Entusiasmo com IA dá maior ganho semanal deste ano a S&P 500 e Nasdaq

[Penaforte]

A Ballard tem dados sucessivos sinais de força nos últimos tempos, está a corrigir das recentes subidas e uma aproximação ao suporte dos 2,45/50$ pode justificar uma entrada/reforço.

[Penaforte]

Hoje vai-me custar actualizar este tópico, como diz um amigo meu - "A bolsa é um jogo de burros. Ora se é burro por não vender quando se devia, ora se é burro por vender quando não se devia".
Claro que depois de fechar a posição é muito fácil saber se a venda foi na mouche ou não, em caso de dúvida o mais importante é mesmo seguir o plano previamente definido. O meu plano ditou que na sexta-feira despachasse metade da posição na BLDP, ficando hoje a olhar para esta vela. Pois hoje sinto-me burro .

Deixo o gráfico, sem grandes comentários numa altura que fechou numa resistência com indicadores esticados, a última vez que isso aconteceu a coisa não correu bem para os longos.

[Penaforte]

Preço continua no range $2-$2,15 sendo possível desenhar uma Pennant o que caso se comprove implicará continuação do movimento ascendente.
Aspecto menos positivo, o indicador Accumulation/Distribution demonstra uma bearish divergence no dia 18/08 com a subida do preço com volume e um aumento de distruição.

O volume decresceu e aguarda-se pelo próximo movimento que levará o preço para além de uma das extremidades. Stop profits in place pois trata-se de uma cotada bastante especulativa e com movimentos fortes e rápidos como se pode ver pelo histórico do preço.

[Penaforte]

Actualizando, a cotada comporta-se como esperado, veio fechar o gap reagindo positivamente (reforço de posição) e voltou ao agora suporte e LTA.
Esperemos para ver qual a reacção a esta zona que se revela importante, positiva se possível .

[Penaforte]

Bem, vou desenterrar um tópico do tempo em que era teenager, esperemos que não seja mau presságio .

Andava a acompanhar cotadas para investir a médio/longo prazo em sectores com tanto potencial de crescimento quanto risco, "clean energy", biotechs, etc.

Como o user tão bem apresentou a empresa em 2003 (!!), não me vou alongar muito nesta área. Recentemente fechou um contrato com a Toyota referente ao Japão, o que pode ser um game changer para a empresa. Num campo mais especulativo, sabe-se que os "Clintons" são grandes apoiantes das "clean energies", pelo que há um sentimento positivo em torno destas empresas, caso o dark side of the force perca as eleições. Foi aliás o Bill Clinton que ajudou a lançar as "Fuel cells" no mapa há uns bons anos atrás.

Anyway, tretas à parte, tecnicamente estava interessante e entrei na Ballard na fase onde acumulou durante 1 ano (identificada no gráfico) e reforcei no breakout, aguardo agora um teste à zona quebrada e se a reação for positiva pondero novo reforço.

[Scubawarrior]

...--------------------------------------------------------------------
Total 28,166 28,035 90,413 61,645
--------------------------------------------------------------------
--------------------------------------------------------------------

Segment (loss) gain
for period (1)
Power Generation $ (3,772) $ (4,684) $ (11,066) $ (13,047)
Transportation 4,032 (1,275) 2,391 (23,026)
Material Products (392) 530 (460) 1,314
--------------------------------------------------------------------
Total $ (132) $ (5,429) $ (9,135) $ (34,759)

Corporate amounts:
Research and product
development (12,408) (9,970) (34,397) (34,232)
General and
administrative (3,913) (5,591) (12,480) (16,696)
Marketing (2,203) (2,063) (7,162) (7,028)
Depreciation and
amortization (11,999) (11,012) (34,664) (34,098)
Investment and other
income 2,964 (6,466) 23,579 12,601
Writedown of
investments - - (7,335) -
Equity in loss of
associated companies (378) (779) (1,427) (1,584)
Minority interest - 4,648 4,578 21,418
Business integration
and restructuring
costs (2,743) (2,999) (7,128) (16,477)
Other - (61) - (190)
--------------------------------------------------------------------
Loss before income
taxes $ (30,812) $ (39,722) $ (85,571) $(111,045)
--------------------------------------------------------------------
--------------------------------------------------------------------

(1) Research and product development costs directly related to
segments are included in segment (loss) gain for the period.



8. Guarantees and Contingencies:

The Company has issued a letter of credit in the amount of $1,031,000 related to a lease agreement for premises. The letter of credit expires December 2003.

Periodically, the Company enters into forward foreign exchange contracts to manage exposure to currency rate fluctuations. At September 30, 2003, the Company had no forward foreign exchange contracts outstanding.

Ballard Power Systems is recognized as the world leader in developing, manufacturing and marketing zero-emission proton exchange membrane fuel cells. Ballard is commercializing fuel cell engines for transportation applications and fuel cell systems for portable and stationary products. Ballard is also commercializing electric drives for fuel cell and other electric vehicles, power conversion products, and is a Tier 1 automotive supplier of friction materials for power train components. Ballard's proprietary technology is enabling automobile, bus, electrical equipment, portable power and stationary product manufacturers to develop environmentally clean products for sale. Ballard is partnering with strong, world-leading companies, including DaimlerChrysler, Ford, EBARA, ALSTOM and FirstEnergy, to commercialize Ballard(R) fuel cells. Ballard has supplied fuel cells to Honda, Mitsubishi, Nissan, Volkswagen, Yamaha, and Cinergy, among others.

Ballard, the Ballard logo and Power to Change the World are registered trademarks of Ballard Power Systems Inc. Nexa and AirGen are trademarks of Ballard Power Systems Inc.

SOURCE: Ballard Power Systems Inc.

Ballard Power Systems Inc.
Investor Information: Michael Rosenberg, 604-412-3195
Fax: 604-412-3100
investors@ballard.com
or
Media Information: Debby Harris, 604-412-4740
Fax: 604-412-3100
media@ballard.com
or
Marketing Department: Product Information, 604-453-3520
Fax: 604-412-3100
marketing@ballard.com

www.ballard.com

[Scubawarrior]

Ballard power system é líder mundial em fuel cell technology, é energia de hidrogénio líquido. o futuro...é assim não poluênte e inesgotável.

Ballard Reports Solid Third Quarter 2003 Results
- BusinessWire

VANCOUVER, British Columbia, Oct 29, 2003 (BUSINESS WIRE) -- Ballard Power Systems today reported its financial results for the third quarter ending September 30, 2003. All amounts are reported in U.S. dollars unless otherwise noted.

Ballard's revenue in the third quarter ending September 30, 2003 was $28.2 million, up slightly from revenue of $28.0 million for the same period in 2002. Product revenue for the quarter increased by $7.4 million or 69% over the same period in 2002. Revenue for the nine months ended September 30, 2003 was $90.4 million, a 47% increase over revenue of $61.6 million for the same period in 2002.

Net loss for the quarter was $31.1 million ($0.26 per share), compared to a loss of $40.2 million ($0.38 per share) for the same period in 2002. Included in the net loss for the quarter was $2.7 million in restructuring costs ($0.02 per share) compared to $3.0 million ($0.03 per share) for the corresponding period of 2002. For the nine-month period ended September 30, 2003, Ballard's net loss was $86.1 million ($0.73 per share) compared to $112.4 million ($1.07 per share) for the same period in 2002.

Cash used by operations and capital expenditures for the quarter, excluding restructuring and integration expenditures, was $17.8 million compared to $37.7 million for the same period last year. For the nine-month period ended September 30, 2003, Ballard's cash used by operations and capital expenditures, excluding business integration and restructuring expenditures, was $35.1 million compared to $105.7 million for the same period in 2002.

"Ballard continues to build revenue while reducing cash consumption," said Dennis Campbell, Ballard's President and Chief Executive Officer. "Ballard's leadership in transportation fuel cells was demonstrated throughout the third quarter as we saw buses powered by Ballard(R) fuel cells carrying passengers on the streets of Europe, and the strong showing of Ballard(R) fuel cell powered vehicles competing against other advanced technology vehicles at the Michelin Challenge Bibendum, held in California in September. We also had a number of exciting developments in our power generation business this quarter, including the introduction of our Nexa(R) RM Series fuel cell generator and the addition of a third Japanese natural gas company working with our 1 kW combined heat and power fuel cell generator."

"Product revenues from our Transportation segment continued to drive another solid quarter for revenue," said Dave Smith, Ballard's Chief Financial Officer. "We are confirming our guidance for revenues for 2003 of between $100 million and $120 million and expect to finish the year toward the middle of this range. Cash consumption from operations and capital expenditures, excluding business integration and restructuring expenditures, was $35.1 million for the nine-month period ended September 30, 2003, a 67% improvement over the same period in 2002. Assuming no significant changes in exchange rates from the end of the third quarter, we expect our cash requirements for operations and capital expenditures for 2003 to be between $55 million and $65 million, an improvement from our previous guidance of $65 million to $75 million."

In the past several months, 24 Mercedes-Benz Citaro buses, powered by Ballard(R) heavy-duty fuel cell engines, have been delivered to Amsterdam, Barcelona, Hamburg, Luxembourg, Madrid, Reykjavik, Stockholm and Stuttgart as part of the 10 city European Fuel Cell Bus Project. These fuel cell buses will be driven by regular transit drivers, carrying passengers in daily service in each city during a two-year field trial program.

Mitsubishi Motor Corporation ("MMC") introduced its Grandis minivan, powered by a Ballard(R) fuel cell engine, in September. MMC and other members of the Japan Hydrogen & Fuel Cell Demonstration Project are working together with the common goal to commercialize fuel cell vehicles.

During the recent Michelin Challenge Bibendum, the world's largest event showcasing sustainable mobility, Ballard(R) fuel cells powered four of the eight fuel cell vehicles in the competition. These vehicles competed strongly against other fuel cell and non-fuel cell technologies, with the Ballard(R) fuel cell powered vehicles receiving 10 gold awards. Honda's FCX, powered with Ballard(R) fuel cells, placed first in the category for small production vehicles, and the Mercedes-Benz Citaro bus came first in its class, winning gold awards for emissions, energy efficiency and noise, competing against a battery electric bus and a fuel cell-battery hybrid bus. In addition, the Mercedes-Benz F-Cell won design awards for both technology integration and style advancement for prototype vehicles.

In August, Ballard introduced its Nexa(R) RM Series, a hydrogen fueled stationary fuel cell power generator, which will be Ballard's first commercial stationary product. The Nexa(R) RM Series has been developed to meet the needs of the uninterruptible power system ("UPS") and telecommunications power markets. The Nexa(R) RM Series is modular and its power output is scalable in 1 kW increments to meet individual customer requirements.

Ballard has delivered Nexa(R) RM Series systems for utility and server room UPS field trials, and to a telecommunications customer for field trials. The goal of these field trials is to demonstrate, at customer facilities, the benefits of fuel cell technology over incumbent technology, and to develop Ballard's Nexa(R) RM Series as the preferred, premium UPS product for mission critical applications.

Ballard has named Mitsubishi Canada Limited ("MCL") as a worldwide (excluding Japan) distributor for Ballard's 1 kW AirGen(TM) portable fuel cell generator. MCL is the Canadian subsidiary of Mitsubishi Corporation, one of the world's largest general trading enterprises. MCL will add the AirGen(TM) fuel cell generator to its portfolio of products offered to customers through hundreds of affiliate companies. This relationship complements Ballard's previously announced distribution and service relationship with MGE UPS Systems Inc., the world's largest manufacturer of large power protection equipment, for Ballard's AirGen(TM) fuel cell generators and Nexa(R) RM Series products.

After purchasing the AirGen(TM) fuel cell generator assets from Coleman Powermate, Ballard conducted an in-house design review on the AirGen(TM) product. The review revealed that the current design of the AirGen(TM) fuel cell generator's hydrogen storage canister system did not fully comply with Ballard's stringent product design standards. As a result, Ballard is working together with canister suppliers to develop an improved canister and system interface for the canister fueled consumer version of the AirGen(TM) fuel cell generator. Ballard expects that the canister fueled version of the AirGen(TM) product will be launched in 2004.

EBARA BALLARD has been selected to advance to the next phase of development with both Tokyo Gas and Osaka Gas to commercialize a 1 kW combined heat and power fuel cell generator for residential applications in Japan. Ballard has expanded its presence in Japan by entering into a collaboration with Toho Gas, Japan's third largest natural gas company, to develop a 1 kW combined heat and power fuel cell generator for residential applications. With the addition of Toho Gas, Ballard is now working with the three largest natural gas companies in Japan, with a combined customer base of over 16 million households.

Governments continue to invest in fuel cell and hydrogen technology and products because of their potential to clean the air, curb global warming and reduce dependence on imported oil. The Canadian Government just announced Cdn.$215 million in funding for fuel cells, including research and development, demonstration programs and hydrogen infrastructure development. The distribution of funding has not been finalized and it is Ballard's goal to actively participate in these new government programs. Ballard received a grant of up to $1.5 million for research into non-noble metal catalysts through a US Department of Energy request for proposals to conduct research and development for stationary and portable fuel cells. This funding will enable Ballard to pursue additional research pathways to reduce catalyst loading levels and develop new catalyst materials.

A conference call will be held at 7:00 a.m. Pacific Time (10:00 a.m. Eastern Time) on October 29, 2003 to discuss the results for the third quarter. Access to the call may be obtained by calling the operator at 416.640.1907 before the scheduled start time. A playback version of the call will be available for 24 hours after the call at 416.640.1917. The confirmation number to access the playback is 21018110#. The audio web cast can be accessed on Ballard's web site at www.ballard.com and will be archived for replay for two weeks.

This release contains forward-looking statements that are based on the beliefs of Ballard's management and reflect Ballard's current expectations as contemplated under section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. When used in this release, the words "estimate", "project", "believe", "anticipate", "intend", "expect", "plan", "predict", "may", "should", "will", the negative of these words or such other variations thereon or comparable terminology are intended to identify forward-looking statements. Such statements reflect the current views of Ballard with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in those forward-looking statements.

MANAGEMENT'S DISCUSSION & ANALYSIS AND FINANCIAL STATEMENTS

This discussion and analysis covers our interim consolidated financial statements for the three and nine-month periods ended September 30, 2003. As well, it provides an update to the discussion and analysis contained in our 2002 Annual Report. This discussion and analysis should be read in conjunction with the "Management's Discussion & Analysis" section and the annual consolidated financial statements contained in our 2002 Annual Report.

In this discussion and analysis, unless the context otherwise requires, all references to "Ballard", "we", "us" and "our" refer to Ballard Power Systems Inc. and its subsidiaries.

All amounts are expressed in U.S. dollars unless otherwise noted.

OVERVIEW


Our revenues for the three months ended September 30, 2003 were $28.2 million compared to $28.0 million for the same period in 2002. This includes a $7.4 million or 69% increase in product revenues offset by a reduction in engineering service and other revenue. Our revenues for the nine months ended September 30, 2003 were $90.4 million, a $28.8 million or 47% improvement over the same period in 2002 and includes a 57% improvement in product revenues and a 31% improvement in engineering service and other revenue.

Our net loss for the quarter ended September 30, 2003 was $31.1 million, or ($0.26) per share, compared with a net loss of $40.2 million or ($0.38) per share during the same period in 2002. For the nine-month period ended September 30, 2003, our net loss was $86.1 million or ($0.73) per share, compared to a net loss of $112.4 million or ($1.07) per share for the corresponding period in 2002. The lower losses for the 2003 periods primarily result from foreign exchange gains, reduced operating expenses, and lower business integration and restructuring costs, partly offset by lower minority interest. The results for the nine months ended September 30, 2003 also benefited from higher engineering service revenue and were negatively impacted by the writedown of an investment in MicroCoating Technologies, Inc. ("MCT") of $7.3 million or ($0.06) per share, as described below. The lower operating expenses during 2003 were achieved primarily through the wind-down and deferral of certain development programs announced in 2002, and cost reduction initiatives resulting from business integration activities. Cash used by operations and capital expenditures for the three and nine-month periods ended September 30, 2003, excluding business integration and restructuring expenditures, were $17.8 million and $35.1 million, respectively. This compares to $37.7 million and $105.7 million for the corresponding three and nine-month periods in 2002. The decreases are primarily due to the lower losses (excluding non-cash items) as described above, reduced capital expenditures and lower increases in non-cash working capital.

In May 2003, we completed the acquisition of FirstEnergy Corp.'s interest in our stationary power subsidiary, Ballard Generation Systems Inc. ("BGS"), through the issuance of 1,366,063 of our common shares valued at $30.4 million. With the completion of this transaction, we now own 100% of BGS.

In June 2003, we completed the acquisition of Coleman Powermate Inc.'s AirGen(TM) fuel cell generator net assets for $1.6 million in cash.

In May 2001, we acquired approximately 3% of the equity of MCT as part of a collaboration, license and supply agreement for a possible next generation catalyst application technology. In 2003, based on our review in the second quarter of this year of MCT's financial condition and uncertainty concerning its ability to raise sufficient funding to continue operations, we determined that a permanent impairment in the value of our investment in MCT had occurred and wrote off our entire investment of $7.3 million. We retain a non-exclusive license for MCT's technology.

In December 2002, we announced a five-year plan (the "Corporate Restructuring") that provided for a significant reduction in cash consumption, an organizational restructuring, development funding for our next generation transportation fuel cell engine and the further commitment of our vehicular alliance partners, DaimlerChrysler AG ("DaimlerChrysler") and Ford Motor Company ("Ford"). The Corporate Restructuring has increased our efficiency and is enabling us to focus on and accelerate the development of our core technologies, while at the same time reducing administrative overhead expense.

Our business operates in three market segments, Transportation, Power Generation and Material Products. We develop, manufacture and market complete proton exchange membrane ("PEM") fuel engines, PEM fuel cell components and electric drive systems for the Transportation market segment. We develop, manufacture and market a variety of fuel cell and other power generation products ranging from portable and stationary fuel cell power products to power electronics for the Power Generation market segment. Our Material Products Division develops, manufactures and markets carbon fiber products primarily for automotive transmissions and gas diffusion electrode materials for the PEM fuel cell industry.

During the first quarter of 2003, we decided to phase out our internally funded fuel processing activities. We are assessing and rationalizing our fuel processing intellectual property portfolio with a goal of maintaining only intellectual property that has strategic value to us. We will continue our collaborations with several gas companies in Japan through EBARA BALLARD Corporation ("EBARA BALLARD") for the development of natural gas fuel processors for our 1 kW stationary combined heat and power fuel cell generators. The impact on operating expenses and business integration and restructuring expenses from the phase out of our fuel processing activities is not expected to be material.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. We have identified our policies for revenue recognition, warranty provision, inventory provision, investments, intangible assets and goodwill as critical to our business operations and an understanding of our results of operations. These policies are discussed in detail in the "Management's Discussion & Analysis" section of our 2002 Annual Report. The application of these and other accounting policies are described in note 1 to the 2002 annual consolidated financial statements. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

RESULTS OF OPERATIONS

Revenues for the three months ended September 30, 2003 were $28.2 million, up slightly from $28.0 million during the corresponding quarter in 2002. Revenues for the nine months ended September 30, 2003 were $90.4 million, an increase of $28.8 million or 47% from the same period in 2002. Higher product revenues from the Transportation market segment were primary drivers of the increased revenues for both the three and nine-month periods in 2003. Higher engineering service revenue was also a major driver of the increase in revenues for the nine-month period in 2003.

The following table provides a breakdown of our revenues for the reported periods:

---------------------------------------------------------------------
(Expressed in thousands of U.S. dollars)
Three Months Ended September 30
-----------------------------------------------------
2003 2002
-------------------------- --------------------------
Engineering Engineering
Service Service
and and

Product Other Total Product Other Total
-------------------------- --------------------------
Transportation $ 14,299 $ 9,907 $ 24,206 $ 6,474 $ 17,206 $ 23,680
Power Generation 1,075 - 1,075 1,035 - 1,035
Material
Products 2,885 - 2,885 3,320 - 3,320
-------------------------- --------------------------
$ 18,259 $ 9,907 $ 28,166 $ 10,829 $ 17,206 $ 28,035
---------------------------------------------------------------------
---------------------------------------------------------------------

---------------------------------------------------------------------
(Expressed in thousands of U.S. dollars)
Nine Months Ended September 30
-----------------------------------------------------
2003 2002
-------------------------- --------------------------
Engineering Engineering
Service Service
and and

Product Other Total Product Other Total
-------------------------- --------------------------
Transportation $ 45,169 $ 32,620 $ 77,789 $ 24,434 $ 24,943 $ 49,377
Power Generation 2,347 - 2,347 1,664 - 1,664
Material
Products 10,277 - 10,277 10,604 - 10,604
-------------------------- --------------------------
$ 57,793 $ 32,620 $ 90,413 $ 36,702 $ 24,943 $ 61,645
---------------------------------------------------------------------
---------------------------------------------------------------------


Shipments of light-duty fuel cell modules and higher light and heavy-duty service revenues were primary contributors to the increase in Transportation product revenues for both the three and nine-month periods ended September 30, 2003. The increase in revenue for the nine-month period also reflects the delivery of the final heavy-duty bus engines and related product services for the European Fuel Cell Bus Project. We will continue to earn related product and service revenue during the two-year life of the project.

Engineering service revenue primarily reflects the achievement of predefined light-duty fuel cell program development milestones for our customers, the related costs of which are included in research and development expenses. The changes in engineering service revenue as compared to the same periods in 2002 reflect the timing of milestone achievements under this program. The development phase of the current generation light-duty fuel cell engine program is nearing completion and we expect engineering service revenues from this program to decline over the next several quarters.

Power Generation revenues for the three months ended September 30, 2003 were roughly the same as revenues for the same period in 2002. Power Generation revenues for the nine-month period in 2003 were $0.7 million, or 41% higher than the same period in 2002 due to sales of our 1 kW stationary combined heat and power fuel cell generators for the Japanese residential market and sales of our Ecostar(TM) Power Converter.

Material Products revenues for the three and nine-month periods ended September 30, 2003 were down slightly compared to the comparative periods in 2002 due to a decline in our customer's automotive vehicle sales.

Cost of product revenues for the three months ended September 30, 2003 were $15.3 million, an increase of $0.6 million or 4% from the same period in 2002. Cost of product revenues for the first nine months of 2003 was $56.3 million, an increase of $13.9 million or 33% from the corresponding period in 2002. The higher cost of product revenues primarily reflects the increase in revenues discussed above. Partly offsetting the increase in the cost of product revenues for the nine-month period in 2003 are:

-- reductions in our accrued warranty provisions required for our
250 kW stationary generator field trial program, which is
nearing completion;

-- reductions in warranty provisions related to heavy-duty bus
engines due to improved lifetime expectancy, cost savings
related to lower spare module requirements, improved logistics
associated with field support, and lower production costs; and

-- reversals of accrued warranty liabilities due to contractual
expirations and cost reductions for our light-duty fuel cell
modules.


Research and product development expenses for the three months ended September 30, 2003 were $25.4 million, a decrease of $2.9 million or 10% as compared to the same quarter in 2002. Research and product development expenses for the first nine months of 2003 were $77.7 million, a decrease of $9.3 million or 11% from the corresponding period in 2002. The decreases were achieved through cost reduction initiatives and restructuring activities, the wind-down of our 250 kW stationary generator field trial program, our heavy-duty bus development program and our fuel processing activities, and the deferral of certain programs, such as the 10 kW and 60 kW stationary fuel cell power generator programs. For the three and nine-month periods ended September 30, 2003, these decreases were partly offset by the effect of the strengthening Canadian dollar and Euro, relative to the U.S. dollar, on expenditures denominated in those currencies. Included in research and product development expenses for the three and nine-month periods ended September 30, 2003 were costs of $6.9 million and $20.9 million, respectively, related to our achievement of predefined program milestones for our customers for which we earned engineering service revenue. This compares to engineering service related expenditures of $9.0 million and $22.5 million for the corresponding periods in 2002.

General and administrative expenses for the three months ended September 30, 2003 were $3.9 million, a decrease of $2.2 million or 36% from the same period in 2002. General and administrative expenses for the first nine months of 2003 were $12.5 million, a decrease of $5.5 million or 31% from the corresponding period in 2002. The decreases reflect the benefit of cost reduction initiatives and restructuring activities to simplify and streamline the organization that were implemented in 2002. These decreases were partly offset by the effect of the strengthening Canadian dollar and Euro, relative to the U.S. dollar, on expenditures denominated in those currencies.

Marketing expenses for the three and nine-month periods ended September 30, 2003 were $2.2 million and $7.2 million respectively, in line with marketing expenses for the corresponding periods in 2002. Decreases in marketing expenses as a result of cost reduction initiatives were more than offset by the effect of the strengthening Canadian dollar and Euro, relative to the U.S. dollar, on expenditures denominated in those currencies.

Depreciation and amortization was $12.0 million for the three months ended September 30, 2003, compared to $11.0 million in 2002. Depreciation and amortization for the first nine months of 2003 were $34.7 million, an increase of $0.6 million or 2% as compared to the same period in 2002. The increase reflects the amortization of intangible assets associated with our acquisition of the interests of ALSTOM Canada Inc. and FirstEnergy Corp. in our subsidiary, BGS, in December 2002 and May 2003, respectively, partly offset by lower depreciation from the writedown of property, plant and equipment associated with facility consolidations during 2002.

Investment and other income was $3.0 million for the three months ended September 30, 2003, an increase of $9.4 million as compared to the same period last year. Investment and other income for the first nine months of 2003 was $23.6 million, an increase of $11.0 million or 87% from the corresponding period in 2002.

The following table provides a breakdown of our investment and other income and foreign exchange gains and losses for the reported periods:

--------------------------------------------------------------------
(Expressed in thousands of U.S. dollars)
Three Months ended Sept. 30 Nine Months ended Sept. 30
--------------------------------------------------------------------
2003 2002 2003 2002
--------------------------------------------------------------------
Investment and
other income $ 3,000 $ 3,058 $ 7,419 $ 9,179
Foreign exchange
gain (loss) (36) (9,524) 16,160 3,422
-------------------------------------------------
$ 2,964 $ (6,466) $ 23,579 $ 12,601
--------------------------------------------------------------------
--------------------------------------------------------------------


The lower foreign exchange loss for the quarter ended September 30, 2003 was primarily due to a lower balance of Euro and Canadian dollar net monetary assets in 2003 relative to the same period in 2002 and lower exchange rate movement in the third quarter of 2003. The higher foreign exchange gain in the nine-month period ended September 30, 2003, as compared to the same period in 2002, is primarily due to larger changes in exchange rates in 2003. The foreign exchange gains and losses are primarily attributable to the effect of the changes in the value of the Euro and the Canadian dollar, relative to the U.S. dollar, on our Euro and Canadian dollar net monetary assets over the respective periods. While most of our revenue contracts are in U.S. dollars, our local expenditures in Canada and Germany are subject to the effect of exchange rate movements. We hold Canadian and Euro denominated cash and short-term investments to reduce the foreign currency risk inherent in expenditures in these currencies. Investment income declined in both the three and nine-month periods of 2003 primarily due to lower interest rates. Offsetting lower interest rates in the third quarter of 2003 were profits realized on some longer maturity investments.

Writedown of investments was nil for the quarter and $7.3 million for the nine-month period ended September 30, 2003 and represents the write-off of our investment in MCT, as discussed above.

Equity in loss of associated companies for the three months ended September 30, 2003 was $0.4 million, a decrease of $0.4 million or 51% from the same period in 2002. Equity in loss of associated companies for the first nine months of 2003 was $1.4 million, a decrease of $0.2 million or 10% from the corresponding period in 2002. The decreases are primarily the result of lower losses of EBARA BALLARD, our investment in which is accounted for using the equity method.

Minority interest for the three months ended September 30, 2003 was nil, a decrease of $4.6 million from the same period in 2002. Minority interest for the first nine months of 2003 was $4.6 million, a decrease of $16.8 million or 79% from the corresponding period in 2002. The decreases are due to lower losses of our subsidiaries Ballard Power Systems AG ("BPSAG") and BGS and because we ceased recording the minority share in the losses of these companies during 2003. With our acquisition of FirstEnergy Corp.'s interest in BGS in May 2003, we now own 100% of BGS. As well, during the second quarter, the minority interest's share of losses in BPSAG exceeded its investment in this company, and we now recognize 100% of the losses of BPSAG in our financial statements.

Business integration and restructuring costs for the three and nine-month periods ended September 30, 2003 were $2.7 million and $7.1 million, respectively. This compares to $3.0 million and $16.5 million for the same periods in 2002. These costs represent severance and other compensation payments, facility closure costs, asset writedowns and other expenditures associated with restructuring and integration activities.

CASH FLOWS, LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS


Cash, cash equivalents and short-term investments were $336.9 million as at September 30, 2003, a decrease of $40.0 million from the end of 2002. The decrease was primarily driven by net losses (excluding non-cash items) of $33.9 million, cash investments and the acquisition of other assets totaling $3.9 million, capital expenditures of $2.8 million and higher working capital requirements of $1.8 million, partly offset by the change in non-cash long-term liabilities of $1.0 million and net proceeds from the issuance of share capital of $1.5 million.

Cash used by operations for the three and nine-month periods ended September 30, 2003, was $17.4 million and $35.7 million, respectively. This compares to $35.1 million and $114.8 million, respectively, for the corresponding three and nine-month periods in 2002. The lower cash requirements for operations during 2003 were driven by reduced cash losses, lower capital expenditures and lower increases in non-cash working capital.

For the quarter ended September 30, 2003, working capital requirements resulted in cash outflows of $3.7 million compared to $6.1 million for the same period in 2002. The non-cash working capital outflow for the quarter was driven by higher accounts receivable due to invoice timing, increased inventories in advance of expected production requirements for product deliveries and field service, and the prepayment of annual insurance premiums and property taxes. This was partly offset by higher accounts payable and accrued liabilities due primarily to retention bonus accruals (discussed below) and higher accrued warranty liabilities. The higher accrued warranty liabilities resulted from shipments of light and heavy-duty fuel cell modules, partly offset by a reduction in the warranty provision related to our 250 kW stationary generator field trial program.

For the nine months ended September 30, 2003, working capital requirements resulted in cash outflows of $1.8 million compared to $32.0 million for the comparative period in 2002. Working capital requirements for the current nine-month period were driven primarily by lower accounts payable and accrued liabilities reflecting lower expenses and the net payment of business integration and restructuring costs and higher inventories as discussed above. This was partly offset by improved collection of accounts receivable, and an increase in accrued warranty liabilities resulting from shipments of light and heavy-duty fuel cell modules and the effect of the stronger Euro and Canadian dollar, relative to the U.S. dollar, on warranty liabilities denominated in those currencies. The increase in accrued warranty liabilities was partly offset by a reduction in the warranty provision required for light-duty fuel cell modules and heavy-duty bus engines due to improved lifetime expectancy, cost savings related to lower spare module requirements, improved logistics associated with field support and lower production costs. Included in cash used by operations were payments for business integration and restructuring costs of $0.7 million and $3.5 million for the three and nine-month periods ended September 30, 2003, respectively.

Investing activities resulted in cash outflows of $5.1 million and $1.0 million for the three and nine-month periods ended September 30, 2003 respectively. For the quarter, this was primarily due to an increase in short-term investments of $3.4 million, capital spending of $1.1 million, and an additional investment of $0.4 million in Chrysalix Energy Limited Partnership, in which we have a partnership interest. For the nine months ended September 30, 2003 the cash outflow was driven primarily by capital spending of $2.8 million, investments of $1.6 million in EBARA BALLARD, and the acquisition of other businesses of $1.9 million, partly offset by a decrease in short-term investments of $4.7 million, increases in long-term liabilities related to pensions of $1.0 million and proceeds on the sale of intangible assets of $0.5 million. The acquisition of other businesses consists of $1.7 million related to the acquisition of Coleman Powermate, Inc.'s AirGen(TM)fuel cell generator net assets and $0.2 million of acquisition costs related to the purchase of FirstEnergy Corp.'s interest in BGS. Capital spending was primarily for manufacturing equipment and lab and test equipment.

Financing activities resulted in cash inflows of $0.4 million and $1.5 million for the three and nine-month periods ended September 30, 2003, respectively. The increases were primarily from the net proceeds from the issuance of share capital resulting from the exercise of employee stock options.

As at September 30, 2003, we had 118,183,727 common shares, one Class A share and one Class B share issued and outstanding. As at that date, we also had outstanding stock options to purchase 7,445,921 of our common shares.

LIQUIDITY AND CAPITAL RESOURCES

As at September 30, 2003, we had cash, cash equivalents and short-term investments totaling $336.9 million. We will use our funds to meet net funding requirements for the development and commercialization of products in our target markets. This includes research and product development for PEM fuel cell products, carbon fiber products, power electronics and electric drive systems, the purchase of equipment for our manufacturing and testing facilities and the further development of high-volume manufacturing processes and business systems, and the development of our product distribution and service capabilities. Our actual funding requirements will vary depending on a variety of factors, including the progress of our research and development efforts, our relationships with our strategic partners, our commercial sales, our ability to control working capital and the results of our development and demonstration programs.

Assuming no significant changes in exchange rates from the end of the third quarter, we expect our cash requirements for ongoing operations and capital expenditures in 2003 to be between $55 million and $65 million, an improvement from our previous guidance of $65 million to $75 million. The improvement in our guidance reflects foreign exchange gains from the rapid appreciation of the Canadian dollar and Euro, higher engineering service revenues and strong cash management efforts in all areas of our business. The forecasting of our cash requirements can be impacted by the uncertainty of estimating the effect of foreign exchange fluctuations, the timing of customer programs, the timing of certain expenditures and working capital requirements. We remain comfortable with our guidance for cash required for business integration and restructuring costs of $9 million in 2003.

Our expected cash consumption for 2003 reflects a significant reduction from 2002 and will be achieved through increased revenues, decreased spending in most expense categories, and reduced capital expenditures. Reductions in product and technology development expenditures in 2003 are being achieved by:

-- winding-down our 250 kW stationary generator field trial
program, our current heavy-duty bus development program, and
our fuel processing activities;

-- deferring certain programs, such as the 10 kW and 60 kW
stationary fuel cell power generator programs;

-- focusing on core programs; and

-- leveraging, where possible, suppliers and partners to develop
non-core technology.


As well, the move to a centralized functional structure (other than for our Material Products Division) has simplified and streamlined the organization, further reducing our cash requirements.

Our revenue guidance for 2003 is between $100 million and $120 million. We expect to finish the year toward the middle of this range. The forecasting of our revenues for the balance of the year can be impacted by the uncertainty associated with the timing of customer programs in our Transportation segment.

Our revenue guidance for 2003 reflects an increase over 2002, and is primarily driven by higher light-duty automotive fuel cell sales, engineering service revenue from the achievement of pre-defined light-duty fuel cell program development milestones for our customers and delivery of bus engines for the European Fuel Cell Bus Project.

As described in the Management Proxy Circular for our 2003 Annual Shareholders' Meeting and our Management Proxy Circular dated October 18, 2001 with respect to the acquisitions of BPSAG and Ballard Power Systems Corporation from DaimlerChrysler and Ford, certain of our officers are eligible to receive a retention bonus if the officer is continuously employed with us until November 2003. We have clarified the terms of the employment agreements with these officers to reflect the original intent to provide payment in our common shares equal to one year's annual compensation. All but one of the agreements were entered into prior to the adoption of the standards in Section 3870 of the Canadian Institute of Chartered Accountants' Handbook for accounting for stock-based compensation and, therefore prior to the changes made to the employment agreements the retention bonuses were not expensed. Under generally accepted accounting principles, the changes made to the employment agreements require us to expense the cost of these common shares on a prospective basis over the remaining term over which these shares are earned. This will increase non-cash business integration and restructuring costs during 2003 by approximately $4.2 million, of which $1.2 million and $3.4 million were recorded in the three and nine-month periods ended September 30, 2003, respectively. Due to the non-cash nature of these expenses, there will be no effect on our cash guidance of $9.0 million for business integration and restructuring costs.

As previously disclosed, DaimlerChrysler and Ford have agreed in principle that, at our request at any time after December 31, 2003, they will make an equity investment in Ballard of a total of Cdn.$55 million, comprising Cdn.$30 million by DaimlerChrysler and Cdn.$25 million by Ford. DaimlerChrysler and Ford have also agreed in principle to fund a portion of the cost of our next generation light-duty automotive fuel cell engine program. We are continuing to work with DaimlerChrysler and Ford to determine the scope, milestones, deliverables and timing of the program. Several alternative development paths are being explored by the parties. In evaluating these alternative paths, the parties are exploring approaches that could accelerate the program. The scope and timing of the program as initially envisioned could therefore be affected. Previously, DaimlerChrysler and Ford had agreed in principle to fund up to $97 million to support the program, subject to the achievement of certain commercial and technical deliverables. The exact amount of the funding may be higher or lower, depending on the ultimate scope of the program. Some of this funding may be in the form of an equity investment with the balance by way of engineering service revenue. Ballard, DaimlerChrysler and Ford previously intended to formalize these agreements in principle in 2003. It is now expected that these agreements will be signed in 2004.

RISKS & UNCERTAINTIES

Risks & uncertainties related to economic and industry factors are described in detail in the "Management's Discussion & Analysis" section of our 2002 Annual Report and remain substantially unchanged.

BALLARD POWER SYSTEMS INC.
Consolidated Balance Sheets
Unaudited (Expressed in thousands of U.S. dollars)

September 30, December 31,
2003 2002
-------------------------------------------------------------------
Assets

Current assets:
Cash and cash equivalents $ 201,932 $ 237,233
Short-term investments 134,925 139,637
Accounts receivable 26,251 28,123
Inventories 28,873 26,134
Prepaid expenses and other current
assets 2,645 2,219
-----------------------------
394,626 433,346

Property, plant and equipment 86,950 97,899
Intangible assets (note 3) 142,412 156,024
Goodwill 220,308 200,639
Investments (note 4) 19,800 26,546
Other long-term assets 3,056 3,349
-----------------------------
$ 867,152 $ 917,803
-----------------------------
-----------------------------

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued
liabilities $ 40,707 $ 46,749
Deferred revenue 4,333 4,492
Accrued warranty liabilities 31,674 25,637
-----------------------------
76,714 76,878

Long-term liabilities 12,090 11,408
Minority interest - 4,726
-----------------------------
88,804 93,012

Shareholders' equity:
Share capital 1,226,727 1,187,127
Contributed surplus (note 5(b)) 49 -
Accumulated deficit (448,192) (362,100)
Cumulative translation adjustment (236) (236)
-----------------------------
778,348 824,791
-----------------------------
$ 867,152 $ 917,803
-----------------------------
-----------------------------

See accompanying notes to consolidated financial statements.


BALLARD POWER SYSTEMS INC.
Consolidated Statements of Operations and Accumulated Deficit
Unaudited (Expressed in thousands of U.S. dollars, except per share
amounts and number of shares)

--------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
--------------------------------------------------------------------

Revenues:
Product revenues $ 18,259 $ 10,829 $ 57,793 $ 36,702
Engineering service
and other revenue 9,907 17,206 32,620 24,943
-----------------------------------------------
Total revenues 28,166 28,035 90,413 61,645
-----------------------------------------------

Cost of revenues and
expenses:
Cost of product
revenues 15,304 14,689 56,282 42,384
Research and product
development 25,402 28,265 77,663 86,972
General and
administrative 3,913 6,071 12,480 17,976
Marketing 2,203 2,063 7,162 7,028
Depreciation and
amortization 11,998 11,012 34,663 34,098
Capital taxes - 61 - 190
---------------------------------------------
Total cost of
revenues and expenses 58,820 62,161 188,250 188,648
-----------------------------------------------

Loss before
undernoted (30,654) (34,126) (97,837) (127,003)
Investment and
other income 2,964 (6,466) 23,579 12,601
Writedown of
investments (note 4) - - (7,335) -
Equity in loss of
associated companies (378) (779) (1,427) (1,584)
Minority interest - 4,648 4,578 21,418
Business integration
and restructuring
costs (2,743) (2,999) (7,128) (16,477)
-----------------------------------------------
Loss before income
taxes (30,811) (39,722) (85,570) (111,045)
Income taxes 244 470 522 1,337
-----------------------------------------------
Net loss for period (31,055) (40,192) (86,092) (112,382)
Accumulated deficit,
beginning of period (417,137) (286,795) (362,100) (214,605)
-----------------------------------------------

Accumulated deficit,
end of period $ (448,192) $ (326,987) $ (448,192) $ (326,987)
-----------------------------------------------
-----------------------------------------------
Basic and diluted
loss per share $ (0.26) $ (0.38) $ (0.73) $ (1.07)
-----------------------------------------------
-----------------------------------------------
Weighted average
number of
common shares
outstanding 118,108,987 105,344,397 117,187,334 105,219,320
-----------------------------------------------
-----------------------------------------------

See accompanying notes to consolidated financial statements.


BALLARD POWER SYSTEMS INC.
Consolidated Statements of Cash Flows
Unaudited (Expressed in thousands of U.S. dollars)

--------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
--------------------------------------------------------------------

Cash provided by
(used for):
Operating activities:
Net loss for period $ (31,055) $ (40,192) $ (86,092) $(112,382)
Items not affecting
cash:
Compensatory shares 2,806 1,460 7,197 4,103
Depreciation and
amortization 13,953 12,740 40,699 38,865
Loss on sale and
writedowns of
property, plant
and equipment 318 957 368 6,697
Writedown of
investments (note 4) - - 7,335 -
Equity in loss of
associated companies 378 779 1,427 1,584
Minority interest - (4,648) (4,578) (21,418)
Other (95) (83) (276) (250)
-----------------------------------------------
(13,695) (28,987) (33,920) (82,801)
-----------------------------------------------
Changes in non-cash
working capital:
Accounts receivable (1,758) (12,774) 1,872 (15,546)
Inventories (3,081) 8 (1,756) (3,483)
Prepaid expenses and
other current assets (1,441) (1,031) (426) (1,495)
Accounts payable and
accrued liabilities 1,550 2,945 (7,394) (17,657)
Deferred revenue (553) 1,372 (159) 2,282
Accrued warranty
liabilities 1,561 3,342 6,037 3,913
-----------------------------------------------
(3,722) (6,138) (1,826) (31,986)
-----------------------------------------------
Cash used by
operations (17,417) (35,125) (35,746) (114,787)
-----------------------------------------------
Investing activities:
Net decrease in
short-term
investments (3,440) 28,634 4,712 71,720
Additions to
property, plant and
equipment (1,070) (6,017) (2,803) (17,980)
Additions to
intangible assets - - (557) -
Proceeds on sale of
property, plant and
equipment - 28 8 154
Proceeds on sale of
intangible assets - - 479 -
Investments (note 4) (406) (277) (2,016) (2,603)
Acquisition of other
businesses (note 2) - - (1,879) -
Other long-term
assets 6 (635) 66 (804)
Long-term liabilities (217) 427 963 1,956
-----------------------------------------------
(5,127) 22,160 (1,027) 52,443
-----------------------------------------------
Financing activities:
Net proceeds on
issuance of share
capital 377 68 1,504 6,110
Other (2) (19) (32) (57)
-----------------------------------------------
375 49 1,472 6,053
-----------------------------------------------
Decrease in cash and
cash equivalents (22,169) (12,916) (35,301) (56,291)
Cash and cash
equivalents,
beginning of period 224,101 97,399 237,233 140,774
-----------------------------------------------
Cash and cash
equivalents, end of
period $ 201,932 $ 84,483 $ 201,932 $ 84,483
-----------------------------------------------
-----------------------------------------------

Supplemental disclosure of cash flow information (note 6)
See accompanying notes to consolidated financial statements.


BALLARD POWER SYSTEMS INC.
Notes to Consolidated Financial Statements
Unaudited (Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares)



1. Basis of Presentation:

The accompanying financial information reflects the same accounting policies and methods of application as the Company's 2002 Annual Report. The accompanying financial information does not include all disclosure required under Canadian generally accepted accounting principles ("GAAP") because certain information included in the Company's 2002 Annual Report has not been included in this report. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2002 Annual Report.

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

2. Business Acquisitions:

(a) On June 5, 2003, the Company purchased Coleman Powermate, Inc.'s AirGen(TM)fuel cell generator net assets for cash of $1,573,000, plus acquisition costs of $106,000. The costs of acquisition were allocated to the assets and liabilities acquired as follows:

------------------------------------------------------------------
Inventory $ 983
Property, plant and equipment 419
Intangible assets 379
------------------------------------------------------------------

1,781
Current liabilities (102)
------------------------------------------------------------------
Purchase price $ 1,679
------------------------------------------------------------------
------------------------------------------------------------------


(b) On May 2, 2003, the Company completed the purchase of FirstEnergy Corp.'s 13.2% interest in Ballard Generation Systems Inc. ("BGS"). The purchase price was $30,586,000 including $30,386,000 funded through the issuance of 1,366,063 common shares and $200,000 of transaction costs. The value of each common share issued of $22.24 was based on the average quoted market price of the Company's common shares around the announcement date of the acquisition, being August 23, 2001. The acquisition of the minority interest has been accounted for by the purchase method effective May 2, 2003, the date of closing. Of the purchase price, $13,088,000 has been allocated to intangible assets and $17,350,000 has been allocated to goodwill. Upon completion of this transaction, the Company owned 100% of BGS.

(c) On December 18, 2002, the Company purchased ALSTOM Canada Inc.'s 18.2% interest in BGS. A preliminary allocation of the purchase price was reflected in the consolidated financial statements for the year ended December 31, 2002. During the three months ended March 31, 2003, the Company finalized its allocation of purchase price to intangible assets and goodwill. The value of intangible assets was decreased by $2,319,000 for a final value of $12,677,000 and goodwill was increased by $2,319,000 for a final value of $16,726,000. Amortization of intangible assets has been adjusted to reflect the change in purchase price allocation.

3. Intangible assets:

During the nine months ended September 30, 2003, the Company acquired intangible assets of $2,066,000 from a related party through the issuance of 221,356 common shares of the Company.

4. Investments:

During the nine months ended September 30, 2003, the Company reassessed its valuation of its investment in MicroCoating Technologies, Inc. ("MCT"). Due to uncertainty surrounding MCT's ability to raise additional capital and continue as a going concern, the full amount of the investment of $7,335,000 was written-down.

The Company made an additional investment of $1,610,000 (2002 - $1,188,000) in EBARA BALLARD Corporation, representing the Company's proportionate share of financing by EBARA BALLARD's shareholders.

The Company also made an additional investment of $406,000 (2002 - $648,000) in Chrysalix Energy Limited Partnership.

5. Share Capital:

(a) Stock Options


As permitted by the Canadian Institute of Chartered Accountants' ("CICA") Handbook Section 3870 Stock-based Compensation and Other Stock-based Payments, the Company adopted the intrinsic method for recording employee and director stock option grants. As a result, pro-forma disclosure is required to reflect the impact on the Company as if it had elected to adopt the fair value method of accounting provisions of CICA Handbook Section 3870.

The pro-forma disclosure below for the three months ended September 30, 2003, reflects an increase of options to acquire 31,095 common shares of the Company (2002 - 135,000) with a weighted average fair value of $8.73 (2002 - $8.27). The pro-forma disclosure for the nine months ended September 30, 2003, reflects an increase of options to acquire 1,341,327 common shares (2002 - 2,721,374), with a weighted average fair value of $7.30 per share (2002 - $18.04). These options have a vesting period of three years. The fair value of the options issued was determined using the Black-Scholes valuation model under the following weighted average assumptions:

--------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
--------------------------------------------------------------------
Expected life 7 years 7 years 7 years 7 years
Expected dividends Nil Nil Nil Nil
Expected volatility 78% 79% 75% 74%
Risk-free interest rate 5% 5% 5% 5%
--------------------------------------------------------------------


If computed fair values of the options granted in the current and
prior periods had been amortized to expense over their vesting
periods, the net loss and net loss per share would have been:

--------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
--------------------------------------------------------------------

Net loss $ 31,055 $ 40,192 $ 86,092 $112,382
Compensation charge
related to options
granted 4,999 4,104 13,942 6,075
--------------------------------------------------------------------
Pro-forma net loss $ 36,054 $ 44,296 $100,034 $118,457
--------------------------------------------------------------------
Pro-forma basic and
diluted loss per
share $ 0.31 $ 0.42 $ 0.85 $ 1.13
--------------------------------------------------------------------


The Company's share distribution plan is deemed to be compensatory, which resulted in a compensatory charge to the income statement of $2,757,000 for the three-month period ended September 30, 2003 (2002 - $1,460,000) and $7,148,000 for the nine-month period ended September 30, 2003 (2002 - $4,103,000).

As at September 30, 2003, options to purchase 7,445,921 common shares were outstanding.

(b) Deferred Share Units

During 2003, the Company approved a deferred share unit ("DSU") plan for the board of directors. Eligible directors may elect to receive all or part of their annual retainers in DSUs. Each DSU is redeemable for one common share in the capital of the Company after the director ceases to be on the board. As at September 30, 2003, 3,642 DSUs were issued and outstanding, and during the three months ended September 30, 2003, $49,000 of compensation expense was recorded.

6. Supplemental disclosure of cash flow information:

--------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
--------------------------------------------------------------------

Income taxes paid $ 294 $ 53 $ 353 $ 363
Non-cash financing
and investing
activities
Compensatory shares $ 95 $ 253 $ 5,644 $ 1,576
Common shares issued
to acquire intangible
assets (note 3) $ - - $ 2,066 -
Common shares issued
for acquisitions
(note 2) $ - - $30,386 -
--------------------------------------------------------------------



7. Segmented financial information:

As a result of the Corporate Restructuring announced in December 2002, the Company's business operates in three market segments, Transportation, Power Generation and Material Products. The comparative figures have been reclassified to conform to the segmented disclosure adopted in the current year.

Segment revenues and segment (loss) gain represent the primary financial measures used by senior management in assessing performance and allocating resources, and includes the revenues, cost of product revenues and expenses for which segment managers are held accountable. Segment expenses include research and product development costs directly related to individual segments. Costs associated with shared services and other costs are allocated based on headcount and square footage. Corporate amounts include expenses for research and product development, marketing and general and administrative, which apply generally across all segments and are reviewed separately by senior management. A significant portion of the Company's production, testing and lab equipment, and facilities, as well as intellectual property and goodwill, are common across the segments. Therefore, management does not classify asset information on a segmented basis. Instead, performance assessments of these assets and related resource allocations are done on a company-wide basis.

The Company develops, manufactures and markets complete proton exchange membrane (PEM) fuel cell engines, PEM fuel cell components and electric drive systems for the Transportation market segment. The Company develops, manufactures and markets a variety of fuel cell and other power generation products ranging from portable and stationary fuel cell power products to power electronics for the Power Generation market segment. The Company's Material Products segment develops, manufactures and markets carbon fiber products primarily to automotive manufacturers for automotive transmissions and gas diffusion electrode materials for the PEM fuel cell industry.

--------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
--------------------------------------------------------------------

Revenues
Power Generation $ 1,075 $ 1,035 $ 2,347 $ 1,664
Transportation 24,206 23,680 77,789 49,377
Material Products 2,885 3,320 10,27