HYDROGENICS CORP FORM 6-K. (Report of Foreign Issuer) Filed 05/06/08 for the Period Ending 05/06/08

Transcription

1 HYDROGENICS CORP FORM 6-K (Report of Foreign Issuer) Filed 05/06/08 for the Period Ending 05/06/08 Telephone CIK Symbol HYGS SIC Code Motors and Generators Industry Scientific & Technical Instr. Sector Technology Fiscal Year 12/31 Copyright 2008, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

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3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of: May 2008 Commission File Number: HYDROGENICS CORPORATION CORPORATION HYDROGENIQUE (Exact name of registrant as specified in its charter) 5985 MCLAUGHLIN ROAD, MISSISSAUGA, ONTARIO L5R 1B8, CANADA (Address of principal executive office) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F Form 40-F Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of Yes No If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

4 EXHIBIT LIST Exhibit Description 99.1 First Quarter 2008 Interim Consolidated Financial Statements and Results of Operations 99.2 First Quarter 2008 Management s Discussion and Analysis of Financial Condition and Results of Operations 99.3 Press Release dated May 6, Certifications pursuant to Canadian law 99.5 PowerPoint Presentation Entitled First Quarter 2008 Results

5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 6, 2008 HYDROGENICS CORPORATION By: /s/ Lawrence E. Davis Name: Lawrence E. Davis Title: Chief Financial Officer

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7 Exhibit 99.1 Hydrogenics Corporation First Quarter 2008 Interim Consolidated Financial Statements and Results of Operations

8 Hydrogenics Corporation Interim Consolidated Balance Sheets (in thousands of U.S. dollars) (unaudited) Assets Hydrogenics Corporation March 31 December Current assets Cash and cash equivalents $ 27,027 $ 15,460 Restricted cash (note 9) 6,066 Short-term investments 15,032 Accounts receivable 7,625 12,713 Grants receivable Inventories (note 4) 11,655 12,659 Prepaid expenses 1,071 1,105 54,376 57,819 Property, plant and equipment 4,891 4,847 Intangible assets Goodwill 5,025 5,025 $ 64,478 $ 67,940 Liabilities Current liabilities Accounts payable and accrued liabilities $ 16,720 $ 18,166 Unearned revenue 10,601 9,042 27,321 27,208 Long-term debt 1 11 Deferred research and development grants ,489 27,556 Shareholders Equity Share capital 306, ,872 Contributed surplus 15,842 15,606 Deficit (281,423) (277,101) Accumulated other comprehensive loss (4,302) (4,993) Total deficit and accumulated other comprehensive income ( loss) (285,725) (282,094) 36,989 40,384 $ 64,478 $ 67,940 The accompanying notes form an integral part of these Interim Consolidated Financial Statements. Norman Seagram Chairman Douglas Alexander Director First Quarter 2008 Interim Consolidated Financial Statements Page 2

9 Hydrogenics Corporation Interim Consolidated Statements of Shareholders Equity (in thousands of U.S. dollars, except for share and per share amounts) (unaudited) Hydrogenics Corporation The authorized capital stock of the Corporation consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series. The accompanying notes form an integral part of these Interim Consolidated Financial Statements. Accumulated other Common shares Contributed comprehensive shareholders Number Amount surplus Deficit income (loss) equity Balance at Dec. 31, ,916,466 $ 307,376 $ 13,718 $ (249,033 ) $ (5,304 ) $ 66,757 Net loss for the period (28,068) (28,068) Foreign currency translation adjustments Comprehensive loss (27,757) Shares issued: Shares returned to treasury (150,775) (504) 335 (169) Stock-based compensation expense 1,553 1,553 Balance at Dec. 31, ,765, ,872 15,606 (277,101) (4,993) 40,384 Net loss for the period (4,322) (4,322) Foreign currency translation adjustments Comprehensive loss (3,631) Shares issued: Adjustment for partial shares (5) Stock-based compensation expense Balance at Mar. 31, ,765,686 $ 306,872 $ 15,842 $ (281,423) $ (4,302) $ 36,989 First Quarter 2008 Interim Consolidated Financial Statements Page 3 Total

10 Hydrogenics Corporation Interim Consolidated Statements of Operations (in thousands of U.S. dollars, except for share and per share amounts) (unaudited) Hydrogenics Corporation Three months ended March Revenues $ 10,711 $ 6,850 Cost of revenues 8,846 5,936 1, Operating expenses Selling, general and administrative 4,061 6,947 Research and product development (note 7) 1,712 2,862 Amortization of property, plant and equipment Amortization of intangible assets ,107 10,096 Loss from operations (4,242 ) (9,182 ) Other income (expenses) Provincial capital tax (38) (18) Interest Foreign currency gains (losses) (270) 30 (80) 879 Loss before income taxes (4,322) (8,303) Current income tax expense 3 Net loss for the period $ (4,322) $ (8,306) Net loss per share (note 8) Basic and diluted $ (0.05) $ (0.09) Shares used in calculating basic and diluted net loss per share 91,765,689 91,896,363 The accompanying notes form an integral part of these Interim Consolidated Financial Statements. First Quarter 2008 Interim Consolidated Financial Statements Page 4

11 Hydrogenics Corporation Interim Consolidated Statements of Cash Flows (in thousands of U.S. dollars) (unaudited) Hydrogenics Corporation The accompanying notes form an integral part of these Interim Consolidated Financial Statements. Three months ended March Cash and cash equivalents provided by (used in) Operating activities Net loss for the period $ (4,322) $ (8,306) Items not affecting cash Amortization of property, plant and equipment Amortization of intangible assets Unrealized foreign exchange (gains) losses (152) (108) Stock-based compensation Net change in non-cash working capital 7,000 (1,937) 3,096 (9,372) Investing activities Decrease in short-term investments 15,032 54,350 Increase in restricted cash (6,066) Purchase of property, plant and equipment (315) (211) 8,651 54,139 Financing activities Repayment of long-term debt (10) (37) Deferred research and development grant (170) 473 Shares returned to treasury (169) (180) 267 Increase in cash and cash equivalents during the period 11,567 45,034 Cash and cash equivalents Beginning of period 15,460 5,937 Cash and cash equivalents End of period $ 27,027 $ 50,971 Supplemental disclosure Interest paid $ 10 $ 6 Income taxes paid (17) 3 First Quarter 2008 Interim Consolidated Financial Statements Page 5

12 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation 1. Basis of preparation The accompanying interim consolidated financial statements of Hydrogenics Corporation and its subsidiaries ( Hydrogenics or the Corporation ) have been prepared in accordance with Canadian generally accepted accounting principles ( Canadian GAAP ) for interim financial information and are presented in U.S. dollars, unless otherwise noted. Accordingly, they do not include all of the information and footnotes required by Canadian GAAP for annual consolidated financial statements. Canadian GAAP, in the case of the Corporation, conforms in all material respects with accounting principles generally accepted in the United States, except as outlined in notes 2 and 11. The accompanying financial information reflects all adjustments, consisting primarily of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for interim periods. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, The accounting policies used in the preparation of these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation s fiscal 2007 annual report. These interim consolidated financial statements follow the same accounting policies and methods of application as the consolidated financial statements for the year ended December 31, 2007, except as described below. Certain prior year amounts have been reclassified to conform with current period presentation. Risk Management For the interim period ended March 31, 2008, the Corporation has adopted the requirements of The Canadian Institute of Chartered Accountants ( CICA ) Handbook Section 3862, Financial Instruments Disclosures, which apply to fiscal years beginning on or after October 1, This section requires disclosures relating to the nature and extent of the Corporation s exposure to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency risk and interest rate risk, and how the Corporation manages those risks. Liquidity The Corporation has sustained losses and negative cash flows from operations over the past five years. At March 31, 2008, the Corporation has approximately $33,093 of cash, restricted cash and short-term investments. There are uncertainties related to the timing and use of the Corporation s cash resources. These uncertainties include the volume of commercial sales related to its hydrogen generation products and the development of markets for, and customer acceptance of, its fuel cell power products. As a result, the Corporation may need to seek additional equity or arrange debt financing, which could include additional lines of credit. There is no assurance that the Corporation will be successful in its financing efforts or that they will be sufficient. Credit Risk Credit risk arises from the potential that a counterparty will fail to perform its obligations. The Corporation is exposed to credit risk from customers. However, the Corporation has a significant number of customers, which minimizes concentration of credit risk. At March 31, 2008, the Corporation s two largest customers accounted for 25% (24% at March 31, 2007) and 17% (10% at March 31, 2007) of sales, respectively. Losses under trade receivables have historically been insignificant. In order to minimize the risk of loss for trade receivables the Corporation s extension of credit to customers involves review and approval by senior management as well as progress payments as contracts are executed. While the Corporation s credit controls and processes have been effective in mitigating credit risk, these controls cannot eliminate credit risk and there can be no assurance that these controls will continue to be effective, or that the Corporation s low credit loss experience will continue. Most sales are invoiced with payment terms in the range of 30 to 90 days. First Quarter 2008 Interim Consolidated Financial Statements Page 6

13 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation The Corporation reviews its trade receivable accounts regularly and writes down to their expected realizable values, by making an allowance for doubtful receivables, as soon as the account is determined not to be fully collectible. The allowance is charged against earnings. Shortfalls in collections are applied against this provision. Estimates for allowance for doubtful debts are determined by a customer-by-customer evaluation of collectibility at each balance sheet reporting date, taking into account the amounts that are past due and any available relevant information on the customers liquidity and going concern problems. The Corporation s exposure to credit risk for trade receivables by geographic area as at March 31, 2008 was as follows: Three months ended March United States 29 % Middle East 24 % Europe 15 % Asia 9 % Rest of world 23 % 100 % The Corporation may also have credit risk relating to cash and short-term investments, which it manages by dealing with its current bank. Foreign Currency Risk Foreign currency risk arises because of fluctuations in exchange rates. The Corporation conducts a significant portion of its business activities in foreign currencies, primarily Canadian dollars and the Euro. The assets, and liabilities that are denominated in foreign currencies will be affected by changes in the exchange rate between the U.S. dollar and these foreign currencies. The Corporation recognized foreign exchange losses in the first quarter of 2008 of $270 as compared to foreign exchange gains of $30 in the first quarter of The Corporation s objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows by transacting with third parties in U.S. dollars, Canadian dollars, and the Euro to the maximum extent possible and practical. Interest Rate Risk Interest rate risk arises because of the fluctuation in interest rates. The Corporation is subject to interest rate risk on its cash and short-term investments; however the Corporation does not have any significant long-term debt and hence is not subject to interest rate risk. Management of Capital The Corporation s objective in managing capital is to ensure sufficient liquidity to pursue its organic growth strategy, fund research and development, undertake selective acquisitions, while at the same time taking a conservative approach toward financial leverage and management of financial risk. The Corporation s capital is composed of share capital. The Corporation s primary uses of capital are to finance operating losses, increases in non-cash working capital and capital expenditures. The Corporation currently funds these requirements from internally generated cash flows and cash raised through past share issuances. The Corporation s objectives when managing capital are to ensure that the Corporation will continue to have enough liquidity so it can provide its services to its customers and returns to its shareholders. First Quarter 2008 Interim Consolidated Financial Statements Page 7

14 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation The Corporation monitors its capital on the basis of the adequacy of its cash resources to fund its business plan. In order to maximize flexibility to finance the Corporation s ongoing growth, the Corporation does not currently pay a dividend to holders of its common shares. 2. New accounting standards The Corporation has adopted the following changes to its accounting policies: (i) Canadian standards The Canadian Institute of Chartered Accountants ( CICA ) issued Handbook Section 1535, Capital Disclosures, Section 3862 Financial Instruments Disclosures, and Section 3863, Financial Instruments Presentation. Section 1535 establishes disclosure requirements about an entity s capital and how it is managed. The purpose is to enable users of the financial statements to evaluate objectives, policies and processes for managing capital. Sections 3862 and 3863 replaced Section 3861, Financial Instruments Disclosure and Presentation, revising and enhancing disclosure requirements while carrying forward its presentation requirements. These new sections place increased emphasis on disclosure about the nature and extent of risks arising from financial instruments and how the entity manages those risks. These sections apply to interim and annual financial statements relating to fiscal years beginning on or after October 1, The Corporation has adopted this new guidance effective January 1, While these standards impacted disclosure provided by the Corporation, adoption of these standards did not impact its consolidated financial position, results of operations or cash flows. In May 2007, the CICA issued Handbook Section 3031, Inventories, which replaced the existing Section 3030 Inventories. The standard introduced changes to the measurement and disclosure of inventory. This standard is effective for interim and annual periods related to fiscal years beginning on or after January 1, 2008 with earlier application encouraged. The Corporation adopted this new guidance effective January 1, This standard did not have a material impact on its consolidated financial position, results of operations or cash flows; however, the Corporation now carries inventory at the lower of cost and net realizable value. Previously, the Corporation carried inventory at the lower of cost and replacement cost. (ii) U.S. standards The following changes only apply to note 11 of the interim consolidated financial statements. In September 2006, the the Financial Accounting Standards Board ( FASB ) issued Statemetn of Financial Accountin Standars ( SFAS ) No. 157, Fair Value Measurements ( SFAS 157 ). SFAS 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial statement disclosure requirements about a corporation s use of fair value measurements, including the effect of such measures on earnings. This standard is effective for fiscal years beginning after November 15, The Corporation adopted this new guidance effective January 1, This standard did not impact the Corporation s consolidated financial position, results of operations or cash flows. For nonfinancial assets and nonfinancial liabilities, the standard is effective for financial statements issued for fiscal years beginning after November 15, 2008 and the Corporation plans to adopt this guidance effective January 1, The Corporation is currently assessing the effect that this may have on the Corporation s results of operations and consolidated financial position. First Quarter 2008 Interim Consolidated Financial Statements Page 8

15 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 ( SFAS 159 ). SFAS 159 is expected to expand the use of fair value accounting but does not affect existing standards, which require certain assets or liabilities to be carried at fair value. The objective of SFAS 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Under SFAS 159, a Corporation may choose, at specified election dates, to measure eligible items at fair value and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159, for financial assets and financial liabilities, is effective for financial statements issued for fiscal years beginning after November 15, The Corporation adopted this new guidance effective January 1, New Accounting Standards The following changes will be adopted in the future. (i) Canadian standards In February 2008, the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, which replaced the existing Sections 3062 Goodwill and Other Intangible Assets and 3450 Research and Development Costs. The new standard introduced changes to recognition, measurement and disclosure of goodwill and intangible assets. The provisions relating to the definition and initial recognition of intangible assets are equivalent to the corresponding provisions of International Financial Reporting Standard IAS 38, Intangible Assets. The new standard also provides guidance for the recognition of internally developed intangible assets, including assets developed from research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. Section 3064 applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008 with earlier adoption encouraged. The Corporation will adopt this new guidance effective January 1, The Corporation is currently assessing the effect that this standard may have on the Corporation s results of operations and consolidated financial position. (ii) Convergence with International Financial Reporting Standards In 2006, Canada s Accounting Standards Board ratified a strategic plan that will result in Canadian GAAP, as used by public companies, being evolved and converged with International Financial Reporting Standards ( IFRS ) over a transitional period currently expected to be complete by Canadian GAAP will be converged with IFRS through a combination of two methods: as current joint-convergence projects of the United States FASB and the International Accounting Standards Board are agreed upon, they will be adopted by Canada s Accounting Standards Board and may be introduced in Canada before the complete changeover to IFRS, and standards not subject to a joint-convergence project will be exposed in an omnibus manner for introduction at the time of the complete changeover to IFRS. As the International Accounting Standards Board currently, and expectedly, has projects underway that should result in new pronouncements that continue to evolve IFRS, and that this Canadian convergence initiative is very much in its infancy as of the date of these interim consolidated financial statements, it is premature to assess the impact of the Canadian initiative, if any, on the Corporation. First Quarter 2008 Interim Consolidated Financial Statements Page 9

16 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation (ii) U.S. standards The following changes will only apply to note 11 of the consolidated financial statements. In December 2007, the FASB issued Statement SFAS No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The standard retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for the Corporation beginning January 1, 2009 and will apply prospectively to business combinations completed on or after that date. 3. Business Streamlining Initiative On March 20, 2007 and November 6, 2007, the Corporation s Board of Directors approved a restructuring and streamlining of the Corporation s operations in order to reduce its overall cost structure. In 2007, the Corporation recorded a $4,090 charge for severance and related expenses for these initiatives, which are included in selling, general and administrative expenses as at December 31, As at March 31, 2008, the Corporation had paid $3,726 in respect of these charges. The remaining balance of $364 at March 31, 2008 is anticipated to be paid in These amounts were charged to the business segments as follows: $2,946 for Power Systems; $142 for OnSite Generation; and $1,002 for Corporate and Other business segments. On November 7, 2007, the Corporation announced plans to wind up its fuel cell test products design, development and manufacturing business due to lower than planned gross margin and growth prospects and not achieving certain operating targets. During the year ended December 31, 2007, the Corporation incurred $2,016 in respect of severance and related expenses and the write-off of inventory. Of the $2,016 recorded during the year ended December 31, 2007, no severance and related expenses remain unpaid at March 31, Inventories March 31 December Raw materials $ 6,260 $ 5,070 Work-in-progress 5,350 6,768 Finished goods $ 11,655 $ 12, Warranties Product warranty liabilities are included in accounts payable and accrued liabilities on the inteim consolidated balance sheets. Changes in the Corporation s aggregate product warranty liabilities for the three months ended March 31, 2008 and 2007 are as follows: March 31 March Balance, December 31, 2007 and 2006 $ 3,592 $ 5,077 Accruals for warranties 1, Settlements made during the period (700) (922) Balance, March 31, 2008 and 2007 $ 4,023 $ 4,707 First Quarter 2008 Interim Consolidated Financial Statements Page 10

17 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation 6. Stock-based compensation During the three months ended March 31, 2008, 1,300,004 (March 31, ,644,960) stock options with a weighted average fair value of $0.29 at the date of grant were issued to employees. The fair value of the stock options was determined using the Black-Scholes option pricing model with the following assumptions: March 31 March Risk free interest rate (%) 3.46 % 4.11 % Expected volatility (%) 64 % 56 % Expected life (in years) 4 4 Expected dividends nil nil During the three months ended March 31, 2008, the Corporation created a restricted share unit ( RSU ) plan for senior executives. Pursuant to the terms of the plan, RSU s vest on such date no later than December 31 of the third calendar year following the year in respect of which they were granted. All vested RSUs shall be redeemed by the Corporation at an amount equal to the number of vested RSUs multiplied by the award market value of the underlying common shares of the Corporation as at the vesting date. During the three months ended March 31, 2008, 1,287,500 units were awarded under the terms of this plan. Stock-based compensation expense of $0.2 million (March 31, 2007 $0.5 million) is included in selling, general and administrative expenses. 7. Research and product development Research and product development expenses are recorded net of third party program funding received or receivable. For the three months ended March 31, 2008, research and product development expenses and program funding, which has been received or is to be received, are as follows: Three months ended March Research and product development expenses $ 2,223 $ 2,942 Research and product development funding (511) (80) Total research and product development expenses $ 1,712 $ 2, Net loss per share For the three months ended March 31, 2008, the weighted average number of common shares outstanding was 91,765,689 ( ,896,363). No effect has been given to the potential exercise of stock options and warrants in the calculation of diluted net loss per share as the effect would be anti-dilutive. 9. Guarantees As at March 31, 2008, the Corporation had outstanding standby letters of credit and letters of guarantee issued by several financial institutions which total $10,247 (December 31, 2007 $5,213) with expiry dates extending to October The Corporation has restricted cash totaling $6,066 as security for these standby letters of credit and letters of guarantee. These instruments relate primarily to obligations in connection with the terms and conditions of First Quarter 2008 Interim Consolidated Financial Statements Page 11

18 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation the Corporation s sales contracts. The standby letters of credit and letters of guarantee may be drawn upon by the customer if the Corporation fails to perform its obligations under the sales contracts and the Corporation would be liable to the financial institution for the amount of the standby letter of credit or letter of guarantee in the event that the instruments are drawn. 10. Segmented financial information The Corporation s three reportable segments include: (i) OnSite Generation; (ii) Power Systems; and (iii) Test Systems. Where applicable, corporate and other activities are reported separately as Corporate & Other. OnSite Generation includes the design, development, manufacture, and sale of hydrogen generation products. Power Systems includes the design, development, manufacture, and sale of fuel cell products. Test Systems includes the design, development, manufacture, and sale of fuel cell test products and the provision of fuel cell diagnostic testing services. Financial information by reportable segment for the three months ended March 31, 2008 and 2007 is as follows: Three months ended March 31, 2008 OnSite Power Test Corporate & Generation Systems Systems Other Total Revenue from external customers $ 7,313 $ 1,013 $ 2,385 $ $ 10,711 Amortization of intangible assets Amortization of property, plant and equipment Interest income Interest expense Income tax expense Segment income (loss) (i) 89 (2,344) 66 (2,133) (4,322) Three months ended March 31, 2007 OnSite Power Test Corporate & Generation Systems Systems Other Total Revenue from external customers $ 1,815 $ 1,555 $ 3,480 $ $ 6,850 Amortization of intangible assets Amortization of property, plant and equipment Interest income Interest expense 6 6 Income tax expense 3 3 Segment loss (i) (2,313) (4,321) (148) (1,524) (8,306) (i) Segment income (loss) includes directly attributable selling, general and administration costs, research and product development costs net of associated grants and amortization of property, plant and equipment and intangible assets. Intangible assets and goodwill relating to the Corporation s OnSite Generation segment as at March 31, 2008 are $186 and $5,025, respectively (December 31, 2007 $249 and $5,025). The Corporation currently does not allocate its remaining assets among reportable segments. First Quarter 2008 Interim Consolidated Financial Statements Page 12

19 Hydrogenics Corporation Notes to Interim Consolidated Financial Statements (in thousands of U.S. dollars, except share and per share amounts) (unaudited) Hydrogenics Corporation A significant portion of the Corporation s intangible assets and goodwill are common across the locations. Therefore, management does not classify intangible assets and goodwill on a location basis. Revenues are segmented by geography, as follows: Three months ended March United States $ 3,902 $ 3,197 Saudi Arabia 1,842 Korea 1,232 Brazil 682 China Canada 597 Croatia 502 Japan 471 1,311 Germany France United Kingdom 226 Romania 8 80 Rest of world $ 10,711 $ 6, Differences between Canadian and United States accounting principles These interim consolidated financial statements have been prepared in accordance with Canadian GAAP, which differ in certain respects from those principles that the Corporation would have followed had its interim consolidated financial statements been prepared in accordance with accounting principles generally accepted in the United States ( U.S. GAAP ). As permitted for qualifying foreign private issuers, not all disclosures required to provide a complete reconciliation have been provided. There are no differences in the net loss between Canadian GAAP and U.S. GAAP. First Quarter 2008 Interim Consolidated Financial Statements Page 13

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21 Exhibit 99.2 Hydrogenics Corporation First Quarter 2008 Management s Discussion and Analysis of Financial Condition and Results of Operations

22 Basis of Presentation Hydrogenics Corporation The following Management s Discussion and Analysis of Financial Condition and Results of Operations ( MD&A ) covers our interim consolidated financial statements for the three months ended March 31, 2008 and updates our MD&A for fiscal The information contained herein should be read in conjunction with the Consolidated Financial Statements and Auditors Report for fiscal The Corporation s consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ( Canadian GAAP ) for interim financial information. Unless the context otherwise requires, all references to Corporation, Hydrogenics, our, us and we refer to Hydrogenics Corporation and its subsidiaries. Additional information regarding the Corporation, including the Corporation s Annual Information Form, which is also contained in our annaul report on form 40F, is available on SEDAR at and EDGAR at This MD&A is dated May 5, 2008 and all amounts herein are denominated in U.S. dollars, unless otherwise stated. Forward-looking Statements and Risk Factors This MD&A contains forward-looking statements about our achievements, future results, goals, levels of activity, performance, and other future events. We believe the expectations reflected in our forward-looking statements are reasonable, although we cannot guarantee achievements, future results, levels of activity, performance, or other future events. In some cases, you can identify these forward-looking statements by our use of words such as anticipates, believes, continue, could, estimates, expects, intends, seeks, may, plans, potential, predicts, should, strategy or will, or the negative or other variations of these words, or other comparable words or phrases. These forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate in the circumstances. We assume that we will be able to raise additional financing as needed in the next six quarters, and that this, as well as other assumptions, may not materialize. These forward-looking statements involve risks, uncertainties and other factors that may cause our results to differ materially from those anticipated in our forward-looking statements. These risks, uncertainties and other factors may be significant. They include risks related to our ability to raise additional capital, liquidity, revenue growth, operating results, industry, technology and products, as well as other factors discussed in our Annual Information Form and elsewhere in this MD&A. These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in our forward-looking statements. You should not place undue reliance on forward-looking statements. Readers are encouraged to read the section entitled: Forward-Looking Statements in our Annual Information Form and the section entitled Risk and Uncertainties in the Management s Discussion and Analysis portion of our 2007 Annual Report for a discussion of the factors that could affect our future performance. We are under no duty to update any of our forward-looking statements, other than as required by law. Financial Overview Revenues for the three months ended March 31, 2008 were $10.7 million, compared to $6.9 million for the corresponding period in This 56% increase is attributed to increased revenues in our OnSite Generation business unit, partially offset by lower revenues in our Power Systems and Test Systems business units due to a lower level of military revenues and the decision to wind up our Test Equipment business. Net loss for the three months ended March 31, 2008 was $4.3 million, or ($0.05) per share, compared to $8.3 million, or ($0.09) per share, for the same period in This 48% decrease is primarily attributable to increased revenues of $3.9 million, improved gross margins of $1.0 million, decreased selling, general and administrative expenses of $2.9 million and decreased research and product development expenditures of $1.2 million. Cash generated from operations for the three months ended March 31, 2008 was $3.1 million compared to cash utilized in operations of $9.4 million for the same period in This improvement is attributed to $3.5 million of decreased cash outflows from operations excluding working capital movements and a $9.0 million decrease in working capital requirements. First Quarter 2008 MD&A Page 2

23 Critical Accounting Estimates Hydrogenics Corporation Our interim consolidated financial statements are prepared in accordance with Canadian GAAP, which require us to make estimates and assumptions that affect the amounts reported in our interim consolidated financial statements. We have identified several policies as critical to our business operations and essential for an understanding of our results of operations. The application of these and other accounting policies are described in note 2 of our 2007 annual consolidated financial statements. We believe there have been no significant changes in our critical accounting estimates from what was previously disclosed in our MD&A for the year ended December 31, These policies are incorporated herein by reference. Preparation of our interim consolidated 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 revenues and expenses during the reporting period. Actual results may vary significantly from those estimates. Recently Issued Accounting Standards Our accounting policies used to prepare our interim consolidated financial statements for the three months ended March 31, 2008 are unchanged from those disclosed in our 2007 annual consolidated financial statements, except that they include the adoption of the standards noted below. (i) Canadian standards The Canadian Institute of Chartered Accountants ( CICA ) issued Handbook Section 1535, Capital Disclosures, Section 3862 Financial Instruments Disclosures, and Section 3863, Financial Instruments Presentation. Section 1535 establishes disclosure requirements about an entity s capital and how it is managed. The purpose is to enable users of the financial statements to evaluate objectives, policies and processes for managing capital. Sections 3862 and 3863 replaced Section 3861, Financial Instruments Disclosure and Presentation, revising and enhancing disclosure requirements while carrying forward its presentation requirements. These new sections place increased emphasis on disclosure about the nature and extent of risks arising from financial instruments and how the entity manages those risks. These sections apply to interim and annual financial statements relating to fiscal years beginning on or after October 1, We have adopted this new guidance effective January 1, While the adoption of these standards impacted disclosures provided, adoption of these standards did not have a material impact on our consolidated financial position, results of operations or cash flows. In May 2007, the CICA issued Handbook Section 3031, Inventories, which replaced the existing Section 3030 Inventories. The standard introduced changes to the measurement and disclosure of inventory and converges with international accounting standards. This standard is effective for interim and annual periods related to fiscal years beginning on or after January 1, 2008 with earlier application encouraged. We adopted this new guidance effective January 1, This standard did not have a material impact on our consolidated financial position, results of operations or cash flows. (ii) U.S. standards In September 2006, the Financial Accounting Standards Board ( FASB ) issued SFAS No. 157, Fair Value Measurements ( SFAS 157 ). SFAS 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial statement disclosure requirements about a company s use of fair value measurements, including the effect of such measures on earnings. This standard is effective for fiscal years beginning after November 15, We have adopted this new guidance effective January 1, Adoption of this standard did not impact our consolidated financial position, results of operations or cash flows. For nonfinancial assets and nonfinancial liabilities, the standard is effective for financial statements issued for fiscal years beginning after November 15, 2008 and we plan to adopt this guidance effective January 1, We are currently assessing the effect that this may have on our results of operations and consolidated financial position. First Quarter 2008 MD&A Page 3

24 Hydrogenics Corporation In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 is expected to expand the use of fair value accounting but does not affect existing standards, which require certain assets or liabilities to be carried at fair value. The objective of SFAS 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Under SFAS 159, a company may choose, at specified election dates, to measure eligible items at fair value and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159, for financial assets and financial liabilities, is effective for financial statements issued for fiscal years beginning after November 15, We have adopted this new guidance effective January 1, New Accounting Standards The following changes will be adopted in the future. (i) Canadian Standards In February 2008, the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, which replaced the existing Sections 3062 Goodwill and Other Intangible Assets and 3450 Research and Development Costs. The new standard introduced changes to recognition, measurement and disclosure of goodwill and intangible assets. The provisions relating to the definition and initial recognition of intangible assets are equivalent to the corresponding provisions of International Financial Reporting Standard IAS 38, Intangible Assets. The new standard also provides guidance for the recognition of internally developed intangible assets, including assets developed from research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. Section 3064 applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008 with earlier adoption encouraged. We plan to adopt this new guidance effective January 1, We are currently assessing the effect that this standard may have on our results of operations and consolidated financial position. (ii) Convergence with International Financial Reporting Standards In 2006, Canada s Accounting Standards Board ratified a strategic plan that will result in Canadian GAAP, as used by public companies, being evolved and converged with International Financial Reporting Standards ( IFRS ) over a transitional period currently expected to be complete by Canadian GAAP will be converged with IFRS through a combination of two methods: as current joint-convergence projects of the United States FASB and the International Accounting Standards Board are agreed upon, they will be adopted by Canada s Accounting Standards Board and may be introduced in Canada before the complete changeover to IFRS, and standards not subject to a joint-convergence project will be exposed in an omnibus manner for introduction at the time of the complete changeover to IFRS. As the International Accounting Standards Board currently, and expectedly, has projects underway that should result in new pronouncements that continue to evolve IFRS, and that this Canadian convergence initiative is very much in its infancy as of the date of these interim consolidated financial statements, it is premature to currently assess the impact of the Canadian initiative, if any, on the Corporation. (ii) U.S. standards In December 2007, the FASB issued Statement SFAS No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The standard retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the First Quarter 2008 MD&A Page 4

25 Hydrogenics Corporation capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning January 1, 2009 and will apply prospectively to business combinations completed on or after that date. Internal Control Over Financial Reporting No changes were made in our internal control over financial reporting during the interim period ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Results of Operations Revenues for the three months ended March 31, 2008 were $10.7 million an increase of $3.9 million, or 56% compared to the three months ended March 31, 2007 and reflect increased revenues in our OnSite Generation business unit of $5.5 million partially offset by decreases in our Power Systems and Test Systems business units of $0.5 million and $1.1 million, respectively. The following table provides a breakdown of our revenues for the reported period: Three months ended March 31 March OnSite Generation $ 7,313 $ 1,815 Power Systems 1,013 1,555 Test Systems 2,385 3,480 $ 10,711 $ 6,850 OnSite Generation s revenues for the three months ended March 31, 2008 increased primarily as a result of the resumption of production to historical levels combined with operational improvements including reduced production times, improved product standardization, enhanced manufacturing and quality processes and reduced product costs through design and supply chain improvements. Revenues for the three months ended March 31, 2008 consisted of sales of electrolyzer products to customers in industrial markets. At March 31, 2008, we had $21.0 million of confirmed orders for OnSite Generation products and services, the majority of which are anticipated to be delivered and recognized as revenue in Power Systems revenues for the three months ended March 31, 2008 decreased primarily as a result of the absence of revenue related to our multiple unit contract for HyPM 500 Series Fuel Cell Power Modules for delivery to a leading military OEM. Revenues from this contract are expected to resume in the second half of As at March 31, 2008, we had $8.5 million of confirmed orders for Power Systems products and services, approximately one-half of which are anticipated to be delivered and recognized as revenue in Test Systems revenues for the three months ended March 31, 2008 decreased as a result of our decision announced during the fourth quarter of 2007 to wind up our test equipment business. Revenues from test equipment generated during the three months ended March 31, 2008 relate to deliveries and execution of contract deliverables for orders received prior to this decision being taken. The decrease in test services revenues during the three months ended March 31, 2008 is attributed to a decrease in testing services provided to one customer. Further, we anticipate that we will no longer provide testing services to this customer beginning in the third quarter of As at March 31, 2008, we had $0.1 million of confirmed orders for Test Systems products and services, which are anticipated to be delivered and recognized as revenue in Cost of revenues for the three months ended March 31, 2008 was $8.8 million, an increase of $2.9 million from the first quarter of Expressed as a percentage of revenues, cost of revenues was 83% in the first quarter of 2008 compared to 87% for the same period in This 4% improvement can primarily be attributed to improved gross First Quarter 2008 MD&A Page 5

26 Hydrogenics Corporation margins in our OnSite Generation business unit resulting from operational efficiencies. Additional cost of revenues commentary regarding each business unit is provided as follows: OnSite Generation s cost of revenues for the three months ended March 31, 2008 was $6.1 million. Expressed as a percentage of revenues, cost of revenues was 83% for the three-month period ended 31, 2008 compared to 117% for the corresponding period in This 34% improvement is primarily attributed to operational improvements noted above as well as increased overhead absorption as a result of increased revenues. Power Systems cost of revenues for the three months ended March 31, 2007 was $0.9 million. Expressed as a percentage of revenues, cost of revenues was 88% for the three-month period ended March 31, 2008 compared to 75% for the corresponding period in This 13% increase is primarily attributed to a change in product mix compared to the corresponding period in 2007 as a result of a lower proportion of military revenue. In addition, we have been experiencing cost increases as a result of the devaluation of the U.S. dollar relative to the Canadian dollar during the past twelve months. We are curently seeking more aggressive technical, manufacturing and procurement strategies to further reduce costs while enhancing product performance. Test Systems cost of revenues for the three months ended March 31, 2008 was $1.9 million. Expressed as a percentage of revenues, cost of revenues was 79% for the three-month period ended March 31, 2008 compared to 76% for the corresponding period in This 3% increase is primarily attributed to a reduced proportion of testing services in the first quarter of 2008 compared to the corresponding period in Selling, general and administrative expenses ( SG&A ) were $4.1 million for the three months ended March 31, 2008, compared to $6.9 million for the corresponding period in This $2.8 million improvement in SG&A reflects the absence of a $2.1 million severance charge incurred in the first quarter of 2007 to streamline operations, as well as cost improvements resulting from all streamlining and cost reduction initiatives undertaken during 2007 in order to reduce our overall cost structure. These cost improvements were partially offset by $0.5 million of additional costs primarily as a result of a strengthening of the Canadian dollar and the Euro relative to the U.S. dollar. SG&A for the three months ended March 31, 2008 includes $0.4 million of costs related to our test equipment business which is in the process of being wound up as final sales orders were delivered during the three months ended March 31, Research and product development expenses for the three months ended March 31, 2008 were $1.7 million, a decrease of $1.2 million or 41% compared to the first quarter of This decrease reflects a $0.7 million decrease in research and product development expenditures and a $0.4 million increase in third party research and product development funding. The decrease in research and product development expenditures is primarily attributable to our focus on developing standard products for multiple market applications in both our Power Systems and OnSite Generation business units. The increase in third party funding is primarily due to the partial deployment of several Class 1 lift trucks for purposes of long-term testing at a customer facility. Amortization of property, plant and equipment was $0.3 million for the three months ended March 31, 2008, which is consistent with the expense incurred in the three months ended March 31, Amortization of intangible assets was $0.1 million for the three months ended March 31, 2008, consistent with the expense incurred in the three months ended March 31, Provincial capital tax expense was $nil for the three months ended March 31, 2008, consistent with the three months ended March 31, These changes are primarily related to estimates of provincial capital taxes payable and are partially dependent on the eligibility of certain short-term investments being deducted from net assets to arrive at our tax base for capital tax purposes. Interest, net was $0.3 million for the three months ended March 31, 2008 a decrease of $0.6 million compared to the three months ended March 31, 2007, the result of a decrease in cash and cash equivalents and short-term investments on hand combined with lower yields on underlying investments. First Quarter 2008 MD&A Page 6

27 Hydrogenics Corporation Foreign currency losses for the three months ended March 31, 2008 were $0.3 million compared to foreign currency gains of less than $0.1 million in the three months ended March 31, This change is attributable to holding fewer Canadian dollar investments relative to the total investment portfolio during a period of a strengthening Canadian dollar relative to the U.S. dollar as compared to the corresponding period of the previous year. In addition, our foreign currency losses include losses incurred as a result of the execution of several U.S. dollar denominated contracts in our European based operations where we have experienced a strengthening of the Euro relative to the U.S. dollar as compared to the corresponding period of Income tax expense for the three months ended March 31, 2008 was $nil, consistent with the three months ended March 31, Net loss for the three months ended March 31, 2008 was $4.3 million compared to $8.3 million in the three months ended March 31, Net loss for the three months ended March 31, 2008 by segment was as follows: Power Systems $2.3 million; Corporate & Other $2.1 million; partially offset by $0.1 million of net income in the OnSite Generation business segment and $0.1 million of net income in the Test Systems business segment. Additional net loss commentary for the three months ended March 31, 2008 is as follows: OnSite Generation generated net income of $0.1 million for the three months ended March 31, 2008 compared to a net loss of $2.3 million for the three months ended March 31, This improvement is primarily attributed to increased revenues and gross margins. Power Systems incurred a net loss for the three months ended March 31, 2008 of $2.3 million compared to a net loss of $4.3 million for the three months ended March 31, This reduction in net loss is primarily related to the absence of a one time charge reflecting a majority of the $2.1 million severance charge incurred in the first quarter of 2007 in connection with our streamlining initiatives. Many of the cost improvements initiatives as a result of our streamlining undertaken during 2007 have been offset by decreased revenues of $0.5 million, decreased gross margins of $0.2 million and $0.2 million of negative impacts of an increase in the value of the Canadian dollar and the Euro relative to the U.S. dollar as compared to the corresponding period of Test Systems generated net income of $0.1 million for the three months ended March 31, 2008, compared to a net loss of $0.2 million for the three months ended March 31, This improvement is primarily related to the decision to wind up our test equipment business. Revenues from test equipment generated during the three months ended March 31, 2008 relate to deliveries and execution of contract deliverables for orders received prior to this decision being taken. Corporate & Other incurred a net loss of $2.4 million for the three months ended March 31, 2008 compared to a $1.5 million net loss for the three months ended March 31, This $0.9 million increase in net loss is primarily attributed to: (i) a foreign currency loss of $0.5 million incurred during the three months ended March 31, 2008 compared to a foreign currency gain incurred during the corresponding period of 2007; and (ii) a $0.6 million decrease in interest income; partially offset by; (iii) $0.2 million of reduced operating costs as a result of streamlining initiatives undertaken during Net loss per share for the three months ended March 31, 2008 was $0.05, compared to $0.09 for the three months ended March 31, Options granted under our stock option plan have not been included in the calculation of the diluted loss per share as the effect would be antidilutive. Weighted average number of shares outstanding for the three months ended March 31, 2007 was 91,765,689 (three months ended March 31, ,896,363). The number of common shares outstanding as at March 31, 2008 was 91,765,686 (March 31, ,765,691). Stock options outstanding as at March 31, 2008 were 7,509,838 (March 31, ,973,398) of which 4,295,029 were exercisable (March 31, ,285,857). First Quarter 2008 MD&A Page 7

28 Financial Condition, Liquidity and Capital Resources Hydrogenics Corporation Cash and cash equivalents, restricted cash and short-term investments were $33.1 million as at March 31, 2008, an increase of $2.6 million from December 31, This increase is attributable to $3.9 million of net losses (excluding non-cash items), $0.3 million of investing outflows excluding movements in short-term investments, $0.2 million of financing outflows, offset by a $7.0 million decrease in non-cash working capital. Cash and cash equivalents generated in operating activities for the three months ended March 31, 2008 were $3.1 million. Cash and cash equivalents used in operating activities during the three months ended March 31, 2007 were $9.4 million. This $12.5 million improvement is attributed to a $3.5 million decrease in loss from operations before amortization and a $9.0 million decrease in non-cash working capital. Cash and cash equivalents used in investing activities excluding movements in short-term investments and restricted cash for the three months ended March 31, 2008 were $0.3 million. Cash and cash equivalents used in investing activities for the three months ended March 31, 2007 were $0.2 million. This $0.1 million increase was primarily the result of an increase in capital expenditures compared to the corresponding period in Cash and cash equivalents used in financing activities for the three months ended March 31, 2008 were $0.2 million. Cash and cash equivalents generated by financing activities for the three months ended March 31, 2007 were $0.3 million. This change is primarily the result of the drawdown during the three months ended March 31, 2008 of deferred research and product development grants received during the three months ended March 31, We anticipate using our funds to develop and commercialize products primarily for near-term fuel cell and hydrogen generation applications based on anticipated market demand. Our actual funding requirements will vary depending on a variety of factors, including success in executing our business plan, progress on R&D efforts, relationships with strategic partners, commercial sales, our ability to control working capital and the results of our development and demonstration programs. We believe our existing cash balances and cash generated by, or used in, operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months based on the current business plan. However, we may seek to sell additional equity or arrange debt financing, which could include establishing an additional line of credit. The Liquidity and Capital Resources section above contains certain forward-looking statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Readers are encouraged to read the section entitled Forward-looking Statements in our annual information form and the section entitled Risks and Uncertainties in this MD&A for a discussion of the factors that could affect our future performance. Credit Facilities We have $13.6 million in lines of credit available to us for operating purposes, $7.0 million of which is available to us for letters of credit. In addition we have restricted cash of $6.1 million pledged as collateral for letters of credit for a total availability of $13.1 million for letters of credit. Letters of credit aggregating $10.2 million were issued against these lines of credit and restricted cash at March 31, These letters of credit have various expiry dates extending through to October We are in compliance with our debt covenants. Contingent Off-balance Sheet Arrangements and Contractual Obligations We enter into repayable contribution and other research and product development arrangements with various Canadian government ministries and public sector enterprises. Under these arrangements, we have received our total eligible amount totaling $13.0 million (December 31, 2007 $13.4 million) toward agreed upon research and development project costs. In return, these funding parties have a right to repayments of up to 4.0% of gross revenue received by us as a result of commercial exploitation of the associated technology. To date, $25.6 million in revenues from these technologies has been recognized and a repayable amount of $0.1 million has been reflected in our accounts. These arrangements will expire in stages between November 30, 2009 and March 31, 2016 or when total amounts repaid reach the utilized amount of the advance, depending on the terms of the individual contracts. First Quarter 2008 MD&A Page 8

29 There has been no change to our contractual obligations, which are outlined in the MD&A contained in our 2007 Annual Report. Outlook Hydrogenics Corporation This Outlook section contains certain forward-looking statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Please refer to the caution regarding Forward-looking Statements on page 1 and the section entitled Risks and Uncertainties on page 12 of our 2007 Annual Report for a discussion of such risks and uncertainties and the material factors and assumptions related to the statements set forth in this section. During 2007, we undertook two rounds of restructuring and streamlining of the Corporation s operations in order to reduce its overall cost structure. A significant component of these restructuring and streamlining initiatives involved workforce reductions across all business units. The associated workforce reductions in 2007 are anticipated to represent approximately $9.2 million of annualized cost savings. In addition to the streamlining activities noted above, on November 7, 2007, the Board of Directors of the Corporation approved plans to wind up our fuel cell test products design, development and manufacturing business due to lower than planned gross margin and growth prospects and not achieving certain operating targets. We anticipate that the wind up will take up to two years to complete from the date of the annoucement as we will be required to incur costs related to severance, facility closure and warranty obligations. During 2008, and for the next several years, we anticipate we will continue to benefit from a series of broad trends including: (i) sustained high prices for oil and natural gas; (ii) increased government legislation and programs worldwide promoting alternative energy sources such as synthetic fuels, including hydrogen; (iii) increased awareness of the adverse impact of fossil fuels on our climate and environment; and (iv) the need for industrialized economies to access alternative sources of energy to reduce fossil fuel dependency. We anticipate these trends will continue and intensify in the future, allowing the benefits of hydrogen to be further demonstrated in numerous applications. We also anticipate that demands for fuel cell technology will continue to accelerate and advance the case for hydrogen as the fuel of the future. Additional outlook commentary regarding each business unit is provided below: Our strategy for our OnSite Generation business unit is to increase revenues from industrial hydrogen markets while pursuing opportunities in renewable energy markets and transportation. We anticipate that the continued development of products will position us to increase revenues in the industrial market and offer products for integration into larger scale renewable energy installations, such as solar and wind farms, as the demand for these large-scale renewable installations increases. Our strategy for our Power Systems business unit is to sell into early adopting markets as our products become more cost competitive with incumbent technologies. We believe there are near-term sales opportunities in the AC and DC backup power markets and light mobility markets as well as various military markets. Our strategy for our Test Systems business unit is to continue to effect an orderly wind up of our fuel cell test products design, development and manufacturing business in accordance with our desire to focus our resources on our OnSite Generation and Power Systems business segments. Further, we anticipate that we will no longer provide testing services beginning in the third quarter of We expect that in 2008 our gross margin will benefit from operational efficiencies in our OnSite Generation business unit but remain low relative to historical levels. We expect this will occur as a result of: (i) the time necessary to introduce new products; (ii) the time for our Power Systems products to enter commercial markets; and (iii) our ability to improve operational efficiencies across all business units. At the same time, we are aiming to improve our gross margin by standardizing products, enhancing manufacturing and quality processes and reducing product costs through design and supply chain improvements. We will continue to invest in selling, general and administrative areas to address near-term market opportunities and we expect that research and product development costs will increase in the future to support product development initiatives as we commercialize products, in our OnSite Generation and Power Systems business units. We expect that our level of capital expenditures will remain consistent from 2007 in the near future. First Quarter 2008 MD&A Page 9

30 Hydrogenics Corporation Selected Quarterly Financial Data (Unaudited) The following table provides summary financial data for our last eight quarters: Expressed in thousands except per share Quarter ended amounts and number of Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 shares Revenues $ 10,711 $ 11,051 $ 10,624 $ 9,465 $ 6,850 $ 9,547 $ 9,000 $ 5,376 Net Loss (4,322 ) (9,497 ) (6,478 ) (3,787 ) (8,306 ) (22,069 ) (90,732 ) (9,626 ) Net Loss Per Share (Basic & Fully Diluted) (0.05) (0.10) (0.07) (0.04) (0.09) (0.23) (0.99) (0.11) Weighted Average Common Shares Outstanding 91,896,689 91,765,691 91,765,691 91,765,691 91,896,363 91,916,466 91,858,314 91,781,393 First Quarter 2008 MD&A Page 10

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32 Exhibit 99.3 PRESS RELEASE Highlights First quarter revenues up 56% year over year. Hydrogenics Reports First Quarter 2008 Results Higher Revenues, Strong Order Intake and Profitable OnSite Generation Business Unit Provides Foundation for Growth Orders received up 65% to $13.8 million year over year/$29.6 million order backlog. OnSite Generation business achieved profitability in the first quarter of Cash operating costs down 41% or $4.0 million year over year and 36% or $3.2 million on a sequential quarterly basis. Improved gross profit and lower cash operating costs produced a 54% reduction in year over year loss from operations. Cash and cash equivalents, restricted cash and short-term investments were $33.1 million as at March 31, 2008 an increase of $2.6 million from December 31, Mississauga, Ontario. May 6, 2008 Hydrogenics Corporation (NASDAQ: HYGS; TSX: HYG), a leading developer and manufacturer of hydrogen and fuel cell products, is reporting first quarter 2008 results. Results are reported in U.S. dollars and are prepared in accordance with Canadian generally accepted accounting principles. We have emerged from an important transition year where we focused on commercial markets and standard products, reduced headcount approximately 50% to 170 people and raised revenue per employee 300%. As a result of these actions we are pleased to share dramatically improved overall business results in the first quarter. We are now meeting our own challenging targets. Our strategic focus on renewable energy projects and standard commercial products is showing good promise for ongoing growth, said Daryl Wilson, President and Chief Executive Officer. Results for the first quarter of 2008 compared to the first quarter of 2007 Revenues were $10.7 million for the first quarter of 2008, a 56% increase from revenues of $6.9 million for the comparable period of This increase is attributable to increased revenues of $5.5 million in our OnSite Generation business unit, partially offset by decreased revenues in our Power Systems and Test Systems business units due to a lower level of military revenues and the decision to

33 wind up our test equipment business. Gross profit, expressed as a percentage of revenues, was 17% (13% in 2007) and primarily reflects increased gross profits generated by our OnSite Generation business unit resulting from operational improvements including standardizing products, enhancing manufacturing and quality processes and reducing product costs through design and supply chain improvements. Cash operating costs, a non-gaap measure, defined as selling, general and administrative, and research and product development expenses, were $5.8 million, a 41% decrease from $9.8 million in 2007 attributed to the absence of a $2.1 million streamlining charge taken in the first quarter of 2007, an overall reduced cost structure and more focused research and product development. Net loss was $4.3 million for the first quarter of 2008, a decrease of 48% from $8.3 million in Results for the first quarter of 2008 compared to the fourth quarter of 2007 Revenues were $10.7 million for the first quarter of 2008, a 3% decrease in revenues over the fourth quarter of 2007 primarily resulting from variations in order intake patterns in our OnSite Generation business unit. Gross profit, expressed as a percentage of revenues, was 17% compared to 13% primarily due to increased gross profits generated by our OnSite Generation business unit resulting from operational improvements. Cash operating costs were $5.8 million, a decrease of 36% from $9.0 million in the fourth quarter of 2007 reflecting the results of streamlining efforts undertaken during the fourth quarter of Net loss was $4.3 million for the first quarter of 2008, a decrease of 54% from $9.5 million in Liquidity Cash and cash equivalents, restricted cash and short-term investments were $33.1 million as at March 31, The $2.6 million sequential quarterly increase in cash and cash equivalents, restricted cash and short-term investments is attributable to: (i) $3.1 million of net cash inflows from operations, offset by; (ii) $0.3 million of capital expenditures; and (iii) $0.2 million of decreases in deferred research and product development grants. Order backlog Order backlog as at March 31, 2008 was $29.6 million, as follows (in $ millions): Dec. 31/07 Orders Orders Mar. 31/08 Backlog Received Delivered Backlog OnSite Generation $ 15.8 $ 12.5 $ 7.3 $ 21.0 Power Systems Test Systems Total $ 26.5 $ 13.8 $ 10.7 $ 29.6 Page 2

34 In addition to revenues recognized in the first quarter of 2008, we expect to deliver, and recognize as revenue in 2008 more than 80% of our total order backlog as at March 31, First Quarter Highlights Progress on markets: OnSite Generation Delivered seven hydrogen generation units for industrial applications. Secured $12.5 million of new orders and exited the quarter with a $21.0 million order backlog. New orders include delivery of high purity hydrogen onsite units for metallurgical processing, microelectronics manufacturing and preparation of nuclear fuel for shipment to power generation reactors throughout Europe. Power Systems Delivered 12 fuel cell power modules. Received power module orders from four new customers including four orders for forklift power packs. Secured $0.9 million of new orders and exited the quarter with an $8.5 million order backlog. Test Systems Delivered two remaining test stations as we proceeded with the wind up of our test equipment business. Subsequent to quarter end, we signed an agreement to license technology to Greenlight Innovations Corporation, a newly formed business consisting of members of the former management team of Hydrogenics Burnaby based test equipment business. Conference Call Details Hydrogenics will hold a conference call to review results on May 6, 2007 at 9:00 a.m. (EDT). To participate in this conference call, please dial approximately ten minutes before the call. Alternatively, a live webcast of the conference call will be available on the Corporation s website at Please visit the website at least ten minutes early to register and download any necessary software. Should you be unable to participate, a replay will be available on our website for two weeks. Page 3

35 ABOUT HYDROGENICS Hydrogenics Corporation ( ) is a globally recognized developer and provider of hydrogen generation and fuel cell products and services, serving the growing industrial and clean energy markets of today and tomorrow. Based in Mississauga, Ontario, Canada, Hydrogenics has operations in North America and Europe. This release contains forward-looking statements about our achievements, future results, goals, levels of activity, performance, and other future events. We believe the expectations reflected in our forward-looking statements are reasonable, although we cannot guarantee achievements, future results, levels of activity, performance, or other future events. These statements are based on management s current expectations and actual results may differ from these forward-looking statements due to numerous factors, including risks related to our ability to raise additional capital, liquidity, revenue growth, operating results, industry, technology and products. Readers should not place undue reliance on Hydrogenics forward-looking statements. Readers are encouraged to review the section captioned Risk Factors in Hydrogenics regulatory filings with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission for a more complete discussion of factors that could affect Hydrogenics future performance. Furthermore, the forward-looking statements contained herein are made as of the date of this release, and Hydrogenics undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release, unless otherwise required by law. The forward-looking statements contained in this release are expressly qualified by this cautionary statement. For Further Information Please Contact Hydrogenics Corporation Lawrence E. Davis, Chief Financial Officer Phone: (905) Website: ldavis@hydrogenics.com Page 4

36 Hydrogenics Corporation Interim Consolidated Balance Sheets (in thousands of U.S. dollars) (unaudited) Assets March 31 December Current assets Cash and cash equivalents $ 27,027 $ 15,460 Restricted cash 6,066 Short-term investments 15,032 Accounts receivable 7,625 12,713 Grants receivable Inventories 11,655 12,659 Prepaid expenses 1,071 1,105 54,376 57,819 Property, plant and equipment 4,891 4,847 Intangible assets Goodwill 5,025 5,025 $ 64,478 $ 67,940 Liabilities Current liabilities Accounts payable and accrued liabilities $ 16,720 $ 18,166 Unearned revenue 10,601 9,042 27,321 27,208 Long-term debt 1 11 Deferred research and development grants ,489 27,556 Shareholders Equity Share capital 306, ,872 Contributed surplus 15,842 15,606 Deficit (281,423) (277,101) Accumulated other comprehensive loss (4,302) (4,993) Total deficit and accumulated other comprehensive income (loss) (285,725) (282,094) 36,989 40,384 $ 64,478 $ 67,940 Page 5

37 Hydrogenics Corporation Interim Consolidated Statements of Shareholders Equity (in thousands of U.S. dollars, except for share and per share amounts) (unaudited) Accumulated other Common shares Contributeds comprehensive shareholders Number Amount urplus Deficit income (loss) equity Balance at Dec. 31, ,916,466 $ 307,376 $ 13,718 $ (249,033 ) $ (5,304 ) $ 66,757 Net loss for the period (28,068) (28,068) Foreign currency translation adjustments Comprehensive loss (27,757) Shares issued: Shares returned to treasury (150,775) (504) 335 (169) Stock-based compensation expense 1,553 1,553 Balance at Dec. 31, ,765, ,872 15,606 (277,101) (4,993) 40,384 Net loss for the period (4,322) (4,322) Foreign currency translation adjustments Comprehensive loss (3,631) Shares issued: Adjustment for partial shares (5) Stock-based compensation expense Balance at Mar. 31, ,765,686 $ 306,872 $ 15,842 $ (281,423) $ (4,302) $ 36,989 The authorized capital stock of the Corporation consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series. Total Page 6

38 Hydrogenics Corporation Interim Consolidated Statements of Operations (in thousands of U.S. dollars, except for share and per share amounts) (unaudited) Three months ended March Revenues $ 10,711 $ 6,850 Cost of revenues 8,846 5,936 1, Operating expenses Selling, general and administrative 4,061 6,947 Research and product development 1,712 2,862 Amortization of property, plant and equipment Amortization of intangible assets ,107 10,096 Loss from operations (4,242 ) (9,182 ) Other income (expenses) Provincial capital tax (38) (18) Interest Foreign currency gains (losses) (270) 30 (80) 879 Loss before income taxes (4,322) (8,303) Current income tax expense 3 Net loss for the period $ (4,322) $ (8,306) Net loss per share Basic and diluted $ (0.05) $ (0.09) Shares used in calculating basic and diluted net loss per share 91,765,689 91,896,363 Page 7

39 Hydrogenics Corporation Interim Consolidated Statements of Cash Flows (in thousands of U.S. dollars) (unaudited) Three months ended March Cash and cash equivalents provided by (used in) Operating activities Net loss for the period $ (4,322) $ (8,306) Items not affecting cash Amortization of property, plant and equipment Amortization of intangible assets Unrealized foreign exchange (gains) losses (152) (108) Stock-based compensation Net change in non-cash working capital 7,000 (1,937) 3,096 (9,372) Investing activities Decrease in short-term investments 15,032 54,350 Increase in restricted cash (6,066) Purchase of property, plant and equipment (315) (211) 8,651 54,139 Financing activities Repayment of long-term debt (10) (37) Deferred research and development grant (170) 473 Shares returned to treasury (169) (180) 267 Increase in cash and cash equivalents during the period 11,567 45,034 Cash and cash equivalents Beginning of period 15,460 5,937 Cash and cash equivalents End of period $ 27,027 $ 50,971 Page 8

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41 Exhibit 99.4 FORM F2 CERTIFICATION OF INTERIM FILINGS I, Daryl Wilson, President and Chief Executive Officer of Hydrogenics Corporation, certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument Certification of Disclosure in Issuers Annual and Interim Filings ) of Hydrogenics Corporation (the issuer) for the interim period ending March 31, 2008; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; 4. The issuer s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the issuer, and we have: a) designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and b) designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer s GAAP; and 5. I have caused the issuer to disclose in the interim MD&A any change in the issuer s internal control over financial reporting that occurred during the issuer s most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuer s internal control over financial reporting. Date: May 5, 2008 Daryl Wilson Daryl Wilson President and Chief Executive Officer

42 FORM F2 CERTIFICATION OF INTERIM FILINGS I, Lawrence E. Davis, Chief Financial Officer of Hydrogenics Corporation, certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument Certification of Disclosure in Issuers Annual and Interim Filings ) of Hydrogenics Corporation (the issuer) for the interim period ending March 31, 2008; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; 4. The issuer s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the issuer, and we have: a) designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and b) designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer s GAAP; and 5. I have caused the issuer to disclose in the interim MD&A any change in the issuer s internal control over financial reporting that occurred during the issuer s most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuer s internal control over financial reporting. Date: May 5, 2008 Lawrence E. Davis Lawrence E. Davis Chief Financial Officer

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44 1 rog en ics.com Hyd ro gen ics Corporation First Quarter Results Exhibit 99.5

45 3 rog en ics.com Safe Harbor Statement This presentation contain s forward -looking statemen ts abou t our achievements, fu ture resu lts, goals, lev els of activity, performance, and o ther fu ture ev ents. We believe the expectatio ns reflected in our forward -looking statemen ts are reasonable, although we cannot guaran tee achievements, future results, levels of activ ity, p erformance, or other future events. These statements are based on managemen t's cu rrent exp ectations and actual results may differ from these fo rward -looking statemen ts du e to numerou s facto rs, includ ing risks related to our ability to raise add itional cap ital, liquidity, revenue growth, operating resu lts, industry, technology and p ro ducts. Yo u shou ld no t place undue reliance on these forward -looking statemen ts. Inv estors are encouraged to review the section captio ned "Risk Factors" in ou r regulatory filin gs with th e Canad ian securities regulatory authorities and the United States Secu rities and E xch ang e Commission fo r a more complete discussion of factors that could affect our future performance. Furthermore, th e forward -looking statemen ts contained herein are made as of th e d ate o f this presentation, and we u ndertak e n o obligation to revise or u pdate an y forward-looking statemen ts in order to reflect even ts or circumstances that may arise after the date of this presentation, unless oth erwise required b y law. The forward -looking statemen ts contained in this p resentation are exp ressly qu alified by this cautionary statement.

46 5 rog en ics.com ydrogenics.com Notes Reven ues increased 5 6% to $ 10.7 million, p rimarily as a result of increased revenues in the OnSite Generation b usin ess. The decrease in o ur Power Systems and Test Systems b usinesses, respectively, are the result o f a lower level of military rev en ues an d the impact of our decision to wind u p our test eq uipment business. Reven ues Revenues T hree mo nths end ed March 3 1, 2008 $M $ M 56% Revenues by Business Un it

47 7 rog en ics.com ydrogenics.com Gross Profit No tes Increased gross profit in our OnSite Generation business unit is the result of operational improvements inclu ding standardizing p ro ducts, enhancing manufacturing and quality processes and red ucing prod uct costs through design and supply chain improvements. Decreased gross pro fit in our Power Systems bu siness unit is primarily the resu lt of a lo wer level o f military rev enu es and lower overhead absorptio n. Three months ended March 31, Gross Profit by Business Unit % % Gross Profit

48 9 rog en ics.com ydrogenics.com Cash O peratin g Expenses Notes Decrease in cash op eratin g costs is the result of streamlinin g efforts an d the decision to wind u p our fuel cell test equipment business, commenced in Th ree mon ths ended March 31, 2008 Foo tnote: Cash o perating expenses are defin ed as the sum of selling, general and administrative ex pen ses and research and produ ct development ex penditu res. This is a non -GAAP measu re and may not b e comparable to similar measures used b y oth er comp anies. Management u ses this measure as a rough estimate of th e amo unt o f fixed co sts to operate the organization an d believes this is a useful measu re for inv estors for the same p urpose. Refer to slide * for a reconciliatio n of this measure to Lo ss from O perations. 41 % $M

49 11 dro genics.com com Net Loss Notes Decrease in net loss is the result of increased revenues, improved gross margins an d redu ced cash op eratin g co sts primarily resu ltin g fro m operation al imp ro vements in our OnSite Generation busin ess unit and th e results of streamlining in itiatives undertaken in Three months en ded March 31 $M

50 13 dro genics.com com Order Back log December Backlog Orders Received Ord ers D elivered March Backlog On Site Gen eratio n $ $ $ 7.3 $ 21.0 Power Systems Test Systems To tal $ 26.5 $ 13.8 $ $ As at March 31, 2008 ($M) Notes In additio n to revenue recogn ized d uring the first qu arter of 2008, we currently expect to deliver, and recognize as revenue, a minimum of 80% of o ur total o rd er backlog in the remain der of

51 15 dro genics.com com Balance Sh eet Highlights Cash and cash equ ivalents, restricted cash an d short-term investments $ 33.1 $ Accoun ts and g rants receivable (5.0 ) (36.8) Inventory (1.0) (7.9) Accou nts p ay able (1.4) (7.7) Dec $ % As at March 31, ($M) Change Mar

52 17 dro genics.com com Q1 Results * EBITDA is d efin ed as earning s before interest, taxes, n on-cash foreign exchange, depreciation and amortizatio n. EBITDA is a non -GAAP measu re and may not b e comparable to similar measures used b y oth er comp anies. Management u ses EBITD A because it believes it is a u seful measure of cash flows. Please see slid e * fo r a reco nciliation of this measu re Ch ang e Change $ % Reven ues Gross Profit % o f Revenues Op eratin g Expenses Selling, general and administrative (2.8) (40.6) Research and product dev elopment (1.2) (41.4) Total operating expenses (4. 0) (4 0.8) EBITDA* (3.9) (8.9) (in $ millio ns)

53 19 dro genics.com com Reconciliation of Non-GAAP Measu res T hree mo nths end ed March 3 1, Three month s ended March 31, Cash Operating Costs $ 5. 8 $ 9.8 Less: Gross profit Add: Amortizatio n of property, plan t and equipment Ad d: Amortization of intang ible assets Loss from operations $ 4.2 $ 9.2 Cash Operating Costs ($M)

54 21 dro genics.com com Reconciliation of Non-GAAP Measu res T hree mo nths end ed March 3 1, Three month s ended March 31, EBITDA loss $ 3.9 $ 8.9 A dd: Amortization of property, plan t and equip ment Ad d: Amortization of intangible assets Less: Other (inco me) 0.1 (0.9) Net loss $ 4.3 $ 8.3 EBIT DA ($ M)

55 23 dro genics.com Take-aways: Stronger financial performan ce sup ported by On Site Gen eratio n business un it achievin g profitability, impro ved gross pro fit and a 41% seq uen tial reductio n in cash o perating costs. $29.6 millio n order backlog provides basis fo r significantly improved financial p erformance in Greater visibility for renewable energ y sto rage applications u sing our electrolysis products. Co ntinu ed progress on mark et eng ag emen t initiatives with fuel cell custo mers. Recent U.S. and EU g overn ment initiatives aimed at accelerating end user adoption o f fuel cell products. Operational improvements including prod uct cost reductio ns are o ngoin g in o rd er to accelerate th e tak e-up in mark ets for our products.