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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Number of shares outstanding of each of the issuer’s classes of common stock, as of May 14, 2003:

     16,436,886 shares of Common Stock, $.001 par value per share.

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IMPCO TECHNOLOGIES, INC.
INDEX

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PART I– FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003

          The accompanying condensed consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the financial position and operating results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and the results of operations, contained in the Company’s Annual Report on Form 10-K for the transition period ended December 31, 2002.  The consolidated financial statements of IMPCO Technologies, Inc. (“IMPCO” or the “Company”) as of March 31, 2003 include the accounts of the Company and its majority-owned subsidiaries IMPCO-BERU Technologies B.V. (“IMPCO BV”) and Grupo I.M.P.C.O. Mexicano, S. de R.L. de C.V. (“IMPCO Mexicano”), its wholly-owned subsidiaries IMPCO Technologies, Pty. Limited (“IMPCO Pty”) and IMPCO Tech Japan K.K. (“IMPCO Japan”), and its joint ventures Minda IMPCO Technologies Limited and CNGC-IMPCO Technologies, LLC (“CNGC”). The Company has a 40% interest in a joint venture, Minda IMPCO Limited, and uses the equity method for reporting the results of this entity.

          The results of operations for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the twelve months ended December 31, 2003, or for any future period.

          The condensed balance sheet at December 31, 2002 has been derived from the audited financial statements at that date. In addition, the unaudited condensed statements of operations and the statements of cash flows for the three months ended March 31, 2002 present the operating results of the Company’s former Quantum division as a discontinued operation. On July 23, 2002, the Company completed the spin-off of its Quantum division by distributing one share of Quantum stock for every share of IMPCO common stock held on the July 5, 2002 record date. As a result of this spin-off, the Company no longer holds any interest in Quantum.

          The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of conducting business.

          It is currently anticipated that the Company will require additional sources of financing in order to capitalize on opportunities that management believes to exist in the alternative fuel market, to invest in long-term business opportunities including the $7.0 million payment to the BRC equity holders before September 30, 2003, and to pay off the $5.5 million Bank of America line of credit, which matures in May 2003. These additional sources of financing may include bank borrowings or public or private offerings of equity or debt securities. No assurance can be given that such additional sources of financing will be available on acceptable terms, if at all. If additional sources of financing are not available, the Company plans to implement measures to conserve cash and reduce costs, which may affect its ability to capitalize on strategic growth opportunities. Additionally, if the Company is unable to raise sufficient funds to pay off the Bank of America line of credit and is unable to extend this facility, the Company would be in default with the bank, which could significantly affect its liquidity. However, one of the Company’s directors has committed to provide an $8.0 million loan to meet the Bank of America obligation if the Company is unable to find alternative sources.

          Management believes that its existing working capital and the commitment of funds from one of its directors are sufficient to fund its operations for the next twelve months.

RECENTLY ADOPTED ACCOUNTING STANDARDS

          In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of ”.  SFAS 144 also supersedes the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”. The Statement is effective for year-ends beginning after December 15, 2001. Under the provisions of SFAS No. 144, the operating results of Quantum are presented as a discontinued operation in the Company’s condensed consolidated financial statements for the three months ended March 31, 2002.

          In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, “Accounting For Stock Based Compensation Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123 “Accounting For Stock-Based Compensation”, to provide new guidance concerning the transition when a company changes from the intrinsic-value method to the fair-value method of accounting for employee stock-based compensation cost. As amended by SFAS No. 148, SFAS No. 123 also requires additional disclosure regarding such cost in annual financial statements and in condensed interim financial statements. Certain disclosure provisions of SFAS No. 148 were adopted by the Company in its financial statements prepared as of December 31, 2002.

          On July 23, 2002, the Company completed the spin-off of its Quantum subsidiary by distributing one share of Quantum common stock for every share of IMPCO common stock held on the July 5, 2002 record date.  The Company also made a contribution in cash of approximately $15.0 million to Quantum as part of the spin-off transaction.  As a result of the Quantum spin-off, the Company no longer holds any continuing interest in Quantum.

          The Company adopted SFAS No. 144 effective as of May 1, 2002. Under the provisions of SFAS No. 144, the results of operations of Quantum are presented as a discontinued operation in the Company’s condensed consolidated statements of operations. Losses from the discontinued operation, net of a tax benefit, were approximately $5.9 million for the three months ended March 31, 2002 and include net revenue of approximately $6.1 million for the three months ended March 31, 2002.

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          Unaudited operating results of the discontinued operation for the three months ended March 31, 2002 is as follows:

          The Company’s debt payable is summarized as follows:

(a)  Bank of America NT&SA

Loan Covenants and Collateral.    The Bank of America credit facility contains certain restrictions, as well as limitations on other indebtedness, and is secured by substantially all of the Company’s assets.  In June 2002, the credit facility with Bank of America was amended to extend the maturity date of the Company’s line of credit and term loans to May 31, 2003 and to reduce the available line of credit from $9.5 million to $8.0 million at the end of June 2002. The terms of this amendment also required the line of credit to be reduced by $1.0 million on each of September 30, 2002, December 31, 2002 and March 31, 2003. On March 24, 2003, Bank of America amended its agreement to (1) waive the funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio and the debt service coverage ratio for the period ending January 31, 2003 (2) increase the interest rate on all loans to prime plus five percentage points (3) terminate the swap agreement as of March 24, 2003 and (4) defer the $1.0 million March 31, 2003 line of credit reduction to April 30, 2003.  On April 30, 2003, Bank of America issued another amendment to the agreement allowing a reduction to the line of credit equal to $500,000 rather than the $1.0 million reduction

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defined in the March 24, 2003 amendment. On May 14, 2003, Bank of America amended the facility to waive for the funded debt to EBITDA and debt service coverage ratios for the period ended April 30, 2003. As a result of obtaining this waiver, the Company is in compliance with all covenants and conditions under this credit facility.

Revolving Line of Credit.    The $5.5 million revolving line of credit bears interest, payable monthly, at a rate equal to the Bank’s prime rate plus 5%. At March 31, 2003, the outstanding line of credit balance was $5,450,000, which was subject to an interest rate of 9.25%.

Term Loan.    The Company’s credit facility agreement and line of credit with Bank of America will expire as of May 31, 2003. As a result, all of the term and capital expenditure loans issued by the bank have been classified as a current liability on the balance sheets as of December 31, 2002 and March 31, 2003 although portions of the term loan debt do not mature in calendar year 2003. The Company intends to terminate its relationship with Bank of America on no later than May 31, 2003 and expects to secure a new credit facility from a different senior lender before that time. It is anticipated that all of the Company’s debt with Bank of America will be refinanced by the new credit facility.

In accordance with the amended bank agreement dated March 24, 2003, the term loan bears interest, payable on a monthly basis, at a rate equal to the Bank’s prime rate plus 5% and matures September 30, 2004.  As of March 31, 2003, the term loan had a balance of $3,812,000 at an interest rate of 9.25%.

Capital Leases and Capital Expenditure Lines of Credit Facilities.    The Company has two non-revolving capital expenditure line of credit facilities and two capital leases with Bank of America. The interest rate for each of the capital expenditure lines of credit is prime plus 5%. At March 31, 2003, one line of credit has a balance of approximately $1,016,000 and an interest rate of 9.25%. The other line of credit has a balance of $783,000 bearing interest at a rate of 9.25% and matures on May 31, 2003. Upon the date of maturity, this line of credit may be converted into a term loan due on May 31, 2005 and may be prepaid, in whole or in part, at any time. Both of these credit facilities are classified on the balance sheet as of March 31, 2003 as part of current maturities of long-term debt and capital leases.

The Company’s capital lease obligations as of March 31, 2003 with Bank of America are approximately $21,000 and $245,000 and bear interest rates of 3.4% and 3.3%, respectively. These obligations are classified on the balance sheet as of March 31, 2003 as part of current maturities of long-term debt and capital leases with the exception of approximately $13,000, which is classified as capital leases.

(b)  Credit Facility—Fortis Bank

IMPCO BV has secured a EUR 2,300,000 (US$2,100,000) revocable credit facility with Fortis Bank in the Netherlands. The interest rate is determined on weekly based on a weighted average of several money market indices. IMPCO BV’s borrowings under this facility may not exceed the combined total of 70 % of the book value of its accounts receivable (not older than 90 days) and 50% of the book value of its inventory (or the current market value when lower) with a maximum of EUR 1,000,000. At March 31, 2003, the interest rate was 4.1% and the outstanding balance was $36,000.

(c)  The Hong Kong and Shanghai Banking Corporation Ltd.

Line of Credit.    In April 2002, IMPCO Japan secured a ¥64,000,000 (US$500,000) line of credit facility with the Hong Kong and Shanghai Banking Corporation Ltd., Osaka Branch. This line of credit has a fixed interest rate for a period of 12 months and matures in June 2003. The line of credit is secured with cash from IMPCO Australia that has been placed in a restricted account with National Australian Bank Limited. National Australian Bank has issued a stand-by letter of credit to HSBC as collateral for the line of credit. At March 31, 2003, the outstanding loan balance was ¥64,000,000 (US$534,000) bearing an interest rate of 1.702%.

(d) Other Finance Loans

In February 2003, the company financed an insurance policy through a third party lender.  As of March 31, 2003 the balance of this loan was approximately $204,000.  The loan matures in December 2003 and bears interest at 5.62%.

At March 31, 2003, the weighted average interest rate for all of the Company’s debt was 8.7%.

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          The following table sets forth the computation of basic and diluted earnings per share:

          For the three months ended March 31, 2003, options to purchase 1,120,074 shares of common stock and 300,000 stock warrants were excluded in the computation of diluted net income per share, as the effect would be anti-dilutive. For the three months ended March 31, 2002, options to purchase 1,475,122 shares of common stock and 300,000 stock warrants were excluded in the computation of diluted net income per share, as the effect would be anti-dilutive.

          SFAS No. 123, as amended by SFAS No. 148, requires pro forma information regarding net income and net income per share to be disclosed for new options granted after fiscal year 1996. The fair value of these options was determined at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

          The estimated fair value of the options is amortized to expense over the options’ vesting period for pro forma disclosures. The per share “pro forma” for the effects of SFAS No. 123, as amended by SFAS 148, is not indicative of the effects on reported net income/loss for future years. The Company’s “reported” and “pro forma” information for the three-month periods ended March 31, 2002 and March 31, 2003 are as follows:

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          The components of comprehensive income (loss) for the three months ended March 31, 2002 and 2003 are as follows:

          The Company classifies its business into two operating segments: the United States Operations (“U.S. Operations”) division and the International Operations division. Due to the Quantum spin-off on July 23, 2002, IMPCO has reported the results of Quantum as a loss from discontinued operation on the condensed consolidated statements of operations.  The U.S. Operations division sells products, including parts and conversion systems, for applications in the transportation, material handling, stationary and portable power generator, and general industrial markets. The International Operations in Australia, Europe, Japan, China, India, China and Mexico provide distribution for the Company’s products, predominantly from the U.S. Operations division and some product assembly.

          The Company recognizes revenue for product sales when title is transferred, ordinarily when products are shipped, and when collectibility is reasonably assured. Corporate expenses represent a sub-category of selling, general and administrative expense. Corporate expenses consist of general and administrative expense incurred at the corporate level and, prior to May 1, 2002, included the amortization of goodwill and other intangible assets. Intersegment eliminations are primarily the result of intercompany sales from the U.S. Operations division to International Operations. End markets for the Company’s products include the transportation and industrial markets, which includes the material handling and power generation industries.

          The Company expenses all research and development when incurred. Research and development expense includes both contract-funded research and development and Company sponsored research and development.

          Net revenue and operating income for the Company’s business segments for the three months ended March 31, 2002 and 2003 are as follows:

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(1)  Represents corporate expenses not allocated to any of the operating segments.

          Income taxes for the three months ended March 31, 2003 were computed using the effective tax rate estimated to be applicable for the full fiscal year without giving effect to any changes with respect to the valuation allowance on deferred income taxes. The effective tax rate and amount of the valuation allowance are subject to ongoing review and evaluation by management.

          Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. The Company believes, based on its history of prior operating earnings, its completed spin-off of Quantum and its expectations of future earnings, that operating income of the Company will more likely than not be sufficient to recognize fully these net deferred tax assets. In December 2002, the Company recognized a $24.0 million valuation allowance based on the weight of available evidence that a portion of these deferred tax assets would not be realized within the next three years, notwithstanding that some of these assets may have longer lives under applicable tax laws.  At December 31, 2002 and March 31, 2003 the total amounts recognized as net deferred tax assets on the consolidated balance sheets were $9.4 million and $9.3 million, respectively, which were net of valuation allowances of $24.0 million for both periods.

          On October 3, 2002, the Company entered into an option agreement with the equity holders of B.R.C. Societá a Responsabilita Limitata (“BRC”) under which the Company was granted an option to acquire a 50% ownership interest in M.T.M. S.r.l. of Italy (“MTM”). The price to acquire this option included a $1.5 million payment and the issuance of approximately 2.3 million shares of our common stock (which the parties acknowledged and agreed were valued at $10.0 million). BRC is the parent company of MTM, a supplier for alternative fuel products and systems used in automobiles throughout Europe and in Africa and Central and South America. To exercise the option, the Company initially was required to give BRC a written notice between January 1 and January 15, 2003, and to pay the BRC equity holders an additional US$4,050,000 plus €1,250,000 in cash not later than January 31, 2003. The BRC equity holders and the Company subsequently extended the notice date to February 17, 2003 and the exercise date to May 8, 2003. The Company gave the required notice on February 13, 2003. As of December 31, 2002, the total consideration provided to BRC in the form of common stock and cash was approximately $12.3 million. During the three months ended March 31, 2003 cash payments to BRC totaled $1.5 million and the remainder of the cash payment was made on April 18, 2003. A deferred payment of $7.0 million is due in September 2003. On May 8, 2003 the 50% purchase of MTM became effective. The costs incurred in connection with the MTM acquisition are included in business acquisition costs in the consolidated balance sheets as of December 31, 2002 and March 31, 2003. If the Company is unable to obtain the necessary funds to pay the required $7.0 million to BRC, the selling shareholders have the right to purchase the 50% ownership in MTM from IMPCO for $10.0 million consisting of cash of $4.3 million and a number of lock-up IMPCO shares valued at $5.7 million.

          In connection with the Quantum spin-off, all stock options outstanding on the spin-off date were split into one option of IMPCO stock and one option of Quantum stock.  The exercise price of both the IMPCO and Quantum stock options was adjusted based on the relative market values of the common stock of both companies on the first trading day following the spin-off. Options exercised prior to the Quantum spin-off were made at the exercise price prior to such adjustment.  All vesting schedules remained the same and the option holders will not be required to exercise their options concurrently.

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          In February 2003, the Board of Directors adopted the 2003 Stock Incentive Plan (“plan”), subject to the approval and adoption of the plan by the stockholders at the Annual Meeting of Stockholders to be held on June 12, 2003. The plan provides for the issuance of stock options initially covering up to 800,000 shares of the common stock of the Company.

          On January 11, 2002, the Company completed a private placement of 2,000,000 shares of common stock at a price of $11.25 per share for $22.5 million. The Company also issued to the investors warrants to purchase an aggregate of 200,000 shares of common stock at an exercise price of $13.25 per share. Each purchaser was issued a warrant to purchase one-tenth of a share of common stock for each share of common stock purchased under the agreement. In addition, the Company issued warrants to purchase an aggregate of 100,000 shares of common stock to the placement agent in connection with the transaction. The total of 300,000 warrants were outstanding at March 31, 2003 and the warrants are exercisable at any time until January 11, 2006.

          On March 28, 2003, the Company granted 200,000 warrants to purchase common stock at a price of $2.51 in connection with an $8.0 million loan commitment from a director expiring May 31, 2003 (if exercised interest payable monthly at 12% with a maturity of January 31, 2004). The warrants expire in four years. If the commitment is exercised, the Company will grant 600,000 warrants on similar terms.

          On April 14, 2003, the Company issued warrants, fully vesting, to lenders to acquire 120,000 shares of IMPCO common stock at a price 120% over the market price of $2.05 in connection with bridge loans totaling $1.2 million made to the Company. The loans are due and payable on October 14, 2003.

          Estimated future warranty obligations related to certain products are provided by charges to operations in the period in which the related revenue is recognized. Estimates are based, in part, on historical experience. Changes in the Company’s product warranty liability during the three months ended March 31, 2002 and 2003 are as follows:

          In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, amortization of goodwill is no longer permitted. No such amortization expense for goodwill was recognized following the adoption of SFAS No. 142 on May 1, 2002. The following data shows the effect on net income (loss) and net income (loss) per share of common stock if the provisions of SFAS No. 142 had been in effect for the three months ended March 31, 2002.

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ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

          This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations that follows, may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about our industry, our beliefs and assumptions. We use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: we may be unable to raise additional capital necessary to fund our operations and capitalize on market opportunities; our business depends on the growth of the alternative fuel market, particularly in international markets; we may not be able to meet the terms and conditions of the Bank of America financing arrangements which expires in May 2003; our recent spin-off of Quantum Fuel Systems Technologies Worldwide, Inc. (“Quantum”) is subject to tax risks for us and our stockholders, including restrictions on our issuance of equity securities in order to maintain the tax-free status of the spin-off; we face significant competition, which could decrease our revenue and market share; we face risks of operating internationally, including potential foreign currency exposure, difficulty and expense of complying with foreign laws and regulations and political instability; new technologies could render our products obsolete; we may be unable to adequately protect our intellectual property rights; we depend on third-party suppliers to supply materials and components for our products; we may be subject to increased warranty claims due to lengthened warranty periods being offered by our OEM customers; the market for our products could be adversely affected by changes in environmental and other policies and regulations; we may be subject to litigation if our stock price is volatile; and changes in general economic conditions could materially affect our results of operations. This list of factors is not intended to be exhaustive. Reference should also be made to the factors set forth from time to time in our The Securities Exchange Commission (The “SEC”) reports, including but not limited to, those set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2002. You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this Quarterly Report on Form 10-Q.

OVERVIEW

          We design, manufacture and supply components and advanced systems that include fuel metering, electronic control and fuel storage products that enable internal combustion engines to run on clean burning alternative fuels such as propane and natural gas instead of gasoline. Based on over 44 years of technology development and expertise in producing cost-effective, safe and durable fuel technology systems for engines, we believe we are positioned to provide enabling products and technologies in the rapidly expanding alternative fuel industry.

          Prior to the Quantum spin-off, we classified our business operations into three reporting segments: the Quantum division, the Gaseous Fuel Products division and International Operations. Due to the Quantum spin-off on July 23, 2002, this division is now classified as a discontinued operation, and we have renamed the Gaseous Fuel Products division as the United States Operations division (“U.S. Operations”). The U.S. Operations division sells products, including parts and conversion systems, for applications in the transportation, material handling, stationary and portable power generator and general industrial markets. Our International Operations in Australia, Europe, India, Japan, China and Mexico provide distribution for our products, predominantly from our U.S. Operations division and some product assembly on engines.

          We recognize revenue for product sales when title is transferred, ordinarily when products are shipped, and when collectibility is reasonably assured. Corporate expenses represent a sub-category of selling, general and administrative expense. Corporate expenses consist of general and administrative expense incurred at the corporate level and, prior to May 1, 2002, included the amortization of goodwill and other intangible assets. The amortization of goodwill included in corporate expenses for the three months ended March 31, 2002 was approximately $0.2 million as compared to $0.0 million for the three months ended March 31, 2003. Intersegment eliminations are primarily the result of intercompany sales from the U.S. Operations division to International Operations. End markets for our products include the transportation and industrial markets, which include the material handling and power generation industries.

RECENT DEVELOPMENTS

          Quantum Spin-off.    On July 23, 2002, we completed the Quantum spin-off by distributing one share of Quantum common stock for every share of IMPCO common stock held on the July 5, 2002 record date. As a result of the Quantum spin-off, we have reported the results of Quantum as a discontinued operation.  We expect the spin-

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off of Quantum to have a favorable effect on our results of operations and cash flows from operations. Readers should note that comprehensive financial data that include periods before the Quantum spin-off may not present a meaningful comparison with subsequent periods because of the effect of the discontinued operation.

          Fiscal Year. On November 29, 2002, our board of directors approved a change in our fiscal year end from April 30 to December 31. We prepared a Transitional Report on Form 10-K covering the period May 1, 2002 to December 31, 2002. For purposes of comparability of financial reporting during 2003, we presented our financial results for the three-month period ended March 31, 2002 to correspond to the new fiscal year.

          Business Acquisition. On October 3, 2002, we entered into an option agreement with the equity holders of B.R.C. Societá a Responsabilita Limitata (“BRC”) under which we received an option to acquire a 50% ownership interest in M.T.M S.r.l. of Italy (“MTM”). The price to acquire this option included a $1.5 million payment and the issuance of approximately 2.3 million shares of our common stock (which the parties acknowledged and agreed were valued at $10.0 million). BRC is the parent company of MTM, a supplier for alternative fuel products and systems used in automobiles throughout Europe and in Africa and Central and South America. To exercise the option, we initially were required to give BRC a written notice between January 1 and January 15, 2003, and to pay the BRC equity holders an additional US$4,050,000 plus €1,250,000 in cash not later than January 31, 2003. We and the BRC equity holders subsequently extended the notice date to February 17, 2003 and the exercise date to May 8, 2003. We gave notice on February 13, 2003. As of December 31, 2002, the total consideration provided to BRC in the form of common stock and cash was approximately $12.3 million. During the three months ended March 31, 2003 cash payments to BRC totaled $1.5 million and the remainder of the cash payment was made on April 18, 2003. A deferred payment of $7.0 million is due in September 2003. On May 8, 2003 the 50% purchase of MTM became effective. During April, we raised the necessary funds to make the cash payments to BRC from internal working capital sources and bridge loans totaling $1.2 million, all having maturities that expire on October 14, 2003. In addition, the lenders were issued warrants to acquire 120,000 shares of our common stock, fully vesting, at a price 120% over the market price of  $2.05. If we are unable to obtain the necessary funds to pay the required $7.0 million to BRC, the selling shareholders would have the right to purchase the 50% ownership in MTM from IMPCO for $10.0 million consisting of cash of $4.3 million and a number of lock-up IMPCO shares valued at $5.7 million.   

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, goodwill, taxes, inventories, warranty obligations, long-term service contracts, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

          We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

          We recognize revenue for product sales when title is transferred, ordinarily when products are shipped, and when collectibility is reasonably assured.  The costs of shipping and handling, when incurred, are recognized in the cost of goods sold.   We expense all research and development when incurred.

          We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability may be required.

          We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

          We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

          We operate wholly-owned and majority-owned subsidiaries. We recorded goodwill at the time of purchase for the amount of

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the purchase price over the fair values of the assets and liabilities acquired. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the goodwill, thereby possibly requiring an impairment charge in the future.

         We recorded a net deferred tax asset and a $24.0 million valuation allowance for that portion of the asset that we believe is not likely to be realized within the next three years, notwithstanding that some of those assets may have longer lives under applicable tax laws. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. We believe, based on our history of prior operating earnings, its spin-off of the Quantum division and its expectations of future earnings, that operating income will more likely than not be sufficient to realize the future benefits of the amount classified as net deferred tax asset. Future adverse changes in market conditions, poor operating results or a decline in our projections about future profitability may affect our assessment of the adequacy of the reserve and consequently, the net carrying value of net deferred tax assets. In the event that we determine that it is more likely than not that we would be unable to realize an additional portion of the net deferred tax asset, an additional adjustment to the deferred tax asset valuation allowance would be charged to income in the period such determination was made.

       We recognize the financial results for discontinued operations, net of tax, in the Company’s condensed consolidated statements of operations as discontinued operation. Cash flows related to discontinued operations are segregated from continuing operations in the statement of cash flows.

RESULTS OF OPERATIONS

          Net revenue and operating income for our business for the three months ended March 31, 2002 and 2003 are as follows:

(1)  Represents corporate expenses not allocated to any of the operating segments.

          Net revenue increased approximately $4.1 million, or 26.7%, from $15.4 million in the first quarter of 2002 to $19.6 million in the first quarter of 2003. The first quarter 2003 increase was due to a $1.7 million increase in net sales of our products to the industrial market and a $2.4 million increase in net sales of our products to the transportation market. Total revenues for the first quarter of 2003 were the highest level of revenue since the three months ended October 31, 2000, which recorded $20.4 million in revenues. The improvement in revenues as compared to the first quarter of 2002 can be partially attributed to a recovery of orders from customers classified within our industrial market. These customers had suffered from a post September 11, 2001 decline in business activity.

          Operating income increased during the first quarter by approximately $3.1 million, or 156.6%, from a $2.0 million loss in the first quarter of 2002 to a $1.1 million profit in the first quarter of 2003. The increase in operating income was, in part, due to increased revenue of  $4.1 million ($1.1 million), due partially to a favorable change in product mix ($1.4 million), and also partially due to reduced operating expenses ($0.6 million). The improvement in gross profit percentage is also attributable to higher mix of revenues favoring the industrial market, which has historically reported higher gross margins.

          US Operations Division.  For the three months ended March 31, 2003, revenue increased by approximately $3.0 million, or 26.6% as compared to the same period in the prior year. The increase in sales during the first quarter of 2003 was caused by a $1.6 million increase in revenue for the industrial market and a $1.4 million increase in revenue for the transportation market.

          Gross profit for the three months ended March 31, 2003 increased approximately $1.4 million, or 56.7% as compared to the same period in fiscal year 2002. For the three-month period, approximately $0.8 million of the increase in gross profit was due to changes in product mix and approximately $0.6 million was due to the increase in revenue.

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          For the three months ended March 31, 2003, operating income increased by more than $2.3 million, or 2,276.1% as compared to the same period in the prior fiscal year. The increase for the three-month period was mainly due to the increase in gross profit of $1.4 million and $0.9 million in lower operating expenses due to management’s focus on reducing operating expenses.

          International Operations.  For the three months ended March 31, 2003, net revenue increased by approximately $2.3 million, or 30.9% compared to the same period in the prior year. For the three months ended March 31, 2003, our European subsidiary accounted for a revenue increase of $1.7 million and Mexico and Asia/Pacific Rim subsidiaries combined for $0.6 million in additional revenue as compared to the same period in 2002. The increase in sales during the three months ended March 31, 2003 was caused primarily by a $2.0 million increase in revenue for the transportation market and a $0.3 million increase in revenue for the industrial market.

          During the three months ended March 31, 2003, operating income increased by approximately $0.8 million, or 390.9%, as compared to the same period in 2002. For the three-month period, the $0.8 million increase in operating income is attributable to a $0.5 million increase in gross profit associated with the increase in revenue, a $0.6 million increase due to changes in product mix, and offset by an increase in operating expenses of approximately $0.3 million.

          Corporate Expenses.  Corporate expenses consists of general and administrative expenses at the corporate level to support our operating segments in areas such as executive management, finance, human resources, management information systems, legal services and investor relations.  As of May 1, 2002, the amortization of goodwill and other intangible assets is no longer recorded as a corporate expense due to the implementation of Financial Accounting Standards Board Statement No. 142, “Goodwill and Other Intangible Assets”.  For the three months ended March 31, 2002, approximately $0.2 million of amortization of goodwill and other intangibles was charged to corporate expense. Expenses for the three months ended March 31, 2003 were approximately $0.2 million less than the first quarter of 2002 reflecting a constant level of expenditures for corporate expenses.