S C A L I N G G L O B A L O P P O R T U N I T I E S Investor Presentation September 2016 1 1
Safe Harbor Statement This presentation contains "forward-looking information," within the meaning of applicable Canadian securities laws and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). Forward-looking statements can be identified by the use of words, such as "plans," "expects," or "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates," or "believes" or variations of such words and phrases or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved. These forward-looking statements relate to, among other things, our future results, levels of activity, performance, goals or achievements or other future events. These forward-looking statements are based on current expectations and various assumptions and analyses made by us in light of our experience and our perceptions of historical trends, current conditions and expected future developments and other factors that we believe are appropriate in the circumstances. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in our forward-looking statements. These risks, uncertainties and factors include, but are not limited to: our inability to 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; lack of new government policies and regulations for the energy storage technologies; 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; failure to maintain the requirements for continued listing on NASDAQ; dilution as a result of significant issuances of our common shares and preferred shares; inability of U.S. investors to enforce U.S. 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 our forward-looking statements and are encouraged to review the section captioned "Risk Factors" in our regulatory filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission for a more complete discussion of factors that could affect our future performance. Furthermore, the forward-looking statements contained herein are made as of the date of this presentation, and we undertake no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this presentation, unless otherwise required by law. The forward-looking statements contained in this presentation are expressly qualified by this. 2
Q2 2016 Highlights • Strong bookings of $16.2M -- including first substantial order from China – Total backlog once again over $100M • Gross margins above 22% YTD, up nearly 800 basis points year-over-year • Currently in heavy inventory build up as we are making excellent progress on major programs • Working to finalize south Korean Hydrogen Power Plant with Kolon • Doubled facility capacity through new lease on an adjacent property in Canada to support growth 3
Our Company Technology 145 (Patents & Applications) Extensive Know-How Wide Experience Canada Geographies Canada, Belgium, Germany, US, SE Asia, Russia, China, Korea Financial LTM Revenue: $34.5M Snapshot Backlog: $103M Germany 1995 Start Corporate 2000 IPO HYGS | NASDAQ; HYG | TSX 12.5M basic |13.1M fully diluted Belgium 4
Our Strategy: Many applications on two standardized platforms Impact : We scale volume in one, to the advantage of others • Clean Continuous Power Generation in Korea • Extended Range Electric Rail Transport for Europe • Utility Scale Energy Storage for Germany HYDROGEN • Nuclear Waste Water Treatment in Japan • Clean Electric Public Transport in California & China Many applications on two standardized platforms (Growth) (Simplicity & Cost Reduction) 5
What are the Drivers – Where are they at? Scale Policy Alternatives Our platform scalability Climate Change Off oil, off diesel, zero leads the industry Carbon Reduction emission, zero carbon Off diesel is growing theme Our backlog has never Air pollution mitigation been stronger >$100M Electrification of Germany transport is growing Our pipeline has never Korea been stronger China Complementary and California differentiated offering We are waiting on 3 very Canada to batteries large opportunities Japan $10-100M Now turning into real Hydrogen offers larger money ($Billions) with scale, longer range, carbon tax, Cap & Trade better life cycle cost 6
How Do Our Products Work? Fuel Cell (Power Systems) Takes Hydrogen Electric Hydrogen and creates Fuel Cell Power electricity Electromechanical Engine Air Water Electrolyzer (Onsite Generation) Hydrogen Takes electric Water Electrolyzer power (often from Fuel Gas renewables) and creates Hydrogen Generation Electric fuel for bulk Oxygen Power energy storage 7
How Does Our Technology Lead? Platform 1 – New Engine Low Pressure Standard Dry-Dry Safe Fuel Cell Compact Reliable Power Module Simple Durable Low Number of Parts Platform 2 – New Fuel World’s Most Compact Single Safe Hydrogen Stack Unit Reliable Electrolyzer Low number of Connections Highly Scalable 8
The Size of the Prize Segment TAM Where we are now? Trigger/Accelerator • Specialized Applications Foothold Market $200 Million 1 Industrial • CAPEX reduction Market Leader Hydrogen p.a. • Renewable Energy Inputs Recurring Industrial Rev • Renewal Energy Production $80M Pipeline Prospects Power-to-Gas • EU Renewable Fuel Quality $14 Billion 2 Global Leader Energy Storage E.ON – 2 units operating Directive Electric • Battery Range Limitation 2-3X battery range Mobility • Fueling Infrastructure $2 Billion 3 Same fueling experience Range • China Growth Alstom Rail 50M Euro Extension Stationary Waste refinery hydrogen • Success of 1MW Pilot Power $200 Million 4 Continuous Power plant • Next step 5-50MW Generation Kolon Partner • Vehicle Rollout in Europe $400 Million 5 50 (6) Fueling Stations Built and North America Fuel • Hydrogen Bus Fleet Rollout 1 Visant Strategies inc Hydrogen Markets 2006 report along with total competitor sales from key competitors (Teledyne, NEL, Proton and excl China) 2 Commercialization of Energy Storage in Europe, McKinsey/FCH JU, 2015 – Global Extrapolation using ave prices for GW storage equivalents 3 2013 Global EV Outlook, IEA 2013, and from reports issued by US DOE, Navigant Consulting, EU Automotive Assoc. and the Green Car Congress 4 Calculated based on surplus H2 gas capacity at the three main refining sites in South Korea 5 Calculated based on publically stated figures from H2Mobility Germany, UK and France, citing 400 to 600 H2 fueling station deployments 6 Hydrogen fueling station databases for EU and NA LBST – H2stations.org 9
Cost Reduction is the Accelerator: We’ve Come a Long Way , and We’re Not Done Yet Done Next Electrolysis - 50% - 50% Fuel Cell - 90% - 50% Innovation Standardize Cost Appl. Exp. $/kW -90% Supply Chain Scaling Mass Production TODAY - 50% 10
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