectual property rights and joint
efforts in fuel cell product development, engineering, prototyping, testing,
branding, and marketing strategies. As part of the agreement, GM received 11.4
million of our common shares, or approximately 24% of



                                       44
<PAGE>

our outstanding shares. We also issued GM warrants to acquire an additional 2.5
million common shares, bringing GM's stake to approximately 28% of our
outstanding equity. GM also appointed a representative to our board of directors
in conjunction with the alliance, resulting in the expansion of our board from
seven directors to eight.

                  C.       INTERESTS OF EXPERTS AND COUNSEL.

                           Not applicable.

ITEM 8.           FINANCIAL INFORMATION.

                  A.       CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
                           INFORMATION.

         Please see the Financial Statements listed in Item 18 for audited
consolidated financial statements prepared in accordance with this Item.

                  B.       SIGNIFICANT CHANGES.

         There have been no significant changes since the date of the financial
statements included in this annual report.

ITEM 9.           THE OFFER AND LISTING.

                  A.       OFFER AND LISTING DETAILS.

PRICE HISTORY OF COMMON SHARES.

         Our common shares are quoted on the Nasdaq National Market under the
symbol "HYGS" and are listed on The Toronto Stock Exchange under the symbol
"HYG." The following tables set forth, for the periods indicated, high and low
sale prices of our common shares as reported on the Nasdaq National Market and
The Toronto Stock Exchange, respectively:



                                       45
<PAGE>

                             Nasdaq National Market


<TABLE>
<CAPTION>

                                                          Highest Reported Price          Lowest Reported Price
                                                          ----------------------          ---------------------
<S>                                                           <C>                             <C>
Annual Market Prices
   Fiscal Year Ended December 31, 2001............                $ 8.09                          $1.70
   Fiscal Year Ended December 31, 2000 (from
   November 1)....................................                 12.31                           2.75
Quarterly Market Prices
   Fiscal Year Ended December 31, 2001
     First Quarter................................                  8.09                           3.25
     Second Quarter...............................                  7.30                           3.51
     Third Quarter................................                  4.85                           1.70
     Fourth Quarter...............................                  7.94                           2.07
   Fiscal Year Ended December 31, 2000
     First Quarter................................                    --                             --
     Second Quarter...............................                    --                             --
     Third Quarter................................                    --                             --
     Fourth Quarter...............................                 12.31                           2.75
Monthly Market Prices
     April 2002...................................                  8.04                           5.92
     March 2002...................................                  8.30                           6.40
     February 2002................................                  7.37                           5.91
     January 2002.................................                 10.32                           5.94
     December 2001................................                  7.94                           5.06
     November 2001................................                  6.23                           4.15

</TABLE>

                           The Toronto Stock Exchange


<TABLE>
<CAPTION>

                                                          Highest Reported Price          Lowest Reported Price
                                                          ----------------------          ---------------------
<S>                                                          <C>                             <C>
Annual Market Prices
   Fiscal Year Ended December 31, 2001............              Cdn.$12.50                       Cdn.$2.65
   Fiscal Year Ended December 31, 2000 (from
   November 1)....................................                   21.75                            4.30
Quarterly Market Prices
   Fiscal Year Ended December 31, 2001
     First Quarter................................                   12.25                            5.05
     Second Quarter...............................                   11.00                            5.50
     Third Quarter................................                    7.35                            2.65
     Fourth Quarter...............................                   12.50                            3.30
   Fiscal Year Ended December 31, 2000
     First Quarter................................                      --                              --
     Second Quarter...............................                      --                              --
     Third Quarter................................                      --                              --
     Fourth Quarter...............................                   21.75                            4.30
Monthly Market Prices
     April 2002...................................                   12.60                            9.29
     March 2002...................................                   12.98                           10.27
     February 2002................................                   11.85                            9.06
     January 2002.................................                   16.53                            9.51
     December 2001................................                   12.50                            8.02
     November 2001................................                    9.85                            6.70


</TABLE>
                  B.       PLAN OF DISTRIBUTION.

                           Not applicable.



                                       46
<PAGE>

                  C.       MARKETS.

         As noted above, the Company's common shares are quoted on the Nasdaq
National Market and are listed on the Toronto Stock Exchange

                  D.       SELLING SHAREHOLDERS.

                           Not applicable.

                  E.       DILUTION.

                           Not applicable.

                  F.       EXPENSES OF THE ISSUE.

                           Not applicable.

ITEM 10.          ADDITIONAL INFORMATION.

                  A.       SHARE CAPITAL.

                           Not applicable.

                  B.       MEMORANDUM AND ARTICLES OF ASSOCIATION.

                  BY-LAWS AND ARTICLES OF INCORPORATION

         The Company's Restated Articles of Incorporation, which we refer to as
our articles of incorporation, are filed with Industry Canada, pursuant to the
Canada Business Corporations Act, which we refer to as the CBCA. Our articles of
incorporation do not have a stated purpose.

         Our authorized capital consists of an unlimited number of common shares
with no par value and an unlimited number of preferred shares with no par value
issuable in series, of which 47,918,446 common shares and no preferred shares
were issued and outstanding as of December 31, 2001.

                  DIRECTORS

         Pursuant to applicable Canadian law, our directors, in exercising their
powers and discharging their duties must act honestly and in good faith with a
view to the best interests of the Company. They must also exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.

         Pursuant to the provisions of the CBCA, a director who is party to a
material contract or transaction with the Company or who has a material interest
in any person who is party to a material contract or transaction with the
Company must disclose to the Company the nature and extent of such interest in
writing or request to have such interest noted in the minutes of meetings of the
directors. Furthermore, a director who has a material interest in a matter
before the board must refrain from voting on the matter unless the contract: is
with one of our affiliates; is an arrangement for money lent to or obligations
undertaken by the director for the benefit of the Company or one of our
affiliates; relates to the director's remuneration as a director or officer of
the Company; or, relates to our indemnity or insurance for our officers and
directors. Absent appropriate quorum, directors are precluded from voting on any
matters concerning remuneration.

         Pursuant to the CBCA a majority of our directors must be resident
Canadians. The CBCA also requires that we have not less than three directors, at
least two of whom are not officers, directors or employees of the Company. We
currently have seven directors, all of whom are resident Canadians. Our articles
of incorporation and our by-laws do not impose any other director qualification
requirements.



                                       47
<PAGE>

                  COMMON SHARES

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

                  PREFERRED SHARES

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

                  ACTION NECESSARY TO CHANGE RIGHTS OF SHAREHOLDERS

         Under the CBCA, amendments to our articles of incorporation will
generally require approval by special resolution. A special resolution is a
resolution passed by a majority of not less than two-thirds of the votes cast by
the shareholders who voted in person or by proxy in respect of that resolution
at the annual or special meeting called for such purpose. If the amendment is of
a nature affecting a particular class or series of our shares in a manner
requiring a separate class or series vote, that class or series is entitled to
vote on the amendment whether or not it otherwise carries the right to vote.
Under the CBCA, our directors may make, amend or repeal any by-law that
regulates our business or affairs. Where our directors make, amend or repeal a
by-law, they are required to submit the by-law, amendment or repeal to the
shareholders at the next meeting of shareholders, and the shareholders may, by
an ordinary resolution, which is a resolution passed by a simple majority of the
votes cast by shareholders who voted in respect of the resolution, confirm,
reject or amend the by-law, amendment or repeal.

                  MEETINGS OF SHAREHOLDERS

Our board is required to call an annual meeting of the shareholders no later
than 15 months after the holding of the last preceding annual meeting. Our board
may also call a special meeting of the shareholders at any time. The only
persons entitled to attend a meeting of our shareholders are our directors, our
auditors and those persons entitled to vote at such meeting and any other
persons who, although not entitled to vote at the meeting, are entitled to
attend such meeting pursuant the provisions of the CBCA.

Under our by-laws, a quorum of shareholders is present at a meeting,
irrespective of the number of persons actually present at the meeting, if the
holders of a majority of the shares entitled to vote at the meeting are present
in person or represented by proxy.

                  LIMITATIONS ON RIGHT TO OWN SECURITIES

         There are no limitations in our articles of incorporation or by-laws or
under Canadian federal or provincial laws, on the right of non-residents of
Canada or foreign owners to hold or vote our common shares, except for
transactions involving or being deemed to involve an acquisition of control,
which requires compliance with the Investment Canada Act.

                  CHANGE IN CONTROL



                                       48
<PAGE>

         Our articles of incorporation and by-laws do not contain any provisions
that would have the effect of delaying, deferring or preventing a change in
control of the Company.

         Under the CBCA, certain extraordinary corporate actions, such as
amalgamations, continuances, sales, leases or exchanges of all or substantially
all of the property of a corporation other than in the ordinary course of
business, and other extraordinary corporate actions such as liquidations or
dissolutions are also required to be passed by special resolution. In certain
cases, a special resolution to approve an extraordinary corporate action is also
required to be approved separately by the holders of a class or series of
shares.

                  DISCLOSURE OF OWNERSHIP

         Our by-laws do not impose an ownership threshold, above which
shareholder ownership must be disclosed and any obligation to make such
disclosure would be the subject of applicable securities laws.

                  C.       MATERIAL CONTRACTS.

         Contribution agreement, dated January 10, 2001, between Canada
(National Resources Canada) and the Company, including an amendment dated April
11, 2001. In the first quarter of 2001, we entered into a contribution agreement
with the Government of Canada, pursuant to which the Government of Canada,
through the Climate Change Action Fund and NRCan, agreed to contribute up to
Cdn.$2 million to be used in the development of a 50kW fuel cell power generator
fueled by natural gas. The total project cost is Cdn.$6,000,000 over two years.
The Technology Early Action Measures (TEAM) component of the Climate Change
Action Fund is contributing $1.6 million to the project and NRCan is
contributing Cdn.$400,000. We are contributing Cdn.$4,000,000 to the project.
Under this agreement, NRCan receives a royalty equal to 4% of all revenue we
receive for the licensing and sale of the intellectual property related to this
project. This royalty right expires upon the earlier of NRCan recouping the
amount of the funding given to us or 10 years. We retain all intellectual
property rights in this project, provided that we pursue the commercialization
of the intellectual property, subject to a non-exclusive royalty-free license
granted to Canada in perpetuity to use or sublicense the intellectual property
rights, should we decide not to commercialize the technology.

         Employment agreements, dated April 20, 2001, between the Company and
each of Pierre Rivard, Boyd Taylor, Joseph Cargnelli and Ravi Gopal. In respect
of these agreements, we have agreed to provide these officers with annual
salaries in 2001 ranging from Cdn.$135,000 to Cdn.$160,000 per annum. In
addition, each agreement provides for an initial term of two years ending April
20, 2003, with automatic one year extensions thereafter unless otherwise
terminated pursuant to the terms of such agreement. These agreements also
provide for payments of varying amounts not exceeding 24 month's salary in lieu
of notice if the executive officer is terminated without cause from his position
at any time during the term of the agreement. Upon termination resulting from a
change of our control, each executive officer will be entitled to receive an
amount equal to 24 month's salary. In addition, upon termination resulting from
a change of control, all unvested options shall become immediately exercisable
for a period of ninety days from the date of termination.

         Joint Development Agreement dated April 18, 2001 between the Company
and Johnson Matthey, Inc. Pursuant to this agreement we are developing a fully
integrated natural gas fuel processor system with Johnson Matthey, Inc. The fuel
processor is expected to incorporate Johnson Matthey's proprietary fuel
processing technology and our integrated system controls and balance-of-plant
subsystems.

         Sales Agency Agreement dated July 23, 2001, between the Company and
Hankook BEP Co. Ltd. Pursuant to this agreement, Hankook BEP, a Korean
distributor of automotive testing systems, will market and sell our FCATS
products in the Korean market.

         Distribution Agreement dated August 22, 2001, between the Company and
Toyota Tsusho Corporation. Pursuant to this exclusive agreement Toyota Tsusho
Corporation will market and sell our FCATS products in the Japanese market.



                                       49
<PAGE>

         Corporate Alliance Agreement, Master Intellectual Property Agreement,
Governance Agreement, Share Subscription Agreement, Escrow Agreement and
Registration Rights Agreement, each dated October 16, 2001, between the Company
and General Motors Corporation. On October 16, 2001, we formed a strategic
alliance with General Motors Corporation (GM) to accelerate the development of
fuel cell technology into global commercial markets. The alliance includes
shared intellectual property rights and joint efforts in fuel cell product
development, engineering, prototyping, testing, branding, and marketing
strategies. As part of the agreement, GM received 11.3 million of our common
shares, or approximately 24% of our outstanding shares. We also issued GM
warrants to acquire an additional 2.4 million common shares, bringing GM's stake
to 28% of outstanding equity. GM also appointed a representative to our board of
directors in conjunction with the alliance, resulting in the expansion of our
board from seven directors to eight.

         Share Purchase Agreement dated April 16, 2002 among the Company, Dr.
Bernd Pitschak, Dr. Karl Klug and Creavis GmbH. Pursuant to this agreement we
acquired all of the issued and outstanding shares of EnKat GmbH, a company
located in Gelsenkirchen, Germany, for a total of approximately $550,000. EnKat
provides process engineering services relating to the integration of testing
environments for fuel cells and their components. We will rely on EnKat to
establish operations in Europe and to bolster our technological expertise in
fuel processing.

                  D.       EXCHANGE CONTROLS.

         There is no law, government decree or regulation in Canada restricting
the export or import of capital or affecting the remittance of dividends,
interest or other payments to a nonresident holder of common shares, other than
withholding tax requirements.

                  E.       TAXATION.

         Because Canadian and United States tax consequences may differ from one
holder to the next, the discussion set out below does not purport to describe
all of the tax considerations that may be relevant to a shareholder and such
shareholder's particular situation. Accordingly, a shareholder is advised to
consult a tax advisor as to the United States and Canadian federal, provincial,
state and other tax consequences of owning our common shares. The statements of
United States and Canadian tax law set out below are based upon the laws and
interpretations in force as of the date of this annual report, and are subject
to changes occurring after that date.

                   CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

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

         o        deals at arm's length with us;

         o        is the beneficial owner of our common shares;

         o        holds our common shares as capital property;

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

         o        is not an insurer for whom our common shares constitute
                  designated insurance property.

         Our common shares will be capital property to a U.S. holder unless they
are held in the course of carrying on a business or in an adventure in the
nature of trade. This summary does not apply to a U.S. holder that is a
"financial institution" for purposes of the rules contained in the Income Tax
Act (Canada). There are no Canadian federal estate taxes applicable to the
purchase or ownership of our common shares. Under the Income Tax Act



                                       50
<PAGE>

(Canada), on death, a U.S. holder would be deemed to dispose of all of his or
her assets, including our common shares.

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

         This summary is not exhaustive and, except for the proposed amendments
to the Income Tax Act, does not take into account or anticipate prospective or
retrospective changes in the law or the administrative or assessing practices of
the Canada Customs and Revenue Agency, whether these changes are effected by
judicial, governmental or legislative action or interpretation. This summary
does not take into account tax legislation or considerations of any province or
territory of Canada. None of the tax consequences described herein depend or
rely upon any of the proposed amendments to the Income Tax Act passing into law.
Because Canadian tax consequences may differ from one holder to the next, this
summary does not purport to describe all of the tax considerations that may be
relevant to a shareholder and his particular situation. In unusual cases, the
Canadian tax treatment to a U.S. holder may differ from the treatment described
herein. A shareholder is advised to consult a tax advisor.

DIVIDENDS

         Dividends paid, credited or deemed to have been paid or credited on our
common shares are subject to non-refundable Canadian withholding tax under the
Income Tax Act at the rate of 25%, although this rate may be reduced by the
provisions of an applicable income tax treaty. Subject to the exceptions noted
immediately below, under the Convention, U.S. holders who beneficially own the
dividends will be subject to a 15% withholding tax on the gross amount of such
dividends. In the case of a U.S. holder that is a corporation which beneficially
owns at least 10% of our voting shares, the applicable rate of withholding tax
on dividends will be reduced to 5%. In the case of dividends paid, credited or
deemed to be credited to a U.S. holder that is a tax exempt organization as
described in Article XXI of the Convention, generally no withholding tax will be
payable.

DISPOSITIONS

         Under the Income Tax Act, assuming that a shareholder is a U.S. holder
and provided that our common shares are listed on a prescribed stock exchange,
which includes the Toronto Stock Exchange and the Nasdaq National Market, the
shareholder will be exempt from Canadian tax on a capital gain realized on an
actual or deemed disposition of the common shares unless such shareholder,
persons with whom such shareholder did not deal at arm's length or such
shareholder together with such persons owned 25% or more of our issued shares of
any class at any time during the five-year period before the actual or deemed
disposition. For this purpose, it is the position of the Canada Customs and
Revenue Agency that a holder of an interest in or option to acquire our shares
will be considered to hold the shares to which such interest or option relates.

                 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

         The following discussion summarizes the material United States federal
income tax considerations arising from the acquisition, ownership and
disposition of our common shares by a United States holder. A United States
holder is:

         o        an individual citizen or resident of the United States;

         o        a corporation created or organized in or under the laws of the
                  United States or any of its political subdivisions;

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



                                       51
<PAGE>

         o        a trust, if its administration is subject to the primary
                  supervision of a United States court and it has one or more
                  United States persons with authority to control all of such
                  trust's substantial decisions.

         The discussion below is based upon the provisions of the United States
Internal Revenue Code of 1986, as amended, or Code, on treasury regulations
promulgated thereunder and on existing administrative rulings and court
decisions in effect as of the date of this annual report, any of which may be
repealed, revoked or modified, perhaps with retroactive effect, so as to result
in federal income tax consequences different from those discussed below. The
following discussion describes the general application of the U.S. federal
income tax laws. The discussion does not purport to describe all of the tax
considerations that may be relevant to any particular shareholder in light of
such shareholder's circumstances.

         This discussion deals only with United States holders who hold their
common shares as a capital asset and does not address tax considerations
applicable to United States holders that may be subject to special tax rules,
such as:

         o        dealers or traders in securities or currencies;

         o        financial institutions or other United States holders that
                  treat income in respect of our common shares as financial
                  services income;

         o        life insurance companies;

         o        tax-exempt entities;

         o        United States holders that hold our common shares as a part of
                  a straddle or conversion transaction or other arrangement
                  involving more than one position or that hedge against
                  currency risks in respect of our common shares;

         o        United States holders that own, or are deemed for United
                  States tax purposes to own, 10% or more of the total combined
                  voting power of all classes of our voting shares;

         o        shareholders subject to the alternative minimum tax provisions
                  of the Code;

         o        partnerships or persons who hold our common shares in a
                  partnership or other pass-through entity;

         o        United States holders that have a principal place of business
                  or "tax home" outside the United States; or

         o        United States holders whose "functional currency" is not the
                  United States dollar.

         EACH UNITED STATES HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR TO
DETERMINE THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
ASSOCIATED WITH THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES,
IN LIGHT OF SUCH HOLDER'S PARTICULAR FACTS AND CIRCUMSTANCES.

DISTRIBUTIONS

         Distributions that we make with respect to our common shares, other
than distributions in liquidation and distributions in redemption of shares that
are treated as exchanges, will be taxed to United States holders as ordinary
dividend income to the extent that the distributions do not exceed our current
and accumulated earnings and profits, as determined for United States federal
income tax purposes. The amount treated as a dividend will include any Canadian
withholding tax deducted from the distribution. Distributions, if any, in excess
of our current and accumulated earnings and profits, as determined for United
State federal income tax purposes, will constitute a nontaxable return of
capital to a United States holder and will be applied against and reduce the
United States



                                       52
<PAGE>

holder's tax basis in our common shares. To the extent that these distributions
exceed the tax basis of the United States holder in our common shares, the
excess will be treated as capital gain.

         In the case of distributions in Canadian dollars, the amount of the
distributions will equal the United States dollar value of the Canadian dollars
distributed, determined by reference to the spot currency exchange rate on the
date of receipt of the distribution by the United States holder, and the United
States holder will realize a foreign currency gain or loss only to the extent
that gain or loss arises as a result of foreign currency fluctuations from the
date the distribution is received (or deemed received) to the date such
distribution is converted into United States dollars. Any foreign currency gain
or loss will be treated as ordinary income or loss, which generally will be
United States source income or loss.

         Dividends that we pay will not be eligible for the dividends-received
deduction allowed to United States corporations under Section 243 of the Code.

SALE OR OTHER DISPOSITION

         Upon a sale or other disposition of our common shares, a United States
holder will recognize gain or loss in an amount equal to the difference between
the amount realized on the sale or disposition and the United States holder's
adjusted tax basis in the common shares (determined in U.S. dollars) sold or
disposed of. Subject to special rules that apply in the event we were to be
classified as a passive foreign investment company, any gain or loss recognized
will be capital gain or loss (the deductibility of which is limited) and will be
long-term capital gain or loss if the United States holder has held our common
shares for more than one year on the date of the sale of disposition. Special
rules may apply in the case of a sale of common shares to the Company.

FOREIGN TAX CREDIT

         In computing its United States federal income tax liability, a United
States holder may elect for each taxable year to claim a deduction or, subject
to the limitations with respect to foreign tax credits, a credit for foreign
income taxes paid or accrued by it, including any non-United States taxes
withheld from distributions, if any, that we pay on our common shares. For
foreign tax credit purposes, under Section 904(g) of the Code, in the event that
at least 50 percent of our shares (determined by vote or value) is owned,
directly, indirectly or by attribution, by United States persons, and subject to
the limitations described below, a portion of the dividends that we pay in each
taxable year will be treated as United States-source income, depending upon the
ratio for that taxable year of our United States-source earnings and profits to
our total earnings and profits. The remaining portion of our dividends will be
treated as foreign-source income and will be treated as passive income, subject
to the separate foreign tax credit limitation for passive income. The
application of Section 904(g) is subject to two limitations. First, if in any
taxable year we have earnings and profits, and less than 10 percent of those
earnings and profits are from United States sources, then dividends that we pay
from our earnings and profits for that year will be treated entirely as
foreign-source income. Second, because dividends that we pay are treated
entirely as foreign-source income under the Convention, a United States holder
that qualifies for the benefits of the Convention may elect to have the portion
of those dividends that would be treated as United States-source income under
Section 904(g) instead treated as foreign-source income that is subject to a
separate foreign tax credit limitation.

         If we were to be a passive foreign investment company (see "-- Passive
Foreign Investment Companies" below), special rules would apply to the
calculation of foreign tax credits. The rules relating to the determination of
the amount of foreign income taxes which may be claimed as foreign tax credits
are complex and United States holders should consult their tax advisors to
determine whether and to what extent a credit would be available.

PASSIVE FOREIGN INVESTMENT COMPANIES

         In general, a foreign corporation will be classified as a PFIC in any
taxable year in which either (i) 75% or more of its gross income is passive
income or (ii) 50% or more of the average value of its assets are held for the
production of, or produce, passive income. Passive income for these purposes
includes items such as dividends, interest, royalties, rents and gains from
commodities and securities transactions.



                                       53
<PAGE>

         If a corporation is a passive foreign investment company, a United
States holder must determine under which of three alternative taxing regimes it
wishes to be taxed:

         o        The "QEF" regime applies if the United States holder elects to
                  treat the PFIC as a "qualified electing fund" ("QEF") for the
                  first taxable year in which the United States holder owns
                  common shares of the foreign corporation or in which the
                  foreign corporation is a PFIC, whichever is later, and if the
                  foreign corporation complies with certain reporting
                  requirements. If the QEF regime applies, then each year that
                  the foreign corporation is a PFIC such United States holder
                  will include in its gross income a proportionate share of the
                  PFIC's ordinary earnings (which is taxed as ordinary income)
                  and net capital gain (which is taxed as long-term capital
                  gain), subject to a separate election to defer payment of
                  taxes, which deferral is subject to an interest charge. These
                  amounts would be included in income by an electing United
                  States holder for its taxable year in which the PFIC's taxable
                  year ends, whether or not such amounts are actually
                  distributed to the United States holder. A United States
                  holder's basis in the shares of the PFIC for which a QEF
                  election has been made would be increased to reflect the
                  amount of any taxed but undistributed income. Generally, a QEF
                  election allows an electing United States holder to treat any
                  gain realized on the disposition of his shares in the PFIC as
                  capital gain.

                  Once made, the QEF election applies to all subsequent taxable
                  years of the United States holder in which it holds common
                  shares of the foreign corporation and for which the foreign
                  corporation is a PFIC and can be revoked only with the consent
                  of the Internal Revenue Service. A shareholder makes a QEF
                  election by attaching a completed Internal Revenue Service
                  Form 8621, including the PFIC annual information statement, to
                  a timely filed United States federal income tax return. Even
                  if a QEF election is not made, a U.S. person who is a
                  shareholder in a PFIC must file a completed Internal Revenue
                  Service Form 8621 every year.

                  If a QEF election is not made for the first taxable year in
                  which the United States holder holds common shares in a
                  foreign corporation and the foreign corporation is a PFIC,
                  then special rules would apply.

         o        A second regime, the "mark-to-market" regime, may be elected
                  if the PFIC stock is publicly traded. Pursuant to this regime,
                  an electing United States holder's shares in the PFIC are
                  marked-to-market each year and the United States holder
                  recognizes as ordinary income or loss an amount equal to the
                  difference as of the close of the taxable year between the
                  fair market value of the PFIC stock and the United States
                  holder's adjusted tax basis in the PFIC stock. Losses are
                  allowed only to the extent of net mark-to-market gain
                  previously included by the United States holder under the
                  election for prior taxable years. An electing United States
                  holder's adjusted basis in the PFIC stock is increased by
                  income recognized under the mark-to-market election and
                  decreased by the deductions allowed under the election.

                  Under the mark-to-market election, gain on the sale of PFIC
                  stock is treated as ordinary income, and loss on the sale of
                  PFIC stock, to the extent the amount of loss does not exceed
                  the net mark-to-market gain previously included, is treated as
                  ordinary loss. The mark-to-market election applies to the tax
                  year for which the election is made and all later tax years,
                  unless the common shares cease to be marketable or the
                  Internal Revenue Service consents to the revocation of the
                  election.

                  If the mark-to-market election is not made for the first
                  taxable year in which the United States holder holds common
                  shares in a foreign corporation and the foreign corporation is
                  a PFIC, then special rules would apply.

         o        A United States holder making neither the QEF election nor the
                  mark-to-market election is subject to the "excess
                  distribution" regime. Under this regime, "excess
                  distributions" are subject to special tax rules. An excess
                  distribution is either (1) a distribution with respect to
                  stock that is greater than 125% of the average distributions
                  received by the United States holder from the PFIC over the
                  shorter of either the preceding three years or such United
                  States holder's holding



                                       54
<PAGE>

                  period for the PFIC's common shares, or (2) 100% of the gain
                  from the disposition of shares in the PFIC.

                  Excess distributions must be allocated ratably to each day
                  that a United States holder has held its shares in the PFIC. A
                  United States holder must include amounts allocated to the
                  current taxable year in its gross income as ordinary income
                  for that year. All amounts allocated to prior years of the
                  U.S. Holder would be taxed at the highest tax rate for each
                  such prior year applicable to ordinary income. The U.S. Holder
                  also would be liable for interest on the deferred tax
                  liability for each such prior year calculated as if such
                  liability had been due with respect to each such prior year. A
                  U.S. Holder that is an individual is not allowed a deduction
                  for interest on the deferred tax liability. The portions of
                  gains and distributions that are not characterized as "excess
                  distributions" are subject to tax in the current year under
                  the normal tax rules of the Code.

                  A U.S. person who inherits shares in a foreign corporation
                  that was a PFIC in the hands of the decedent (who did not make
                  either of the elections described above), is denied the
                  otherwise available step-up in the tax basis of such shares to
                  fair market value at the date of death. The U.S. person steps
                  into the shoes of the decedent and will be subject to the
                  rules described above.

         The Company's management does not believe that the Company was a PFIC
for the taxable year ended December 31, 2001; however, there can be no assurance
that the Internal Revenue Service will not take a contrary position. The
Company's status in future years will depend on its assets and activities in
those years and the Company cannot assure you that it will not be considered a
passive foreign investment company for any taxable year. If the Company is a
PFIC for any taxable year in which you are a shareholder, you will be treated as
continuing to own an interest in a PFIC in subsequent tax years, unless you make
the QEF election or the mark-to-market election. The Company will notify United
States holders in the event it concludes that it will be treated as a PFIC for
any taxable year to enable United States holders to consider whether or not to
elect to treat the Company as a "qualified electing fund" for U.S. federal
income tax purposes, to elect to "mark to market" their common shares or to
become subject to the "excess distribution" regime.

         UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
THE APPLICATION OF THE PFIC RULES, INCLUDING ELIGIBILITY FOR AND THE MANNER AND
ADVISABILITY OF MAKING, THE QEF ELECTION OR THE MARK-TO-MARKET ELECTION.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

         United States holders generally are subject to information reporting
requirements with respect to dividends paid in the United States on our common
shares. Under the Code, a United States holder may be subject, under certain
circumstances, to backup withholding at a rate up to 30% with respect to
dividends paid on our common shares unless the holder provides proof of an
applicable exemption or correct taxpayer identification number and otherwise
complies with applicable requirements of the backup withholding rules. A holder
of common shares who does not provide a correct taxpayer identification number
may be subject to penalties imposed by the Internal Revenue Service. Amounts
withheld under the backup withholding rules are not an additional tax and may be
refunded or credited against the holder's federal income tax liability, provided
the required information is furnished to the Internal Revenue Service.

                  F.       DIVIDENDS AND PAYING AGENTS.

                  Not applicable.

                  G.       STATEMENT BY EXPERTS.

                  Not applicable.

                  H.       DOCUMENTS ON DISPLAY.



                                       55
<PAGE>

         We have filed this annual report with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended. Statements
made in this annual report as to the contents of any contract, agreement or
other document referred to herein are not necessarily complete. With respect to
each such contract, agreement or other document filed as an exhibit to this
annual report, reference is made to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.

         We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and file reports and other information with
the Securities and Exchange Commission and with the securities regulators in
each of the provinces of Canada under applicable provincial securities
legislation. Reports and other information which we file with the Securities and
Exchange Commission, including this annual report, may be inspected and copied
at the public reference facilities of the Securities and Exchange Commission at
450 Fifth Street N.W., Room 1024, Washington D.C. 20549.

         Copies of this material can also be obtained by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Additionally, copies of this
material may also be obtained from the Securities and Exchange Commission's
Internet site at http://www.sec.gov. The Commission's telephone number is
1-800-SEC-0330. Documents filed in Canada are available at the website of the
Canadian System for Election and Document Analysis and Retrieval (SEDAR) at
http://www.sedar.com.

ITEM 11.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         INTEREST RATE RISK. The primary objective of our investment activities
is to preserve principal while at the same time maximizing the income we receive
from our investments without significantly increasing risk. Some of the
securities in which we invest may have market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. We
currently maintain an investment portfolio primarily of Canadian government
backed short-term notes. The average duration of all of our investments in 2001
was less than one year. Due to the short-term nature of these investments, we
believe that we have no material exposure to interest rate risk arising from our
investments. Therefore, no quantitative tabular disclosure is required.

         FOREIGN CURRENCY RATE FLUCTUATIONS. We are exposed to foreign currency
exchange risk related to our transactions, assets and liabilities denominated in
foreign currencies. Specifically, we held US$64.2 million in short-term
investments, of which about 40% was denominated in US dollars, with the balance
held in Canadian dollar deposits. For the year ended December 31, 2001, we
reported our financial statements in US dollars, however the currency of
measurement was the Canadian dollar.

         Effective January 1, 2002, we changed our functional currency to the US
dollar. Currently, approximately 60% of our short-term investments are
denominated in Canadian dollars. Assuming no change in the relative currency
weighting of short-term investments, every 1% change in the value of the
Canadian dollar relative to that of the US dollar will result in a foreign
currency gain or loss of approximately $360,000. This excludes the impact of the
exchange rate on other balance sheet items or on ongoing operational cash flows.


ITEM 12.      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

                  Not applicable.


                                     PART II

ITEM 13.      DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

                  There have not been any material defaults on payments of
indebtedness, there are no payments of dividends in arrears, and there have not
been any other material delinquencies.

ITEM 14.      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
              OF PROCEEDS.



                                       56
<PAGE>

                  A. There have been no material modifications to the
                  instruments defining the rights of holders of any class of
                  registered securities.

                  B. There have been no material modifications or qualifications
                  to the rights evidenced by any class of registered securities.

                  C. There have been no withdrawals or substitutions of a
                  material amount of assets securing any class of registered
                  securities.

                  D. The trustees or paying agents for our registered securities
                  have not changed in the last financial year.

                  E.The effective date of the registration statement for which
                  the information is being disclosed is October 26, 2000 (File
                  No. 333-42682) (the "Registration Statement"). The following
                  table sets forth, with respect to the common shares
                  registered, the amount of securities registered, the aggregate
                  offering price of amount registered, the amount sold and the
                  aggregate offering price of the amount sold, for the account
                  of our company:

<TABLE>
                  ------------------------------------------------------ ----------------
<S>                                                                     <C>
                  Number of common shares registered...................    7,000,000
                  ------------------------------------------------------ ----------------
                  Aggregate offering price of shares registered........  $84,000,000
                  ------------------------------------------------------ ----------------
                  Number of common shares sold.........................    7,000,000
                  ------------------------------------------------------ ----------------
                  Aggregate offering price of shares sold..............  $84,000,000
                  ------------------------------------------------------ ----------------

</TABLE>

                   The following table sets forth the expenses incurred by us in
connection with our initial public offering during the period commencing the
effective date of the Registration Statement and ending December 31, 2001. None
of these expenses were paid directly or indirectly to directors, officers,
persons owning 10% or more of any class of equity securities of our company or
to our affiliates:

<TABLE>
<CAPTION>
                  ---------------------------------- ------------------------------------
                                                     Direct Or Indirect Payments To
                                                     Persons Other Than
                  Purpose                            Affiliated Persons
                  ---------------------------------- ------------------------------------
<S>                                                <C>
                  Underwriting discounts and         $5,880,000
                  commissions......................
                  ---------------------------------- ------------------------------------
                  Other expenses...................  $1,608,606
                  ---------------------------------- ------------------------------------
                  Total expenses...................  $7,488,606
                  ---------------------------------- ------------------------------------

</TABLE>

         The net public offering proceeds to us, after deducting the total
expenses (set forth in the table above), were $76,511,394.

                  The following table sets forth the amount of net public
offering proceeds used by us for the purposes listed below. None of such
payments were paid directly or indirectly to directors, officers, persons owning
10% or more of any class of our equity securities or to our affiliates:


<TABLE>
<CAPTION>
                  ---------------------------------- ------------------------------------
                                                     Direct Or Indirect Payments To
                                                     Persons Other Than
                  Purpose                            Affiliated Persons
                  ---------------------------------- ------------------------------------
<S>                                                <C>

</TABLE>



                                       57
<PAGE>



<TABLE>
<CAPTION>
                  ---------------------------------- ------------------------------------
                                                     Direct Or Indirect Payments To
                                                     Persons Other Than
                  Purpose                            Affiliated Persons
                  ---------------------------------- ------------------------------------
<S>                                                <C>
                  Acquisition of other companies     N/A
                  and business(es).................
                  ---------------------------------- ------------------------------------
                  Construction of plant, building    N/A
                  and facilities...................
                  ---------------------------------- ------------------------------------
                  Purchase and installation of       $3,585,000
                    machinery and equipment........
                  ---------------------------------- ------------------------------------
                  Purchase of real estate..........  N/A
                  ---------------------------------- ------------------------------------
                  Repayment of                       N/A
                  indebtedness.....................
                  ---------------------------------- ------------------------------------
                  Working capital..................  $8,756,394
                  ---------------------------------- ------------------------------------
                  Temporary investments............  $64,170,000 in short-term
                                                     government backed notes
                  ---------------------------------- ------------------------------------
                  Other purposes...................  N/A
                  ---------------------------------- ------------------------------------

</TABLE>


ITEM 15.       [RESERVED]

                  Not applicable.

ITEM 16.      [RESERVED]

                  Not applicable.


                                       58
<PAGE>

                                    PART II

ITEM 17.      FINANCIAL STATEMENTS.

         Not applicable.

ITEM 18.      FINANCIAL STATEMENTS.

         Please see the accompanying financial statements attached to this
annual report commencing on page F-1.


ITEM 19.      EXHIBITS.


<TABLE>
<CAPTION>

        EXHIBIT NUMBER          NAME OF DOCUMENT
        --------------          ----------------
<S>                           <C>
             1.1                Articles of the Company.  (1)
             1.2                By-laws of the Company.  (2)
             2.1                Form of share certificate.  (3)
             4.1                Stock Option Plan.  (4)
             4.2                Form of Stock Option Agreement.  (5)
             4.3                Lease, dated May 19, 1999, by and between the Company and Atlantis Real Estate
                                Corporation.  (6)
             4.4                Employment letter agreement between Dr. Ravi Gopal and the Company, dated March 16,
                                1998.  (7)
             4.5                Offer to Lease dated June 1, 2000 by and between the Company and Orlando
                                Corporation.  (8)
             4.6                Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated October 17, 1996, between Canada and the Company.  (9)
             4.7                Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated July 3, 1997, between Canada and the Company.  (10)
             4.8                Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated June 9, 1998, between Canada and the Company.  (11)
             4.9                Efficiency and Alternative Energy Program Amendment to the Contribution Agreement
                                between Canada and the Company, dated March 13, 2000.  (12)
             4.10               Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated June 9, 1999, between Canada and the Company.  (13)
             4.11               Natural Resources Canada Efficiency and Alternative Energy Program Amendment No. 1
                                to the Contribution Agreement between Canada and the Company, dated February 1,
                                2000. (14)
             4.12               Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated May 25, 2000, between Canada and the Company.  (15)
             4.13               Industrial Research Assistance Program Contribution Agreement, dated November 24,
                                1998, between National Research Council Canada and the Company.  (16)
             4.14               Industrial Research Assistance Program Contribution Agreement, dated December 1,
                                1999, between National Research Council Canada and the Company.  (17)
             4.15               Research Agreement for a Cooperative Project, dated November 19, 1996, between
                                Universite du Quebec a Trois-Rivieres and the Company.  (18)
             4.16               Lease, dated June 23, 2000, by and between Orlando Corporation and the Company.  (19)
             4.17               Employment Agreement between Pierre Rivard and the Company, dated April 20, 2001.
                                (20)
             4.18               Employment Agreement between Boyd Taylor and the Company, dated April 20, 2001. (21)
             4.19               Employment Agreement between Ravi Gopal and the Company, dated April 20, 2001. (22)


</TABLE>

                                       59
<PAGE>


<TABLE>
<CAPTION>

        EXHIBIT NUMBER          NAME OF DOCUMENT
        --------------          ----------------
<S>                           <C>
             4.20               Employment Agreement between Joseph Cargnelli and the Company, dated April 20, 2001.
                                (23)
             4.21               Agreement of Lease, dated as of December 15, 2000, between Crown/Chadwick Realty
                                Corp. and the Company (24)
             4.22               Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement between Canada and the Company, dated January 10, 2001. (25)
             4.23               Natural Resources Canada Efficiency and Alternative Energy Program Amendment No. 1
                                to the Contribution Agreement, dated April 11, 2001. (26)
             4.24               Joint Development Agreement between the Company and Johnson Matthey, Inc, dated
                                April 18, 2001.
             4.25               Sales Agency Agreement between the Company and Hankook BEP Co. Ltd., dated July 23,
                                2001.
             4.26               Distribution Agreement between the Company and Toyota Tsusho Corporation, dated
                                August 22, 2001.
             4.27               Corporate Alliance Agreement between General Motors Corporation and the Company,
                                dated October 16, 2001.
             4.28               Master Intellectual Property Agreement between General Motors Corporation and the
                                Company, dated October 16, 2001.
             4.29               Governance Agreement between General Motors Corporation and the Company, dated
                                October 16, 2001. (27)
             4.30               Share Subscription Agreement between General Motors Corporation and the Company,
                                dated October 16, 2001. (28)
             4.31               Escrow Agreement between General Motors Corporation and the Company, dated October
                                16, 2001. (29)
             4.32               Registration Rights Agreement between General Motors Corporation and the Company,
                                dated October 16, 2001. (30)
             4.33               Share Purchase Agreement among the Company, Dr. Bernd Pitschak, Dr. Karl Klug and
                                Creavis GmbH, dated April 16, 2002.

</TABLE>

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

(1) Incorporated by reference from Exhibit 3.1 to Amendment No. 4 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on October 13, 2000.

(2) Incorporated by reference from Exhibit 3.1 to Amendment No. 4 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on October 13, 2000.

(3) Incorporated by reference from Exhibit 4.1 to Amendment No. 5 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on October 23, 2000.

(4) Incorporated by reference from Exhibit 10.3 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(5) Incorporated by reference from Exhibit 10.4 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(6) Incorporated by reference from Exhibit 10.5 to the Company's Registration
Statement on Form F-1, File No. 333-42682, filed with the Securities and
Exchange Commission on July 31, 2000.

(7) Incorporated by reference from Exhibit 10.7 to the Company's Registration
Statement on Form F-1, File No. 333-42682, filed with the Securities and
Exchange Commission on July 31, 2000.

(8) Incorporated by reference from Exhibit 10.8 to the Company's Registration
Statement on Form F-1, File No. 333-42682, filed with the Securities and
Exchange Commission on July 31, 2000.



                                       60
<PAGE>

(9) Incorporated by reference from Exhibit 10.9 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(10) Incorporated by reference from Exhibit 10.10 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(11) Incorporated by reference from Exhibit 10.11 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(12) Incorporated by reference from Exhibit 10.12 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(13) Incorporated by reference from Exhibit 10.13 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(14) Incorporated by reference from Exhibit 10.14 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(15) Incorporated by reference from Exhibit 10.15 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(16) Incorporated by reference from Exhibit 10.16 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(17) Incorporated by reference from Exhibit 10.17 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(18) Incorporated by reference from Exhibit 10.18 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(19) Incorporated by reference from Exhibit 10.19 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(20) Incorporated by reference from Exhibit 4.18 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(21) Incorporated by reference from Exhibit 4.19 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(22) Incorporated by reference from Exhibit 4.20 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(23) Incorporated by reference from Exhibit 4.21 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(24) Incorporated by reference from Exhibit 4.22 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(25) Incorporated by reference from Exhibit 4.23 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(26) Incorporated by reference from Exhibit 4.24 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(27) Incorporated by reference from Exhibit 2 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.

(28) Incorporated by reference from Exhibit 1 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.

(29) Incorporated by reference from Exhibit 4 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.

(30) Incorporated by reference from Exhibit 3 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.



                                       61
<PAGE>
                            HYDROGENICS CORPORATION

                         INDEX TO FINANCIAL STATEMENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2001
AND 2000

<Table>
<S>                                                                                  <C>
Auditors Report......................................................................F-2

Consolidated Balance Sheets as at December 31, 2001 and 2000.........................F-3

Consolidated Statements of Operations and Retained Earnings (Deficit) for
the years ended December 31, 2001, 2000 and 1999.....................................F-4

Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999..................................................................F-5

Notes to Consolidated Financial Statements...........................................F-6
</Table>

                                      F-1
<PAGE>


HYDROGENICS CORPORATION




Auditors' Report



To the Shareholders of Hydrogenics Corporation

We have audited the consolidated balance sheets of Hydrogenics Corporation as at
December 31, 2001 and 2000 and the consolidated statements of operations and
retained earnings (deficit) and cash flows for each of the years in the
three-year period ended December 31, 2001.These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2001
and 2000 and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2001 in accordance with
Canadian generally accepted accounting principles.


PRICEWATERHOUSECOOPERS LLP

/s/ PRICEWATERHOUSECOOPERS
----------------------------
Chartered Accountants
March 1, 2002
Toronto, Canada



Comments by Auditors for United States of America Readers on Canada - United
States of America Reporting Difference

In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when
there is a change in accounting principles that has a material effect on the
comparability of the Company's financial statements, such as the change in the
definition of cash equivalents as described in note 2 to the consolidated
financial statements. Our report to the shareholders, dated March 1, 2002 is
expressed in accordance with Canadian reporting standards which do not require a
reference to such a change in accounting principles in the auditors' report when
the change is properly accounted for and adequately disclosed in the financial
statements.


PRICEWATERHOUSECOOPERS LLP

/s/ PRICEWATERHOUSECOOPERS
----------------------------
Chartered Accountants
March 1, 2002
Toronto, Canada




                                      F-2

<PAGE>


                                                        HYDROGENICS CORPORATION

Consolidated Balance Sheets



As at December 31, 2001 and December 31,2000
(thousands of U.S. dollars)

<TABLE>
<CAPTION>

                                                          DECEMBER 31,        December 31,
                                                                 2001                2000
                                                          ------------        ------------
<S>                                                       <C>                 <C>
ASSETS
CURRENT ASSETS
Cash ....................................................      1,639                 1,844
Short-term investments ..................................     64,170                75,592
Accounts receivable (notes 3 and 12) ....................      4,353                 2,582
Grants receivable .......................................        741                    75
Inventories (note 4) ....................................      2,969                 1,213
Prepaid expenses ........................................        129                   122
                                                            --------              --------
                                                              74,001                81,428


DEPOSITS ................................................        102                    67
PROPERTY, PLANT AND EQUIPMENT (note 5) ..................      3,780                 1,497
ACQUIRED INTELLECTUAL PROPERTY (note 6) .................     29,750                    --
                                                            --------              --------
                                                             107,633                82,992
                                                            --------              --------


LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (notes 7 and 12)      1,593                 2,463
Income taxes payable ....................................         11                   169
                                                            --------              --------
                                                               1,604                 2,632
                                                            --------              --------

LOAN PAYABLE (note 8) ...................................        208                   100
                                                            --------              --------
                                                               1,812                 2,732
                                                            --------              --------

SHAREHOLDERS' EQUITY
Share capital and other equity (note 9) .................    114,526                80,740
Deficit .................................................     (4,659)               (1,843)
Foreign currency translation adjustment .................     (4,046)                1,363
                                                            --------              --------
                                                             105,821                80,260
                                                            --------              --------
                                                             107,633                82,992
                                                            --------              --------
</TABLE>



COMMITMENTS AND CONTINGENCIES (note 10)
APPROVED BY THE BOARD OF DIRECTORS:


NORMAN SEAGRAM                                      PIERRE RIVARD

/s/ Norman Seagram                                  /s/ Pierre Rivard
---------------------                               ---------------------

NORMAN SEAGRAM,                                     PIERRE RIVARD,
Chairman                                            President, CEO


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



                                      F-3
<PAGE>


HYDROGENICS CORPORATION


Consolidated Statements of Operations and Retained Earnings (Deficit)


For the years ended December 31, 2001, 2000 and 1999
(thousands of U.S. dollars, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                    2001            2000           1999
                                                                    ----            ----           ----
<S>                                                                <C>            <C>            <C>
REVENUES ..................................................         7,418          8,883          2,674

COST OF REVENUES ..........................................         4,941          6,485          2,105
                                                               ----------     ----------     ----------
                                                                    2,477          2,398            569
                                                               ----------     ----------     ----------

OPERATING EXPENSES
Selling, general and administrative .......................         4,403          2,069            534
Research and development ..................................         3,518            790            398
Research and development grants ...........................        (1,181)          (140)          (262)
Depreciation of property, plant and equipment .............           716            224             44
Amortization of acquired intellectual property ............         3,459             --             --
                                                               ----------     ----------     ----------
                                                                   10,915          2,943            714
                                                               ----------     ----------     ----------
LOSS FROM OPERATIONS ......................................        (8,438)          (545)          (145)
                                                               ----------     ----------     ----------

OTHER INCOME (EXPENSES)
Accrued dividends and amortization of
     discount on preferred shares .........................            --           (262)           (73)
Provincial capital tax ....................................          (123)          (260)            --
Interest ..................................................         2,927            832              9
Foreign currency gains (losses) ...........................         2,974         (1,329)            --
                                                               ----------     ----------     ----------
                                                                    5,778         (1,019)           (64)
                                                               ----------     ----------     ----------
LOSS BEFORE INCOME TAXES ..................................        (2,660)        (1,564)          (209)


CURRENT INCOME TAX EXPENSE (RECOVERY) (note 11) ...........           156            172             (1)
                                                               ----------     ----------     ----------
NET LOSS FOR THE YEAR .....................................        (2,816)        (1,736)          (208)


RETAINED EARNINGS (DEFICIT) - BEGINNING OF YEAR ...........        (1,843)          (107)           101
                                                               ----------     ----------     ----------
DEFICIT - END OF YEAR .....................................        (4,659)        (1,843)          (107)
                                                               ----------     ----------     ----------

LOSS PER SHARE (note 15)
Basic and diluted .........................................         (0.07)         (0.08)         (0.01)
Shares used in calculating basic and diluted loss per share    38,217,593     22,341,370     19,687,500
                                                               ----------     ----------     ----------
</TABLE>


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


                                      F-4
<PAGE>


                                                        HYDROGENICS CORPORATION



Consolidated Statements of Cash Flows



For the years ended December 31, 2001, 2000 and
1999 (thousands of U.S. dollars)

<TABLE>
<CAPTION>

                                                                               2001                2000                1999
                                                                               ----                ----                ----
<S>                                                                          <C>                 <C>                   <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year ...........................................            (2,816)             (1,736)               (208)
Items not affecting cash
     Depreciation of property, plant and equipment ..............               716                 224                  44
     Amortization of acquired intellectual property .............             3,459                  --                  --
     Amortization of discount on preferred shares ...............                --                  85                  20
     Unrealized foreign currency (gains) losses .................            (1,606)              1,329                  --
     Imputed interest on loan payable ...........................                19                   7                  --
     Future income taxes ........................................                --                  --                  (9)
Net change in non-cash working capital (note 16) ................            (5,404)             (1,122)                 67
                                                                             ------             -------                ----
                                                                             (5,632)             (1,213)                (86)
                                                                             ------             -------                ----

INVESTING ACTIVITIES
Decrease (increase) in short-term investments ...................             8,782             (75,756)                 --
Increase in deposits ............................................               (40)                (67)                 --
Purchase of property, plant and equipment .......................            (3,138)             (1,492)               (280)
                                                                             ------             -------                ----
                                                                              5,604             (77,315)               (280)
                                                                             ------             -------                ----


FINANCING ACTIVITIES
Increase in loan payable ........................................                97                  92                  --
Preferred shares issued - net of issuance costs .................                --               3,623                  --
Common shares issued - net of issuance costs ....................              (149)             76,186                  --
                                                                             ------             -------                ----
                                                                                (52)             79,901                  --
                                                                             ------             -------                ----

INCREASE (DECREASE) IN CASH AND DURING THE YEAR .................               (80)              1,373                (366)
Effect of exchange rates on cash ................................              (125)                 18                  --
CASH - BEGINNING OF YEAR ........................................             1,844                 453                 819
                                                                             ------             -------                ----
CASH - END OF YEAR ..............................................             1,639               1,844                 453
                                                                             ------             -------                ----

SUPPLEMENTAL DISCLOSURE
Interest paid ...................................................                 9                   7                  --
Income taxes paid ...............................................               317                  --                   4
                                                                             ------             -------                ----
</TABLE>

Non-cash transactions (note 6)


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




                                      F-5

<PAGE>


HYDROGENICS CORPORATION



Notes to Consolidated Financial Statements
For the years ended December 31, 2001, 2000 and 1999
(thousands of U.S. dollars, except share and per share amounts)

1. DESCRIPTION OF BUSINESS
Hydrogenics Corporation designs, develops, manufactures and sells
proton-exchange membrane, or PEM, fuel cell automated test stations and fuel
cell systems. The Company is based in Canada, and its principal customers
include automotive companies, fuel cell developers and component suppliers
primarily located in the United States, Europe and Asia.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles, which conform in all material
respects with accounting principles generally accepted in the Unites States,
except as outlined in Note 18.

As at, and for all periods prior to December 31, 2001, the functional currency
of the Company was the Canadian dollar. Effective December 31, 1999, the U.S.
dollar was adopted as the reporting currency and the financial information for
1999 has been presented in U.S. dollars in accordance with a translation of
convenience method using the exchange rate at December 31, 1999 of US$1.00 -
Cdn$1.4433 being the Bank of Canada noon buying rate at December 31, 1999. For
years subsequent to December 31, 1999, Canadian dollar amounts are translated
into the U.S. dollar reporting currency using the current rate method, whereby
assets and liabilities are translated at the year-end exchange rate, and
revenues and expenses are translated at the average exchange rate for the year.
Gains and losses from translation into the reporting currency are included in
the cumulative translation adjustment in shareholders' equity.

Due to recent changes in the Company's economic circumstances, whereby its cash
flows are denominated primarily in U.S. dollars, effective January 1, 2002 the
U.S. dollar will be adopted as the functional currency. As a result of this
change, the Company's income will include gains and losses on the translation
into U.S. dollars of items denominated in Canadian dollars and other foreign
currencies. For 2001 and prior years, the Company's income includes gains and
losses on the translation into Canadian dollars of items denominated in
currencies other than Canadian dollars.

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

Revenue recognition
Revenues related to the sale of fuel cell test stations, power modules and fuel
cell system components are recorded when goods are delivered, title passes to
the customer, and collection is reasonably assured.

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

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

Product warranty
The Company typically provides a warranty for parts and labour for one year and
provides for future warranty costs based on management's best estimates of such
costs, taking into account the nature of the contracts.

Grants and investment tax credits
Grants to fund various research activities are received from government and
other institutions. These grants are recorded as either a liability, a reduction
of the cost of the applicable property, plant and equipment, or a credit in



                                      F-6
<PAGE>


             HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (thousands of U.S. dollars, except share and per share amounts)


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

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

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

<Table>
<Caption>

<S>                                                                  <C>
Increase in cash provided by investing activities for 2001            $72,325
Increase in cash used in investing activities for 2000                $75,756
Decrease in cash and cash equivalents as at December 31, 2001          $3,926
Decrease in cash and cash equivalents as at December 31, 2000         $75,592
</Table>

The Company's consolidated statements of cash flows for 2000 and 1999 have been
revised to reflect the impact of this change, and to disclose the change in
cash, defined as cash on deposit, for each year. This change in accounting
policy had no effect on reported earnings and retained earnings for 2001, 2000
and 1999, and no effect on any reported balances for 1999.

Short-term investments
Short-term investments are interest bearing securities with original terms to
maturity of less than one year and are recorded at amortized cost. The Company
intends to hold all short-term investments to the maturity dates.

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

Long-lived assets
     Acquired intellectual property
     Acquired intellectual property is recorded at cost less accumulated
     amortization. Amortization is calculated using a declining balance method
     with a rate of 50% per annum which reflects the economic use of the asset
     and the pace of technological change.

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




                                      F-7
<PAGE>

HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of U.S. dollars, except share and per share amounts)



Depreciation is computed using the declining balance method as follows:
<TABLE>
<CAPTION>

        <S>                                                <C>
        Computer hardware and software ..................  30% per annum
        Office furniture and equipment ..................  20% per annum
        Test equipment ..................................  30% per annum
        Automobiles .....................................  30% per annum
</TABLE>


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

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

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

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

Foreign currency transactions
Monetary assets and liabilities denominated in currencies other than the
Canadian dollar, the Company's functional currency for 2001, 2000 and 1999, are
translated into Canadian dollars at the rate of exchange in effect at the end of
the year. Revenue and expense items are translated into Canadian dollars at the
rate of exchange in effect on the dates transactions occur. Exchange gains and
losses on translation to Canadian dollars are reflected in income. See "basis of
presentation" above regarding the Company's U.S. dollar reporting currency and a
change in the Company's functional currency in 2002.

Stock-based compensation
No compensation expense is recognized when stock options are granted to
employees. Any consideration paid by employees on exercise of stock options or
purchase of stock is credited to share capital. Disclosure of amounts related to
stock-based compensation is included in note 18.

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

Use of estimates
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made by the Company include allowances for potentially uncollectible
accounts receivable, warranty



                                      F-8
<PAGE>

             HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (thousands of U.S. dollars, except share and per share amounts)


provisions, useful life estimates for acquired intellectual property and other
long lived assets, valuation allowances for future income tax assets and
provisions for costs to complete contracts in progress.

3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>

                                                           2001          2000
                                                           ----          ----
<S>                                                       <C>           <C>
Trade accounts receivable ..........................      3,817         1,939
Less: Allowance for doubtful accounts ..............       (122)           --
Goods and services tax .............................        310           253
Refundable investment tax credits ..................        273           333
Other ..............................................         75            57
                                                          -----         -----
                                                          4,353         2,582
                                                          -----         -----
</TABLE>

4. INVENTORIES

<TABLE>
<CAPTION>

                                                           2001          2000
                                                          -----         -----
<S>                                                       <C>           <C>
Raw materials ......................................      1,962         1,161
Work-in-progress ...................................        466            18
Finished goods .....................................        541            34
                                                          -----         -----
                                                          2,969         1,213
                                                          -----         -----
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                           2001          2000
                                                          -----         -----
<S>                                                       <C>           <C>
Cost
     Test equipment ................................      3,096         1,032
     Office furniture and equipment ................        746           307
     Computer hardware and software ................        583           253
     Leasehold improvements ........................        263           148
     Automobiles ...................................         15            16
                                                          -----         -----
                                                          4,703         1,756
                                                          -----         -----
Accumulated depreciation
     Test equipment ................................        557           149
     Office furniture and equipment ................        140            43
     Computer hardware and software ................        157            58
     Leasehold improvements ........................         64             8
     Automobiles ...................................          5             1
                                                          -----         -----
                                                            923           259
                                                          -----         -----
Net book value
     Test equipment ................................      2,539           883
     Office furniture and equipment ................        606           264
     Computer hardware and software ................        426           195
     Leasehold improvements ........................        199           140
     Automobiles ...................................         10            15
                                                          -----         -----
                                                          3,780         1,497
                                                          -----         -----
</TABLE>

Test equipment under construction, as at December 31, 2001, not yet subject to
depreciation amounted to $147 (2000 - $311).



                                      F-9
<PAGE>

HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of U.S. dollars, except share and per share amounts)



6. ACQUIRED INTELLECTUAL PROPERTY
On October 16, 2001, the Company issued 11,364,006 common shares and 2,470,436
common share purchase warrants with an aggregate value of $33,658 (net of
issuance costs of $277) in exchange for perpetual royalty free intellectual
property rights for certain fuel cell stack technology. The terms of the
warrants are described in Note 9.

As at December 31 the carrying value of the acquired intellectual property is as
follows:

<TABLE>
<CAPTION>
                                                           2001       2000
                                                         ------      -----
<S>                                                      <C>         <C>
Cost ..............................................      33,209         --
Accumulated amortization ..........................      (3,459)        --
                                                         ------      -----
Net book value ....................................      29,750         --
                                                         ------      -----
</TABLE>

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

<TABLE>
<CAPTION>
                                                          2001        2000
                                                         -----       -----
<S>                                                      <C>         <C>
Trade accounts payable .............................     1,105       1,816
Provincial capital tax .............................        --         265
Accrued payroll costs ..............................       265          80
Warranty accrual ...................................       172         186
Unearned revenue ...................................        51          --
Other ..............................................        --         116
                                                         -----       -----
                                                         1,593       2,463
                                                         -----       -----
</TABLE>

8. LOAN PAYABLE
At December 31, 2001 a loan of $208 (2000 - $100) is repayable for grant
financing from a government agency for research and development activities. The
balance is repayable over a four-year period commencing April 1, 2005. The
amount repayable in each quarter is 1.3% of the Company's gross revenues for the
proceeding quarter. Based on the maximum amount repayable being 150% of the
principal, the Company has charged to expense imputed interest of $19 in 2001 at
an effective rate of 10% per annum (2000 - $7; 1999 - $nil).


9 SHARE CAPITAL AND OTHER EQUITY
The authorized capital stock of the Company consists of an unlimited number of
common shares and an unlimited number of preferred shares issuable in series.
<TABLE>
<CAPTION>

                                                         2001         2000         1999
                                                         ----         ----         ----
<S>                                                  <C>           <C>             <C>
Issued and outstanding
47,918,446 (2000 - 35,560,000; 1999 - 19,687,500)
     common shares .................................  109,804       80,740           21
2,470,436 (2000 - nil; 1999 - nil) common share
     purchase warrants .............................    4,722           --           --
Other equity .......................................       --           --          124
                                                      -------       ------          ---
                                                      114,526       80,740          145
                                                      -------       ------          ---
</TABLE>


On October 16, 2001, the Company issued 11,364,006 common shares and 2,470,436
common share purchase warrants with an aggregate value of $33,658 (net of
issuance costs of $277) in exchange for perpetual royalty free intellectual
property rights for certain fuel cell stack technology. Each common share
purchase warrant is exercisable


                                      F-10
<PAGE>



             HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (thousands of U.S. dollars, except share and per share amounts)

for one common share of the Company at a price of $4.00 per share. The fair
value of common share purchase warrants issued amounted to $4,722, net of
issuance costs, and was determined using a Black-Scholes pricing model with a
risk-free rate of 3.9%, a 5 year term and a volatility factor of 108%. The
common share purchase warrants were placed in escrow on October 16, 2001 and are
automatically released from escrow at a rate of 61,761 warrants per month over
40 months and expire on October 16, 2006.

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

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

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

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

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

During 2000, the Company adopted a broad-based employee share option plan. This
plan replaced previous employee share purchase arrangements. The number of
common shares that may be issued under the share option plan is limited to
4,641,000. All options are for a term of 10 years from the date of grant and
vest over three years unless otherwise determined by the board of directors. As
at December 31, 2001, 1,970,335 (2000 - 1,981,438; 1999 - 266,602) options are
fully vested and the remainder vest over four years from the date of grant.
Under Canadian generally accepted accounting principles no compensation expense
has been recorded in respect of these options. A summary of the Company's stock
option activity is as follows:

<TABLE>
<CAPTION>

                                                  Options for         Weighted average
                                                common shares           exercise price
                                                -------------         ----------------
                                                                                  CAN$
<S>                                                 <C>                           <C>
Balance - December 31, 1998 ...................            --                       --
Options granted ...............................     1,394,533                     0.22
                                                    ---------
Balance - December 31, 1999 ...................     1,394,533                     0.22

Options granted ...............................     2,547,117                     1.21
Options exercised .............................       (49,000)                    0.72
                                                    ---------
Balance - December 31, 2000 ...................     3,892,650                     0.86

Options granted ...............................       668,100                     5.73
Options exercised .............................      (994,440)                    0.20
Options forfeited on termination ..............      (460,715)                    0.70
                                                    ---------
Balance December 31, 2001 .....................     3,105,595                     2.15
                                                    ---------
</TABLE>

                                      F-11
<PAGE>


HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of U.S. dollars, except share and per share amounts)


The following table summarizes information about the Company's share options
outstanding as at December 31, 2001:

<TABLE>
<CAPTION>

                                                                           Weighted
                                                  Number                    average                          Number
            Exercise Price                outstanding at                  remaining                  exercisable at
                      CAN$             December 31, 2001           contractual life               December 31, 2001
            --------------             -----------------           ----------------               -----------------
<S>         <C>                                  <C>                           <C>                           <C>
                      0.05                       865,000                       8.06                         865,000
                      0.29                       875,625                       8.00                         740,250
              1.00 to 2.00                       403,240                       8.24                         261,263
              2.01 to 4.00                       436,400                       9.66                          16,240
             4.01 to 10.00                       415,580                       9.04                          59,890
            10.01 to 18.12                       109,750                       8.81                          27,692
                                               ---------                                                  ---------
                                               3,105,595                                                  1,970,335
                                               ---------                                                  ---------
</TABLE>

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


10. COMMITMENTS AND CONTINGENCIES
The Company incurred rental expenses of $788 under operating leases in 2001
(2000 - $390; 1999 - $30). As at December 31, 2001, the Company has future
minimum lease payments under operating leases relating to premises and office
equipment as follows: $

               2002 ......................  881
               2003 ......................  854
               2004 ......................  688
               2005 ......................  446
                                          -----
                                          2,869
                                          -----

The Company has entered into repayable contribution and other research and
development arrangements with various governmental ministries and public sector
enterprises. Under these arrangements, the Company will receive up to a
cumulative amount of $1,912 (2000 - $657; 1999 - $530) towards agreed upon
research and development project costs. The utilized amount of the advances at
December 31, 2001 was $1,726 (2000 - $547; 1999 - $413). In return, these
funding parties have a right to receive as repayments, 1.3% to 4% of gross
revenue received by the Company as a result of the commercial exploitation of
the associated technology. To date no revenues from these technologies have been
recognized and no repayable amounts have been reflected in the accounts. These
arrangements will expire in stages between September 30, 2006 and March 31,
2016, or when total payments paid reach the utilized amount of the advance,
depending on the terms of the individual contracts.


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

<TABLE>
<CAPTION>

                                                                  2001            2000
                                                                  ----            ----

<S>                                                              <C>               <C>
Non capital losses ...........................................   2,017             585
Investment tax credits .......................................      22              15
Warranty and other provisions ................................      60              75
Property, plant and equipment and intellectual property ......     231             (39)
Share issue costs ............................................   1,433           2,157
Unrealized foreign exchange (gains) loss .....................    (475)            477
Valuation allowance ..........................................  (3,288)         (3,270)
                                                                ------          ------
                                                                    --              --
                                                                ------          ------
</TABLE>



                                      F-12
<PAGE>



             HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (thousands of U.S. dollars, except share and per share amounts)


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

                                                      2001              2000            1999
                                                      ----              ----            ----
<S>                                                 <C>               <C>               <C>
Loss before income taxes ......................     (2,660)           (1,564)           (209)
                                                    ------            ------           -----
Statutory income tax rate .....................      34.12%            34.95%          21.62%
                                                    ------            ------           -----
Income taxes (recovery) at statutory rate .....       (908)             (547)            (45)
     Non-deductible expenses ..................        306                91              16
     Other permanent differences ..............        151                18               7
     Large corporations tax ...................        156               172              --
     Income tax rate changes ..................        441                --              --
     Change in valuation allowance ............         18               438              21
                                                    ------            ------           -----
Income tax expense (recovery) .................        156               172              (1)
                                                    ------            ------           -----

</TABLE>

As at December 31, 2001, the Company has available loss carry-forwards of $6,462
(2000 - $1,333; 1999 - $nil) that may be used to reduce taxable income in future
years, expiring in 2007 and 2008. The Company also has earned non-refundable
investment tax credits amounting to approximately $22 (2000 - $15; 1999 - $nil)
that can be used to reduce future federal income taxes payable, expiring in
2009. The Company has recorded a valuation allowance to reflect uncertainties
associated with the realization of the future income tax assets.


12. RELATED PARTY TRANSACTIONS
In the normal course of operations, the Company subcontracts certain
manufacturing functions to a company owned by a relative of one of the principal
shareholders of Hydrogenics Corporation. Billings by this related company for
manufacturing functions totaled $1,219 in 2001 (2000 - $615; 1999- $178). At
December 31, 2001, the Company has an accounts payable balance due to this
related company of $119 (2000 - $46).

In the normal course of operations, the Company sells certain products and
performs services to a company that owns a significant number of common shares.
Revenues from this related company totaled $2,460 in 2001 (2000 - $2,556; 1999 -
$963). At December 31, 2001, the Company has an accounts receivable due from
this related company of $2,058 (2000 - $519).

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


13. FINANCIAL INSTRUMENTS
At December 31, 2001 and 2000, the fair values of cash, short-term investments,
accounts receivable, grants receivable, accounts payable and accrued liabilities
approximate their respective carrying values because of the short-term nature of
these instruments. The Company's loan payable is at market terms and
accordingly, fair value approximates carrying value.

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

A substantial portion of the Company's accounts receivable is with a limited
number of customers located globally (note 17). The Company performs ongoing
credit evaluations on its customers' financial condition and generally requires
no collateral from its customers. The Company maintains an allowance for
doubtful accounts receivable based on management's assessment of expected
collectibility.

                                      F-13
<PAGE>


HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of U.S. dollars, except share and per share amounts)


14. LINE OF CREDIT
The Company has an operating line of credit available up to $628 (Cdn$1,000). As
at December 31, 2001 and 2000, the Company had not drawn on this line. The
operating facility bears interest at Royal Bank of Canada prime rate plus 0.5%,
is due on demand and includes a general security agreement over all assets.


15. LOSS PER SHARE
Loss per share is calculated using the weighted average number of common shares
outstanding for the year, adjusted for stock splits in prior years, of
38,217,593 shares in 2001 (2000 - 22,341,370; 1999 - 19,687,500). No effect has
been given to the potential exercise of stock options and warrants in the
calculation of diluted earnings (loss) per share as the effect would be
anti-dilutive.

Effective January 1, 2001, the Company adopted the revised section 3500,
"Earnings per Share" of the Canadian Institute of Chartered Accountants (CICA)
Handbook whereby, the treasury stock method, rather than the imputed earnings
approach, is to be used to determine the incremental number of shares that would
be outstanding had the Company used proceeds from the exercise of options and
warrants to buy shares. The adoption of this standard had no impact on the
Company.


16. STATEMENTS OF CASH FLOWS
Net change in non-cash working capital is as follows:

<TABLE>
<CAPTION>

                                                                    2001                2000                1999
                                                                    ----                ----                ----
<S>                                                               <C>                 <C>                   <C>
Decrease (increase) in current assets
     Accounts receivable ......................................   (1,920)             (1,626)               (639)
     Grants receivable ........................................     (690)                 63                (109)
     Inventories ..............................................   (1,879)             (1,100)                (89)
     Prepaid expenses .........................................      (14)               (114)                 (8)
Increase (decrease) in current liabilities
     Accounts payable and accrued liabilities .................     (749)              1,545                 851
     Income taxes payable .....................................     (152)                160                   9
     Dividends payable ........................................       --                 (50)                 52
                                                                  ------              ------                ----
                                                                  (5,404)             (1,122)                 67
                                                                  ------              ------                ----
</TABLE>

17. SEGMENTED FINANCIAL INFORMATION
The Company currently operates in a single reporting segment, being the design,
development, manufacturing and sale of proton-exchange membrane, or PEM,
automated test stations, power modules, and power module components and the
provision of fuel cell related engineering and testing services. Substantially
all the Company's long-lived assets are located in Canada. Revenue is derived
primarily from the sale of goods to customers located as follows:
<TABLE>
<CAPTION>


                                           2001              2000              1999
                                           ----              ----              ----

<S>                                       <C>               <C>               <C>
United States ......................      3,080             5,098             1,753
Japan ..............................      2,081                --                --
Germany ............................        699                --                --
United Kingdom .....................        600             3,442               795
Rest of World ......................        958               343               126
                                          -----             -----             -----
                                          7,418             8,883             2,674
                                          -----             -----             -----
</TABLE>




                                      F-14
<PAGE>

            HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (thousands of U.S. dollars, except share and per share amounts)


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

<TABLE>
<CAPTION>

                                    2001          2000          1999
                                    ----          ----          ----
<S>                                   <C>           <C>           <C>
First .......................         33            39            36
Second ......................         28            29            30
Third .......................          9            10            14
Fourth ......................          6             7             9
Others ......................         24            15            11
                                    ----          ----          ----
                                     100           100           100
                                    ----          ----          ----
</TABLE>

18. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES AND
    PRACTICES
The financial statements have been prepared in accordance with Canadian
generally accepted accounting practices (Canadian GAAP), which differ in certain
respects from those principles and practices that the Company would have
followed had its financial statements been prepared in accordance with
accounting principles and practices generally accepted in the United States
(U.S. GAAP).

The reconciliation of loss for the year based on Canadian GAAP to conform to
U.S. GAAP is as follows:

<TABLE>
<CAPTION>

                                                                       2001                 2000                 1999
                                                                 ----------           ----------           ----------

<S>                                                              <C>                  <C>                    <C>
Loss for the year based on Canadian GAAP ......................      (2,816)              (1,736)                (208)
Accrued dividends and amortization of discount on
     preferred shares (i) .....................................        --                    262                   73
Change in reporting currency (iv) .............................        --                   --                      4
Stock-based compensation (ii) .................................      (1,468)              (3,369)                 (34)
                                                                 ----------           ----------           ----------

Loss for the year based on U.S. GAAP ..........................      (4,284)              (4,843)                (165)
Other comprehensive income (loss)
     Foreign currency translation (v) .........................      (5,409)               1,360                    1
                                                                 ----------           ----------           ----------
Comprehensive loss based on U.S. GAAP .........................      (9,693)              (3,483)                (164)
                                                                 ----------           ----------           ----------

Basic and fully diluted loss per share based
     on U.S. GAAP .............................................       (0.11)               (0.22)               (0.01)
Weighted average number of shares used in
     Calculating loss per share ...............................  38,217,593           22,341,370           19,687,500

</TABLE>


The effect of these adjustments on the shareholders' equity of the Company is as
follows:

<TABLE>
<CAPTION>

                                                                       2001                 2000                1999
                                                                       ----                 ----                ----

<S>                                                                 <C>                   <C>                     <C>
Shareholders' equity based on Canadian GAAP                         105,821               80,260                  38
Equity component of preferred shares                                     --                   --                (124)
Cumulative amortization of discount on preferred shares                  --                   --                  21
                                                                    -------               ------                ----
Shareholders' equity (deficiency) based on U.S. GAAP                105,821               80,260                 (65)
                                                                    -------               ------                ----
</TABLE>



                                      F-15
<PAGE>


HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of U.S. dollars, except share and per share amounts)



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

(ii)  Stock-based compensation
      Under Canadian GAAP, no compensation expense has been recognized with
      respect to employee stock options. For U.S. GAAP reporting, the Company
      uses the intrinsic value method of APB Opinion No. 25 and options
      issued under the plan are deemed to be compensatory to the extent that
      the fair value of the stock exceeds the exercise price at the date of
      grant. The compensation cost is recognized over the vesting period. For
      U.S. GAAP, the compensation cost not yet recognized is presented as a
      deferred stock-based compensation charge, with a corresponding amount
      included in stock options outstanding, both of which form part of
      shareholders' equity. At December 31, 2001, equity balances under U.S.
      GAAP for deferred stock-based compensation and stock options
      outstanding are $648 and $4,589, respectively.

      Had the Company determined compensation cost based on the fair value
      method as prescribed in Statement of Financial Accounting Standards No.
      123, "Accounting for Stock-based Compensation," the fair market value
      of the stock options granted in 2001 would have been $2,322 (2000 -
      $3,822; 1999 - $108) and the pro forma net loss would have been $(5,834)
      ($(0.15) loss per share) (2000 - $(5,444), $(0.25) loss per share; 1999
      - $(185), $(0.01) loss per share). For the purposes of these
      disclosures stock options are valued using the Black-Scholes option
      pricing model with the following weighted average assumptions: risk
      free interest rate of 4.86% to 5.39%, expected life of ten years and
      expected volatility of between 108% and 113%.

(iii) New accounting standards
      For Canadian GAAP reporting purposes, the Company will adopt the new
      Canadian standard for reporting stock based compensation effective
      January 1, 2002, CICA Handbook section 3870 "Stock Based Compensation
      and Other Stock Based Payments". Under this standard, stock-based
      payments to non-employees and direct awards of stock to employees and
      non-employees will be accounted for using a fair value method of
      accounting. For grants of stock options to employees, this standard
      allows either the recognition of a compensation expense for grants of
      stock options to employees, based on the estimated fair value at the
      date of grant, or alternatively, the disclosure of pro forma net
      earnings or earnings per share data, as if the stock based compensation
      had been recognized in earnings. Management is currently evaluating the
      implementation aspects of this new standard.

      The Company has determined that other recently issued Canadian and U.S.
      accounting pronouncements have no impact on the Company at this time.

(iv)  Change in reporting currency
      As disclosed in note 2, effective December 31, 1999, the Company
      adopted the U.S. dollar as its reporting currency. Under Canadian GAAP,
      at the time of change in reporting currency, the historical financial
      statements are presented using a translation of convenience whereby all
      amounts for the current year and comparative figures are translated at
      the exchange rate prevailing at December 31, 1999. Under U.S. GAAP, the
      financial statements, including prior years, are translated according
      to the current rate method whereby revenues and expenses are translated
      at exchange rates prevailing at the respective transaction dates.



                                      F-16
<PAGE>


             HYDROGENICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (thousands of U.S. dollars, except share and per share amounts)


The condensed statements of operations and cash flows for the years ended
December 31, 1999, after giving effect to the change in reporting currency and
stock based compensation under U.S. GAAP, are as follows:

<TABLE>
<CAPTION>

                                                     2001             2000           1999
                                                     ----             ----           ----
<S>                                                 <C>              <C>            <C>
Revenues ......................................     7,418            8,883          2,598
Cost of revenues ..............................     4,941            6,485          2,045
Operating expenses ............................    12,383            6,312            727
Loss from operations ..........................    (9,906)          (3,914)          (174)
Loss for the year .............................    (4,284)          (4,843)          (165)
</TABLE>


<TABLE>
<CAPTION>
                                                           2001           2000          1999
                                                           ----           ----          ----

<S>                                                      <C>              <C>            <C>
Cash used in operating activities ..................     (7,025)          (984)          (83)
Cash provided by (used in) investing activities ....      5,443        (77,869)         (272)
Cash provided by (used in) financing activities ....        (52)        79,672            --
</TABLE>


     Comprehensive income
 (v) U.S. GAAP requires disclosure of comprehensive income which comprises
     income (loss) and other comprehensive income. The only item of other
     comprehensive income for the Company is the charge to the currency
     translation adjustment. Under Canadian GAAP, there is no standard for
     reporting comprehensive income.

     Earnings (loss) per share
(vi) The numerator for purposes of calculating earnings (loss) per share under
     U.S. GAAP has been calculated as follows:
<TABLE>
<CAPTION>

                                                           2001           2000          1999
                                                           ----           ----          ----
<S>                                                      <C>            <C>             <C>
Net loss ...........................................     (4,284)        (4,843)         (165)
Less: Dividends on preferred shares ................         --            179            50
                                                         ------         ------          ----
Loss attributable to common shares .................     (4,284)        (5,022)         (215)
                                                         ------         ------          ----
</TABLE>


19. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the basis of
presentation adopted in the current year.



                                      F-17



<PAGE>


                                   SIGNATURES

         The Company hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                  HYDROGENICS CORPORATION

                                  By:      /s/ PIERRE RIVARD
                                           ----------------------------------
                                           Pierre Rivard
                                           Chief Executive Officer and President

Date: June 26, 2002



<PAGE>


                                  EXHIBIT LIST

<TABLE>
<CAPTION>

        EXHIBIT NUMBER          NAME OF DOCUMENT
        --------------          ----------------
<S>                           <C>
             1.1                Articles of the Company.  (1)
             1.2                By-laws of the Company.  (2)
             2.1                Form of share certificate.  (3)
             4.1                Stock Option Plan.  (4)
             4.2                Form of Stock Option Agreement.  (5)
             4.3                Lease, dated May 19, 1999, by and between the Company and Atlantis Real Estate
                                Corporation.  (6)
             4.4                Employment letter agreement between Dr. Ravi Gopal and the Company, dated March 16,
                                1998.  (7)
             4.5                Offer to Lease dated June 1, 2000 by and between the Company and Orlando
                                Corporation.  (8)
             4.6                Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated October 17, 1996, between Canada and the Company.  (9)
             4.7                Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated July 3, 1997, between Canada and the Company.  (10)
             4.8                Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated June 9, 1998, between Canada and the Company.  (11)
             4.9                Efficiency and Alternative Energy Program Amendment to the Contribution Agreement
                                between Canada and the Company, dated March 13, 2000.  (12)
             4.10               Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated June 9, 1999, between Canada and the Company.  (13)
             4.11               Natural Resources Canada Efficiency and Alternative Energy Program Amendment No. 1
                                to the Contribution Agreement between Canada and the Company, dated February 1,
                                2000. (14)
             4.12               Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement, dated May 25, 2000, between Canada and the Company.  (15)
             4.13               Industrial Research Assistance Program Contribution Agreement, dated November 24,
                                1998, between National Research Council Canada and the Company.  (16)
             4.14               Industrial Research Assistance Program Contribution Agreement, dated December 1,
                                1999, between National Research Council Canada and the Company.  (17)
             4.15               Research Agreement for a Cooperative Project, dated November 19, 1996, between
                                Universite du Quebec a Trois-Rivieres and the Company.  (18)
             4.16               Lease, dated June 23, 2000, by and between Orlando Corporation and the Company.  (19)
             4.17               Employment Agreement between Pierre Rivard and the Company, dated April 20, 2001.
                                (20)
             4.18               Employment Agreement between Boyd Taylor and the Company, dated April 20, 2001. (21)
             4.19               Employment Agreement between Ravi Gopal and the Company, dated April 20, 2001. (22)
             4.20               Employment Agreement between Joseph Cargnelli and the Company, dated April 20, 2001.
                                (23)
             4.21               Agreement of Lease, dated as of December 15, 2000, between Crown/Chadwick Realty
                                Corp. and the Company (24)
             4.22               Department of Natural Resources Efficiency and Alternative Energy Program
                                Contribution Agreement between Canada and the Company, dated January 10, 2001. (25)
             4.23               Natural Resources Canada Efficiency and Alternative Energy Program Amendment No. 1
                                to the Contribution Agreement, dated April 11, 2001. (26)

</TABLE>



                                        1
<PAGE>


<TABLE>
<CAPTION>

        EXHIBIT NUMBER          NAME OF DOCUMENT
        --------------          ----------------
<S>                           <C>
             4.24               Joint Development Agreement between the Company and Johnson Matthey, Inc, dated
                                April 18, 2001.
             4.25               Sales Agency Agreement between the Company and Hankook BEP Co. Ltd., dated July 23,
                                2001.
             4.26               Distribution Agreement between the Company and Toyota Tsusho Corporation, dated
                                August 22, 2001.
             4.27               Corporate Alliance Agreement between General Motors Corporation and the Company,
                                dated October 16, 2001.
             4.28               Master Intellectual Property Agreement between General Motors Corporation and the
                                Company, dated October 16, 2001.
             4.29               Governance Agreement between General Motors Corporation and the Company, dated
                                October 16, 2001. (27)
             4.30               Share Subscription Agreement between General Motors Corporation and the Company,
                                dated October 16, 2001. (28)
             4.31               Escrow Agreement between General Motors Corporation and the Company, dated October
                                16, 2001. (29)
             4.32               Registration Rights Agreement between General Motors Corporation and the Company,
                                dated October 16, 2001. (30)
             4.33               Share Purchase Agreement among the Company, Dr. Bernd Pitschak, Dr. Karl Klug and
                                Creavis GmbH, dated April 16, 2002.

</TABLE>

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

(1) Incorporated by reference from Exhibit 3.1 to Amendment No. 4 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on October 13, 2000.

(2) Incorporated by reference from Exhibit 3.1 to Amendment No. 4 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on October 13, 2000.

(3) Incorporated by reference from Exhibit 4.1 to Amendment No. 5 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on October 23, 2000.

(4) Incorporated by reference from Exhibit 10.3 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(5) Incorporated by reference from Exhibit 10.4 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(6) Incorporated by reference from Exhibit 10.5 to the Company's Registration
Statement on Form F-1, File No. 333-42682, filed with the Securities and
Exchange Commission on July 31, 2000.

(7) Incorporated by reference from Exhibit 10.7 to the Company's Registration
Statement on Form F-1, File No. 333-42682, filed with the Securities and
Exchange Commission on July 31, 2000.

(8) Incorporated by reference from Exhibit 10.8 to the Company's Registration
Statement on Form F-1, File No. 333-42682, filed with the Securities and
Exchange Commission on July 31, 2000.

(9) Incorporated by reference from Exhibit 10.9 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(10) Incorporated by reference from Exhibit 10.10 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(11) Incorporated by reference from Exhibit 10.11 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(12) Incorporated by reference from Exhibit 10.12 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(13) Incorporated by reference from Exhibit 10.13 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.


                                        2

<PAGE>

(14) Incorporated by reference from Exhibit 10.14 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(15) Incorporated by reference from Exhibit 10.15 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(16) Incorporated by reference from Exhibit 10.16 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(17) Incorporated by reference from Exhibit 10.17 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(18) Incorporated by reference from Exhibit 10.18 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(19) Incorporated by reference from Exhibit 10.19 to Amendment No. 2 to the
Company's Registration Statement on Form F-1, File No. 333-42682, filed with the
Securities and Exchange Commission on September 25, 2000.

(20) Incorporated by reference from Exhibit 4.18 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(21) Incorporated by reference from Exhibit 4.19 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(22) Incorporated by reference from Exhibit 4.20 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(23) Incorporated by reference from Exhibit 4.21 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(24) Incorporated by reference from Exhibit 4.22 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(25) Incorporated by reference from Exhibit 4.23 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(26) Incorporated by reference from Exhibit 4.24 to the Company's Annual Report
on Form 20-F, filed with the Securities and Exchange Commission on May 22, 2001.

(27) Incorporated by reference from Exhibit 2 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.

(28) Incorporated by reference from Exhibit 1 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.

(29) Incorporated by reference from Exhibit 4 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.

(30) Incorporated by reference from Exhibit 3 to the Schedule 13D of General
Motors Corporation, filed with the Securities and Exchange Commission on October
25, 2001.


                                       3