1166380--7/28/2006--QUANTUM_FUEL_SYSTEMS_TECHNOLOGIES_WORLDWIDE

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We depend on our sales to and contracts with General Motors for a substantial portion of our revenue. Our Quantum Fuel Systems business revenue depends to a significant extent on our relationship with General Motors and General Motors commitment to the commercialization of fuel cell vehicles. Our revenue is highly concentrated among a small number of customers. Our business depends on the growth of the specialty vehicle and hydrogen economy markets. We expect our merger with Tecstar Automotive Group to result in benefits to the combined company, but we may not realize those benefits due to challenges associated with integrating the companies. Our financial results could suffer if the goodwill and other intangible assets we acquired in our merger with Tecstar Automotive Group become impaired, or as a result of costs associated with our merger with Tecstar Automotive Group. We could become subject to stockholder litigation associated with our merger with Tecstar Automotive Group and the restatement of our financial statements. The cyclical nature of automotive production and sales, particularly those of General Motors, could adversely affect our Tecstar Automotive Group business. We have a history of operating losses and negative cash flow that may continue into the foreseeable future. We may never be able to introduce commercially viable hydrogen products and systems. A mass market for hydrogen fuel cell products and systems may never develop or may take longer to develop than anticipated. Evolving customer design requirements, product specifications and testing procedures could cause order delays or cancellations. Higher gasoline prices, higher interest rates and/or decreases in the level of disposable consumer income could adversely affect the demand for the products of our Tecstar Automotive Group business. Our ability to design and manufacture fuel systems for fuel cell, hydrogen and hybrid applications that can be integrated into OEM products will be critical to our business. We depend on third-party suppliers for the supply of materials and components for our products. The terms and enforceability of many of our strategic partner relationships are uncertain. We currently face and will continue to face significant competition. We depend on our intellectual property, and our failure to protect that intellectual property could adversely affect our future growth and success. Our failure to obtain or maintain the right to use certain intellectual property may negatively affect our business. We have limited experience manufacturing fuel systems for fuel cell and hydrogen applications on a commercial basis. We may need to raise additional capital in the future to achieve commercialization of our products and technologies and to develop facilities for mass production of these products. We may not meet our product development and commercialization milestones. Our business could suffer if we fail to attract and maintain key personnel. We may be adversely affected by labor disputes. We may be subject to warranty claims, and our provision for warranty costs may not be sufficient. Our business may be subject to product liability claims or product recalls, which could be expensive and could result in a diversion of management s attention. Our insurance may not be sufficient. Our business may become subject to future product certification regulations, which may impair our ability to market our products. Failure to comply with applicable environmental and other laws and regulations could adversely affect our business and harm our results of operations. New technologies could render our existing products obsolete. Changes in environmental policies could hurt the market for our products. The development of uniform codes and standards for hydrogen fuel cell vehicles and related hydrogen refueling infrastructure may not develop in a timely fashion. Future sales of substantial amounts of our common stock could affect its market price. Our future operating results may fluctuate, which could result in a lower price for our common stock. If we fail to maintain adequate internal controls we may not be able to produce reliable financial reports in a timely manner or prevent financial fraud. We may be unable to remedy our material weakness on internal control over financial reporting in a timely manner. The market price and trading volume of our common stock may be volatile. Past acquisitions and any future acquisitions or transactions may not be successful. Our recent acquisitions and any future acquisitions could harm our operating results and share price. The disposition of businesses that do not fit with our evolving strategy can be highly uncertain Provisions of Delaware law and of our amended and restated certificate of incorporation and amended and restated bylaws may make a takeover or change in control more difficult.

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1166380--7/28/2006--QUANTUM_FUEL_SYSTEMS_TECHNOLOGIES_WORLDWIDE_INC