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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2004,

or

For the transition period from                          to                         

Commission File No. 001-15143

IMPCO TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

16804 Gridley Place, Cerritos, CA 90703

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (562) 860-6666

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. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Number of shares outstanding of each of the issuer’s classes of common stock, as of October 28, 2004:

18,616,649 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

December 31, 2003 and September 30, 2004

(In thousands of dollars)

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2003 and September 30, 2004

(In thousands of dollars)

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three and nine months ended September 30, 2003 and 2004

(In thousands of dollars except per share data)

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine months ended September 30, 2003 and 2004

(In thousands of dollars)

See accompanying notes to condensed consolidated financial statements.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004

1.    Basis of Presentation

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 year ended December 31, 2003. The consolidated financial statements of IMPCO Technologies, Inc. (“IMPCO” or the “Company”) as of September 30, 2004 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 majority-owned joint ventures Minda IMPCO Technologies Limited. 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. In July 2003, the Company purchased 50% of B.R.C. Societá Responsabilitá Limitata (“BRC”). The Company uses the equity method to recognize the assets and liabilities of BRC in the Company’s consolidated results. The results of operations for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the twelve months ended December 31, 2004, or for any future period.

Recent Accounting Standards

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, (“FIN 46”). FIN 46 introduces a new consolidation model, the variable interests model, which determines control (and consolidation) based on potential variability in gains and losses of the entity being evaluated for consolidation. The requirements for FIN 46, including its disclosures, apply immediately.

FIN 46 provides guidance for determining whether an entity qualifies as a variable interest entity (“VIE”) by considering, among other considerations, whether the entity lacks sufficient equity or its equity holders lack adequate decision-making ability. If the entity does not qualify as a VIE, then the

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

consolidation criteria is based on previously established accounting standards. Qualifying VIEs are covered by FIN 46 and are individually evaluated for consolidation based on their variable interests. FIN 46 requires consideration and estimates of a significant number of possible future outcomes of the VIE as well as the probability of each outcome occurring. Based on the allocation of possible outcomes, a calculation is performed to determine which party, if any, has a majority of potential negative outcomes (expected losses) or a majority of the potential positive outcomes (expected residual returns), with an emphasis on negative outcomes. That party, if any, is the primary beneficiary and is required to consolidate the VIE. The Company has evaluated the potential effect of FIN 46 as of September 30, 2004 and there was no effect on its consolidated financial statements at adoption.

In December 2003, the FASB issued Interpretation No. 46 (R), Consolidation of Variable Interest Entities, which requires the consolidation of variable interest entities, as defined. FIN 46 is applicable to financial statements to be issued by the Company after 2002; however, disclosures are required currently if the Company expects to consolidate any variable interest entities.

In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 (“SAB No. 104”), Revenue Recognition, which codifies, revises and rescinds certain sections of SAB No. 101, Revenue Recognition, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have a material effect on the Company’s consolidated results of operations, consolidated financial position or consolidated statements of cash flows.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

2.    Debt Payable

The Company’s debt payable is summarized as follows (in thousands of dollars):

(a)    Senior Subordinated Secured Promissory Note—Bison Capital Structured Equity Partners, LLC

On July 21, 2003 the Company entered into an agreement with Bison Capital Structured Equity Partners, LLC (“Bison”) to sell to Bison a senior subordinated secured promissory note in the amount of $20.0 million bearing interest at a rate of 11.25%. Interest payments are due monthly over the term of the note and the principal amount of the note is due in full on July 21, 2007. The proceeds of the note were approximately $17.3 million and resulted in a loan discount of approximately $2.7 million, which is amortized to interest expense over the term of the note. At September 30, 2004 the carrying value of the note was approximately $18.5 million. At December 31, 2003 and September 30, 2004, the unamortized loan discount balances were approximately $2.5 million and $2.1 million, respectively. Approximately $3.7 million was recognized as interest expense in the nine months ended September 30, 2004. The Bison note is secured by a pledge of the equity securities of the Company’s non-U.S. subsidiaries. At December 31, 2003 and at June 30, 2004, the Company was in default for not meeting certain financial measurement covenants at the end of the fourth quarter of 2003 and at April

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

30, 2004. The Company obtained a waiver of these defaults at December 31, 2003 and at June 30, 2004, and for certain covenant amendments for the remainder of 2004. The Company paid the default rate of interest for the first quarter of 2004 (3% over the stated rate) in cash amounting to $150,000. The default rate of interest thereafter will be paid in kind (“PIK”) and increase 150 basis points each quarter (up to a maximum of 18.75% per annum) as long as the Company does not perform up to the covenants established at the inception of the loan. As of September 30, 2004, the Company was in compliance with the revised covenant amendments as contained in the amended agreement, dated March 12, 2004. At September 30, 2004, the effective interest rate per annum including the PIK interest was 17.25%.

In conjunction with the promissory note purchase agreement, the Company issued warrants to Bison to purchase 500,000 shares of the Company’s common stock at a price of $2.00 per share. In September 2003, Bison exercised the warrants and acquired 500,000 shares of common stock.

On October 25, 2004, the Company announced its intention to prepay the amounts due to Bison under the terms of the senior subordinated secured promissory note consisting of a $20.0 million principal plus a prepayment penalty of $1.0 million and the accrued PIK interest of approximately $1.0 million for a total of approximately $22.0 million. The Company expects to complete the prepayment of the Bison note prior to concluding its acquisition of the remaining 50% equity interest of its Italian affiliate, BRC, as announced on October 25, 2004. The Company expects to conclude this transaction on or about December 31, 2004 or, if closing conditions remain unsatisfied on that date, then in the first quarter of 2005. The cash required to prepay this loan will be sourced primarily from an intercompany loan with the Company’s Italian affiliate, BRC. BRC has agreed to loan to the Company approximately $21.0 million consisting of internal cash resources of approximately $12.0 million and loan proceeds of $9.0 million from Italian lenders. In the event the Company does not pay the Bison note in full prior to closing, the Company would need Bison’s consent to close.

(b)    Revolving Promissory Note—LaSalle Business Credit, LLC

On July 18, 2003 the Company entered into a revolving promissory note with LaSalle Business Credit, LLC (“LaSalle”) for a maximum amount of $12.0 million bearing interest at a rate of 5.50% per annum at September 30, 2004. The note is payable in full on July 18, 2006. The Company’s availability

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

under this facility is determined by a percentage of eligible accounts receivable and inventory balances as defined by the asset-based lending agreement. As of September 30, 2004, approximately $9.7 million was outstanding under the line of credit and approximately $2.3 million was unused and available under the line. Approximately, $0.4 million was recognized as interest expense in the first nine months of 2004. At December 31, 2003, the Company was in default for not meeting certain financial measurement covenants at the end of the fourth quarter of 2003. The Company obtained a waiver of its covenants at December 31, 2003 and at June 30, 2004. During October 2004, the Company concluded its negotiations and executed an agreement with LaSalle, effective June 30, 2004, which established revised financial covenants consistent with the Company’s business projections through the current term of the agreement. As of September 30, 2004, the Company was in compliance with the terms and conditions of the loan agreement, as amended.

According to terms of the Company’s loan agreement with LaSalle, the Company requires LaSalle’s consent to acquire the remaining 50% equity interest of its Italian affiliate, BRC. The Company expects to obtain LaSalle’s consent.

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

In April 2002, IMPCO Japan secured a ¥64.0 million ($0.6 million) line of credit facility with the Hong Kong and Shanghai Banking Corporation Ltd. (“HSBC”), Osaka Branch. This line of credit was renewed in March 2003 with a fixed interest rate of 1.685% for a period of 12 months and matured in April 2004. The line of credit was secured by cash from a restricted account with National Australian Bank Limited, which issued a stand-by letter of credit to HSBC as collateral for the line of credit. In April 2004, the line of credit was repaid in full.

(d)    Minda IMPCO Ltd. Notes Payable

During the fourth quarter of 2003, Minda IMPCO Ltd., a 60% owned subsidiary in India, entered into several loan agreements and obtained a total of INR6.0 million ($134,000) in loans with an average interest rate of 14% and mature in two years. During the first nine months of 2004, additional amounts were borrowed totaling $304,000 and the amount owed at September 30, 2004 totaled approximately $438,000.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

(e)    Factoring Agreement—Heller Financial

During June 2004, I.M.P.C.O. Mexicano utilized an existing factoring agreement, with recourse, with Heller Financial (“Heller”) in which IMPCO Mexicano received proceeds of approximately 8.8 million Mexican pesos ($770,000 at September 30, 2004). This transaction was accounted for as a secured financing arrangement in which IMPCO Mexicano is obligated to pay Heller $770,000 plus accrued interest at 4.53% per annum by October 2004 in the event that the factored accounts receivable are not settled. As of September 30, 2004 the amount owed under this agreement was $270,000. During October 2004, the balance of $270,000 was paid in-full. During the term of the loan, a total of $750,000 in factored receivables was collected and applied against the outstanding loan balance.

(f)    Other Loans

In April of 2004, the Company financed certain insurance policies through a third party lender with a maturity of nine months.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

3.    Earnings (loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands of dollars except per share data):

For the three and nine month periods ended September 30, 2004, options to purchase 1,755,209 and 799,709 shares of common stock, respectively, were excluded from the computation of diluted net income per share, as the effect would be anti-dilutive. For the three and nine months ended September 30, 2004, warrants to acquire 300,000 and no shares of common stock, respectively, were excluded from the computation of diluted net income per share, as the effect would be anti-dilutive.

For the three and nine month periods ended September 30, 2003, options to purchase 2,359,824 shares of common stock and 795,000 warrants to acquire shares of common stock, respectively, were excluded from 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 proforma information regarding net income and net income per share to be disclosed for

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

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 “proforma” 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 “proforma” information for the three and nine months ended September 30, 2003 and September 30, 2004 are as follows (in thousands of dollars except per share data):

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

4.    Comprehensive Income

The components of comprehensive income for the three and nine months ended September 30, 2003 and 2004 are as follows (in thousands of dollars):

5.    Business Segment Information

The Company classifies its business into two operating segments: United States Operations (“U.S. Operations”) and International Operations. U.S. Operations sells products, including complete certified engines, fuel systems, parts and conversion systems, for applications in the transportation and industrial markets. International Operations in Australia, Europe, Japan, India, and Mexico provide distribution for the Company’s products, predominantly from U.S. Operations and some product assembly.

The Company recognizes revenue for product sales when title is transferred, ordinarily when product is shipped, and when management is reasonably assured of collectibility. Corporate expenses represent a sub-category of selling, general and administrative expense. Intersegment eliminations are primarily the result of intercompany sales from U.S. Operations 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.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

Net revenue and operating income for the Company’s business segments for the three and nine months ended September 30, 2003 and 2004 are as follows (in thousands of dollars):

6.    Income Taxes

Income taxes for the three months ended September 30, 2004 were computed using the effective tax rate estimated to be applicable for the full fiscal year without giving effect to any change 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,

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

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. In December 2003, the valuation allowance was increased by $2.5 million to $26.5 million attributable to the increase in deferred tax assets, primarily due to the increase of net operating loss carryforwards. At December 31, 2003 and September 30, 2004, the total amounts recognized as net deferred tax assets on the consolidated balance sheets were $9.8 million and $9.2 million, respectively, which was net of valuation allowance of $26.5 million.

For the nine months ended September 30, 2004, undistributed earnings of the Company’s foreign subsidiaries were approximately $2.0 million. Undistributed earnings are considered to be indefinitely reinvested and, accordingly, no provision for United States federal and state income taxes has been provided thereon. Upon distribution of earnings in the form of dividends or otherwise, the Company would be subject to both United States income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. Determination of the amount of unrecognized deferred United States income tax liability is not practical because of the complexities associated with its hypothetical calculation. In April 2004, the Company’s 51% owned subsidiary in Holland paid a €2.0 million dividend in which the Company received approximately $1.2 million in cash. Accordingly, the Company recognized a tax expense of approximately $0.3 million in the three months ended June 30, 2004.

7.    Business Acquisition

On October 3, 2002, the Company entered into an option agreement with the equity holders of BRC under which the Company was granted an option to acquire a 50% ownership interest in BRC for approximately $23.8 million, which included the issuance of approximately 2.3 million shares of Company common stock (which the parties acknowledged and agreed were valued at $10.0 million). The Company announced on May 8, 2003 that the purchase of 50% of BRC was completed pending a $7.0 million payment that represented the deferred portion of the purchase price due on September 30, 2003. On July 22, 2003, in conjunction with the refinancing of the Company’s debt, the deferred payment of $7.0 million was paid to the equity holders of BRC consequently completing the first 50% acquisition of BRC. On October 25, 2004, the Company announced its intention to acquire the remaining 50% equity interest in BRC. As of December 31, 2003, the Company had incurred

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

acquisition costs of approximately $24.7 million, which is shown on the consolidated balance sheet as part of investment in affiliates. The Company uses the equity method of accounting to recognize the investment in and the results of BRC in the Company’s consolidated results. The unaudited condensed balance sheet for BRC as of September 30, 2004 follows (in thousands of dollars):

For the nine months ended September 30, 2003 and 2004, unaudited revenues were $27.8 million and $38.7 million, respectively. BRC’s net income before considering the Company’s 50% share in earnings for the same periods were a loss of $0.7 million and income of $2.3 million, respectively.

Related Party Transaction

In July 2003, the Company made the final deferred payment to the BRC equity holders, which completed the $23.8 million acquisition of a 50% equity interest in BRC. Mr. Mariano Costamagna is the Chief Executive Officer of MTM S.r.l., an Italian corporation and a wholly owned subsidiary of BRC and, prior to the transaction, directly or indirectly held a 50% equity interest in BRC. In connection with this purchase, the Company paid $6.9 million and issued 1,039,262 shares of common stock to Mr. Costamagna or his spouse, representing payment for one-half of the 50% interest he held directly or indirectly in BRC. Mr. Costamagna was elected to a three-year term as a Company director beginning June 12, 2003. Mr. Costamagna presently owns 20% equity interest in BRC, and other members of his immediate family own between 5% and 20% of the equity interest in BRC.

Since 2002, BRC has leased buildings from IMCOS2, S.r.l., a related company. For the nine months ended September 30, 2003 and 2004, rental payments to IMCOS2, S.r.l. were €337,500.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

Subsequent Event

On October 25, 2004, the Company announced that it had entered into an agreement to acquire the remaining 50% equity interest of BRC from BRC’s founders Mr. Mariano Costamagna, a Company director, and Mr. Pier Antonio Costamagna in exchange for $37.6 million, of which approximately $10.0 million will be paid in cash and the remainder with 5.1 million shares of the Company’s common stock. This acquisition is subject to financing contingencies and certain other conditions, including redemption of the Bison senior subordinated promissory note issued in July 2003. The transaction is subject to stockholders’ approval and the receipt of a consent from the Company’s senior lender, LaSalle. The transaction is expected to close by December 31, 2004.

8.    Stockholders’ Equity

In February 2003, the Board of Directors adopted the 2003 Stock Incentive Plan (“Plan”), which was approved by the stockholders at the Annual Meeting of Stockholders 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. As of September 30, 2004, none of these options have been exercised and none of the underlying shares of common stock have been issued.

On March 28, 2003, the Company granted 200,000 warrants to purchase common stock at a price of $2.51, 120% over market price, in connection with an $8.0 million standby loan commitment from a director expiring May 31, 2003 and subsequently extended to July 31, 2003. The warrants expire in four years. The commitment was not exercised and was cancelled during 2003. During 2003, the Company utilized the Black-Scholes model to determine the fair value of the warrants of approximately $0.3 million and recognized the entire amount as interest expense during 2003.

On April 14, 2003, the Company issued warrants, fully vesting with a five-year expiration period, to lenders to acquire 305,000 shares of IMPCO common stock at a price 120% over the market price of $2.05 in connection with bridge loans totaling approximately $3.1 million. The loans were repaid in full by December 2003. During 2003, the Company utilized the Black-Scholes model to determine the fair value of the warrants of approximately $0.4 million and recognized the entire amount as interest expense during 2003.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

On July 21, 2003, the Company granted 500,000 warrants to Bison to acquire common stock of the Company at a price of $2.00 in connection with the senior subordinated secured promissory note with Bison in the amount of $20.0 million due in July 2007. The warrants were fully exercised during September 2003 and the corresponding number of shares of common stock is included in the number of shares outstanding as of September 30, 2004. In July 2003, the Company recognized the fair value of the warrants totaling approximately $2.6 million as part of additional paid in capital on the condensed consolidated balance sheets and has amortized as part of interest expense on a ratable basis over the four-year term of the loan approximately $0 and $160,000 for the three months ended September 30, 2003 and 2004, respectively.

Subsequent Event

On October 28, 2004, the Company filed a registration statement on Form S-3 respecting a proposed delayed offering of up to $60 million for the purpose of using the SEC’s shelf-registration rules in order to sell shares of the Company’s common stock in one or more public offerings in the future. The Company anticipates that the initial portion of this offering will raise at least $15.0 million, and that the proceeds of this tranche will be used to satisfy obligations incurred to acquire the remaining 50% interest in BRC. In connection with the purchase agreement, the Company has agreed to issue approximately 5.1 million shares of the Company’s stock and pay approximately $10.0 million in cash to the founders of BRC in order to complete the acquisition of BRC. The other $5.0 of the initial tranche will be used to cover transaction costs, meet working capital needs and satisfy certain debt obligations under the purchase agreement.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

9.    Warranty

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 September 30, 2004 are as follows (in thousands of dollars):

10.    Related Party Transactions

In December 2000, the Company loaned an officer of the Company $100,000. The loan initially bore interest at a rate of 5% per annum and, since June 30, 2001, bears interest at a rate of 9% per annum. The loan became due and payable in full on July 31, 2002. On March 5, 2004, the loan was repaid in full.

In September 2001, the Company loaned this officer $175,000. The loan bears interest at a rate of 9% per annum and became due and payable on July 31, 2002. The amount outstanding at September 30, 2004 was approximately $215,000. The Company expects to be fully repaid by September 2005.

On September 30, 2003, the 10% minority holder of IMPCO Mexicano exercised his put option for $0.5 million. The Company entered into an agreement whereby a Company director agreed to purchase the 10% interest for $0.5 million and would allow the Company to repurchase the 10% interest at cost. In December 2003, the Company repaid the director $0.5 million, plus accrued interest of approximately $50,000, for his 10% interest and the Company owns 100% of IMPCO Mexicano.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

11.    Equity Share in (Income) Loss of Unconsolidated Affiliates

The Company uses the equity method of accounting for consolidations when there is less than 50% ownership in the equity interests of an affiliate or in those circumstances where the Company does not have effective control over the operations of an affiliate. In July 2003, the Company acquired 50% ownership in the equity ownership of BRC but did not acquire effective control over the operations of BRC. Accordingly, the Company recognizes its 50% share in the net income or loss of BRC as part of equity share in (income) loss of unconsolidated affiliates in the condensed consolidated statements of operations. The Company also recognizes the amortization of the cost differential that occurred as a result of the purchase price difference between the Company’s 50% share of the fair value of net assets and liabilities acquired and the 50% share of the net book value of BRC as of the date of acquisition. As of December 31, 2003 and September 30, 2004, the unamortized cost differentials carried as part of investment in affiliates on the condensed consolidated balance sheets were approximately $3.4 million and $3.1 million, respectively, and are currently being amortized over a useful life of 10 years. During 2004, the Company changed the remaining useful life of these cost differentials from 5 years to 10 years.

During the three and nine months ended September 30, 2004, BRC recognized net income of approximately $1.1 million and $2.3 million, respectively.

During the three months end September 30, 2003, BRC recognized a net loss of approximately $0.7 million. The Company acquired a 50% ownership in BRC in July 2003.

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IMPCO TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2004

The components of equity share in (income) loss in unconsolidated affiliates follow (in thousands of dollars):

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Forward-looking Statements

This Quarterly Report on Form 10-Q, particularly including Management’s Discussion and Analysis of Financial Condition and Results of Operations that follows, contains forward-looking statements 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 in part to help identify forward-looking statements. These statements are not guarantees of future performance or promises of specific courses of action and instead 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 matters discussed in the section entitled “Risk Factors” beginning at page 33. 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 other 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 fiscal year ended December 31, 2003. You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this report.

Overview

We design, manufacture and supply components, complete certified engine systems and fuel 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 45 years of technology development and expertise in producing cost-effective, safe and durable fuel technology systems for engines, we believe that we are positioned to provide enabling products and technologies in the rapidly expanding alternative fuel industry.

We classify our business into two business segments: U.S. Operations and International Operations. Our U.S. Operations sells products, including complete certified engines, 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 U.S. Operations and some product assembly on engines.

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We recognize revenue for product sales when title is transferred, ordinarily when products are shipped, and when management is reasonably assured of collectibility. Corporate expenses represent a sub-category of selling, general and administrative expense. Intersegment eliminations are primarily the result of intercompany sales from U.S. Operations to International Operations. End markets for our products include the transportation and industrial markets, which includes the material handling, industrial and power generation industries.

Net revenue for the nine months ended September 30, 2004 increased by approximately $34.5 million to $91.1 million from $56.6 million for the same period of 2003. Net income for the nine months ended September 30, 2004 was $2.0 million, or $0.10 per share on a diluted basis as compared to a loss of $1.0 million or ($0.06) per share on a diluted basis for the same period ended September 30, 2003. We attribute the increase in revenue to deliveries of our certified complete engine systems in response to new federal regulations requiring that certain “off-road” vehicles meet new and more stringent emissions standards.

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Recent Developments

Business Acquisition.    On October 3, 2002, we entered into an option agreement with the equity holders of B.R.C. Societá a Responsabilitá Limitata (“BRC”) under which we were granted an option to acquire a 50% ownership interest in BRC for approximately $23.8 million, which included the issuance of approximately 2.3 million shares of our common stock (which the parties acknowledged and agreed were valued at $10.0 million). We announced on May 8, 2003 that the purchase of 50% of BRC was completed pending a $7.0 million payment that represented a deferred portion of the purchase price due on September 30, 2003. On July 22, 2003, in conjunction with the refinancing of our Company, the deferred payment of $7.0 million was paid to the equity holders of BRC consequently completing the 50% acquisition of BRC. As of December 31, 2003, we incurred acquisition costs of approximately $24.7 million and are shown on the consolidated balance sheet as part of investment in affiliates. We use the equity method of accounting to recognize the investment in and the results of BRC in our consolidated financial results. The unaudited condensed balance sheet for BRC as of September 30, 2004 follows (in thousands of dollars):

For the nine months ended September 30, 2003 and 2004, unaudited revenues were $27.8 million and $38.7 million, respectively. BRC’s net income, not adjusted to reflect the Company’s 50% equity interest for the same periods were a loss of $0.7 million and income of $2.3 million, respectively.

Refinancing.    In July 2003, we entered into a senior subordinated secured promissory note with Bison Capital Structured Equity Partners, LLC (“Bison”) and a revolving promissory note with LaSalle Business Credit (“LaSalle”) for $20.0 million and $12.0 million, respectively. The proceeds from these lending arrangements were used to refinance approximately $11.3 million of Bank of America credit facilities; to finance the $7.0 million deferred payment to complete the 50% acquisition of BRC; and to provide for working capital.

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At December 31, 2003 and at June 30, 2004, we were in default on the LaSalle loan for not meeting certain financial measurement covenants at the end of the fourth quarter of 2003. The company obtained waivers of its covenants at December 31,2003 and at June 30, 2004. We are currently paying a rate of interest equal to 5.50%. In October 2004, we concluded negotiations with LaSalle and executed an agreement, effective June 30, 2004, which revised the financial covenants to be more consistent with our business projections through the end of the term of the loan in 2006. As of September 30, 2004, we are in compliance with the terms and conditions of the loan agreement, as amended.

At December 31, 2003 and at June 30, 2004, we were in default on the Bison loan for not meeting certain financial measurement covenants at the end of the fourth quarter of 2003 and at April 30, 2004. As of September 30, 2004, we are in compliance with the revised covenant amendments as contained in the amendment, dated March 12, 2004. At September 30, 2004, we were paying an interest rate equal to 17.25%.

Subsequent Events.    On October 25, 2004, we announced that we had entered into an agreement to acquire the remaining 50% equity interest of BRC from BRC’s founders Mr. Mariano Costamagna, a Company director, and Mr. Pier Antonio Costamagna, in exchange for $37.6 million, of which approximately $10.0 million is to be paid in cash and the remainder with 5.1 million shares of our common stock. This acquisition is subject to financing contingencies and certain other conditions, including redemption of the senior subordinated promissory note issued in July 2003. The transaction is subject to our stockholders’ approval and the approval of our senior lender, LaSalle, and the transaction is expected to close by December 31, 2004.

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.

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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, including foreign subsidiaries, for product sales when title is transferred or when the earnings process is otherwise complete, ordinarily when products are shipped, and when management is reasonably assured of collectibility. 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. Our standard warranty period is 18 months from the date of manufacture. The warranty obligation on our certified engine products can vary from 3 to 5 years depending on the specific part and the actual hours of usage.

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 record goodwill at the time of purchase for the amount of 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, which we believe is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be

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able to realize all or part of our net deferred tax asset in the future, an additional valuation allowance would be recognized and charged to income in the period such a determination was made.

Results of Operations

Net revenue and operating income for our business for the three and nine months ended September 30, 2003 and 2004 are as follows (in thousands of dollars):