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Hydrogenics Reports Fourth Quarter 2010 Results

Non-GAAP Financial Measures

Certain financial measures referred to in this press release are not measures recognized by GAAP. These non-GAAP financial measures do not have standardized meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other entities. Investors are cautioned that these non-GAAP financial measures should not be construed as alternatives to other measures of financial performance calculated in accordance with GAAP.

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.

Forward-looking Statements

This release contains forward-looking statements within the meaning of the "safe harbour" provisions of the U.S. Private Securities Litigation Reform Act of 1995, and under applicable Canadian securities law. These statements are based on management's current expectations and actual results may differ from these forward-looking statements due to numerous factors, including: our inability to increase our revenues or raise additional funding to continue operations, execute our business plan, or to grow our business; inability to address a slow return to economic growth, and its impact on our business, results of operations and consolidated financial condition; our limited operating history; inability to implement our business strategy; fluctuations in our quarterly results; failure to maintain our customer base that generates the majority of our revenues; currency fluctuations; failure to maintain sufficient insurance coverage; changes in value of our goodwill; failure of a significant market to develop for our products; failure of hydrogen being readily available on a cost-effective basis; changes in government policies and regulations; failure of uniform codes and standards for hydrogen fuelled vehicles and related infrastructure to develop; liability for environmental damages resulting from our research, development or manufacturing operations; failure to compete with other developers and manufacturers of products in our industry; failure to compete with developers and manufacturers of traditional and alternative technologies; failure to develop partnerships with original equipment manufacturers, governments, systems integrators and other third parties; inability to obtain sufficient materials and components for our products from suppliers; failure to manage expansion of our operations; failure to manage foreign sales and operations; failure to recruit, train and retain key management personnel; inability to integrate acquisitions; failure to develop adequate manufacturing processes and capabilities; failure to complete the development of commercially viable products; failure to produce cost-competitive products; failure or delay in field testing of our products; failure to produce products free of defects or errors; inability to adapt to technological advances or new codes and standards; failure to protect our intellectual property; our involvement in intellectual property litigation; exposure to product liability claims; failure to meet rules regarding passive foreign investment companies; actions of our significant and principal shareholders; dilution as a result of significant issuances of our common shares and preferred shares; inability of US investors to enforce US civil liability judgments against us; volatility of our common share price; and dilution as a result of the exercise of options. Readers should not place undue reliance on Hydrogenics' forward-looking statements. Investors 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.
Hydrogenics Corporation
Consolidated Balance Sheets
(in thousands of US dollars)
    December 31 2010 December 31 2009
Current assets    
Cash and cash equivalents $ 7,881 $ 9,159
Restricted cash  883 1,603
Accounts receivable 5,603 3,685
Grants receivable 572 490
Inventories 8,376 11,746
Prepaid expenses 762 1,270
  24,077 27,953
Restricted cash 225 240
Property, plant and equipment 1,871 2,889
Intangible assets 200 280
Goodwill 5,100 5,446
  $ 31,473 $ 36,808
Current liabilities    
Accounts payable and accrued liabilities $ 10,096 $ 14,782
Unearned revenue 3,751 4,546
  13,847 19,328
Shareholders' Equity    
Common shares (nil par value) 316,167 307,038
Contributed surplus 16,992 16,713
Deficit (309,352) (300,795)
Accumulated other comprehensive loss (6,181) (5,476)
Total deficit and accumulated other comprehensive loss (315,533) (306,271)
  17,626 17,480
  $ 31,473 $ 36,808
Hydrogenics Corporation
Interim Consolidated Statements of Operations
(in thousands of US dollars, except for share and per share amounts)
    Three months ended December 31 Year ended  December 31
  2010 2009 2010 2009
  Revenues $ 5,805 $ 4,207 $ 20,930 $ 18,841
Cost of revenues 3,839 3,542 15,504 15,113
  1,966 665 5,426 3,728
Operating expenses        
Selling, general and administrative 2,640 4,003 10,228 16,995
Research and product development 944 720 3,445 5,219
Impairment of property, plant and equipment -- 317 -- 317
Amortization of property, plant and equipment 170 151 690 864
Amortization of intangible assets 33 90 96 120
  3,787 5,281 14,459 23,515
Loss from operations (1,821) (4,616) (9,033) (19,787)
Other income (expenses)        
Loss on disposal of assets -- (14) (93) (14)
Litigation settlements -- -- 437 --
Provincial capital tax (4) (1) (9) (154)
Interest (12) 84 35 169
Foreign currency gains (losses) (55) 230 109 40
  (71) 299 479 41
Loss before income taxes (1,892) (4,317) (8,554) (19,746)
Current income tax (recovery) -- (10,388) 3 (10,371)
Net income (loss) for the period $ (1,892) $ 6,071 $ (8,557) $ (9,375)
Net earnings (loss) per share        
Basic and diluted  $ (0.34) $ 1.64 $ (1.82) $ (2.54)
Weighted average number of common shares outstanding 5,488,630 3,699,795 4,689,504 3,697,740
Hydrogenics Corporation
Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
    Three months ended December 31 Year ended  December 31
  2010 2009 2010 2009
Cash and cash equivalents provided by (used in)        
Operating activities        
Net income (loss) for the period $ (1,892) $ 6,071 $ (8,557) $ (9,375)
Items not affecting cash        
Loss on disposal of assets -- 14 93 14
Impairment of property, plant and equipment -- 317 -- 317
Amortization of property, plant and equipment 90 553 899 1,206
Amortization of intangible assets 33 30 96 120
Unrealized foreign exchange gains (35) (420) (91) (148)
Non-cash selling, general and administrative expenses -- -- 763 --
Stock-based compensation expense 22 92 279 413
Net change in non-cash working capital (915) (2,414) (3,593) (3,632)
  (2,697) 4,243 (10,111) (11,085)
  Investing activities        
Decrease (increase) in restricted cash (44) (289) 735 (713)
Proceeds from disposal of property, plant and equipment 112 -- 112 --
Purchase of property, plant and equipment (133) (596) (380) (752)
  (65) (885) 467 (1,465)
Financing activities        
Deferred research and development grants -- -- -- 70
Common shares issued, net of issuance costs -- 23 8,366 38
  -- 23 8,366 108
  Increase (decrease) in cash and cash equivalents during the period (2,762) 3,381 (1,278) (12,442)
Cash and cash equivalents – Beginning of period 10,643 5,778 9,159 21,601
Cash and cash equivalents – End of period $ 7,881 $ 9,159 $ 7,881 $ 9,159
CONTACT: Lawrence Davis, Chief Financial Officer
         Hydrogenics Corporation
         (905) 361-3633

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