The fuel-cell maker, which reports in U.S. dollars, said its net loss for the period ended March 31 was $14.3 million or 12 cents per basic share. That compared with a year-earlier loss of $17.2 million, 13 cents per share.

Sales from clients General Hydrogen and Cellex Power slipped below Ballard's expectations as both companies work on different stages of buyout talks with Plug Power.

The Cellex deal has been signed, while the potential of a GH takeover was announced last week.

"Over the past few months, Cellex and GH have been clearly preoccupied with transactional matters, which has diverted their focus from sales and marketing activities. As a result, shipment volumes in Q1 were negligible," said president and CEO John Sheridan in a conference call.

Ballard said its volume orders have slipped below the initial 2,900 units announced as part of the GH supply agreement for 2007 and 2008.

The company declined to estimate how low the orders will fall, but said in a release that it would talk to its customers to "reassess market plans and volume projections over the coming months, after the outcome of the possible transaction activity is known."

"Our current thinking is that reduced volume impact will be short term" in 2007 and 2008, Sheridan added in the call.

Meanwhile, GH is in negotiations with its new owner about the supply agreement it signed with Ballrard in Oct. 2006. Ballard's executives couldn't offer any predictions of where the contract was headed.

Sheridan said that the company has a "collaborative relationship" with Plug and while a long-term supply agreement doesn't exist, he believes Ballard is in a better position than its competitors to keep the contract.

He told investors that when Plug announced it was buying Cellex, the company's executives highlighted Ballard's stack technology as a "key to them and key to the Cellex end users."

The comment made Sheridan optimistic that the discussion would favour a contract with Ballard.

But until a solid outlook is in place, Ballard is hoping to offset the sales declines with other contracts, such as one with the U.S. Department of Defence for materials handling, which was announced last month.

Overall, revenue for the year is expected to stay between $55 million and $65 million.

In the first quarter, revenue climbed to US$13.6 million from $9.4 million.

The engineering development saw revenue rise 73 per cent to $1.7 million, while product and service revenue totalled $9.7 million on higher shipments of fuel cells.

"Revenue growth was strong, and while operating cash consumption was higher than the same quarter in 2006, this was largely due to the timing of collections from customers last year," president and CEO John Sheridan said in a release.

Earlier this month Ballard extended its contract with DaimlerChrysler to service Mercedes-Benz fuel-cell demonstration buses in Hamburg and Amsterdam through 2008.

Ballard shares edged up a penny to $6.28 on the Toronto Stock Exchange.