~~Table~~UNITED STATES ~~of Contents~~

~~UNITED~~SECURITIES AND ~~STATES~~EXCHANGE COMMISSION

~~SECURITIES~~Washington, D.C. ~~AND~~20549 ~~EXCHANGE COMMISSION~~

~~Washington,~~FORM 10-Q ~~D.C. 20549~~

~~FORM~~x Quarterly report ~~10-Q~~pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~x Quarterly report pursuant to Section 13 or 15(d) of~~ For the quarterly ~~Securities~~period ~~Exchange~~ended ~~Act~~September of30, ~~1934~~2005,

~~For the quarterly period ended June 30, 2005,~~ or

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~¨ Transition report pursuant to Section 13 or 15(d) of~~ For the transition ~~Securities~~period ~~Exchange Act of 1934~~from to

~~For~~Commission File ~~the~~No. ~~transition~~001-15143 ~~period from to~~

~~Commission~~IMPCO Technologies, ~~File No~~Inc. ~~001-15143~~

~~IMPCO~~(Exact name ~~Technologies,~~of ~~Inc.~~registrant as specified in its charter)

(Exact name of registrant as specified in its charter)

Delaware	91-1039211
(State of Incorporation)	(IRS Employer I.D. No.)

Delaware		91-1039211
16804 Gridley Place, Cerritos, CA	90703
(State of Incorporation)		(IRS Employer I.D. No.)
(Address of principal executive offices)	(Zip Code)

16804 Gridley Place, Cerritos, CA		90703
(Address of principal executive offices)		(Zip Code)

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

~~Registrant’s~~Indicate ~~telephone~~ by ~~number,~~check ~~including~~mark ~~area~~whether ~~code:~~the registrant (~~562~~1) ~~860-6666~~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 (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 ¨

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

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

~~Yes x No ¨~~Number of shares outstanding of each of the issuer’s classes of common stock, as of November 18, 2005:

~~Number of~~ 28,902,791 shares ~~outstanding~~ of ~~each of the issuer’s classes of~~ common stock, as$.001 ofpar ~~August~~value 3,per ~~2005:~~share.

28IMPCO TECHNOLOGIES,~~620,446~~ ~~shares of common stock, $~~INC.~~001~~ ~~par value per share.~~

~~Table~~TABLE OF ofCONTENTS ~~Contents~~

IMPCO TECHNOLOGIES, INC.

Part I. Financial Information
	Item 1.	Financial Statements	3
		Condensed Consolidated Balance Sheets - December 31, 2004 (restated) and September 30, 2005 (unaudited)	3
		Condensed Consolidated Statements of Operations (unaudited) - Three and Nine Months Ended September 30, 2004 and 2005	5
		Condensed Consolidated Statements of Cash Flows (unaudited) - Nine Months Ended September 30, 2004 and 2005	6
		Notes to Condensed Consolidated Financial Statements (unaudited) - September 30, 2005	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
	Item 4.	Controls and Procedures	45
Part II. Other Information
	Item 2.	Changes in Securities and Use of Proceeds	46
	Item 4.	Submission of Matters to a Vote of Security Holders	46
	Item 5.	Other Information	46
	Item 6.	Exhibits	47
Signatures			48
Index to Exhibits			49

- ~~TABLE OF CONTENTS~~ 2 -

Part I. Financial Information
	Item 1.	Financial Statements	3
		Condensed consolidated balance sheets – December 31, 2004 and June 30, 2005 (unaudited)	3
		Condensed consolidated statements of operations (unaudited) – Three and six months ended June 30, 2004 and 2005	5
		Condensed consolidated statements of cash flows (unaudited) – Six months ended June 30, 2004 and 2005	6
		Notes to condensed consolidated financial statements (unaudited) – June 30, 2005	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	Item 4.	Controls and Procedures	36
Part II. Other Information
	Item 2.	Changes in Securities and Use of Proceeds	37
	Item 4.	Submission of Matters to a Vote of Security Holders	37
	Item 5.	Other Information	38
	Item 6.	Exhibits	38
Signatures			39
Index to Exhibits

PART I-FINANCIAL INFORMATION

~~-2-~~ITEM 1. FINANCIAL STATEMENTS

~~Table~~IMPCO TECHNOLOGIES, ofINC. ~~Contents~~

~~PART~~CONDENSED CONSOLIDATED ~~I–FINANCIAL~~BALANCE ~~INFORMATION~~ SHEETS

~~ITEM~~(In thousands 1.of ~~FINANCIAL~~dollars ~~STATEMENTS~~except share data)

IMPCO TECHNOLOGIES, INC.

	December 31,		September 30,
	2004		2005
	(Restated)		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,418	$	22,265
Accounts receivable less allowance for doubtful accounts
of $1,687 and $2,637		18,072		35,775
Inventories:
Raw materials and parts		8,624		24,565
Work-in-process		233		1,265
Finished goods		3,747		5,061
Total inventories		12,604		30,891
Deferred tax assets		182		901
Other current assets		1,956		3,635
Related party receivables (note 12)		2,746		3,730
Total current assets		43,978		97,197
Equipment and leasehold improvements:
Dies, molds and patterns		7,174		7,155
Machinery and equipment		8,039		12,660
Office furnishings and equipment		7,809		9,923
Automobiles and trucks		409		994
Leasehold improvements		3,474		3,485
		26,905		34,217
Less accumulated depreciation and amortization		19,702		23,111
Net equipment and leasehold improvements		7,203		11,106
Goodwill		7,973		29,018
Deferred tax assets, net		8,183		-
Intangible assets, net		-		25,372
Investment in affiliates		27,046		2,776
Business acquisition costs		788		-
Other assets		2,430		2,100
Non-current related party receivable (note 12)		851		3,748
Total Assets	$	98,452	$	171,317

~~CONDENSED~~See accompanying ~~CONSOLIDATED~~notes ~~BALANCE~~to ~~SHEETS~~condensed consolidated financial statements.

~~(In thousands of dollars except share data)~~ - 3 -

	December 31,2004		June 30,2005
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,418	$	16,359
Accounts receivable less allowance for doubtful accounts of $1,687 and $2,590		18,072		38,060
Inventories:
Raw materials and parts		8,624		26,388
Work-in-process		233		1,126
Finished goods		3,747		6,308
Total inventories		12,604		33,822
Deferred tax assets		182		760
Other current assets		1,956		2,253
Related party receivables (Note 12)		2,746		6,570
Total current assets		43,978		97,824
Equipment and leasehold improvements:
Dies, molds and patterns		7,174		7,177
Machinery and equipment		8,039		11,635
Office furnishings and equipment		7,809		9,176
Automobiles and trucks		409		602
Leasehold improvements		3,474		4,090
		26,905		32,680
Less accumulated depreciation and amortization		19,702		22,169
Net equipment and leasehold improvements		7,203		10,511
Net goodwill		8,856		46,892
Deferred tax assets, net		8,183		8,183
Investment in affiliates		27,668		2,778
Business acquisition costs		788		—
Other assets		2,430		3,264
Non-current related party receivable (Note 12)		851		3,464
Total Assets	$	99,957	$	172,916

IMPCO TECHNOLOGIES, INC.

~~See accompanying notes~~CONDENSED to CONSOLIDATED ~~condensed~~BALANCE ~~consolidated~~SHEETS ~~financial statements.~~

~~-3-~~(In thousands of dollars except share data)


	December 31,			September 30,
	2004			2005
	(Restated)			(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,914		$	22,888
Accrued payroll obligations		2,889			5,556
Other accrued expenses		5,624			13,706
Current revolving line of credit		7,680			5,940
Current maturities of other debt		140			3,087
Current portion of related long-term debt (note 12)		2,600			-
Deferred tax liability		-			1,446
Related party payables (note 12)		-			3,619
Total current liabilities		28,847			56,242

Term loans		-			8,538
Related party term loan (note 12)		19,400			-
Related party long-term liabilities (note 12)		-			195
Capital leases		151			191
Other liabilities		2,316			4,479
Deferred tax liabilities		-			9,042
Minority interest		2,907			2,960
Stockholders' equity:
Preferred stock, $.001 par value, authorized 500,000 shares;
none issued and outstanding for each period		-			-
Common stock, $.001 par value, authorized 100,000,000 shares
18,737,437 issued and outstanding at December 31, 2004 and
28,900,791 issued and outstanding at September 30, 2005		19			29
Additional paid-in capital		135,291			192,049
Shares held in treasury		(528	)		(617	)
Accumulated deficit		(90,872	)		(101,100	)
Accumulated other comprehensive income (loss)		921			(691	)
Total stockholders' equity		44,831			89,670
Total Liabilities and Stockholders' Equity	$	98,452		$	171,317

~~IMPCO~~See accompanying ~~TECHNOLOGIES,~~notes ~~INC.~~to condensed consolidated financial statements.

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~ - 4 -

~~(In~~IMPCO TECHNOLOGIES, ~~thousands~~INC. ~~of dollars except share data)~~

	December 31,2004			June 30,2005
				(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,914		$	26,000
Accrued payroll obligations		2,889			3,866
Other accrued expenses		5,624			12,854
Current revolving line of credit		7,680			7,814
Current maturities of term loan		140			2,978
Current portion of related party term loan		2,600			—
Related party payables (Note 12)		—			3,196
Total current liabilities		28,847			56,708
Term loans		—			9,172
Related party term loan (Note 12)		19,400			—
Capital leases		151			173
Other liabilities		2,316			4,601
Minority interest		2,782			3,301
Stockholders’ equity:
Preferred stock, $.001 par value, authorized 500,000 shares; none issued and outstanding for each period		—			—
Common stock, $.001 par value, authorized 100,000,000 shares 18,737,437 issued and outstanding at December 31, 2004 and 28,593,841 issued and outstanding at June 30, 2005		19			29
Additional paid-in capital		135,291			190,898
Shares held in treasury		(528	)		(615	)
Accumulated deficit		(89,242	)		(90,251	)
Accumulated other comprehensive income (loss)		921			(1,100	)
Total stockholders’ equity		46,461			98,961
Total Liabilities and Stockholders’ Equity	$	99,957		$	172,916

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~See accompanying notes~~(Unaudited) ~~to condensed consolidated financial statements.~~

~~-4-~~(In thousands except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2005			2004			2005

Revenue	$	30,064		$	49,073		$	91,146		$	122,683
Costs and expenses:
Cost of revenue		21,933			34,749			66,874			88,463
Research and development expense		1,189			2,488			3,190			6,503
Selling, general and administrative expense		4,552			9,348			13,282			24,728
Amortization of intangible assets		-			1,905			-			1,905
Acquired in-process technology		-			129			-			204
Total costs and expenses		27,674			48,619			83,346			121,803
Operating income		2,390			454			7,800			880
Other income (expense)		10			(22	)		3			957
Interest expense, net		(1,504	)		(126	)		(4,163	)		(506	)
Income before income taxes and equity share
in income of unconsolidated affiliates		896			306			3,640			1,331
Equity share in income of unconsolidated affiliates		435			138			718			990
Income tax expense		(483	)		(9,282	)		(1,499	)		(11,649	)
Income (loss) before minority interests and cumulative effect of a change in accounting principle		848			(8,838	)		2,859			(9,328	)
Minority interests in income of consolidated subsidiaries		343			264			853			783
Income (loss) before cumulative effect of a change in accounting principle		505			(9,102	)		2,006			(10,111	)
Cumulative effect of a change in accounting principle, net of taxes		-			(117	)		-			(117	)
Net income (loss)	$	505		$	(9,219	)	$	2,006		$	(10,228	)
Net income (loss) per share before cumulative effect of a change in accounting principle:
Basic net income (loss)	$	0.03		$	(0.32	)	$	0.11		$	(0.38	)
Diluted net income (loss)	$	0.03		$	(0.32	)	$	0.10		$	(0.38	)
Per share effect of the cumulative effect of a change in accounting principle:
Basic net income (loss)	$	-		$	-		$	-		$	(0.01	)
Diluted net income (loss)	$	-		$	-		$	-		$	(0.01	)
Net income (loss) per share :
Basic net income (loss)	$	0.03		$	(0.32	)	$	0.11		$	(0.39	)
Diluted net income (loss)	$	0.03		$	(0.32	)	$	0.10		$	(0.39	)
Number of shares used in per share calculation:
Basic		18,617			28,679			18,595			26,335
Diluted		19,478			28,679			19,704			26,335

See ~~IMPCO~~ accompanying ~~TECHNOLOGIES,~~notes ~~INC.~~to condensed consolidated financial statements.

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~ - 5 -

~~(Unaudited)~~IMPCO TECHNOLOGIES, INC.

~~(In~~CONDENSED CONSOLIDATED ~~thousands~~STATEMENTS ~~except~~OF ~~per share~~CASH ~~data)~~FLOWS

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2005			2004			2005
Revenue	$	32,478		$	48,605		$	61,081		$	73,610
Costs and expenses:
Cost of revenue		23,881			35,507			44,941			53,716
Research and development expense		1,059			2,674			2,001			4,015
Selling, general and administrative expense		4,568			7,814			8,738			15,378
Acquired in-process technology		—			—			—			75
Total costs and expenses		29,508			45,995			55,680			73,184
Operating income		2,970			2,610			5,401			426
Other income		—			1,077			—			979
Interest expense, net		(1,504	)		(123	)		(2,659	)		(380	)
Income before income taxes and equity share in income of unconsolidated affiliates		1,466			3,564			2,742			1,025
Equity share in income (loss) of unconsolidated affiliates		323			(58	)		283			852
Income tax expense		(581	)		(2,040	)		(1,015	)		(2,367	)
Income (loss) before minority interests		1,208			1,466			2,010			(490	)
Minority interest in income of consolidated subsidiaries		224			294			510			519
Net income (loss)	$	984		$	1,172		$	1,500		$	(1,009	)
Net income (loss) per share:
Basic net income (loss)	$	0.05		$	0.04		$	0.08		$	(0.04	)
Diluted net income (loss)	$	0.05		$	0.04		$	0.08		$	(0.04	)
Number of shares used in per share calculation:
Basic		18,592			28,586			18,584			25,164
Diluted		19,620			28,847			19,822			25,164

(Unaudited)

~~See accompanying notes~~(In to thousands ~~condensed~~of ~~consolidated~~dollars) ~~financial statements~~

-5-

	Nine Months Ended
	September 30,
	2004			2005

Cash flows from operating activities:
Net income (loss) as reported	$	2,006		$	(10,228	)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities, net of BRC acquisition:
Amortization of intangibles arising from acquisition		-			1,905
Depreciation and other amortization		2,961			4,161
Inventory reserves		-			890
Interest paid-in-kind		625			-
Increase in allowance for doubtful accounts		-			106
Valuation allowance for deferred taxes		-			8,654
Minority interests in income (loss) of consolidated affiliates		(184	)		(729	)
Equity share in income of unconsolidated affiliate		(908	)		952
Unrealized gain on foreign exchange transactions		-			(1,035	)
Stock option expense		-			1,776
In-process R&D		-			204
Decrease in deferred income taxes		572			324
(Increase) decrease in accounts receivable		(13,322	)		1,536
Decrease (increase) in inventories		1,066			(26	)
Increase (decrease) in accounts payable		1,159			(6,456	)
Increase in accrued expenses		302			3,481
Increase in other current assets		-			(801	)
Decrease in other liabilities		(154	)		(1,185	)
(Increase) decrease in other long-term assets		(592	)		3,045
Other, net		8			44
Net cash (used in) provided by operating activities		(6,461	)		6,618

~~Table~~(continued on ofthe ~~Contents~~following page)

See ~~IMPCO~~ accompanying ~~TECHNOLOGIES,~~notes ~~INC~~to condensed consolidated financial statements.

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~ - 6 -

~~(Unaudited)~~IMPCO TECHNOLOGIES, INC.

~~(In~~CONDENSED CONSOLIDATED ~~thousands~~STATEMENTS ~~of dollars)~~OF CASH FLOWS (CONTINUED)

	Six Months EndedJune 30,
	2004			2005
Cash flows from operating activities:
Net cash used in operating activities	$	(7,533	)	$	(978	)
Cash flows from investing activities:
Purchase of equipment and leasehold improvements		(348	)		(1,826	)
Business acquisition cost-BRC, net of cash acquired		(66	)		(9,164	)
Proceeds from sale of equipment		1			—
Net cash used in investing activities		(413	)		(10,990	)
Cash flows from financing activities:
Increase (decrease) in revolving line of credit		3,417			(1,617	)
Payments on term loans		(885	)		(2,373	)
Proceeds from term loans		996			—
Payments of capital lease obligations		(33	)		—
Acquisition of common shares held in trust		(143	)		(86	)
Decrease in restricted cash		724			—
Proceeds from issuance of common stock		437			24,580
Net cash provided by financing activities		4,513			20,504
Effect of exchange rate changes on cash		(709	)		(595	)
Net (decrease) increase in cash and cash equivalents		(4,142	)		7,941
Cash and cash equivalents at beginning of period		9,524			8,418
Cash and cash equivalents at end of period	$	5,382		$	16,359
Supplemental disclosure of cash flow information:
Non-cash financing activities:
Issuance of 5,098,284 shares of common stock in connection with the acquisition of the remaining 50% of BRC at a price of $5.74 per share	$	—		$	29,264

(Unaudited)

~~See accompanying notes~~(In to thousands ~~condensed~~of ~~consolidated financial statements.~~ dollars)

-6-

	Nine Months Ended
	September 30,
	2004			2005

Cash flows from investing activities:
Purchase of equipment and leasehold improvements		(1,099	)		(2,464	)
Business acquisition cost, net of cash acquired		(215	)		(9,462	)
Purchase of intangible assets		-			(393	)
Proceeds from sale of equipment		1			-
Net cash used in investing activities		(1,313	)		(12,319	)

Cash flows from financing activities:
Increase (decrease) in revolving line of credit		4,705			(3,866	)
Payments on term loans		(1,169	)		(1,396	)
Proceeds from term loans		1,194			-
Payments of capital lease obligation		33			-
Acquire common shares held in trust		(143	)		(89	)
Decrease in restricted cash		724			-
Proceeds from issuance of common stock		201			25,743
Net cash provided by financing activities		5,545			20,392

Exchange rate difference on cash flows		(514	)		(844	)
Net (decrease) increase in cash and cash equivalents		(2,743	)		13,847
Cash and cash equivalents at beginning of period		9,524			8,418
Cash and cash equivalents at end of period	$	6,781		$	22,265


Supplemental disclosure of cash flow information:
Non-cash financing activities:
Issuance of 5,098,284 shares of common stock in connection with the acquisition
of BRC at a price of $5.74 per share	$	-		$	29,264

Acquisition of equipment under capital lease	$	83		$	-

See note 8, "Business Acquisition"

~~Table~~See accompanying ofnotes ~~Contents~~to condensed consolidated financial statements.

- ~~IMPCO TECHNOLOGIES, INC.~~ 7 -

IMPCO TECHNOLOGIES, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~June~~ September 30, 2005

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 year ended December 31, 2004. The consolidated financial statements of~~ IMPCO Technologies, Inc. ( “IMPCO” or the “Company”) as of ~~June~~September 30, 2005, include the accounts of the Company and its wholly-owned subsidiaries B.R.C. Societá a Responsabilitá Limitata (“BRC”), IMPCO Technologies, Pty. Limited (“IMPCO Australia”), IMPCO Tech Japan K.K. (“IMPCO Japan”) and Grupo I.M.P.C.O. Mexicano, S. de R.L. de C.V. (“IMPCO Mexicano”), its 51%-owned subsidiary IMPCO-BERU Technologies B.V. (“IMPCO BV”), and its 50% share in joint ventures Minda IMPCO Limited (“Minda”) and IMPCO-BRC Mexicano (“IBMexicano”). During the first quarter of 2005, the Company used the equity method to recognize its share in the net earnings or losses of BRC, Minda and IBMexicano in the consolidated statement of operations. On March 31, 2005, the Company completed the acquisition of the remaining 50% of BRC, and, accordingly, the Company consolidated the balance sheet of BRC as of March 31, 2005 and the statement of operations ~~for~~beginning with the quarter ended June 30, 2005. The following table details the Company’s ownership interests and methods of consolidation for its various international ~~affiliates~~subsidiaries and affiliates beginning in the second quarter of ~~fiscal~~ 2005:

Entity	Location	~~Location~~Ownership Interest	Method of Consolidation	~~Ownership Interest~~	~~Method of Consolidation~~
BRC	Italy	~~Italy~~100%	Fully Consolidated	~~100%~~	~~Fully Consolidated~~
IMPCO Australia	Australia	~~Australia~~100%	Fully Consolidated	~~100%~~	~~Fully Consolidated~~
IMPCO Japan	Japan	~~Japan~~100%	Fully Consolidated	~~100%~~	~~Fully Consolidated~~
IMPCO Mexicano	Mexico	~~Mexico~~100%	Fully Consolidated	~~100%~~	~~Fully Consolidated~~
IMPCO BV	Netherlands	~~Netherlands~~51%	Fully Consolidated	~~51%~~	~~Fully Consolidated~~
Minda	India	~~India~~50%	Equity Method	~~50%~~	~~Equity Method~~
IBMexicano	Mexico	~~Mexico~~50%	Equity Method	~~50%~~	~~Equity Method~~

The accompanying ~~results~~condensed ~~of operations~~consolidated ~~for~~financial ~~the~~statements ~~three~~are unaudited and reflect ~~six~~all ~~months~~adjustments ~~ended~~(consisting ~~June~~only ~~30,~~of ~~2005~~normal recurring adjustments) which are, ~~not~~in ~~necessarily~~the ~~indicative~~opinion of management, necessary for a fair presentation of the financial position and operating results ~~that~~for ~~may~~the interim periods. The condensed consolidated financial statements should be ~~expected~~read ~~for~~in conjunction with the consolidated ~~twelve~~financial ~~months~~statements ~~ended~~and ~~December~~notes 31thereto, ~~2005,~~together orwith ~~for~~management’s discussion ~~any~~and ~~future~~analysis ~~period.~~of ~~Certain~~financial ~~prior~~condition ~~period~~and ~~amounts~~the ~~have~~results ~~been~~of operations, ~~reclassified~~ contained toin ~~conform~~the toCompany’s annual report on Form 10-K for the ~~current~~year ~~period~~ended December ~~presentation~~31, 2004, as amended.

2The results of operations for the three and nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the twelve months ended December 31, 2005, or for any future period. ~~RECENT~~Certain ~~ACCOUNTING~~prior period amounts ~~STANDARDS~~have been reclassified to conform to the current period presentation.

~~The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (“SFAS”) No. 123R, Share-Based Payment,~~Prior ~~which~~ Period sets accounting requirements for “share-based” compensation to employees, including employee-stock-purchase-plans and provides guidance on accounting for awards to non-employees. This statement will require the Company to recognize in its statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees, but expresses no preference for the type of valuation model. For public entities, this statement is effective for the first interim period beginning after June 15, 2005. However, the Securities and Exchange Commission (“SEC”) has deferred the implementation date to the beginning of the next fiscal year, and, as a result, the Company will adopt this statement in the first quarter of 2006. The Company is evaluating the impact of this pronouncement on its financial position, net income or loss, and earnings or loss per share. Restatement

~~SFAS~~In November 2005, IMPCO filed Amendment No. ~~151,~~2 ~~Inventory~~to ~~Costs,~~its ~~eliminates~~annual report on Form 10-K for the ~~“so~~year ~~abnormal”~~ended ~~criterion~~December in31, ~~Accounting~~2004 ~~Research~~to ~~Bulletin (“ARB”)~~amend 43and ~~“Inventory~~restate ~~Pricing”.~~the ~~This~~Company’s ~~statement~~audited financial nostatements ~~longer~~for ~~permits~~the ayear ~~company~~ended toDecember ~~capitalize~~31, ~~inventory~~2004, ~~costs~~to reflect certain amounts on its ~~balance~~financial ~~sheets~~statements ~~when~~that it identified as errors during the third ~~production~~quarter ~~defect~~of ~~rate~~2005. ~~varies~~The ~~significantly~~Company ~~from~~determined ~~the~~that goodwill, ~~expected~~investment in affiliates, ~~defect~~minority ~~rate.~~interest ~~The~~liability ~~statement~~and accumulated deficit as of ~~reduces~~ December 31, ~~the~~2004, ~~differences~~were ~~between~~incorrectly Ustated.S. The Company amended and ~~international~~restated them ~~accounting~~on the ~~standards.~~consolidated ~~This~~balance ~~statement~~sheet isas ~~effective~~of ~~for~~December ~~inventory~~31, ~~costs~~2004. ~~incurred~~Consequently, on ~~during~~the consolidated ~~annual~~balance ~~periods~~sheet ~~beginning~~as ~~after~~of ~~June~~December 1531, ~~2005.~~2004, ~~The~~total ~~Company~~assets, ~~intends~~total stockholders’ toequity ~~adopt~~and ~~this~~total ~~statement~~liabilities inand stockholders’ equity have been restated. In addition, the ~~first~~Company determined that impairment ~~quarter~~ loss of ~~fiscal~~goodwill ~~2006.~~and ~~The~~minority ~~adoption~~interest in income of ~~SFAS~~consolidated ~~No.~~subsidiaries for ~~151~~the isthree ~~not~~and ~~expected~~twelve tomonths ~~have~~ended aDecember ~~significant~~31, ~~impact~~2004, onwere ~~the~~incorrectly stated. The Company’s amended ~~results~~and ofrestated ~~operations~~them. orConsequently, ~~financial~~the accumulated ~~position.~~deficit at December 31, 2004 has been restated.

InThe following ~~December~~tables ~~2004,~~set forth the ~~FASB~~amended ~~issued~~and ~~FASB~~restated ~~Staff~~amounts ~~Position~~with ~~No. FAS109-1 (“FSP FAS 109-1”), Application of FASB~~respect ~~Statement~~ to total ~~No.~~assets ~~109,~~and ~~Accounting~~total ~~for~~liabilities ~~Income~~and ~~Taxes,~~stockholders’ ~~for~~equity ~~the~~as ~~Tax~~part ~~Deduction~~of ~~on Qualified Production Activities Provided by~~ the consolidated ~~American~~balance ~~Jobs~~sheet ~~Creation~~at ~~Act~~December of31, 2004. ~~FSP~~Those ~~FAS~~captions ~~109-1 clarifies that the deduction~~ on ~~qualified production activities will be~~the ~~treated~~ consolidated asbalance asheet, ~~“special~~with ~~deduction”~~the asexception ~~described~~of instockholders’ ~~SFAS~~equity ~~No. 109~~captions, that ~~Accounting~~were ~~for~~not ~~Income~~affected ~~Taxes.~~by ~~As such,~~ the ~~special~~restatement ~~deduction~~are ~~will~~not ~~have~~presented. noThe ~~effect~~complete amended ~~on deferred tax assets~~ and ~~liabilities~~restated ~~existing~~consolidated atbalance ~~the~~sheet ~~date~~is ofprovided ~~enactment.~~within ~~The impact of~~ the accompanying ~~deduction~~condensed ~~will~~consolidated befinancial ~~reported in the period in which~~ statements.

~~-7-~~ Consolidated Balance Sheet

~~Table~~Restated Amounts Due to Correction of ~~Contents~~Error

As ~~the deduction is claimed. The adoption~~ of ~~FSP~~December ~~FAS~~31, ~~109-1 is not expected to have a significant impact on the Company’s financial position or results of operations.~~ 2004

In December 2004, the FASB issued FASB Staff Position FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision Within the American Jobs Creation Act of 2004 (“FSP FAS 109-2”) to allow additional time beyond the financial reporting period of enactment to evaluate the effect of this act on the Company’s plan for reinvestment or repatriation of foreign earnings for purposes of calculating the income tax provision. The adoption of FSP FAS 109-2 is not expected to have a significant impact on the Company’s financial position or results of operations.

	As previously Reported *		Error Correction			Ref		As Restated
Assets:
Goodwill		8,856		(883	)		-a		7,973
Investment in affiliates		27,668		(622	)		-a		27,046
Total Assets	$	99,957	$	(1,505	)			$	98,452

In December 2004, the FASB issued the SFAS No. 153, Exchange of Nonmonetary Assets, An Amendment of APB Opinion No. 29. SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets. SFAS No. 153* eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges As ~~that~~ reported doon ~~not~~Form ~~have~~10-K commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 shall be effective for ~~nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after~~ the ~~date~~year ~~SFAS~~ended ~~No.~~December ~~153 is issued. The provisions of SFAS No. 153 shall be applied prospectively. The Company will adopt the provisions of SFAS No. 153 in its fiscal period beginning July 1~~31, ~~2005~~2004. ~~The adoption of SFAS No. 153 is not expected to have a significant impact on the Company’s financial position or results of operations.~~

~~3. DERIVATIVE FINANCIAL INSTRUMENTS~~- 8 -

~~The Company uses derivative financial instruments that include foreign exchange contracts to manage certain foreign currency risks. The Company does not~~Consolidated ~~use~~ Balance foreign exchange contracts for trading purposes. On January 5, 2005, BRC entered into a forward foreign exchange agreement covering a three year period for the purpose of hedging the foreign exchange risk between the euro and the U.S. dollar in connection with the quarterly payments that IMPCO makes to BRC in accordance with the MTM loan agreement (see Note 9 (a)). This hedging agreement was not designed to hedge the unrealized foreign exchange gains and losses due to foreign currency movements that occur from time to time that could impact the Company’s consolidated financial results either favorably or unfavorably. BRC concluded that this agreement did not meet the requirements for hedge accounting in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Accordingly, the Company recognized a loss of approximately $0.7 million for the three and six months ended June 30, 2005, respectively. These amounts are classified on the condensed consolidated statements of operations for the three and six months ended June 30, 2005 as part of other income. Sheet

~~In connection with the MTM loan which is to be settled in U.S. dollars, BRC, whose functional currency is the euro, has recognized in its statements of~~Restated ~~operations~~ Amounts ~~approximately~~Due ~~$1.3 million and approximately $2.5 million in unrealized foreign exchange gains due~~ to ~~the~~Correction movements between the euro and the U.S. dollar during the three and six months ended June 30, 2005, respectively. The Company’s share in income before tax due to the unrealized gains on foreign exchange was approximately $1.3 million and $1.9 million for the three and six months ended June 30, 2005, respectively. During the first quarter ended March 31, 2005, approximately $0.6 million was classified as part of ~~the Company’s share in the earnings of the unconsolidated results of BRC. During the second quarter ended June 30, 2005, approximately $1.3 million was recognized as part of other income.~~ Error

~~-8-~~As of December 31, 2004

~~Table~~ (Thousands of ~~Contents~~Dollars Except Share Data)

4. EARNINGS (LOSS) PER SHARE

	As previously Reported *			Error Correction			Ref		As Restated
Liabilities and Stockholders' Equity
Minority interest		2,782			125			-b		2,907
Stockholders' equity:
Preferred stock, $.001 par value, authorized 500,000 shares;
none issued and outstanding at December 31, 2004		-								-
Common stock, $.001 par value, authorized 100,000,000 shares
18,735,437 issued and outstanding at December 31, 2004		19								19
Additional paid-in capital		135,291								135,291
Shares held in treasury		(528	)							(528	)
Accumulated deficit		(89,242	)		(1,630	)		-c		(90,872	)
Accumulated other comprehensive income (loss)		921								921
Total stockholders' equity		46,461			(1,630	)				44,831
Total Liabilities and Stockholders' Equity	$	99,957		$	(1,505	)			$	98,452

~~The~~* As reported ~~following~~on ~~table~~Form ~~sets~~10-K ~~forth~~for the ~~computation~~year ofended ~~basic~~December ~~and diluted earnings (loss) per share:~~ 31, 2004.

	Three Months EndedJune 30,				Six Months EndedJune 30,
	2004		2005		2004		2005
Numerator:
Net income (loss)	$	984	$	1,172	$	1,500	$	(1,009	)
Denominator:
Denominator for basic earnings per share - weighted average number of shares		18,592		28,586		18,584		25,164
Effect of dilutive securities:
Employee stock options		705		150		859		—
Warrants		282		111		339		—
Shares held in trust		41		—		40		—
Dilutive potential common shares		19,620		28,847		19,822		25,164
Net income (loss) per share:
Basic net income (loss)	$	0.05	$	0.04	$	0.08	$	(0.04	)
Diluted net income (loss)	$	0.05	$	0.04	$	0.08	$	(0.04	)

Notes to the Consolidated Restated Balance Sheet for the Year Ended December 31, 2004.

~~For the three and six~~a- ~~months~~ The amounts ~~ended~~reported ~~June~~for ~~30,~~goodwill ~~2004, options to purchase 1,023,934~~ and ~~568,557~~investment ~~shares~~in ofaffiliates ~~common stock, respectively,~~ were ~~excluded~~oversated on ~~from~~ the previously ~~computation~~reported ofconsolidated ~~diluted~~balance ~~net~~sheet ~~income~~at ~~per~~December ~~share~~31, as2004, by approximately ~~the~~$0.9 ~~effect~~million ~~would~~and ~~be anti-dilutive~~$0.6 ~~For~~million, ~~the~~respectively. ~~three~~During ~~months ended June 30,~~the ~~2005,~~ fourth quarter ~~options~~of ~~to purchase 2~~2004,~~684,423~~ ~~shares~~the ofCompany ~~common~~performed ~~stock~~a ~~were~~goodwill ~~excluded~~impairment ~~from~~analysis of ~~the~~its subsidiaries ~~computation~~IMPCO ofMexicano ~~diluted~~and ~~net~~IMPCO ~~income~~Japan, ~~per~~and ~~share,~~determined asthat the goodwill allocated ~~effect~~to ~~would~~these besubsidiaries ~~anti-dilutive~~was impaired. ~~For~~The ~~the~~Company ~~six~~failed ~~months~~to ~~ended~~properly determine ~~June~~and ~~30,~~record ~~2005,~~the ~~options~~correct toamounts ~~purchase~~as ~~3,395,856~~impairment ~~shares~~loss of goodwill ~~common~~ for these ~~stock~~operations; ~~and~~consequently ~~warrants~~, tothe ~~acquire~~amounts ~~775,000~~reported ~~shares~~for ofgoodwill ~~common~~and investment ~~stock~~in affiliates were ~~excluded~~overstated ~~from~~on the ~~computation since the~~ Company's ~~reported~~audited ~~net~~financial statements ~~loss~~as ~~and~~of ~~the~~December ~~effect~~31, ~~would be anti-dilutive~~2004.

~~SFAS~~b- The ~~No.~~amount ~~123,~~reported ~~Accounting~~ for ~~Stock~~minority ~~Based~~interest ~~Compensation,~~in asthe previously ~~amended~~reported byconsolidate ~~SFAS~~balance ~~No.~~sheet ~~148,~~at ~~Accounting~~December ~~for~~31, ~~Stock~~2004, was ~~Based~~ understated ~~Compensation~~by –approximately ~~Transition~~$0.1 ~~and~~million ~~Disclosure,~~due ~~requires~~the ~~pro~~the ~~forma~~company's ~~information~~failure to recognize ~~regarding~~in ~~net~~the ~~income~~Company's ~~and~~consolidated ~~net~~statement ~~income~~of ~~per~~operations, ~~share~~as tothe majority interest beholder, ~~disclosed~~losses ~~for~~of ~~new~~IMPCO ~~options~~Mexico ~~granted~~attributable ~~after~~to ~~fiscal~~the ~~year~~10% ~~1996.~~minority interest ~~The~~holder ~~fair value~~ of ~~these~~IMPCO ~~options~~Mexicano ~~was determined~~that atexceeds the ~~date~~minority interest holder's share of ~~grant using~~ the ~~Black-Scholes~~equity ~~option-pricing~~capital ~~model~~of ~~with~~ the ~~following weighted-average assumptions:~~ subsidiary.

	Three Months EndedJune 30,				Six Months EndedJune 30,
	2004		2005		2004		2005
Expected dividend yield	—		—		—		—
Expected volatility	83.3	%	84.2	%	83.3	%	84.2	%
Risk free interest rate	4.0	%	3.8	%	4.0	%	3.8	%
Expected life of the option (years)	6.0		6.8		6.0		6.8

c- Accumulated deficit in the previously reported consolidated balance sheet at December 31, 2004, was understated by approximately $1.6 million. Accordingly, the restated accumulated deficit increased by approximately $1.6 million.

~~-9-~~2. RECENT ACCOUNTING STANDARDS

~~Table~~The Financial Accounting Standards Board (“FASB”) issued Statement of ~~Contents~~Financial Accounting Standard (“SFAS”) No. 123R, Share-Based Payment, which sets accounting requirements for “share-based” compensation to employees, including employee-stock-purchase-plans and provides guidance on accounting for awards to non-employees. This statement will require the Company to recognize in its statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees, but expresses no preference for the type of valuation model. For public entities, this statement was effective for the first interim period beginning after June 15, 2005. However, the Securities and Exchange Commission (“SEC”) has deferred the implementation date to the beginning of the fiscal year beginning after June 15, 2005, and, as a result, the Company will adopt this statement in the first quarter of 2006. The Company is evaluating the impact of this pronouncement on its financial position, net income or loss, and earnings or loss per share.

~~The~~SFAS No. 151, ~~estimated~~Inventory ~~fair~~Costs, ~~value~~eliminates of the ~~options~~“so isabnormal” ~~amortized~~criterion toin ~~expense~~Accounting Research ~~over~~Bulletin ~~the~~(“ARB”) ~~options’~~43 ~~vesting~~“Inventory ~~period~~Pricing”. ~~for~~This statement no longer ~~pro~~ permits ~~forma~~a ~~disclosures.~~company ~~The~~to ~~per~~capitalize ~~share~~inventory ~~“pro~~costs ~~forma”~~on ~~effects~~its ofbalance ~~SFAS~~sheets ~~No.~~when the production ~~123,~~defect asrate ~~amended~~varies bysignificantly ~~SFAS~~from ~~148,~~the ~~are~~expected ~~not~~defect ~~indicative~~rate. The statement ofreduces the ~~effects~~differences onbetween ~~reported~~U.S. ~~net~~and ~~income/loss~~international accounting standards. This statement is effective for ~~future~~inventory ~~years~~costs incurred during annual periods beginning after June 15, 2005. The Company’s ~~“reported”~~intends ~~and~~to ~~“pro~~adopt ~~forma”~~ this statement ~~information~~in ~~for~~ the ~~three~~first ~~and~~quarter ~~six~~of ~~months~~2006. ~~ended~~The ~~June~~adoption ~~30,~~of ~~2004~~SFAS ~~and~~No. ~~June~~151 ~~30,~~is not expected ~~2005~~to ~~are:~~have a significant impact on the Company’s results of operations or financial position.

	Three Months EndedJune 30,						Six Months EndedJune 30,
	2004			2005			2004			2005
Income (loss) as reported	$	984		$	1,172		$	1,500		$	(1,009	)
Add: compensation expense included in reported income and (loss) (a)		—			16			—			1,775
Deduct: total stock-based employee compensation expense determined under the fair value based method for all awards, net of related taxes		(425	)		(1,339	)		(1,014	)		(1,796	)
Proforma income (loss)	$	559		$	(151	)	$	486		$	(1,030	)
Basic earnings (loss) per share:
As reported	$	0.05		$	0.04		$	0.08		$	(0.04	)
Proforma	$	0.03		$	(0.01	)	$	0.03		$	(0.04	)
Diluted earnings (loss) per share:
As reported	$	0.05		$	0.04		$	0.08		$	(0.04	)
Proforma	$	0.03		$	(0.01	)	$	0.02		$	(0.04	)

- 9 -

~~(a)~~In December ~~The~~2004, ~~Company~~the ~~recognized~~FASB ~~approximately~~issued $FASB Staff Position No. FAS109-1 (“FSP FAS 109-1”), Application of FASB Statement No.8 ~~million~~109, ~~and~~Accounting ~~$16~~for Income Taxes,~~000~~ infor the ~~first~~Tax ~~quarter~~Deduction on Qualified ~~and~~Production ~~second~~Activities ~~quarters~~Provided by the American Jobs Creation Act of 2004. FSP ~~2005~~FAS 109-1 clarifies that the deduction on qualified production activities will be treated as a “special deduction” as described in SFAS No. 109, ~~respectively~~Accounting for Income Taxes. As such, inthe ~~connection~~special ~~with~~deduction ~~new~~will ~~measurement~~have ~~dates~~no ~~under~~effect on deferred tax assets and liabilities existing at the ~~intrinsic~~date ~~value~~of ~~method~~enactment. The impact of the deduction will be reported in ~~accordance~~the ~~with~~period ~~Opinion~~in ~~25,~~which ~~Accounting~~the ~~for~~deduction ~~Stock~~is ~~Issued~~claimed. toThe ~~Employees~~FSP ~~(see~~FAS 109-1 is ~~Note~~effective ~~10)~~upon issuance and the Company adopted it upon issuance. The adoption of FSP FAS 109-1 did not have a significant impact on the Company’s financial position or results of operations.

5In December 2004, the FASB issued FASB Staff Position FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision Within the American Jobs Creation Act of 2004 (“FSP FAS 109-2”) to allow additional time beyond the financial reporting period of enactment to evaluate the effect of this act on the Company’s plan for reinvestment or repatriation of foreign earnings for purposes of calculating the income tax provision. ~~COMPREHENSIVE~~The ~~INCOME~~FSP FAS 109-2 is effective upon issuance and the Company adopted it upon issuance. The adoption of FSP FAS 109-2 did not have a significant impact on the Company’s financial position or results of operations.

~~The~~In December ~~components~~2004, the FASB issued SFAS No. 153, Exchange of ~~comprehensive~~Nonmonetary ~~income~~Assets, ~~for~~An Amendment of APB Opinion No. 29. SFAS No. 153 addresses the ~~three~~measurement ~~and~~of ~~six~~exchanges ~~months~~of ~~ended~~nonmonetary ~~June~~assets. 30SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for ~~2004~~Nonmonetary Transactions, and replaces ~~2005~~it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as ~~follows:~~a result of the exchange. The Company adopted the provisions of SFAS No. 153 beginning July 1, 2005. The adoption of SFAS No. 153 did not have a significant impact on the Company’s financial position or results of operations.

	Three Months EndedJune 30,						Six Months EndedJune 30,
	2004			2005			2004			2005
Net income (loss)	$	984		$	1,172		$	1,500		$	(1,009	)
Foreign currency translation adjustment		(1,109	)		(1,616	)		(985	)		(2,021	)
Comprehensive (loss) income	$	(125	)	$	(444	)	$	515		$	(3,030	)

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, A Replacement of APB Opinion No. 20 and FASB Statement No. 3. This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 requires that most voluntary changes in accounting principle be recognized by retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This Statement carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This Statement also carries forward the guidance in Opinion 20 requiring justification of a change in accounting principle on the basis of preferability. SFAS No. 154 is effective for fiscal year beginning after December 15, 2005. The Company will adopt SFAS No. 154 beginning January 1, 2006. The adoption of SFAS No. 154 is not expected to have a significant impact on the Company’s financial position or results of operations.

~~-10-~~3. DERIVATIVE FINANCIAL INSTRUMENTS

~~Table~~The Company uses derivative financial instruments that include foreign exchange contracts to manage certain foreign currency risks. The Company does not use foreign exchange contracts for trading purposes. On January 5, 2005, BRC entered into a forward foreign exchange agreement covering a three year period for the purpose of ~~Contents~~hedging the foreign exchange risk between the euro and the U.S. dollar in connection with the quarterly payments that IMPCO makes to BRC in accordance with the MTM Loan (see note 9 (a)). This hedging agreement was not designed to hedge the unrealized foreign exchange gains and losses due to foreign currency movements that occur from time to time that could impact the Company’s consolidated financial results either favorably or unfavorably. The Company concluded that this agreement did not meet the requirements for hedge accounting in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Accordingly, the Company recognized losses of approximately $0.1 million and $0.7 million for the three and nine months ended September 30, 2005, respectively. These amounts are classified on the condensed consolidated statements of operations for the three and nine months ended September 30, 2005 as part of other income (expense).

In connection with the MTM Loan which is to be settled in U.S. dollars, BRC, whose functional currency is the euro, has recognized in its statements of operations approximately $23,000 and $2.6 million in unrealized foreign exchange gains due to the movements between the euro and the U.S. ~~BUSINESS~~dollar ~~SEGMENT~~during ~~INFORMATION~~the three and nine months ended September 30, 2005, respectively. The Company’s share in income before tax due to the unrealized gains on foreign exchange was approximately $23,000 and $2.0 million in foreign exchange gains for the three and nine months ended September 30, 2005, respectively. During the first quarter ended March 31, 2005, approximately $0.6 million was classified as part of the Company’s share in the earnings of the unconsolidated results of BRC.

~~Prior to the second quarter of 2005 and the completion of the acquisition of BRC, the Company classified its businesses into two operating segments:~~- United States Operations (“U.S. Operations”) and IMPCO International Operations (“IMPCO International”). U.S. Operations sells products, including certified engines, fuel systems, parts and conversion systems, for applications in 10 the transportation and industrial markets. IMPCO International in Australia, Europe and Japan provides distribution for the Company’s products, predominantly from U.S. Operations and some product assembly. Following the acquisition of BRC on March 31, 2005 and for the three months ended June 30, 2005, the Company added BRC Operations, which designs, manufactures and sells products for use in the transportation segment through its foreign subsidiaries, affiliates and independent channels of distribution. Beginning in January 1, 2005, the Company no longer consolidates its operations in India as part of International Operations. Since the Company’s ownership interest in the India operations was 50%, and since the Company did not have effective control over the operations of this entity, the Company uses the equity method of accounting for recognizing the results of this operation (see Note 13). The Company continues to consolidate IMPCO Mexicano, but the Company’s operating interests in Mexico are limited to its 50% interest in IBMexicano, a joint venture entered into on December 31, 2004. -

~~The Company recognizes revenue for product sales when title is transferred, ordinarily when product is shipped, and when management is reasonably assured of collectibility~~4. 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 IMPCO International. End markets for the EARNINGS ~~Company’s~~ (LOSS) ~~products~~PER ~~include~~SHARE ~~the transportation and industrial markets, which includes the material handling and power generation industries.~~

The following ~~Company~~table ~~expenses~~sets ~~all~~forth ~~research~~the ~~and~~computation ~~development~~of ~~when~~basic ~~incurred. Equipment used in research~~ and ~~development~~diluted ~~with~~earnings (loss) per ~~alternative~~share: ~~future uses is capitalized.~~

-11-

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2004		2005			2004		2005
Numerator:
Net income (loss)	$	505	$	(9,219	)	$	2,006	$	(10,228	)

Denominator:
Denominator for basic earnings per share - weighted
average number of shares		18,617		28,679			18,595		26,335
Effect of dilutive securities:
Employee stock options		567		-			766		-
Warrants		253		-			302		-
Shares held in trust		41		-			41		-
Dilutive potential common shares		19,478		28,679			19,704		26,335

Net income (loss) per share:
Basic net income (loss)	$	0.03	$	(0.32	)	$	0.11	$	(0.39	)
Diluted net income (loss)	$	0.03	$	(0.32	)	$	0.10	$	(0.39	)

~~Table~~For the three and nine months ended September 30, 2004, options to purchase 1,755,209 and 799,709 shares of ~~Contents~~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.

~~Revenue~~For the three and ~~operating~~nine ~~income~~months ~~for~~ended ~~the~~September ~~Company’s~~30, ~~business~~2005, ~~segments~~options ~~for~~to ~~the~~purchase ~~three~~2,929,056 shares ~~and~~of ~~six~~common ~~months~~stock ~~ended June~~and ~~30,~~warrants ~~2004~~to ~~and~~acquire ~~2005~~775,000 ~~and~~shares ~~net~~of ~~assets~~common ~~assigned~~stock were toexcluded ~~each~~from of the ~~operating~~computation ~~business~~since ~~segments~~the asCompany ofreported ~~December~~net ~~31,~~loss ~~2004~~ and the effect ~~June~~would ~~30,~~be ~~2005~~anti-dilutive. ~~are as follows:~~

	RevenuesThree Months EndedJune 30,						RevenuesSix Months EndedJune 30,
	2004			2005			2004			2005
U.S. Operations	$	25,473		$	22,222		$	48,265		$	42,231
IMPCO International Operations		10,255			6,889			19,707			15,059
BRC Operations (4)		—			21,515			—			21,515
Intersegment Elimination		(3,250	)		(2,021	)		(6,891	)		(5,195	)
Total	$	32,478		$	48,605		$	61,081		$	73,610
	Operating IncomeThree Months EndedJune 30,						Operating IncomeSix Months EndedJune 30,
	2004			2005			2004			2005
U.S. Operations	$	4,079		$	1,973		$	7,006		$	3,830
IMPCO International Operations		1,015			191			2,289			1,033
BRC Operations (4)		—			3,078			—			3,078
Corporate Expenses (1) (2) (3)		(1,717	)		(2,301	)		(3,392	)		(7,136	)
Intersegment Elimination		(407	)		(331	)		(502	)		(379	)
Total	$	2,970		$	2,610		$	5,401		$	426

SFAS No. 123, Accounting for Stock Based Compensation, as amended by SFAS No. 148, Accounting for Stock Based Compensation - Transition and Disclosure, 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:

	Net Assets As Of
	Three Months Ended September 30,						Nine Months Ended September 30,
	December 31,2004			June 30,2005
	2004			2005			2004			2005
U.S. Operations (5)	$	70,326		$	71,211
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
IMPCO International Operations		29,631			28,358
Expected volatility		74.1	%		83.1	%		74.1	%		83.1	%
BRC Operations		—			73,347
Risk free interest rate		3.5	%		4.2	%		3.5	%		4.2	%
Total	$	99,957		$	172,916
Expected life of the option (years)		6.0			6.8			6.0			6.8

~~(1) Represents corporate expenses not allocated to any of the operating segments.~~- 11 -

~~(2)~~The estimated ~~Includes~~fair ~~$75,000~~value ~~in-process~~of ~~R&D~~the options is amortized to expense over the options’ vesting period for pro forma disclosures. The per share “pro forma” effects of SFAS No. 123, as amended by SFAS 148, are not indicative of the ~~six~~effects on reported net income/loss for future years. The Company’s “reported” and “pro forma” information for the three and nine months ended ~~June~~September 30, ~~2005,~~2004 ~~related~~and September to30, ~~the~~2005 ~~acquisition~~are: ~~of BRC~~

(3) Includes, for the six months ended June 30, 2005, approximately $2.2 million in expense related to compensation, lifetime medical benefits and previously granted stock options to two former executive officers of the Company (see Note 10); professional fees for approximately $1.5 million; and equipment lease costs for $0.3 million.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2005			2004			2005

Income (loss) as reported	$	505		$	(9,219	)	$	2,006		$	(10,228	)

Add: compensation expense included in
reported loss (a)		-			-			-			1,775

Deduct: total stock-based employee
compensation expense determined under
the fair value based method for all awards,
net of related taxes		(527	)		(44	)		(1,541	)		(1,840	)

Proforma (loss) income	$	(22	)	$	(9,263	)	$	465		$	(10,293	)

Basic earnings (loss) per share:
As reported	$	0.03		$	(0.32	)	$	0.11		$	(0.39	)
Proforma	$	(0.00	)	$	(0.32	)	$	0.03		$	(0.39	)

Diluted earnings (loss) per share:
As reported	$	0.03		$	(0.32	)	$	0.10		$	(0.39	)
Proforma	$	(0.00	)	$	(0.32	)	$	0.02		$	(0.39	)

(4a) ~~BRC~~The ~~revenues~~Company recognized approximately $1.8 million and ~~operating~~$16,000 ~~income~~in ~~for~~the first quarter and second quarter of 2005, respectively, in connection with new measurement dates under the ~~three~~intrinsic ~~months~~value ~~ended~~method ~~June~~in 30accordance with Opinion 25, ~~2005~~Accounting for Stock Issued to Employees (see note 10).

(5~~) Net assets assigned to Corporate are included in U~~.S. COMPREHENSIVE INCOME ~~Operations.~~(LOSS)

7.The components ~~INCOME~~of ~~TAXES~~comprehensive income (loss) for the three and nine months ended September 30, 2004 and 2005 are as follows:

During the second quarter ended June 30, 2005, the Company recognized approximately $2.0 million in income tax expense for its foreign operations representing a 47% effective tax rate. For the U.S. Operations, the Company recorded a tax benefit of approximately $1.5 million based on $2.6 million in losses for the second quarter ended June 30, 2005, and a related increase in net deferred tax assets of $ 1.5 million attributable to net operating loss carryforwards. After considering the likelihood of recoverability of the additional deferred tax assets, the Company recognized an increase in the valuation allowance for deferred taxes by the same amount. Consequently, no tax provision was recorded for the U.S. operations during the second quarter ended June 30, 2005. Management will continue to monitor the future recoverability of the $8.2 million in deferred tax assets recognized on the balance sheet as of June 30, 2005.


	Three Months Ended September 30,					Nine Months Ended September 30,
	2004		2005			2004			2005

Net income (loss)	$	505	$	(9,219	)	$	2,006		$	(10,228	)
Foreign currency translation adjustment		265		409			(720	)		(1,611	)
Comprehensive income (loss)	$	770	$	(8,810	)	$	1,286		$	(11,839	)

~~Pursuant to Internal Revenue Code Sec. 382 and 383, certain changes in the ownership structure (common stock issuances in the case of IMPCO) may partially~~- or fully limit future use of net operating losses and tax credits available to offset future taxable income and future tax liabilities, respectively. At June 30, 2005, the Company evaluated the impact of Sec. 382 and 383 and determined that there 12 ~~was no material limitation on the current availability of net operating loss carry forwards.~~ -

~~-12-~~6. BUSINESS SEGMENT INFORMATION

~~Table~~Prior to the second quarter of ~~Contents~~2005 and the completion of the acquisition of BRC, the Company classified its businesses into two operating segments: United States Operations (“U.S. Operations”) and IMPCO International Operations (“IMPCO International”). U.S. Operations sells products, including certified engines, fuel systems, parts and conversion systems, for applications in the transportation and industrial markets. IMPCO International in Australia, Europe and Japan provides distribution for the Company’s products, predominantly from U.S. Operations and some product assembly. Following the acquisition of BRC on March 31, 2005 and beginning on April 1, 2005, the Company added BRC Operations, which designs, manufactures and sells products for use in the transportation segment through its foreign subsidiaries, affiliates and independent channels of distribution. Beginning on January 1, 2005, the Company no longer consolidates its operations in India as part of International Operations. Since the Company’s ownership interest in the India operations was 50%, and since the Company did not have effective control over the operations of this entity, the Company uses the equity method of accounting for recognizing the results of this operation (see note 13). The Company continues to consolidate IMPCO Mexicano, but the Company’s operating interests in Mexico are limited to its 50% interest in IBMexicano, a joint venture entered into on December 31, 2004.

~~For~~The Company ~~the~~recognizes ~~six~~revenue ~~months~~for ~~ended~~product ~~June~~sales ~~30,~~when ~~2005,~~persuasive ~~undistributed earnings~~ evidence of ~~the Company’s foreign operations~~an ~~were~~ arrangement, ~~approximately~~such ~~$3.2~~as ~~million.~~agreements, ~~Undistributed~~purchase ~~earnings~~orders ~~are~~or ~~considered~~written torequests, exists; delivery behas ~~indefinitely~~been ~~reinvested~~completed and, ~~accordingly,~~ no ~~provision~~significant ~~for~~obligations ~~United~~remain; ~~States~~the Company’s price ~~federal~~to ~~and~~the ~~state~~buyer ~~income~~is ~~taxes~~fixed ~~has~~or ~~been~~determinable; ~~provided~~and ~~thereon~~collection is probable. Corporate ~~Upon~~expenses ~~distribution~~represent ofselling, ~~earnings~~general inand ~~the~~administrative ~~form~~expense. of Intersegment ~~dividends~~eliminations orare ~~otherwise,~~primarily the ~~Company~~result ~~would~~of beintercompany ~~subject~~sales from U.S. Operations to ~~both~~IMPCO ~~United~~International. ~~States~~End ~~income~~markets ~~taxes~~for ~~(subject~~the toCompany’s anproducts include ~~adjustment~~the ~~for~~transportation ~~foreign~~and ~~tax~~industrial ~~credits)~~markets, ~~and~~which ~~withholding~~includes ~~taxes~~the material handling ~~payable~~and topower ~~various~~generation ~~foreign countries~~industries.

8The Company expenses all research and development when incurred. ~~BUSINESS~~Equipment used ~~ACQUISITION~~in research and development with alternative future uses is capitalized.

~~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~~Revenue ~~50%~~ and ~~ownership~~operating ~~interest~~income ~~in BRC~~ for ~~approximately $23.8 million, which included $13.8 million cash and~~ the ~~issuance of approximately 2.3 million shares of~~ Company’s ~~common~~business ~~stock~~segments ~~(which~~for the ~~parties~~three ~~acknowledged~~ and ~~agreed were valued at $10.0 million).~~nine ~~The~~ months ~~Company~~ended ~~announced~~September ~~on October 25~~30, 2004 ~~that it intended to acquire the remaining 50% of BRC using approximately $10.0 million from the proceeds of a public offering of the Company’s equity~~ and ~~the issuance of approximately 5.1 million shares of the Company’s common stock. On March 31,~~ 2005, ~~the~~and ~~Company~~net ~~acquired~~assets ~~the~~for ~~remaining~~each ~~50%~~ of ~~BRC. The actual purchase price was determined to be $39.3 million based on~~ the ~~weighted average price of the Company’s common stock of $5.74 per~~ ~~share~~ operating bybusiness ~~referring~~segments toas ~~the daily closing price~~ of ~~the~~December ~~Company’s common stock during the three days prior to and following the agreement date of October 22~~31, 2004. ~~Collectively,~~and ~~the~~September ~~Company paid approximately $67.6 million for 100% of BRC~~30, ~~consisting~~ 2005 of approximately $39.3 million in common stock, approximately $23.8 million in cash, approximately $2.1 million in other directly related costs and approximately $2.4 million in the Company’s share in the earnings of BRC from Julyare ~~2003~~ as tofollows: ~~March 31, 2005.~~

The Company has performed an initial and preliminary purchase price allocation in accordance with the purchase method of accounting for business combinations. The purchase method of accounting allocates the amount paid for an acquisition over the fair value of the assets and liabilities acquired, and measures the excess of the purchase price over the fair value as goodwill. Goodwill is evaluated at least annually for impairment, or more frequently, if the acquirer believes that the goodwill has been impaired due to changing facts and circumstances. Other intangible assets that are separable from goodwill and have definite lives are subject to amortization over their remaining useful lives. Indefinite-lived intangible assets are subject to on-going evaluation for impairment. The portion of the purchase price that represents the fair value of in-process research and development (“IPR&D”) on the date of the acquisition is recognized as acquired in-process technology on the condensed consolidated statement of operations in the same period as the acquisition. The Company performed an initial and preliminary purchase price allocation as set forth in the following table:

	Revenues						Revenues
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2005			2004			2005

U.S. Operations	$	23,807		$	20,324		$	72,073		$	62,555
IMPCO International		9,367			7,411			29,074			22,470
BRC Operations (1)		-			23,026			-			44,540
Intersegment Elimination		(3,110	)		(1,688	)		(10,001	)		(6,882	)
Total	$	30,064		$	49,073		$	91,146		$	122,683

	Amount
		Operating Income						Operating Income
	($000’s)
		Three Months Ended						Nine Months Ended
Investment in BRC:
		September 30,						September 30,
Common stock	$	39,264
		2004			2005			2004			2005
Contractual cash payments		23,818
U.S. Operations	$	3,035		$	1,449		$	10,050		$	5,280
Share in earnings of BRC		2,383
IMPCO International		952			(346	)		3,241			687
Other direct costs		2,145
BRC Operations (2) (3) (4)		-			646			-			3,724
	$	67,610
Corporate Expenses (5) (6)		(1,913	)		(1,852	)		(5,304	)		(8,989	)
Value Assigned to Assets and Liabilities:
Intersegment Elimination		316			557			(187	)		178
Current assets		48,883
Total	$	2,390		$	454		$	7,800		$	880
Property plant and equipment		5,350
Acquired in-process technology		75
Related party receivables		24,601
Other assets		593
Current liabilities		(36,213	)
Long-term liabilities		(13,784	)
Assets and liabilities	$	29,505
Excess of purchase price over fair value of net assets acquired (goodwill)	$	38,105

~~The Company’s~~- preliminary assessment is that the tangible current assets and liabilities of BRC are being carried at fair value at June 30, 2005. A more detailed assessment will be completed by the fourth quarter of 2005. 13 -

-13-

	Net Assets at
	December 31,		September 30,
	2004		2005
U.S. Operations		68,821		69,184
IMPCO International		29,631		25,924
BRC Operations		-		76,209
Total		98,452		171,317

~~Table of Contents~~_____________

The Company has performed a preliminary allocation of the purchase price and determined that approximately $75,000 represents the minimum amount within a range of values between $75,000 and $170,000 for IPR&D costs, and, accordingly, has recognized this expense on the consolidated statement of operations for the six months ended June 30, 2005. This allocation was determined by using the income approach, which utilizes a discounted cash flow approach to estimate the present value of future cash flows that are expected to result from R&D projects that were in-process, or incomplete, as of the acquisition date of March 31, 2005. One project was determined to have met the criteria for classification as IPR&D including (1) ~~the~~Includes existence of remaining technological risks (2) absence of alternative uses for this project or its underlying assets and (3) presence of substantive and verifiability qualities that characterize an IPR&D project. The Company used a risk adjusted discount rate of 18% to discount future cash flows reflecting that most of the project was nearing completion and that revenue estimates associated with these projects were already conservatively discounted. Other research and development projects were excluded from this classification on the basis that they represented either sustaining engineering projects or that they no longer had any significant technological risk associated with them. The Company will refine its estimate of IPR&D along with other intangible assets during the remainder of 2005 prior to finalizing the purchase price allocation of the BRC ~~acquisition~~revenues ~~including any unrecognized amortization expense related to definite-lived intangible assets~~ for the ~~quarterly~~six ~~periods~~months ~~following~~ended ~~the~~September ~~March 31~~30, 2005 ~~acquisition date~~.

~~The~~(2) ~~Company~~Includes ~~completed the purchase of the remaining 50% of~~ BRC onoperating ~~March~~income 31, 2005 and consolidated the March 31, 2005 balance sheet of BRC with the consolidated balance sheet of IMPCO. The Company consolidated the second quarter 2005 results and cash flows of BRC with the Company’s consolidated statements of operations and cash flows for the ~~three and~~ six months ended ~~June~~September 30, 2005. The following table sets forth pro forma consolidated statement of operations for the six months ended June 30, 2005 under the assumption that the acquisition had occurred on January 1, 2005 instead of on March 31, 2005:

	Six Months Ended June 30,2005		Ref
Pro Forma Statement of Operations:
Revenue	$	92,830
Costs and expenses:
Cost of revenue		67,302
Research and development expense		4,514	(a)
Selling, general and administrative expense		17,861	(b)
Acquired in-process technology		75	(c)
Total costs and expenses		89,752
Operating income		3,078
Other income		2,219	(d)
Interest expense, net		317
Income before income taxes and equity share
in loss of unconsolidated affiliates		4,980
Equity share in loss of unconsolidated affiliates		41
Income tax expense		4,086	(e)
Income before minority interests		853
Other expense
Minority interest in income of consolidated subsidiaries		519
Net income	$	334
Basic net income per share	$	0.01
Number of shares used in per share calculation		28,568	(f)

(3)	Includes $129,000 in-process R&D expense for the three months ended September 30, 2005, related to the acquisition of BRC.

~~Notes~~(4) toIncludes, for the ~~pro~~three ~~forma~~months ~~statement~~ended September 30, 2005, approximately $1.9 million in amortization expense for intangible assets acquired from BRC, including a "catch up" adjustment of ~~operations:~~ $0.95 million for the three months ended June 30, 2005.

(a5) ~~Includes~~Represents ~~approximately~~corporate ~~$1.0~~expenses ~~million~~not ~~for~~allocated ~~accelerated~~to ~~amortization~~any of ~~leasehold improvements during~~ the ~~three~~operating ~~months~~segments ~~ended~~including ~~June 30~~$75,000 ~~2005~~ in-process ~~connection~~R&D ~~with~~expense ~~the~~recorded ~~announced~~in ~~closure~~the ofthree ~~the~~months ~~Seattle~~ended ~~facility~~March ~~during~~31, ~~the~~2005, ~~third~~related ~~quarter~~to ofthe ~~2005~~BRC acquisition.

(b6) Includes, for the nine months ended September 30, 2005, approximately $2.2 million in expense related to compensation, lifetime medical benefits and previously granted stock ~~option~~options ~~related~~to ~~expenses~~two ~~during~~former executive officers of the ~~first~~Company ~~quarter~~(see note 10); professional fees of approximately $1.6 million; and equipment lease costs of $0.3 million.

~~-14-~~7. INCOME TAXES

~~Table~~During the third quarter of ~~Contents~~2005, the Company recognized approximately $1.0 million in income tax provision for its foreign operations, excluding IMPCO Mexicano, representing a 48% effective tax rate. During the third quarter of 2005, the Company reviewed the recoverability of the net deferred tax asset balance of approximately $8.2 million related to U.S. Operations consisting of approximately $10.0 million in deferred tax assets offset by deferred tax liabilities of approximately $1.8 million. The Company determined that the likelihood of recoverability of the net deferred tax asset was less than the “more likely than not” threshold as defined by SFAS No. 109, Accounting for Income Taxes. The factors that the Company considered in its determination that the carrying value of net deferred tax assets was impaired and that an increase in the valuation allowance for deferred taxes of approximately $8.7 million was warranted were primarily the performance of U.S. Operations over the past three years in terms of achieving adequate pre-tax profitability and the uncertainty in the near future whether U.S. Operations would generate sufficient profitability to support the carrying value of approximately $8.7 million. In the determination of the amount of the additional deferred tax expense of $8.7 million and the corresponding increase in the valuation allowance, approximately $0.5 million is added to the current net deferred tax balance of $8.2 million in consideration of goodwill temporary taxable differences, included as part of deferred tax liabilities, that are not offset against the deferred tax asset in the determination of the required increase in the valuation allowance. The $0.5 million that represents the goodwill temporary differences is included under deferred tax liabilities on the condensed consolidated balance sheet as of September 30, 2005.

~~2005~~The company ~~resulting~~completed ~~from~~its ~~reduced~~purchase ~~responsibilities~~price ~~for~~allocation ~~two~~in ~~former~~connection ~~officers~~with of the ~~Company~~BRC acquisition ~~who~~and, ~~are~~as ~~currently~~a ~~employed~~consequence, byrecognized ~~the~~a ~~Company~~deferred astax ~~consultants~~liability of approximately $10.5 million (see ~~Note~~note 108) of which approximately $1.4 million has been classified as the current portion on the condensed consolidated balance sheet at September 30, 2005.

~~(c)~~Pursuant to ~~In-process~~Internal ~~research~~Revenue ~~and~~Code ~~development~~Sec. ~~expense~~382 ofand ~~$75~~383,~~000~~ ~~during~~certain changes in the ~~first~~ownership structure ~~quarter~~(common stock issuances in the case of ~~2005~~IMPCO) ismay ~~related~~partially or fully limit future use of net operating losses and tax credits available to ~~the~~offset future ~~purchase~~taxable ~~price~~income ~~allocation~~and ~~under~~future tax liabilities, respectively. At September 30, 2005, the ~~purchase~~Company ~~method~~evaluated the impact of ~~accounting~~the ~~for~~Internal ~~business~~Revenue ~~consolidations~~Code Sec. 382 ~~This~~and 383 ~~amount~~and isdetermined ~~subject~~that tothere ~~further~~was ~~revisions~~no ~~when~~impact on the ~~purchase~~current ~~price~~availability ~~allocation~~of net operating ~~is completed~~losses.

(d) Includes approximately $2.5 million unrealized foreign exchange currency gains in connection with the MTM Loan (see note 9(a)) for the six months ended June 30, 2005 partially offset by approximately $0.6 million fair value loss of derivative instrument (See note 3).- 14 -

~~(e)~~For the nine ~~Tax~~months ~~provision~~ended September 30, 2005, undistributed earnings of the Company’s foreign operations were approximately $43.15 million. isUndistributed ~~based~~earnings are considered onto abe 43indefinitely reinvested and, accordingly, no provision for United States federal and state income taxes has been provided thereon.5% ~~effective~~Upon distribution ~~tax~~of ~~rate~~earnings in the form of dividends or otherwise, the Company would be subject to both United States income taxes (subject to an adjustment for ~~total~~foreign ~~IMPCO~~tax ~~International~~credits) and ~~BRC~~withholding taxes payable to various foreign countries.

~~(f) Assumes that the 4~~8.6 BUSINESS ACQUISITION million shares issued with the equity offering that was completed in February 2005 were issued on January 1, 2005. Assumes that the 5.1 million shares that were issued to the sellers of BRC on March 31, 2005 were issued on January 1, 2005.

~~Inventory~~On October ~~Valuation~~3, ~~Methods~~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 $13.8 million cash and the issuance of approximately 2,300,000 shares of Company common stock (which the parties acknowledged and agreed were valued in the aggregate at $10.0 million).

~~IMPCO~~In September ~~(excluding BRC) values its inventories~~2004, ~~which~~the ~~were~~Company’s ~~approximately~~board ~~$15.9~~of ~~million~~directors atconsidered ~~June~~the ~~30,~~Company’s proposal ~~2005,~~to atacquire the ~~lower~~remaining 50% of ~~cost or market value~~BRC. ~~Cost~~The isnegotiated ~~determined~~purchase byagreement was ~~using~~announced ~~the~~on ~~first~~October in25, ~~first~~2004 ~~out~~and ~~(FIFO)~~included ~~method~~a ~~while~~purchase ~~market~~price ~~value~~that isconsisted ~~determined~~ of by$10.0 ~~the~~million ~~replacement~~in ~~cost~~cash ~~for raw materials~~ and ~~parts and net realizable value for work-in-process and finished goods inventory. BRC carries its inventory, which was~~ approximately ~~$17.9 million at June 30~~5, ~~2005~~100,000 of at the ~~lower of market or~~Company’s ~~cost~~ common ~~where~~stock. ~~cost~~The isCompany ~~determined~~considered ~~using~~ the ~~weighted~~following ~~average~~factors ~~cost~~during ~~method.~~the ~~Total~~course of negotiations ~~inventories~~to atpurchase ~~June~~the ~~30,~~remaining ~~2005~~50% of ~~approximately~~BRC: ~~$33.8~~(1) ~~million~~a ~~were~~fairness ~~determined~~opinion of ~~based~~the price onto ~~both~~be ~~methods.~~paid ~~Both~~for ~~methods~~the ~~are~~remaining ~~acceptable~~50% ~~under~~of ~~generally~~BRC ~~accepted~~provided ~~accounting~~by ~~principal~~an independent ~~practiced~~ valuation infirm ~~the~~and ~~United~~(2) ~~States; however,~~ the Company isbelieved ~~evaluating~~that the ~~impact~~acquisition of ~~changing~~BRC, a world-class ~~the~~provider ~~methodology~~of ~~used~~alternative byfuels ~~BRC~~products to the ~~FIFO~~transportation market segment, ~~method~~would ~~and~~position ~~expects~~IMPCO toin ~~measure and report~~ the ~~impact~~transportation onmarket ~~the~~segment ~~consolidated financial statements~~ as a ~~change in accounting~~market ~~principle~~ leader.

~~Management~~The Company ~~Transition~~concluded the acquisition of the final 50% of BRC on March 31, 2005, following a special stockholders’ meeting held on March 10, 2005 in which the stockholders approved the acquisition. In accordance with EITF 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination, the Company determined the value of the consideration paid to the sellers of BRC for the final 50% to be approximately $39.3 million, based on (1) a cash payment of $10.0 million; (2) the weighted average price of the Company’s common stock for the three days prior to and following October 22, 2004 of $5.74 per share; and (3) the issuance of approximately 5,100,000 shares of common stock. The Company also recorded in connection with the final 50% of BRC approximately $1.1 million for other direct transaction costs and approximately $2.4 million for the accumulated earnings of BRC recognized using the equity method from July 2003 to March 31, 2005.

OnThe Company ~~January~~completed 1the purchase price allocation in the quarter ended September 30, 2005, ~~Mariano~~in ~~Costamagna,~~accordance with the ~~Managing~~purchase ~~Director~~method of ~~BRC,~~accounting ~~became~~for business combinations. The purchase method of accounting allocates the ~~Chief~~amount ~~Executive~~paid for ~~Officer~~an acquisition ~~and~~over ~~President~~the fair value of ~~IMPCO,~~the assets and onliabilities ~~the~~acquired. ~~same~~The excess ~~day,~~of ~~Robert~~the ~~Stemmler~~purchase ~~resigned~~price asover the ~~Chief~~fair ~~Executive~~value ~~Officer~~is ofclassified ~~IMPCO~~as goodwill. Goodwill Onis ~~April~~not 7,amortized ~~2005~~but is evaluated for impairment, ~~Nickolai~~at A.least ~~Gerde~~annually, or more ~~resigned~~frequently, asif ~~IMPCO’s~~the ~~Vice~~acquirer ~~President~~believes ofthat ~~Finance,~~goodwill ~~Chief~~may ~~Financial~~be impaired due ~~Officer~~ to changing facts and ~~Treasurer~~circumstances. OnOther ~~April~~intangible 6,assets ~~2005,~~that Mrare separable from goodwill and have definite lives are subject to amortization over their remaining useful lives. ~~Stemmler,~~Indefinite-lived ~~who~~intangible ~~had~~assets ~~served~~are assubject ~~Chairman~~to on-going evaluation for impairment. The portion of the ~~Board~~purchase ofprice ~~Directors,~~that represents ~~resigned~~the ~~his~~fair ~~chairmanship~~value of in-process research and ~~his~~development ~~position~~(“IPR&D”) on the date of the acquisition is recognized as ~~director.~~acquired Onin-process ~~May~~technology on ~~18,~~the ~~2005,~~condensed ~~Thomas~~consolidated M.statement ~~Costales~~of ~~was~~operations ~~appointed~~in ~~interim~~the ~~Chief~~same ~~Financial~~period as ~~Officer~~the ~~and~~ acquisition. ~~Treasurer,~~The aCompany’s ~~position~~final hepurchase ~~previously~~price ~~held~~allocation ~~from~~is ~~1995~~set toforth ~~2000.~~in the following table:

~~9. DEBT~~- 15 -

The Company’s consolidated debt payable is summarized as follows:

	Amount
	($000's)
Investment in BRC:
Common stock	$	39,264
Contractual cash payments		23,818
Share in earnings of BRC		2,383
Other direct costs		2,335
	$	67,800

Value Assigned to Assets and Liabilities:
Current assets		48,883
Property plant and equipment		5,860
Intangible assets		26,865
Acquired in-process technology		204
Related party receivables		21,350
Other assets		4,046
Current liabilities		(36,574	)
Long-term liabilities		(13,424	)
Deferred tax liabilities		(10,471	)
Assets and liabilities	$	46,739

Excess of purchase price over fair value of net assets acquired (goodwill)	$	21,061

	December 31,2004		June 30, 2005
			(Unaudited)
(a) Term loan - MTM, S.r.l.	$	22,000	$	—
(b) Revolving promissory note - LaSalle Business Credit, LLC		7,680		6,141
(c) Term loan - Unicredit Banca Medio Credito S.p.A.		—		10,857
(d) Term loan - Italian Ministry of Industry		—		931
(e) Short-term loan - Banca Credito Cooperativo di Cherasco		—		1,206
(f) Other loans		93		801
Capital leases		198		201
	$	29,971	$	20,137
Less: current portion		10,420		10,792
Non-current portion	$	19,551	$	9,345

In its allocation of the purchase price the Company determined that approximately $204,000 represented IPR&D costs, and, accordingly, has recognized $129,000 of this expense in its consolidated statement of operations for the three months ended September 30, 2005, and $204,000 in its consolidated statement of operations for the nine months ended September 30, 2005. This allocation was determined using the income approach, which utilizes a discounted cash flow approach to estimate the present value of future cash flows that are expected to result from R&D projects that were in-process, or incomplete, as of the acquisition date of March 31, 2005. One project was determined to have met the criteria for classification as IPR&D including (1) the existence of remaining technological risks; (2) absence of alternative uses for this project or its underlying assets; and (3) presence of substantive and verifiability qualities that characterize an IPR&D project. The Company used a risk adjusted discount rate of 20% to discount future cash flows reflecting that most of the project was nearing completion and that revenue estimates associated with these projects were already discounted. Other research and development projects were excluded from this classification on the basis that they represented either sustaining engineering projects or they no longer had any significant technological risk associated with them. Acquired intangible assets with definite lives were valued at approximately $26.9 million and consisted of the following:

-15-

Intangible asset	Remaining Life		Amortization Method		Value (in millions)
Existing technology		7 years		Straight line	$	19.4
Customer relationships		11 years		Sum-of-the-years digit		4.3
Trade name		11 years		Straight line		3.2
Total					$	26.9

~~Table~~The Company assigned fair values to the intangible assets by applying valuation models that assigned future after-tax cash flows to existing technology and customer relationships as of ~~Contents~~March 31, 2005. In each case, a 16% discount rate and a statutory tax rate of 37.25% was used. To determine the fair value for the trade name, the Company applied the royalty savings method which is designed to estimate the amount of savings the Company would realize in the future by not having to pay a royalty fee for use of BRC’s trade name. A deferred tax liability in the amount of approximately $10.5 million was recorded in the three months ended September 30, 2005, based on the temporary taxable differences between the financial and historical tax bases of the stepped-up values of the identifiable assets. A 37.25% tax rate was applied to the total of the stepped-up value of fixed assets of approximately $1.2 million and the fair values assigned to the intangible assets of approximately $26.9 million. For the three and nine months ended September 30, 2005, the Company recorded amortization expense of approximately $1.9 million for the intangible assets acquired and depreciation expense of approximately $62,000 for the increase in fair value of the tangible fixed assets acquired, which were estimated to have a remaining useful life of 10 years. Among the intangible assets acquired, existing technology and trade name were amortized using the straight line method and customer relationships were amortized using the accelerated sum-of-the-years digit method. The sum-of-the-years digit method of amortization reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. The expenses represent amortization expense and depreciation expense for the six months ended September 30, 2005, from March 31, 2005 acquisition date of BRC, recorded in the third quarter of 2005.

~~(a) Term Loan – MTM S.r.l.~~- 16 -

~~On December 23, 2004 the Company entered into a loan (“MTM Loan”) agreement with MTM S.r.l. or MTM, a wholly owned subsidiary of BRC pursuant to~~The ~~which the~~ Company ~~borrowed~~completed ~~$22.0 million for~~ the ~~purpose~~purchase of ~~prepaying~~ the ~~Company’s~~remaining ~~loan~~50% ~~from Bison Capital Structured Equity Partners (“Bison loan”) in the amount~~ of ~~$22.0~~BRC million, which included the principal of $20.0 million, a prepayment penalty of $1.0 million and accrued interest of $1.0 million. The terms of the MTM Loan require the Company to make quarterly principal payments of $650,000 during the first and second years, $800,000 during the third year, $1,000,000 during the fourth year, $1,150,000 during the fifth year and a $5,000,000 payment of unpaid principal at the conclusion of the term on ~~December~~March 31, ~~2009. Mr. Costamagna~~ 2005 and ~~his brother, Pier Antonio Costamagna, who serves as Chief Engineering~~ ~~Officer~~ consolidated ~~of MTM have personally guaranteed~~ the repayment of the MTM Loan. The variable interest rate on the MTM Loan is based on the 3-month EURIBOR rate plus 1.5% per annum, which was approximately 3.7% and 3.7% at January 1, 2005 and April 1, 2005, respectively. The Company paid principal and interest payments of $853,500 and $844,819 on March 31, 2005 ~~and June 30, 2005, respectively. For purposes of~~ balance sheet ~~presentation, the June 30, 2005 outstanding balance~~ of ~~$20.7~~BRC ~~million~~with ~~has~~the ~~been~~consolidated ~~eliminated~~ balance ~~upon~~sheet ~~consolidation~~ of ~~BRC financial statements with those of~~ IMPCO. The ~~MTM~~Company ~~Loan~~consolidated ~~may be accelerated in~~ the ~~event~~second ~~that~~and ~~any~~third ~~payment~~quarter 2005 isresults ~~not~~and ~~made~~cash ~~within~~flows ~~15 days~~ of ~~the~~BRC ~~due~~with ~~date, if~~ the ~~employment of Mariano Costamagna, the~~ Company’s ~~Chief~~ ~~Executive~~consolidated ~~Officer,~~statements ~~is terminated for any reason (with certain exceptions for termination upon Mr. Costamagna’s death), if the Company materially breaches his employment agreement or upon written notice~~ of ~~any other default under the Term~~ ~~Loan.~~ operations ~~Additionally, Mariano Costamagna~~ and ~~Pier~~cash ~~Antonio~~flows ~~Costamagna have guaranteed the MTM loan. In return~~ for ~~Messrs. Costamagnas’ guarantee,~~ the ~~Company~~three ~~has~~and ~~pledged~~nine ~~its~~months ~~equity~~ended ~~interest~~September ~~in BRC as collateral in the event the guarantee is~~30, ~~utilized~~ 2005, respectively. The ~~MTM~~following ~~loan~~table ~~agreement~~sets ~~contains~~forth ~~restrictive covenants limiting the Company’s ability to: (~~a) ~~incur~~pro ~~additional~~forma ~~indebtedness~~consolidated statement ~~other~~of ~~than~~operations ~~unsecured~~for ~~trade credit, capital leases and additional indebtedness pursuant to~~ the ~~senior~~nine ~~Credit Facility~~months ~~(described~~ended ~~below)~~September ~~with~~30, ~~LaSalle; (b) merge~~2005, ~~consolidate or sell~~ under the assumption ~~Company’s~~that ~~assets; (c) purchase, retire or redeem~~ the ~~Company’s~~acquisition ~~capital~~had ~~stock;~~occurred ~~and~~on ~~(d)~~January ~~make~~1, ~~capital~~2005 ~~expenditures~~instead ~~in excess~~ of ~~$2.5 million in any fiscal year. The~~ ~~shares~~ on March of31, ~~BRC~~2005: ~~are also pledged as security for the MTM loan. The loan also contains a cross default provision linked with the Credit Facility (described below).~~

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


	Nine Months Ended September 30,
Pro Forma Statement of Operations:	2005			Ref

Revenue	$	141,903
Costs and expenses:
Cost of revenue		102,144
Research and development expense		7,003			(a	)
Selling, general and administrative expense		27,211			(b	)
Amortization of intangible assets		2,861			(c	)
Acquired in-process technology		204			(d	)
Total costs and expenses		139,423
Operating income		2,480
Other income		2,197			(e	)
Interest expense, net		(443	)
Income before income taxes and equity share
in income of unconsolidated affiliates		4,234
Equity share in income of unconsolidated affiliates		98
Income tax expense		(13,001	)		(f	)
Loss before minority interests and cumulative effect of a change in accounting principle		(8,669	)
Minority interest in income of consolidated subsidiaries		783
Net loss before cumulative effect of a change in accounting principle		(9,452	)
Cumulative effect of a change in accounting principle		(117	)
Net loss	$	(9,569	)

Basic net loss per share	$	(0.33	)

Number of shares used in per share calculation:		28,611			(g	)

On July 18, 2003, the Company entered into a revolving promissory note (“Credit Facility”) with LaSalle Business Credit, LLC (“LaSalle”) for a maximum amount of $12.0 million bearing an annual interest rate of prime plus 1%. The borrowings under the Credit Facility have been used for working capital purposes. On March 29, 2005, the Company and LaSalle mutually agreed to reduce the maximum borrowing amount under the Credit Facility to $9.0 million and extended the Credit Facility, one additional year, to July 18, 2007. The Company’s availability under this Credit Facility is determined by a percentage of eligible accounts receivable and inventory balances as defined by the asset-based lending agreement. As of June 30, 2005, approximately $6.1 million was outstanding under the Credit Facility and approximately $1.9 million was unused and available. Approximately, $0.2 million was recognized as interest expense in the first six months of fiscal 2005. At December 31, 2004 and June 30, 2005, the Company was in default under the terms of the Credit Facility since it did not meet certain financial covenants at the end of the fourth quarter of 2004 and the second quarter of fiscal 2005. The Company renegotiated its covenants at December 31, 2004 and at June 30, 2005 to include revised covenants for the third and fourth quarters of 2005, and obtained a waiver for the second quarter of 2005. Under the terms of the Credit Facility, the annual interest rate was 6.25% at December 31, 2004 and 7.25% at June 30, 2005. _______________

~~(c)~~Notes to ~~Term~~the ~~Loan~~pro –forma ~~Unicredit~~statement ~~Banca~~of ~~Medio~~operations: ~~Credito S.p.A.~~

~~On December 2, 2004, MTM entered into a five-year unsecured loan agreement~~ (~~“Unicredit Loan”~~a) ~~with~~Includes ~~Unicredit Banca Medio Credito S.p.A. (“Unicredit”) of Italy in which MTM received~~ approximately $~~13.6 million based on the December 31, 2004 exchange rate of $~~1.365 to the euro. The primary purposes of the Unicredit Loan were to improve MTM’s working capital and to consolidate various mid- to long-term debt obligations with a single lender on more attractive terms. The payment terms are such that MTM will make quarterly principal payments of approximately $0.6 million ~~throughout~~for ~~the~~accelerated ~~term~~amortization of ~~the~~leasehold ~~Unicredit~~improvements ~~Loan, which~~in ~~matures~~connection ~~on December 31, 2009~~ with ~~interest based on~~ the ~~3-month~~closure EURIBOR rate plus 1%, which was 3.2% at June 30, 2005. At June 30, 2005, the amount outstanding under the Unicredit Loan was approximately $10.9 million. The loan agreement requires that MTM maintain a debt to equity ratio of ~~less than 0.80 and MTM is not allowed to remit dividends based on income for~~ the ~~fiscal~~Seattle ~~years 2004 and 2005~~facility. ~~At June 30, 2005, MTM was in compliance with these requirements.~~

~~(d) Term Loans – Italian Ministry of Industry~~- 17 -

In(b) ~~1998~~Includes ~~and~~approximately ~~2002,~~$2.2 ~~BRC~~million ~~entered~~in ~~into unsecured loan agreements with the Italian Ministry of Industry for the purpose of funding the acquisition of property~~compensation, ~~plant~~ ~~and~~benefits ~~equipment~~ and ~~research~~stock ~~and~~option ~~development~~related ~~expenditures.~~expenses ~~The~~for ~~loans~~two ~~are~~former ~~repayable~~officers ~~through annual installments and through 2011 at a subsidized interest rate~~ of ~~3.25%.~~the AtCompany ~~June~~(see ~~30,~~note ~~2005, approximately $0~~10).~~9 million was owed under these agreements.~~

(ec) ~~Line~~Nine ofmonths’ ~~Credit~~amortization –expense ~~Banca~~for ~~Credito~~intangible ~~Cooperativo~~assets direcorded ~~Cherasco~~as a result of the purchase price allocation.

At(d) ~~June 30, 2005, BRC had an unsecured line of credit of approximately $1.3 million with no outstanding balance.~~ In-process ~~addition,~~research ~~BRC~~and ~~has~~development aexpense ~~$7.4 million line~~ of ~~credit secured by customer account receivable drafts, of which~~ $10.2 million ~~was~~is ~~outstanding~~recognized atas ~~June~~an ~~30,~~expense ~~2005.~~under ~~The~~the ~~interest~~purchase ~~rate~~method onof ~~these~~accounting ~~short-term~~for ~~borrowings~~business ~~was approximately 3~~consolidations.~~0% per annum at June 30, 2005.~~

~~-16-~~(e) Includes primarily $2.6 million unrealized foreign exchange currency gains in connection with the MTM Loan (see note 9(a)) for the nine months ended September 30, 2005 partially offset by approximately $0.7 million fair value loss of derivative instrument (See note 3).

~~Table~~(f) Tax provision of ~~Contents~~$13.0 million is based on a 42% effective tax rate for IMPCO International, excluding IMPCO Mexicano, and BRC and includes an increase in the valuation allowance of $8.7 million for deferred tax assets in the third quarter of 2005 (see note 7).

(fg) ~~Other~~Assumes ~~Finance~~that ~~Loans~~the 4,600,000 shares issued with the equity offering that was completed in February 2005 were issued on January 1, 2005; also assumes that the approximately 5,100,000 shares that were issued to the sellers of BRC on March 31, 2005 were issued on January 1, 2005.

~~In April and June of 2005, the Company financed, through a third party lender, certain insurance policies, a total of approximately $0.9 million, which~~Inventory ~~are~~ Valuation ~~payable~~Methods ~~within a year from the date of financing. At June 30, 2005, the balance of these outstanding loans total approximately $0.8 million bearing an annual interest rate of 6.45%.~~

10IMPCO (excluding BRC) values its inventories, which were approximately $13.3 million at ~~STOCKHOLDERS~~September 30, 2005, at the lower of cost or market value. Cost is determined by using the first in, first out ("FIFO") method while market value is determined by the replacement cost for raw materials and parts and net realizable value for work-in-process and finished goods inventory. Until September 2005, BRC carried its inventory at the lower of market or cost where cost is determined using the weighted average cost method. In September 2005, BRC changed its inventory valuation method from average cost to the FIFO method. At September 30, 2005, the total value of the Company’s ~~EQUITY~~inventory (net of reserves for obsolescence) under the FIFO method was approximately $30.9 million. The Company re-measured the value of BRC’s inventory at March 31, 2005, the date of consolidation of BRC with IMPCO, using the FIFO method. The difference between the value of BRC’s inventory using the FIFO method and its value using the average cost method at March 31, 2005 was approximately $187,000. Pursuant to APB 20, Accounting Changes and Error Corrections, this amount has been reported as the cumulative effect of a change in accounting principle of $117,000, net of taxes of approximately $70,000.

~~In February 2005, the Company completed a public offering in which it sold 4.6 million shares of common stock to investors and realized net proceeds of~~Management ~~approximately~~ Transition $24.1 million based on a selling price of $5.75 and net of issuance costs of approximately $2.3 million. As a precondition to the remaining 50% acquisition of BRC that was completed on March 31, 2005, the Company used approximately $10.0 million of the proceeds as payment to the sellers of BRC. The remaining cash proceeds from the equity offering is being used primarily for working capital purposes.

On January ~~March 10~~1, 2005, Mariano Costamagna, the ~~Company’s~~Managing ~~shareholders~~Director ~~approved~~of BRC, became the Chief ~~BRC~~Executive ~~acquisition~~Officer ~~(see~~and ~~Note~~President 8)of IMPCO, and on the ~~issuance~~same ~~of 5~~day,~~098,284~~ Robert ~~shares~~ Stemmler ofresigned ~~common~~as ~~stock~~the inChief ~~accordance~~Executive ~~with~~Officer ~~the~~of ~~October~~IMPCO. 22On April 7, 2005, Nickolai ~~2004~~A. ~~Equity~~Gerde ~~Purchase~~resigned ~~Agreement~~as ~~between~~IMPCO’s ~~the~~Vice ~~Company~~President ~~and~~of ~~the~~Finance, ~~equity~~Chief ~~holders~~Financial Officer ofand ~~BRC~~Treasurer. On ~~March~~April 316, 2005, ~~the~~Mr. ~~Company~~Stemmler, ~~completed~~who ~~the~~had ~~acquisition~~served as Chairman of ~~BRC~~the byBoard ~~issuing~~of ~~the~~Directors, ~~same~~resigned ~~number~~his ofchairmanship ~~shares~~and ofhis ~~the~~position ~~Company~~ as ~~stock~~director. atOn aMay ~~weighted~~18, ~~average~~2005, ~~stock~~Thomas ~~price of $5~~M.~~74,~~ ~~valued~~Costales atwas ~~approximately~~appointed ~~$29.3~~interim Chief Financial ~~million~~Officer ~~based~~and onTreasurer, ~~the~~a ~~price~~position ofhe ~~the~~previously ~~Company’s~~held ~~stock~~from ~~for~~1995 to 2000. ~~three~~On ~~trading~~September ~~days~~20, ~~prior~~2005, toMr. ~~and~~Costales ~~following~~was ~~October~~appointed ~~22,~~Chief ~~2004~~Financial Officer and Treasurer.

~~During the first half of 2005, 112,300 shares of common stock were issued~~- ~~from the exercise of stock options at an average price of $3.68, with proceeds to the Company of approximately $0.4 million.~~ 18 -

During the first quarter of 2005, the Company determined that the anticipated responsibilities and duties of a currently and continuously employed consultant and the former chief executive officer of the Company would not be significant or sufficient enough to justify the continued recognition of the employee’s compensation costs over the remaining two-year term of the employee’s current employment and consulting agreement9. ~~The Company determined a new measurement date in connection with stock options to purchase approximately 1.1 million shares of the Company’s common stock currently held by the former executive with~~ DEBT the purpose of recognizing compensation expense for accounting purposes in the first quarter of 2005. The Company also determined that a new measurement date of January 5, 2005, was appropriate for stock options previously granted to a former vice president and chief operating officer of the Company whose current duties and responsibilities as an executive advisor would not be significant or sufficient enough to justify the scheduled vesting of his remaining stock options to purchase approximately 100,000 shares of the Company’s common stock over the remaining term of his employment agreement, which expires March 6, 2006. As a result, the Company recognized compensation expense of approximately $0.4 million in the first quarter of 2005. Consequently, the total cost of approximately $2.2 million recognized during the first quarter of 2005, consisted of $0.3 million toward compensation expense, $0.1 million toward lifetime medical benefits for the former CEO and spouse and $1.8 million toward compensation expense related to stock options outstanding. Expense related to the outstanding stock options held by the former CEO was determined using the intrinsic value method, in accordance with APB No. 25, Accounting for Stock Issued to Employees, as amended, and the closing price of the Company’s stock as of March 11, 2005 of $6.20 per share. The Company applied the intrinsic value method to the stock options held by a former vice president and chief operating officer based on the closing price of the Company’s stock as of January 5, 2005 of $7.19.

~~During the second quarter of 2005, the Company recognized approximately $13,000 in compensation expense related to a new measurement date of April 7, 2005~~The ~~in connection with the extension of the exercise date by which the~~ Company’s ~~previous~~consolidated ~~Chief~~debt ~~Financial~~payable ~~Officer~~is ~~could~~summarized ~~exercise~~as ~~his stock options upon his resignation on April 7, 2005.~~ follows:

-17-

	December 31, 2004		September 30, 2005
			(Unaudited)

(a) Term loan - MTM, S.r.l		22,000		-
(b) Revolving promissory note - LaSalle Business Credit, LLC		7,680		5,940
(c) Term loan - Unicredit Banca Medio Credito S.p.A.		-		10,241
(d) Term loan -Italian Ministry of Industry		-		929
(e) Short-term loan - Banca Credito Cooperativo di Cherasco		-		-
(g) Other loans		93		455
Capital leases		198		191
	$	29,971	$	17,756
Less: current portion		10,420		9,027
Non-current portion	$	19,551	$	8,729

~~Table~~(a) Term Loan of- ~~Contents~~MTM S.r.l.

11On December 23, 2004 the Company entered into a loan agreement (“MTM Loan”) with MTM S.r.l. ~~ACCRUED~~(“MTM”), ~~WARRANTY~~a ~~COSTS~~wholly owned subsidiary of BRC pursuant to which the Company borrowed $22.0 million for the purpose of prepaying the Company’s loan from Bison Capital Structured Equity Partners (“Bison Loan”) in the amount of $22.0 million, which included the principal of $20.0 million, a prepayment penalty of $1.0 million and accrued interest of $1.0 million. The terms of the MTM Loan require the Company to make quarterly principal payments of $0.65 million during the first and second years, $0.8 million, during the third year, $1.0 million during the fourth year, $1.15 million during the fifth year and a $5.0 million payment of unpaid principal at the conclusion of the term on December 31, 2009. Mr. Costamagna and his brother, Pier Antonio Costamagna, who serves as Chief Engineering Officer of MTM, have personally guaranteed the repayment of the MTM Loan. The variable interest rate on the MTM Loan is based on the 3-month EURIBOR rate plus 1.5% per annum, which was approximately 3.7% and 3.7% at January 1, 2005 and October 1, 2005, respectively. The Company paid principal and interest payments of $853,500, $844,819 and $838,888 on March 31, 2005, June 30, 2005 and September 30, 2005, respectively. For purposes of balance sheet presentation, the September 30, 2005 outstanding balance of approximately $20.1 million has been eliminated upon consolidation of BRC financial statements with those of IMPCO. The MTM Loan may be accelerated in the event that any payment is not made within 15 days of the due date, if the employment of Mariano Costamagna, the Company’s Chief Executive Officer, is terminated for any reason (with certain exceptions for termination upon Mr. Costamagna’s death), if the Company materially breaches his employment agreement or upon written notice of any other default under the MTM Loan. Additionally, Mariano Costamagna and Pier Antonio Costamagna have guaranteed the MTM Loan. In return for Messrs. Costamagnas’ guarantee, the Company has pledged its equity interest in BRC as collateral in the event the guarantee is utilized. The MTM Loan contains restrictive covenants limiting the Company’s ability to: (a) incur additional indebtedness other than unsecured trade credit, capital leases and additional indebtedness pursuant to the senior Credit Facility with LaSalle (described below); (b) merge, consolidate or sell the Company’s assets; (c) purchase, retire or redeem the Company’s capital stock; and (d) make capital expenditures in excess of $2.5 million in any fiscal year. The shares of BRC are also pledged as security for the MTM Loan. The MTM Loan also contains a cross default provision linked with the Credit Facility (described below).

~~Based in part on historical experience, the Company estimates the cost of future warranty obligations related to certain products and recognizes it in the~~(b) Revolving ~~cost~~ Promissory ofNote—LaSalle ~~operations~~Business ~~in the period in which it recognizes the related revenues. Changes in the Company’s product warranty liability during the three and six months ended June 30~~Credit, ~~2004~~LLC ~~and 2005 are as follows:~~

	Three Months EndedJune 30,						Six Months EndedJune 30,
	2004			2005			2004			2005
Warranty reserve:
Balance at beginning of period	$	591		$	1,719		$	674		$	1,376
New warranties issued		76			74			51			164
Warranties settled		(4	)		(101	)		(62	)		(235	)
Warranties reserved for BRC		—			—			—			387
Balance at end of period	$	663		$	1,692		$	663		$	1,692

On July 18, 2003, the Company entered into a revolving promissory note (“Credit Facility”) with LaSalle Business Credit, LLC (“LaSalle”) for a maximum amount of $12.0 million bearing an annual interest rate of prime plus 1%. The borrowings under the Credit Facility have been used for working capital purposes. On March 29, 2005, the Company and LaSalle mutually agreed to reduce the maximum borrowing amount under the Credit Facility to $9.0 million and extended the Credit Facility one additional year, to July 18, 2007. The Company’s availability under this Credit 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, 2005, approximately $5.9 million was outstanding under the Credit Facility and approximately $2.3 million was unused and available. Approximately, $0.3 million was recognized as interest expense in the first nine months of 2005. At December 31, 2004 and June 30, 2005, the Company was in default under the terms of the Credit Facility since it did not meet certain financial covenants at the end of the fourth quarter of 2004 and the second quarter of 2005, respectively. The Company renegotiated its covenants at December 31, 2004 and at June 30, 2005 to include revised covenants for the third and fourth quarters of 2005, and obtained a waiver for the second quarter of 2005. The Company was in compliance with the revised covenants at September 30, 2005. Under the terms of the Credit Facility, the annual interest rate was 6.25% at December 31, 2004 and 7.75% at September 30, 2005.

~~12. RELATED PARTY TRANSACTIONS~~- 19 -

~~The following table sets forth amounts that are included within the captions noted on the balance sheets at December 31, 2004 and June 3, 2005~~(c) Term ~~representing~~ Loan ~~related~~- ~~party~~Unicredit ~~transactions~~Banca ~~within~~Medio ~~the~~Credito ~~Company~~S.p.A.

	December 31,2004		June 30,2005
Current Receivables:
IMPCO-BRC Mexicano (a)	$	1,993	$	2,665
MTE S.r.l. (d)		—		5
Jehin Engineering Company Ltd. (f)		—		570
Minda IMPCO Limited (b)		753		659
WMTM Equipamento de Gases Ltd. (g)		—		2,671
	$	2,746	$	6,570
Non-current Receivables:
IMPCO-BRC Mexicano (a)	$	851	$	—
WMTM Equipamento de Gases Ltd. (g)		—		3,464
	$	851	$	3,464
Current Payables:
MTM, S.r.l. (c)	$	—	$	—
MTE S.r.l. (d)		—		1,230
Europlast S.r.l. (e)		—		662
TCN S.r.l. (e)		—		822
IMPCO-BRC Mexicano (a)		—		482
	$	—	$	3,196
Current Portion of Term Loan
MTM, S.r.l. (c)	$	2,600	$	—
Term Loan
MTM, S.r.l. (c)	$	19,400	$	—

On December 2, 2004, MTM entered into a five-year unsecured loan agreement (“Unicredit Loan”) with Unicredit Banca Medio Credito S.p.A. (“Unicredit”) of Italy in which MTM received approximately $13.6 million based on the December 31, 2004 exchange rate of $1.36 to the euro. The primary purposes of the Unicredit Loan were to improve MTM’s working capital and to consolidate various mid- to long-term debt obligations with a single lender on more attractive terms. The payment terms are such that MTM will make quarterly principal payments of approximately $0.6 million throughout the term of the Unicredit Loan, which matures on December 31, 2009, with interest based on the 3-month EURIBOR rate plus 1%, which was 3.2% at September 30, 2005. At September 30, 2005, the amount outstanding under the Unicredit Loan was approximately $10.2 million. The Unicredit Loan requires that MTM maintain a debt to equity ratio of less than 0.80 and MTM is not allowed to remit dividends based on income for the fiscal years 2004 and 2005. At September 30, 2005, MTM was in compliance with these requirements.

(ad) Term Loans ~~IMPCO~~-~~BRC~~ ~~Mexicano~~Italian isMinistry ~~50%~~of ~~owned~~Industry ~~by IMPCO and was established in December 2004.~~

~~(b)~~In 1998 and ~~Minda~~2002, ~~IMPCO~~BRC ~~Limited~~entered isinto ~~50%~~unsecured ~~owned~~loan byagreements ~~IMPCO~~with ~~and~~the ~~was~~Italian ~~established~~Ministry of inIndustry ~~December~~for ~~2004~~the aspurpose aof ~~result~~funding the acquisition of aproperty, ~~recombination~~plant and equipment ofand ~~previous~~research ~~ownership~~and ~~interests~~development ~~with~~expenditures. ~~joint~~The ~~venture~~loans ~~partner~~are ~~Minda~~repayable through ~~Industries~~annual installments and through 2011 at an effective interest rate of 6.9%. ~~India~~At September 30, 2005, approximately $0.9 million was owed under these agreements.

(ce) ~~MTM, S.r.l. is a wholly owned subsidiary~~ Line of ~~BRC~~Credit ~~S.r.l.,~~- ~~which~~Banca ~~was~~Credito ~~50%~~Cooperativo ~~owned~~di byCherasco ~~IMPCO at December 31, 2004. Remaining 50% acquired on March 31, 2005, and, accordingly, intercompany balances are eliminated upon consolidation.~~

~~(d)~~At September ~~MTE~~30, S2005, BRC had an unsecured line of credit of approximately $1.r3 million with no outstanding balance.l In addition, BRC has a $7.4 ismillion line ~~50%~~of credit ~~owned~~secured by ~~MTM~~customer account receivable drafts, Sof which none was outstanding at September 30, 2005.r The interest rate on these short-term borrowings was approximately 3.l0% per annum at September 30, 2005.

(ef) Other Finance ~~The~~Loans ~~Chief Executive Officer of IMPCO serves on the board of directors of and owns 40% of Europlast and 30% of TCN.~~

~~(f)~~In April and ~~Jehin~~June ~~Engineering~~of ~~Ltd.~~2005, Isthe 13Company financed, through a third party lender, certain insurance policies, a total of approximately $0.6%9 ~~owned~~million, bywhich ~~BRC;~~are ~~BRC~~payable within ~~has~~a ~~significant~~year ~~influence~~from ~~and~~the ~~uses~~date of financing. At September 30, 2005, the ~~equity~~balance of these ~~method~~outstanding toloans ~~consolidate~~total approximately $0.5 million bearing an annual interest rate of 6.45%.

~~(g) WMTM Equipamento de Gases Ltd~~10. STOCKHOLDERS’ EQUITY ~~is 50% owned by BRC S.r.l. and is consolidated using the equity method.~~

~~-18-~~In February 2005, the Company completed a public offering in which it sold 4,600,000 shares of IMPCO common stock to investors and realized net proceeds of approximately $24.1 million based on a selling price of $5.75 and net of issuance costs of approximately $2.3 million. As a precondition to the remaining 50% acquisition of BRC that was completed on March 31, 2005, the Company used approximately $10.0 million of the proceeds as payment to the sellers of BRC. The remaining cash proceeds from the equity offering are being used primarily for working capital purposes.

~~Table~~On March 10, 2005, the Company’s stockholders approved the BRC acquisition (see note 8) and the issuance of ~~Contents~~5,098,284 shares of common stock in accordance with the October 22, 2004 Equity Purchase Agreement between the Company and the equity holders of BRC. On March 31, 2005, the Company completed the acquisition of BRC by issuing the same number of shares of the Company stock at a weighted average stock price of $5.74, valued at approximately $29.3 million based on the price of the Company’s stock for three trading days prior to and following the agreement date of October 22, 2004.

~~Loans~~During the nine months ended September 2005, the Company issued 419,250 shares of common stock from the exercise of stock options at an average price of $3.80, with proceeds to ~~Executive~~the ~~Officer~~Company of approximately $1.6 million.

~~In December 2000, the Company loaned an officer of the Company $100,000. The loan, which was due and payable on July 31,~~- ~~2002, initially bore interest at a rate of 5% per annum and, bore interest at a rate of 9% per annum from June 30, 2001 until it was repaid in full on March 31, 2004.~~ 20 -

InDuring the ~~September~~first ~~2001~~quarter of 2005, the Company ~~loaned~~determined ~~this~~that the anticipated responsibilities and duties of a currently and continuously employed consultant and the former chief executive officer ~~$175~~of the Company would not be significant or sufficient enough to justify the continued recognition of the employee’s compensation costs over the remaining two-year term of the employee’s current employment and consulting agreement. The Company determined a new measurement date in connection with stock options to purchase approximately 1,100,000 shares of the Company’s common stock currently held by the former executive with the purpose of recognizing compensation expense for accounting purposes in the first quarter of 2005. The ~~loan~~Company ~~bears~~also ~~interest~~determined atthat a new measurement ~~rate~~date of ~~10%~~January ~~per~~5, ~~annum~~2005, was appropriate for stock options previously granted to a former vice president and ~~became~~chief operating officer ~~due~~ of the Company’s international operations whose current duties and ~~payable~~responsibilities onas an ~~July~~executive 31advisor would not be significant or sufficient enough to justify the scheduled vesting of his remaining stock options to purchase approximately 100,000 ~~2002.~~shares ~~The~~of ~~amount~~the ~~outstanding~~Company’s atcommon ~~June~~stock 30over the remaining term of his employment agreement, ~~2005~~which ~~was~~expires March 6, 2006. As a result, the Company recognized compensation expense of approximately $~~52,000~~0.4 Onmillion ~~July~~in 29the first quarter of 2005. Consequently, the total cost of approximately $2.2 million recognized during the first quarter of 2005, consisted of $0.3 million toward compensation expense, $0.1 million toward lifetime medical benefits for the former chief executive officer and ~~fully~~spouse ~~repaid~~and $1.8 million toward compensation expense related to stock options outstanding. Expense related to the ~~remaining~~outstanding ~~balance~~stock ~~due~~options ~~including~~held ~~accrued~~by ~~interest~~the former chief executive officer was determined using the intrinsic value method, in accordance with APB No. 25, Accounting for Stock Issued to Employees, as amended, and the closing price of the Company’s stock as of March 11, 2005 of $6.20 per share. The Company applied the intrinsic value method to the stock options held by the former vice president and chief operating officer based on the closing price of the Company’s stock as of January 5, 2005 of $7.19.

~~Other~~During the nine months ended September 30, 2005, the Company recognized approximately $13,000 in compensation expense related to a new measurement date of April 7, 2005 in connection with the extension of the exercise date by which the Company’s previous chief financial officer could exercise his stock options upon his resignation on April 7, 2005.

~~BRC leases buildings in Italy from IMCOS2 S~~11.~~r.l., a company owned 100% by Messrs. Costamagna, for the amounts of~~ ACCRUED ~~approximately~~ WARRANTY ~~$175,000~~COSTS ~~and $350,000 for the three and six months ended June 30, 2005, respectively.~~

13Based in part on historical experience, the Company estimates the cost of future warranty obligations related to certain products and recognizes it in the cost of operations in the period in which it recognizes the related revenues. ~~EQUITY~~Changes in the ~~INVESTMENTS~~Company’s product warranty liability during the three and nine months ended September 30, 2004 and 2005 are as follows:

The following table sets forth the Company’s share in the (earnings) losses or other expenses in unconsolidated affiliates for the three month and six month periods ended June 30, 2004 and 2005:


Warranty reserve:	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2005			2004			2005

Balance at beginning of period	$	663		$	1,315		$	674		$	1,376
New warranties issued		(28	)		420			23			605
Warranties settled		(5	)		(129	)		(67	)		(375	)
Balance at end of period	$	630		$	1,606		$	630		$	1,606

	Three Months EndedJune 30,						Six Months EndedJune 30,
	2004			2005			2004			2005
Share in BRC earnings	$	(423	)		—		$	(613	)	$	(1,146	)
Share in Minda (earnings) losses		(19	)		(37	)		35			6
Share in IMPCO BRC Mexicano losses		—			95			—			177
IMPCO Egypt expenses		—			—			—			21
Amortization of BRC equipment step-up		90			—			180			90
Other BRC related expenses		29			—			115			—
Total	$	(323	)	$	58		$	(283	)	$	(852	)

12. RELATED PARTY TRANSACTIONS

~~On December 31, 2004,~~The ~~the~~ following ~~Company~~table ~~completed~~sets ~~the~~forth ~~reorganization~~amounts ofthat ~~its~~are ~~interests~~included inwithin ~~India~~the ~~such~~captions noted on ~~that~~ the ~~Company’s~~balance ~~joint~~sheets ~~venture~~at ~~interests in India were reduced to 50% from 60%. On~~ December 31, 2004, ~~the~~and ~~Company~~September ~~also established a 50% ownership in a joint venture~~30, ~~IMPCO-BRC~~ ~~Mexicano,~~2005 which became the Company’s primary operating entity in Mexico. The Company believes that it has significant influence but not effective control over these two entities because (1) in each case, the Company does not have therepresenting ~~power~~ related toparty ~~elect~~transactions awithin ~~majority of~~ the ~~combined entity’s directors (2) the operational and day-to-day control of the combined entity is controlled by the~~ Company~~’s partner in each of the joint ventures and (3) budgets and plans for each of the entities are developed by the partner~~.

~~During 2004, the~~- ~~Company’s primary operating entity in Mexico was IMPCO Mexicano, which continues to be fully consolidated with the financial results of the Company.~~ 21 -

The Company’s interests in IMPCO Egypt were written off in 2004 in the amount of approximately $150,000.

	September 30,
	2004		2005

Current Receivables:
IBMexicano (a)	$	1,993	$	2,163
MTE S.r.l. (b)		-		14
Jehin Engineering Company Ltd (c)		-		20
Minda IMPCO Limited (d)		753		79
WMTM Equipamento de Gases Ltd (e)		-		1,452
MTM Hydro S.r.l.(f)		-		2
	$	2,746	$	3,730

Non-current Receivables:
IBMexicano (a)	$	851	$	-

Current Payables:
MTE S.r.l. (b)	$	-	$	1,236
Europlast S.r.l. (g)		-		704
TCN S.r.l. (g)		-		779
IMCOS Due S.r.l. (h)		-		723
Biemmedue S.p.a. (h)		-		20
MTM Hydro S.r.l.(f)		-		4
IMCO/BRC Egypt (i)		-		2
IBMexicano (a)		-		151
	$	-	$	3,619

Current Portion of Term Loan
MTM, S.r.l (j)	$	2,600	$	-

Term Loan
MTM, S.r.l (j)	$	19,400	$	-

Noncurrent Liability
IBMexicano (a)	$	-	$	195

On(a) ~~March~~IBMexicano ~~31,~~is ~~2005, the Company completed its acquisition of the remaining~~ 50% of ~~BRC.~~owned Asby ~~such, the Company has fully consolidated BRC’s results of operations for the second quarter ended June 30, 2005 with those of~~ IMPCO ~~for~~and ~~the~~was ~~same~~established ~~period.~~in ~~The~~December ~~Company had already consolidated the balance sheet of BRC at March 31, 2005, when it completed its acquisition of BRC~~2004.

14(b) MTE, S.r.l. ~~SUBSEQUENT~~is ~~EVENT~~50% owned by MTM, S.r.l., a 100% owned subsidiary of BRC.

~~Seattle~~(c) ~~facility~~Jehin ~~closure~~Engineering Ltd. is 13.6% owned by BRC; BRC has significant influence and uses the equity method to consolidate

On(d) ~~March~~Minda ~~18,~~IMPCO ~~2005,~~Limited ~~the~~is ~~Company~~50% ~~announced~~owned ~~its~~by ~~intention~~IMPCO ~~to close the Seattle facility~~ and ~~relocate~~was ~~key~~established ~~technical~~in ~~personnel~~December to2004 ~~other~~as ~~IMPCO~~a ~~facilities.~~result ~~On July 7, 2005, the Company received approval from the landlord~~ of ~~the Seattle facility for the Company to proceed with~~ a ~~sublease~~recombination ~~agreement in which the facility would be subleased for the remainder~~ of ~~the~~previous ~~lease~~ownership ~~term~~interests ~~through September 2011. The Company does not assume any additional liability under the sublease agreement that it had not already assumed under the master lease agreement~~ with ~~the~~joint ~~landlord.~~venture ~~The~~partner ~~Company~~Minda isIndustries obligated under the agreement to substantially exit the facility by August 1, 2005 and to make restorations to the facility by October 31, 2005. The Company recognized approximately $1.0 million during the three months ended June 30, 2005 for accelerated amortization for leasehold improvements, furniture and fixtures and approximately $0.5 million will be recognized during the third quarter of ~~2005~~India. ~~In the aggregate, the Company expects to incur approximately $2.2 million in expenses, of which approximately $0.8 million will represent cash outflows.~~

~~-19-~~(e) WMTM Equipamento de Gases Ltd. is 50% owned by BRC S.r.l. and is consolidated using the equity method.

~~Table~~(f) The Chief Executive Officer (“CEO”) of ~~Contents~~IMPCO owns 62% of MTM Hydro S.r.l. with his immediate family and serves on its board.

~~ITEM~~(g) 2.The ~~MANAGEMENT’S~~CEO ~~DISCUSSION~~of ~~AND~~IMPCO ~~ANALYSIS~~serves OFon ~~FINANCIAL~~the ~~CONDITION~~board ~~AND~~of ~~RESULTS~~directors OFand ~~OPERATIONS~~owns 20% of Europlast and 30% of TCN with his immediate family.

~~FORWARD-LOOKING~~(h) ~~STATEMENTS~~The CEO of IMPCO owns 100% of Imcos Due S.r.l. and 100% of Biemmedue S.p.a. with his immediate family and serves on each of their boards.

~~This~~(i) ~~Quarterly~~IMPCO/BRC ~~Report~~Egypt onis ~~Form~~50% ~~10-Q,~~owned ~~particularly~~by ~~including Management’s Discussion and Analysis of Financial Condition and Results of Operations that follows, contains forward-looking statements that involve risks and uncertainties~~IMPCO. 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, those described in the section below entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Readers should refer to the risk factors disclosed from time to time in our other SEC filings and shareholder communications for discussions of various issues which may impact our financial condition or results of operations in the future. Readers should not place undue reliance on these forward-looking statements, which reflect our views as of the date of filing this Quarterly Report on Form 10-Q.

~~In this report, references to the “Company” and to first-person pronouns, such as “we,” “our” and “us,” refer to IMPCO Technologies, Inc.~~ (~~“IMPCO”~~j) ~~and its consolidated subsidiaries~~MTM, ~~unless the context otherwise requires~~S. ~~The acquisition of B~~r.Rl.C. ~~Societá~~was ~~a Responsabilitá~~50% ~~Limitata~~owned ~~(“BRC”)~~by ~~was~~IMPCO ~~completed~~at onDecember ~~March~~ 31, ~~2005.~~2004 ~~Consequently,~~and ~~the~~100% ~~financial~~owned ~~statements~~by ~~of BRC are fully consolidated with~~ IMPCO’s ~~financial~~at ~~statements~~March ~~as of June 30~~31, 2005.

~~OVERVIEW~~ - 22 -

~~We design, manufacture and supply components, complete certified engine systems and fuel systems that include fuel metering,~~Loans ~~electronic control and fuel storage products that enable internal combustion engines~~ to ~~run~~Executive onOfficer clean burning alternative fuels such as propane and natural gas instead of gasoline. Based on over 46 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.

WeIn September ~~classify our business into three business segments: U.S. Operations~~2001, ~~IMPCO International~~the ~~Operations~~Company ~~(“IMPCO~~loaned ~~International”)~~an ~~and~~officer ~~BRC Operations~~$175,000. ~~U.S.~~The ~~Operations~~loan ~~sell~~carried an interest ~~products,~~rate ~~including~~of ~~complete~~10% ~~certified~~per ~~engines,~~annum ~~parts~~ and ~~conversion~~became ~~systems,~~due ~~for~~and ~~applications~~payable inon ~~the~~July ~~transportation~~31, ~~material handling, stationary~~ ~~and portable power generator and general industrial markets~~ 2002. ~~IMPCO~~On July ~~International in Australia~~29, ~~Europe and Japan distributes our products predominantly from U.S. Operations as well as provide some product assembly on engines. BRC Operations designs~~2005, ~~manufactures~~ ~~and sells alternative fuel systems primarily into~~ the ~~automotive~~officer ~~and~~fully ~~transportation~~repaid ~~markets throughout~~ the ~~world.~~remaining ~~BRC~~balance ~~Operations~~due ~~sells product to IMPCO International and records a sale on its financial statements. Accordingly, on the~~including ~~consolidated~~ accrued ~~financial statements these transactions are eliminated~~interest.

We recognize revenue from 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 andOther 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 include the material handling, stationary and portable power generator and general industrial markets.

Revenues for the three and six months ended June 30, 2005 increased by approximately $16.1 million and $12.5 million to $48.6 million and $73.6 million, respectively, from $32.5 million and $61.1 million,BRC ~~respectively,~~ leases ~~for~~buildings ~~the same periods~~ in ~~2004.~~Italy ~~We attribute the increase in net revenues primarily to the revenues~~ from ~~BRC,~~IMCOS ~~which~~Due ~~was fully consolidated in our financial statements for the quarter ended June 30, 2005, offset by decrease in revenues from U.~~S. ~~operations as well as due to the absence of revenues from India and Mexico that we no longer consolidate~~r.l., On a ~~proforma~~company ~~basis~~owned ~~for purposes of comparison, assuming BRC had been consolidated since January 1, 2004, our combined revenues for~~100% ~~the~~ by ~~three and six month periods ended June 30, 2005 would have been $48~~Messrs.6 Costamagna ~~million~~ and ~~$92.8~~members ~~million, respectively, representing an increase~~ of ~~$2.9~~their ~~million~~immediate ~~or 6.2%~~ famililes, for the amounts ~~quarter and an increase~~ of ~~$7.8 million or 9.2% for the six-month period in~~ ~~2004,~~ approximately ~~respectively. Net income for the three months ended June 30, 2005 was~~ $~~1.2 million~~175,000 orand $~~0.04 per share~~525,000 ~~compared to $1.0 million, or $0.05 per share,~~ for the ~~same~~three ~~period~~and innine ~~the prior year. Net loss for the six~~ months ended ~~June 30, 2005 was~~ ~~$(1.0)~~ September ~~million, or ($0.04) per share, compared to net income of $1.5 million, or $0.08 per share, for six months ended June~~ 30, 2004. We attribute the second quarter income of approximately $1.2 million partially to a $1.3 million unrealized foreign exchange gain on the MTM loan (the “MTM Loan”). For the six months ended June 30, 2005, ~~we recognized approximately $1~~respectively.9 million in unrealized foreign exchange gains on the MTM loan due to the strengthening of the U.S. dollar against the euro. We cannot predict that future foreign exchange fluctuations will have the same favorable impact on future quarterly results that have occurred during the first six months of 2005. Our second quarter net income was

~~-20-~~13. EQUITY INVESTMENTS

~~Table~~The following oftable ~~Contents~~sets forth the Company’s share in the (earnings) losses or other expenses in unconsolidated affiliates for the three months and nine months ended September 30, 2004 and 2005:

also affected unfavorably by the acceleration of leasehold improvement amortization expense of approximately $1.0 million in relation to the closure of the Seattle facility. We expect to record an additional $1.2 million in charges against income during the third quarter of 2005 in connection with the closure of the facility.

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2004			2005		2004			2005

Share in BRC earnings		565			-	$	1,178		$	1,146
Share in earnings of BRC affiliates		-			55		-			202
Share in Minda earnings (losses)		4			30		(31	)		(50	)
Share in IB Mexicano earnings (losses)		-			53		-			(197	)
IMPCO Egypt expenses		-			-		-			(21	)
Other BRC related expenses		(134	)		-		(429	)		(90	)
Total	$	435		$	138	$	718		$	990

~~RECENT~~On December ~~DEVELOPMENTS~~31, 2004, the Company completed the reorganization of its interests in India such that the Company’s joint venture interests in India were reduced to 50% from 60%. On December 31, 2004, the Company also established a 50% ownership in a joint venture, IMPCO-BRC Mexicano, which became the Company’s primary operating entity in Mexico. The Company believes that it has significant influence but not effective control over these two entities because (1) in each case, the Company does not have the power to elect a majority of the combined entity’s directors (2) the operational and day-to-day control of the combined entity is controlled by the Company’s partner in each of the joint ventures and (3) budgets and plans for each of the entities are developed by the partner.

~~Business Acquisition. On March 31, 2005, we completed the acquisition of BRC by issuing 5,098,284 shares of our common stock at a value of $5.74~~During ~~per share based on the weighted average closing prices for the three days prior to and following October 22,~~ 2004, ~~and $10.0 million in cash to~~ the ~~sellers of BRC in exchange for the remaining 50% of BRC. We had initially acquired 50% of BRC in July 2003 for approximately $23.8 million. Beginning on March 31, 2005, we consolidated BRC~~Company’s ~~balance~~primary ~~sheet;~~operating ~~however,~~entity ~~since,~~in ~~the~~Mexico ~~transaction~~ was ~~not~~IMPCO ~~completed until the end of the first quarter~~Mexicano, ~~we did not consolidate BRC’s statements of~~which ~~operations~~ continues orto ~~cash~~be ~~flows~~fully ~~for~~consolidated ~~that period. Beginning~~ with the ~~second~~financial ~~quarter of 2005, we consolidated BRC’s~~ results of ~~operations with our results. The following table sets forth on an unaudited basis~~ the ~~pro forma results for the six months~~Company. ~~ended~~ During ~~June 30~~2005, ~~2005~~the asCompany’s ifprimary ~~the~~operating ~~acquisition~~entity ~~had~~in ~~occurred~~Mexico onwas ~~January 1~~IBMexicano, ~~2005:~~a 50% joint venture.

	Six Months EndedJune 30, 2005		Ref
Pro Forma Statement of Operations:
Revenue	$	92,830
Costs and expenses:
Cost of revenue		67,302
Research and development expense		4,514	(a	)
Selling, general and administrative expense		17,861	(c	)
Acquired in-process technology		75	(b	)
Total costs and expenses		89,752
Operating income		3,078
Other income		2,219	(d	)
Interest expense, net		317
Income before income taxes and equity share in loss of unconsolidated affiliates		4,980
Equity share in loss of unconsolidated affiliates		41
Income tax expense		4,086	(e	)
Income before minority interests		853
Other expense
Minority interest in income of consolidated subsidiaries		519
Net income	$	334
Basic net income per share	$	0.01
Number of shares used in per share calculation		28,568	(f	)

The Company’s interests in IMPCO Egypt were written off in 2004 in the amount of approximately $150,000.

~~Notes~~On March 31, to2005, the ~~pro~~Company ~~forma~~completed ~~statement~~its acquisition of the remaining 50% of BRC. As such, the Company has fully consolidated BRC’s results of operations: for the second quarter ended June 30, 2005 with those of IMPCO for the same period. The Company had already consolidated the balance sheet of BRC at March 31, 2005, when it completed its acquisition of BRC.

~~(a) Includes approximately $1~~14.0 RELOCATION OF ~~million~~NORTH ~~for~~AMERICAN ~~accelerated~~HEADQUARTERS ~~amortization~~AND ofPRODUCTION ~~leasehold improvements during the three months ended June 30, 2005 in connection with the announced closure during the third quarter of 2005 of the Seattle facility.~~FACILITY

~~(b)~~On September ~~In-process~~6, ~~research~~2005, ~~and~~the ~~development~~Company ~~expense~~signed ofan ~~$75~~agreement to sublease a 108,000 square foot ~~during~~building, including 4,000 square feet of office space, located in Santa Ana, California (the ~~first~~“Santa ~~quarter~~Ana Facility”), for a term of 13 years beginning September 1, 2005, isand ~~related~~plans to relocate its combined corporate headquarters and U.S. manufacturing operations from its current location in Cerritos, California ("Cerritos Facility"), to the ~~purchase~~Santa ~~price~~Ana ~~allocation~~Facility ~~under~~by December 31, 2005. The Company believes the ~~purchase~~new ~~method~~location has sufficient space to modernize and consolidate most of ~~accounting~~its ~~for~~North ~~business~~American ~~consolidations~~production and component engineering facilities. ~~This~~The ~~amount~~Company isplans ~~subject~~to install new state-of-the-art production lines, machining, and test equipment in the Santa Ana Facility. The Company also plans to ~~further~~relocate ~~revisions~~some asof its current U.S. production lines to its BRC facility in Cherasco, Italy. As a global leader in the ~~purchase~~alternative ~~price~~fuels ~~allocation~~marketplace, the Company’s strategy is ~~completed~~to use the improved efficiencies, capabilities and capacity to position it to better serve its markets and to take advantage of new products and new markets.

(c) Includes approximately $2.2 million in compensation, benefits and stock option related expenses during the first quarter of 2005 resulting from reduced responsibilities for two former officers of the Company who are currently employed by the Company as consultants (see Note 10 to the condensed consolidated financial statements).- 23 -

~~(d)~~The annual ~~Includes~~rent ~~approximately~~for the Santa Ana Facility is $2714,000, which is set to increase 3% every year pursuant to the terms of the agreement.5 ~~million~~The ~~unrealized~~terms ~~foreign~~of ~~exchange~~the ~~currency~~agreement also ~~gains~~include rent abatement for the ~~six~~first three months, ~~ended~~subject ~~June~~to 30certain conditions. In connection with this relocation, ~~2005~~the ~~partially~~Company ~~offset~~expects byto recognize approximately $0.68 million in expenses, including approximately $0.3 million for impairment loss onof leasehold improvements and furniture and fixtures, approximately $0.2 million for the recognition of incremental rent expense for the Santa Ana Facility prior to the planned exit of the Cerritos Facility, relocation and set-up costs in the Santa Ana Facility of approximately $0.2 million and the fair value ~~recognition~~of the remaining lease obligation of ~~hedging~~the ~~agreement~~Cerritos Facility ~~(See~~of ~~Note~~approximately 3$0.1 million. The Company recorded approximately $0.1 million of relocation related costs in the three months ended September 30, 2005. The total cash outflows related to this relocation is expected to be approximately $1.3 million, which includes leasehold improvements of approximately $0.9 million in the ~~condensed~~Santa ~~consolidated~~Ana ~~financial~~Facility ~~statements)~~and prepaid expenses of $0.1 million.

-21 24 -

~~Table~~ITEM 2. MANAGEMENT’S DISCUSSION ofAND ~~Contents~~ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~(e)~~FORWARD-LOOKING STATEMENTS ~~Tax provision of $4.1 million is based on a 43.5% effective tax rate for IMPCO International Operations and BRC.~~

~~(f)~~This quarterly ~~Assumes~~report ~~that~~on Form 10-Q, particularly the 4Management’s Discussion and Analysis of Financial Condition and Results of Operations that follows, contains forward-looking statements that involve risks and uncertainties.6 ~~million~~These forward-looking ~~shares~~statements ~~issued~~are ~~with~~not ~~the~~historical ~~equity~~facts ~~offering~~but are statements that are based ~~was~~on ~~completed~~our management’s 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 ~~February~~part ~~2005~~to ~~were~~help ~~issued~~identify onforward-looking ~~January~~statements. These statements 1are not guarantees of future performance or promises of specific courses of action. They are subject to certain risks, ~~2005~~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 these forward-looking statements. ~~Assumes~~These ~~that~~risks and uncertainties include, those described in the 5section below entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.1 ~~million~~Readers ~~shares~~should ~~that~~refer ~~were~~to the risk ~~issued~~factors disclosed from time to ~~the~~time ~~sellers~~in our other SEC filings and stockholder communications for discussions of ~~BRC~~various onissues ~~March~~which ~~31,~~may ~~2005~~impact our ~~were~~financial ~~issued~~condition or results of operations in the future. Readers should not place undue reliance on ~~January~~these 1forward-looking statements, ~~2005~~which reflect our views as of the date of filing this quarterly report on Form 10-Q.

OnIn this quarterly ~~December 23~~report, ~~2004,~~references ~~we entered into a $22.0 million loan agreement with MTM, a wholly owned subsidiary of BRC. The loan proceeds were used~~ to ~~retire all debts and related obligations we had incurred pursuant to a loan agreement dated July 18, 2003 with Bison Capital Structured Equity Partners, LLC (~~the “~~Bison Loan~~Company”). ~~The~~and ~~MTM Loan carries an interest rate equal~~ to 3first-~~month~~person ~~EURIBOR plus 1.5% per annum~~pronouns, ~~which totaled approximately 3.7%~~ such as ~~of January 1~~“we, ~~2005~~” “our” and ~~3.7%~~“us,” atrefer ~~April~~to 1,IMPCO ~~2005~~Technologies, ~~respectively~~Inc. ~~The~~(“IMPCO”) ~~MTM Loan matures on December 31, 2009~~ and its ~~will~~consolidated ~~be repaid in quarterly installments beginning April 1~~subsidiaries, ~~2005,~~unless ~~each payment in~~ the ~~amount~~context ofotherwise ~~not~~requires. ~~less than $650,000 in the first two years, $800,000 in~~Our ~~the~~ acquisition ~~third~~of ~~year,~~B.R.C. ~~$1,000,000~~Societá ~~in the fourth year and $1,150,000 in the final year, with~~ a ~~$5,000,000~~Responsabilitá ~~“balloon~~Limitata ~~payment~~(“BRC”) ofwas ~~the~~completed ~~remaining unpaid principal and interest due~~ on March ~~December~~ 31, ~~2009~~2005. ~~This~~BRC’s ~~loan~~balance ~~may~~sheet bewas ~~accelerated~~consolidated ~~in the event that any payment is not made within 15 days of the date when due, if the employment of our Chief Executive Officer, Mariano Costamagna, is terminated for any reason (~~with ~~certain exceptions for termination upon Mr. Costamagna~~IMPCO’s ~~death),~~as ifof ~~we materially~~March ~~breach his employment agreement~~ 31, or2005 ~~upon~~and ~~written notice of any other uncured event of default under~~ the ~~agreement.~~remaining ~~Using~~financial ~~proceeds~~statements ~~from the MTM Loan, we repaid the Bison Loan on December 30, 2004 in the amount~~ of ~~$20.0~~BRC ~~million~~were ~~plus~~fully ~~a prepayment~~consolidated ~~penalty~~ with ofIMPCO’s ~~$1.0~~financial ~~million~~statements ~~and~~beginning ~~accrued~~April ~~interest of $~~1~~.0 million for a total of $22.0 million. The MTM Loan agreement contains restrictive covenants limiting our ability to: (a) incur additional indebtedness other than unsecured trade credit~~, capital leases and additional indebtedness pursuant to our senior Credit Facility with LaSalle; (b) merge, consolidate or sell our assets; (c) purchase, retire or redeem our capital stock; and (d) make capital expenditures in excess of $22005.~~5 million in any fiscal year.~~

~~We believe that the BRC acquisition, the~~OVERVIEW retirement of the Bison Loan and its replacement with the MTM Loan will be highly beneficial to us in a number of ways, including savings in interest expense we expect to realize, which allows us to increase our product development, sales and marketing, and manufacturing capabilities. Interest expense savings alone are expected to be approximately $2.9 million per year on a consolidated basis estimated by comparing the reduction in principal amount and interest rate from $20.0 million at 18.75% under the Bison Loan to $10.0 million at 3-month EURIBOR plus 1.5% per annum under the MTM Loan and using current EURIBOR rates. Beginning in the second quarter of 2005, we eliminated, upon consolidation, the intercompany interest income and expense related to the $22.0 million MTM Loan.

~~Public Offering. In~~We ~~February 2005~~ design, wemanufacture ~~completed~~and asupply ~~public~~components, ~~offering~~complete incertified ~~which~~engine itsystems and fuel ~~sold~~systems ~~4.6~~that ~~million~~include ~~shares~~fuel ofmetering, ~~common~~electronic ~~stock~~control ~~to investors~~ and ~~realized~~fuel ~~net~~storage products ~~proceeds~~that ofenable ~~approximately~~internal ~~$24.1~~combustion ~~million~~engines ~~based~~to run on aclean ~~selling~~burning alternative ~~price~~fuels ofsuch ~~$5.75~~as propane and ~~net~~natural ofgas ~~issuance~~instead ~~costs~~ of ~~approximately $2~~gasoline.3 Based ~~million.~~ on over As66 ayears ~~precondition~~of toIMPCO’s ~~the~~and ~~remaining 50% acquisition of~~ BRC’s ~~that~~combined ~~was~~technology ~~completed~~development onand ~~March~~expertise in ~~31,~~producing ~~2005~~cost-effective, wesafe ~~used~~and ~~approximately~~durable ~~$10.0~~fuel ~~million~~technology ofsystems ~~the~~for engines ~~proceeds as payment~~ to the ~~sellers~~world-wide ofmarket, ~~BRC.~~we ~~The~~believe ~~remaining~~we ~~cash~~are ~~proceeds~~positioned ~~from~~to ~~the~~provide enabling ~~equity~~products ~~offering~~and ~~will be~~technologies ~~used~~in ~~primarily~~the ~~for~~rapidly ~~working~~expanding ~~capital~~alternative ~~purposes~~fuel industry.

~~Management~~We classify ~~Transition~~our business into three business segments: U.S. Operations, IMPCO International Operations (“IMPCO International”) and BRC Operations. 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. IMPCO International in Australia, Europe and Japan distributes our products predominantly from U.S. Operations as well as provides some product assembly on engines. BRC Operations designs, manufactures and sells alternative fuel systems primarily into the automotive and transportation markets throughout the world. BRC Operations sells product to IMPCO International and records a sale on its financial statements. Accordingly, on the consolidated financial statements these transactions are eliminated.

OnWe recognize ~~January~~revenue 1for product sales when persuasive evidence of an arrangement, such ~~2005~~as agreements, ~~Mariano~~purchase ~~Costamagna~~orders or written requests, ~~the~~exists; ~~Managing~~delivery ~~Director~~ has been ofcompleted ~~BRC,~~and ~~became~~no significant obligations remain; our price to the ~~Chief~~buyer is fixed ~~Executive~~or ~~Officer~~determinable; and ~~President~~collection ofis ~~IMPCO,~~probable. ~~and~~Corporate onexpenses ~~the~~represent general ~~same~~and ~~day,~~administrative ~~Robert~~expense. ~~Stemmler~~Intersegment ~~resigned~~eliminations asare primarily the result ~~Chief~~of ~~Executive~~intercompany ~~Officer~~sales offrom ~~IMPCO~~U.S. OnOperations ~~April~~to 6,International ~~2005, Mr~~Operations. End ~~Stemmler~~markets ~~also~~for ~~resigned~~our ~~from~~products include the ~~board~~transportation ofand ~~directors,~~industrial ~~effective~~markets, ~~May~~ which 3include the material handling, ~~2005~~stationary and portable power generator and general industrial markets.

OnRevenues for ~~April~~the three and nine months ended September 30, 2005 increased by approximately $19.0 million or 63.2% and $31.6 million or 34.6% to $49.1 million and $122.7 million, respectively, from $30.1 million and $91.1 million, respectively, for the same periods in 2004. We attribute the increase in net revenues primarily to the revenues from BRC, which was fully consolidated in our financial statements beginning with the quarter ended June 30, 2005, ~~Nickolai~~offset by decrease Ain revenues from U.S. ~~Gerde~~Operations ~~resigned~~as well as due to the absence of ~~IMPCO’s~~ revenues ~~Vice~~from ~~President~~India and Mexico that we no longer consolidate. On a pro forma basis for purposes of ~~Finance~~comparison, ~~Chief~~assuming ~~Financial~~BRC ~~Officer~~had been consolidated since January 1, 2004, our combined revenues for the three and ~~Treasurer~~nine months ended September 30, 2005 would have been $49.1 Onmillion ~~May~~and 18$141.9 million, respectively, representing an increase of $4.0 million or 8.9% for the quarter and an increase of $11.4 million or 8.8% for the nine months ended September 30, 2004, respectively. Net loss for the three months ended September 30, 2005 was $9.2 million, ~~Thomas~~or M$0.32 ~~Costales~~per diluted share, compared to net income of $0.5 million, or $0.03 per diluted share, for the same period in the prior year. Net loss for the nine months ended September 30, 2005 was ~~appointed~~$10.2 ~~interim~~million, ~~Chief~~or ~~Financial~~$0.39 per ~~Officer~~diluted share, compared to net income of $2.0 million, or $0.10 per diluted share for nine months ended September 30, 2004. We attribute the third quarter net loss of approximately $9.2 million and ~~Treasurer~~the nine months net loss of approximately $10.2 million primarily to an increase in the valuation allowance for deferred tax assets of $8.7 million. Additionally, the acceleration aof ~~position~~leasehold heimprovement ~~previously~~amortization ~~had~~in ~~held~~relation ~~from~~to ~~1990~~the closure of the Seattle facility contributed approximately $0.5 million and $1.5 million to our ~~1995~~net losses for the three and nine months ended September 30, 2005, respectively. For the nine months ended September 30, 2005, we recognized approximately $2.0 million in net unrealized foreign exchange gains on the MTM Loan due to the strengthening of the U.S. dollar against the euro. We do not forecast that fluctuations in future foreign exchange rates will have a similar favorable impact on future results of our operations.

~~Closure of the Seattle Facility~~ - 25 -

~~On March 18, 2005, we announced our intention to close the Seattle facility~~RECENT ~~and~~ DEVELOPMENTS relocate key technical personnel to other IMPCO facilities. On July 7, 2005, we received approval from the landlord of the Seattle facility for the Company to proceed with a sublease agreement in which the facility would be subleased for the remainder of the lease term through September 2011. We did not assume any additional liability under the sublease agreement that we had not already assumed under the master lease agreement with the landlord. We are obligated under the agreement to substantially exit the facility by August 1, 2005 and to make restorations of the facility by October 31, 2005. We have recognized approximately $1.0 million during the three months ended June 30, 2005 for accelerated amortization of leasehold improvements, furniture and fixtures and approximately $0.5 million will be recognized during the third quarter of 2005. In the aggregate, we expect to record approximately $2.2 million in expenses, of which approximately $0.8 million will represent cash outflows.

~~CRITICAL~~Business Acquisition. ~~ACCOUNTING~~We had acquired ~~POLICIES~~the ~~AND~~initial ~~ESTIMATES~~50% of BRC in July 2003 for approximately $23.8 million. On March 31, 2005, we completed the acquisition of BRC by issuing 5,098,284 shares of our common stock at a value of $5.74 per share based on the weighted average closing prices for the three days prior to and following October 22, 2004, and $10.0 million in cash to the sellers of BRC in exchange for the remaining 50% of BRC. Beginning on March 31, 2005, we consolidated BRC’s balance sheet with IMPCO’s balance sheet; however, since the transaction was not completed until the end of the first quarter, we did not consolidate BRC’s statements of operations or cash flows for that period. Beginning with the second quarter of 2005, we consolidated BRC’s results of operations with our results. The following table sets forth on an unaudited basis the pro forma results for the nine months ended September 30, 2005, as if the acquisition had occurred on January 1, 2005:

~~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 26 ~~statements requires management to make estimates and judgments that affect the reported amounts~~ -

-22-


	Nine Months Ended September 30,
Pro Forma Statement of Operations:	2005			Ref

Revenue	$	141,903
Costs and expenses:
Cost of revenue		102,144
Research and development expense		7,003			(a	)
Selling, general and administrative expense		27,211			(b	)
Amortization of intangible assets		2,861			(c	)
Acquired in-process technology		204			(d	)
Total costs and expenses		139,423
Operating income		2,480
Other income		2,197			(e	)
Interest expense, net		(443	)
Income before income taxes and equity share
in income of unconsolidated affiliates		4,234
Equity share in income of unconsolidated affiliates		98
Income tax expense		(13,001	)		(f	)
Loss before minority interests and cumulative effect of a change in accounting principle		(8,669	)
Minority interest in income of consolidated subsidiaries		783
Net loss before cumulative effect of a change in accounting principle		(9,452	)
Cumulative effect of a change in accounting principle		(117	)
Net loss	$	(9,569	)

Basic net loss per share	$	(0.33	)

Number of shares used in per share calculation:		28,611			(g	)

~~Table~~Notes to the pro forma statement of ~~Contents~~operations:

of(a) ~~assets,~~Includes ~~liabilities,~~approximately ~~revenues~~$1.5 ~~and~~million ~~expenses,~~in ~~and~~accelerated ~~related~~amortization ~~disclosure~~ of ~~contingent~~leasehold ~~assets~~improvements ~~and~~in ~~liabilities.~~connection Onwith an on-going basis, we evaluate our estimates, including those related to doubtful receivables, 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,~~closure ~~the results~~ of ~~which form~~ the ~~basis~~Seattle ~~for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources~~facility. ~~Actual results may differ from these estimates under different assumptions or conditions.~~

~~We believe~~(b) ~~the~~Includes ~~following~~approximately ~~critical~~$2.2 ~~accounting~~million ~~policies~~in ~~affect~~compensation, ~~the~~benefits ~~more~~and ~~significant~~stock ~~judgments~~option ~~and~~related ~~estimates~~expenses ~~used~~for intwo ~~the~~former ~~preparation~~officers of ~~our~~the Company (see note 10 to the condensed consolidated financial statements: ).

We(c) ~~recognize~~Nine ~~revenue~~months’ ~~from~~amortization ~~product~~expense ~~sales~~for ~~when~~intangibles ~~title~~recorded isas ~~transferred~~a orresult ~~when the earnings process is complete, ordinarily when products are shipped, and when management is reasonably assured~~ of ~~collectibility.~~purchase ~~The~~price ~~costs of shipping and handling, when incurred, are recognized in the cost of goods sold~~allocation. .

We(d) ~~expense~~In-process ~~all~~ research and development ~~when~~expense ~~incurred~~of $0.2 ~~Equipment~~million ~~used~~is inrelated ~~research~~to ~~and~~the ~~development~~purchase ~~with~~price ~~alternative~~allocation ~~future uses~~under isthe ~~capitalized.~~purchase method of accounting for business consolidations.

We(e) ~~provide~~Includes ~~for~~primarily ~~the~~$2.6 ~~estimated~~million ~~cost~~unrealized ~~of product~~foreign ~~warranties~~exchange atcurrency ~~the~~gains ~~time~~in ~~revenue~~connection iswith ~~recognized.~~the ~~While~~MTM weLoan ~~engage~~(see innote ~~product~~9(a) ~~quality~~to ~~programs~~the ~~and~~condensed ~~processes,~~consolidated ~~including~~financial ~~actively~~statements) ~~monitoring~~for ~~and evaluating~~ the ~~quality~~nine ofmonths ~~our~~ended ~~component~~September ~~suppliers~~30, ~~our~~2005 ~~warranty~~partially ~~obligation~~offset ~~is affected~~ by ~~product failure~~approximately ~~rates, material usage and service delivery costs incurred in correcting a product failure~~$0.7 ~~Should~~million ~~actual~~fair ~~product~~value ~~failure~~loss ~~rates,~~of ~~material~~derivative ~~usage~~instrument or(see ~~service~~note ~~delivery~~3 ~~costs differ from our estimates, revisions~~ to the ~~estimated~~condensed ~~warranty~~consolidated ~~liability may~~financial ~~be required~~statements).

We(f) ~~write~~Tax ~~down~~provision ~~our~~of ~~inventory~~$13.0 ~~for~~million ~~estimated obsolescence~~is orbased ~~unmarketable~~on ~~inventory~~a ~~equal~~42% toeffective ~~the~~tax ~~difference~~rate ~~between~~for ~~the~~IMPCO ~~cost~~International, ofexcluding ~~inventory~~IMPCO Mexicano, and ~~the~~BRC ~~estimated~~and ~~market~~includes ~~value~~an ~~based~~increase ~~upon~~in ~~assumptions~~the ~~about~~valuation ~~future~~allowance ~~demand~~of ~~and~~$8.7 ~~market~~million ~~conditions.~~for Ifdeferred ~~actual~~tax ~~market~~assets ~~conditions~~in ~~are~~the ~~less~~third ~~favorable~~quarter ~~than~~of ~~those projected~~2005 by(see ~~management,~~note ~~additional~~7 ~~inventory~~to ~~write-downs~~the ~~may~~condensed beconsolidated ~~required.~~financial statements).

We(g) ~~maintain~~Assumes ~~allowances~~that ~~for~~the ~~doubtful~~4,600,000 ~~accounts~~shares ~~for~~issued ~~estimated~~with ~~losses~~the ~~resulting~~equity ~~from~~offering ~~the~~that ~~inability~~was ofcompleted ~~our~~in ~~customers~~February to2005 ~~make~~were ~~required~~issued ~~payments.~~on IfJanuary ~~the~~1, ~~financial~~2005; ~~condition~~also ofassumes ~~our~~that ~~customers~~the ~~were~~5,100,000 toshares ~~deteriorate,~~that ~~resulting~~were ~~in an~~issued ~~impairment~~to ofthe ~~their~~sellers ~~ability~~of toBRC ~~make~~on ~~payments~~March 31, ~~additional~~2005 ~~allowances~~were ~~may~~issued beon ~~required.~~January 1, 2005.

~~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. 27 -

WeOn December ~~record~~23, a2004, ~~net~~we ~~deferred~~entered ~~tax~~into ~~asset~~the $22.0 million MTM Loan with MTM, ~~which~~a wholly owned subsidiary of BRC. The loan proceeds were used to retire all debts and related obligations we ~~believe~~had isincurred ~~more~~pursuant ~~likely~~to ~~than~~the ~~not~~Bison Loan dated July 18, 2003 with Bison Capital Structured Equity Partners, LLC (the “Bison Loan”). The MTM Loan carries an interest rate equal to be3-month EURIBOR ~~realized~~plus 1.5% Weper ~~consider~~annum, ~~future~~which ~~taxable~~totaled ~~income~~approximately 3.7% as of January 1, 2005 and ~~ongoing~~3.7% ~~prudent~~at October 1, 2005, respectively. The MTM Loan matures on December 31, 2009 and ~~feasible~~will ~~tax~~be ~~planning~~repaid ~~strategies~~in quarterly installments beginning April 1, 2005, each payment in ~~assessing~~the amount of not less than $0.65 million in the first ~~need~~two years, ~~for~~$0.8 amillion ~~valuation~~in ~~allowance~~the third year, $1.0 Inmillion in the ~~event~~fourth year weand $1.15 ~~were~~million in tothe ~~determine~~final year, with a $5.0 million “balloon payment” of the remaining unpaid principal and interest due on December 31, 2009. This loan may be accelerated in the event that weany ~~would~~payment is not bemade ~~able~~within 15 todays of ~~realize~~the ~~all~~date orwhen ~~part~~due, if the employment of our ~~net~~Chief Executive Officer, ~~deferred~~ Mariano Costamagna, ~~tax~~is ~~asset~~terminated for any reason (with certain exceptions for termination upon Mr. Costamagna’s death), if we materially breach his employment agreement, or upon written notice of any other uncured event of default under the agreement. Using proceeds from the MTM Loan, we repaid the Bison Loan on December 30, 2004 in the ~~future~~amount of $20.0 million plus a prepayment penalty of $1.0 million and accrued interest of $1.0 million for a total of $22.0 million. The MTM Loan contains restrictive covenants limiting our ability to: (a) incur additional indebtedness other than unsecured trade credit, ancapital leases and additional ~~valuation~~indebtedness ~~allowance~~pursuant ~~would~~to beour Credit ~~recognized~~Facility with LaSalle; (b) merge, consolidate or sell our assets; (c) purchase, retire or redeem our capital stock; and ~~charged~~(d) ~~against~~make ~~income~~capital expenditures in ~~the~~excess ~~period~~of ~~such~~$2.5 amillion in any ~~determination~~fiscal ~~was made~~year.

~~We recognize changes in the fair value of a foreign currency hedging agreements as a component of other income and expense on the condensed~~Public consolidated statement of operations, unless the hedging agreement qualifies under hedge accounting. If hedge accounting applies, changes in the fair value of the hedging agreement would be deferred as a component of shareholders’ equity. We also record foreign currency transaction gains and losses as other income and expense on the condensed consolidated statement of operations. Offering

~~-23-~~ In February 2005, we completed a public offering in which we sold 4,600,000 shares of our common stock to investors and realized net proceeds of approximately $24.1 million based on a selling price of $5.75 per share and net of issuance costs of approximately $2.3 million. As a precondition to the remaining 50% acquisition of BRC that was completed on March 31, 2005, we used approximately $10.0 million of the proceeds as payment to the sellers of BRC. The remaining cash proceeds from the equity offering will be used primarily for working capital purposes.

~~Table~~Management Transition ~~of Contents~~

~~RESULTS~~On January OF1, ~~OPERATIONS~~2005, Mariano Costamagna, the Managing Director of BRC, became the Chief Executive Officer and President of IMPCO, and on the same day, Robert Stemmler resigned as the Chief Executive Officer of IMPCO. On April 6, 2005, Mr. Stemmler also resigned from the board of directors, effective May 3, 2005.

~~Revenue~~On April 7, ~~and~~2005, ~~operating~~Nickolai ~~income~~A. ~~for~~Gerde ~~consolidated~~resigned as IMPCO’s ~~(unaudited)~~Vice ~~for~~President ~~the~~of ~~three~~Finance, Chief Financial Officer and ~~six~~Treasurer. ~~months~~On ~~ended~~May ~~June~~18, 302005, ~~2004~~Thomas ~~and~~M. ~~2005~~Costales was ~~including~~ appointed ~~the~~interim ~~effect~~Chief ofFinancial ~~the~~Officer ~~BRC~~and ~~acquisition~~Treasurer, ~~beginning~~a ~~with~~position ~~the~~he previously ~~three~~had ~~months~~held ~~ended~~from ~~June~~1995 ~~30,~~to ~~2005,~~2000. ~~and~~On ~~the~~September ~~classification~~20, of2005, ~~the~~Mr. ~~BRC~~Costales was appointed ~~Operations~~Chief asFinancial aOfficer ~~business~~and ~~segment:~~Treasurer.

	Revenues Three Months EndedJune 30,						Revenues Six Months EndedJune 30,
	2004			2005			2004			2005
U.S. Operations	$	25,473		$	22,222		$	48,265		$	42,231
IMPCO International Operations		10,255			6,889			19,707			15,059
BRC Operations (4)		—			21,515			—			21,515
Intersegment Elimination		(3,250	)		(2,021	)		(6,891	)		(5,195	)
Total	$	32,478		$	48,605		$	61,081		$	73,610
	Operating IncomeThree Months EndedJune 30,						Operating Income Six Months EndedJune 30,
	2004			2005			2004			2005
U.S. Operations	$	4,079		$	1,973		$	7,006		$	3,830
IMPCO International Operations		1,015			191			2,289			1,033
BRC Operations (4)		—			3,078			—			3,078
Corporate Expenses (1) (2) (3)		(1,717	)		(2,301	)		(3,392	)		(7,136	)
Intersegment Elimination		(407	)		(331	)		(502	)		(379	)
Total	$	2,970		$	2,610		$	5,401		$	426

Seattle Facility Closure

~~(1)~~On March 18, ~~Represents~~2005, ~~corporate~~we ~~expenses~~announced ~~not~~our ~~allocated~~intention to ~~any~~close the Seattle facility and relocate key technical personnel to other IMPCO facilities. On July 7, 2005, we received approval from the landlord of the ~~operating~~Seattle ~~segments~~facility to proceed with an agreement to sublease the facility for the remainder of the lease term through September 2011. We did not assume any additional liability under the sublease agreement that we had not already assumed under the master lease agreement with the landlord. We exited the facility on August 1, 2005 and are obligated to make restorations to the facility by October 31, 2005. We recognized approximately $1.5 million in accelerated amortization for leasehold improvements, furniture and fixtures. During 2005, we expect to record approximately $2.2 million in expenses, of which approximately $0.8 million will represent cash outflows.

~~(2) Includes $75,000 in~~-~~process R&D expense for the six months ended June 30, 2005.~~ 28 -

~~(3) Includes, for the six months ended June 30, 2005, $2.2 million in expense related to compensation, lifetime medical benefits and previously granted stock options to two former executive officers~~ Relocation of North ~~the~~American ~~Company~~Headquarters ~~(see note 8 to the condensed consolidated financial statements); $1.5 million in professional fees;~~ and ~~$0.3 million in equipment lease costs.~~ Production Facility

(On September 6, 2005, we signed an agreement to sublease a 108,000 square foot building, including 4,000 square feet of office space, located in Santa Ana, California (the “Santa Ana Facility”), ~~Includes~~for a term of 13 years beginning September 1, 2005. We plan to relocate our combined corporate headquarters and U.S. manufacturing operations from its current location in Cerritos, California (Cerritos Facility), to the ~~effect~~Santa Ana Facility during the first quarter of 2006. We also plan to relocate some of our current U.S. production lines to our BRC facility ~~beginning~~in ~~with~~Cherasco, Italy. We believe the ~~three~~new ~~months~~location ~~ended~~has ~~June~~sufficient space 30to modernize and consolidate most of our North American production and component engineering facilities. We plan to install new state-of-the-art production lines, ~~2005~~machining, and test equipment in the Santa Ana Facility. As a global leader in the alternative fuels marketplace, our strategy is to use the improved efficiencies, capabilities and capacity to position us to better serve our markets and to take advantage of new products and new markets.

~~Revenues~~The annual ~~increased~~rent ~~approximately~~for ~~$16.1~~the ~~million,~~Santa orAna ~~6.2%,~~Facility tois $~~49.7~~714,000, ~~million~~which inis ~~the~~set ~~second~~to ~~quarter~~increase 3% every ofyear ~~2005~~pursuant ~~from~~to ~~$32.5 million in~~ the ~~second~~terms ~~quarter~~ of ~~2004~~the agreement. The ~~increase~~terms inof ~~revenues for~~ the ~~second~~agreement also ~~quarter~~include ofrent ~~2005~~abatement ~~was~~for the ~~result~~first ofthree ~~$21.5~~months, ~~million~~subject ofto ~~revenues~~certain conditions. ~~from~~In ~~BRC~~connection ~~recorded~~with inthis ~~the~~relocation, ~~second~~we ~~quarter~~expect ofto ~~2005~~recognize approximately ~~offset by a decline of~~ $30.28 million, ~~$1.6~~in ~~million~~expenses, ~~and~~including approximately $0.63 million in ~~revenues~~ for impairment ~~from~~loss ~~our~~of ~~U.S.~~leasehold ~~Operations,~~improvements ~~Mexican~~and ~~operation~~furniture and ~~Indian operations~~fixtures, approximately ~~respectively~~$0.2 ~~The~~million ~~reduction~~for ~~of revenues in our Mexican and Indian operations is attributed to~~ the ~~establishment~~recognition of ~~joint~~incremental ~~ventures~~rent in expense for the ~~fourth~~Santa ~~quarter~~Ana ofFacility ~~2004~~prior into ~~Mexico and India, which are no longer consolidated with our operating results. We include our 50% ownership in these entities by applying~~ the ~~equity~~planned ~~method~~exit of ~~accounting~~the ~~which~~Cerritos ~~recognizes~~Facility, relocation ~~only~~and ~~our~~set-up ~~share~~costs in ~~their respective earnings. By market segment,~~ the ~~increase~~ inSanta ~~revenues~~Ana ~~for~~Facility ~~the second quarter~~ of ~~2005 of~~ approximately $160.1 2 million ~~over~~and the ~~corresponding~~fair ~~period~~value inof ~~2004~~the ~~was~~remaining ~~the~~lease ~~result~~obligation of anthe ~~increase~~Cerritos Facility ~~in revenues in our transportation market segment~~ of approximately $170.61 million,. ~~offset~~We byrecorded aapproximately $10.5 1 million ~~decline in our industrial market segment. The increase in our transportation segment was due primarily to the inclusion~~ of ~~BRC~~relocation ~~revenues~~related ascosts ~~part of our transportation segment beginning with the second quarter of 2005. The reduction of approximately $1.5 million~~ in ~~our industrial market segment during~~ the three months ended ~~June~~September 30, 2005. The total ascash ~~compared~~outflows related to ~~the~~this ~~same~~relocation ~~period~~is inexpected ~~2004~~to ~~was~~be ~~primarily~~approximately $1.3 ~~due~~million towhich aincludes ~~leveling-off~~leasehold ofimprovements ~~shipments~~ of ~~our~~approximately ~~certified engine packages and fuel systems in our U~~$0.S.9 ~~Operations.~~ million in ~~During~~ the ~~three~~Santa ~~months~~Ana ~~ended~~Facility ~~June 30, 2004, we responded to the January 1, 2004 effective date for new~~ and ~~more~~prepaid ~~stringent~~expenses ~~EPA regulations with higher shipments~~ of ~~the~~$0.1 ~~certified engine systems than for the same period in 2005~~million.

~~For the six months ended June 30, 2005, revenues increased by~~CRITICAL ~~$12.5~~ ACCOUNTING ~~million,~~POLICIES orAND ~~20.5%,~~ESTIMATES from $61.1 million in the same period of 2004. The increase in revenues for the six months ended June 30, 2005 was due to a $21.5 million increase from BRC offset by a decline of $4.3 million, $4.6 million and $1.0 million in revenues from our U.S. Operations, Mexican operation and Indian operations, respectively, and an increase of $0.9 million in our Netherlands operation. By market segment, the increase in revenues for the first half of 2005 of approximately $12.5 million over the corresponding period in 2004 was due to an increase in revenues in our transportation market segment by $15.4 million offset by a $2.9 million decline in our industrial market segment. The increase in our transportation segment was due primarily to the inclusion of BRC revenues of approximately $21.5 million as part of our transportation segment beginning with the second quarter of 2005, partially offset by the reduction of approximately $4.6 million and $1.0 million in our Mexican and Indian markets due to the change to the equity method of accounting for the results of these operations. The reduction of approximately $2.9 million in our industrial market segment during the six months ended June 30, 2005 as compared to the same period in 2004 was primarily due to a leveling-off of shipments of our certified engine packages and fuel systems in our U.S. Operations business segment, a softening of demand in our power generation market and the completion of an OEM program in U.S. Operations business segment.

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-24going basis, we evaluate our estimates, including those related to doubtful receivables, 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.

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

~~Operating income decreased during the second quarter of 2005 by approximately $0.4 million, or 12.1%,~~We ~~from~~ recognize arevenue ~~$3.0~~for ~~million~~product insales ~~the~~when ~~second~~persuasive ~~quarter~~evidence of ~~2004 to $2.6 million in the second quarter of 2005. The decline in operating income was due to~~ an ~~increase of gross profit of $4.5 million due to $16.1 million in higher revenues offset by $4.9 million in~~arrangement, ~~higher~~ such ~~operating~~as ~~expenses.~~agreements, ~~The~~purchase ~~increases~~order inor ~~both~~written ~~gross profit and operating expenses are attributed primarily to the inclusion of BRC financial results for the second quarter of 2005~~requests, ~~which~~exists; ~~included approximately $6.2 million in gross profit,~~delivery ~~approximately~~ has been ~~$3.1~~completed ~~million in operating expenses~~ and ~~approximately~~no ~~$3.1~~significant ~~million~~obligations inremain; ~~operating~~our ~~income.~~price ~~Gross profit for U.S. Operations and IMPCO International including eliminations declined approximately $1.7 million due~~ to ~~reduced~~the buyer ~~revenues of~~is ~~approximately~~ fixed ~~$5.4~~or ~~million~~determinable; and ~~operating~~collection ~~expenses~~is ~~increased approximately $1~~probable.8 ~~million~~The ~~due~~costs ~~to accelerated amortization~~ of ~~$1.0~~shipping and handling, ~~million~~when ~~related~~incurred, toare ~~the~~recognized ~~closure~~in of the ~~Seattle~~cost ~~facility, higher equipment leasing costs~~ of ~~$0.3~~goods ~~million and higher outside professional fees of $0~~sold.4 ~~million.~~

~~Operating income decreased~~We ~~during~~ expense ~~the~~all ~~six~~research months ended June 30, 2005 by approximately $5.0 million, or 92.1%, from a $5.4 million in the first half of 2004 to $0.4 million in the first half of 2005. The decline in operating income was due to an increase of gross profit of $3.8 million due to $12.5 million in higher revenues offset by $8.7 million in higher operating expenses. The increases in both gross profit and ~~operating~~development ~~expenses~~when ~~are attributed primarily to the inclusion of BRC financial results for the six months ended June 30, 2005, which included approximately $6~~incurred.2 ~~million~~Equipment inused ~~gross profit, approximately $3.1 million~~ in ~~operating expenses and approximately $3.1 million in operating income. Gross profit for U.S. Operations and IMPCO International including~~research ~~eliminations declined approximately $2.5 million due to reduced revenues of approximately $9.0 million~~ and operating expenses increased approximately $5.7 million due to accelerated amortization of $1.0 million related to the closure of the Seattle facility, higher audit fees of $0.8 million, higher equipment leasing costs of $0.3 million and higher outside professional fees of $0.6 million, approximately $2.2 million in higher compensation and benefits costs related primarily to a new measurement date for stock options granted to two of our former officers and approximately $0.1 million for in-process research and development ~~expenditures~~with ~~related~~alternative tofuture ~~the~~uses ~~acquisition~~is ~~of BRC, increased development costs for new products of $0~~capitalized.~~3 million~~ ~~and other of $0.4 million.~~

~~U.S. Operations~~We ~~For~~ provide ~~the~~for ~~three months ended June 30, 2004, revenues decreased by approximately $3.3 million to $22.2 million, or 12.8%, from $25.5 during~~ the ~~same~~estimated ~~period~~cost inof ~~the~~product ~~prior~~warranties ~~year.~~at ~~The decrease in revenues during~~ the ~~second~~time ~~quarter of 2005 was due~~revenue ~~primarily to a $2~~ is recognized.3 ~~million~~While ~~decrease~~we engage in ~~the~~product ~~industrial~~quality ~~market~~programs and aprocesses, including actively ~~$1.0~~monitoring ~~million~~and ~~decrease~~evaluating ~~in transportation market. During~~ the ~~second~~quality ~~quarter~~ of ~~2004, revenues in~~ our ~~industrial~~component ~~market were increasing significantly due to shipments of~~ suppliers, our ~~certified~~ ~~engine~~ warranty ~~systems~~obligation tois ~~customers~~affected ~~required~~by toproduct ~~comply~~failure ~~with the EPA regulations effective January 1~~rates, ~~2004~~material ~~that~~usage and service ~~imposed~~delivery ~~more~~costs ~~stringent~~incurred ~~emissions~~in ~~requirements~~correcting ona ~~certain~~product ~~“off-road” vehicles~~failure. ~~During~~Should actual product ~~the~~failure ~~second quarter of 2005~~rates, ~~shipments~~material ofusage ~~our certified~~or ~~engine~~service ~~systems~~delivery ~~into~~costs ~~distribution~~differ from ~~were lower than during the same period in the prior year because the initial demand for certified engines was met during 2004. Revenues declined in~~ our ~~transportation market segment by approximately $1.0~~ ~~million~~ estimates, ~~primarily~~revisions asto ~~a result of~~ the ~~completion~~estimated ofwarranty aliability ~~vehicle~~may ~~conversion~~be ~~program~~required.

~~For~~We write down ~~the~~our ~~six~~inventory ~~months~~for ~~ended~~estimated ~~June~~obsolescence ~~30, 2005, revenues from U.S. Operations decreased by approximately $6.0 million to $42.3 million,~~ or ~~12.5%,~~unmarketable ~~from~~inventory equal ~~$48.3 million during~~ to the ~~same~~difference ~~period~~between in the ~~prior~~cost ~~year.~~of ~~The~~inventory ~~decrease~~and ~~in net revenues during~~ the ~~second~~estimated ~~quarter~~market ofvalue based ~~2005~~upon ~~was~~assumptions ~~due~~about ~~primarily~~future todemand aand $4market conditions.4 ~~million~~If ~~decrease~~actual market inconditions ~~the~~are ~~industrial~~less ~~market~~favorable ~~and~~than athose ~~$1.6~~projected ~~million~~by ~~decrease~~management, additional ininventory ~~the~~write-downs ~~transportation~~may ~~market~~be required.

~~For the three months ended June 30, 2005, U.S. Operations recorded operating income of $2.0 million compared to $4.1 million~~- in operating income during the same period in the prior year. Operating income was lower in the three months ended June 30, 2005 due to $1.1 million in lower gross profit due to lower revenues of $3.3 million and higher operating expenses of 29 ~~approximately $1.0 million due primarily to the acceleration of the amortization of leasehold improvements at the Seattle facility.~~ -

~~For~~We maintain ~~the~~allowances ~~six~~for ~~months~~doubtful ~~ended~~accounts ~~June~~for ~~30,~~estimated ~~2005,~~losses ~~U.S.~~resulting from the ~~Operations~~inability ~~recorded operating income~~ of ~~$3.8~~our ~~million~~customers ~~compared~~ to ~~$7.0~~make ~~million~~required ~~in operating income during the same period in the prior year~~payments. ~~Operating~~If ~~income was lower in~~ the ~~six~~financial condition ~~months~~of ~~ended~~our ~~June~~customers ~~30,~~were ~~2005 due~~ to ~~$1.8~~deteriorate, ~~million~~resulting in ~~lower~~an ~~gross profit from lower revenues~~ impairment of their ~~$6.0~~ability ~~million and higher operating expenses of approximately $1.4 million due primarily~~ to ~~the~~make ~~amortization of leasehold improvements at the Seattle facility~~payments, additional ~~product~~allowances ~~development~~may ~~costs~~be ~~of $0~~required.~~3 million and other costs of $0.1 million.~~

~~IMPCO~~We operate ~~International~~wholly-owned ~~Operations~~and ~~For~~majority-owned ~~the three months ended June 30, 2005, revenues decreased by approximately $3~~subsidiaries.4 ~~million,~~We orrecord ~~32.8%,~~goodwill at ~~to $6.9~~the ~~million~~ time ~~from~~of ~~$10.3~~purchase ~~million~~for ~~during~~ the ~~same~~amount ~~period~~of in the ~~prior~~purchase ~~year.~~price ~~The~~over ~~decrease in revenues during~~ the ~~second~~fair ~~quarter~~ values of ~~2005 was primarily due to~~ the ~~reduction~~assets ~~in our ownership in Mexico~~ and ~~India~~liabilities toacquired. ~~50%,~~Future ~~when~~adverse wechanges ~~changed~~in tomarket ~~the equity method to~~conditions ~~recognize~~ or ~~the~~poor operating results of ~~operations~~underlying ininvestments ~~these~~could ~~countries.~~result ~~For~~in ~~the six months ended June 30, 2005, revenues decreased by approximately $4.7 million,~~ losses or ~~23.4%,~~an inability to ~~$15.1~~recover ~~million from $19.7 million during~~ the ~~same~~carrying ~~period~~value inof the ~~prior~~goodwill, ~~year.~~thereby ~~The decrease in~~possibly ~~revenues~~ requiring ~~during~~an ~~the~~impairment ~~first~~charge ~~half~~in ~~of 2005 was primarily due to~~ the ~~changes made in our ownership structure in Mexico and India~~future.

~~For~~We amortize ~~the~~intangible ~~three~~assets ~~and~~acquired ~~six~~if ~~months~~they ~~ended~~are ~~June~~determined ~~30,~~to ~~2005,~~have ~~operating~~definite useful ~~income decreased by approximately $0~~lives.8 ~~million,~~Certain orintangible ~~81.2%~~assets, ~~and~~such byas ~~approximately~~acquired ~~$1.3~~technology ~~million,~~and ~~or 54.9%~~ trade names, ~~respectively,~~are asamortized ~~compared~~on toa ~~the~~straight-line ~~same~~basis ~~periods~~over intheir ~~2004~~estimated reasonable useful lives. WeCertain ~~recorded~~other ~~additional~~intangible ~~reserves~~assets, ~~during~~such ~~the~~as, ~~second~~customer ~~quarter~~relationships are ~~for~~amortized ~~inventory~~using inan ~~our~~accelerated ~~Mexican~~method ~~operations~~since ~~for~~the ~~$0.4~~value ~~million~~of customer relationships ~~and~~is ~~recorded~~expected ~~other~~to ~~operating~~decline ~~expenses~~at ofa ~~approximately~~faster $0rate.~~2 million.~~

~~-25-~~We record a net deferred tax asset, which we believe is more likely than not to be realized. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net deferred tax asset in the future, an additional valuation allowance would be recognized and charged against income in the period such a determination was made.

~~Table~~We recognize changes in the fair value of ~~Contents~~a foreign currency hedging agreements as a component of other income and expense on the condensed consolidated statement of operations, unless the hedging agreement qualifies under hedge accounting. If hedge accounting applies, changes in the fair value of the hedging agreement would be deferred as a component of stockholders’ equity. We also record foreign currency transaction gains and losses as other income and expense on the condensed consolidated statement of operations.

~~BRC Operations BRC Operations became an operating segment of our business for the second~~- ~~quarter of 2005. BRC’s revenues and operating income for the second quarter of 2005 were approximately $21.5 million and $3.1 million, respectively.~~ 30 -

~~Corporate Expenses Corporate expenses consist of general and administrative expenses that support our~~RESULTS ~~operating~~ OF ~~segments~~OPERATIONS in areas such as executive management, finance, human resources, management information systems, professional legal and accounting services and investor relations. Corporate expenses for the three months ended June 30, 2005 were $2.3 million or $0.6 million higher than the same period of fiscal year 2004. For the six months ended June 30, 2005, corporate expenses were $7.1 million or $3.7 million greater than expenses recorded during the corresponding period of the prior year. Corporate expenses were higher in the three months ended June 30, 2005 due to higher outside professional fees of $0.4 million and higher equipment leasing costs of $0.3 million and other costs of $0.1 million. For the six months ended June 30, 2005, higher corporate costs were incurred in the amount of $3.7 million as compared to the same period in the prior year primarily due to approximately $2.2 million in higher compensation and benefits expenses related to the first quarter 2005 determination that the stock options currently held by two of our former officers required revised measurement dates in connection with their reduced responsibilities during the remaining terms of their respective employment agreements, increased costs of $0.3 million for equipment leasing and $1.5 million for increased outside professional fees incurred in the first and second quarters of 2005 in connection with the filing of our Form 10-K and Form 10-Q.

~~Interest Expense Net interest expense for the three months~~Revenue ended June 30, 2005 was approximately $0.1 million compared to $1.5 million for the corresponding period of 2004, or a decrease of $1.4 million, or 91.8%. This decrease is attributed to the prepayment of the $20.0 million Bison Loan in December 2004. During the second quarter of 2004, we were subject to a default rate of interest of 15.75% on a loan balance of $20.0 million. We also recognized non-cash interest expenses in the second quarter of 2004 in the amount of approximately $0.5 million due to amortization of approximately $7.5 million in debt issuance costs attributed to the Bison loan. In December 2004, BRC concluded a loan agreement in the amount of approximately $13.6 million, in which BRC will be required to pay $0.6 million in principal payments and ~~interest~~operating ~~based~~income ~~on the 3-month EURIBOR rate plus 1% per annum, which was approximately 3.2% at June 30, 2005. Accordingly, approximately $0.1 million was paid and recognized in the statement of operations~~ for the three months ended June 30, 2005. Net interest expense for the six months ended June 30, 2005 was approximately $0.4 million as compared to $2.7 million for the comparable period of 2004. During the first quarter of 2005 and prior to the consolidation of BRC at March 31, 2005, we recognized interest expense in our consolidated ~~financial statements in connection with a loan between~~ IMPCO ~~and MTM, a wholly owned subsidiary of BRC from which we borrowed $22.0 million in December 2004 for the purpose of prepaying the Bison loan in December 2004~~ (~~see Note 9(a~~unaudited) to the condensed consolidated financial statements). The MTM loan bears interest based on the 3-month EURIBOR rate plus 1.50% per annum, which was approximately 3.7% during the second quarter of 2005. Accordingly, approximately $0.2 million was paid in interest and recognized in the statement of operations for the three and nine months ended ~~March~~September ~~31, 2005. Following the acquisition of BRC this expense is eliminated upon consolidation of BRC. Interest expense during the six month period ended June~~ 30, 2004 ~~included the effect of a default rate of interest under the Bison loan that averaged 14.25%~~ and ~~15.75%~~2005: during the first and second quarters of 2004, respectively, or approximately $1.5 million in total for the six month period. Approximately $1.0 million for non-cash interest expenses in the first and second quarters of 2004 was recognized in connection with the amortization of approximately $7.5 million in debt issuance costs attributed to the Bison loan.

Other Income and Expense In connection with the MTM Loan between IMPCO and MTM for $22.0 million in December 2004 and the hedging agreement by BRC during the first quarter of 2005 for the purpose of hedging the quarterly payments due under the MTM Loan, we recognized as other income and expense unrealized foreign exchange gains and losses with respect to “marking to market” of the MTM loan balance, and gains and losses with respect to the fair value determination of the hedging agreement. In the three months ended June 30, 2005, we recognized approximately $1.3 million in unrealized gains on foreign exchange between the U.S. dollar and the euro partially offset in the same periods by a recognized loss on the hedging agreement of approximately $0.7 million, respectively.

	Revenues						Revenues
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2005			2004			2005

U.S. Operations	$	23,807		$	20,324		$	72,073		$	62,555
IMPCO International		9,367			7,411			29,074			22,470
BRC Operations (1)		-			23,026			-			44,540
Intersegment Elimination		(3,110	)		(1,688	)		(10,001	)		(6,882	)
Total	$	30,064		$	49,073		$	91,146		$	122,683

We routinely conduct transactions in currencies other than our reporting currency, the U.S. dollar. We cannot estimate or forecast the direction or the magnitude of any foreign exchange movements with any currency that we transact in; therefore, we cannot measure or predict the future impact of foreign currency exchange rate movements upon our consolidated financial statements.

	Operating Income						Operating Income
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2005			2004			2005

U.S. Operations	$	3,035		$	1,449		$	10,050		$	5,280
IMPCO International		952			(346	)		3,241			687
BRC Operations (2) (3) (4)		-			646			-			3,724
Corporate Expenses (5) (6)		(1,913	)		(1,852	)		(5,304	)		(8,989	)
Intersegment Elimination		316			558			(187	)		178
Total	$	2,390		$	454		$	7,800		$	880

Income in Unconsolidated Affiliates For the three and six months ended June 30, 2005, we recognized an expense of approximately $0.1 million and an income of approximately $0.9 million, respectively, as our share in the income or losses of unconsolidated affiliates. For the three and six months ended June 30, 2004, we recognized an income of approximately $0.3 million and $0.3 million, respectively, as our share in the income of unconsolidated affiliates. During the three months ended March 31, 2005, and prior to the acquisition of the remaining 50% of BRC, we recognized in our consolidated financial statements approximately $1.1 million as our share of the earnings of BRC as compared to $0.2 million for the six month period ended June 30, 2004. BRC recorded an 86% increase in revenues, after translation into U.S. dollars, during the first quarter of 2005 over the corresponding quarter of 2004. BRC recognized an unrealized gain on foreign exchange during the first quarter of 2005 of approximately $1.2 million, of which we recognized approximately $0.6 million during the first quarter of 2005. ____________

Provision For Income Taxes During the second quarter ended June 30, 2005, we recognized approximately $2.0 million in income tax expense from our foreign operations representing a 47% effective tax rate. For the U.S. operations, we recorded a tax benefit of approximately $(1.5) ~~million~~Includes ~~based~~BRC onrevenues ~~$2.6 million in losses~~ for the ~~second~~six ~~quarter~~months ended ~~June~~September 30, 2005~~, and a related increase in net deferred tax assets of $ 1~~.5 million attributable to net operating loss carryforwards. After considering the likelihood of recoverability of the additional deferred tax assets, we recognized an increase in the valuation allowance for deferred taxes by the same amount. Consequently, no tax provision was recorded for the U.S. operations during the second quarter ended June 30, 2005.

~~-26-~~(2) Includes BRC operating income for the six months ended September 30, 2005.

~~Table~~(3) Includes $129,000 in-process R&D expense for the three months ended September 30, 2005 related to the acquisition of ~~Contents~~BRC.

~~Management~~(4) ~~will~~Includes, ~~continue~~for ~~to monitor~~ the ~~future~~three ~~recoverability~~months ofended ~~the~~September ~~$8.2 million in deferred tax assets recognized on the balance sheet as of June~~ 30, 2005~~. Included in the foreign tax provision of $2.0 million~~, approximately $1.79 million ofin ~~tax~~amortization expense, orfor anintangible ~~effective~~assets ~~tax~~acquired ~~rate~~from ofBRC ~~41%~~including ona ~~pretax~~"catch ~~income~~up" adjustment of ~~approximately~~ $40.195 million, ~~is related to BRC~~ for the three months ended June 30, 2005.

~~LIQUIDITY~~(5) ~~AND~~Represents ~~CAPITAL~~corporate ~~RESOURCES.~~expenses not allocated to any of the operating segments including $75,000 in-process R&D expense recorded in the three months ended March 31, 2005, related to the BRC acquisition.

~~Our~~(6) ~~ongoing~~Includes, ~~operations~~for ~~are~~the ~~funded~~nine bymonths ~~cash~~ended ~~generated~~September ~~from~~30, ~~operations~~2005, ~~debt~~approximately ~~financings~~$2.2 ~~and sales~~million ofin ~~our~~expense ~~equity~~related ~~securities.~~to ~~In addition~~compensation, ~~these~~lifetime ~~sources~~medical ofbenefits ~~cash~~and ~~provide~~previously ~~for~~granted ~~capital~~stock ~~expenditures~~options ~~and~~to ~~research~~two ~~and~~former ~~development,~~executive asofficers ~~well~~of asthe Company (see note 10 to ~~invest~~the incondensed ~~and~~consolidated ~~operate~~financial ~~our~~statements); ~~existing~~professional ~~operations~~fees of approximately $1.6 million; and ~~prospective~~equipment ~~new~~lease ~~lines~~costs of ~~business~~$0.3 million.

AtRevenues increased ~~June~~approximately 30$19.0 million, ~~2005~~or 63.2%, to $49.1 million in the third quarter of 2005 from $30.1 million in the third quarter of 2004. The increase in revenues for the third quarter of 2005 was the result of $23.0 million of BRC revenues recorded in the third quarter of 2005 offset by a decline of $4.0 million in revenues from our ~~cash~~U.S. Operations and ~~cash~~IMPCO ~~equivalents~~International ~~totaled~~including $1.0 ~~approximately~~million and $161.47 million reduction in revenues from our India operations and Mexico operations, ~~compared~~respectively. The reduction of revenues in our Mexico and India operations is attributed to ~~cash~~the establishment of joint ventures in Mexico and ~~cash~~India ~~equivalents~~in the fourth quarter of 2004 which are not consolidated with our operating results. We include our 50% ownership in these entities by applying the equity method of accounting which recognizes only our share in their respective earnings. By market segment, the increase in revenues for the third quarter of 2005 of approximately $819.40 million atover ~~December~~the corresponding ~~31,~~period in 2004 was the result of increase in revenues of $20.0 million in our transportation market segment, offset by a decline of $1.0 million in our industrial market segment. The increase in our transportation market segment was due primarily to the inclusion of BRC revenues as part of our transportation market segment beginning with the second quarter of 2005.

~~We currently are party to two significant credit agreements:~~ - 31 -

•For the nine Anmonths ~~asset-based~~ended ~~lending~~September ~~facility~~30, ~~with~~2005, ~~LaSalle~~revenues ~~Business~~increased ~~Credit~~by ~~LLC~~$31.6 ~~(“LaSalle”) dated July 22~~million, ~~2003~~ or 34.6%, asto ~~amended~~$122.7 asmillion offrom ~~March~~$91.1 ~~29,~~million ~~2005~~during ~~and~~the ~~August~~same 2,period ~~2005~~in 2004. The increase ~~This~~in ~~revolving~~revenues ~~credit~~for ~~facility~~the ~~carries~~nine anmonths ~~interest~~ended ~~rate~~September ~~per~~30, ~~annum~~2005 ~~equal~~was primarily due to ~~prime~~a ~~plus 1~~$44.~~0%,~~5 ~~which~~million ~~amounted~~increase toin ~~6.25%~~revenues ~~per~~from ~~annum~~BRC. atThis ~~December~~increase ~~31,~~was offset by ~~2004~~a ~~and~~decline 7of $6.~~25% at June 30~~4 million, ~~2005,~~$6.3 million and ~~has~~$2.1 million ain revenues ~~borrowing~~from ~~limit equal to 85% of~~ our ~~eligible~~U.S. ~~accounts~~Operations, ~~receivable~~Mexico ~~plus~~operations ~~the~~and ~~lesser~~India ~~of $4~~operations,~~500~~ respectively,~~000~~ ornet ~~60%~~ of ~~our~~an ~~eligible~~increase ~~inventory~~of as$1.0 million ~~measured~~ from ~~time~~our toNetherlands operation. ~~time,~~By ~~subject~~market tosegment, ~~reasonable~~the ~~reserves~~increase ~~established by LaSalle~~ in ~~its~~revenues ~~discretion,~~for ~~and~~the asfirst nine months of ~~March 29,~~ 2005 ~~carries a maximum borrowing limit~~ of approximately $931.06 million. ~~This~~over ~~lender~~the ~~has~~corresponding aperiod ~~senior security interest~~ in 2004 ~~substantially~~was due ~~all~~to ofan ~~our~~increase ~~assets~~in ~~located~~revenues in ~~the United States. At June 30, 2005~~ our ~~outstanding~~transportation ~~balance~~market ~~under~~segment ~~this loan agreement was~~ by $636.1 9 million, asoffset ~~compared~~by toa $75.73 million atdecline ~~December~~in ~~31, 2004, and~~ our ~~maximum~~industrial ~~available~~market ~~borrowing~~segment. The increase ~~amount~~in ~~based~~our ontransportation ~~eligible~~segment ~~accounts~~was ~~receivable~~due ~~and~~primarily ~~eligible~~to ~~inventory~~the as inclusion of ~~June~~BRC revenues ~~30, 2005 was $8.0 million, which left actual available borrowing capacity~~ of approximately $144.95 million as part of ~~that~~our ~~date.~~transportation Insegment beginning ~~accordance~~ with the ~~Third~~second ~~Amendment~~quarter toof ~~the Loan and Security Agreement, dated March 29,~~ 2005, ~~the~~partially ~~credit~~offset ~~facility was extended~~ by ~~one~~the ~~year~~reduction of approximately $1.9 million and ~~matures on July 18, 2007~~$2.0 ~~Additionally,~~million wein ~~negotiated~~our Mexico and ~~agreed~~India ~~with~~operations ~~LaSalle~~due to ~~amend~~ the change ~~loan covenants in effect in~~ to the ~~original~~equity ~~agreement,~~method ~~as amended, and to replace certain covenants that we achieve certain minimum levels~~ of ~~consolidated~~accounting ~~and domestic earnings before interest and taxes adjusted~~ for ~~depreciation and amortization (“EBITDA”) on a quarterly basis,~~ the ~~quarterly~~results ~~consolidated~~of ~~and~~these ~~domestic~~operations. ~~fixed~~The reduction ~~charge coverage ratio covenant and the quarterly consolidated and domestic leverage ratio covenant and incorporate a new covenant that we maintain a minimum defined quarterly level~~ of ~~pre-tax~~approximately ~~income (income before taxes) for both domestic and consolidated basis~~$5.3 Wemillion ~~also~~in ~~negotiated~~our ~~revised~~industrial ~~covenants~~market ~~for~~segment during the ~~domestic~~nine ~~and~~months ~~consolidated~~ended ~~tangible~~September ~~net~~30, ~~worth at December 31~~2005, ~~2004.~~as ~~Although~~compared weto ~~were out of compliance with~~ the ~~EBITDA,~~same ~~fixed~~period in ~~change ratio and leverage ratios at December 31,~~ 2004, was ~~the~~primarily ~~third~~due ~~amendment~~ to ~~the~~a ~~LaSalle~~leveling-off ~~Agreement~~of ~~reserved~~shipments orof ~~set~~our ~~aside~~certified ~~these~~engine packages ~~covenants~~and ~~resulting~~fuel systems in ~~current~~our ~~compliance~~U.S. ~~with~~Operations. ~~loan~~During ~~covenants.~~the Atnine ~~June~~months ended September 30, ~~2005~~2004, we ~~were~~responded ~~not in compliance with the domestic pre-tax income covenant as established within the Third Amendment~~ to the ~~Loan~~January ~~and Security Agreement~~1, ~~dated~~2004 ~~March~~effective ~~29,~~date for ~~2005. We obtained the necessary waivers from LaSalle~~ new and onmore ~~August~~stringent 2,EPA ~~2005,~~regulations wewith ~~renegotiated~~higher asshipments ~~part~~ of the ~~Fourth~~certified engine systems ~~Amendment~~than ~~to the Loan and Security Agreement the domestic pre-tax covenant~~ for the ~~third~~same ~~and~~period ~~fourth~~in ~~quarters of~~ 2005.

•Operating income ~~The~~decreased ~~MTM Loan pursuant~~ to ~~which we borrowed approximately~~ $~~22.~~0.5 million ~~from~~in ~~MTM~~the onthird ~~December~~quarter ~~23, 2004. The proceeds~~ of ~~the~~2005 ~~loan~~by ~~were used to retire~~ approximately $221.09 million ~~of our indebtedness under the Bison Loan~~, anor ~~amount that included a prepayment premium and accrued but unpaid interest~~81.0%, ~~which~~from ~~carried~~$2.4 anmillion ~~annual~~in ~~interest~~the ~~rate~~third ofquarter ~~18.75% as~~ of ~~December 31,~~ 2004. The decrease ~~MTM~~in ~~loan,~~operating ~~which~~income was ~~guaranteed~~due byto ~~Mr.~~an ~~Costamagna~~increase ~~and~~of ~~his~~gross ~~brother,~~profit ~~Pier~~of $6.2 million ~~Antonio~~due ~~Costamagna, carries a rate equal~~ to 1$19.5%0 ~~above~~million ~~3-month~~in ~~EURIBOR~~higher ~~per~~revenues ~~annum,~~offset ~~which~~by ~~was at 3~~$8.7%1 ~~during~~million in ~~the~~higher operating ~~second~~expenses. ~~quarter~~The ofincreases ~~2005,~~in ~~provided~~both ~~that~~gross ~~the~~profit ~~rate will increase to 3.5% above 3-month EURIBOR after~~ and ~~during~~operating ~~the~~expenses are ~~continuance~~attributed ofprimarily ato ~~default under~~ the ~~loan~~inclusion ~~agreement and to 6.5% above 3-month EURIBOR on any unpaid portion~~ of ~~the~~BRC ~~loan~~financial ~~outstanding~~results ~~30 days after~~ for the ~~maturity~~third quarter ~~date~~ of ~~December 31, 2009. The loan will be repaid in quarterly installments beginning on April 1,~~ 2005, ~~each~~which inincluded ~~the~~approximately ~~amount of not less than~~ $~~650,000~~6.9 million in ~~the~~gross ~~first two years~~profit, approximately $~~800,000~~6.3 million in ~~the~~operating ~~third year~~expenses, including approximately $1~~,000,000~~.9 million in ~~the~~six ~~fourth~~months' ~~year~~amortization ~~and~~expense ~~$1,150,000~~for ~~in the final year~~intangible assets, contributing ~~with~~approximately ~~any remaining unpaid principal and interest to be repaid upon maturity~~$0.6 ~~The~~million ~~loan agreement provides for automatic acceleration of the MTM loan~~ in ~~case~~operating ofincome. Operating aincome ~~default~~from ~~due~~U.S. toOperations ~~nonpayment~~and ~~for~~IMPCO ~~more~~International ~~than~~including eliminations 15declined ~~days~~approximately ~~after~~$2.6 ~~the~~million ~~date~~ due ~~or due~~ to ~~the~~reduced ~~termination~~ revenues of approximately ~~Mariano~~$4.0 ~~Costamagna~~million asand ~~our~~increased ~~Chief~~operating ~~Executive~~expenses ~~Officer or a material breach~~ of ~~his~~approximately $1.8 ~~employment agreement~~million. ~~The~~Operating ~~loan~~expense ~~agreement also provides~~ for ~~acceleration of~~ the ~~loan upon notice from MTM in case of any other default under the agreement~~U. ~~The loan agreement contains restrictive covenants limiting our ability to: terminate Mariano Costamagna as our Chief Executive Officer, with certain exceptions for termination upon Mr~~S. ~~Costamagna’s~~Operations ~~death, incur additional debt obligations (other than unsecured trade credit, capital leases~~ and ~~additional~~IMPCO ~~debt~~International during ~~obligations pursuant to~~ the ~~senior~~third ~~credit~~quarter ~~facility~~of ~~with~~2005 ~~LaSalle);~~increased ~~merge,~~due ~~consolidate~~to oran ~~sell~~increase ~~our~~in ~~assets;~~allowance for doubtful ~~purchase,~~receivables ~~retire~~from ~~or redeem~~ our ~~capital~~unconsolidated ~~stock;~~joint ~~and~~venture ~~make~~affiliates ~~capital expenditures in excess~~ of $21.5 million, inaccelerated ~~any~~amortization ~~fiscal~~of ~~year~~$0.5 Atmillion ~~June~~related ~~30,~~to ~~2005,~~ the ~~amount~~closure of ~~owed~~the Seattle ~~under~~facility ~~this loan agreement was approximately $20.7 million~~ and weexpenses ~~were~~related ~~compliant~~to ~~with~~ the ~~covenants~~relocation ~~therein~~of ~~and~~corporate headquarters ~~other~~of ~~related~~$0.1 ~~terms and conditions~~million.

~~-27-~~Operating income decreased during the nine months ended September 30, 2005 by approximately $6.9 million, or 88.7%, to $0.9 million from $7.8 million in the nine months ended September 30, 2004. The decline in operating income was due to a $9.9 million increase in gross profit due to the addition of $31.6 million in revenues offset by $16.8 million in higher operating expenses. The increases in both gross profit and operating expenses are attributed primarily to the inclusion of BRC financial results beginning in April 2005, which included approximately $13.1 million in gross profit, approximately $9.4 million in operating expenses, including approximately $1.9 million in six months' amortization expense for intangible assets, contributing approximately $3.7 million in operating income. Gross profit for U.S. Operations and IMPCO International including eliminations declined approximately $3.3 million due to reduced revenues of approximately $13.0 million. Operating expenses for U.S. Operations and IMPCO International increased approximately $7.5 million due to accelerated amortization of $1.5 million related to the closure of the Seattle facility, increased allowance for doubtful receivables from our joint venture affiliates of $1.5 million, higher outside professional fees of $1.6 million, higher equipment leasing costs of $0.3 million, approximately $2.2 million in higher compensation and benefits costs related primarily to a new measurement date for stock options granted to two of our former officers, $0.1 million in expenses related to relocation and other expenses of $0.3 million.

~~Table~~U.S. Operations For the three months ended September 30, 2005, revenues decreased by approximately $3.5 million, or 14.6%, to $20.3 million, from $23.8 million during the same period in the prior year. The decrease in revenues during the third quarter of 2005 ~~Contents~~was primarily due to a $0.8 million decrease in revenues from our industrial market segment and a $2.5 million decrease in revenues from our transportation market segment. During the third quarter of 2004, revenues from our industrial market segment were increasing significantly due to shipments of our certified engine systems to customers required to comply with the EPA regulations effective January 1, 2004 that imposed more stringent emissions requirements on certain “off-road” vehicles. During the third quarter of 2005, shipments of our certified engine systems into distribution were lower than during the same period in the prior year because the initial demand for certified engines was met during 2004. The decline in our transportation market segment revenues is primarily due to the completion of a vehicle conversion program.

AsFor the nine amonths ~~result~~ended ofSeptember ~~the~~30, ~~consolidation~~2005, ofrevenues ~~BRC’s~~from ~~balance~~U.S. ~~sheet~~Operations ~~into~~decreased by approximately ~~IMPCO’s~~$9.5 ~~balance~~million, ~~sheet~~or 13.2%, ~~the~~to ~~following~~$62.3 ~~loans~~million, ~~which were~~from ~~not~~$72.1 ~~presented~~million during inthe ~~our~~same ~~balance~~period ~~sheet~~in atthe ~~December~~prior 31year, ~~2004,~~primarily ~~are~~due ~~included~~to ina ~~our~~$5.1 ~~balance~~million decrease ~~sheet~~in atrevenues ~~June~~from ~~30,~~our ~~2005,~~industrial market and ~~the~~a ~~MTM~~$4.4 ~~loan~~million ~~has~~decrease in revenues ~~been~~from ~~eliminated~~our ~~for~~transportation ~~purposes~~market. ~~of the balance sheet consolidation:~~

~~• On December 2, 2004, MTM entered into a five~~-year unsecured term loan agreement with Unicredit Banca Medio Credito S.p.A. (“Unicredit”) of Italy in which MTM received $13.6 million (at December 31, 2004 exchange rate). The primary purposes of the Unicredit Loan were to improve MTM’s working capital and to consolidate various mid 32 - to long-term debt obligations with a single lender on more attractive terms. The payment terms are such that MTM will pay approximately $0.6 million on a quarterly basis throughout the term of the loan and interest based on the 3-month EURIBOR rate plus 1% per annum, which was 3.2% at December 31, 2004 and at June 30, 2005. At June 30, 2005, the amount outstanding was approximately $10.9 million. The loan agreement requires that MTM maintain a debt to equity ratio of less than 0.80 and MTM is required to not remit dividends based on income for the fiscal years 2004 and 2005. At June 30, 2005, the MTM debt to equity ratio was 0.54.

•For the three Inmonths ~~1998~~ended ~~and~~September ~~2002~~30, ~~BRC~~2005, ~~entered~~U.S. ~~into~~Operations ~~unsecured~~recorded ~~term~~an ~~loan~~operating income ~~agreements~~of ~~with~~$1.4 ~~the~~million ~~Italian~~compared ~~Ministry~~to of$3.0 ~~Industry~~million ~~for~~in ~~the~~operating ~~purpose~~income ofduring the same ~~funding~~period in the ~~acquisition~~prior ofyear. ~~property,~~Operating ~~plant~~income ~~and~~was ~~equipment~~lower ~~and~~in ~~research~~the ~~and~~three months ended ~~development~~September ~~expenditures.~~30, ~~The~~2005 ~~loans~~due ~~are~~to ~~repayable~~$1.0 ~~through~~million ~~annual~~in ~~installments~~lower ~~and~~gross ~~through~~profit ~~2011~~due to at$3.5 million ain ~~subsidized~~lower ~~rate~~revenues ofand 3$0.~~25%.~~6 Atmillion ~~June~~in ~~30,~~higher ~~2005,~~operating ~~approximately~~expenses primarily due to the $0.95 million ~~was~~in ~~owed~~accelerated ~~under~~amortization ~~these~~of ~~agreements~~leasehold improvements at the closed Seattle facility and $0.1 million in relocation costs.

•For the nine Atmonths ~~June~~ended September 30, 2005, ~~BRC~~U.S. ~~had~~Operations anrecorded ~~unsecured line~~ operating income of ~~credit~~$5.3 ~~amounting~~million compared to ~~approximately~~ $110.31 million ~~with~~in nooperating ~~outstanding~~income ~~balance.~~during ~~Additionally,~~the same period ~~BRC~~in ~~has~~the upprior toyear. aOperating ~~$7.4~~income ~~million~~during ~~line~~the ofnine ~~credit~~months ~~secured~~ended September by30, ~~customer~~2005 ~~account~~was ~~receivable~~lower ~~drafts,~~compared ~~which~~to ~~has~~the asame ~~current~~period ~~availability~~in ofthe prior year due to a $6.2.8 million. ~~The~~decrease ~~weighted~~in ~~average~~gross ~~interest~~profit ~~rate~~from on$9.5 ~~these~~million ~~short-term~~lower ~~borrowings was~~ revenues, and approximately 3$2.0% atmillion ~~June~~in ~~30,~~higher ~~2005.~~operating ~~The~~expenses ~~balance~~primarily ofdue to $1.2 5 million atin ~~June~~accelerated ~~30,~~amortization ~~2005~~of ~~was~~leasehold ~~under~~improvements at the ~~secured~~closed Seattle ~~line~~facility, ofadditional ~~credit~~product ~~and~~development ~~both~~costs ~~lines~~ of ~~credit~~$0.3 ~~are~~million and ~~callable~~other costs onof ~~demand~~$0.2 million.

InIMPCO International For the three ~~February~~months ended September 30, 2005, werevenues ~~concluded~~decreased aby ~~public~~approximately $2.0 million, ~~offering~~or in20.9%, ~~which~~to we$7.4 ~~sold~~million 4from $9.64 million ~~shares~~during the same period in the prior year. The decrease in revenues during the third quarter of 2005 was primarily due to the reduction in our ~~common~~ownership ~~stock~~in Mexico and India to 50%, ~~investors~~as we ~~and~~changed ~~realized~~to ~~net~~the ~~proceeds~~equity method to recognize the results of ~~$24~~operations in these countries.1 ~~million~~For ~~net~~the ofnine ~~issuance~~months ~~costs~~ended ofSeptember 30, 2005, revenues decreased by approximately $26.36 million., ~~We paid~~or 22.7%, to ~~the~~$22.5 ~~sellers~~million offrom ~~BRC~~ $1029.01 million during the onsame ~~March~~period ~~31,~~in ~~2005~~the prior year. The decrease in ~~addition~~revenues toduring the nine months ~~issuance~~ended ofSeptember 530,~~098,284~~ ~~shares~~2005 ofwas ~~our~~primarily ~~common~~due ~~stock~~to ~~valued~~the ~~for~~changes ~~accounting~~made ~~purposes~~in our ownership atstructure ~~$5.74~~in ~~per~~Mexico ~~share~~and India.

~~Our~~For the three ~~ratio~~months ofended ~~current~~September ~~assets~~30, to2005, ~~current~~operating ~~liabilities~~income ~~was~~decreased by approximately $1.~~7:1~~3 atmillion, ~~June~~or 30136.4%, ~~2005~~as ~~and~~compared ~~1.5:1~~to atthe ~~December~~same ~~31,~~period in 2004. In Ataddition ~~June~~to ~~30,~~the ~~2005,~~decrease ~~our~~in ~~total working~~revenues, ~~capital~~a ~~had increased by~~ $~~26.~~0.9 million toincrease ~~$41.1~~in ~~million~~the allowance ~~from~~for ~~$15.1~~doubtful ~~million~~accounts atin ~~December~~our ~~31,~~Mexico ~~2004.~~operations ~~This~~contributed ~~increase~~to the decrease isin ~~due~~operating ~~primarily~~income. toFor the ~~consolidation~~nine ofmonths ~~BRC,~~ended ~~which~~September ~~at June~~ 30, 2005, operating ~~represented~~income decreased by approximately $~~13.~~2.6 million, inor ~~working~~78.8% ~~capital,~~as compared ~~higher~~ to ~~cash~~the ~~balances~~same ofperiod ~~approximately~~in $72004.9 ~~million~~In ~~resulting~~addition ~~from~~to the ~~February~~decrease ~~2005~~in ~~public offering~~revenues, ~~the elimination upon consolidation of~~ a $20.6 9 million ~~for~~increase in the ~~current~~allowance ~~portion~~for ofdoubtful ~~the~~accounts, ~~MTM Loan~~ and ana ~~increase~~$0.4 million in additional inventory inreserves ~~U.S.~~for ~~Operations~~obsolete ~~and~~returned ~~IMPCO International of approximately $3.3 million~~equipment, ~~partially~~both ~~offset~~in our Mexico byoperations acontributed ~~$1.0~~to ~~million~~the ~~increase~~decrease in ~~current~~operating ~~liabilities~~income.

~~Net~~BRC Operations BRC Operations ~~cash~~became ~~used~~an by operating ~~activities~~segment ~~for~~of ~~the~~our ~~six~~business ~~months~~in ~~ended June 30, 2005, including~~ the ~~effect~~second quarter of ~~BRC for the three months ended June 30,~~ 2005~~, was $1~~.0 ~~million, compared~~BRC’s torevenues ~~$7.5~~and ~~million used by operations for the six months ended June 30, 2004. The cash flow used by~~ operating ~~activities~~income for the six months ended ~~June~~September 30, 2005 ~~resulted~~were ~~primarily~~approximately ~~from a net loss of~~ $144.~~0 million, adjusted favorably for non-cash charges for depreciation and amortization of $2.6 million, minority interest in consolidated subsidiary of $0.~~5 million, ~~one-time charges for in-process R&D for $0.1 million, additional inventory reserves of $0.6 million~~ and ~~for the expense effect of new measurement dates for the stock options held by former executive officers of~~ $1.8 million, and partially offset by our share in income of unconsolidated affiliates of $1.2 million, and the net effect of a gain on foreign exchange movements and the fair value adjustment for the hedge agreement of $0.9 million. Changes in working capital that positively affected cash flows were an increase of accounts receivable of $0.8 million and an increase in accrued expense of $3.~~3 million,~~7 ~~offset partially by cash flows of $2.8~~ million ~~and $4.8 million associated with an increase of inventory and a decrease of accounts payable~~, respectively~~. For the comparable six months ended June 30~~, ~~2004, cash used by operating activities~~including ~~was~~ approximately $~~7.5 million consisting of net income of $~~1.59 million, ~~adjusted~~in ~~for non-cash charges for depreciation and~~ amortization expense ofrelated ~~$1.7~~to ~~million and interest accrued on the Bison Loan of $0.3 million offset partially by $0.6 million for our share~~intangible in the income of unconsolidated affiliates and $0.5 million for minority interests in consolidated subsidiaries. Working capital changes that negatively affected cash were increases in accounts receivable and the net effect of all other assets ~~and~~ ~~liabilities of $11~~ acquired.5 million and $1.2 million, respectively, offset by positive effects on cash flow related to increase of $2.0 million in accounts payable, a decrease of $0.2 million in inventory, a decrease in deferred taxes of $0.3 million and all other of $0.3 million. During the first half of 2004, the initial launch of our certified engine systems product line was the primary reason for the significant cash outflows on an operating basis.

~~Net~~We completed ~~cash~~the ~~used~~purchase inprice ~~investing~~allocation ~~activities~~of ~~for~~ the ~~six~~BRC ~~months~~acquisition ~~ended~~in ~~June~~the ~~30,~~third quarter of 2005, ~~was~~and allocated $1126.0 9 million, anto ~~increase~~intangible ofassets ~~$10.6~~with ~~million~~estimated useful lives ranging from ~~the~~seven ~~six~~to ~~months~~11 ~~ended~~years. ~~June~~The ~~30,~~amortization ~~2004.~~expense ~~This~~for these intangible ~~increase~~assets isbeginning ~~due~~with ~~primarily~~the tothird ~~payments~~quarter ~~made~~ended toSeptember ~~BRC~~30, 2005, will ~~shareholders~~be ~~totaling~~approximately $103.08 million asper ~~part~~year ofand ~~the~~will ~~acquisition~~decrease ofto ~~the~~approximately $3.4 ~~remaining~~million ~~50%~~per ofyear ~~BRC~~during ~~completed~~the onnext ~~March~~seven 31years, and to approximately ~~2005~~ $0.5 million ~~Investing~~to ~~activities~~$0.3 ~~for~~million over the ~~six~~remaining ~~months~~four ~~ended~~years. ~~June~~During the quarter ended September 30, 2005, ~~includes~~we recorded approximately $1.69 million in amortization of these ~~cash~~intangible onassets, ~~BRC’s~~including ~~balance~~approximately ~~sheet~~$0.95 asmillion ~~acquired~~for ~~cash~~the three months beginning April 1, 2005, subsequent to our acquisition of the remaining 50% of BRC on March 31, 2005.

~~Net~~Corporate Expenses Corporate expenses ~~cash~~consist ~~provided~~of bygeneral ~~financing~~and ~~activities~~administrative expenses that support our operating segments in areas such as executive management, finance, human resources, management information systems, professional legal and accounting services, and investor relations. Corporate expenses for the ~~six~~three months ended September ~~June~~ 30, 2005 stayed relatively flat at approximately $1.9 million, as ~~including~~in the same period in the ~~effect~~prior ofyear. ~~BRC~~Corporate expenses for the ~~three~~nine months ended ~~June~~ September 30, 2005, ~~was~~increased $203.57 million or an69.5% ~~increase~~to of $169.0 million from $4.5 .3 million ~~provided~~during inthe ~~financing~~same ~~activities~~period in the ~~six~~prior ~~months~~year ~~ended~~due ~~June~~to ~~30,~~approximately ~~2004~~$2.2 million ~~This~~in ~~increase~~higher ~~was~~compensation ~~due~~and ~~primarily~~benefits expenses related to ~~the~~two of our former officers, and $~~24.~~1.6 million ~~net~~in ~~proceeds~~increased ~~from~~outside ~~the~~professional ~~equity~~fees related to ~~offerings~~our ~~in February~~filings with the SEC.

Interest Expense Net interest expense for the three months ended September 30, 2005 was approximately $0.1 million compared to approximately $1.5 million for the corresponding period of 2004, or a decrease of $1.4 million, or 91.6%. This decrease is attributed to the prepayment of the $20.0 million Bison Loan in December 2004. During the third quarter of 2004, we were subject to a default rate of interest of 17.25% on a loan balance of $20.0 million. In addition, in the third quarter of 2004, we also recognized non-28cash interest expense of approximately $0.3 million due to the amortization of approximately $7.5 million in debt issuance costs from the Bison Loan. In December 2004, BRC concluded a loan agreement in the amount of approximately $13.6 million, in which BRC is required to pay $0.6 million in principal payments along with interest based on the 3-month EURIBOR rate plus 1% per annum, which was approximately 3.2% at July 1, 2005. Accordingly, approximately $0.1 million was paid and recognized in the statement of operations for the three months ended September 30, 2005. Net interest expense for the nine months ended September 30, 2005 was approximately $0.5 million as compared to $4.2 million for the comparable period of 2004. During the first quarter of 2005 and prior to the completion of the acquisition of BRC at March 31, 2005, we recognized $0.2 million in interest expense in our consolidated financial statements in connection with the MTM Loan, a wholly owned subsidiary of BRC from which we had borrowed $22.0 million in December 2004 to prepay the Bison Loan (see note 9(a) to the condensed consolidated financial statements). The MTM Loan bears interest based on the 3-month EURIBOR rate plus 1.50% per annum, which was approximately 3.7% during the third quarter of 2005. Following our acquisition of BRC, the interest expense on MTM Loan has being eliminated upon consolidation.

~~Table of Contents~~- 33 -

Interest ~~2005~~ expense induring ~~which~~the ~~4.6~~nine ~~million~~months ~~shares~~ended ~~were~~September ~~sold~~30, to2004 ~~investors~~included atthe effect of a default ~~price~~rate of $5interest under the Bison Loan that averaged 14.25%, 15.75% and 17.25% ~~before~~during ~~underwriter~~the ~~fees~~first, second and ~~expenses~~third quarters of 2004, respectively, or approximately $4.2 million in total for the nine month period.3 In the nine months ended September 30, 2004, approximately $0.9 million in non-cash interest expense was recognized in connection with the amortization of approximately $7.5 million in debt issuance costs attributed to the Bison Loan.

WeOther Income ~~believe~~and ~~that~~Expense In connection ~~our~~with ~~existing~~the ~~capital~~MTM ~~resources~~Loan ~~together~~and ~~with~~the ~~revenue~~hedging ~~from~~agreement ~~continuing operations~~by ~~should~~BRC beduring ~~sufficient~~the first quarter toof ~~fund~~2005 ~~operations~~ for the ~~next~~purpose 12of ~~months.~~hedging Wethe ~~have~~quarterly ~~been~~payments ~~successful~~due inunder the MTM ~~acquiring~~Loan, ~~necessary~~we ~~waivers~~recognized toas ~~our~~other ~~loan~~income ~~covenants~~and expense unrealized foreign exchange gains and inlosses ~~revising~~with ~~our~~respect ~~covenants~~to “marking to ~~the~~market” ~~LaSalle~~of ~~agreement~~the asMTM ~~required;~~Loan ~~however~~balance, and wegains ~~cannot~~and ~~assure investors~~losses ~~that~~with ~~LaSalle~~respect orto ~~any~~the ~~other~~fair ~~lender~~value ~~will~~determination ~~agree~~of tothe hedging agreement. ~~amend~~In the ~~financial~~three ~~covenants~~months orended ~~grant~~September ~~further~~30, or2005, ~~continuing~~we ~~waivers~~recognized approximately $23,000 in ~~the~~unrealized ~~future.~~gains Ifon weforeign ~~cannot~~exchange ~~obtain~~in connection with the ~~necessary~~MTM ~~waivers~~Loan orbetween ~~amendments,~~the orU.S. ~~return~~dollar toand ~~compliance~~the ~~with~~euro ~~these~~offset ~~and~~by ~~all~~a ~~other~~recognized ~~loan~~ loss ~~covenants,~~on the ~~our~~hedging ~~lenders~~agreement ~~may~~of ~~accelerate~~approximately ~~our~~$0.7 ~~debt,~~million. ~~foreclose~~For onthe ~~certain~~nine ofmonths ended September ~~our~~30, ~~assets~~2005, orthe ~~take~~unrealized ~~other~~foreign ~~legal~~exchange ~~action~~gains ~~against~~amounted usto ~~that,~~$2.0 million ~~alone~~partially oroffset inby ~~the~~$0.7 ~~aggregate,~~million ~~may~~in ~~have~~realized aforeign ~~material~~exchange ~~adverse~~losses from ~~effect~~the onfair ~~our~~value ~~results~~adjustment of ~~operations~~the hedging agreement.

~~For~~We routinely ~~periods~~conduct ~~beyond~~transactions 12in ~~months,~~currencies weother ~~may~~than ~~seek~~our ~~additional~~reporting ~~financing to fund future operations~~currency, ~~through~~ the ~~future~~U.S. ~~offerings~~dollar. ofWe ~~equity~~cannot orestimate ~~debt securities~~ or ~~agreements~~forecast ~~with~~the ~~corporate~~direction ~~partners~~or ~~and collaborators with respect to~~ the ~~development~~ magnitude of ~~our~~any ~~technologies~~foreign ~~and~~exchange ~~products,~~movements orwith toany ~~expand~~currency ~~our~~that ~~business~~we ~~strategy~~transact ~~to contemplate new technologies or~~in; ~~products.~~ therefore, Wewe ~~cannot~~do ~~assure~~not ~~you,~~measure ~~however,~~or ~~that~~predict wethe ~~will~~future beimpact ~~able~~of toforeign ~~obtain~~currency exchange ~~additional~~rate ~~funds~~movements on ~~acceptable~~our ~~terms,~~consolidated iffinancial ~~at all~~statements.

~~Our~~Income in ~~cash~~Unconsolidated ~~requirements~~Affiliates For ~~may~~the three ~~vary~~and ~~materially~~nine ~~from~~months ~~those~~ended ~~now~~September ~~planned~~30, ~~because~~2005, we recognized income of approximately ~~fluctuations~~$0.1 million and $1.0 million, respectively, as our share in the income of unconsolidated affiliates. For the three and nine months ended September 30, 2004, we recognized an income of approximately $0.4 million and $0.7 million, respectively, as our ~~sales~~share ~~volumes~~in orthe ~~margins~~income orof ~~because~~unconsolidated affiliates. During the three months ended March 31, 2005, and prior to the acquisition of ~~other~~the ~~factors~~remaining ~~identified~~50% of BRC, we recognized in our consolidated financial statements approximately $1.1 million as our share of the earnings ~~section~~ of BRC ~~below~~as ~~entitled~~compared ~~“Risk~~to ~~Factors~~$0.”2 million for the nine month period ended September 30, 2004. BRC recorded an 86% increase in revenues, after translation into U.S. dollars, during the first quarter of 2005 over the corresponding quarter of 2004. BRC recognized an unrealized gain on foreign exchange during the first quarter of 2005 of approximately $1.2 million, of which we recognized approximately $0.6 million during the first quarter of 2005.

~~Contractual~~Provision For ~~Obligations~~Income Taxes During the third quarter ended September 30, 2005, we recognized approximately $1.0 million in income tax expense from our foreign operations, excluding Mexico operations, representing a 48% effective tax rate. For the U.S. Operations, we recorded an increase in the valuation allowance for deferred taxes of approximately $8.7 million to fully reserve the carrying value of net deferred tax assets because we determined that the likelihood of recoverability of the net deferred tax asset was less than the "more likely than not" threshold as defined by SFAS No. 109, Accounting for Income Taxes.

~~The following table contains supplemental information regarding total~~LIQUIDITY ~~contractual~~ AND ~~obligations~~CAPITAL ~~as of June 30, 2005~~RESOURCES. ~~The capital lease obligations are undiscounted and represent total minimum lease payments.~~

	Payments Due by Period
Contractual Obligations	Total		Less thanOne Year		2-3Years		4-5Years		More Than5 Years
Revolving lines of credit	$	7,814	$	7,814	$	—	$	—	$	—
Term loans payable		12,122		2,950		5,108		3,912		152
Capital lease obligations		201		28		173		—		—
Operating lease obligations		12,434		2,212		3,356		3,003		3,863
Other and miscellaneous		4,205		1,260		1,865		1,080		—
Totals	$	36,776	$	14,264	$	10,502	$	7,995	$	4,015

Our ongoing operations are funded by cash generated from operations, debt financings and sales of our equity securities. In addition, these sources of cash provide for capital expenditures and research and development, as well as to invest in and operate our existing operations and prospective new lines of business.

~~RISK~~At September ~~FACTORS~~30, 2005, our cash and cash equivalents totaled approximately $22.3 million, compared to cash and cash equivalents of approximately $8.4 million at December 31, 2004.

We currently ~~have~~are ~~substantial~~party ~~debt~~to ~~that~~two wesignificant ~~may~~credit beagreements: ~~unable to service.~~

We• ~~are~~The ~~highly~~first ~~leveraged~~significant ~~and~~credit ~~have~~agreement ~~significant debt~~is ~~service~~an ~~obligations.~~asset-based Ascredit facility (“Credit Facility”) with LaSalle Business Credit LLC (“LaSalle”) dated July 22, 2003, amended as of ~~June~~March 3029, 2005 and August 2, we2005. ~~had~~This ~~aggregate~~revolving ~~outstanding~~Credit ~~indebtedness,~~Facility ~~including~~carries ~~trade~~an ~~payables~~interest ofrate ~~approximately~~per ~~$26~~annum equal to prime plus 1.0%, ~~million~~which amounted to 6.25% per annum at December 31, of2004 ~~$49~~and 7.375% ~~million~~at asSeptember ~~compared~~30, 2005, and has a borrowing limit equal to ~~total~~85% ~~stockholders’~~of ~~equity~~our eligible accounts receivable plus the lesser of $994.05 million. ~~Our~~or ~~Credit~~60% ~~Facility with~~of our eligible inventory as measured from time to time, subject to reasonable reserves established by LaSalle ~~has~~in its discretion. As of September 30, 2005 this facility carries a maximum borrowing limit of $9.0 million. This lender has a senior security interest in substantially all of our assets located in the United States. At September 30, ~~which~~2005 our outstanding balance under this loan agreement was ~~limited~~$5.9 ~~based~~million, onas compared to $7.7 million at December 31, 2004, and our maximum available borrowing amount based on eligible accounts receivable and ~~our~~ eligible inventory as of ~~June~~September 30, 2005 was $8.2 million, towhich left actual available borrowing capacity of approximately $82.03 million. Ofas of that ~~amount~~date. In accordance with the Third Amendment to the Loan and Security Agreement (“Third Amendment”), $6dated March 29, 2005, the Credit Facility was extended by one year and matures on July 18, 2007. Additionally, we agreed with LaSalle to amend the Credit Facility covenants in effect under the original agreement, and to replace or revise certain covenants related to: (1) ~~million~~our ~~was~~achievement ~~outstanding~~of ascertain minimum levels of consolidated and domestic earnings before interest and taxes adjusted for depreciation and amortization (“EBITDA”) on a quarterly basis; (2) the quarterly consolidated and domestic fixed charge coverage ratio covenant; (3) the quarterly consolidated and domestic leverage ratio covenant; and (4) the domestic and consolidated tangible net worth at December 31, 2004. In addition, we agreed to incorporate a new covenant that we maintain a minimum defined quarterly level of pre-tax income (income before taxes) from both the domestic and consolidated operations. Although we were not in compliance with the EBITDA, fixed change ratio and leverage ratios at December 31, 2004, the Third Amendment waived these covenants. At June 30, 2005, ~~leaving~~we ~~approximately~~were $1not in compliance with the domestic pre-tax income covenant as established within the Third Amendment.9 ~~million~~We ~~unused~~obtained the necessary waivers from LaSalle and ~~available~~on August 2, 2005, we renegotiated the domestic pre-tax covenant for the third and fourth quarters of 2005 as part of the Fourth Amendment to the Loan and Security Agreement (“Fourth Amendment”). At September 30, 2005, we were in compliance with the all of the covenants as established within Fourth Amendment.

We borrowed in December 2004 $22.0 million from MTM ($20.7 million unpaid at June 30, 2005). Although this loan has been eliminated from the balance sheet due to consolidation of BRC, this loan may be accelerated in the event that any- payment is not made within 15 days of the date when due, the termination of Mariano Costamagna’s employment for any reason whatsoever, with limited exceptions for termination occasioned by his death, or we materially breach Mariano 34 Costamagna’s employment agreement. The MTM loan agreement also provides for acceleration of the loan upon notice from MTM in case of any other default under the loan agreement. Also, Mariano Costamagna and Pier Antonio Costamagna have guaranteed the MTM loan. In return for Messrs. Costamagnas’ guaranties, we have pledged our equity interest in BRC as collateral in the event the guarantee is utilized. In December 2004, MTM incurred $13.6 million ($10.9 million unpaid at June 30, 2005) of indebtedness in order to improve MTM’s working capital and to consolidate various mid - ~~to long-term debt obligations with a single lender. In addition, as of June 30, 2005, BRC had other outstanding indebtedness of approximately $2.1 million.~~

• The second significant credit agreement is the MTM Loan pursuant to which we borrowed approximately $22.0 million from MTM on December 23, 2004. The proceeds of the MTM Loan were used to retire approximately $22.0 million of our indebtedness under the Bison Loan, an amount that included a prepayment premium and accrued but unpaid interest, which carried an annual interest rate of 18.75% as of December 31, 2004. The MTM Loan, which was guaranteed by Mr. Costamagna and his brother, Pier Antonio Costamagna, carries a rate equal to 1.5% above 3-29month EURIBOR per annum, which was at 3.7% during the second quarter of 2005, provided that the rate will increase to 3.5% above 3-month EURIBOR after and during the continuance of a default under the MTM Loan agreement and to 6.5% above 3-month EURIBOR on any unpaid portion of the loan outstanding 30 days after the maturity date of December 31, 2009. Beginning on April 1, 2005, the loan will be repaid in quarterly installments, each in the amount of not less than $0.65 million in the first two years, $0.8 million in the third year, $1.0 million in the fourth year and $1.15 million in the final year, with any remaining unpaid principal and interest to be repaid upon maturity. The MTM Loan provides for automatic acceleration of the MTM Loan in case of a default due to nonpayment for more than 15 days after the date due or due to the termination of Mariano Costamagna as our Chief Executive Officer or a material breach of his employment agreement. The MTM Loan also provides for acceleration of the MTM Loan upon notice from MTM in case of any other default under the MTM Loan. The MTM Loan contains restrictive covenants limiting our ability to: terminate Mariano Costamagna as our Chief Executive Officer, with certain exceptions for termination upon Mr. Costamagna’s death, incur additional debt obligations (other than unsecured trade credit, capital leases and additional debt obligations pursuant to the Credit Facility with LaSalle); merge, consolidate or sell our assets; purchase, retire or redeem our capital stock; and make capital expenditures in excess of $2.5 million in any fiscal year. At September 30, 2005, the amount owed under MTM Loan was approximately $20.1 million and we were compliant with the covenants therein and other related terms and conditions.

~~Table~~As a result of ~~Contents~~the consolidation of BRC’s balance sheet into IMPCO’s balance sheet, the following loans, which were not presented in our balance sheet at December 31, 2004, are included in our balance sheet at September 30, 2005, and the MTM Loan has been eliminated for purposes of the balance sheet consolidation:

~~Our~~• On December 2, 2004, MTM entered into a five-year unsecured term loan agreement with Unicredit Banca Medio Credito S.p.A. (“Unicredit”) of Italy by which MTM received $13.6 million (at December 31, 2004 exchange rate). The primary purposes of the Unicredit Loan were to improve MTM’s working capital and to consolidate various mid- to long-term debt ~~subjects~~obligations uswith a single lender on more attractive terms. The payment terms are such that MTM will pay approximately $0.6 million toward the principal on a quarterly basis throughout the term of the loan and applicable interest based on the 3-month EURIBOR rate plus 1% per annum, which was 3.2% at December 31, 2004 and at September 30, 2005. At September 30, 2005, the amount of loan outstanding was approximately $10.2 million. The loan agreement requires that MTM maintain a debt to ~~numerous~~equity ~~risks~~ratio of less than 0.80 and MTM is required to not remit dividends based on income for the fiscal years 2004 and 2005. At September 30, ~~including~~2005, the ~~following:~~MTM debt to equity ratio was 0.54.

• weIn ~~will~~1998 beand ~~required~~2002, toBRC ~~use~~entered ainto ~~substantial~~unsecured ~~portion~~term ofloan ~~our~~agreements ~~cash~~with ~~flow~~the ~~from~~Italian ~~operations~~Ministry toof ~~pay~~Industry ~~interest~~for onthe ~~our~~purpose ~~debt,~~of ~~thereby~~funding ~~reducing~~the ~~cash~~acquisition ~~available~~of toproperty, ~~fund~~plant ~~working~~and ~~capital,~~equipment ~~capital~~and research and development expenditures,. ~~strategic~~The ~~acquisitions,~~loans ~~investments~~are repayable through annual installments and ~~alliances~~through 2011 at an effective rate of 6.9%. At September 30, ~~and~~2005, ~~other~~approximately ~~general~~$0.9 ~~corporate~~million ~~requirements;~~was owed under these agreements.

• ~~our~~At ~~leverage~~September ~~may~~30, ~~increase~~2005, ~~our~~BRC ~~vulnerability~~had toan ~~general~~unsecured ~~economic~~line ~~downturns~~of ~~and~~credit ~~adverse~~amounting ~~competitive~~to ~~and~~approximately ~~industry~~$1.3 ~~conditions~~million ~~and~~with ~~may~~no ~~place~~outstanding usbalance. atAdditionally, BRC has up to a ~~competitive~~$7.4 ~~disadvantage~~million ~~compared~~line toof ~~those~~credit secured by customer account receivable drafts, which has a current availability of ~~our~~$6.2 ~~competitors~~million. ~~who~~The weighted average interest rate on these short-term borrowings was approximately 3.0% at September 30, 2005. Both lines of credit are ~~less~~callable ~~leveraged;~~on demand.

~~• our debt service obligations may limit our flexibility to plan for, or react to, changes in our business and in the industry in which we operate;~~- 35 -

•In February 2005, we concluded a public offering in which we sold 4.6 million shares of our ~~level~~common stock to investors and realized net proceeds of ~~debt~~$24.1 million ~~may~~net ~~make~~of itissuance ~~difficult~~costs ~~for~~of usapproximately $2.3 million. We paid to the sellers ~~raise~~of ~~additional~~BRC ~~financing~~approximately $10.0 million on ~~terms~~March ~~satisfactory~~31, 2005 in addition to ~~us;~~the issuance ~~and~~of 5,098,284 shares of our common stock valued for accounting purposes at $5.74 per share.

•Our ratio of ifcurrent weassets doto ~~not~~current ~~comply~~liabilities ~~with~~was ~~the~~1.7:1.0 ~~financial~~at September 30, 2005 and 1.5:1.0 ~~other~~at ~~restrictive~~December ~~covenants~~31, in2004. At September 30, 2005, our ~~debt~~total ~~instruments~~working capital had increased by $25.9 million to $41.0 million from $15.1 million at December 31, ~~any~~2004. ~~such~~This ~~failure~~increase ~~could~~is due primarily to the consolidation of BRC, ifwhich at September ~~not~~30, ~~cured~~2005, orrepresented ~~waived~~approximately $13.9 million in working capital, higher ~~have~~cash abalances ~~material~~of ~~adverse~~approximately ~~effect~~$8.8 onmillion ~~our~~resulting ~~ability~~from tothe ~~fulfill~~February 2005 ~~our~~public ~~obligations~~offering, ~~and~~an onincrease ~~our~~in ~~business~~inventory orin ~~prospects~~U.S. ~~generally~~Operations and IMPCO International of approximately $3.9 million, ~~including~~the elimination upon consolidation of $2.6 million for the ~~possibility~~current ~~that~~portion ~~our~~of ~~lenders~~the ~~might~~MTM ~~foreclose~~Loan onand ~~our~~a ~~assets~~reduction of $1.7 million in revolving line of credit balances.

WeNet cash provided ~~have~~by ~~recently~~operating ~~been~~activities infor ~~default~~the ~~under~~nine ~~our~~months ~~primary~~ended ~~debt~~September ~~facilities~~30, 2005, including ~~and~~the weeffect ~~cannot~~of ~~assure~~BRC ~~you~~for ~~that~~the wesix ~~will~~months beended ~~able~~September to30, 2005, ~~avoid~~ was $6.6 ~~events~~million ofcompared ~~default~~to or$6.5 ~~noncompliance~~million in net cash used by operations for the nine ~~future~~months ended September 30, to2004. ~~obtain~~Cash ~~amendments~~flows provided by operating activities for the nine months ended September 30, 2005, resulted primarily from a $8.7 million increase in valuation allowance to ~~our~~fully ~~debt~~reserve ~~facilities~~deferred tax assets, ora $6.1 million in depreciation and amortization expense including $1.9 million in amortization expense for intangible assets, a $3.0 million increase in other long-term assets and a $1.8 million in expense related to ~~refinance~~stock options held by former executive officers. These were partially effect by a $10.2 million in net loss, $1.0 million in unrealized gain from the net effect of movements between the U.S. dollar and the euro on the MTM Loan balance and the fair value adjustment for the foreign currency derivative instrument and a $1.0 million in our ~~indebtedness~~share ifin ~~events~~income of ~~default~~unconsolidated affiliates. Changes in working capital that positively affected operating cash flows were toa ~~occur~~$3.5 million increase in accrued expenses, and a $1.5 million decrease in accounts receivable offset by a $6.5 million decrease in accounts payable.

~~Our~~For the comparable ~~debt~~nine ~~requires~~months usended toSeptember ~~maintain~~30, ~~specified~~2004, ~~financial~~cash ~~ratios~~used ~~and~~by ~~meet~~operating activities ~~specific~~was ~~financial tests~~$6.5 ~~For~~million ~~example,~~consisting ~~our~~of ~~amended~~net ~~loan agreement~~income ~~with~~of ~~LaSalle~~$2.0 ~~requires~~million, usadjusted for tonon-cash ~~generate~~charges ~~specified~~for ~~amounts~~depreciation and amortization expense of ~~pre-tax~~$3.0 million and ~~income,~~interest ~~tested~~accrued ~~quarterly~~on ~~during~~the ~~2005~~Bison ~~and~~Loan onof a$0.9 ~~rolling~~million ~~basis~~offset ~~thereafter~~partially by $1.2 million ~~Our~~for ~~failure~~our toshare ~~comply~~in ~~with~~the ~~these~~income ~~covenants~~of ~~would~~unconsolidated ~~result~~affiliates and $0.2 million for minority interests in ~~events~~our ofconsolidated ~~default~~subsidiaries. Working capital changes that, ifnegatively ~~not~~affected ~~cured~~cash ~~or waived,~~were ~~could~~increases ~~require~~in usaccounts topayable of ~~repay~~$1.2 million, ~~these~~a ~~borrowings~~decrease ~~before~~in ~~the~~inventories ~~due~~of ~~date~~$1.1 Ifmillion, wea ~~are~~decrease ~~unable~~in todeferred income ~~make~~tax aof ~~required~~$0.6 ~~repayment~~million, and ~~are~~an ~~not~~increase ~~able~~in toaccrued ~~refinance~~expenses ~~these~~of ~~borrowings~~$0.3 million, offset ~~our~~entirely ~~lenders~~by ~~could~~negative ~~foreclose~~cash onflows ~~our~~of ~~assets~~$13.3 Ifmillion weand ~~were~~$0.7 ~~unable~~million due to increase ~~refinance~~in ~~these~~accounts receivable and other assets, respectively. During ~~borrowings~~ the onfirst nine ~~favorable~~months ~~terms~~of 2004, the initial launch of our ~~business~~certified ~~could~~engine besystems product line ~~adversely~~was ~~impacted~~the primary reason for the significant cash outflows on an operating basis.

AtNet cash used ~~December 31, 2004, and at June 30, 2005, we were~~ in ~~default~~investing onactivities ~~borrowings~~for ~~under~~ the ~~LaSalle~~nine ~~Credit~~months ~~Facility~~ended ~~for~~September ~~not~~30, ~~meeting~~2005, was $12.3 ~~certain~~million, ~~financial~~an ~~covenants~~increase ~~at each~~ of ~~these dates~~$11.0 ~~The~~million ~~third~~compared ~~amendment~~ to the ~~LaSalle~~nine months ~~loan,~~ ended September ~~dated March 29~~30, ~~2005, reserved or set aside the EBITDA, fixed charge ratio and leverage ratios that we were not in compliance with on December 31,~~ 2004. AsThis ofincrease ~~June~~is ~~30,~~due ~~2005,~~primarily weto ~~did~~payments ~~not~~made ~~meet~~to BRC stockholders ~~the~~totaling ~~specified levels of pretax income for U~~$10.~~S. operations.~~0 Wemillion ~~obtained~~as apart ~~waiver~~ of the ~~specific~~acquisition ~~covenants~~of ~~and renegotiated as~~ the ~~fourth~~remaining 50% ~~amendment~~of toBRC ~~the~~completed ~~LaSalle~~on ~~loan~~March ~~the~~31, ~~domestic~~2005. ~~pre-tax~~Investing ~~income~~activities ~~covenants~~ for the ~~third~~nine months ended ~~and~~September ~~fourth~~30, ~~quarters of~~ 2005. Weincludes ~~may~~approximately ~~not~~$1.6 bemillion ~~successful~~of incash ~~obtaining waivers in~~on ~~the~~ BRC’s balance ~~future~~sheet ~~should~~as ~~our~~acquired ~~operating~~cash ~~results~~on ~~fail~~March to31, ~~achieve the specified amounts of income as defined in the covenants~~2005.

~~The terms of our debt may severely limit our ability to plan for or respond to changes in our business.~~ - 36 -

~~Our~~Net cash provided ~~debt~~by ~~agreements~~financing ~~contain~~activities afor ~~number~~the nine months ended September 30, 2005, including the effect of ~~restrictive~~BRC ~~covenants~~for ~~that~~the ~~impose~~six months ended September 30, 2005, ~~significant~~ was $20.4 ~~operating~~million ~~and~~or ~~financial~~an ~~restrictions~~increase onof ~~our~~$14.9 ~~operations~~million from $5.5 ~~Among~~million ~~other~~provided by financing ~~things~~activities in the nine months ended September 30, ~~these~~2004. ~~restrictions~~This increase was ~~limit~~due ~~our~~primarily ~~ability~~to the $24.1 million net proceeds from the equity offerings in February 2005 in which 4.6 million shares were sold to: investors at a price of $5.75 before underwriter fees and expenses of approximately $2.3 million.

•We believe ~~change~~that our ~~Chief~~existing ~~Executive~~capital ~~Officer~~resources together with cash from continuing operations should be sufficient to fund operations for the next 12 months. We have been successful in acquiring necessary waivers to our loan covenants and in revising our covenants to the LaSalle Credit Facility; however, we offer no assurances that LaSalle or any other lender will agree to amend the financial covenants or grant further or continuing waivers in the future. If we are not in compliance with our amended covenants and are unable to obtain the necessary waivers or amendments, our lenders may accelerate our debt, foreclose on certain of our assets or take other legal action against us that, alone or in the aggregate, may have a material adverse effect on our results of operations and financial condition.

•For periods ~~incur~~beyond ~~liens~~12 months, we may seek additional financing to fund future operations through future offerings of equity or ~~make~~debt ~~negative~~securities ~~pledges~~or onagreements with corporate partners and collaborators with respect to the development of our technologies ~~assets;~~and products, or to expand our business strategy to contemplate new technologies or products. However, we offer no assurances that we will be able to obtain additional funds on acceptable terms, if at all.

•Our cash requirements ~~merge,~~may ~~consolidate,~~vary ormaterially ~~sell~~from those now planned because of fluctuations in our ~~assets;~~sales volumes or margins or because of other factors identified in the section below entitled “Risk Factors.”

•Contractual Obligations ~~incur additional debt;~~

•The following ~~pay~~table ~~dividends~~contains supplemental information regarding total contractual obligations as of September 30, ~~redeem~~2005. The capital ~~stock~~lease orobligations ~~prepay~~are undiscounted ~~other~~and ~~debt;~~represent total minimum lease payments.

• make investments and acquisitions;

			Payments Due by Period
			Less than						More Than
Contractual Obligations	Total		One Year		2-3 Years		4-5 Years		5 Years

Revolving lines of credit		5,940		5,940		-		-		-
Term loans payable		11,625		3,087		5,125		3,317		96
Capital lease obligations		191		11		180		-		-
Operating lease obligations*		30,770		4,111		7,961		6,277		12,421
Other and miscellaneous		3,896		1,218		1,778		900		-
Totals		52,422		14,367		15,044		10,494		12,517

•* On September ~~make~~1, ~~capital~~2005, ~~expenditures;~~we entered into a lease agreement for a term of 13 years for our new North American headquarters and production facility, which increased our operating lease obligations by approximately $10.9 million, or approximately $0.8 million per year.

•RISK FACTORS ~~amend our debt instruments and certain other material agreements.~~

~~Mariano~~We currently ~~Costamagna and Pier Antonio Costamagna~~ have ~~guaranteed~~substantial ~~our~~debt ~~performance~~that ~~under the MTM loan and, in connection with those guarantees,~~ we ~~have pledged~~may ~~our~~be ~~BRC~~unable ~~equity interest and made certain other concessions~~ to ~~them~~service.

~~Because~~We are highly ofleveraged ~~certain requirements arising under Italian law, Mariano Costamagna~~ and ~~Pier Antonio Costamagna (the “Founders”)~~ have ~~jointly~~significant ~~and~~debt ~~severally~~service ~~guaranteed~~obligations. ~~our~~As ~~performance~~of ~~under the MTM loan agreement.~~September In 30, ~~order~~2005, towe ~~secure~~had ~~their~~aggregate ~~recourse~~outstanding inindebtedness ~~the~~of ~~event~~$44.3 ~~that~~million ~~guaranty~~(including trade ispayables ~~exercised~~of ~~and~~approximately ~~the~~$22.9 ~~Founders~~million), ~~are~~as ~~required~~compared to ~~make~~total stockholders’ ~~payments~~equity of ~~the~~$89.7 ~~amounts~~million. ~~due,~~Our weCredit ~~have~~Facility ~~pledged~~with toLaSalle ~~the~~has ~~Founders~~a maximum ~~our~~borrowing ~~entire~~limit ~~interest~~of ~~in BRC~~$9.0 Ifmillion, wewhich ~~fail~~was tolimited ~~perform~~based ~~the~~on ~~terms~~our ofeligible accounts ~~the~~receivable ~~MTM loan~~ and ~~the~~our ~~Founders~~eligible ~~are~~inventory ~~required~~as toof ~~fulfill~~September ~~their guarantees~~30, ~~the Founders may require us~~ 2005, to approximately ~~reimburse~~$8.2 ~~them~~million. ~~for~~Of ~~their~~that ~~payments as guarantors~~amount, or$5.9 ~~they~~million ~~may~~was ~~take~~outstanding as ~~possession~~ of September ~~our~~30, ~~equity~~2005, ~~interest~~leaving inapproximately ~~BRC,~~$2.3 ormillion ~~both.~~unused Ifand available.

-30 37 -

~~Table~~The MTM Loan has been eliminated from the balance sheet due to consolidation of ~~Contents~~BRC, this loan may be accelerated in the event that payment is not made within 15 days of the date when due, the termination of Mariano Costamagna’s employment for any reason whatsoever, with limited exceptions for termination occasioned by his death, or we materially breach Mariano Costamagna’s employment agreement. The MTM Loan also provides for acceleration of the loan upon notice from MTM in case of any other default under the MTM Loan . Also, Mariano Costamagna and Pier Antonio Costamagna have guaranteed the MTM Loan. In return for Messrs. Costamagnas’ guaranties, we have pledged our equity interest in BRC as collateral in the event the guarantee is utilized. In December 2004, MTM incurred $13.6 million ($10.2 million unpaid at September 30, 2005) of indebtedness in order to improve MTM’s working capital and to consolidate various mid- to long-term debt obligations with a single lender. In addition, as of September 30, 2005, BRC had other outstanding indebtedness of approximately $0.9 million.

Our ~~the~~ debt subjects ~~Founders~~us ~~were~~ to ~~take~~numerous ~~possession~~risks, ofincluding the ~~BRC~~following: equity interest in total or partial satisfaction of their rights under the pledge agreement, we would lose our rights to participate in BRC’s earnings and assets. This could have a material adverse effect upon our earnings and our assets.

We• ~~have~~we will be required to use a ~~history~~substantial portion of ~~significant~~our cash ~~outflows~~flow ~~that~~from ~~may~~operations ~~limit~~to pay interest on our ~~ability~~debt, thereby reducing cash available to ~~grow~~fund ~~and~~working ~~may~~capital, ~~materially~~capital ~~and~~expenditures, ~~adversely~~strategic ~~impact~~acquisitions, ~~our~~investments ~~prospective~~and ~~revenues~~ alliances, and ~~liquidity.~~other general corporate requirements;

We• ~~have experienced operating losses and net cash outflows. At June 30, 2005,~~ our ~~cash~~leverage ~~and~~may ~~cash~~increase ~~equivalents totaled approximately $16.4 million and~~ our ~~working~~vulnerability ~~capital~~to ~~was~~general ~~$41.1~~economic ~~million.~~downturns ~~We have experienced significant cash outflows in connection with our initial equity investment in BRC~~ and ~~servicing~~adverse ~~our~~competitive ~~debt. Based upon our eligible accounts receivable~~ and ~~our~~industry ~~eligible~~conditions inventory as of June 30, 2005 our funds available for borrowing under our senior secured credit facility were approximately $8.0 million, of which approximately $6.1 million was outstanding, leaving approximately $1.9 million unused and ~~available.~~may Asplace ~~of June 30, 2005, we had total stockholders’ equity of $99.0 million and an accumulated deficit of $90.3 million. Moreover, our loan agreement with MTM requires~~ us toat ~~repay~~a ~~MTM~~competitive ~~the~~disadvantage ~~principal~~compared ~~according~~ to ~~the~~those ~~following schedule, with an additional $5.0 million “balloon payment”~~ of ~~accrued~~our ~~interest~~competitors ~~and~~who ~~unpaid~~are ~~principal~~less ~~due on December 31, 2009:~~ leveraged;

Quarters Ending	QuarterlyPaymentAmount
April 1, 2005 through January 1, 2006	$	650,000
April 1, 2006 through January 1, 2007	$	650,000
April 1, 2007 through January 1, 2008	$	800,000
April 1, 2008 through January 1, 2009	$	1,000,000
April 1, 2009 through December 31, 2009	$	1,150,000

•	our debt service obligations may limit our flexibility to plan for, or react to, changes in our business and in the industry in which we operate;

~~Changes~~• inour ~~stock option~~level ~~accounting~~of ~~rules~~debt may ~~adversely~~make ~~impact~~it ~~our~~difficult ~~reported~~for ~~operating~~us ~~results~~to ~~prepared~~raise inadditional ~~accordance~~financing ~~with~~on ~~generally~~terms ~~accepted~~satisfactory

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