Hemisphere GPS Reports Record Q2 Revenues, Earns $0.06 per Share as Gross Margins Reach 52.5%



    2008 first half earnings reach $9.0M, or $0.17, on revenues of $49M

    CALGARY, July 29 /CNW/ - (TSX: HEM) Hemisphere GPS, a designer and
manufacturer of advanced GPS products, today reported financial results for
the second quarter and first six months of 2008. All amounts in this news
release are in US dollars.
    For the second quarter ended June 30, 2008, Hemisphere GPS reported a 59%
increase in revenues to a second quarter record of $23.0 million, a
substantial increase from revenues of $14.5 million in the second quarter of
2007. Significant revenue growth was realized in all product lines and regions
for Ground Agriculture, Air Agriculture and Precision Products - which
includes marine GPS Compass applications. Revenue growth continues to be
driven by strong fundamentals in the agriculture market where record grain
prices are resulting in higher farm incomes. In addition, the Company's
patented Crescent(R) Vector(TM) GPS Compass technology has experienced strong
growth for marine applications.
    "We have seen a significant increase in revenues since the North American
harvest began in the third quarter of 2007, and the acceptance of GPS and
auto-steering within precision agriculture is at an all time high," stated
Steven Koles, President & CEO of Hemisphere GPS. "Our total revenues for the
trailing twelve months have reached $71 million, which represents growth of
66% over the prior year comparable twelve month period".
    The Company commenced shipments of its Outback Guidance(R) S3(TM) product
at the end of March, which contributed to revenue growth in the quarter. For
the second quarter of 2008, Hemisphere GPS saw year-over-year growth of
approximately 48% in North American revenues and 91% growth in non-North
American revenues, demonstrating the strength of the global agricultural
markets.
    Revenues from the Company's Precision Products line - focused on
non-agriculture markets - continued to show very strong growth, increasing by
71% in the second quarter and 75% year-to-date. The growth in this product
line has been driven by strong demand for the Company's Vector GPS Compass
sensor products, differential GPS receivers and GPS components sold to
original equipment manufacturers ("OEM's") and system integrators.
    Gross margin for the second quarter increased to 52.5% of revenues from
46.7% for the same quarter of 2007. Gross margin has improved as a result of
initiatives focused on margin improvement including new products, pricing
programs, outsourcing of higher volume components and finished goods to
third-party manufacturing overseas and the inclusion of software revenues from
the Beeline(R) integration which generate very high gross margins.
    Second quarter research and development expenses were $2.0 million, or
8.8% of revenues, an increase of 72%, including Beeline expenses, compared to
the second quarter of 2007 (44% excluding Beeline). During 2007, and in the
first half of 2008, the Company has made a number of significant new hires
continuing to build the strength of its research and development capabilities.
The acquisition of Beeline Technologies in December 2007 added approximately
20 engineering employees, greatly strengthening the Company's software
engineering capability. The investment in research and development activities
is critical for the Company to maintain and build its position in current and
targeted markets and the Company is targeting to spend at least 10% on such
activities on an annualized basis.
    Total operating expenses in the second quarter of 2008, which include
operating expenses from the acquired Beeline business, were $8.6 million, an
increase of $3.3 million, or 63% compared to the second quarter of 2007.
Adjusting for the impact of Beeline operating expenses and the strengthening
Canadian dollar, normalized operating expenses increased by approximately 36%,
or $1.9 million, when compared to the second quarter of 2007. Revenue growth
was over 50% during this period, excluding Beeline revenues, demonstrating the
scalability of the Company's business model as revenues grow.
    Hemisphere GPS reported record second quarter net income of $3.2 million,
or $0.06 per share (basic and diluted), an increase from $0.2 million, or
$0.00 per share (basic and diluted), in the second quarter of 2007.
    For the first six months of 2008, Hemisphere GPS reported record revenues
of $49.0 million, a 57% increase over revenues of $31.1 million for the same
period in 2007. Gross margin for the first half of the year increased to
51.4%, from 48.2% for the first half of 2007. Year-over-year expenses
increased to $16.7 million from $10.9 million, $2.2 million of which were
associated with the Beeline acquisition. Net income jumped to $9.0 million, or
$0.17 per share (basic and diluted), compared to $2.4 million, or $0.05 per
share (basic and diluted) in the first half of 2007.
    At June 30, 2008, the Company held cash of approximately $21.9 million
compared to a balance of $13.5 million at December 31, 2007 and $17.4 million
at March 31, 2008. Working capital at June 30, 2008 was approximately
$37 million.
    Mr. Koles added: "With the maturity now generated in the business and
continued strength in our balance sheet, we are well poised for further
scalability as we continue to grow the business in all segments."
    As of June 30, 2008, there were 56,401,276 common shares outstanding.
During the quarter, the Company issued 1,500,028 common shares related to
performance warrants issued in connection with the 2005 acquisition of the
Outback sales and distribution business assets. There are no further
performance warrants outstanding.

    
    Operational Highlights

    -   The Company's next generation in Outback Guidance, the new Outback
        S3, which began shipping in March, continues to be one of the most
        successful product launches in the history of Hemisphere GPS. The S3
        is loaded with the latest technology and features, and is expandable
        to work with other Outback Guidance products and accessories
        including the Outback eDriveTC(TM) GPS assisted steering system which
        automatically steers the vehicle. Combined with BaselineHD(TM),
        Outback S3 and eDriveTC provide centimeter-level accuracy.

    -   Hemisphere GPS released its new Air IntelliFlow(TM) dual-rate system
        product for the aerial application market that will greatly improve
        the efficiency of applications and the productivity of pilots. The
        product addresses a broad range of applications, including crop
        spraying, pest control, forestry and fire management.

    -   Based on the company's patented Crescent Vector technology,
        Hemisphere GPS added the LV100 GPS Compass Board to its innovative
        precise heading and positioning product line. An industry first, the
        LV100 is a complete GPS compass and positioning assembly utilizing a
        unique design featuring a single carrier board with integrated
        GPS antennas, designed for easy integration by OEM customers. The
        LV100 GPS Compass Board is ideal for a wide array of applications,
        especially in the marine, machine control and precision agriculture
        markets. An alternative to traditional gyro and fluxgate compass
        sensors, it provides precise positioning and speed measurements while
        being immune to magnetic interference typically present on vessels.

    -   Hemisphere GPS expanded its intellectual property portfolio with the
        awarding of four new patents for its latest innovations in the areas
        of GPS positioning and automated steering. The new patents are
        related to:
        -  Hemisphere's Crescent Vector technology used in marine navigation
           and various precise positioning and attitude determination
           applications. The patents include sophisticated steering
           algorithms and dynamic calibration techniques as well as
           positional precision and accuracy enhancements.
        -  Outback Guidance BaseLineHD portable base station delivering
           real-time centimeter-level positioning for machine control
           applications.
        -  Implement steering technology which enables the position of an
           implement to be controlled while it is being towed behind a
           tractor or other self-propelled vehicle. The patent covers the
           guidance algorithms and electrical components that interface with
           the steering system.

    -   Hemisphere implemented a plan to assist employees in purchasing
        shares of the Company through an Employee Share Purchase Plan
        ("ESPP") enabling employees to further increase ownership interest in
        the Company to participate in the ongoing success of Hemisphere GPS,
        and further align their interests with those of the Company's
        external shareholders.
    

    Conference Call - Tuesday July 29 at 11:00AM ET (9:00am MT)

    A conference call and Web cast for shareholders, analysts and other
members of the investment community has been scheduled for Tuesday July 29,
2008 at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) to discuss the
financial results and provide updates on operations.
    To participate in the conference call, please dial 1-800-732-0232
approximately 10 minutes before the conference call. Please note that a live
Web cast of the call will be available on the Hemisphere GPS Web site at
http://www.hemispheregps.com. The Web cast will be archived there for later
review.
    A recording of the call will be available through August 5. Please dial
1-877-289-8525 and enter the reservation number 21279042 followed by the
number sign to listen to the rebroadcast.

    About Hemisphere GPS

    Hemisphere GPS designs and manufactures innovative, cost-effective
GPS products for positioning, guidance, and machine control applications in
Agriculture, marine and other markets. The Company holds numerous patents and
other intellectual property and owns leading brand names, including
Outback Guidance(R) and BEELINE(R), two of the leading brands in precision GPS
for Ground Agriculture. The Company is headquartered in Calgary, Alberta, with
major product development, sales, and marketing facilities in Arizona, Kansas,
Texas, and Australia. For more information about Hemisphere GPS, please go to
www.hemispheregps.com.

    The above disclosure contains certain forward-looking statements that
involve substantial known and unknown risks and uncertainties. These
forward-looking statements are subject to numerous risks and uncertainties,
certain of which are beyond Hemisphere GPS' control, including: the impact of
general economic conditions, industry conditions, increased competition, the
lack of availability of qualified personnel or management, fluctuations in
foreign exchange or interest rates, stock market volatility and market
valuations of companies with respect to the announced transactions and the
final valuations thereof, and obtaining required approvals of regulatory
authorities. Hemisphere GPS' actual results, performance or achievement could
differ materially from those expressed in, or implied by these forward-looking
statements and, accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur, or if
any of them do so, what benefits, including the amount of proceed, that
Hemisphere GPS will derive there from.

    
    HEMISPHERE GPS INC.
    Consolidated Statements of Operations and Deficit
    (unaudited - expressed in U.S. dollars)
    -------------------------------------------------------------------------
                            Three months ended          Six months ended
                                 June 30,                    June 30,
                      --------------------------- ---------------------------
                              2008          2007          2008          2007
    -------------------------------------------------------------------------

    Sales             $ 23,036,767  $ 14,472,990  $ 48,945,531  $ 31,121,045

    Cost of sales       10,948,560     7,720,702    23,783,077    16,121,663
    -------------------------------------------------------------------------
                        12,088,207     6,752,288    25,162,454    14,999,382
    Expenses:
      Research and
       development       2,026,017     1,180,707     3,830,408     2,261,590
      Sales and
       marketing         3,299,394     2,006,152     6,597,461     4,645,388
      General and
       administrative    2,168,144     1,439,656     4,133,650     2,576,235
      Stock-based
       compensation        220,911       168,262       348,791       355,867
      Amortization         911,301       511,499     1,839,066     1,026,289
    -------------------------------------------------------------------------
                         8,625,767     5,306,276    16,749,376    10,865,369

    -------------------------------------------------------------------------
    Earnings before
     undernoted items    3,462,440     1,446,012     8,413,078     4,134,013

    Foreign exchange
     loss (gain)           322,565       248,914      (271,794)      208,923
    Interest income        (92,101)     (133,368)     (207,273)     (196,372)
    Legal fees on the
     settlement of
     lawsuit                     -       966,363             -     1,507,124
    Loss on sale of
     marketable securities       -        35,342             -        35,342
    Other income                 -             -      (263,036)            -
    -------------------------------------------------------------------------
    Earnings before
     income taxes        3,231,976       328,761     9,155,181     2,578,996

    Current income taxes    62,134             -       175,903             -
    -------------------------------------------------------------------------
    Earnings from
     continuing
     operations          3,169,842       328,761     8,979,278     2,578,996

    Loss from
     discontinued                -       111,242             -       200,769
    -------------------------------------------------------------------------
    Net earnings         3,169,842       217,519     8,979,278     2,378,227

    Deficit, beginning
     of period         (34,660,278)  (37,421,085)  (40,469,714)  (39,581,793)
    Adjustment due to
     adoption of new
     accounting policy     150,135             -       150,135             -

    -------------------------------------------------------------------------
    Deficit, end of
     period           $(31,340,301) $(37,203,566) $(31,340,301) $(37,203,566)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per
     common share
     from continuing
     operations:
      Basic and
       diluted        $       0.06  $       0.01  $       0.17  $       0.06
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per
     common share:
      Basic and
       diluted        $       0.06  $          -  $       0.17  $       0.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     shares
     outstanding:
      Basic             56,229,439    46,188,924    53,510,557    46,142,078
      Diluted           56,921,538    46,537,696    53,976,161    46,311,534
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    HEMISPHERE GPS INC.
    Consolidated Balance Sheets
    (unaudited - expressed in U.S. dollars)
    -------------------------------------------------------------------------
                                                     June 30,    December 31,
                                                        2008            2007
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash                                     $  21,856,037   $  13,455,779
      Accounts receivable                          8,410,349       7,128,751
      Inventories                                 14,372,394      15,325,088
      Deferred commissions                           278,779         262,945
      Prepaid expenses and deposits                  417,170         637,009
      Current assets of discontinued operations            -         398,402
      -----------------------------------------------------------------------
                                                  45,334,729      37,207,974

    Deferred commissions                             267,403         257,546
    Property and equipment                         8,195,148       8,200,232
    Intangible assets                              9,512,684      10,905,247
    Goodwill                                      42,044,794      43,247,897
    -------------------------------------------------------------------------
                                               $ 105,354,758   $  99,818,896
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities $   6,559,908   $   8,437,776
      Deferred revenue                             1,775,886       1,607,063
      Current portion of capital leases                    -         102,939
      Notes payable                                        -         327,963
      Current liabilities of discontinued
       operations                                          -          58,477
      -----------------------------------------------------------------------
                                                   8,335,794      10,534,218

    Deferred revenue                               1,780,119       1,716,973

    Shareholders' equity:
      Share capital                              109,449,617      86,592,382
      Performance warrants                                 -       5,296,681
      Contributed surplus                          2,588,707       2,685,651
      Warrants                                             -      16,237,045
      Deficit                                    (31,340,301)    (40,469,714)
      Accumulated other comprehensive income      14,540,822      17,225,660
      -----------------------------------------------------------------------
                                                  95,238,845      87,567,705

    -------------------------------------------------------------------------
                                               $ 105,354,758   $  99,818,896
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    HEMISPHERE GPS INC.
    Consolidated Statements of Comprehensive Income
    (unaudited - expressed in U.S. dollars)
    -------------------------------------------------------------------------
                            Three months ended          Six months ended
                                 June 30,                    June 30,
                      --------------------------- ---------------------------
                              2008          2007          2008          2007
    -------------------------------------------------------------------------

    Net earnings      $  3,169,842  $    217,519  $  8,979,278  $  2,378,227

    Translation of
     assets and
     liabilities into
     U.S. dollars
     reporting
     currency              852,977     4,253,491    (2,684,838)    5,106,681
    -------------------------------------------------------------------------

                      $  4,022,819  $  4,471,010  $  6,294,440  $  7,484,908
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    HEMISPHERE GPS INC.
    Consolidated Statements of Cash Flows
    (unaudited - expressed in U.S. dollars)
    -------------------------------------------------------------------------
                            Three months ended          Six months ended
                                 June 30,                    June 30,
                      --------------------------- ---------------------------
                              2008          2007          2008          2007
    -------------------------------------------------------------------------

    Cash flows from
    (used in)
     operating
     activities:
      Earnings from
       continuing
       operations     $  3,169,842  $    328,761  $  8,979,278  $  2,578,996
      Items not
       involving cash:
        Amortization       911,301       511,499     1,839,066     1,026,289
        Stock-based
         compensation      220,911       168,262       348,791       355,867
        Loss on sale
         of marketable
         securities              -        35,342             -        35,342
    -------------------------------------------------------------------------
                         4,302,054     1,043,864    11,167,135     3,996,494

      Change in non-cash
       operating
       working capital:
        Accounts
         receivable      2,828,228       199,129    (1,198,888)   (3,480,788)
        Inventories        611,800      (553,305)      497,345    (1,171,396)
        Prepaid expenses
         and deposits       86,960       (42,425)      203,158       106,024
        Deferred
         commissions         1,445       (24,910)      (41,882)     (128,538)
        Accounts payable
         and accrued
         liabilities    (3,643,464)     (968,493)   (1,627,206)    1,703,600
        Notes payable      (11,463)            -      (322,680)            -
        Deferred revenue    32,615       154,020       336,107       688,305
    -------------------------------------------------------------------------
                         4,208,175      (192,120)    9,013,089     1,713,701

      Cash used in
       discontinued
       operations                -      (483,176)            -      (594,320)
    -------------------------------------------------------------------------
                         4,208,175      (675,296)    9,013,089     1,119,381

    Cash flows from
     (used in)
     financing
     activities:
      Long-term debt             -             -             -      (256,501)
      Capital lease
       obligations         (50,762)      (74,938)     (101,003)     (116,176)
      Issue of share
       capital, net of
       share issue costs   675,202       272,486       939,940       282,673
    -------------------------------------------------------------------------
                           624,440       197,548       838,937       (90,004)

    Cash flows from
     (used in) investing
     activities:
      Purchase of property
       and equipment      (383,061)     (384,378)     (854,530)     (511,686)
      Business
       acquisition,
       net                 (92,654)            -       (92,654)            -
      Proceeds on sale
       of marketable
       securities                -       546,761             -       546,761
    -------------------------------------------------------------------------
                          (475,715)      162,383      (947,184)       35,075

    -------------------------------------------------------------------------
    Increase (decrease)
     in cash position    4,356,900      (315,365)    8,904,842     1,064,452

    Effect of currency
     translation on cash
     balances and cash
     flows                 121,873       922,456      (504,584)    1,047,845

    Cash, beginning
     of period          17,377,264    11,082,487    13,455,779     9,577,281
    -------------------------------------------------------------------------
    Cash, end of
     period           $ 21,856,037  $ 11,689,578  $ 21,856,037  $ 11,689,578
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental
     disclosure:
      Interest paid   $      7,252  $      4,808  $     14,435  $     23,322
    





For further information:

For further information: Cameron Olson, Chief Financial Officer,
Hemisphere GPS, (403) 259-3311, COlson@HemisphereGPS.com; Cory Pala, Investor
Relations, E.vestor Communications Inc., (416) 657-2400, CPala@evestor.com

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